Q4 2024 Couchbase Inc Earnings Call

Unknown Executive: Good afternoon, and welcome to Couchbase's fourth quarter 2024 earnings. We will be discussing the results announced in our press release, issued after the market closed. With me are Couch.

Good afternoon, and welcome to couch basis fourth quarter 2024 earnings call.

We will be discussing the results announced in our press release issued after the market close today.

With me are couch basis chair, President and CEO, Matt Kane and CFO, Greg Henry.

Unknown Executive: Chair, President, O. Mac. CFO, Greg, Today's call will contain forward-looking statements, including 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 representative of our views at any subsequent date, and we do not undertake any duty to update them.

Today's call will contain forward looking statements.

Which include statements concerning financial and business trends and strategies market size product capabilities 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.

Unknown Executive: Forward-looking statements by their nature address matters that are subject to risks and uncertainties that could cause actual results to differ materially from those expected. For a discussion of 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.

Forward looking statements by their nature 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.

<unk> Form 10-Q filed with the SEC.

Okay.

During the call. We will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting practice of 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.

Unknown Executive: 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. These are included in our earnings press release, which is available on our Investor Relations website. With that, let me turn the call over to you.

Included in our earnings press releases, which are available on our Investor Relations website.

With that let me turn the call over to Matt.

Unknown Executive: Good afternoon, and welcome to Couchbase's fourth quarter 2024 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me on the call 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. We do not undertake any duty to update these statements.

Good afternoon, and welcome to Couch basis fourth quarter 2024 earnings call, we'll be discussing the results announced in our press release issued after the market closed today with me are couch basis Chair, President and CEO, Matt <unk> 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 finished performance and financial condition.

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, we do not undertake any duty to update these statements.

Unknown Executive: 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 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'll also discuss certain non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles.

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 quarterly report on Form 10-Q filed with the SEC.

During the call. We'll 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.

Matthew M. Cain: 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, I will turn the call over to Matt. Thank you, Edward. And thank you all for joining us on the call today. I'm delighted to report that we have delivered a strong Q4 with all our key financial metrics exceeding our outlook. Highlights include growing Capella Mix, continued Big Deal activity, including a particularly robust quarter for renewals and expansions. Strong new customer logos and overall excellent operational performance from all teams across the company. Total Annual Recurring Revenue, or ARR, was $204.2 million, up 25% year-over-year. Revenue in Q4 was $50.1 million, up 20% year-over-year. Non-Gap Operating Loss in Q4 was $4.1 million, representing a negative operating margin of 8.2%.

With that let me turn the call over to Matt.

Thank you Edward and thank you all for joining us on the call today.

I'm delighted to report that we delivered a strong Q4 with all our key financial metrics exceeding our outlook highlights include growing Capella Max continued big deal activity, including a particularly robust quarter for renewals and expansions strong new customer logos and overall excellent op.

Operational performance from all teams across the company.

Total annual recurring revenue or <unk> was $204 2 million up 25% year over year.

Revenue in Q4 was $50 1 million up 20% year over year non.

non-GAAP operating loss in Q4 was $4 1 million, representing a negative operating margin of eight 2%.

Matthew M. Cain: 8.6 percentage points above the midpoint of our implied operating margin guidance range. We finished fiscal 2024 with strong momentum, capping off a historic year for Couchbase. We drove strong top-line growth in a challenging macroeconomic environment, including accelerating our net new ARR growth. We achieved important milestones with Capella, which now represents 11% of our ARR and over 25% of our customer base. We worked tirelessly to improve our operational rigor and improve our efficiency across the entire company, which resulted in meaningful operating profit outperformance and substantial operating and free cash flow margin expansion. We enhanced and refined our go-to-market motion across marketing, sales, and our partner ecosystem. Our product and engineering teams delivered multiple important enhancements and capabilities across our platform and did so at an accelerated pace. And we welcome many of you to our first Analyst Day as a public company this past December in New York.

Eight six percentage points above the midpoint of our implied operating margin guidance range.

We finished fiscal 2024 with strong momentum.

<unk> off a historic year for Cat space, we drove strong top line growth in a challenging macroeconomic environment, including accelerating our net in any way our graph.

We achieved important milestones with capella, which now represents 11% of our E R and over 25% of our customer base.

We worked tirelessly to improve our operational rigor and improve our efficiency across the entire company, which resulted in meaningful operating profit outperformance and substantial operating and free cash flow margin expansion.

We enhanced and refined our go to market motion across marketing sales and our partner ecosystems.

Our product and engineering teams delivered multiple important enhancements and capabilities across our platform and did so at an accelerated pace.

And we welcome many of you to our first analyst day as a public company. Just this last December in New York.

Matthew M. Cain: I couldn't be more proud of the progress we made across all of our key strategic initiatives: deliver top-line growth, increase the mix of Capella, drive sales and marketing efficiency, and accelerate the pace of leverage in our model. Now, let me discuss some highlights of the quarter and the year.

I couldn't be more proud of the progress we made across all of our key strategic initiatives deliver topline growth increase the Mexican capella drive sales and marketing efficiency and accelerate the pace of leverage in our model.

Now, let me discuss some highlights of the quarter and the year.

Matthew M. Cain: I'll start by reviewing the many innovations we have announced over the past few months. These have contributed to the inflection point we are seeing with Capella and will be instrumental in unlocking future growth and leveraging opportunities. From day one, we've architected our platform to enable demanding applications to not only deliver premium performance but also provide rich, hyper-personalized, differentiated experiences for end users. Because of our differentiated architecture, our multi-purpose platform converges operational and analytical capabilities and seamlessly integrates advanced services like indexing, eventing, full text search, and more in a single solution. This approach is why Couchbase can uniquely power adaptive applications for customers.

I'll start by reviewing the many innovations we have announced over the past few months. These have contributed to the inflection point, we are seeing with capella and will be instrumental in unlocking future growth and leverage opportunities.

From day, one we've architected our platform to enable demanding applications to not only deliver premium performance, but also provide rich hyper personalized differentiated experiences for end users.

Because of our differentiated architecture, our multipurpose platform converge is operational and analytical capabilities and seamlessly integrates advanced services like indexing of venting full text search and more in a single solution.

This approach is why couch based can uniquely power adaptive applications for customers.

Matthew M. Cain: We've built a strong foundation with differentiation we can sustain. And now we've taken that foundation and have layered on new features and capabilities that we have recently announced that position us well for how adaptive applications are evolving with AI. First, we increase developer productivity by introducing the Capella IQ Copilot into our database as a service. IQ allows developers to interact with Capella using natural language conversation, making database interactions more intuitive, efficient, and accessible for developers. They can go from an idea to code in just a few clicks.

We've built a strong foundation with differentiation we can sustain.

And now we've taken that foundation and have layered on new features and capabilities that we have recently announced that position us well for how adaptive applications are evolving with AI.

First we increased developer productivity by introducing the Capella IQ co pilot into our database as a service.

IQ allows developers to interact with capella using natural language conversation, making database interactions more intuitive efficient and accessible for developers.

They can go from an idea to code in just a few clicks.

Matthew M. Cain: Next, we further extended our platform capabilities by announcing a columnar service for Capella, which converges operational and real-time analytic workloads into a single platform. Customers can ingest data from anywhere into Capella in real time, reducing complexity and costs while increasing developer productivity. Initial feedback from the private preview has been exceptional, and we are excited about what this key new service will unlock. Finally, as you may have seen last week, we announced vector search as a new feature in our platform, optimized for running on-site, across clouds, and devices at the edge, including mobile and IoT. While vector database point solutions aim to solve the challenges of processing and storing data for LLMs, having multiple standalone solutions adds complexity to the enterprise IT stack and slows application performance. Our multipurpose capabilities eliminate that friction and deliver a simplified and unified architecture to improve the accuracy of LLM results. We also make it easier and faster for developers to build applications by using a single SQL++ query, which incorporates the vector index, removing the need to use multiple indexes or products.

Next we further extended our platform capabilities by announcing a column there service for Capella, which convergence operational and real time analytic workloads into a single platform.

Customers can ingest data from anywhere in the Capella in real time.

Reducing complexity and cost while increasing developer productivity.

Initial feedback from the private preview has been exceptional and we are excited about what this key new service will unlock.

Finally.

As you May have seen last week, we announced vector search is a new feature in our platform.

Optimized for running onsite across clouds and devices at the edge, including mobile and Iot.

Well vector database point solutions aimed to solve the challenges of processing and storing data for L. L. Ams, having multiple standalone solutions.

Adds complexity to the enterprise I T stack and flows application performance.

Our multipurpose capabilities eliminate that friction and deliver a simplified and unified architecture to improve the accuracy of L. O M results.

We also make it easier and faster for developers to build applications by using a single CCAR plus plus query, which incorporates the vector index, removing the need to use multiple indexes or products.

Matthew M. Cain: And we're the first vendor to announce vector search at the edge, enabling organizations to run AI applications anywhere in connected or disconnected modes. I'm also pleased to announce that we are extending our AI Partner Ecosystem with LangChang and LLAMA Index integrations, enabling a common API interface to converse with a broad library of LLMs, while providing developers with choices for LLMs. Together, we're embracing the opportunity to enable hyper-personalized, high-performance, and adaptive applications powered by AI that deliver exceptional experiences to their end users. Customers are responding very positively to how our approach is aligned to their AI-powered adaptive application journey. As you can see, we've achieved a lot in a short amount of time on both product innovation and customer uptake, and it's gratifying to see our efforts bearing fruit.

And were the first vendor to announce vector search at the edge.

The organizations to run AI applications anywhere in connected or disconnected modes.

I'm also pleased to announce that we are extending our AI partner ecosystem with lane Chang and lot of index integrations, enabling a common API interface to converse with a broad library of L. L M. While.

While providing developers with choices for L O happens.

Taken together, we're embracing the opportunity to enable hyper personalized high performing and adaptive applications powered by AI that deliver exceptional experiences to their end users.

<unk> are responding very positively to how our approach is aligned to their AI powered adaptive application journey.

As you can see we've achieved a lot in a short amount of time on both product innovation and customer uptake and it's gratifying to see our efforts bearing fruit.

