Greetings, and welcome to the Couchbase Second Quarter Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Edward Parker, Head of Investor Relations. Thank you, Edward. You may begin. Good afternoon, and welcome to Couchbase's Second Quarter 2024 Earnings Call. We will be discussing the results announced in our press release issued after the market closed today. With me are Couchbase's Chair, President, and CEO, Matt Cain, and CFO, Greg Henry. Today's call will contain forward-looking statements, which include statements concerning financial and business trends and strategies, market size, our expected future business and financial performance and financial conditions, and our guidance for future periods. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we will not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks discussed in today's press release and our most recent annual report on Form 10-K or quarterly report on Form 10-Q filed with the SEC. During the call, we will also discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics, is included in our earnings press releases, which are available on our investor relations website. With that, let me turn the call over to Matt. Thank you, Edward, and good afternoon, everyone. On today's call, Greg and I will provide details on our second quarter results, as well as our third quarter and full year fiscal 2024 guidance. I'll start off with a few highlights of our Q2 financial results. Couchbase delivered a strong quarter, once again, beating our guidance across all metrics. I am pleased with the team's execution against our strategy to deliver top-line momentum while outperforming on profitability, all against a difficult economic environment. Total annual recurring revenue, or ARR, was $180.7 million, up 24% year-over-year, up 23% in constant currency, and 5% sequentially. Revenue in Q2 was $43.1 million, up 8% year-over-year and 5% sequentially. Our non-GAAP gross margin remains best-in-class at 87.2%. Non-GAAP operating loss was $9.2 million, and non-GAAP operating margin was four percentage points above the midpoint of our implied guidance range. This demonstrates our focus on increasing efficiency across our business and continued operating expense discipline. As we cross the halfway point of the fiscal year, I'm especially proud of the progress we're making on the four key priorities we laid out for fiscal 2024. Focus on top-line growth, increase the mix of Capella, drive sales and marketing efficiency, and accelerate the pace of leverage in our model. While there is much more to do across all of these to reach our full potential, our momentum is building. We believe we are set up for a strong second half of the year, and more importantly, beyond. We have many initiatives underway to continue our progress, but I want to touch specifically on the exciting opportunity we see with AI and how it will be a tailwind for all four of our key priorities. To begin, databases are the unsung heroes of AI, because without data, there is no AI. The fact is, behind every application is a database. From day one, we have architected a cloud database platform that enables demanding applications to not only perform but provide rich, personalized, differentiated experiences for end users. Combining operational and analytical capabilities, our multimodal platform also seamlessly integrates advanced services like indexing, eventing, full-text search, and more in a single solution for developers. Our platform and unique architecture are perfectly suited for the massive performance and scalability requirements that AI applications require. We're investing in additional AI capabilities that will further extend the value of Couchbase as a cloud database platform for modern AI applications. Generative AI is the next great catalyst for modern applications. Developers and customers are exploring ways to build AI-powered apps that can run anywhere with our platform. To cement our long-term position as a destination for AI applications, our AI strategy has the following four pillars. First, drive developer productivity and adoption. Second, optimize AI processing. Third, enable AI-powered apps anywhere, including at the edge. And fourth, build and foster a vibrant AI ecosystem. With that backdrop, I'm excited that last week we announced a private preview of Capella iQ, which adds generative AI capabilities to our Capella offering to greatly enhance developer productivity. Developer productivity has never been more important, given the pressure to rapidly innovate and deliver increasingly more complex workflows. This new capability in Capella will allow developers to use natural language prompts to quickly and easily generate queries and code, sample data sets, and unit tests. What used to take a developer hours to code, takes minutes with Capella iQ, moving from thought to code in just a few clicks. I encourage you to visit our website and watch the demo video of Capella iQ to see just how profound of an impact the feature will have for developers. Leveraging generative AI to build and test applications more quickly and more easily in Capella leads to higher developer productivity and quality, with the ultimate result being faster and more efficient time to market. We expect this will drive increased Capella adoption and consumption. Our vision for Capella iQ is to be a copilot for developers that makes intelligent recommendations during the development process, and we will continue to build out and enhance this important new feature. On the go-to-market side, we continue to focus on improving efficiency by driving ongoing operational improvements and investing in our partner ecosystem. AI is undoubtedly gaining momentum across our partner ecosystem, which is why last week we also announced our Couchbase AI Accelerate Partner Program. This program is designed to make it easier for customers to build AI applications with Capella and support integrations with the broader AI and data ecosystem. It reduces friction for customers who are building and deploying models