Couchbase Announces Second Quarter Fiscal 2023 Financial Results
"I'm pleased to report that we delivered results above the high end of guidance, including another quarter of 30% constant currency ARR growth," said
Second Quarter Fiscal 2023 Financial Highlights
- Revenue: Total revenue for the quarter was
$39.8 million , an increase of 34% year-over-year. Subscription revenue for the quarter was$37.1 million , an increase of 32% year-over-year. - Annual recurring revenue (ARR): Total ARR as of
July 31, 2022 was$145.2 million , an increase of 26% year-over-year, or 30% on a constant currency basis. See the section titled "Key Business Metrics" below for details. - Gross margin: Gross margin for the quarter was 88.0%, compared to 88.1% for the second quarter of fiscal 2022. Non-GAAP gross margin for the quarter was 88.7%, compared to 88.3% for the second quarter of fiscal 2022. See the section titled "Use of Non-GAAP Financial Measures" and the tables titled "Reconciliation of GAAP to Non-GAAP Results" below for details.
- Loss from operations: Loss from operations for the quarter was
$15.2 million , compared to$14.0 million for the second quarter of fiscal 2022. Non-GAAP operating loss for the quarter was$8.4 million , compared to$12.0 million for the second quarter of fiscal 2022. - Cash flow: Cash flow used in operating activities for the quarter was
$7.7 million , compared to$16.0 million in the second quarter of fiscal 2022. Capital expenditures were$1.7 million during the quarter, leading to negative free cash flow of$9.3 million , compared to negative free cash flow of$16.0 million in the second quarter of fiscal 2022. - Remaining performance obligations (RPO): RPO as of
July 31, 2022 was$166.5 million , an increase of 40% year-over-year.
Recent Business Highlights
- In a sponsored benchmark program with global IT service provider Altoros, Capella significantly outperformed competing database-as-a-service offerings across various workloads and cluster sizes. The performance testing leveraged the Yahoo! Cloud Serving Benchmark standard for NoSQL database benchmarking.
- Announced the general availability of Capella App Services, a fully managed application backend, on
Google Cloud. By expanding multi-cloud support for our fully managed offline-first data sync offering, customers can easily move Capella App Services between public clouds. - Granted a third
U.S. patent, this time for innovative use of inverted search indexes for querying array fields in JSON. The patent explains how to build indexes with an unlimited number of array keys and query them efficiently using SQL++,Couchbase's query language. Prior to this innovation, databases could only index a single array key per index, which limited the query performance. - Introduced the Couchbase Ambassador Program, designed to support and empower
Couchbase's community of users and contributors who are passionate about and experts inCouchbase technology to share their knowledge with a broader developer audience. - Launched the Couchbase Community Hub to better connect users and contributors as well as foster increased sharing, learning and discovery. The Community Hub is a new space for the
Couchbase developer community that complements the existing Couchbase Discord server and Couchbase Community Forums. - Recognized as one of the Best Workplaces in the
Bay Area in 2022 by Great Place toWork andFortune Magazine .
Financial Outlook
For the third quarter and full year of fiscal 2023,
Q3 FY2023 Outlook |
FY2023 Outlook |
|||
Total Revenue |
|
|
||
Total ARR |
|
|
||
Non-GAAP Operating Loss |
|
|
The guidance provided above is based on several assumptions that are subject to change and many of which are outside our control. If actual results vary from these assumptions, our expectations may change. There can be no assurance that we will achieve these results.
Conference Call Information
About
At
Use of Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, we believe certain non-GAAP financial measures are useful to investors in evaluating our operating performance. We use certain non-GAAP financial measures, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, may be helpful to investors because they provide consistency and comparability with past financial performance and meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. Non-GAAP financial measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP and may be different from similarly-titled non-GAAP financial measures used by other companies. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures (provided in the financial statement tables included in this press release), and not to rely on any single financial measure to evaluate our business.
Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss attributable to common stockholders and non-GAAP net loss per share attributable to common stockholders: We define these non-GAAP financial measures as their respective GAAP measures, excluding expenses related to stock-based compensation expense and employer taxes on employee stock transactions. We use these non-GAAP financial measures in conjunction with GAAP measures to assess our performance, including in the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance.
