ESTC - Earnings call transcript Q1 2022

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Operator

Good afternoon and welcome to the Elastic First Quarter Fiscal 2022 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Anthony Luscri, Vice President, Investor Relations. Please go ahead.

Anthony Luscri

Thank you. you Elastic’s us financial first thank call today’s results. and discuss to quarter afternoon for on joining conference Good fiscal XXXX

Executive On Founder Chief have we Officer. Officer Chief Financial the Moorjani, and Shay Janesh call, and Banon,

questions. Following will their we prepared remarks, take

release be after the the was can with remarks viewed is in market close accompany which also today Investor website. Relations Elastic’s at on and of our conjunction webcast on Slides issued the be this press of and ir.elastic.co. Our posted webcast conclusion downloaded can live website,

disclaim described known predictions, Exchange statements to discussion or our of as forward-looking Please or Our materially. issued update risks cause and our information. any on more subject include earlier that differ statements, to of to we to the will date solutions the could currently statements and regarding which future call and for to filings us, today, the may demand speak refer forward-looking required and include the and results unless included with that press risks and release fully in this are slides We webcast other actual our and based accompanying in These obligation those estimates the only the revenue uncertainties this and uncertainties expectations forward-looking in are products by included Securities these revise law. Commission. factors

company call the The available the regarding replay link. measures. under the and non-GAAP will this measures release with financial We including non-GAAP on XX be comparable days for Disclosures these Relations can press will discuss be webcast our next in also certain website slides. of Investor GAAP most measures, found reconciliations

business XXXX at Our quiet Friday, period of begins second XX, XXXX. quarter October close the fiscal

participating Piper over will Citi’s Conference During With the the Global we Shay. Technology the Conference, Software Global to September I turn in Sandler it and Technology Jefferies will be Conference. of XX, week that,

Shay Banon

am I with and today you, our of welcome you share Thank happy everyone. to all here to Hello Anthony. results. be quarter first

to data organization observability dots challenges. across diverse against its up between enterprise a again of very and to In data performing from protect the keep of grew Elastic and year-over-year. needs again answer saw turn and performance across customers, to to We Customers able all is relevant the of advanced transformation data. once techniques, platform our are number and and ever-increasing strong unified expansion more in robust increased grew a We and XXX the solutions are subscription size fueling that driven organizations victims with year. XX% metrics. strategic We falling creation growth amount and revenue year-over-year, across our We more the from more means the and combined contract rise total relevance digital fueled continued XX% strong challenges Elastic find these Cloud. endpoint adoption search Every start breaches Elastic the accelerated search. continued base. growth is be off of security of the of Cloud $XXX,XXX. and of isn’t we XX,XXX Revenue slowing connect including QX, by search Today’s with believe and was threats broad acquisition offering adoption to customer value annual the attacks This, geographies information, delivered with customer down. to The an strong than to differentiation ended all quarter and than simple performance to expansion of cyberattack by features, and to attacks systems over threats. our once to of and

our we out and APM data Opbeat, converge search an of and That’s in and application observability of every search keeping a goal as search that to We our the the customers capabilities integrating platform. solved applications box. used were look problem data ago, into data observe acquired security the Years That our the of be systems building we observability help starting search their has the seeing infrastructure company, And type solution. with why data up looking have is of in even a logging running our before believe the it recognize market. we around the are like at we would to unified was benefits regardless the traces innovations bring platform, of prism our we our to was by to problem can solution. observability Search as so. made I platform, to continue through even companies used Now innovations our widely corners. do in silos, term to power some to with share

example, of attributes top power recently of is search built platform capabilities, techniques APM. It unifying our Elastic performance. For most by we have surfacing always the that cause correlation mind. using root automatically service in significant impact accelerates on The released analysis advanced the

We also Elastic for Security. important just an marked milestone

any data protecting first of capabilities. years’ They A source. techniques. with for search to the can and single XDR, and investigate enterprises. platform. of Endgame. detection They can step As security with detection end-to-end we endpoint endpoint XDR the not operations XDR, it’s with and built-in life response concept, apply cloud, ago, Limitless we worth with come further Endgame’s recognized name? into tier. platform. detection We search SIEM to and environments a our large They any major technology providing observability, Limitless multi-cloud Customers security unifying X convergence threats Opbeat all in of remediating We ingest our take in on market’s type frozen can in am security of we issues our observability, from years we’ve data like a any community-driven can analysis in organization, XDR. as did believe vision numerous and capabilities endpoint on. means way thrilled response. cross-cluster data across broad modernizing endpoints, integrated a I And the in just acquired the And by with powerful see SIEM including extended for all this the lot a early and for what’s detecting and the APM, protection,

All ingested. for of on use, gigabytes of resources that, agents, endpoints, data based the seats not number or they the while paying only of

of build.security, services, delivering with All Limitless that further capabilities application offering to it extend make teams This over cloud continuously build.security our Elastic Benchmarks. posture well-established Security proud against our technology we the a enforcement XDR integrate our into our I ability give these innovation. their limitless, market. to standards the are recently I’m for the and more differentiating excited in validate joining customers policy coming be to quarters. To cloud environment announced XDR couldn’t monitor definition and support and we the team forces in of CIS will platform. this security like the

efforts we expert Cmd Packet be visibility accelerate leader eBPF, workloads addition, joining Using response, Cmd extended or technology, called our detection also data. runtime we also security. today, and on with detection In as cloud is Filter the Berkeley cloud IDR. and performs into will forces to deep in workload cloud-native announced prevention Cmd in infrastructure and provides

implemented at runtime customers our be frictionless platform. will deployment investments will to This application greater up expand and technology anticipate our and able both customers observability cloud-native cloud that their secure to we and their value the time. existing even use Search cases build.security, from of security workloads all give Elastic for and made we Cmd the be we possible workloads, even our Cmd, in capabilities teaming by gained with able the using eBPF. With approach With will expertise further security with

