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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
__________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2023
OR
oTRANSITION 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)
__________________________________
Delaware26-3576987
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3250 Olcott Street
Santa Clara, California 95054
(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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.00001 per shareBASENasdaq 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 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 fileroAccelerated filer
x
Non-accelerated fileroSmaller reporting companyo
 Emerging growth companyx
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 November 30, 2023, the registrant had 48,071,639 shares of common stock outstanding.


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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;
macroeconomic conditions, foreign exchange fluctuation, 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, as well as the impact of artificial intelligence in business;
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.
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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. 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.
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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.
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, particularly in the current macroeconomic environment.
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.
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.
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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 or source available 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.
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.
Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business.
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.
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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 October 31,As of January 31,
20232023
Assets
Current assets
Cash and cash equivalents
$46,907 $40,446 
Short-term investments
109,719 127,856 
Accounts receivable, net
30,494 39,847 
Deferred commissions
12,874 13,096 
Prepaid expenses and other current assets
7,450 8,234 
Total current assets
207,444 229,479 
Property and equipment, net
9,630 7,430 
Operating lease right-of-use assets5,259 6,940 
Deferred commissions, noncurrent
7,896 7,524 
Other assets
1,760 1,666 
Total assets
$231,989 $253,039 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$3,172 $1,407 
Accrued compensation and benefits
9,124 12,641 
Other accrued expenses
3,399 6,076 
Operating lease liabilities
2,980 3,117 
Deferred revenue
71,529 71,716 
Total current liabilities
90,204 94,957 
Operating lease liabilities, noncurrent
2,742 4,543 
Deferred revenue, noncurrent
3,775 3,275 
Total liabilities
96,721 102,775 
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.00001 par value; 200,000,000 shares authorized as of October 31, 2023 and January 31, 2023; zero shares issued outstanding as of October 31, 2023 and January 31, 2023
  
Common stock, $0.00001 par value; 1,000,000,000 shares authorized as of October 31, 2023 and January 31, 2023; 48,055,227 and 45,432,029 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively
  
Additional paid-in capital
604,637 561,547 
Accumulated other comprehensive loss
(112)(807)
Accumulated deficit
(469,257)(410,476)
Total stockholders’ equity
135,268 150,264 
Total liabilities and stockholders’ equity
$231,989 $253,039 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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COUCHBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Revenue:
License$4,577 $3,519 $14,318 $14,908 
Support and other39,420 32,201 109,175 89,852 
Total subscription revenue43,997 35,720 123,493 104,760 
Services1,816 2,837 6,455 8,441 
Total revenue45,813 38,557 129,948 113,201 
Cost of revenue:
Subscription3,549 2,631 11,067 7,548 
Services1,562 2,244 5,875 6,759 
Total cost of revenue5,111 4,875 16,942 14,307 
Gross profit40,702 33,682 113,006 98,894 
Operating expenses:
Research and development15,903 13,998 47,578 42,760 
Sales and marketing31,602 27,448 96,503 81,764 
General and administrative10,739 8,828 30,823 25,183 
Restructuring
  46  
Total operating expenses58,244 50,274 174,950 149,707 
Loss from operations(17,542)(16,592)(61,944)(50,813)
Interest expense (26)(43)(76)
Other income (expense), net
1,298 317 3,986 22 
Loss before income taxes(16,244)(16,301)(58,001)(50,867)
Provision for income taxes11 376 780 1,013 
Net loss$(16,255)$(16,677)$(58,781)$(51,880)
Net loss per share, basic and diluted$(0.34)$(0.37)$(1.26)$(1.16)
Weighted-average shares used in computing net loss per share, basic and diluted47,586 44,932 46,724 44,619 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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COUCHBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(in thousands)
Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Net loss$(16,255)$(16,677)$(58,781)$(51,880)
Other comprehensive loss:
Net unrealized gains (losses) on investments, net of tax189 (332)695 (1,180)
Total comprehensive loss$(16,066)$(17,009)$(58,086)$(53,060)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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COUCHBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
(in thousands, except shares)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
(Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
(Deficit)
SharesAmount
Balance as of July 31, 202347,063,914 $ $588,845 $(301)$(453,002)$135,542 
Issuance of common stock upon exercise of stock options406,971 — 2,703 — — 2,703 
Issuance of common stock in connection with employee stock purchase plan94,730 — 1,153 — — 1,153 
Vesting of restricted stock units489,612 — — — — — 
Stock-based compensation— — 11,936 — — 11,936 
Net unrealized gains on investments— — — 189 — 189 
Net loss— — — — (16,255)(16,255)
Balance as of October 31, 202348,055,227 $ $604,637 $(112)$(469,257)$135,268 
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
(Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
(Deficit)
SharesAmount
Balance as of July 31, 202244,771,717 $ $544,614 $(1,043)$(377,185)166,386 
Issuance of common stock upon exercise of stock options94,725 — 666 — — 666 
Issuance of common stock in connection with employee stock purchase plan76,816 — 959 — — 959 
Vesting of restricted stock units176,020 — — — — — 
Stock-based compensation— — 7,097 — — 7,097 
Net unrealized losses on investments— — — (332)— (332)
Net loss— — — — (16,677)(16,677)
Balance as of October 31, 202245,119,278 $ $553,336 $(1,375)$(393,862)$158,099 

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Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
(Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of January 31, 202345,432,029 $ $561,547 $(807)$(410,476)$150,264 
Issuance of common stock upon exercise of stock options1,174,523 — 7,353 — — 7,353 
Issuance of common stock in connection with employee stock purchase plan168,843 — 2,000 — — 2,000 
Vesting of restricted stock units1,279,832 — — — — — 
Stock-based compensation— — 33,737 — — 33,737 
Net unrealized gains on investments— — — 695 — 695 
Net loss— — — — (58,781)(58,781)
Balance as of October 31, 202348,055,227 $ $604,637 $(112)$(469,257)$135,268 
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
(Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of January 31, 202243,847,484 $ $525,392 $(195)$(341,982)$183,215 
