CouchBase's (NASDAQ:BASE) Q3 Sales Top Estimates But Stock Drops

Kayode Omotosho /
2021/12/07 4:13 pm EST

Database as a service company Couchbase (NASDAQ: BASE) reported Q3 FY2022 results beating Wall St's expectations, with revenue up 19.9% year on year to $30.8 million. The company expects that next quarter's revenue would be around $34 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. CouchBase made a GAAP loss of $15.9 million, down on its loss of $9 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) Q3 FY2022 Highlights:

  • Revenue: $30.8 million vs analyst estimates of $29.4 million (4.76% beat)
  • EPS (non-GAAP): -$0.29 vs analyst estimates of -$0.35
  • Revenue guidance for Q4 2022 is $34 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow was negative $20.3 million, compared to negative free cash flow of $16 million in previous quarter
  • Gross Margin (GAAP): 87.8%, in line with same quarter last year

"Our strong third quarter performance was driven by ongoing large deal momentum, including some significant expansions, as well as acceleration of our cloud business. We also delivered solid top line growth with ARR up 21% and revenue up 20% year over year," 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.

Couchbase benefits from long term secular data growth trends, notably non-traditional data generated by mobile devices and the cloud that doesn’t readily translate to traditional relational database analysis. Couchbase stands to benefit as enterprises accelerate their digital transformations, as the overall database market remains in relatively early stages of cloud adoption, with IDC estimating nearly 70% of spend remaining on-prem in 2020.

Sales Growth

As you can see below, CouchBase's revenue growth has been strong over the last year, growing from quarterly revenue of $25.7 million, to $30.8 million.

CouchBase Total Revenue

This quarter, CouchBase's quarterly revenue was once again up 19.9% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $1.12 million in Q3, compared to $1.74 million in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 19.9% over the next twelve months, although estimates are likely to change post earnings.

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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 87.8% in Q3.

CouchBase Gross Margin (GAAP)

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. 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 Q3 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 $1.12 billion and more than $207.6 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. Revenue guidance for the rest of the year not exceeded expectations but indicates the company is staying on target. Zooming out, we think this was a decent quarter. But investors might have been expecting more (especially considering the results MongoDB announced yesterday) and the company is down 5.42% on the results and currently trades at $27.9 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.