HCP - Earnings call transcript Q2 2023

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Operator

Thank you for standing by, and welcome to HashiCorp's Second Quarter Fiscal 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the call over to VP of Investor Relations and Corporate Development, Alex Kurtz. Please go ahead.

Alex Kurtz

to XXXX welcome call. quarter and afternoon, HashiCorp's second fiscal earnings Good issued closed afternoon, our in quarter and discussing will our the results release This be second financial we today. for the press after market announced With and Dadgar. and Welihinda; CFO, CTO HashiCorp's me Co-Founder, CEO, are McJannet; Navam Dave Armon conjunction pertaining an At that earnings the in contains close to lease, earnings additional market the our of information our deck quarter. we and financial today with have published our review We decks the calls. encourage of advance to you in

the made You investor of at safe access Reform our can decks forward-looking website Litigation provisions ir.hashicorp.com. on contain Act will statements harbor of the Securities Today's under call Private that XXXX. are the

financial statements Forward-looking XXXX. statements for our similar and statements. guidance plan, by future fiscal believe, be as intend, anticipate, at condition the concerning these and third trends, as representing quarter and undertake may and statements should and do any business our words year and financial fiscal update today any statements such relied not the full expect, of our business include These seek identified views to duty expected be not XXXX These upon performance we and views will or as of date, only subsequent statements. reflect or financial our

cause by Forward-looking could differ address results actual to that matters their uncertainties to nature, from risks statements, that are and subject materially expectations.

to and ir.hashicorp.com. well our SEC measures and furnished also at GAAP comparable with has financial non-GAAP presented GAAP, discuss accordance A measures, Generally prepared on these also the are are certain we directly release, Accounting accordance available financial is non-GAAP of Accepted these noted. call included in otherwise prepared on call, earnings measures most will the we is financial reconciliation metrics The website During with in define unless which this financial been as which our as in the Principles. not other how press to measures metrics

Angeles. Finally, we User Day on at will a in October HashiConf Financial Analyst our be hosting Global Los Conference X

also Dave? event. me will at over live-streaming this ir.hashicorp.com. to will Dave. that, let Details be available be We turn the call With

Dave McJannet

Alex. second earnings quarter to Welcome, you, Thank call. everyone, our

We are $XXX.X with for XXX%. non-GAAP $XXX.X Current of trailing in with to million, strong of And representing performance the excited growth. $XXX,XXX equal year-over-year a of as XXX. dollar QX quarter guidance or reaching rate reached total HashiCorp that our XX%, with revenue along was we exceeded recurring year-over-year annual retention net share million, customers four-quarter to you of growth representing average a obligations greater remaining we added XX% than XX revenue, with

look Cloud remainder revenue we trends new Our in as representing we $XX.X to out performance as reached We're offering capabilities. of and very our in new revenue, are with to about managed of QX, subscription million features continue of and HashiCorp X.X% the year, pleased in the Cloud quarter. the roll Platform HashiCorp the excited offerings out adoption

in a operating of a a the to inevitably details more by and minutes we help operate transition to outline security that model. consistent second products about cloud cloud I'd enterprises how into cloud, few take delivering diving to like Before provide infrastructure today automation suite and quarter, the and multi-cloud,

a look to stack. system their enterprises they each infrastructure their approach cloud, layer As standardize require record to of of for

layers. system that provides And use why portfolio product across those of record HashiCorp. Our organizations each that's of

annual these they customers which HashiCorp Strategy Cloud And a recently of our cloud-agnostic cloud-first with of multi-cloud approach. valuable to released observations. a standard, consistent enable becomes State model. as becoming our our and built as are the of highlighted operating Survey, adoption the even more products We products Our suite is second

adopted infrastructure, and multi-cloud now organizations say or build who First, helping have to goals. and it's is that way all standard according multi-cloud their the them business to the operate achieve most respondents advance survey, their nearly

success on the factor foundational leading hyper-focused Respondents are the security. security in determining Vault. cloud that cloud of the organizations offering, strategy said their This HashiCorp is, of our reinforces Second, value security. in fact,

all cloud platform centralized Third, that respondents rely they on said nearly a team.

before, you've build want As and their with adoption the see platform. following and teams I'd seen something maturity we've predictable this the call importance of very it level cloud application platform the finding cloud years journey heard the utilize customers. open like it building a is signals becoming at success trend A adoption We organization. tactical. cloud efforts. decides stage cloud underscore typical on our the from norm group to that with believe every us what products. tasked phase is looks what for organizations they few last It version over emerge to is for central the of the cloud I the with to that new, source This this team path. It's a business nearly or a first of

more the shift cloud we're seeing function As platform centralized these next phase to mature organizations a of team cloud adoption, emerge.