Matthew M. Cain: As our Capella base continues to grow, we're seeing favorable consumption dynamics emerge as both existing and new customers realize our platform's unique performance and scale. We're seeing increased consumption across our customer base, which is indicative not only of the value we bring but also gives us confidence in our ability to deliver sustainable growth. As such, we are committed to taking advantage of this recent inflection we've seen. We fully expect Capella to become an increasingly meaningful driver behind ARR and net retention, as well as an important engine for new logo acquisition, and it will contribute to leverage across our entire business. Now I'd like to turn to Customer Wins. In Q4, we saw new Capella wins across many industries, including manufacturing, media, fintech, technology, retail, and telco. Array is a financial innovation platform that helps digital brands, financial institutions, and fintechs get compelling consumer products to market faster.

Capello base continues to grow we're seeing favorable consumption dynamics emerge as both existing and new customers realize our platforms unique performance and scale. We're.

We're seeing increased consumption across our customer base, which is indicative not only of the value. We bring but also gives us confidence in our ability to deliver sustainable growth.

As such we are committed to taking advantage of this recent inflection we've seen.

We fully expect capella to become an increasingly meaningful driver behind <unk> and net retention as well as an important engine for new logo acquisition.

And it will contribute to leverage across our entire business.

Now I'd like to turn the customer wins.

In Q4, we saw new capello wins across many industries, including manufacturing media Fintech technology retail and telco.

Array is a financial innovation platform that helps digital brands financial institutions, and Fintech get compelling consumer products to market faster.

Matthew M. Cain: Array's offerings help its partners drive revenue, increase engagement, and empower millions of consumers to achieve their financial goals. This quarter, Array selected Capella to support profile management for its privacy application because of its compelling value and impressive database performance. In Q4, a leading cloud communications provider expanded its investment in Capella to continue supporting its real-time communications platform. This platform connects widely used applications to carriers worldwide, with all conversations being managed and recorded with our cloud database platform. This customer initially began migrating to Capella because of the scalability and benefits that a fully managed service provided to its developer team. They gained the ability to step away from database management and focus on developing core business applications. Another Capella expansion from the quarter came from a premier provider of life insurance in the Asia Pacific region. Couchbase powers customer 360 data for this provider's many millions of customers.

Arrays offerings helps its partners drive revenue.

Increased engagement and empower millions of consumers to achieve their financial goals.

This quarter, our raised selected capella to support profile management for its privacy application because of the compelling value and impressive database performance.

In Q4, a leading cloud communications provider expanded its investment in Capella to continue supporting its real time communications platform.

This platform connects widely used applications to carriers worldwide with all conversations being managed and recorded with our cloud database platform.

This customer initially began migrate into capella because of the scalability and benefits that a fully managed service provided to its developer team.

The gain the ability to step away from database management and focus on developing core business applications.

Another capella expansion from the quarter came from a premier provider of life insurance in the Asia Pacific region.

Couch based powers customer 360 data for this providers many millions of customers.

Matthew M. Cain: The customer decided to expand its investment in Capella on Google Cloud for cost optimization and to continue modernizing their architecture and database management in the cloud. Of note, this was our first multi-million dollar Capella migration. We also continue to see robust large deal activity with the strong foundation of our enterprise server. A new enterprise logo for us this quarter came from a multinational financial services company and one of Europe's leading banks, BBVA.

Customer decided to expand its investment in capella on Google cloud for cost optimization and to continue modernizing their architecture and database management in the cloud.

Of note. This was our first multimillion dollar capella migration.

We also continue to see robust large deal activity with a strong foundation of our enterprise server.

Our new enterprise logo Fritz this quarter came from a multinational financial services company.

One of Europe's leading banks B B V a.

Matthew M. Cain: They selected Couchbase to replace another NoSQL database at a worldwide level because of the price performance our platform offered, and they will be using Couchbase to power profile management for their entire customer base. Finally, as I previously mentioned, we saw robust renewal and expansion activity in the quarter with some of our largest customers. This includes a Fortune 500 shipping and logistics company, which saw the largest expansion in our history, and a major multinational technology company that provides software solutions for the global travel and tourism industry. Both customers rely on Couchbase for multiple applications and deployment modalities, and we're honored to continue their journey with them. As we look ahead towards fiscal 2025, we have a massive opportunity in front of us. Our foundation rests upon a carefully architected platform purpose built to enable mission critical adaptive applications that are often deployed at the edge in an increasingly AI powered world.

Selected couch based or replace another no sequel database at a worldwide level because of the price performance our platform offered and they will be using couch dates to power profile management for its entire customer base.

Finally, as I previously mentioned, we saw robust renewal and expansion activity in the quarter with some of our largest customers.

This includes a fortune 500 shipping and logistics company, which saw the largest expansion in our history.

And a major multinational technology company that provides software solutions for the global travel and tourism industry.

Both customers rely on couch base for multiple applications and deployment modalities and we're honored to continue their journey with them.

As we look ahead towards fiscal 2025.

We have a massive opportunity in front of us.

Our foundation rests upon a carefully architected platform purpose built to enable mission critical adaptive applications.

But are often being deployed at the edge and an increasingly AI powered world.

Matthew M. Cain: I strongly believe that our foundational tenets of scale, performance, and flexibility have never been more relevant as we continue to leverage our core innovations while adding new ones. These include our new real-time analytic and vector search capabilities, both of which together have the potential to make a meaningful impact on our business. Our priorities going forward are to continue to drive sustained growth, capitalizing on the inflection we're seeing across the business and accelerate the pace of leverage in our model. If I were to emphasize one of these priorities, it'd be the forthcoming leverage that I see building across all aspects of our business.

I strongly believe that our foundational tenets of scale performance and flexibility have never been more relevant as we continue to leverage our core innovations, while adding new ones.

These include our new real time analytic and vector search capabilities, both of which together have the potential to make a meaningful impact to our business.

Our priorities going forward are to continue to drive sustained growth.

Capitalize on the inflection we're seeing across the business and accelerate the pace of leverage in our model.

If I were to emphasize one of these priorities, it's the forthcoming leverage that I see building across all aspects of our business.

Matthew M. Cain: This spans from how we innovate and deliver new capabilities and services to how we go to market, growing our outstanding customers while also acquiring new ones, and driving more efficiency in our P&L and model. Having held our annual kickoff last month, I can say confidently that we have a strong, motivated, and highly aligned team in place to achieve our ambitions in fiscal 2025. At Couchbase, we're inspired by the generational opportunity that is in front of us and in being a trusted advisor for our customers, partners, and the broader industry.

The spans from how we innovate and deliver new capabilities and services to how we go to market growing our outstanding customers.

While also acquiring new ones to driving more efficiency in our P&L and model.

Having held our annual kickoff last month I can say confidently that we have a strong motivated and highly aligned team in place to achieve our ambitions in fiscal 2025.

A couch space were inspired by the generational opportunity that is in front of us and being a trusted adviser for our customers partners and the broader industry.

Gregory N. Henry: It's an honor to be a strategic technology provider to so many organizations that are changing the way we interact through their modern applications. We have work to do, and it won't be easy, but at Couchbase, we pride ourselves on attacking 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.

It's an honor to be a strategic technology provider to so many organizations that are changing the way we interact through their modern applications.

We have work to do and it won't be easy, but the couch base, we pride ourselves on attacking 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.

Gregory N. Henry: Thanks, Matt. And thanks, everyone, for joining us. We finished fiscal 2024 with another strong quarter as we beat guidance across all key metrics. We are pleased with our execution, our dedication to delivering value to our customers, and our ability to navigate the environment while driving very strong outperformance in our operating loss guidance. I'll now walk you through our fourth quarter and full year fiscal 2024 financial results in more detail. Total Annual Recurring Revenue, or ARR, was $204.2 million at the end of the fourth quarter, representing 25% growth year-over-year and 8% sequentially, driven by strong growth and Capella contribution, as well as our core enterprise business. At the end of the quarter, Capella's ARR was $21.8 million, representing 11% of our total ARR.

Thanks, Matt and thanks, everyone for joining US we finished fiscal 'twenty 'twenty four with another strong quarter as we beat guidance across all key metrics. We are pleased with our execution, our dedication to delivering value to our customers and our ability to navigate the environment, while driving very strong outperformance in our operating loss guidance.

I'll now walk you through our fourth quarter and full year fiscal 'twenty 'twenty four financial results in more detail.

Total annual recurring revenue or <unk> was $204 $2 million at the end of the fourth quarter, representing 25% growth year over year, and 8% sequentially driven by strong growth in capella contribution as well as our core enterprise business.

At the end of the quarter Capella air are with $21.8 million, representing 11% of our total air are.

Gregory N. Henry: Revenue for the fourth quarter was $50.1 million, an increase of 20% year-over-year and 9% sequentially, and $180 million for the full year, an increase of 16% year-over-year. Revenue growth benefited from growing consumption of Capella and strength in our enterprise business, partially offset by declines in professional services. Subscription revenue for the fourth quarter was $48.1 million, an increase of 26% year-over-year and 9% sequentially, and $171.6 million for the full year, an increase of 20% year-over-year. Professional services revenue for the fourth quarter was $2 million, a decline of 42% year over year and an increase of 12% sequentially, and $8.5 million for the full year, a decline of 29% year over year. As a reminder, this was consistent with our expectations following outside strength and professional services in fiscal 2023. We expect professional services to normalize at current levels in fiscal 2025.

Revenue for the fourth quarter was $50 $1 million, an increase of 20% year over year, and 9% sequentially and $180 million for the full year, an increase of 16% year over year.

Revenue growth benefited from growing consumption of capella and strengthen our enterprise business, partially offset by declines in professional services.

Subscription revenue for the fourth quarter was $48 $1 million, an increase of 26% year over year, and 9% sequentially and $171 $6 million for the full year, an increase of 20% year over year.

Professional services revenue for the fourth quarter was $2 million, a decline of 42% year over year, and an increase of 12% sequentially and $8 $5 million for the full year, a decline of 29% year over year. As a reminder, this was consistent with our expectations following outsized strength in professional services in fiscal 'twenty two.

'twenty three.

We expect professional services to normalize at current level in fiscal 2025.

Gregory N. Henry: Our ARR per customer performance in the fourth quarter was $273,000, up from $264,000 in the third quarter, up 12% year over year and indicative of the growing wallet share we have with large customers. As a reminder, as our Capella mix continues to grow in contribution, we expect ARR per customer growth could moderate or decline in future quarters. Our dollar-based net retention rate, or NRR, continues to exceed 115% driven by strong renewal upsell activity across our base of larger enterprise customers. Our NRR has been steadily improving thanks to Capella. We exited the year with 749 customers, an increase of 34 net new customers from the third quarter.

Our <unk> per customer performance in the fourth quarter with $273000 up from $264000 in the third quarter up 12% year over year and indicative of the growing wallet share we have with large customers.

