All right. Welcome to the afternoon session, day four of the Morgan Stanley TMT Conference. We are pleased to have the management team from Couchbase, CEO Matt Cain and CFO Greg Henry. Thank you, Matt and Greg for joining us once more at the TMT conference. Great to be here. Awesome. Let's get through Thanks, Sanjit. Let's get through the disclosures, and we'll start off the conversation. For more important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If any questions, please reach out to your Morgan Stanley sales representative. Matt, maybe just start off the conversation just picking up on some of the themes from the earnings call. Fiscal year 2023 was a pretty successful year across both growth and product. ARR came in at sort of 24% constant currency. Can you give us a sense of what Were there any sort of themes in terms of which market segments, customer verticals, helped drive that growth? To the extent you're seeing any particular market segments, you know, being more cautious, any sort of patterns in the data that you saw in Q4? Well, first, Sanjit, we were excited about Q4 and the end of the fiscal year. I think throughout the year, we talked about Couchbase being a story of acceleration, accelerating growth, and we're proud to, you know, talk about accelerating leverage in the business model. We believe we're still in the very early innings of a generational market transition in all things database, really driven by digital transformation and the use of modern applications to change the way we live our lives and you know, how we work. At Couchbase, we're very proud to participate in that. I think as I reflect on the fiscal year, those themes really, you know, came true. I think people are looking for a database for mission-critical applications with scale and performance features, you know, from cloud to the edge, that really aligns very well with our value proposition and what we've worked so hard to architect. When I think about digital transformation, it's, you know, understanding the customer, bringing massive amounts of goods and services to a lot of different people, doing that with real-time experiences and highly interactive applications. That's really what we try to do and what we put into our platform. There is no one single vertical where that applies. I mean, everything from next gen telco to healthcare to financial services to, you know, travel and entertainment. We have a platform that has applicability across those use cases because each one of those companies are striving to do that with their applications. You know, certainly macro is a topic du jour, and we need to be able to articulate the value proposition, with strong total cost of ownership benefits and allow people to think about investing in Couchbase as a modern platform, you know, for the long term. you know, there's certainly dynamics that we need to be aware of, but by and large, you know, we're believers in what we're building. It's aligned to digital transformation. We're proud to support our customers and again, reflect on a very productive year. Yeah, that's a great overview. Greg, maybe for you, in terms of the outlook, you guided revenue 11%-13% for next year, ARR growth in the range of 16%-19%. Can you walk us through the assumptions that underpin that outlook? 'Cause it does represent a deceleration versus the year you just completed. Yeah. Yep. Thanks, Sanjit. We did, though, that's where we got it to. I think the one theme or assumption we make is that the macro persists or in fact gets worse. The impact or outcome of that would be things like, you know, lack of sales productivity, not having the Capella transitions from the install base as we would expect, net retention rates flat to down. Those are the assumptions or those are the impacts of that assumption, and that's what we've baked in, which was an elevated level of prudence versus what we had this year. Now I'd say if I think back a year ago, things actually worsened during the year. We just wanna be in a position where we can at a minimum meet, if not beat our guidance. That's how we, you know, that's how we went to set it up. I will tell you that coming out of Q4, even though we saw the macro impact, some of the things I stated that were in the guidance that we're not seeing those today per se. Mm-hmm. That's why I think if you look at our Q1 guidance, there's a little bit more confidence there. We know that things deteriorated last year as we progressed, and we just don't wanna be in a position where if that happens, that we're not able to, you know, deliver on the guidance. Especially this particularly early start to the, to the year, early stage of the year. Correct. That makes a ton of sense. One of the questions I've been getting, you know, over email since the results is just the spread between ARR growth and total revenue growth. We've talked about some of these dynamics before. Maybe just sort of remind us of what's sort of driving that for next year? Yeah. There's a couple things that are driving it that are even maybe different than they were in the prior years. One is, we had an outperformance on our professional services this year. We grew 64%. If you just looked at the trajectory versus coming off the last couple years, it was just an outsized year. We had