we is successful commercial managed collaboration must by team being a As for of capabilities that and to product networking this enable teams become to these sets security, platform they security the and that the standardization becoming leading And up cloud of best enterprise governance, to this practices creation phase and operations. requirement proliferate, their adoption. and projects when of basis see cloud prescriptive, high-value cloud that HashiCorp the second the realize industrialize operations, is team. It's a platform

cloud stages organization. them and fundamentally a platform realized establish required for like ability a They with because of and selected to mass both financial their cloud underpin one policies their that ago, how that XXX manner. platform approached platform to represents offered both institutions operations. it public a Terraform customers. do our frictionless XX,XXX We're and throughout over infrastructure the the about in apps Vault. to one change and to their central workflow began just and a business. product global world largest our team Importantly, two platform tasked cloud to what strategic actual team buying private of completed financial portfolio. entire cloud from major in a they looked the the for Enterprise team I'd expansion center a this, self-service partner the an team manage were on Their of to share We're a partner institution Terraform code provision and they transition needed team is as developers To this the proud like in with early centers This team clouds. their who's to renewal one with to the safely infrastructure platform of data for the migration infrastructure this within common enable they early delivering cloud big if example of succeed, to years

deals highlight Now want examples strategic I'd turn attention the notable motion during a that land, of and adopt, we renew extend like show to in the your the in and expand, our to marketplace just transactions. execution demonstrate quarter quarter few completed to I that second our action.

operations is deal. plans. of at service has began to scale and at Consul working XX%. and millions availability now expansion momentum afforded enabled The their reduce high able by resiliency spend to of products scale time, operational with same their company least and support users, of are our the to to this the and and Indonesia First, in An is company by XXXX XX,XXX solution to with the and Consul the to source platform service on requires open are nodes. in scale using land a one standardized They discovery in technology health plans Consul fastest-growing that Indonesia companies e-commerce

Vault. Next, that an A and was provider Consul expand deal. using Nomad, banking-as-a-service already

the Terraform which This a world. migration, landed new Vault largest Cloud year as quarter, so Cloud company initially by they aggressive to customer Terraform customer consists and and second expanded two cloud the to an the This cloud migrating of the contract services Terraform five-year build customer Enterprise with of technology in the quarter. had existing extend X,XXX to is And and with to for Cloud over deployed is units underpinning on global migration customer end new to policies governing gives growing now in out in a moving project, in model extended them bring AWS. of limited for growth in our applications HashiCorp to Cloud million HashiCorp Platform, environments on deal standards have enforce previously the that support $XX and initiative, their year of plan Vault migration. XXXX. to a fiscal base. third, offering insurance for providers full a XXXX one embark a the governance the business During predictable and they scale they the this plan, three-year with managed Consul This the

to continuing our committed earn trust. companies count to and proud deeply are like as to are customers these their We

June, Finally, had more of as Community for the focused as to introduced Bank, push out versions Booking.com, both others. I'd we HashiConf The well at hosted Swiss robust that TomTom our such high innovation our showing sold delivering continued building Conference on Deutsche we Europe conference, us our and speakers highlight was our briefly customers. as updates the practitioners multiple product In and like were We thousands in value featuring experience virtually. join made Railway, product our in-person several cloud customer announcements towards products ongoing quarter.

with with encouraged we're the the beta. delivered we which particularly secure high HCP I'm Boundary, customers, a progress managed about. of of interest our which speed announced offering, incredibly the we in beta offering private our First, by Boundary access are the we of and thrilled and level to team's private HashiCorp remote excited

release, have for cloud-based and subsequently delivered Azure this Consul, AWS announced we networking and Consul Second, now service on Azure. environments. offerings we both Microsoft With of HCP product, our

for Drift in of Terraform immediate is errors Terraform for a drifts continually feature that provides the Detection for infrastructure, Enterprise looking which customers. checks high-impact the introduced we Cloud, state value This or capability configuration. Third,

at sector with the Standard evaluated for Processing XXX-X, Information conformant for milestone also customers. in over compliance, important many on let Federal at to me Finally, XXX-X an seeing HashiConf Vault Global that, our our Navam. to FIPS Los public today. achieving And you X all Angeles. was Conference as as joining taking the our you FIPS forward known us look I Thank with Day place XXX-X, call Investor turn of October

Navam Welihinda

for and Thank today. everyone again us to you, joining thanks Dave,

revenue trailing line grew to over top produced retention rate your total results. by which quarter dollar 'XX. reached financial second FY net XX% of and our long-term We XXX% XXX%, our four-quarter year-over-year, results our the rate. our target We average in Turning attention was strong

our our at of XX% remains came revenue. and regions. region X% Americas from our the APAC segments, The geographic XX% to from Looking largest the contributor Americas, approximately revenue EMEA the from

the an the revenue expect percentage from world increasing rest We over of of long term. the

margin, gross resource continues as expense to non-GAAP us in prioritize the our net HashiCorp non-GAAP business. and come well income the non-GAAP allocation to plans. operating of side. GAAP in as to ahead allowed so efficiency Doing income Moving our

previously growth. focus $X.XX came With As expectations in year, margin an we product net aggressively ongoing per business operating on growth share continued of entered basis. and leverage of durable have discussed, the believe We operating a IPO, coverage planned, the share sales this of in investment investment long-term our we loss in our cycle an success, help financial the an understanding and from ahead we areas invest performance per continuing on metrics, invested a several of track on after to and annual business into as $X.XX Starting customer EPS, our QX business. in GAAP on innovation. basis in we our we to moved goal our journey our to incurring cycle, in we with an deliver improving while operating of key efficiency, cycle a basis which where on non-GAAP

our find published deck accompanying detail You this in of site. you deck I our review KPI on in will today lot encourage a investor to detail. ir.hashicorp.com the

is customers or cohort, of XXX we our in equal $XXX,XXX a second grew or the a metrics, greater customer progress during customer added the the our trailing remains growth track. on XX% foundation core business these durable one continued year-over-year Focusing continued greater greater basis, revenue from $XXX,XXX XX-month quarter, the quarter. On $XXX,XXX increase. our and to customers per $XXX,XXX on to per the or of which The growth model, of large $XXX,XXX customers

