Q4 2024 Hashicorp Inc Earnings Call

[music].

Unknown Executive: Ladies and gentlemen, thank you for standing by, and welcome to the Hashicorp Fiscal 2024 Fourth Quarter and Full Year Earnings Call. At this time, all participants are in a listen-only mode.

Ladies and gentlemen, thank you for standing by and welcome to the Hershey Club.

Fiscal 2020 for fourth quarter and full year earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question answer session.

Unknown Executive: After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I will now turn the conference over to your first speaker today, Aleks Kurtz, Vice President of Investor Relations and Corporate Development. Thank you.

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, Vice President of Investor Relations and corporate development. Thank you.

Please go ahead.

Alexander Kurtz: Good afternoon, and welcome to Hashicorp's fiscal 2024 fourth quarter earnings call. This afternoon, we will be discussing our fourth quarter financial results announced in our press release issued after the market closed today. With me are Hashicorp's CEO, Dave McJanet, CFO, Navam Wilihinda, and CTO and co-founder Armon Dadgar.

Good afternoon, and welcome to actually Corp's fiscal 2020 for fourth quarter earnings call. This afternoon, we will be discussing our fourth quarter financial results announced in our press release issued after the market close today.

With me are Hashi Corp, 's, CEO, Dave Mclennan, CFO and the bomb will end up our CTO and co founder of <unk>.

Alexander Kurtz: In conjunction with our earnings press release, we have published an earnings presentation that provides additional financial information about our quarter. We encourage you to review that presentation in advance of our call. You can access it on our investor website at ir.hashicorp.com.

In conjunction with our earnings press release, we have published an earnings presentation.

Additional financial information about our quarter.

Average you to review that presentation in advance of our call you can access it on our Investor website at IR Dot Heidrick work Dot com.

Alexander Kurtz: Today's call will contain forward-looking statements, which are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition, and our guidance for the first quarter and the full 2025 fiscal year. These statements may be identified by words such as expect, anticipate, intend, plan, believe, seek, or will, or similar words.

Today's call will contain forward looking statements, which are made under the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Forward looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the first quarter.

For 2025 fiscal year.

These statements maybe identified by words, such as expect anticipate intend.

Plan believe seek orwell or similar statements.

Alexander Kurtz: These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. During the call, we will also discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles.

These statements reflect our views as of today, only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements.

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

During the call. We will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles.

Alexander Kurtz: The financial measures presented on this call are prepared in accordance with GAAP, unless otherwise noted. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these and other metrics, is included in our earnings press release, which has been furnished to the SEC, and is also available on our website at ir.hashicorp.com. With that, let me turn the call over to Dave.

The financial measures presented on this call are prepared in accordance with GAAP unless otherwise noted.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as.

As well as how we define it and other metrics is included in our earnings press release, which has been furnished to the SEC.

It's also available on our website at IR Dot Hiseq Corp Dot com.

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

David McJannet: Thank you, Aleks, and welcome everyone to our fourth quarter earnings call for fiscal 2024. We reported solid fourth quarter results that exceeded our top and bottom line guidance, with revenues of $156 million, representing year-over-year growth of 15%, and we are pleased with our current non-GAAP remaining performance obligations performance, which reached $483 million, representing 21% year-over-year growth. I want to start today's call by thanking everyone on the Hashicorp team for the solid fourth quarter close to our fiscal year. Through their hard work, we exceeded expectations in the quarter with important new enterprise logo wins and CRPO growth that demonstrated continued demand for our products as customers trust us with their most important cloud projects. More broadly, based on conversations we had last quarter, we believe that the optimizations that enterprises undertook over the past 18 months are showing signs of abating, and we are seeing early signs of re-engagement on new cloud initiatives. Our confidence here comes from tangible proof points during the quarter, specifically improving renewal rates and overall better pipeline conversion. This is in line with what we've expected since the start of this cycle.

Thank you, Alex and welcome everyone to our fourth quarter earnings call for fiscal 2024.

We reported solid fourth quarter results that exceeded our top and bottom line guidance with revenues of $156 million.

Presenting year over year growth of 15% and are pleased with our current non-GAAP remaining performance obligations performance, which reached $483 million, representing 21% year over year growth.

I want to start today's call by thanking everyone on the harsh Corp team for the solid fourth quarter close to our fiscal year.

Through their hard work, we exceeded expectations in the quarter with important new enterprise logo wins and CRP or gross the demonstrated continued demand for our products as customers Trust us with their most important cloud projects.

More broadly based on conversations we had last quarter, we believe that the optimizations with enterprise we undertook over the past 18 months are showing signs of abating and we are seeing early signs of reengagement on new cloud initiatives.

Our confidence comes from tangible proof points during the quarter, specifically, improving renewal rates and overall better pipeline conversion.

This is in line with what we'd expect it started with cycle.

David McJannet: And while there is some ongoing consumption of historical self-managed entitlements among portions of our customer base, the move to the cloud is a secular trend with a clearer business need, and there's still a long runway ahead for the largest global enterprises as they mature their cloud efforts. Today, I want to focus on our path to accelerated growth as we enter the new fiscal year. And to be direct, we are behind where we wanted the company to be at this point in our growth cycle, and we have work to do.

While there is some ongoing consumption of historical shelf managed entitlements mark portions of our customer base.

The move to cloud is a secular trend with a clear business need and there is still a long runway ahead for the largest global enterprises as they mature their cloud efforts.

Today I want to focus on our path to accelerated growth as we entered the new fiscal year.

And to be direct we are behind where we wanted the company to be at this point in our growth cycle and we have work to do.

David McJannet: We're on a path back to 20% quarterly revenue growth during FY 2026, and I want to outline the top three initiatives taking place at the company to drive this acceleration. At a very high level, we're moving quickly to improve sales execution, turning the dial even more on commercial differentiation, and in Q1, rolling out a plan to reallocate more R&D resources to our cloud product. The first initiative is simplifying our go-to-market strategy, which consists of a more prescriptive go-to-market approach and increased process rigor driven by our president, Susan St. Ledger

We are on a path back to 20% quarterly revenue growth during FY 2026, and I want to outline the top three initiatives taking place at the company to drive this acceleration.

At a very high level, we're moving quickly to improve sales execution.

Turning the dial even more on commercial differentiation and Q1 rolling out a plan to reallocate more R&D resources to our cloud products.

The first initiative is simplifying our go to market strategy, which consists of a more prescriptive go to market approach and increase process rigor driven by our president Susan St Ledger.

David McJannet: We began implementing these initiatives back in the back half of FY24 and are completing the rollout with the field teams this week at our sales kickoff. On the first front, we are shifting from best-in-class standalone products to infrastructure lifecycle management and security lifecycle management. That messaging is finding early traction with our sales teams and potential customers. On the second front, Susan will continue to drive the sales process.

We began implementing these initiatives back in the back half of FY 'twenty for treating the rollout with the field teams. This week at our sales kickoff.

On the first front, we are shifting from best in class Standalone products to infrastructure lifecycle management and security lifecycle management.

That messaging is finding early traction with our sales teams and potential customers.

On the second front, Susan will continue to drive sales process discipline.

David McJannet: Emphasizing speed, efficiency, and simplification in the field, while also concentrating our sales investments on additional technical field resources, we saw some early evidence of positive results in our fourth quarter with improved field execution and improved renewal. To give you an example of these efforts, I'd like to discuss a customer that extended from a single product to include a second one of our security offerings, Vault, to Boundary in Q4. This software company initially used Vault in conjunction with a homegrown solution to manage and issue one-time credentials for developer access to cloud infrastructure. After facing challenges enabling their R&D team to access their cloud infrastructure in a self-service manner, this customer quickly realized the need to replace their homegrown privilege access management solution.

Driving speed efficiency and simplification in the field, while also concentrating our sales investments on additional technical field resources.

We saw some early evidence of positive results in our fourth quarter with improved field execution and improved renewals.

To give you. An example of these efforts I'd like to discuss a customer that extended from a single product to include a second one of our security offerings vault to boundary in Q4.

This software company initially use vault in conjunction with a homegrown solution to manage an issue onetime credentials for developer access to cloud infrastructure.

After facing challenges, enabling their R&D team to access their cloud infrastructure in a self service manner. This customer quickly realized the need to replace their homegrown privilege access management solution.

David McJannet: Given the customer's existing deployment of vaults, our field teams were able to show that adding boundary would provide comprehensive security lifecycle management, reducing time to value. This customer started with just 500 engineers running on boundary and now expects to grow to over 6,000. We strongly believe that simplified multiproduct messaging will help us win more deals like these in FY25. The second initiative is commercial differentiation. Greater separation between our commercial and free community office.

Given the customers existing deployment of Volte, our field teams were able to show that adding boundary would provide comprehensive security lifecycle management, reducing time to value.

This customer started with just 500 engineers running on boundary and now expected to grow to over 6000.

We strongly believe that simplified multi product messaging will help us win more deals like these in FY 'twenty five.

The second initiative is about commercial differentiation.

Later separation between our commercial and free community offerings.

David McJannet: While the ecosystem is clearly standardized on our community edition products, we need to drive more value for our commercial customers. Our product development efforts over the past two years have increasingly been oriented towards enterprise capabilities in our commercial offering. We are further turning the dial toward commercial differentiation, which we believe will have a positive impact on wind rates and on renewal. One major example of commercial differentiation is Terraform stacks. We gave a preview of stacks at Hashicorp last year, which will bring major new functionality to Terraform and the ability to manage infrastructure estates that span multiple environments. This feature is now in private beta with our commercial customers and will be made available through Terraform Cloud exclusively to our commercial customers later this year.

While the ecosystem, that's clearly standardized on our community edition products, we need to drive more value for our commercial customers.

Our product development efforts over the past two years have increasingly been oriented towards enterprise capabilities that our commercial offerings. We are further turning the dial towards commercial director initiation, which we believe will have a positive impact on win rates and on renewals.

One major example of commercial differentiation as Terraform stacks, we gave a preview of stacks and Pasha crop last year, which will bring major new functionality and the ability to manage infrastructure of states that span multiple environments.

This feature is now in private beta with our commercial customers and will be made available through tariff from cloud exclusively to our commercial customers later this year.

David McJannet: This will drive significant differentiation, especially for our large customers with complex estates. During the fourth quarter, one of our larger land deals on Terraform Cloud demonstrates the power of our differentiated commercial products for customers. A global pharmaceutical company opted to replace their homegrown infrastructure provisioning process built on our community edition with Terraform Cloud. They became a paying customer for the first time because of Terraform Cloud-specific features, including no code provisioning and the upcoming stacks rollout, as well as our RUM pricing model update in Q2, which aligned pricing more closely with their cloud budgeting process.

This will drive significant differentiation, especially for our large customers with complex states.

During the fourth quarter, one of our larger land deals on tariff from cloud demonstrates the power of our differentiated commercial products for customers a global pharmaceutical company opted to replace their homegrown infrastructure provisioning process built on our community addition, with telecom cloud Dave.

They became a paying customer for the first time because of tariff from cloud specific features including no code provisioning and the upcoming stacks rollout as well as our run pricing bottle update in Q2, which will on pricing more closely with their cloud budgeting process.