a nice backlog build, and we had a nice demand for service delivery, so we overperformed there. Mm-hmm. That was a headwind last tailwind last year. It's gonna become a headwind as we go into fiscal 2024. We're not gonna be able to repeat that. I would expect that the services business will actually be down year-over-year, but in line with how we've been thinking about it over the multi-year period. That's one. Cause obviously services is in revenue, not in ARR. Two is, as you think about, as Capella comes online, we just talked about changing the way we do the rev rec so that Capella will be on a pure consumption basis. If you think about new customers or migrating customers, the ramp of consumption is fairly delayed. Whereas if you know, sign a deal immediately, the way we do ARR, it goes into the ARR at the full level for the first year and then moves to consumption one year later. Those are some of the reasons I'd say you're getting that delta. We remind people that ARR for us is what we believe the better measure of the performance of the business and what's happening within the business in the more near term. That makes total sense. Let's talk a little bit before we get into, I wanna have a conversation with Matt around, you know, how Couchbase is gonna win in a tougher budget environment. On the op margin side too, you showed some nice upside in Q4 and for the full year. When your outlook was also sort of better, still unprofitable, but sort of give us through from an investment perspective, where are you sort of continuing to invest, double down, and what are the areas you're looking to pull back or get more efficient on? Yes, I appreciate that, and we do feel really good about how we closed the year, and I think it was the, you know, continuation, but beginning of some real good efficiency and sort of moving towards profitability. We have every intention in terms of continuing to deliver more efficiency and move to profitability and free cash flow positivity, not in fiscal 2024, but you'll see us continue to progress there. Look, we're still making investments in our go-to-market. I'll let Matt talk a little bit more about that. You know, we've been very, you know, clear about making investments in Capella because we believe that's the growth engine of the future. There's clearly more technologies coming along the lines of serverless and other things that will absolutely be drivers for us as well. I think when we look across the business as we got into this macro environment, there's just areas where we have, you know, you know, duplications or redundancies that we think we can get after. We started to do that. We talked about a, you know, a 5% optimization that we did in the end of the year. We think there's a lot more. I mean, we just have things like, you know, in my organization, I had two IT leaders. We didn't need two IT leaders, and we're consolidating down to one. Across the organization, we're looking at that. We're looking at the software purchases we make, right? The tools we use, and are we really utilizing those to their full ability, and are there other areas where we also have software redundancies. We're just looking literally across everything in the business. Matt, I don't know if you wanna follow up? Look, I think it's about balance and being precious with our resource allocation, but also being mindful that this is a generational market opportunity. We still think we're in the very early innings of major disruption on all things databases, and we're sitting on the right side of that. A year ago, I brought in our current head of engineering, Gopi. Mm-hmm. The transformation that he's driving in our engineering team and a cloud focus, driving things with Capella, but taking advantage of our platform and the capabilities that enterprises depend on, we need to continue to innovate. You know, Huw has been in the role now for several quarters. We're making great operational improvements in how we go to market across sales and marketing and business development, but we still wanna grow. I think we're gonna be, you know, very responsible on how we strike that balance. What gives me great confidence is we have the leadership team in place that have been able to strike these balances at previous points of their career. How do we, you know, pursue our ambitions of growth and, you know, technology disruption, but not be afraid to find efficiencies as we do so. We're playing long ball here, and we see a massive opportunity, but we also wanna, you know, do right by our investors and, you know, get to efficiency. I think that's gonna be a big narrative for us as we talked about on the call, but, sort of on an inflection point of growth and efficiency, this year. Could you speak to, a little bit just as a follow-up to, your plans for quota-carrying capacity next year? It's been a focus area for the last couple of years. Is that gonna be a continued area of investment going into next year? Yeah, we study that very hard. Mm-hmm. It reminds me of how much fun I had when I was the interim CRO for a year. We have a lot of pride in our highly sophisticated, highly instrumented- Mm-hmm enterprise go-to-market model. We know exactly where we are at any given point on how many quota carriers, how many are ramped. We have a