chbase(BASE) - 2024 Q4 - Annual Report

Part I Business Overview Couchbase provides a cloud database platform fusing relational and NoSQL strengths for modern applications, serving 749 customers - Couchbase offers a cloud database platform combining relational and NoSQL flexibility for modern, AI-powered enterprise applications[21] - Core products include Couchbase Capella (DBaaS), Couchbase Server, and Couchbase Mobile for edge devices[30][31][32] - The go-to-market strategy combines direct enterprise sales with a developer-focused product-led growth approach[56] - As of January 31, 2024, the company served 749 customers and employed 796 individuals worldwide[54][64] - Key competitive strengths include high performance, JSON data model flexibility, SQL++ familiarity, affordability, and multi-cloud to edge deployment versatility[24] - Primary competitors include legacy providers (Oracle, IBM), NoSQL providers (MongoDB), and major cloud providers (Amazon, Microsoft, Google)[80] Risk Factors The company faces risks from net losses, intense competition, operational challenges, cybersecurity, and complex regulatory compliance - The company has a history of net losses, incurring $80.2 million in fiscal 2024, with no guarantee of future profitability[86] - Intense competition comes from legacy (Oracle, IBM), NoSQL (MongoDB), and major cloud providers (Amazon, Microsoft, Google) with greater resources[90][91] - Risks from third-party open source software include negative sales impact, litigation, and easier competitor access to technology[146][153] - Security breaches or unauthorized data access could result in loss of confidence, litigation, and significant financial liability for mission-critical applications[168][169] - Compliance with evolving data protection laws (GDPR, CCPA) is complex and costly, with non-compliance risking significant fines and business harm[171][173] - Macroeconomic conditions like inflation and recession fears may cause customers to delay purchases, reduce spending, and lengthen sales cycles[131][132] - As of January 31, 2024, the use of $335.6 million federal and $193.2 million state NOLs may be limited by ownership changes and regulations[192][193] Cybersecurity Couchbase's cybersecurity program, based on industry standards like SOC 2, is overseen by the Audit Committee and CISO - The cybersecurity program is based on industry frameworks and validated by third-party audits like SOC 2, Type II, and PCI DSS[222] - Oversight is provided by the Audit Committee of the Board, receiving regular updates from management and the CISO[229] - The CISO-led cybersecurity team assesses and manages threats, employing technical safeguards like firewalls and penetration testing[223][224][229] Properties Couchbase's headquarters is a 46,000 sq. ft. leased facility in Santa Clara, with additional global offices, owning no real property - The company's headquarters is a 46,000 sq. ft. leased facility in Santa Clara, CA, with the lease expiring March 2025[230] - Additional offices are leased in the US, UK, Israel, and India; the company owns no real property[230] Part II Management's Discussion and Analysis (MD&A) Fiscal 2024 revenue grew 16% to $180.0 million, with ARR at $204.2 million, despite a $80.2 million net loss Overview and Business Model Couchbase primarily generates revenue from subscriptions (95% in FY2024) via a land-and-expand model, including DBaaS Revenue Comparison (in thousands USD) | Fiscal Year | Total Revenue | Subscription Revenue % | Services Revenue % | | :--- | :--- | :--- | :--- | | 2024 | $180,037 | 95% | 5% | | 2023 | $154,824 | 92% | 8% | | 2022 | $123,542 | 94% | 6% | - The business model relies on subscriptions for Couchbase Server and Couchbase Capella, focusing on expanding existing customer use cases[249] - Macroeconomic conditions are causing longer deal cycles, increased customer scrutiny, and smaller initial purchase increments[251] Key Business Metrics Key metrics include ARR, growing 25% to $204.2 million, and 749 customers, with net retention over 115% Key Business Metrics | Metric | As of Jan 31, 2024 (Millions USD) | As of Jan 31, 2023 (Millions USD) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | ARR | $204.2 | $163.7 | 25% | | Customers | 749 | 675 | 11% | - Couchbase Capella ARR was approximately $21.8 million as of January 31, 2024[256] - The dollar-based net retention rate has exceeded 115% for nine quarters, indicating strong existing customer expansion[253] Results of Operations (Fiscal 2024 vs. 2023) FY2024 total revenue grew 16% to $180.0 million, with operating loss at $84.5 million and net loss at $80.2 million Revenue Comparison (in thousands USD) | Revenue Type | FY 2024 | FY 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Subscription | $171,554 | $142,895 | $28,659 | 20% | | Services | $8,483 | $11,929 | ($3,446) | (29)% | | Total Revenue | $180,037 | $154,824 | $25,213 | 16% | - The 20% subscription revenue growth was driven by both existing customers (contributing ~88% of the increase) and new customers[291] Operating Loss and Net Loss Comparison (in thousands USD) | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Gross Profit | $157,955 | $134,565 | | Total Operating Expenses | $242,492 | $203,880 | | Loss from Operations | ($84,537) | ($69,315) | | Net Loss | ($80,183) | ($68,494) | - Sales and marketing expenses increased by $19.5 million (18%) due to higher personnel costs and travel[297] - Research and development expenses grew by $6.3 million (11%) due to increased stock-based compensation and personnel costs[295] - The company recorded a $5.2 million impairment charge for capitalized internal-use software no longer in service[281][411] Liquidity and Capital Resources As of Jan 31, 2024, Couchbase had $153.6 million in cash, with operating cash outflow of $26.9 million Cash and Liquidity (in millions USD) | Metric | As of Jan 31, 2024 | | :--- | :--- | | Cash, cash equivalents, and short-term investments | $153.6 | | Accumulated Deficit | ($490.7) | | Deferred Revenue | $84.5 | Cash Flow Summary (in millions USD) | Cash Flow | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($26.9) | ($41.2) | | Net cash provided by (used in) investing activities | $15.4 | ($23.4) | | Net cash provided by financing activities | $12.9 | $9.7 | - As of January 31, 2024, RPOs totaled $241.8 million, with $147.6 million expected to be recognized in the next 12 months[419] - Subsequent to fiscal year-end, on February 7, 2024, the company secured a new three-year, $25.0 million revolving credit facility with MUFG Bank[475] Consolidated Financial Statements This section presents audited consolidated financial statements for FY2022-2024, reflecting revenue growth and net losses Consolidated Balance Sheets As of Jan 31, 2024, total assets were $247.8 million, liabilities $117.3 million, and equity $130.4 million Key Balance Sheet Items (in thousands USD) | Account | Jan 31, 2024 | Jan 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents & short-term investments | $153,632 | $168,302 | | Total Current Assets | $224,286 | $229,479 | | Total Assets | $247,752 | $253,039 | | Liabilities & Equity | | | | Deferred Revenue (Current) | $81,736 | $71,716 | | Total Current Liabilities | $112,506 | $94,957 | | Total Liabilities | $117,331 | $102,775 | | Total Stockholders' Equity | $130,421 | $150,264 | Consolidated Statements of Operations FY2024 total revenue was $180.0 million, with gross profit of $158.0 million and net loss of $80.2 million Statement of Operations Highlights (in thousands USD) | Metric | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | | Total Revenue | $180,037 | $154,824 | $123,542 | | Gross Profit | $157,955 | $134,565 | $108,761 | | Loss from Operations | ($84,537) | ($69,315) | ($56,258) | | Net Loss | ($80,183) | ($68,494) | ($58,229) | | Net Loss Per Share | ($1.70) | ($1.53) | ($2.37) | Consolidated Statements of Cash Flows FY2024 net cash used in operations was $26.9 million, with $15.4 million from investing activities Cash Flow Summary (in thousands USD) | Cash Flow Activity | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($26,893) | ($41,185) | ($41,574) | | Net cash provided by (used in) investing activities | $15,426 | ($23,366) | ($92,030) | | Net cash provided by financing activities | $12,933 | $9,706 | $192,410 | | Net increase (decrease) in cash | $905 | ($55,242) | $58,391 | Notes to Consolidated Financial Statements Notes detail accounting policies, balance sheet items, debt, stock compensation, tax assets, and a completed restructuring plan - Revenue recognition treats term-based software licenses (upfront) and post-contract support (ratably) as separate performance obligations[357] - A $5.2 million impairment charge was recorded in FY2024 for capitalized internal-use software no longer in service[411] - As of Jan 31, 2024, RPOs totaled $241.8 million, with $147.6 million expected as revenue in the next 12 months[419] - In March 2023, the Board modified 1,060,000 executive Market-based RSUs, converting 840,000 to performance-based vesting[444] - A full valuation allowance of $137.1 million is maintained against U.S. federal and state net deferred tax assets[459] - A restructuring plan initiated in Q4 FY2023 is complete, with total charges of $1.7 million incurred across FY2023 and FY2024[465][466] Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of January 31, 2024 - Management concluded both disclosure controls and internal control over financial reporting were effective as of January 31, 2024[479][480] - No material changes to internal control over financial reporting occurred during Q4 fiscal 2024[481]