Issuance of common stock upon exercise of stock options655,656 — 4,033 — — 4,033 
Issuance of common stock in connection with employee stock purchase plan314,315 — 4,484 — — 4,484 
Vesting of restricted stock units301,823 — — — — — 
Stock-based compensation— — 19,427 — — 19,427 
Net unrealized losses on investments— — — (1,180)— (1,180)
Net loss— — — — (51,880)(51,880)
Balance as of October 31, 202245,119,278 $ $553,336 $(1,375)$(393,862)$158,099 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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COUCHBASE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended October 31,
20232022
Cash flows from operating activities
Net loss$(58,781)$(51,880)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization2,034 2,304 
Stock-based compensation, net of amounts capitalized33,148 18,930 
Amortization of deferred commissions13,742 12,549 
Non-cash lease expense2,313 2,152 
Foreign currency transaction losses649 1,298 
Other(2,580)177 
Changes in operating assets and liabilities
Accounts receivable9,114 13,404 
Deferred commissions(13,892)(12,269)
Prepaid expenses and other assets837 691 
Accounts payable1,735 1,476 
Accrued compensation and benefits(3,517)(7,076)
Other accrued expenses(2,997)300 
Operating lease liabilities(2,561)(1,930)
Deferred revenue313 (11,108)
 Net cash used in operating activities(20,443)(30,982)
Cash flows from investing activities
Purchases of short-term investments(90,456)(110,637)
Maturities of short-term investments111,974 81,143 
Additions to property and equipment(3,425)(4,093)
 Net cash provided by (used in) investing activities18,093 (33,587)
Cash flows from financing activities
Proceeds from exercise of stock options7,353 4,033 
Proceeds from issuance of common stock under ESPP2,000 4,484 
 Net cash provided by financing activities9,353 8,517 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(542)(855)
Net increase (decrease) in cash, cash equivalents and restricted cash6,461 (56,907)
Cash, cash equivalents and restricted cash
Beginning of period40,989 96,231 
End of period$47,450 $39,324 
Cash and cash equivalents$46,907 $38,781 
Restricted cash included in other assets543 543 
Total cash, cash equivalents and restricted cash$47,450 $39,324 
Supplemental disclosures of cash activities
Cash paid for income taxes$1,245 $620 
Cash paid for interest$43 $76 
Non-cash investing and financing activities:
Stock-based compensation capitalized as internal-use software costs$589 $497 
Net change in unrealized gains or losses on available-for-sale debt securities$695 $(1,180)
Change in purchases of property and equipment included in accounts payable and other accrued expenses
$224 $169 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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COUCHBASE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business
Couchbase, Inc. provides a leading cloud database platform for modern applications. Couchbase was incorporated in the State of Delaware in 2008 and is headquartered in Santa Clara, California. In these notes to the unaudited condensed consolidated financial statements, the “Company,” “Couchbase,” “we,” “us” and “our” refers to Couchbase, Inc. and its subsidiaries on a consolidated basis.
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, 2023, 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 nine months ended October 31, 2023, are not necessarily indicative of the results to be expected for the year ending January 31, 2024, 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 Companys Annual Report on Form 10-K for the year ended January 31, 2023, as filed with the SEC on March 29, 2023.
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.
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, but are not limited to, standalone selling prices for each distinct performance obligation, capitalized internal-use software costs, expected period of benefit for deferred commissions, valuation of stock-based awards, the determination of allowance for doubtful accounts, the incremental borrowing rate used to measure operating lease 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 macroeconomic conditions such as inflation and foreign exchange fluctuations, 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.
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Significant Accounting Policies
Other than those described below related to the Company's adoption of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), there have been no material changes to the Company's significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023, that have had a material impact on its condensed consolidated financial statements and related notes.
Short-Term Investments
The Company determines the appropriate classification of its investments at the time of purchase. As the Company views these securities as available to support current operations, it accounts for these debt securities as available-for-sale and classifies them as current assets on its condensed consolidated balance sheets. These securities are recorded at estimated fair value. When the fair value of a security declines below its amortized cost basis, the carrying value of the security will be reduced to its fair value if it is more likely than not that management is required to sell the impaired security before recovery of its amortized basis, or management has the intention to sell the security. If neither of these conditions are met, the Company determines whether any portion of the decline is due to credit losses. Any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in the Company’s condensed consolidated statement of operations. When the fair value of the security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in accumulated other comprehensive income (loss) and are recognized in the Company’s condensed consolidated statement of operations only if the Company sells or intends to sell the security before recovery of its cost basis. Realized gains and losses are determined based on the specific identification method and are reported in interest and other income (expense), net in the Company’s condensed consolidated statements of operations.
Accounts Receivable
Accounts receivable includes billed and unbilled receivables, net of allowance for credit losses. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The allowance for credit losses is estimated based on the Company’s assessment of the collectibility of accounts receivable by considering various factors, including the age of each outstanding invoice, the collection history of each customer, historical write-off experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions over the life of the receivable. The Company assesses collectibility by reviewing accounts receivable on an aggregate basis when similar characteristics exist and on an individual basis when specific customers with collectibility issues are identified. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk primarily consist of cash, cash equivalents, restricted cash, short-term investments and accounts receivable. The Company maintains its cash and cash equivalents, restricted cash and short-term investments with high-quality financial institutions. Cash equivalents consist of money market funds which are invested through financial institutions in the United States. Deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on these deposits.
For its accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the consolidated balance sheet. Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain customers and generally does not require collateral on accounts receivable. The Company maintains an allowance for doubtful accounts and historically bad debts have not been material.
