Couchbase, Inc.

Q4 2023 Earnings Conference Call


spk_0: reading welcome to the couch of a fourth quarter and full year fiscal twenty twenty three or news conference call at this time of artist arizona listen only most a question and answer session will follow the form of recent asian if anyone should require operators is this during a conference please press start as early as or phone keypad please note this conferences been recorded out now during the conference over the hosts it edward parker you may be in
spk_1: good afternoon and wasn't couch basis for quarter two thousand twenty three or it's called will be discussing resulted outside press issued after the market closed today with the or catchphrases chair and ceo not games and see outbreak every trade call content for looking statements which would say that's concerning financial distress and strategies market size and expect your business and financial performance financial conditions that are guidance your future periods the same it's reflect the views as a today only ended up your light upon as representing our views of any such a date or you not undertake any did it up the be statements or looking statements by their nature address matters that are subject to risk and uncertainty that cause actual results to differ material from expectations for discussion other material rest another important factors i could affect our actual results please refer to these rest discussing today's presley's and are most recent report on forms and case for quarterly report on form thank you father the fcc during the call will also discussed or non gaap financial measures which are not prepared in accordance with generally accepted accounting principles a reconciliation of these non gaap financial measures the most directly comparable job financial measures as well as how we define these metrics and other metrics was included on his press releases which are about water the situations outside but that when it's on the cover the map
spk_2: thank you edward and good afternoon everyone on today's call greg it i will provide details on our fourth quarter results as well as our first corner and full year fiscal twenty twenty four guidance
spk_1: i'll start off with a few highlights of argue for financial results
spk_2: cap space delivered another strong quarter beating are guidance across all metrics we deliver these results in spite of continued macro economic headwinds anchored by growing momentum with capella excellent retention metrics an ongoing large deal activity furthermore or pipeline continued to see healthy growth i'm especially pleased with the substantial progress we've made operationally during the quarter headlined by better than expected non gap operating margin performance
spk_1: this is a direct result of our focus across the company on driving improvement in efficiency efforts the will serve as well in fiscal two thousand twenty four and beyond
spk_2: total annual recurring revenue for a or are was one hundred and sixty three point seven million up twenty three percent year over year and up twenty four percent and constant currency revenue into for was forty one point six million dollars up nineteen percent year over year or non gap gross margin remains best in class and eighty six point three percent
spk_1: non gaap operating loss was nine point nine million fifteen percentage points above the midpoint of i'm plied operating margin guidance range will cover more on this in a minute but we will continue to compliment are strong topline momentum with an increasing focus on driving more efficient growth and
spk_2: operating leverage in our model we exited the quarter with six hundred and seventy five customers an increase of seventeen from que three the majority of which were capello deals before greg provides more details on cue for i want to highlight our accomplishments from the past year and reiterate our priorities for fiscal twenty twenty four looking back it's fiscal two thousand twenty three i'm extremely proud the we accomplish all that we laid out to do at the beginning of the year i attribute the success to three things or expanded and differentiate a product portfolio are enhanced and more efficient go to market initiatives and key additions to our world class team these achievements have put us in an excellent position heading into fiscal twenty twenty four to build on our momentum and importantly meaningfully accelerate the pace of leverage in our model let me briefly recap these achievements first we made rapid progress with capella are fully manage cloud database platform recall that we launch capello on google cloud during the summer which includes are unique app services next we introduced a new developer experience for capella in the fall and then announced capello on azure this past january completing availability on all three major cloud platform and thanks to the investments we made we saw some meaningful new capello logo additions and migrations across a broad range of industries over the year this was complemented by drawing pipeline of exciting capello opportunities across both new and existing customers
spk_1: second we made significant progress with our go to market efficiency we transformed how we go to market across by from and sell to motions both in terms of efficacy and efficiency
spk_2: importantly or partner an alliance ecosystem continues to deepen during the year we saw strong bookings growth sourced and influenced by partners including i as fees cloud service providers and system integrators i am particularly excited about our broaden multiyear strategic collaboration agreement with eight of us that we announced at reinvent in november
spk_1: this is already begun to accelerate and streamlined customer migrations to capella on a w s
spk_2: on the by from side we continue to invest in growing our minds share with developers through community building and developer relations we grew the number of the angeles and the market increase our developer events and enhanced are online community presence all of this combined with products enhancements we made for developers will be an important accelerator for a business and third we evolved are world class team and culture by adding new leadership across multiple parts of the organization including sales engineering and more
spk_1: our culture remains a sustainable competitive advantage as we attract develop and retain a highly skilled talent necessary to execute on our growth strategies refocus roles and responsibilities has it has accelerated our product development and delivery allowed us to move at a faster pace and drive higher operational rigor and enhance go to market efficiency
