A lot of what I’d normally mention is already at jonwayne’s excellent post ( https://discussion.fool.com/t/hashicorp-ipo/57403 ) I’ll try not to repeat too much. I haven’t used their products so please correct any inaccuracies.,
Description
They have a lot of products but I’ll focus only on terraform because it’s the one that drives adoption of their products.
Terraform reduces the time, complexity and risk involved with managing virtual machines deployed not only to external Cloud providers but also to your internal datacenter/network.
It does so by
- Abstracting the multiple and differing behind-the-scenes steps one must take to manage virtual machines on all the different platforms, into a single standardized set of parameters
- Providing “plugins,” to most of the providers that end-users are likely to deploy virtual machines to, that enable interaction with all of the providers using the single set of parameters
- Providing an interface that enables the end-users to specify what they want, using the single set of parameters.
Let’s imagine you are on a team responsible for deploying virtual machines for a large corporation. First thing that hits your desk on Monday is a ticket to spin up 4 machines across 2 regions in AWS for a total of 8 machines for an application called ABC. And another ticket to do the same for another application called XYZ. So you go into some AWS console and start pointing/clicking/configuring things.
Then on Tuesday you get a change to the ABC ticket; it needs to be moved to Azure. And XYZ needs 8 more machines. So you now have to get into a AWS console and a Azure console.
Then on Wednesday you get a change to ABC and XYZ because somebody forgot to mention these applications also need to be available internally. They want you to take 2 servers away from each of ABC and XYZ and deploy then on VMWare in your internal network. Unfortunately VMWare is a separate team, and you have to co-ordinate with the VMWare team and open a sub-ticket with them and someone has to now login to a VMWare console.
The promise of terraform is that instead of having to deal with logging into the management console of all these different environments, you can utilize a single interface that makes this stuff easy. You don’t have to login to and point/click on a million things; just tell terraform what you want, at a high level and terraform takes care of the details.
An ROI argument can be made because terraform and other Hashicorp products make efficient use of the time of highly-paid technical people. Other benefits include better configuration control, auditability etc.
Revenue
| year | q1 | q2 | q3 | q4 | total |
|---|---|---|---|---|---|
| 2020 | 22 | 26 | 33 | 39 | 121 |
| 2021 | 44 | 51 | 55 | 62 | 212 |
| 2022 | 67 | 75 | 82 | 97 | 321 |
| 2023 | 101 | 114 | 124 | 136 | 475 |
| 2024 | 138 |
100,000 or greater ARR customers
Last 6 quarters: 655, 704, 734, 760, 798, 830
NOTE: They do have tens of customers with $1 million or greater ARR, though I think they’ve been inconsistent with reporting it. They have three customers with more than $10 million ARR.
NRR
Last 6 quarters: 127, 131, 133, 134, 134, 131, 127
RPO
| year | q1 | q2 | q3 | q4 |
|---|---|---|---|---|
| 2020 | 101 | 110 | 133 | 171 |
| 2021 | 175 | 198 | 225 | 286 |
| 2022 | 308 | 336 | 368 | 451 |
| 2023 | 458 | 498 | 553 | 674 |
| 2024 | 660 |
Gross Margin: 81%
My commentary:
Since IPO they have (mostly) reported increased revenus and RPO each quarter. Notably, they reported a decrease in RPO in the most recent quarter.
They are not yet profitable but they are still dominant in their niche and still growing revenue. Numbers like operating losses are moving in the right direction.
Meanwhile the stock’s price has consistently come down, and the value compression arguably makes for a good entry point at current prices.
…which is part of Bert’s investment thesis:
I’m surprised that revenue from its cloud-deployed products are still at 11% of revenues and I think some scrutiny of that is warranted.