Earnings call transcript Q1 2024

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the HashiCorp's Fiscal 2024 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your first speaker today, Alex Kurtz, VP of Investor Relations and Corporate Development. you. Thank ahead. go Please

Alex Kurtz

release welcome afternoon, fiscal our we financial our fiscal and today. market earnings first first call. XXXX press in announced This will results after to afternoon, the XXXX close HashiCorp's quarter quarter issued Good be discussing

Armon HashiCorp's release, Co-Founder, encourage we provides an presentation In me have CTO are Navam additional and our that presentation our review of that about to We Dave published you CEO, With conjunction our financial CFO, with McJannet; Welihinda; advance and Dadgar. press quarter. information earnings earnings in call.

on You can access ir.hashicorp.com. investor it our at website

Today's call Act contain statements Reform of of provisions under which are will Safe Harbor the Litigation forward-looking Private XXXX. Securities the made

business guidance Forward-looking condition year. and statements include the concerning for and statements full future financial and and financial financial XXXX our business quarter expected second and performance fiscal our trends,

identified statements today any relied plan, will representing at seek subsequent or intend, may any such our our not duty we statements. upon These date, as undertake anticipate, statements. reflect be update as not to do expect, views be believe, and statements should these views similar by or as words and These only of

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

are with call the Accepted this Accounting discuss will which financial otherwise in certain accordance presented noted. also prepared GAAP, call, unless on in Generally we are Principles. During non-GAAP accordance financial not measures, measures with The prepared

metrics available earnings SEC furnished which we define website the financial and been measures is A ir.hashicorp.com. other reconciliation how our as most measures, to is these well to directly the and our has as also at press in included GAAP on financial non-GAAP release, of these comparable

Dave. that, let call turn Dave? over to me the With

Dave McJannet

of with and first cash line public pleased exceeded $XXX XXXX. Alex, revenue quarter earnings and positive guidance welcome, our top bottom for quarter report solid first quarter to XX% improvements growth flow year-over-year our our that everyone of of We're our call a with you, and to company. profitability million as first representing Thank fiscal results in free

remaining with added million, or $XXX,XXX revenue obligations than to year-over-year equal XX% we customers in total XX last compared reached to performance Current quarter, greater annual of non-GAAP to representing a growth. reach XXX. $XXX.X recurring And

subscription Our capabilities roll offerings We to HashiCorp excited million Cloud trends Platform the $XX.X adoption revenue, revenue and features quarter. of XX% during in new representing about in we reached new as FY'XX. remain continue out

a results Against the delivered. pleased challenging that QX environment, I'm the solid team with

continue provide and what impact the challenges business like in to macro I'd to our However, on we're more market. color seeing

economy and means the time QX, Armon I what much about A these that speaking key regardless they of businesses. uncertainty for with are theme spent feeling customer of own their size, our from the is During customers. it discussions, and

about As began we last budget saw customers this cycles. our uncertainty calls, thinking start impact rates have interest to budget of in mentioned the October as we higher last year their earnings in FY'XX few

many scrutinizing to This software deal spend. and cycles. economic optimize driving are teams software larger uncertainty their organizations is purchases Procurement stretching

happening near-term these cloud across deals. customer long-term remains trend challenges, customer we of the our in inspection to all deepening notably As largest our unabated. is most but Despite budgets believe segments, of computing

our confidence highlight have we for customers I the give would to next the to stories customer the us on product fit. outlined and continue presentation several We opportunity to as years. in plan cloud continue IR demand site our earnings in their market our products for see initiatives

and and These of adoption European early a office very journey. company, customers a backup include verticals exchange services diverse cloud in US large a based very platform, all financial their stock software

continue they can we trust focused on partner laser their to initiatives. invest cloud with be in these customers that are so a building as We central

In logos, an as XXXX to we've QX as new largest we addition, adding of ARR greater XX added global number added our healthy customers on number $XXX,XXX net during continue and new the add we traction customers than larger solid in well. produce focus five quarters,

customers These important of an our an is as and of them footprint grow future model our to are over we time. large part our become critical piece increasingly with infrastructure built their

deals, our the confidence on So of our heavy while about that enabler give to large transition. us the seeing entry and level we're long-term budget these companies role scrutiny as large with deals shift expansion cloud

We in strong also which late continue year. growing and interest see last to boundary, we introduced

for by user secure boundary security a reminder, key organizations solves remote using access. identity a challenge As

and on QX noted customers. I with road of Armon As earlier, the I spent much

In about as to which Boundary, we the for great is nearly signal meeting, the opportunity every term product. a customers longer proactively see inquire

during Next particularly we announcements week sharing call. HashiDays, cloud European our user will highlight of product make innovation, around conferences will next automation. series ongoing quarter's details host we where that I to look a more forward security

to Navam, we market want the more over provide it the handing I announcements today. on after Before to made closed detail

operating we meaningful Navam the First, lot are acknowledge describe workforce customer to to approximately reflect a of announced contributions a want X%. to I HashiCorp and is will part to current talented of the necessary spending company. we effort environment. leaving our costs reduce lightly a reduction is a people by not made This our that of that decision who made