As a reminder, at our Capella mix continues to grow in contribution we expect <unk> per customer growth could moderate or decline in future quarters.

Our dollar based net retention rate or enter our continues to exceed 115% driven by strong renewal and upsell activity across our base of larger enterprise customers are.

<unk> has been steadily improving thanks to capella.

We exited the year with 749 customers an increase of 34 net new customers from the third quarter Capella. Once again represented the majority of new logos in the quarter and we grew our capella customer logo count by 41 over 25% from the third quarter.

Gregory N. Henry: Capella once again represented the majority of new logos in the quarter, and we grew our Capella customer logo count by 41, over 25% from the third quarter. We continue to be encouraged by the strength of our new logo pipeline and remain confident in our ability to reliably expand logos, as evidenced by our consistent ARR growth and our strong retention metrics. 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.

We continue to be encouraged by the strength of our new logo pipeline and remain confident of our ability to reliably expand logos as evidenced by our consistent are our growth and our strong retention metrics.

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.

Gregory N. Henry: In Q4, our gross margin was 90.4%, benefiting from sustained enterprise gross profit margin strength, a lower services revenue mix, the completion of the amortization from some of our initial Capella investments, and leverage as a result of our expanding Capella revenue base, offset by a growing Capella mix which carries a lower gross margin. This compares to a growth margin of 86.3% a year ago and 89.5% last quarter. For the full fiscal year, our gross margin was 88.5% compared to 87.6% in fiscal 2023. As a reminder, as Capella Mix increases, we expect gross margin to decline in fiscal 2025.

In Q4, our gross margin was 19, 4% benefiting from sustained enterprise gross profit margin strength lower services revenue mix. The completion of the amortization from some of our initial capella investments and leverage as a result of our expanding capello revenue base offset by growing capella mix, which carries a lower gross margin.

This compares to a gross margin of 86, 3% a year ago, and 89, 5% last quarter.

For the full fiscal year, our gross margin was 88, 5% compared to 87, 6% in fiscal 2023.

As a reminder, as capella mix increases we expect gross margin will decline in fiscal 2025.

Gregory N. Henry: Turning to expenses, we continue to invest to capture the generational opportunity we see in front of us but are focused on driving leverage across our business. We are pleased with our execution on this front, as our expense discipline and benefits from our cost savings initiatives resulted in us again outperforming our operating loss outlays. Our sales and marketing expenses for Q4 were $29.4 million, or 59% of revenue, compared to $26.7 million, or 64% of revenue a year ago. For the full fiscal year, our sales and marketing expenses were $113.6 million, or 63% of revenue, compared to $101.3 million, or 65% of revenue in the prior fiscal year.

Turning to expenses, we continue to invest to capture the generational opportunity, we see in front of us, but our focus on driving leverage across our business.

We are pleased with our execution on this front as our expense discipline and benefits from our cost savings initiatives have resulted in us again outperforming our operating loss outlook.

Our sales and marketing expenses for Q4 were $29 $4 million or 59% of revenue compared to $26 $7 million or 64% of revenue a year ago.

For the full fiscal year, our sales and marketing expenses were $113 $6 million or 63% of revenue compared to $101.3 million or 65% of revenue in the prior fiscal year.

Gregory N. Henry: Research and development expenses for Q4 were $12.9 million, or 26% of revenue, compared to $12.9 million, or 31% of revenue a year ago. For the full fiscal year, our research and development expenses were $50.5 million, or 28% of revenue, compared to $49.7 million, or 32% of revenue in the prior fiscal year. General and administrative expenses for Q4 were $7.1 million, or 14% of total revenue compared to $6.3 million, or 15% of revenue a year ago. For the full fiscal year, our general and administrative expenses were $26.5 million, or 15% of revenue compared to $25.9 million, or 17% of revenue in the prior fiscal year. Operating loss for Q4 was $4.1 million, or a negative 8% operating margin, compared to an operating loss of $9.9 million, or a negative 24% operating margin, a year ago.

Research and development expenses for Q4 were $12 $9 million or 26% of revenue compared to $12 $9 million or 31% of revenue a year ago for.

For the full fiscal year, our research and development expenses were $55 million or 28% of revenue compared to $49 $7 million or 32% of revenue in the prior fiscal year.

General and administrative expenses for Q4 were $7 $1 million or 14% of total revenue compared to $6 $3 million or 15% of revenue a year ago.

For the full fiscal year, our general and administrative expenses were $26 $5 million or 15% of revenue compared to $25 $9 million or 17% of revenue in the prior fiscal year.

Operating loss for Q4 was $4 $1 million or a negative 8% operating margin compared to an operating loss of $9 $9 million or a negative 24% operating margin a year ago.

Gregory N. Henry: Operating loss for the full fiscal year was $31.3 million, or a negative 17% operating margin compared to an operating loss of $41.3 million, or a negative 27% operating margin in the prior fiscal year. Net loss attributable to common stockholders for Q4 was $2.9 million, or negative six cents per share. For the full fiscal year, net loss was $27 million, or negative 57 cents per share.

Operating loss for the full fiscal year was $31 $3 million or a negative 17% operating margin compared to an operating loss of $41 $3 million or a negative 27% operating margin in the prior fiscal year.

Net loss attributable to common stockholders for Q4 was $2 $9 million or negative six cents per share for.

For the full fiscal year net loss was $27 million or negative <unk> 57 per share.

Gregory N. Henry: Before I turn to the balance sheet and cash flow statement, I want to mention an impairment charge of $5.2 million that we recognized in Q4. This impairment charge relates to a reprioritization of some R&D resources as we have focused our efforts on Capella, AI capabilities, services, and related development. This has been excluded from but does not affect our non-GAAP results for the quarter. Turning to the Balance Sheet and Cash Flow Statement. We ended Q4 with $153.6 million in cash, cash equivalents, and short-term investments.

Before I turn to the balance sheet and cash flow statement I want to mention an impairment charge of $5 $2 million that we recognized in Q4.

This impairment charge relates to a re prioritization some R&D resources as we have focused our efforts on capella AI capabilities services and related development. This has been excluded from but does not affect our non-GAAP results for the quarter.

Turning to the balance sheet and cash flow statement, we ended Q4 with $153 $6 million in cash cash equivalents and short term investments, we remain well capitalized to execute against our long term growth strategy.

Gregory N. Henry: We remain well capitalized to execute against our long-term growth strategy. Our remaining Performance Obligations, or RPO, totaled $241.8 million at the end of Q4, an increase of 46% year-over-year, driven in part by the timing of robust renewal activity with some of our larger customers, several of which are on multi-year contracts driving higher average duration than we have seen in recent quarters. We expect to recognize approximately 61%, or $147.6 million, of total RPO as revenue over the fiscal year 2025, which represents 26% year-over-year growth. As a reminder, we experienced fluctuations in our RPO balances due to a host of factors, including renewal time, as well as changes in contract duration. Operating cash flow for Q4 was negative $6.5 million, and for the full year, it was negative $26.9 million. Free cash flow for Q4 was negative $7.7 million, or a negative 15.4% free cash flow margin. Free cash flow for the full year was negative $31.6 million, or a negative 17.6% free cash flow margin.

Our remaining performance obligations or our P O totaled $241 $8 million at the end of Q4, an increase of 46% year over year driven in part by the timing of robust renewal activity with some of our larger customers several of which are on multiyear contracts driving higher average duration than we've seen in recent quarters.

We expect to recognize approximately 61% or $147 $6 million of total RPM as revenue over the fiscal year, 2025, which represents 26% year over year growth.

As a reminder, we experienced fluctuations in our R. P O balances due to a host of factors, including renewal time as well as changes in contract duration.

Operating cash flow for Q4 was negative $6 $5 million for the full year was negative $26 $9 million pre.

Free cash flow for Q4 was negative $7 $7 million or a negative 15, 4% free cash flow margin free.

Free cash flow for the full year was negative $31 $6 million or negative 17, 6% free cash flow margin.

Gregory N. Henry: Now, I will provide guidance for Q1 and the full year fiscal 2025. As Matt discussed, we enter fiscal 2025 with very strong momentum across our businesses, and our pipeline remains strong. We achieved a critical milestone with Capella and expect it will continue to be an important driver behind all aspects of our business in fiscal 2025. Furthermore, we anticipate that our investment in our product capabilities, partner ecosystem, and go-to-market activities will continue to complement our ARR momentum. While we continue to scrutinize their expenses, we remain dedicated to increasing efficiency, growing our free cash flow and operating margins, and driving leverage across the business with a continued focus on increasing the Rule of Forty metric. We will continue to invest in our strategic priorities.

Now I will provide guidance for Q1 and the full year fiscal 2025 as Matt discussed we enter fiscal 2025 with very strong momentum across our businesses and our pipeline remains strong.

We achieved a critical milestone with capella and expect it will continue to be an important driver behind all aspects of our business in fiscal 2025.

Furthermore, we anticipate that our investment in our product capabilities partner ecosystem and go to market motion will continue to complement our Ara momentum.

We continue to scrutinize our expenses as we remain dedicated to increasing our efficiency growing our free cash flow and operating margins and driving leverage across the business with continued focus on increasing our rule of 40 metric we will continue to invest in our strategic priorities.

Gregory N. Henry: As such, we expect to grow OPEX slightly faster in fiscal 2025 than in fiscal 2024. We remain committed to achieving positive free cash flow by fiscal 2026 and positive operating income by fiscal 2027, underpinned by 20% plus compound annual ARR growth, as I discussed last December at analyst day. Finally, we remain mindful of macro headwinds and continue to carefully monitor their impact on our business.

As such we expect to grow Opex slightly faster in fiscal 2025, then in fiscal 'twenty 'twenty four will.

We remain committed to achieving positive free cash flow by fiscal 2026 and positive operating income by fiscal 2027, underpinned by 20% plus compound annual air our growth as I discussed last December at Analyst day.

Finally, we remain mindful of the macro headwinds and continue to carefully monitor their impact on our business as such our outlook maintains a consistent degree of conservatism to account for the uncertainty as well as lack of visibility into how the macro may impact consumption trends for our emerging as a service offering.

Gregory N. Henry: As such, our outlook maintains a consistent degree of conservatism to account for the uncertainty as well as the lack of visibility into how the macro may impact consumption trends for our emerging as-a-service offerings. With these factors in mind, for the first quarter of fiscal 2025, we expect total revenue in the range of $48.1 million to $48.9 million, or year over year growth of 18% at the midpoint. We anticipate ARR in the range of $206.5 million to $209.5 million, which represents 21% growth year-over-year at the midpoint. Additionally, we expect a non-gap operating loss in the range of negative $8.5 million to negative $7.5 million.

