Q1 2025 Couchbase Inc Earnings Call

Operator: Greetings and welcome to the Couchbase First Quarter 2025. At this time, all participants are on a listen-only session. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please call 1-866-422-9483.

Greetings and welcome to the Couch based first quarter 2025 earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: A brief question and answer session will follow the formal presentation.

Speaker Change: Funny once you require operator assistance during the conference. Please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

Edward Akira Parker: As a reminder, this conference is being recorded. It is now my pleasure to introduce you to Edward Parker, Head of Investor Relations. Good afternoon, and welcome to Couchbase's first quarter 2025 earnings call. We'll be discussing the results announced in our press release issued after the market closed today. Also with me are Couchbase's Chair, President, and CEO, Matt Cain, and CFO, Greg Henry. Today's call will contain forward-looking statements, which include statements concerning financial and business trends and strategies, market size, product capabilities, our expected future business and financial performance and financial condition, and our guidance for future periods.

Speaker Change: It is now my pleasure to introduce your host Edward Parker head of Investor Relations. Thank.

Edward Akira Parker: Thank you you may begin.

Speaker Change: Good afternoon, and welcome to cash basis first quarter 2025 earnings call, we'll be discussing the results announced in our press release issued after the market close today with me are kind of speeches 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 products capabilities.

Edward Akira Parker: 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. We're looking for statements, by their nature, to address matters that are subject to risks and uncertainties that can cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks discussed in today's press release and our most recent annual report on Form 10-K or quarterly report on Form 10-Q filed with the FCC.

Speaker Change: Our expected future business and financial performance and financial condition, and our guidance for future periods.

Speaker Change: These statements reflect our views as of today, only and should not be relied upon as representing our views at any subsequent date.

Speaker Change: Undertake any duty to update these statements.

Gregory N. Henry: These 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 your first risks discussed in today's press release and our most recent annual report on form.

Greg Henry: Hey.

Greg Henry: The report on Form 10-Q filed with the SEC.

Edward Akira Parker: During the call, we will also discuss certain non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles. The reconciliation of these non-GAAP financial measures and 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.

Speaker Change: During the call. We will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP.

Speaker Change: Measures to the most directly comparable GAAP financial measures as well as how we define these metrics and other metrics.

Speaker Change: Earnings press releases, which are available on our Investor Relations website.

Speaker Change: With that let me turn the call over to Matt.

Matthew M. Cain: Thank you, Edward, and good afternoon, everyone. We entered fiscal 2025 with strong momentum, coming off a historic 2024 for Couchbase, where we achieved important Capella milestones, accelerated our net new AR growth, increased the cadence of innovation with multiple enhancements and new capabilities on our platform, and enacted initiatives that drove increased leverage and efficiency across the business. I'm pleased to report that we made continued progress on our growth, inflection, and efficiency in Q1, delivering revenue and operating loss results that exceeded the high end of our outlook.

Speaker Change: You Edward and good afternoon, everyone.

We entered fiscal 2025 with strong momentum coming off a historic 'twenty 'twenty four for couch base, where we achieved important capello milestones accelerated our net new air growth increase the cadence of innovation with multiple enhancements and new capabilities on our platform.

Matt: And enacted initiatives that drove increase leverage and efficiency across the business.

Matthew M. Cain: Annual Occurring Revenue, or ARR, was $207.7 million, up 21% year-over-year, inclusive of a definitional change noted in our press release that Greg will discuss in more detail in a moment. Revenue in Q1 was $51.3 million, up 25% year over year, $2.4 million ahead of the high end of our guidance range. Non-Gap Operating Loss in Q1 of $6.7 million was also ahead of the high end of our guidance range, which represented a negative operating margin of 13%.

Speaker Change: I'm pleased to report that we've made continued progress on our growth inflection and efficiency in Q1, delivering a revenue and operating loss results that exceeded the high end of our outlook.

Speaker Change: They are recurring revenue or <unk> was $207 $7 million up 21% year over year inclusive of a definitional change noted in our press release that Greg will discuss in more detail in a moment.

Revenue in Q1 was $51 $3 million up 25% year over year to $4 million ahead of the high end of our guidance range.

Speaker Change: non-GAAP operating loss in Q1 of $6 $7 million was also ahead of the high end of our guidance range, which represented a negative operating margin of 13%.

Matthew M. Cain: 3.5 percentage points above the midpoint of our implied operating margin guidance range. We added 19 net new logos, and Capella now represents 29% of our customer base and 11.5% of ARR. This quarter, we saw new customer wins across a variety of industries, including manufacturing, fintech, healthcare, retail, telco, and gaming. Customer interest in and uptake of Capella continues to grow, and feedback on our newest capabilities and enhancements has been very positive, as customers are looking to Couchbase to enable the next generation of adaptive applications.

Speaker Change: 3.5 percentage points above the midpoint of our implied operating margin guidance range.

Speaker Change: We added 19, net new logos and Capella now represents 29% of our customer base and 11, 5% of Anr.

This quarter, we saw new customer wins across a variety of industries, including manufacturing Fintech health care retail telco and gaming.

Speaker Change: Customer interest in an uptake of Capella continues to grow.

Feedback on our newest capabilities and enhancements has been very positive as customers are looking for a couch base to enable the next generation of adaptive applications.

Matthew M. Cain: Last quarter, I discussed the leverage that I saw building across our business as a result of our efforts to improve operational rigor and efficiency, and we made further progress on this front in Q1. Our first quarter Rule of 40 score improved by over 12 points year-over-year and 23 points from Q1 of fiscal 2023.

Last quarter I discussed the leverage that I saw building across our business as a result of our efforts to improve operational rigor inefficiency and we made further progress on this front in Q1.

Speaker Change: Our first quarter rule of 40 score improved by over 12 points year over year, and 23 points from Q1 of fiscal 2023.

Matthew M. Cain: This was also our first quarter of free cash flow positivity, and we remain on track to deliver on our profitability commitments we made at last December's Analyst Day. Driving efficiency across go-to-market, R&D, and all aspects of our operations will continue to be one of our highest priorities for fiscal 2025. However, despite these achievements in the quarter, our ARR performance was impacted by more pronounced timing dynamics than we anticipated.

Speaker Change: This was also our first quarter, our free cash flow positivity and we remain on track to deliver on our profitability commitments. We made at last December at the analyst day.

Speaker Change: Driving efficiency across go to market R&D and all aspects of our operations will continue to be one of our highest priorities for fiscal 2020 five.

Speaker Change: Despite these achievements in the quarter our air our performance was impacted by more pronounced timing dynamics than we anticipated.

Speaker Change: As we've often discussed.

Matthew M. Cain: As we've often discussed, given our customer base of large enterprises, the mission-critical nature of many of the applications we support, and the sensitivities that our renewals, upsells, and Capella migrations have on our reporting metrics, including ARR, quarterly timing is always an important element of our business. Now, we pride ourselves on focusing on what we can control while also accounting for a variety of uncertainties that are not always in our control, including deal timing.

Speaker Change: Given our customer base of large enterprises. The mission critical nature of many of the applications, we support and the sensitivities that are renewals upsells and capello migrations have on our reporting metrics, including air our quarterly timing is always an important element of our business.

Speaker Change: Now, we pride ourselves on focusing on what we can control while also accounting for a variety of uncertainties that are not always in our control including deal timing.

Matthew M. Cain: However, these dynamics, in combination with the ongoing macroeconomic headwinds, including longer deal cycles and elevated budget scrutiny, had an outsized impact on our ARR balance at the end of the quarter due to several deals that pushed beyond Q1. That said, we don't see any change to the momentum in our business or our ability to achieve our full-year objectives. Adding to our confidence is that several of these flip deals have since closed, and several more are expected to close this quarter.

Speaker Change: However, these dynamics in combination with the ongoing macroeconomic headwinds, including a longer deal cycles and elevated budget scrutiny had an outsized impact on our AR balance at the end of the quarter due to several deals which pushed beyond Q1.

Speaker Change: That said, we don't see any change the momentum in our business or our ability to achieve our full year objectives.

Speaker Change: Two our confidence is at several of these slip deals have since closed and several more expected to close this quarter.

Matthew M. Cain: More broadly, I continue to be very encouraged with our progress across many aspects of our business, including our strengthening pipeline, the growing relevance of our foundational technology and architecture, increasing demand for Capella, the strong interest in our new platform capabilities, the momentum building behind our go-to-market motion, and especially the aforementioned efficiency improvements. As such, we believe that our ARR result for the quarter doesn't fully reflect the momentum we are seeing in our business and the trajectory of our business going forward.

Speaker Change: More broadly I continue to be very encouraged with our progress across many aspects of our business, including our strengthening pipeline the growing relevance of our foundational technology and architecture, increasing demand for capella.

Speaker Change: <unk> interest in our new platform capabilities.

Speaker Change: Mentum building behind our go to market motion and especially the aforementioned efficiency improvements as such we believe that our air our result in the quarter. It doesn't fully reflect the momentum we are seeing in our business and the trajectory of our business going forward.

Matthew M. Cain: Now, turning to product, I'm excited to share customer feedback on some new features we've announced over the past few quarters. These new innovative capabilities further enhance our ability to enable the building of adaptive applications alongside an evolving AI landscape. The first of these features was our co-pilot capabilities, Capella IQ, now in GA, which allows developers to interact with Capella using natural language. Feedback on Capella IQ has been positive, and customers are seeing results. A leading European travel comparison and booking website is leveraging Capella and the IQ Copilot to power development for their search engine and e-commerce platform for storing user data related to bookings and payments.

Speaker Change: Now turning to product I'm excited to share customer feedback on some new features we've announced over the past few quarters.

Speaker Change: These new innovative capabilities further enhance our ability to enable the building of adaptive applications alongside an evolving AI landscape.

Speaker Change: The first of these features was our co pilot capabilities Capella IQ now and G E, which allows developers to interact with capella using natural language.

Speaker Change: Feedback on Capella IQ has been positive.

Speaker Change: Customers are seeing results.

A leading European travel comparison in booking website is leveraging capella in the IQ co pilot to power development for their search engine and e-commerce platform for storing user data related to bookings and payments.

Matthew M. Cain: They have migrated these apps to Capella to automate more of their operations and significantly reduce their maintenance and administration investment. Next, we announced our Capella Columnar service, which converges operational and analytic workloads in real time on a single platform. Customers who are using Columnar and Private Preview are valuing its ability to connect to multiple data sources, derive real-time insights using the same familiar SQL++ query language for both query and analytics workloads, and are benefiting from the simplified architectural approach of having their operational and analytic infrastructure tightly integrated.

Speaker Change: They have migrated these apps to capella to odd automate more of their operations and significantly reduce their maintenance and administration investment.

Speaker Change: Next we announced our Capella column, there service, which converges operational and analytic workloads in real time on a single platform.

Speaker Change: Customers, who are using column there are in private preview our value and its ability to connect the modal multiple data sources driving real time insights using the same familiar sequel, plus plus query language for both query and analytics workloads and are benefiting from the simplified architectural approach of having their operation.

Speaker Change: And al and analytic infrastructure tightly integrated.

Matthew M. Cain: In Q1, we delivered the general availability of Vector Search to help businesses bring to market a new class of AI-powered adaptive applications that engage users in a hyper-personalized and contextualized way. Couchbase now supports retrieval augmented generation techniques, or RAG, in the cloud and the data center with mobile and edge vector search, in public beta.

Speaker Change: In Q1, we delivered the general availability of Becker searched health businesses bring to market, a new class of AI powered adaptive applications.

Speaker Change: That engage users in a hyper personalized and contextualized way.

Speaker Change: Couch space now supports retrieval augmented generation techniques or rag in the cloud and the data center with mobile and edge vector search.

Speaker Change: And public data.

Matthew M. Cain: Initial feedback on our vector search capabilities has been very positive. Customers appreciate having access to this feature across our entire platform and like the architectural simplicity inherent in not having it as a separate component within their infrastructure. Our customers are envisioning a range of use cases, including adding hyper personalized content generation into their applications and enhancing applications with hybrid search, which combines traditional search and similarity search all at once.

Speaker Change: Initial feedback on our vectors search capabilities has been very positive customers appreciate having access to this to this feature across our entire platform and like the architectural simplicity inherent and not having it as a separate component within their infrastructure.

Speaker Change: Our customers aren't visiting a range of use cases, including adding hyper personalized content generation into their applications and enhancing applications with hybrid search which combines traditional search and similarity search all at once.

