Couchbase, Inc.

Greetings and welcome to the Couchbase second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. The 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Edward Parker at ICR. Thank you. You may begin.

Good afternoon and welcome to CouchBase's second quarter 2025 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me are CouchBase's Chair, President 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, product capabilities, 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 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 could cause actual results that differ materially from expectations. For discussion of the material risks and other important factors that could affect our actual results, please refer to the risks discussed in today's press release and our most recent annual report on Form 10-K, 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, is 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. I'm pleased to report that in Q2, we made strong progress on our full-year objectives, delivering excellent new customer logo growth, strong new business, meaningful growth in Capella consumption and ARR mix, and continued progress on the growth, efficiency, and leverage across our organization. Annual recurring revenue, or ARR, was 214 million, up 18% year over year and 19% in constant currency. Revenue in the second quarter was 51.6 million, up 20% year over year and above the high end of our guidance range. Non-GAAP operating loss in Q2 was also above the high end of guidance at 4.1 million, representing a negative operating margin of 8%, 2.2 percentage points above the midpoint of our implied operating margin guidance range. We added 62 net new logos, up from 12 in the second quarter of fiscal 2024 and 19 from last quarter, not including the additional 39 customers added due to our change in methodology made in Q1 to include on-demand customers. Capella now represents 31% of our customer base and 13.5% of our total ARR, both up two points sequentially. Over the past several quarters, I've discussed the leverage that we've seen building across our business as a result of our efforts to improve operational rigor and efficiency. We made further progress on this front in Q2 with our second quarter rule of 40 score improving 14 points year over year. Driving efficiency across go-to-market, R&D, and all aspects of our operations will continue to be one of our highest priorities for the balance of fiscal 2025. I'm proud of the strong execution of the entire Couchbase team in what continues to be a challenging macroeconomic environment. In Q2, we saw new customer wins across a variety of industries, including healthcare, financial services, manufacturing, retail, technology and communications, and travel and hospitality. We saw strong growth, new ARR growth across new and existing customers and strong Capella migrations and new logo additions, including a mid six figure Capella land, the largest in our history. Customer uptake and consumption of Capella continues to grow nicely. Our pipeline of large strategic opportunities continues to expand and we are well positioned to have a very strong second half of the year. And thanks to the hard work of our go-to-market teams, we successfully closed all of the significant deals that slipped from Q1. We delivered one of the best gross new ARR quarters in company history, and we were able to do so despite a renewal pool, which as I discussed last quarter, is disproportionately weighted toward the back half of the year. Offsetting the strong execution was a higher level of customer loss and downsell, which resulted in an unanticipated headwind to our ARR performance in Q2. While we experienced some churn and downsell in any given quarter, the impact to Q2 was higher and more concentrated than what we normally experience. Not reflected in this quarter's results, however, was the significant progress we are making with a large number of strategic accounts where we are participating in multi-year initiatives to support the next generation of enterprise applications. Greg will discuss our outlook in more detail in a few moments, but the strong visibility we have across the size, scale, and diversity of these opportunities gives us confidence in our ability to achieve our full-year objectives. Our customers continue to demonstrate a growing commitment to the Couchbase platform. As the demand for rich, hyper-personalized, and real-time AI applications accelerates, we believe the core tenants of our value proposition are only becoming more relevant. In parallel, we're witnessing and participating in an increasing number of strategic projects across our customer base, focused on evaluating, architecting, and building the next phase of data infrastructure to support our customers' AI and application requirements. And it's becoming clear that many alternative approaches and solutions are failing to meet the long-term demands of enterprises looking to scale their infrastructure to support their next generation application roadmap. Couchbase was deliberately architected to be the foundation for mission-critical applications, delivering the world's most scalable, performant, and flexible modern database. We've intentionally built our platform to combine uncompromising performance with the flexibility of deployment and usage models from cloud to on-premise and to the edge and everything in between. And with the introduction of Capella, we do so in an easy to use and familiar way, while at the same time rapidly enhancing our platform with new services. As enterprises endeavor to build the next generation of adaptive applications, we are seeing the need to combine the ever-increasing volumes of data from disparate and traditionally siloed sources, whether it's structured or unstructured data, broad-based internet data, or proprietary enterprise data, with extremely low latency in a highly connected and performant way. This need will only become more urgent. Our strategy continues to be focused on seizing this moment. It's driven by our architectural foundation that supports a broad range of use cases and workloads complemented by the low TCO of Capella enabled by our go-to-market motion and focused on developers, system architects, and other key stakeholders across our large enterprise target market. Now, turning to product specifics, we are continuously extending our platform with new features and services that are purposely designed to advance the capabilities of developers to build next generation applications. This quarter, we announced the general availability of Couchbase Mobile with Vector Search. which makes it possible for businesses to offer similarity and hybrid search in their applications on mobile and at the edge. We also introduced Capella Free Tier, a perpetual free developer environment which empowers developers to evaluate and explore products and test new features without time constraints as they develop next generation production ready applications on