Q1 2023 Couchbase Inc Earnings Call
Ladies and gentlemen, please standby your.
<unk> first quarter 2023 earnings call will begin momentarily. Thank you for your patience and please stand by.
[music].
Ladies and gentlemen, thank you for standing by and welcome to Couch basis first quarter 2023 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Please be advised that today's conference is being recorded I would now like to turn the conference over to your first speaker today Edward Parker head of Investor Relations. Thank you. Please go ahead.
Good afternoon, and welcome to Couch basis first quarter 2023 earnings call, we will be discussing the results announced in our press release issued after the market closed today with me are couch basis, President and CEO , Matt Kane and CFO , Greg Henry.
Today's call will contain forward looking statements, which include statements concerning financial and business trends and strategies are 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.
Yes.
Forward looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations for a 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 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 is included in our earnings press release, which is 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 Gregg and I will provide details on our first quarter results as well as our second quarter and full year fiscal 2023 guidance, let's kick things off with a few highlights of our Q1 financial results.
Revenue in Q1 was $34 $9 million, an increase of 25% year over year.
Total annual recurring revenue or <unk> was $139 $7 million, representing 27% year over year growth.
Net new <unk> was a record for Q1 and RP O grew 68% to $169 million.
Our gross margin remains best in class at 87, 3%.
Operating profit was negative $13 $4 million ahead of guidance.
I'm pleased to report that we had a great quarter and strong start to the fiscal year.
In our core business, we continue to see ongoing large deal momentum robust renewal activity strong expands and healthy new lands.
And in our emerging cloud business initial uptake and leading indicators of demand for Capella continue to validate our excitement in and indeed, my very high expectations for our as a service offering.
I'll cover more on that in a moment.
In addition of beating our guidance across all metrics I'm, especially excited that AOR grew 31% year over year on a constant currency basis, the third straight quarter of acceleration and at the fastest rate for us since the beginning of the pandemic.
This not only reflects our growth potential but also the momentum we are seeing in the marketplace for a leading enterprise platform and the continued urgency behind digital transformation initiatives. Despite the increased macro volatility we've seen in recent months.
Simply put I remain confident that we have the opportunity to drive a generational rethink in the $60 billion database market.
Couch pieces, the modern database for enterprise applications, and we are convicted that we have the best enterprise database.
And now we are equally convicted that we are well on our way to having the best cloud database.
We've made tremendous progress on this front and we've been accelerating our innovation engine towards realizing this aspiration.
Okay.
As a primary example, we recently announced significant additions to the capella portfolio as well as major enhancements to our core platform.
Let me dig into a little bit more detail about each of these innovations and our acceleration of how we develop and deliver our services to the market.
First we continued to invest aggressively in capella and feedback remains overwhelmingly positive.
Our offering provides flexibility and ease of adoption for developers.
And performance at scale for enterprise applications with price performance that are superior to competitors.
We are thrilled with the response, thus far and leading indicators are all where we wanted them to be.
One of our near term priorities as extending the availability of capella to new regions and more cloud service providers to support hybrid and multi cloud strategies last week, we announced capella on Google cloud, giving customers flexibility with where they choose to deploy capella improving alignment with.
<unk> and supporting hybrid and multi cloud strategies from a single platform.
Additionally, we recently announced the Capella now fully manages and host a backend for mobile and Iot applications called Capella App services.
It's worth noting that adding our unmatched mobile support to Capella has been the number one request we receive.
We are bringing this to market significantly ahead of schedule and are delighted to address this market need.
By unifying the entire couch based product offering under Capella, we are delivering all of the couch based as a service with a highly competitive cloud offering that makes it easier for developers to build the next great mobile and Iot application.
Our unique investments in mobile and edge database capabilities completely round out our ability to run anywhere and mobile support is a strong differentiating factor among our competition.
We have a robust capella roadmap ahead of us and you can expect more announcements this year, including support for additional cloud providers enhanced developer experience and more ways to consume couch based as a service.
Turning to our core platform in May we introduced version seven one of couch based server, which delivers meaningful advancements in performance.
Storage capacity and workload breath.
These new innovations significantly reduce the cost of building and running applications, while gaining operational efficiency and reducing T. C. L.
We also expanded our operational analytics capabilities at a time when customers demand easier access to analytics on active data.
This latest core platform or lease is noteworthy because it reduces deployment costs for couch base and sets the stage for our long term plans for capella.
