UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2022
OR
| 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
__________________________________
(Exact name of registrant as specified in its charter)
__________________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices and Zip Code) | ||||||||
(650 ) 417-7500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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 x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
| Large accelerated filer | o | Accelerated filer | o | |||||||||||
x | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
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 x
As of August 31, 2022, the registrant had 44,786,337 shares of common stock outstanding.
Table of Contents
| Page | ||||||||
i
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 Quarterly Report on 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 customers 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, as well as market acceptance of new products and features;
•our expectations regarding future developments with respect to Couchbase Capella, our fully-managed database-as-a-service (“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 macroeconomic conditions, as well as inflation concerns, rising interest rates and recessionary fears, 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 Quarterly Report on 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment.
2
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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, 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 you are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. If any of the following risks or if any of those listed elsewhere in this Quarterly Report on 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 and key business metrics may fluctuate significantly, and if we fail to meet the expectations of analysts or investors, the market price of our common stock 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.
3
•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 key business metrics with internal systems and tools and do not independently verify such metrics. Certain of these 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 and assets 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 certain source code under a source-available license, the Business Source License version 1.1 (“BSL 1.1”) may harm the adoption of our source code.
4
•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.
5
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, | ||||||||||
| 2022 | 2022 | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Short-term investments | |||||||||||
Accounts receivable, net | |||||||||||
Deferred commissions | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
Deferred commissions, noncurrent | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued compensation and benefits | |||||||||||
Other accrued expenses | |||||||||||
Operating lease liabilities | |||||||||||
Deferred revenue | |||||||||||
Total current liabilities | |||||||||||
Operating lease liabilities, noncurrent | |||||||||||
Deferred revenue, noncurrent | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 9) | |||||||||||
| Stockholders’ equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
COUCHBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| License | $ | $ | $ | $ | |||||||||||||||||||
| Support and other | |||||||||||||||||||||||
| Total subscription revenue | |||||||||||||||||||||||
| Services | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | |||||||||||||||||||||||
| Services | |||||||||||||||||||||||
| Total cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense), net | ( | ( | |||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Cumulative dividends on Series G redeemable convertible preferred stock | ( | ( | |||||||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share attributable to common stockholders, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
COUCHBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(in thousands)
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Net unrealized gains (losses) on investments, net of tax | ( | ( | ( | ||||||||||||||||||||
| Total comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
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 Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of April 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on investments | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of July 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of April 30, 2021 | $ | $ | $ | $ | ( | $ | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of redeemable convertible preferred stock to common stock upon initial public offering | ( | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions and other issuance costs | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Settlement of fractional shares to be paid in cash | — | — | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on investments | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of July 31, 2021 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
9
| Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with employee stock purchase plan | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on investments | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of July 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 31, 2021 | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of redeemable convertible preferred stock to common stock upon initial public offering | ( | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions and other issuance costs | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Settlement of fractional shares to be paid in cash | — | — | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on investments | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of July 31, 2021 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
10
COUCHBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| Six Months Ended July 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Stock-based compensation, net of amounts capitalized | |||||||||||
| Amortization of deferred commissions | |||||||||||
| Non-cash lease expense | |||||||||||
| Foreign currency transaction losses | |||||||||||
| Other | |||||||||||
| Changes in operating assets and liabilities | |||||||||||
| Accounts receivable | |||||||||||
| Deferred commissions | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Accrued compensation and benefits | ( | ( | |||||||||
| Accrued expenses and other liabilities | ( | ||||||||||
| Operating lease liabilities | ( | ||||||||||
| Deferred revenue | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of short-term investments | ( | ( | |||||||||
| Maturities of short-term investments | |||||||||||
| Additions to property and equipment | ( | ( | |||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Proceeds from issuance of common stock under ESPP | |||||||||||
| Proceeds from initial public offering, net of underwriting discounts and commissions | |||||||||||
| Payments of deferred offering costs | ( | ||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash | |||||||||||
| Beginning of period | |||||||||||
| End of period | $ | $ | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash included in other assets | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
| Supplemental disclosures of cash activities | |||||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Cash paid for interest | $ | $ | |||||||||
| Non-cash investing and financing activities: | |||||||||||
| Stock-based compensation capitalized as internal-use software costs | $ | $ | |||||||||
| Net change in unrealized gains or losses on available-for-sale debt securities | $ | ( | $ | ( | |||||||
Change in deferred offering costs included in accounts payable and other accrued expenses | $ | $ | |||||||||
Change in purchases of property and equipment included in accounts payable and other accrued expenses | $ | $ | |||||||||
| Conversion of redeemable convertible preferred stock to common stock | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
11
COUCHBASE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of January 31, 2022, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all the information required by GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of only normal recurring adjustments) that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three and six months ended July 31, 2022, are not necessarily indicative of the results to be expected for the year ending January 31, 2023, or for any other interim period or for any other future year.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the year ended January 31, 2022, as filed with the SEC on March 31, 2022.