XXXX, already leader to and our who make products team. with board organization. Susan acquainted as St. are a master she's product most and July our of HashiCorp, we scale understands portfolios. of deeply Ledger been has a the sales field technical worldwide how that of President will excited well be Susan joining since the Susan our complex in is on our so Second, company

got an each Susan, experienced where billion times, led she Okta we multiple helped for rare leader and to with most organizations $X the them work has this field the opportunity done who in With surpass recently having Splunk, revenue.

phase organization growth. well field the through economic through well overall that and conditions trust and our leadership confidence serve and have will as We her experience current of next our as

in opportunity cloud we achieve in take profitability better our trend long-term now of we the guidance strongly to continue meet And opportunity. on remain of line goal. year to and this with against believe and next fiscal the aggressive to given last operate an goal we adoption that track believe are to I quarter, advantage provided positioned

I'd like to turn and Now questions. answering it Navam look forward over to to any I

Navam Welihinda

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

engine. Our customer in first quarter fundamental progress results our showed solid adoption

very consistent. process Our remains

extends land customer to QX Customers account the XXX the plus our success customer as customer increase drove with adopt particular a our of its then organization. and this adjacent source customer by products. expands account to our product. products in We XX. open The and increase a engine organization product into adoption usage XXXK commercial The throughout by ARR

customer currently Our X,XXX count total and XXXK count respectively. ARR XXX customer and is plus

of into quarters the past While QX. adoption remains also pattern economic we've consistent, Dave as few mentioned, customer continued the in the noted headwinds

seasonality, most we our the segment, The with larger quarter customer of sales segment. among acute contracts which first typical on ongoing saw budgets, in customer within and impacts slowdowns cycles. Combined with large along caused our pressure customer our enterprise were behavior customer elongation global

and rates of percentage us. this roughly quarterly retention the reduced a spend for customers points. one and excess The our of with in adjusted due gross addition, portion spending two their to customer net retail capacity sector, to adjustment In largest impact some our was

with one our to the continues the be our customers. engaged largest adjustment, team and remains of very Despite customer

buying the create large for current rest and the of expect fiscal year. of pace customer ongoing We will extensions environment uncertainty the expansions the in

have year full reflected these guidance. we Accordingly, expectations in our

overall given of the widened potential range also the outcomes our have purchasing revenue We environment.

cautious While we have managing ongoing we spending a diligence very expenses, our operating shown customer in in environment. are

we our in of through workforce. a additional cost As approximately took today to of force steps X% result, our reduce a structure reduction

other considered spend took and actions, including employee a open, number Before reductions, reducing unfilled eliminating program carefully jobs. making of any we but our

the helped a and to valued It employees very decision have HashiCorp was who is difficult for hard out build transition company. this

also However, on is profile to resources deliver long-term necessary also have maintaining believe the and to it enough current environment, to investment our right the spending while economic navigate plan. we

begin in QX, be see we QX will beyond. reduction reductions in end the flow expect and the cash which Following of by year force our impact complete these free of materially to in we of to the this

cash sustainably an annual positive the negative and on cash following beyond. free year approximately expect We flows of basis followed free margins by FY'XX, X% in flow

positive Other second quarter low cash than flows. have flows, seasonally free cash to we're all other quarters expecting

We our that, the With reach profitability maintaining in let's move EBIT guidance. are to our FY target of non-GAAP second XXXX. to on half

ir.hashicorp.com results. our guidance presentations in in financials quarterly be our website available numbers Our under full can found earnings

million and in encourage to to the second million and for expect disclosures GAAP non-GAAP total disclosures, loss range $XX the quarter $XXX operating full guidance, the non-GAAP summarize of I metric of you through To the we share revenue doc $XXX our to to count million million. range reconciliations. FY'XX, for in of a read $XX

'XX, For range the expect FY'XX range $XXX $XXX million of full in non-GAAP $XXX we the loss year $XXX of the total and in million expect and million. million revenue operating and

for questions. available your Alex? and take of attention. Thanks your Armon I any Dave, to are

Alex Kurtz

With operator, to Navam. that our Thanks, let's go question. first

Operator

Our Instructions] comes question from [Operator Auty line Sterling of first you. Thank with the MoffettNathanson.

go Your line Please open. is ahead.

