“For the full year FY 2023, we now expect total revenue of $420.5 million to $421.5 million, representing a growth rate of 66% to 67% year-over-year.”

In context

“Brian Robbins (CFO): Thank you, Sid, and thank you again for everyone joining us. I'd like to spend a moment reviewing the key characteristics of our business model and what we are seeing in the macro environment. Then I'll quickly recap our third quarter financial results and key operating metrics and conclude with our guidance. Our third quarter results continue to demonstrate our ability to drive high growth with improving incremental margins. Fueling these results are a number of key aspects of our business model that I would like to discuss briefly. These include the predictability of a subscription model that provides high visibility, a platform sale rather than a point solution with very little revenue based on consumption, a diversified customer base across industry verticals, customer sizes, and geographic regions, and a short implementation cycle with an established and well-documented ROI. These attributes contribute to the results we are seeing. To illustrate this, customer cohorts from seven years ago are still expanding today. Despite the ongoing volatility in the macroeconomic environment in the third quarter, we see customers continuing to prioritize the need to leverage a mission-critical platform to build software better, faster, cheaper, and in a more secure manner. We're also pleased with how we executed on hiring. We added over 200 new team members in Q3, and we continue to experience lower attrition than the industry. We view the uncertainty in the macro economy as a benefit for hiring new team members, and we continue to be active in recruiting, primarily focusing on adding new team members in sales and R&D. Next, turning to the numbers. Revenue of $113 million this quarter represents an increase of 69% organically from the prior year. We ended Q3 with over 6,400 customers with an ARR of at least $5,000 compared to over 5,800 customers in the prior quarter and over 4,000 customers in the prior year. This represents a year-over-year growth rate of approximately 59%. Currently, customers with $5,000 or greater in ARR represent approximately 95% of our total ARR. We also measure the performance and growth of our larger customers, who we define as those spending more than $100,000 in ARR with us. At the end of the third quarter of FY 2023, we had 638 customers with ARR of at least $100,000 compared to 593 customers in the prior quarter and 427 customers in the third quarter of FY 2022. This represents a year-over-year growth rate of approximately 49%. As many of you know, we do not believe calculated billings to be a good indicator for our business, given that prior period comparisons can be impacted by a number of factors, most notably our history of large prepaid multiyear deals. This quarter, total RPO grew 62% year-over-year to $393 million, and CRPO grew 67% to $278 million. We ended our third quarter with a dollar-based net retention rate consistent with previous quarters. This exceeded our reporting threshold of 130%, which we believe remains best-in-class and consistent with our track record as a public company. The ultimate tier continues to be our fastest-growing tier, representing 39% of ARR for the third quarter of FY 2023 compared with 32% of ARR in the third quarter of FY 2022. Non-GAAP gross margins were 89% for the quarter, which compares to 89% in the immediately preceding quarter and 90% for the third quarter of FY 2022. As we move forward, we estimate a moderate reduction in this metric due to the rapid year-over-year growth rate of our SaaS offering. We saw improved operating leverage across the business this quarter, largely driven by revenue outperformance. Non-GAAP operating loss is $21.6 million or negative 19% of revenue compared to a loss of $23.9 million or negative 36% of revenue in Q3 of last fiscal year. FY 2023 includes $5 million of expenses related to our joint venture and majority-owned subsidiaries. In addition, we incurred $2.1 million in termination payments relating to events that were canceled. Operating cash use was slightly over $1 million in the third quarter of FY 2023 compared to $10.1 million used in the same quarter last year. In summary, we're pleased with our performance during the third quarter of FY 2023 on both the top and bottom line, and we believe our business is set up for continued strength. Now let's turn to guidance. For the fourth quarter of FY 2023, we expect total revenue of $119 million to $120 million, representing a growth rate of 53% to 54% year-over-year. We expect non-GAAP operating loss of $27 million to $26 million, and we expect non-GAAP net loss per share of $0.15 to $0.14, assuming 150 million weighted average shares outstanding. For the full year FY 2023, we now expect total revenue of $420.5 million to $421.5 million, representing a growth rate of 66% to 67% year-over-year. We expect a non-GAAP operating loss of $100 million to $99 million, and we expect non-GAAP net loss per share of $0.56 to $0.55, assuming 148 million weighted average shares outstanding. On a percentage basis, our new annual FY 2023 guidance implies non-GAAP operating margin improvement of approximately 1,525 basis points year-over-year at the midpoint of our guidance ranges. Over the longer term, we believe that a continued targeted focus on growth initiatives and scaling the business will yield further improvements in unit economics. A few more details on guidance in our model. We now estimate that we will incur approximately $16 million of incremental expenses related to the resumption of travel and in-person customer and marketing events as well as new public company costs that were not incurred during FY 2022. In addition, we forecast approximately $20 million of expenses related to JiHu, our China joint venture. This compares with $12 million of combined JiHu and Meltano costs in FY 2022. We are in the early stages of our FY 2024 planning process, but would like to provide an update on FY 2024 revenue growth and our path to achieving free cash flow breakeven. Based on everything we know today, we are currently comfortable with the Street estimates, which have us growing revenue over 40%. On the expense side, we continue to evaluate our hiring plans going forward as we monitor leading indicators in our business as it relates to the macro economy. As Sid and I have said over the last several quarters, our number one priority is growth, but we'll do it responsibly. There has been no philosophical change in how we run the business to maximize shareholder value over the long term. We continue to be focused on growth while driving improvements in the unit economics of our business. In addition, we're targeting to be free cash flow breakeven for FY 2025. We hope this provides some greater visibility into our financial targets. On our next earnings call, we'll provide more detailed guidance for FY 2024. We believe we're addressing a very substantial market opportunity that is currently underpenetrated and that we'll be well positioned to capture an outsized portion of it. We continue to drive positive business outcomes, time to value, and ROI for our customers.”