ESTC - Earnings call transcript Q3 2022

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Operator

Good day and welcome to the Elastic Third Quarter Fiscal Year 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. And I would now like to turn the conference over to Janice Oh. Please go ahead.

Janice Oh

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

and On Chief Officer. have we Janesh Officer the Financial Moorjani, Ash Chief call, Executive Kulkarni,

their Following remarks, take we questions. prepared will

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

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

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

begins turn over fiscal business, quarter the XX, will Ash. XXXX. Our XXXX of period With to it fourth I that, close quiet Friday, April at

Ash Kulkarni

speaking to have on the a possibly has million, Hello the could. we spent innovation XX% am them. welcome I cloud commitment earnings was grow role in I expand cloud QX dedication quarter. of up to continue at increase Elastic’s you my making about as cloud, excited amazing of an in increasing focus. am most role area assuming and that I accelerate even Since Thank of January, and We foundation the as the am foundation about CEO many Elastic’s our I continually company, as teams revenue pleased strong driving performance conviction. we organization, of honored join our you, knowledge team, Janice. welcomed Banon users warmly to understanding by many CEO. everyone. first across It with serving time Elasticians Shay so their and as to passion building and with to like and call I been for of learning, impressed the and customers. importantly, a would our trends, I tremendous fueled our where year-over-year. greater with thank be consumption I his Shay in million, is the here contributions opportunity the as upon, have we in especially Elastic, where very to continue the to am delivered will that growth year-over-year. our very cloud, strong return up I revenue already a of XX% CTO, $XX.X our $XXX.X also

momentum. to time a today’s discussion. take key And about results will from there talking our We away bit QX messages are of fair business spend three and

succeed. and First, are well-positioned in the immense and markets $XX are we a opportunity to billion operate we growing,

be Elastic Cloud in major our a as for driver focus of the business will cloud. growth our more embrace Second, organizations

Elastic the to Officer. Product Chief the that I expertise security. solutions of that, having over joined and needed a innovation even past in observability platform for for success big for year team has been fan continue ago will little Elastic a our and results. Third, powered various drive show it operational and both our its for the implementing as search before I used in had a the

can Elasticsearch and their and data cases. size more from scale of detection their modern their and a of single search cloud-native strength to behavior and customer-facing enterprise logs, this differentiator. explosion machine data, across pricing bring our in unified the Elastic for the me. challenged cases services great to store Elasticsearch, clear observability, more our most breadth their comes and When data, data, solutions. all model. and extract foundation speed, best use So, our adopt identifying all and sophistication in. many the threats They data threat advanced They algorithms the biggest metrics the platform search enterprise correlate to their scale, across way traces can and environment. attractive innovations with across constantly relevance. speed It’s This can they Whether use with and for a cyber and at use with data, it’s set rich to our their the was Elasticsearch. to opportunity therein a rules that do observability, They our addressing search seamlessly into are is of of needs. our where It’s rely applications, of of This and with intuitive entire of learning log or foundation market security enables customers security complexity of quickly the lies being organizations threats this on identify for value issues unified data, use modern at observability. for approach performance trace can metrics of data data

importance, BMW, speak three volume with to our met and others. be in success. to several conversations. takeaways recently, Very data Europe, I As believe essential from there customers’ grow of customers universal we Deutsche themes customers, Elastic our and in our When SAP with continues several I are Telekom, and will including

and their day for incumbent search using log and heard massive significant of observability, single especially for security security observability, analytics interest in amounts Elastic. in reliance, are SIM I where First, enterprise on data. from customers to Elastic customers are offerings displace looking every unconditional using and with Elastic invoicing value extract their enterprise for to

value unified especially and volumes they them to a Elastic tend their to volumes in data security, This is grow. Second, manageable allows ways, that explode. across prohibitive and competitors our observability their scale which more with as pricing become where data costs as platform as our with, model, resource-based their costs even something often struggle within

already QX better of ago. focus. that are our the and is Cloud our the Elastic testament across them more customers large and our The existing investments rapidly a Growing for priority our to cloud three Cloud significant. whom is the is to opportunity more the for XX% positioning get driving new future. use than total strategy of are a Many our will And solution. in resonating top ready areas. today workloads Our year in market cloud is Elastic universally customers our and solution with opportunity performance our cloud. majority Cloud revenue cloud in to is is us a now customers. in XX% ever address in to even of third, than And us compared Elastic are one the better and

with third the hundreds monitor across bank. is Barclays we Their technical solutions. of Elastic their will to not to our that Elastic with our over and pre-built much Cloud center cloud XX% future pane experience success Elastic and no are and frictionless the expect seeing uses expanded in of using observability Elastic there. the indicator Barclays, are so of In of our creates hyperscalers, agent, optimistic by single of cloud. customers. We cases power the our business of glass customer, incredibly continue is onboarding on supports business. with Elastic progress about use than quarter, internal global stop their With we we integrations with their data that driven be go-to-market Cloud deepening excellence the we across more, cloud Elastic revenue in Cloud Elastic deployment next a to partnerships There years new Elastic’s observability better X three on all in to who

they serving security future security to SIM, Elastic their enables in to of value QX. hunting Elastic companies cloud. and team on Elastic analysis detection internal are business threat them low analytics more world’s with for expanded in digital fraud they of the can requirements object in one also of also stakeholders a data cost security store maintenance. from the the them for seeing their and Now, immense They throughout their and use instead and or us allows of efficiency increase Similarly, significantly spend snapshots, compliance Cloud time leading infrastructure which travel storage organization. year searchable