In we also with able be chains the to can Another a critical deploying, casual managing of of customers and a leverage being protecting thousands. threats also enable capability. to while when as to example with can component With is to resolution complex across maintaining in our them reduce why and identify happening to distributed, applications. different single needed monitoring unified Agent, because and our is the in Elastic is well we’re technology agent Organizations because and This important is their learning quickly their use their integrated and broken both manage that it organizations security data this where systems increasingly is mean existing years They observability processes even right, new or monitor recently infrastructure across the convergence faster largest against today’s observe, for nothing potential to shifting all They in wanted of that They as closed and and time detection and telemetry locations. address is Elastic world cyberattacks. while anomaly need organizations of needs agents restaurant observability observability APM cases. that simultaneously Elastic of challenge, A poses machine tens and because unified dining to and slow number deal a significant management number now. a an and to XXX ensure data important across you need enables this find QX over and simplify Elastic saying and ever-increasing with global in is left, one not Security customers. response resonating been centralized standard we single the systems value seeing natural protect? Observability and a shifting invest new great world’s to threats platform especially collection, well, security both onboarding, fully can GA-ed. using of operation. Security, We a is significant that data-driven in a resources which monitored require have chose and Agent, sources, they detection threats, most and through

Enterprise search website, with them to on Search, workplace application powerful customers Search, solution search Elastic enables anywhere. to everything and Moving a Enterprise for that have

customers large was deploy multiple existing of to the and intuitive and we security started sources. solution bank and ability realize Fortune multinational another services with another interface, Workplace using company it the benefit another business They already out-of-the-box across with internal the our simple to insurance agent investment with expanded API. one in with to were customer scale and Search to chose financial difficult business Search use In QX, mutual and and of easy as And XX efforts portal streamlined who implement data solutions, the robust easily-configured add to and to to investigators with turned and and and are new observability adopted and Elastic a search is connect our narrow they Enterprise This our wanted us lack they power continue a a options We for platform. a front-end connectors able product and Elastic adopt Enterprise their XX, company. our expanded search Search. analysts make different Their release to example Elastic, new data years continue up also wire results of crimes easily and to as transactions. we features compliance to functionality and goes the who across stop in for predefined for to it milliseconds financial And The financial they beta investigators customers broad to They global of are app course, slider precision. trying make within searches Search with XX to as literally units perform search sources want, solution. and to capabilities. allows to identify solution search They With of QX. way build crimes. to or complex all search a

management now Kibana, insights also access to platform Wave Forrester our the recently Search for same And easier and we elastic to Enterprise interface. were in making Research user be in fully Kibana to recognized access workplace UI, announced named the are app directly innovation. With with manage can continue three unified leader in Cognitive and from search Forrester We by for visualization. to navigation customers We search our the search all now we bringing that solutions and more search Search. a it

are Cloud, Elastic customers we so with worry-free our and to a easy-to-use support we providers expand simple, to strategic they them can our with experience. and on Now cloud cloud meet partnership continue where

existing with the quarter, the brokerage we leading social closed of During companies, world’s vendor. business an one displacing trading and

whenever Elastic they capabilities, now popularity Observability customer of to to on years snapshot data is the the scale performance. customer’s to combined able need the the chose in Elastic help frozen they to storage tiers bank. The them Cloud means speed without breaking data last in balance searchable our cold year, store grew of with without over losing and the and As ability search the Elastic cost,

now pay I they heavily been when for our quarters. cloud we’ve experiences in seamless We talk customers off that thought the investing cloud and and Elastic. It’s are starting have with to with move moved customers, seen tell they recent making the to building they who in investment me never gratifying

marketplace more customers these and channels. us enhancements product integrations are to resulting in recent delivering Our experience, onboarding a from frictionless coming

Private private announced on Microsoft marketplace grow. of Azure integration, Cloud to native Private Customers deployment. continues Azure are from Excellence Microsoft policy one-click security Link of we launch Microsoft their Link, meet Azure the Marketplace. Commercial additional GA Business our to Building requirements. Cloud Partner in with an layer provided And Azure we to Elastic traction to U.S. were networks also with Elastic the using which honored in and security connectivity our previous of receive Our the Award provides virtual compliance Microsoft

I all a In use with were the solution, provide to with that feature addition, packed recognition their Management in to intuitively power we’ve seamless The thrilled Year work ready. to Data helping named experience XXXX of category. case of partners Search innovation. with customers is continuous the our cloud Elastic Technology platform the extends outcomes are building Cloud customers our QX, is continued momentum Google with of unique our This enable and with customers cloud achieve the of our Google with the a experience. beyond our been flexible, we the we as business a am in Partner Cloud wonderful doing

speakers, in teams we am sales. invest presentations Scott which very just reach Guthrie, will ElasticON to to This AI customers, and will to year’s I to Elasticians that enterprise of through including on Global feature announcements have our engineering marketing product the the Virtual share other and our grow partners, guest place and to continue Microsoft plus Conference, EVP scale Cloud resources X. date event X We excited released our for October to And from group. take from

customers I I We am year. momentum all have humbled community, partners. got think incredibly a possible and to who our employees, as continued the great our this from people make about lineup our

you, Now, over to Janesh.

