HashiCorp(HCP) - 2022 Q4 - Annual Report

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section provides cautionary statements regarding forward-looking information, highlighting inherent risks that could cause actual results to differ materially PART I This part covers the company's business operations, risk factors, properties, legal proceedings, and other essential information Business Overview HashiCorp provides foundational technologies for cloud adoption, automating infrastructure provisioning, security, networking, and application deployment Overview HashiCorp's core mission is to solve cloud adoption infrastructure challenges through automation, leveraging open-core products like Terraform, Vault, Consul, and Nomad - HashiCorp's core mission is to solve infrastructure challenges of cloud adoption through an operating model that automates provisioning, security, networking, and application deployment[14] - Primary commercial products include Terraform (infrastructure provisioning), Vault (secrets management), Consul (networking automation), and Nomad (workload orchestration)[15] - Products are developed using an open-core model, fostering broad community adoption with over 250 million downloads in fiscal 2022[18][19] Key Business Growth Metrics (Fiscal Year Ended January 31) | Metric | FY2022 | FY2021 | FY2020 | | :-------------------------------- | :----- | :----- | :----- | | Customers with $100K+ ARR | 655 | 500 | 338 | | Revenue | $320.8M | $211.9M | $121.3M | | Revenue Growth (YoY) | 51% | 75% | - | | Net Loss | $(290.1)M | $(83.5)M | $(53.4)M | | Last four quarter average net dollar retention rate | 131% | 123% | - | Our Solution HashiCorp's cloud-native solutions enable automation across provisioning, security, networking, and application deployment, fostering a powerful network effect through its open-source community model - HashiCorp products are designed for modern cloud-native architectures, enabling automation across provisioning, security, networking, and application deployment, while being cloud platform- and technology-neutral[25] - The open-source community model fosters user feedback, contributions, and partner integrations, creating a powerful network effect for adoption and standardization[25] - Key benefits to customers include accelerated time to delivery, reduced risk and improved security/governance, business agility, improved operational efficiency, and access to talent[27] Our Growth Strategy The company's growth strategy focuses on expanding its customer base, increasing product adoption within existing accounts, leveraging the HashiCorp Cloud Platform, and extending global reach - Grow customer base by acquiring new customers, converting open-source users to paid customers, and expanding sales and marketing efforts[27] - Expand and extend within existing customer base by up-selling additional modules, increasing product usage, and cross-selling additional products, evidenced by a 131% net dollar retention rate[27][293] - Unlock additional value and market share through HashiCorp Cloud Platform (HCP), enabling consumption-based pricing and serving SMBs and large enterprises with fully-managed solutions[29] - Extend technology leadership through continuous investment in R&D, new product development, and fostering the open-source community[29] - Expand global reach, with sales outside the U.S. accounting for 27% of revenue in fiscal 2022, by investing in sales, marketing, and customer support in key geographic areas[29][297] Our Products & Technology HashiCorp's products are organized around provisioning, security, networking, and application delivery, built on core design principles and offered through self-managed software and the HashiCorp Cloud Platform - Products are organized around four primary functionalities: Provisioning, Security, Networking, and Application Delivery, enabling a consistent cloud operating model[29][30][31] - Key design principles (Tao) include building for workflows, codification for automation, composability over complexity, and pragmatism to integrate with existing environments[34] - HashiCorp Cloud Platform (HCP) provides a fully-managed cloud platform for Terraform, Consul, and Vault, accelerating enterprise cloud migration and offering consumption-based pricing[32][33] - Core products like Terraform (infrastructure-as-code, 1,800+ providers) and Vault (identity-based security, secrets management) are well-established and drive the majority of current revenues[34][35][36][40] - Emerging products include Consul (application-centric networking, service mesh) and Nomad (scheduler and workload orchestrator), with community products like Packer and Vagrant supporting development and packaging[18][38][39][45][49] Our Customers HashiCorp serves a growing customer base, including over 375 Forbes Global 2000 companies, with 27% of revenue from outside