for AI applications and includes technical, enablement, and go-to-market opportunities for participating partners. Additionally, we continue to deepen and expand our relationships with our strategic partners, who are starting to see next-gen AI applications deployed on their clouds. At AWS, we're developing ongoing ways to reach and serve our customers through an increasing number of go-to-market activities around joint asset creation, developer engagement, and AWS Summits around the world. I'm happy to share that Couchbase is now a Google Cloud Premier Partner. The aforementioned recent announcements illustrate how exciting the AI opportunity tailwind is, and how it drives further progress against our four key priorities for the year. While it is still early days, the potential for AI to drive significant transformation is enormous. That said, we continue to deliver additional important Capella innovations for customers at a rapid pace. Last week, we also announced several other new updates to Capella that further enhance the developer experience, increase efficiency, and make it easier to operate the cloud database platform. Our differentiated technology remains at the heart of who we are, and we will continue to work hard every day to rapidly bring market-leading enhancements and capabilities to our offering. Now, turning to customer wins, I am pleased with the breadth of activity across industries and our product portfolio that we saw this quarter. Starting with Capella, our managed service continues to gain momentum. Once again, Capella represented the majority of our new logos and was an important contributor to our strong net retention rate. In Q2, we saw new Capella wins across many industries, including financial services, academia, manufacturing, telco, high tech, and gaming. We also continue to see existing customer migrations and expansions with Capella. During the quarter, leading global fintech company, MoneyGram, decided to expand its partnership with us and invest in Capella to offload database management and further improve TCO. Switching to enterprise, we were excited to add several impressive new logos during the quarter, including a large banking group in Europe. This customer had to migrate away from Oracle because its legacy relational database was not delivering the desired performance. This customer is using Couchbase for its derivatives clearing application and selected our platform for its superior performance and speed. I'm also pleased that we won an AI-powered application with Tondo Smart, a fast-growing technology company in Israel that delivers a connected devices platform for smart cities. Tondo selected Couchbase to power its cloud-based smart city management platform, including AI for city sensor operational excellence use cases. This customer needed a cloud database platform that could deliver high performance, scalability, and mobile use cases. Only Couchbase could deliver on these needs with the most compelling price performance. We also saw significant enterprise expansions with long-term customers, including a large Australian multinational banking company, one of the U.S.'s largest financial services companies, and a major consumer electronics retailer. Additionally, Tesco, a British multinational grocery retailer and one of the world's largest retailers, has signed a multi-year agreement. Trendyol is the leading multi-category e-commerce marketplace in Turkey and one of the top e-commerce platforms in the world. Recently, Trendyol significantly expanded its partnership with Couchbase to help support many of its most important applications, including its online shopping cart, delivery tracking, product catalog, coupons, claims, inventory management, pre-orders, and customer personalization. This was one of the biggest expansions in our history, and we are pleased to be such a valued partner for Trendyol's growing business. Now let me provide a few thoughts on the near term demand environment. As we discussed over the last two quarters, the macro uncertainty continues to present headwinds for IT spending, and we continue to see longer deal cycles, extra layers of scrutiny and approval, and customers electing to buy in smaller increments. These trends persisted through the end of the quarter, but I am very pleased with our execution against these headwinds. That said, we continue to see a healthy pipeline of deals and interest in our cloud database platform, driven by trends such as the rapid adoption of cloud, desire for greater cost efficiency, and IT modernization. Though it is early days, we believe AI will drive a transformational impact for businesses as customers reimagine existing applications and create net new ones. AI requirements of extremely high performance and massive scale, coupled with the convergence of operational and analytical capabilities, are the foundational elements of how we are architected. These dynamics are creating additional tailwinds and opportunities for us as a company, while further leveraging the very strengths that make us who we are. You've often heard me say that Couchbase has been built for this moment, and I think that's as true today as it ever has been. In closing, we're making progress on our initiatives. We're committed to focusing on what we can control, and we're nimble in navigating areas we cannot control. We remain dedicated to delivering against our key priorities for fiscal 2024, focus on top line growth, increase the mix of Capella, drive further sales and marketing efficiency, and accelerate the pace of leverage in our model. Before handing the call over to Greg, I want to emphasize one of our core values that I've repeated many times before. At Couchbase, we attack hard problems driven by customer outcomes. With that, I'll hand the call over to Greg to walk you through our results in more detail. Greg? Thanks, Matt, and thanks everyone for joining us. We had another strong quarter as we beat guidance across all key metrics. Despite the elevated level of deal scrutiny that Matt mentioned, we are pleased