Sterling Auty

some Is Ledger thanks. to head go-to-market changes cetera? Yeah, up in approach you that of well. or of changing program extent make with as early also coming sense Susan either et either I'm you into there the in St. magnitude curious mentioned Thank the want sales. Because of structure to guys. terms Hi, the or staffing, spend you. an

Dave McJannet

for Hey, Sterling, question. thanks the

this about I times has opportunity now of different and done us. growth step in the leader in think, companies. We about it's go-to-market next who back had a we think unique front of in to multiple bring as really phase that multiple

think, aspiration. about super we're so excited the And I that's candidly, opportunity, the

envision it's try had It's program was alluded quarter ourselves changes related scale had Susan. independent spend some made really beyond some last and that we There's company progressing next changes, for that that. to the but over as I about. certainly generation and line, or just relative program of Navam strong that's about to the to the what we not a revenue think, the so cost reflecting keep through to it up really setting nothing ourselves

Sterling Auty

Understood. Thank you

Alex Kurtz

Thanks, Sterling.

question. Next

Operator

moment. One

comes of Derrick Our the TD next Wood Cowen. line with question from

Your go ahead. line is open. Please

Derrick Wood

question to budget investors Great. markets. move there, pressures your from is the from end open given Thanks. you're kind I'm seeing source out there's getting Obviously, commercial in you're dynamics One if customers those of

sense churn you or the you're as that of on a those look kind was of if get I seeing risk hoping going kind view of of forward? any what's to your dynamics Just of

Dave McJannet

again. Hey, It's one that commercial short organization. an products an corporate solve the a for products for I'll individual, Dave. The problem answer Derrick. solves is the no. answer The source problem open

different in So they're fundamentally sense, products. a

seeing traveling we couple is a communicating over calls, we're been environment. the what very, think decisions terms what we've consistent we to interest no And us, of consistent, what . last as end is seeing so, be no, which design ton, in I the in are granted Armon at do, the change and what front when earnings very, very competitive very I both is being of to

really the different than last in over scrutiny just pressure we're really anybody the the predict else. us, as is in couple other of that much difficult that on to just but like indicated is that vendors What is seeing And market, procurement putting no we've increased process calls. is

speaks at I which in don't you'll ARR to unabated. the and of I new NDE, crypto their see XX of we numbers no XXX,XXX plans. way. remains hear report, change that What over think think customers consistent to in quarter earnings long-term our is XX doing as Global some I trend material you really look customers, other And and added anybody changing strong sort cloud The just XXXX really start another of

Derrick Wood

you. Thank Okay.

Alex Kurtz

Derrick. Thanks,

question. Next

Operator

One moment.

with comes KeyBanc. next from Our Michael the Turits line question of

ahead. is go open. line Your Please

Michael Turits

I just to as of Hey changed as a for sense to want guys. try possible. much what's get

extending, up in this And extremely have you optimization prior type seems which deal to to fact, held cycles cloud quarters. scrutiny et deal some a period extent, in benefited during You've people in have of well cetera. seen

So is the have you year? anything for point your there that determined might outlook inflection worsening here that feel was like

Navam Welihinda

the Navam Hey, it's here. Thanks for Michael, question.

talk to pipeline changed, activity, changed So creation front-end is very think points the activity of the is what's terms not environment, strong. which the is what's pipeline in still about remains I main the

the of customer Dave the XXXK in ads, and ads mentioned total As call, very net terms in a healthy quarter ads. GXK

quarter a of What's in is of in all year. as well, the So efforts, long first first remain and seasonality the activity similar. this things first efforts, that's cloud transformation happened quarter, large this reflected pressures bit related deals given. new quarter very budget large And those global or In and little of cloud that a very a you we've headwinds, lot a deals. in cycle, saw of lot the in procurement very, the range to enterprise the segment segment guidance the

working thing material we I'll But the change of deal with example first the in to quarter. the you first quarter a So multiyear held due and procurement some were main remember we our an was it as issue, second these on saw several give in deals, ended to quarter large that's of up that in products. closing up procurement deal and process the using

for cloud just effort don't a elongates lost transformation happen competitive happen So to pressures. they move canceled, don't because lost they get get it the these and deals in is they when -- different quarter. They

Dave McJannet

This Dave. is Maybe just add.

just a subjective commentary. of me add to Let kind

seemed in -- the than that lot what hyperscaler scrutiny quarter I based lot think cloud be previous a quarters. as on anything And acute externally see the And at the moment. that you results. there's a of narrative the to certainly, in hyperscalers, in see there's to related saw on more I just the of around you

We are there's things transition. larger certainly that fundamentally get And transactions cloud elongated to to the scrutiny anything increased tied cloud on cause related. associated does with as

Michael Turits

Thanks, Dave and Navam.