No customer accounted for 10% or more of total revenue for the three and nine months ended October 31, 2023 and 2022. No customer accounted for 10% or more of gross accounts receivable as of October 31, 2023, and one customer accounted for approximately 12% of gross accounts receivable as of January 31, 2023.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
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
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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 adopted this standard effective February 1, 2023 on a modified retrospective basis, and the adoption did not result in any cumulative effect adjustment in the condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
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.
3. Cash Equivalents and Short-Term Investments
The following tables summarize the Company’s cash equivalents and short-term investments (in thousands):
As of October 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash Equivalents
Money market funds$30,622 $— $— $30,622 
Total cash equivalents30,622 — — 30,622 
Short-Term Investments
U.S. government treasury securities89,576  (63)89,513 
U.S. government agency securities11,977  (41)11,936 
Corporate debt securities5,813  (7)5,806 
Commercial paper1,999   1,999 
Asset-backed securities466  (1)465 
Total short-term investments109,831  (112)109,719 
Total$140,453 $ $(112)$140,341 
As of January 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash Equivalents
Money market funds$29,239 $— $— $29,239 
Corporate debt securities$1,122 $— $— 1,122 
Total cash equivalents30,361 — — 30,361 
Short-Term Investments
U.S. government treasury securities71,981 1 (729)71,253 
U.S. government agency securities7,839 3 (1)7,841 
Corporate debt securities11,952  (50)11,902 
Commercial paper31,500   31,500 
Asset-backed securities5,391  (31)5,360 
Total short-term investments128,663 4 (811)127,856 
Total$159,024 $4 $(811)$158,217 
During the three and nine months ended October 31, 2023 and 2022, the Company did not reclassify any amounts to earnings from accumulated other comprehensive income (loss) related to unrealized gains or losses in other income (expense), net in the condensed consolidated statements of operations.
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As of October 31, 2023, the Company’s short-term investments consisted of $107.7 million and $2.0 million with a contractual maturity date of less than one year and greater than one year, respectively. As of January 31, 2023, the Company’s short-term investments consisted of $122.0 million and $5.9 million with a contractual maturity of less than one year and greater than one year, respectively.
The Company’s gross unrealized losses and fair values for short-term investments that were in an unrealized loss position as of October 31, 2023 and January 31, 2023, aggregated by investment category and the length of time that individual securities have been in a continuous loss position were as follows (in thousands):
As of October 31, 2023
Less Than 12 Months12 Months or GreaterTotal
Unrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair Value
U.S. government treasury securities$(49)$77,681 $(14)$5,977 $(63)$83,658 
U.S. government agency securities(41)11,936   (41)11,936 
Corporate debt securities(7)5,806   (7)5,806 
Asset-backed securities  (1)465 (1)465 
Total$(97)$95,423 $(15)$6,442 $(112)$101,865 
As of January 31, 2023
Less Than 12 Months12 Months or GreaterTotal
Unrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair Value
U.S. government treasury securities$(729)$64,397 $ $ $(729)$64,397 
U.S. government agency securities(1)1,918   (1)1,918 
Corporate debt securities(49)8,909 (1)1,999 (50)10,908 
Asset-backed securities(31)5,359   (31)5,359 
Total$(810)$80,583 $(1)$1,999 $(811)$82,582 
As of October 31, 2023, the Company had 28 short-term investments in an unrealized loss position. As of January 31, 2023, the Company had 27 short-term investments in an unrealized loss position. As of October 31, 2023, the Company determined that the declines in the market value of its investment portfolio were not driven by credit related factors. During the three and nine months ended October 31, 2023, the Company did not recognize any losses on its short-term investments due to credit related factors.
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.
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.
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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 October 31, 2023
Level 1Level 2Total
Cash Equivalents
Money market funds$30,622 $ $30,622 
Total cash equivalents30,622  30,622 
Short-Term Investments
U.S. government treasury securities 89,513 89,513 
U.S. government agency securities 11,936 11,936 
Corporate debt securities 5,806 5,806 
Commercial paper 1,999 1,999 
Asset-backed securities 465 465 
Total short-term investments 109,719 109,719 
Total$30,622 $109,719 $140,341 
As of January 31, 2023
Level 1Level 2Total
Cash Equivalents
Money market funds$29,239 $ $29,239 
Corporate debt securities$ 1,122 1,122 
Total cash equivalents29,239 1,122 30,361 
Short-Term Investments
U.S. government treasury securities 71,253 71,253 
U.S. government agency securities 7,841 7,841 
Corporate debt securities 11,902 11,902 
Commercial paper 31,500 31,500 
Asset-backed securities 5,360 5,360 
Total short-term investments 127,856 127,856 
Total$29,239 $128,978 $158,217 
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 U.S. government agency securities, asset-backed securities, commercial paper, U.S. government treasury 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.
5. Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
As of October 31,
As of January 31,
20232023
Prepaid expenses$3,058 $4,140 
Prepaid software3,475 2,560 
Other current assets917 1,534 
Total prepaid expenses and other current assets$7,450 $8,234 
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Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
As of October 31,As of January 31,
20232023
Computer equipment$3,753 $3,586 
Furniture and fixtures418 342 
Capitalized internal-use software8,435 7,884 
Leasehold improvements1,903 1,889 
Construction in progress—capitalized internal-use software6,791 3,395 
Total gross property and equipment21,300 17,096 
Accumulated depreciation and amortization(11,670)(9,666)
Total property and equipment, net$9,630 $7,430 
Depreciation and amortization expense was $0.4 million and $0.8 million for three months ended October 31, 2023 and 2022, respectively, and $2.0 million and $2.3 million for the nine months ended October 31, 2023 and 2022, respectively. Included in these amounts were the amortization of capitalized internal-use software development costs of $0.3 million and $0.6 million in the three months ended October 31, 2023 and 2022, respectively, and $1.5 million and $1.6 million for the nine months ended October 31, 2023 and 2022, respectively.