such Consul We Our launched grew by Azure. HCP features HCP past year-over-year. public XXX% quarter, and new as products this show HCP HCP We and Microsoft beta business momentum. Boundary positive revenue HCP on continues our several to

we how moving the wanted before guidance, on are provide about Finally, environment. I to to context current at looking some macro

this scrutiny quarter transformation and on on The quarters. in may from cloud contracts. customers close spend have expect some customers, to impact While can the timing scrutiny increased investments to continue. are transformation several and spend by when we initiatives digital some see macro we of our long-cycle saw the that We our we upcoming headwinds expect on continued

rates, While million an impact our it million predict our is FY of we on to which impact have estimated the macro incorporated headwind $X into revenue close guidance. have difficult XXXX, our to to in $X approximate we

Given year. the levels our expected of forward macro impacts, this some investment we more business in to moderated have efficiency the on operating focus spend

continue customers, will quarter in spend accordingly that during Historically, QX or by a as enterprise to gain been everyone encouraged Outside We are quarters. expect purchasing products, we that macro, with due buying has the are subject the interest clarity. seeing to the to the slower the our we we new our business with the our quarter. same partnerships is to largest progress forming market the see increase institutions world like decrease and I'd seasonality are we extremely patterns to months, also of we some summer result in seasonality particularly products. remind our seasonally overall this Despite HCP adjustments, macro by in and

let's to move Now our on guidance.

XXXX, total in to expect of revenue million. we the third $XXX quarter of the million For range $XXX fiscal

operating QX $XX in non-GAAP range of We million. million $XX expect the loss a to

fully net non-GAAP $X.XX expect XXX.X basic on million be average share and We diluted based loss and to per weighted outstanding. shares between $X.XX

$XXX the and year For fiscal the $XXX we total full range XXXX, million. revenue expect in of million

million. million loss expect range operating FY and the non-GAAP We of XXXX in $XXX $XXX

on based weighted basic million average between non-GAAP in to shares share. expect computing per be $X.XX loss per share and net and non-GAAP diluted XXX.X We used $X.XX loss net

full X I are improvement targeting Finally, I operating FY We're in to our to our level. compared QX increased a wanted questions. percentage pleased with by efficiencies, with provide spending Driven and Day non-GAAP initial non-GAAP for FY any Dave, at medium- our Alex? for points year provide on XX we model to and view range upcoming operating October. margin of that, we to outlook detail margin of 'XX of will on 'XX FY more Armon operating the are to for for And results. company's focus Analyst happy your our longer-term But guidance 'XX. our take

Alex Kurtz

Navam. Thanks,

Frontiers let's During the first attending the With Global Tech be to and that, Conference. our quarter, Conference we Citigroup Sandler Sachs the Goldman Conference, operator, Global Tech will Piper go Growth question. the

Operator

comes Oppenheimer Ittai question of & first Company. from Our of Instructions] [Operator the line Kidron

Ittai Kidron

bit -- others? customers, this drivers taking How upsell Any a more great. new thanks a Congrats, helpful. rate. the The us have of a give Can little for up, great and Navam, color the impressive. of macro this much where dollar you incorporating move of net how of color the is Continues on color you're will follow-up. breakdown a vertical is be it? behind quarter, that. footprint regional I increase versus hold solutions? Very a of more is retention to and on question quite question That

Navam Welihinda

into a retention was this by Thanks, our as saw $XXX,XXX the also net net the in our into and group, dollar where we're with is continuing Ittai. from they the of rate, of retention who tick-up our customer the I a and is strong dollar have to driven we general are expand group very XXX% mentioned, we expand Yes, adopt Navam. reaffirmations terms rate, QX quarter have with right? our last products. quarter customer and usage And success which products, customers mainly was pleased secondary

see based net that's more our moving retention to component their rate. which down to move pricing on expansions you'd get also break see cloud, to of X use basically customers you secondarily, usage. also contributed. big product you and the on -- customers cycle. or So our into And extend second It's The expand, it is or third purchases,

we're I overall, So number. and very with Ittai, think that both it pleased was

Dave McJannet

platform what This been unique, we buying a trying this which center notion is very bit, principle for product that it's some a noting, about design I and think is worth we've Note certainly, just that Dave. our bit time. of back single accomplished little I the of also stepping quite portfolio, a talked little for teams. have

the So I But is starting a to I you're and manifest the it really math. is philosophy as extension is next that, the some think of company. And the to of that product existing both expansion underscore that we product. just what see benefits that of built in

Ittai Kidron

from great. the quarterly first quarter Okay, on adds as And I decline look when there, But then a follow-up a good at HCP, another quarter. there. the net

to you see perform You've but less quarter the addition the drivers how did that last. about expectation the as cloud we grown of added there? slowly, the me Not they to do we'd in can point this about did the partners, this think has it more quarter? your you like this? than And in inflection in say. other What And tell

Navam Welihinda

real so Dave, in quick to over quick jump I'll before handing just it a point.

revenue our second customers has And into ahead -- XX% focused model which came sort the XX expand is of strong which that, and customer been growth the in customer basis the we of group, we add $XXX,XXX to quarter. that of of base. to well on customer and the group to aiming about durable continuing XXX very have Our represents extend that total. been the predominantly was We've of in

Dave McJannet

Yes.