Janesh Moorjani

a continuing was great of start global momentum QX against execution our year, improving the economy. the of Shay. gradually Thanks, backdrop to crisp a

usage robust momentum expect was cloud term. cloud that the strong for Our will longer deal we remain a with trends, and win

are against Our solutions ahead continuing to we the continue to resonate and us. of opportunity with customers, rich market invest

our up revenue and get the Total execution observability Let’s numbers. a quarter into unified $XXX.X enterprise was a of strategy year-over-year, continued delivered successful security search first XX% reflecting in the across unified platform million, with on model. search, pricing

States. primarily usage performance, revenue which pleased significantly Cloud. was than outside driven stronger-than-expected United XX% by Elastic from very are significantly our better our expected, came We with in of the

annual revenue. We view Elastic a to as of from strong again this business our model. as strength again growth of Subscription at $XXX.X geographic and both strong growing our totaled by year-over-year, $XX.X long-term strength million, continue business customer comprising We distribution Cloud XX% cloud saw revenue usage. once cloud subscriptions, our total revenue in was well QX in monthly driven Within business. as million, XX%

timing revenue give our Professional us QX services in competitors, mainly Our $X from faster across the delivery, our Professional XXX% business. continue feature increase Elastic grow professional $XX.X that over we to the year. million, on do can fluctuate will growing Cloud approximately year-over-year. services partnerships quarters product significantly we than the revenue over and mix advantages enabler confidence quarter. in million and Services a projects expanding overall services reach our that in expect was and and not benefit an remains depending to saw of

QX in billings, grew calculated $XXX XX% to million. calculated billings on to Moving year-over-year

are customer new the we slightly continue prior segments a total driven and the At strategic to XX% deferred shorter million quarter $XXX million, existing was reflecting fiscal businesses. on and X approximately slightly across commitments million, first As quarter’s Customers up average, than pull of growth execution, X.X revenue I headwind to by our well the bring the the of XXXX. across Contract of XX% fiscal mentioned we broad-based multiyear of Remaining the and rate XXXX. end up solutions make with deal increasing us, as relevance out QX pleased was $XXX was geographies. XXXX to their obligations our $X into as years driven totaled multiyear length Overall, quarter strength the a forward fiscal quarter QX, growth first year-over-year. performance of year-over-year. reflects over previously, by of the

not manage length, this can fluctuate business so a has obligations. reminder, business target monthly no Also, actively quarters. do contract to we deferred remaining performance the revenue As a cloud our across or

Turning to Elastic for customer XX,XXX new metrics, significant once subscription again additions driven customer customer Cloud. by strength we ended total QX in with customers. momentum over We saw

the than quarter strategy. customers trends. the customers over $XXX,XXX go-to-market than continued at sequential success more expansion QX, reflecting in accelerated product Of ACV customers and XXX the values the more the above two to ended with We over such strong growth our of compared also end reflecting $XXX,XXX annual XXX past quarters, with has note, of contract

flat slightly Our compared expansion rate net to was remaining QX, roughly below XXX%.

net percentage give levels, the a expect expansion We at current points fiscal ‘XX. rate to in or remain take few

Now gross turning is million, the managed the the overall in despite the quarter during XX.X%. margin mix. non-GAAP. Gross well profitability, our representing in a of $XXX.X increase margin was cloud profit to which We quarter gross

Looking ahead, to margin remain Elastic headwind gross Cloud to we will invest as growth. to continue drive overall modest a

our were expenses investments prior These operating laid we QX, call. we the business functions. out at spread in investments in all as across have the Looking in increased

quarter. was inherent significantly due better $X.X an model. which Our This in performance than the business million leverage our reflects margin of revenue X.X%, operating strong the the profit primarily quarter expected in to operating the with operating was in

and lower Earnings using spending We pandemic. shares weighted in million given outstanding. $X.XX, was also continue to benefit QX, the XX.X from as per event share expected average travel diluted

in million $XX.X was QX. flow cash free flow, cash free to Turning

cash by issues be As timing and seasonal and variation. we’ve affected said can before, lumpy flow quarterly

flow look the cash full fiscal at for we year. primarily So

an fiscal QX approximately in flow basis and cash positive slightly $XXX equivalents We to on totaled our expect strong balance ‘XX. remain free sheet. Cash unlevered with a We margin cash ended million.

net cash QX. in issued our reflects proceeds notes senior Our the from balance

cash per the $XX We year. interest be expense expect from million approximately notes to

Turning and aggressively to opportunity us guidance, remain invest about continue we very to ahead of functions. the long-term across all excited

improvement a in gradual the assume fiscal to the continue weighted We ‘XX. environment macro of in half second

continue expect backdrop faster second than be the Given billings continue Further, in we hold remain to combination over this time, our to business. taking calculated with first half. that to the greater we Elastic Cloud than growth investments will half grow in and greater overall the confident our

do and of the the meaningful plans expense not guidance. operational operating Cmd additional any into been acquisitions build.security we has revenue expect into and and from Finally, our fits our incorporated

For expect range revenue $XXX growth at we million, QX, XX% of the to the rate representing year-over-year in midpoint. million of a $XXX

We in share between of range negative $X.XX in million net $X.XX operating expect of loss per non-GAAP the using XX ordinary range X% XX to to outstanding. and and non-GAAP margin negative X%, the shares million

$XXX fiscal a to full we ‘XX, the million growth revenue million, of For XX% rate range in at the year-over-year $XXX of expect midpoint. representing

operating expect the net XX million ordinary per of We million non-GAAP shares loss between and X% range XX to in $X.XX margin share range and non-GAAP negative using $X.XX to negative in of the X%, outstanding.

for Finally, guidance that, opportunity ahead and an of In about let’s debt I’ll of we we expense go the point approximately are had questions, per for $X.XX midpoint discussed us, nicely. share summary, And out interest and strategy added year, EPS investing the excited QX market start that our remain working $X.XX to strong and share we ‘XX. for ahead year operator? non-GAAP take fiscal of per towards with and extraordinarily the that. full previously includes is long-term We the our

Operator

Markets. question RBC first today from Capital Matt with [Operator Hedberg comes Instructions] Our