We will continue to invest aggressively and thoughtfully and technology with an intense focus on scaling our company for long term growth.
Major aspect of this initiative is fully committing to becoming a cloud centric company.
Naturally this starts with our cloud offering, but we're taking this commitment to the next level.
As we shared in March we welcomed Gobi duty to our leadership team as our senior Vice President of engineering to help accelerate our product development and delivery.
Since then we have refocused roles and responsibilities across all levels of the engineering organization pursuant to our top priority of cloud Centricity.
In Q1 alone we more than doubled the number of people focused on Capella development and we're already seeing results.
The most visible sign of this is last week's capella announcements, which were delivered ahead of schedule.
We're also evolving our software release cadence from server led to cloud led so that new features and capabilities will be released on capella before or concurrently with server update.
This not only result in a faster release cycle for our customers, who will benefit from seamless updates.
But also encourage as new customers to choose capella and existing customers to migrate to capella.
On the go to market front, we are engaging in cultivating a new audience of developers with our evolving by from sales motion.
We are seeing ongoing interest in our free trial strong engagement from existing customers and great responses to our capella workshops.
In fact, we saw nearly a 50% increase from Q4 to Q1 and new trial accounts created and nearly 45% growth in new trial clusters deployed.
And I am proud to say that we closed another seven figure capella deal in the quarter.
On the sell two side, we continue to execute on our high touch enterprise sales motion, including global return to in person customer and prospect meetings and events.
We're seeing continued investment in digital transformation, resulting in big deal momentum driven by very healthy renewal and expansion activity.
Our partner and alliance ecosystem remains strong and continues to contribute to our go to market acceleration.
Specifically in Q1, we saw an over 100% year over year increase in partner sourced and influence new business.
Now I'd like to spend a few minutes discussing some exciting customer wins during the quarter.
Western Union is a couch based customer delivering cross border cross currency money movement and payments service to its millions of customers around the world across more than 200 countries and territories.
This quarter Western Union broadened its relationship with us with the Capella transaction, which will migrate multiple applications to our database as a service.
Western Union relies on couch space, and AWS for scalability, and the cloud greater developer agility and to deliver a seamless customer experience we.
We are very proud of this partnership and excited Western Union has turned to couch based for its modernization strategy.
Another new win was Fortune 500 company Halliburton, which is one of the world's largest oilfield services companies.
Robert and chose couch based for our unique mobile and data synchronization capabilities as they seek to automate various processes and workflows aiming to achieve new business opportunities and efficiencies across well sites and drilling operations.
With couch base, the Halliburton completion tools field mobile application will.
We will be able to synchronize data across devices with limited to no internet connectivity, increasing efficiency by preventing both data duplication and redundancy of efforts.
We are thrilled that they chose us for this exciting application.
Another new customer during the quarter was a leading web site hosting company. This customer was looking for a flexible solution to help deploy next generation e-commerce capabilities, including online service ordering and payments for its customer base.
They needed a platform that can handle complicated use cases for business critical applications.
This customer selected couch based capella over a cloud service provider due to our better performance better developer experience and cost efficiency.
As we look towards Q2, and the rest of the year I'd be remiss to not acknowledge the increased volatility across the macro environment.
One of our core values is to attack hard problems driven by customer outcomes.
Spite the volatility we have worked hard to put couch based in a great position and I feel as confident as ever in our long term prospects and here are four reasons why.
First from a product perspective, as we have just discussed we continue to bring new products and capabilities to market and our portfolio is growing and its ability to meet the complex wide ranging demands of the largest enterprises customer.
Customers choose couch base in part due to our ability to enable applications a quad across a wide spectrum of deployment and consumption models from cloud to on premise from the data center to the edge and everything in between.
Our differentiated technology remains at the heart of who we are and we continue to aggressively invest in our innovation agenda.
Second with respect to cloud industry analysts are forecasting that cloud database management service revenue will account for 50% of the total database market revenue this year.
And with Capella, we're now well positioned to fully participate in this opportunity.
Cloud is at the heart of most our customer conversations and Capella continues to gain momentum as evidenced by robust big deal momentum and strong pipeline generation across all regions.
We believe capella is well on its way towards becoming an important contributor to our business. This year.
Third digital transformation initiatives continue to receive the highest levels of attention and prioritization across the organization.