Accrued Compensation and Benefits
Accrued compensation and benefits consisted of the following (in thousands):
As of October 31,
As of January 31,
20232023
Accrued bonus$4,060 $5,944 
Accrued commissions2,248 3,593 
Accrued payroll and benefits2,261 1,995 
Employee contributions under the ESPP555 1,109 
Total accrued compensation and benefits$9,124 $12,641 
Other Accrued Expenses
Other accrued expenses consisted of the following (in thousands):
As of October 31,
As of January 31,
20232023
Accrued professional fees$806 $1,020 
Sales and value added tax payable202 737 
Income taxes payable125 743 
Accrued restructuring 1,567 
Other2,266 2,009 
Total other accrued expenses$3,399 $6,076 
6. Deferred Revenue and Remaining Performance Obligations
The following table presents the deferred revenue balances (in thousands):
As of October 31,
As of January 31,
20232023
Deferred revenue, current$71,529 $71,716 
Deferred revenue, noncurrent3,775 3,275 
Total deferred revenue$75,304 $74,991 
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Changes in the deferred revenue balances during the nine months ended October 31, 2023 and 2022 were as follows (in thousands):
Nine Months Ended October 31,
20232022
Beginning balance$74,991 $71,723 
Performance obligations satisfied during the period that were included in the deferred revenue balance at the beginning of the year(63,887)(56,768)
Increases due to invoicing prior to satisfaction of performance obligations64,200 45,661 
Ending balance$75,304 $60,616 
Remaining performance obligations (“RPOs”) represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods.
As of October 31, 2023, the Company’s RPOs were $164.4 million. The Company expects to recognize revenue of $111.8 million of these remaining performance obligations over the next twelve months with the remaining balances recognized thereafter.
7. Debt
Interest expense consisting primarily of unused Credit Facility (as defined below) fees was immaterial for the three and nine months ended October 31, 2023 and 2022.
Term Loan
In August 2018, the Company entered into an agreement for a term loan with a certain lender, which was amended in April 2019 and in June 2020 (the “Amended Loan”). The Amended Loan provided maximum borrowings of up to $25.0 million, maturing in June 2024. In January 2021, the Company repaid all outstanding indebtedness owed pursuant to the Amended Loan and terminated the agreement. Pursuant to the termination of the Amended Loan, the related security interests have been removed and the covenants shall be of no further force and effect.
In connection with the April 2019 amendment, the Company issued warrants to purchase 105,350 shares of the Company’s common stock at $7.48 per share, exercisable over 10 years. The fair value of the warrants was recorded to equity and as a debt discount that was amortized to interest over the term of the loan. The total fair value of the common stock warrants was $0.4 million. As of October 31, 2023, all warrants were outstanding and exercisable.
Credit Facility
In January 2021, the Company entered into an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (the “Credit Facility”) providing the Company the ability to borrow up to $40.0 million from a revolving line of credit and extending the maturity date to January 2024. Upon the execution of the amended Credit Facility, the Company borrowed $25.0 million from the line of credit, which was repaid in full during the fiscal year ended January 31, 2022.
The line of credit was secured with a pledge on substantially all the assets of the Company, except any intellectual property and was subject to a minimum revenue covenant. The amendment also added certain financial covenants, including covenants related to certain financial metrics, that if not met, would limit the amount of additional borrowings under the line of credit. The amended line of credit agreement also required the company to maintain an adjusted quick ratio (as defined by the agreement) of at least 1.15 to 1.0. The line of credit agreement also contained certain customary affirmative and negative covenants as well as customary events of default, subject to certain exceptions, including restrictions on the Company’s ability to, among other things, incur debt and liens, maintain collateral accounts, undergo fundamental changes including mergers or consolidations, dispose assets including selling, transferring or assigning assets, pay dividends or other distributions or make or permit payments on any subordinated debt. The outstanding principal balance was due at maturity with interest payable monthly. The line of credit bore a variable annual interest rate of the prime rate plus 0.5%. The Company was required to pay a fee equal to 0.25% per annum on the unused portion of the line of credit. The Company was also subject to a termination fee ranging from 0.5% to 1.0% of the line of credit if the Company terminates the agreement prior to the maturity date.
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On March 14, 2023, Silicon Valley Bridge Bank, N.A. announced that it had assumed the obligations and commitments of former Silicon Valley Bank, including the line of credit, and later became a division of First-Citizens Bank & Trust Company. The agreements that governed the former Silicon Valley Bank relationship remained in place. There were no changes to the terms of the Credit Facility and the Company had full access to its cash balances.
On June 5, 2023, the Company terminated the Credit Facility pursuant to Section 12.1 thereof. Any termination fee owed by the Company as required by Section 2.5(c) thereof has been waived by Silicon Valley Bank. At the time of termination, no borrowings were outstanding under the Credit Facility. Concurrently with the termination of the Credit Facility, all liens securing the Company’s obligations under the Credit Facility were released.
8. Leases
The Company leases facilities under non-cancelable operating leases, primarily for rent of office space. The Company's leases have various expiration dates through November 2027, some of which include options to extend the leases for up to three years. The Company does not have any finance leases.
Operating lease costs were $0.8 million for both the three months ended October 31, 2023 and 2022, and $2.3 million and $2.2 million for the nine months ended October 31, 2023 and 2022, respectively. Variable lease costs were $0.2 million during both the three months ended October 31, 2023 and 2022, and $0.5 million and $0.6 million during the nine months ended October 31, 2023 and 2022, respectively. Short-term lease costs were immaterial during the three and nine months ended October 31, 2023 and 2022.