spk_2: in summary the strategic product go to market and team investments we made in fiscal two thousand and twenty three or yielding incremental offerings and capabilities that we believe bolsters our ability to deliver sustain growth while also doing so in increasingly efficient way we've always operated under a
spk_1: discipline approach to our expenses
spk_2: however the implementation of increased operational rigor in recent weeks reflects an extra step to compliment our growth with improve leverage and twenty twenty four now turning to wins from a quarter we are pleased that into for a majority of our net new logos were capella
spk_1: we added customers from a broad range of industries including technology e commerce gaming insurance health care travel and more
spk_2: some exciting wins included a premiered global gaming and entertainment company a publicly traded global i t company and a fast growing mobile healthcare company the capella new logo use cases from the quarter reinforce what we started to see with capella new logos at the beginning of the year customers selecting capella for best in class performance speed flexibility scale ability and improved tcl in addition the new logos we continue to see and acceleration of capello migrations from existing customers one such migration came from a clothing company that owns several major international brands
spk_1: this long time customer has leveraged couch based to build digital showrooms for a smooth immersive experience that works flawlessly regardless of internet connectivity
spk_2: they made the decision to move from on prem to capella because of the flexibility performance and improved tcl that are management service provided another notable capello migration in the corner was a seven figure deal from a leading cloud based enterprise communication platform provider
spk_1: this customer initially selected capella when looking to support large scale real time communication for managing sessions and recording sms messages after seeing initial success with capello performance
spk_2: they have move their entire couch face a states a capella their developer team is experience and even greater reduction in database management and they have reduced tcl
spk_1: all while capella has supported the rapid application gross
spk_2: and our server and mobile offerings continue to generate both new logos and large expansions for us
spk_1: in the quarter we saw momentum across a broad range of industries and groups including telco retail media and entertainment technology and travel continue to leverage our platform for a wide range of use cases and a power many of their most important business applications they also continue to take advantage of are differentiated architecture and multi modal capabilities by consolidating vendors to realize cost efficiencies and lower tcf
spk_2: now turning to some thoughts on the near term environments given the large opportunity ahead of us we plan to keep innovating and investing while also placing increase rigor on our expense discipline and focusing on what we can control like many of our technology peers we're seen the impact of macro economic headwinds affecting broader i t spending and these trends intensified in the quarter
spk_1: for example some customers and prospects are taking longer to make their buying decisions are requiring extra layers of approval or electing to buy and smaller ignorant increments
spk_2: that said the man indicators remain strong and we continue to see healthy pipeline growth
spk_1: modern databases are nothing short of a requirement for successful digital transformation which remains a strategic priority across the global enterprises and organizations we serve
spk_2: relational systems are too expensive and ill suited for the task and we believe that other emerging know sequel solutions lack sufficient performance and scale to accommodate the incessant growth and data volume and variety that is at the core of application modernization couch bases ability to deliver in a fast flexible familiar and affordable way continues to resonate across our market of note the increase interest in the economic value of our platform and the unique value proposition of capella are serving as a powerful validation of one of our core differentiator especially against us more challenging macro backdrop as we looked to fiscal twenty twenty four we remain extremely mindful of all these dynamics this focus has carefully informed how we are looking at the near term outlook both in terms of driving continued growth and leverage i am confident that we are well positioned as to whether any downturn as a result of the strategic initiatives that are just starting to bear their fruits coupled with the operational improvements we've implemented these included greatly expanded product portfolio particularly with capella and meaningfully expanded partner ecosystem
spk_1: and transformational changes in terms of how we go to market this will serve as well as we continue to seize the massive opportunity to drive a generational rethink of the database market
spk_2: in closing i want to reiterate our priorities first delivering topline growth
spk_1: second increasing the mix of capella across all metrics third driving further sales and marketing efficiency and forth accelerating the pace of leverage in our model i have high expectations for fiscal twenty twenty four and our management team is committed to delivering improvements across all of these areas
spk_2: before handing the call over the greg i want to emphasize one of our core values that have repeated many times before that couch base we attack hard problems driven by customer outcomes with that are hand the call of to drag to walk you through a result in more detail greg thanks matt and thanks everyone for joining us we did another strong quarter as we beat guys across all key metrics against the more challenging macro environment and despite experiencing increased levels of deal the we continue to see strong performance on robots we know rate and overall health demand for a solution while our efforts to reduce costs can improve efficiency resulted in a meaningful outperformance of are operating loss guidance
spk_3: we are pleased with or execution in the quarter