Alex Kurtz

Michael. Thanks,

question. Next

Operator

please. moment One

Our next Ittai line Oppenheimer. the comes from Kidron question with of

ahead. Please line go Your open. is

Ittai Kidron

dig spend. I'd of reduced customer Thanks, the like to retail in that guys. the into portion

things few this. around a Just

the a of just be spend must fair about that two-point customer, actually right, a -- without think customer, percent value why on way a you would doing guiding how quite all, see it reduced or or to a I'm to if can customer revenue didn't And right color significant the have it as that using to for big to there? Is magnitude? it First in the actually quarter? math Navam, of it is you're consensus not some give line say be next this impact, the of

Dave McJannet

of I'll the Ittai. the I'll it. of the that more Yes, for we the shared finance of sort as season. Hey, scrutiny. math in really really side I answer entitlements let happening It's procured the Dave. and it. think, Navam side good question. have the Thanks prepared peak around answer remarks, there's what's of a board example a retail actually for across customer in procurement It's subjective

which vendors up product that's They would largest state, They on. with do application want multiproduct for customer. underscore entitlement that that them. are the that is particular particular other remain to one the for of with commented something partnership ended for I that But just particular have sort customers. we consistent a rightsizing our in what that they of

We are engaged super them. with

this And companies very cloud it's in that they're very also, lot clear early very money early. a spend their estate. but they're These on big of category, are

that So comment and net, on an Navam it partners was I'll let are math. the optimization we certainly

Navam Welihinda

mentioned retention about Yes, was customer X% gross it's the to I think impact revenue prepared during X% ours. about large of net I and And remarks, it rates, relationship our a impact.

the of customer. we're reflective movement general terms the this rather think than is that In specific guidance, deal large guidance seeing I any of quarter, given in to the

well, in of side what's purchasing obviously extend the was impact relationship decision a being budget reflected and to in customer's happening CFO more but new the contract large more in the quarter impacts this So and of cycle. this and in part that this the it's more relation guidance procurement as

Ittai Kidron

it. Thanks. Appreciate

Alex Kurtz

Ittai. Thanks,

Next question please.

Operator

One with moment. Piper Jim next comes Sandler. And Fish the our line from question of

Please Your open. line go is ahead.

James Fish

the question. Thanks for guys. Hey,

of portion back kind sort that How this next And Just other of after? large there. quarter the Thanks. kind to reducing the to have there or rate of kind happen should greater XX-month trailing we mid-teens that much building we call guarantees of is this the doesn't of off in Or question let's retail risk Ittai Navam, customer quarter continue does should XXX% period to this you of net of get forward? long-term kind a What like customers than of target? mean that, kind retention spend? expect it,

Dave McJannet

a our in think don't shared. and have I the so sure. guidance a is guidance view more vertical this Yes, question. I quickly about we Thanks -- as the remainder have state can pretty overall the think I that of imagine, of -- of for, framework just the I reflected a you we view Navam's very retail customer Yeah, the DC. generally think good forget And is we for on, really specific is

Navam Welihinda

Yes.

I'd year's lot In there's about rates, to the this retention be get budget very terms cycle, after GXK. a net You've healthy optimistic hold the point activity on of through right? to we not still got

You've on got very activity XXXK. healthy the

with extensions and going forward. multiproduct our multiproduct happened portfolio impact These also are and happen our extensions also product that and which expansions Boundary -- the all revenue that product, upcoming will expansion

retention reality that rates new no, would of net don't a So, I what is think this be.

a it's line. stopping with sort along from to purchasing think the environment the proceeding of more I large reflection contracts of finish

resets once see impacts next extension of -- these cycle we and multiproduct expansion think, I budget purchase into usual Once this recovery. the the one,

long-term which we've targets remain set XXX%, intact, and very optimistic is our So long-term. we're of that being about above the target

Alex Kurtz

Thanks.

Next question.

Operator

moment. One

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

Your go line open. Please is ahead.

Alex Zukin

the a Thanks first question. guys. just for I've got and multipart taking then Hey, one clarification.

journey? of the incremental you kind you on the June month causing can migration? are I maybe cloud customers to these mentioned, dynamics some kind April And relative that's on incremental the seen focus what seeing cloud of these what Dave, next within then in of contracts, is that's how this about phase You in greater and Is put that optimization longer pausing cycles, March sales larger on do? the May dynamic comment of this Like before that it trended? friction? on you've and anything seeing the if about think So of to similar being guess larger these these is deals, are like hyperscalers. scrutinization is deals, Is -- this you we

Dave McJannet

if for having consistent. hey, been the conversations same they're you interesting we're which conversations about cloud. we've is, Alex. months, It's that the having the super because it's think Thanks, last seven Like now, we're also going

Global slowing They function. not yes, down. They to are engaging we've a created us unabated are Those say, plans engineering are platform by XXXX. the with

we and of already friction guys some that. basis towards to the is just time how It's design of place. in which the do You consumption taking us win, that are align organization the

consistency those with conversations the instances, specifically. done pipeline with it's procurement where not of to one most that of question the I that happening is buying companies company week, the one department being those are exactly this utility, two the was stopped by happening an same ahead demand, front-end being what wins the plan a design that through in flow some have on as massive the seeing, we're conversation what's typical things of of what's degree insurance slightly which the do finance entitlement That's side. what's is given