The following table presents supplemental cash flow information related to leases:
Nine Months Ended October 31,
20232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases$2,535$2,345
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$475$2,205
The following table presents supplemental balance sheet information related to operating leases (in thousands, except for lease term and discount rate):
October 31, 2023January 31, 2023
Operating lease right-of-use assets$5,259 $6,940 
Operating lease liabilities$2,980 $3,117 
Operating lease liabilities, noncurrent2,742 4,543 
Total operating lease liabilities$5,722 $7,660 
Weighted-average remaining lease term2.2 years2.7 years
Weighted-average discount rate4.2 %3.8 %
As of October 31, 2023, remaining maturities of operating lease liabilities were as follows (in thousands):
PeriodOperating Leases
Remaining for Fiscal 2024$830
Fiscal 20253,160
Fiscal 20261,316
Fiscal 2027436
Fiscal 2028 and thereafter247
Total lease payments5,989
Less: imputed interest(267)
Total$5,722
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9. Commitments and Contingencies
Other Contractual Commitments
Other contractual commitments relate to third-party cloud infrastructure agreements and subscription arrangements.
There were no material contractual commitments that were entered into during the nine months ended October 31, 2023 that were outside the ordinary course of business.
Legal Matters
From time to time, the Company may be a party to various legal matters, threatened claims, or proceedings in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies. Legal accruals are recorded when and if it is determined that a loss related to a certain matter is both probable and reasonably estimable. The Company is not currently a party to any legal proceedings that, if determined adversely to it, would, in management’s opinion, have a material and adverse effect on the Company’s financial condition, results of operations, or cash flows.
Indemnification Agreements
In the ordinary course of business, the Company enters into agreements of varying scope and terms pursuant to which the Company agrees to indemnify customers, vendors, lessors and other business partners with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. Additionally, the Company entered into indemnification agreements with the Company’s directors and officers that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements nor are we aware of any such claims that could reasonably be expected to incur material costs.
10. Stockholders’ Equity and Employee Incentive Plans
Redeemable Convertible Preferred Stock
As of October 31, 2023, there were no shares of redeemable convertible preferred stock issued and outstanding.
The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of 200,000,000 shares of undesignated preferred stock with a par value of $0.00001 per share with rights and preferences, including voting rights, designated from time to time by the board of directors.
Common Stock
The Company’s Amended and Restated Certificate of Incorporation authorized the Company to issue 1,000,000,000 shares of common stock at a par value of $0.00001 as of October 31, 2023 and January 31, 2023.
Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when and if declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding. As of October 31, 2023 and January 31, 2023, no dividends had been declared.
As of October 31, 2023, the Company has reserved common stock for future issuance as follows:
Number of Shares
Stock options outstanding6,477,939 
Restricted stock units issued and outstanding5,479,990 
Remaining shares available for issuance under the 2021 Plan2,531,482 
Shares available for issuance under the 2023 Inducement Plan1,014,013 
ESPP1,239,636 
Common stock warrants105,350 
Total16,848,410 
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Stock Plans
The Company has four equity incentive plans: the 2008 Equity Incentive Plan (the “2008 Plan”), 2018 Equity Incentive Plan (the “2018 Plan”), 2021 Equity Incentive Plan (the “2021 Plan”) and 2023 Inducement Equity Incentive Plan (the "2023 Inducement Plan"), collectively (the “Stock Plans”). In connection with the Company’s IPO in July 2021, the 2008 Plan and the 2018 Plan were terminated and replaced by the 2021 Plan and all shares that remained available for issuance under the 2018 Plan at that time were reserved for issuance under the 2021 Plan. The number of shares of common stock available for issuance under the 2021 Plan will be increased by any shares of common stock subject to awards outstanding under the 2008 Plan and the 2018 Plan that expire or otherwise terminate without having been exercised or issued in full, are tendered to or withheld by the Company for payment of an exercise price or for satisfying tax withholding obligations or are forfeited to or repurchased by the Company due to failure to vest.
The Company has issued stock options to employees, directors, consultants and advisors pursuant to the 2018 Plan and restricted stock units (“RSUs”) under the 2021 Plan.
Equity awards permitted under the 2021 Plan may be stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares. Stock option grants may be either Incentive Stock Options (“ISO”) or Non-Qualified Stock Options (“NSO”). ISO may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees, consultants, and nonemployee directors. Employee stock options are granted with an exercise price no less than the fair value of the underlying common stock on the grant date. Options granted under the 2021 Plan expire ten years from the date of grant and generally vest over four years at a rate of 25% upon the first anniversary of the issuance date and 1/48 per month thereafter.
As of October 31, 2023, there were 2.5 million shares available for grant under the 2021 Plan. The 2021 Plan provides that the number of shares reserved will automatically increase on the first day of each fiscal year, beginning on February 1, 2022, by an amount equal to the least of (i) 4,120,000 shares, (ii) five-percent (5%) of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator of the 2021 Plan no later than the last day of the immediately preceding Fiscal Year.
During the fiscal year ended January 31, 2023, the Company adopted the 2023 Inducement Equity Incentive Plan (the “2023 Inducement Plan”), pursuant to which the Company reserved 1,300,000 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The maximum number of shares of our common stock that may be issued under the 2023 Inducement Plan will not exceed 1,300,000 shares. The 2023 Inducement Plan was approved by the Company’s Board of Directors without stockholder approval in accordance with such rule. As of October 31, 2023, there were 1.0 million shares available for grant under the 2023 Inducement Plan.
Employee Stock Purchase Plan
In July 2021, the Company established an Employee Stock Purchase Plan (“ESPP”) in which eligible employees may contribute up to 15% of their base compensation to purchase shares of common stock at a price equal to 85% of the lower of (1) the fair market value of a share of the Company’s common stock at the beginning of the offering period and (2) the fair market value of a share of the Company’s common stock on the purchase date. Participants are permitted to purchase a maximum of shares during each offering period and, initially, no participant may purchase more than 1,000 shares during any offering period. Starting with the offering period beginning September 21, 2023, participants may purchase up to 1,500 shares during any offering period.