capacity plan that gets us to the upside of our forecast. Then we can, you know, move that in any direction. I think a lot of companies think about capacity as in, do I have enough reps? Are they ramped or un-ramped? Mm-hmm. There's a lot of nuance in between. You know, what is the level of enablement? How sophisticated are your systems and tools? What kind of operational rigor do you have in place to get the most out of reps? What kind of retention are you seeing? What is the state of your sales leadership and, you know, the effectiveness there? Not only do I think we are well covered in terms of sales capacity, but I think those other things that make the engine more effective are better than they've ever been, you know, at Couchbase. Layer on the efficiency of Capella, and that being the offering that the market wants, you know, that's additional uplift. Mm-hmm. That's on our, you know, quota carriers, and where we've been particularly mindful is go-to-market expense, non-quota carriers. As we think about efficiencies, let's draw those down, enable, you know, the right set of resources, you know, to do a lot of work. I'll tell you another thing that we're excited about alongside that, you know, sales capacity is our partner motion. We think there's a ton of upside and additional reach that we're gonna derive from, you know, the CSPs in addition to, you know, channels that have been strong for us, like ISVs. It's that entire system that we look at. Sales capacity is obviously critically important, but, you know, the amount of efficiency we're gonna get out of each one of those, I think we're better poised than we ever have been. Let's take a minute just to address the partner motion and the relationship with the CSPs. Can you just go sort of give us a status update across the big three, where do you stand, both from like, you know, the availability of the service, but then also on the go-to-market side? If you could just sort of walk through each of the major cloud providers and give us an update there, that would be helpful. One year ago today, we were in market with Server on AWS. I think about our cloud portfolio as, you know, kind of six products. Server and Mobile on the big three clouds. At sort of summer timeframe, we went from one to four. We brought in Mobile on AWS and added GCP on both, and just recently, we announced that we were in market with Azure. I think the partnerships are gonna follow the route to market on the offering. We've been working, you know, quite some time and, you know, at a, at a higher level, quite frankly, with AWS because we've been in market longer. Mm-hmm. We were so proud to announce the Strategic Collaboration Agreement in the back half of the year. There's certainly benefits on the T's and C's of the agreement itself, but I think it's more indicative of what they see in Couchbase. They don't do this with very many partners. Mm. The level of, you know, account planning and territory planning and, you know, understanding specific promotions and driving the enablement, we're just a little bit further ahead with AWS than we are the other two. We fully intend and Mm. That we're gonna do the same with, you know, GCP and Azure Microsoft as we go forward. It starts with product, and we need to make sure that we have the offerings in market. The good news is we have pent-up demand and pipeline from a customer perspective on all of those clouds. Because if they're a Couchbase customer, we run in all those clouds today, we just haven't had it with Capella. Mm. I think we've been, you know, working on sort of the skeleton of the, of the partnership with all of those and really expect that we can, you know, start to sprint now that we're, that we're in market. Yeah. That makes a lot of sense. I wanna talk about Capella more in depth. Before I get there, across all my companies that I cover, like, the strategy that almost everyone talks about is vendor consolidation, standardization, you know, hugging your customer and taking more share of wallet. You guys have been talking about that prior to the downturn, with things like relational offload and relational migrations. What's sort of the playbook, and what sort of momentum are you seeing on a, you know, standardization consolidation strategy within the Couchbase customer base? Glad you brought that up because I think that's part of the value proposition that we've been talking about at Couchbase that is more relevant now in the market than it ever has been. If you go back to 2011, when we say the modern-day Couchbase was created, it was actually a combination of two independent companies. One was an open source cache, and one was a document-oriented database. Our founders back then believed in this concept that was core to our development called layer consolidation. How do I build a platform that can do more with less in support of an application? Over the decade of innovation, we've added capabilities like Full-Text Search and operational analytics and relational offload and said, "Well, let's not only run that in the data center, let's extend it out to the edge with mobile capabilities. Let's do that all with SQL compatibility because we've taken a platform approach to our development. The reason we did that is because we fully believed that eventually