So change stands we towing you're if little that design behind in He time. just view. wins going a will your you, of with the catch to point question. you won course reason material but it's to other boat I part really to want that because is boat like over has nine this Armon a traveled through like almost procurement, of behind it's literally further because There's those quarter. needs no than the last weeks Maybe that direction that, a think flow

Armon Dadgar

Yes.

what Dave think to I maybe just echo said. anecdotally,

rightsizing is consistently into have this optimization the and them focus their I is for think locked are budget their on of seeing top what vendors really and an of focusing most fiscal estates. year, we're consolidation these of organizations going sort pretty

I think pressure continue that we to see you're especially so procurement seeing, translate bigger deals. to And the the around that

on we start TerraForm great. of other like engaging these I are we How thinking layers we on Vault help think really about the product tools foundational journey. said, aspects do all into us where and thinking that still the of them But can How our about automation next platform. do with along groups architect

how get think ways, do realizing really And hands it's are aperture you really many a I around their platform towards need I trend accelerating I going scale, central think do the in have efficiently cloud to for at that. also right? if organizations Because to they're teams, these

to those transformation have of it's think accelerating standardization the it's order a lot also and around exiting I the So tooling. need

all activity think speaks pipeline think to that well I there. I and So the is happening the

Dave McJannet

net just a of also is it Armon's to occurring I'll certainly positive vendors which shift to add, consolidation general just also point, a is cycle, during this for towards add us. to

design us actually make portfolio accrues general, successful As their they're process, vendor, as on they to well win over it long a in as going to term. win through side very, companies trying will multiproduct we right very are happen and it the longer the the design as things those rationalize

Alex Zukin

Perfect. what monthly on just then question? the about cadence And

Dave McJannet

would normally, you suggest, mean, know very it's I I to I similar feel me.

Armon Dadgar

And speaks I I our think been annual And are to there's I Yes. guide. don't think think basis this set fact that's these that on the budgets marked for change. really a generally reflected an in organizations.

be I organizations, for budget reset their would think unusual to it most midyear.

Alex Zukin

maybe Perfect. there Susan Is role? help a helpful. And clarification Just the on that would this a new meaningful the changes be start of someone? kind given to through year, go-to-market July? Is of any role. to question organization contemplated in the just appointment Is the there she replacing

Dave McJannet

our positioned I'll in was as in of is role availability next opportunity about uniquely her of never interest who about to phase we suffice is and mentioned, Susan, her. someone think energy scale, always $X say to do us our that her is having play ahead pointed. the I very and we lack that's super -- it not billion that. say, as we're certainly think about excited And to as It the was one where about the as number of the I bring

And do positioned that. we well to super think she's

as requirement role as a around that President And next bringing think for And right a growth. Worldwide so of phase us. role to the is for this of introduce more is Operations. time the we're we of about We Field her that think decision

role us will beyond. she'll her conceptually, existing arrives it's phase grow team report the it no of to will the completely obviously determined once material her new full the and and scope next changes obviously she into time help a next in So just month. beyond addition and that, But be the

Alex Kurtz

Thanks, All right. Alex.

Next question. ready next it. Got We're question. for

Operator

question of BTIG. with next the from line Our Gray Powell comes

is line Please open. Your go ahead.

Gray Powell

Okay, very much great. for question. Thank the taking you

you can me dig the appreciate I more, it. sort if help of revenue Just into guidance

I around XX% second guidance revenue full grow year. half in the that XX% implies year think the you or of the

which should then Just about going grew And we the the is point how XX%? cRPO, last at how to appreciated. should reacceleration? think potential we know call, growth but just reconcile I maybe be that hard to be for really of reaccelerate or timing to a that one against some any color would

Navam Welihinda

Gray. Yes. side. Thanks, Good question the cRPO on

So weighted. the obviously the we enterprise is right? reflective the half when of it, front they're half seasonality, a compared think sell to contracts, So back cRPO tail-end as you about large seasonality --

So has half front bookings perspective. is much the the on -- from back our a a revenue half bigger impact a than

growth half to So will front back the the half. rates the cRPO from differ

growth of So the just a rate what there year rate growth perspective difference quarters is revenue to and timing implies the or going a first because the be is year, between half for what back -- of right? the three bookings the from quarter numbers, the full are it back cRPO absolute

the guidance. basically and about enterprise segment in think the factored how segment we've So headwinds continued in we and the revenue global

caveated this early is also year. in I Now the really

from front-end, customers. field the Dave and optimistic every customer Armon We're of as give and along. and when we'll we what So the visit we're about terms seeing we'll execute quarter, we're in given seeing very updates our activity, go move given especially especially what you

and sort as out a think this normal the But to budget every current moved environment, point, quarter through Armon some cycle. and And rates. until we set So feel be the changes base, and update. once year, cycles of we're we're going back are reflecting an we're at purchasing budgets budget that's to mentioned, customer be I where seeing normal with that our point, our growth we at of will will be that

Gray Powell

Got it.

