Good morning. We'll go ahead and kick off the next session. My name is Brent Bracelin, the Co-Head of Tech Research here at Piper Sandler. We're pleased to have Couchbase with us. We have Greg Henry, the CFO, and Scott Anderson, SVP of Cloud Growth and Business Operations, AKA Mr. Capella? Yep. Yep. So listen, our thesis on Couchbase is relatively simple. Behind every good application lies a database. In fact, even some bad applications lies a database. But given this kind of microservice architecture, it feels like there's a ton of opportunity to increase your attach rates over time. Don't believe that one database is gonna rule them all. Lots of opportunities here to drive differentiation. Maybe, Scott, we'll start with you. How does Couchbase break through the noise of three hundred, I think, different database flavors on DB-Engines? Yeah. I think we've broken through that noise, especially in the enterprise for Tier 0 and Tier 1 applications, and we've been doing this for the last 10 years, and so kind of our core value proposition is performance at scale, and leveraging JSON is a very flexible data format within that. I think there's an opportunity with the number of technologies that we've released this calendar year, and a great example of that is Capella iQ, which is our enables developers the ability to interact with Capella using natural language to create queries, to create indexes, and then being able to execute those actions, so unlike a third-party chatbot, where you're trying to get code snippets, you're simply cutting and pasting that and trying to put that into an IDE or directly into Capella and creating a SQL++ query. In the context of Capella, though, you're getting that information, basically writing a query in natural language and getting the SQL++ code, and probably the most important thing is the button that says Execute, and being able to get those results immediately within the Capella UI, and that really speeds development, and a lot makes, I think, Couchbase much more accessible to a broader range of developers. It speeds their learning journey to become an expert in using Couchbase overall. What's the adoption of Capella iQ so far? Take rate. Yeah. We're seeing... I I would say it's probably 40%-50% of the people who are using the product as part of a trial. We just introduced on Monday our perpetual free tier here, so before it was bound to a 30-day trial. So extending that, where developers can experiment and prototype for a longer period of time, is they're leveraging our broader set of tools, including iQ. Almost one of every two- Yep customers coming to the platform are actually- They're experimenting with playing with that, and that's a capability that we look to extend kind of every single month, not only into SQL, but asking questions around the state of the database, kind of what's going on, when should I scale, and those types of things, 'cause people just want to interact using natural language. So let's maybe level set the discussion around Capella. Mm-hmm. How long you've been building it? Yep. Walk us through the design, kind of logic behind it. Yep ... and maybe what makes it a little different than some of the other cloud service offerings out there. Yeah, sure. Well, it starts with Couchbase Server, as well as our Sync Gateway capability within that platform. And so we're building it four to five years ago. I would say it's been about twenty months since we proliferated to all three clouds and added a service called App Services, which is our sync capability between Server and Couchbase Lite, which is an embedded database that can run on IoT devices, phones, tablets, and so forth. And so I think your question was kind of what's driving the demand around Capella and the differentiation, I- Yeah. So I think what people look at, and we kind of have two cohorts of people coming to Capella. One, which is our enterprise customers that we have, who are looking to offload the management capabilities and move from really an annual subscription model to a consumption model, which provides some TCO benefits regarding seasonality usage, how can they lower their cost structure around dev and test environments? 'Cause we have features like hibernation, automatic scaling within that environment. For new customers, and where we've driven a lot of our new logo activity for Couchbase has been with Capella, and that's the ability to get up and running, configure a database, have a database endpoint in just a few minutes, and then complementing that with the capabilities of things like IQ that I mentioned before. I think the other aspect is the multi-model capability that's inherent within Couchbase Server, be it a KV access point query, full-text search, vectorized search, hybrid search. The new columnar data service that we launched last month is another capability. The ability to do time series, graph traversal within a single data platform simplifies the environment for a developer, where they can use a single platform and leverage all the access methods that they need to, to support their application. Scott's been busy over the last, you know, four or five years, it sounds