people are gonna need platforms that they can depend on and do more with less. We've been articulating that part of our, you know, company strategy for some time. We layer on Capella that makes that all easier to consume. That's very much part of the dialogue. I think when resources are plentiful, both dollars and people, there's less sort of constraint to drive that level of discipline and that level of thinking in enterprises. If you fast-forward today, find me a customer that isn't having that discussion, and there's so much focus right now on just spend, dollars to acquire vendor solutions. There's not as much focus yet on the people to do the work, and I think there's gonna be a shortage of developers to do all this innovation in a resource-constrained environment. Couchbase has thought through that. You take our SQL compatibility, repurposing the labor force, align that with, you know, the platform capabilities we have, and we can sit in front of customers and say, "I can help you with your objectives. I can help you build next generation applications, and I can confidently tell you we can do that with lower total cost of ownership." You then take our architecture in-memory shared nothing scale out. The more you run that in cloud, the more our differentiation materializes in cost performance benefits. Mm-hmm. If you look at the Capella price performance comparisons to MongoDB and other solutions, you can see that value proposition coming to light in, I need less infrastructure to do the same amount with an application. Now, as we think about our go-forward development with additional technologies that are gonna make that even more efficient, you know, this is a, this is a wave that we're gonna ride for some time. Despite the intensifying of some of these macro dynamics- Mm. Which could have short-term effects on demand, the big picture, drawing people to a value proposition of a platform with lower TCO plays right to, you know, our strengths and what we've been building for some time. Now, could you break this down for those listening in the audience, maybe a customer example at a Q4 that sort of highlights this kind of North Star- Okay. Vision of consolidation? We had a very large financial services company that came to our sales kickoff a couple weeks ago. Mm. This is now a seven-figure subscription customer. Mm-hmm. They were under pressure. Hey, how do we rationalize node counts and things like that? We started talking to them about Capella. We said, "Well, we've got services. We're gonna help you rewrite the applications." We get them into Capella. We've grown that estate. Guy gets up on stage in front of our sellers and he says, "I've now consolidated MongoDB and Redis, and I now run Couchbase with Capella." He had a slide up with the several hundreds of thousands of dollars that he saved this year alone. Mm. I've got all kinds of new use cases. I don't have to employ a large set of database administrators. I've got new use cases where we can just go innovate, we can get them into Capella. By the way, I have massive relational implementations that are costing me too much money. I'm looking at a path to move those into Capella. Mm-hmm. That is the value proposition in action: caching, document database, next generation use cases, mobile capabilities, all in the form factor of Capella, where we manage it on their behalf, and raw operational savings that are material that he's willing to talk about publicly. Capella, I think, playing off the top of my head, has been out for a little more than a year now. In Q4, I think, was the first quarter where the majority of your new customer acquisitions came from the Capella side of the house. You also, I think, spoke to Couchbase customers migrating. The migration activity to Capella is picking up. What are sort of the trend lines that you've seen from the start of the year to the beginning of the year? How do you think Capella is going to play out in calendar year 2023, fiscal year 2024? As I reflect on the year, I think the form factor of a Database-as-a-Service is the consumption model of choice for enterprises. Mm-hmm. We've been admittedly catching up to that. Mm-hmm. Right? Bringing, you know, the consumption model. When I think about the year, I think it was a transformational one in how we think about cloud. I brought in, you know, Gopi, who's been running engineering. There's not an engineer at Couchbase now that's not thinking cloud first. Mm-hmm. The pace of innovation is accelerating. We've got some great things coming. Our go-to-market teams now have Capella top of mind. I could give you a list of our entire ARR base and tell you which customer is ready to go on Capella, which one's considering Capella, and which one is, you know, net new workloads. When we study our, you know, pipeline creation, conversion, we look at things like trials and ease of use. We marry that up with things like our new user interface. I mean, there's a lot of pent-up momentum that points to. Mm-hmm. The value proposition of Capella being realized. We are extremely excited about it. We continue to lean in and learn everywhere we can, but I think it's the value proposition playing out exactly as we thought it would. As we think about the sales motion and when I was working with you on the IPO, you