Beginning with the first quarter of fiscal 2023, we have excluded employer payroll taxes on employee stock transactions, which is a cash expense, from our non-GAAP results. These payroll taxes have been excluded from our non-GAAP results because they are tied to the timing and size of the exercise or vesting of the underlying equity awards, and the price of our common stock at the time of vesting or exercise may vary from period to period independent of the operating performance of our business. Prior period non-GAAP financial measures have not been adjusted to reflect this change, and the effect of this change is not material for any period previously presented.
Free cash flow: We define free cash flow as cash used in operating activities less additions of property and equipment, which includes capitalized internal-use software costs. We believe free cash flow is a useful indicator of liquidity that provides our management, board of directors and investors with information about our future ability to generate or use cash to enhance the strength of our balance sheet and further invest in our business and pursue potential strategic initiatives.
Please see the reconciliation tables at the end of this press release for the reconciliation of GAAP and non-GAAP results.
Key Business Metrics
We review a number of operating and financial metrics, including ARR, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
We define ARR as of a given date as the annualized recurring revenue that we would contractually receive from our customers in the month ending 12 months following such date. Based on historical experience with customers, we assume all contracts will be automatically renewed at the same levels unless we receive notification of non-renewal and are no longer in negotiations prior to the measurement date. ARR also includes revenue from consumption-based cloud credits of Couchbase Capella products. ARR for Couchbase Capella products is calculated by annualizing the prior 90 days of actual consumption, assuming no increases or reductions in usage. ARR excludes revenue derived from the use of cloud products only based on on-demand arrangements and services revenue. ARR should be viewed independently of revenue, and does not represent our revenue under GAAP on an annualized basis, as it is an operating metric that can be impacted by contract start and end dates and renewal dates. ARR is not intended to be a replacement for forecasts of revenue. Although we seek to increase ARR as part of our strategy of targeting large enterprise customers, this metric may fluctuate from period to period based on our ability to acquire new customers and expand within our existing customers. We believe that our ARR is an important indicator of the growth and performance of our business. We updated our definition of ARR beginning in the first quarter of fiscal 2023 to include revenue from consumption-based cloud credits of Couchbase Capella products by annualizing the prior 90 days of actual consumption, assuming no increases or reductions in usage. The reason for this change is to better reflect the ARR for Couchbase Capella products following the launch of Couchbase Capella in fiscal 2022. ARR for periods prior to the first quarter of fiscal 2023 has not been adjusted to reflect this change as it is not material to any period previously presented.
We also attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates within the current period. We calculate constant currency growth rates by applying the applicable prior period exchange rates to current period results.
Forward-Looking Statements
This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include, but are not limited to, quotations of management, the section titled "Financial Outlook" above and statements about
Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) |
|||||||
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Revenue: |
|||||||
License |
$ 6,382 |
$ 4,416 |
$ 11,389 |
$ 8,694 |
|||
Support and other |
30,677 |
23,613 |
57,651 |
45,800 |
|||
Total subscription revenue |
37,059 |
28,029 |
69,040 |
54,494 |
|||
Services |
2,732 |
1,670 |
5,604 |
3,160 |
|||
Total revenue |
39,791 |
29,699 |
74,644 |
57,654 |
|||
Cost of revenue: |
|||||||
Subscription(1) |
2,521 |
2,072 |
4,917 |
4,124 |
|||
Services(1) |
2,260 |
1,453 |
4,515 |
2,793 |
|||
Total cost of revenue |
4,781 |
3,525 |
9,432 |
6,917 |
|||
Gross profit |
35,010 |
26,174 |
65,212 |
50,737 |
|||
Operating expenses: |
|||||||
Research and development(1) |
14,341 |
12,623 |
28,762 |
25,164 |
|||
Sales and marketing(1) |
27,473 |
22,263 |
54,316 |
42,897 |
|||
General and administrative(1) |
8,429 |
5,278 |
16,355 |
10,775 |
|||
Total operating expenses |
50,243 |
40,164 |
99,433 |
78,836 |
|||
Loss from operations |
(15,233) |
(13,990) |
(34,221) |
(28,099) |
|||
Interest expense |
(25) |
(252) |
(50) |
(497) |
|||
Other income (expense), net |
261 |
(77) |
(295) |
7 |
|||
Loss before income taxes |
(14,997) |
(14,319) |
(34,566) |
(28,589) |
|||
Provision for income taxes |
372 |
151 |
637 |
480 |
|||
Net loss |
$ (15,369) |
$ (14,470) |
$ (35,203) |
$ (29,069) |
|||
Cumulative dividends on Series G redeemable convertible preferred stock |
— |
(1,438) |
— |
(2,917) |
|||
Net loss attributable to common stockholders |
$ (15,369) |
$ (15,908) |
$ (35,203) |
$ (31,986) |
|||
Net loss per share attributable to common stockholders, basic and diluted |
$ (0.34) |
$ (1.76) |
$ (0.79) |
$ (4.16) |
|||
Weighted-average shares used in computing net loss per share attributable |
44,648 |
9,045 |
44,459 |
7,696 |
(1) Includes stock-based compensation expense as follows: |
||||||
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Cost of revenue—subscription |
$ 141 |
$ 30 |
$ 263 |
$ 57 |
|||
Cost of revenue—services |
117 |
24 |
211 |
46 |
|||
Research and development |
2,087 |
569 |
3,986 |
1,139 |
|||
Sales and marketing |
2,463 |
688 |
4,450 |
1,229 |
|||
General and administrative |
1,919 |
670 |
3,267 |
1,339 |
|||
Total stock-based compensation expense |
$ 6,727 |
$ 1,981 |
$ 12,177 |
$ 3,810 |
Condensed Consolidated Balance Sheets (in thousands) (unaudited) |
|||
As of |
As of |
||
Assets |
|||
Current assets |
|||
Cash and cash equivalents |
$ 46,338 |
$ 95,688 |
|
Short-term investments |
145,767 |
110,266 |
|
Accounts receivable, net |
29,018 |
36,696 |
|
Deferred commissions |
11,525 |
11,783 |
|
Prepaid expenses and other current assets |
9,655 |
8,559 |
|
Total current assets |
242,303 |
262,992 |
|
Property and equipment, net |
5,639 |
4,288 |
|
Operating lease right-of-use assets(2) |
7,696 |
— |
|
Deferred commissions, noncurrent |
7,798 |
8,243 |
|
Other assets |
1,334 |
1,219 |
|
Total assets |
$ 264,770 |
$ 276,742 |
|
Liabilities and Stockholders' Equity |
|||
Current liabilities |
|||
Accounts payable |
$ 5,579 |
$ 1,923 |
|
Accrued compensation and benefits |
10,530 |
16,143 |
|
Other accrued expenses |
4,103 |
3,231 |
|
Operating lease liabilities(2) |
3,075 |
— |
|
Deferred revenue |
67,139 |
69,010 |
|
Total current liabilities |
90,426 |
90,307 |
|
Operating lease liabilities, noncurrent(2) |
5,491 |
— |
|
Deferred revenue, noncurrent |
2,467 |
2,713 |
|
Other liabilities |
— |
507 |
|
Total liabilities |
98,384 |
93,527 |
|
Stockholders' equity |
|||
Preferred stock |
— |
— |
|
Common stock |
— |
— |
|
Additional paid-in capital |
544,614 |
525,392 |
|
Accumulated other comprehensive loss |
(1,043) |
(195) |
|
Accumulated deficit |
(377,185) |
(341,982) |
|
Total stockholders' equity |
166,386 |
183,215 |
|
Total liabilities and stockholders' equity |
$ 264,770 |