Matthew M. Cain: We also remain focused on adding capabilities that make it easier for developers to rapidly create applications and increase developer engagement with Couchbase. Recent enhancements include the release of a new AI-powered documentation chatbot built on AWS Bedrock and adding social sign-on for Google and GitHub. The introduction of social sign-on for Capella has contributed to significant growth in Capella sign-ups. In fact, the number of trial sign-ups per day has more than doubled since the introduction of social SSO.

Speaker Change: We also remain focused on adding capabilities that make it easier for developers to rapidly create applications and increased developer engagement with couch base.

Speaker Change: Recent enhancements include the release of a new AI powered documentation chatbot built on AWS bedrock, and adding social sign on for Google and get Hot.

Speaker Change: The introduction of social sign on for Capella has contributed to significant growth and capello sign ups. In fact, the number of trial sign ups per day more than doubled since the introduction of social SSO.

Matthew M. Cain: Our foundation will always be our ability to support mission-critical workloads with leading performance and scale, and we continually add new features and services that enable our customers to power the applications they use to run their businesses. For example, we've extended our alert notification capabilities so that external monitoring systems such as ServiceNow can receive alerts from a Capella cluster, further integrating Couchbase in the enterprise. We also added simple graph traversals using recursive common table expressions in SQL++, meaning developers can easily navigate relationship hierarchies like organizational charts within their applications, unlocking new workloads.

Our foundation will always be our ability to support mission critical workloads with our leading performance and scale and we continually add new features and services that enable our customers to power the applications they use to run their businesses.

Speaker Change: We've extended our alert notification capabilities, so that external monitoring system, such as a service now can receive alerts from our capella cluster further integrating couch based in the enterprise.

Speaker Change: We also added simple graph traversal using recursive common table expressions in CCAR, plus plus meaning developers can easily navigate relationship hierarchies like org charts within their applications unlocking new workloads.

Matthew M. Cain: And we introduce customer-managed encryption keys to elevate customers' control over data security. These capabilities enable organizations to use Couchbase for new mission-critical workloads. For example, Couchbase powers Verizon Thingspace, an innovative end-to-end IoT development platform that helps enterprise customers build and deploy IoT solutions. Verizon originally needed a database with high availability and superior performance to provide real-time visibility and status of IoT devices to customers. Verizon is planning to consolidate multiple databases into Couchbase to simplify database administration and further reduce TCO. Verizon is not alone.

Speaker Change: And we introduced customer managed encryption keys to elevate customers control over data security.

Speaker Change: These capabilities enable organizations to use couch space for new mission critical workloads.

Speaker Change: For example, couch based powers horizon things space and innovative end to end Iot development platform that helps enterprise customers build and deploy Iot solutions.

Verizon: Verizon I originally needed a database with high availability and superior performance to provide real time visibility and status of the Iot devices to customers.

Horizon: Horizon is planning to consolidate multiple databases into couch space to simplify database administration and further reduce T C L.

Matthew M. Cain: While customer needs can vary from company to company, a common trend we see across industries is the desire to lower TCO. Couchbase sets itself apart due to the features and dependability that I've already discussed, but it's also our proven ability to lower customers' overall costs. Best in class price performance isn't just about delivering lower costs. It's also about helping organizations reduce or eliminate existing costs by delivering incremental opportunities for efficiency. This can include cost savings from database consolidation. Customers like Broadjump, Talent Sky, and Rakuten have all selected Couchbase for our extensive features and exceptional price performance. Rakuten is a global technology leader in services that empower individuals, communities, businesses, and society.

Horizon: Verizon is not alone.

Speaker Change: While customer needs can vary from company to company a common trend we see across the industry is that the desire to lower T. C. L.

Speaker Change: Couch based sets itself apart due to the features and dependability that I've already discussed.

Speaker Change: But it's also our proven ability to lower customers' overall cost.

Speaker Change: Best in class price performance isn't just about delivering lower costs.

Speaker Change: Also about helping organizations reduce or eliminate existing cost by delivering incremental opportunities for efficiency.

Speaker Change: This can include cost savings from database consolidation.

Like broad jump talent Sky and racket and all selected couch space for our extensive features and exceptional price performance.

Speaker Change: Racket 10 is a global technology leader and services that empower individuals communities businesses and society.

Matthew M. Cain: Leveraging Couchbase to power its programmatic advertising systems, Rakuten was able to reduce its total cost of ownership by 20% through database consolidation using Couchbase's easily scalable platform. On the go-to-market side, we are continuing to make enhancements to our go-to-market strategy in order to fully capitalize on our opportunity with our continued focus on operational discipline and gaining sales efficiencies. We're creating more intentionality in how we qualify new logos, migrations, and opportunities for expanding the use of Couchbase for existing applications while bringing new applications onto our platform.

Racket: Leveraging couch base to power its programmatic advertising systems rackets, and was able to reduce its total cost of ownership by 20% through database consolidation using couch spaces, you'll eat.

Racket: Usually scalable platform.

Racket: On the go to market side, we are continuing to make enhancements to our go to market motion in order to fully capitalize on our opportunity with our continued focus on operational discipline and gaining sales efficiencies.

Speaker Change: We're creating more intentionality on how we qualify new logos migrations and opportunities for expanding the use of couch space for existing applications, while bringing new applications onto our platform.

Matthew M. Cain: This includes driving improvements in how we identify prospects and compelling events that necessitate a fresh and modern approach that Couchbase offers. We're also placing more focus on strategic account teams that support our largest customers while allocating an increase in dedicated resources focused on generating new business. We need to make further progress on these efforts throughout fiscal 2025, which we believe will enable greater efficiency in our customer success and upsell efforts and ability to win new applications, both of which will contribute to sustained growth. Finally, this quarter, we announced the appointment of Julie Irish as Couchbase's first Chief Information Officer.

Speaker Change: This includes driving improvements in how we identify prospects and compelling events that necessitate a fresh and modern approach the couch based offers.

Speaker Change: We're also placing more focus on strategic account teams that are supporting our largest customers, while allocating an increase and dedicated resources focused on generating new business.

Speaker Change: We can make further progress on these efforts throughout fiscal 'twenty 25, which we believe will enable greater efficiency in our customer success and upsell motions and ability to win new applications, both of which will contribute to sustained growth.

Speaker Change: Finally, this quarter, we announced the appointment of purely Irish as couch basis first Chief information Officer.

Matthew M. Cain: In this role, Julie's driving Couchbase's global IT strategy in alignment with our key business objectives. She's leading the global IT and security team and setting the strategy for systems and IT to position Couchbase's internal infrastructure and product security for future growth and effectiveness. We're thrilled to have Julie as part of our world-class team.

Speaker Change: In this role Julie's driving couch basis global I T strategy in alignment with our key business objectives.

Speaker Change: She's leading the global I T and security team and setting the strategy for systems and I T to position coach bases internal infrastructure and product security for future growth and effectiveness, we're thrilled to have Julie as part of our world class team.

Matthew M. Cain: As we look toward the rest of fiscal 2025, I remain confident in our mission, our strategy, and our ability to achieve our objectives. While I am not satisfied with the full extent of our results in Q1, we made progress on our strategic priorities, and I believe that we have everything we need to make this year another exceptional one for Couchbase. 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.

Speaker Change: As we look toward the rest of fiscal 2025, I remain confident in our mission our strategy and our ability to achieve our objectives.

Speaker Change: While I'm not satisfied with the full extent of our results in Q1, we made progress on our strategic priorities and I believe that we have everything we need to make this year another exceptional on per cap space.

Speaker Change: Our foundation rests upon a carefully architected platform purpose built to enable mission critical adaptive applications that are often being deployed at the edge and increasingly AI powered world.

Matthew M. Cain: We will continue to work tirelessly to support our customers and acquire new ones, enhance and extend our technology leadership, deliver new capabilities and services, drive increased Capella adoption, and we'll do so in a more efficient manner and with a maniacal focus on our Rural 40 trajectory. At the same time, we will prepare and manage for the things we cannot control, the macroeconomic environment and timing dynamics that are not always predictable.

Speaker Change: We will continue to work tirelessly to support our customers and acquire new ones enhance and extend our technology leadership.

Speaker Change: Deliver new capabilities and services drive increased capella adoption and we'll do so in a more efficient manner and with a maniacal focus on a rule of 40 trajectory.

Speaker Change: At the same time, we will prepare and manage against the things we cannot control the macroeconomic environment and timing dynamics that are not always predictable.

Gregory N. Henry: As I've said many times at Couchbase, we attack hard problems driven by customer outcomes. With that, I'll now hand the call over to Gregg to discuss our results in more detail.

Speaker Change: As I've said many times at couch pace, we attack hard problems driven by customer outcomes.

Speaker Change: With that I'll now hand, the call over to Greg to discuss our results in more detail Greg.

Gregory N. Henry: Thanks, Matt. And thanks, everyone, for joining us. We entered fiscal 2025 with significant momentum, and I am pleased with our top and bottom line performance in the quarter, our dedication to delivering value to our customers, and our ability to navigate the challenging environment while driving very strong outperformance in our operating loss guidance. That said, our ARR result was not what we had expected, impacted by several deals that did not close on time in the quarter as planned.

Gregory N. Henry: Thanks, Matt and thanks, everyone for joining us we entered fiscal 'twenty 25, with significant momentum and I am pleased with our top and bottom line performance in the quarter, our dedication to delivering value to our customers and our ability to navigate the challenging environment, while driving very strong outperformance in our operating loss guidance.

Gregory N. Henry: That said our AOR result, with novel, we had expected impacted by several deals that did not close on time in the quarter as planned however, given the momentum we see in our business, we remain confident in our ability to achieve our priorities for fiscal 2025.

Gregory N. Henry: However, given the momentum we see in our business, we remain confident in our ability to achieve our priorities for fiscal 2025. Before I turn to the first quarter financial results, I want to share an update on our revenue cycle methodology. Beginning this quarter, we adjusted our ARR calculation to include the on-demand portion of our business. Under our previous calculation, ARR excluded revenue derived from the use of both Capella and Enterprise based on on-demand arrangements, as well as services revenue.

Gregory N. Henry: In some cases, we have begun to see some Capella customers who bought the annual credit model go on demand. These shifts can be temporary or longer term. However, if customers oscillate between these two models, ARR under our prior methodology will not completely reflect how our business is actually performing. As such, we believe that including on-demand or ARR calculation more accurately reflects our business and is more closely aligned to how we look at ARR internally. The impact on our first quarter ARR was an addition of $1.5 million.

Gregory N. Henry: Before I turn to the first quarter financial results I want to share an update to our <unk> methodology beginning this quarter, we adjusted our AOR calculation to include the on demand portion of our business.

Speaker Change: Under our previous calculation error are excluded revenue derived from the use of both capella and enterprise based on on demand arrangements as well as services revenue.

Speaker Change: In some cases, we have begun to see some capella customers, who bought the annual credit model go on demand.

Speaker Change: These shifts can be temporary or longer term.

Speaker Change: Or if customers oscillate between these two models are our under our prior methodology will not completely reflect how our business is actually performing.

Speaker Change: As such we believe that including on demand or IRR calculation more accurately reflects our business is more closely aligned to how we look at are our internally.

Speaker Change: The impact on our first quarter AOR was an addition of $1.5 million. This change is reflected in our Q1 results along with our future guidance and reporting but will not be retroactively adjusted in our previously reported results given it's a relatively immaterial impact.

Gregory N. Henry: This change is reflected in our Q1 results, along with our future guidance and reporting, but will not be retroactively adjusted in our previously reported results, given its relatively immaterial impact. Additionally, we will now also include on-demand customers in our customer count. This one-time adjustment to our customer count was an additional 39 customers in Q1. Similarly, this will be included in our prospective results but will not be retrospectively adjusted. Lastly, we will continue to not include services in ARR or customer count.

Speaker Change: Additionally, we will now also include on demand customers and our customer count. This one time adjustment to our customer count with an additional 39 customers in Q1.

Speaker Change: Similarly, this will be included in our prospective results, but will not be retrospectively adjusted.

Speaker Change: Lastly, we will continue to not include services and they are or customer count.

Gregory N. Henry: Unless otherwise stated, all references to ARR and customer count are reflective of our updated methodology. I'll now walk you through our first quarter financial results in more detail. Total ARR was $207.7 million, representing growth of 21% year-over-year and 2% sequentially. Foreign currency fluctuation since we provided our Q1 guidance in March resulted in an approximately $350,000 headwind. We ended the first quarter with $23.9 million in Capella ARR, representing 11.5% of our total ARR.

