Couchbase, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the CouchBase's second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Edward Parker, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon and welcome to CouchBase's second quarter 2022 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me are CouchBase's president, CEO Matt Cain, and CFO Greg Henry. Today's call will contain forward-looking statements, which include statements concerning financial and business trends and strategies, our expected future business and financial performance and financial condition, and our guidance for future periods. These statements reflect our views as of today only and should not be relied upon as representing our views of any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For discussion of material risk and other important factors that could affect our actual results, please refer to the risk discussed in today's press release. Our final prospectus under Rule 424B filed with the Securities and Exchange Commission on July 22nd, 2021. Our quarterly report on Form 10-Q for the quarter ended April 30th, 2021 to be filed with the SEC and our other periodic filings with the SEC. During the call, we will also discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics is included in our earnings press release and final IPO prospectus, which are available on our investor relations website. With that, let me turn the call over to Matt.

Thank you, Edward, and good afternoon, everyone. Thank you all for joining us on our first earnings call as a public company. During today's call, Greg and I will provide details on our second quarter results, as well as third quarter and full year guidance. Let's kick off with a few highlights on our Q2 financial results. Our mission is to empower enterprises with the ability to build, deploy, and maintain their most mission-critical applications by delivering the world's most scalable, performant, and flexible modern database. I'm pleased to report that we had a very strong quarter with Q2 revenue coming in at $29.7 million, which was up 18% year over year. Total annual recurring revenue, or ARR, was $115.2 million, which was up 20% year over year. We saw broad-based strength across our enterprise customer base, including increasing big deal momentum as well as a strengthening pipeline. Our remaining performance obligations, or RPO, grew a very strong 47% year over year. Our gross margin remains best in class at 88.3%. I'm proud of these results and everything that the Couchbase team has achieved, especially in light of the challenging conditions as a result of the COVID pandemic over the past year and a half. I would like to take a second to acknowledge our employees and partners for the resiliency and dedication to serve and support our customers during these unprecedented times. Our people are our greatest strength. And as a team, we've invested thousands of people years into our platform, our services, and everything we do to make our customers win. It's been a lot of hard work. I'm proud of what we've accomplished and excited about what we will achieve in the months and years to come. For many investors and analysts dialed in, we've had the pleasure of getting to know you over the years, but some of you may be new to the Couchbase story. To that end, in case you're not familiar, I wanted to take some extra time to walk through who we are and what we do. Four and a half years ago, I got a call from one of the lead investors at Excel, and he said, Matt, I want to talk to you about maybe the most important company that you might not have heard of. I've never forgotten that introduction, and in some ways, it has never been more true now than ever before. While you have all clearly heard of Couchbase, you still may not be aware of how prevalent we are in your day-to-day life. Let me give you some perspective on what this means. Imagine a typical day. You wake up. You check some carrier notifications on your mobile phone before dialing into a video conference meeting you have mid-morning. You then check your personal credit score, reflecting a credit card application, before heading out to meet a colleague for lunch. You decide to pick up the tab using an online payment app, knowing you'll expense it later through your corporate expense system. Back at the office, you plan a firm-wide online virtual town hall. Before you call the day, you get online and search for a used car for your graduating senior before shopping for a wedding anniversary gift for your spouse. On your way home, you check your professional social media network looking for candidates and prospects. After dinner, you turn on the TV and you stream your favorite show. While using a multitude of applications like these on any given day may seem ordinary, if not mundane, fully immersive, highly interactive, and always available applications, have become essential, if not critical, in our personal and professional lives. Every one of these companies providing these services has digital transformation at the core of its strategy. And these applications would not be possible without the power of the Couchbase platform. Simply put, Couchbase is providing the modern database for enterprise applications. The opportunity is one of the largest in enterprise software. Based on data from IDC, we estimate that the database market will be worth $62 billion by 2024. And we are quite intentional in saying that our addressable