Ladies and gentlemen, thank you for standing by, and welcome to HashiCorp's fiscal year 24 third quarter earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Alex Kurtz, Vice President of Investor Relations and Corporate Development. Thank you. Please go ahead. Good afternoon, and welcome to HashiCorp's fiscal 2024 third quarter earnings call. This afternoon, we'll be discussing our third quarter fiscal 2024 financial results, announcing our press release issued after the market closed today. With me are HashiCorp's CEO, Dave McJannet, CFO, Navam Welihinda, and CTO and Co-founder, Armon Dadgar. 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. 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 fourth quarter and full 2024 fiscal year. These statements may be identified by words such as expect, anticipate, intend, plan, believe, seek or will, or similar statements. 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. 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. Dave? Thank you, Alex, and welcome everyone to our third quarter earnings call for fiscal 2024. We reported solid third quarter results that exceeded our top and bottom line guidance, with revenue of $146 million, representing year-over-year growth of 17%. Current non-GAAP remaining performance obligations reached $421 million, representing 23% year-over-year growth, and we added 26 customers with greater than or equal to $100,000 in annual recurring revenue to reach a total of 877. Our HashiCorp Cloud Platform offerings reached $19.9 million in revenue, representing 14% of subscription revenue in the quarter. The team performed well under difficult circumstances, with continued new large customer wins, despite sustained deal scrutiny that's a result of the broader macroeconomic environment. Coming out of our annual user conference in October this quarter, we remain convinced about the long-term opportunity ahead of us as the world's largest enterprises move to the cloud. With that as backdrop, I want to talk today about what we're doing, both short-term and long-term, to fully realize this opportunity. HashiCorp's position as an enabler for the cloud makes us unique. At HashiConf in October, we had more than 1,200 in-person and 12,000 virtual attendees, and hosted keynotes with customers such as Home Depot and Unity Games. The size of our community and the variety of customer use cases on display at HashiConf underscore that we have a large, long-term opportunity that touches multiple facets of cloud infrastructure. At HashiConf, we unveiled multiple new product advancements aimed at enabling both developers and platform teams with workflow automation capabilities and lifecycle management. We announced HCP Vault Secrets, a good example of how our continued investment in cloud capabilities is expanding our portfolio, and also gave a preview of HCP Vault Radar, which is based on the secret scanning startup we acquired earlier this year. We also made several announcements related to Terraform, the industry standard for Infrastructure as Code. I think attendees and users were most excited about Terraform Stacks, a major investment and enhancement to the Terraform execution engine. We also announced our first generative AI feature within Terraform, which uses LLMs to generate module tests for users. Additionally, we announced the private beta of HashiCorp Developer AI, an AI-powered companion for finding reference materials, architectural guidance, and product examples from the HashiCorp Developer Portal. You'll also continue to see us being targeted about incorporating AI capabilities into our products over time. We're being thoughtful about what AI use cases are valuable to our customers and are proceeding deliberately. However, you will continue to see investments across our portfolio with a focus on lifecycle management capabilities across infrastructure and security. As I mentioned earlier, it's no secret that market conditions remain difficult. While there are many things we cannot control, there are many others we can, so we've taken steps to help us with both near-term performance and meeting the long-term opportunity ahead of us. First, we are focused on simplifying our go-to-market messaging and strategy. At our Financial Analyst Day, we introduced new messaging centered on lifecycle management, which we apply to both our infrastructure and security offerings. This helps our sales teams more easily position key parts of the HashiCorp product portfolio as comprehensive solutions to common problems and package them together. Susan St. Ledger, our President of Worldwide Field Operations, is key to this go-to-market approach, and she's already having an impact with new leadership hires and enablement efforts to our field teams. With our help, our field teams will be better positioned to execute on this new strategy, while also putting additional focus on our cloud offerings. This investment in our go-to-market is aligned with the investments in our products I mentioned earlier, and together, they will help us to continue to win and expand within the Global 4,000. Second, it's worth noting that these go-to-market efforts are also crucial to our ongoing focus on building a wholly integrated offering around the HashiCorp Cloud Platform. These cloud-managed products are a fast-growing part of our business, as you can see in our results. Through HCP, these products can be sold and consumed more easily, with simplified opportunities for product expansions and extensions, and we can better respond to changing customer needs. We are already seeing positive responses to the new cloud pricing frameworks we introduced earlier this year. Finally, we remain focused on increasing efficiency and are committed to creating further operating leverage in our business. Those efforts are already underway, and we are making good progress on our path to profitability. Navam will discuss