Speaker Change: Unless otherwise stated all references to <unk> and customer count are reflective of our updated methodology.

Speaker Change: Now I'll walk you through our first quarter financial results in more detail.

Total AOR was $207.7 million, representing growth of 21% year over year and 2% sequentially.

Foreign currency fluctuation since we provided our Q1 guidance in March resulted in approximately 350000 dollar headwind.

Speaker Change: We ended the first quarter with $23 $9 million of Capella Air are representing 11, 5% of our total air are.

Gregory N. Henry: Revenue for the first quarter was $51.3 million, an increase of 25% year over year and 2% sequentially. Capella Consumption continues to be a tailwind for revenue. Professional Services revenue was $2.3 million in Q1, a decline of 7% year-over-year, and an increase of 13% sequentially.

Speaker Change: Revenue for the first quarter was $51 $3 million, an increase of 25% year over year, and 2% sequentially Capella consumption continues to be a tailwind for revenue growth.

Speaker Change: Professional services revenue was $2 $3 million in Q1, a decline of 7% year over year, and an increase of 13% sequentially.

Gregory N. Henry: As a reminder, we continue to expect professional services to remain normalized at current levels throughout this fiscal year following declines in fiscal 2024 and outside strength in fiscal 2023. Our ARR per customer performance in the first quarter was $257,000, roughly flat from Q1 2024 and down from $273,000 in the fourth quarter. As a reminder, ARR per customer growth could moderate or decline as our Capella mix continues to grow in contribution. Our dollar-based net retention rate, or NRR, continues to exceed 115%.

Speaker Change: As a reminder, we continue to expect professional services to remain normalize at current levels throughout this fiscal year following declines in fiscal 2024 and outsized strength in fiscal 2023.

Speaker Change: Our <unk> per customer performance in the first quarter was $257000 roughly flat from Q1, 2024 and down from $273000 in the fourth quarter.

Speaker Change: As a reminder, air or per customer growth could moderate or decline that capello mix continues to grow and contribution.

Our dollar based net retention rate or enter our continues to exceed 115%.

Gregory N. Henry: We exited Q1 with 807 customers, an increase of 58 net new customers from the last quarter. Additionally, under our prior customer account methodology, we added 19 net new customers in Q1. Once again, Capella represented the majority of new logos.

Speaker Change: We exited Q1 with 807 customers an increase of 58 net new customers from the last quarter under a prior customer count methodology. We added 19 net new customers in Q1.

Once again capello represented the majority of the new logos. This.

Gregory N. Henry: This quarter, under our prior customer account methodology, we grew our customer account logo by 26, an increase of 13% from the fourth quarter. Our strong retention metrics and steady Capella ARR growth continue to give us confidence in our new logo pipeline and our ability to consistently expand new logos. In discussing the remainder of the income statement, please note that, unless otherwise stated, all references to expenses, results of operations, and share count are on a non-GAAP basis.

Speaker Change: This quarter under our prior customer comment the biology, we grew our customer count logo by 26, an increase of 13% from the fourth quarter.

Speaker Change: Our strong retention metrics and steady capella are our growth continues to give us confidence in our new logo pipeline and our ability to consistently expand new logos.

Speaker Change: In discussing the remainder of the income statement. Please note that unless otherwise stated all references to expenses results of operations and share count are on a non-GAAP basis.

Gregory N. Henry: Our Q1 gross margin was 89.9%, benefiting from sustained enterprise gross profit margin strength and a lower services revenue mix, offset by a growing Capella mix, which inherently carries a lower gross margin. This compares to 86.4% in Q1 of last year and 90.4% last quarter. As a reminder, we expect gross margin to decline as Capella Mix increases. We remain focused on balancing leverage across our business while investing in areas that help us capture the massive opportunity in this space.

Our Q1 gross margin was 89, 9% benefiting from sustained enterprise gross profit margin strength and lower services revenue mix offset by growing capella mix, which inherently carries a lower gross margin.

Speaker Change: This compares to 86, 4% in Q1 of last year and 94% last quarter.

Speaker Change: As a reminder, we expect gross margin will decline as capello mix increases.

Speaker Change: We remain focused on balancing leverage across our business, while investing in areas that help us capture the massive opportunity in this space I am pleased with our expense discipline and cost savings initiatives once again, resulting an outperformance against our operating loss outlook.

Gregory N. Henry: I'm pleased with our expense discipline and cost savings initiatives, once again resulting in outperformance against our operating loss outlook. Turning to expenses, as Matt discussed, increasing our sales and marketing efficiency was an area of focus in Q1. Our sales and marketing expenses were $31.9 million, or 62% of revenue, compared to $29.2 million, or 71% of revenue a year ago. Research and development expenses were $13.5 million, or 26% of revenue, compared to $12.5 million, or 31% of revenue a year ago. General and Administrative Expenses were $7.4 million, or 14% of revenue compared to $6.7 million, or 16% of revenue a year ago. The operating loss for Q1 was $6.7 million, or a negative 13% operating margin.

Speaker Change: Turning to expenses as Matt discussed, increasing our sales and marketing efficiency with an area of focus in Q1, our sales and marketing expenses were $31 $9 million or 62% of revenue compared to $29 $2 million or 71% of revenue a year ago.

Speaker Change: Research and development expenses were $13 $5 million or 26% of revenue compared to $12 $5 million or 31% of revenue a year ago Jenny.

Speaker Change: General and administrative expenses were $7 $4 million or 14% of revenue compared to $6 $7 million or 16% of revenue a year ago.

Speaker Change: Operating loss for Q1 was $6 $7 million or a negative 13% operating margin. This compares to a loss of $12 $9 million or a negative three 2% operating margin in Q1 of last year.

Gregory N. Henry: This compares to a loss of $12.9 million, or a negative 32% operating margin, in Q1 of last year. The net loss attributable to common stockholders was $5.2 million, or a negative $0.10 per share. Turning to the balance sheet, we ended the first quarter with $160.2 million in cash, cash equivalents, and short-term investments. We continue to remain well capitalized for executing against our long-term strategy. Our remaining performance obligations, or RPO, were $220 million at the end of Q1, up 33% year-over-year.

Speaker Change: Net loss attributable to common stockholders was $5 $2 million or negative 10 cents per share.

Speaker Change: Turning to the balance sheet, we ended the first quarter with $162 million in cash cash equivalents and short term investments.

Speaker Change: We continue to remain well capitalized for executing against our long term strategy.

Our remaining performance obligations or her P O with $220 million at the end of Q1 up 33% year over year, we expect to recognize approximately 62% or $137 million of total ARPA.

Gregory N. Henry: We expect to recognize approximately 62%, or $137 million, of total RPO as revenue this fiscal year, representing growth of 22% year-over-year. As a reminder, we experience fluctuations in our RPO balances due to a host of factors, including renewal timing, as well as changes in contract duration. Operating cash flow for the first quarter was $1.6 million.

Speaker Change: As revenue over this fiscal year, representing growth of 22% year over year.

Speaker Change: As a reminder, we experienced fluctuations in our RPI balances due to a host of factors, including renewal timing as well as changes in contract duration.

Speaker Change: Operating cash flow for the first quarter was $1 $6 million free cash flow was approximately $560000 were a positive 1% free cash flow margin.

Gregory N. Henry: Free cash flow was approximately $560,000, or a positive 1% free cash flow margin. As Matt noted, this was also our first quarter of positive free cash flow and a significant milestone towards achieving our commitment of being free cash flow positive for fiscal 2026. Now, I will provide our guidance for Q2 and the full year fiscal 2025. As Matt discussed, we entered Q1 with strong momentum across our business, and our pipeline remains strong.

As Matt noted this was also our first quarter free cash flow positivity and a significant milestone towards achieving our commitment of being free cash flow positive for fiscal 2026.

Speaker Change: Now I will provide our guidance for Q2 and the full year of fiscal 2025 as Matt discussed we entered Q1 with strong momentum across our business and our pipeline remains strong.

Gregory N. Henry: Furthermore, we anticipate that Capella will continue to be an important driver of all aspects of our business, while investments in enhancing our product capabilities, partner ecosystem, and go-to-market motion will continue to complement our ARR momentum. We will continue to invest in our strategic priorities. However, we are highly focused on continuing to drive rapid progress in increasing our Rule of 40 metric as we remain dedicated to increasing our efficiency, growing our free cash flow and operating margin, and driving leverage across our business.

Speaker Change: Furthermore, we anticipate that Capello, we'll continue to be an important driver of all aspects of our business while investments in enhancing our product capabilities partner ecosystem and go to market motion will continue to complement our ALR momentum.

Speaker Change: We will continue to invest in our strategic priorities. However, we are highly focused on continuing to drive rapid progress in increasing our rule of 40 metric as we remain dedicated to increasing our efficiency growing our free cash flow and operating margin and driving leverage across our business. We.

Gregory N. Henry: We remain confident in the massive opportunity in front of us and the ability to achieve our financial objectives for the year. In addition, we are highly focused on our execution, in-quarter linearity, and visibility into factors not in our control, such as deal timing. Finally, we remain mindful of macroeconomic headwinds and continue to carefully monitor their outlook for our business. As such, our outlook maintains a consistent degree of conservatism to account for these variables, as well as a lack of visibility into how the macroeconomic environment may impact upsell and migration timing, as well as consumption trends for emerging as-a-service offerings.

Speaker Change: We remain confident in the massive opportunity in front of us and the ability to achieve our financial objectives for the year.

Speaker Change: In addition, we are highly focused on our execution in quarter linearity and visibility into factor is not our control such as deal timing.

Speaker Change: Finally, we remain mindful of the macroeconomic headwinds and continue to carefully monitor their outlook to our business.

Speaker Change: As such our outlook maintains a consistent degree of conservatism to account for these variables as well as lack of visibility into how the macroeconomic environment, the impact upsell and migration timing as well as consumption trends for our emerging as a service offering.

Gregory N. Henry: With these factors in mind, for the second quarter of fiscal 2025, we expect total revenue in the range of $50.6 million to $51.4 million, or year-over-year growth of 18% at the midpoint. We anticipate ARR in the range of $212.5 million to $215.5 million, representing 18% growth year over year at the midpoint. We expect non-GAAP operating loss in the range of negative $5.7 million to negative $4.7 million.

Speaker Change: With these factors in mind for the second quarter of fiscal 2025, we expect total revenue in the range of $50 6 million to $51 $4 million or year over year growth of 18% to midpoint we.

Speaker Change: We anticipate here or in the range of $212 5 million to $215 $5 million, representing 18% growth year over year at the midpoint, we expect non-GAAP operating loss in the range of negative $5 7 million to negative $4 $7 million.

Operator: For the full year of fiscal 2025, we are raising our revenue outlook while maintaining our AR guidance and decreasing our operating loss. We note that despite the timing dynamics we experienced in Q1, there is no material change to our pipeline, opportunities, and overall business momentum. As such, we remain confident in our ability to achieve our full-year ARR guidance. We now expect total revenue in the range of $204.5 to $208.5 million, or a year-over-year growth of 15% at the midpoint.

Speaker Change: For the full year of fiscal 2025, we are raising our revenue outlook, while maintaining our <unk> guidance and decreasing our operating loss. We note that despite the timing dynamics, we experienced in Q1, there was no material change to our pipeline opportunities and overall business momentum as such we remain confident of our ability to achieve our full year guidance.

Speaker Change: We now expect total revenue in the range of $204 five to $208 $5 million or year over year growth of 15% at the midpoint. We continue to expect are are in the range of $235 5 million to $245 million, representing 17% growth at the midpoint and finally, we expect a non-GAAP.

Speaker Change: Operating loss in the range of negative $26 5 million to negative $21 $5 million.

Operator: We continue to expect ARR in the range of $235.5 million to $240.5 million, representing 17% growth at the midpoint. And finally, we expect a non-GAAP operating loss in the range of negative $26.5 million to negative $21.5 million. With that, Matt and I are happy to take your questions. Operator. We will now be conducting a question and answer session. If you'd like to ask, and you may press star two if you'd like to remove your

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

Speaker Change: Thank you we will now be conducting a question and answer session.

Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate that your line is in the question queue.

Speaker Change: And you May press star two if you'd like to move your question from the queue.