Okay. Thank you very much.

Alex Kurtz

you. Thank right. All

Next question.

Operator

One moment.

the from of line comes JPMorgan. Mark question next Murphy Our with

is ahead. Your line Please open. go

Mark Murphy

you very much. Thank

not expansion typically then So and in your actually is coming seeing customers the your heaviest the from would what largest we -- scrutiny see.

the current million be out on -- you, as we're behavior would kind the that And customers that -- they think that so at number footprint. of ARR those of know of just why follow-up, then they two they we they'd assume number Is to larger $XX double-click that I is the trust maybe June? way? and what a a sitting are would you shake explain would as you, seeing consume want Can customers now? that that

Dave McJannet

Dave. Hey, Mark, it's

Let me answer the one. first

so Just yes, just as the we're friction or I a understand I well existing clarify, is so seeing new. inside as I commentary procurement general customers think

I would which But think expect consistent. quarter, given but were -- those what But reflective the overall, in are companies certainly, maybe they the and exactly in cycles I them own anything. than ago, from just of their saw is us. I a year constraints NDE a than business, the again that's more a strong of what commentary general very we to slower think larger pieces incremental continuing purchase for

Navam Welihinda

Yes, Mark.

On mentioned. our the engaged large, I three large is remain $XX of as our They million current, the of million below line. customer still it one and largest one yes, customers, side, slipped the customers $XX

count is too. the yes, So, there

Mark Murphy

Thank you.

Alex Kurtz

Mark. Thanks,

Next question.

Operator

Nick Scotiabank. And moment. with the comes from Altman of next question our line One

Your line is open. ahead. Please go

Nick Altman

more. the upside some Great. the good the why There and of a count bit bit Thanks, guys. margins were upward a wasn't X% I guess margin in guidance quarter surprised revised with reduction. I'm head

anything there just prior be to risk we margin thinking factored clarify guidance? there or So is the into And considering? should then else was the about

Navam Welihinda

we is the than clarify, what factored to previously our in. so But QX, current guiding related which ripe into EPS of our to had the just severance Hey, Yes, factored margins. is better overall, impacts some Nick. I our think

long-term the back the through of and the and half impacts the takes And see until work year. severance that the back half -- impacts second also really and note actuals in first first way it the your to quarter its margins quarter of to the -- year the after

what So we're that's of the seeing in terms margin guidance.

dip But to always that in free to cash second should the second the the seasonality, you guidance apart up seasonality ACV to due flow from we EPS positive quarter -- has being be and going expect quarter our first expect expect flow free the you're said, of cash for year. quarter ticked a rest

Alex Kurtz

Thanks. Great.

question. Next

Operator

moment. One

Our next Truist from Jump Miller question of the Securities. with comes line

open. is line Please ahead. Your go

Miller Jump

that then the of reducing you Hey, reduced for one headcount Thanks which have color the of segments give was up rest business more guys. where just continue on taking on reduction. And Thanks. hiring plan -- Maybe there could the for you any I you in? or are the question. plan segments year. to follow headcount any maybe more just the on you wondering to

Dave McJannet

Actually, a part question, to underscore, of I'll be let done. needed maybe the one decision to we as difficult hugely to for second. answer that us the the and want for I just the is this make felt Navam first

to not of reflect an for over that back past be quarters, deliberately, like the cycle clearly, obviously that want through with environment had in place materialize, four sales to very an and everybody investment demand a expectation we just I extending did gone just else. different demand certain environment with cycles

feel make this of cycle, on year required we in like next. the capacity a good investment and to that want I position we're that deliver But because to deliver clear to

do across in sectors. to all do, need So and that capacity R&D modifications certainly, both all good to feel were what required across remains we about while the in We there sales. segments

Navam Welihinda

for We when we we're sure in were And the want we capacity. still make the we in investments where And organizations, are Yes, maintained path. took to felt you Dave, spend going in impact and decision we we is careful needed company, lightly. think before very the so sales invested something this long-term. down many steps a large which about right. the Echoing are large we difficult impacts We our R&D. to ultimately, growth took very not a this and us

payback where the in products is the took certain and geos we or And several what longer in thought a term. little down. it of that the of business was trimming We understanding criticality action

road still So sales perspective the overall, staffed from also a and map. and quarters deliver to we deliver product both R&D well are very the

that headcount year. quarter employee or have sufficient this feel base the we we the the we have is And that for that

materially add environment unless So we changes. we're going feel don't to the like