those in more detail. These efforts do not alter our ability to build new products, as you can see from the broad set of announcements we made at HashiConf. Now, I'll turn it over to Navam to walk through the details of our Q3 performance, and then I'm happy to take any questions. Thank you, Dave, and thanks, everyone, for joining us today. Echoing Dave, I also wanted to reflect on how great it was to host everyone at our user conference, HashiConf, last quarter. It was amazing to see the energy our community, customers, and employees created at this event. I also wanted to extend a big thank you to those who joined us in person or virtually, and to all employees who worked hard to make this event a success. During HashiConf, we also hosted a financial analyst day, where we talked about two key fundamental focus areas for us financially. First, was the focus on customer count momentum, and second, was the focus on cost efficiency. On the customer count focus, our team continues to simplify our go-to-market approach, resulting in continued momentum on our net new customers at over $100K in ARR. We added 79 net new customers at or above 100K in ARR year to date. Given this progress, we remain well on track against our goal of adding 80-100 customers over 100K in ARR per year. As you may know, our 100K ARR customers are foundational to our model, and they have a high growth potential as a group and provide a significant portion of our current revenue, as well as our future revenue potential. Customer bookings in the third quarter played out largely as we expected. It was a seasonal quarter with unchanged macro buying behavior from most customers, very similar to what we experienced during the first half of FY 2024. The buying behavior led to smaller land contracts and smaller expansion and extension contracts. Despite the contracts being smaller, we saw growth in the number of contracts we engaged in with our customers. On the efficiency focus, I want to announce a significant corporate milestone for the company. We reached both a positive non-GAAP earnings per share this quarter and a positive free cash flow this quarter. The milestone is an important step towards our goal of non-GAAP operating profit by the back half of next year. We expect free cash flow to be positive from this point forward, other than in Q2, which is a seasonal low free cash flow period for us due to booking seasonality. Before moving on to guidance, I wanted to briefly revisit our approach to the financial outlook. We are confident in the company's long-term positioning, especially after the positive customer conversations we had with many of our larger customers during and after HashiConf about the new innovation we're bringing to the market. In the shorter term, we remain judicious in our guidance approach, given the demand environment and how that impacts our sales cycles and contract size with our larger customers. We will continue our assessment of the demand environment and provide guidance for next year as we customarily do in the next earnings call. 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 financial metric disclosures, share count disclosures, and GAAP to non-GAAP reconciliations. To summarize our guidance, for the fourth quarter of fiscal 2024, we expect total revenue in the range of $148 million-$150 million, and a non-GAAP operating loss in the range of $16 million-$13 million. For the full fiscal year 2024, we expect total revenue in the range of $576 million and $578 million, and expect FY 2024 non-GAAP operating loss in the range of $89 million and $86 million. Thanks for your attention. Dave, Armon, and I are available to take any of your questions. Alex? Thanks, Navam. With that, operator, let's go to our first question. Thank you. And as a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Sanjit Singh from Morgan Stanley. Your line is open. Thank you for taking the questions, and congrats on the positive free cash flow and the positive non-GAAP EPS. When I look at the results, though, and I think you guys have been pretty clear about this, that, you know, haven't really seen any improvement yet in sort of buying behavior in the broader macro backdrop. And as you guys sort of look to simplify the sales motion, which you guys are very clear about, at the investor session I was wondering to get a sense of how you feel or how long do you think it'll take to see, you know, returns on these go-to-market investments and some of the changes you're making to go-to-market? Is this something that's gonna, you know, have to play out through the balance of next year, or is next year a period where we could see growth start to bottom and potentially accelerate? Hey, Sanjit, thanks. This is Dave. I'll answer that one. I think the way that we think about it is we're clearly coming out of a period of aggressive investment in software in the Global 2000 for the last, you know, couple of years. And what's clear is that cohort of companies is digesting the entitlement that they have purchased, and you see that in the net dollar retention numbers of us and others in our peer group. And I think that's a significant aspect of the demand environment that we're speaking about. You know, on the positive side, the consumption vendors and the cloud vendors who obviously have consumption-based models, are indicating stabilization, and, and that's positive for the entire ecosystem, and you would expect that to flow through to the entitlement vendors over the course of the next several quarters. I think what we do see, certainly we're excited about the simplification we're bringing to bear, and we already see, as Navam highlighted, demand for our products remains consistent. Deal volumes, as Navam indicated, are as high as ever. Our win rates are, you know, as consistent as ever, and we're not seeing any changes to the discounting behavior in our field. We're just seeing