XX the Just to year we XXX added XX our was quarter. the underscore and guidance customers to that, Navam, per in framework

HCP predicated what some customer alluding you cloud that total our that on the is some adds is at obviously, think products. on count, is on When new to the offering of the you're of offering. sort and on our I self-managed specifics look of portion

out, about. tail longer has pointing new a affinity distribution today. our predominantly, self-managed there's see macro would channel to say was around products think the Navam as customer that some we've towards companies move base. the a for impact I our driven that customer the is of I the It But is us, I number talked there revenue by reflected terms And in think probably of HCP going certainly, math. of as in you that count. smaller bunch is

tier yes, of it Hopefully, super up the the But interest I super, velocity sign-ups noise. the cloud in So of to offerings as would the overall, SMB. to makes well of our some both sort it free enterprise that encouraged of by attribute growing settle the as longer-tail offering clear. cloud-managed all of

Operator

Our of of Singh next question Sanjit from Morgan comes Stanley. line the

Sanjit Singh

question of there make on. list more a Wanted insight jump or and that we I out Is value, a a monetization this over for features Detection. paid idea set can to the that next sort How capabilities roll your feature continue you think or to get is sense particularly could on a adding from? about that to start there guys to can perspective. get be did a -- of Drift from did a come capability? much Armon Dave broadly, that little generation offerings, of as And more several around for Maybe enterprise add Where what feature preparing the of a years just want something? value? you how

Armon Dadgar

Thanks, my about Great. to enterprise help with my is to source really on the the products. standardize our top of I take to need it's them practitioner-oriented compliance challenges, challenges, do record workflow back open a build Yes. that governance first winning happy security ultimately we that one. getting on workflow. the think mentioned, way how it as Then Dave around is, ultimately, kind a my is based I'm about of of model, challenges system going of Sanjit. sort practitioners Armon. and This The to

manifests our so And sort in product that's strategy. of what

I about caused Consul or where Detection, manual They we then introduced security great But Terraform. that Terraform the outside we right, it taking issues Cloud their be something the by enterprise in is at place X reconfiguration and/or tier or really into drift, Terraform by if using compliance starts other as practitioner someone about challenge. or logging might think great, want about a source. start Enterprise saying, Terraform open Drift our by day capability changes free issues So of like the really worry capacity.

features see between road we about standardization in orientation scale. whether start split like concerns which is practitioners, Detection, capabilities or that which want really day the Drift drive the really extending has, you higher-value so to and into are And to these our of around this workflow X almost security map at what designed is around platform operations commercial that the team the

of really across kind long second it's around practitioner. investing One So we workflow building where conference release those longer Drift capability those And is upcoming the sort piece systems and right? that. focused capabilities of that of are major October from of a our winning the to monetization the story we're yes, of think on perspective, short, part new being then two sort the different record, of top on new in right? a those capabilities build about and And parts, Detection at is around track sales

Sanjit Singh

forward higher $X great little for the is sure question a million upcoming size The bit your perspective maybe sounds the framework. relatively there's revenue -- impact. looking business perspective. it's impact Navam, bookings on the And a conference. a $X to Thank and encouraging for I'm because to minimal you. That's million from and a quite of actually follow-up you

explain sort to to the $X Whether whether of that million assumption that terms pipeline. you different customer around of $X cohorts, on of rates different million, conversion got framework? it's you can it's how In sort

it. sort to appreciate of that million million. any Just $X clarity Would to unpack $X

Navam Welihinda

Sanjit. Sure,

across way was we the there is out it quarter doing people most board the but what you're and And QX The did most this and actual the I Navam. So -- played in performance see customers, we're very of seeing scrutiny customers we out momentum was, that from a on we from same. strong spend. was think terms saw

of in that is we impact we're deals a that have, QX we uncertain. the the expecting timing essentially and is So the little scrutiny is QX, of what to and but tend more get,

essentially mostly the close impact we've year, $X of the that the million half of and you. year of half factored provided cycles that $X the is million into back back think given the higher we to is bookings, Obviously, the to outlook that So elongation the we're very the company, still to for us and year revenue confidence guidance. this we're that a raise But in ratable all that, good despite year a gave we than have to going that.

Operator

the comes Alex Zukin of question Wolfe next Our line of Research. from

Alex Zukin

I you the to result the a to guess possible have base. that you that's pretty And got if that just got and think to initiatives Is longer quick about follow-up. macro sales it and as were of a get you Dave, And it were multi-cloud maybe of customers to a incrementally is -- drill or cycles, weaker? But scrutiny, more some any customer moves verticals were just in? incrementally or maybe I've diverse there incremental any efficient optimize? specific get more and cost-cutting efficient -- are for then starting looking to see or deploy are stronger

Dave McJannet

on Let customers. seeing what -- we're comment from me the

how adoption kind exactly how how of line to that I want our portfolio. that and reframe reality -- product the opening in just happens think I to the remarks, relates

to every journey with saying, practitioner our build open in something that cloud", is want new some they cloud source products. So net "I begins where use and

of That team because the people's the of usage with whether reduce provision. of multi-cloud, of platform policy our they or it's getting right, typical, and very the for VX our They adopt time can risk the cost to apply value products, commercial what's they that what's those proposition way for to VX is going can that is a accelerate They can now cloud market else single cloud. of developers. it's without something so wants team cloud, associated actually very, central reduce very, very getting repeatable. in mature, provisions. use companies products to As The cloud, governance,

it's is So offerings. of basis I irrespective whether just that the value multi-cloud, of tease our actually single want apart. or commercial cloud it to And proposition

the use source open are products Our designed practitioner. by for

parts used are core buyer, the commercial IT is by platform which owner. Our that

more If position to really we're very trend some heterogeneity We puts unabated. Obviously, impact. macro relative anything, see really don't that very, the in is cloud less the changed. over value that a than sense, adoption but So time. that course us proposition aware having there's around really, of seeing continues where towards And positive very, in the think market. secular of was The I question we're that that strong.