the U.S., supported by a large open-source community Customer Metrics (As of January 31) | Metric | FY2022 | FY2021 | FY2020 | | :-------------------------------- | :----- | :----- | :----- | | Total Customers | 2,715 | 1,473 | 831 | | Customers with $100K+ ARR | 655 | 500 | 338 | | Customers with $1M+ ARR | 72 | - | - | | Forbes Global 2000 Customers | >375 | - | - | | Revenue from outside U.S. | 27% | 25% | 23% | - No single customer accounted for more than 10% of total revenue in fiscal 2022[53] - The open-source community includes over 38,000 members in more than 140 chapters across over 50 countries[25][54] Marketing Marketing efforts focus on community adoption through free open-source software, learning resources, and events, supported by sales for demand generation and partner activation - Marketing efforts prioritize community adoption by providing free open-source software, learning resources, and hosting events like HashiConf (7,000-9,000 online viewers in 2021)[55] - Sales support includes demand generation, pipeline acceleration, and partner activation, leveraging the value demonstrated by users on the platform[56] Sales HashiCorp employs a go-to-market strategy combining bottom-up open-source adoption with a top-down enterprise sales model, supported by an inside sales team and a partner ecosystem - Go-to-market strategy combines bottom-up open-source adoption with a top-down sales model, leveraging developers' influence in technology decisions[58] - Sales efforts are driven by an enterprise sales force for large organizations, an inside sales team for smaller customers, and HCP for self-service offerings[60] - Partner ecosystem, including global/regional systems integrators and resellers, facilitates transactions and customer implementations[61] Research and Development R&D focuses on continuous innovation for new products and enhancements to existing offerings, supported by over 500 employees and significant investment, with expenses reaching $165.0 million in fiscal 2022 - R&D focuses on innovation for new products and enhancements to existing products to solve cloud operating model challenges and maintain competitive position[63] Research and Development Expenses | Fiscal Year | Amount (in millions) | YoY Growth | | :---------- | :------------------- | :--------- | | 2022 | $165.0 | 153% | | 2021 | $65.2 | 62.6% | | 2020 | $40.1 | - | - Over 500 employees were in the R&D organization as of January 31, 2022[64] Our Competition HashiCorp competes with internal IT teams, public cloud providers, and legacy vendors, differentiating through multi-cloud consistency, integration, and strong open-source community engagement - Competition comes from internal IT teams using open-source, public cloud providers' in-house offerings (AWS, Azure, GCP), and legacy providers (Red Hat, CyberArk, VMware, IBM)[66][67] - Competitive advantages include multi-cloud consistency, integration with existing platforms, strong open-source community engagement, and continuous innovation[68][75] Our Employees and Human Capital Management HashiCorp manages over 1,850 global employees through competitive compensation, share incentive plans, and a commitment to diversity, equity, and inclusion - Over 1,850 employees globally as of January 31, 2022[71] - Objectives include attracting, retaining, incentivizing, and integrating employees through competitive compensation and share incentive plans[70] - Commitment to diversity, equity, and inclusion, fostering a kind and forgiving work environment[71] Intellectual Property HashiCorp protects its proprietary technology through patents, copyrights, trademarks, and trade secrets, holding 6 issued U.S. patents and 9 registered U.S. trademarks as of January 31, 2022 - Relies on patent, copyright, trademark, and trade secret laws, as well as license agreements, to protect proprietary technology[72] Intellectual Property Holdings (As of January 31, 2022) | Type | U.S. | Foreign | | :-------------------- | :----- | :------ | | Issued Patents | 6 | 0 | | Patent Applications | 22+ | Several | | Registered Trademarks | 9 | 57 | | Trademark Applications | 3 | 28 | Technology Infrastructure HashiCorp's cloud infrastructure is primarily outsourced to public cloud operators like AWS, Google Cloud, and Microsoft Azure, requiring continuous interoperability and adherence to their terms - Substantially all cloud infrastructure is outsourced to public cloud operators, primarily AWS, Google Cloud, and Microsoft Azure[75] - Solutions must remain interoperable with public clouds, and the company is subject to their standard agreements, policies, and terms of service[75] Available Information SEC filings, including 10-K, 10-Q, and 8-K reports, are publicly available on the company's investor relations website and www.sec.gov - SEC filings (10-K, 10-Q, 8-K) are available on ir.hashicorp.com/financial-information/sec-filings