Operator: If participants using speaker equipment, it may be necessary to, One moment, please. And our first question will come from the line of Matt Hedberg with RBC. Please proceed with your question. Great. Thanks for taking my questions, guys. So maybe I'll start with Matt.

Speaker Change: All participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please pull for questions.

Speaker Change: Thank you.

Our first question will come from the line of Matt Hedberg with RBC. Please proceed with your question.

Matthew M. Cain: First of all, congrats on the cash flow generation in Q1. I know that's been a huge focus for you guys. Based on your comments, I mean, it seems like the macros deteriorated a little bit from Q4. You know, I'm guessing, was there any commonality to the deals that were pushed? And is there any way to quantify the dollar value, just like just roughly speaking of deals that you thought may have closed but didn't?

Matthew George Hedberg: Great. Thanks for taking my questions guys.

Matthew George Hedberg: So maybe I'll start with Matt first of all congrats on the cash flow generation in Q1, I know that's been a huge focus for you guys.

Speaker Change: Based on your commentary it seems like the macros deteriorated a little bit from Q4.

Matthew George Hedberg: Yes.

Matthew George Hedberg: Was there any commonality to the deals that pushed in and is there any way to quantify the dollar value just like just roughly speaking of deals that you thought may have close but didn't.

Matthew M. Cain: Hey Matt, good to hear from you, and I appreciate the comment on cash flow. I'm sure that'll be something we come back to throughout the call. Look, we've been talking for some time about macro headwinds, longer deal cycles, and higher levels of approval. In certain cases, customers decide to start smaller or, you know, shorter deal terms. And we've talked about how that's continued to, you know, persist for some time. Now, as we evaluate our business, not all industries, verticals, and geographies are affected in the exact same way. And so, what we typically do is look at the overall pipeline against those dynamics and determine what we think we're going to be able to get done.

Matthew George Hedberg: Hey, Matt good to hear from you and I appreciate the comment on cash flow I'm sure that'll be something we come back to throughout the call.

Matthew George Hedberg: We've been talking for some time about macro headwinds longer deal cycles higher levels of approval.

Matthew George Hedberg: In certain cases customers deciding to start smaller or shorter deal terms.

Matthew George Hedberg: And we've talked about how that's continued to persist for some time.

Now as we evaluate our business not all industries and verticals and geographies are affected in the exact same way.

Matthew George Hedberg: And so what we did.

Matthew George Hedberg: Typically do is look at the overall pipeline against those dynamics and determine.

Matthew George Hedberg: What we think we're gonna be able to get done macro continues to be a factor is there is there a slight uptick on things like you know focus on budgets and approval cycles.

Matthew M. Cain: Macro continues to be a factor. But is there a slight uptick in things like focus on budgets and approval cycles? Probably, but quite frankly, you know, there was business there for us. And anytime we fall short of my expectations, my job and the job of the leadership team is to evaluate and really understand what happened and then not overreact and not underreact. And that's exactly how we've looked at things. We've studied the specific deals that went over the quarter boundary extremely closely.

Matthew George Hedberg: <unk>, but quite frankly.

Matthew George Hedberg: You know there were there was business air for Us and anytime we fall short of my expectations My job and the job of the leadership team is to evaluate and really understand what happened and then not overreact and not underreact and that's exactly how we've looked at things. So we've studied extremely closely the specific deal.

That went over the quarter boundary.

Matthew M. Cain: And as you know, our business is driven by renewals with large expansions, new logos, and more and more Capella migrations. As we got out of the gates with Q1, we did not have the same level of really big renewals with expansions as we had in previous Q1s. So that was always a factor.

Matthew George Hedberg: And as you know our businesses driven by renewals with large expansions, you know new logos and more and more capello migrations.

Matthew George Hedberg: As we got out of the gates with Q1, we did not have the same level of really big renewals with expansion as we have in previous Q1, So that was always a factor.

Matthew M. Cain: And the push from Q1 to Q2 was not one big deal, but it was more a collection of really good opportunities. And we've studied those, and subsequently, we've had many of them close. Some of them, in fact, Matt, that went over the quarter boundary have actually increased in size.

Matthew George Hedberg: And the push from Q1 to Q2 was not one big deal, but it was more a collection of really good opportunities and we've studied those and subsequently we've had you know many of them close some of them in fact, Matt that went over the quarter boundary have increased in size you know they go up to a different law.

Matthew M. Cain: You know, they go up to a different level, and we benefit from a more strategic view, and some of them are looking really good to bring in. So, you know, macro is a factor. Our job is to understand that and overcome it. You know, we continue to believe in our value proposition and, you know, have confidence in the business moving forward. So no change in our overall momentum. In terms of the dollar impact, Greg, I don't know if you'd.

Matthew George Hedberg: Level, and we benefit from a more strategic view and some of them are you know looking really good to bring in so.

Matthew George Hedberg: You know macro is a factor our job is to understand that and overcome it we continue to believe in our value proposition and.

Gregory N. Henry: They have to have confidence in the in the business moving forward. So no no change on our overall momentum and in terms of the dollar impact Greg I don't know if you'd yeah. I mean again as Matt said it was that it was several deals that that several of which are closed. So again, it's all baked into the guidance as we go forward and we don't see it being an <unk>.

Gregory N. Henry: Yeah, I mean, again, as Matt said, it was it was several deals, several of which have closed. So again, it's all baked into the guidance as we go forward, and we don't see it having an impact on the year. It's just the timing dynamic for us.

Gregory N. Henry: Packed on the year, it's just a timing dynamic for us.

Gregory N. Henry: Well, it's great that there are a lot of them closing already. Maybe just a quick one, a follow up for you, Greg, you know, maybe just a little bit more on why customers choose on demand pricing. And is it fair to assume given the $1.5 million Q1 impact that, you know, it's kind of like a $6 million impact a full year? Is that the right way to think about it?

Speaker Change: Got it well, it's great that there are a lot of them are closing already maybe just a quick one a follow up for you. Greg you know, maybe just a little bit more on why customers choose on demand pricing and is it fair to assume given the $1 $5 million Q1 impact that you know, it's kind of like a 6 million dollar impact to full year is that kind of the right way to think about it.

Gregory N. Henry: Yeah, let me explain that. Let me start with the end of the question. No, it's not a $6 million impact. It's a one-time $1.5 million pickup. And the on-demand business could grow from there, but it is not a revenue-type thing where you can annualize it. It's a one-time ARR balance item.

Speaker Change: Yeah, Let me I appreciate that let me start with at the end of the question no. It's not a $6 million impact its a one time $1 $5 million.

Speaker Change: Pick up and the on demand business could grow from there, but it is not a revenue type thing where you can annualize it it's a onetime AOR balance items so think.

Gregory N. Henry: So think of it as $1.5 million, not $5 or $6 million for the year at all. And then why do we, I mean, look, we've talked about in the past when I met with you folks and the investor community that, at the time, at the right time, we would include on-demand. We felt it was the right time. It was the beginning of the year.

Speaker Change: Think of it as one and a half million not not five or $6 million for the year at all and then why do we I mean look.

Speaker Change: We've talked about in the past when I've met with you folks and in the Investor community that at the at the time at the right time. We would include on demand. We felt it was the right time. It was the beginning of the year to be honest with you. It's more about if you look at the materiality, it's less than a percent of error or it's 5% of customer accounts. So.

Gregory N. Henry: To be honest with you, it's, it's more about, if you look at the materiality, it's less than a percent of ARR. It's 5% of customer accounts. So we were doing it more for the customer account fluctuation than the ARR per se. And then also on your question about, You know, the impact, I mean, look, we think on-demand makes sense to be in the number. Customers can run out of annual credits at any point in time.

Speaker Change: We were doing it more for the customer count fluctuation than in the air or per Se and then also on your question about.

Speaker Change: You know you.

Speaker Change: D D.

Speaker Change: The impact I mean look.

Speaker Change: We are we think the on demand makes sense to be in a number customers can run out of annual credit at any point in time. They can go on demand for a period of time, and then come back and re by the annual credits, but if that happens to be over the quarter point based on our definition they would be on demand customers and thus impacting customer count had a R. R.

Matthew M. Cain: They can go on-demand for a period of time and then come back and rebuy the annual credits. But if that happens to be over the quarter point, based on our definition, they would be on-demand customers and thus impact customer count and ARR. So we wanted to include those to really be consistent with others and not have to have this dynamic of whether they're going to be in or out at a certain point in time.

Speaker Change: So we wanted to include those two are really.

Speaker Change: Really be consistent with others and not have to have this dynamic of whether theyre going to be in or out in a quarter point and timing.

Matthew M. Cain: Yeah, the other thing I would add is that we're working really hard to build up the consumption side of our business, and as we go down market, we want to make sure customers have the flexibility of just how they want to consume.

Speaker Change: Yes, Matthew other thing I would add.

Speaker Change: We're working really hard to build up the consumption side of our business and as we go down market, we want to make sure customers have the flexibility of just how they want to consume.

Speaker Change: And so I think this is additive to our business. It removes friction from the sales teams on getting them going with Capella, that's not the way we wanted to enable that to the fullest extent possible in and we actually see some healthy movement from a starter pack to on demand or on demand into and the credits. So we.

Matthew M. Cain: And so I think this is additive to our business; it removes friction from, you know, the sales teams on getting them going with Capella; it's not, you know, the, we want to enable that to the fullest extent possible. And we actually see some healthy movement from a starter pack to on demand or on demand into credit. So we think it's a good time for it, and it's more natural and indicative of, you know, how we're driving the business and customer relationships on a going forward basis. Thanks for the clarification.

Speaker Change: It's a good time for it and it's more natural and indicative of how we're driving the business and customer relationships on a go forward basis.

Matthew M. Cain: That certainly helps a lot. Thanks, guys. Thanks, Pat.

Speaker Change: Thanks for the clarification I'm not sure that certainly helps a lot. Thanks guys.

Pat: Thanks Pat.

Operator: The next question comes from the line of Howard Ma with Guggenheim Securities; please proceed. Great, thanks for taking the question. I want to dovetail on Matt's question before and so with respect to the flip deal. When you're talking to the decision makers, and Matt, you just said, based on your own analysis, if you were to rank order the top three reasons, would it be tighter budget constraints relative to the start of the year?

Speaker Change: Our next question comes from the line of Howard MA with Guggenheim Securities. Please proceed with your question.

Speaker Change: Great. Thanks for taking the question I wanted to dovetail on Matts question before and so with respect.

To the to the slipped deals.

Speaker Change: When you're talking to the decision makers.

Howard Ma: You just said based on your own your own analysis is it can you kind of could you. If you were to kind of rank order. The top three reasons. I mean is it is a tighter budget constraints relative to just started the year. I mean would you say is it increased competition or maybe it's something more benign like couch pieces offering more capabilities now so you're being evaluated as part of a broad.

Operator: Is it increased competition? Or maybe it's something more benign, like Couchbase is offering more capabilities now, so you're being evaluated as part of a broader strategic decision, and that can require more approval. Yeah, Howard. I think you nailed it.

Howard Ma: <unk> strategic decision and in fact can require more approvals. So if you were to kind of rank order to what you know what would you say to that.

Matthew M. Cain: I think there are two big factors. One of them is just higher levels of approval. And I think sometimes even organizations may not understand exactly what approvals are going to be required. So they may think they have everything they need, and then it gets down to the end, and it gets escalated, and we just have a little bit more work to do. And I think that's the biggest dynamic that we've seen. And the good news is that the value proposition holds true, and we're able to do that work.

Howard: Yeah, Howard I think you I think you nailed it.

Speaker Change: There are two big factors one of them is just higher levels of approval and I think sometimes even organizations may not understand exactly what approvals are going to get.

Speaker Change: We're gonna be required so they may think they have everything they need and it gets down to the end and it gets elevated and we just have a little bit more work to do and and I think that's the biggest dynamic that we've seen in and the good news is the value proposition holds true and we're able to do that work the.

Matthew M. Cain: The other dynamic that you touched on, and I'd say this is particularly relevant with Capella migrations, which is going to be a big driver of ARR for us. The consideration is a little bit different than would be the case with a big enterprise deal. How are they rationalizing cloud spend? How does that factor into the overall TCO? What kind of calculations are there for developer productivity or operational savings? And again, that value proposition is there, but what we're learning is each and every one of those has unique dynamics. For example, what software version are they running?