Except for the initial offering period, the ESPP provides for 24-month offering periods beginning March 21 and September 21 of each year, and each offering period will consist of four six-month purchase periods. The initial offering period began on July 22, 2021 and ended on September 20, 2023. The initial offering period consisted of four purchase periods with the first purchase date on March 21, 2022, and the final purchase period ending on September 20, 2023.
The Company recognized stock-based compensation expense related to the ESPP of $0.4 million during both the three months ended October 31, 2023 and 2022, and $1.0 million and $1.7 million during the nine months ended October 31, 2023 and 2022, respectively. As of October 31, 2023, accrued ESPP employee payroll contributions of $0.6 million are included within accrued compensation and benefits in the consolidated balance sheet. ESPP payroll contributions used to purchase shares are reclassified to stockholders’ equity on the purchase date. As of October 31, 2023, $2.1 million of unrecognized stock-based compensation expense related to the ESPP is expected to be recognized over a weighted-average vesting period of 1.0 year.
During the nine months ended October 31, 2023, 168,843 shares of common stock were issued under the ESPP.
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Stock Options
The following table summarizes stock option activity under the Stock Plans for the nine months ended October 31, 2023 (aggregate intrinsic value in thousands):
Options OutstandingWeighted-
Average
Contractual
Term
Aggregate
Intrinsic
Value
Number of
Options
Weighted-
Average
Exercise
Price
Balances as of January 31, 2023
7,819,480 $9.78 5.21$51,606 
Options exercised(1,174,523)$6.26 
Options granted $ 
Options cancelled(167,018)$19.51 
Balances as of October 31, 2023
6,477,939 $10.16 4.92$45,231 
Options vested and expected to vest as of October 31, 2023
6,477,939 $10.16 4.92$45,231 
Options vested and exercisable as of October 31, 2023
5,848,451 $9.16 4.67$44,239 
No stock options were granted during the nine months ended October 31, 2023 and 2022.
The aggregate intrinsic value of options exercised during the three months ended October 31, 2023 and 2022 was $4.7 million and $0.7 million, respectively, and $13.4 million and $8.4 million during the nine months ended October 31, 2023 and 2022, respectively. Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock.
The Company recognized stock-based compensation expense related to stock options of $0.8 million and $3.2 million during the three and nine months ended October 31, 2023, respectively.
As of October 31, 2023, there was $4.7 million of unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.1 years.
Service-Based RSUs
During the year ended January 31, 2022, the Company began granting RSUs to its employees. RSUs granted had service-based vesting conditions. The service-based vesting condition for these awards is generally satisfied by rendering continuous service over two to four years, depending on the award, during which time the grants will vest quarterly.
The following table is a summary of service-based RSU activity for the nine months ended October 31, 2023:
RSUs Outstanding
Number of RSUs Weighted Average Grant Date Fair Value Per Share
Balances as of January 31, 2023
3,442,982 $18.39 
RSUs granted2,792,129 $16.57 
RSUs vested(1,279,832)$17.93 
RSUs forfeited(513,289)$17.66 
Balances as of October 31, 2023
4,441,990 $17.46 
The aggregate fair value of the RSU awards granted was $2.7 million and $4.9 million during the three months ended October 31, 2023 and 2022, respectively, and $46.3 million and $69.2 million during the nine months ended October 31, 2023 and 2022, respectively. This represents the fair value of the common stock on the date the service-based vesting awards were granted.
We recognized $8.6 million and $4.3 million in stock-based compensation expense related to service vesting-based RSUs during the three months ended October 31, 2023 and 2022, respectively, and $24.0 million and $10.7 million during the nine months ended October 31, 2023 and 2022, respectively. As of October 31, 2023, there was $69.5 million of unrecognized compensation expense related to service-based RSUs expected to be recognized over a weighted-average vesting period of 2.2 years.
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Performance-based and Market-based Awards
Modification of Market-Based Awards
On March 20, 2023, the Board of Directors approved a modification of the Company’s 1,060,000 outstanding Market-based RSUs granted to certain executive officers and members of senior management. This resulted in 840,000 of the awards modified to performance-based vesting and the other 220,000 remained market-based vesting with modified stock price targets and requisite service periods.
Performance-based Awards
The 840,000 awards granted to certain executive officers were modified from market-based vesting conditions to performance-based vesting conditions and will vest based on the Company achieving certain financial metrics over revised service periods. For the portion of the awards where the expectation of the achievement of performance conditions remained probable prior to and post modification, the Company accounted for this change as a Type I modification under ASC 718, Compensation—Stock Compensation. For the portion of the awards where the expectation of the achievement of performance conditions changed from probable prior to the modification to improbable post-modification, the Company accounted for this change as a Type II modification. The Company recognizes expense for performance-based RSUs ("PSUs") over the requisite service period based on management's expectation of the number of PSUs expected to vest. For any change in the expectation of the number of PSUs that are probable of vesting, the Company will cumulatively adjust compensation expense in the period that the change in estimate is made. The incremental stock-based compensation expense related to these modified awards was $6.0 million.
During the nine months ended October 31, 2023, the Company granted 70,000 PSUs to an executive officer pursuant to the 2021 Plan with vesting conditions identical to the modified awards discussed above. The grant date fair value of the award was $0.7 million.
We recognized a total of $1.6 million and $4.0 million in stock-based compensation expense related to PSUs during the three and nine months ended October 31, 2023, respectively. As of October 31, 2023, there were 840,000 awards outstanding and a total of $5.9 million of unrecognized compensation expense related to PSUs expected to be recognized over an average vesting period of 1.1 years.
