Couchbase, Inc.

Greetings. Welcome to the CouchBase fourth quarter and full year fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Edward Parker. You may begin.

Good afternoon and welcome to CouchBase's fourth quarter 2023 earnings call. We'll be discussing the results announced in our press release issued after the market closed today. With me are Couchbase's chair and 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, market size, and 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 at 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 can cause actual results to differ material from expectations. For discussion of the material risks and other important factors that could affect our actual results, please refer to these risks discussed in today's press release and our most recent annual report on Form 10-K or quarterly report on Form 10-Q filed 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 as included in our earnings press releases, 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. On today's call, Greg and I will provide details on our fourth quarter results, as well as our first quarter and full year fiscal 2024 guidance. I'll start off with a few highlights of our Q4 financial results. Couchbase delivered another strong quarter, beating our guidance across all metrics. We delivered these results in spite of continued macroeconomic headwinds anchored by growing momentum with Capella, excellent retention metrics, and ongoing large deal activity. Furthermore, our pipeline continues to see healthy growth. I'm especially pleased with the substantial progress we made operationally during the quarter, headlined by better than expected non-GAAP operating margin performance. This is a direct result of our focus across the company on driving improvement in efficiency, efforts that will serve us well in fiscal 2024 and beyond. Total annual recurring revenue, or ARR, was $163.7 million, up 23% year-over-year and up 24% in constant currency. Revenue in Q4 was $41.6 million, up 19% year over year. Our non-GAAP gross margin remains best in class at 86.3%. Non-GAAP operating loss was 9.9 million, 15 percentage points above the midpoint of our implied operating margin guidance range. We'll cover more on this in a minute, but we will continue to complement our strong top line momentum with an increasing focus on driving more efficient growth and operating leverage in our model. We exited the quarter with 675 customers, an increase of 17 from Q3, the majority of which were Capella deals. Before Greg provides more details on Q4, I want to highlight our accomplishments from the past year and reiterate our priorities for fiscal 2024. Looking back at fiscal 2023, I'm extremely proud that we accomplished all that we laid out to do at the beginning of the year. I attribute this success to three things. Our expanded and differentiated product portfolio, our 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 2024 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, our fully managed cloud database platform. Recall that we launched Capella on Google Cloud during the summer, which includes our unique app services. Next, we introduced a new developer experience for Capella in the fall, and then announced Capella on Azure this past January, completing availability on all three major cloud platforms. And thanks to the investments we made, we saw meaningful new Capella logo additions and migrations across a broad range of industries over the year. This was complemented by a growing pipeline of exciting Capella opportunities across both new and existing customers. Second, we made significant progress with our go to market efficiency. We transformed how we go to market across buy from and sell to motions, both in terms of efficacy and efficiency. Importantly, our partner and alliance ecosystem continues to deepen. During the year, we saw strong bookings growth, sourced and influenced by partners, including ISVs, cloud service providers, and system integrators. I am particularly excited about our broadened multi-year strategic collaboration agreement with AWS that we announced at reInvent in November. This has already begun to accelerate and streamline customer migrations to Capella on AWS. On the buy from side, we continue to invest in growing our mind share with developers through community building and developer relations. We grew the number of evangelists in the market, increased our developer events, and enhanced our online community presence. All of this, combined with product enhancements we made for developers, will be an important accelerator for our business. And third, we evolved our world-class team and culture by adding new leadership across multiple parts of the organization, including sales, engineering, and more. Our culture remains a sustainable competitive advantage as we attract, develop, and retain the highly skilled talent necessary to execute on our growth strategies. Refocused roles and responsibilities have 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. In summary, the strategic product go-to-market and team investments we made in fiscal 2023 are yielding incremental offerings and capabilities that we believe bolsters our ability to deliver sustained growth while also doing so in an increasingly efficient way. We've always operated under a disciplined approach to our expenses. However, the implementation of increased operational rigor in recent weeks reflects an extra step to complement our growth with improved leverage in 2024. Now, turning to wins from the quarter, we are pleased that in Q4, a majority of our net new logos were Capella. We added customers from a broad range of industries, including technology, e-commerce, gaming, insurance, healthcare, travel, and more. Some exciting wins included a premier global gaming and entertainment company, a publicly traded global IT 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, scalability, and improved TCO. In addition to new logos, we continue to see an acceleration of Capella migrations from existing customers. One such migration came from a clothing company that owns several major international brands. This longtime customer has leveraged Couchbase to build digital showrooms for a smooth, immersive experience that works flawlessly regardless of internet connectivity. They made the decision to move from on-prem to Capella because of the flexibility, performance, and improved TCO that our managed service provided. Another notable Capella migration in the quarter was a seven-figure deal from a leading cloud-based enterprise communication platform provider. 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 Capella's performance, they have moved their entire Couchbase estate to Capella. Their developer team is experiencing even greater reduction in database management, and they have reduced TCO, all while Capella has supported their rapid application growth. And our server and mobile offerings continue to generate both new logos and large expansions for us. In the quarter, we saw momentum across a broad range of industries, including telco, retail, media and entertainment, technology, and travel. Customers continue to leverage our platform for a wide range of use cases and to power many of their most important business applications. They also continue to take advantage of our differentiated architecture and multimodal capabilities by consolidating vendors to realize cost efficiencies and lower TCO. Now, turning to some thoughts on the near-term environment. Given the large opportunity ahead of us, we plan to keep innovating and investing while also placing increased rigor on our expense discipline and focusing on what we can control. Like many of our technology peers, we're seeing the impact of macroeconomic headwinds affecting broader IT spending. and these trends intensified in the quarter. For example, some customers and prospects are taking longer to make their buying decisions, are requiring extra layers of approval, or are electing to buy in smaller increments. That said, demand indicators remain strong and we continue to see healthy pipeline growth. 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. Relational systems are too expensive and ill-suited for the task. And we believe that other emerging NoSQL solutions lack sufficient performance and scale to accommodate the incessant growth in data volume and variety that is at the core of application modernization. Couchbase's ability to deliver in a fast, flexible, familiar, and affordable way continues to resonate across our market. Of note, the increased 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 differentiators, especially against this more challenging macro backdrop. As we look to fiscal 2024, 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 to weather any downturn as a result of these strategic initiatives that are just starting to bear their fruit, coupled with the operational improvements we've implemented. These include a greatly expanded product portfolio, particularly with Capella, a meaningfully expanded partner ecosystem, and transformational changes in terms of how we go to market. This will serve us well as we continue to seize the massive opportunity to drive a generational rethink of the database market. In closing, I want to reiterate our priorities. First, delivering top line growth. Second, Increasing the mix of Capella across all metrics. Third, driving further sales and marketing efficiency. And fourth, accelerating the pace of leverage in our model. I have high expectations for fiscal 2024, and our management team is committed to delivering improvements across all of these areas. Before handing the call over to Greg, I want to emphasize one of our core values that I've repeated many times before. At Couchbase, we attack hard problems driven by customer outcomes. With that, I'll hand the call over to Greg to walk you through our results in more detail. Greg?