HashiCorp (NASDAQ:HCP) Surprises With Q4 Sales, Next Quarter Sales Guidance Is Optimistic

Anthony Lee /
2023/03/09 4:06 pm EST
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Cloud infrastructure automation platform HashiCorp reported Q4 FY2023 results that beat analyst expectations, with revenue up 40.7% year on year to $135.8 million. The company expects that next quarter's revenue would be around $133 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. HashiCorp made a GAAP loss of $49.4 million, improving on its loss of $227.7 million, in the same quarter last year.

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HashiCorp (HCP) Q4 FY2023 Highlights:

  • Revenue: $135.8 million vs analyst estimates of $124.2 million (9.3% beat)
  • EPS (non-GAAP): -$0.07 vs analyst estimates of -$0.22
  • Revenue guidance for Q1 2024 is $133 million at the midpoint, above analyst estimates of $128.6 million
  • Management's revenue guidance for upcoming financial year 2024 is $593 million at the midpoint, missing analyst estimates by 0.02% and predicting 24.6% growth (vs 48.9% in FY2023)
  • Free cash flow was negative $1.11 million, compared to negative free cash flow of $17.9 million in previous quarter
  • Net Revenue Retention Rate: 131%, down from 134% previous quarter
  • Customers: 4,131, up from 3,899 in previous quarter
  • Gross Margin (GAAP): 82.7%, up from 72.3% same quarter last year

Initially created as a research project at the University of Washington, HashiCorp (NASDAQ:HCP) provides software that helps companies operate their own applications in a multi-cloud environment.

As Marc Andreessen says, "software is eating the world" which means the volume of software produced is exploding. But building software is complex and difficult work which drives demand for software tools that help increase the speed, quality, and security of software deployment.

Sales Growth

As you can see below, HashiCorp's revenue growth has been impressive over the last two years, growing from quarterly revenue of $61.8 million in Q4 FY2021, to $135.8 million.

HashiCorp Total Revenue

And unsurprisingly, this was another great quarter for HashiCorp with revenue up 40.7% year on year. Quarter on quarter the revenue increased by $10.4 million in Q4, which was in line with Q3 2023. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates HashiCorp is expecting revenue to grow 31.8% year on year to $133 million, slowing down from the 50.8% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $593 million at the midpoint, growing 24.6% compared to 48.4% increase in FY2023.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

HashiCorp Net Revenue Retention Rate

HashiCorp's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 131% in Q4. That means even if they didn't win any new customers, HashiCorp would have grown its revenue 31% year on year. Despite the recent drop this is still a great retention rate and a clear proof of a great product. We can see that HashiCorp's customers are very satisfied with their software and are using it more and more over time.

Key Takeaways from HashiCorp's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on HashiCorp’s balance sheet, but we note that with a market capitalization of $5.91 billion and more than $1.29 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly HashiCorp outperformed analysts’ revenue expectations this quarter. The company also beat Consensus on RPO (remaining performance obligations, a revenue leading indicator). And we were also glad to see the acceleration in new contract wins. On the other hand, the revenue guidance for next year indicates a significant slowdown and the revenue retention rate deteriorated a little. Overall, this quarter's results still seemed pretty positive and shareholders can feel optimistic. The company is up 4.87% on the results and currently trades at $31.21 per share.

Should you invest in HashiCorp right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.