smaller land and expand activity from our customers. Super optimistic about the longer arc and do think the simplification we're bringing to bear will help. I appreciate the thoughts, Dave. And then, Armon, just love to get an update on Boundary and how you see, you know, the demand funnel building for that offering. Yeah, thanks, Sanjit. Yeah, so over summer, I think there was two fairly significant announcements. One was our introduction of session recording, and the second was the introduction of the Boundary Self-Managed Enterprise product. And I think what we've seen since then is a pretty healthy construction of pipeline, where we have, you know, major enterprises that we're engaged with, you know, a few of which, you know, talked at, at HashiConf. You know, folks like, ManTech, a major FSI partner, as well as EQ Bank, talking about how they've adopted Boundary in their environments and, you know, continue to be excited about the pipeline that we're seeing building and the opportunity around Boundary. Awesome. I'll leave it there. Thank you very much. All right, Sanjit. Thank you. Next question, please. Thank you. One moment for our next question. Our next question will come from the line of Jason Ader from William Blair. Your line is open. Okay, thank you. Good afternoon, guys. Just wanted to ask, you know, sort of high level, what in the last 90 days has occurred that gives you the most optimism for 2024? You wanna answer that one, Armon? Sure, yeah, Jason, happy to. This is Armon. You know, I think a few things. I think one was we were pleasantly surprised that, you know, as of, you know, this last quarter, we officially have more cloud contracts than we have self-managed. And I think for us, that's a really exciting sign in terms of just where we're seeing the demand shift towards the cloud platform versus self-managed. You know, and obviously, that's sort of weighted towards the commercial customers today. But I think equally, we're starting to see that shift now happen where, you know, the larger enterprise customers are signaling their willingness to move. And, you know, particularly for the management products like Terraform, I think we're seeing increased demand to move those to cloud, you know? And so, you know, for us, that's optimistic as we think about next year and going into really pushing more heavily on cloud, where we feel like we can start to shift towards, you know, Terraform Cloud as a default motion for our land, rather than self-managed Terraform, which historically has been driven by just customer appetite and interest. Great. Anything else? You said there was a few things. Yeah, I think it's those few, right. It's the tip of the cloud to being. We have more contracts on cloud than we have on self-managed, and I think it's the enterprise willingness to move to cloud as well. Great. Thank you very much. Okay. Thanks, Jason. Thank you. One moment for our next question. Our next question comes from the line of Ittai Kidron from Oppenheimer. Your line is open. Thanks. A couple of questions for me, first for you, Navam. RPO, if my math is right, has now grown faster than revenue for about four quarters in a row. That, needless to say, is not a relationship that can stay. So help me understand why did the disconnect has existed for such a long time, and when would you expect this to converge or reverse? That's number one. For you, Dave, you've talked about in the past how your progress for the year is really reflection of budgets set late in the previous year, hence, that was the reason why you didn't see a slowdown in your business activity at the beginning of the slowdown a couple of years ago. As you have conversations with customers here and now about 2024, and maybe this is asking Jason's question in a different kind of a way, what are they telling you about budgets for 2024? What is it that you're hearing about how 2024 could shape up directionally from a spend standpoint relative to 2023? Thank you. Maybe I'll answer your second question first, Ittai. It's Dave. You know, I think, you know, the short version is we're—we just have to be focused on Q4 for now. That's really where our attention is. But I would say, you know, to add to what Armon had indicated previously, you know, I point back to our contract volumes being very, very healthy, very, very positive, notwithstanding the ASP changes, as you can understand, based on the digestion process that's going on inside of our existing customers, in particular. And then number 2, I will just add that our product downloads are at a record high, and that certainly gives us confidence that the trends continue unabated, or we're just working through is the budgeting cycle, and so we'll see how Q4 works out, but certainly ample optimism about the, you know, what comes over the longer arc. Yeah, Ittai, I'll cover your RPO question. We're very pleased with the RPO growth. It signifies basically that our customers are, through this vendor consolidation period, our customers are entering into longer-term contracts with us, meaning, spanning multiple years and, and placing their faith in us, in our products. So that's obviously a big positive for us, and we're seeing continued momentum in RPO. CRPO is the more relevant one as it connects to revenue over the next 12 months. So that's a closer proxy for revenue. And, you know, obviously, we keep a close eye on that, and we're seeing reasonably good growth rates on the CRPO side as well. In terms of convergence, you know, our view of revenue, as I mentioned during the prepared remarks, is we'll take a very measured view until the time that we see the buying behavior and the macro change. And we haven't taken a different view as to how we forecast the next quarter and how we think about the future. So it's been consistent with the prior periods, forecast. Thank you. Thanks, Ittai. Next question. Thank you. One moment for our next