with our execution, our dedication to delivering value to our customers, and our ability to navigate the environment while driving healthy outperformance in our operating loss guidance. I'll now walk you through our second quarter in more detail before providing our guidance for the third quarter and full year. Total annual recurring revenue, or ARR, was $180.7 million at the end of the second quarter, representing 24% growth year-over-year, or 23% growth year-over-year on a constant currency basis, and 5% sequentially. Revenue for the second quarter was $43.1 million, an increase of 8% year-over-year and 5% sequentially. Recall that revenue in the year ago quarter benefited from strong subscription revenue growth, as well as outperformance in our on-demand business and strength in professional services, both of which are non-recurring. Subscription revenue for the second quarter was $41 million, an increase of 11% year-over-year and 6% sequentially. Professional services revenue for the second quarter was $2.2 million, a decline of 20% year-over-year and 11% sequentially, consistent with our expectations following outsized strength in professional services in fiscal 2023. We continue to expect contribution as a percentage of revenue in fiscal 2024 to be below recent levels. Our ARR per customer performance in the second quarter was $261,000, up from $254,000 in the first quarter, up 14% year-over-year and indicative of the growing wallet share we have with large customers. As a reminder, as Capella continues to grow in revenue contribution, we expect ARR per customer growth could moderate or decline in future quarters. Our dollar-based net retention rate, or NRR, continues to exceed 115%, driven by strong renewal and upsell activity across our base of larger enterprise customers. Our NRR has been steadily improving thanks to Capella, and our in-quarter NRR was the highest in the last three years. We exited the quarter with 691 customers, an increase of 12 net new customers from the first quarter. As Matt mentioned, Capella once again represented the majority of new logos in the quarter, and we grew our Capella customer logo count by more than 20% from the first quarter. We're encouraged by the strength of our new logo pipeline and remain confident in our ability to reliably expand logos, as evidenced by our consistent ARR growth and our strong retention metrics against a more challenging spending environment. In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses, results of operations, and share count are on a non-GAAP basis. In Q2, our gross margin remained strong at 87.2%. This compares to a gross margin of 88.7% a year ago and 86.4% last quarter. Generational opportunity we see in front of us, but are focused on improving the efficiency of our growth. We are pleased with our execution on this front, as our expense discipline and early benefits from our cost-saving initiatives resulted in us outperforming our operating loss outlook. Our sales and marketing expenses for Q2 were $28 million, or 65% of revenue, compared to $24.9 million, or 63% of revenue a year ago. We continue to thoughtfully invest in our as-a-service offering, as well as in additional features to bolster our platform. General and administrative expenses for Q2 were $6.3 million, or 15% of total revenue, compared to $6.5 million, or 16% of revenue a year ago. Non-GAAP operating loss for Q2 was $9.2 million, for a -21% operating margin, four percentage points higher than the midpoint of our guidance, compared to an operating loss of $8.4 million, or a -21% operating margin a year ago. Non-GAAP net loss attributable to common stockholders for Q2 was $8 million, or -17 cents per share. Turning to the balance sheet and cash flow statement. We ended Q2 with $155.8 million in cash, cash equivalents, and short-term investments. We remain well-capitalized to execute against our long-term growth strategy. Our remaining performance obligations, or RPO, totaled $170.6 million at the end of Q2, an increase of 2% year-over-year. We expect to recognize approximately 67%, or $114.4 million of total RPO as revenue over the next twelve months, which represents 11% year-over-year growth. Operating cash flow for Q2 was -$500,000, and free cash flow was -$1.6 million, or -4% free cash flow margin. We are pleased with the progress we have made in our free cash flow profile and remain committed to driving further improvement. Now, I will provide guidance for Q3 and the full year fiscal 2024. As Matt discussed, we continue to see solid momentum, and our pipeline remains strong. Furthermore, we anticipate that our investments in our product capabilities, partner ecosystem, and go-to-market motion will complement our momentum in fiscal 2024. That said, we are mindful of the macro headwinds and continue to carefully monitor their impact on our business, including bookings, pipeline conversion, retention and expansion rates, deal sizes, sales cycles, logo acquisition, and sales productivity. As such, our outlook maintains a consistent degree of true conservatism across all of those metrics to account for the uncertainty, as well as lack of visibility into how the macro may impact consumption trends for our emerging as-a-service offering. With these factors in mind, for the third quarter of fiscal 2024, we anticipate ARR in the range of $185 million-$188 million, which represents 23% growth year-over-year at the midpoint. We expect total revenue in the range of $42.7 million-$43.3 million, or a year-over-year growth of 12% at the midpoint. We expect a non-GAAP operating loss in the range of -$9.9 million-$9.1 million. For the full year of fiscal 2024, we are raising our ARR outlook and now expect ARR in the range of $195.5 million-$199.5 million, or 21% growth at the midpoint. This compares to our prior outlook of $191.5 million-$195.5 million, or 18% growth at the midpoint. We continue to expect total revenue in the range of $171.7 million-$174.7 million, for a year-over-year growth of 12% at the midpoint. As a reminder, we've historically seen variability with respect to the implementation timing of certain enterprise deals, which impacts our revenue visibility along with new or migrated Capella customers. We therefore continue to view ARR as a better indicator than revenue of the strength of our business. While we anticipated that contribution from services revenue in fiscal 2024 would be below recent levels, we now expect this dynamic to be more pronounced this fiscal year due to customers electing fewer services as a result of macro-related budgetary pressures, as well as the naturally lower services attach rate with Capella. Finally, we are decreasing our operating loss outlook and now expect a non-GAAP operating loss in the range of -$42.5 million-$38.5 million. With that, Matt and I are happy to take your questions. Operator? Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from Matt Hedberg with RBC Capital Markets. Please proceed with your question. Great, guys. Thanks for taking my questions. Congrats on the results here. Matt, I want to start with you. I think the way that you outlined kind of the four ways that you're thinking about GenAI was super helpful, and I think in your script you mentioned you plan to monetize it with sort of increased Capella adoption and consumption. But I'm wondering, for some of the other products, like Capella iQ, is there an additional monetization strategy with that? Matt, good to hear from you. Simple answer is that'll be part of the Capella offering, and we expect to monetize it with additional consumption, more developer reach, better go-to-market efficiency. So we think there's a compelling impact to the business, but as far as the service itself is, will be part of, again, part of Capella. Great. No, that makes, that makes a lot of sense. And then, you know, I know on the hyperscaler front, you know, I know you've had a lot of progress with AWS, so it was great to hear your comments on GCP this quarter. I'm just sort of wondering, you know, when you're seeing deals come in through partners like that, what, what does the profile of those customers look like? And how would you talk about sort of the pipeline for those hyperscaler type deals? Yeah, Matt, so we're excited about the ongoing momentum with AWS. Obviously, you know, the bar that we got over with GCP and their premier program, you know, the announcement with our AI, specific partner program and the benefits that are gonna bring there. Investing in the ecosystem and, you know, thinking about our customers and developers and the total tools they wanna use, partnerships are gonna continue to be a big part, a big part of our business. Quite frankly, we're seeing success with partners across all deal types, you know, up to and including our very largest customers that are working on Capella migrations, you know, all the way to, you know, our 5K starter packs in, you know, relatively new regions for us. You know, so we think a lot about not just partner source, but partner influence. You can appreciate that all of the, you know, partners that we work with have tremendous reach and credibility with customers, and the extent to which we can, you know, build joint solutions and have strategic account plans and do territory planning with them, all of which we're seeing, you know, across the business, really beneficial to us and a big part of that go-to-market efficiency that we've been talking about for some time. Thanks a lot, Matt. Well done. Thank you. Our next question is from Ittai Kidron with Oppenheimer. Please proceed with your question. Thank you. Greg, I wanted to ask you about revenue, ARR and cRPO. So looking at your revenue growth, I think it's the fifth quarter in a row where it's declining, decelerating from over 30% to now under 10% on a year-over-year basis. Your ARR, however, is holding quite firm at the 23-24 range, and your cRPO is in the teens, in the low teens. So help me reconcile the three. How should I think about the evolution of these three key metrics going forward, and why are they so far apart, I guess? Yeah. Hey, Ittai, good to hear from you. Yeah, well, first, I'd point out just ARR obviously does not include services or any of our on-demand business, whereas revenue and RPO, cRPO would pick all that up. So there is a little bit of sort of apples and oranges there. And again, just for the revenue perspective, particularly for this quarter, there was a couple things. Our subscription business continued to do well. Services, as we talked about in our script, has been more impacted because of the macro, and so the demand is less. So we're seeing that. And obviously, last year at this time, just from a year-over-year comparison, we sort of peaked from both a subscription revenue and a services revenue, and that's not repeating. I think the subscription revenue, software revenue has been reasonably, reasonably constant, and we think we will continue to see an improvement on the subscription revenue as we go forward. On RPO and cRPO in particular, when we get towards some of the later stages of our contracts, whether they're one year or multi-year, that's when there's sort of less in the remaining performance obligations. So we have a couple of our largest customers that are up for renewal between now and Q1, and we think that we will start seeing an improvement on the RPO as well. Okay, and just to be clear, you said Capella is not part of ARR? No, Capella is part of ARR. What's not part of ARR is professional services, any on-demand business. On-demand. Got it. And is it common to see Capella on-demand, or it's mostly one-year contracts? I'm sorry, could you repeat that? Capella, is it, is it common to see consumption there on-demand, or is it mostly one-year contracts or one or three-year? It's the largest majority of the Capella business today is our annual credit model- Got it. -which would fall into ARR. Got it. Okay. Matt, one for you on the competitive side of the equation. Help me understand what you're seeing out there and what is changing for you. You know, some of your competitors are doing very