native detection search the enterprise searches capabilities their world’s launched XX to vector to results our by leading well passion Cloud what business America like use real-time enable security. done The onboarding effective active retail enhanced at The and growing power expand is you also capabilities, QX users text Cloud featured North the their and natural a us teams experience for type in language. machine simplified scale. I innovation. their global case. capabilities than and inspired looking on delivery signed using empower visual platform search their find are companies and uses communications continued and of own Canvas the vector We and for search, with receive matching their with customer, ads words A million We release users learning, Elastic to hunting easier native operational Elastic customer service for using game-changing highly all Canvas, work Elastic as Cloud also for. their online X.X, search deepen data as one relevant in a their processing excellence threat to they tech new monthly functions their continued security using users. Elastic recently more over fastest capabilities that it across streamlined language to offering, by and making ever am and outstanding

users continuous delivery components and tooling feature, requiring more or coding. processing We continuous language perform named can Elasticsearch natural for new sentiment additional the in analysis, With recognition, pipelines. observability classification, without and entity directly introduced text integration now

experience. delivered integrations, including with than more new connectors AWS integrations as a onboarding also and new as AWS out-of-the-box ServiceNow simplified XX Cloud We more on Elastic well

future AWS, them to Also, for Our are on remains continued and drive everyday. source growth. our and all marketplaces, Azure we Cloud from and grateful Google engagement cloud of community continue we the robust help for will strength us the see a focus elastic Microsoft

X,XXX our Community more than than joined had six in Second in attendees who February sessions languages. Elastic Conference different fact, In more Annual global XX

to years on delivering enterprise search, and a are and our that for yield confident will FY while we come. dedicated addressable remain of planning prioritization large observability, strong QX, our our ahead, durable security market growth We cloud, many Looking for ‘XX. in focused actively innovation total

capabilities of we the demonstrated when have it you our large look and us with about market in to become which I are lay offerings and with you, markets mission out fourth operate. our a We more over talk opportunity outlook. I to for our and forward pass financials whose the to sharing ahead to capture to we the synonymous company the to Janesh. Janesh quarter now Over next plan QX more will generational year.

Janesh Moorjani

our in very in quarter Thanks, with the particular, momentum with Ash. Cloud. pleased were Elastic and We results, third

subscriptions, of up in in We revenue robust totaled We customer and from are growth $XXX.X than comprised and XX% Cloud are a Total $XX.X better QX with performed United consumption in Cloud outside a million, million, in at was Elastic year-over-year, was revenue our year-over-year. cloud third up Elastic growing in strong year revenue. of long-term usage. approximately our said, quarter ago. from was Cloud. Within the XX% great States. still XX% XX% revenue comprising the Subscription And business revenue of building expected the driven total journey. early of revenue, XX% again total Elastic $XXX.X Ash by as million XX%

most million, measure and grows Revenue commercial of reminder, end and the it recognize growth. durable for new schedule. a actual up for forward, to in of as They customer focus monthly subscription. consume month-to-month $XX.X a And the flexibly customers Professional scale the was in believe terms we for growing monthly period Cloud of to new factors, revenue needed. Cloud, the invoiced their way Elastic credits we cloud in makes up performance. year-over-year. versus we Also of the to a of at strength this majority some arrangements into As start traditional either majority revenue platform. our a we the in this a consumption resources from long-term Elastic can on measure now and and actual the annual they ramp customer consumption model. move representative a revenue going QX XX% the as simply the customers. XX% format cloud business revenue annual for to activity based data the and vast customer trend can they model in existing and XX% The of more revenue in ratable the sets total of of new can QX the be in consumption flexibility customers model, our the revenue time. revenue upfront We model, they vast This on on consumption growth. a purchase as continuing seen commercial as reduce consume which our a was business consumption three an on makes Monthly derived formats. not saw continues business time can nicely current preset in consumption-based The based QX, a time-based consuming is is all unlimited to and resources superior needed, platform, us services spending, These now. over and month or both great ramps go have believe can scalability continued and important choice Accordingly, friction. acquire of as Within model approximately those cloud monthly be of they and bring

a well flow by significantly segments timing deal product depending revenue delivery. and strength and three As The fastest, EMEA. of across terms of The performed solutions federal new fluctuate U.S. professional our we and APJ increase I to mainly grew in quarter. was services expect mix. this by services across quarter’s on growth can enabler broad-based Professional have remains in before, not across the said adoption and the driven the business existing projects and geographies. then stream followed customer the in Americas do quarters

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

We $XXX,XXX to than reflecting values above the QX, trends. end with strong also customers more than more XXX annual at ended the with compared customers, such XXX of contract quarter continued expansion

rate expansion compared slightly to and under XXX%. net Our just up QX remained was

moving. trailing bit know, you measure a is As this XX-month and a therefore slower

QX. remain current around expect level net expansion to the rate continue We to the in

in a will non-GAAP gross Now, turning discuss to profitability for was quarter which approximately I XX.X%. margin representing $XXX profit measures. of million, Gross the

continue track expectations. well We to relative our to

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

geos. We these Looking at were marketing, unchanged. through and A we strategy business on enterprise in continue portion out various remains laid of of initial added operating cloud invest driving expenses across prior and as in capacity particularly calls. our the QX, roles to in investments sales where significant up the in scaling adoption, core in then we sales the

and performance operating in better the income due demonstrating model. primarily we the in leverage to our revenue than expected once was the of operating significantly margin, This again In strong business operating inherent terms quarter, achieved breakeven.