question. Our next question comes from the line of Alex Henderson from Needham. Your line is open. Great, thanks. I was hoping you could talk through the, the AI issue, with us a little bit, to understand the mechanics around how enterprises are adopting it versus, their alternative uses of, of investment. It seems to me that there's two possible solutions here. One would be that it would drive app development and internet as, excuse me, infrastructure as code, content and demand, as a result, or, it could slow app development as they spend time ascertaining the value of AI, how to use it, and, and how to integrate it into their programs. So can you talk a little bit about those two alternative worldviews? Sure. Yeah, I mean, I can, I can share certainly what we're seeing in the customer conversations that we're having. You know, our, our general sense is that there's a lot of excitement, certainly among people about, you know, if nothing else, at least being able to dip their toes in and being able to access these models, start leveraging them, being able to sort of see how they could apply to people's businesses. And so, you know, because of the specialization of these models in the different cloud providers, we've seen this as actually a tailwind for many customers to actually go towards a multi-cloud strategy, right? They might have been single CSP or, you know, might have had, you know, a large percentage of their workload on-prem, and this has been a driver for them to accelerate, either going multi-cloud or going to cloud to begin with, so that they can leverage that, because I think most customers realize they won't have access to, you know, certain best-of-breed capabilities, and certainly if they're stuck on-prem. So I think in that sense, it's it has been an accelerator in terms of customers pulling forward some of that strategy. On the flip side, you know, I think we're also seeing it generate interesting opportunities across the portfolio. We did talk at our Financial Analyst Day about a very large financial company we work with that invested in Nomad to build a large-scale compute grid, you know, based on, you know, thousands of GPUs, really looking at how do they leverage these techniques at scale in a cost-effective way. And we've seen that playing out, driving interest across the portfolio, certainly Terraform for provisioning, Nomad for doing large-scale workload orchestration, and Consul for enabling networking across, you know, a multi-cloud estate. So, you know, I think it's certainly been a useful tailwind for us. So you don't see any slowdown in the app development cycle. So that brings me to the second part of the question, which is, we've gone through the year of efficiency over the last 18 months, more than a year now. And that obviously cleaned up a lot of wasteful cloud infrastructure. It seems likely that those teams are now shifting away from that thought process of how do I fix the waste that I've got, to how do I keep it from happening again in the future. And to that extent, I would think that Terraform would prove to be one of the key tools that would, you know, be used to produce a standardized model to manage resources in the cloud. Where are we on that, changeover, and how do we think, that will play out over the next 18 months? Is it a very shallow, slope to recovery? Is it a longer process, or is it something that could actually, you know, reaccelerate the, the growth outlook? Yeah, it's a really great question, and that, you know, the observation I would share is, you know, and you've heard us probably talk about this at a, at a few different events, is we almost characterize an organization's adoption of cloud as going through multiple phases, right? Phase one, we tend to think of as, I'll call it almost an ad hoc approach, right? You know, multiple application teams are all sort of lit up to go build their applications in cloud, but with no sort of standardized process, workflow, you know, central tooling, et cetera. It's every team sort of free-for-alling. And I think what ends up happening is there's different catalysts. You know, for some organizations, it might be a security issue, for others, it's a compliance issue, for others, it's a cost issue. But at some point, there's a catalyst for an organization to say, "You know what? This is unsustainable." We actually need to get to a phase two, where we look at a more mature organizational approach, where we have a centralized platform team that creates a standard set of process, standard set of tooling, put some guardrails around it, both from a cost perspective, security, compliance perspective. And that phase two, you know, tends to then be where organizations really unlock cloud adoption at scale, right? Because now they have the controls in place to really, to really scale. And so I think to your point, I think your observation is exactly right. What this year of optimization has done is basically pull forward that phase two in the construction of the platform team, across a broad swath of customers that we certainly interact with, right? I'd say we've, you know, I think that for us is a great tailwind, because ultimately, those platform teams are our customer. If that's the case, is that then causing a pull-in in the time to reaccelerate? I mean, that's the conclusion? I think what it's doing is it's creating a central. You know, ultimately, these are the groups we sell to, right? So, you know, yes, it makes it easier for us over the long term to, to build a relationship with these platform teams, and then ultimately drive our expand and extend motion, to grow, grow usage of, you know, the land product and, and ultimately sell them the rest of the portfolio. Thanks, Alex. Yeah, we have a bunch of questions left to go, so we're just gonna move along a little bit, and just limit to one question for now, and we'll try to get more answers later. Next