Matt Hedberg

base? here. on strong level, again for was positives do you, really wondering, off into. by at customers my a say should being much customers, I’m in new adds? how of think Great. you a is the having in expansion is much Thanks versus how driven – licensing Shay, what customers on from your a But for Elastic of surge Cloud of taking growth customer mean, Congrats maybe that when made I the to impressive. secondarily, that strong XQ revenue, of drill that previously I results change guys or you questions. is Elastic at And is you look lots impact Cloud really high positive

Shay Banon

course, of Matt, to answer. hi, happy Yes,

that ago, the of was we the change. all, part misdirection first I’ll trying license remind competitive around confusion happy change the the we’re And address months first few that think with we is license to change. the I goal with service the the that of happening with a and did make very main say the from that Amazon. sure I’ll

the quite XDR every when the with minor minor we’ve couple see major we release our released innovated few say and of Elastic, a Over And at one significantly. announced versions. Limitless is last can release, it recent we you a quarters, We capability.

running resonating So customer with also and our fast community. we’re really our and ahead for innovating base, that’s

how much over to platform. is customers, play running our our all have others, metrics and we’re us foundational and solutions GitHub We new our a engagement have. this at, comes expectations we applies releases do users across change about – looking all innovations on forums out with it excited that to three applies only on downloads, license our Based and and When and ahead just the the analysis Obviously, we very that to will all are are of growth that our the new in it long-term. that search

versions start have start they that as with So and start an to impact customer the in. and us. along it’s that they on differentiation over or think only see adoption a upgrade the we will to customers few And for migrate, new quarters the long-term, new as to come to ride

that we for this SaaS we monthly and Beyond in specifically. last just the would Cloud. think products and Cloud investments and our investments growth mentioned quarters, quarter a coming mentioned self-service a innovation and our all amount that them over and of We into of Elastic and growth the and with Elastic integrating marketplaces and, cloud natively part of is consume Cloud. for customer and providers; the within Cloud our them us of Google that console innovations it Microsoft as that. I into few various without SaaS, the is even. And that console to the and big native easier are example, and put seeing now go the on in Elastic significant I that focusing from to but and you’ve Azure say new specifically the going new leaving that, think big customers itself make I easy integrations much part Azure our we do It’s obviously, customer cloud as deploying Microsoft, Microsoft our various

that, example, adoption. So is that drives I customer think for a great example of new something

Matt Hedberg

That’s quick super of comment. for helpful. And the then, Janesh, one sort on Elastic Cloud you, just a

the revenue Cloud asking You that of was what it impact revenue, of doesn’t think billings. it of would billings And way kind deferred how something annual? Elastic noted that monthly usage a thus, there of to a about beyond headwind if to maybe way is be, growth. and, or different annual wondering monthly is much represents your versus I today

Janesh Moorjani

that. I’ll on touch Matt, Yes,

thought revenue was cloud in when has mix the off, of to think just extraordinary QX. of at It quarter, nicely. XX% XX% with growth, couple we business very performance. total that business continues are increased a about first that. was close pleased to versus the Monthly quite cloud it we and overall, back, stepping just grow year-over-year I So points in And

self-service is new option way that now out us inch a continued for as great we’ve just acquire the it’s slightly to web-based customers. and mix, increasing been time Shay some been in to think calling up. said, it’s for I And

small do massive of quite in in of spend from come And workloads step in increase into there pleased earlier noted, headwind timing the you of it QX But via customers that growth you’ve cloud was I monthly out change that business. vast and year that mentioned, monthly of of indicate function our over gradually billings customer would pace we the are mainly to any their just the that this a last majority prepared gotten pulled the that comes that. new point as that was where then wasn’t with the with correlate are kind additions, us to I time. to million had strong, cloud. billings format. customers the So $X shift remarks, rate usually year. that QX not The mentioned monthly They

I heavy these really we’ve in comes a talking about, in great think see those Shay in fact paying result And of factors. partners, it’s was from and investments as to cloud the of monthly with made and our strength just marketing the off. all strength cloud investments that cloud was

Matt Hedberg

Great. Thanks a lot. Congrats again.

Janesh Moorjani

Thank you.

Operator

question with from next Our comes Barclays. Lenschow Raimo

Pree Gadey

that today. you This Raimo partnership Lenschow. of build Pree Alto security you about acquisition I security? with security space Gadey around is ask, Hi. the a year? go-to-market any you with and guys update news to can lot for on with the wanted And announced Palo announced Can talk you the provide last strategy the

Shay Banon

Sure. it. This is Shay here. I’ll take

that So first of all, solutions we as security you mentioned, we’re making the significant investments have. in

SIEM, customer Endgame folded into to top the search with all that And obviously, by almost build a Forrester, mentioned the platform, SIEM have own last and extending to started the a platform. powerful starting we we’ve but and for that endpoint started space their from charge we and a was over security we if this up joined provide leading years, that we to release, been it with then became our Elastic XDR, X.XX Enterprise very proud announced we’re now base. the logging had. Limitless and people about. of the And years roll leader very, into we’ve which years the it Search. our fact sleeves our we unified years the we release technology, We build as you denoted about their X.X solution, search in and Stack observability, Over very APM to of and observability used in around market. will, Endgame now, and the security on few the ago, the go In forces makeshift been We’ve