Navam Welihinda

Yes, more than enterprise. impact so Alex, broad-based relatively I'd SMB was that the but I'd say say

the So focus area scrutiny on that's of side. SMB of X higher

geographically, more I EMEA-focused would little was it Secondarily, Americas-focused. bit a say than

So the focused good full customers Americas, predominantly for us moderated news on the us being a is there's year. gave in that which and impact, confidence $XXX,XXX

Alex Zukin

to Perfect. of And some at then little I respect quarter versus bookings RPO so bit to RPO looked versus the this slipped last just if a as With with maybe follow-up. look a then it maybe metrics, and RPO kind metrics? it three-year really like cRPO, looks strength strong. And from of do factoring of of forward-looking in, revenue upfront want over deals some factor deals? because more that a complex -- math fact duration that that more the one-year maybe perspective, is the there into should customers you're less changes any we Any

Navam Welihinda

on of of up for a business. a QX in being the where I'd and range unpredictable. we terms and was solid wide Sure. Yes. I'd measured quarter we deals what In duration in normally duration normal side. ended was see our mean QX, the it to say there are And take comment ratability typically reversion the first. QX outcomes. there's with -- execution us the view large take look deals long around timing duration a and unpredictable. a the We forecast, we Larger view middle on at a roughly normal XX%-plus are side we quarter of of a how

overall, But of that year. in. comes take measured about and confident how the feel full we So a more view -- strong we QX

Operator

Our next question William from of Jason Blair. comes Ader

Jason Ader

are open My guys over for more trended choose, own enterprise is, you deals opt has of the think customers you the how environment kind open source your first question could main and competition do that then source? And that time? in is given often how where now, there's risk

Dave McJannet

Yes.

thanks a earlier, which to used back to go inevitably -- which the a converts a commercial at I'll and again. is source just bit domain for problem there's is reiterate there's open that So to phase point question, phase which the a

our as of as everywhere. and is a open building the from So stated beginning, around model, proliferating source we large as our market possible

So enter us not the our is in to source it's using that technology the that's the brought of open company because that But practitioner. candidly, model. by for any basis atypical is already

commercial organization, And platform all open products zero source change concerns lower is is understand been. core for environment. say that risk, it the teams. tier the I model, and teams, anybody as service has faster is to for supporting in how and apply service run running a this the service no lower any As our central those which really dynamic I to is set users, different entire cost starts of it now a product completely, That that would for expect that than to from it to wouldn't time platform today is that is now, of the value those benefiting and certainly policy zero with basis shared is do our downtime? how different I is team governance, a

of surprised dynamic were change. no foundational any in be given usage tech, I'd increasingly our change. the if net, of So And there fact,

Jason Ader

update Great. that can topic us of category Armon, open an And that well? you good Consul? as Are feeling you give winning source, then on guys on about

Armon Dadgar

Yes, I feel great. think for Thanks we Consul about the good pretty Yes, question, Jason. generally.

Again, trust, new evolved winning customers so major expanding going continue we existing that motion were that land it's about usage see or quarter, that to to continuing platform a Trust extending to of And moving point, Vault governance Dave's team, of around Terraform this it's we're trust use around either to work have really that challenges, for. the we the sort network central Consul and extend either from into additional of think first. position case once that of typically posture. then I Zero with

Azure, we which the the on as feel regions continuing continuing expanding net releasing clouds, new there and additional bring optimistic and to Consul mentioned, address. surface So about HCP the good so of like additional service cloud can is Dave products area to Consul customers about traction, on to

Dave McJannet

a was, we new in add Consul prepared as continue land. of net reminder, -- fact, in Consul indicative just It's I'll remarks the the just to we one add on customers the we a called that point healthy out business. would of be evolution. previously, But is market immature anticipate part still terms that, clip. we -- a shared continue certainly at will meaningful as I its a of that our to in customers new relatively

Operator

question next Mark of Our comes from JPMorgan. Murphy

Mark Murphy

along evidence as kind Dave those of there QX multi-product seeing you connected metrics have mounting quick or lines? Hashi's any or in are of Armon, And see can being in then a follow-up. usage? maybe used you synergistically concert suite or a I share anecdotes And products do

Armon Dadgar

portfolio, question. products. we product Yes, think cloud has within we're Thanks, I number the it's think design different that them been to Yes. in one HCP, chassis for be the customers to Mark, right? want within common particularly dimensions, right, And in, that I to think for multiple seeing so come core expand this a of seamless the a I from as

impact. And big for that there, billing. think us unified already we're identity to focus of seeing terms certainly, been I it's approaches So and in having a