well in the marketplace. I'm just trying to think about where you see your place in the market, and then on the competitive front, anything from a win rate standpoint would greatly appreciate it. Thank you. Look, Ittai, generally speaking, I'm pleased with how competitive we are. If we think about the nature of applications that we serve, the demand for high performance and scalability and cloud-to-edge architectures have never been, you know, more prevalent than they are today. I think what's exciting to us is the additional, what I would call, at-bats that we're getting with Capella and moving, you know, down market and bringing the full power of the Couchbase platform and all those benefits with the consumption model that is often preferred by, by customers, certainly, you know, a majority of them. But when we get into, you know, competitive situations and we, you know, do proof of concepts and show the power of the platform and the integration of the services, the value proposition, the TCO dynamics, the do more with less, I, I would say in some ways those value propositions have never been more relevant than they are now. And I think it, you know, increases the value that people see in our platform, both existing and, and new customers. So, I'm pleased with how we compete. You know, we wake up every day with the appetite to, you know, do more and do better, but we're well positioned with, you know, dynamics like migration to cloud, modernization, and many other things that we've talked about before. Very good. Thank you. Appreciate it. Thanks, Ittai. Thank you. Our next question is from Sanjit Singh with Morgan Stanley. Please proceed with your question. Great, thank you. This is Theo in for Sanjit. I first have a higher level question, sort of on the AI strategy that you laid out. And I mean, it really resonates, and the way that we're trying to sort of think about these impacts are mostly in two ways, right? The new workloads related to AI apps, and then the migration, which in many cases gets accelerated through AI. When you're thinking about kind of those two opportunities, and I think you spent a lot of time talking about the first one of those two, where do you see kind of the bigger opportunities one or two years out? And then what are you doing today to position for both or maybe for the bigger ones more so than the other ones? Anything that you can kind of share around your strategy, both on the migration side as well as kind of the new workload side that you already talked about? Yeah, look, appreciate the question. I think if we step back and say, you know, why are we all so excited about AI? We think it's, you know, the next great catalyst for applications, both existing and new. And we talk a lot about the demand for rich, personalized, customized applications that we use in our personal and professional lives, and the demands on the database to be able to bring all that data to light, combine operational and analytical capabilities, leverage services like indexing, eventing, and search in a single platform, that's never been more relevant. If you think about the amount of data that's gonna need to be processed to further bring light with even more personalization and customization for future applications, that lends itself very well to the Couchbase platform that was built for scale and performance from cloud to edge, with TCO benefits. We're spending a lot of time with large customers today on their future plans of AI, and us being a platform that is strategic to them, you know, for their existing applications. At the same time, as we mentioned, you know, in the prepared remarks, we had a net new customer in an emerging geography that is an AI company for smart cities, that realized that Couchbase was the platform that they needed to process all their data and enable the application that they're building. So as we have always done, we take an architectural approach to the data layer, and then upon a solid foundation, integrate services in a compelling way for both customers and developers. You combine all that with the, you know, Capella consumption model, and we're really bringing a lot of capabilities together in a seamless way that, quite frankly, other vendors just aren't architected to do, certainly at the scale and performance. And so I think we're going to be able to get at both migrations and new workloads. You know, as we look at the effect on our business, because of the size of some of our existing customers, when we monetize a migration, that can be a little bit of a bigger contribution out of the gate. But we certainly spend a lot of time and attention on new logos. So, you know, we'll be able to track the trending of which one is a bigger impact over time. But you'd be hard-pressed to find any customer that is thinking about a future data platform strategy that isn't inclusive of AI. And we think an integrated platform is the winning strategy, and we're excited about our path forward. Makes a lot of sense. Then maybe just one quick follow-up question. Just when I'm thinking about reconciling the customer numbers, I think you had 12 customers this quarter, which was a step up from last quarter, but still maybe compared to your commentary around pushing down market, around kind of the new customer momentum, particularly around Capella, seems still a little bit low compared to some of the levels that you put up last quarter. Is there any way that you can help us think about sort of the new customer signings piece versus the customer churn piece? Is that churn piece still kind of weighing down that net add number, or any kind of more granularity you can share on that, that would be super helpful. Yeah, happy, happy to give some color there. So, so to your question, yes, we are still seeing a bit more churn on our smaller customers like we did last quarter, which are macro impacted. They do not have a big dollar impact. Our growth ads are performing well and in line with what we've seen historically. And as we mentioned in the script, you know, Capella, the Capella