question? Thank you. One moment for our next question. Our next question will come from the line of Mark Murphy from J.P. Morgan. Your line is open. Thank you very much, and congrats on the nice, free cash flow generation. I'm wondering, Dave, if you detect any difference in the demand environment or willingness to invest in November or December, being that we're on the heels of softer inflation, strong GDP growth, there's been, you know, very favorable interest rate movements, as you noted, there's optimization, moderation being seen by consumption software companies and, you know, stock market kind of breaking out and moving higher. I'm just wondering if any of that is kind of translating into your dashboard at this point. Hey, thanks, Mark. Yeah, I think you're exactly right on the correlation to the consumption models and the lag for the entitlement models, I think, as you pointed out in the past. And so generally speaking, you saw from some of the consumption models commentary about improvement. I think, you know, for us, we sort of have to wait till the quarter progresses a little bit more to be able to make much of a commentary. I think, as ever, you know, there's tremendous interest for what we do. Getting through the procurement departments becomes the question, and I think that is always the wild card. I would say too early to tell, based on the, you know, the last a month or two. You know, as we indicated, you know, our deal volumes in Q3 were, you know, as Navam indicated, higher than ever. Our win rates were consistent, our discounted practices are no different. So, we're certainly optimistic that, you know, that continues. Then thank you, Dave. Navam, just as a quick follow-up on the model considerations. When I look at the RPO, I mean, I see it kind of. I see softness there, I see it sort of falling off trend. I just mean sequentially, it's still quite good year-over-year. Is there anything notable there in terms of, you know, down, were there any downsells, I mean, cancellations? You said there were not, pricing concessions, but there, you know, there were some moving pieces with all the OpenTofu stuff. Was there anything unusual that might have impacted that, or is it just a, you know, just kind of a, you know, lingering of some of the, buying, you know, some of the tougher buying behavior? Yeah, I think it's mostly the buying behavior you talked about, Mark. It's deal volume being up, but at smaller deal sizes, which causes NDR to go down, and that's what's impacting your RPO rates. So still strong from a growth perspective, year to year, still long commitments from our customers. You know, we're feeling good about RPO, but it's mostly the smaller deal volume and combined with larger amounts of deals happening. Understood. Thank you. All right. Thanks, Mark. Next question. Thank you. One moment for our next question. Our next question comes from the line of Alex Zukin from Wolfe Research. Your line is open. Yeah. Hey, guys. Thanks for taking the question. So I'm gonna push a little bit more on this because it's hard to reconcile three numbers for us. On the one hand, we have the guide for next quarter at 10%, we have CRPO bookings at 3% this quarter, and we have a consensus estimate for growth for next year at 18%. I completely understand the commentary about, you know, smaller deal sizes and a larger volume of deals, but can you dimensionalize both of those attributes? Like, how much more volume are you seeing? How much smaller are the deal sizes? When does NRR bottom? You know, because this would be a good time to maybe just help us understand, is that 10% the right jumping-off point as we think about next year? Is there an acceleration curve baked into next year based on your conviction level around, you know, upselling on some of these land—you know, this larger volume of lands? Give us a little bit of color so, you know, we can, we can kind of model this out. Yeah. Thanks, Alex. I, I think a lot of your questions came out around sort of our view of 2025, and I think, you know, the only thing I can say at this point is we're seeing good contract activity at the smaller sizes, which means that people still believe in our software and are designing us in, right? We haven't seen, to Dave's point earlier, is buying behavior changes, and we're operating under that assumption until we see it, which means that we aren't forecasting anything beyond what we see. So we got to execute Q4 first, and we'll give you our 2025 view in Q1 when we normally do. Okay, understood. And I guess it—maybe Dave, how much of the—how should we think about execution here and some of the new sales strategies, either, you know, making this pushing this faster or making it actually go slower? Like, is that a tailwind or a headwind to realizing, to getting back to some of those larger deal conversations or dynamics over the next few quarters? Yeah, got it. Yeah, thanks. I think you sort of asking just sort of what's the implication of some of the modifications to our go-to-market approach on that model, and I would come back to, you know, the fact that we brought in a new president of field operations, as you know, as Susan St. Ledger, who's brought a bunch of simplification and rigor and efficiency to what we're doing. But at the same time, these are infrastructure sales cycles, and so I would expect the impact of that to be felt in the coming quarters, not immediately. You know, super excited about the modifications there. She's brought on some strong folks, and she's been a great partner, but I would really expect her impact to be felt over the future quarters as opposed to, you know, this quarter or the next. Thanks, Alex. Operator? Thank you. In the interest of time, please limit yourself to one question. One moment for our next question. Our next question will come from the line of Nick Altman from Scotiab ank. Your line is open. Awesome. Thanks, guys. Can