David McJannet: But in addition to focusing on differentiation through new capabilities, we know enterprise customers have elevated expectations for the lifecycle of software that they deploy, with a strong preference to minimize production. Earlier today, we introduced long-term support for LTS releases for our commercial customers. The LTS release has enabled customers to stay on a supported version for up to two years at a time with the promise to backport critical fixes, security patches, and hardened upgrade paths. Prior to the LTS announcement, customers needed to do regular major version upgrades to remain supported. This provides significant value for customers who want to manage their risk and operations and we believe will be another significant driver to land new opportunities and strengthen renewables. The LTS releases will be available with the upcoming versions of Vault, Console, and Nomad. In contrast, users of the Community Editions will have access to critical updates in the latest version and will have to perform frequent updates to stay current.

But in addition to focusing on differentiation through new capabilities, we know enterprise customers have elevated expectations for the lifecycle of software that they deploy with a strong preference to minimize production changes.

Earlier today, we introduced long term support for Lts releases for our commercial customers the.

The Lts release has enabled customers to stay on a supported version.

Up to two years at a time with the promise to back toward critical fixes security patches and hardened upgrade paths.

Prior to the <unk> announcement customers needed to do regular major version upgrades to remain supported.

This provides significant value for customers, who want to manage their risks and operational efficiency.

And we believe will be another significant driver to land new opportunities and strengthen the renewals.

The lts releases will be available with the upcoming versions of bolt console and nomad.

In contrast users of the community additions will have access to critical updates and the latest version and we'll have to perform frequent updates to stay current.

David McJannet: While we continue to offer innovative technology to the community, our outside focus is on providing value to paying customers. Our prior approach provided the same life cycle for commercial and community versions, and we are now driving a clear differentiation. On that note, our third major initiative is to deliver the enterprise-ready Hashicorp cloud platform across infrastructure lifecycle management and security lifecycle management. We are seeing strong customer interest in this and are taking steps to expedite our delivery. Our new Chief Product Officer, Michael Weingartner, is focused on enterprise cloud delivery and is moving quickly to organize our product development teams to drive cloud innovation at a faster pace. We have already reallocated resources to this initiative, as it is central to an overall company-wide shift to lead with our cloud offerings. As we mentioned last quarter, we are defaulting enterprise land to the cloud, beginning with Terraform Cloud in Q1.

While we continue to offer innovative technology to the community are outside focuses on providing value to paying customers are.

Our prior approach provided the same lifecycle for commercial and community versions and we are now driving clear differentiation.

On that note our third major initiative is to deliver the enterprise ready cloud platform across infrastructure lifecycle management and security lifecycle management.

We are seeing strong customer interest for this and are taking steps to expedite our deliberate.

Our new Chief product Officer, Michael Whang Gardner is focused on enterprise cloud delivery and is moving quickly to organize our product development team to drive cloud innovation at a faster pace.

We have already reallocated resources to this initiative as it is central to an overall companywide shift to lead with our cloud offerings.

As we mentioned last quarter, we are defaulting enterprise land to cloud beginning with tariff from cloud in Q1.

David McJannet: As part of this shift, incentives for our field teams are weighted towards the cloud rather than self-managed software. Additionally, we will prioritize enterprise land across infrastructure lifecycle and security lifecycle management with HCP. Landing our customers on the cloud first with HCP enables them to realize value faster. As we deliver more cross-product experiences, it enhances our ability to drive and extend motion from our core land products as well. As our R&D teams continue to deliver new product innovations, having customers on the cloud platform enables customers to use those new capabilities immediately, in contrast to self-managed software, which requires planned upgrades. Combined, these features will drive improved net retention rates over the long term. To show how this works in practice, here's an example of a customer that expanded both Vault and Terraform Cloud in Q4, doubling the size of their initial land deal. This travel agency had experienced significant resource constraints that made it difficult to deploy applications on bare metal as fast as they needed.

As part of this shift incentives for our field teams are weighted towards cloud rather than self managed software.

We will prioritize enterprise land across infrastructure lifecycle, and security lifecycle management with HCP.

Landing our customers on cloud first with HCP enables them to realize value faster.

As we deliver more cross product experiences and enhances our ability to drive and extend motion from our core land products as well.

As our R&D teams continue to deliver new product innovations, having customers on the cloud platform enables customers to use those new capabilities immediately.

In contrast, the self managed software which requires planned upgrades.

Bind these facets will drive improved net retention rates over the long term.

To show how this works in practice. She is an example of a customer that expanded both bulk and sharepoint crowded Q4, doubling the size of their initial land deal.

Travel agency had experienced significant resource constraints that made it difficult to deploy applications on bare metal was back if they need it.

David McJannet: They were also dealing with subsidiaries operating at different levels of cloud maturity. As a result, this customer realized that only Terraform Cloud could keep pace with their infrastructure complexity. They standardized on Terraform Cloud not just for its portability and lower operating costs but also because Terraform Cloud enables them to deploy new applications much faster, improving their competitive positioning.

They were also dealing with subsidiaries operating at different levels of cloud maturity.

As a result, this customer realize that only tariff from cloud to keep pace with their infrastructure complexity.

They standardized on tariff from cloud not just first portability and lower operating costs, but also biggest here from cloud enabled them to deploy new applications much faster improving their competitive positioning.

Navam Welihinda: To summarize, our goals for this year are to simplify our go-to-market, expand the differentiation of our commercial products, and shift our business to focus heavily on our Hashicorp-managed cloud products. Now I'll turn it over to Navam to walk through the details of our Q4 and full year performance, and forward-looking guidance, and then we will be happy to take any questions. Goodbye.

To summarize our goals for this year are to simplify our go to market expand the differentiation of our commercial products and shift our business to focus heavily on our house Corp managed cloud products.

Now I'll turn it over to <unk> to walk through the details of our Q4 and full year performance forward looking guidance and then we will be happy to take any questions.

Hey, Bob.

Navam Welihinda: Thank you, Dave, and thanks to everyone for joining us. Echoing Dave's comments, I also want to thank our team for all the effort and continued focus that they have put in, which helped us close Fiscal 24 on a positive note. We grew our fourth-quarter revenue by 15% year-over-year, our full-year revenue by 23% year-over-year, and ended with another positive free cash flow quarter. More importantly, our team put in a lot of work last year to set up Hashicorp for future success and momentum.

Thank you, Dave and thanks to everyone for joining us today, echoing Dave's comments I also want to thank our team for all the effort and continued focus that they have put in which helped us close fiscal 'twenty four on a positive note.

We grew our fourth quarter revenue by 15% year over year, our full year revenue by 23% year over year and ended with another free cash flow positive quarter.

More importantly, our team put in a lot of work last year to set a path for future success and momentum.

Navam Welihinda: As Dave mentioned in his remarks, there continue to be pockets of optimization among customers. But the environment in Q4, as well as the outlook for fiscal 2025 from a macro perspective, appears to be better than fiscal 2020. As Dave also mentioned, while we are not completely out of the woods on how customers are working through historical entitlements, our renewal rates improved in Q4 compared to Q3, and our pipeline conversion, as well as our sales-driven customer activity, also improved in Q4 compared to Q3. We believe the combination of abating market headwinds due to consumption optimization, as well as the three operational initiatives of GTM simplification, increased commercial product differentiation, and more enterprise-ready HCP cloud offerings puts us in a solid position to achieve improved bookings in fiscal 2020.

As Dave mentioned in his remarks, there continues to be pockets of optimization among customers, but the environment in Q4 as well as the outlook for fiscal 2025 from a macro perspective appears to be better than fiscal 'twenty four.

As Dave also mentioned, while we are not completely out of the woods on how customers are working to historical entitlements are renewal rates improved in Q4 compared to Q3, and our pipeline conversion as well as our sales driven customer activity also improved in Q4 compared to Q3.

We believe the combination of abating market headwinds due to consumption optimization.

As well as the three operational initiatives on GTS simplification increased commercial product differentiation and more enterprise ready ACP cloud offering puts us in a solid position to achieve improved bookings in fiscal 'twenty.

Navam Welihinda: Given our entitlement model, and as we have discussed before, there is a lag between bookings momentum and accelerating revenue growth. Our expectation is to see a U-shaped recovery in our revenue growth rate, with Q2 being the trough in our revenue, followed by progressively better revenue growth rates in Q3 and Q4 of this year. We expect CRPO growth rates to follow the trough and recovery pattern, with the lowest point of CRPO growth being in Q2, followed by improved CRPO growth rates, ending in approximately 20% CRPO year-over-year growth by the end of fiscal 2020.

Given our entitlement model and as we have discussed before there is a lag between bookings momentum and accelerating revenue growth rates are.

Our expectation is to see a U shaped recovery in our revenue growth rates. This year with Q2 being the trough in our revenue growth rates.

Road by progressively better revenue growth rates in Q3, and Q4 of this year.

We expect ERP Oh growth rates to follow the trough in recovery pattern with the lowest point of <unk> growth being in Q2, followed by improved <unk> growth rates ending in approximately 20% <unk> year over year growth by the end of fiscal 'twenty five.

Navam Welihinda: As Dave mentioned, we also expect the momentum in CRPO to put us on a path to reach 20% quarterly revenue growth during fiscal 2020. Now, let's move on to our fiscal 25 guidance. For the first quarter of fiscal 25, we currently expect total revenue in the range of $152 million and $154 million, and a non-GAP operating loss in the range of $19 million to $16 million.

I've mentioned, we also expect the momentum in CRP, how to put us on a path to reach 20% quarterly revenue growth during fiscal 2026.

Let's move on to our fiscal 'twenty guidance and yes.

For the first quarter of fiscal 'twenty five weeks.

We currently expect total revenue in the range of $152 million and 154 million.

And our non-GAAP operating loss in the range of $19 million to $60.

Navam Welihinda: As a reminder, our business shows seasonal booking patterns between Q4 and Q1. Q4 is a strong budget flush quarter where we see the highest number of large multi-year contracts. These multi-year contracts create a larger upfront revenue component in Q4 compared to Q1. Our Q1 guidance takes into account this regular seasonality. For the full fiscal year 25, we currently expect total revenue in the range of $643 and $647 million and expect fiscal 25 non-GAAP operating loss in the range of $46 million and $43 million.

As a reminder, our business showed seasonal bookings patterns between Q4 and Q1.

Q4 is a strong budget last quarter, where we see the highest number of large multiyear contracts.

These multiyear contracts create a larger upfront revenue component in Q4 compared to Q1, our Q1 guidance takes into account this regular seasonality pattern.

For the full fiscal year 'twenty five we currently expect total revenue in the range of 643 and 647 million.

And expect fiscal 'twenty, five non-GAAP operating loss in the range of $46 million and $43 million.

Navam Welihinda: As mentioned in my prior remarks, the quarterly growth rates in the back half of the year are expected to be higher than the full-year revenue. We also currently expect our growth margins to remain strong throughout the year in the low to mid 80 percent. We will continue with the measured investment posture we demonstrated in fiscal 2024, growing expenses slower than revenue. We currently expect to achieve non-GAAP operating income breakeven by Q4 of this year.

As mentioned in my prior remarks, the quarterly growth rates in the back half of the year are expected to be higher than the full year revenue growth rate.

We also currently expect our gross margins to remain strong throughout the year in the low to mid 80% range.

We will continue with a measured investment posture, we've demonstrated in fiscal 2024 growing expenses slower than revenue growth.

Currently expect to achieve non-GAAP operating income breakeven by Q4 of this year.