market comprises both relational and NoSQL technology. This is not to downplay the tremendous success that NoSQL has seen to date in net new applications, but to emphasize that we are in the very early innings of what will be a generational transition as application and database platforms migrate from legacy relational systems to a new modern type of database. We believe emphatically that Couchbase was built for this moment. Let me describe in a bit more detail how Couchbase is uniquely underpinning the modern application. As many of you know, traditional relational databases were designed to facilitate a business transaction, a purchase order, an account transfer, an inventory update. But knowing how rich and immersive modern applications have now become, let's consider what it means for the database. For example, planning and booking a trip online ultimately culminates in a transaction, buying plane tickets and reserving a hotel room. But only after a multitude of events, from price shopping to exploring reviews to searching for dates and availability, We call these events interactions, and these interactions are exploding in volume, driven by the increasingly personalized and dynamic applications they support. It's the culmination of these interactions which ultimately defines the transaction, the moment when you click reserve or purchase. But the reality is that moment is much more than a transaction. It's an experience. and the quality of the experience depends on how successful a particular application is at obtaining the specific good or service you're in pursuit of. In the legacy relational world, the user experience was isolated to a single event based on highly structured data. In the modern world, each transaction is powered by a large number of interactions made up of both structured and unstructured data. As these interactions become increasingly data-driven and dynamic, the ratio of transactions to interactions and the interdependencies across a growing number of applications and data sources continues to climb, often by orders of magnitude. Some of our more complex deployments have our existing customers executing thousands of interactions or even hundreds of thousands of interactions per single transaction. As relational technology failed to keep up with this new dynamic, NoSQL technology was created to accommodate this deluge of unstructured data. However, while enterprises have the desire to build modern applications unencumbered by the legacy of relational technology, enterprise requirements demand that applications operate at a degree of performance, scale and reliability across a wide spectrum of deployment and consumption modalities that other NoSQL solutions can't provide. We built Couchbase specifically to meet this enterprise challenge. A database purpose-built to enable accelerated digital transformation. A database that uniquely combines the flexibility of NoSQL with business critical attributes as first principles. a database that empowers modern application design but leverages the existing and ubiquitous knowledge of SQL. Simply put, Couchbase has the scalability and flexibility necessary to accommodate the constant growth in data volume and variety while architected to run anywhere, from cloud to on-prem, from data center to edge, and to do all of these things with uncompromising performance but in an approachable and familiar way. This is where Couchbase Server 7, our newest product innovation released in Q2, further sets us apart from the competition. Couchbase Server 7 bridges the best aspects of relational databases, like distributed SQL transactions, with the flexibility of a modern database. Like I mentioned, there is an urgent need for a database platform that can support both developing and deploying new applications and also modernizing and upgrading existing ones. Couchbase Server 7 eliminates the key friction points that have kept enterprises from modernizing their relational-based applications. This unlocks an entirely new portion of the very large relational database market for us because we can now own the transactions in addition to all the interactions where we have always been strong. In fact, the majority of our customers are now using Couchbase as a source of truth, which means that we are a fully flexible, persistent data store, a library of information that aggregates data from a variety of sources on which applications rely to enable a wide range of capabilities and services. Looking forward, as our customers continue to leverage more and more transaction services with Couchbase, We are becoming the system of record for a growing number of enterprise applications. By having one unified platform that can take on modernizing the legacy relational applications and the new modern applications, enterprises can confidently accelerate strategic initiatives, such as more quickly moving business critical applications into the cloud, improving application flexibility, and increasing developer agility. I want to expand on these capabilities by quickly summarizing the five ways that Couchbase is uniquely architected to enable us to offer customer benefits that no one else in the market can. First, Couchbase is an all-in-one platform built on an in-memory, shared-nothing architecture, which can serve as a cache, a source of truth, and a system of record. We're extensible and multimodal, which obviates the need for point solutions and silo deployments. Second, we are