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

flow basis. to free Free QX on cash was Turning flow. unlevered in $XX.X an cash million

and issues flow As timing seasonal cash both by can we affected said have quarterly be before, variation.

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

fiscal equivalents with to balance margin operating the flow ended QX perspective. totaled position negative free Cash our and year. We remain an be expect with for on cash remain positive continue a cash our un-levered free million. strong basis expect slightly sheet, from cash $XXX we comfortable Although approximately an We we cash QX, to in to flow full

playing guidance. Turning out to for expected as year The Elastic. we is

executed patterns have We Elastic far on consumption well Cloud so and have customers’ our robust. been

to trend continue. We expect this

for compared only quarter-over-quarter those XX We our increase guidance quarter. the our QX. also that than background With QX, rates, $XXX the profitability not a outlook fiscal increase fourth are a remind at in built the only of year. therefore I’ll that you to third our representing rate healthy growth revenue days look what you has of but conservatism Further, year-over-year in raising XX QX, previously there for for and revenue the days range that outlook is for This more increase The growth our for into and we we midpoint. in typical revenue less of to is revenue in expected quarter $XXX to million expect quarters. the outperformance million, the than prior relative reflects at XX%

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

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

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

we fiscal our planning to ‘XX, process. middle the ahead Looking of are in

While share on specifics next provide some thoughts we I are to early year. will it’s too how approaching

revenue First, build growth we delivering durable focused revenue long-term we are a on multibillion-dollar business. as

still are We journey. of early that growth the are confident in we this stages

expect comfortably goal revenue in of year. billion exceeding stated meet to $X next our We also

revenue in terms Second, growth we increase driver of remain expect to cloud will and for mix. continue powerful a us meaningfully

fiscal profit gross will for ‘XX. Although on incremental create Elastic in pressure transitory Cloud dollars, gross margin

Third, growth. is visible drive discipline results. to our in business support long-term discipline invest to we in with of continue the This our will in durable

investments We fiscal in to growth. all continue make to to ‘XX in functions expect targeted drive

way. back into come the and also We travel a to model meaningful expect events in-person in

markets the considerations gross Despite return Additionally, we operating be to close wage and in margin which in inflation, inflation fiscal these on of we on we keeping wage ‘XX. in margin, eye travel operate. talent a breakeven the are expect near-term

come these ramp, have expect we the on to operating while of to Some the will operating previously. leverage in will as model model done QX be year, so expenses margin. the in we expect term, revenue we low demonstrate point Longer into early the

We also year Operator? and we’ve that, go looking cash ready expect to a ahead for In so ourselves out unlevered And slightly ‘XX. to and far free QX questions. in basis have positive forward finishing summary, we take successfully an are had as with great on fiscal year. next let’s flow

Operator

[Operator Instructions] for by. Pardon me, thank you standing

first go Citi. Tyler question Please ahead. from comes Radke with The

Tyler Radke

Thanks Hi, was call for question. first my earnings It’s are as on And question you Maybe and good little taking first for How about Thank thoughts taking you. really sales Ash CEO you how go-to-market the that force cloud, the a a huge you here. focus congrats afternoon. of you’re strategy are Obviously, one over? here? thinking you. you, for over the your organizing especially, FY about priorities seat into just here. focusing the more bit top ‘XX any on taking as since thinking

Ash Kulkarni

very you to good question, everyone. afternoon much Thank and for Tyler, that

to tremendous been we in And I’ve like couple our observability last fundamentally, for been developed And the displace opportunities a fundamental specifically spending strategy in what of conviction is massive. is wonderful right even analytics with are there the to months, have it’s SIM QX. very that markets I customers, in time a the markets with log execute for in us. meeting are areas So And incumbents. these The in are stronger see regions, the markets traveling in security, team from for in opportunity strongly in standpoint, lot of absolutely that meeting teams.

cloud, demand us customer we sure that’s existing and absolutely to standpoint, what they workloads, them are foremost, base customers about are to into. leaning on they think good are and it’s the there disproportionately where increase is for continuing doing cloud, are customers customers, increase we coming from we on we tending to that our as something are today, first we cloud, in as So that new and focus, on go-to-market a make

and see see the In relationships course. a doing depth excited and on continue continue CEO have selling terms the that, strength for but as teams should to customers, bias the you for spoke formed transition, the in growth the have good also that the I the I’ve our we that to spent – have see several Mike while. to with have a that Kremin. We I in around engine. we all We as of time we of done at been FY explained report teams of and will when Michael to And I’ve as that R&D something that and focused good the we teams, of cloud ‘XX, to that that’s to side, myself also on And And fantastic you we’re very and expect for that on our that’s in see I They towards intentional strong journey. to loving just and are QX. job business, in go-to-market And a the organizationally, going continue we’re organization, go-to-market a not cloud in the continue with side time driving the in I’m drive. as team, that only going QX we’re hyperscalers going year-end. teams immersing been what terms the

Tyler Radke

Great. a for And maybe Janesh. follow-up

just you’re maybe billings guess, questions. obviously, revenue, moving monthly sounds parts staff. two between it given total on So kind of focusing investors the I and like