like. Very excited about all the features they've added. Yeah. Greg, for you, as you think about kind of this growth engine, 90% growth in Capella last quarter, walk us through the levers of that business from a revenue growth perspective. What are the levers? It sounds like there's a lot of new customers you're adding as well, and then there's a migration opportunity as well. So how does that look? Yeah, so it's a great point. So we have a migration opportunity. We have 86.5% of our business is still in the enterprise, and you can see, based on our ARR per customer, around $250, and having $45 million+ ARR accounts, we have a great set of customers and scaled customers that we have the opportunity to migrate over, and when we migrate them over, we say that a dollar of enterprise becomes a dollar fifty to two dollars of Capella due to the fact that you're now getting the infrastructure and the managed service. So that's an uplift right there. We've also seen from the migrated customers is they tend to grow faster in Capella than they would have in enterprise, and we tried to highlight that at our investor day last year- Mm-hmm. where we showed this $1 million customer, they came all in, and before you knew it, they were over 3X within, I don't know, 12 or 18 months, and so they grew extremely fast, so that's a great opportunity. As Scott mentioned, it's allowing us to access a number of customers that we wouldn't have in the enterprise because of the ease of access and ease of use of Capella and the self-service sort of buy-from nature. And so we're getting new customers on Capella that we wouldn't have had, and again, we see great growth there. The consumption, I know we get a lot of questions around consumption and what's happening. For us, consumption continues to trend very, very well. We're in the early phase of adoption, and if you go back and look at some of, you know, the other cloud-managed service companies out there, they experienced this great adoption rate and grew tremendously over the last four or five years, and only now are we getting to the optimization point. We are not anywhere near that, so we're seeing, again, great consumption from both the migrated and the new logos we're getting. What portion of your existing customers have migrated? Are we, you know- Small. 20% of the way process, 5% of the process? Yeah, I mean, you see 13.5% of our total ARR. We don't disclose it, but it's clearly less than that, because there's a good portion of that ARR that's from new. I mean, most of the customer count that's coming into Capella now is new versus migrated, so we have a- Less than ten. ... tremendous opportunity to still migrate over. And look, we're working on it all the time. We've you know, looked at our entire customer base. We have in three buckets: actively looking at Capella, you know, considering in the future, and then, obviously, we do have a bucket of customers who are not considering right now. Although we've been using this example that we did our single largest deal in company history in Q4 of last year, and at the time the customer said, "We're not interested in Capella. Don't put it in the quote. Not interested." And here we are, nine months later, and we're talking about adding Capella to the existing estate, and they're looking at other things from a Capella perspective for the following year. So things change very quickly. Interesting. Maybe back to you, Scott, here. If you think about the overall kind of database market, one of the questions we've gotten more recently is around open source, right? Mm-hmm. And, I think three years ago, the big debate was: How do you compete against cloud native? Now it's like, well, how do you compete against open source? So maybe walk through the competitive landscape, and how you differentiate versus kind of some of these open source alternatives out there. Yeah, if you look at the licensing changes over the last three to four years, particularly within the NoSQL space, you know, community edition and so forth, I think basically every company is throttled to some extent based off of scale or deployment model. I think when people look at open source, they're they need to be looking at the total cost of ownership, of how do I support that? How do I manage it? How do I patch it, and how do I deal with that? And I think, you know, introducing Capella into the mix- Mm-hmm ... obviously, is a fully managed service, gives us a very competitive offering when you look at TCO relative to open source offerings, which are gonna be inherently self-managed. There's a little bit more risk within there. I think the other thing that we've seen and we've talked about is, when you get to a data platform versus kind of a single access pattern, let's say a cache, right? There are some elements within the database or tech stack that is kinda commoditized from an open source perspective. We've worked very hard over the last 10 years, starting as kind of a cache persistent database, to add a broad set of capabilities, which, you know, we feel very strongly competes incredibly well against any open source or proprietary database. Brent, so Scott and I joined