Navam Welihinda: On a final note, as you know, we posted two strong cash flow generating quarters in Q3 and Q4 in fiscal 2020. We expect positive free cash flow results during this fiscal year other than in Q2, which has collection seasonality related to seasonal Q1 vote. We expect to generate cash in all other ports.

On a final note as you know we posted two strong cash flow generating quarters in Q3, and Q4 and fiscal 'twenty four.

We expect positive free cash flow results. During this fiscal year other than in Q2, which has collection seasonality related to seasonal Q1 bookings.

We expect to generate cash and all other players.

Navam Welihinda: Positive free cash flow generation combined with a strong cash balance puts us in a position of having excess cash relative to our operating needs and any potential midterm M&A expected cash. We believe Hashicorp has a lot of growth ahead of it and that there is still a lot of runway ahead for the largest global enterprises as they mature their cloud. In addition, we're always responsible for our capital allocation and believe the best use of excess capital is to return it to our shareholders via our share repurchase program.

Positive free cash flow generation combined with a strong cash balance puts us in a position of having excess cash relative to our operating needs and.

And any potential midterm M&A expected cash needs.

We believe hockey Corp has a lot of growth ahead of US and then there is still a lot of runway ahead for the largest global enterprises as they mature their cloud efforts.

In addition, we're always responsible in our capital allocation and believe the best use of excess capital is to return it to our shareholders.

Share repurchase program.

Navam Welihinda: As outlined in our earnings release today, the board has authorized the $250 million repurchase program to be executed commencing in fiscal 2020. This authorized program is expected to be the first of a continuing program of Sherry. Our full guidance numbers can be found in our earnings presentation available on our ir.hashicorp.com website under financials, quarterly results. I encourage you to read through the doc for full metric disclosures, share count disclosures, and gap to non-gap reconciliation.

So as outlined in our earnings release today. The board has authorized a $250 million repurchase program to be executed commencing in fiscal 2025.

This authorized program is expected to be the first of our continuing program of share repurchases.

Our full guidance numbers can be found in our earnings presentation available on our IR Dot <unk> Dot com website under financials quarterly results I encourage you to read through the dark pool metric disclosures share count disclosures and GAAP to non-GAAP reconciliation.

Unknown Executive: Thanks for your attention. Dave, Armon, and I are available to take any of your questions. Out.

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

Unknown Executive: Thanks, Navam. With that, Operator, let's go to our first question. Thank you. If you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Yes.

Thanks to Bob with that operator, let's go to our first question.

Thank you.

I'd like to ask a question. Please press star one on your telephone.

Then again automated message advise that you had it right.

Unknown Executive: If you would like to remove yourself from the queue, please press star 11 again. Also, we ask that you please wait for your name to be announced before proceeding with your question. One moment while we compile the Q&A raft. Our first question today will be from Derek Wood of TD Cowen. Your line is open.

If you would like to remove yourself from the queue. Please press star one again.

Also we ask that you. Please wait for your name to be announced before proceeding with your question one moment, while we compile the Q&A roster.

Our first question today will be coming from Derek Glynn of TD Cowen Your line is open.

Unknown Executive: Oh, great. Thanks. I wanted to just touch on the push to drive enterprises to the cloud. Can you just give us an update as to what the reception has been?

Oh, great. Thanks.

Wanted to just touch on the push to drive enterprises to the cloud.

Can you just give us an update as to what the reception has been.

Armon Dadgar: Just trying to get a sense whether it's kind of too early to expect, you know, a big embracement of cloud at the G2K level, or if you think that could really start to take greater hold and maybe start to drive some higher mix in cloud as we move through the year. Hey, Derek, thanks so much for the question. Yeah, so I think, you know, historically, I think we've talked about it before on the calls that, you know, predominantly, we sold cloud through our corporate segment before. And I think that was driven by both sort of customer appetite, as well as platform and product readiness. I think the big shift for us this year, and we're in fact, at sales kickoff right now, is that we feel like both of those have changed pretty significantly, right? We're seeing large customers want to adopt Terraform Cloud, and the platform has matured pretty significantly over the course of the last year, just given the investments we've made there. And so we're shifting to a default posture for our enterprise segment that's cloud first for Terraform.

Just trying to get a sense, whether it's kind of too early to.

Expect.

Big Embracement of cloud of the GTK level or if you think that could really start to take greater hold that maybe start to drive some higher mix in cloud as we as we move through the year.

Hey, Derek Thanks, so much for the question.

Yes, so I think historically I think we've talked about it before on the calls that predominantly we sold cloud through our corporate segment before and I think that was driven by customer.

Customer appetite as well as platform and product readiness I think the big shift for us.

This year, we are in fact at sales kickoff right now is that we feel like both of those have changed pretty significantly right. We're seeing large customers want to adopt terraform cloud platform has matured pretty significantly over the course of last year, just given the investments we've made there and so we're shifting to a default posture for our enterprise segment, that's cloud first for tariffs.

Armon Dadgar: And with that, we've actually changed sales compensation to incentivize a cloud land over self-managed. So yeah, we're feeling very good that, you know, both of those things are sort of mature, both from a customer willingness, as well as a product readiness. That's great. If I could, Armon, just to follow up, just got a question on the competitive landscape on the security side, definitely you have between vault and boundary, you've got different competitive dynamics, and Microsoft has entered the market with Entra. Just curious how you see Microsoft competitively and, generally, how you guys are feeling about win rates. Yeah, I mean, what I'd say is we're actually a close partner with Microsoft. We joined the Microsoft Security Alliance as well, pretty recently.

And with that we'd actually change sales compensation.

Incentivize cloud Landover self managed so yes, we are feeling very good that both of those things are sort of mature both from a customer willingness as well as the product readiness.

That's great if I could just a follow up just had a question on the competitive landscape on the security side.

Definitely you got between vault and boundary you've got different competitive dynamics and Microsoft because entered that market with Ed trap.

Curious, whether how you see Microsoft competitively are generally.

How you guys are feeling about about win rates.

Yes, I mean, what I'd say is we're actually close partner with Microsoft We joined the Microsoft Security Alliance as well.

Armon Dadgar: So we don't see Entra as a competitive offering. We partner with them pretty closely on deep integration between Entra and our products and the HCP platform as well. So, certainly, much more of a partner play than it is a competitive one.

<unk> recently, so we don't see enter as a competitive offering we partner with them pretty closely around deep integration between our product and the HCP platform as well so certainly much more of a partner play.

Then it is a competitive one we feel good about our positioning I think we haven't seen any changes really in the competitive dynamics around those and in fact.

Armon Dadgar: You know, we feel good about our positioning. I think we haven't seen any changes in the competitive dynamics around those. And in fact, as we're sort of building a more complete offering around Vault with both our Radar product through acquisition as well as Boundary, which is an organic build, we feel like we can tell a much more complete story around security lifecycle management. All right. Thanks, Derek.

Sort of building a more complete offering around vault with both our radar product through acquisition as well.

Boundary, which is the organic build we feel like we can tell a much more complete story around security lifecycle management alright.

Thanks, Eric next question.

Thank you one moment our next question.

Our next question will be coming from <unk>.

Morgan Stanley Your line is open.

Alright. Thank you for taking the question and congrats on the accelerated bookings growth in Q4 and to stay on that point on the bookings performance.

Unknown Executive: Next question. Thank you. One moment for our next question. Our next question will be coming from Sanjit Singh, of Morgan Stanley. Your line is open.

Was that a function of just stronger execution or did you see.

Or kind of spend environment come through in Q4 versus what you saw earlier this year.

Unknown Executive: Hi, thank you for taking the question and congrats on the accelerated bookings growth in Q4. And to stay on that point about the improved bookings performance, Dave, was that a function of just stronger execution? Or did you see a better kind of spend environment come through in Q4 versus what you saw earlier? Hey Sanjit, thanks.

Hey, Sanjay Thanks, I think it's.

I think the summer special tied to the optimization cycle to everybody I'll be talking about for quite some time I think we certainly felt better in Q4.

Previously that translated into better pipeline conversion rates partial part of that is also execution.

David McJannet: You know, I think some of them are especially tied to the optimization cycles that we've all been talking about for quite some time. I think we certainly felt better in Q4 than we had previously, and that translated into better pipeline conversion rates. Part of that is also execution on the part of the work that Susan St.

On the part of the work that students have letters of enduring.

Process rigor into what we're doing so I think that's actually the combination of both of those to be honest.

With that said, we're particularly pleased with the work that has been doing great.

I speak for the team February every really enjoyed working with her in.

That is certainly helping our go to market motion.

Often and you laid out a very specific.

This plan outlined in <unk> 'twenty.

David McJannet: Ledger has been doing to drive process rigor into what we're doing. So I think it's actually the combination of both of those, to be honest, and I would say we're particularly pleased with the work that Susan's been doing. I speak for the team.

20% revenue growth in fiscal year 2006 on the go to market side of the equation and then you guys have been talking about this for a couple of quarters now can you give us a sense of the magnitude of changes.

Implemented as you know.

And just sort of a sales kickoff.

Astellas process this year.

So if you look later.

David McJannet: We really enjoyed working with her, and that is certainly helping our go-to-market motion. Awesome. And you laid out a very specific plan and outline on how to reassert 20% revenue growth in fiscal year 26. On the go-to-market side of the equation, and you guys have been talking about this for a couple of quarters now, can you give us a sense of the magnitude of changes that are being implemented as you go into sort of the sales kickoff and the sales process this year? And what does that sort of look like? Yeah, I'll put it in maybe a couple of categories.

Maybe a couple of categories. One is around our coverage approach and the second one is around our overall prescription of motions on the first on the first topic.

We serve the called the 4000 largest organizations in the world I'm not sure, we prioritize and Thats, where our focus is and so we have reallocated our resources more specifically to cover those top 4000, I think it's fair to say they were perhaps a more dispersed previously and we certainly believe that concentration of investment will will improve yield.

Of those teams as to where we expect our revenue to come from but number two is the simplification the simplification of the go to market.

Narrative that retail in a very very consistent and simple way, we have a large product portfolio as we've scaled.

David McJannet: One is around our coverage approach, and the second one is around our overall prescription of motions. On the first topic, you know, we serve what are called the 4000 largest organizations in the world. And that's where we are prioritized. And that's where our focus is. And so we've reallocated our resources more specifically to cover those top 4000. And I think I would prefer to say they were perhaps more dispersed previously.

The challenge in enabling and Onboarding reps to be able to tell all the aspects of the stores that we.

That we service and so you've seen us really anchor on two core cost structure on infrastructure lifecycle and security lifecycle and prosecuting that consistently through their large chilled organization is really the exercise in front of us. So it's really those two things one is coverage and the second one it's really just a disciplined process and candidly that's normal for <unk>.

David McJannet: And we certainly believe that the concentration of investment will improve yield from those teams as to where we expect the revenue to come from. Point number two is the simplification and simplification of the go-to-market narrative that we tell in a very, very consistent and simple way. You know, we have a large product portfolio, and as we've scaled, there's been a challenge in enabling and onboarding reps to be able to tell all the aspects of the stories that we that we service. And so you've seen us really anchor on two core constructs around the infrastructure lifecycle and the security lifecycle. And so prosecuting that consistently through a large field organization is really the exercise in front of us. So it's really those two things. One is coverage, and the second one is really just the discipline of process.

Sure.

Okay.