With these factors in mind for the first quarter of fiscal 2025, we expect total revenue in the range of $48 1 million to $48 $9 million or year over year growth of 18% at the midpoint we.

We anticipate a or are in the range of $206 5 million to $209 $5 million, which represents 21% growth year over year at the midpoint.

We expect a non-GAAP operating loss in the range of negative $8 5 million to negative $7 $5 million.

Gregory N. Henry: For the full year of fiscal 2025, we expect total revenue in the range of $203 million to $207 million, or year-over-year growth of 14% at the midpoint. As a reminder, we've historically seen variability with respect to the implementation timing of certain enterprise deals and new or migrated Capella customers, which impacts our revenue visibility. We expect this timing dynamic to influence the pace of revenue growth in fiscal 2025, with the aforementioned large customer renewals continuing into the first half of fiscal 2025 and causing our revenue seasonality to be slightly more weighted in the first half of the year relative to what we saw in fiscal 2024. As such, we'd expect fiscal Q3 revenue could be flattish from Q2.

For the full year of fiscal 2025, we expect total revenue in the range of $203 million to $207 million.

On a year over year growth of 14% at the midpoint.

As a reminder, we've historically seen variability with respect to the implementation timing of certain enterprise deals and new or migrated capella customers, which impacts our revenue visibility. We expect this timing dynamic to influence the pace of revenue growth in fiscal 2025 with aforementioned large customer renewals continuing into the first half of <unk>.

Fiscal 2025, and causing our revenue seasonality to be slightly more weighted in the first half of the year relative to what we saw in fiscal 'twenty 'twenty four.

As such we would expect fiscal Q3 revenue could be flattish from Q2.

Gregory N. Henry: We therefore continue to view ARR as a better indicator than revenue of the strength of our business. We expect full year fiscal 2025 ARR in the range of $235.5 million to $240.5 million, or 17% growth at the midpoint. And finally, we expect a non-GAAP operating loss in the range of negative $27.5 million to negative $22.5 million. With that, Matt and I are happy to take your questions. Operator.

We therefore continue to view <unk> as a better indicator than revenue of the strength of our business. We expect full year fiscal 2025 are are in the range of $235 5 million to $245 million or 17% growth at the midpoint.

And finally, we expect a non-GAAP operating loss in the range of negative $27 5 million to negative $22 $5 million.

With that Matt and I are happy to take your questions operator.

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Matthew George Hedberg: Our first question comes from Matt Hedberg with RBC. Great, guys. Thanks for taking my questions.

Our first question comes from Matt Hedberg with RBC capital markets. Please state your question.

Great guys. Thanks for taking my questions. Congrats on a really strong year and it's really really good to see the.

Matthew M. Cain: Congratulations on a really strong year. And it's really, really good to see the success with Capella and just general buying behavior improvement. I think it feels like a lot of hard work that's gone into that. So well done, guys.

Success, with Capella, and just general buying behavior improvement.

I think of it like it it feels like it's a lot of hard work that's gone into that so so well done guys.

Matthew M. Cain: You know, on the strong customer ads this quarter, and I guess most specifically the Capella wins, can you talk about sort of both that partner motion as well as sort of the direct effort there? Because I know it's been a lot of work, not only on the product side, but on the go-to-market side, maybe you were seeing some of the most success on some of the go-to-market initiatives. Hey Matt, how are you?

On the strong customer adds this quarter and I guess more specifically capello wins can you talk about sort of both that that that partner motion as well as sort of the direct effort. There because I know it's been a lot of work not only on the product side, but on the go to market side, maybe you were seeing some of the most success on some of the go to market initiatives.

Okay.

Hey, Matt how are you good goodness good to speak certainly appreciate the acknowledgment on the hard work, we do look at it as a historic year for the company and look we've been talking all year on the expectation that capella is really going to help us on new logo acquisition.

Matthew M. Cain: Good to speak with you. I certainly appreciate the acknowledgment of the hard work. We do look at it as a historic year for the company. Look, we've been talking all year about the expectation that Capel is really going to help us with new logo acquisition. We saw great geographic balance in the quarter, you know, continuing to look after new logos as well as migrations, but you're right to call out the partner contribution. We've been really focused for some time now on driving robust relationships at a global and local level with the likes of AWS and the other cloud providers. I'd say that was a highlight of the quarter, but it wasn't only AWS.

We saw great geographic balance in the quarter.

Continue looking after new logos as well as migrations, but you're right to call out the partner contribution.

We've been really focused for some time now on driving robust relationships that are global and local level with the likes of AWS and the other cloud providers.

I'd say that was a highlight in the quarter.

But it wasn't the only AWS, we called out are the largest capello migration, we've ever seen with with G. C. P. M. So I think when when you mentioned that this is a result of a lot of hard work I'd say, there's a lot of diversification to our to the outcome and.

Matthew M. Cain: We called out the largest Capella migration we've ever seen with GCP. So I think when you mentioned that this was the result of a lot of hard work, I would say there's a lot of diversity to the outcome. And, you know, we had high expectations and continue to do so on a lot of fronts with Capella in general and the success of the partnership. Really, really good to hear that. That's, it's great.

We had high expectations and continue to do so on a lot of fronts with Capella in general and you know the success with the partnerships.

Really really good to hear that that's that's great.

Matthew M. Cain: And then maybe just as a follow-up, you mentioned in your prepared remarks that you talked about vector search. Can you talk about what you expect to see some customer use cases for that and maybe how you think that might impact, you know, monetization or growth rates from a customer perspective? Yeah, look, we're really excited to be on the forefront of what we think is maybe the largest market transition the world has seen and certainly the greatest catalyst for application innovation that we've seen for some time. You can appreciate that due to the nature of our sophisticated platform, we're fortunate to engage in a lot of future discussions with customers. And it's coming across a wide variety of verticals.

And then maybe just as a follow up you mentioned in your prepared remarks, you talked about better search can you talk about you know what you expect to see some customer use cases for that and maybe how you think that might impact you know monetization or growth rates from a customer perspective.

Yeah look we're really excited to be on the forefront of what we think is maybe the largest market transition. The world has seen and certainly the greatest catalysts to application innovation that we've seen for some time.

You can appreciate that due to the nature of our sophisticated platform.

We're fortunate to engage in a lot of future discussions with with customers and it's coming across a wide variety of verticals couple of examples that I would point to that I like a lot. No recently, we were talking to an e-commerce provider and they're envisioning well, how do I change the customer experience.

Matthew M. Cain: A couple examples that I would point to that I like a lot. Recently, we were talking to an e-commerce provider, and they were envisioning, well, how do I change the customer experience, you know, at the edge? An example could be, "Hey, I want a new pair of shoes that matches the outfit that I'm wearing, that's the color of the car parked outside, available within, you know, 15 miles with inventory in store today." That would be really hard to do without the addition of AI and combining that with platform capabilities that allow not just vector search but also understanding text and range-based search and geospatial technology.

At the edge.

An example could be hey, I want a new pair of shoes that matches the outfit that I'm wearing that's the color of the car parked outside available within 15 miles with with the inventory in store today.

That would be really hard to do without the addition of AI and combining that with platform capabilities that allow not just vector surge, but understanding tax and range based search and geospatial technology and the fact that we've taken the comprehensive platform approach too.

Matthew M. Cain: And the fact that we've taken the comprehensive platform approach to, you know, Capella and enterprise allows us to support those types of applications. Now, a lot of people, Matt, are excited about the upside of AI and those hyper personalized adaptive applications that are going to be increasingly common in our lives. But there's also, you know, the downside that enterprises are worried about.

You know capella and enterprise allows us to support those types of applications now a lot of people matter excited about the upside of AI and those hyper personalized adaptive applications that are going to be increasingly common in our life, but theres also you know the downside that enterprises are worried about.

Matthew M. Cain: Another customer that we're actively talking about is in the logistics space, and they're looking to, you know, integrating chatbot technology to drive efficiency throughout their organization. And while we're working with them, they have a peer in an industry where the chatbot went wrong and started making disparaging remarks about the company, you know, negatively interfacing with customers. And so what that points to is the downside of ensuring that enterprise information is protected and that, you know, you avoid the downside of AI getting angry.

Another customer that we're actively talking about is in the logistics space.

And there they're looking about you know integrating chatbot technology to drive efficiency throughout the organization.

And while we're working with them they have a peer and in an industry, where the chatbot went wrong.

Started making disparaging remarks about the company.

Negatively interfacing with customers.

So what that points to is the downside of ensuring that.

Enterprise information is protected and that you avoid the downside of of AI getting angry.

Matthew M. Cain: And so we're engaged in POCs to prove that we can minimize the downside with, you know, our use of data and integrating multiple data sources, but also provide the upside of those unique experiences. So hopefully, that gives you a sense of the types of engagements that we're having with our customers and really taking pride in being a future strategic platform that they can bet on for the necessity of multiple use cases that we bring together. Thanks a lot, Matt. Well done!

And so we're engaged in P. O sees to prove that we can minimize the downside with you know with our use of data and integrating multiple data sources, but also provide the upside of those unique experiences. So hopefully that gives you a sense of the types of engagements that we're.

Having with our customers and really taken prior to being a future strategic platform that they can bet on four.

You know the necessity of multiple use cases that we bring together.

Thanks, a lot Matt well done.

Thank you and our next question comes from Jason Ader with William Blair. Please state your question.

Matthew George Hedberg: And our next question comes from Jason Ader with William Blair. Yeah, thank you. Good afternoon, guys.

Yeah. Thank you. Good afternoon, guys just wanted to try to square the guidance a bit with all the positive commentary and in particular, the low 25% growth that you just reported for the quarter and for the year.

Jason Noah Ader: Just wanted to try to square the guidance a bit with all the positive commentary and, in particular, the 25% ARR growth that you reported for the quarter and for the year. It basically looks like, based on the Q1 guidance, there'd need to be, You know, some deceleration as the year progressed in ARR growth and, Just given all the good things that you have going on in the business, I'm just trying to reconcile that and maybe there's something more specific going on. Maybe you had some large renewals or early renewals in FY 24 that won't recur in FY 25. Can you just help us kind of square the guidance with all the positive commentary? Hey Jason, it's Greg.

It basically looks like based on the Q1 guidance there need to be.

Oh, some deceleration as the year progressed.

And our gross and.

