SEC Filing | Couchbase, Inc.

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base-10q_20210731.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-40601

Couchbase, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	26-3576987
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3250 Olcott Street Santa Clara, CA	95054
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 417-7500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common stock, par value $0.00001 per share		BASE		Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 31, 2021, the registrant had 43,342,865 shares of common stock, $0.00001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	72
Item 4.	Mine Safety Disclosures	72
Item 5.	Other Information	72
Item 6.	Exhibits	73
Signatures		74
Exhibit Index

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:

•

our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, our ability to determine reserves and our ability to achieve and maintain future profitability;

•

the sufficiency of our cash, cash equivalents and short-term investments to meet our liquidity needs;

•

the demand for our products and services or for data management solutions in general;

•

our ability to attract and retain users and partners;

•

our ability to develop new products and features and bring them to market in a timely manner and make enhancements to our offerings;

•

our expectations regarding future developments with respect to Couchbase Cloud, our fully-managed DBaaS offering;

•

our ability to compete with existing and new competitors in existing and new markets and offerings;

•

the impact of the COVID-19 pandemic and associated economic downturn on our business and results of operations;

•

our expectations regarding the effects of existing and developing laws, rules, regulations and other legal obligations, including with respect to taxation and data privacy and security;

•

our ability to manage risk associated with our business;

•

our expectations regarding new and evolving markets;

•

our ability to maintain, develop and protect our brand;

•

our ability, and our customers’ and our third-party service providers’ ability, to maintain the security and availability to each of our technological and physical infrastructures;

•

our expectations and management of future growth;

•

our expectations concerning relationships with third parties;

•

our ability to obtain, maintain, defend and enforce our intellectual property;

•

our use of third-party open source software in our solutions and the availability of portions of our source code on an open source basis;

•

our ability to successfully acquire and integrate companies and assets; and

•

the increased expenses associated with being a public company.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Form 10-Q. You should not rely upon forward-looking statements as predictions of future events.

We have based the forward-looking statements contained in this report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate

that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this report and the documents that we reference in this report and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

RISK FACTOR SUMMARY

Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face. You should carefully review and consider the full discussion of our risk factors below this summary, together with the other information in this Form 10-Q. If any of the following risks or if any of those listed elsewhere in this Form 10-Q actually occur, our business, reputation, financial condition, results of operations, revenue and future prospects could be seriously harmed. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.

•

We have a history of net losses, may not achieve or maintain profitability in the future and may not continue to grow on pace with historical rates.

•

We face intense competition and if we are unable to compete effectively, our business, financial condition and results of operations would be adversely affected.

•

We may fail to cost-effectively acquire new customers or obtain renewals, upgrades or expansions from our existing customers, which would adversely affect our business, financial condition and results of operations.

•

The market for our products and services is relatively new and evolving, and our future success depends on the growth and expansion of this market.

•

If we fail to innovate in response to changing customer needs, new technologies or other market requirements, our business, financial condition and results of operations could be harmed.

•

We have a limited operating history, which makes it difficult to predict our future results of operations.

•

Our future results of operations may fluctuate significantly, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

•

We recognize a significant portion of revenue from subscriptions over the term of the relevant subscription period, and as a result, downturns or upturns in sales are not immediately reflected in full in our results of operations.

•

We depend on our sales force, and we may fail to attract, retain, motivate or train our sales force, which could adversely affect our business, financial condition and results of operations.

•

Our sales strategy to target larger enterprises involves risks that may not be present or that are present to a lesser extent with respect to smaller enterprises, such as long and unpredictable sales cycles and sales efforts that require considerable time and expense.

•

If we are not able to maintain and enhance our brand, especially among enterprise architects, application developers and other key functions that support them, our business and results of operations may be adversely affected.

•

The global COVID-19 pandemic has harmed and could continue to harm our business and results of operations, as could other pandemics, natural disasters, political crises or other unexpected events.

•

Our business could be adversely affected by economic downturns.

•

Real or perceived errors, failures or bugs in our products or interruptions or performance problems associated with our technology and infrastructure could adversely affect our growth prospects, business, financial condition and results of operations.

•

Our ability to maintain and increase sales with our existing customers depends, in part, on the quality of our customer support, and our failure to offer high-quality support would harm our reputation and adversely affect our business and results of operations.

•

We track certain operational metrics with internal systems and tools and do not independently verify such metrics. Certain of our operational metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies in such metrics may adversely affect our business and reputation.

•

Our company culture has contributed to our success and if we cannot maintain this culture as we grow, our business could be harmed.