know, one of the themes was historically, Couchbase targeting the enterprise architects, the guy that's sort of designing distributed systems and then ultimately getting to that, you know, getting to developers. I just wanted to, you know, get a sort of progress update on that motion in terms of targeting developers, building that community, if you will, and sort of building off those kind of like that product-led growth that we've seen that like a lot of cloud companies have seen when they launch a managed service offering. Yeah. I think whenever I think about a database, I think about the applications that database has been architected to support. We take great pride in the fact that we support mission-critical applications. If you think about a mission-critical application at Morgan Stanley or another big customer- Mm-hmm. You're gonna have developers. They are the people writing the applications. They need to understand how it works. They need to understand, you know, query and all those things. At the same time, if I'm an enterprise and I'm deploying a mission-critical application that my business is dependent on, I'm gonna have a central team make sure that I have resiliency programs and security. You know, by the way, if I'm gonna spend millions and millions of dollars on this, I'm gonna have C-level engagement and procurement to make sure I'm getting a good deal. I think at Couchbase, we're cognizant of the fact for enterprise, there's gonna be a multi-persona sale. One of the sort of maybe misunderstood things about Couchbase is we've been only architect and not developer. If you go talk to any one of our customers around the world, you're gonna find developers that love the product because of the elegance of design, the simplicity with SQL, you know, the data resiliency, data movement, data orchestration technologies. What we have been unable to do is go developer only or developer first. If you think about our buy from motion, we were a community-driven company, so I would have to go download Community Edition, bring my own infrastruc-- it's not clean. Mm-hmm. If I contrast that with an as a service solution where I can just get online and I start writing applications and you're running that for me, well, that's a completely different experience. I think we're gonna take the value proposition of our product and marry that up with an experience that developers want, and that's how we're gonna be able to drive, you know, mind share and, you know, the product-led growth component of the business that we haven't seen. What we're doing is making sure we're orchestrating that experience with things like UI and embedded documentation, making sure that experience is great. Mm-hmm. Then building the sort of buy from go-to-market motions, developer advocacy, you know, developer relations, and sort of thinking about articulating the value proposition, not just for the generic developer, but how I talk to a backend developer is different than, you know, a frontend developer, or a full stack developer versus a mobile developer. So the sophistication of our understanding and the crafting of the messaging with the consumption model, you know, we're really pleased with the progress we're seeing, and that's only gonna complement our direct touch model. The instrumentation between those is really, really powerful. Yeah. It's 2023, I can't, you know, not ask you the AI question, right? When we think about things like Copilot from Microsoft and some of these generative AI models, it seems like directionally it's gonna improve developer productivity. I was wondering how that you see that playing out in terms of the database layer and what are sort of the opportunities for Couchbase as developer productivity increases, and are there any sort of risks associated to the business from this movement? We see it as a tailwind in three distinct ways. The first, if I take generative AI, we think there's a real opportunity to help migrate applications from non-Couchbase databases to Couchbase databases. One of the barriers that are introduced when people are evaluating that is, yeah, I can see the value, I could potentially see how it's better TCO. I don't know that I have the people to rewrite the application and go through the hard work. We're actually evaluating, can we use some of these languages to do the work of rewriting the application stack knowing that the data model on a relational offload is well suited for that? Mm-hmm. Imagine if we can go to an enterprise and say, "Hey, we can take the hard work out. You know, let's get you into Couchbase on your relational offload, and now you have a platform that you can, you know, innovate on more powerfully for new applications." That's area one. Area two is how do we use AI in general to improve Capella as a service. Mm-hmm. Optimize for customers, start to understand, you know, can we take even more advantage of the underlying infrastructure in better and better ways? We think that's gonna be really compelling as we improve the value proposition of Capella. The third, I would say AI is dependent on massive amounts of data, structured and unstructured. Mm-hmm. As a data company who's built one of the most sophisticated data repositories with data movement technology, we think that's gonna be an