Our fifth annual Global survey of 650, I T leaders found that on average enterprises plan to increase their investment in digital transformation by 46% over the next 12 months I am consistently hearing this from business leaders and our conversations with customers increasingly revolver.
How couch base can play a central role in driving multiyear strategic transformations lending visibility and confidence to our outlook.
And fourth as the CEO of Couch base I have the honor of leading a great team of people while it may not be visible on an income statement, the resiliency and creativity of our teams inspires me every day.
I'm so proud of how our world class team came together supported our customers and one another adapted the constantly changing conditions and executed over the past couple of years.
Nothing prepares us for the future more than being battle tested.
My confidence in our ability to persevere and innovate and an exciting dynamic and at times volatile market is stronger today than it's ever been.
Before I hand, the call over to Greg I want to share my excitement about the announcement that Hugh Owen has been promoted to be our new chief revenue officer.
Hewitt served as a leader of our international sales business for nearly four years and knows our business inside and out he.
He has already played a significant role in accelerating growth for couch base.
In fact during his tenure he has driven sales execution and increase international air or by nearly 200%.
His background combined scaling sales at high growth companies such as good technology.
With operational sales excellence at leading enterprise technology companies like Veritas, Symantec, and Lenovo and makes him well suited to take couch base to the next level of growth.
He was an ideal successor to step into the CRO role and I am pleased to welcome him to the management team.
Succession planning is part of maintaining a world class team and with our strong and healthy business Foundation I am certain that now is the right time to make this transition.
I'd like to thank Dennis Murphy for his contributions to couch base, a CRO over the past three years.
He has led the field organization with incredible dedication and focus throughout the pandemic no less and we wish him well in his future endeavors.
Dennis will be with us through the end of this month to aid with the transition.
Thanks to him sales is in a great position to begin a new chapter under Hugh.
In conclusion, we had a great start to the year.
We continue to execute across all facets of the business and the secular drivers supporting our growth trajectory remains strong.
I believe this will be a landmark year for couch base.
I'd like to thank our team for their effort and focus and starting off the new year on solid footing.
I'd also like to thank our customers and partners for placing their trust in couch base, all of whom are our pleasure to serve.
Yeah.
With that I'll hand, the call over to Greg to walk you through our results in more detail Greg.
Thanks, Matt and thanks, everyone for joining us we had a great start to the year.
Continued robust demand environment and we're pleased to have outperformed our previous outlook I'll now walk you through our first quarter financial results in more detail before providing our guidance for the second quarter and full year.
Were thrilled to share the total annual recurring revenue or <unk>.
At the end of the first quarter was $139 $7 million, representing 27% growth year over year or 31% growth on a constant currency basis, and an acceleration for the third quarter in a row.
Revenue for the first quarter was $34 $9 million, an increase of 25% year over year the impact of foreign currency exchange on year over year revenue growth was immaterial.
Subscription revenue for the first quarter was $32 million, an increase of 21% year over year professional services revenue for the first quarter was $2 $9 million, an increase of 93% year over year.
We exited the quarter with 614 customers an increase of 24 customers from the fourth quarter. Please.
Please note that we changed the way, we classify customers, including 11 incremental customers, resulting from an atrophy change in our customer count requirements starting in fiscal 2023.
Our air or per customer performance in the first quarter was $227000 up from $225000 from the fourth quarter. During the first quarter of fiscal 2023, we revise our air our definition to measure Capella era by Annualizing. The prior 90 days of actual consumption, we continue to execute from air our revenue derived from the.
Use of the cloud product only based on on demand arrangement and services revenue revised methodology had an immaterial impact on Iraq.
We are pleased to report our dollar based net retention rate continued to exceed 115%.
In discussing the remainder of the income statement. Please note that unless otherwise stated all references to our expenses results of operations and share count are on a non-GAAP basis.
In Q1, our gross margin remained best in class at 87, 3% as compared to a gross margin of 88% a year ago and 88, 7% last quarter.
Turning to expenses, our sales and marketing expenses for Q1 were $24 $8 million or 71% of revenue compared to $20 $1 million or 72% of revenue a year ago. We continue to build out our go to market function to capture the generational opportunity that we see ahead of us.
Research and development expenses for Q1 were $12 $5 million to 36% of revenue compared to $12 million or 43% of revenue a year ago, we saw healthy leverage from our R&D investments during the quarter and we capitalized approximately $750000 of Capella software development, which was previously planned to be an expense, we expect to see additional leg.
