Couchbase Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matt Hedberg - RBC Capital Markets - Analyst : Great. Thanks for taking my questions, guys. So maybe I'll start with Matt. First of all, congrats on the cash flow generation in Q1. I know that's been a huge focus for you guys. Based on your commentary, I mean, it seems like the macros deteriorated a little bit from Q4. I'm guessing it -- was there any commonality to the deals that pushed? And is there any way to quantify the dollar value, just like, just roughly speaking of deals that sort of you thought may have closed, but didn't?

Question: Matt Hedberg - RBC Capital Markets - Analyst : Got it. That's great that there are a lot of them that are closing already. Maybe just a quick one, a follow-up for you, Greg. Maybe just a little bit more on why customers choose on-demand pricing and is it fair to assume, given the $1.5 billion Q1 impact, that it's kind of like a $6 million impact to full year? Is that kind of the right way to think about it?

Question: Matt Hedberg - RBC Capital Markets - Analyst : Thanks for the clarification. That certainly helps a lot.

Question: Howard Ma - Guggenheim Securities - Analyst : Yes, great. Thanks for taking the question. I want to dovetail on Matt's question before. And so with respect to the slipped deals, when you're talking to the decision makers -- and Matt, you just said, based on your own analysis. Is it -- can you kind of -- if you were to kind of rank order the top three reasons, I mean, is it tighter budget constraints relative to the start of the year? I mean, would you say is it increased competition or maybe it's something more benign like Couchbase is offering more capabilities now. So you're being evaluated as part of a broader strategic decision and that can require more approvals. So if you were to kind of rank order that, would what would you say that?

Question: Howard Ma - Guggenheim Securities - Analyst : Matt, thanks. That's really good color. And I just want to ask a follow-up on IT optimization. So in light of that, I want to better understand how your customers are consuming, how they're choosing to consume Capella. Is the dynamic more so that Capella customers are choosing not to renew their commitments and then therefore they're moving completely to on-demand or PAYGO? Or is it just that they're keeping the size of their

Question: Howard Ma - Guggenheim Securities - Analyst : Got it. Sounds like you're managing it really well. Thank you both.

Question: Austin Dietz - UBS Securities LLC - Analyst : Thanks, guys. Matt, I'm just going to ask, what would be your latest thoughts on Columnar service? You know, obviously, the potential to [take off more analytical loads] is exciting. Can you just unpack this opportunity a little further? Is this potentially going to pick up wallet share from existing analytical applications today? Is this more about net new applications. Do you mind just unpacking that opportunity for us?

Question: Austin Dietz - UBS Securities LLC - Analyst : Okay, great. Thanks, guys.

Question: Raimo Lenschow - Barclays - Analyst : Thank you. Can I go back to Matt's question at the very beginning and just maybe to clarify one more time. So if you think about the ARR shortfall a little bit, like did the macro get worse or was it sales execution that kind of caused the delays when you looked at the deal afterwards? Because that's the big question we are asking for the whole sector, like not just you, like everyone. Did it get incrementally worse? Because we've all been working in that kind of tough environment for quite a while so the question is, is it actually changing from here? Or was it more like like deal-specific? And I had one follow-up. Thank you.

Question: Raimo Lenschow - Barclays - Analyst : Yes. Okay, perfect. That's very clear. And then Greg, one follow-up for you. Like well done on the positive cash flow outcome this quarter. I know you're not guiding for cash flow, but how do you think about cash flows going forward for the rest of the year and from an annual perspective? Thank you.

Question: Raimo Lenschow - Barclays - Analyst : Okay, got it. Thank you.

Question: Sanjit Singh - Morgan Stanley - Analyst : Yes. Thank you for taking my questions and my congrats on the free cash flow positive quarter this quarter and just the general improvement in operational efficiencies on a year-over-year basis. I wanted to talk a little bit about the migration opportunity. I was wondering, Matt, if there's like a cohort of customers that migrated last year and sort of in that sort of [near to that] ramp, and what sort of trendlines you're seeing from those customers that have migrated in terms of their usage growth? And like if I look at the pipeline of opportunities after fiscal year '25, how much of migration play a role in that pipeline, if you could -- just some color on the migration opportunities?