•

We may be unable to make acquisitions and investments or successfully integrate acquired companies into our business, and our acquisitions and investments may not meet our expectations, any of which could adversely affect our business, financial condition and results of operations.

•

If we are unable to maintain successful relationships with our partners, our business, financial condition and results of operations could be harmed.

•

Certain estimates and information we refer to publicly are based on information from third-party sources and we do not independently verify the accuracy or completeness of the data contained in such sources or the methodologies for collecting such data, and any real or perceived inaccuracies in such estimates and information may harm our reputation and adversely affect our business.

•

Our use of third-party open source software in our solutions, the availability of core portions of our source code on an open source basis and contributions to our open source projects could negatively affect our ability to sell our products and provide our services, subject us to possible litigation and allow third parties to access and use software and technology that we use in our business, all of which could adversely affect our business and results of operations.

•

Our distribution and licensing model could negatively affect our ability to monetize and protect our intellectual property rights.

•

Because of the rights accorded to third parties under open source licenses, there may be fewer technology barriers to entry in the markets in which we compete and it may be relatively easy for new and existing competitors, some of whom may have greater resources than we have, to compete with us.

•

Our decision to license source code to Couchbase Server 7.0 under a source-available license, the Business Source License version 1.1, may harm the adoption of our source code for Couchbase Server 7.0.

•

We could incur substantial costs in obtaining, maintaining, protecting, defending and enforcing our intellectual property rights and any failure to obtain, maintain, protect, defend or enforce our intellectual property rights could reduce the value of our software and brand.

•

We have been and may in the future become subject to intellectual property disputes which may be costly to defend, subject us to significant liability, require us to pay significant damages and limit our ability to use certain technologies.

•

If our security measures, or those of our service providers or customers, are breached or unauthorized parties otherwise obtain access to our or our customers’ data or software, our products and services may be perceived as not being secure, customers may reduce or terminate their use of our products and services and we may face claims, litigation, regulatory investigations, significant liability and reputational damage.

•

A portion of our revenue is generated by sales to heavily regulated organizations, which are subject to a number of challenges and risks.

•

Our executive officers, directors and holders of 5% or more of our common stock continue to have substantial control over us, which will limit your ability to influence the outcome of important transactions, including a change in control.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

COUCHBASE, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)

	As of July 31,			As of January 31,
	2021			2021
Assets
Current assets
Cash and cash equivalents	$	239,246		$	37,297
Short-term investments		14,321			19,546
Accounts receivable, net		20,183			35,897
Deferred commissions		8,645			8,353
Prepaid expenses and other current assets		8,099			2,449
Total current assets		290,494			103,542
Property and equipment, net		5,578			6,506
Deferred commissions, noncurrent		5,394			4,941
Other assets		1,316			2,199
Total assets	$	302,782		$	117,188
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities
Accounts payable	$	7,153		$	2,428
Accrued compensation and benefits		9,020			9,110
Other accrued liabilities		3,575			4,154
Deferred revenue		48,980			57,168
Total current liabilities		68,728			72,860
Long-term debt		24,963			24,948
Deferred revenue, noncurrent		5,356			4,542
Other liabilities		1,312			1,358
Total liabilities		100,359			103,708
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, $0.00001 par value; 0 shares and 26,070,258 shares authorized as of July 31, 2021 and January 31, 2021, respectively; 0 shares and 26,070,213 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively; aggregate liquidation preference of $314,829 as of January 31, 2021		—			259,822
Stockholders’ equity (deficit)
Preferred stock, $0.00001 par value; 200,000,000 and 0 shares authorized as of July 31, 2021 and January 31, 2021, respectively; 0 shares issued outstanding as of July 31, 2021 and January 31, 2021, respectively		—			—
Common stock, $0.00001 par value; 1,000,000,000 and 43,200,000 shares authorized as of July 31, 2021 and January 31, 2021, respectively; 43,282,941 and 6,199,305 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively		—			—
Additional paid-in capital		515,245			37,410
Accumulated other comprehensive income		—			1
Accumulated deficit		(312,822	)		(283,753	)
Total stockholders’ equity (deficit)		202,423			(246,342	)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	302,782		$	117,188

The accompanying notes are an integral part of these condensed consolidated financial statements.