engineered for massive data volumes and scale, operating at sub-millisecond performance and petabyte scale, often an order of magnitude ahead of our competitors. We're cloud native, which means that compute, network, and storage resources can be scaled independently of one another on a workload-by-workload basis. so application teams can determine which underlying resources they need to optimize for their application development. Third, we empower developer agility and flexibility by bringing the power of NoSQL's modern approach to data management with the usability of time-honored and ubiquitous skill sets through a unique SQL-based interface as well as full-text search. Developers don't need to learn a new language to use Couchbase, and enterprises can leverage existing skill sets. Fourth, we offer enterprise-grade operational effectiveness and security so that data is protected through cross data center replication while ensuring transactional consistency and best-in-class scalability. And fifth, we can be deployed flexibly in any environment from multi-cloud, hybrid cloud, edge, on-prem, and are fully managed as a service offering. Let me share a few specific examples of how our customers are using Couchbase to power their most important applications, including some new customer wins and renewals from the quarter. Amadeus needed to deliver travel search results at lightning speed, 24 by 7, that contained real-time route and seat availability information matched to the personalized profile of the traveler. They rely on Couchbase for performance, scalability, and availability to handle 20 million personalized search operations per second at sub-millisecond latencies. We've also helped give them greater developer agility so they can spend more time helping customers and innovating more freely for things like merchandising, new distribution capability, and loyalty. Couchbase is used in multiple lines of Amadeus' businesses, deployed in several public and private clouds. Pfizer has been on a modernization journey. They selected Couchbase to power their platform for health applications called Newton, because our modern database delivered on flexibility. Their application developers can easily update, modify, and utilize patient data. For them, Couchbase was simple to deploy on the AWS cloud, easily supporting dozens of applications, and providing the flexible and robust indexing Pfizer needs for Newton's reporting application. In Q2, the Slovak IT company POSOM, a member of Deutsche Telekom Group, adopted Couchbase Cloud on Azure to gain better performance for their city parking system, ParkDots. ParkDots modernizes the customer experience of finding, paying for and extending a parking spot via their mobile device. For municipalities, they can monitor the occupancy of parking spaces, manage residential parking, control the eligibility of parking, and integrate, for example, with the payment or information systems of a given city. Also in Q2, an international defense ministry selected Couchbase over incumbent MongoDB to serve as the system of truth powering its next generation national intelligence strategy. Of course, this is a very sensitive project. This seven-figure TCB competitive win exemplifies our commitment to customer success, our superior performance, flexibility, and ease of development, especially in transitioning the system from MongoDB to Couchbase. Their developers needed a flexible database that easily mapped and moved JSON data objects. This application contains all the attributes in which Couchbase shines. Developer-controlled dynamic profiles, real-time updates across distributed systems, and consumption over multiple web and mobile interfaces. This is what modern applications will continue to look like. A large financial services company that has been undergoing modernization efforts expanded with us in Q2 to migrate and power a very strategic set of applications that are used for marketing purposes. The applications deliver marketing campaigns and promotions to and on behalf of the company's global merchants, including more than 10 million merchants in the US alone. Given their global nature, these applications require 24 hours, seven day a week, 365 day a year uptime. And with Couchbase, they can efficiently scale and support the exponential increase in offers. They have benefited from both reduced infrastructure costs and increased application agility delivered by our modern database. Of note, this was the biggest TCV deal in company history, and we are proud to be such a strategic and trusted partner to this customer. Another win in the quarter was Northwestern University's Catalyst Lab, which selected Couchbase as part of a broader tech effort to reduce chronic disease risk factors by optimizing innovative, technology-supported interventions. By utilizing health promotion lists, wearable devices, and mobile applications, they design, develop, and test their interventions to promote weight loss, multiple healthy diet and physical activity changes, and smoking cessation via personalized mobile experiences for the wearer. Now let me touch on multiple growth initiatives we are pursuing to capture more opportunities. First, we are focused on acquiring new customers. We are proud to count more than 30% of the Fortune 100 as customers, but clearly have an opportunity to grow this number meaningfully. In a two-pronged approach, we leverage our enterprise class direct sales force to pursue new