Question: Sanjit Singh - Morgan Stanley - Analyst : That's super encouraging to hear, Matt. The other question, the follow-up I had was sort of around you mentioned a couple of times, there's been (inaudible) in support of mission-critical applications and driving digital transformation. I'm sort of wondering in the context of that, we have macro, but we also have just a lot of stuff being brought to market or the GenAI side. You guys just released (inaudible) that quarter. So I'm wondering from like the customer's perspective, the ability to digest all of this new innovation in the sort of data infrastructure side. And then, you know, there's a lot of proof of concept (inaudible). Is that slowing the ability to get -- to restart that digital transformation initiative or fill that next net new mission-critical application, in your view?

Question: Sanjit Singh - Morgan Stanley - Analyst : I appreciate that, Matt. Thank you so much.

Question: Andrew Nowinski - Wells Fargo - Analyst : Okay. Thanks. I want to ask a question just broadly on GenAI. Has the focus on the training phase of GenAI and perhaps the slower start of the inference phase had any impact on your growth, either with new logos or migrations?

Question: Andrew Nowinski - Wells Fargo - Analyst : Okay. And then I wanted to ask about the go-to-market changes you're making. It sounds like you're having your sales team focus on the larger strategic accounts. I'd assume those workloads are larger and presumably have more predictable consumption patterns, but are they also more competitive? Some of the other larger vendors are also targeting those same strategic accounts.

Question: Andrew Nowinski - Wells Fargo - Analyst : Got it. Thanks.

Question: Rudy Kessinger - D.A. Davidson Equity Capital Markets - Analyst : Yes. Thanks for taking my questions, and I appreciate the candor here in sort of pointing the finger more at yourself instead of just playing into macro. I want to dig in again on just this $1.5 million of ARR that came from the reclassification, because I guess one way you could look at it, if we exclude that $1.5 million, your ARR would have been below the low end of your guidance range. And so how much of that $1.5 million in ARR that you're now including came from customers who intra-quarter in Q1, switched from credits to on-demand versus how much was from customers who have been on-demand for a while now?

Question: Rudy Kessinger - D.A. Davidson Equity Capital Markets - Analyst : Okay. That's helpful. And then I'm curious, some other competitors out there called out kind of slowing consumption growth trends. Just curious what you guys have seen, and in particular with some of your customers where they're on commitments, how are they tracking in their consumption growth towards those commitments? And do you see any risk of maybe some downsizing later on throughout the year, once customers get to that renewal point and maybe they're not quite up to their commitment level on consumption?

Question: Imtiaz Koujalgi - Wedbush Securities - Analyst : Hey, guys. Thanks for taking my question. I have a question, again, just a follow-up on the $1.5 million adjustment, Greg. So when you give us a guide for ARR last year, for the full year, I guess you're not assuming to include the on-demand portion in the ARR. So now that you're adding that on-demand piece, I guess we've got an uplift of $1.5 million in Q1, but shouldn't that be passed on to the full year guide as well? Because that uplift was not factored into the initial guide. Or are you effectively, I guess, lowering the guide by $1.5 million?

Question: Imtiaz Koujalgi - Wedbush Securities - Analyst : Got it. Thanks. And then secondly, on the guide, I know you guys feel good about the second half of the year given the renewal base. But I'm asking about the -- my question is about the guide for Q2. When I look at the guide to the midpoint for ARR, you are expecting -- I think the net new ARR implied is about $6 million. You added about $2.5 million in Q1. And when you compare that to the [businesses] now they look a little bit aggressive, right? Your [actually] you add Q2 ARR, net new ARR which is almost in line with your Q1 net new ARR? Here I guess, your guide is implying a big jump in what's your -- the net new ARR you're supposed to add in Q2. So just in terms of guidance, I guess, philosophy or framework, are you assuming that whatever got pushed out is closing in Q2, nothing else is getting pushed out from Q2? How do you feel about that guide being, I guess, conservative or aggressive versus what you guys did in Q1?

Question: Imtiaz Koujalgi - Wedbush Securities - Analyst : Got it, thanks. One last one, if I may, guys. Just on the on the mix of new business between upsell and new logos, it looks like new logos were very strong this quarter. So is it fair to assume the majority of the pushouts and whatever weakness you saw was in renewals and upsells and new logo momentum seems pretty healthy this quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 05, 2024 / 8:30PM, BASE.OQ - Q1 2025 Couchbase Inc Earnings Call

Question: Imtiaz Koujalgi - Wedbush Securities - Analyst : Thanks, guys.