spk_2: oh now walk you through her fourth quarter and for your physical twenty twenty three financial results in more detail total annual recurring revenue for a are with one hundred sixty three point seven million dollars at the end of the fiscal year representing twenty three percent growth you over year for twenty four percent growth you'll be you're on a constant currency basis revenue for the fourth quarter with forty one point six million dollars an increase of nineteen percent year over year and one hundred fifty four point eight million dollars for the full year can increase of twenty five percent year over year in addition a strong subscription revenue growth is quarter revenue benefited from continued trying to professional services which we remind you is nonrecurring and has not appeared in our air our numbers nor customer accounts description revenue for the fourth quarter with thirty eight point one million dollars an increase of sixteen percent year over year and one hundred forty two point nine million dollars for the for you can increase of twenty three percent year over year professional services revenue for the fourth quarter with three point five million dollars an increase of fifty three percent year over year and eleven point nine million dollars for a full year in increase of sixty four percent your rear we do not anticipate the same degree of strengthen professional services in fiscal twenty twenty four expect contribution of the percentage of revenue to be slightly below recent levels we exited the year with six hundred seventy five customers can increase of seventeen that new customers from a third quarter herrera are per customer performance in the fourth quarter was two hundred forty two thousand dollars up from two hundred thirty one thousand dollars in the third quarter and indicative of growing large share of we have with large customers in fact the number of customers bending over one million dollars in here are two forty six percent in fiscal twenty twenty three as a reminder have capello continue to grow in revenue contribution respect air are per customer growth could moderate or decline in future quarters our dollar paid net retention rate continues to exceed one hundred fifteen percent he discussing the remainder of the income statement please note that unless otherwise stated all references to our expenses results of operations and share account on a non gap basis into for are gross margin remain best in class eighty six point three percent this compares to a gross margin of eighty eight point seven percent a year ago and eighty point zero percent last quarter or gross margin for the full fiscal year with eighty seven point six percent slightly lower than our fiscal your tweet tweet to of kiddie point four
spk_3: percent due to an increase mix of capello as well professional services as a reminder of capello mixing increases weeks that gross margin will decline over time
spk_2: turn into expenses we can see you invest to capture the generational opportunity see in front of us are focused on improving the efficiency of our growth her sales and marketing expenses for queue for with twenty six point seven million dollars for sixty four percent of revenue compared to twenty two point two million dollars for sixty three percent of revenue year ago for the full fiscal year for sale the market expenses will one had one point three million dollars for sixty five percent of revenue compared to eighty five point four million dollars for sixty nine percent of revenue in the prior fiscal year research and development expenses for to for were twelve point nine million dollars for thirty one percent of revenue compared to twelve point three million dollars for thirty five percent of revenue a year ago for the for yeah fiscal year or research and development expensive for forty nine point seven million dollars or thirty two percent of revenue compared to forty point three million dollars for three nine percent of revenue in the prior fiscal year during the past year we continue to thoughtfully invest in our have a service offering as well as in additional features to bolster our platform offering general administrative expenses for to for were six point three million dollars for fifteen percent of total revenue compared to five point seven million dollars for sixteen percent of revenue a year ago for the full fiscal year or general administrative expenses were twenty five point nine million dollars for seventeen percent of revenue compared twenty one point zero million dollars for some
spk_1: nineteen percent of revenue in a prior fiscal year
spk_2: non gap operating loss for cute for was nine point nine million dollars for negative twenty four percent operating margin compared to an operating loss of nine point one million dollars for negative twenty six percent operating margin the year ago operating loss for full fiscal year was forty one point three million dollars or negative twenty seven percent operating margin compared to an operating loss of forty five point five million dollars for negative thirty seven percent operating margin in a prior fiscal year during the fourth quarter in addition to ongoing efforts improve operational efficiency the math talked about we identified additional opportunity for caught optimization and took pro active measures to improve her margin profile and accelerate our path to profitability this included optimizing are headcount by approximately five percent largely from rigorous performance management and roll the nation's incremental to this natural leverage embedded in our model with his fate that these actions will result in approximately four million dollars of net savings and fiscal twenty twenty four we will monitor market conditions and selectively manage or headcount to align with our strategic initiatives while improving operating margins
spk_3: not gap that loss a trivial the common stock holders for to for with eight million dollars or negative eighteen cents per share for the full fiscal year that loss of four point five million dollars for negative ninety cents per share
spk_2: trying to the balance sheet and casual statement we added queue for with one hundred sixty million dollars in cash cash equivalent and short term investments will remain well capitalized that's cute against our long term growth strategy remaining performance allegations are rpm totaled one or fifty five point nine million dollars at the end of two for an increase of three percent your rear weeks back to regular approximately seventy one percent or one hundred seventy point two million dollars in total rpm revenue over the physical your twenty twenty four which represents nineteen percent year over year ago we note that are total rpr performance have been impacted by your year contraction in billings times has some customers are electing shorter term contracts to the macro uncertainty and because our sales plant no longer incentivized both i your contracts and aggressively operating castle for to for with negative ten point two million dollars and for the full year was negative forty one point two million dollars free cash flow of with you for with negative eleven point eight million dollars for native twenty percent free cash flow margin free cash flow for the full