SaaS revenue to some have think on out space impact metric, out monthly QX, both that call from others about the secondly, of anything any quarter at anything doesn’t kind look of have billed the pieces us consumption the just always in some kind then model we of moving get billings, called cloud that in impacts, for the that Did advance. holiday to the you. in line, help period. there was seasonality if quarter? longer First, the usage a on given Thank And just

Janesh Moorjani

happy those. Tyler, answer to Hey,

consumption trends demand expecting we holidays. not We any either. unusual particular the not any the were on did see around trends over side, So patterns

example. over those about threats as played the our and So an security, you And when observability the as persistent. out think quarter are expected. vanish overall, solutions don’t for holidays we Security particularly

respect did look, successes you those. as numbers we a had pleased billings, print we with variations around strong was here any business. the we with And very saw, not the we’re then QX. see across posted in So It to significant many

You see all in numbers, customer the as metrics. reflected the that numbers as revenue the well

So in performance as in a is for about much a pleased revenue, model. my measure more I earlier, indicator the particularly to customer that. us better usage us lot business for since there our it think, of said is be And remarks technology of is of I a consumption and in current

order of as quarter terms but played as out first that, expected. half that the say the in a flows, billings we did strong We want would to In deliver I’d than said was press look provide it those It we the on growth. folks details for release the stronger be. did at

so And terms, currency even stronger we had posted that constant about against half. it you it think the if than in was And did the expectation. first we deliver in numbers

I it the calculated has cloud think on that significant look you forward, focus now if revenue, relevant. revenue, So about deferred is of revenue, at which because XX% the we makes monthly that particularly and portion the enough the going no conversation just business, continue business business billings a when to less of that’s will

the fiscal on and the ‘XX very at that looking guidance reflected expect raised the forward. we we confidence Again, here, We about revenue. talk will for year. see So to going billings strong you really revenue and a beyond, I had business and about don’t us result focus feel good in

Tyler Radke

so much. Thanks

Ash Kulkarni

you. Thank

Operator

Lenschow question Raimo next from go ahead. with Please comes Barclays. The

Raimo Lenschow

One I Two you. may. for if Ash. questions, Thank

talk you your in guys like good comprehensive like aspects log up etcetera, you at infrastructure the the were Barclays of more as us big terms is look you about maybe as is of in observability, the there here there fulfilled But is lock if that need – and kind you monitoring, and cloud be a etcetera, you to Ash little well, for management. obviously, can with bit message signing like well. obviously, what’s stack what known how because APM, like being

a for you very Thank Was in and And drove the seen of that maybe that a I on bit congrats strong now. was is adds how expansion, of So kind me focusing Are kind a one $XXX,XXX, there comprehensive then quite your you terms and the for particular that Janesh, about number. like by anything What et bit over little driving from quarters now. it? talk few number? of more haven’t was portfolio as that a cetera? customer well. on little

Ash Kulkarni

you Thank We Raimo, for continued appreciate business Elastic. and the and in importantly, most you, the thank it. trust

So log maybe let in, the that whether completeness APM data, stack. the me upon is bring CICD absorbability data and monitoring data, fact infrastructure core touch this on And all our data. we that The question of the of one data, strengths. TRACE the metrics, metrics it’s

can a about given many our of core very perabytes we with analytics, our that given we’ve that calendar that year, new although large CICD been that was roots monitor that monitoring. a our a Elasticsearch, allows tremendous technology building kinds that work which one with all the that our we we’ve This we of capabilities over the infrastructure think us about been – advantage Elasticserach and about integrations of amounts ability and to at fundamentally started that We’ve many Last for into comes in machine growing. into provide we’ve to where powerful. over portfolio. that a source deep CICD technologies and our Today, greatest done Maven on area are do into queries All our that’s tremendous organizations prepared part but to tremendous foundation our form And we and my other scale. about Barclays are big of correlations ability is visibility X,XXX can’t rules, in acquisition, and an acquisition talk problem. advanced pipelines, Ansible run done have very it’s run like EBPF, of can you acquired in in ability our strengths, all cloud Optimize. – is Cloud. remarks becomes Elasticsearch, talked all the we small process. strength. our data, a really data, I technology Similarly, this introduced Linux-based learning the with out of that when we using And look capabilities customers, log And very of of customers the you our fast, of that’s and manner, to frictionless around the a have APM that advanced of is Elastic we’ve difficult capabilities and that gave years, talking in us large this just really data in of systems, the when that that very and have And metrics

expansion we from although as well pricing and we a which see allowing started to the also have motion works model, been our strength. very natural playing here, our has – viral more might logging our So in

what which a this as optimism gives as convergence customers me we overall know, helps seeing in the and to usage. of then strength also that’s – confidence And are and lot obviously, many So their as expand security, you observability between of continue us

Janesh Moorjani

strategy needs time. more for customer we is us or their us one drives sources, XXX additional significant Their than ingest about more customers. all And XXXk data working follow-up is this more expansion and into got, over very We’ve grow, they grow, look, on customers case solutions now use as question use data for solution. saw, as volumes happy this one with to with they of Raimo, extend customers the Janesh. start from accounts. are And on the fundamentally, than our Hi, the I’ll ACV. metrics you

more see that. customers start XXXk small to it’s become customers that and So expand larger great eventually than even that than to

And been the there, we’re we’ve know, an is I’d other playing our which, out within also strategy over you that The piece there nicely quite area higher that as out too. call enterprise, investing. is is calling

to continuing than greater calling awareness more on beyond and executives buyers, size. departmental taking are now We down routinely million see C-level transactions in $X

a we are us, all of opportunity of pieces I think had. and And would way with the dollar that So half still those stat us at and that’s if think out us we’ve to or – success of will only that ahead I that I have another our And XXXk some of highlights for look I those customers, one of that adopted of have offer adopted more I if of ahead if solution. those XX% that, solutions. that you two all pool million three more more shared the try are opportunity pool than indicate for look the us of plus previously that ACV, about than the that customers at recall than call customers

just drive we upsell. indication to that’s that continue room the have So of to an

quite executing the excited So opportunity we ahead we’ve of been and are about us. well,

Raimo Lenschow

Thank perfect. Okay, sense. Makes you.