and www.sec.gov[77](index=77&type=chunk) Risk Factors HashiCorp faces significant risks including rapid growth management, persistent net losses, and market entry challenges due to its open-source model Risk Factors Summary Key risks include challenges from rapid growth, a history of net losses, significant reliance on subscription revenue, and low technological barriers to entry due to open-source licenses - Rapid growth poses management challenges and requires system improvements[81] - The company has a history of net losses and may not achieve or sustain profitability[81] - Limited operating history makes business evaluation and future forecasting difficult[81] - Quarterly results may fluctuate significantly, and past performance is not indicative of future results[81] - Significant reliance on subscription revenue, with downturns not immediately reflected due to ratable recognition[81][95] - Open-source and source-available licenses create limited technological barriers to entry, making it easy for competitors, including public cloud operators, to enter the market[81][96] Risks Related to Our Business and Operations Operational risks include managing rapid growth, achieving future profitability, dependence on public cloud providers, potential product defects, and complexities of international operations - Rapid growth (51% revenue growth in FY2022) strains management, operational, and financial resources, requiring continuous improvement of systems and processes[84][85] Net Losses (in millions) | Fiscal Year | Net Loss | | :---------- | :------- | | 2022 | $(290.1) | | 2021 | $(83.5) | | 2020 | $(53.4) | - Future profitability is uncertain due to ongoing investments in product enhancement, customer growth, sales & marketing, and technology development[87] - Dependence on public cloud operators (AWS, Google Cloud, Microsoft Azure) for platform operation means disruptions or changes in their policies could adversely affect business[140][141][144] - Products may contain errors, failures, or security vulnerabilities, leading to reputational damage, financial losses, and liability, especially for security-focused products like Vault[120][121] - International operations (27% of FY2022 revenue from outside U.S.) expose the company to geopolitical conflicts, regulatory changes, and management challenges across diverse geographies[135][136] Risks Related to Our Intellectual Property Intellectual property risks include potential litigation from open-source software use, challenges in protecting proprietary technology, and substantial costs from infringement claims - Incorporation of third-party open-source software carries risks, including potential litigation for non-compliance with licenses, and ease of competition due to permissive open-source rights[170][171][173] - Failure to obtain, maintain, protect, and enforce proprietary intellectual property (patents, trademarks, copyrights, trade secrets) could allow competitors to access technology or develop similar products[175] - Risk of substantial costs from intellectual property infringement claims, including legal fees, settlement payments, licensing, or product redesign[180][182] Risks Related to our Regulatory, Legal, Tax, and Accounting Environment The company faces risks from evolving global privacy regulations, export controls, anti-bribery laws, and potential changes in tax laws or accounting principles, which could lead to fines or increased liabilities - Subject to evolving global privacy, data protection, and data security regulations (e.g., CCPA, CPRA, GDPR, ePrivacy Regulation), with potential for significant fines and operational changes for non-compliance[185][187][188][192][193] - Governmental export and import controls (e.g., EAR, OFAC) and economic sanctions (e.g., against Russia/Belarus) could impair international competitiveness or lead to penalties[197][198] - Failure to comply with anti-bribery, anti-corruption (FCPA), and anti-money laundering laws could result in severe sanctions and reputational damage[199][200] - Changes in tax laws, intercompany arrangements, or accounting principles could lead to increased tax liabilities or unfavorable accounting charges[203][208][213] - Utilization of net operating loss carryforwards ($647.8 million federal, $498.3 million state as of Jan 31, 2022) may be limited by ownership changes or tax law changes[205][206][207] General Risks Related to Us General risks include M&A integration challenges, internal control effectiveness, capital needs, exposure to macroeconomic factors, catastrophic events, stock price volatility, and concentrated voting control from the dual-class stock structure - Acquisitions and strategic investments pose integration challenges, divert management attention, and could dilute stockholder value[214][215] - Failure to maintain effective internal controls over financial