about the same time, so we've been at Couchbase for almost eight years, and so we've been even from the time we got there. It was like the thing at the time was, can open source even be a viable business model, right? We've been sort of living through this open source, and I get why people are asking the questions, and it'll always be there, and we embrace open source. Obviously, we have our own community free version, open source. Mm-hmm. But, I think it's just another thing that is coming up now, and we'll work our way through that as well. Made it almost fifteen minutes without talking about AI, but we have to talk about AI, the elephant in the room. Yeah. A big debate here around what does that app stack look like? The database requirements change as you go from building applications to now building applications with either RAG or embedding an LLM. Like, how is the architecture changing, and is it a radical change, or are there minor things you're doing to help support those new AI apps? Yeah, I think, and Greg and I have talked about it. We've talked about this quite a bit. You know, in a world of AI applications, our strong belief is performance and scalability is gonna be even more critical as we go forward- Okay ... out of the hallmark of Couchbase. So I feel that the market is coming to us from AI in terms of the requirements. And I think as you look at the data processing around AI, looks like agent workflows and so forth, where you're stacking processing on top of processing on top of processing. Each one of those hops, dependent on the database, latency matters the most because you're getting a compounded effect within that overall. So I think that plays very strongly to our memory first architecture, which allows us to perform incredibly fast and continue that performance as the environment scale overall. I think the other thing that we've looked at, and it's been fascinating over nearly two years, I think, since OpenAI ChatGPT launched. If you look at RAG and a number of those processes, I'd look at boxes, and I look at connected lines. And our goal, if we look at this, is: where can we move those boxes into something like Capella data platform, and where can we eliminate those lines? 'Cause each one of those properties, especially if you're going in and out of different systems or environments, as I said before, creates latency- Mm-hmm. creates complexity, and creates risk in the overall environment. So we've made efforts over this last year, and we'll continue to do that, especially with Capella, on how can we bring additional services into Capella to remove latency, simplify the overall environment? I think we have some very exciting things we'll be talking about kind of shortly, later this year, about our approach within that, I think the industry will be really excited to hear about. If I think about the flavors of databases out there- Mm-hmm. I think one of the things that Mongo's done really well is build affinity with the developers. Mm-hmm. It sounds like Capella iQ is kind of helping you catch up a little bit there. Yep ... and is a unique angle for you. But if I fast-forward five, ten years from now, and the machines are actually now creating the applications, not humans- Yep ... how do you build affinity with the machine for to build- Yeah An app with Capella? Let's assume that the machines have an algorithm that is unbiased and is looking very pragmatically at the technology stack that they're choosing from. I think the algorithm that I would write would be looking at: Does it meet my performance needs? Does it meet my cost needs? Is it available? Is it easy to connect with? And I think in that world, I feel, and Greg and I were talking about this, very strongly, that we're set up well. Mm-hmm. The biases move, it allows- Mm ... new players to rise much more quickly because it is simply looking at it in a very pragmatic way, which is: What is the best solution to accomplish my task and to support my application? And I think also, if you think about the prompt or so forth, build my application, leveraging the database that is low cost upfront, that can scale infinitely as my application takes off, I think those are requirements that Couchbase satisfies today and will satisfy in the future. Brent, so we were having this conversation on the way out here. Mm-hmm. I'm like, "This is interesting. Why don't I go to ChatGPT and ask it what the best NoSQL database is?" It says, "Well, it depends on what you're doing," and then it'll list out us and Mongo and Redis and DataStax, but it's very specific about where we- Mm ... where we do well, which is what Scott said, scale and performance. So to his point, if it's unbiased and you're going through there, and you're like, "What am I doing? Mm-hmm. It, you know, this is where it's gonna... You know, I think it's gonna benefit us 'cause we're, we are known- Mm ... as the scale and performance database. Imagine documentation and making sure all your documentation is published online so that- Yep ... they can actually read all that. See it, yep. So see it. Yep. Yeah, super important going forward. I think those agents, as they build