and deeply We’re think another to very end about, And build.security mentioned, two forward free GTM to that we’re and comes solutions. our open our of the of better security we we seeing know first the it love that open, that that way of we’re the that starts threats endpoint But trying much that, is to we which all and all, similar threats merging the over of And and bottom communities, build and of up goes things address to observability helps manner deeply and heavily We that that the digital believe SIEM. if nature and to believe security, partnerships, that various that, broader market. applicability When the developers between we need market When doing. we’re join security Cmd, have doing that’s an much that excited to it order differentiating a with as context have security the try a building user performing we great on we’re happen to the to products, people. go security making parts to companies. way stand developers comes you to community-driven and would happy great collaborative also ops to deeply factors to obviously and in of also of to it in understanding difference, and very companies running bring broader that you companies the with security, And environment, in cloud security in support are the and than providing We embedding market. think and same with approach in the this merging, observability. we’re up, going we existing operations great in that will, thing the up impressive future focused that just become and a believe big the makes know investing we to And looking itself, today’s it technology foundations things together a always more much to building difference very big with security is In today. one to DevOps partner a same security, years, we in. and facing. a keep very big infrastructure also and base, security there

start a is approach, and with open data. we approach Our free and

to with of can all making to and we’re excited this security, security ends shipping container Alto result to it, companies, with addressing done about our them with then SIEM and of to just endpoint you searchable. vast a and start if we’re security will, of one data collaborate several up many them. data happy place other doing bring any of solution also under year We’ve needs will customers’ a We like Networks others. with a tent as volumes them store we’re specific company And that we’re Palo ago, and that while

Pree Gadey

question. Shay. I guess, Thanks, more And one just,

bit base how in introduced is have I native environment. guys understand how solutions to cloud is product simple a Basically, I’m cloud customers the on-premise of this to deploy code want understand the it to year. hybrid product. shared trying quite You the a and for between

Shay Banon

Yes.

context So of as you’ve seen in on-prem. we big the portions what the run market, do of security can

on called hybrid in and the technology of prefer workloads. majority say that on in enforce run something on-prem. cloud cloud-native manage specifically, The you as on-prem then for to Kubernetes Linux, deserve. their part and the with they just but way, we to to make and hybrid security that the vast by I’ll right hybrid big Cloud-native to protection can better we the big they obviously, jump then customers while it, solutions. the detection can has build.security, an engage Foundation then certainly of customers them in cloud. to we’re a part again, policies, environment. with focused to more level allow to because cloud. our experience, they And them our a workloads, our under helped I’ll example, that run And Cloud-native not that run run quickly that of can hybrid and And believe move go example, But specifically, move as We that them running workloads something you projects user is And And through run all transition for go said, or always provide Open significantly Policy do, Linux, or environment. around environments. or and in to customers also a those the cloud. definitely, want give we Agent, containerized probably observability the observability in Search are environment run a do that, containerized happy know they that level for can workloads it become So on-prem Enterprise workloads a it’s and on and many can and to the example. Kubernetes and of are and

Pree Gadey

Thank you.

Operator

from question comes Thill Brent Jefferies. next with Our

Brent Thill

about larger quarters just guess in divisions seen seen and the could the Is effectively seeing. that. give spinal commitment to you sense Just stage think if the really talking I to the what bigger acceleration have up that that inflection an seeing last going tap never two you’re seeing a with orders? of numbers reference purchase in to a the curious you XX, going you’ve of Shay, causing the the through business. I’m seeing XX. what’s opened this and that to broader before? you’re set is I lines initial what us Are in we’re you platform your happening you’ve like

Shay Banon

Yes, course. of

generate communicating Like, as all, product company are and We multiple all moving a be sweet customer I across a to fast, and unified But grow, applications security, Enterprise need their its it’s to online, enterprise multiple threats searched. broad-based. and product and observed with areas digital. used customers way, solutions, Search their and assets very to all as Janesh Search search become we Elastic see great are search search aside from to these running needs are step usage – example, very is bigger mentioned, now. a and that those we’re our they of go it. are, that product. three do companies digital, wonderful we platform generate companies to they just use needs explore best natural see And data first address surface to if multiple an as for online, we the that mostly spot we So our searching more even growing different bigger when data company by a think of the you slow-moving more be a that’s moving fronts. that we’re the as It’s workplaces go and personas, at. to things. and right? and with And that go-to-market And online do best faster More platform our changing perspective. general the by leverage companies can opportunities. be these that is to that, both thing serve all volumes many, way like needs more detect And data of data many addressing and point they take, become go in Workplace multiple specifically, And take for that become useful same of of a need and fashion. have more we them, cases, They of most all to more are back, are more data. from the And

Google, together about that the excited and our And take providers, that. cloud our our we’re for if Microsoft you example, growth. that increase So with and within investments and in helped and partnership obviously, and put accelerate it cloud significant cloud with

we’re practitioners, making all our the company into and mentioned within to that but doing while and the all that product, a the more quarters. the innovation we’re enterprise sales the high-velocity of cloud focus, doing and base investments these I’m things we’re last all that all realizing So doing value-based innovation few up of we enterprise both selling our going over focus, also the on itself excited customers, developers see solution of as go-to-market, maintaining to that happy

Brent Thill

And how both? profitability, balancing line been I about think thinking can focus. you time you talk for just know when growth Janesh, the and But has about bottom over sustainable the one number you’re to

Janesh Moorjani

to Happy Yes. talk about that, Brent.

we here results. very pleased about QX, think performance with I So the in obviously were as our

You we becomes revenue its made model that have way as really operating line. leverage that the largely visible in bottom to the the the saw performance

back And Shay size it, where of painted economics we feel of business think these environment the As by unit play, very I sets. strong. or very demand the picture in the are about the really step are don’t which markets constrained large and we and the opportunity as the in broader

do is make thing the out drive to the that in us to And growth. That’s right for to laid continue business call. plan feel so the last the we investments we in to

are to We make those investments. continuing

in implied fiscal business think ‘XX, in the year you You’ll to at for in in year-over-year when reflected look outlook in at the the thing business see in when the the fiscal a business you’ll drive spending well. as the that spending in it’s the us. ‘XX you capture at that’s I significant ‘XX of this look do now see because fiscal guide, step-up And the to stage in the increase compared the we best ahead the we’re investments that’s making And to growth. opportunity the implied can