Miller Jump

color. Understood. Thanks for the

Alex Kurtz

you. Thank

question. Next

Operator

question. next our for moment One

comes of with Kash question the line from Sachs. Goldman next Rangan Our

ahead. Your line is open. Please go

Kash Rangan

and what not Hey, been Murphy have by And out. timed ChatGPT, it guys. I Zukin. Mark asked Alex asked questions

So but business, has track, very, of had net a very President cloud, because she scope different TerraForm the something products. to in obviously, that very close Salesforce believe was Operations at great you different Susan she is or expanding more? got seriousness, at you to If when want you is Do rate, do Worldwide market at I existing critical Okta, of color? [Technical would is you Splunk, coming and game? deployment? coming think the so brings Susan, the And you she customers Hashi a In of Thank for be in also, of Difficulty] my for some that much. on thinking I What just to of just there the cutting existing that to accomplish at with non-TerraForm from pretty so give can Or respect Hashi this the from is stage look down way here. to be it And expansion have is house, that triangulate, the great? also, out customers own pressure

Dave McJannet

Dave. the I'll one. answer This is first Kash. Hey,

got it, I and think try I'll to the second. I to get

just of it's my rebuy the new It's is think expansion pace. the I because that net we're pressure seeing. observation that cycle procurement largely around

that relationships acquisitions there. our with applications here small the them customers, products notwithstanding are and Once our runtime on deployed, generally positive and makes long

to is long of next of customer speaking, So generally NDE the next slight that notwithstanding slowdown sort use rebuy the one the along. just a one the case is Navam in that product thing referred

any specific a help In people a is market. available to really we and as top terms next it I few think us our billion $X of that's very at is to she are that, list. type the and going the where and or about to put in do to -- world is there we're It's phase in product company, phase go very Susan, of revenue, operationally portfolio and at ahead, very, the of that an about of different we think phase think shifts of cognizant

it's So scaling a company. question generally as for more a us

them. are support in we extremely critical and the role and to and build customers be shifting among to see, can going the companies planet, a our play long result, relationships you They're large as possible that will best is want As we for our companies not cloud, a them.

Kash Rangan

Wonderful. best. so all the Thank you much and

Alex Kurtz

Thank you, Kash.

Next question.

Operator

One moment.

Securities. Our Patrick next with from Walravens line of question JMP the comes

Please go Your open. is ahead. line

Patrick Walravens

way Great. data, Is how [indiscernible] Armon, today? and aggregated it to about were thinking of and you How was helpful about still Thank that apps business? Hey, year, across about beginning think a data. variability talking are you. division the the is a the there thought at three you in budget and you lot more

Armon Dadgar

Thanks Pat. the for Hey, question.

think committed the way. is cloud, still these still that useful of see a still moving teams is these think in at all I I are what accounts layer, we infrastructure they're ahead. all And to

three, over a beat, years, I gangbusters, these a drive has where bit is to think hey optimize and on there look been a moment sort last efficiency consolidate opportunity of four to cloud in taking pause states. of spending the little they're at and

cloud waste really think pausing what it's beat multi-cloud But a is our environment. in do on ahead fairly see we forging sort a strategy, from but So no to a I one large as broadly is that view is strategy. a taking everyone cloud of the think really is divesting like right? optimization, amount of I

infrastructure pause that will we generative as And feel If continue net move interested sort that I then think of of anything, of in that. people already AI I and where the sense, lot be seeing cloud think, think with who we growth expect drivers we're think is, And techniques, customers now of actually new optimism will leveraging I the some those are we some in a there. take workload.

large to financial their who working and on get group a dramatically to exactly accelerated Azure with, been has for we've pulled There's efforts that purpose. very forward

and workload, bringing to using net Vault Terraform that and that's So Console them and new they're multi-cloud expanding to multi-cloud journey. underpin

in pause, on we'll I at that seeing be grow take sense, continue cloud to workloads will the So this that broadly see to like that there's going that optimization across and then to continue think a we're market feel we infrastructure layer.

Patrick Walravens

you. can follow-up are your Navam All And right. revenue in Great. -- how as -- I confident just guidance? a Thank you

Navam Welihinda

Hey, Pat.

guidance. Armon said, due large the optimistic losing of yes, the contract to confident into we're And new program. out of cancellation I elongated not very or about we're rest to year. So losing It out as due competitive about in our this pressure cycle think cloud factors the revenue

large next to as in So we reflecting But But we year. quarters. or this can what the the contract the our next see to change, full occur activity confidence headwinds is three as soon this should expect we year as achieve they normal. year return will for

Alex Kurtz

Pat. Thanks,

question. Next

Operator

One of our moment. question line Morgan Stanley. Singh next And with comes the from Sanjit

