Couchbase, Inc. (BASE) Q1 2026 Earnings Call Transcript
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Overview
The earnings call presents a mixed picture. Strong ARR growth and strategic account expansion are positives, but concerns over churn, foreign currency impacts, and declining margins weigh negatively. The Q&A reveals management's confidence in market positioning and strategic improvements, but also highlights macro pressures and revenue guidance uncertainties. The lack of a share repurchase program and continued operating losses add to a cautious outlook, resulting in a neutral sentiment for the stock price movement over the next two weeks.
Key Financial Performance
Total ARR $252.1 million, up 21% year-over-year (20% in constant currency), and 6% sequentially. This growth was driven by strong upsell and expansion activity in large strategic accounts and continued Capella adoption.
Net New ARR $14.2 million, up more than 300% year-over-year. This reflects healthy renewals, expansion from customers launching new applications, and further growth in Capella contribution.
Revenue $56.5 million, up 10% year-over-year and 3% sequentially. The increase was attributed to strong performance in software revenue, which was $54.8 million, up 12% year-over-year.
Professional Service Revenue $1.7 million, down 27% year-over-year and 22% sequentially. This decline was not elaborated upon in the call.
Gross Margin 88.7%, down from 89.9% a year ago and 89.4% last quarter. The decrease was attributed to foreign currency fluctuations.
Operating Loss $4.2 million, or negative 7.4% operating margin, improved from an operating loss of $6.7 million or negative 13% operating margin a year ago. The improvement was driven by operating leverage and improved sales and marketing efficiency.
Net Loss $3 million, or negative $0.06 per share.
Cash and Cash Equivalents $141.8 million at the end of Q1, indicating a strong capital position to execute long-term growth strategy.
Remaining Performance Obligations (RPO) $239.6 million, an increase of 9% year-over-year, with approximately 66% expected to be recognized as revenue over the next 12 months, representing growth of 16% year-over-year.
Operating Cash Flow Negative $6.8 million.
Free Cash Flow Negative $8.6 million, or a negative 15.3% free cash flow margin.
Operating Highlights
Couchbase Edge Server Launch: In Q1, we launched Couchbase Edge Server, an off-line first lightweight database server and Sync solution designed for applications in resource-constrained edge environments.
AI Capabilities Expansion: We continue to invest in and rapidly innovate our AI capabilities, including a high-performance vector database for AI agent-based applications.
Capella Adoption: Capella now represents 17.4% of total ARR, with an 84% year-over-year increase in Capella ARR.
New Customer Wins: Couchbase secured new enterprise customers across various industries, including energy, defense, and healthcare.
Net New ARR Growth: Net new ARR was $14.2 million, up more than 300% year-over-year, marking the highest ever for a first quarter.
Customer Base Growth: Exited Q1 with 937 customers, despite a decrease of 10 net new customers due to churn in starter packs.
Go-to-Market Enhancements: Enhanced go-to-market strategy with dedicated strategic account teams and Capella free tier to lower barriers for new customers.
Focus on Strategic Accounts: Continued focus on large strategic accounts, with a growing pipeline of opportunities.
Risk or Challenges
Macroeconomic Uncertainty: Despite macroeconomic uncertainty, Couchbase was able to deliver strong results in Q1 2026.
Customer Churn: There was a decline of 10 net new customers due to churn in customers with starter packs, which impacted total net customers.
Foreign Currency Fluctuations: Foreign currency fluctuations resulted in a $550,000 headwind to operating loss and a 1% headwind to operating margin.
Operating Loss: The company expects a non-GAAP operating loss in the range of negative $15.5 million to negative $10.5 million for the full year, which includes a $3.5 million headwind from foreign currency fluctuations.
Retention Rate: The dollar-based net retention rate (NRR) is expected to return to historical levels in the second half of the fiscal year, but may remain below 115% until the company anniversaries the anomalous loss and down sell experienced in Q2 of fiscal 2025.
Guidance & Outlook
Total ARR: Total ARR was $252.1 million, up 21% year-over-year, 20% in constant currency, and 6% sequentially.
Net New ARR: Net new ARR was $14.2 million, up more than 300% year-over-year.
Capella Adoption: Capella now represents 17.4% of total ARR and 33% of customer base, with ARR increasing over 80% year-over-year.
Strategic Accounts: Couchbase is emerging as a long-term platform provider for critical applications, with a growing pipeline of strategic opportunities.
Couchbase Edge Server: Launched Couchbase Edge Server, designed for offline access and performance in resource-constrained environments.
AI Capabilities: Investing in AI capabilities, including a high-performance vector database for AI agent-based applications.
Q2 Revenue Guidance: Expect total revenue in the range of $54.4 million to $55.2 million, representing 6% year-over-year growth at midpoint.
Q2 ARR Guidance: Anticipate ARR in the range of $255.8 million to $258.8 million, representing 20% growth year-over-year at midpoint.
Full Year Revenue Guidance: Expect total revenue in the range of $228.3 million to $232.3 million, or 10% year-over-year growth at midpoint.
Full Year ARR Guidance: Expect ARR in the range of $279.3 million to $284.3 million, representing 18% year-over-year growth at midpoint.
Full Year Operating Loss Guidance: Expect a non-GAAP operating loss in the range of negative $15.5 million to negative $10.5 million.
Shareholder Return Plan
Share Repurchase Program: None
Key Q&A
Earnings Word Cloud
BASE Transcript
The earnings call presents a mixed picture. Strong ARR growth and strategic account expansion are positives, but concerns over churn, foreign currency impacts, and declining margins weigh negatively. The Q&A reveals management's confidence in market positioning and strategic improvements, but also highlights macro pressures and revenue guidance uncertainties. The lack of a share repurchase program and continued operating losses add to a cautious outlook, resulting in a neutral sentiment for the stock price movement over the next two weeks.
The earnings call summary and Q&A indicate strong financial performance with 17% ARR growth, a significant Capella migration, and record free cash flow. Despite a slight decline in gross margin and NRR, the company raises its revenue guidance and remains optimistic about future growth and profitability. The departure of the CFO and unclear management responses introduce some risk, but overall, the positive developments and improved guidance outweigh these concerns, suggesting a likely positive stock price movement.
The earnings call summary shows strong financial performance with a 17% increase in ARR and 13% revenue growth. The Q&A session highlights confidence in future growth, especially with AI integration and record pre-contracted ARR. Despite operational risks and macroeconomic concerns, guidance remains strong with a focus on achieving positive cash flow by 2026. The absence of a share buyback program is a minor negative, but overall, the strategic positioning and growth prospects, particularly with Capella and AI, suggest a positive sentiment, likely leading to a stock price increase of 2% to 8%.
The earnings call summary highlights positive revenue growth and improvements in operating efficiency, despite some churn and downsell issues. The Q&A section reveals strong new customer acquisitions, strategic initiatives, and a healthy retention rate, which are encouraging. Although there are concerns about churn, management's confidence in ARR guidance and strategic deals for Q4 is promising. The improvement in gross margin and reduced operating loss further support a positive outlook. However, the lack of a share buyback program and cash flow challenges slightly temper the sentiment, resulting in an overall positive rating.
BASE Report
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