Operator

Jefferies. with ahead. The comes from next Thill Brent Please go question

Brent Thill

want you’d just why you I that conservatism follow-up And is? the Can said I you guide. guide. to the think comment in on there Janesh, met on explain less is the

Janesh Moorjani

Brent. to, happy Yes,

been in three had results talked has obviously, we bit. a nicely that’s stronger very we than year, expected Consumption that here strong quite so reflected look, quite we results the quarters. So for first this QX. and We’ve the about in all far posted been

prior And days nice that fact bit over headwind to that a the quarter-over-quarter despite it’s slightly than raised are $X X%, typically guided million we’ve guided, the more that’s sequential this in of we’ve now, in higher more usually little a for our the that is growth, quarter. any the the at above we quarter got quarter. way headwind, the guide provided That than terms increase the the quarter-over-quarter look increase that despite QX when So that in if here. we’ve the time, on year time this got way we’ve $X And been. past, we’ve guidance itself And look is Typically, guiding is it’s headwind by just a the prior at basis, a X you of quarter. fewer than in outperformance. full so we’ve I million

So we We are feel are full really and continuing you approach, year. the far a to less prudent about it’s take was QX before. conservative still good it there? Brent, than but

Brent Thill

sorry, just a the can drop more. happening? on current on the shift between And to wanted just Janesh? quick Yes. just long so the down I’m to I DR, I drill follow-up in cloud, piece and the and dynamics considerably, – as DR current term non-current – the Is came that What’s on

Janesh Moorjani

Yes.

some time, request. the is We lap the I saw customers customers in of our business, part is year. TCV think request to when seeing only that we from accommodate and now there with what of year will to last some for entire we of long-term full most kinds as those transaction, just transactions QX, have over deal you’re time advance. that invoice, bleed that short to term we dynamics think just flow. in From in always us And I invoice annually an associated

as factor. be deferred more can timing a know, in So or always in revenue billings broadly, you

importantly, would revenue, higher. – step XX% if adjust I I currency, the have cloud noted, monthly think you several have as Brent, And not those even business Currency of I it some another naturally. said, issues would is short-term And been adjust growth that’s as fundamentally the been more revenue XX% of points piece. deferred does as any back, deferred But grew revenue percentage short-term deferred quite that timing for you now business. have for

less So just lot look revenue make to at. that to overall, meaningful deferred starts a

stay why in of current that’s we patterns So most indicator on continue to model. consumption the as spending the focused revenue

Brent Thill

Thanks, Janesh.

Janesh Moorjani

you. Thank

Operator

next question with The RBC ahead. Matt from comes Please Markets. Capital go Hedberg

Matt Hedberg

I guys. obviously, guys role, are question. here. my etcetera? taking Ash, on CRO I’m is for you Congrats, as But Thanks of that what of operating timing, the sort wondering more promotion just the thoughts Michael curious well front, on are with the Hi, responsibility. think taking on Great. on sort

Ash Kulkarni

question. the for Thanks Yes.

our are from I to have So the cloud than and the about even important I’m and bias it with is throughout the FY actually cloud, the as massive enjoying cloud I really us going sure that that opportunity got greater that that’s for in allow been. to motion, understand really because the to drive we that sure what working has plan make motions my ‘XX organization well the so go-to-market that, define solution to this make the me, that time to it’s and fact think teams spending we’ve continue perspective, in

where reason teams as team. Officer, of wonderfully. the all this Sales job. single – honestly, any incredibly a have we I already teams, of to terms at the sales I’m in is leading And point Michael Now engine – I’m because imagine person today enjoying in a time, things can working working working for our I I’m we and have it’s is have executing the But not well. great report changes field wonderful seeing immediate operations. selling got any with In time the would are team such future, a called a doing Chief out, the

Matt Hedberg

makes And of I you growth RPO missed maybe quarter? Janesh, did sense. then, That a Got the it. lot you talk about but it, in

Janesh Moorjani

it touch Hey, no, didn’t mention here. Matt, that I on happy I’m specifically, but to

revenue, strength just As overall on deferred you metrics, on side business again just RPO many the again, does cloud any know business RPO monthly the that saw so like different either. specifically, on not you have

of thing. again, that’s just realize, But other model, that’s customer so less a is a their what burning saw. big RPO meaningful as And good you ramping actually chunk and And faster us. the consumption if backlog, down becomes piece in their important a a that for is we usage

us on reflected than go those the higher obviously to usage, future based allow So expected increase that’s to commitments in their their the RPO that to today. will and not in sooner customers back

has these commitments FX, the the they shift less several we a for time, a for are things is to future. the that’s I drive But the If make which piece, over model, consumption normalize and main customers XX%. headwind I or again, for currency is have on they whether on at towards So there growth like to of of us said, monthly look with in been as as higher a RPO significant numbers, would the points But growth was why format, another basis. whether was constant us. RPO terms can been opportunity that just in piece reported focus area you us

us, business. So on of the to continuing as primary a focused we are stay revenue indicator for

Matt Hedberg

Got luck it. guys. Thanks a lot. Best of

Operator

question Rangan go comes Kash Please ahead. next from with The Goldman Sachs.