Bridge as we scale general and administrative expenses for Q1 were $6 $5 million or 19% of total revenue compared to $4 $8 million or 17% of revenue a year ago.
Operating loss for Q1 was $13 $4 million or a negative 38% operating margin compared to an operating loss of $12 $3 million for negative 44% operating margin a year ago.
non-GAAP net loss attributable to common stockholders for Q1 was $14 $3 million or negative 32 cents per share.
Turning to the balance sheet and cash flow statement, we continue to be well capitalized and in Q1 with $201 million in cash cash equivalents and short term investments.
Our remaining performance obligations, our RP O totaled $159 million at the end of Q1, an increase of 68% year over year. Our continued exceptional strength in our P. O growth fueled by significant upsell and renewal deals we expect to recognize approximately 60% to $100.7 million of total ARPA revenues over the next two.
12 months.
Operating cash flow for Q1 was negative $8 $6 million, while free cash flow was negative $9 $4 million.
Negative, 27% free cash flow margin.
Now to conclude the call I'll provide guidance for Q2 and the full year fiscal 2023.
Despite increased macroeconomic volatility our pipeline remains strong we continue to see strong business momentum elevated database infrastructure migration activity across our industry and sort of broad based digital transformation initiatives.
That said, we are monitoring the environment closely we continue to see an incremental strengthening of the U S dollar, resulting in a headwind from foreign exchange exposure.
Furthermore, we've historically seen variability with respect to the implementation timing of certain deals, which impacts our revenue visibility. Accordingly, we are prudently considering these factors into our revenue guidance, even if we see continued upside to our outlook clearly a deviation from this assumption would cause us to modify our guidance higher or lower keeping.
Keeping that in mind, let's turn to our outlook for the second quarter of fiscal 2023, we expect total revenue in the range of $35 8 million to $36 million, therefore, our year over year growth of 21% at the midpoint.
We anticipate here or in the range of $142 5 million to $144 5 million, which represents 25% growth at the midpoint I would add that we anticipate approximately a 3% negative impact to our air growth rate due to foreign currency fluctuations.
We expect a non-GAAP operating loss in the range of negative $11 9 million to negative $11 $7 million.
For the full fiscal year 2023, we are raising our revenue and our outlook, while decreasing our operating loss, we expect revenue to be in the range of $147 2 million to $148 $2 million, therefore year over year growth of 20% at the midpoint we.
We expect air are the range of $160 5 million to $164 $5 million or 22% growth at the midpoint.
We note that we anticipate approximately 150 basis point negative impact to our growth rate due to foreign currency fluctuations.
And finally, we expect a non-GAAP operating loss in the range of negative $55 2 million to negative $54 $2 million. Our updated guidance reflects the full year impact of the capitalization of Capella software development, we discussed a moment ago.
Finally, I want to share our thoughts on balancing growth and profitability as Matt outlined earlier, we have a 60 billion dollar database market ahead of us and we are investing aggressively to become a cloud first company our level of investment is informed by the tremendous market opportunity, while prudently evaluating and managing our cost structure delivering healthy revenue growth.
While improving profitability is a top priority for us for fiscal 2023 guidance implied that non-GAAP operating margins will improve by approximately 200 basis points in the second half of the year compared to the first half.
Longer term, we are positioning the business to sustained high growth and believe we will have a highly profitable business model as we scale with that Matt and I are happy to take your questions operator.
Thank you as a reminder to ask a question you will need to press star one on your telephone to it.
Draw your question press the pound key.
Our first question comes from Matt Hedberg with RBC capital markets. You May proceed.
Great. Thanks for taking my question guys. Congrats on the results. Matt you know really you had a lot of positive things to talk about with capella, including the seven figure win N. G. C. P support.
I'm wondering now that you have some additional data points. There can you talk a bit more about the competitive environment as you add more features and support and how are your win rates versus other cloud alternatives.
Great great to hear from you.
Yes.
Very excited about the quarter with respect to capella.
Mentioned some of the innovations we're extremely excited to have accelerated the roadmap in key areas.
Adding additional clubs a point like G. C. P is massive so.
Two is the addition of our mobile platform, which we're calling capella App services.
It's really opened the aperture pretty significantly for us previously where end market just with server on AWS.
This one is going to really add a lot in terms of our ability to still add value to two customers were.
We're seeing demand across the pipeline top of funnel shared some statistics on trials and cluster wisdom, and obviously some big wins.