logo count actually is up 20% quarter-over-quarter. So we're actually very pleased with how Capella is performing. We're still working through some of that, you know, smaller business, churn, but overall, we think that, we're going to start seeing, you know, sort of more favorable, impacts to the customer count as we move forward through the second half of the year. Great, that makes sense. Thank you. Thank you. Our next question is from Raimo Lenschow with Barclays. Please proceed with your question. Perfect. Thank you. Can you speak a little bit to what you see in terms of pipeline and how pipeline is evolving? It looks like this quarter, you know, things continue to improve for you. But, like, if you think about, like, early-stage pipeline, as you think about the back part of the year, what are you seeing there? And then I have one quick follow-up. Raimo, the simple answer is we feel really good about it. Hopefully, you've come to appreciate the level of detail that we have and how we measure that. Everything from expansions in the back half, how we expect those to, you know, grow, migrations to Capella, you know, new logos, and understand the dynamics that are different there. You know, the early stage Capella progression in terms of, you know, trials and into active deals. And so I think as we look across the, you know, entirety of the pipeline, both in terms of size, scale, velocity, those metrics look really good, and we feel confident about the demand of the product and quite frankly, the execution of the go-to-market team to continue to, you know, grow and nurture the pipeline for, you know, the back half and beyond. But overall, I think it's an exciting mix of opportunities and, you know, indicative of, you know, the optimism we have in the business as we go forward. Yeah. And then, if—as we think about professional services going forward and, you know, when you speak about revenue, subscription revenue is obviously better, like, how do you think about that, the glide path there, in terms of, you know, that, you know, professional services obviously then going to be a little bit of a headwind all the time. Like, how do you think about managing that journey, Greg? Thank you. Congrats from me as well. Yeah, thanks, Raimo. Look, we obviously think professional services is key to our business. We believe it actually generates more software sales long term for us. But right now, what we're seeing is customers, when they're budget-constrained due to macro, they are opting to continue and grow on the software side, but a little bit less on the services side. So services, as we talked about at the beginning of the year, would be slightly down versus last year, given we outperformed last year. There's probably been a slightly bit more of a headwind than we expected. The second part of that is, as we get more and more into Capella, given that it's a service into itself, that they, the customers are going to have a less smaller attach rate to the Capella business from a service perspective. So I think both of those things are starting to play right now. But look, we still think services are important for customers, and we'll continue to push them, but we're very pleased at how the software part of the business is outperforming while services is, you know, slight offset to that. Yeah, very clear. Thank you very much. Congrats. Thanks, Raimo. Thank you. Our next question is from Rob Oliver with Baird. Please proceed with your question. Great. Good afternoon, guys. Thanks for taking my question. I had two. Greg, I'll start with you since there was one earlier on customer count. So the 20% growth in Capella customers, you know, certainly sounds great. And then just from some of the other commentary you guys made, trying to triangulate, it feels like the contribution might be about half new logos and half existing customers on Capella. You know, is that right? And how should we think about that, you know, going forward? I know you guys have said Capella is gonna be, you know, the single best source of new logos for you, but sort of in the coming quarters, how should we think about that split? From a new logo perspective, Rob, is that where- Yes. Uh, I- Yeah, now I'm thinking more Capella adds. It seems like, you know, 'cause you guys said 20% growth of Capella customers, but based on your customers added on the commentary around that, some of them aren't new logos. So I just wanted to get a sense of how that split is. Yeah, I think so. A couple things. One is we do expect that Capella will continue to be the majority of new logos as we go forward into the second half of the year and into next year. That's just where we're seeing the most momentum. I would remind you that we do have customers that have both Enterprise, Couchbase Enterprise, and Couchbase Capella. And so you know, they're in a total customer count, we only count them as one, but obviously, when we give you the Capella customers, everybody who's got Capella, but some of them also have Enterprise. So just when you're trying to- Yeah S ort of reconcile the math, just to be aware of that. But again, we expect there to be the majority of that being Capella. But we're still, obviously, as Matt was talking about with the pipeline, we still have a good pipeline around enterprise, you know, business, too. So we still plan on, you know, driving new logo business there. In terms of if you think about ARR and revenue, clearly the migrations will be the larger, you know, 'cause given our enterprise nature and the large customers, that will make up the bigger amount in the near term until the newer customers get ramped up. Okay, helpful. Thanks. And then, you know, Matt, you've gotten a couple questions on AI and some on the macro already. So I guess I'll ask about, you know, Capella consumption trends interquarter, you know, kind of what you're seeing in terms of customer usage for those that adopt the Capella. Any color there would be real helpful. Thanks, guys. Rob, we've said a couple times that we have really high expectations for Capella, and