Your line ahead. is go open. Please

Sanjit Singh

guess a environment, base? a talk rightsizing Armon. environment, Thank what or their hearing what and give in squeezing in. And when that previous how take could that of your long mentioned optimizing ball -- you with your you In feedback the they goes customer Armon I I'll had rightsizing entails? your you're gotten, from for the Dave from about talk I me to environment, of the you us jump the for you've a customers, sense project initiative does from question. your conversations rightsizing question or that when it you

Armon Dadgar

the Hey, Sanjit. question. good really It's Thanks a question. for

environments think as it takes part might shape have forms, much few some of what testing see you of XX% that different been I right? be unconstrained cloud the customers I have and of development is their we it, as a So think relatively spend.

environments through there's resources, is really things for orphaned the on went environment months, of it or paying up three an left that. that those one which So a I you're this, test and meter whole looking lot of developers is side running think dev

that that down. there's you them So to those go think an shut happening and test, process, have a where lot through inventory -- of in takes identify workloads I dev

have you maybe environment of multiple that's servers of I this where kind place. really take to voice One production have Then forms run is, you on hey, XX. a think running on five on needs the other side,

Okay, to of the five. can we and shrink identify that sort footprint down

a have a medium-sized it's be other a really I I'm capacity. where cases You extra-large double when on on should like of running kind

then through is challenge, over So deployed and go to the have I where am and inventory all complex data that. assets kind look some to think of I really if overutilized, management telemetry change that rightsize you also of the I to through am a where understand

of variability maturity takes, terms goes In I cloud frankly, back actually of a long fair to program. think how and it amount that their of the there's

on that was in not they don't have that good in a were readily and are this team is them. the don't conversations a accelerant like team responsible of driving production. leased And an fact, what that I a think, data way. The has for standardizing platform for available their They dev us value a aperture workloads handle workloads been test, visibility programs TerraForm of have The central of mature, to that on around having tools it. what because me gives standardized central

that do allows It of you on to kind usage. instrumentation

been So for conversation of creating of driver standardized importance sort us, useful layers. actually a it's on those the

multiple phases that, organizations to a and of sort of problem around longer there's right? hands teams don't journey, their the management. that They identification, with think it's and and get have have change I rightsizing

Dave McJannet

comments, my add other If just Sanjit. I could

as overspend, and we're and there's all obviously, orphan we're lot new it's is same of of environments ourselves. of clean-up One, that it the described, -- we There's consumption not driving forces. down. Armon for countervailing I of it to -- time, kind doing going me, things think to two slowing. is see that At those the paying cloud so a velocity

the time, is at line going increase down, an things of same of you're So new coming cloud. the as seeing the that in slope

in the provisioning in getting problem actually bit. people is So it's that a solve ultimately, critical putting constraints a by offset how from sense, And of process. little a TerraForm element

in certainly place, to the have procurement The to irony being, that function put what but you is doing. to people are that get

Sanjit Singh

seems broadly optimization. where place And workload that's as from well. ultimately, with context. environment growth how That's new manifesting in it helpful a our impact how the hopefully really the surpasses to outpaces talking get hyperscalers align And to are we or about

leader in and I sales confidence sales one to have terms guide. guys Navam question new around the clear the encouraging. place. loud and in like and your for do that's in So follow-up of back it I previous process. We the a procurement you longer the cycles had hear goes

so alignment, had we've weaker. of of blocking organization, then in change also territory is I bit at little of change risk instituted a to of and is magnitude in how wanted being the comp, a like much the tackling terms and time And environment terms understand in where the the a sales sales,

the wanted risk So this and understand to that like I creates changes incremental execution magnitude whether of just those year?

Navam Welihinda

she Thanks, help fact, We in Sanjit. of could the or we're answer risk incremental no. company of The new execution and us And this optimistic is don't stage. how addition with see about Susan. short the into impacts grow

or impair reminder, this workforce where our regions reduction, core a most overly we furthest didn't took considered in very transformation is advanced most digital along. the as the capacity carefully when the we Just

to where reduction and Susan. longer-term geos at as workforce the looked bit. those the on plan. were impacts leadership those is we we were Rather, investments, will, still margin rightsize And a sales existing that report and were potentially saw that the they up a we The little unit intact,

with change, like there's still organizational risks So with org is the and no feel the incremental incremental very stable, we change. no the risks

Sanjit Singh

the appreciate context. I Thank Understood. you.

Alex Kurtz

Sanjit Thanks,

Operator

remarks. over turn McJannet conference Dave Thank you. like any back for to to I further the would And

Dave McJannet

like here, for forward express all you. the soon. from for you appreciate dialing to thanks to everybody participation my everyone the in certainly and speaking Look just to questions. we and Thank I'd

Operator

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

disconnect. now may You

HashiCorp (HCP) 7 Jun 232024 Q1 Earnings call transcript