reporting could lead to inaccuracies and loss of investor confidence[216] - Need for additional capital to support growth, with potential for dilution from equity issuances or restrictive covenants from debt financing[217][218] - Exposure to fluctuations in currency exchange rates, interest rates, and inflation (7.0% annual inflation for 2021) could negatively affect financial results[221][223] - Catastrophic events (natural disasters, pandemics like COVID-19, geopolitical conflicts like Russia-Ukraine) can disrupt business operations and impact financial performance[224][226][228] - The market price of Class A common stock may be volatile, influenced by operating performance, market conditions, and analyst coverage[232] - Dual-class stock structure (Class B has 10 votes/share, Class A has 1 vote/share) concentrates voting control (37.6% with executive officers/directors, 22.4% with co-founders), limiting influence of Class A stockholders[234][235] Unresolved Staff Comments The company has no unresolved staff comments from the SEC - No unresolved staff comments[254] Properties HashiCorp's principal executive office is in San Francisco, California, with all facilities leased to support its global remote-first workforce - Principal executive office in San Francisco, CA (37,000 sq ft, lease expires May 2027)[254] - Operates as a remote-first company with a global distributed workforce[254] - All facilities are leased; no real property is owned[255] Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 7, 'Commitments and Contingencies,' in the financial statements - Legal proceedings information is incorporated by reference from Note 7, 'Commitments and Contingencies'[256] Mine Safety Disclosures This item is not applicable to the company - Not applicable[257] PART II This part details the market for common equity, stockholder matters, financial condition, results of operations, and market risk disclosures Market for Common Equity and Stockholder Matters HashiCorp's Class A common stock began trading on Nasdaq in December 2021, with 597 stockholders of record as of March 2022, and no dividends are anticipated Market Information for Common Stock HashiCorp's Class A common stock (HCP) commenced trading on the Nasdaq Global Select Market on December 9, 2021 - Class A common stock (HCP) began trading on Nasdaq Global Select Market on December 9, 2021[260] Holders of Record As of March 21, 2022, there were 597 stockholders of record for HashiCorp's Class A common stock, with a closing price of $48.44 Stockholder Information (As of March 21, 2022) | Metric | Value | | :-------------------- | :------ | | Stockholders of Record | 597 | | Class A Common Stock Closing Price | $48.44 | Dividend Policy The company has not declared or paid cash dividends on its Class A common stock and does not anticipate doing so in the foreseeable future - No cash dividends have been declared or paid on Class A common stock, and none are anticipated in the foreseeable future[262] Use of Proceeds HashiCorp's IPO, which closed on December 13, 2021, generated $1.2 billion in gross and net proceeds from the issuance of 16.53 million shares at $80.00 per share IPO Proceeds | Metric | Value | | :-------------------------------- | :---------------- | | IPO Closing Date | December 13, 2021 | | Shares Issued | 16,530,000 | | Public Offering Price per Share | $80.00 | | Gross Proceeds | $1.2 billion | | Net Proceeds (after discounts/expenses) | $1.2 billion | Recent Sales of Unregistered Securities The company reported no recent sales of unregistered securities - No recent sales of unregistered securities[264] Stock Performance Graph The stock performance graph compares Class A common stock to the S&P 500 and S&P 500 Information Technology Index since December 9, 2021 - Stock performance graph compares Class A common stock to S&P 500 and S&P 500 Information Technology Index since December 9, 2021[266][269] Purchases of Equity Securities by the Issuer and Affiliated Purchasers No purchases of equity securities by the issuer or affiliated purchasers were reported - No purchases of equity securities by the issuer or affiliated purchasers[271] Reserved This item is intentionally reserved and contains no information - Item 6 is reserved[272] Management's Discussion and Analysis HashiCorp's fiscal 2022 saw significant revenue growth to $320.8 million (51% YoY) and a 131% net dollar retention rate, despite a $290.1 million net loss due to investments, with strong liquidity post-IPO Overview HashiCorp's technologies address core cloud adoption challenges by automating infrastructure provisioning, security, networking, and application deployment through products like Terraform, Vault, Consul, and Nomad - HashiCorp's technologies address core cloud adoption challenges by automating infrastructure provisioning, security, networking, and application deployment[276] - Primary