Speaker Change: The other dynamic that you touched on and I'd say this is particularly relevant with capella migrations, which is going to be a big driver of AOR for us. The consideration is a little bit different than would be the case with a big enterprise deal how are they rationalizing cloud spend how does that factor into the overall T C L.

Speaker Change: What kind of calculations are in there for developer productivity or operational savings and.

And again that that value proposition is there, but but what we're learning is each and every one of those has unique dynamics.

Speaker Change: What software version are they running where they deployed what's the complexity of the application what's their cloud provider.

Matthew M. Cain: Where are they deployed? What's the complexity of the application? What's their cloud provider? And so, as we go through this inflection in Capella, and we continue to learn, I think that's a dynamic that will continue to play out. And the fact that a bigger percentage of those are showing up to me is indicative of the product market fit that we have with Capella and the path that we're on. But it adds complexity, and you combine that with the higher levels of approval and the people that are asking those questions, I'd say those are increasing factors in how we're managing our business.

Speaker Change: And so as we go through this inflection in Capella and we continue to learn.

Speaker Change: That's a dynamic that continues to play out and the fact that a bigger percentage of those are showing up to me is indicative of that.

Speaker Change: Product market fit that we have with capella and and and the path that we're on.

Speaker Change: But it adds complexity and and you combine that with the higher levels of approval and the people that are asking those questions.

Speaker Change: You know I'd say those are increasing.

Increasing factors in an hour, how we're managing our business and.

Matthew M. Cain: And the thing that gives me comfort is we're leaning into investments and capabilities to drive that into the organization and ensure that, you know, we're able to act with, you know, better efficiency as we manage those. So I'd say those are, you know, two factors that played out in the quarter.

Speaker Change: The thing that gives me comfort is we're leaning into investments and capabilities.

Speaker Change: To drive that.

Speaker Change: Into the organization and ensure that we're able to act with you know.

Speaker Change: Better efficiency as we manage those so I'd say those are those are two factors that.

Speaker Change: Played out in the quarter.

Matt: Yeah, Matt. Thanks, that's really good color and I just want to ask a follow up on Jeff's.

Matthew M. Cain: So in light of that, I wonder if I could understand how your customers are consuming, how they're choosing to consume Capella. Is it dynamic more so that your Capella customers are choosing not to renew their commitments, and then, therefore, they're moving completely to on-demand or pay-go, or is it just that they're keeping the size of their commitments unchanged? Yeah, Howard, I'm going to take a crack at it, and then I'll let Greg pile on. When we see the fluctuation for Capella customers between credit and on demand, I would say, generally speaking, that those are smaller customers with smaller applications.

Speaker Change: Sensation in light of that I wonder if that understand how your customers are consuming how they're choosing to consume capella is it is a dynamic more so that your capella customers are choosing not to renew their commitments and then therefore, they're moving completely to on demand or paygo or is it just that they're keeping the size of their commitments.

Speaker Change: Unchanged, but theyre just over consuming more on demand.

Speaker Change: Yeah, So Howard I'm going to take a crack at it and then I'll, let Greg pile on.

Speaker Change: When we see the fluctuation for capella customers between credit and on demand.

Speaker Change: I would say generally speaking that's smaller customers with with smaller applications.

Matthew M. Cain: With larger customers that have more significant Capella deployments, you know, they're buying credits, and we're managing their consumption. And those metrics continue to look very positive. And then we get into rebuys and providing them with more credits and sizing and understanding the pace of their growth of initial applications or applications that they're adding. We spent a lot of time studying that and making sure that we have a healthy relationship, quite frankly, with the customers so that they're not getting ahead of themselves, and we're providing value as a strategic vendor.

Speaker Change: With larger customers that have more significant capella deployments.

Greg: They're they're buying credits and we're managing their consumption in those metrics continue to look very positive and then we get into revise and providing them with more credits and sizing and understanding the pace of their growth of initial applications are applications that theyre, adding we spent a lot of time studying.

Greg: That and making sure that we have a healthy relationship quite frankly with the customers that they're not getting ahead of themselves and we're providing value us as a strategic vendor.

Matthew M. Cain: So, the overall, you know, consumption that we're seeing in Capella, we're really excited about that shift to, you know, on-demand. Again, smaller customers, and Howard, as an example, we may sell a 5 or 10K starter pack; the customer gets going, and they choose to move into that on-demand as they're building out the application. We may very well move them back at the right time, but I'd say it's a different part of the pyramid than where the bulk of the Capella AR is.

Greg: So.

Greg: The overall you know consumption that we're seeing in capello were really excited about that that shift to on demand again, a smaller customers and Howard as an example, we may sell a five or 10-K starter pack the customer gets going and they choose to move into you know into that on demand is as they're building.

Greg: The application.

Speaker Change: We may very well move them back at the right time, but I'd say, it's a it's a different part of the pyramid than than where the bulk of the capella Arris, Yeah, I agree with everything Matt sat and again you can have these dynamics where.

Gregory N. Henry: Yeah, I agree with everything Matt said. And again, you can have these dynamics where even a large customer will say, hey, you know what? I'm going to buy more credits, but for some reason, there's a timing element. And they will say, I'll go on-demand for a couple of weeks, and I'll come back and place my rebuy. We do not see the larger-scale Capella customers all going on-demand for any extended period of time, but there could be these windows, and what we don't want to see happen is have that window cross a quarter point and, based on our definitions, not be able to report them as a Scott, it sounds like you're managing it really well. Thank you both.

Speaker Change: Even our large customer will say, hey, you know what I'm going to buy more credits, but for some reason, there's a timing element and they will say I'll go on demand for a couple of weeks and I'll come back and place My Rebuy, we do not see the larger scale capella customers are all going to on demand for any extended period of time, but there could be these windows and what we don't want to have to see happen.

Speaker Change: Is have that window across a quarter point and based on our definition is not be able to report that as a customer or potentially IRR.

Speaker Change: Got it sounds like you're managing that really well. Thank you both.

Howard: Thanks Howard.

Matthew M. Cain: Thanks, Howard. Our next question comes from the line of Austin Dietz with UBS. Please proceed with your question. Thanks, guys. Matt, I was just going to ask, looking at your latest thoughts on columnar service, obviously, the pencil spaces take off more analytically exciting. So can you just unpack this opportunity a little further?

Speaker Change: Our next question comes from the line of Austin Dietz with UBS. Please proceed with your question.

Matthew M. Cain: You know, is this potentially going to pick up, you know, wallet share from existing analytical applications today? Or is this more about, you know, net new applications? Do you mind just unpacking that opportunity further for us? Yeah, hey, awesome.

Speaker Change: Thanks, guys.

Unknown Attendee: Let me get your latest thoughts on column or service, obviously, the potential issues take off more analytics.

Speaker Change: So exciting so can you just unpack this opportunity a little further.

Speaker Change: Is this potentially can pick up wallet share from existing analytical applications. Today is this more about net new.

Speaker Change: <unk> do you mind, just unpacking that opportunity great of course.

Speaker Change: Yeah, Hey, Hey, awesome. Thanks for the question.

Matthew M. Cain: Thanks for the question. When we think about the role that we play at Couchbase, we're very focused on enabling a very rich data platform to help enterprises build truly mission-critical applications. And our job is to enhance our platform with additional capabilities that make those applications that much more sophisticated, that much more personalized, that much more real-time for the enterprises that are deploying them. And a lot of that is bringing multiple data repositories into the database that the application then can derive performance and insights from.

Speaker Change: When we think about the role that we play a couch space, we're very focused on.

Speaker Change: Enabling a very rich data platform to help <unk>.

Speaker Change: Enterprises build truly mission critical applications and our job is to.

Speaker Change: Enhance our platform with additional capabilities that make those applications that much more sophisticated that much more personalized that much more real time.

Speaker Change: For the enterprises that are deploying them.

Speaker Change: And a lot of that is bringing multiple data repositories into the database that the application then can derive.

Speaker Change: Performance and insights from.

Matthew M. Cain: And clearly, we have access to a lot of data for the applications on the operational data side, but the addition of Columnar allows us to ingest data from other sources and then unlock real-time insights while the application is being performed that makes the application perform that much better. So this is not about moving into, you know, non-real-time operationally performing applications, but it's how do we bring the analytical capabilities together with more and more data sources to make that application, you know, that much more sophisticated, that much more complete.

Speaker Change: And clearly we have access to a lot of data for the applications on the operational data side, but the addition of column there allows us to ingest data from other sources and then unlock real time insights while the application is being performed that makes the application perform that much better.

Speaker Change: So this is not about moving into a.

Speaker Change: Non real time operationally performing applications, but it's how do we bring the analytical capabilities with more and more data sources to make that application.

Speaker Change: That much Ah that much more sophisticated that much more complete.

Matthew M. Cain: Now, as we think about the world of AI and what we call adaptive applications, we think it's going to be really critical, particularly for business-critical applications, that multiple data sets are brought to bear for applications that, you know, analytics and AI capabilities can then enhance. And that's structured data, unstructured data, data that we hold in, you know, in the cloud, at the edge.

Speaker Change: Now as we think about the world of AI and what we call adaptive applications. We think it's going to be really critical particularly for business critical applications that multiple datasets are brought to bear for applications that you know analytics and AI capabilities can then enhance and that structured data on <unk>.

Matthew M. Cain: And Columnar is a big advancement in, you know, ingesting, manipulating, and understanding data alongside the operational data store itself. So, the feedback so far with customers has been really, really positive. As they're mapping out their, you know, strategic initiatives on a go-forward basis, when we can sit down and show them this capability along with other services in the platform, I think they really see the value and how they can leverage it on a go-forward basis. Okay, great. Thanks, guys. Thanks, Austin.

Speaker Change: <unk> data.

Speaker Change: <unk> data that we hold in and.

Speaker Change: And in the cloud at the edge and call them. There is a big advancement on ingesting manipulating understanding data alongside the operational data store itself.

In terms of.

Speaker Change: How we will monetize this I think it really enhances the strategic value of our platform. It's a major extension, we have architectural advantages and a unique approach to how we're managing J sign another capabilities.

Speaker Change: And it's a really powerful addition for developers that allow them to again build more and more sophisticated applications. So the feedback so far with customers has gone really really positive.

Speaker Change: Is there is there are mapping out there.

Speaker Change: Strategic initiatives on a go forward basis, when we can sit down and show them. This capability along with other services in the platform. It I think they they really see the value in and how they can leverage that on a go forward basis.

Speaker Change: Okay, great. Thanks, guys.

Unknown Attendee: Thanks Austin.

Operator: The next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your, Thank you. Can I go back to Matt's question at the very beginning and just maybe clarify that one more time? So if you think about the ARR shortfall a little bit, like did the macro get worse, or was it sales execution that kind of caused the delays when you looked at the deal afterwards? Because that's the big question we are asking for the whole sector, not just you, but everyone. Did it get incrementally worse?

Raimo Lenschow: Our next question comes from the line of Raimo <unk> with Barclays. Please proceed with your question.

Raimo Lenschow: Thank you.

Speaker Change: Can I go back to Matt's question at the very beginning and just maybe to clarify one more time. So what do you think about the E. R. R.

Speaker Change: Short fall a little bit like did the macro got worse or was it shields execution that kind of caused the delays when you looked at the deal afterwards, because that's the big question, we are asking for the whole sector.

Matthew M. Cain: Because we've all been working in that kind of tough environment for quite a while, so the question is, you know, is it actually changing from here, or, you know, was it more like, you know, deal specific? And I had one follow-up. Thank you. Hey, Raimo.

Speaker Change: Not just you like everyone. That's does it get incrementally worse, because we've all been working in that kind of tough environment for quite a while and so the question is is it actually changing from here or.

Speaker Change: Was it more like.

Speaker Change: No specific and I had one follow up thank you.

Matthew M. Cain: Look, I think the two are interrelated, right? And again, if we have, we've been talking about macro for some time; we've spoken with you about that, you know, many times. And our job is to articulate our value proposition, despite macro, and a big part of that is TCO. I think our business is built to, you know, sustain the environment that we're in, and people need to invest and drive digital transformation and, you know, deploy platforms that are, you know, relevant and are going to unlock applications in an AI-powered world, and none of that has changed.

Speaker Change: Hey, Raimo look I think it's at the two are interrelated right and again, if if we have we've been talking about macro for some time, we've we've spoken with you about that many times.

Speaker Change: And our job is to articulate our value proposition, despite macro and a big part of that is is T. C. L.

I think our business is built to sustain the environment that we're in and people need to invest and drive digital transformation and you know deploy platforms that are relevant.

