HashiCorp(HCP) - 2023 Q3 - Quarterly Report

Part I. Financial Information This part presents the company's unaudited financial statements, management's analysis, and disclosures on market risk and controls Item 1. Financial Statements (Unaudited) Presents the unaudited condensed consolidated balance sheets, statements of operations, and cash flows for the period Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 31, 2022 | Jan 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,274,901 | $1,355,828 | | Total current assets | $1,441,934 | $1,532,589 | | Total assets | $1,553,365 | $1,623,675 | | Liabilities & Stockholders' Equity | | | | Deferred revenue, current | $220,579 | $206,416 | | Total current liabilities | $319,028 | $308,677 | | Total liabilities | $346,159 | $341,384 | | Accumulated deficit | ($731,041) | ($506,102) | | Total stockholders' equity | $1,207,206 | $1,282,291 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended Oct 31, 2022 | Three Months Ended Oct 31, 2021 | Nine Months Ended Oct 31, 2022 | Nine Months Ended Oct 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $125,341 | $82,221 | $340,101 | $224,246 | | Gross profit | $102,793 | $71,082 | $276,624 | $187,512 | | Total operating expenses | $180,131 | $92,616 | $511,023 | $249,561 | | Loss from operations | ($77,338) | ($21,534) | ($234,399) | ($62,049) | | Net loss | ($71,958) | ($21,951) | ($224,939) | ($62,438) | | Net loss per share, basic and diluted | ($0.38) | ($0.33) | ($1.22) | ($0.94) | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Oct 31, 2022 | Nine Months Ended Oct 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($86,040) | ($49,217) | | Net cash used in investing activities | ($6,314) | ($4,738) | | Net cash provided by financing activities | $11,434 | $1,348 | | Net decrease in cash, cash equivalents, and restricted cash | ($80,920) | ($52,607) | - The company's primary commercial products are HashiCorp Terraform, Vault, Consul, and Nomad, offered as self-managed software and through a fully-managed cloud platform[22] - As of October 31, 2022, the company had $531.8 million in remaining performance obligations (RPOs), with approximately 61% expected to be recognized as revenue over the next 12 months[33] - For the nine months ended October 31, 2022, total stock-based compensation expense was $138.4 million, a significant increase from $4.8 million in the prior year period, primarily due to RSUs vesting post-IPO and the ESPP[65] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 fiscal 2023 performance, highlighting revenue growth, key metrics, and rising operating expenses - HashiCorp's foundational technologies enable a cloud operating model for automating infrastructure provisioning, security, networking, and application deployment[78][79] - The business model is based on a combination of open-source software and proprietary features for paid tiers, with revenue primarily from subscriptions[81][82] - The company employs an "adopt, land, expand, and extend" sales motion, leveraging its open-source and self-serve cloud offerings to drive initial adoption[88] - The trailing four-quarter average net dollar retention rate was 134% as of October 31, 2022, up from 127% as of October 31, 2021, indicating strong expansion within the existing customer base[95] - Customers with $100,000 or greater ARR represented 89% of revenue for the three months ended October 31, 2022, up from 87% in the prior-year period[104] - The 50% increase in Q3 subscription revenue was driven by $14.0 million from new customers and $26.1 million from expanded product adoption among existing customers[141] - The increase in operating expenses was primarily driven by higher employee-related costs due to increased headcount across all functions, including significant increases in stock-based compensation expense post-IPO[147][148][149] - As of October 31, 2022, the company had cash and cash equivalents of $1.27 billion, primarily from its December 2021 IPO proceeds[168][169][171] - Net cash used in operating activities for the nine months ended October 31, 2022, was $86.0 million, an increase from $49.2 million in the prior year period, driven by a larger net loss[172][174][175] - On July 28, 2022, the company terminated its $50.0 million revolving line of credit agreement with HSBC Ventures USA Inc[170] Key Business Metrics Comparison | Metric | As of Oct 31, 2022 | As of Jan 31, 2022 | | :--- | :--- | :--- | | Total customers | 3,899 | 2,715 | | Total customers with $100,000 or greater ARR | 760 | 655 | | RPOs | $531.8 million | $428.8 million | | Non-GAAP RPOs | $553.4 million | $452.2 million | Revenue Comparison (in thousands) | Revenue Type | Three Months Ended Oct 31, 2022 | Three Months Ended Oct 31, 2021 | % Change | | :--- | :--- | :--- | :--- | | Subscription revenue | $120,198 | $80,143 | 50% | | Professional services and other | $5,143 | $2,078 | 147% | | Total revenue | $125,341 | $82,221 | 52% | Operating Expense Comparison (in thousands) | Expense Category | Three Months Ended Oct 31, 2022 | Three Months Ended Oct 31, 2021 | % Change | | :--- | :--- | :--- | :--- | | Sales and marketing | $92,872 | $53,511 | 74% | | Research and development | $53,887 | $25,655 | 110% | | General and administrative | $33,372 | $13,450 | 148% | | Total operating expenses | $180,131 | $92,616 | 94% | Quantitative and Qualitative Disclosures About Market Risk The company discloses its exposure to interest rate, foreign currency, and inflation risks - The company does not believe an immediate 10% change in interest rates would materially affect its investment portfolio's fair market value, though declines would reduce future interest income[185] - All sales contracts are denominated in U.S. dollars, but a portion of operating expenses are in foreign currencies, creating exposure to foreign currency risk[186] - Management does not believe that inflation has had a material effect on the business, financial condition, or results of operations[187] Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of the reporting date - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of October 31, 2022[189] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[190] Part II. Other Information This part covers legal proceedings, risk factors, and other required corporate disclosures Legal Proceedings The company reports no material legal proceedings outside the ordinary course of business - The company may become involved in various legal proceedings in the ordinary course of business but believes there was not a reasonable possibility of a material loss as of October 31, 2022[50][52] Risk Factors Key business risks include a history of net losses, intense competition, and reliance on subscription renewals - The company has a history of net losses, incurring $72.0 million and $224.9 million for the three and nine months ended October 31, 2022, respectively, and may not achieve or sustain profitability[202] - Permissive open-source licenses create low technological barriers to entry, allowing competitors, including public cloud operators, to easily enter the market and compete using HashiCorp's own software[212] - The dual-class stock structure concentrates voting control with pre-IPO stockholders, including executive officers and founders, limiting the influence of Class A common stockholders on corporate matters[350] Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities occurred during the reporting period - There were no unregistered sales of equity securities during the period[370] Defaults Upon Senior Securities The company reports no defaults upon senior securities - There were no defaults upon senior securities[371] Mine Safety Disclosures This disclosure is not applicable to the company's operations - Not applicable[372] Other Information This section indicates no other information is required to be reported for the period - There is no other information to report for this period[373] Exhibits This section lists all exhibits filed with the quarterly report, including officer certifications - Lists the exhibits filed with the report, including officer certifications and XBRL data[374][375]