Eric.

I appreciate it thank.

Thank you.

Next question. Please thank you one moment for the next question.

And the next question will be coming from Nick Altmann of Scotiabank. Your line is open.

Awesome.

Thanks, guys I wanted to actually circle back on the last question here just around the go to market.

But can you maybe just talk about one sort of the go to market tweaks and overall simplification.

It will be complete and then just as a follow up how meaningful do you think that go to market changes will be versus sort of the overall macro or end market improving.

Thanks for that.

So as it turns out we had our sales kick off right now and there is tons of excitement about.

About what we're doing here with the team obviously, it's always both of those things.

David McJannet: And candidly, that's normal for a company. Thank you. Next question, please. Thank you.

In terms of the completeness of our go to market two weeks ago, I think we're materially through that I think a lot of that work was done in Q3 and Q4 of last year in terms of setting ourselves up for this in our sales kickoff is ultimately for the final moment and that obviously from here it's about execution.

Unknown Executive: One moment for the next question, and the next question will be coming from Nick Altman of Scotiabank. Your line is open.

David McJannet: Awesome. Thanks, guys. I wanted to actually circle back on the last question here just around the go-to-market. But can you maybe just talk about when the sort of the go-to-market tweaks and overall simplification will be complete? And then just as a follow-up, how meaningful do you think the go-to-market changes will be versus sort of the overall macro and market? Hey David, thanks for that. Yeah, so as it turns out, we're at our sales kickoff right now, and there's tons of excitement about what we're doing here with the team. Obviously, it's always both of those things.

The groundwork has been set.

And then overall in terms of where the equipment comes from it comes from both obviously I think we certainly saw signs of optimization abating.

In the fourth quarter of last year.

And while there is still a big Opex focus from all of the largest customers in the world around their overall software spend and are optimistic.

The pipeline, we're generating now yields into the second half of the year that is.

Looking at a good position for the second half.

Navam Welihinda: In terms of the completeness of our go-to-market tweaks, I think we're materially through that. I think a lot of that work was done in Q3 and Q4 of last year in terms of setting ourselves up for this, and our sales kickoff is ultimately the final moment. Obviously, from here on in, it's about execution, but the groundwork is being set. And then, overall, in terms of where the improvement comes from, it comes from both. I think we certainly saw signs of optimization abating in the fourth quarter of last year, and while there's still a big OPEX focus from all the largest customers in the world around their overall software spend, we're optimistic that as the pipeline we're generating now yields into the second half of the year, we'll be in a good position for the second half. And then, Navam, any changes to the guidance philosophy?

Great and then any changes to the guidance philosophy I know historically speaking you guys have talked about maybe being a little bit more conservative around large deal activity and maybe actually knows from the guidance. So just any updates to the 2025 guidance philosophy.

Relatively similar in terms of the guidance philosophy as it relates to last quarter large deal exclusion. That's what we've factored into the Q1 guide and as Dave mentioned, we've also factored in what we saw in Q4 and from an optimization perspective, and the effects of that that will have on pipeline generation in the sales cycle associated with it.

It leads to the second half acceleration in the shape of the recovery.

The recovery curve that we talked about.

In prepared remarks, which gets us back to the 20%.

Navam Welihinda: I know, historically speaking, you guys have talked about maybe being a little bit more conservative around large deal activity and maybe excluding those from the guidance. So, any updates on the 2025 guidance philosophy? Relatively similar in terms of the guidance philosophy as it relates to out-of-quarter large-deal exclusion. That's what we factored in to the Q1 guide, and as Dave mentioned, we've also factored in what we saw in Q4 from an optimization perspective and the effects of that that it'll have on pipeline generation and the sales cycle associated with it, which leads to the second-half acceleration in the shape of the recovery Great. Okay.

Growth rate, which we're aiming for.

Okay. Thanks, guys. Thank you next question. Please thank you.

The next question.

Our next question will be coming from Natalia.

Hey, John.

Oppenheimer Your line is open.

Thanks, Hey, guys.

I'm trying to.

More clearly put the finger on the driver for the next 12 months versus the following year.

Nevada.

Listen to your commentary around.

Optimization of abating and pipeline, improving and conversion rates improving.

How much of your fiscal 'twenty five.

It is really a reflection of a better environment rather than the three core pillars of improvement that you're talking about I'm just wondering.

You have all these changes that you're making there to go to market and commercial differentiation in cloud.

Unknown Executive: Thank you. Next question, please. Thank you. One moment for the next question. Our next question will be coming from Atalia Kidron of Oppenheimer. Your line is open.

Are these really more of a fiscal 'twenty six contributors rather than fiscal 'twenty five.

Hey, Todd this is armen.

Yes, I think Thats a good question the way I would think about it is the three initiatives that we talked about as Dave was just mentioning.

Armon Dadgar: Thanks. Hey guys, I'm trying to more clearly put the finger on the driver for the next 12 months versus the following year. Navam, when I listen to your commentary around optimization abating and pipeline improving and conversion rates improving, how much of your Fiscal 25 guide is really a reflection of a better environment rather than the three core pillars of improvement that you're talking about? I'm just wondering if all these changes that you're making to go-to-market and commercial differentiation and cloud are really more of a Fiscal 26 contributor rather than Fiscal 25? Hey Ittai, this is Armon.

These are in some sense things that have been started and in progress for some of them for quarter. Some of them for years right. So when we think about go to market simplification and a lot of that work started upon Susan joining us and a lot of the foundational work was on Q3, Q4, obviously rolling out with Cisco and sort of getting finalized.

When we talk about the commercial differentiation, that's a dial as we've talked about that we've been turning for a little while I think we're continuing to feel the ability to turn that out further with the <unk>.

Sell license changes and other things we put in place late last year and.

Armon Dadgar: Yeah, I mean, I think that's a good question. The way I would think about it is, you know, the three initiatives that we talked about, as Dave was just mentioning, these are, in some sense, things that have been started and in progress for, you know, some of them for quarters, some of them for years. So when we think about going to market simplification, you know, a lot of that work started upon Susan joining us. And a lot of that foundational work was in Q3, Q4, obviously rolling out with, you know, SCO and sort of getting finalized. When we talk about commercial differentiation, that's a dial, as we've talked about, that we've been turning for a little while. You know, I think we're continuing to feel the ability to turn that dial further with, you know, the BSL license changes and other things we put in place late last year. And so we're continuing to sort of shift that dial within that new investment. Things like Terraform Stacks that Dave mentioned as well, obviously a major new capability.

And so we're continuing to sort of shift that dialed with net new investments things like terraform stacks that Dave mentioned as well, obviously major new capability on the policy change today around the introduction of LTE at some changes to our back per policy. So again. Some of these things are building momentum on top of changes that were already made and then with enterprise ready cloud again that was a big focus for US last year, that's why we're feeling good.

Changes the default motion around tariff on cloud and then continuing to invest heavily in enterprise. This year. So again these are not necessarily.

Starting from a cold start on these initiatives a lot of these we've been building momentum, we're continuing to put sort of wood behind the arrow.

I think that's clearly a big part of what's going to drive this year, and then going into fiscal 'twenty.

Okay, and then with regards to your U shape.

Pattern of recovery through the year.

When I look at some of the important kpis that you provide.

Net customer additions of 100 K customer additions.

Armon Dadgar: And then with the policy change today around the introduction of LTS and changes to our backport policy. So again, some of these things are building momentum on top of changes that have already been made. And then with Enterprise Ready Cloud, again, that was a big focus for us last year. That's why we're feeling good about changing the default motion around Terraform Cloud and then continuing to invest heavily in enterprise this year. So again, these are not necessarily starting from a cold start on these initiatives. A lot of these, we've been building momentum on. We're continuing to put some sort of wood behind the arrow.

All of our expansion rate and even.

HCP revenue growth.

All of those.

I have not been impressive.

In the fourth quarter continued to show deceleration.

Would they use shaped comment also apply to those metrics, meaning should we expect total customer additions to accelerate in the second half 100, K additions to accelerate net dollar expansion to accelerate cloud ACP revenue to accelerate.

Yes. Thanks for the time I think we've commented on what the bookings recoveries expected to look like given what we saw in Q4, which was strong performance from a sales perspective and the results that we saw from a from a bookings.

Armon Dadgar: So I think that's clearly a big part of what's gonna drive this year and then going into fiscal 26. Okay, and then with regard to your U-shaped pattern of recovery through the year. I look at some of the important KPIs that you provide, such as Net Customer Additions, 100K Customer Additions, a dollar expansion rate, and even the HCP revenue growth. All of those, which have not been impressive in the fourth quarter, continue to show deceleration. Would the U-shaped comment also apply to those metrics?

Renewals perspective.

That's what's baked in.

And what will follow is obviously, a recovery and all the metrics associated with bookings.

Revenue growth rates.

100, K customers I want to make a point on the customer at total customer counts a lot a lot of the total customer count or a fair amount of the total customer count Delta that you see Q3 to Q4, our self managed customers or sorry pay as you go customers.

Navam Welihinda: Meaning, should we expect all customer additions to accelerate in the second half? A hundred K additions to accelerate, the dollar expansion to accelerate, and cloud HCP revenue to accelerate? Yeah, thanks, Ittai.

Which are very small and don't have a material impact to revenue so.

Navam Welihinda: I think we've commented on what the bookings recovery is expected to look like, given what we saw in Q4, which was strong performance from a sales perspective in the results that we saw from a bookings and renewals perspective, right? That's what's baked in, and what will follow is obviously a recovery in all the metrics associated with it. Revenue Growth Rate and 100K Customs. I want to make a point about the total customer count.

The variations quarter over quarter on those customer counts are really material to our revenue.

The 100 gig customer count there is variability quarter over quarter, but overall, we were at the top end of where we thought we'd be on a 100 K customer count for the year and again on a sales driven customer count.

<unk>.

We ended up pretty strong in.

Q4, so yes to your questions on how the shape of the recovery and the path to 20% plays out into the underlying kpis as well.

Navam Welihinda: A lot of the total customer count, or a fair amount of the total customer count delta that you see, Q3 to Q4, are self-managed customers or, sorry, pay-as-you-go customers, which are very small and don't have a material impact on revenue. So, you know, the variations quarter over quarter on those customer accounts aren't really material to our revenue. The 100k customer count, you know, there's variability quarter of a quarter, but overall, we're at the top end of where we thought we'd be on the 100k customer count for the year. And again, on the sales-driven customer count, we've, we've, we ended up pretty strong in Q4. So, yes to your questions on how the shape of the recovery and the path to 20% plays out in the underlying KPIs. Thank you. Thanks, Ittai.

Alright, thank you thanks.

Thanks next question. Please thank you one moment for the next question.

Our next question coming from Alex <unk> of <unk>.

Research Your line is open.

Hey, guys can you hear me okay.

Yes, we can hear you out.

Perfect.

Maybe just the.

First one for me.

If I look kind of on <unk> question about the 100000 customer adds in the quarter. It felt like you had accelerating bookings, but call. It a weaker net new 100000 customer add quarter. So was the outperformance on bookings there driven by some very large deals that.

Seven seven figure deals or some of the largest deals that you've seen or what drove that and then kind of how to think about that.

Unknown Executive: Next question, please. Thank you. One moment for the next question. Her next question will be coming from Aleksandr Zukin of Wolf Research. Your line is open. Hey you guys, can you hear me okay?