We are very competitive with our capella offering.
It provides a level of simplicity and productivity for the developer, which quite frankly, our previous offering didn't at the same level, but maintained the scale and performance for modern applications and does all of that with.
What we think is the best T C O in the industry.
So we continue to work aggressively to add capabilities, but the leading indicators.
<unk> discussions with our.
Largest customers on discussions with prospects.
I really appreciate the value proposition of capella and the ability to get the full power and benefit of couch base with a more simplified consumption model and we're going to continue to put a lot of wood behind that arrow as we go forward.
That's great and then maybe as a follow up you just mentioned simpler consumption models and you're bringing in a new CRO that you highlighted Hugh.
With sort of the ramp and compel a yeah. What are some of the biggest things that you think the go to market model could benefit because to me. It feels like you have the increased ability to land quicker than maybe you had previously maybe just huge focus.
You know with with sort of the success of Capella right now.
Well, let me, let me take a moment to talk about the transition and then I'll get into.
What we're focused on on a go forward basis.
First off I'd like to thank Dennis for his service over the last three years that you've known the company for a while and I think you can appreciate that we're just a different company than we were three years ago and.
Not only has he performed in that role.
But he has helped me prepare the company and the organization in human particular for this important succession.
This is something that we've been planning for and making sure that Hugh and the organization is ready at the right time, and we're very confident in.
In the decision and now being the right time, a big part of that stem.
From the very question you are asking what do we need to drive. He has experience includes scaling growth technology companies, but also operating.
At a level of detail and scale that few.
Revenue leaders in the world have running over 1 billion dollar businesses.
I think that focus and fundamentally understanding the value proposition of couch space to developers and.
Architects alike, who can enable him to lead the field organization to continue with areas of strength like land and expand but quite frankly.
And the areas that we know we can get better which is new customer acquisition and leveraging capello.
As a way to do that and quite frankly, Matt the region that he's been leading has been pacing ahead of the company on those important metrics for some time on new logos and early cloud traction and I expect that that.
And that recipe is going to be applied in a more consistent way across the world and we're gonna be well positioned to improve as we go forward.
Thanks, guys.
Thank you. Our next question comes from Kash Rangan with.
Goldman Sachs you May proceed.
Alright, Thank you very much and congrats on the quarter.
Matt I wouldn't mind, if you could just said to you could take a step back and evaluate.
You're right.
You go to market for Capella and also from a product architecture standpoint, considering that the service was or at least not too long ago, but what are you uncovering as to where the market is resonating with.
With Capella is obviously the ease of deployment the cost model all of this stuff. It's about I. Appreciate it but are you starting to see some clear patterns. Maybe you don't maybe you do of use cases that are a slam dunk for capella that you could envision this being.
Able to uncover a different market segment, a different set of market.
Needs that are unmet or do you think it's more of a consumption model. That's really the differentiation that it's meant to really go after a different set of customers that are decidedly not reached some critical but could be mission critical in the future. What are the things that you've learned from the launch and what customers are telling it. Thank you so much.
Hey, Kash, let me, let me Peel that apart.
I'm going to start with kind of a product first and how we think about our architecture and quite frankly, how we carefully.
Built the solution.
And what we think is the best way possible.
You and I have spent a lot of time on.
The unique differentiators of couch based under the Hood and the way that we.
Architected the platform for scale and performance a single integrated solution from cloud to edge sequel compatibility fundamental thought we think about things layering in services like full text search and analytics and really having a robust platform. So that we can confidently say that.
We are able to serve enterprises and their mission critical applications. Unlike anyone else what capella allows us to do is bring all of those benefits to those customers in a very simple way and I can't tell you how refreshing. It is when we hear from customers I wanted the full power of Cafe I, just don't want to spend any time running and managing it.
And now you all can do that for me.
Now cash quite frankly, another big part of our innovation is addressing the developer experience and that's everything from the UI to documentation too.
Expanding our developer community and the other integrations that are important to run alongside the database.
We're working on connectors into things like graph QL another important capabilities that we know.
Developers are really interested in and allow them to build and run applications bought much more flexible.
And with the agility that value proposition resonate.
What we're so excited about is our fundamental architecture.
Have differentiation.
But we believe we can sustain over time and as we continue to build out.
Capello with with the.
<unk> Road map, we have the potential to remain the cloud the edge leader with a consumption model.
As the industry, leading from a total cost of ownership perspective.
