Unidentified Analyst: Great. Thank you.
Operator: Our next question comes from Taz Koujalgi with Wedbush Securities. Please state your question.
Taz Koujalgi: Hey, guys. Thanks for taking my question. First of all, for Matt or Greg, on vector search, can you again explain how you monetize that feature? Is that part of the base product? Is it an add-on? Do people pay for that separately on top of the core product?
Matt Cain: Yeah, it will be — Taz, it will be part of the platform. It’s an extension of other features. And so that’ll either license that or use Capella Credits like they would other components of the platform.
Taz Koujalgi: Really helpful. Any — still early, but any sense of what kind of uplift the customer gets when he starts using that feature of the product?
Matt Cain: Look, it’s too early for us to give you kind of financial trends and patterns. I think it’s a big part of the value proposition. And what we think about Couchbase is, what are the application dynamics within our customer base? And what are they trying to do with their innovation agendas? You’d be hard pressed to find any enterprise that isn’t quickly trying to figure out how to get the most out of this exciting technology of AI. Well, when you think about highly adaptive applications in an AI-powered world, that’s going to really depend on a sophisticated data platform that brings together these features, but can also handle the scale and performance of massive data sets that include private information, public information, structured data, unstructured data at the cloud, at the edge.
And so, I think when we talk about one of the biggest market transitions and opportunities that the world has ever seen, it’s hard to put a number on the opportunity. What we’re focused on is meeting the needs of our customers that are building these adaptive applications. And if you were to step back and say, lay out the aspects of a data platform for the future world, you’d be hard pressed to find one that doesn’t have that has a better start than what we have. And we truly believe that we’ve been built for this moment. So that’s really our focus. We continue to press hard on meeting customer needs. Monetization is going to be exciting, but again, early days for us to give you specifics.
Taz Koujalgi: Really helpful. Just one follow-up for Greg. Very strong customer adds this quarter. Any comment on what that does to the average land sizes for new customers? Are you landing more smaller customers now because of the Capella traction or the average deal size didn’t really change much?
Greg Henry: Hey, Taz. Yeah, we’re certainly as we’ve talked about with Capella, we’re going to be landing more customers at a smaller land point and we are seeing that for sure. However, it doesn’t mean that like in this quarter, we talked about a couple of large enterprise deals as well, and you see our ARR per customer continue to grow, although it should moderate over time with these Capella customers coming on. But yes, the land points will be smaller and we are perfectly fine with that because Matt gave the example before the customer starts at $10,000 or $20,000 within the year is at $800,000 So zero issue with landing spot and growing from there.
Taz Koujalgi: Really helpful. Thanks, guys.
Matt Cain: Thanks, Taz.
Operator: Our next question comes from Rudy Kessinger with D.A. Davidson. Please state your question.
Andres Miranda: Hi. This is Andres Miranda for Rudy. I just have a quick question for you guys. How is the consumption growth trending with Capella customers? If you could talk a little bit about that? And the consumption growth in Q4 so far in Q1 was — is in line with Q1 with recent quarters or better or worse? Any extra color that you can give on so far?
Greg Henry: Yeah. Hey, good afternoon. Yeah, look, consumption continues to be good for Capella. We’re very pleased at where we are with, again, not only bringing customers on, but getting them going and using. We talked about where there’s a number of our customers that are continuing to not only use at the pace that they bought, but actually use beyond the pace that they bought, meaning consuming faster than they thought they would. So, we still feel very good about those consumption trends. We talked a little bit about those at Investor Day, and they continued through Q4. And look, as anything we would do, we look at the most recent trends for the last three to six months as the best predictor of what’s going to happen in Q1, and we’ve leverage that to model into our Q1 guidance.
And just as a reminder, again, what we covered at Investor Day, if you look at the pace of growth of customers in Capella versus Enterprise, they grow about 2 times faster going from 0 to $100,000 and 4 times faster going from $100,000 to $500,000. So, we’re seeing that continue. And again, I’ll reference back the example that Matt shared before about a customer starting $10,000 or $20,000 and ending up a year later $800,000. So, we remain very bullish on Capella and the consumption capabilities.