Hey, Alex This is Dave Yeah, sure happy to answer that one just to be clear on the 100 gig customer kind of reiterate what <unk> pointed out is.

The 100 gig customer amount is going to move around quarter to quarter. We actually ended at the very very high end of our guidance for the year in terms of hundreds of new customer adds.

Unknown Executive: Yep, yep, we can hear you out. Perfect. So maybe just the first one for me.

Quarter over quarter, we actually saw a good number of customers landing slightly smaller than 100, K, but just below the threshold and we fully expect those to graduate up over the next quarter and your as a progressive so actually I think we feel pretty good about the energy customer number to your question on.

David McJannet: You know, if I look kind of at Ittai's question about the 100,000 customer ads in the quarter, it felt like you had accelerating bookings, but, you know, call it a weaker net new 100,000 customer ad quarter. So was the outperformance on bookings there driven by some very large deals, you know, seven-figure deals or some of the largest deals that you've seen? Or what drove that and then kind of how to think about that? Hey, Aleks. This is Dave.

On the large large deal construct no. There was no significant large deal of note. There were unusual for the fourth quarter I think it was more of a general.

Good Q4.

As we had anticipated also has underscored <unk> comment.

David McJannet: Yeah, no, sure. I'm happy to answer that one. To be clear, on the $100K customer account, I'll reiterate what Navam pointed out is that the $100K customer amount is going to move around quarter to quarter. We actually ended at the very, very high end of our guidance for the year in terms of the $100K customer ad. Quarter over quarter, we actually saw a good number of customers landing slightly smaller than 100k, but just below the threshold, and we fully expect those to graduate up over the next quarter and year as it progresses. So actually, I think we feel pretty good about the 100k customer number. To your question on the large, large deal contract, no; there were no significant large deals of note that were unusual for the fourth quarter.

On the overall customer count to be Super Super clear, we made a pricing change in Q2 of last year, which caused some of our pay as you go customers those customers paying maybe a couple of thousand dollars a year.

To be able to use our free tier ones at the end of the year approached and so the vast vast majority of that customer count change comes from just particularly Asian of those older pay as you go customers credit card customers into a free version of the product and we fully expect over time, they will graduate back to become paying customers as well so don't want to misread.

The customer count.

In terms of your overall commentary because we actually feel pretty good about it.

Okay understood and maybe just just the second question.

David McJannet: I think it was more of a general, you know, good Q4 as we had anticipated. Also, just underscore Navam's comment on the overall customer count being super, super clear. We made a pricing change in Q2 of last year, which caused some of our pay-as-you-go customers, those customers paying maybe a couple thousand dollars a year, to be able to use our free tier once the end of the year approached

What level of visibility do you have from kind of the Q4 bookings pipeline because youre guiding this U shape that you are guiding to you're effectively guiding for growth to double in fiscal 'twenty six based on the trajectory you laid out of reaching 20% by Q2.

David McJannet: And so the vast, vast majority of that customer count change comes from just the matriculation of those older, you know, pay-as-you-go customers, credit card customers into a free version of the product. And we fully expect that, over time, they will graduate back to become paying customers as well. So I don't want to misread the customer count in terms of your overall commentary because we actually feel pretty good about it. Okay, understood. And maybe just the second question.

Fiscal 'twenty six so like is there is there something that like how much of that is you still have to really go get versus leveraging the opportunity.

You already have and what are kind of some of the puts and takes.

Is it macro stabilizing improving.

Because.

That's quite a revenue growth ramp over the course of the next two years.

Yes, let me let me this is Dave Thanks for the question let.

Unknown Executive: What level of visibility do you have, from kind of the Q4 bookings pipeline, because you're guiding this U shape that you're guiding to, you're effectively guiding for growth to double in fiscal 26, based on the trajectory you laid out of reaching 20% by Q2 of fiscal 26. So, like, is there something that you still have to really get versus, you know, leveraging the opportunity that you already have? And what are kind of some of the puts and takes?

Let me make sure that I clarify a couple of things so first of all.

The Q4 activity is what informs our full year view combined with the three initiatives that Dave mentioned, which are tailwind to the operations right and.

The U shape.

Is meant to imply that there is a shallow dip and recovery, which you should take into consideration as we look into the full year.

And also the back end growth rates are higher than the total years growth rate just because of the shape of the recovery rate and then what follows is basically progressive improvement on the growth rate.

Navam Welihinda: Is it macro stabilizing, improving? Because that's quite a revenue growth ramp over the course of the next two years. Yeah, let me be quiet. This is Devon.

Navam Welihinda: Let me make sure that I clarify a couple of things. So first of all... The Q4 activity is what informs our full-year view, combined with the three initiatives that Dave mentioned, which are tailwinds to the operations, right? And the U-shaped... is meant to imply that there is a shallow dip in recovery, which you should take into consideration as we look into the full year. And also, the back-end growth rates are higher than the total year's growth rate, just because of the shape of the recovery, right? And then what follows is basically progressive improvement on the growth rate until it reaches 20% in the fiscal 2026 period, not that fiscal 26 will be 20%. Transcripts provided by Transcription Outsourcing, LLC.

Till it reaches 20% in fiscal 2026 period, not that fiscal 'twenty six will be 20% just to be clear. So what we're what we're signaling is that.

The fourth quarter was a great quarter, and we feel like the optimization cycles abating. There is signs of positive activity, we're not out of the woods and we are doing a lot of work with the three initiatives that we outlined thats going to have positive impacts to our operations and thats going to result in positive momentum in terms of growth rates starting in <unk>.

In the back half of the year.

Alright understood.

Thanks, Alex next question please.

Thank you one moment for the next parcel.

Navam Welihinda: The fourth quarter was a great quarter, and we feel like the optimization cycle is abating. There are signs of positive activity. We're not out of the woods, and we are doing a lot of work with the three initiatives that we outlined that are going to have positive impacts on our operations, and that's going to result in positive momentum in terms of growth rates starting in the back half of. All right. Thanks, Aleks.

And our next question will be coming from Mark Murphy.

Piedmont and your line is open.

Alright, Thank you very much.

Just to clarify you you commented that Q2 should be the trough for <unk>.

Did you say that's also the case for revenue growth or are those slightly out of phase and then just.

I'm wondering at roughly what levels you see that <unk> growth bottoming out for instance, should we should we project that forward at mid to high teens, and then I have a quick follow up.

Navam Welihinda: Next question, please. Thank you. One moment for the next question. And our next question will be coming from Mark Murphy of JP Morgan. Your line is open.

Yeah. Thanks, Mark so, yes, the <unk> growth rate recovery and the revenue growth rate recovery from a growth rate perspective have similar shapes. There is seasonality related to the <unk> because the booking seasonality front half versus back half so that that has.

Unknown Executive: Thank you very much. Navam, just to clarify, you commented that Q2 should be the trough for CRPO growth. Did you say that's also the case for revenue growth, or are those slightly out of phase? And then just wondering at roughly what levels you see that CRPO growth bottoming out? For instance, should we project that forward at mid to high teens?

A little bit to play on what the growth rate on from a CRP perspective is.

We mentioned, how you should think about the exit velocity of CRP, which is 20% plus.

Navam Welihinda: And then I have a quick follow-up. Yeah, thanks, Mark. So yeah, the CRPO growth rate recovery and the revenue growth rate recovery from a growth rate perspective have similar shapes. There's seasonality related to CRPO because of the booking seasonality of front half versus back half, so that has a little bit to play on what the growth rate from a CRPO perspective is.

Sequentially, 20%, sorry in Q4, which is basically the leading indicator of what we think the revenue growth rates on a quarterly basis into 2026 will be so that's how we're thinking about the CRP shape going into going into this year.

Okay, and so you would kind of leave us to around I guess, our own guesswork on where the bottom of that.

Navam Welihinda: We mentioned how you should think about the exit velocity of CRPO, which is 20% to approximately 20%, sorry, in Q4, which is basically the leading indicator of what we think the revenue growth rate is on a quarterly basis into 2020. So that's how we're thinking about the CRPO shape going into... Okay, and so you would kind of leave us to our own, I guess our own guesswork on where the bottom of that you will trough out for Q2, is that fair? Yeah, I think the second quarter is the trough, and we expect to see, you know, as I mentioned, a relatively shallow U-shaped trough and recovery.

You will trough out for Q2 is that fair.

Yes, I think the second quarter as is the trough and we expect to see as.

As I mentioned, a relatively shallow U.

U shape.

Trough in a recovery.

Okay, and as a follow up maybe for our monitor Dave.

Where do your customers staying on the topic of multi cloud adoption at this point I'm wondering if the insertion of.

A number of llm's into the landscape might be causing.

Armon Dadgar: Okay, and as a follow-up question, maybe for Armon or Dave, where do your customers stand on the topic of multi-cloud adoption at this point? I'm wondering if the insertion of, you know, a number of LLMs into the landscape might be causing more dedication to Azure and OpenAI or more experimentation with Google? Anything that would signify more multi-cloud in customer roadmaps, and you know, then, by extension, that might be amplifying the Hashicorp value proposition? Hey Mark.

Any more dedication to azure and open AI or more experimentation with Google.

Anything that would signify more multi cloud in customer Roadmaps and then by extension that might be amplifying the hashi core value proposition.

Hey, Mark Thanks for the question I think what you sort of outlining the question is exactly the type of behavior, we're starting to see which is a lot of customers predominantly maybe had a I'll call. It a single primary cloud type of strategy.

Armon Dadgar: Yeah, thanks for the question. I think what you sort of outlined in the question is exactly the type of behavior we're starting to see, which is a lot of customers predominantly maybe had a, I'll call it, a single primary cloud type of strategy and, you know, sort of looked at other clouds, potentially secondary or even, you know, tertiary, when it made sense for them.

And sort of looked at other clouds potentially secondary or even.

Tertiary when sort of made sense for them I think what's changed to your point is theyre looking at leveraging best of breed journey technology, and I think thats pulling forward a bunch of roadmap around how do we go from training.

Secondary tertiary cloud.

So really a much more of a primary cloud environment that we have access to those.

Armon Dadgar: I think what's changed to your point is they're looking at leveraging best of breed, Gen AI technology. And I think that's pulling forward a bunch of roadmap around how do we go from treating this as a secondary tertiary cloud into really a much more of a primary cloud environment so we have access to those. , , , , , , , ,Azure, Azure, as well, so it's creating a bunch of that sort of pull forward in terms of customers looking at true multi-cloud environment. Obviously for us this is helpful as it's driving more interest in the tools in terms of how do we have a cloud agnostic operating model.

Sort of best of breed capabilities. So you know.

In particular customers, who are making price primarily AWS looking at leveraging Google and Azure maybe customers are primarily.

Azure looking at leveraging Google as well, so I think it's creating a bunch of that sorry, Paul.

Pull forward.

In terms of customers looking at multi cloud environment and obviously for US. This is helpful. As it's driving more interest in the tools in terms of how do we have a cloud agnostic operating model.

Thank you.

Alright.

Unknown Executive: Thank you. Thanks Mark, next question. One moment for the next question. Our next question will be coming from Janet Fish of Piper Sandler. Your line is open.

Thanks, Mark next question.

The next question.

Yes.

Our next question will be coming from Ken fish of Piper Sandler Your line is open.