logos while we continue to invest in developer-focused initiatives. This allows us to drive top-down demand through enterprise architects, line of business owners, and CIOs, as well as drive bottom-up demand directly with software developers that build the applications. These two personas, the enterprise architects and the application developers, are both first-class citizens when it comes to building enterprise applications. but it can't be overstated how different each of them are. Consider enterprise requirements on the one hand, which include high performance, scalability, and reliability, and developer requirements on the other hand, which include agility, flexibility, and ease of use. Couchbase has uniquely served the needs of both of these personas on a single platform without sacrificing the requirements of one versus the other. And that is tremendously important as we think about capitalizing on the enterprise opportunity. As such, our go-to-market motion features a top-down sell-to motion in concert with the bottoms-up buy-from motion, powering a flywheel we are using to drive sustainable and durable growth. Second, we are continuing to build out our ecosystem of cloud service providers, systems integrators, and ISV partners, which serve as a powerful go-to-market force multiplier for Couchbase. For example, we saw several exciting new partner sign-ups in the quarter, including Virtusa Corporation, which is focused on providing digital business strategy, digital engineering, and information technology services and solutions to its G2K customer base across a wide variety of industries. Additionally, we were pleased to announce during the quarter that Couchbase is the high-performance persistent data store underlying Infosys' Epoch 4 digital supply chain solution. Overall, we are seeing a growing percentage of deals that are partner sourced and partner assisted, and we expect this to continue to grow. Third, we are tied to application growth. When our customer's footprint for modern application grows, we grow. We see this both with expansion of existing applications, as well as the growth in net new applications. We see this as a long and enduring trend as enterprises are undergoing massive application modernization in the months and years to come. Fourth, as a robust end-to-end platform with a full suite of enterprise features ranging from security and data protection, data analytics, multimodal support, and eventing, all of which are key underpinnings of modern applications that deliver extremely personalized and delightful experiences to customers. This gives us substantial opportunities to cross-sell new capabilities and features to customers who are modernizing legacy applications and building net new modern applications. And fifth, building upon our current virtual private cloud offering, we expect forthcoming enhancements to our cloud offering in the second half to be a major growth driver as enterprises increasingly look to offload the management and tuning of database systems so they can fully focus on the applications that run their business. It will also allow customers to develop their applications with greater speed and agility. Furthermore, these new innovations will enhance one of the core value propositions of Couchbase, the ability to enable enterprises to leverage our modern database in whatever deployment and consumption model that the business requires. We've invested an enormous amount of time into this offering, and we're extremely pleased with the customer feedback we've received thus far. Needless to say, we have very high ambitions for our as-a-service portfolio. Taken together, we believe we have the potential to not only continue our land and expand motion, but drive a land and explode motion as we continue to serve some of the largest corporations in the world. In conclusion, we are thrilled to have recently joined the public markets and could not be more excited about the opportunity in front of us. We believe data is at the heart of the enterprise. Enterprises use data to power modern applications that delight us as customers and improve the world as we know it. This is how software is enhancing the way we live, work, and play, and the rate of change continues to accelerate. We believe that our modern database will be the bedrock underneath these new applications, unleashing and empowering the experiences that ultimately change our lives and disrupt industries for years to come. We know we have a long way to go and much work to do, but we're ambitious and excited and are building a business based on the assumption that opportunities like this don't come around very often. The current market is based on technology that is four decades old, and for good reason. the relational model has served companies well. But we are looking to the next four decades and believe our technology and strategy offers a compelling solution for our businesses and partners around the world. We wouldn't have this opportunity without the extraordinary team we have in place, as well as the core values that guide us in what we do every single day. At Couchbase, we will always act with uncompromising integrity. We attack hard problems, driven by what's best for our customers. We play to win, together, and we work to make tomorrow better than today. And perhaps our most single important value is to be a good human, always. I will now turn the call over to Greg to talk about our financial results. Greg?