year with negative forty six point eight million dollars or negative thirty percent free cash a margin we are pleased with the material prevent we have made our free cash for profile remained committed to driving further improvement now i will provide guidance for to one and a for your physical twenty twenty four as matt disgust we can to to see south momentum across or industry in support of broadway digital transformation issues and are pipeline remain strong furthermore we anticipate that incremental girl drivers including our expanded product capabilities and half part of the ecosystem can improve go to mark emotion will continue to contribute to our momentum and physical twenty twenty for these factors in addition to excellent renewal race give us cautious optimism that we can sustain and build upon a moment of we the cheese is going public that said we are mindful the macro headwinds impacting i t spending and our modern me environment and the impact on our business closely including booking pipeline and pipeline conversion retention and expansion rate feel sided sales cycles logo acquisitions and field productivity
spk_3: as such are all look prudently embed and elevated degree of conservatism across all these for looking metrics to comfort of uncertainty
spk_2: in addition we've taken additional steps to put us in a position to quickly respond and make changes to our offering model should the need arise additionally i like to remind everyone that as opposed to the annual credit portion of our capello business the on demand portion is not currently countered iraq and as such were factoring this emerging dynamic in our outlook last week i want to highlight a change in how we planted forecast for capello revenue recognition historically we assume consumption to be approximate straight line but now assume a true consumption patterns and customer usage to ramp over the contract period especially for new logos and enterprise customers who migrated capello lol the impact is not mature the revenue to one typical twenty twenty four we do expect a negative impact of the full year revenue approximately two million dollars representing and approximately one percent year over year impact the growth relative to or prior recognition method with these factors in mind for the first quarter of fiscal twenty twenty four weeks back total revenue in a range of three nine point five million to four point one million dollars for your for your growth a fourteen percent to midpoint we had to fit a are in the range of one or sixty nine point two million two hundred seventy two point two million dollars which represents twenty percent growth year over year at the midpoint we expect a non gap operating loss in a range of negative fourteen point nine million to negative forty one point one million dollars for the full year physical twenty twenty four weeks back total revenue in a range of one hundred seventy one point seven million two hundred seventy four point seven million dollars for a year over year growth of twelve percent of the midpoint for thirteen percent before the revenue recognition change as a reminder with historically seen variability with respect to the implementation timing certain enterprise deals which impacts are revenue visibility along with the new or migrated capello customers
spk_0: we therefore can see to view here are as a better indicator than revenue of the strength of our business we expect they are are in a range of one hundred ninety million two hundred ninety four million dollars or seventeen percent growth that midpoint and finally we expect a non gap operating loss in a range of negative forty four million to negative forty million dollars with that man i are happy to take your question operator thank you and at this time will be conducting a question and answer session if you like to ask questions please for star one on your cell phone keypad a conference confirmation total indicating a line is in the questioning you you may for a star to if you like to remove your question from the queue for participate speaker equipment and may be necessary to pick up your hands before pressing starkey
spk_4: one moment please while we pull for questions
spk_5: and offers question comes from the line of my lunch hour with barclays please we'll see what your questions he thinks you and congrats on another solid quarter and met a prescription for you and then follow for great
spk_2: matt think about to current environments talked about the headwinds slow mentally
spk_1: the longer a decision making ficus tetris but you're still seem to be performing pretty much you talk a little bit about these actions you have taken in terms of sales approach your own accounts to want to land etc to kind of enables you to come out come up with these pretty solid you famous but also with a very solid your guide for the next year thank you a remote good afternoon a dead as we think about how we performed against the environment would be very maniacal to separate the things that we can control from the thing said we can't in i think tropical the probably thought about that more as we indicated in the prepared remarks there were some things outside of our control that intensified in the corner longer sale cycles elevated decision making criteria focus on economic value in a some customers taking a little bit longer to in a move something in the production in we take great pride and the fact that if we shipped over the things that we can control operational rigor really understanding our sales cycle showing up it's true you know partners to our and customers really articulating the value of couch base and consolidating multiple solutions in the one providing a solution with three total cost of ownership particularly with with capella executing on initiatives with a partnerships set of really opened up with or expanded go to market with the capello offering we we feel great about our ability to overcome some other it's intensified environments and really delivered solid results across the business which than a lot of time talking about couch bases of story of acceleration and in a lot of an emphasis is and on top how do we draw the company
spk_5: faster halloween treats the mix of capella on top of others things this quarter were particularly proud with what we've done to accelerate the leveraging in the business and spending more time and attention on on the operational sides i'm so from the standpoint of being in today's environment we talk a lot about you of them all the way it is not really wanted to be and understanding that their economic forces outside of bar outside of our control really mean again and and making sure that we are totally focused on what we can control across product go to market and and our teams and that collective effort and that focus on the dedication of obtain couch be it's really allowed us to put up a great results and set us up for you know of the greatest where you're at