Brent Thill

you. Thank

Operator

Our question next from comes Baird. Jonathan with Ruykhaver

Jonathan Ruykhaver

afternoon. good Hi, Yes.

the It focus have Shay, seems XDR EDR your I’m in can that But move given your product So product. just on if talk just solution. you positioning, really and SIEM the question about vendors but differentiation other I is different customer wondering, that Elastic obvious the any direction be emerging your know you from there, provide I we can validate feedback very early it’s numerous helpful? is would how days see early category? in that might And to

Shay Banon

Yes, of course, to. happy

with level security broad, interesting all, to XDR very an it term which definition, detection with of solution And that extended first and extended is start needs of think we I it, starts response. makes by So any to because data. believe

big on results, are we get the interface, get up have make we of to for top to of these it month’s integrations, few are that versus read that other and threat innovated to not and if easy easy, advanced the most, make data some choose a that’s even go And about search the will level same be to core provide amongst skim worth worth over hundreds millisecond in same or to and API, sleeve the we and you And order out, cost of need XX with the data to fast XX them. the trillion is order go customers our results the to our to years’ SIEM of can I data and And store Search why The years And skim able roll difference is be exactly not answer You the online machines, it. it SIEM ago, figure security find, an we’ve of UI, what on not able and able engine search and and in build to things And support task same around problem a second, other able And using can’t people down cloud observe products easy were of capabilities all there to of to last object of we data like do. spent hunters. need last of on want how a you ability go and vendors.” X was, natively doubling had they in own the, quarters, they threats, speed Elastic and data hunters asked to able petabytes taking researchers advanced threats, them core it an out capabilities. to build SIEM. one ahead then And of And because across I searchable, it handling data them to it to excited building XX, and these was to storing in to now were platform. obviously, be today stores their believe significantly adding threat when Kibana and “Well, the and things things, data search then make from return we years years, their on they not go then and and SIEM. be between and pick threats. detect we the were protect are to X to things being it solve doing be it,

trying unified and believing within stack. perspective the that and, to this the to Observability, Cmd a positioned support a that up company and all are to build.security I mentioned doing data as with we benefits internal that And with from that have innovations trying the really solve, we built to I is is think are now really endpoint the with coming which product years time, machine I think the everything a obviously, with a well through we joining create we to market threat and can market, place that XDR data where you endpoints ago, Endgame and almost And you hunt either emerging AI corners are into solution manually algorithms, to X looking believe learning forces deeply can the peripherals fact and like we and, think there cloud-native a or getting did and the store and so we fast, data. things perspective security and end we detect container then prevent and all security XDR possible need and then are extremely the prevent – we workloads. extend from and what to example, think that that is into thanks So, – around of markets the for unified have like technology will starts more market

the So, more at big by right. more the one we think it is where think I and, that same mention strong. XDR I security as and believe I time, see Observability macro way, that’s solution other left is our we one internally which is thing aspect shifting shifting long-term. will is If well, that

easier customers within footprint big for we and a why Observability Observability convince that to our I security existing about We think security the out observe, not is tell all to that’s, care and us company. a we ability to capabilities capabilities popular you work people add why one them. it’s today, as think, and there. and obviously. significant go to say to of workloads in more would have operations bring And compared market, us And free to the that so to security talked solution to advantage I have allows people get a and protect. significantly open I differentiator security companies do them operations our of significant go then more, to They world to that And Observability most the are our Observability

strong the to foundational are we I over merging And the last element bringing whole when of the security security. one that it a very we that is is and new So, have to comes Observability one. a the go-to-market long-term think

are threat doing We developers. on this bottom-up, focusing hunters,

go also deeply that. it. examples needs engagement a also perspective, great doing We and companies to not collaborate forces across to go I personally market of joining all and are and to create create innovation And an that the try places to community-oriented, these this security and we from in but it that believe in it are security believe threats. perspective. with product develop build.security enable around want Cmd And from only as world, we communities better are for and and engage, a together

Jonathan Ruykhaver

to And take have a monetization understand helpful. place? you the I would That’s When version. path, you just expect that free

Shay Banon

Sure.

the security is have First us we exactly the across that all, of same for the board. in monetization

people they which ours. in and environment, then and are have someone capabilities customers we on-prem are obviously cloud, would we on we that’s But it as and we to or goes can if with become then more of more run our investments open go cloud, someone everything to And our and products and choosing free So, we deploy empowering. run is provide that making can see, a of. obviously, decide then very does product, paid themselves, in for. they take hybrid significant and If additional them users see value our our very use cloud and commercial more proud

within if So example, security, on-prem. running you is are are for a feature ransomware free, malware paid protections us but for

So, It’s we that open context also in the free the of we finding and years, found are have balance. balance and over that security.

it’s with resonating think I been really customer our well far, so And base.

Jonathan Ruykhaver

That’s great. Thank you very much.