B do can move the with and of kind product of that start to seamlessly within all platform. product So customers the A,

of up there's self-managed base, in within well particularly cloud is continuing great that example that. friction it. lower where seeing Pacific working products, region, of a kind cloud, customer our Asia sort to a quarter two already motion of of customer out to Then So additional I then it. of on an enterprise to examples think, see initial one product good in during and in product signing expansion with Actually, quarter,

mentioned, I then extension see goes in motions trust about core back of winning motion number with it the NDR. where one team, think for play. to that's landing reflected, product platform well. that and NDR that really, that it's And again, think the and expansion doing the reflected the as in I you as us, And Navam extension an

Mark Murphy

XX% X% And slowed to bit. sequential I'm prior been revenue trending in sequentials in a looking revenue, is and which then Navam, the That support stream, quarters. growth XX% major the at had that the one

some in what in scrutiny? the bit stabilize that could on or perhaps QX or of could a QX? underlying of is the little something driver wondering, rebound that deal macro that see or that Just Is it? reflecting And -- the piece we is

Navam Welihinda

Thanks, Yes. Mark.

accelerate lines of focus the don't And of In I'd of Support and main percentage large are expect total. lines, the to extensions. is be that say for we product and revenue expansions revenue terms a cloud sold being to us. very essentially our

mark where around bouncing essentially sub-X% it's is So the we're aiming for.

this So downtick. within support the expected didn't I'd line It was quarter, say show certainly meaningful and any normal or uptick bounds. as

-- the way. in was services sorry, I'm line was any I So the -- any anomalous think services that don't

Operator

comes next Fatima of Citi. line of from Our question Boolani the

Fatima Boolani

with start I'll Dave, you.

edges. to You to some in kind to changes the and some go -- decision-making observable back budgetary the rather, I the observable alluded changes around of Navam, patterns buying or the prepared But the reduction that realized Indonesian of their the public XX% immediately their product. costs cloud in use e-commerce a in customer using shared remarks your vis-à-vis you that operating want example who with

why budget overcompensated then that I follow-up scrutiny? if or some curious, necessarily hasn't the I'm a And have so counteracted for for may. I And of Navam,

Dave McJannet

one. for that Thanks answer I'll Yes, the question.

to this So to play of center markets private and -- criteria. it considered aspect are some this, are considered of infrastructure. that both I of transitions taking These to from underpinning customers. reality data those period is one by and cloud decisions yes, time think that back that are all of transition I out, just pull are I is decision of deeply deeply the they're the cost And also think but is sort

but just sense, up these how with a undo. in greater that things indicate people. sort that to in serious And that outlook are, to the of reinforced These indicative which in those year, to positives. difficult refer for saw of actually sometimes a you the sort decisions our does the between for would as the are I year risks come of good guide the periods of said, and our decisions raise caution, in there's that also balance being for That scrutiny. So are ability

Fatima Boolani

outlook some just for on you and color that the guidance of out us. you from fleshed Navam, and the some here And philosophy additional

two-parter So this. on maybe a

in the and versus some of, experience compare similar in can through the pull of going now this really I'm being commentary response buying what without back of feel in then to environment contrast sacrificing again, dynamics. And hiring sort envelope do COVID. posture had if changing around and curious to that can and You've sort execute you saw COVID the you see your pandemic where exactly you you proactive to expense momentum titrating seeking the you're the that bit a little macro, on where you on? did

Navam Welihinda

Great Yes. Thanks, Fatima. questions.

terms intact also each deal digital cycle The And that foundational cloud is lengthening the much certainly In cycle different some and of continues of and COVID was I'd intact cycles. cycles, then now. of aspects say very it be saw transformation from other. very every transformation to much

uncertain It's was different. this So how very say, of it's this would And less I different in point That around, had sales very where team we field we enterprise our headwind. time at don't additional slightly a terms behaviors. sell. uncertain, to that point have adopt

and full been in the feel we with that different we're the but year. a we're about comfortable full remarks, reflected prepared that So some in year about spend, it's talked impact there's and during obviously, it's scrutiny cycle. And we've feel the confident

an in terms resource In we've efficient allocation. of terms been of the spend, always company

the the of decision plan first quarter conscious investment made end spend the investment as And go this three that fourth of continues During to is be a fourth ahead quarter -- for cycle. into cycle. we quarters the IPO, we the to

beyond normal So operating going we're to that point. move cycle leverage into a

adequate continue We're essentially the and three saying focus term that investments year and the is year's this of we the So think investing that pulling made investing all to back. in ahead next this not less further long the are just And to first going performance. quarters business. for into we're we're on

Operator

Sandler. the Piper Jim next Our line Fish question comes of from of

James Fish

main is rough quarter starting we're and Boundary And understand Terraform terms between quarter sets? to opposed of take Nomad contribution to towards there this as the revenue change Any what and the and ask, to change even I'll trying customers in Really Consul a are product main solutions? the bait of the and in shift to just Vault? prioritizing if more

Dave McJannet

take Yes. This Dave. Thanks. is I'll those.

in security first went are problem the maturity, think consistent. general, else, which remains than really honestly, pattern the And to market it the the ones more much speaks the people is problem, I provisioning into. anything

So Terraform people continue and to Vault are be where landing.

sort at That which on to our of shared we a how notion we center said, accounts is what of tends depends single it think being buying opportunity. this view to I be. the X

expansion Boundary's on terms common in the adopted will generally that we Consul yet. company is into product. would certainly, they actually third Boundary. is adjacent course so which view The currently And products say of certainly I as reality excited of the the as over about which time. one is depending not prioritize. a We're available items more different it natural a be

about So And things idea taking about market maturity. do and kind virtue remains company. how the channel this think net, But play out, while overall, about the to maturity a distribution and a same. market I of are These opportunity. of of a buying the us more single less being just essence think of think about the common that's multi-product center is we the we