spk_2: script efforts and in one for breaks i was done on the improve leverage can you just don't mind for you think about the path to break even profitability and the drivers that will get you don't think your works for me
spk_0: yeah thanks again for run over your comments yeah what we see now that the improve the results in the corner for the year in terms of leverage far as we talked a lot of affairs marks the are continuing to be very focused on that
spk_1: things around things like new authorities will be coming into focus always you know increased by ten points in the prior year and would be very mindful that going for as dated a couple of things that will really focus on it is is growing the growing much greater efficiency a greater leverage and so he thought some the actions because he thought lot of the fourth quarter input other acts of the play to have any eaten sort of feared for yet in terms of you know cost management and of along with continue to be you know a take world company we think that we're going to continue see future leverage as well as you know moving towards that past the daffodil the you then we haven't put a timeframe on not yet rhino the we are committed to was getting there thank you our next question come from the line of our my with guggenheim securities be see which are question great thanks for taking a question i have one for mad and one for greg first for mad so as you progress towards a more frictionless buying screens can you comment on is it most of new capello customers on gw s or are they find directly from the marketplace where you're usually a a couch made sales rep involved and then with respected as your and juicy v and understand that general bill billion out she's great
spk_6: the when will propel be available for direct purchase on on those marketplaces and and i guess is more bobby how how significant you think availability on the hyper scale of marketplaces will be to expanding archipelago putnam base
spk_2: i our appreciate the question is if we think about our
spk_1: efforts on overall efficiency and go to market we spend a lot of time talking about are hardly instrumented direct sales model and complimenting that with
spk_2: what what we refer to as a bite from model
spk_1: how do we engage developers early in their consideration and bind cycle and create a great experience for them as arab are you waiting technologies an understanding of the value of couch face we believe that with the capello offering morgan and dramatically increase that that by from experience and are innovation the map
spk_2: integrating with developer tools and creating an even more frictionless experience and you know new new new eyes all of these factor into on you know that that complimentary motion that we can then in an instrument against our direct sales engagement you know if we go back one year ago we were only and market with server on a w last and this year we've rounded out the portfolio on capello are now in in a market with all three him hyper scale or is under server or and mobile so to answer that question we think there is tremendous outside
spk_1: indeed portfolio that are you know sellers and our partners are are now bring in the market any time we have capello as part of our offering our ability to dramatically increasing engagement with our partners the is is is a very real factor for us and you saw our eight of us we announced the strategic collaboration partnership which was a big milestone for us we anticipate reaching the you know similar levels with you know google and agger now that we are
spk_2: in market with those those solutions
spk_1: as it pertains to actually getting new logos over the line
spk_2: the great thing is we're benefiting from
spk_1: ways in which customers want to consume the technology is they want to buy it through
spk_2: are you know cloud marketplaces that's open to on if they want to engage with us in a more traditional ways you know we can do it that way
spk_1: in one of the things that we're very proud of him queue for is actually a majority of our net new logos came from capello this time around and we benefited from that makes you know about partner leverage and or go to market team's ability to continue to evangelize capella and and what it can do for for them in a folding their development needs the doing in a more efficient and and lower total cost of ownership wage so
spk_2: i put that in squarely in the bucket of what we can control of the intersection of how to innovate and and improve our go to market in in as far as not working on again big big outside their and we do think that will be transformational for the company as we go forward okay good great thanks so much matter thanks where as really helpful color enough i get squeeze only one in for it for greg he just held us that understand the discrepancy between totally on our guidance for it's for six hundred ninety percent growth in total revenue guidance from eleven to thirteen percent growth the and understand that there's he are you you discuss the capella ready wreck mission changed it's about a percentage points of for the still it's still get back at us feel like a forty five percent delta or percentage point out this is the in that primarily due do
spk_1: due to an increase in in committed self managed contracts that said that sense you could add an air rp don't recognize as readings were on like it's is that's is that still the primary primary difference of that makes sense
spk_0: thank you yeah no it's it's that yeah howard thank god and good have you on a golf course and are yeah makes sense when i say two to two drivers on that sort of on delta between a growth in the air on the revenue the first the dimensional capello said we get more the power and now especially with that updated revenue recognition models are doing it as consumed in particular
spk_2: yeah we have migration the new logo are things take a little bit of time to ramp from a consumption perspective that settles that have read some some dealt in terms of their the revenue growth persevere our growth and the second the have added that some services obviously he thought about services that are there are it is part of revenue
spk_7: last year we are outperforming services and you know services and fifty four percent last year
spk_8: ahead of what we expected and we're not expecting it to go anywhere near that in fact that uprising flight negative round this year and so that's would still two things combined with trading the sort of differentiation if you will between a girlfriend you say hundred reminisce