you just give a little bit of an update on the revenue or the bookings mix between Terraform and Vault, and maybe just provide us some directional color around the growth rates there through 2023? And then just maybe on the other side of that, can you just talk about how some of those mix shift dynamics between Terraform and Vault are sort of playing into the near-term go-to-market strategy, the product roadmap, and how you guys are thinking about navigating 2024? Yeah, maybe I'll start with that one. This is Dave. Thanks for that. So I think I would just decompose our portfolio into two basic life cycle solutions. One is around infrastructure life cycle, and the other one is around the security life cycle. And obviously Terraform is aligned to the infrastructure cycle, Vault and Boundary are aligned to the security life cycle. I would say there's equivalent interest really in both. And I'd say over time, those businesses have been very, very consistently similar. When organizations get more mature in their operations, those two concerns get combined into a common platform engineering function, just to put the pieces together. But our fundamental consumer is an ops person and a security person. So that dynamic is unchanged, and I think security life cycle and ops life cycle is the way to think about it. And, maybe I'll let Navam comment if there's a financial aspect. Yeah, I think from a net new ACV perspective, I think they're roughly equal, give or take a couple hundred K one way or the other on the two. You know, the security life cycle products have, are slightly larger, so the infrastructure products grow slightly faster at a smaller base. But combined, they combine make up the majority of our revenue. All right. Thanks, Nick. Let's go to the next question. Thank you. One moment for our next question. Our next question comes from the line of Oliver Cookinden from JMP Securities. Your line is open. Oh, hi. Actually, it's Pat Walravens. Thank you. Hey, Armon, this one I think is for you, which is I was just looking back at my old MongoDB model, and when they were at roughly $150 million in total revenue, the cloud was 47% of total revenue and growing 61%. And you guys, at $150 million in quarterly revenue, the cloud is 14%. So just walk us through what, what are the sort of two or three key points we need to understand about the difference between, you know, a database that's moving to the cloud and HashiCorp's infrastructure solutions? Hey, Pat. Yeah, thanks for the question. Yeah, I think what I'd point to is, you know, the major differences, if I think about something like a database like Mongo versus the solutions we have, it's, it's where they sit in the stack and sort of their level of criticality. And what I mean by that is, you know, obviously, database is critical, but typically it's, it's bound to the scope of a single application, right? I'm building a net new app. That app needs to store some data. Great, I, I can spin up a Mongo database for that. When you think about, you know, our solution, by virtue of being infrastructure, they span horizontally across, you know, usually, you know, hundreds, thousands, if not the entire estate, right? And so if you think about something like Vault, you might have hundreds of applications connected into it. So the criticality is different, and then the, you know, as a result of that, the customer's willingness to have that, you know, outside of their control when something goes, you know, potentially wrong, is very different. And I think, you know, that's the feedback we consistently get from our customers is, you know, "Guys, this is tier zero software. If I lose Vault, if I lose Consul, my data center goes down." Right? And so I think that willingness to let a third party run it, where they don't necessarily have the direct operational control, it's just a much higher bar. And when you think about what are the vendors, you know, these folks really trust, you know, it's effectively Amazon, Azure, or Google, right? And even that was a position of trust that took many years for the clouds to get to within these, you know, enterprise vendors. So I think, you know, that's the difference I would point to. You know, the good news is we're seeing that shift, right? And so I think we're increasingly seeing, you know, our enterprise customers realize they don't have the operational, you know, expertise to operate this the way we do. And so we are starting to see even our largest enterprise customers go down the path of HCP. And so we're excited about that. You know, particularly, we see a difference in behavior between our sort of runtime products and non-runtime. So for, you know, non-runtime tools like Terraform, for example, there's more willingness. And so I think that's why next year we're looking at really defaulting a land motion to Terraform Cloud, because we feel like we're at that point where, you know, customer willingness is there, platform capability is there. All right. Thanks, Pat. Let's go to the next question, please. Thank you. Our next question comes from the line of Fatima Boolani from Citi. Your line is open. Thank you. Good afternoon. Thank you for taking my questions. Armon, just on that line of discussion around lending more and leading more with cloud, especially in the enterprise, I'm wondering, as you put your head together with Navam and Dave, what sort of implications does that have for how you might have to rearchitect your pricing strategy for the enterprise? You know, in the same breath, driving adoption, but also managing the complexity that might come with, you know, partially self-managed and partially consumption-oriented offerings. So I guess the question is, do you kind of have to blow up your pricing models to drive that behavior in the enterprise? And, you know, how would that impact kind of your reported financial metrics? Thank you. Hey, Fatima. Yeah, no, great