it, there's gonna be the marketing material that's out there, but then there becomes the prototyping and testing, where you kind of strip away FUD, marketing, and so forth, and it's coming down to operations per second and the cost of those operations per second. Mm ... and accessibility within that. So I believe it's gonna be a really pragmatic approach in terms of what works, and they're gonna want to demonstrate the value versus just trusting the marketing material on certain aspects. Clearly, some interesting product advantages you have, clear focus on the type of workload that Couchbase and Capella are well suited for. Greg, let's talk about the financials. Mm-hmm. The financial picture is a little more murky here. We've had a tough Q1, a tough Q2. Walk us through visibility, pipeline, what gives you confidence in the rest of the year? Yeah. So, we, we've always said, even before, you know, when we were talking about after Q1, that second half of this year was where the majority of our renewals sit for the year. In fact, we said it was at least 60%, and we tend to upsell at the renewal point, given that, again, 86% of the business is still in enterprise. We also... You know, Matt was talking about the health of the accounts as well, which is the health of the accounts that we were up for renewal in the first half were a little bit more challenging, and that's why we saw some of the slightly elevated loss and downsell that we talked about in Q2. The health of the accounts in the second half, we feel is much better. These are customers that are, you know, not looking at competitive alternatives, that are growing with Couchbase, that have proclivity to grow. And so we feel pretty good about that. We also talked about the fact that we have, in Q4, some pre-contracted ARR that's elevated than beyond normal levels. So we typically will have some. Like, this year, Q1 and Q3 had zero. Q2 had a modest amount. Q4 has an outsized amount because of the deals we did in Q4 last year. We did our single largest customer and another top five customer as well, and they were both of them were on multiyear, contracts with built-in growth throughout those contracts because they know where they're gonna grow, and we've seen the growth pattern. So we're basically just picking up that next year of ARR. But when you factor that in, which is 100% contracted, we see between the health of the pipeline in the second half, the fact that we've got the pre-contracted ARR, which brings the number to a very reasonable and achievable outcome for Q4, we feel comfortable with that. I mean, we got questions about, "Hey, given the first half, why wouldn't you lower guidance?" for example. And look, we run the same process every time, looking at the business, guiding the same way, and we felt it was our sort of fiduciary responsibility to our investor base to say, "Look, this is how we see things." We don't wanna be overly aggressive, but we also don't wanna go overly conservative and create some unwarranted, you know, worry about it. So we feel pretty good about how we're set up for the second half. How much risk is there that you do see a renewal slip or a renewal that doesn't go in your favor? To be honest with you, we haven't had much of that. Okay. It hasn't been a renewals are not happening. Again, in Q1, we saw a few slipped deals, but yes, they... We captured them, but it was not a significant amount. And they were sort of several small dollar accounts. We have many large dollar accounts that are coming up in the second half, and we've also... We talked about this on the earnings call, that we actually have a few early fiscal 2026 customers who have proactively reached out to us to talk about getting their next deal done, and they also have had a history of doing deals, you know, before the renewal date. So that just gives us, again, some more, you know, room to work with in terms of what deal activity is out there. So clearly, the focus was on kind of the renewals and some deal slippage. But if you look at the new business, the new business was very strong. And maybe walk us through what's driving the acceleration. Was there a little bit of an anomaly in Q2 when you see that sharp acceleration in customers, or is the pipeline of new business still pretty healthy? Yeah, I think it was just the way I looked at it is we thought we had the third highest gross ARR in company history in Q2. I think it was a combination of we picked up some of the. We closed almost every one of the slipped deals from Q1, so that was one point. We had very good sales execution, and demand was still good, and so those all led to having a good gross ARR quarter. Unfortunately, we had some loss in down-sell, you know, one that was known but significant, one that was not known, also significant, and so that just sort of muted the net number. But we... You know, if you look at the rest of the quarter, right, we did $5 million net new of Capella, which obviously wasn't nearly as impacted on the loss and down-sell. Best quarter of new logo in company history, single largest new Capella logo in company history. So we had some real positive bright spots that were