Andres Miranda: Okay. Sounds good. And one last question, if I may. Next 12 month RPOs were up very strongly over Q3. How much was that driven by strong renewals versus new deals? And should the next 12 months RPOs begin to track more in line with ARR in fiscal year ’25?
Greg Henry: Yeah. So, I think you were asking about RPO and ARR. The RPO, that was the question. Obviously, again, we talked about those couple of large enterprise deals being large not only large, but large multiyear deals. So, we saw a very nice increase in our RPO. You’ll see that continue obviously year-over-year early in the year, but then obviously these customers will start burning off their revenue and the RPO growth will moderate. And I’d just say if you look at RPO over the last couple of years, it’s a good sort of pattern set of what we probably would expect to happen over the next couple of years.
Andres Miranda: Okay. Sounds good. Thank you.
Greg Henry: Thank you.
Operator: Our next question comes from Param Singh with Oppenheimer & Co. Please state your question.
Param Singh: Yeah, hi. Thank you. Yeah, this is Param Singh on for Ittai Kidron, and thank you for taking my question. I know the revenue guidance have been beaten to death, but I just want to understand the impact from a higher mix of Capella. And as you look to fiscal ’25, what are you embedding in your guide as an incremental headwind?
Greg Henry: Yeah. Hey, thanks, Param. It’s Greg. So, a couple of things. Look, we as you saw with our Q1 guide, we feel good about how Q1 is going to shape up from a revenue perspective. In particular, again, I’ll go back to that large customer that we signed in Q4 with a start date in Q1, which will give us an outsized upfront license revenue from ASC 606, which is a bit anomalous. So, if you think about revenue for the year, Q1 will be stronger than normal and then it will be sort of flattish for the next couple of quarters, just given the strength of that upfront license revenue. We don’t necessarily see I know you referred to a headwind potentially with Capella revenue. We don’t see that being a headwind. We see that being, if anything, a tailwind as we continue to move forward. So again, continued good strength with our enterprise customers and growth with Capella should help us, again, get to that medium term outlook of being a 20%-plus top-line grower.
Param Singh: Got it. Yeah, I was thinking more in terms of revenue recognition, but I hear your point. So, if I think about Capella and columnar, the opportunity to provide an analytical database, what have you heard so far? What’s the opportunity set in incremental workloads you can address with that?
Matt Cain: Great. I’m glad you brought that up. It was a really important release for the year. And as we think about again our worldview that applications need to be highly personalized, highly interactive, available from the cloud to the edge, we think a fundamental attribute is being able to inject real-time analytics while the application is being used by users. And so, it’s really about complementing the operational data store with real-time analytics. What’s important about our approach to columnar also is injecting multiple datasets, whether that’s from S3 or other competitive database solutions into the Couchbase engine, so that, that application is that much more sophisticated. So, I think about the amount of data that’s in the platform that the application can draw its sophistication from, that’s really the power of that combination.
You then extend vector, which brings in AI intelligence delay on top of that. This is the power of the Couchbase platform in action.
Param Singh: Any commentary on early feedback from customers here?
Matt Cain: Yeah. Look, I mean, we’re in preview. I’d say it’s exceeded our expectations. Specific commentary on the ease of rolling that out, the you start to get into the complexity of things like ETL and moving data from one system to another. We can remove that complexity and converge all that capability into the Couchbase platform. Keep in mind, we’re doing this with SQL++ and natural language. All of this is embedded in Capella iQ. So, the capabilities that our developers have at their fingertips that they didn’t have even six months ago, I think is being acknowledged in these previews, and we expect that to continue as we move to GA.
Param Singh: Okay. Thanks again for taking my questions, and great quarter guys.
Matt Cain: Thank you, Param.
Operator: Thank you. There are no further questions at this time. I’ll turn the floor back to Matt Cain for closing comments.
Matt Cain: Thanks, operator. And thanks to everyone for joining us today. We’re thrilled with our performance and believe fiscal 2025 will be another historic year for Couchbase. We look forward to speaking with you all again soon. Thank you.
Operator: Thank you. This concludes today’s conference. All parties may disconnect. Have a good day.