commercial products include Terraform, Vault, Consul, and Nomad, which can be adopted individually or as an integrated stack[277][278] Our Business Model HashiCorp's business model combines open-source offerings with proprietary features for paid tiers, generating revenue primarily from subscriptions to self-managed software and HCP, driven by an 'adopt, land, expand, and extend' strategy - Business model combines open-source offerings with proprietary features for paid tiers, focusing on collaboration, governance, enterprise use cases, and premium support[279] - Revenue is primarily from subscriptions to self-managed software (1-3 year terms, billed upfront or annually in advance) and HCP (consumption-based or annual contracts)[280][281][282] - Go-to-market strategy is 'adopt, land, expand, and extend,' leveraging open-source engagement and self-service cloud models to drive initial adoption, followed by enterprise sales for subscription contracts and cross-selling[286] - Last four quarter average net dollar retention rate was 131% as of January 31, 2022, indicating strong customer expansion[286] Factors Affecting Our Performance Performance is driven by increasing product adoption, expanding within the existing customer base (131% net dollar retention), growing HCP adoption, accelerating technology leadership, and international expansion - Growth depends on increasing product adoption and landing new customers, with over 2,700 total customers and over 375 Forbes Global 2000 customers as of January 31, 2022[289][291] - Expanding and extending within the existing customer base is a significant opportunity, evidenced by a 131% net dollar retention rate as of January 31, 2022[292][293] - Increasing adoption of HashiCorp Cloud Platform (HCP) is a key growth driver, with HCP subscription revenue reaching $18.5 million for fiscal 2022[294] - Accelerating technology leadership through R&D and product expansion, including new product launches like Boundary and Waypoint, is crucial for competitive advantage[295][296] - International expansion is a significant opportunity, with non-U.S. revenue at 27% in fiscal 2022, and planned investments in Europe, Middle East, Africa, and Asia-Pacific[297] Key Business Metrics Key business metrics highlight growth in total customers and those with $100,000+ ARR, significant increase in HCP subscription revenue, and substantial RPOs, alongside negative free cash flow Key Business Metrics (As of January 31) | Metric | FY2022 | FY2021 | FY2020 | | :-------------------------------- | :----- | :----- | :----- | | Total customers | 2,715 | 1,473 | 831 | | Total customers with $100,000+ ARR | 655 | 500 | 338 | | Subscription revenue from HCP | $18.5M | $2.9M | $0.3M | | RPOs (GAAP) | $428.8M | $263.9M | $152.1M | | Non-GAAP RPOs | $452.2M | $286.1M | $171.0M | - Customers with $100,000 or greater ARR represented 88%, 83%, and 71% of revenue for fiscal 2022, 2021, and 2020, respectively, indicating a focus on large enterprise customers[301] - Approximately 63% of GAAP RPOs and 64% of non-GAAP RPOs are expected to be recognized as revenue over the next 12 months as of January 31, 2022[303][304] Free Cash Flow (in thousands) | Fiscal Year | GAAP Net Cash Used in Operating Activities | Purchases of Property and Equipment | Capitalized Internal-Use Software | Free Cash Flow (Used In) | Free Cash Flow as % of Revenue | | :---------- | :--------------------------------------- | :-------------------------------- | :------------------------------ | :----------------------- | :----------------------------- | | 2022 | $(56,215) | $(214) | $(6,382) | $(62,811) | (20)% | | 2021 | $(39,623) | $(4,304) | $(2,920) | $(46,847) | (22)% | | 2020 | $(28,365) | $(980) | $0 | $(29,345) | (24)% | Impact of COVID-19 COVID-19 caused some customer spending slowdowns and operational changes but also accelerated cloud transitions, potentially benefiting HashiCorp's long-term offerings - COVID-19 led to slowdowns in customer spending in certain industries and operational changes (e.g., virtual events, remote work)[311] - The pandemic accelerated customer transitions to the cloud, increasing the relevance and potential long-term positive impact for HashiCorp's offerings[312] Key Components of Results of Operations Revenue primarily derives from subscriptions (licenses, support, cloud-hosted services) recognized ratably, with professional services sold on a fixed-fee basis, and operating expenses driven by personnel costs - Revenue is primarily from subscriptions (licenses, support, cloud-hosted services), with the substantial majority recognized ratably over the subscription term[313][314][315] - Professional services revenue is from training and deployment services, sold on a fixed-fee basis since fiscal 2021[317] - Cost of subscription revenue includes personnel, third-party cloud infrastructure, and internal-use