spk_2: if a great i appreciate the responses and an aussie the florida thank you
spk_1: thank you
spk_2: our next question comes from a lot of cash and with goldman sachs was he was your question
spk_1: cast sorry casts are interrupted we can't very well
spk_2: little their hands
spk_1: guess projects scott
spk_2: gosh
spk_1: you're little hard to hear i think i picked up most of it
spk_2: and i'll sort of read state what i heard and and reflections i miss anything in a please feel free to come back i'm an addict generally noting that we've been and market with capella an understanding that there's big outside their what are we seeing in terms of you know adoption from capella and in a furthermore consumption and in are are there any patterns emerging so what i would say generally speaking is
spk_1: capello dominating our customer conversations both new logos and migrations
spk_2: and we mention some some use cases and a quarter to very high level for both new logos and and migrations which which i'll touch on and second of generally speaking i will tell you that when we get somebody into the capella offering whether be a new logo or an existing customer we are seen the pizza
spk_1: growth and consumption or been ahead of what we would see em or traditional model and that's a line to what we would have expected
spk_0: in light of the fact that you know we really work on ease of operational efficiency and opening up use cases and being able to directly engage developer leveraging things like telemetry to understand you know where customers may be having challenges and then being able to offer them in a subsequent advice or even services to accelerate in any other things
spk_9: or or overcome any barriers i'm as it pertains to use cases i think we're excited that that we're seeing as leverage across a vast variety of in a vertical and use cases
spk_10: you know it into for alone
spk_2: on capello we talked about you know gaming company that application was for internal bug reporting for their you know developed development process enabling their developers to be that much more agile on responding to in a product feedback on that's very different from one of our migrations which was a large online marketplace and
spk_1: europe where the applications running and capello managing a thirty million item product catalogs across you know many retailers and so in a couch this is a broad based platform that services highly interactive applications an app for teams to tell cohen finance and you know professional services and as use cases and we are seeing you know the play out in the market said the offering in the consumption model of capella offers additional benefits that you know catchphrase hadn't had him in a product arsenal and info you know we've been out to market with it and we that extremely high expectations for you know the impact of that's going to have to our business and we're seeing that play out in in the results and you know in in the pipeline on a go for basis themselves are consistent with what you know we've been talking about were seen that and and remain very bullish on you know what what does has in store for us as we go forward
spk_2: and our next question concerning line of ram our with their he see which request
spk_1: great a good afternoon guys can hear me okay loud and clear okay great yeah thanks six caches questions i always learn a lot from and i could not your that oneself ah but she wanted to make sure and i met on partners i'm obviously you're excited about partners two sizes are getting bigger you're talking about a more efficient go to market get can you give us a flavor of you know i guess first how partners if at all our info
spk_11: looting deals today and that killed down the road what might constitute excess either from say you're percentage of your taught to how we might think about it does said the evolution of your partner's driving your business and then i had a follow up for greg thanks
spk_1: are out appreciate the question but partners are a foundational element of of our strategy and it's it's not just one partner type
spk_2: as as i think about the impact obviously we are very excited about you know expanded partnerships with steve but the see of peace and in we think the in a piece of leverage there is only going to increase as as we have more capello and market and at the same time we have great success with i have these and we also have investments and partnerships with vs eyes in addition to resellers and you know geography and you'd be hard pressed rotten to find a customer were a partner hasn't been engaged with us in some way and is we analyze you know the them analytics of of a deal flow and pipeline we often talk about partner influence your partner source and you can see some variation by cool or or you know by geography and under various channels that we're are encouraging are go to market teams that have to think about partners in every one of their deals in a very excited about some of the joint dollar market activities that we have with the likes of a ws for converting large customers moving workloads and a capella getting out that new workloads and existing customers and quite frankly
spk_9: are you don't really impressed with their desire to go after net new logo for the cloud providers and in cap space and are some really creative things that we can do in terms of email account mapping leveraging are see install base with their coverage to convert people to capello into the new logo for for both provide
spk_12: earth ah in itself
spk_0: greg maybe a little pylon and in some of the particular metrics from in a few for but as i think about it it's pervasive across the business and gives us an opportunity to touch our customers and future customers
spk_13: in in a way that you know just expand our leverage exponentially
spk_2: yeah right i did that mad point i mean we typically see one third up there are four to two thirds of your activity what are some partner source or partner influence so have mattered instead of a big meaningful part of our of our business
spk_14: okay that's really helpful guide and then thanks matt and and greg you're just a follow up for you and you know i don't you guys had talked about potentially on feel being able to kind of reached at materiality threshold on capella ah give perhaps this fiscal year and it of nice conversion traction and
spk_1: now majority of new customer at so it is still fair to assume that we might see that broken out later this year thanks like us
spk_6: yeah thanks for their right yeah looks said that said we are pleased with the power in the tracks and he saw the customer you know impact it's having along with other then i think that's a fair statement and we haven't made any commitments i think it's fair to think that you know at some point is your sad