$ 276,742 |
(2) |
The Company adopted ASU 2016-02, "Leases" (Topic 842) using the modified retrospective method as of |
Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) |
|||||||
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Cash flows from operating activities |
|||||||
Net loss |
$ (15,369) |
$ (14,470) |
$ (35,203) |
$ (29,069) |
|||
Adjustments to reconcile net loss to net cash used in operating activities |
|||||||
Depreciation and amortization |
727 |
698 |
1,466 |
1,406 |
|||
Amortization of debt issuance costs |
— |
15 |
— |
15 |
|||
Stock-based compensation, net of amounts capitalized |
6,727 |
1,981 |
12,177 |
3,810 |
|||
Amortization of deferred commissions |
4,401 |
3,368 |
8,410 |
6,326 |
|||
Non-cash lease expense |
752 |
— |
1,400 |
— |
|||
Foreign currency transaction losses |
62 |
80 |
1,036 |
5 |
|||
Other |
103 |
34 |
301 |
68 |
|||
Changes in operating assets and liabilities |
|||||||
Accounts receivable |
(4,452) |
(2,712) |
7,329 |
15,845 |
|||
Deferred commissions |
(3,908) |
(4,353) |
(7,706) |
(7,071) |
|||
Prepaid expenses and other assets |
(1,526) |
(3,950) |
(1,214) |
(5,848) |
|||
Accounts payable |
2,812 |
3,532 |
3,543 |
4,553 |
|||
Accrued compensation and benefits |
2,504 |
3,183 |
(5,608) |
(91) |
|||
Accrued expenses and other liabilities |
1,106 |
(1,081) |
1,035 |
(1,749) |
|||
Operating lease liabilities |
(445) |
— |
(1,111) |
— |
|||
Deferred revenue |
(1,149) |
(2,311) |
(2,117) |
(7,375) |
|||
Net cash used in operating activities |
(7,655) |
(15,986) |
(16,262) |
(19,175) |
|||
Cash flows from investing activities |
|||||||
Purchases of short-term investments |
(15,838) |
(5,407) |
(69,468) |
(7,133) |
|||
Maturities of short-term investments |
23,202 |
7,095 |
32,802 |
12,285 |
|||
Additions to property and equipment |
(1,677) |
(20) |
(2,476) |
(250) |
|||
Net cash provided by (used in) investing activities |
5,687 |
1,668 |
(39,142) |
4,902 |
|||
Cash flows from financing activities |
|||||||
Proceeds from exercise of stock options |
753 |
2,841 |
3,367 |
4,288 |
|||
Proceeds from issuance of common stock under ESPP |
— |
— |
3,525 |
— |
|||
Proceeds from initial public offering, net of underwriting discounts and commissions |
— |
214,854 |
— |
214,854 |
|||
Payments of deferred offering costs |
— |
(1,356) |
— |
(2,795) |
|||
Net cash provided by financing activities |
753 |
216,339 |
6,892 |
216,347 |
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(119) |
(119) |
(838) |
(125) |
|||
Net increase (decrease) in cash, cash equivalents and restricted cash |
(1,334) |
201,902 |
(49,350) |
201,949 |
|||
Cash, cash equivalents, and restricted cash at beginning of period |
48,215 |
37,887 |
96,231 |
37,840 |
|||
Cash, cash equivalents, and restricted cash at end of period |
$ 46,881 |
$ 239,789 |
$ 46,881 |
$ 239,789 |
|||
Reconciliation of cash, cash equivalents, and restricted cash within the |
|||||||
Cash and cash equivalents |
$ 46,338 |
$ 239,246 |
$ 46,338 |
$ 239,246 |
|||
Restricted cash included in other assets |
543 |
543 |
543 |
543 |
|||
Total cash, cash equivalents and restricted cash |
$ 46,881 |
$ 239,789 |
$ 46,881 |
$ 239,789 |
Reconciliation of GAAP to Non-GAAP Results (in thousands, except per share data) (unaudited) |
|||||||
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Reconciliation of GAAP gross profit to non-GAAP gross profit: |
|||||||
Total revenue |
$ 39,791 |
$ 29,699 |
$ 74,644 |
$ 57,654 |
|||
Gross profit |
$ 35,010 |
$ 26,174 |
$ 65,212 |
$ 50,737 |
|||
Add: Stock-based compensation expense |
258 |
54 |
474 |
103 |
|||
Add: Employer taxes on employee stock transactions |
22 |
— |
24 |
— |
|||
Non-GAAP gross profit |
$ 35,290 |
$ 26,228 |
$ 65,710 |
$ 50,840 |
|||
Gross margin |
88.0 % |
88.1 % |
87.4 % |
88.0 % |
|||
Non-GAAP gross margin |
88.7 % |