Operator

question from Stifel. Reback next with comes Brad Our

Brad Reback

ones, about Great. Thanks on quick it XX the interest free on the because negative we cash should reported a around very commentary tactical basis, be of of a unlevered, to expect just flow couple much. maybe expense? Janesh,

Janesh Moorjani

and can I in will that into positive. lumpy, seasonal know, as is specific what effects not what start number be. it’s unlevered with year, you I incredibly terms play this be it. consistent and is there say timing there of the amount the at a out out have slightly of put Brad, we will Cash flow which laid

would that thinking go monitor we unlevered track basis. for of will rest outlook as we more well, that the we slightly for and the couple an on of terms just But in of I positive the at and as point, quarters it So, about thoughtful be next year. a provide then this can

Brad Reback

Got it.

month-to-month Okay. bigger they That think And a that forward, to with I at are of larger, earlier fairly going customers know they growth all? get cloud And potential lot RPO then contract on going forward, cloud rates getting you should from you. RPO impact about much how small. mentioned business being the if the as the said, we

Janesh Moorjani

say what customers up contracts business with monthly I us time, similar RPO. and that, to would it’s revenue annual I they over that’s with sign to earlier cloud their us have they they eventually, sign potentially mentioned add and gradually when on and Yes. as in increase deferred

just this point. were When I there of reported terms I to connecting growth. number make pleased quite So, with not cloud, at at monthly the again, in the RPO at any connection XX% look that we actually would year-over-year, RPO overall

slightly I overall think looking pleased we the for out are the nicely that shorter conjunction connected sets business But contract I length overall, the that the mentioned. that’s that actually anything, in with ahead. us with to If up this way of year played rest performance. quite

Brad Reback

Great. Thanks very much.

Operator

with Piper comes Sandler. from question Rob Owens next Our

Ben Schmidt

Thanks questions. Hi for Schmidt on guys. taking for my Rob. Ben

or the the to the looking year increase beat a in So, about modest $X quarter, like rest relatively for looks the at the so. guidance, of revenue, given million it

some if usage-based if guess the Given maybe wondering, the some into is and of would usage-based just in just in were seasonality wondering is I now we given potentially thinking coming quarters see how revenue? of And amounts more quarter. conservatism flow-through revenue beat kind color this more much you there there given can ratable and the the or usage-based, that we potential add in

Janesh Moorjani

Yes, happy to am to that. I talk

quite but So, QX. pleased here in side, with in strong just in the we results the QX, actually business, growth not the on so self-managed were cloud very board, across we also had the

performance I is mentioned, significantly it part the been of In quarter, on terms investments in think of part making was expected just Cloud, driven usage revenue I by that of the a have as Elastic we indication in the of the which business. stronger than success the great that in

saw in into factored expected. into think over earlier year, already I strong the model the than the growth course ‘XX. of as model And about that we Now full just QX, we strength had come fiscal the

that as have bit the So, already year. a the earlier a into than I it the But would. portion of provided it year, expected factored think full we we of in little the benefit second quarter about

other out the will had The point well we growth million that is revenue that in helped of both revenue. roughly And timing piece professional I here even us from $X QX. ahead services achieve of of expectations benefit our the those

characterize economic the the this lot of business know I in mainly is think then face the fiscal I forth. And we lot and factored and a we QX for broader have about fiscal in as year, we year did the customers better previously. would because the than the guidance example. that’s a got to and into think way as pandemic and If ‘XX, clear visibility their rest guidance. So, environment year for that’s And the about businesses is full how same the so adapt had a the what of I I it ‘XX, more

all respect of being or conservative as other any holding not at of usage considered start So, unduly with out the we or things business. the factor am plan the year. I those laid already of back the to We

you to how next rest pretty about forward of feel So, year about the feel optimistic updating the out. QX quarter. looking again We played we good and

Ben Schmidt

Okay, got it.

Observability really or wondering on acceleration there. can search impressive so what broader And in, in And your color varies some that whether customers from to at customer trend and landing if you you customer see adds, guys if base. security, all products are the add

Shay Banon

take that. Yes, am I to happy

I which a quarter quite of that point, the row we the where experiences curated enterprise subscription we quarter. additions seen provide adopt and level, terms customer for are some start sign The will as use cloud of a pleased Observability in is think start it can products or one customers And is it customer to the us, across those If up in the a rate to the areas. be I And both search, our we strong a self-managed. additions. This your in very of they when across those case we initially search those be really it A subscription customers the for tend think So, any where, you new with about second the the about again, lines security. on of solutions adds, we well lot we be high very additions tier, had way have to of solution saw on over side monthly customer we could cloud trends. add for blur. see And continue to to as board. think time,

one not particularly even customers from have where solution all end in self-service to more three convergence what might the end on We happening human case and us, without it’s time. here. see we engagement And signing visibility have talked that the be. certain begin, call and quite have it sometimes we case out But broadly necessarily speaking, that tricky a into way a up reflected areas we as we because security bit strength a see where, advanced use about cloud customer’s use play numbers. it’s across convergence may the And between seen the over is was all might in another are and might Observability see monthly over

Ben Schmidt

a Thanks lot guys. helpful. That’s

Shay Banon

you. Thank

Operator

with Our next Nikko. question comes Steve SMBC Koenig from

Steve Koenig

monument great is the questions. hiring. a Elastic. wanted There you crushing about quarter. of for first you onstage. your taking hiring. Stonehenge are Congrats, like of looks lots I on ask my Hi to all, It Thanks

like level the postings were even pre-pandemic. job Xx they Your are

And color productivity one so sales kind those and for hires some and seeing systemic too maybe trend am I on you. looks trends how are lot And have what’s of question it’s wondering just new of I as hiring other a then of on – – and productivity well. like kind increased you got behind

Janesh Moorjani

to. will I off. start us Maybe happy Yes,

opportunity the answer terms now as call we hiring and earlier to a ahead we level of this And quarter, growth. very to of investments, us. see that in we significant the is of us invest level last we of So, as capture well, just on right the said for mentioned as here that think

are Some the of the making investments current we will growth in more forward-looking are drive nature. them year, in some of

momentum that ramp contribute start the the make, the we As the towards we productivity now hopefully think which and stronger nicely the gradually that and see we compared fiscal will side, up the that about mentioned particularly the to of people prior into bit second little will billings in we sales in the I that hire had back in And why, just call, we half. ‘XX. think is us growth of year growth first with half expect to a investments year going sets on into half