Just given all the good things that you have on that is going on in the business I'm just trying to.

Reconcile that and maybe there's something more specific going on maybe you had some large renewals early renewals.

FY 'twenty for us that won't recur in FY 'twenty five can you just help us kind of square the guidance with all the positive commentary.

Yeah, Hey, Jason it's Greg good to hear from you. Thanks for the question look we're obviously very happy with how we performed in fiscal 'twenty four with IRR performance accelerating again, yet another year and we remain committed to being to growing our top line 20 plus percent. Obviously you know we're early days in.

Gregory N. Henry: Good to hear from you. Thanks for the question. Look, we're obviously very happy with how we performed in fiscal 24, with ARR performance accelerating again yet another year. And we remain committed to growing our top line 20 plus percent. Obviously, you know, we're early days into fiscal 25.

Fiscal 'twenty five we feel very good about how we've guided and as we've always stated we're working to at a minimum meet it if not beat it and I think we have established a good track record of that now and so we just gotta go out there as Matt said and it's going to be a lot of hard work, but we know what's in front of us and we feel good about it and like I said, where we're still <unk>.

Gregory N. Henry: We feel very good about how we've guided. And as we've always stated, we're working to, at a minimum, meet it, if not beat it. And I think we have established a good track record of that now. And so we just got to go out there, as Matt said, and it's going to be a lot of hard work.

Gregory N. Henry: But, you know, we know what's in front of us, and we feel good about it. And like I said, we're still committed to being a 20 plus percent grower over this, you know, medium term period that we laid out at investor day. And that's what we've been working for for the last month, and we'll continue to do for the rest of the year. Gotcha. So it's just.

Emitted two over this medium term period that we laid out over the investor day be a 20 plus percent grower.

That's what we've been working for for the last month and will continue for the rest of the year.

Gotcha. So it's just.

For.

Jason Noah Ader: We're just going to be conservative this year given all of the macro. I think we're going to continue to maintain the same level of conservatism that we had last year and with some of the macro, and again as Capella continues to ramp over time. But again, we feel like we're in a good position and coming off a good year, and we'll work at it for the next 11 months to deliver at least what we've guided to, if not better. Gotcha.

We're just gonna be conservative on the year, given all the macro uncertainty.

I think we're going to continue to maintain the same level of conservatism that we had last year and with with some of the macro and again its capella continues to ramp over time, but again, we feel like we're in a good position and coming off a good year and.

We'll go work at it for the next 11 months to deliver.

At least what we've guided to if not better.

Jason Noah Ader: Then one quick follow-up for you, Greg, on gross margin. Can you give us a sense of where the gross margin outlook will be for FY25 and beyond? I know you have Capella, that's a lower gross margin offering. So can you just help us with the models?

Gotcha and then one quick follow up for you Greg on the gross margin can you give us a sense of.

Gross margin, where the gross margin outlook will be for FY 'twenty five and beyond I know you have capella, that's a lower gross margin offering. So can you just help us with our models here.

Jason Noah Ader: Yeah, it'll, it'll certainly continue to tick down from where it is now. It'll probably tick down quarter on quarter as we go throughout the year as Capella becomes more and more meaningful to the business. So that's how I would think about modeling that as you go through fiscal 25. Thanks guys.

Yeah, it'll it'll it'll certainly continues it'll tick down from where it is now.

<unk> ticked down quarter on quarter as we go throughout the year as capello becomes more and more meaningful to the business. So.

That's how I would think about modeling that as you go through fiscal 'twenty five.

Gotcha, Okay. Thanks, guys.

Jason Noah Ader: Thanks, Jason. Our next question comes from Rob Oliver with Bayer. Good evening.

Thanks, Jason.

Our next question comes from Rob Oliver with Baird. Please state your question.

Great.

Robert Cooney Oliver: Thanks, Matt. Thanks, Greg. I have two questions for you.

Thanks, Matt Thanks, Greg.

Two questions for me the first is on <unk>.

Robert Cooney Oliver: The first is on ARR. I know you guys have said that ARR could moderate as you ramp up Capella, but, you know, you're continuing to see really nice growth of 12% year over year. And I know from Analyst Day and from some of our conversations, it does seem like some of the Capella transitions are actually producing larger ARR numbers. So we'd just be curious to know what sort of color you can provide and what you're seeing in that uplift on ARR as you move your customers to Capella. And then I had a quick follow-up. Yeah, hey, Rob.

I know you guys have said that.

Our our could moderate as you ramp.

But you know you're continuing to see really nice growth up 12% year over year and I know from the analyst day and from some of our conversations it does seem like some of the capella transitions are actually producing larger Arab numbers. So would just be curious to know what sort of color you can provide.

And what you're seeing in that uplift.

On a R. R. As you move your customers to Capella and then I had a quick follow up.

Yeah, Hey, Rob Great to hear from you, Yes look we still feel great. I mean are we laid out obviously at the Investor day, How Capello was performing we gave you. The you know that for last Q3, the end quarter net retention rate was 167%.

Gregory N. Henry: Great to hear from you. Yeah, look, we still feel great. I mean, we obviously laid out at the investor day how Capella was performing. We gave you the, you know, that for last Q3, the end-quarter net retention rate was 167%. So when we bring those customers on, we continue to grow them very nicely. And we think we can maintain doing that we talked about, you know, that we have continued progress in terms of Capella penetration of our AR balance, and we will continue to see that throughout the year. And we feel again, very good about how Capella is performing both migrations. And as Matt talked about the new logo piece of things, so I don't think we're going to see moderation from Capella; I think it's going to continue to be the tailwind.

So when we bring those customers on we continue to grow them very nicely and we think we can maintain doing that we talked about you know that we have a continued progress in terms of capella penetration of or I are balanced we will continue to see that throughout the year and we feel again very good about how capella is performing both migrate.

<unk> and as Matt talked about the new logo piece of things So I.

I I don't think we're going to see a moderation from Capella I think it's going to continue to be the tailwind and and that's why we felt confident at the Investor day to talk about having this medium term growth rate of 20 plus percent for a for the top line.

Matthew M. Cain: And that's why we felt confident at the investor day to talk about having this medium-term growth rate of 20 plus percent for the top line. Rob, let me tell you an exciting story from the air. Recently, I spoke with a customer. They started off; they were a very small Couchbase customer. And this is a company that you would know, big scale, big technology focus. But at the beginning of this fiscal year, the one that we just finished, they were less than 20k.

Rob Let me, let me tell you an exciting story from there.

Recently speaking with a customer.

They they started off they were very small couch based customer and this is a company that you would know big scale Big technology focus.

At the beginning of this fiscal year. The one that we just finished they were less than 20 K over.

Matthew M. Cain: Over the course of the year, we proved our value proposition to them with Capella. They had multiple applications that they migrated into Couchbase Capella, and we actually exited the year with them running north of 800k ARR. Now, they would have said out of the gate, hey, we're interested in this, and we hear what you're saying about the value proposition. But what the customer explicitly said that was running this was, I need to prove this out to myself and my teams.

Over the course of the year, we proved our value proposition to them with Capella they had multiple.

Applications that they migrated into couch based capella and we actually exited the year with them running north of 800 K a R. R.

Now they would have said out of the gate Hey, we're interested in this and we hear what you're saying on the value proposition of what the customer explicitly said that was running this is I need to prove this out to me and my teams. These are mission critical applications that the company is running on and we need to be very diligent with how we prove this out how we plan our workflow.

Matthew M. Cain: These are mission-critical applications that the company is running on, and we need to be very diligent with how we prove this out, how we plan our workflows, and how we plan our upgrade project. And that's indicative of conversations that we're having with a lot of customers about migrations. And as we've said before, we don't want to push customers before they're ready. We don't think that smart reality is, there's only so much that we would be successful with that.

As how we plan our.

Upgrade project and that's indicative of conversations that we're having with a lot of customers on migrations and as we've said before we don't want to push customers before they're ready. We don't think that's smart reality is there's only so much that we would be successful at that we want to be a trusted partner. So we think there is a.

Matthew M. Cain: We want to be a trusted partner, so we think there are many, many, many more of those to come. We can't predict when we're going to get those growth rates, just like we wouldn't have predicted the scale of that one over the course of the year. So I think we just have to balance what we can control and what we can't.

Many many many more of those to come we can't predict when we're going to get those those growth rates just like we wouldn't have predicted the scale of that one over the course of the year. So.

So I think we're just we've got a balance what we can control and what we can't and I think you you hear us talking about the potential because that's real.

Matthew M. Cain: And I think you hear us talking about the potential because that's real, and customers are telling us how valuable it is once they get in there. But there's some work to do based on the mission critical nature of a lot of these applications. That's super exciting. Okay. Yeah. Matt.

And customers are telling us how valuable it is once they get in there, but there's some work to do based on the mission critical nature of a lot of these applications.

That's super exciting okay. Yeah. Thanks, Matt Thanks, Greg and then my quick follow up is just Greg for you.

Robert Cooney Oliver: Thanks, Greg. And then my quick follow up is just for you on Capella IQ and some of the costs associated with that. Yeah, I appreciated earlier in my previous question, Jason was pushing you guys on potential conservatism on the top line and on ARR. And I guess, you know, how firm a handle do you guys have on the costs associated with Capella IQ, and just wanted to get a sense for how you sort of factored that into the cost outlook for the year. Thanks again, guys.

On Capella IQ and some of the costs associated with that.

Yeah I appreciate it you know earlier like previous question, Jason was pushing you guys on potential.

Conservatism on the top line and on a R. R.

Yes.

Oh from a handle do.

You guys have on the cost associated with Capella IQ and just wanted to get a sense for how you sort of factored that into the cost outlook for the year. Thanks again guys.

Robert Cooney Oliver: Yeah, thanks, Rob. Yeah, look, we have a I think we have a very good handle on the cost profile of Capella and can easily model that out. I think the more challenging piece, as Matt said, is just the pace of adoption and particularly the migrations that are going to drive, you know, the growth of Capella as we go here. So I feel very comfortable about how we are managing the cost and understanding how that's going to play out over the course of the next year or even several years. It's really about the top line growth that's associated with it. So we feel very good about where that business is going and where we'll eventually get from a Capella margin perspective. I appreciate it.

Yeah. Thanks, Rob Yeah look we have a I think we have a very good handle on the cost profile of capella and can easily.

Really model that out I think the the more challenging piece, what Matt said is just the pace of adoption and Mike, particularly the migrations that are going to drive you know.

The growth of Capella as we as we go here so I feel very comfortable about how we are on managing the cost and.