And how we're going to utilize the underlying resources and the things that we're doing with.
Core technology like new storage engines are all along the lines of.
Moving from the best Enterprise database to the best Enterprise Cloud database now in terms of users. We're maniacally focused on the developer with all of that ease of use but at the same time we.
We can talk to architects about the scale and performance advantages that we maintain.
I will say cash, but we are seeing an ability to go down market more effectively than we have previously.
I think equally important we talked about the most mission critical applications. We believe that we are able to.
Increase the breadth of applications that we can serve for enterprise and mid market customers.
And so we were not only opening our total addressable market with new regions and new cloud the new services, but doing that from an application.
Respective and customers love that they want to do more with less they see couch base as a platform that they can in Boston, we're now making it easier for them to use and run and couldnt be more excited about how we go forward now.
We're clearly investing in the go to market along the way everything from managing trials and creating a great customer experience.
Managing through a different type of pipeline that is very active.
And empowering our field organizations with the intelligence on where people are in that cycle. While at the same time, increasing the amount of dedicated resources that we have in the field and in other parts of the company to get the most out of our offering so.
Lot behind your question, but.
We are very excited about the trajectory and what we're seeing in the business. Thank.
Thank you so much Matt and Greg one for you.
As you as you approach. The next couple of years, what should we think about that as being the key drivers of profitability granted that you definitely had operating income outcome.
Outcome are significantly better than what we all expected, but just wanted to get your thoughts refined thoughts on that thank you.
Yeah, Hey, Kash, Yeah, I think part of it goes back to what Matt was saying Capella is going to give you there.
To drive away for us.
But look we're in a large and growing Tam we're going to be you know.
Continuing to invest.
We see opportunities both on the R&D cannot go to market side.
We got an accelerating growth story now so I think that that's going to help us obviously get there we're going to continue to push forward will do believe we'll see sales efficiency.
And productivity coming out of that organization and.
We will obviously continue to make the move towards profitability cash flow profitability. We obviously haven't set long term targets, we expected in the next year or so we'll do an investor day and lay out those targets for you, but you can be rest assured that Beth.
Investing for growth, but also being mindful of profitability at the same time and that we are fully funded.
From a capital perspective people to take the thought over the next couple of years, though.
I'd say more to come in terms of the long term model, but.
We are very mindful of that as we go forward here.
Wonderful. Thank you so much.
Thank you. Our next question comes from Jason Ader with William Blair.
You May proceed.
Yeah. Thank you hey, guys.
First question is just on Covid COVID-19 impacted verticals.
We've all been ups and so over the last few months and like every seats taken.
So.
How is that business trending has it returned to kind of pre COVID-19 levels any color there would be helpful.
Yeah, Hey, Jason it's Greg.
To hear from you Yeah look obviously you saw we put up a strong Q1, continuing to see growth acceleration reacceleration into fiscal 'twenty, three and obviously, we're going to continue to push for it going forward. We aren't we are our sales teams are getting back out on the road.
We're trying to we actually are having a first in person fail sort of boot camp here on site. This week right to get people back.
In headquarters and training going so that's all helping and then as far as the customers go we are seeing a pretty.
Healthy return to normalcy I would say, we're as close to sort of pre COVID-19 levels that we have been ever since that began and that's what.
Generating the growth rates that youre seeing today I would also go back to the IPO time, we laid out the plan that we were being impacted by Covid and that this was going to wane over the next several quarters and we're going to get back to pre COVID-19 growth bubble and that's exactly what we're what we're seeing right now. So we're we're excited about that cohort, but we're also excited about the rest of them continued to be <unk>.
P.
Great and then maybe one for you Matt you see.
Just from a product standpoint, do you see your sequel like architecture as a competitive advantage.
Especially when you think about connectivity to data warehouse in bi tools.
Without question, Jason I think it's been a.
He part of our architecture and mindset for many years in fact.
We continue to rack up patents specific to sequel on our implementation and our ability to make the life easier for developers that are that are writing applications.
And we think it's.
Really important it's going to allow enterprises to do more with their existing people.
Drive not just modern applications that help them re platform off legacy solutions and a very efficient way. So without without question. We think we're highly differentiated there and continue to make that point.
Emphasis as we go forward.
And do you see customers using.
Some of those sequel like the P I tools such on your.
Two in kind of in an App analytics.
Operational analytics.
Yes, no question when I talked about the developer experience and integrations.