software amortization; cost of professional services includes personnel and third-party contractors[320][321] - Operating expenses (sales & marketing, R&D, G&A) are heavily driven by personnel-related costs, including salaries, bonuses, benefits, and stock-based compensation[324] Results of Operations Total revenue grew 51% to $320.8 million in fiscal 2022, primarily from subscription revenue, but net loss significantly increased to $290.1 million due to substantial increases in sales & marketing and R&D expenses Consolidated Statements of Operations Data (in thousands) | Metric | 2022 | 2021 | 2020 | | :-------------------------- | :------- | :------- | :------- | | Total Revenue | $320,769 | $211,854 | $121,261 | | Total Revenue Growth (YoY) | 51% | 75% | - | | Total Subscription Revenue | $313,683 | $205,907 | $117,662 | | Cloud-hosted services revenue | $18,613 | $4,092 | $2,339 | | Net Loss | $(290,138) | $(83,515) | $(53,370) | | Total Operating Expenses | $546,643 | $254,811 | $153,563 | | Gross Profit | $257,329 | $170,802 | $97,346 | | Gross Margin | 80% | 81% | 80% | - Subscription revenue increased by 52% in fiscal 2022, driven by new customers ($45.1 million) and expanded adoption from existing customers (131% net dollar retention rate)[335] - Net loss significantly increased to $290.1 million in fiscal 2022, primarily due to a 91% increase in sales and marketing expenses and a 153% increase in R&D expenses, largely from higher headcount and IPO-related stock-based compensation[331][341][342] Stock-Based Compensation Expense (in thousands) | Expense Category | FY2022 | FY2021 | FY2020 | | :-------------------------- | :------- | :------- | :------- | | Total Cost of Revenue | $13,922 | $1,364 | $490 | | Sales and Marketing | $64,991 | $11,286 | $2,466 | | Research and Development | $67,865 | $5,974 | $1,507 | | General and Administrative | $53,790 | $20,599 | $4,998 | | Total Stock-Based Compensation | $200,568 | $39,223 | $9,461 | Liquidity and Capital Resources HashiCorp's liquidity significantly improved post-IPO, with $1.4 billion in cash and equivalents as of January 2022, despite an accumulated deficit of $506.1 million and historical negative operating cash flows Cash and Cash Equivalents (in thousands) | As of January 31, | 2022 | 2021 | | :---------------- | :------- | :------- | | Cash and cash equivalents | $1,355,828 | $270,793 | | Restricted cash | $1,783 | $1,783 | | Total Cash, Cash Equivalents, and Restricted Cash | $1,357,611 | $272,576 | - IPO in December 2021 generated $1.2 billion in net proceeds, significantly boosting liquidity[347] - Accumulated deficit of $506.1 million as of January 31, 2022, and negative operating cash flows in fiscal 2022, 2021, and 2020[348][353] - Has a $50.0 million revolving credit facility, undrawn as of January 31, 2022, with customary restrictive covenants[350] - Used $111.0 million of IPO proceeds to satisfy tax withholding obligations for RSU settlements in Q4 fiscal 2022[352] Contractual Obligations and Commitments As of January 31, 2022, HashiCorp's contractual obligations totaled $80.1 million, primarily comprising operating leases, hosting infrastructure commitments, and non-cancelable purchase obligations Contractual Obligations (as of January 31, 2022, in thousands) | Obligation Type | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | | :-------------------------- | :------ | :--------------- | :---------- | :---------- | :---------------- | | Operating leases | $20,603 | $3,781 | $8,074 | $7,471 | $1,277 | | Hosting Infrastructure Commitments | $29,638 | $6,569 | $23,069 | $0 | $0 | | Non-cancelable purchase obligations | $29,883 | $16,820 | $13,063 | $0 | $0 | | Total | $80,124 | $27,170 | $44,206 | $7,471 | $1,277 | Critical Accounting Policies and Estimates Key accounting estimates include standalone selling prices for revenue recognition, discount rates for operating leases, fair value of share-based awards, and accounting for income taxes - Key estimates include standalone selling prices (SSP) for performance obligations in revenue recognition, discount rates for operating leases, fair value of share-based awards, and accounting for income taxes[363][432] - Revenue recognition involves identifying performance obligations (licenses, support, cloud-hosted services, professional services) and allocating transaction price based on relative SSP, with most subscription revenue recognized ratably[365][367][372][376] - Deferred contract acquisition costs (sales commissions) are amortized over an estimated benefit period of five years for initial contracts and contractual term for renewals[381][465] - Stock-based compensation expense is estimated using the Black-Scholes model for options and fair value of common stock for RSUs, with significant assumptions for expected term, volatility, and risk-free interest rate[384][386][480][481] - Prior