COUCHBASE, INC.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)

	Three Months Ended July 31,						Six Months Ended July 31,
	2021			2020			2021			2020
Revenue:
License	$	4,416		$	3,010		$	8,694		$	5,540
Support and other		23,613			20,627			45,800			39,269
Total subscription revenue		28,029			23,637			54,494			44,809
Services		1,670			1,523			3,160			3,396
Total revenue		29,699			25,160			57,654			48,205
Cost of revenue:
Subscription		2,072			1,276			4,124			2,273
Services		1,453			1,407			2,793			3,087
Total cost of revenue		3,525			2,683			6,917			5,360
Gross profit		26,174			22,477			50,737			42,845
Operating expenses:
Research and development		12,623			9,237			25,164			18,279
Sales and marketing		22,263			16,475			42,897			33,702
General and administrative		5,278			3,468			10,775			6,861
Total operating expenses		40,164			29,180			78,836			58,842
Loss from operations		(13,990	)		(6,703	)		(28,099	)		(15,997	)
Interest expense		(252	)		(2,495	)		(497	)		(4,016	)
Other income (expense), net		(77	)		614			7			307
Loss before income taxes		(14,319	)		(8,584	)		(28,589	)		(19,706	)
Provision for income taxes		151			254			480			482
Net loss	$	(14,470	)	$	(8,838	)	$	(29,069	)	$	(20,188	)
Cumulative dividends on Series G redeemable convertible preferred stock		(1,438	)		(1,150	)		(2,917	)		(1,150	)
Net loss attributable to common stockholders	$	(15,908	)	$	(9,988	)	$	(31,986	)	$	(21,338	)
Net loss per share attributable to common stockholders, basic and diluted	$	(1.76	)	$	(1.76	)	$	(4.16	)	$	(3.77	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		9,045			5,662			7,696			5,660

The accompanying notes are an integral part of these condensed consolidated financial statements.

COUCHBASE, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

(in thousands)

	Three Months Ended July 31,						Six Months Ended July 31,
	2021			2020			2021			2020
Net loss	$	(14,470	)	$	(8,838	)	$	(29,069	)	$	(20,188	)
Other comprehensive income (loss):
Net unrealized gains (losses) on investments, net of tax		1			—			(1	)		—
Total comprehensive loss	$	(14,469	)	$	(8,838	)	$	(29,070	)	$	(20,188	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

COUCHBASE, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(unaudited)

(in thousands, except shares)

	Redeemable Convertible Preferred Stock						Common Stock					Additional Paid-In			Accumulated Other Comprehensive Income			Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares			Amount		Capital			(Loss)			Deficit			(Deficit)
Balance as of April 30, 2020		18,901,887		$	155,506			5,659,677		$	—	$	31,481		$	—		$	(255,120	)	$	(223,639	)
Issuance of common stock upon exercise of stock options		—			—			12,810			—		58			—			—			58
Issuance of Series G redeemable convertible preferred stock, net of issuance costs		7,168,326			104,316			—			—		—			—			—			—
Stock-based compensation		—			—			—			—		1,366			—			—			1,366
Net loss		—			—			—			—		—			—			(8,838	)		(8,838	)
Balance as of July 31, 2020		26,070,213		$	259,822			5,672,487		$	—	$	32,905		$	—		$	(263,958	)	$	(231,053	)

	Redeemable Convertible Preferred Stock						Common Stock					Additional Paid-In			Accumulated Other Comprehensive Income			Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares			Amount		Capital			(Loss)			Deficit			(Deficit)
Balance as of April 30, 2021		26,070,213		$	259,822			6,460,868		$	—	$	40,686		$	(1	)	$	(298,352	)	$	(257,667	)
Issuance of common stock upon exercise of stock options		—			—			521,489			—		2,841			—			—		$	2,841
Conversion of redeemable convertible preferred stock to common stock upon initial public offering		(26,070,213	)		(259,822	)		26,710,600			—		259,822			—			—			259,822
Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions and other issuance costs		—			—			9,589,999			—		209,924			—			—		$	209,924
Settlement of fractional shares to be paid in cash		—			—			(15	)		—		(9	)		—			—			(9	)
Stock-based compensation		—			—			—			—		1,981			—			—			1,981
Net unrealized gains (losses) on investments		—			—			—			—		—			1			—			1
Net loss		—			—			—			—		—			—			(14,470	)		(14,470	)
Balance as of July 31, 2021		—		$	—			43,282,941		$	—	$	515,245		$	—		$	(312,822	)	$	202,423

	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive Income		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital		(Loss)		Deficit			(Deficit)
Balance as of January 31, 2020		18,901,887	$	155,506		5,646,238	$	—	$	30,554	$	—	$	(243,770	)	$	(213,216	)
Issuance of common stock upon exercise of stock options		—		—		26,249		—		144		—		—			144
Issuance of Series G redeemable convertible preferred stock, net of issuance costs		7,168,326		104,316		—		—		—		—		—			—
Stock-based compensation		—		—