Speaker Change: Relevant to and are going to unlock applications in an AI powered world and none of that has changed.

Matthew M. Cain: As I mentioned, we had the business there, and that business, some of it is subsequently closed, you know, as I've articulated. If we go inspect each and every one of those, are there questions on whether we are extracting the right amount of value? Are those the questions that delayed things macro-related? Yes. Should we have executed and gotten more of them across the line?

Speaker Change: As I mentioned, we had the business there and that business. Some of it is subsequently close to you know as as I've articulated it.

Speaker Change: If we go inspect each and every one of those are their questions on our we extracting the right amount of value are the are the questions that delayed things macro related yes.

Matthew M. Cain: Yes. And so then we study those to say, well, has macro gotten worse? And is it going to impact the go forward business? Or do we believe if we get further ahead of those, and we have a little more time, and you know, we're spending time with the next level of approvers, are we going to get those over the line? And that's where we have confidence where we sit. And there's a lot of learning, particularly with Capella and migrations and, you know, the different types of questions that are coming with the different clouds. So I'd say macro persists.

Speaker Change: Should we have executed and gotten more of them across the line, yes, and so then we study those to say well has macro gotten worse and is that going to impact. The go forward business or do we believe if we get further ahead of those and we have a little more time and we're spending time with the next level.

Speaker Change: All of our approvals.

Matthew M. Cain: We're certainly very aware of it. Our value proposition is well aligned with enterprise and Capella, and we know we can do better. Yeah, okay, perfect.

Speaker Change: Are we going to get those over the line and that's where we have confidence where we set and there's a lot of learning, particularly with capella and migrations and.

Speaker Change: The different types of questions that are coming with it with the different clouds. So I'd say macro persists, we're certainly very aware of that our value proposition is well aligned with enterprise and Capella and we know we can do better.

Gregory N. Henry: That's very clear. And then Greg, one follow-up question for you, like, well done on the positive cash flow outcome this quarter. I know you're not guiding for cash flow, but how do you think about cash flows going forward for the rest of the year and from an annual perspective? Thank you.

Speaker Change: Yeah, Okay perfect.

Speaker Change: And then Greg one follow up for you like well done on the airports.

Speaker Change: Positive cash flow and I'll come to support I know, you're not guiding for cash flow, but how do you think about cash flows going forward for the rest of the year and something I'm Gonna perspective. Thank you.

Gregory N. Henry: Yeah, thanks, Raimo. Yeah, we're very proud, obviously, of getting to cash flow positive in Q1, particularly coming off the large Q4, which, you know, helps that. I think, again, we will probably remain cash flow negative for the rest of the year, but I think you'll see by the time we get to the end of the year, we will have made significant progress, again, versus what we did last year. So, as I said in my remarks, we're still committed to being free cash flow positive next year in fiscal 26. But you should still see cash flow negative for the remainder of the year, and I'd say the general same seasonality you've seen historically. Thank you. Thank you very much.

Brian: Yeah. Thanks, Brian Yeah, we're very proud obviously of getting to cash flow positive in Q1, particularly coming off the large Q4, which you know.

Speaker Change: It helps that I think again, we will probably remain cash flow negative for the rest of the year, but.

Speaker Change: But I think you'll see by the time, we get to the end of year, we will have made significant progress again versus.

Speaker Change: What we did last year. So we as I said in my marks remarks, we're still committed to being free cash flow positive next year in fiscal 'twenty six but.

Speaker Change: Could still see cash flow negative for the remainder of the year and I'd say general same seasonality you've seen.

Speaker Change: Historically.

Speaker Change #100: Okay perfect. Thank you.

Pavel: Thanks Pavel.

Operator: Your next question comes from the line of Sanjit Singh with Morgan. Yeah, thank you for taking the questions and my congrats on the FreeCast Go Positive quarter this quarter. And this is a general improvement in operational efficiency on a year-to-year basis. I wanted to talk a little bit about the migration opportunity. I was wondering, Matt, if there's like a cohort of customers that migrated last year and sort of in that sort of year two of that ramp, and what sort of trend lines you're seeing from those customers that have migrated in terms of their usage growth. And if I look at the pipeline of opportunities for fiscal year 25, how much migration plays a role in that pipeline if you get some color on the migration opportunity. Hey Sanjit, um, look I...

Speaker Change #101: Our next question comes from the line of <unk> Singh with Morgan Stanley. Please proceed with your question.

Speaker Change #102: Yes. Thank you for taking my questions Congrats on the free cash flow positive.

Speaker Change #103: Quarter this quarter and just a general improvement in small cells impose all available.

Speaker Change #104: Could you talk a little bit about the migration opportunity I was wondering that as well.

Speaker Change #105: This cohort of customers about my data last year, and it sort of in that sort of way.

Speaker Change #105: Yes, sure that ramp and what sort of trend lines, you're seeing from those customers that have migrated in terms of the usage growth.

Speaker Change #106: I look at the pipeline of opportunities after fiscal year 'twenty five how much of migration play a role in that pipeline.

Speaker Change #107: Well it's different.

Speaker Change #107: Okay.

Speaker Change #108: And sanjiv.

Speaker Change #109: Look I.

Matthew M. Cain: I feel pretty good, quite frankly, about the whole dynamic of Capella Migrations, both in the ones that we have migrated over and the monetization, quite frankly, but equally important, the customer feedback, as well as the number of opportunities that we have lined up and the advanced level of discussions that we're having with them on when is the right time for them to move and when do we create a compelling event. Customers understand the value proposition of TCO; they understand that they're able to focus on building applications, and we can run the database.

Speaker Change #109: I feel pretty good quite frankly about the whole dynamic of capella migrations, both in the ones that we have migrated over.

Speaker Change #109: And the monetization quite frankly, but equally important the customer feedback as well as the number of opportunities that we have lined up and the advanced level of discussions that we're having with them on when is the right time for them to move in and when do we create a camp.

Speaker Change #109: Compelling event customers understand the value proposition of T. C O. They understand that they were able to go focus on building applications and we can run the database we have.

Matthew M. Cain: We had one of our largest migrations stand up in front of a large group and say, I've hit euphoria with Capella, and I've been working on databases for my entire career, 25 years, and I never thought that I would get to the point where a database would just run on its own. Now, this is a customer that's had a very long journey with us, starting with enterprise, some of our very early versions of our as-a-service offering, and it hasn't always been perfect, to be frank, but they've stuck with us because the power of the Couchbase platform is so critical. Now we've gotten them migrated over, and they're using the word euphoria.

Sanjiv: We had one of our largest migrations sanjiv stand up in front of a large group and say I've.

Sanjit Kumar Singh: I've hit Euphoria, with Capella and I've been working on databases for my entire career 25 years and I never thought that I would get to the point, where a database would just run out of town. Now. This is a customer that had a very long journey with us starting with enterprise some of our very early versions of our as a server.

Sanjit Kumar Singh: This offering and it hasn't always been perfect to be Frank, but they have stuck with us because the power of the couch based platform is so critical now we've gotten them migrated over and they're using the word euphoria.

Matthew M. Cain: We have worked relentlessly to ensure that the customer experience is world class, and we continue to get amazing feedback. And so the pace of it is going to depend on when customers are ready for that compelling event. Do they have other projects in line? You know, are there things they need to do with their software version to get moved over?

Sanjit Kumar Singh: We have worked relentlessly to ensure that the customer experiences is world class and we continue to get amazing feedback and so you know the pace of it is going to depend on when customers are ready with that compelling about do they have other projects. In line. You know are there things they need to do with the software version to get moved.

Matthew M. Cain: You know, just the business side of the equation. So, there are many factors that we're leaning into, but the pipeline has never been healthier. Our understanding of the variables that are important for us to address and for them to address to get things over the line and, you know, get up and running in a healthy way has never been better. Now, we're not always going to be able to control the moment at which they go, but I'm comfortable with the fact that we look at Capella in a lot of different ways.

Sanjit Kumar Singh: Over just the business side of the equation. So there's many factors that we're leaning into but the pipeline has never been healthier our understanding of the variables that are important for us to address them for them to address to get things over the line and you know get up and running in a healthy way, we've we've never been better at that.

Sanjit Kumar Singh: Now, we're not always going to be.

Sanjit Kumar Singh: Be able to control the moment at which they go but I'm comfortable with the fact that we look at capella in a lot of different ways. If you look at the customer count number that's gone up faster this quarter than you know the.

Matthew M. Cain: If you look at the customer count number, that's gone up faster this quarter than, you know, the ARR percentage, and that's just a function of, you know, when those migrations are going to happen. So, again, there are a lot of things that I'm excited about as it pertains to, you know, the future, but Capella migrations is, you know, at the top of the list. That's super encouraging to hear, Matt.

Sanjit Kumar Singh: The the AOR percentage and that's just a function of you know when those migrations are going to happen. So.

Sanjit Kumar Singh: Again.

Sanjit Kumar Singh: There's a lot of things that I'm excited about that as it pertains to the go forward, but capello migrations as you know at the top of the list.

Speaker Change #112: Oh Super Interrogating here not the other question a follow up I had was sort of around you know you mentioned a couple of times.

Matthew M. Cain: The other question, the follow-up I had was sort of around, you mentioned a couple of times in the Q&A this fall about Couchbase's role in supporting mission-critical applications and driving digital transformation. And I'm sort of wondering, in the context of that, we have macro, but we also have just a lot of stuff being brought to market, you know, on the Gen AI side. You guys just released Vector Search G&A in that quarter.

Speaker Change #112: Thus far about.

Speaker Change #112: Got his role in supporting mission critical applications in driving transformation.

Speaker Change #113: I'm not I'm kind of wondering in the context that we have macro but we also have a lot of.

Speaker Change #113: Just being brought to market on the jet AI why you guys only decorative G&A that water.

Matthew M. Cain: I'm wondering from like the customer perspective, the ability to digest all of this new innovation in the sort of data infrastructure side. And then, you know, there's a lot of proof of concepts and evals. Is that slowing the ability to get to restart that digital transformation initiative or build that next net new mission clinical application, in your view? Yeah, Sanjit, I think it's a sophisticated point.

Speaker Change #113: What is it like the customers my perspective, the ability to digest all of this new innovation in the sort of data infrastructure side and then you know there's a lot of different concept to me about that.

Speaker Change #113: Slowing the ability to get a restart that digital transformation. The next whatever build that net new next let new mission critical application.

Speaker Change #113: Yes.

Matthew M. Cain: And if we think about the world's mindshare, which is inclusive of our customer base, the amount of time that we're spending on AI compared to any point in the future is higher. And so if there's a certain allocation of digital transformation versus AI, you know, there's been some focus on AI, not always at the expense of digital transformation, but it's been, you know, certainly a topic that everyone is talking about that we need to factor into our sales cycles, and customers need to factor into factor into, you know, their own initiatives. I do think the distraction is greater the more simple the app is.

Amit: Yes, Amit I think it's a sophisticated point and yeah if.

Amit: If we think about the world's mind share, which is inclusive of our customer base. The amount of time that we're spending on AI compared to any point in the future is higher and so if there's a certain allocation of digital transformation versus AI you know there's there's been.

Amit: You know some some focus on AI not always at the expensive digital transformation, but its been you know certainly a topic that everyone is talking about that that we need to.

Amit: You know factor in to our sales cycles and customers need to factor into your factor into it.

Speaker Change #115: Are there initiatives.

Speaker Change #115: I do think the distraction is larger the more simple the app is.

Matthew M. Cain: I think when you get into mission-critical, you know, high-performance applications, it's an and, not an either. And you still need operational data stores; you still need, you know, to ingest other data sets. It's going to be really important that you have the edge capabilities. And so as we're articulating Couchbase in an AI world, that's a pretty natural discussion when we're thinking about and It's not, oh, it's, you know, it's this or some other tool.

I think when you get into mission critical high performing applications, it's an and not an or.

Speaker Change #115: And you still need operational data stores, you still need to ingest other datasets.

Speaker Change #115: It's going to be really important that you have the edge capabilities and so as we're articulating couch base in an AI world, that's a pretty natural discussion when when we're thinking about and it's not Oh. Its you know its this or or some other tool. So I think it's a factor we're having to arm our sales teams and spend time with customers.

Matthew M. Cain: So I think it's a factor. We're having to arm our sales teams and spend time with customers, but we're still able to get things done. And that includes migrations as well as new logos.