Initial Public Offering
In July 2021, the Company completed its initial public offering (“IPO”), for the sale and issuance of 9,589,999 shares of its common stock at $24.00 per share, which included 1,250,869 shares issued pursuant to the exercise of the underwriters’ option to purchase additional shares. The Company received net proceeds of $214.9 million, after deducting underwriters’ discounts and commissions and before consideration of other issuance costs. In connection with the IPO, all 26,710,600 shares of outstanding redeemable convertible preferred stock automatically converted into an equivalent number of shares of common stock, inclusive of 640,387 shares of additional stock issued related to preferred stock conversion and dividend features.
Reverse Stock Split
On June 30, 2021, the Company effected a 2.5 -for-1 reverse stock split of its outstanding common stock, common stock warrants, preferred stock, and stock option awards. All issued and outstanding shares of common stock, common stock warrants, preferred stock, stock option awards and per share data have been adjusted in these condensed consolidated financial statements, on a retrospective basis, to reflect the reverse stock split for all periods presented. The par value of the common stock and preferred stock was not adjusted because of the reverse stock split.
Fiscal Year
The Company’s fiscal year ends on January 31. Unless otherwise stated, references to year in these condensed consolidated financial statements relate to fiscal year rather than calendar year.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Couchbase, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts stated in the financial statements and accompanying notes. Such estimates include standalone selling prices for each distinct performance obligation, capitalized internal-use software costs, expected period of benefit for deferred commissions, valuation of the Company’s common stock prior to the IPO in July 2021, valuation of stock-based awards, the determination of allowance for doubtful accounts, the incremental borrowing rate used to measure operating liabilities, and accounting for income taxes. The Company bases its estimates on historical experience and assumptions that management considers reasonable.
The Company assesses these estimates on a regular basis; however, actual results could differ from these estimates. Estimates and assumptions about future events and their effects, including the impact of the COVID-19 pandemic, cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the condensed consolidated financial statements as new events occur and additional information becomes known. To the extent the Company’s actual results differ materially from those estimates and assumptions, the Company’s future financial statements could be affected.
COVID-19
While the duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the extent and effectiveness of containment actions, it has already had an adverse effect on the global economy and the lasting effects of the pandemic continue to be unknown. The Company may experience customer losses, including due to bankruptcy or customers ceasing operations, which may result in delays in collections or an inability to collect accounts receivable from these customers. The impact of COVID-19 on the Company’s financial condition, results of operations, or liquidity continues to remain uncertain, and as of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or an adjustment to the carrying value of the Company’s assets or liabilities. These estimates may change, as new events occur and additional information is obtained, which will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.
Significant Accounting Policies
Except for the accounting policy for leases, which was updated as a result of adopting a new accounting standard, there have been no material changes to the significant accounting policies that were disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022.
See “Recently Adopted Accounting Pronouncements” below for additional information on the impact of the adoption of the new accounting standard for leases on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The Company adopted this guidance on February 1, 2022 prospectively for implementation costs incurred after the date of adoption, and the adoption did not have a material impact on its consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by amending and clarifying existing guidance in ASC 740, as well as removing certain exceptions within ASC 740. The Company adopted this guidance on February 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.
Leases
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02 and several amendments, codified as ASC 842, Leases which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. The
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Company adopted the guidance on February 1, 2022 utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of fiscal 2023.
The Company elected the package of transitional practical expedients upon which, among other provisions, allowed the Company not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs, for any existing leases on the adoption date. The Company elected not to record leases that, at the commencement date, have a lease term of 12 months or less. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of ROU assets. The Company also did not elect to combine its lease and non-lease components. Non-lease components that are not fixed are expensed as incurred as variable lease payments.
Lease ROU assets and liabilities, with the exception of short-term leases, are recognized at the commencement date based on the present value of lease payments over the lease term. The Company estimates the discount rate based on the information available at the lease commencement date unless the implicit rate is readily determinable. For leases that commenced prior to the adoption of Topic 842, the Company used the discount rate on February 1, 2022. The lease ROU assets also include any lease payments made and exclude lease incentives such as tenant improvement allowances. Options to extend the lease term are included in the lease term when it is reasonably certain the extension option will be exercised.
Upon adoption of ASC 842, the Company recognized operating lease ROU assets and operating lease liabilities of $6.7 million and $7.5 million, respectively, as of February 1, 2022 and did not include any retrospective adjustments to comparative periods to reflect the adoption of ASC 842. The difference of $0.8 million between operating lease ROU assets and operating lease liabilities at the adoption date related to deferred rent.
See Note 8, “Leases” to the Notes to Condensed Consolidated Financial Statements for more information.
Accounting Pronouncements Not Yet Adopted
Under the Jumpstart Our Business Startups Act (the “JOBS Act”), the Company meets the definition of an emerging growth company and can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the Company is no longer an emerging growth company or until the Company affirmatively and irrevocably opts out of the extended transition period.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications made more recently. For trade receivables, loans and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The Company plans to adopt this standard on February 1, 2023 and is currently evaluating the impact of the adoption on its condensed consolidated financial statements.