Making it easy to move data from an application that we're powering.
Into other analytical solutions.
Has been a big point of focus in every release, we increased the number of connectors and integrations with the latest and greatest.
Analytics.
Analytic systems and others as a matter of fact, we talked about our seven one relief.
A lot of features around analytics, and particularly our operational analytics, where you can run analytic based queries directly on the data in real time of the application that we're powering. So we spent a lot of time with our customers Jason understanding their environments understanding their technical stack what role.
Do we uniquely play and then how do we.
Participate in a.
Kind of overall solution perspective, with other elements of the stack. So no question about it we lean into those conversations.
Right a bit and it's going to continue to drive our development as we go forward.
Thanks, guys. Good luck.
Thanks, Jason.
Thank you. Our next question comes from Sanjay Singh with Morgan Stanley You May proceed.
Thank you for taking the questions and congrats congrats Greg on the best quarter, yet I think I've seen and so congrats to the to.
The entire team.
On the great start to the year I wanted to talk a little bit about the quarter itself.
To what extent is the theme of your script.
Revolved around a lot around capella listen with capella kind of the driver.
As.
You know the extremely solid air our results this quarter, but maybe you could start there and then I had a follow up.
So Angie we appreciate the.
The comments I'm very proud of the team look we talk about there being many layers to grow the couch base and I think that's been consistent in our conversation for.
Some time, Greg talked about and that's from a return of industries that are important to us getting.
Getting back to sale of efficiency that we've proven to ourselves before.
And then layering in cloud on top of that as I reflect on a quarter I think every one of those had a factor in our results.
Very healthy renewals large expansion.
But without question Capella plays a role.
We continue to grow that business, we're excited about that.
Salt as well as the leading indicators, but I think another big part of the Sangeeta customers thinking about the right time for them to move into Capella.
We're making long term investments there is not a conversation that we're having that doesn't involve.
A win around.
Capella migration and moving new applications into it.
At the same time, if you look at some of the pipeline generation.
I think we're benefiting from a solution on a go to market model that we have them. So I think I played a big role in I think it's going to play an even bigger role as we go forward.
Yeah, So let's talk a little bit thought that bigger role going forward, if I should think of.
The classes of opportunity ahead for the company and had for Capella sort of organized by systems or gate engagement, which has been sort of the companies are better and butter.
Systems of intelligence, which you guys have also how to play in and then frankly, the relational opportunity with some you know for the update to couch based server on relational migrations, where do you see kind of a near term opportunity for capella.
And that sort of organizational framework and what do you think is.
Makes it may take some time to see some of the fruits of.
All of the effort the sales effort there.
Sanjiv.
It's a pretty sophisticated question I think when I think about the application types.
Now a source of true system of record.
Relational offload.
I sort of separate the couch based value proposition and our flexible data schema and our underlying architecture from the delivery and consumption mechanism of capella.
So I think the reality is with Capella, we're gonna be able to get after all of those that you talked about and I think it's going to depend on the particular agenda of the customer base on which one they want to go with first right.
If I think about the demand environment, we have customers that are leaning into digital transformation and a more aggressive way than they ever have there playing offense, we're running modern applications.
And they're building things from the ground up that our systems of engagement.
Source of record.
Based applications, we had another set of customers that may be weary of the environment and more prudent with their spend they may be thinking more of how do I do more with less and we can shift and Adam Berry.
Compelling conversation with them about P. C O. The reality is in relational offload and the reality is capella can be a weapon for us in both of those.
Both of those circumstances, because we've built the database in such a way that we're now enabling it to.
Be consumed, but not losing any of the underlying.
The attributes of the core platform from from the cloud to edge.
So we think the.
Total addressable opportunity for Capella is immense and the fact that we've taken our time to build it the right way and stayed committed as an end to end platform is going to serve us well as we go forward.
Understood and very encouraging congrats guys.
Thanks, Andy.
Yes.
Thank you. Our next question comes from Raimo <unk> Barclays. You May proceed with two questions.
Thank you and congrats from me as well great to see the acceleration.
Matt.
You talked about some of the aspects.
The drive to growth in the future in terms of developer product et cetera, where are we on the other.
Other thing that we haven't discussed yet is the reference base reference customers with deployment of its key or where are we on that journey for capella could you speak to that please and then I have a follow up for Craig.
Can you clarify are you talking about when we're gonna have capella customers.