Speaker Change #115: But we were still able to get things done and and that includes migrations as well as new logos.

Matthew M. Cain: When we do have those conversations, we feel really good about what we can articulate because, you know, of all the capabilities we have and our multi-pronged approach with respect to AI, which isn't just the platform but unlocking improvements for developers, which is an area that's, quite frankly, only an accelerant, not slowing things down with, you know, IQ and our co-pilot. So I'd say those are factors that we're weighing into how we go to market and how we message.

Speaker Change #115: When we do have those conversations we feel really good about what we can articulate because.

Speaker Change #115: Of all the capabilities, we have and are.

Speaker Change #115: Multi pronged approach with respect to AI, which isn't just the platform, but unlocking improvements for developers.

Speaker Change #115: Which is an area that's quite frankly, only an accelerant not not slowing things down with IQ and our and our co pilot. So I'd say those are factors that were weighing into how we go to market and how we message, but all things considered because of our strategic position I think we.

Matthew M. Cain: But all things considered, because of our strategic position, I think, you know, we can use that to our advantage. I appreciate that, Matt. Thank you so much. Thanks Sanjeev. This question comes from the line of Ittai Kidron with Oppenheimer.

Speaker Change #115: You can use that to work.

Speaker Change #116: Thank you so much.

Angie: Thanks Angie.

Speaker Change #118: Our next question comes from the line of attack here.

Ron: Ron with Oppenheimer. Please proceed with your question.

Operator: Thanks, guys. Greg, I wanted to dig again into your confidence around the ARR target for the year. I understand that you have another $1.5 million in on-demand. That's a little bit of a buffer there, but

Speaker Change #120: Thanks, Hey, guys.

Greg: Greg I wanted to dig into your confidence around DAA or our target for the year I understand that you have another.

Greg: $1.5 million of on demand, that's a little bit of a buffer there but.

Gregory N. Henry: I'm kind of wondering if the fact that deals get pushed out ultimately means you do need to spend more time on those things in the quarter when you didn't expect it, which means, ultimately, sales bandwidth is not allocated to deals. And why isn't there like a rolling effect of this going forward? Why do you think you can catch up, especially since you're highlighting what is clearly still a very complicated, not easy, backdrop? Yeah, hey, Ittai.

Greg: I'm kind of wondering.

Speaker Change #121: The deals get pushed out ultimately that means you do need to spend more time on those things in the quarter. When you didn't expect it which means ultimately sales bandwidth is not allocated to deals and why isn't there like a rolling effect of this going forward. What do you think it can catch up especially.

Speaker Change #122: Since you're looking at.

Speaker Change #122: What is clearly a very skilled complicated not easy backdrop.

Matthew M. Cain: Look, we feel confident in the guidance. The reality is, the way this year set up was going to have a larger amount of renewals on the enterprise side of the business, which is still, you know, approximately 88% of our business in the second half of the year. And those are all still tracking.

Speaker Change #123: Yeah, Hey tie.

Speaker Change #124: Look we feel confident in the guidance. The reality is is the way. This year set up was going to have a a larger amount of the renewals on the enterprise side of the business, which is still.

Speaker Change #124: Approximately 88% of our business in the second half of the year and those are all still tracking I've also had the ability to have may close now and see how we are paying in terms of having closed those deals we talked about from Q1 as well as what the you know the.

Matt: <unk> on the deal activity is so as Matt mentioned most.

Matt: Literally on the doorstep, where we were one signature away in most cases.

Matt: So that's why we still feel good about what we're able to deliver not only for Q2, but for the full year and really don't.

Matt: See Q1, which is typically as you know a small quarter really dictating how the rest of the year.

Matt: It's going to perform.

Gregory N. Henry: I've also had the ability to have May close now and see how we're performing in terms of having closed those deals we talked about in Q1, as well as what the pipeline and the deal activity is. So, as Matt mentioned, most of us feel literally on the doorstep, where we are one signature away in most cases. So that's why we still feel good about what we're able to deliver not only for Q2, but for the full year and really don't see Q1, which is typically, as you know, a small quarter, really dictating how the rest of the year is going to perform. Ittai, if I could provide some additional context.

Matt: Okay.

Speaker Change #125: Okay, if I could provide some additional context.

Speaker Change #126: When we moved into the year, we talked about driving efficiency and leverage and getting more out of our investment and on the go to market side. There were probably four levers that we felt really good about new capabilities new investments.

Matthew M. Cain: When we moved into the year, we talked about driving efficiency and leverage and getting more out of our investment. And on the go-to-market side, there were probably four levers that we felt really good about, new capabilities and new investments. That's really understanding how we qualify our opportunities and align our sales efforts, a lot of tools and capabilities for Capella migrations, as we've mentioned, more focus on strategic accounts with dedicated teams, and then things that we're doing around the developer experience. And as we analyze when we expect to see the impact of that, the reality is it's not going to happen out of the gate in Q1.

Speaker Change #126: That's really understanding how we qualify our opportunities and align our sales motions.

Speaker Change #126: A lot of tools and capabilities for Capella migrations and as we've mentioned.

Speaker Change #126: More focus on strategic accounts with dedicated teams and then things that we're doing around the developer experience.

Speaker Change #126: As we analyzed when we expect to see that the impact of that the reality is.

Speaker Change #126: It's not going to happen out of the gate in Q1, we're going to see that above and beyond contribution.

Matthew M. Cain: We're going to see that above and beyond contribution, you know, more back end loaded. We're starting to see a little bit in Q2, but certainly in the back half. And so we feel really good about the operational improvements that we've driven there. We can see the leading indicators, and I expect those to have an impact as we go through the year, as we plan for them to have. So that, in addition to the renewal base, I think leads to our confidence in how we've laid things out. Okay, maybe as a follow-up then on this, Matt.

Speaker Change #126: More backend loaded we're starting to see a little of it in Q2, but certainly in the back half and so we feel really good about the operational improvements that we've driven there we can see the leading indicators and you know I expect those to have an impact as we go through the year as we.

Speaker Change #126: Plan for them to be so that in addition to the renewal base I think leads to our confidence on how we've laid things out.

Speaker Change #127: Okay, maybe as a follow up then on this matter.

Matthew M. Cain: I'm just trying to make sure I understand your perspective on the big picture of the macro. Is the macro unchanged from your perspective versus a quarter ago, or has it become slightly more difficult, more negative? And if it did get a little bit more difficult, how is this informing the pace of your investment in the business between now and year-end? Yeah, look, I'd say on the margin that it's hard to argue that it hasn't softened a bit.

Speaker Change #128: I'm just trying to make sure I get your perspective on the big picture on the macro.

Speaker Change #129: Is the macro either unchanged from your perspective versus a quarter ago or has it become slightly more difficult more negative and if it did get a little bit more difficult.

Speaker Change #129: How is this informing the pace of your investments in the business between now and year end.

Matthew M. Cain: Now, again, we've been talking about these factors for some time. And there are multiple factors, approval cycles, size of deals, you know, starting smaller. I wouldn't say that every one of them was a factor in Q1. It's probably again, as I've talked about those migrations and approvals. But we've thought about that for the year. And again, the pipeline is there, and you know, we're in a good place to go execute. All that said, we remain very committed to driving leverage in the model. And that's not about spending less; that's about doing things better.

Speaker Change #129: Yeah.

Speaker Change #130: Yeah look I'd say on the margin, it's hard to argue that it hasn't softened a bit.

Speaker Change #130: Now again, we've been talking about these factors for some time and Theres multiple factors approval cycle size of deals.

Speaker Change #130: Starting smaller I wouldn't say that every one of them was a factor in Q1, it's probably again as I've talked about those migrate migrations and approvals.

Speaker Change #130: But we've thought about that for the year and again the pipeline is there and you know.

Speaker Change #130: We're in a good place to go execute all of that said, we remain very committed to driving leverage in the model and that's not about spending less that's about doing things better.

Matthew M. Cain: We're very proud of the rule of 40 improvement, you know, over the last year and certainly the last two. And we've been talking about the foundation that we've built and now being a part of this Capella inflection, which is allowing us to just be better in how we develop products, how we support our customers, how we take things to market, you know, the impact on the business with the monetization of Capella.

Speaker Change #130: We're very proud of the rule of 40 improvement you know over the last year and certainly the last two and we've been.

Speaker Change #130: Talking about the foundation that we've built and now being a part of this capella inflection, which is allowing us to just be better and how we develop product how we support our customers how we take things to market you know the.

Speaker Change #130: The impact on the business with the monetization of Capella.

Matthew M. Cain: So we remain very committed to delivering what we articulated at Analyst Day. And as we've talked about, there are factors outside of our control, like macro, and then there are factors inside of our control, like efficiency and leverage and being smart about how we do things are directly in our control. And I'm very proud of the results that the team delivered and confident in the ones we're gonna, you know, continue to put out. Appreciate it.

Speaker Change #130: So we remain very convicted convicted on delivering what we articulated at analyst day.

Speaker Change #130: And as we've talked about there are factors outside of our control like macro and then there are factors inside of our control.

Speaker Change #130: And efficiency and leverage and being smart about how we do things is directly in our control and I'm very proud of the results that the team delivered and competent on the ones, we're going to continue to put up put out.

Speaker Change #131: I appreciate it thank you.

Speaker Change #131: Yeah.

Speaker Change #131: Okay.

Operator: Thank you. This question comes from the line of Andrew Nowinski with Wells Fargo. Okay, thanks. I'm going to ask a question just broadly on GEN-AI.

Speaker Change #132: Our next question comes from the line of Andrew Nowinski with Wells Fargo. Please proceed with your question.

Matthew M. Cain: Has the focus on the training phase of GEN-AI and perhaps the slower start of the inference phase had any impact on your growth, either with new logos or migration? I don't think so. I think, again, it's part of the dynamic and part of the discussion that we're having as customers evaluate AI in general, but it isn't going to slow down the evaluation of Couchbase and Capella as an important data platform. Okay, and then I wanted to ask about the go-to-market changes you're making. It sounds like you're having your sales team focus on the larger strategic counts. I'd assume those workloads are larger and, presumably, have more predictable consumption patterns, but are they also more competitive?

Okay. Thanks can I ask a question just on broadly on Jenny I.

Andrew Nowinski: The focus on the training phase of Jenny I and perhaps the slower start of the inference phase had any impact on your growth either with new logos or migrations.

Speaker Change #134: I don't I don't think so I think again, it's part of the dynamic and part of the discussion that we're having as customers evaluate AI in general but.

Speaker Change #134: I'm not going to slow down the evaluation of couch based and Capella is a important data platform.

Speaker Change #135: Okay, and then I wanted to ask you about the go to market changes, you're making it sounds like you're having your sales team focused on the larger strategic accounts I'd assume those workloads are larger than <unk>.

Speaker Change #135: Presumably have more predictable consumption patterns, but.

Speaker Change #135:

Matthew M. Cain: You know, some of the other larger vendors are also targeting those same strategic accounts. Look... So I think this is a and, not a and or.

Speaker Change #136: Are they also more competitive you know some of it.

Speaker Change #136: The other larger vendors are also targeting the same strategic accounts.

Speaker Change #136: Look.

Matthew M. Cain: And it's about really understanding the unlock potential of some of our really large enterprises. And if you look at the makeup of our business, we have some massive customers that are investing in Couchbase as a true, true strategic platform. We've unlocked a few of those that get us into some very significant, you know, deal sizes, and they start to standardize on Couchbase for certain applications.

Speaker Change #136: So I think this is an and not an or and it's about really understanding the unlocked potential of some of our really large enterprises and if you look at the makeup of our business. We have some massive customers that are investing in couch space as a true true strategic platform.

Speaker Change #136: We've unlocked a few of those that get us into some very significant deal sizes and they start to standardize on couch base for certain applications.

The idea is that with more of that understanding we can unlock these massive opportunities with dedicated teams and that selling motion and how you go to market is very different than engaging in the developer on a five K starter pack and getting them to build a net new application.

Speaker Change #136: Or for for their company and so it's about focus and ensuring that you know if if we're expanding use case at that size or working on a replacement of a legacy database, who we're talking to and how we're talking and what kind of proof of concept versus trial, they're doing those can be different.