James Fish

That's really helpful.

talked despite On being kind but development obviously, go-to-market can able with system evolve kind process Consul the -- of of the how integrators Azure underlying working we things, hyperscalers of with around go-to-market side been with even positioning either kind more there by multi-cloud? to this or help about any of here, has of strength your automate that

Dave McJannet

point adoption, accelerate Yes. has of times certainly et from the several and us view. Dave. I about an I always think Google Azure start, a ability made of as I'll mean, proposition is Partner Yes, to won for that well, has cetera. the partner this Armon Year will excellent have provider, cloud our been the and cloud

And support then the in concert are slowly our So is overall, our motion providers. with cloud partner from and there's much SI to providers go-to-market the ecosystem. cloud typically very growing

works. of As computing, and that you biggest know, any in trifecta challenge the Armon, us, cloud irrespective differences? gap probably skills the why that is is

Armon Dadgar

No.

Dave I captured think it.

realize only there is I think that our and accelerate value SI a by of sort services to They be traditional of it. thing the I'd community tend the large, help resell less channel. to the and provide adoption add customers is, of

that's engaging to of large, product. by the have bringing and their investment SI a how sort our the community, large think is in SI accelerate the then help I directly we partners adoption of I we think in focus with and So and very extensive customers while

Operator

Our next Derrick Cowen. from of question comes Wood

Derrick Wood

a in other subject. platform of it center, strategic central core product I to cloud seems to question. you of wanted a mean, get products. buying first Dave, start companies go this where only I once really not on extension driving team makeup to back centralized kind the that's to inflection see but like

I think teams are these early still. pretty kinds this of formation of

being mean, out stick you positioning financial just of a curious win. what forward verticals I'm called large out as I kind this So services thinking. early in

large that's that a Has vertical see served and starting the You really win. you'd any ones flag? other this to been called out insurance

Dave McJannet

verticals that say, are good at is Generally, what historically I'd it's yes. is. those software delivery it

it's that So some at financial is are are telcos. version. yes, has short But are health There there historically Certainly, early this. cares that a good been services.

has I how successfully. underscores the Global think done it actually is this XXXX opportunity because in early the it construct cloud how is

the expect, ubiquitous that there's admin time. virtualization became think I time. analog over the VI we good if there's development. -- So look the yes, But certainly, software financial at are you verticals an as services, some role here. an see yes, And at think big those over And I it we generally example,

Derrick Wood

it. one Got for Navam, you.

wanted drill on Just QX to down the guide.

Is last The the I is QX years? kind conservatism? sequentially. couple makes that points going weighted past up got QX just that QX be X% considering think Or extra of or revenue why to seasonality more think in kind it's of few there something this model at some sequentially. pipeline the midpoint, we're in you something seen years, in of it's see versus you'd down should extra terms this of a we

Navam Welihinda

the question. for Thanks Yes.

still strong refill But a QX was was -- ratability. it to QX, a quarter from we components. to move was it XX%-plus QX yes, with as and have very very So the very non-ratable you ratable

the deals a guide, QX we do normally inherently we which way things, the at about quarter large think look we when and So are solid execution is unpredictable.

So view in. we factored we've a how on come seasonality. in And take measured those

mentioned at considered and being looking we're Dave the very the things as All I up mentioned those the all for entire we're said, in year, for So that half. what optimistic year are QX. full back before, guiding

optimistic think turn how going the the we're So QX regardless is I very of QX, split, year out. about to

Operator

comes next of Brad America. of Our Bank question from Sills

Brad Sills

great. Okay,

about to I ask that. question ASP. just Yes, a wanted Sorry about

$XXX,XXX is a the that me of comp. cohort out accelerating that on to than to of [XX%] off tougher stands greater customer ASP One metrics

like more So extending question could Vault, if they acceleration in to are Is my that unpack versus Consul, already is, expanding that these extension, categories customers due expansion other you a or bit. Packer? they little have, what

Navam Welihinda

Yes, got it. The customer one. inherently journey an predictable is

You so as And do happens land a then to so so then concern, X thing extension Vault and on Terraform forth. expand increases. you of to is usage next to Consul, the day Vault, you be sort

extended So cohort on as later you coming more beginning, think about and a then maturing, expansion with products. the extension it's those in expansion

growth about ASP reaffirmations a is our continuing and our those buy within the cohort. of seeing our that's pleased And durable extensions customer set. growth think within software. $XXX,XXX customer with continued within we're to from the very The those which product is expansions how customers you So generally we're framework, journey

Brad Sills

Wonderful. Great if may, And more, one to please. hear. I then

Hashi And it Consul what a customer standard Is et take to along point? get provisioning, that What does this Hashi. do You to multi-cloud the a to manage networking, it get deployment. to talk for we need center. big to point? to concept about buying cetera, customers enough that a centralized of simply, now We have move security, with can

Armon Dadgar

a great it's question. Yes,

adoption initial cloud the and to maybe organization an happens sort the opens agreement up What signs out Cloud what X.X, is this often number I X.X. And think seen different we've jokingly it think see is development providers sort with of or we of X.X, call an sort in a internal of and of floodgate their times, I more so community. phase. play we X

a way, driving you it to of months have approach those to teams of inconsistent so cloud isn't all what sort that's in And compliance, across controls XX security, an common approach adoption. later this common tactical common There is doing centralized are Inevitably, happens XX ad-hoc right? very sort it.