At scale talking about the success they've had.
Yeah, correct, Yeah like you know what.
Luca you once you kind of basically one does like you know people from industry, you're saying like Oh are we using it look at this and then it becomes like more means and a big pumps mean screened them.
Yes.
I think the.
The reality is we have a lot of customers that are doing pretty significant things with capella and we're having very encouraging dialogues with some of our largest customers you can appreciate that theres always be.
And the delicate nature of asking customers to talk about mission critical applications.
Unfortunately, not every single one of our customers is prepared to do it when they are realizing that value.
I do think that.
Western Union is an example of.
A customer that is deployed a couch dance at massive scale and we're thinking about.
Just the applications they have running but displacing other database.
<unk> solutions are moving more and more workloads.
The capella, so we're going to provide those examples.
As we go and it's not just large enterprises I think what we.
We really want to.
I'll help the market understand that the value that developers are getting out of it as well. So it's a point of focus for us.
We're going to continue to serve those up.
As we have them. The great thing is we don't believe that there's going to be a shortage of example, there's just going to be there.
The efficiency at which we can provide them at the time, there they're seeing that value.
Yeah, Okay, perfect makes sense and then Greg the last quarter, you and when you guided you know where you were.
One of the first to kind of point out that there's volatility in the market. If you think about the guidance now and how comfortable you are with kind of raising the guidance, which you did kind of well done like how are you feeling about the macro impact to your thinking from here.
Yes, Raimo. So so first of all I'd say look we're very comfortable with our guidance.
As you know we obviously.
<unk>.
Prepare guidance that we can.
We deliver on that and we're going to continue to hopefully exceed that if we if we do our jobs well, but we so we're trying to guide smartly prudently, but understanding there is this macro economic environment.
Some uncertainties.
And so we've we get a good amount of visibility based on our business model today and then so we're playing that plus some of this prudently into the guidance. So again, we feel good about it but we're watching closely.
And we haven't seen materially impact to date, but we also know that there's that there is this level of uncertainty out there. So we've kind of tried to build that balance in there into our guidance. If we go out to the future, but we feel good about.
The guidance that we provided today.
Okay.
<unk>.
Thanks.
Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from Brad Reback with Stifel. You may have.
Receipt.
Great. Thanks very much.
Matt as you look at the hiring plan for the remainder of this year have you guys modified it at all from what the.
Original plan was for the operating side. This this fiscal year. Thanks.
Hey, Brad how are you looking at.
We think about our hiring plan.
No.
On a very regular basis. So we go into the year with sort of a set plan and then we adapt as we.
Deem necessary I don't think theres any fundamental shifts to how we've thought about the year.
We're in great shape with field capacity, we continue to put more into capella dedicated resources.
On our development side of the organization.
We're investing in things like University hiring program, So I think from an overall.
Spend perspective, we understand what the levers are Brad and you've seen us demonstrate that over time.
We can lean in or pull back a little bit as we deem necessary.
I'd say, we're generally speaking aligned to what we thought about before but.
But making sure that we take every investment and every resource that we put into the business with the.
No seriousness and ensuring that we're putting in the right places so outside of those normal.
Sort of operational fluctuation that I'd say were paid.
Pacing as plan, Greg Yeah, Brad I'd, just add one thing so.
Aligned with everything that Matt said, when we when we run the business we run the business too.
Two to a dollar target if you will to an opex target necessarily drive to a head count target and we let our leaders decide how they want to allocate those dollars. So for example, Dolby are new.
I think outside of engineering came in and he thought that we needed a better sort of feeder system and as Matt alluded to the university hiring so he's gone out and really taken some more senior all the we're in the budget and added University hiring element. So you'll actually I think you'll see like the head count pick up a bit as we go forward if he had more resources.
Lower dollar and creates a sort of a better pyramid already engineering organization, but again from a pure dollar perspective, we're making the right investments and we're going to manage that extremely closely given what's going on in environment.
That's great thanks very much.
Yeah.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Matt Kane for any further remarks.
Thanks, operator to recap, we had a great quarter and a strong start to the fiscal year.
<unk> by the third straight quarter of accelerating our growth.
And I am excited about our opportunity with Capella this year as.
As well as some very big trends in our favor like digital transformation acceleration of the cloud and innovation at the edge couch bases in a great position. We look forward to seeing you all back here next quarter. Thank you.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
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Thank you.
Okay.
Yes.
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All right.
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