Unknown Executive: Hey guys, thanks for the questions. Maybe first, Dave or Armon, for you, any pipeline benefit on the security side given we're seeing, you know, Unknown Speaker, Unknown Speaker, give the approval for security budgets and see strength and security budgets overall and focus on identity protection. Is that a large reason why the pipeline is as strong as it is that you're relaying to us? And when do you expect the windows and remote functionalities to be available in order to go toe to toe with sort of the 600 pound grill on that?

Okay.

Hey, guys. Thanks for the questions.

First Dave or arm on for you any pipeline benefited on the security side.

We're seeing.

Boards essentially.

Give you approval for security budgets and seeing strength in security budgets overall and focus on identity protection is a large reason why the pipeline is as strong as it is that you are relating to us.

When do you expect the windows and remote functionality to be available in order to go toe to toe with sort of a 600 pound gorilla in that space.

Armon Dadgar: Yeah, thanks for the question. You know, I think we are seeing relative robustness in the pipeline in the security space. And I think even, even last year, I think that was probably the case that it held up better than maybe other budgets, just given how top of mind cyber is for most organizations.

Yes, thanks for the question I.

I think we are seeing relative robustness on pipeline in the security space.

And I think even even last year I think that was probably the case that it held up better than maybe other budgets just given how top of mind Cyprus for most organizations and the other thing Thats been helpful. As as we're sort of filling in the portfolio going from really sort of bulk standalone to more of a true security lifecycle as Dave mentioned with sort of boundary and.

Armon Dadgar: And the other thing that's been helpful is as we're sort of filling in the portfolio and going from really sort of vault standalone to more of a true security lifecycle, as Dave mentioned, with sort of boundary and radar, it's allowing us to position a more compelling portfolio offering around sort of a full security lifecycle. As to the second question around Windows and RDP, that's a big focus for us this year within boundary. We think realistically that it's going to be more back half weighted to flush out the capability to make sure it's fully mature. It makes sense.

It's allowing us to position a more compelling portfolio offering around sort of a full security lifecycle.

As to the second question around Windows and RTP, that's a big focus for us this year within boundary.

I think realistically that's going to be more back half weighted to flesh out the capability to make sure it's fully mature.

Makes sense and Nevada for you on the guide can you just help us frame, how youre thinking about that.

Armon Dadgar: And Navam, for you on the guide, can you just help us frame how you're thinking about the balance of new business here versus the recovery in your expansion rate? And, you know, are you seeing the difference between CRPO and long-term RPO growth this quarter? Is it just you're seeing shorter duration deals with the existing base, or just continued lower usage? Thanks. Yeah, I don't think there's been much meaningful change in terms of the weighted average duration of our contracts at this point in the fourth quarter. We are seeing smaller land sizes, and, as we mentioned over the last year, we saw an elongation in the land cycle leading to year-over-year declines in the absolute value of land combined with more land deals.

Balance of new business here versus the recovery in your expansion rate and.

Are you seeing on the difference between <unk> and long term RPI growth this quarter or is it just youre seeing shorter duration deals with the existing base or just continued lower usage.

Yes, I don't think theres been bunch meaningful change in terms of the weighted average duration of our contracts.

At this point in the fourth quarter.

We are seeing smaller land sizes and as we mentioned.

Over the last year, we saw an elongation in the land cycle, leading to year over year declines in the absolute value of land combined with more land deals so more contracts landing with more customers, but at a smaller size. So those expand and extend over time so that.

Navam Welihinda: So more contracts landing with more customers, but at a smaller size, so those expand and extend over time. The 2025 guide is basically predicated on Expand-Expand versus a big land chain from a revenue perspective, but we are expecting improvements. Great.

2025 guide is basically predicated on expand extend.

Versus a a.

A big land change.

From a from a revenue perspective, but we are we are expecting improvements in both.

Alright.

Unknown Executive: Next question, please. Thank you. One moment. And our next question will be coming from Jason Adder of William Blair. Your line is open.

Question. Please.

Thank you one moment.

And our next question will be coming from Jason Ader of William Blair. Your line is open.

David McJannet: Yes, hi. Good afternoon, guys. I just wanted to ask about the renewals. I know you made some comments about that. Um, are you seeing customers still being pretty cautious on renewals because they have under consumed entitlements over the last 18 months or so? And then can you just remind us, what's the incentive for someone to expand on a renewal if they can just under-commit and then true things up as time goes on? Is there a penalty there?

Yes, hi.

Afternoon, guys.

Just wanted to ask on the renewals I know you made some comments on that.

Are you seeing customers still being pretty cautious.

On renewals because they under consumed entitlements over the last.

18 months or so.

And then can you just remind us.

What's the incentive for someone.

To expand on our renewal is they can just under commit and then true things up as time goes on is there a penalty there anything any kind of additional.

David McJannet: Any kind of additional details on how that would work? somebody actually over consumes relative to their, Hey Jason, it's Dave. Yeah, thanks for the question. On the first one, yeah, it's a good point. I mean, you've got to keep in mind that this optimization cycle is now, you know, several quarters in, and you're starting to anniversary some of the entitlements that people have already, you know, right-sized on their renewals. So yes, to a degree, I think that's one of the aspects of our point of view, which is that this optimization cycle is showing signs of resistance, and certainly that will play out in NDE over time And, you know, pure down renewal to the extent that people haven't consumed their entitlements, but there's probably a little bit of ways to go still.

Details on how that would work.

Somebody actually over consumers relative to their entitlements.

Hey, Jason it's Jeff.

Thanks for the question on the first one yes, it's a good point I mean, you got to keep in mind that this optimization cycle is now several quarters and you are starting to anniversary some of the some of the entitlements that people had already.

Rightsize on their renewals so yes to a degree I think I think that's one of the one of the aspects of our of our point of view, which is that this optimization cycle of showing signs of abating and certainly that plays out.

<unk> over time.

Pure down renewal to the extent that people havent consume their entitlements.

It's probably a little bit of ways to go still I think thats implicit in our.

David McJannet: I think that's implicit in our guidance, but it's certainly much better, and we're now lapping the previous period where it starts to look more favorable. In terms of your second question, we don't, there is not an immediate incentive for people to true up at the moment they expand. That generally is done at the renewal of the contract. You know, you got to keep in mind the scale of the organizations we work with. Is that just the typical enterprise buying behavior? So you do not necessarily see that expansion until the renewal of that contract, given the entitlement nature of things. Again, unlike the consumption models, we sell entitlements, and so there is just this natural lag as the market starts to recover. Maybe the one thing, Jason, I would add to your question as to what their incentive for, you know, under committing in that sense is that the VDP discounts they would get by committing to a lower threshold would be lower, right?

In our guidance, but it's certainly much better than we're now lapping previous period.

It starts to look more favorable.

Terms of your second question.

There is not an immediate incentive.

For people to true up at the moment they expand that.

That generally is done on the renewal of the contract you got to keep in mind. This for scaled the organization. We work with is that it's just the typical enterprise buying behavior. So you do not necessarily see.

That expansion until the renewal of that contract given the technical nature of things again, unlike the consumption models or sell entitlement and so there is just a natural lag as the market starts to recover maybe the one thing Jason I would add there is the sort of your question is what's the incentive for under committing in that sense.

The PDP discounts they would get committing to a lower threshold would be lower right. So customers will realize better pricing by pivoting to a higher dollar amount.

Navam Welihinda: So customers will realize, you know, better pricing by committing to a higher dollar amount. So that's it. So is there a possibility that... As we kind of come out of all of this, there's going to be, you know, on the renewals, let's say FY26, there's going to be sort of a bump because there's going to be a true up element because customers were caught more cautious on their prior renewal. You see what I'm saying? Yeah, I don't think we have a real point of view that far out.

Thank you.

So is there is there a possibility of that.

As we kind of come out of all of this is going to be.

On the renewals lets say youre going to slide 26, there is going to be sort of a bump because theres going to be a true up element because customers were more cautious on their prior renewal you see what I'm, saying.

Yes, I don't think we have a real point of view that far out I do think this is implicit in the MDU rates that we've seen previously as people sort of on their on the renewals expanding substantially.

Unknown Executive: I do think this is implicit in the NDE rates that we've seen previously, as people sort of on their renewals expanding substantially, and obviously, we've been in a period where that hasn't been happening, and at some point, it will revert. Thank you. All right. Thanks, Jason. Next question, please. Thank you. Thank you. And our next question will be coming from Kasthuri Rangan of Goldman Sachs.

Substantially and obviously, we've been interfered with that hasnt been happening and at some point it will revert.

Thank you.

Alright, Thanks, Jason next question please.

We have one.

Yes.

Sure.

And our next question will be coming from Kash Rangan of Goldman Sachs. Your line is open.

David McJannet: Thank you very much, team. I'm curious to spend a little bit of time, if you don't mind, Dave. I think you read out a bunch of things that Susan is going to be doing in the go-to-market organization. It came across as being very substantive at the same time, but it also went by very quickly.

Yes. Thank you very much team I am curious to spend a little bit of time, if I don't mind, Dave I think you read out a bunch of things that Susan is going to be doing to the go to market organization at.

It came across.

Being very substantive at the same time. It also went through very quickly.

David McJannet: Can you expand upon what exactly is going to be the new bent to go-to-market and the measures that Susan is adopting? What are they meant to remedy versus the approaches in the past, and how important is this? Because the product, we've always appreciated the product strength of Hashicorp. It's been the key asset for the company, is trying to understand incrementally the tweaks to go-to-market, what are they really addressed, and what are they really motivated by, so we can all understand the shape of this recovery. Hey, Kasthuri, yeah, I'm happy to double-click on that a little bit.

Can you expand upon what exactly is going to be the new bent to go to market and the measures that.

Susan is adopting.

What are they meant to remedy versus the the approaches in the past and how important is this because of product. We've always appreciated the product strength of Harsha carpet has been it's been the key.

Key asset for the company just trying to understand incrementally the tweaks to go to market.

What are they really addressed and what are they really motivated by so we can all understand the shape of this recovery. Thank you so much.

Hey, guys sure, yes, happy to double click on that a little bit.

David McJannet: I'll say, just to reiterate, really the first... The most substantive change that we introduced over the last six months was a refocusing of our go-to-market resources on a slightly smaller number of our accounts. I think that's point number one. Obviously, we were in a very aggressive investment phase coming out of our IPO, and as the market environment changed, we obviously had to remedy the fact that we had a lot of resources now allocated to places where perhaps we'd gone to relatively quickly. So now we've pulled those resources back to focus on the most important accounts, and that is certainly paying dividends, and it's the appropriate thing to do. Point number two, I think it's worth actually just contextualizing where, sort of, as you evolve from the early adopters of the world to the early majority, how you have to engage with them in a much more prescriptive manner.

Just to reiterate is really the first <unk>.

Substantive change that we introduced over the last six months was a refocusing of our go to market resources on a slightly smaller number of accounts I think that's point number one obviously, we had been in a very aggressive investment phase.

Coming out of our IPO and as the market environment changed we obviously have to remedy. The fact that we had a lot of resources now allocated in places where perhaps.

We've gone through relatively quickly. So now we've pulled those resources back to focus on the most important accounts and that is that is certainly paying dividends and it's the appropriate thing to do.

Number two I think it's worth actually just contextualize ing.

Sure.

As you are all from the early adopters of the world to the early majority how you have to engage with them in a much more prescriptive manner again.