we're pleased with the momentum. In terms of consumption, I would say that's meeting, if not exceeding even our internal expectations. I think it's proving the value proposition of do more with less, getting people focused on application development while we run the database. I think they're realizing the benefits of, you know, the underlying Couchbase platform faster with more efficiency. You know, we've talked about the, you know, it driving the majority of net new logos. We're also seeing, you know, improvement on net retention rate driven by, you know, the success of Capella. You know, your comment on balancing migrations and new logos is really important to us. While we are certainly focused on and excited on new logos, an area that we will do better, we see some really healthy migrations on Capella. In addition to the ones we provided, you know, one of the largest hospitality companies in the world that's been an existing customer of ours, aggressively pursuing next generation apps with Capella for the value proposition of scale and performance and cost effectiveness. And that's just, you know, one example. As we look at the pipeline and the planning that we're doing with, you know, existing customers while managing the pipeline of new, you know, we're looking at consumption dynamics in both cohorts, as if you will, and my comment on exceeding expectations actually pertains to both, which is something, you know, adding to our excitement about Capella overall. Great, helpful caller. Thank you very much. Thanks. Thanks, Rob. Thank you. Our next question is from Jason Ader with William Blair. Please proceed with your question. Yeah, thank you. Good afternoon, guys. I just wanted to ask about the go-to-market side. I know we talked a lot about Capella here on this call, but are there any specific initiatives on the go-to-market side that are helping you get in front of new enterprise customers? Which still seems to be like, you know, a challenge for you guys to get in front of, to get the at bats and to get in front of those prospects. Yeah, Jason, I would say there's probably not a thing that we're doing on the go-to-market side that isn't focused on getting in front of new customers. Everything from, you know, demand, announcing new capabilities, building our pipeline, establishing channel programs, investing in geographies that are relatively new to us, where we're seeing disproportionate demand and, you know, and faster return. I think, you know, one of the things that we're very mindful of is, you need a compelling event for an application to be developed. And for the applications that we serve, in a lot of cases, they're truly mission-critical, and there's a time element to that initial land. We've talked about shortening that quite a bit with Capella. But our teams are maniacally focused on new customer acquisition and managing the pipeline. You know, there's not an hour that goes by at Couchbase that we're not, you know, thinking about how to get better there. So, as Greg mentioned, we expect that to improve. We're seeing the leading indicators that we would want, and I think it's an area that I would say unquestionably we can and will do better as we go forward. Just following up on that, Matt, can you talk about any geographies? You, you mentioned sort of, you know, disproportionate success in certain geos. Anything that you can expand on there? Yeah. Hey, Jason, it's Greg. I'll add it. I mean, look, there's a couple regions in particular. So, we actually broke out our sort of EMEA region, and we run it as Europe and then TIMEA, which is Turkey, Israel, Middle East and Africa. And we're seeing very good activity there. We have a great leader there. And then the other one, which we've been investing in the last couple of years is Asia Pacific, which has also been doing very well. And as you can imagine, because we're newer there and newer technology, we're seeing a lot of Capella activity and a lot of new logo activity coming out of Asia Pacific. Those regions are really starting to, you know, become, you know, much more impactful to the business, as we've invested there over the last few years. Thanks, guys. Good luck. Thanks, Jason. Thank you. Our next question is from Brad Reback with Stifel. Please proceed with your question. Oh, great. Thanks very much. Matt, any reason you wouldn't break Capella out next year? In what sense, Brad? Like, reporting wise? Yes. We expect to break that out when we're ready and are excited to be at the point we can do that. Okay. Switching gears, thoughts around using M&A to gain scale? Thanks. Yeah, Brad. I mean, I think we pride ourselves in being agile with our strategy, and we're always doing build, buy, partner analysis. You know, it's something that would be an ongoing consideration for us, and as we think particularly about M&A, there's benefits beyond scale, like in improving the platform in a particular area. So I'd say it's part of what we do, but I'm not prepared to make comments beyond that. Great. Thanks very much. Thanks, Brad. Thanks, Brad. Thank you. Our next question is from Taz Koujalgi with Wedbush Securities. Please proceed with your question. Hey, guys. Thanks for taking my question. One for Greg. Greg, I know you don't focus on billings as much, focus mostly on revenues and ARR, but if you look at the billings number, this quarter looks a little bit light, I think seasonally, down sequentially, which is, I believe, never happened before. So anything to call out there on the billings metric? Any headwind on the invoicing duration front? No, not really. I would say, Taz, I mean, again, we've tried to say that billings for us is a bit noisy. We don't focus on that too much. We think ARR is a better measure, and a lot of it has to do with the timing of some of the renewals, because we are still, y ou know, the predominant part of our business is the enterprise business, and the renewal timing, we're annual upfront. When we get those billings is when we do the renewal. So no, I wouldn't read into anything about the billings. Durations