Couchbase Inc. (BASE) 2025 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Progress in Q2

Delivered excellent new customer logo growth, strong new business, and meaningful growth in Capella consumption and ARR mix.

• Revenue and ARR Growth

Annual recurring revenue (ARR) was $214 million, up 18% year-over-year. Revenue in Q2 was $51.6 million, up 20% year-over-year.

• New Customer Additions

Added 62 net new logos, up from 12 in Q2 2024 and 19 from last quarter.

• Capella Growth

Capella now represents 31% of the customer base and 13.5% of total ARR, both up 2 points sequentially.

• Product Innovations

Announced general availability of Couchbase Mobile with vector search and introduced Capella Free Tier and Capella Columnar.

Pessimistic Highlights

• Higher Customer Loss and Downsells

Experienced higher levels of customer loss and downsell, resulting in an unanticipated headwind to ARR performance in Q2.

• Unexpected Churn

One significant customer ceased operations following its acquisition by a larger entity, contributing to the churn.

• Impact on ARR

The unexpected churn and downsell impacted the net new ARR for the quarter, despite strong gross ARR additions.

Company Outlook

• Confidence in Full-Year Objectives

Strong visibility across the size, scale, and diversity of opportunities gives confidence in achieving full-year objectives.

• Strategic Accounts

Significant progress with large strategic accounts participating in multi-year initiatives to support next-generation enterprise applications.

• Focus on Efficiency

Continued focus on driving efficiency across go-to-market, R&D, and all aspects of operations.

• Free Cash Flow Positive

Committed to being free cash flow positive for fiscal 2026.

Q & A Highlights

• Q: Unexpected Churn and Downsells (Matthew Hedberg, RBC Capital Markets)

A: No commonality in the churn; one customer ceased operations following acquisition. Gross ARR add was one of the best in company history. (Greg Henry)

• Q: New Customer Adds and Partner Success (Matthew Hedberg, RBC Capital Markets)

A: 62 net logo adds highlight the quarter. Partner motion extends reach and relevance with strategic customers. (Matt Cain)

• Q: Columnar Database and GenAI (Kasthuri Rangan, Goldman Sachs Group, Inc.)

A: Columnar database is strategic for AI, enabling JSON analytics and operational write-back, enhancing developer productivity. (Matt Cain)

• Q: Q4 ARR Growth Drivers (Kasthuri Rangan, Goldman Sachs Group, Inc.)

A: Larger than normal amount of contracted ARR with start dates in Q4, contributing to strong second-half visibility. (Greg Henry)

• Q: Capella Net New ARR (Brent Bracelin, Piper Sandler & Co.)

A: Capella growth driven by new customer count, ARR mix, and the largest Capella land in history. (Matt Cain)

• Q: Churn and Downsells (Brent Bracelin, Piper Sandler & Co.)

A: Healthy enterprise-level gross retention; Q2 churn and downsell seen as anomalous. (Greg Henry)

• Q: Churn and Downsells Context (Mike Cikos, Needham & Company LLC)

A: Two big accounts caused outsized churn; one was planned, the other was a surprise. (Matt Cain)

• Q: Expense Discipline and Partner Contribution (Mike Cikos, Needham & Company LLC)

A: Focus on efficiency and leveraging partner relationships for growth. (Matt Cain)

• Q: Competitive Landscape with Hyperscalers (Theodor Thun, Morgan Stanley & Co.)

A: Couchbase's core attributes remain relevant; partnership momentum with hyperscalers is positive. (Matt Cain)

• Q: Billings and Free Cash Flow (Theodor Thun, Morgan Stanley & Co.)

A: Billings can be lumpy; focus on ARR, RPO, and revenue as key metrics. (Greg Henry)

• Q: Sales Execution and Churn (Ittai Kidron, Oppenheimer & Co. Inc.)

A: Churn seen as isolated incidents; overall sales execution remains strong. (Matt Cain)

• Q: Strategic Projects in Q4 (Ittai Kidron, Oppenheimer & Co. Inc.)

A: Many strategic accounts with significant ARR potential; robust pipeline for the second half. (Matt Cain)

• Q: Operating Breakeven by End of Next Year (Jason Ader, William Blair)

A: Committed to free cash flow positive in fiscal 2026; not expecting non-GAAP operating income breakeven for the year. (Greg Henry)

• Q: ARR Guidance Confidence (Jason Ader, William Blair)

A: Confident in guidance due to predictable enterprise model, Capella growth, and contracted ARR. (Matt Cain)

• Q: Contracted ARR Dynamics (Howard Ma, Guggenheim Securities)

A: Contracted ARR is material and will be recognized in Q4; renewal pool and upsell opportunities in the second half. (Greg Henry)

• Q: Downsells and Economic Activity (Raimo Lenschow, Barclays Capital)

A: Downsells seen as normal course of business; no broader pattern beyond two big outliers. (Matt Cain)

• Q: ARR Definition and Back Half Expansions (Howard Ma, Guggenheim Securities)

A: Contracted ARR will be recognized in Q4; renewal pool and upsell opportunities in the second half. (Greg Henry)