to IPO, common stock valuations involved complex objective and subjective factors, including income and market approaches, and allocation methods like OPM or PWERM[388][389][390] JOBS Act Accounting Election As an emerging growth company, HashiCorp irrevocably elected not to use the extended transition period for new accounting standards, aligning with other public companies - As an emerging growth company, HashiCorp irrevocably elected not to use the extended transition period for new accounting standards, aligning with other public companies[394] Recently Issued Accounting Pronouncements The company adopted ASU 2019-12 (Income Taxes) in fiscal 2022 with no material impact and is evaluating ASU 2020-04 (Reference Rate Reform) for fiscal 2023 adoption - Adopted ASU 2019-12 (Income Taxes) in fiscal 2022; no material impact due to full valuation allowance on U.S. deferred tax assets[493] - Evaluating ASU 2020-04 (Reference Rate Reform) for adoption in fiscal 2023[494] Market Risk Disclosures HashiCorp faces market risks from interest rate and foreign currency fluctuations, though historically immaterial, and inflation has not materially affected its business Interest Rate Risk HashiCorp's $1.4 billion in cash and equivalents are primarily in short-term money market funds, making a 10% interest rate change unlikely to materially affect fair value or operating results - Cash and cash equivalents ($1.4 billion as of Jan 31, 2022) are primarily in highly liquid money market funds[398] - Due to short-term investment nature, a 10% change in interest rates is not expected to materially affect portfolio fair value or operating results[398] Foreign Currency Risk All sales contracts are in U.S. dollars, but operating expenses in foreign currencies expose the company to exchange rate risk, which has not been historically material - All sales contracts are denominated in U.S. dollars[399] - Operating expenses incurred in foreign currencies (e.g., British Pound, Euro, Canadian Dollar, Australian Dollar, Singaporean Dollar, Japanese Yen, Indian Rupee) expose the company to foreign currency risk[399] - Foreign currency impact has not been material historically; no derivative or hedging transactions currently in place[399] Inflation Risk Inflation has not had a material effect on the company's business, financial condition, or results of operations - Inflation has not had a material effect on the business, financial condition, or results of operations[400] Financial Statements and Supplementary Data This section presents HashiCorp's audited consolidated financial statements for fiscal years 2020-2022, including balance sheets, operations, and cash flows, with an unqualified opinion from Deloitte & Touche LLP Independent Auditors' Report Deloitte & Touche LLP issued an unqualified opinion on HashiCorp's consolidated financial statements for fiscal years ended January 31, 2022, 2021, and 2020 - Deloitte & Touche LLP provided an unqualified opinion on the consolidated financial statements for fiscal years ended January 31, 2022, 2021, and 2020[407] - The financial statements present fairly the financial position, results of operations, and cash flows in conformity with GAAP[407] Consolidated Financial Statements This section includes the Consolidated Balance Sheets, Statements of Operations, and Statements of Cash Flows for fiscal years 2020-2022, reflecting key financial positions and performance Consolidated Balance Sheets (as of January 31, in thousands) | Asset/Liability | 2022 | 2021 | | :--------------------------------------- | :--------- | :--------- | | Total Current Assets | $1,532,589 | $384,104 | | Total Assets | $1,623,675 | $445,264 | | Total Current Liabilities | $308,677 | $187,253 | | Total Liabilities | $341,384 | $217,955 | | Redeemable Convertible Preferred Stock | $0 | $349,113 | | Total Stockholders' Equity (Deficit) | $1,282,291 | $(121,804) | Consolidated Statements of Operations (Year Ended January 31, in thousands) | Metric | 2022 | 2021 | 2020 | | :-------------------------- | :------- | :------- | :------- | | Total Revenue | $320,769 | $211,854 | $121,261 | | Gross Profit | $257,329 | $170,802 | $97,346 | | Total Operating Expenses | $546,643 | $254,811 | $153,563 | | Net Loss | $(290,138) | $(83,515) | $(53,370) | | Net Loss per Share (Basic & Diluted) | $(3.48) | $(1.32) | $(0.90) | Consolidated Statements of Cash Flows (Year Ended January 31, in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--------------------------------------- | :--------- | :--------- | :--------- | | Net cash used in operating activities | $(56,215) | $(39,623) | $(28,365) | | Net cash (used in) provided by investing activities | $(6,596) | $22,776 | $46,020 | | Net cash provided by financing activities | $1,147,846 | $177,124 | $1,071 | | Net increase in cash, cash equivalents, and restricted cash | $1,085,035 | $160,277 | $18,726 | Notes to Consolidated Financial Statements Notes detail accounting policies, revenue recognition, stock-based compensation, liquidity, and other financial components, including the impact of the December 2021 IPO and significant net operating loss carryforwards - The company completed its IPO in December 2021, converting all redeemable convertible preferred stock to Class B common stock and recognizing $190.5 million in cumulative stock-based compensation expense related to RSUs[427][428] - Revenue recognition policy details the five-step process, including identification of performance obligations (licenses, support, cloud-hosted services, professional services) and allocation based on standalone selling price (SSP)[445][451] - Deferred contract acquisition costs (sales commissions) are capitalized and amortized over an estimated benefit period of five years for initial contracts[464][465] - Stock-based compensation expense for fiscal 2022 was $200.6 million, significantly higher than previous years, primarily due to IPO-related RSU vesting and ESPP commencement[332][558] - As of January 31, 2022, the company had U.S. federal and state net operating loss carryforwards of $647.8 million and $498.3 million, respectively, with a full valuation allowance recorded against U.S. deferred tax assets[572] - The company has a $50.0 million revolving credit facility, undrawn as of January 31, 2022, and is in compliance with all covenants[511] - Contractual obligations as of January 31, 2022, include $20.6 million for operating leases, $29.6 million for hosting infrastructure, and $19.3 million for other purchase commitments[516] - Subsequent events include an increase in shares reserved under the 2021 Plan and ESPP in February 2022, and RSU grants in March 2022[578][579] Changes in Accountants There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[581] Controls and Procedures Management concluded disclosure controls were effective as of January 31, 2022, with no material changes, and the company is exempt from auditor attestation as an emerging growth company - Disclosure controls and procedures were effective as of January 31, 2022, ensuring timely and accurate reporting[583] - As an emerging growth company, the company is not required to have an auditor attestation report on internal control over financial reporting[584][249] - No material changes in internal control over financial reporting were identified during the period[585] Other Information There is no other information to report under this item - No other information to report[587] PART III This part incorporates by reference information on directors, executive compensation, security ownership, related transactions, and accountant fees from the proxy statement Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement for the 2022 annual general meeting of stockholders - Information incorporated by reference from the 2022 Proxy Statement[589] Executive Compensation Information regarding executive compensation is incorporated by reference from the definitive proxy statement for the 2022 annual general meeting of stockholders - Information incorporated by reference from the 2022 Proxy Statement[590] Security Ownership and Stockholder Matters Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the definitive proxy statement for the 2022 annual general meeting of stockholders - Information incorporated by reference from the 2022 Proxy Statement[591] Related Transactions and Director Independence Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the definitive proxy statement for the 2022 annual general meeting of stockholders - Information incorporated by reference from the 2022 Proxy Statement[592] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the definitive proxy statement for the 2022 annual general meeting of stockholders - Information incorporated by reference from the 2022 Proxy Statement[593] PART IV This part lists exhibits, financial statement schedules, and includes the required signatures for the Annual Report on Form 10-K Exhibits and Financial Statement Schedules This section lists all exhibits filed as part of the Annual Report on Form 10-K, with financial statement schedules omitted as information is included elsewhere - Lists exhibits filed with the 10-K, including organizational documents, stock plans, and executive agreements[596][597][598] - Financial statement schedules are omitted as information is included elsewhere in the report[595] Form 10-K Summary This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[602] Signatures The report is signed by the registrant's authorized officers and board members, affirming compliance with the Securities Exchange Act of 1934 - The report is signed by the Chief Financial Officer (Navam Welihinda) and other authorized persons, including the CEO and directors, on March 25, 2022[604][608]