Database as a service company Couchbase (NASDAQ: BASE) reported Q1 FY2024 results that beat analyst expectations, with revenue up 17.6% year on year to $41 million. However, guidance for the next quarter was less impressive, coming in at $41.5 million at the midpoint, being 4.25% below analyst estimates. Couchbase made a GAAP loss of $21.9 million, down on its loss of $19.8 million, in the same quarter last year.
Is now the time to buy Couchbase? Access our full analysis of the earnings results here, it's free.
Couchbase (BASE) Q1 FY2024 Highlights:
- Revenue: $41 million vs analyst estimates of $39.8 million (3.08% beat)
- EPS (non-GAAP): -$0.27 vs analyst estimates of -$0.32
- Revenue guidance for Q2 2024 is $41.5 million at the midpoint, below analyst estimates of $43.3 million
- The company reconfirmed revenue guidance for the full year, at $173.2 million at the midpoint (in line)
- Free cash flow was negative $8.47 million, compared to negative free cash flow of $11.8 million in previous quarter
- Gross Margin (GAAP): 85.6%, down from 86.7% same quarter last year
"We delivered a solid start to the fiscal year and are pleased that our results exceeded our guidance on all metrics," said Matt Cain, Chair, 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.
Sales Growth
As you can see below, Couchbase's revenue growth has been strong over the last two years, growing from quarterly revenue of $28 million in Q1 FY2022, to $41 million.
This quarter, Couchbase's quarterly revenue was once again up 17.6% year on year. But the revenue actually decreased by $627 thousand in Q1, compared to $3.07 million increase in Q4 2023.However, Couchbase's sales do seem to have a seasonal pattern to them, and since management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.
Guidance for the next quarter indicates Couchbase is expecting revenue to grow 4.29% year on year to $41.5 million, slowing down from the 34% 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 11.4% 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.
Profitability
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 85.6% in Q1.
That means that for every $1 in revenue the company had $0.86 left to spend on developing new products, marketing & sales and the general administrative overhead. 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. It is good to see that the gross margin is staying stable which indicates that Couchbase is doing a good job controlling costs and is not under pressure from competition to lower prices.
Key Takeaways from Couchbase's Q1 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 $1.02 billion and more than $163.6 million in cash, the company has the capacity to continue to prioritise growth over profitability.
It was good to see Couchbase outperform Wall St’s revenue expectations this quarter. On the other hand, it was unfortunate to see that the revenue and operating loss guidance for the next quarter both missed analysts' expectations. Furthermore, full year revenue guidance was maintained from the previous guidance despite the beat and full year operating loss guidance was only slightly better. The company also continues to burn cash. Overall, this quarter's results could have been better. The company is down 15.8% on the results and currently trades at $18.71 per share.
Couchbase may have had a tough quarter, but does that actually create an opportunity to invest 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.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.