Market-based Awards
The 220,000 awards granted to certain members of senior management were modified to revise the 60-trading day stock price target of the Company’s common stock and the requisite service periods. The incremental stock-based compensation expense related to these modified awards was not material. As of October 31, 2023, there were 198,000 awards outstanding and a total of $1.3 million of unrecognized compensation expense related to market-based RSUs expected to be recognized over an average vesting period of 1.1 years.
Determination of Fair Value
The Company estimates the fair value of stock options and purchase rights issued to employees under the ESPP using the Black-Scholes option-pricing model, which is dependent upon several variables, such as the fair value of the Company’s common stock, the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield.
Expected term—The expected term represents the weighted-average period the stock options are expected to remain outstanding and is calculated using the simplified method, as the Company did not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The simplified method calculates the expected term as the midpoint between the vesting date and the contractual expiration date of the option.
Expected volatility—The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company does not have sufficient trading history for the Company’s common stock.
Risk-free interest rate—The risk-free rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s awards.
Dividend yield—The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.
Fair value of underlying common stock— Prior to the Company’s IPO, the fair value was determined by the Board of Directors with input from management and contemporaneous independent third-party valuations. Subsequent to
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the IPO, the fair value of the Company’s common stock is based on the daily average selling price on the Nasdaq Global Select Market.
No stock options were granted during the three and nine months ended October 31, 2023 or 2022.
The fair value of employee stock purchase rights for the offering period under the 2021 ESPP was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Nine Months Ended October 31,
20232022
Employee Stock Purchase Plan:
Expected term (in years)1.00.9
Expected volatility62.9 %63.0 %
Risk-free interest rate5.3 %2.8 %
Dividend yield  
Stock-Based Compensation
Stock-based compensation expense, net of amounts capitalized was as follows (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Cost of revenue—subscription$130$128$559$391
Cost of revenue—services119106413317
Research and development3,1161,9059,4985,891
Sales and marketing4,1882,41311,4616,863
General and administrative4,2022,20111,2165,468
Restructuring1
Total stock-based compensation expense$11,755 $6,753 $33,148 $18,930 
11. Income Taxes
Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, adjusted for discrete items, if any, for the reporting period. The Company updates its estimate of the annual effective tax rate each quarter and records a cumulative adjustment in such period.
The Company recorded an immaterial amount of income tax expense for the three months ended October 31, 2023 and $0.4 million for the three months ended October 31, 2022, and $0.8 million and $1.0 million for the nine months ended October 31, 2023 and 2022, respectively. Income tax expense consists primarily of income taxes in foreign jurisdictions in which the Company conducts business. Due to the Company’s history of losses in the United States, a full valuation allowance on the Company’s domestic deferred tax assets, including net operating loss carryforwards, research and development tax credits, capitalized research and development, and other book versus tax differences was maintained. The Company has deferred tax attributes for stock-based compensation and fixed assets in the United Kingdom, and has not recorded a valuation allowance on the deferred tax attributes as of October 31, 2023. The Company will continue to evaluate for any future developments.
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12. Restructuring
During the fiscal year ended January 31, 2023, the Company initiated a restructuring plan to improve operational efficiency. This resulted in severance and related costs and stock-based compensation related to modifications of vested awards granted to certain employees impacted by the restructuring plan. As of October 31, 2023, the restructuring plan is complete.
Restructuring expense was as follows (in thousands):
Nine Months Ended October 31, 2023
Employee severance and related costs$45 
Stock-based compensation1 
Total restructuring charges$46 
Accrued Restructuring
Restructuring liabilities are reported within accrued expenses in the condensed consolidated balance sheets. An immaterial amount was paid during the year ended January 31, 2023. The activity in our restructuring liabilities for the nine months ended October 31, 2023 is as follows (in thousands):
Total
Balance as of January 31, 2023$1,567 
Restructuring charges and adjustments45
Payments(1,612)
Balance as of October 31, 2023$ 
13. Geographic Information
The following table depicts the disaggregation of revenue by geographic area based on the billing address of the customer (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
United States$29,796 $24,443 $82,848 $69,585 
International16,017 14,114 47,100 43,616 
Total$45,813 $38,557 $129,948 $113,201 
No individual foreign country contributed 10% or more of total revenue for the three and nine months ended October 31, 2023 and 2022.
As of October 31, 2023 and January 31, 2023, the majority of the Company’s long-lived assets, including operating lease ROU assets, were located in the United States.
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14. Net Loss per Share
Basic net loss per share attributable to the Company’s common stockholders is computed by dividing the net loss attributable to the Company’s common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is the same as basic net loss per share for all years presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss position in each period presented.
The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):
Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Numerator
Net loss$(16,255)$(16,677)$(58,781)$(51,880)
Denominator
Weighted-average shares used in computing net loss per share, basic and diluted47,586 44,932 46,724 44,619 
Net loss per share, basic and diluted$(0.34)$(0.37)$(1.26)$(1.16)
The following potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented because the impact of including them would have been anti-dilutive (in thousands):
As of October 31,
20232022
Stock options6,478 8,093 
RSUs5,438 4,290 
Employee stock purchase rights under the ESPP163 150 
Common stock warrants105 105 
Total12,184 12,638 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled Special Note Regarding Forward-Looking Statements and Risk Factors for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31. Our fiscal years ended January 31, 2022, 2023 and 2024 are referred to herein as fiscal 2022, fiscal 2023 and fiscal 2024, respectively.
Overview
Couchbase provides a leading cloud database platform for modern applications. Our mission is to simplify how developers and architects develop, deploy and consume modern applications that span cloud, edge and everything in between. Enterprises rely on Couchbase to cost-effectively power the core applications their businesses depend on with the highest performance, reliability, scalability and versatility requirements for which there is no tolerance for disruption or downtime. Any compromise of these requirements could cause these applications to fail—stopping or delaying package delivery for shipping companies, interrupting reservations for travel companies or causing product shortages in stores for retailers.