spk_2: begin sherry mora more details and information around the elders as people okay crickets thanks again
spk_1: thanks rob you
spk_2: our next question comes from the line of matt head with rbc capital markets leave was he was your question
spk_1: great as a stigma courses said cigarettes on the year he didn't you prefer to my to talk about some slicks a macro had with intensifying is a quarter played on yeah i guess that greg could you talk about meet you know thoughts are on the guidance for fiscal twenty four digit digital dead sort of additional levels of conservatism like extended feel cycles already reply planks mercenaries
spk_2: a grappling this man
spk_1: light of the importance of the question about i'd start off and then turn it over to to greg
spk_2: you know as we mentioned we did see some dynamics intensifies and as we thought about the year ahead
spk_12: we wanted to come out with an assumption that those dynamics persist if not get worse
spk_1: with with that assumption and mine we could look across the business and actually had an elevated level of of conservatism across things like sideline generation conversion retention and expansion raids sale cycle deal size logo acquisition because those things you know that macros dynamic is outside of our control
spk_2: if you were to run that out that would imply that we will not see an improvement in fails productivity that close rage don't improve that we don't have a material impact from capello migrations that we don't have material you know increase the new logo different with capella and see migrations and even a deterioration to never tension rates now to be very clear the patterns that we're seeing our in in our business or not aligned with the effects of of that assumption and so we wanted to be very mindful of the macro economic environment noting that we don't control and we don't know how long it's going to process
spk_1: and then again focus on what we can control and ensure that we're going to do everything possible to am
spk_2: you know whether those dynamics and an inner focus on what we can yeah i did added that matches and we carefully thought we played soccer with the jasmine sign or guidance but that are or guidance is not indicative of what i think i can performances or the potential very committed to continue this pattern of world the mean i think
spk_1: demonstrated since sounds and read salaries were gonna trade since becoming a public company can particularly in delivering more efficiency and profitability matt nine the benefit been through some be challenges not specific this one but other ones and we feel like were visibly experience with managers and had this have applied all that into the guidance and our running the business great great cause they should make small some and then actually i up tilt my second question answer bouncing girl the probability of sleep in with the success of the power coming out here i peel we talked about a lot of go to market investments try broader at options as you looked to fiscal twenty four arthur incremental things that you think are going to be a top priority to the the best dollars spent on go to market the can get drive cutting the successor of color
spk_15: yeah that's the great question like look again at wheaton probably seen some of that are their sales and marketing efficiency improve this year and we're certainly yeah i'm building a plan for the truth and next year had you know we made a change she joined up as a new zero middle of last year and it really been sending not only the first six
spk_16: not running the business but also getting things in place to continue to create more more efficiency and and set up for better success in the future of he'd creating new you know get new models with in sales organization
spk_0: the as map thought about it is i'm prepared remarks were hiring we think are are better leaders and so the combination of another the things you believe that allows in as the growth potential we believe there but also create efficiency we thank god is awful
spk_17: before the snap map for my chair it it's great for me to think about the we're taking the field this fiscal year with the best team the couch that has ever had
spk_1: in it's not just on the direct sales side to see the level of collaboration and focus across our sale themes in i'm mad and as the business development team what john doing on the marketing side and in the synergy that coming together across those on the critical few priorities that are gonna give us you know the best return in a not of those leaders it's a talented greg alluded to that we're bringing in underneath them so i'd say it's level of focus of the level of
spk_2: collaboration the understanding on in a where the leverage points are quite frankly willingness to lean into areas that may not be a competitive strength for us where we know we can do better i'm in so i think there's a lot said you all may not see that we certainly have confidence and seeds for good things to come based on all the hard work on the operational initiatives that that i think there's clear line and on across the company thanks like us thanks that our next question comes on line of rudy to do with the a davidson was he was your quit a great think for at my questions certainly understanding you got a lotta conservatism on the guy it sounds like on the top flight i'm curious to what extent that same conservatism
spk_17: you know you're applying to get the operating loss outlook i think sunlight look at this and say know last two years and he gets mad at roughly fifty million rabbits you still guidance roughly the same offered last dollar basis as as he has two years ago
spk_1: the a wire she showed more leverage yet day rudy the thanks for the question again i go back to his arm look at how is a form of if the point three and perfectly as again gap later in the year i think he saw some of that some efficiency and leverage fall to the bottom line with a very good about how will we deliver last year and like i mentioned earlier
spk_2: you know if we think about forty and and making progress there i was i'm a lot adding at a ten points last year to that harm as we go for the as again we talked about their the pool instantly that into our guidance and i would say it's both on the top right and the bottom line we we are expecting to see more efficiency for you know better that are free cash for position so they're they're certainly in some some of that on
spk_1: you don't risk adjustments can be to the bottom line as well obviously to the top line