opportunity for us as well, probably a little bit further out than the previous two, but you know, certainly material. Just 'cause it's like a next topic and a sort of emerging debate in the category. Historically, if you look at database management, database market, it's been siloed into two groups: analytics, data warehousing, and then transactions, interactions, right? There seem to be more of a movement to unify these worlds, as it's been attempted before. Seems like we're trying to do that again. What's your take on the convergence between analytics and operational databases, and how does that, and where does sort of Couchbase fit into that, in that convergence? We are pretty excited about this, we've been excited about it for some time. If I look at the database market, depending on the market analyst, you've probably got a $60 billion TAM... Mm-hmm. On the operational side. Probably got a similar size TAM on the analytical side. What's emerging is this thing in between that I think is really interesting, real-time analytics. How do I provide insight right now with things that are happening? I may not have the time to put it into an analytic system, but my operational solutions aren't built to provide insight, and I certainly don't wanna slow down the performance of the application that I'm, you know, trying to run analytics against. If you go back, we were probably the first NoSQL solution that talked about analytics as one of the incremental services in our platform. We think there's real value in this niche right now of real-time analytics, and we think the fact that we manage the data and we've got these capabilities is gonna allow us to address that problem and provide even more real-time analytics and rich applications while a person is engaging with that application. We do not see a world where those two things completely combine. I think the capabilities are too different. Mm-hmm. I do think there's gonna be crossover in this area of real time, and we've been, you know, working on this for some time in a JSON native format, which we think is gonna be the one for the future. Big part of how we've been thinking about things for some time, and I think the market is catching up to the capabilities we have on the platform. Yeah, makes total sense. We're running out of time. Conversation's flying by. I wanted to go back to Greg to sort of frame out for us what we think of a popular topic around stock-based compensation, share dilution. How is the company thinking about managing that going forward? Yeah, it's timely question. We just had the comp committee right before the board meeting. Yeah. We got it right off the presses. Yeah. Look, we're mindful of it. We understand that, you know, investors are also watching this closely. We've kind of set a mark with the board about a sort of mid-single digit burn rate. Mm-hmm. You know, we look at obviously stock-based comp as a percentage of revenue, but we're really more focused on the shares out and the dilution. The mid-single digit burn rate is how we're thinking about it this year. Obviously as we see, you know, the stock progress and continue to move up, we think that would give us some benefit and move that lower, and we'll continue to, you know, watch that very closely and hopefully over time we can move from the mid-single digits and bring it down. That's the mark we set for this year. Great. Any questions for the Couchbase management team? Lastly, Akamai, Fly.io, that space to maybe do something structurally, especially given how you guys are structured. Let me just repeat the question. The question on edge computing and where you guys fit into the edge computing ecosystem. I would be willing to bet you a beverage of your choice that you have multiple Couchbase databases inside the mobile device sitting on, in front of you. We fundamentally believe that applications need to go to the edge, and the way that you need to have a database in the right form factor and manage things like, you know, asynchronous connection, we've been in market with that for some time. I think the CDN providers are extending the efficiency of the resources to do it in non-mobile connectivity. You define edge as a small cloud. We have future-proofed our architecture that we can take advantage of whatever compute and infrastructure is out there. You know, we think about fat pipes and skinny pipes and offline and, you know, online. When we talk about distributed applications cloud to edge, we've prepared our platform for some time, and I think this is only gonna provide a catalyst for, you know, additional growth. What I would say is we are on the evolutionary path of non-relational technology. We need a flexible data schema. We actually allow the database to define the schema, and we do think we're right on that path. At the same time, we believe in SQL. We are SQL compatible, and we think it's really powerful that you get a new engine, but you keep the steering wheel, gas pedal, and brake pedal that you're used to running. I think, you know, your two questions really underpin some significant parts of our, you know, differentiation that's core to our platform. With that, we're out of time. Matt and Greg, I really appreciate you giving us the update on Couchbase. Thank you very much. Thanks, Sanjit.