Our database is versatile and works in multiple configurations, from fully-managed cloud to multi- or hybrid-cloud, to on-premises environments, and beyond the edge. We have architected our database to fuse the trusted strengths of relational databases with the flexibility, performance and scale of many NoSQL systems, across the cloud. Our database platform serves the needs of both enterprise architects and application developers. Combined with our performance at scale, we believe this power enables customers to run their most important applications with the effectiveness they require, with the efficiency they desire and in the modern infrastructure environments they demand.
With nearly every aspect of our lives being transformed by digital innovation, enterprises are charged with building applications that enable delightful and meaningful customer experiences. Enterprises are increasingly reliant on applications, which in turn rely on databases to store, retrieve and operationalize data into action. Today, applications are operating at a scale, speed and dynamism unheard of just a decade ago. There is an increasing diversity of application types, modalities and delivery and consumption models, and the volume, velocity and variety of data on which they rely is growing at an exponential rate. Looking forward, there is potential for artificial intelligence (AI) to drastically transform business and the nature of modern applications as a whole. Consequently, the demand on enterprises and their databases is growing exponentially.
While legacy database technologies were built to the highest performance and reliability requirements of their generation, they are approaching the limits for which they were designed. The underlying architecture of these technologies has not changed significantly, while the requirements of the applications they need to support are changing dramatically, especially with the emergence of generative AI which relies heavily on real-time data. Legacy database technologies are buckling under the pressure of digital transformation, as they were not built to update and respond in microseconds, enable rich, customized user experiences and perform without latency.
We designed Couchbase to give enterprises a database for the modern cloud world. Our platform combines the best capabilities of a relational database, like SQL transactions and ACID guarantees, with the flexibility and scalability of a NoSQL database. This allows enterprises to confidently accelerate strategic initiatives such as more quickly moving business-critical applications into the cloud, improving application flexibility and increasing developer agility. For our customers, we facilitate a seamless transition from legacy relational databases to our modern cloud database platform resulting in better application scalability, user experience and security at the pace that works for them. We believe our unique architecture is also well-suited to power AI applications which require exceptionally high performance and scalability. We deliver this cloud database platform both as a customer-managed product and as a fully-managed database-as-a-service that is managed by Couchbase. Our database-as-a-service, called Couchbase Capella, supports a broad set of use cases, reducing a customer’s need to buy, deploy and manage additional databases or supporting technologies.
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We sell our platform through our direct sales force and our ecosystem of partners. Our platform is broadly accessible to a wide range of enterprises, as well as governments and organizations. We have customers in a range of industries, including retail and e-commerce, travel and hospitality, financial services and insurance, software and technology, gaming, media and entertainment and industrials. We focus our selling efforts on the largest global enterprises with the most complex data requirements, and we have cloud-based, fully managed offerings for enterprises looking for a turnkey version of our platform.
We have achieved significant growth over our operating history. For the nine months ended October 31, 2023 and 2022, our revenue was $129.9 million and $113.2 million, respectively, representing period-over-period growth of 15%. As of October 31, 2023 and 2022, our annual recurring revenue (“ARR”) was $188.7 million and $151.7 million, respectively, representing period-over-period growth of 24%. For the nine months ended October 31, 2023 and 2022, our net loss was $58.8 million and $51.9 million, respectively, as we continued to invest in the growth of our business to capture the massive opportunity that we believe is available to us.
Our Business Model
We generate the substantial majority of our revenue from sales of subscriptions, which accounted for 95% and 93% of total revenue for the nine months ended October 31, 2023 and 2022, respectively. We derive a substantial majority of our subscription revenue from the Enterprise Edition of Couchbase Server and Couchbase Mobile. Couchbase Server is generally licensed per node, which we define as an instance of Couchbase running on a server. Our subscription pricing is based on the computing power and memory per instance, as well as the chosen service level. We offer three different support levels: the Platinum level offers 24/7 support and the shortest response time of 30 minutes; the Gold level offers 24/7 support with a response time of 2 hours; and the Silver level offers 7am-5pm local time support, 5 days a week. These response times are for incidents of the highest severity level, which we identify as level P1. The initial response time for levels P2 and P3 incidents, which are less severe, are longer.
We also derive subscription revenue from our database-as-a-service offering. Our database-as-a-service offering, called Couchbase Capella, is sold on a consumption basis, which removes the need to license different node types separately. Couchbase Capella pricing delivers superior customer flexibility relative to other Cloud Service Providers (“CSPs”) as on-demand pricing allows customers to pay only for what they use based on hourly pricing and the credits purchased through our annual credit model expire only at the end of a 12-month period, rather than ratably throughout the year. We also provide automatic conversion to on-demand consumption when annual credits expire or are exhausted. Couchbase Capella credits can be purchased upfront to provide cost savings with volume discounts available based on credit quantity. We offer three pricing levels for Couchbase Capella, based on the support response time. Revenue from Couchbase Capella was not material for both the nine months ended October 31, 2023 and 2022.
The non-cancelable term of our subscription arrangements typically ranges from one to three years but may be longer or shorter in limited circumstances and is typically billed annually in advance. The timing and billing of large, multi-year contracts can create variability in revenue and deferred revenue between periods.
We also generate revenue from services, which represented 5% and 7% of our total revenue for the nine months ended October 31, 2023 and 2022, respectively. Our services revenue is derived from our professional services related to the implementation or configuration of our platform and training. We have invested in building our services organization because we believe it plays an important role in customer success, ensuring that our customers fulfill their digital transformation agendas while leveraging our platform, accelerating our customers’ realization of the full benefits of our platform and driving increased adoption of our platform.