Couchbase. Developers now have the access, convenience, and simplicity to learn, develop, and deploy applications on Capella into production. On top of all of this, we GA'd Capella Columnar during the quarter. This powerful innovation empowers our customers to unify operational and analytical workloads on a single platform. Our approach reduces complexity, lowers TCO, and accelerates time to market positioning our customers with a strong foundation in their AI-driven transformation journeys. As modern applications are increasingly being built on higher performance semi-structured formats like JSON, application teams and IT organizations face growing challenges. The flow of real-time data at scale is severely constrained by the architectural limitations of relational systems. This introduces latency, impacts productivity and performance due to rigid and complicated ETL operations and impedes real-time operational writebacks, disrupting critical tasks in today's data-driven environments. Overcoming these obstacles is crucial for organizations aiming to harness the full potential of their data in real time. Couchbase is intentionally architected to solve these challenges through its innovative columnar data format, which eliminates the inefficiencies of legacy, rigid, and outdated systems. Our approach paves the way for AI-powered applications to seamlessly integrate operational data with real-time analytics, enabling our customers to deliver more agile, personalized, and cost-effective solutions. We believe this strategy aligns strongly with the application agendas of enterprises where the demand for real-time AI-driven insights is rapidly accelerating. Appella Columnar is a transformative achievement for us, and I am thrilled to share that Q2 saw fast adoption and positive feedback from early users across various industries. This strong market response underscores the significant value our customers see in integrating advanced analytics directly with their operational environments. And by combining Capella Columnar with advanced vector search capabilities with a unified cloud database platform, we enable enterprises to further reduce costs, simplify operations, and put both the operational and analytical power directly in the hands of developers to create reliable, adaptive applications that scale effortlessly from cloud to edge. What gives us confidence in our strategy is that we continue to see it resonate with our growing customer base. A new Capella customer in Q2 is a financial service company that chose Capella to power their client reporting service in its data hub. We were selected because of our ability to enable greater transparency and reporting precision to its commercial clients, including providing inner day reporting and full transaction detail availability. Another new Capella logo this quarter was an aviation and aerospace component manufacturing company that provides in-flight entertainment and communication solutions to airlines. Requiring a database that would provide performance at scale with the flexibility to power content management of its business critical in-flight entertainment system, this customer selected Couchbase because of the compelling mobile offering and edge capabilities. Turning to expansion this quarter, a global leader in unified retail commerce solutions, Aptos, expanded its investment in Capella to continue supporting its cloud-native point of sale system, Aptos One. Aptos originally selected Couchbase for its mobile and offline first capabilities and was able to reduce infrastructure costs and improve operational efficiencies by migrating to Capella and has continued to invest in Capella for easier deployment of new products and features while reducing database administration. Another Capella expansion came from an automobile trading company, Toyota Astra Motor. This customer is leveraging Capella to deliver an application to improve customer experience end-to-end and decided to expand its investment in Capella because of its performance advantage. This comprehensive mobile application will serve all of Toyota's clients' needs. A global leader in the convenience foods and beverages space also expanded their Couchbase investment this quarter. Initially needing a database solution with offline available functionality for its sales application used by field representatives, this customer again expanded with Couchbase because of our database's superior offline first capabilities, flexibility, and ability to process a high number of transactions. We also had an important new relationship with a large ISV, which contributed a significant number of new logos in the quarter. Partner-led sales continues to be a key component of our go-to-market strategy, and ISVs can be a force multiplier to our existing motion and reinforces the value proposition that we bring to customers. Finally, I'm excited to welcome Josh Harbert as our new Chief Marketing Officer. Over his 20 years in marketing roles at both private and public software and technology companies, he has demonstrated a strong track record of accelerating growth and achieving strategic outcomes. Josh's experience will be instrumental in leading all aspects of our marketing strategy and execution. We're thrilled to have Josh as part of our world-class team. In conclusion, I'm pleased with how our teams have responded and executed in the second quarter. We made progress across our strategic priorities, delivered strong new customer growth, meaningfully increased our Capella mix, successfully launched Capella columnar, and continue to drive efficiency across our model. Our customers and prospects are focused on building the next generation of adaptive applications while addressing the growing data challenges of an increasingly AI-powered world. Our foundation rests upon a carefully architected platform, purpose-built to enable these mission-critical applications, and I'm honored that Couchbase is serving as a strategic partner, helping customers navigate this journey. We are not fully satisfied with our net new ARR performance in the first half of the year. That said, We're making rapid operational progress across the business, inclusive of several key strategic accounts where we are emerging as a strategic and long-term critical platform provider. This robust pipeline of exciting opportunities gives us confidence in our ability to drive substantial wins and expansions going forward. This dynamic, taken with other important levers in the business, reinforce our confidence in delivering the year. We will work tirelessly to support our customers and acquire new ones, enhance and extend our technology leadership, deliver new capabilities and services, and drive increased Capella adoption. And we'll do so in a more efficient manner and with a dedicated focus on a Rule of 40 trajectory. As I have said many times, at Couchbase, we attack hard problems driven by customer outcomes. With that, I'll now hand the call over to Greg. to discuss our results in more detail. Greg?