Understanding how that's going to play out over the course of the next year or even several years, it's really about the top line growth that's associated with it. So we feel we feel very good about where the a that business is going and where we will eventually get from our capella margin perspective.

Awesome I appreciate it thanks again guys.

Robert Cooney Oliver: Thanks again, guys. Thanks, Rob. Our next question comes from Raimo Lenschow with Barclays Police. Hey, thank you and congratulations from me as well. Man, one for you, like, ask Capello.

Thanks, Rob.

Our next question comes from Raimo <unk> with Barclays. Please state your question.

Thank you and congrats from me as well.

Once that you would like to ask.

Raimo Lenschow: Bigger part of the overall mix and obviously the bigger part for you. How do you think about your sales approach and how you sell? I'm asking because a lot of your peers that have gone through the same transition at some point discover it, like you probably need to kind of think about it differently, so think more about consumption rather than just kind of putting a proper project in place. Like, is there anything on the horizon for you guys as we think about this year or next, Raimo? Great question. We had our sales kickoff week one of this fiscal year, and I was particularly excited about it. And people are asking me, you know, why the excitement.

Comes like a bigger part of the overall mix and obviously the momentum is clearly there for you how do you think about your sales approach.

How you sell how you incentivize the sales force I'm asking because there's a lot of your peers that have gone through to see them transition.

Some point discover it you probably need you kind of think about differently should think more about consumption Robyn.

Rather than just kind of putting a corporate project in place.

Is there anything on the horizon for you guys as we think about this year or next year. Thank you.

Brian Great question.

We had our sales kickoff week one of this fiscal year and I was particularly excited about it and people are asking me you know why the excitement and obviously we wanted to share the good news on the fiscal year and celebrate a lot of great work by many people.

Matthew M. Cain: And obviously, we wanted to share the good news about the fiscal year and celebrate a lot of great work by many people. But what I was more excited about was the work that we've done to get in front of this year. And despite the fact that we delivered results that we were proud of knowing that we could do more, and a lot of that is understanding the underlying dynamics of capella and consumption at a much higher level than we did a year ago, because we have, you know, a lot of data that we can chew on. We're now able to look at our pipeline in an even more sophisticated way to understand, look, is this a customer that's or is this a use case where somebody is re-platforming an application off a competitive solution and displacing an existing database where something like TCO and application rewrite is so much more important?

What I was more excited about is the work that we've done to get in front of this year.

And despite the fact that we delivered results that we were proud of knowing that we can do more and a lot of it is understanding underlying dynamics of capella in consumption at a much higher level than we did a year ago. Because we have you know a lot of data that we can chew on.

We're now able to look at our pipeline and in an even more sophisticated way to understand because this is a customer that's building a net new application that need to understand the capabilities and how to integrate.

No sequel, with natural language for developers.

Or is this a use case, where somebody's re platforming and application offer competitive solution in displacing an existing database, where something like T. C O and application rewrite is there's so much more important as we peel those layers, we can be much more.

Matthew M. Cain: As we peel those layers back, we can be much more fine-tuned with our go-to-market approach and align to what prospects and customers are looking for. And so we've layered this approach in to everything we're doing on the go-to-market, and that just goes above and beyond what we already had in place. Then we can follow up with specific enablement for our teams to say, hey, if you're getting these types of questions, this is part of the value proposition that you need to point to or, you know, here's how to leverage a trial or professional services. All of that is with the lens of Capella and consumption.

I'm fine tuned with our go to market approach and aligned to what prospects and customers are looking for.

And so we've layered this approach in to everything we're doing on the go to market and that just goes above and beyond what we what we already had in place then we can follow up with specific enablement to our teams to say hey, if you're getting these types of questions. This is part of the value proposition that you need to point to or you know here's how to leverage a trial.

Or professional services.

All of that is with a lens of Capella and end consumption and then over the course of the year as we've executed on this inflection really building the instrumentation that we need to understand.

Matthew M. Cain: And then, over the course of the year, as we've executed on this inflection, really building the instrumentation that we need to understand every aspect of how customers are consuming. Maybe they're tracking below what we might have thought. Maybe they're running, you know, hot.

I understand every aspect of how customers are consuming maybe they're tracking below what we might have thought maybe they're running hot being able to speak.

Matthew M. Cain: Being able to, you know, speak to them on a proactive basis to make sure that it's headed in the direction that we want it to be and where we want them to be. So I'd say those are all different dynamics that the team is really leading into. And we're excited to keep pushing forward. Yeah, and Raimo, I just want to add one thing: even last year, and it will continue this year, we have an element of consumption as part of the sales compensation plan. So it's not just about selling the project but also, you know, getting consumption going as well. Okay, perfect.

Speak to them on a proactive basis to make sure that that's headed in the direction that we want it to be in and we want them to be so I'd say those are all different dynamics that.

The team is really leading into and.

And we're excited to to keep pushing forward, yes, Raimo I just add one thing is even last year and it will continue this year, we have an element of consumption as part of the sales compensation plan. So it's not just about selling the project, but also you know getting consumption going as well.

Raimo Lenschow: That makes sense. And then Greg, one for you, and it's more, not so much for this year, but more conceptually. If you think about professional services, how do you kind of plan for that as a percent of the total or like how do you think about the growth there in the long run? Is there kind of like a base level that you need to do because you know some of the initial or early stage projects early in the market kind of product releases you kind of want to handle yourself to see the feedback quicker, and the rest can go with partners? If I think about modeling professional services beyond Yeah, thanks, Raimo.

Okay, perfect that makes sense and then Greg one for you and it's more.

Not so much for this year, but more conceptually if you think about professional services.

D C did you.

How do you kind of plan, we said that.

As a percent of the total or like how do you think about the growth there in the long run is there any kind of like a.

At this level that you need to do.

Chris you know with some of the initial or early stage project early early in the market's kind of product releases, you kind of wonder handled yourself to see repeat that quicker.

It can come and go with partners like <unk>.

I think about modeling professional services.

Beyond this year as well like how should we think about them. Thank you.

Yes, Thanks, Raimo, Yeah, I think modeling.

Gregory N. Henry: Yeah, I think modeling services going forward, at least for the next year or two. We obviously had a significant outperformance in fiscal 23, but I think we got to 24 was more of a normal level. And I think that's the way you should think about it going forward. And as we've talked about over time, as more of our business goes to Capella, the services, because there are embedded, obviously, services as part of Capella, the professional services component will probably moderate and flatten out over time; it won't continue to grow, because that's really the majority of the services we're driving today are in the enterprise business versus Capella. So I think, you know, this year was a good year to sort Thank you. Thanks for having me.

Services going forward at least for the next year or two I think you know we we obviously had a significant outperformance in fiscal 'twenty. Three I think we got to 24 was more of a normal level and I think that's the way you should think about it going forward and as we've talked about over time as more of our business goes to capello the services because theres embedded obviously server.

As part of Capella, the professional services component will probably moderate and flatten out over time. It wont continue to grow because that's really the majority of the services, we're driving today or on the enterprise business.

Versus capella. So I think you know this this year was a good year to sort of really level set and see sort of moderate growth from here out.

Okay perfect. Thank you.

Thanks Robyn.

Howard Ma: Our next question comes from Howard Ma with Guggenheim Security. Thanks, and I want to add my congratulations, Donny, on a solid finish this year. For either Matt or Greg, can you help us think about the mix of total ARR between Capella and Server exiting this year or Enterprise exiting this year to Fiscal 25? What are the biggest pieces that would shift the ARR mix to Capella?

And our next question comes from Howard MA with Guggenheim Securities. Please state your question.

And I want to add my congratulations on a.

Solid finish to the year for either Matt or Greg can you help us think about the mix of total air are between Capella and server exiting this year or enterprise exiting this year. So fiscal 'twenty five what are the biggest pieces that would shift our mix of capella as you did more expansions of existing pellet customers where isn't migrations for on Prem.

Gregory N. Henry: Is it more expansions of existing Capella customers, or is it migrations for on-prem? And how much are on-prem renewals driving the mix shift? Thanks. Yeah, hey, Howard, thanks for that. This is Greg.

And how much are on prem renewals driving the mix shifts. Thanks.

Yeah, Hey, Howard Thanks for that as Greg.

Gregory N. Henry: Look, as we noted, we finished the year at 11% of our AR was Capella. And I think I would go back to at the investor day, we said during that medium term four to six year horizon, we would be disappointed if we didn't get to at least a third of Capella's mix, if not even half of the business. So just sort of plotting the course to that timeframe, because we're not guiding to the Capella mix in fiscal 25. I would say, though, that the bigger drivers are first migrations of enterprise customers over, particularly the large ones, some of the larger scale ones that will accelerate it would be expanding the existing Capella customer base, which Matt gave a great example of just recently. And then lastly, look, we've talked about the new logos; you're going to see the quantity tick up, but they're going to be a lower starting point as we, you know, enter into the Capella journey. So that's probably the third one in terms of rank order, if you will.

Look we as we noted we finished the year at 11% of our AOR was Capella and I think I'd go back to at the Investor Day, We said during that medium term four to six year horizon, we would be disappointed if we didn't get to at least a third of capella mix, if not even a half of the business. So just sort of plotting a course of that timeframe because we're not guiding to.

The capella mix in fiscal 'twenty five.

Would say, though that the.

The bigger drivers are first migrations of enterprise customers over particularly the large some of the larger scale ones that will accelerated two would be expanding the existing capella customer base, which Mack gave a great example of just recently and then lastly look we've talked about that new logos.

Youre going to see the quantity tick up but theyre going to be at a lower starting point as we enter.

Enter into the Capella journey, so that's probably the third one in terms of rank order if you will.

Gregory N. Henry: Okay, I appreciate you ranking ordering that, Greg. And just a follow up for you. What is it you mentioned about the longer average contract duration? What is driving that?

Okay. I appreciate you rank ordering that Greg and just a follow up for you. What is the you mentioned the the longer average contract duration of what is driving that is it is it renewals or are new logos and do you expect that to be a persisting revenue tailwind. This year, we're only in the first half.

Gregory N. Henry: Is it renewals or new logos? And do you expect that to be a persisting revenue tailwind this year or only in the first half? Yeah, Howard. In Q4, we did two renewals of our largest enterprise customers. One we talked about within the quarter, one was actually in Q1, they renewed early. And so those two went in, and they were both multi-year deals.

Yeah, So Howard.

Q4, we did two renewals of our largest enterprise customers.

One we've talked about within the quarter one was.