are, you know, steady, if not slightly improving from sort of the lows we saw in the sort of worst of the macro. A nd then just one follow-up for Matt. Matt, you've seen strong strength in Capella in the last few quarters. And on the go-to-market motion for Capella, is there a self-service element where people are signing up Capella without requiring a sales guy or a sales rep to engage with them? If you just comment on any self-service motion with Capella traction versus a direct sales selling Capella to your customers. Yeah, Taz, it's certainly part of the Capella value proposition, what I would say, complementing our, you know, more direct, highly instrumented go-to-market model, enabling developers to come to us in their evaluation, initial purchase, et cetera. So it's certainly something that we're actively building as a complement to the overall business. And, you know, one of the benefits that we see there is not just for new logos, but expansion activity, where people within our existing accounts can get at, you know, new applications faster. So, we're focusing a lot on what we call the developer experience and getting into product-led growth, all of which is possible with, you know, the Capella offering. And, we're excited about the instrumentation we have in place and the leading indicators of what that will do to the overall business. Got it. Very helpful. Thanks, guys. Thanks, Taz. Thank you. Our next question is from Howard Ma with Guggenheim Securities. Please proceed with your question. Thank you. Greg, ARR guidance assumes that you add about the same amount of net new ARR in the second half of the year as the $17 million added in the first half. Can you remind us if new bookings is normally more back half weighted? And if so, are there any offsetting factors this year that would make the two halves more equal? Yeah. Hey, Howard, appreciate the question. Look, obviously, we feel good about the ARR performance and even, even the ARR guide and the outlook we have in the second half. To your question about the bookings, yes, there is slightly more weighted towards the bookings in the second half, particularly Q4, tends to be our largest bookings quarter. Again, this is, this is the guidance which we feel good about, and as we've stated before, we, you know, set up guidance to hopefully, at a minimum, meet that, if not beat it. And, again, we feel good about the momentum we have heading into the second half. Okay, great. Thanks. And for Matt, do you think new GenAI capabilities could accelerate your new customer acquisition engine near term? Or, you know, for instance, do you have any evidence that Capella customer prospects are placing more weight on capabilities such as coding copilots when choosing a database management system? Or is GenAI more of a mechanism to drive expansion among existing customers? Thank you. Howard, I think the simple question or simple answer to the question is yes. We were excited to announce Capella iQ. You know, I would tell you that the early sign-ups for private preview have exceeded my expectation, which I think is indicative of, you know, new customer activity. If you think about the value proposition of Capella and just making it so much easier for developers, so much more efficient, to get the full benefit of Couchbase, that's really important to us and, quite frankly, something that we think is gonna add a lot to how people think about and then directly and quickly experience Couchbase. I think it's gonna be an accelerant on both sides, new and migrations. Great. That's encouraging. Thank you. Thanks, Howard. Thank you. Our next question is from Rudy Kessinger with D.A. Davidson. Please proceed with your question. Hey, thanks for taking my questions. On Capella, I know I speak for everybody on this call regularly awaiting, you know, further metrics you can share. Could you at least comment, maybe directionally, just how Capella has trended as a percentage of new bookings? Yeah. Yeah. Hey, Rudy, it's Greg. Good to hear from you. Yeah, look, again, Capella, every quarter, becomes a larger percentage of pretty much every metric, whether it's bookings, revenue, ARR, or customer account. It just continues to grow, and so, w hich is what we expected. So, yeah, it just becomes a bigger, bigger component every quarter because it's growing faster than the rest of the business. Okay, fair enough. And then on the ARR outperformance in the quarter and the $4 million raise for the year, what's the primary driver there? It sounds like that is primarily consumption exceeding expectations, but I know FX also flipped to a 1% tailwind in the quarter. Did that have any impact on the $4 million raise for the year? A little bit, not as much. I think it was two things. I think it's the Capella acceleration. We talked about the net retention rate continuing to improve and it being the best in three years. So that was part of it, driven by Capella. But Matt also referred to some large enterprise deals we closed in the quarter with some very material expansion. So it's really, again, it's a combination of both, both. I see it as sort of just broad-based performance in the quarter, quite honestly, in terms of, you know, where we had set guidance. The pipeline's strong, so, you know, we're again excited for what we did here in the second quarter and the second half outlook. Thank you. There are no further questions at this time. I would like to hand the floor back over to management for any closing comments. Thanks, operator. To recap, we had another strong quarter. We remain excited about our opportunity with Capella due to some very big trends in our favor: the rapid adoption of cloud, desire for greater cost efficiency, IT modernization, and of course, AI. We are cognizant of the macro environment and are sharply focused on execution during times like this, while also building for what we believe will be a very exciting future. Thank you all for joining us, and we look forward to speaking with you next quarter. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.