88.3 % |
88.0 % |
88.2 % |
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Reconciliation of GAAP operating expenses to non-GAAP operating expenses: |
|||||||
GAAP research and development |
$ 14,341 |
$ 12,623 |
$ 28,762 |
$ 25,164 |
|||
Less: Stock-based compensation expense |
(2,087) |
(569) |
(3,986) |
(1,139) |
|||
Less: Employer taxes on employee stock transactions |
(45) |
— |
(69) |
— |
|||
Non-GAAP research and development |
$ 12,209 |
$ 12,054 |
$ 24,707 |
$ 24,025 |
|||
GAAP sales and marketing |
$ 27,473 |
$ 22,263 |
$ 54,316 |
$ 42,897 |
|||
Less: Stock-based compensation expense |
(2,463) |
(688) |
(4,450) |
(1,229) |
|||
Less: Employer taxes on employee stock transactions |
(67) |
— |
(103) |
— |
|||
Non-GAAP sales and marketing |
$ 24,943 |
$ 21,575 |
$ 49,763 |
$ 41,668 |
|||
GAAP general and administrative |
$ 8,429 |
$ 5,278 |
$ 16,355 |
$ 10,775 |
|||
Less: Stock-based compensation expense |
(1,919) |
(670) |
(3,267) |
(1,339) |
|||
Less: Employer taxes on employee stock transactions |
(13) |
— |
(84) |
— |
|||
Non-GAAP general and administrative |
$ 6,497 |
$ 4,608 |
$ 13,004 |
$ 9,436 |
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Reconciliation of GAAP operating loss to non-GAAP operating loss: |
|||||||
Total revenue |
$ 39,791 |
$ 29,699 |
$ 74,644 |
$ 57,654 |
|||
Loss from operations |
$ (15,233) |
$ (13,990) |
$ (34,221) |
$ (28,099) |
|||
Add: Stock-based compensation expense |
6,727 |
1,981 |
12,177 |
3,810 |
|||
Add: Employer taxes on employee stock transactions |
147 |
— |
280 |
— |
|||
Non-GAAP operating loss |
$ (8,359) |
$ (12,009) |
$ (21,764) |
$ (24,289) |
|||
Operating margin |
(38) % |
(47) % |
(46) % |
(49) % |
|||
Non-GAAP operating margin |
(21) % |
(40) % |
(29) % |
(42) % |
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Reconciliation of GAAP net loss attributable to common stockholders |
|||||||
Net loss attributable to common stockholders |
$ (15,369) |
$ (15,908) |
$ (35,203) |
$ (31,986) |
|||
Add: Stock-based compensation expense |
6,727 |
1,981 |
12,177 |
3,810 |
|||
Add: Employer taxes on employee stock transactions |
147 |
— |
280 |
— |
|||
Non-GAAP net loss attributable to common stockholders |
$ (8,495) |
$ (13,927) |
$ (22,746) |
$ (28,176) |
|||
GAAP net loss per share attributable to common stockholders |
$ (0.34) |
$ (1.76) |
$ (0.79) |
$ (4.16) |
|||
Non-GAAP net loss per share attributable to common stockholders |
$ (0.19) |
$ (1.54) |
$ (0.51) |
$ (3.66) |
|||
Weighted average shares outstanding, basic and diluted |
44,648 |
9,045 |
44,459 |
7,696 |
The following table presents a reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP measure, for each of the periods indicated (in thousands, unaudited):
Three Months Ended |
Six Months Ended |
||||||
2022 |
2021 |
2022 |
2021 |
||||
Net cash used in operating activities |
$ (7,655) |
$ (15,986) |
$ (16,262) |
$ (19,175) |
|||
Less: Additions to property and equipment |
(1,677) |
(20) |
(2,476) |
(250) |
|||
Free cash flow |
$ (9,332) |
$ (16,006) |
$ (18,738) |
$ (19,425) |
|||
Net cash provided by (used in) investing activities |
$ 5,687 |
$ 1,668 |
$ (39,142) |
$ 4,902 |
|||
Net cash provided by financing activities |
$ 753 |
$ 216,339 |
$ 6,892 |
$ 216,347 |
Key Business Metrics (in millions) (unaudited) |
||||||||||||
As of |
||||||||||||
|
|
|
|
|
|
|||||||
2021 |
2021 |
2021 |
2022 |
2022 |
2022 |
|||||||
Annual Recurring Revenue |
$ 109.5 |
$ 115.2 |
$ 122.3 |
$ 132.9 |
$ 139.7 |
$ 145.2 |
View original content to download multimedia:https://www.prnewswire.com/news-releases/couchbase-announces-second-quarter-fiscal-2023-financial-results-301619726.html
SOURCE
Investor Contact: Edward Parker, ICR for Couchbase, IR@couchbase.com; Media Contact: Michelle Lazzar, Couchbase Communications, CouchbasePR@couchbase.com