Database as a service company Couchbase (NASDAQ: BASE) reported Q2 FY2023 results topping analyst expectations, with revenue up 33.9% year on year to $39.7 million.Guidance for the full year also exceeded estimates, and the guidance for the next quarter came in at $36.6 million, in line with analyst estimates. Couchbase made a GAAP loss of $15.3 million, down on its loss of $14.4 million, in the same quarter last year.
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Couchbase (BASE) Q2 FY2023 Highlights:
- Revenue: $39.7 million vs analyst estimates of $35.8 million (10.9% beat)
- EPS (non-GAAP): -$0.19 vs analyst estimates of -$0.28
- Revenue guidance for Q3 2023 is $36.6 million at the midpoint, roughly in line with what analysts were expecting
- The company lifted revenue guidance for the full year, from $147.7 million to $150 million at the midpoint, a 1.55% increase
- Free cash flow was negative $9.33 million, compared to negative free cash flow of $9.4 million in previous quarter
- Gross Margin (GAAP): 87.9%, in line with same quarter last year
"I'm pleased to report that we delivered results above the high end of guidance, including another quarter of 30% constant currency ARR growth," said Matt Cain, President and CEO of Couchbase.
Formed in 2011 with the merger of Membase and CouchOne, Couchbase (NASDAQ:BASE) is a database as a service platform that allows enterprises to store large volumes of semi-structured data.
Data is the lifeblood of the internet and software in general, and the amount of data created is growing at an accelerating pace. Likewise, the importance of storing the data in scalable and efficient formats continues to rise, especially as the diversity of the data and associated use cases expand from analyzing simple, structured data to high-scale processing of unstructured data, images, audio and video.
As you can see below, Couchbase's revenue growth has been strong over the last year, growing from quarterly revenue of $29.6 million, to $39.7 million.
This was a standout quarter for Couchbase, with the quarterly revenue up 33.9% year on year, which is above average for the company. On top of that, revenue increased $4.93 million quarter on quarter, a strong improvement on the $211 thousand decrease in Q1 2023, and a sign of acceleration of growth, which is very nice to see indeed.
Guidance for the next quarter indicates Couchbase is expecting revenue to grow 18.7% year on year to $36.6 million, in line with the 19.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 15.6% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Couchbase's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 87.9% in Q2.
That means that for every $1 in revenue the company had $0.87 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a great gross margin, that allows companies like Couchbase to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.
Key Takeaways from Couchbase's Q2 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Couchbase’s balance sheet, but we note that with a market capitalization of $647.7 million and more than $192.1 million in cash, the company has the capacity to continue to prioritise growth over profitability.
We were impressed by how strongly Couchbase outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 0.74% on the results and currently trades at $14.97 per share.
Should you invest in Couchbase right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.