spk_0: he realizes we believe said that is mostly fall through as the progressive years i think the combination of ah to get us executing for me to control generating growth have enough often as well as providing more efficiency and seeing that sort of the a multiplier effect at the bottom line okay and then and then on to palette any system was the majority of god new customers with our customers and few for
spk_18: i imagine there's actually smaller deals relative some the other customers you signed by how should we think about it in terms of net new era are just what percentage of that and a quarter case from capella
spk_1: you know it it still too early to break any that out
spk_19: yeah really that good question yet we had a broken a that couple of the perfect out on i would i would say that sound you hear ah pointed out the league smaller the old yes the that he said that the path that advocates on i would also say that we were also very focused as you think about with the field team and with customers is
spk_1: we want people to do far smaller size the else because that typically the is the quicker you are you getting customers up and running and moving power we believe if we can get him going getting started family the great thing in the future so i would you do you expect to see generally smaller deal sizes we talked about the iraq customer that could moderate over time as we feel for capello command smaller the advisors are we you think that's the way too
spk_2: greater capello adoption what should be at the a few our growth and even see the mean that retention rate over time so that's how we see it as i mentioned to rob some squash previously you know we believe at some point of view we will break up the matrix and is or share information are looking for
spk_1: okay great thanks for asking the questions and you our next question comes from the line of sanjay singh when morgan stanley the was he was your question great thank you for the answer fringes i want to have one question on sort of the theme of consolidation arm on the last earnings call you spoke quite a bit about how customers are coming to you to sort of consolidate two or three i didn't know sequel to our databases to capello i don't want to ask how that team is sort of impacting the current quarter or que for am and then how they go to will that be into to ski a twenty four maybe particularly looking at first year twenty four if you parsing out how much of that consolidation is sort of the cost argument versus the product argument i'm
spk_2: what sort of the levasseur you can yeah maybe pause are sort of keep that team of consolidation going
spk_1: issued the question look at i think it is pretty fundamental to our value proposition and quite frankly has been a big part of the mindset that we've had and developing our architecture from the very outset of company he we put a decade of innovation into ensuring that our modern cloud database can support multiple modalities that it can run from cloud the edge
spk_2: if you'd be hard pressed to find a company that was talking about real time analytics on top of an operational database earlier in i didn't catch case was an average sort of predicted that today's applications would require these these characteristics i think part of the successor you've seen and couch catchphrase with large enterprise customers is that we've we've done
spk_6: helping them understand how they can put more and more applications relational offload
spk_18: in a things like that read platforming applications that new inside of of a single platform
spk_1: it can be a cash advance on database and support things like full text search you know a damn thing and the have seen a connector them to other jason sees combat paradigm has has never been more important and we overlay that with the either
spk_2: consumption of our i think this is critically important in and how companies are choosing databases and picking strategic vendors for them in an apartment for about four days as obviously when there's economic pressure companies are get even more focused on how can i do more productive with law resources indoors extract cost each company is different different industries are going through different thing so whether it's about more productivity or less cause the things we can equally good at at both of those and never has been has there been more focused on that part of the conversation and that part of our value proposition than than there is now so i think we saw that in queue for i think we expect to see that
spk_20: as as we go forward and as we continue to innovate and expand the types of application that we can support for developers what capella
spk_0: you know we think that's gonna layer on
spk_2: the amount of outside and them in the business with sam with this element and and this dynamic that we think is going to process for a long time exxon thank you and if i can squeeze in of a quick second question on on on your contract terms and three broken now it's armed was the mixes with a year from existing customer days and then how long did you expect the shifting contract turns to consider us anyway you can sort of to guidelines around that help us understand at which point i'm p o can become a more meaningful forward metric the and yeah good question we haven't broken that out on the contract terms with i talked about generically in the past us for the are weighted average terms we haven't broken that are specifically we did mention that the the terms are that shorter they're not outside the historical norm ah but they're on the low side given what's going on the macro and as he said in our guys with nice are expected to ah
spk_21: we've had assumed the backrow stay the same will get worse than the application of that would be that the macro for the contract terms
spk_0: to stay the same or potentially get all shorter by tom that that sort of the best of we have right now
spk_2: and again will continue to kind of of the us as we get more information but that will resume right now
spk_1: and i thank you and our next question comes from the line of robbery galvin which the for free for see which your questions hi this is rob galvin on for bribery ducked into taking a question i wanted you could touch touch on the capello on demand transit you saw during the quarter or not you to is a quarter to three years later and i'm just wondering what you for trying to like thanks
spk_0: yeah thanks for appreciated for appreciate the question to look at capello on demand continues to just like the rest of the television continue to be performing well as a lot of people that are for the and willing to come in and and wanna try to make that commitment and we see that across the marketplaces

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