Matthew M. Cain: And with the specialization in certain areas, we're going to be that much more efficient and, you know, unlock opportunities. So it's about going to market, aligning to who we're talking to in those accounts, giving them, you know, what they need to advance through their either building or buying cycle, and just bringing the right resources to bear for, you know, the customers in mind. So, look, we see leading indicators, but as Greg mentioned, just the way the renewal base is built up, some of that activity is going to be more back-end loaded. But, you know, we're pretty excited about what we see so far. Got to think about it. Thanks, Andy. Our next question comes from the line of Rudy Kessinger with D.A.

Speaker Change #136: And with the specialization in certain areas, we're gonna be that much more efficient and.

Speaker Change #136: Unlock opportunities. So it's about go to market motions aligning to who we're talking to in those accounts, giving them what they need to advance through their either building or buying cycle.

And just bringing the right resources to bear for the customers of mine so look.

Speaker Change #137: Look we see leading indicators, but as Greg mentioned, just the way the renewal base is built up some of that activity is going to be more backend loaded, but we're pretty excited about what we see so far.

Speaker Change #138: Got it thanks.

Andy: Thanks, Andy.

Operator: Davidson. Please proceed with your question. Yeah, thanks for taking my questions. And I appreciate the candor here and, you know, sort of pointing the finger more at yourself instead of just playing with the macro. I want to dig in again, and just this million and a half of ARR that came from the reclassification, because I guess one way you could look at it, if we exclude that million and a half, your ARR would have been below the low end of your guidance. And so how much of that 1.5 million ARR that you're now including came from customers who, intra-quarter and Q1 switched from credits to on-demand versus how It's Greg.

Speaker Change #140: Our next question comes from the line of Rudy passenger with D. A Davidson. Please proceed with your question.

Rudy Grayson Kessinger: Hey, guys. Thanks for taking my questions and I appreciate the candor here and sort of pointing the finger more yourself instead of just playing into macro.

Speaker Change #142: I wanted to dig in again on just the million and a half of that came from the reclassification because I guess one way you could look at it if we exclude that maybe you didn't have or would have been below the low end of your guidance range and so how much of that $1 5 million there are that you're now including <unk>.

Came from customers, who intra quarter in Q1 switched from credits to on demand versus how much was from customers who have been on demand for a while now.

Gregory N. Henry: Look, again, as I stated, we didn't do this, I would say, from an ARR perspective. We did it more from a customer account perspective because of the significant impact on the customer account. The movement that you talk about was probably generally immaterial in the quarter, so it's not driving that big a thing, but we have seen this. And what we don't want to do, because it's the beginning of the year, we thought it was the right time to put this out here, that we would be sort of clean for the year. Because we have seen some of that.

Greg: Yeah, Hey, Rudy it's Greg.

Greg: Look again as I stated we didn't do this I would say from an <unk> perspective, we did it more from a customer count perspective, because of the significant impact on the customer count.

Greg: The the movement that you talk about was probably generally immaterial in the quarter. So it's not it's not driving.

Greg: That big a thing, but we have seen us and what we don't want to do because it's the beginning of the year. We thought it was the right time to put this out here.

Gregory N. Henry: We just don't want to get caught at a later point down the road where our definition would have had us reclassify that out of customer or out of ARR. And then, just for clarification on your point, yes, if you remove this on demand, but I did mention that there were 350,000 FX headwinds.

He would be sort of clean for the for the year because we have seen some of that we just don't want to get caught at a later point.

Speaker Change #143: Down the road, where our definition would've had a re class that out of customer or out of <unk> and then just for clarification on your point.

Yes, if you move to this on demand, but I did mention that there was 350000 of FX headwind. So we would have landed within our guidance range, albeit on the low end as you noted, but not not outside of it.

Gregory N. Henry: So we would have landed within the guidance range, albeit on the low end, as you noted, but not outside of it. Okay, that's helpful. And then I'm curious, you know, some other competitors out there have called out kind of slowing consumption growth trends. Just curious what you guys have seen.

Speaker Change #144: Okay. That's helpful. And then I'm curious you know some other competitors out there called out kind of slowing consumption growth trends. Just curious what you guys have seen in <unk> and in particular with some of your customers where they are on commitments.

Gregory N. Henry: And in particular, with some of your customers where they're on commitments, you know, how are they tracking in their consumption growth towards those commitments? And do you see any risk of maybe some downsizing, you know, later on throughout the year, once customers get to that renewal point, maybe they're not quite up to their commitment level in terms of consumers? Yeah, we have not seen any material we call breakage where they're not using their credits at all.

Speaker Change #145: How are they tracking and their consumption growth towards those commitment and and do you see any risk of of Navy some downsizing.

Speaker Change #145: You know later on throughout the year once customers get to that renewal point, maybe they're not quite up to their commitment lifelong two assumptions.

Speaker Change #146: Yeah, we have not seen.

Any material, what we call breakage, where they're not using their credits.

Gregory N. Henry: In fact, most are using them early. So we still see very positive consumption trends throughout Q1. And even with the benefit of now having May, we've still seen another increase in consumption even in May. So, because we're still in this early phase of this consumption model, as compared to some of the other companies that are sort of more mature and have been doing this for a lot longer, we're still in this early phase of adoption. So, we are still seeing positive consumption trends. However, we have not seen this optimization that is being spoken of.

Speaker Change #146: At all in fact, most are using them early so we still see a very positive consumption trends throughout Q1, and even with the benefit of now having may we still see another increase in consumption. Even in may so because we're still in this early phase of this consumption model as compared to some of the other companies.

That are sort of more mature and have been doing this for a lot longer we are still in this early phase of adoption. So we're still seeing positive consumption trends, we have not seen this optimization that is being spoken off we're still seeing healthy growth and we're seeing customers like the one we talked about in Q4, which is a multimillion dollar account.

Gregory N. Henry: We're still seeing healthy growth, and we're seeing customers like the one we talked about in Q4, which is a multimillion-dollar account. It's six months in, and they're now consuming at the level that they bought into. So it's not taking us even a full year to get them up to full consumption.

Speaker Change #146: Six months in there now consuming at the level that they bought into so it's not taking us even a full year to get them up to the full consumption level. So we feel pretty good about the consumption trends, we're seeing at current time.

Gregory N. Henry: So we feel pretty good about the consumption trends we're seeing at current times. Our next question comes from the line of... Hey guys, thanks for taking my question. I have a question, again, just to follow up on that 1.5 gen adjustment, Greg. So when you gave us a guide for ARR last year for the full year, I guess you're not assuming to include the on-demand portion in the ARR.

Speaker Change #147: Our next question comes from the line of task with Doggy with Wedbush Securities. Please proceed with your question.

Speaker Change #148: Hey, guys. Thanks for taking my question I've got question again, just to follow up on that one five.

Greg: Greg So could you give us a guide.

Speaker Change #149: For our last year for the full year, I guess, you're not assuming to conclude the odd the mad portion in the L. A so now that you're adding that onto my peers I guess, we got enough the uplift for one five months in Q1.

Operator: So now that you're adding that on-demand piece, I guess we got an uplift of 1.5 million in Q1. But shouldn't that be passed on to the full-year guide as well because that uplift was not factored into the initial guide? Or is it effectively, I guess, lowering the guide by 1.5 million? Yeah, so, Taz, we introduced this methodology change in Q1. It was not previously contemplated in the guidance.

Speaker Change #150: But shouldn't that get passed onto the full year guide as long ago.

Speaker Change #151: That uplift should was not factored into that.

Speaker Change #152: The initial guide or is it are you effectively.

Speaker Change #153: Lowering the guide by one 5 million.

Gregory N. Henry: It is now contemplated in the guidance that we've reiterated for the year. But yes, it is in there now, and it will be going forward. Net new ARR? Here, I guess your guide is implying a big jump in, what you're calling, The NET New Era you're supposed to add in C2.

Speaker Change #154: Yeah. So so taz we are we introduces methodology change in Q1. It was not previously contemplated in the guidance. It is now contemplated in the guidance that we've reiterated for the year, but it yes. It is in there now and.

Speaker Change #154: It will be going forward.

Speaker Change #155: Got it thanks, and then secondly on the guide I know you guys where are you guys feel good about the second half of the year, given the really old base, but I'm I'm asking about the my question is about the guys for.

Speaker Change #156: For Q2, when I look at the guide at the midpoint, but are you. How are you expecting I think their nephew are already in flight of about six of them yet.

Speaker Change #156: Added about $2 5 million and in Q1.

Speaker Change #156: And then when you compare that to the typical seasonality it looks a little bit with it right.

Do you attribute to Iraq.

Speaker Change #156: Almost in line with your if you will.

Speaker Change #157: Are you where are your I guess your guide is implying a big jump and what's your.

Speaker Change #158: Are you supposed to attitude here so just.

Gregory N. Henry: So just in terms of guidance, I guess, philosophy or framework, are you assuming that whatever got pushed out is closing in C2, nothing else is getting pushed out from C2? How do you feel about, you know, that guide being, I guess... Conservative or aggressive, this is what you guys did in Q1. Yeah, we're both comfortable with the Q2 and full year guidance. And as we've always said, we set that up, taking in all the factors, including what Matt talked about in terms of the macro changes that we saw.

Speaker Change #159: Our guidance philosophy of framework are you assuming that whatever got pushed out is closing in Q2, nothing else is getting pushed out.

Q2, how do you how do you feel about you know that guy being.

Speaker Change #159: I guess conservative or aggressive with what you guys did in Q1.

Gregory N. Henry: So that's all factored into both Q2 and full year guidance, and we obviously, as we've said before, we always attempt to at a minimum meet it, if not beat it. As we sort of alluded to, several of those deals from Q1 have now closed in Q2.

Speaker Change #160: Yeah, we were both comfortable with the Q2 and the full year guidance and as we've always said, we set that up taking in all the factors, including the Mac talked about in terms of the the the macro changes that we saw so that's all factored into both Q2 and full year guidance and we obviously as we've said before we always attempt to at a minimum.

Speaker Change #160: Meet it if not beat it.

Speaker Change #160: We sort of alluded to several of those deals from Q1.

Gregory N. Henry: We've had the benefit of seeing May, so we feel very comfortable with both the Q2 and the full year guidance in terms of our ability to execute and deliver on that. One last one, if I may, guys, just on the mix of new business between upsell and new logos. It looks like new logos are very strong this quarter. Is it fair to assume that the majority of the pushouts and whatever weakness you saw was in renewals and upsells, and new logo momentum seemed pretty healthy this quarter?

Speaker Change #160: We have now closed in Q2, we've had the benefit of seeing may So we feel very comfortable with both the Q2 and the full year guidance in terms of our.

Speaker Change #160: Our ability to execute and deliver on that.

Speaker Change #161: Got it one last one if I may guys just on the a and the mix of new business between up Southern your logo. It looks like you know it was already a very strong this quarter. So is it fair to assume the majority of the push outs in whatever weakness you saw was was it renewals and upsells and new logo momentum seen a pretty healthy this quarter.

Gregory N. Henry: Guys, I think it was a mix in terms of what went over the quarter boundary. And as we've said, new logos have been and continue to be an area of focus for us. So we are relatively pleased with that performance. And, you know, if we look back at last year, we're off to a very nice start with respect to net logos. We think that's indicative of what we can do on a going forward basis.

As I think it was a mix.

In terms of what went over the quarter boundary.

Speaker Change #161: And as we've said new logos. It has been and continues to be an area of focus for us. So.

Speaker Change #161: We are relatively pleased with that performance and you know.

Speaker Change #161: If we look back last year, we're off to a very nice start with respect to net logos. We think that's indicative of what we can do on a go forward basis.

Gregory N. Henry: Thanks, guys. Thanks, Tabs. Thank you. We have reached the end of our question and answer session. And with that, I would like to turn the floor back over to Matt Cain for any, Thanks, operator. We started this year with continued progress following our historic 2024. I remain confident in our ability to drive leverage across our business and capture the generational opportunity in front of us.

Speaker Change #162: Thanks, guys.

Taz: Thanks Taz.

Speaker Change #164: Thank you we've reached the end of our question and answer session and with that I would like to turn the floor back over to Matt Kane for any closing comments.

Matthew M. Cain: Thank you all for joining us. And we look forward to speaking with you next quarter. This concludes today's teleconference. You may disconnect your lines at this time.

Matthew M. Cain: Thanks, Operator, we started this year with continued progress following our historic 2024, I remain confident in our ability to drive leverage across our business and capture the generational opportunity in front of us.

Matthew M. Cain: You all for joining us and we look forward to speaking with you next quarter.

Operator: Thank you for your... Go to www.flydreamers.com for more.

Speaker Change #166: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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