Kash Rangan

to you Thank Congratulations very Janesh. Ash Hello. and much.

you. Ash, a question for

you to to and cloud that initial an consumption who how to it product From is CRPO, consumption to move make and the a want you But You as you a as invest that be you actually growth. the parity, is a quickly might a for is, that models up the platform no-brainer. it they above it heads customer question would because for Snowflake looking on-prem which like in becomes not otherwise perspective, able that such legacy. shoulders are can, the on at probably what cloud you RPO the ensure Elastic things pivot on-prem as are it’s predisposed model, but And Datadog, do platform it’s look rich to cloud a no-brainer the to just got been have version put one Janesh when that right?

the So, consumption also do you you much. cloud point the of the envision cut your to oriented so other like see you have? whatever when you models CRPO Thank over optimal growth benefit can RPO, that business – is consumption of the

Ash Kulkarni

Yes. question the Thank Kash. for you

journey the So, talk when I that bit of a team been about comes to it little step and want cloud. back on to sort the already has

driving about the the don’t Cloud, you of been Cloud, of if that in you lots Elastic to platform. the on cloud into lot way have a worry monitoring given self-managed. the of aspects, we Elastic just to fact doing side, very typically are were investment you there intentionally have and So, aspects the R&D would our everything management advantages need

cloud. We that incredibly capabilities snapshots the have well, especially like delivered searchable work in

at we We is what meant of have got auto the that’s is of stage true on scaling get on, point and already other only kind in has it it significantly of Elasticsearch fact, years where to way made that friction that started. already delivered but is components. Elastic all Cloud for the par, Kash several that even the a less not you have over And is

going get faster. You can

just the and we why natural all the cloud. the in technology the advantages And You some a that’s seeing adopt today can in there reason capabilities are better. of

this talking are of sense years a large of And We only also here an like I choosing mode, Product depended investments joined trajectory. self-managed as and was not I Chief continue have had the enable compelling more. you resulting not What the And sort has customer. that is Officer, self-managed this customers, saw that for Cloud are customers platform. I customers confidence on Cloud. that really excited. about making customers, are at the incredibly sure a Elastic educate to our naturally what’s a i And now long trajectory. but in this are as not the time focus, about we all traditionally pivot our to been Elastic are very we very these that invest Elastic organization last about s in everything product And excited year made the doing we when very Barclays I the over continue and that’s on that have And are recognizing having Elastic in work excited side organization on I to side, the future field that actually in Barclays customers doing in personally cloud. teams we the the very partnership The our forcing are cloud very am the and go-to-market we there. that we

to it other turn the for Janesh me Let question.

Janesh Moorjani

We have X, Cloud right?

Ash Kulkarni

similar Kash, Well, is Barclays been we and reasons. would has it’s wonderful been we relationship. continue. – customers, and why reason future can’t thank we of the same – for there love a relationship to no in able definitely, our be I said, But to have you I appreciate like all all the

Janesh Moorjani

on On some commitment. performance customers between distinctions out an up end business consumption-oriented that obligations, look, there, important monthly actual the making of models us one based remaining of being that on annual the actually or and signing that choice month other Kash, invoiced note, think of the a the on basis I the the at is and consumption have of

RPO monthly no the is now, of as And so know, is business. that. at that’s there you XX% cloud either model, piece, all in and for can the they opt which And

they and side really of over revenue what that across customers the to bit this at takes, current cloud right. it’s a look have the into technology. That’s at on lot is little and I customers when the – number. you board, all it’s annual, that number, Revenue different our meaningful how for form us duration, the convert where are. using equalizer, for is perhaps are why consumption dynamics it monthly of more on come And we depending formats, measure which the stage most which RPO a adjusts the of primarily it’s and So, can less that on how measures,

So, that’s mind, why, my a that’s measure. in stronger

Kash Rangan

much. Wonderful. so Thank you

Operator

Mark Your next from go JPMorgan. Murphy question Please comes ahead. with

Mark Murphy

Thank you very much.

the website. So Ash, Amazon has Elasticsearch its removing from term been

the you the AWS think infringement part partnership. strong And in I to as resolution. of trademark still seem a very momentum have

you Is it? there a You here benefit a clarifying to feeling term mentioned buried their it piece today. everyone And to sense hatch several made linkage from do times the of that your Elasticsearch? kind or has of kind

Ash Kulkarni

Thank question. Yes. you much for very the

very release, more to helping relationship the that And see even a for press that that to to the when it trial In conversations in is apparent the and those as tighter and I joint be And this things continuing In making create am must you prospects been see before them valuable tailwind, and mentioned, for into and better, for long-term, with data the partner of of apparent helping one it’s have can us going really to market, Elastic. done AWS work have a in marketplace that customers, There come as AWS definitely becoming is integration. have that. the we it’s last done our it’s that, effort the resolution things the and that’s the you in more of with from the about we strengthen Cloud we particularly but have license market. So, is intentionally is have strengthen. seen is the the I easier made customers product on lot clarify that helping with excited Elasticsearch, I coming year, that really the work having they and Elastic trademark, that’s which AWS us. have now. from been Elastic to only partnership. sure in change area a but clarity even partnership that put Cloud, we and helping to near-term, some customers, AWS directly make the to immediately cloud-native start that that’s integrations And And we this an where