And so very quickly, it becomes unmanageable.

cost of and compliance running of triggers you it it overruns you're because either concern security issues. some because triggers spend, so those a into have And or concerns

a organizations shift do central And and realize then to group, need more to approach actually be cloud, to a that to they tends stronger, so go create that have catalyst they right? X.X that so the how consistent then from them the where X.X. And for oftentimes, they that's to

for the foresight. pattern is most it the and tends organizations the catalyst people that see you it. who Rare think the problem the then run in be time, of I that into to have is

first. customers, And you to but and pain feel the have encourage so sometimes certainly, we try

Operator

Our next from Brad Reback Stifel. question comes of

Brad Reback

that one and we be split evenly marketing? as or will for next way the going think leverage commentary to between it fairly Or is and about Navam, trend year, sales other? the R&D

Navam Welihinda

the board those Brad. prove and will marketing, invested out three Thanks, in three of G&A. sales ahead cycle in Yes. split will all in segments, and We've segments, across It well. all the and all be evenly R&D as leverage three

Operator

KeyBanc. from Our next question comes Michael of Turits

Michael Turits

on margins increase XX-point My couple but year. question congrats a the for is next times, last on to our of because X

it? of some So see slowing Navam for evidence own Dave. impact or businesses to hyperscalers to in Terraform any you you deployments able cloud seeing you who that at of were from their Did when that cloud did just people down migrating you lot that There all, this quarter of the to migration, against frequently not of clouds. Did people the question are it? did was a kind execute see adopt so at -- all? And action making typically, What see? well particular since

Dave McJannet

is this David. Yes,

it's I level. side, I general, demand we that macro say the the saw it job you're as did candidly. during of and describing. see think attribute at it And to what strong anything a thing our would teams specific I relates good quarter. I phenomenal hard sort to in think would to from don't our execution

Michael Turits

down to could Consul. a Armon, then more in if And see Indonesia. you you win had major on bit that drill a little Great

a earlier that adoption You've you've remarked in prior quarter of seen maturation, calls Consul.

anything, cases the the growth? mesh service So are what service use and what, service mentioned You if cases? are around mapping, driving discovery is the use

Armon Dadgar

question. great Yes,

primary two effectively I cases. -- use two think there's

think, one mix organizations I The cloud, some workloads, play, right? mix have of more greater see there's They technologies are containerized at application. as some of Increasingly, a serverless is, of mix adopting workload. first we virtualized

one, it's Consul, they those they of tends one have problem first to kind concern platforms another, one fact that to a need of interoperate lead really multi-platform, different is you right? initial With with. with to the on solving basic we security discovery connect the multi-cloud source of workloads So enabling really that. another. the day to that the that think simply I case more use one running Then or be So that discovery the workloads have X is around the of

through intervene automate at Terraform network. is to discovery, And more So So right? that's And of and to my humans cost have filing to enabling see a X really focusing functions which the think optimization of as sort case, look our invest do talking on of the sort update is day tickets manual enabling communication. that's posture than day more protect right, right? then how the those more service actually connecting kind how so versus It's I really another, then a X network investment of to one Consul service-to-service the day and Trust think in, a in use where of of Zero how about processes mesh service I organizations sort rather process applications where on X we I network Consul automation, do concern. have of come in security I'm those to concern, different optimization,

multi-cloud to day optimization. tends process of proposition kind is security; be cost enablement core and of sort X, multi-platform; So and of that the day X, X, day

Operator

the [Operator next Securities. Walravens Pat Instructions] JMP of from comes of Our line question

Pat Walravens

curious my through the I'm congratulations. macro let how progressed And me the quarter. add

they said company when strong. was step-down May better. a cloud said in big of one any hadn't problem. and So August, actually then gotten quite that reported the June late were they pretty August July And

is So the guess was has been like I'm how experience done. and quarter just August wondering, August your so far? August? in what How I Or was

Navam Welihinda

Navam it's here. Pat,

enterprise-heavy. the for very us So cycle buying is

quarter in. So contracts ends is of the terms means it's that a how for that -- up what in us weighted come tail-end what that

as in it of see don't to you quarter see closer beginning So the it the ends. generally much and contract you the

the said, well that's scrutiny timing saw half manifesting increased we -- how back All essentially to starts scrutiny. the spend execute very you of managed when that's So said. towards generally QX, of the increased the and being that of the we quarter, despite

Pat Walravens

guess what August, that say? any weighted, far so it's difference you that And end would I back you but

Navam Welihinda

quarter. of difference any last in the August the quarter frame I last don't or It's no see beginning middle difference. compared towards time really the to of

Now been pretty that's note time vacation that's in summer there's I the the and previous the that from that of and years quarter, it's impacts been as in the comment made third well. consistent terms seasonality how

Operator

remarks. I'd Thank McJannet over like to you. turn call time, Dave the At this Sir? to for back closing

Dave McJannet

for like to to forward in Appreciate speaking Yes. I'd the and Thank just everybody thanks to and you participation. for soon. questions my dialing express look the you.

Operator

This today's for you Thank participating. call. concludes conference

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HashiCorp (HCP) 2 Sep 222023 Q2 Earnings call transcript