question. You know, obviously, it's something we've spent a lot of time thinking about. You know, for the reasons you outlined, we obviously don't want to be in a position of having to blow up a pricing model. And so, you know, the reality is, what we looked at really doing for customers is there should effectively be no change to their licensing costs, you know, plus or minus, as they're going from self-managed to cloud. What we don't wanna do is create a tax on them for doing the thing we want them to do. We want customers to adopt cloud. We want them to be on the HCP platform because it gives us a bunch more visibility into their usage, where, you know, we don't have as much, you know, support issues we have to navigate for customers who don't have the operational skills. So we want them fundamentally to be on the cloud, so we don't want to tax them for doing that. So as a result, we spent a lot of time making sure the pricing and packaging is consistent to help them, you know, navigate through that. So, you know, it's more about making sure the customers have a willingness to adopt cloud and that the capabilities are there to meet their enterprise requirements. And we feel good that we're at that point where customers are certainly signaling that willingness now for Terraform. Fatima, the only point I made, I think I'm just trying to dig at your question. To be clear, our, our cloud pricing is an entitlement-based model, just like our self-managed model is. So for us, it's really not a huge transition contractually, if that makes sense. All right. Thanks, Fatima. Let's go to the next question, please. Thank you. Our next question comes from the line of Derrick Wood from TD Cowen. Your line is open. Great, thanks. This is for Navam, and I wanted to ask about the net revenue retention number. Curious if that's been all pressure on just the expansion side, or if you've seen any churn, and what I'm wondering is if you're seeing any customers move from paid to free open source at all. And then, what is your average contract like? Because I presume that once you get through this cycle of renewals, the pressure on that expansion cadence would probably get lifted. Thanks. Hey, Derrick, it's Dave. I'll answer the first one. You know, as a general rule, people don't move from our commercial offerings to the open source. There are certainly instances where if someone's under extreme budget pressure, they might do that temporarily, but that is sort of a bit of an anti-pattern. You certainly hear about it anecdotally, but given the scale of number of customers we have and the scale of users, it's not the most common one. But let Navam answer the financial side. Yeah, on the net retention side, Derrick, the most of the net retention impact quarter-over-quarter comes from the expansion and extension side, meaning smaller expansions and extensions. Now, there is some gross retention impact. You know, for example, this quarter there was an acquisition which caused the churn, but for the most part, the net retention is impacted by the smaller deal sizes on expand/extend. All right. Thanks, Derrick. Let's go to the next question, please. Our next question comes from the line of Gray Powell from BTIG. Your line is open. Oh, great. Thanks for, thanks for taking the question. I just want to follow up on, I think it was Alex's earlier question. So if, if I look at the guidance, the, the high end of the Q4 guide implies that you, that you exit the year with, with revenue growth of 11%. I'm not asking for fiscal 2025 guidance, but maybe you could just talk directly, directionally about, like, the, the top factors, whether it be product initiatives, go-to-market, things that could, drive improved growth. Hey, yeah, this is Navam. So, you know, in 2025, like I said, you know, we really want to go execute Q4 and then get into the new year to see what the demand environment looks like, where we're holding a very measured view into the forecast. And the view is that we're gonna grow revenue faster than we are gonna grow cost and maintain our profitability, our free cash flow profitability and move towards operating profitability on the, on the, by the end of next year or by the back half of next year. So the operating trends and the FCF trends are gonna be good, while we, you know, wait for or see for signs of macro improvement, which will drive productivity up. Okay, thanks. Next question, please. Thank you. One moment for our next question. Our next question comes from the line of Brad Reback from Stifel. Your line is open. Great. Maybe going back to Pat's question a little bit on the cloud. It's been three quarters in a row that the absolute dollar adds, I understand they're small, have come down sequentially. What needs to happen to get that absolute spend accelerating? Thanks. Hey, Brad. Yeah, I think, you know, ultimately it's really about flipping the behavior of the enterprise sales team, right? I think we've talked about this before. You know, we sort of think about a commercial sales motion versus an enterprise sales motion. You know, historically, we've mostly sold the cloud product into commercial, and I think that's where you see, you know, more macro pressure with the smaller customers, you know, which impacts on the sequential cloud growth. I think for us to really see a dramatic shift in the in sort of the dynamics, it's really about changing the behavior of the core sales team that's looking at the enterprise. I think that's where we're signaling that, you know, we feel that the demand signals we're now seeing from the enterprise customers tell us that the appetite is there. And certainly, you know, we feel like the product, you know, capabilities are there, that we feel that at least we're gonna flip Terraform Cloud, where the customer appetite is there, you know, to a default cloud motion, and we expect that that would have a significant