Database as a service company Couchbase (NASDAQ: BASE) reported revenue that beat Wall Street expectations in the third quarter of CY2024, with revenue up 12.7% year over year to $51.63 million. On the other hand, next quarter’s revenue forecast of $52.75 million was less impressive, falling 2.3% below analyst estimates. The non-GAAP loss of $0.05 per share was 37.9% above analyst consensus estimates.
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Gain: $51.63 million vs. analyst estimates of $50.77 million (12.7% YoY growth, 1.7% better)
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Custom EPS: -$0.05 vs. analyst estimates of -$0.08 (37.9% better)
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Adjusted operating result: -$3.48 million vs. analyst estimates of -$5.09 million (-6.7% margin, 31.7% better)
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Revenue guidance for Q4 CY2024 is in the middle at $52.75 million, below analyst estimates of $53.98 million
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Operating margin: -37.3%, compared to -38.3% in the same quarter last year
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Free cash flow was -$17.48 million, compared to -$5.71 million in the previous quarter
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Annual recurring turnover: $220.3 million at quarter end, up 16.7% year over year
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Market capitalization: $1.05 billion
“I am pleased with the continued operational progress of the entire Couchbase team,” said Matt Cain, chairman, president and CEO of Couchbase.
Founded in 2011 through the merger of Membase and CouchOne, Couchbase (NASDAQ:BASE) is a database-as-a-service platform that allows companies to store large amounts of semi-structured data.
Data is the lifeblood of the internet and software in general, and the amount of data created is increasing. As a result, the importance of storing data in scalable and efficient formats continues to increase, especially as the diversity and associated use cases expand from analyzing simple, structured data sets to large-scale processing of unstructured data such as images, audio and video. .
A company’s long-term sales performance can be an indication of its overall quality. Any company can perform well for a quarter or two, but many sustainable companies grow for years. Over the past three years, Couchbase has grown its revenue at a decent annual rate of 20.2%. The growth was slightly above that of the average software company and shows that its offering is resonating with customers.
This quarter, Couchbase reported 12.7% year-over-year revenue growth, and revenue of $51.63 million exceeded Wall Street estimates by 1.7%. The company’s management is currently targeting a 5.3% year-over-year revenue increase in the next quarter.
Looking further ahead, sell-side analysts expect revenue to grow by 12.6% over the next twelve months, a slowdown from the past three years. Still, this projection is above average for the industry and suggests the market is seeing some success for its newer products and services.
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While reported revenue for a software company may include low-margin items such as implementation costs, annual recurring revenue (ARR) is a sum of the next twelve months of contracted revenue purely from software subscriptions, or the predictable, high-margin revenue streams that drive it make SaaS companies so valuable.
Couchbase’s ARR came in at $220.3 million in the third quarter, and over the past four quarters, growth has been impressive, with an average increase of 20.1% year-over-year. This performance matched overall revenue growth and shows that customers are willing to bet on the company’s technology for several years to come. The growth also makes Couchbase a more predictable company, which is a tailwind for its valuation as investors typically prefer companies with recurring revenues.
The customer acquisition cost payback period (CAC) represents the months it takes to recoup the costs of acquiring a new customer. Essentially, this is the breakeven point for sales and marketing investments. A shorter CAC payback period is ideal as it implies a better return on investment and better scalability of the business.
It is very expensive for Couchbase to acquire new customers, with the CAC payback period coming in at 949.6 months this quarter. The company’s inefficiency indicates that it operates in a competitive market and needs to continue investing to grow.
It was encouraging to see that Couchbase exceeded analyst revenue, earnings and earnings expectations and exceeded adjusted operating income expectations this quarter. On the other hand, revenue expectations for the next quarter missed significantly. This is much more important because the markets are forward-looking. Overall, this quarter could have been better. The stock fell 11.9% to $18.62 immediately after the results.
Couchbase’s latest earnings report disappointed. One quarter doesn’t define the quality of a company, so let’s find out if the stock is a bargain at its current price. We think the latest quarter is just one piece of the longer-term business quality puzzle. Quality, in combination with valuation, can help determine whether the stock is a buy. We cover that in our useful full research report which you can read here. It’s free.
