Mark Murphy: Okay. Thank you for that. And as a quick follow-up, Navam, can you remind us what is it that’s driving the spread where the – this quarter, the upfront license revenue grows 80% while that recurring support revenue grows 38%? And do you see a catalyst perhaps for that support revenue, which is the bulk of the revenue to reaccelerate either into Q4 or into next year?
Navam Welihinda: Yes. Thanks for the question, Mark. The distinction between license and software is a very 606 accounting centric view of what’s happening, just as a reminder to everyone, our contracts are basically a single contract where you buy the product with embedded support. And internally, there is a disaggregation per 606 and per assigning individual values to license and support. So the license line has a lot of variability to it, depending on which product, depending on the term of the contract and all those things impacted. So it’s really hard to signal from that license line. We do expect to see sort of the license and support line continue to grow as we continue to see expansions and extensions and land customers in our self-managed product.
Operator: Thank you. One moment for questions. Our next question comes from Sanjit Singh with Morgan Stanley. You may proceed.
Sanjit Singh: And my congrats on the very solid Q3 results as well. Dave, I wanted to get your view on to what extent the sales message is being tailored to this tougher budget environment. With respect to sort of vendor consolidation, tool consolidation, getting customers to run their cloud operations more efficiently, is the team going out with the message about displacing incumbent solutions so that the total cost to a customer may come down by consolidating more spend across the HashiCorp platform? Or is there simply an ROI argument you’re making? Just wanted to get a sense of going into a tougher budget environment, to what extent the sales message is changing to speak to those broader customer budget concerns?
Dave McJannet: Sure. Thanks for that. I maybe think about that in three ways. I think first and foremost, just to be clear that our customer is the cloud program office by and large inside these companies. And that is actually a net new spend category, right, where they are really just trying to determine what vendors are going to be their partners for this next several decades. So it’s very rare that we’re displacing something because this is a net new construct. Yes, I had a security model in the private data center, but now I have cloud. That’s a different vendor set. And I would say much like Datadog, it is relatively unpopulated. Number two, when we go into – and that is a unique opportunity for us, and that is why you see the efficacy that you do of our model.
Number two, the value proposition of our products is always around reducing cost, reducing risk and accelerating time to market for new things, take Terraform, for example, are you overspending on your cloud estate, well, constrained Terraform’s usage so that you apply policy and governance guardrail before you provision things and that will bring your cost down. So it’s a very conducive message to the economic environment we’re in, which certainly helps clearly our sales cycles. And that has always been a message and will continue to be a message. Point number three, I think it’s probably an equally important one, which is I think our $10 million customer demonstrates the growing consolidation of spend across the multiple categories that we participate in with a single vendor.
And I think in some sense, we have the benefit of incumbency for one, two or three of the problems in those companies cloud programs that actually accrue benefit to us as they look to consolidate next year. So it’s not – it’s less of an overt message, but it’s rather just the reality that gets played back to us. And I think it certainly puts us in a good position going forward.
Sanjit Singh: Appreciate the color. That makes a ton of sense. And then Navam, the margin upside was really nice to see this quarter. And heard loud and clear on sort of the progress that you guys are targeting for next year. In terms of how that you’re going to – in terms of how the team is going to materialize that margin improvement? Can you sort of remind us some of the levers that you’re looking to pull to derive that, I think, 500 to 1,000 basis points of expansion next year?
Navam Welihinda: Yes. Sure thing, Sanjit. And yes, we’re very pleased with the overall gross margin and operating income margin performance we had in the quarter. A lot of revenue flows directly down to the bottom line. So as we see the productivity emerge from our employees that we’ve hired over the past several quarters, and if that exceeds our expectations, we expect to see that drop to the bottom line and number one. And also from a gross margin line, we remain a high gross margin company, and we expect to remain a high gross margin company despite the mix shift happening in cloud. So both those things considered as we get economies of scale from – or scale from our existing team and leverage from that team, we expect to see most of that fall down into the bottom line.
Operator: Thank you. One moment for questions. Our next question comes from Brad Sills with Bank of America. You may proceed.
Brad Sills: Great. Thanks for taking my question, guys. I wanted to ask a question about the net revenue retention, the $134 million holding nicely here. Are you seeing a shift towards the Extend versus Expand that’s driving that? Would you say with the progress you’re making in with customers kind of establishing the centralized platform teams, with that in place, does that kind of grease the skids, if you will, for more of that kind of cross-sell into other categories? Any color on just Extend versus Expand?
Dave McJannet: Hi, Brad. Thanks. This is Dave. I think it comes down to cohorts is probably the best way to think about it. I think we generally find in year one people adopt one product, in year two they would renew that product and look to add the second product. So there is a natural cycle to it. And I think what you’re seeing is sort of a growing crop of maturing customers that are now expanding and extending fairly consistently. But I think there’s – again, these are enterprise products, enterprise cycles, deeply considered decisions that probably have a one year delay between them. So I think that cohort view is probably the way we think about it, and I think it is playing out sort of as you would expect.
Brad Sills: Understood. Great. Thanks. And then a question for you, Armon. You alluded to that dial kind of turned up more so for Terraform and Vault more mature offerings on the commercialization with some focus on added value there. Could you elaborate on what are some of those value adds that customers are kind of going for there? And what are some learnings there that you could apply to other products where we might see that in the road map?