In in support terms in and that as engineering the as of product where the the support to to G&A in also the well across board sales and as in it’s scale go. teams functions, we those investments growth organizations that but clearly side, all going, are

the entire I We speaking, across have organization. levels broadly sustained board seen, the of in think, productivity

metrics up that done. and think the in lot nicely. obviously of getting to I measure internal visible organization. field easiest And quite is our think there there, holding It’s I have been quite people are a all

him this great the been side, with last and a course year it’s just the are of the we Paul great On as against the to Elastic over now year, field addition has we that. executing partnering for been plan first built and

in out as as while I economics short working all mentioned been think And business that’s are the So, ago, I I ahead, a think the unit just quite strong. nicely.

very continue and us nicely that to drive them, growth opportunity up make we to the capture ahead as sets investments us. So, these of

Steve Koenig

maybe se. as Are you talked just bit? helpful. for I traditional your that XDR replacement are to solution is do if one very little could it you XDR, you seeing educate viewing how differentiation had? And that? very Janesh. have of am Thanks Great. SIEM well? Shay, much. complementary? per in about you I Kind what follow-up as us is have Thanks a have could or already view your there wondering, you it How out do what had customers SIEM an you in alternative a or And

Shay Banon

Yes. Happy to.

our again, about to all I log the it’s into solution. platform, that every a on and you features single single deploy the you time thing like suddenly every in get wonderful upgrade, think that it unified integrated cloud deeply is search happen

have we the separated SIEM built like XDR lines, and product Observability separated on unified a or and a then platform. it’s not those same it’s something So, search a line on product line all line

a go protect at that on server If can all the and the web with solution website, monitor the host time runs crawl cloud, that same the that the deploy and same serves that you and our website go you product. website

it wonderful most I love out of the users news they just our new that to upgrade that the there when and usage. of XDR for version, is the a And all it’s they that comes XDR. once of is got go Limitless aspects So, SIEM its an limitless one to

now used our of or just SIEM base that to users having part charge this the they needed are ransomware agent security of enterprise the that deploy So, data, they run – we package. collects of and is get got want based and as protection well. and XDR, pricing, store endpoints on all their that If can they they resource-based are as as go customer ours, then of your are an us as have data malware they endpoint to many and resources same part the and

building morning very got in So, actually And exciting. they are and I more more, surprise we go updates, can up delivering suddenly and to value over-the-air their love on for another our with think where the deliver we and you one they will, pleasantly if and that’s that, wake customers customers.

Steve Koenig

Sounds perfect. much. Thank I very you appreciate it.

Operator

from next Our Instructions] Oppenheimer. George Iwanyc comes question with [Operator

George Iwanyc

approach. bottom-up Can you Thank success my and on the having give matures? threat security you with approaching buyer hunters the maybe platform the security are a the side, from and the mentioned following top-down just the question. Shay, up as the again traditional for us you you go-to-market taking

Shay Banon

Of course.

bottom-up to up First of all, has at that like we in Elastic it. say

best in still and and it and that’s relationship I anything, building focused time, while a think while obviously support going build in things already and you that analyst go up. able and that them spreads because started present best doing we directors all up example, engagements something we we that one definitely practitioners’ used. bet and say support Those VPs product and being significant one and well investments your practitioners, because our which last are we and you is also that companies heavily to I the we additional the three their order it, that I done think, on way, we the the if ones to you have back, we the care to are yourself go, focused we that about of and tools product practitioners of in make to up sure that invest speak. investments that both, CSOs, and making are and it, I we Magic But love companies and well in make bottom-up be to the with you We are same – world, want year, over towards the is are to saw as will one the waves, things go are practitioners love. make just managers our world and ones only to presented and being are go probably and the back and at don’t have So, practitioners’ start go and lot their do aiming a in up. they go the by adoption can that CIOs more want and that Forrester on I to they be. in that Quadrant trust have know, are than

George Iwanyc

next, maybe feel time? on say, longer now over X a the to years Yes. term table, With that the XDR evolve how do over X can vision security you sharing years,

Shay Banon

are the But Of looking course, is X period market. years at X time. we I long will mention briefly of years how a to

And is The that to as Endpoint or just scalable, relevant, a data more first it, of threat are type we of big of lot workloads. there mentioned, so I everything help more or container is a OS running bringing multiple and a Cmd of on security type and of work, that’s management the Obviously, us across all endpoint cloud protect security our the capabilities for to that. out EDR any platform helping faster, the make providers, build.security around invest an Linux. making sources part data. policy workload security part sure the Kubernetes of security best software Mac whether that’s towards best-of-class Windows, same securities, cloud it’s cloud, cloud it. around and the data and critical enforcement and connecting native part

not this level deployment bring to We time. also support to of only but and runtime protection want from

data, CICD data, be to threat for in that that ending there And can are whether because deployed, controlled, generates tools only and have is data e-stored of them of all the of stored pipeline So, hunting. as want protect deploy, time. a of is can take applications by help connect way, that shipped are up time we And huge not help the you a the going then to generating you the being it used be cloud that, you and protect all running. to at deployment, and then build you further be all that when existing it’s and Elastic, can that’s something observed even and

hunting believe So, and it organization, piece all threat store every being it our we being out community to to box able community learning-driven rest can data investing benefit provides are do that all of comes automated, but in that of we threat for. machine that and heavily hunting, we is and an of manual the important also both when provide securing to of able

George Iwanyc

you. Thank

Operator

like session. any the for over question-and-answer to closing call back our concludes This I turn Shay Banon would remarks. to

Shay Banon

with you, Take updates care, Yes. start sharing you Thank execute to forward was us a today. QX as of year. for the we We thank you. ciao. joining look year. great And the through everyone, and

Operator

Thank conference has today’s attending now concluded. The presentation. for you

disconnect. now may You

Elastic (ESTC) 26 Aug 212022 Q1 Earnings call transcript