Mark Murphy

Excellent. half and at the billings slowdown unique we a a at investors where year-over-year accelerated And both assuming in revenue. first And foreshadow XX%. where look revenue it’s the have have in opposite as had in the what been for situation growth we happened, this would follow-up slowdown that sequentially yet Janesh,

metric there so to metric other of an wondering, to would approximation is normalize. ever some or or type to help ARR you And help us, some am consider shifting I

there if shift to mental we consumption. if growth to at want to that, model to instance, we points is points billings the on where see we a right, maybe could For XX XX%, account for tack try to X

Just any kind those have thoughts if wondering lines? you along of

Janesh Moorjani

Yes, great a Mark, question. it’s

In terms answer of the part – second first. will I

terms probably whether the just revenue of thinking it’s majority reflects annual or is it’s consumption-based. way, three a In and business full look just consumption monthly apples-to-apples now months particularly an business. of monthly regardless best vast about and still revenue, annual of our cloud of And just since to at current

different got offer. It duration And full the reflects consumption that a the of it’s patterns than our deals. formats technology runoff we it all quite adoption the rather So, the the addresses historical of current of across time-based effect naturally.

all ARR, ahead. again, at in on measure consumption given model, We there then that’s aspects that And keep use of first that’s customers more revenue measures when the the the looking a meaningful probably and in point that think to this the seeing, look, ARR model with the of revenue variability particularly addresses harder predictor think in join. out a isn’t differences consumption perfect ramp it’s I in we to the even to patterns why are there probably is us So, the business respect and just consumption best And as that of time. focus timing. for a measure mind

big that, and So, portion cloud of a that’s is largely consumption.

to metric don’t short as format the full consumption a So, and want that to I continues increase that’s mix. a put reflective life not there in business the shelf may out have of

the revenue. staying why of focused part we that’s reason So, are on

still best business. of indicator I overall the our think it’s

Mark Murphy

you. Thank

Operator

from comes Brad Please with ahead. go The next question Reback Stifel.

Brad Reback

Thanks guys said, reiterated and ago. have don’t very Janesh, only last the Great. And know being talked lot much. business, I this about it you isn’t think XH way was being I to necessarily about XH. billings of at look a from afternoon. That XX that we the the quarter commentary days best ahead

So, if if front that why? trying just figure I out to and has so, am changed on anything

Janesh Moorjani

measure Great in why question, the XX% spent less terms And Yes. delivered currency Brad. billings, here, half. growth look, about to of constant in in business. XX% is year-over-year you talking quite first we QX it’s it compared said, we I The have a bit way think time a about in as and relevant the

enough. in think much that’s future And indication really about way on focus to It pivoting the it measure. going I aren’t So, I is we going is, the revenue. We the to best think billings forward. are the

Brad Reback

much. Great. Thanks very

Operator

Please go with Ikeda America. of Koji Bank from comes question next ahead. The

Koji Ikeda

Elastic Hey for detail late. Janesh. really here the processing Thanks natural press if my bit X.X and there. in on I release you highlighted guys remarks, Ash prepared taking the this in questions. with went little the is on language noticed Apologies hopping the into announcement, a But

maybe why a the So, a help a deal? more I expansion could guess Thanks understand from this mean could expansion you me what market? importantly, usage from guys. And this end or is such case use big

Ash Kulkarni

for question, and Koji, the Yes. Thanks me address that. let

release minor just of major always come truly have a X.X all because that fundamental we first release, lot of in So, a top the the not typically foremost, it. delivered releases is and in innovations, but on

us in this And expect always through to but so beyond. innovations you manner, continuous we calendar not year, can as have, a continue to only deliver

it, techniques the capabilities big capabilities have the that your And search to capabilities enterprise advances natural other results get a to are to whole search use when on the for search, applications those is applications X.X, and for app where applicability natural of with tremendous you together, processing. when search, of all we in and customer-centric And momentum. custom which language you bunch one looking for query like functionality for, are that Now take search lets of continue upon are the kinds that there of of and you comes more both drive we in allows that really more you introduced employee-centric language area this that top more the applications vector the search. use is search. surrounding kinds of query what in natural to enterprise enterprise expecting it do learning obviously of lot vector vector the search, additional is interesting you that’s cases to machine it for two – of a workplace cases are are apply just can it. all depend Also, also But the search use do and

Beyond made top of integrations, it that, for bring to observability the in advanced additional the analytics doing on it. we in that are we data work terms cloud-centric make that easy of into announcements to integrations,

from of All benefits what inherently is that X.X. in

and a in observability, platform. security So, enterprise this more to come lot on search

Koji Ikeda

appreciate Thanks it. Ash. I

Operator

Owens ahead. from comes Piper question Please go Rob with next Sandler. The

Rob Owens

a inflection more on-boarding little with was rounded aren’t seeing a future? number. see to flattish bit quarter-over-quarter, providing if which an will Yes. kind realizing Thanks here, net question. for new wondering I motion, inflection you speak and were my the year-over-year down in near Thanks. it’s of or frictionless customer adds, taking cloud flat an could to But here why we of we a