impact on that, you know, quarter-over-quarter behavior. Okay, thank you. Operator, let's go to the next question. Our next question will come from the line of Ari Terjanian from Cleveland Research. Your line is open. Hello, thanks for taking the question. Nice to meet everybody on the call. Wanted to double-click on how you're thinking about, you know, the role of the partner ecosystem as you change and reevaluate the go-to-market, specifically CSPs, you know, AWS and the marketplace, as well as, you know, the global system integrator partner community. Thank you. Yeah, I'll take that one. Hey, thanks for the question. So, you know, our partner focuses are really around the cloud providers, Amazon, Azure, GCP, et cetera. And then secondarily, it's the system integrator community. And I think, you know, we actually had a huge presence at re:Invent last week, which I think is indicative of, you know, our very tight go-to-market relationship with all three of the big clouds. We certainly, I think we won Collaboration Partner of the Year from Amazon this past year, which is probably the best indicator of how our teams are working together. So it's very much a co-sell behavior with them. And certainly, we work closely with them. You know, material percentage of our opportunities go through their cloud marketplaces, and that's good for them and good for us. So very, very close with the CSPs, and that's been a very strong relationship for us for a very long time. On the system integrator side, our focus is around the skills gap that exists for the deployment and adoption of cloud technologies. You know, I'd say, like many vendors, our scale, the majority of our efforts have been to date with the smaller SIs around the world, of which we have hundreds that we work with, but we certainly are working ever closer with the global system integrators. But those are the primary partners we work with, and we have a large investment in it, and we feel really, really good about how they're both going to be candid. Okay. Thank you. Let's go to the next question, please. Our next question will come from the line of Brad Sills from Bank of America. Your line is open. Hi, this is Carly on for Brad. I guess first question, I wanna ask on, you know, the enterprise customers' ACV. I guess the customer net add is kind of healthy compared to last quarter, but then just on, you know, per customer spend basis, the quarter-over-quarter growth, you know, 0.2% is kind of flattish. You know, you guys definitely mentioned smaller contract size, but just any additional, like, nuances that you can share on those, like, bigger, like, larger customer spending? Hey, Carly, it's Navam. No, I think it boils down to the deal volume being higher and the contract sizes being smaller. They're still consuming our software and still designing us in, but doing that in smaller quantities this year as they go through that digestion period that Dave talked about, following the aggressive investment cycles. Okay. Let's go to the next question, operator. Thank you. One moment for our next question. Our next question comes from the line of Michael Turits from KeyBanc Capital Markets. Your line is open. Hey, guys, thanks. So on the expansion, where they've been the, well, the expansion from an NDR perspective, have the challenges been more on the expand side or on the extend side? So in other words, is it just number of seats and units in the entitlement, or is it, you know, adding new products and people buying more into the platform? Hey, this is Dave. I don't think there's a real difference, to be totally honest. I think every company we engage with has both sides of the problem, the infrastructure problem and the security problem, and I think it's pretty consistent. I think it goes back more towards the, you know, the digestion process of entitlements that they've consumed, and so no real difference between the two, is the short answer. They're very connected to the meta position of our customer base as they're just getting through what they got. All right. Thanks, Mike, and good luck in your next endeavor. Next question, please. Thank you, and one moment for our next question. Our next question comes from the line of Miller Jump from Truist Securities. Your line is open. Great. Thank you for taking the question. Maybe on the packaging side, you all introduced your first bundle approach this year. Can you just talk about maybe what you've learned there and how that could impact the upsell opportunity heading into the renewal heavy Q4? Like, is this something that could potentially drive increased deal sizes in your mind? Yeah, thanks for the question. You know, I think the bundle has been relatively successful for us. I think the way we think about it is ultimately it's an opportunity to help accelerate that extension motion, right? So, you know, customers who typically. You know, we don't position the bundle as a land. It's usually something we leverage as a at renewal time, to the point you made, as a way of introducing the additional products into the account, helping seed them and then ultimately, you know, growing those within the estate as well. So, you know, I think the lesson learned is that it has been successful. We introduced it on the security lifecycle today with the Zero Trust Bundle. You know, I think we're gonna look at continuing to probably leverage that as we think about, you know, simplifying go-to-market next year, and having a, you know, similar type approach across SL, our security and infrastructure lifecycle. Okay. Thanks, Miller. Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Dave McJannet, CEO, for closing remarks. Yeah, I'd just like to express my thanks for the participation from everyone here, and we certainly appreciate you dialing in and for all the questions. We look forward to speaking to everybody soon. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.