Actually in Q1, they renewed early and so those two went in and they were both multi year deals. So we saw a higher than average duration this quarter because of those two deals in particular.

Gregory N. Henry: So we saw a higher than average duration this quarter because of those two deals in particular. But again, I think it's going to get back to where we normally see the duration. I think that was anomalous for those two specific deals.

But again I think it's going to get back to where we normally see the duration.

That was anomalous for those two specific deals and you obviously see short see it show up in our P. O and if you go back a couple of years you saw large R. P. O and then over time those largest customers they burn off their revenue until they get to this renewal point and then we put them back in.

Gregory N. Henry: And you obviously see it show up in RPO. And if you go back a couple years, you see a large RPO growth. And then over time, those largest customers burn off their revenue until they get to this renewal point. And then we put them back in, you know, into the RPO, and then the same thing's going to happen. So it was a Q4 dynamic, I would say, from a duration perspective. Okay, very helpful. Thanks.

And to the RP O and then the same thing is going to happen. So it's a it's a it was a Q4 dynamic I would say from a duration perspective.

Okay very helpful. Thanks.

Stephen Schwartz: Thank you. Our next question comes from Stephen Schwartz with Wells Fargo. Hi, this is Stephen Schwartz on behalf of Andy Malensky.

Thank you.

Our next question comes from Steven Schwartz with Wells Fargo. Please state your question.

Oh, Hi, this is Stefan Andre and thanks for taking my question.

Stephen Schwartz: Thanks for taking my question, to start off on these large deals. I think you had mentioned there were some renewals coming up in Q1 as well, right? Was there anything that maybe pulled into the Q4 that maybe had an impact beyond what you're expecting? Yeah, yeah, we talked about this, Greg. We talked about last quarter that there were two large deals in particular, like very large deals. And one was due for renewal in the quarter, and one was not. And we weren't sure at the time whether that was going to close because it wasn't due in the quarter. But they both did close.

Got.

I guess to start off and these large deals I think you had mentioned there were some.

<unk> coming up in Q1 as well was it was there anything that maybe pulled into Q4.

And then maybe had an impact.

We're expecting.

Yeah, Yeah, we talked about this Greg we talked about last quarter that there was two large deals in particular like very large deals and one was due for renewal in the quarter and one was not and we werent sure at the time, whether that was going to close because it wasn't due in the quarter. They both did close so as we just talked about the duration of the <unk>.

Gregory N. Henry: So as we just talked about the duration of the RPO, pick those up. The one that was in quarter renewal obviously hit ARR and revenue. The one that was, again, just a little bit early into Q4, you'll see it in ARR, but it obviously hasn't started revenue because it has a Q1 revenue start date. So those were the only sort of dynamics that were at play with those couple large deals. Okay.

Our P O.

You know pick those up I'm. The one that was in quarter renewal, obviously hit <unk> and revenue the one that was.

Again, just a little bit early into Q4, you'll see it in <unk>, but it obviously hasn't started revenue because it is a Q1 revenue start dates. So those were the only sort of dynamics that were at play with those couple of large deals.

Got it Okay, and then as a follow up.

Matthew M. Cain: And then as a follow-up, you know, if you think about capitalizing on this inflection and demand that you're seeing, how do you think that plays out in terms of investment in sales and marketing? Look, we certainly want to continue with the momentum, and we're excited about it, but we're equally focused on the leverage side of the business on a go forward basis. And so, when I think about momentum, leverage comes in multiple forms.

And as you think about capitalizing on this inflection in demand that you're seeing.

How do you think of that how that plays out in terms of investments in sales and marketing and R&D.

Look we certainly want to.

Continue with the momentum and we're excited about it but.

We're equally focused on the leverage side of the business on a go forward basis, and so when I think about momentum leverage comes in multiple forms the pace of innovation from our product team is better than it's ever been and.

Matthew M. Cain: The pace of innovation from our product team is better than it's ever been. And we haven't talked about, up to this point on the call, our internal use of AI, but that's helping our development teams be that much more productive. The more insights we have on Capella, the more fine-tuned we can be with, you know, features that we're working on. And so I expect that we're going to get much more efficient, you know, as we execute through this inflection. Same is true on the go-to-market side, you know, having an additional level of telemetry and signaling from the product side, getting into complementing our, you know, enterprise motion with more product-driven growth, you know, better fine-tuning our spend based on, you know, the type of demands per my And so a big part of how we're thinking about inflection is continuing to go fast and being smart about all things Capella.

And we haven't talked about up to this point on the call our internal use of of AI, but that's helping our development teams be that much more productive more insights we have on capella out of the more fine tune. We can be with you know features that we're working on.

And so I expect that we're going to get much more efficient.

We execute through this inflection same is true on on the go to market side, you know, having an additional level of telemetry and signaling from the product side getting into complementing our enterprise motion with more product led growth.

You know better fine tuning our spend based on the type of demands permit right previous comment.

And so a big part of how we're thinking about inflection is continuing to go fast and being smart about all things Capella.

Matthew M. Cain: But then I was really excited about, you know, a more leveraged future across all aspects of our business. And that's before we benefit from the addition of AI to our platform as we take things to market. So a lot of our focus is, again, continued execution that we're proud of and the momentum we've established; how do we maintain that and get into levels of efficiency and leverage that we know are possible. Thank you.

But then being really excited about you know a more leveraged future across all aspects of our business and that's before we benefit from the addition of AI into into our platform is as we take things to market them. So a lot of our focus is again continued execution.

That we're proud of and the momentum we've established how do we maintain that and get into.

Levels of efficiency and leverage that we know are possible.

Okay. Thank you.

Imtiaz Ahmed Koujalgi: Our next question comes from Taz Koujalgi with Wedbush Securities. Hey guys, thanks for taking my question. First of all, Matt or Greg, can you explain how you monetize that feature? That part of the base product is an add-on; people pay for that separately on top of the core product. Yeah, it'll be it'll be part of the platform. It's an extension of, you know, other features. And so they'll either license it or use Capella credits like they would other components of the platform.

Our next question comes from task choreography with Wedbush Securities. Please state your question.

Hey, guys. Thanks for taking my question I'll first before for macro Greg Victor shows Kingsgate spend how do you monetize that future.

Is that part of the product as an add on to people pay for that separately on top of the core products.

Yeah that'll be that'll be part of the platform. It's an extension of of other features and so they'll they'll either license that or use capella credits like they would other.

Matthew M. Cain: Very helpful. Any sense of, you know, what kind of uplift the customer gets when he stops using that feature of the product? Look, it is too early for us to give you any kind of financial trends and patterns. I think it's a big part of the value proposition. And you know, what we think about Couchbase is, what are the application dynamics within, you know, our customer base? And what are they trying to do with their innovation agendas? You'd be hard pressed to find any enterprise that isn't quickly trying to figure out how to get the most out of the Signing Technology of AI. Well, when you think about highly adaptive applications in an AI-powered world, that's going to really depend on a sophisticated data platform that brings together these features but can also handle, you know, the scale and performance of massive data sets that include private information, public information, structured data, and unstructured data in the cloud and on the edge.

So the platform.

That'd be helpful and Australia with any any sense of you know what kind of uplift because someone gets when he stopped using that feature of the product.

Okay.

Too early for us to give you kind of financial trends and patterns.

It's a big part of the value proposition and you know what when we think about a couch faces.

What are the application dynamics within our customer base and what are they trying to do with their innovation agenda as you'd be hard pressed to find any enterprise. It isn't quickly trying to figure out how to get the most out of this exciting technology of of AI.

Well when you think about highly adaptive.

Applications and an AI powered world, that's going to really depend on our sophisticated data platform that brings together. These features but can also handle the scale and performance of massive datasets that include private information public information structured data unstructured data at the cloud at the edge and so on.

Matthew M. Cain: And so I think, you know, we talked about one of the biggest market transitions and opportunities that the world has ever seen. It's hard to put a number on that opportunity. We're focused on, you know, meeting the needs of our customers that are building these adaptive applications. And if you were to step back and say, lay out the aspects of a data platform for the future world, you'd be hard pressed to find one that doesn't have that has a better start than what we have. And we truly believe that we've been, you know, built for this moment.

Thank you know when we talk about one of the biggest market transitions and opportunities that the world has ever seen it it's hard to put a number on the opportunity. We're focused on is meeting the needs of our customers that are building these adaptive applications.

And if you were to step back and say lay out the.

Aspects of a data platform for the future world you'd be hard pressed to find one that doesn't have.

That has a better start than what we have and we truly believe that we've been built for this moment.

Matthew M. Cain: So that's really our focus. We continue to, you know, press hard on meeting customer needs. Monetization is going to be exciting.

So that's really our focus we continue to press hard on meeting customer needs monetization is going to be exciting, but again early days for us to give you specifics.

Imtiaz Ahmed Koujalgi: But again, it's early days for us to give you specifics. I just want to follow up on Greg's, Greg, very strong customer ads this quarter. Any comment on what that is to the average? There are different sizes for new customers. Are you landing more smaller customers now because of the capella traction, or has the average literally changed much? Hey, Taz.

Just one follow up for Greg, Greg very strong customer adds this quarter any comment on what that does to the average.

The average loan sizes with your customers are you landing more smaller customers now because of the correction or the damaging effects literally to change much.

He says yes, we're certainly as we've talked about with Capella, we're gonna be landing more customers that are smaller land point and we are seeing that for.

Gregory N. Henry: Yeah, we're certainly, as we've talked about with Capella, we're going to be landing more customers at a smaller landing point. And we are seeing that, for sure. However, it doesn't mean that, like in this quarter, we talked about a couple large enterprise deals as well. And you see our ARR per customer continue to grow, although it should moderate over time with these Capella customers coming on. But yes, the land point will be smaller.

For sure. However, it doesn't mean that like in this quarter, we talked about a couple of large enterprise deals as well and you see our IRR per customer continue to grow although it should moderate over time with these capella customers coming on but yes. The land point will be smaller and we are perfectly fine with that because Matt gave the example of four of the customers start to 10 or 20000.

Imtiaz Ahmed Koujalgi: And we are perfectly fine with that because Matt gave the example of four customers starting at 10 or 20,000. And within a year, it's at 800,000.

And with the new year is at 800000 so.

Rudy Grayson Kessinger: So, zero issue with landing small and growing from there. Very helpful. Thanks, guys. Thanks, Tess. Our next question comes from Rudy Kessinger with D.A. Davis.

Zero issue with Atlantic small and growing from there.