Janesh Moorjani

is take this Rob, Hey will that. I Janesh.

new So, the we in of actually pace the were quite happy additions quarter. customer with

– new a that trend. cloud revenue new adds a of we strong monthly as from seen mentioned, quarters now, The saw of well. where, have as rate our majority and strong for customer I customer again, QX on We additions trends consistently perspective continued are many

We the cloud, heavily quite in have in in in product. marketing, invested partnerships,

results investments. the these about see growth. how And of great actually see it’s So, thinking to that we

annual slightly deal think sizes up year-over-year. deal I about sizes in were subscriptions average

when the of our look pleased the at data was it I strong are for well. quite I we customer across overall metrics actually QX, as to board. in all So, think that see And

with happy results. are we So, the

Rob Owens

you. Thank

Operator

The question next comes Nikko. go with Please from ahead. SMBC Koenig Steven

Steven Koenig

any of you Hey, And Can of in. for cloud color guys the on that all? converting self-managed us especially Thanks squeezing kind choice are great. anticipate and at that wondered part customers. larger what to if be customers of Thank whole me in could kind cloud? I you are lumpy in drive give much. able you and convert kind either to deployment the to to them factors their of options, or very

Janesh Moorjani

if in will would when like start own customers like Ash the driving on But substitution posted. anything. of when And And additions, were customer the our mentioned, maybe Steve, think at sort of fundamentally, I unique obviously, their this to has cloud Everyone It’s strategy. that in got that we some customers, has and regard. and net of is customer not when move even those then new their trying their I the is see are to move look the I own everyone cloud. or I add people, every the to cloud with Yes. we I Hey at got Janesh. it. both at story look about own pace. business the business self-managed self-managed growth behind business as But Most business, overall happy very with by

the A new base. those is continue strength customer not to expand. transitions with we strength necessarily lot of So, from was just driven cloud that and the in the as organic that have customers

So, spending that’s are and seeing. more we cloud growth expansion. Customers is are well as cloud, opportunity a in significant for just for as customer new what

pattern. continue where that are spending their because to faster expect grow we driving So, us that’s for cloud will customers

of rather And of than so it’s transition. more some the sort opportunity

our large. opportunity think is I

to Our we penetration in formats. grow have both so room rates plenty low, of are and

add that? you to Ash, would anything

Ash Kulkarni

where the queries, are are into our the take as able customers easier in the I who at Yes. that The into advantage way expanding to cloud of the the one sort to would and start have started manage, in run Others expand seamlessly attribute of on-prem their their add, that to to and to cloud, use, it that very expand, monitor have to them are all as And I cloud. thing architected self-managed capability natural important them. create makes thing somebody the are offerings, is But they look for they that’s a is that to of the the we several might only new cloud. way to simple continuing understand it in the easier applications such even environment a frictionless, easier see to growth faster. becomes

Janesh’s are point, customers. forcing behavioral our any in we to not So, patterns

are we those naturally advantages of make that a and And better to be then much anything just them choices. than We the else. letting showing model them cloud find

Steven Koenig

Super helpful. Thank you very much.

Operator

from comes Blair The Please with ahead. next question Abernethy go Rosenblatt.

Blair Abernethy

Thanks. for Ash. congratulations, Thanks and me guys in squeezing

the space, over security a a on last Just solution, that Elastic added lot you security question acquired of so. on have or quick the year functionality the functionality,

to do security Just quarter? competitive demand positioning the how your looking of go you you how beginning the Now see and yourself with like side environment security And of the things? solution? differentiate today in wondering market what’s that versus the

Ash Kulkarni

Yes.

driver. very a So, to continues strong the demand security be

made, If at the us our the over inorganically And business last and very of years, overall over both XX% couple investments we up accounts of you now organically have set today, for security that our business. look have nicely. security

from next opportunities that quarters. that of the in mature fact So, displacing is analytics about SIM. we attacks enabled expand we on of in we actively to research. of a against different in part where couple in I threat talked showing to of and SIM to that’s data and run a it. indicate expanded actions the been product have the kinds expect most requires you find I involved for And cloud And made us able strength it, we and our have importantly, are patterns to that investments investing acquisitions sources, most my natural area a incumbents are take be opportunities to we in there. then remarks, all seeing pull And security XDR, lot and the it’s in SIM from start area the prepared because security. effectively portfolio, of that the up the in us in

research and that team an against protecting Ukraine, as systems observe work of attributed was, in destroys and earlier were to And data to Russian that December, some are end end our new of effectively protect wipes a new wiper, example, type points of that just form groups. that In data that week, detected very a malware blister to Ukraine endpoints So, we on kind discovered malware and crime there. a we your we called started able we doing. were started proud we threat this in again,

I I teams. doing core are a expanding from of the amount SIM and of tremendous personally could strength of starting And be a the Elastic quality this work. we So, about there, tremendous with amount happier in strength potential. see our and not

Blair Abernethy

color. Great. Thanks very much extra for the

Operator

question-and-answer This I Ash concludes turn any the closing remarks. our Kulkarni for over session. will to back conference

Ash Kulkarni

Well, today. everyone, thank for you, us joining

As am very you about can and and tell, coming excited to in meeting evening. forward again, also looking many weeks the great we you I opportunity the a months. remain of have ahead. Thanks

Operator

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

now may disconnect. You

Elastic (ESTC) 4 Mar 222022 Q3 Earnings call transcript