David McJannet: Again, that's the consistent pattern of this particular part of the growth arc of any company. To get to this kind of customer base, which is the early majority, our go-to-market motions are now much more prescriptive in their nature, both for our customers in terms of how we engage with them, which is we go talk to you about more of a solution-oriented conversation around the life cycle. And then, number two, it's much more process rigor, which is, again, just the nature of scaling this side of the organization. So I don't think – I wouldn't say the changes are massively substantive.

Consistent pattern of this particular part of the growth arc of any company as you get to this kind of customer base, which is the early majority.

Marketing promotions are now much more prescriptive and they're in their nature, both for our customers in terms of how we engage with them, which is we go talk to you about more of a solution oriented conversation around lifecycle and then number two it's much more process rigor, which is again just the nature of scaling.

The size of the organization. So I don't think I wouldn't say that changes are massively substantive it's much more process oriented too to help get more consistency and growth is as we hit this particular scale inflection point and the first one is just really about reallocation of resources, which had gotten slightly extended as we group.

David McJannet: It's much more process-oriented to help get more consistency in growth as we hit this particular scale inflection point. And the first one is just really about reallocation of resources, which have gotten slightly extended as we grow. Got it. And one follow-up question for Navam. When you look at the sequential total subscription revenue growth rate, I mean, it was the highest we've seen in several quarters. I'm wondering if you could double-click on that, because if I just annualize that sequential growth rate, you get a better growth rate than what you got into.

Got it and then one follow up for <unk>.

The sequential.

Total subscription revenue growth rate.

With the highest we've seen.

Several quarters I'm wondering if you could double click on that because if I just annualize that sequential growth you get to a better growth than what you're guiding to maybe there is some one time effects in Q4 sequential subscription revenue also look at the sequential change in.

Navam Welihinda: Maybe there's some one-time effects in Q4, sequential subscription revenue. I also look at the sequential change in current RPO, 62 million or so. Again, the highest we've seen in several quarters.

And current RVO.

Roughly $62 million or so again, the highest we've seen in several quarters again can you help us understand what might be driving that Q4.

Navam Welihinda: Can you help us understand what might be driving that Q4? It looks like some of the leading indicators look good, and some don't. I know customer count is a little bit on the sluggish side, but certainly these caught my attention. I just wanted to see if you could offer more perspective. Yeah, thanks, Kesh. Absolutely. I mean, we saw pockets of optimization, which relates to some of the 100K numbers and customer numbers that you saw. But from a broad perspective, Q4 was a great quarter as it related to the performance we saw from a revenue perspective and a CRPO perspective. Now, it's important to keep in mind that there is seasonality in the business in the fourth quarter, particularly in the back half of the year and specifically in the fourth quarter, when these are larger quarters compared to Q1, for example.

It looks like some of the leading indicators look good and some don't like the no customer count this deliberate on the sluggish side, but certainly these caught my attention I just wanted to see if you could offer more perspective. It that's it for me. Thank you.

Yes, thanks, guys.

Absolutely I mean, we saw pockets up optimization, which relates to which relates to some of the one.

100 gain numbers in and customer numbers that you saw but from a broad perspective, Q4 was a great quarter as it as it related to the performance. We saw from a revenue perspective, and a CRP O perspective, now it's important to keep in mind that there is seasonality in the business in the fourth quarter, particularly in the back half of the year.

And specifically in the fourth quarter, where these are larger quarters compared to Q1. For example, so there is a seasonal aspect to Q4 versus Q1.

Navam Welihinda: So there is a seasonal aspect to Q4 versus Q1. But for the most part, we saw positive signs, which we reflected in our prepared remarks and which also was the basis for how we were thinking about the growth recovery and our path back to sort of a 20% quarterly revenue growth rate sometime in the 2026 period. So, yeah, we're optimistic about the early signs we're seeing. Great, thanks. Kash, let's go on to the next question, please. Thank you. And our next question will be coming from Brad Sills of Bank of America. Your line is open.

But for the most part we saw positive signs, which we reflected in our prepared remarks, and which also was.

The basis for how we were thinking about the growth recovery and our path back to sort of a 20% quarterly revenue growth rates sometime into 2026 period. So yes, we are optimistic about the early signs we're seeing.

Alright, Thanks, Kash, that's going to next question. Please.

One longwall.

And our next question will be coming from Brad Sills Bank of America. Your line is open.

David McJannet: Oh, great. Thank you so much. I wanted to ask a question about... You've called it out a couple of times here, both as a separate focus on go-to-market and also on... How should we read that? Are you identifying that as kind of a core use case? Customers, G.C. line of sight.

Oh, great. Thank you so much I wanted to ask a question around the emphasis on security you've called it out a couple of times here.

As a separate focus on go to market and also on the commercial differentiation how should we read that are you identifying that as kind of a core use case beyond provisioning with terraform in other words, our customers do you see line of sight for customers potentially landing with security or terraform.

David McJannet: Hey Brad, yeah, thanks for the question. You know, as we've talked about a lot, we really have two core land products. Obviously, Terraform, which we think about as sort of the key landing point when we talk about infrastructure lifecycle management, starts with provisioning, and there's a sort of a broader portfolio around that. When we think about Volt as our sort of second land product, it's very much the beachhead within the security lifecycle story that we tell, right? So historically, the land business has always been the majority of the revenue.

And then the expansion opportunity kind of unfolds from there.

Hey, Brad Thanks for the question.

We've talked about a lot we really have two core land products, obviously, terraform, which we think about as sort of the key landing point when we talk about infrastructure lifecycle management starts with provisioning and then just a sort of a broader portfolio around that so when you think about bold as our sort of second land product, it's very much the beachhead within the security lifecycle story that we tell right. So those have always been historically at <unk>.

Business they make up the majority of the revenue I think what Youre seeing is an evolution from telling sort of a point product story around those into really simplifying that solution story that Dave talked about.

Armon Dadgar: I think what you're seeing is an evolution from telling sort of a point product story around those to really simplifying that solution story that Dave talked about, so that, you know, our field is enabled to go talk about, you know, we're not just solving a secret management problem with Volt, we're solving a security life cycle where Volt is the beachhead, but really that brings in things like, you know, our radar product for secret scanning So it's really about moving from sort of telling that point product story into a broader solution, but, you know, it's not a dramatic shift. Volt has always been a land product for us and is a significant revenue contributor.

Our field is enabled to go talk about we're not just solving a secret management problem evolve we're solving a security lifecycle.

The beachhead, but really that brings in things like our radar products or secret scanning detection in inventory and then bring them boundary as well for the privilege access management for human access. So it's really about moving from sort of telling that point product story into a broader solution.

Not a dramatic shift all has always been a land product for us and that is a significant revenue contributor.

Understood. Thanks to Bob and then if I could also ask for a bit more detail on some of the process efficiencies that you've identified for areas of improvement Dave you mentioned speed in the in the pipeline velocity in the pipeline as a focus some technical resources to kind of back that up.

David McJannet: So thanks, Navam, and then if I could also ask... a bit more detail on some of the process. For areas of improvement, Dave, you mentioned, you know, speed in the pipeline velocity and Technical Resources to kind of back that up. I'd just love to get more details on how... Hey, Brad.

You are putting into play here, but just love to get more details on how you are.

Thinking about some of the tactical things to improve.

On process discipline. Thank you.

Hey, Brad I think this is.

David McJannet: Yeah, I think this is, again, I'll just bring it back to just the operational opportunities for us to improve as we scale. You know, we're here at our sales kickoff again, reiterating this to our growing sales organization. And so the process is just really about process consistency and, you know, things that yield faster and higher win rates. You know, there's a whole litany of things that are operational in their nature. I think it's just, again, the nature of where we are; it's how do we do this consistently across the world, in every geography, in the same way.

So I'll just bring it back to the operational opportunities for us to improve as we scale.

We are here at our sales kick off again.

Reiterating this through our growing sales organization and so the process is just really about can process consistency.

And things that yield faster and.

Higher win rates there is a whole litany of things that are operational in their nature, but I think it's just again the nature of where we are.

How do we do this consistently across the world.

Every geo in the same way and this is just normal operational day to day element I certainly feel super good about I think that the.

David McJannet: And, you know, this is just normal operational day to day stuff, and I certainly feel super good about it. I think that the fact that Susan Ledger has been out of place for a couple of quarters, I have to remind us that she has been part of a couple of different companies going from the $600 billion scale to the billion-dollar plus. And that's certainly what it takes to do so.

Sure.

The fact that since our lessor has.

<unk> been in play for.

Couple of quarters have to remind that provide us that she has been part of a couple of different companies growing from the $600 million.

Scale to the billion dollar plus and that's certainly what it takes to do so and we're super Super bullish about the work you've done.

David McJannet: And we're super, super bullish about the work she's doing. Thank you. One moment for the next question. And our next question will be coming from Trevor Rambo of BTIG. Your line is open.

Great. Thank you Dave.

Thank you one moment for the next question.

Yes.

Our next.

<unk> will be coming from Tempur rumbaugh.

Armon Dadgar: Hi Gray, this is Trevor speaking on behalf of Gray Powell. Thanks for taking my question. So I just want to circle back on Terraform stacks. Can you provide any insights or statistics on that product?

Your line is open.

Hi, Greg This is Trevor on for Gray Powell, Thanks for taking my question.

So I just wanted to circle back on tariffs Terraform stacks can you provide any insights or statistics on that product.

Armon Dadgar: And then when it goes officially GA, how should we think about that accelerating the free to pay conversions for customers this year and going into next? Thanks. Great, thanks, Trevor. Yeah, so the way I would think about Terraform Stacks is, you know, effectively, you could almost call it Terraform 2.0. It's the biggest enhancement we've added to Terraform since it was introduced, and effectively, what it does is improve Terraform's ability to manage multiple environments, multiple layers of the infrastructure stack at the same time, right? So prior to the stacks, customers had to sort of manually build processes around how to handle multiple environments, for example, development, testing, staging, and production.

Then when it goes officially GAA, how should we think about that accelerating the free to paid conversions for customers like this year and going into next thanks.

Great. Thanks, Trevor Yeah. So the way I would think about terraform stacks is effectively it can almost call. It a tariff on <unk>. It's the biggest enhancement was added to terraform since it was introduced and effectively what it does is enhance the terraform <unk> ability to manage multiple environments and multiple layers of the infrastructure stack at the same time, it's a pre.

To the stacks customers had to sort of manually build process around how to handle multiple environments. For example development testing staging production. So there was a manual process and manual orchestration around that versus what stacks. We now have a native understanding in a native ability to orchestrate across those multiple environment.

Armon Dadgar: So there was a manual process and manual orchestration around that, versus with stacks, we now have a native understanding and a native ability to orchestrate across those multiple environments. You know, for our particular customer base, this is most impactful for those kind of 4000 biggest customers Dave talked about. They all have very large, very complex infrastructure. And so we think this is going to be a compelling feature set for them. And, in fact, already, we're seeing great resonance with the folks in private beta using this capability already. So, you know, the decision we've made is really to bring that only to commercial customers through Terraform Cloud to begin with. And so, to your sort of second part of your question on free to paid conversion, effectively, it won't be available in the pure play community edition; you will have to start with the commercial product to leverage stacks, right?