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3. Cash Equivalents and Short-Term Investments
The following tables summarize the Company’s cash equivalents and short-term investments (in thousands):
As of July 31, 2022 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| Cash Equivalents | |||||||||||||||||||||||
| Money market funds | $ | $ | — | $ | — | $ | |||||||||||||||||
| Total cash equivalents | — | — | |||||||||||||||||||||
| Short-Term Investments | |||||||||||||||||||||||
| U.S. government securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Asset-backed securities | ( | ||||||||||||||||||||||
| Total short-term investments | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
As of January 31, 2022 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| Cash Equivalents | |||||||||||||||||||||||
| Money market funds | $ | $ | — | $ | — | $ | |||||||||||||||||
| Total cash equivalents | — | — | |||||||||||||||||||||
| Short-Term Investments | |||||||||||||||||||||||
| U.S. government treasury securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Commercial paper | ( | ||||||||||||||||||||||
| Total short-term investments | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ||||||||||||||||||
During the three and six months ended July 31, 2022 and 2021, the Company did not
As of July 31, 2022, the Company’s short-term investments consisted of $118.5 million and $27.3 million with a contractual maturity date of less than one year and greater than one year, respectively. As of January 31, 2022, the Company’s short-term investments consisted of $108.3 million and $2.0 million with a contractual maturity of less than one year and greater than one year, respectively.
As of July 31, 2022, the Company had 35 short-term investments in an unrealized loss position. These short-term investments had an estimated fair value of $122.1 million and were not in a continuous unrealized loss position for more than twelve months. As of January 31, 2022, the Company had 25 short-term investments in an unrealized loss position. These short-term investments had an estimated fair value of $71.8 million and were not in a continuous unrealized loss position for more than twelve months. During the three and six months ended July 31, 2022, the Company had no
4. Fair Value Measurements
The Company accounts for certain of its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
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Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts reflected on the condensed consolidated balance sheets for cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short maturities of those instruments.
The following tables present the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis (in thousands):
As of July 31, 2022 | |||||||||||||||||
| Level 1 | Level 2 | Total | |||||||||||||||
| Cash Equivalents | |||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||
| Total cash equivalents | |||||||||||||||||
| Short-Term Investments | |||||||||||||||||
| U.S. government treasury securities | |||||||||||||||||
| Corporate debt securities | |||||||||||||||||
| Commercial paper | |||||||||||||||||
| Asset-backed securities | |||||||||||||||||
| Total short-term investments | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
As of January 31, 2022 | |||||||||||||||||
| Level 1 | Level 2 | Total | |||||||||||||||
| Cash Equivalents | |||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||
| Total cash equivalents | |||||||||||||||||
| Short-Term Investments | |||||||||||||||||
| U.S. government treasury securities | |||||||||||||||||
| Corporate debt securities | |||||||||||||||||
| Commercial paper | |||||||||||||||||
| Total short-term investments | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The Company classifies its money market funds within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company classifies its asset-backed securities, commercial paper, U.S. government securities, and corporate debt securities within Level 2 because they are valued using inputs other than quoted prices which are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.
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5. Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
As of July 31, | As of January 31, | ||||||||||
| 2022 | 2022 | ||||||||||
| Prepaid expenses | $ | $ | |||||||||
| Prepaid software | |||||||||||
| Other current assets | |||||||||||
| Total prepaid expenses and other current assets | $ | $ | |||||||||
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
| As of July 31, | As of January 31, | ||||||||||
| 2022 | 2022 | ||||||||||
| Computer equipment | $ | $ | |||||||||
| Furniture and fixtures | |||||||||||
| Capitalized internal-use software | |||||||||||
| Leasehold improvements | |||||||||||
| Construction in progress | |||||||||||
| Construction in progress—capitalized internal-use software | |||||||||||
| Total gross property and equipment | |||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense was $0.8 million and $0.7 million for three months ended July 31, 2022 and 2021, respectively, and $1.5 million and $1.4 million for the six months ended July 31, 2022 and 2021, respectively. Included in these amounts were the amortization of capitalized internal-use software development costs of $0.5 million and $0.5 million in the three months ended July 31, 2022 and 2021, respectively, and $1.0 million and $1.0 million for the six months ended July 31, 2022 and 2021, respectively.
Accrued Compensation and Benefits
Accrued compensation and benefits consisted of the following (in thousands):
As of July 31, | As of January 31, | ||||||||||
| 2022 | 2022 | ||||||||||
| Accrued bonus | $ | $ | |||||||||
| Accrued commissions | |||||||||||
| Accrued payroll and benefits | |||||||||||
| Employee contributions under the ESPP | |||||||||||
| Total accrued compensation and benefits | $ | $ | |||||||||
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Other Accrued Expenses
Other accrued expenses consisted of the following (in thousands):
As of July 31, | As of January 31, | ||||||||||
| 2022 | 2022 | ||||||||||
| Accrued professional fees | $ | $ | |||||||||
| Sales and value added tax payable | |||||||||||
| Income taxes payable | |||||||||||
| Other | |||||||||||