Very helpful. Thanks, guys.

Thanks, Tim.

Our next question comes from Rudy Kissinger with D. A Davidson. Please state your question.

Andres Miranda: Hi, this is Andres Miranda on behalf of Rudy. I just have a quick question for you guys. How is the consumption growth trending with Kapala customers? If you could talk a little bit about that. And the consumption growth in Q4 so far in Q line was in line with Q1 with recent quarters or better or worse? Any, any extra quarter you can give on so far?

Hi, This is Andreas and you end up Rudy I just have a quick question for you guys. How is the consumption growth trending with a couple of question. If you could talk a little bit about that and the consumption growth in Q4, so far in Q line, which is in line in Q1.

With recent quarters or better worse any any extra color on are you going to keep on so far.

Gregory N. Henry: Yeah. Hey, good afternoon. Yeah, look, consumption continues to be good for Capella. We're very pleased at where we are with, again, not only bringing customers on board but getting them going and using them. We talked about how there are a number of our customers that are continuing to not only use at the pace that they bought but actually use beyond the pace that they bought, meaning they consume faster than they thought they would. So we still feel very good about those consumption trends.

Yeah, Hey, good afternoon, Yeah look consumption continues to be good for Capello were very pleased at where we are with again, not only bringing customers on but getting them going and using we talked about where.

There is a number of our customers that are continuing to not only use at the pace that they bought but actually.

Beyond the pace that they bought meaning consuming faster than.

They thought they would so we still feel very good about those consumption trends.

Gregory N. Henry: We talked a little bit about that at Investor Day, and it continued through Q4. And look, as we would do anything we do, we look at the most recent trends for the last three to six months as the best predictor of what's going to happen in Q1, and we've leveraged that to model into our Q1 guidance. And just as a reminder, again, what we covered at Investor Day, if you look at the pace of growth of customers in Capella versus Enterprise, they grow about two times faster going from zero to 100K and four times faster going from 100K to 500K. So we're seeing that continue.

You talked a little bit about those at Investor day, and they continued through Q4 and look at as anything we would do we look at the most recent trends for the last three to six months is the best predictor of what's going to happen in Q1, and we've leveraged that to model into our Q1 guidance and just as a reminder, again, what we covered at Investor day, if you.

You look at the pace of growth of customers in Capello versus enterprise. They grow about two times faster going from zero to 100, K and four times faster going from 100 K to 500, K. So we're seeing that continue.

Andres Miranda: And again, I'll reference the example that Matt shared before about a customer starting $10,000 or $20,000 and ending up a year later at $800,000. So we remain very bullish on Capella and its consumption capabilities. Okay. Sounds good.

And again I'll reference back to the example that Matt shared before about a customer starting 10 or $20000 and ending up a year. Later 800000. So we're we remain very bullish on capella in the consumption capabilities.

Okay sounds good and one last question if I may on mixed one month Ipos were up pretty strongly over Q3, how much was driven by strong renewals versus new deals and so the next 12 months I would be able to begin to truck more in language here in fiscal year 'twenty five.

Param Singh: And one last question, if I may. Next 12 months RPOs were up very strongly over Q3. How much was that driven by strong renewables versus new deals?

Gregory N. Henry: And should the next 12 months' RPOs begin to track more in line with ARR in fiscal year 25? Yeah, so I think you were asking about RPO and ARR. The RPO, that was the question.

Yeah. So I think you were asking about RPE O and air R. E. D. R. P. O that was the question. Obviously again, we talked about those couple of large enterprise deals.

Gregory N. Henry: Obviously, again, we talked about those couple of large enterprise deals being large, not only large, but large multi-year deals. So, you know, we saw a very nice, you know, increase in our RPO. You'll see that continue obviously year over year, early in the year, but then obviously, these customers will start burning through their revenue, and the RPO growth will moderate. And I'd just say, if you look at RPO over the last couple of years, it's a good sort of pattern set of what we probably would expect to happen over the next couple of years. Okay, sounds good.

<unk> large not only large but large multi year deals so we.

We saw a very nice.

Increase in our Rps you'll.

You'll see that continue obviously year over year early in the year, but then obviously these customers will start burning off the revenue and the ERP Oh growth will moderate and I'd just say if you look at our P. Over the last couple of years. That's a good sort of patterns that are what we probably would expect to happen over the next couple of years.

Okay.

Harveer Singh: Thank you. Thank you. Our next question comes from Param Singh with Oppenheimer and Company. Yeah, hi, thank you. Yeah, this is Param Singh on behalf of Ittai Kidron, and thank you for taking my question. I know the Revenue Guide has been beaten to death, but I just want to understand the impact of a higher mix of Capella, and as you look to Fiscal 25, what are you embedding in your guide as an incremental headway? Yeah, hey, thanks, Parham. It's Greg.

Okay sounds good thank you.

Thank you.

Our next question comes from Param Singh with Oppenheimer <unk> Company. Please state your question.

Yeah, Hi, Thank you yeah. This is harvesting on for if I could go on and thank you for taking my question.

I know the revenue guide has been beaten to death, but I just want to understand the impact from a higher mix of Capella and as you look to fiscal 'twenty five what are you embedding in your guide as an incremental headwind.

Yeah, Hey, Thanks, Param this is Greg.

Harveer Singh: So a couple of things. Look, as you saw with our Q1 guide, we feel good about how Q1 is going to shape up from a revenue perspective, in particular. Again, I'll go back to that large customer that we signed in Q4 with a start date in Q1, which will give us an outsized, you know, upfront license revenue from ASC 606, which is a bit anomalous. So if you think about revenue for the year, Q1 will be, you know, stronger than normal, and then it'll be sort of flattish for the next couple quarters, just given the strength of that upfront We don't necessarily see, I know you referred to a headwind potentially with Capello revenue, but we don't see that being a headwind; we see that being, if anything, a tailwind as we continue to move forward. So again, continued good strength with our enterprise customers and growth with Capello should help us, again, get to that medium-term outlook of being a 20% plus top line grower. Yeah, I was thinking more in terms of revenue recognition, but I hear your point.

A couple of things.

Look we as you saw with our Q1 guide we feel good about how Q1 is going to.

Shape up from a revenue perspective in particular again I'll go back to that large customer that we signed in Q4 with a start date in Q1, which will give us an outsized upfront license revenue from ASC 606, which is a bit anomalous. So if you think about revenue for the year Q1 will be strong.

Longer than normal and then it'll be sort of flattish for the next couple of quarters, just given the strength of that upfront license revenue.

We don't we don't necessarily see I know you referred to a headwind.

Potentially with Capello revenue, we don't see that being a headwind we see that being if anything a tailwind as we continue to move forward. So again continued good strength with our enterprise customers and growth with Capella should help us.

Again get to that medium term outlook of being a 20% plus top line grower.

Got it got it yeah I was thinking more in terms of revenue recognition, but I hear your point. So you know if I think about capella yeah column there the opportunity do you provide the analytical database whatever you heard so far what's the opportunity set and incremental workloads you can address with that.

Gregory N. Henry: So, you know, if I think about Capella, you know, and Columnar, the opportunity to provide an analytical database, what have you heard so far? What's the opportunity set in incremental workloads you can address? Yeah, great. I'm glad you brought that up. It was a really important release for the year.

Yeah, Great I'm glad you brought that up it was a really important release for the year.

Matthew M. Cain: And as we think about, again, our worldview that applications need to be highly personalized, highly interactive, available from the cloud to the edge, we think a fundamental attribute is being able to inject real-time analytics while the application is being used by users. And so it's really about complementing the operational data store with real-time analytics. What's important about our approach to Columnar is also injecting multiple datasets, whether that's from S3 or other competitive database solutions into the Couchbase engine so that that application is that much more sophisticated. So I think about the amount of data that's in the platform that the application can draw its sophistication from; that's really the power of that combination. You then extend Vector, which brings in AI intelligence to layer on top of that.

And as we think about again, our world view that applications need to be highly personalized highly interactive available from the cloud to the edge. We think a fundamental attribute is being able to inject realtime analytics, while the application is being used by users.

So it's really about complementing the operational data store with real time analytics whats important about our approach to column. There also is injecting multiple datasets, whether that's from U S. Three or you know other competitive database solutions into the couch base.

Engine, so that that application is it is that much more sophisticated so I think about the amount of data that's in the platform that the application can draw its sophistication from that that's really the power of of that combination. You then extend vector which brings in AI intelligence to layer on top of that.

Matthew M. Cain: This is the power of the Couchbase platform in action. Any comments or early feedback from customers? Yeah, look, I mean, we're in preview. I'd say it's exceeded our expectations.

This is the power of the couch based platform in action.

And any comments on early feedback from customers here.

Look I mean, we're we're in preview I'd I'd say, it's exceeded our expectations.

Matthew M. Cain: Specific commentary on, you know, the ease of rolling that out, the, you know, you start to get into the complexity of things like ETL and moving data from one system to another, we can remove that complexity and converge all that capability into the Couchbase platform. Keep in mind, we're doing this with SQL plus plus and natural language. All of this is embedded in Capella IQ.

You know specific commentary on.

The ease of rolling that out the you start to get into the complexity of things like E. T L and moving data from one system to another we can remove that complexity and.

In converge all of that capability and into the couch based platform keep in mind, we're doing this with CCAR plus plus in natural language. All of this is embedded in our Capella Iq.

Matthew M. Cain: So the capabilities that our developers have at their fingertips that they didn't have, you know, even six months ago, I think are being acknowledged in these previews, and we expect that to continue as we move to GA. Thanks again for taking my questions, and great quarter guys. Thank you. Thank you. There are no further questions at this time. I'll turn the floor back to Matt Cain for questions.

So the the the capabilities that our developers have at their fingertips that they didn't have even six months ago. I think is being acknowledged in our in these previews and we expect that to continue as we because we moved to G E.

Alright, Thanks, again for taking my questions and great quarter guys.

Thank you.

Thank you there are no further questions at this time I'll turn the floor back to Matt Kane for closing comments.

Matthew M. Cain: Thanks, Operator, and thanks to everyone for joining us today. We're thrilled with our performance and believe fiscal 2025 will be another historic year for Couchbase.

Thanks, operator.

And thanks to everyone for joining us today, we're thrilled with our performance and believe fiscal 2025 will be another historic year for couch space. We look forward to speaking with you all again soon thank you.

Unknown Executive: We look forward to speaking with you all again soon. Thank you. Thank you. This concludes today's conference.

Thank you. This concludes today's conference all parties may disconnect have a good day.