For our particular customer base. This was most impactful to those kind of 4000 biggest customers Dave talked about they all have very large very complex infrastructure and so we think this is going to be a compelling feature set for them and in fact already we're seeing great resonance with the folks in private data using this capability already.

So the decision we've made is really to bring that only to the commercial customers through tear from cloud to begin with and so to your second part of your question on free to paid conversion effectively it won't be available in the pure play community addition, you'll have to start on the commercial product to leverage stack right. So obviously at the very bottom and we have a free tier that allows some limited scale usage.

But any substantial scale you essentially have to be on one of our commercial.

Tears of Terraform power.

Okay. Next question. Please thank you one more question.

And our next question will be coming from a chemo for the ink.

Armon Dadgar: So obviously, at the very bottom end, we have a free tier that allows some limited scale usage, but any substantial scale usage where you'd have to be on one of our commercial tiers of Terraform Cloud, www.uncn.org. Okay. Next question, please. Thank you. One moment.

Inc.

Your line is open.

Good afternoon, and thank you for taking my question I wanted to zone in on.

Scale of motion that will emphasize more of a cloud first selling approach in CAGR endocrine and very large customer base.

Armon Dadgar: One question. And our next question will be coming from Fatima Boolani of City. Your Line is open. Good afternoon, thank you for taking my questions. I wanted to zone in on the sales motion that will emphasize more of a cloud first selling approach to your enterprise and very large customer base. I wanted to get a better understanding of how much of this will involve the conversion of an existing Terraform environment into CloudForm factors, and how much of this is really going to be emphasized and focused around the expansion and extension of a self-managed enterprise's overall Hashi footprint into the broader portfolio of cloud-first solutions. And then we can have a follow-up, please.

I wanted to get a better understanding.

How much of it will involve the conversion of an existing terraform environment into a cloud form factors and how much of this is really going to be emphasized and focused around the expansion and extension.

Self managed enterprises.

Overall hershey footprint into the broader.

Portfolio of cloud first solution and then have a follow up please thank you.

Yes, Thanks, Athena yes.

Yes, it's a great question, so effectively the sales comp change that took place is really to emphasize land deals on terraform cloud now that said, obviously, we're engaged with customers on a renewal.

Armon Dadgar: Thank you. Thanks, Fatima. Yeah, it's a great question. So effectively, the sales comp change that took place is really to emphasize land deals on Terraform Cloud. Now that said, obviously, we're engaged with customers on a renewal basis as well. You know, it's obviously in our interest to move them to Terraform Cloud, but it's also in the customer's interest. I think they realize, you know, features, you know, much more quickly; they don't have to do upgrades, they're not on the hook operationally. So there's a lot of benefit to the customer from moving from self-managed to the cloud. But similarly, for us, we get better visibility into the usage, you know, lower cost of support, and ability to deliver, you know, innovation to them more quickly. So the sort of process changes are really around incentivizing land, but obviously, there's strong incentives on the expansion side as well.

Basis as well, it's obviously in our interest to move them to Terraform power. That's also on the customers' interests I think they realize features much more quickly if they don't have to do upgrades, they're not on the hook.

Operationally, so theres a lot of benefit to the customer from moving from self managed to cloud, but similarly for us as we get better visibility into the usage.

Lower cost of support and ability to deliver innovation to them more quickly. So the sort of process changes are really around incentivizing land. Obviously, there are strong incentives on the expansion side as well.

And then our view is once people are part of the cloud platform that simplifies our ability to drive next product along because they are already on an integrated chat.

Chassis.

I appreciate that and just as it relates to that.

Bundle and then more storytelling approach on the go to market front.

Armon Dadgar: And then, you know, our view is once people are part of the cloud platform, that simplifies our ability to drive the next product along because they're already on an integrated chassis. I appreciate that. And just as it relates to the bundles and the more storytelling approach on the go-to-market front, you did introduce the dealer trust bundle last year. I'd love to get an update on how much traction that's gotten vis-a-vis maybe penetration in the base. And to the extent there are other logical bundles that you could create to build that transaction velocity and enhance that expansion and extension momentum, especially since you're incentiviz So, you know, shortening that expansion sales cycle into other solution areas like, you know, Boundary or Packer and Waypoint. That's it for me.

It introduced a zero trust bundle last year I'd love to get an update on how much traction that Scott.

It seems that you maybe penetration in the base and to the extent that there are other logical bundle, but you can.

It creates.

Bill did that transaction velocity and enhance that expansion and extension momentum, especially since youre incentivizing.

Our cloud shortening that expansion cycle.

Other solution areas.

Foundry or Packer.

Good morning.

That's it for me thank you.

Hey, it's Dave.

Thanks for the question, yes, so so I think the simple way to describe it as.

We effectively have two conversations we have morningstar infrastructure lifecycle, one of our security lifecycle.

We previously had zero trust SKU bundle, which has essentially been replaced by the security lifecycle.

David McJannet: Thank you. Yeah. Hey, Dave, thanks for the question. Yeah. So I think the simple way to describe it is that we effectively have two conversations we have. One is our infrastructure lifecycle, and one is our security lifecycle. We previously had this Zero Trust SKU bundle, which is essentially being replaced by the security lifecycle form factor, which gives you access to multiple products within the security portfolio.

Form factor, which gives you access to multiple products.

Within the security portfolio. So so yes, we have actually recognize the success of about to some degree and institutionalize that as a default selling motion for security lifecycle management, and then also introducing that notion for infrastructure lifecycle management. So we're really trying to simplify.

The structure of what our field teams have to bring to bear and we're certainly optimistic but that complexity will drive better yield.

David McJannet: So, yes, we have actually recognized the success of that to some degree and institutionalized that as a default selling motion for security lifecycle management and then also introduced that notion for infrastructure lifecycle management. So we're really trying to simplify the structure of what our field teams have to bring to bear, and we're sort of optimistic that that simplicity will drive better yield. All right, next question, please. And I think we have to limit it to one question, just a matter of time that we've left here. Thank you. Thank you. One moment.

Alright next question, please and I think we have to limit to one question.

Sure.

Left here. Thank you.

Thank you Juan Manuel.

And as a reminder, here going forward.

Limit yourself to one question.

And our next question will be coming from that.

Ian Your line is open.

Okay.

Hi, This is Matt on for Alex Thanks for taking the question I wanted to double click on the HCP cloud chassis, it's terraform still generating the lion's share of that revenue stream, so far as customers move to fully manage or is making.

Making a move and how is that compensation expected to change over the next 12 months and into fiscal 'twenty six.

Unknown Executive: And as a reminder, here going forward, please limit yourself to one question. And our next question will be coming from Matt Desort of MUN. Your line is open. Hi, this is Matt on behalf of Aleks. Thanks for taking the question. I wanted to double click on the HCP cloud chassis.

Yes, Thanks, Matt.

So today actually both terraform and HCP vault are significant contributors to the to the cloud revenue line I think what we expected this year given the shift we are making towards providing a sales incentive around landing with tariff cloud, we expect that there'll probably be some differential increased land on terraform.

Armon Dadgar: Is Terraform still generating the lion's share of that revenue stream so far as customers move to fully managed services? Or is Vault making a move? And how is that composition expected to change over the next 12 months and into fiscal 26? Yeah, thanks, Matt. So today, actually, you know, both Terraform and HCP Vault are significant contributors to the cloud revenue line. I think what we expect this year is given the shift we're making towards, you know, providing a sales incentive around landing with Terraform Cloud, we expect that there'll probably be some, you know, differential increased lands on Terraform and then looking at basically, you know, evaluating whether a similar thing would make sense back half of the year for Vault.

And then looking at basically evaluating whether a similar thing would makes sense back half of the year.

For vault, but again I think this is where we would look at customer appetite and there are slight differences given the run time nature of both theres, a little bit more customer apprehension versus.

Something that's slightly less.

Like terraform so.

We're going to take a little bit of a wait and see on customers but.

Yes, I think near term, we will take it.

Terrific. Thanks, Thanks, Pat next question please.

Q.

One moment. Please next question.

Our next question will be coming from Brad.

Of Stifel. Your line is lumpy.

Armon Dadgar: But again, I think this is where we look at customer appetite, and there are slight differences given the runtime nature of Vault; there's a little bit more customer apprehension versus, you know, something slightly less runtime-critical, like Terraform. So, you know, we're gonna take a little bit of a wait and see approach with customers. But yeah, I think in the near term, we'll see more

Great.

This is mark on for Brad.

If you could provide a little detail on the linearity in the quarter and the macro improvement I guess optimization abatement that you guys talked about and how that sustained through February and how that contributed to kind of your confidence for the guide for both FY 'twenty five 'twenty six.

Armon Dadgar: Thanks. Thanks, Matt. Next question, please. Thank you. One moment for the next question, and our next question will be coming from Brad Reback of Cecil. Your line is open. This is Mark speaking on behalf of Brad. I wanted to see if you could provide a little detail on the linearity in the quarter and the macro improvement, the, I guess, optimization abatement that you guys talked about and how that sustained through February and how that contributed to kind of your confidence for the guide for both FY25 and 26. Yeah, just a reminder, we're subject to regular enterprise patterns, which means that there is linearity more towards the back half compared to the front half of both the year and the quarter. Q4 was stronger than expected from a linearity perspective, and, as I mentioned earlier, all positive signs from a macro perspective and how the optimization cycle is playing out.

Yes, just.

Just a reminder, where we're subject to regular enterprise patterns, which means that there is.

Linearity is more towards the back half compared to the front half of the year in the quarter Q4 was was stronger than expected from a linearity perspective.

As I mentioned earlier, all positive signs for me from a macro perspective, and how the optimization cycles play out.

Thank you next question please.

Thank you.

And our next question will be coming from Ari.

<unk> of Cleveland Research your line with Barclays.

Hi, Thanks for taking the question just real quick on.

<unk> what percent of land in the quarter were.

The cloud is to be cloud and then do you think is there any potential pull forward ahead of comp plan changes for this year. Thanks.

Navam Welihinda: Thank you. Next question, please. Thank you. And our next question will be coming from Ari. Ari Terjanian of Cleveland Research, your line is open.

Yes, there was nothing unusual that happened in the fourth quarter compared to the other quarters. So nothing nothing in terms of.

Unknown Executive: Hi all, thanks for taking the question. Just real quick on, you know, RPO, what percent of lands in the quarter were, you know, the cloud, HTTP cloud, and then, you know, do you think, you know, is there any potential pull forward ahead of, you know, comp plan changes for this year? Thanks. Yeah, there was nothing unusual that happened in the fourth quarter compared to the other quarters, so nothing in terms of, you know, unusual activity.

Unusual activity there.

Alright, thanks, Thanks, Eric.

Thank you and at this time I would like to go ahead and turn the call back over to management for closing remarks.

Okay.

I'd like to thank everyone and express my thanks for your participation.

We were able to attend and we certainly appreciate all the questions. We look forward to speaking to everybody soon thank you.

This.

Today's conference call. Thank you for participating you may all disconnect.

Okay.

Yes.

Okay.

Okay.

Navam Welihinda: Thanks, Art. Thank you. And at this time, I would like to go ahead and turn the call back over to management for closing remarks. Please do so.

Okay.

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Unknown Executive: I'd just like to thank everyone and express my thanks for everyone that was able to attend, and we certainly appreciate all the questions. We look forward to speaking to everybody soon. Thank you. This concludes today's conference call. Thank you for participating. You may all disconnect.

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