just, unfortunately, seemingly overshadowed by, you know, one or two of these loss and down-sell accounts. Obviously, your roots go back to ServiceNow, who's done a phenomenal job of balancing margins and growth. Walk us through that philosophy here. How committed are you to driving this path to free cash flow, positive free cash flow and breakeven? Yeah, we're, we're very committed to it, and I think we've hopefully shown that, at, at least in the first half, that the trend is going in the direction that would signal that we are on the path to achieving that. At the same time, look, we start from a position of strength with gross margins that are around 88%, depending on the quarter, and so we are very focused on driving Capella. Even though it would be rate dilutive, it'll be margin dollar accretive. And so we are doing everything we can to push either new customers towards Capella or even continuing to migrate, and we think that will, over time, not only benefit us short term as we get the uplift, but we already see the consumption and the net retention rate we're seeing on those customers, and it's gonna be something that's gonna pull the business along. Pivney, you here, Scott. As we think about the opportunity next year, you've been busy, building, adding features. What are you most excited about on the product side for next year? That's a great question. I think there. We've got some things that we're looking at later this winter that I'm really excited about. I'm not gonna disclose them, but I. As I kinda go back to what I said before, is when I look at emerging technologies in AI, and I think we've seen this multiple times in the industry. I've been in Silicon Valley for thirty years, right? You start with a bunch of point solutions, a lot of complexity, a lot of people figuring it out, and I think there's gonna be some solidification in kind of the AI stack and technology stack. I think there's an opportunity for Couchbase as we pull those different processes and connections into Capella and really simplify that environment. What I'm really excited about is seeing the types of applications that people are going to be able to build. I would say some of the integrations that we're gonna be doing over this next year. I think the advancement of IQ and how we make that a critical component for developers using Couchbase is gonna be really, really interesting. I think, you know, seeing what the developer community can do with RAG and these other things to build these next generation set of applications. I think we have today, with the launch of Columnar, with the launch of our vector capability and hybrid search, as those products continue to mature, to see them being broadly adopted via Capella and even with Couchbase Server, in the case of Vector, and seeing those applications evolve. I'm really excited about those capabilities. That new free tier offering- Yep ... with the Capella iQ, is that really the goal, is to try to just reduce friction and try to stimulate a more- Yeah! -demand? And it was feedback from developers. In some cases- Okay ... it's, you know, "Why do I have to create another account to get another thirty-day trial? I'm in prototyping. Let me go longer at the end of the day. Okay. It gives us the opportunity to observe what they're doing over a longer period of time and drive engagement. I think one of the things that's really important in the kind of perpetual free tier and with developers is, I think some people try to monetize a little bit too early, and my view is always: How can we help you? Just bet that if we help them really, really well, answer their questions, allow them to progress, we're gonna win in the end. So this allows us to have a longer engagement period with those developers, help them build their applications, get the prototype out there, get that application approved, and help them bring that through the dev test and eventually production cycle. Great- Let me just add. So and we haven't even seen the sort of full benefits from a monetization perspective of this, right? Because in the last 12 months, we launched IQ, vector search, Columnar, and free tier, and so these things are fairly nascent. Mm-hmm. And so they're getting used and leveraged, and we're starting to see it, but we haven't even seen the real sort of full power and benefits of all these sort of great things that the engineering and product teams have delivered. Anything else you'd add as you think about investors thinking about next year? Yeah, the only thing we've been saying is this year was a little unique. I talked about the first half, second half dynamic. As we look into fiscal 2026, at least at this point, we see a bigger renewal pool next year, just based on the timing of when contracts renew, which is always a good sign, and it's much more balanced first half, second half. So I think this year, when we look back, will sort of be unusual in terms of what we saw from a first half, second half dynamic. We're out of time here, and I just wanna thank you guys for joining us in Nashville. It's been great. Yep. Thanks. Thank you. Thank you to the Piper team. Really appreciate it. Absolutely.