- Earnings call transcript Q2 2023

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Operator

Good day and welcome to the Elastic Second Quarter Fiscal 2023 Earnings Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Nikolay Beliov, Vice President of Investor Relations. Please go ahead, sir.

Nikolay Beliov

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

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

we the take Following will questions. remarks, prepared

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

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

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

Media December Ash. turn XXXX that, third Technology, XXXX, close begins the X, Telecommunications XX, over quiet we On XXXX. of to Conference. business it Our Barclays I the be Global will will on and in With Friday, January participating fiscal at quarter period

Ash Kulkarni

We thank of all currency. In ago QX, and XX% grew in than values XX% have you approximately in opportunity Nikolay subscription XX% revenue, I X,XXX XX,XXX continued XX% and quarter more our contract quarter fundamental for in of in year with us. business. over year-over-year total and ended currency. annual from revenue $XXX,XXX. Thank you, comprised constant long-term year-over-year up strengths constant Cloud confidence grew customers, core the joining the Elastic of our with market the including

During on our moat widening the durable quarter, continued focus growth, competitive three areas: progress profitable across growth. our focus our we continuing to driving make key and

continue platform for show customers also cases. onto preference saw a consolidation use our to We for multiple

While in our us In and the slowing started we we began shift the differentiated of the experience SMB in the macroeconomic down belt segment. well, platform to month consumption October, also have to see climate ourselves. tightening positions

overall, on stay a it onto greater place, also to than support In single We conditions. for and our investments countries product us in use more our That our requires adverse and cases. platform environment, internal particularly more created also us on the U.S. difficult them where customers increased scrutiny we consolidating sales be excellence. our realize business them focused of as coverage, our multiple drive help value critical to order ever help to this saw clearly the has through for close before strengthening deals important is dollar to operational

are drive in those ahead. overall up business those more of see areas profitability Looking end we business the we areas growth, faster. who In and in who optimize intend where continued opportunity for to focused challenging be the investment other on our ahead, adapt even even times, the profitable those fastest

We grateful employees hard their all the right and and have rebalancing we best taking easy and to decision them XX% their investments and made long-term With the our work decision, in reinvest to by areas contributions to earlier align strategic this and reduce made functions some in we families. we We priorities to success. drive announcement Elastic. are this very within owe an company profoundly and to to we are with all not us the Towards company. was our steps selectively our for This us growth. workforce impacted will difficult and investments this position decision success help of across end, savings the of the our today are for position that profitable

of of better As we motion. also an of to margins share reposition prefer will operating SMB marketing, hiring. path cloud double on investments the a coverage deliver ‘XX, on us these will low-touch a products, our the FY XX% actions and details self-service emphasize strategic serverless Enterprise Janesh significant allow customers like we to to in and needs areas thoughtfully our to who our are going non-GAAP generally in increase later. will In future in for to example, half a us segment. increase address to sales down set commitment. technical more operating non-GAAP income ‘XX in a our These growth automated compared approach FY second the portion prior and improved our This

our let long-term Now, about growth. talk of me the durability

OX last including more Ecolab, Telefonica. XX I SAP and customers, with than Standard USAA, XXX Chartered Westpac, Bank Canvas, the days, Over Concur, met have

We AutoZone, including our and SWIFT. crowds reinforcing amazing has room-only York Demand growth. and a events Singapore, which of at attending ElasticON New firm in and Amsterdam events Elastic from our Comcast for meeting standing with Booking.com, with bottom-up hear our and awareness, our to some driving events, are BMW, our customers, product-led been strong ElasticON greater in-person are pipeline customers adoption also fueling and

traces, pricing from application invest metrics logs, with open, areas to analyze is data security, data that interactions that in we they continuing offer of observability, And and consumption-based the our and and seeing platform to customer an security search. our their observability model, working. are are allows We in high-performance strategy a related other with use newer simple Especially that all platform a a to across we proposition into opportunity onto technologies cases creates Elastic consolidation drive a easy. platform. is to from price ever compelling place incredibly consolidate to customers times, value and and our other advantage lean onto our platform our Elastic see switch Cloud, In greater than platform. and at these And with cost all before expanding

expanded of long-time applications we solutions, a Observability to and they quarter, expanded their This Elastic into Search and Elastic cloud Cloud supply business to customer, Elastic consolidate with leading streamline instance provider infrastructure. global chain RRD, packaging, multiple marketing, recently single on a a print Enterprise

with expanded most improve to deal global is an satisfaction. we based logging AWS a customer, partnership. Cloud What on business this me also Elastic that the demonstrates excites this customer and heavy the on Elastic the partnered through strengthening Observability manufacturer. the AWS Previously, Marketplace, U.S. equipment with We X-figure with service top availability consolidated a OpenSearch its company quarter with deal platform which

Speaking we momentum of Cloud. with and build cloud continued partnerships, Azure to AWS, Microsoft Google

their the Azure key Elastic customers partner the setup through than use started Altra hyperscaler processors, Marketplace experience Ampere AWS, on to the security customers latest and cases. again new Virtual ARM-based With an maximize revenue was for Microsoft Machines year-over-year. marketplaces enables a observability, search Elastic Marketplace. and streamlined we more AWS through on get doubled easier Cloud launch letting Azure’s sign-up for This efficiency with with Also, experience a joint console. across announced of Our cloud Cloud operational the AWS Elastic

resides data Finally, make and that Cloud Google expanded drive partnership to on customers Cloud. an from workloads for with we Cloud monitor insights announced lakes Google to in Google easier it and secure data

to their moat, the series to Search, This optimized our costs. enable our we to metrics our needs. Now, platform. onto our ElasticON onto observability metrics reduce current customers announced help further all in onto innovations data real continuing is platform competitive At events, see our recently technical Elastic will innovations product easily Elastic in a drive and customers in we advantage available environment, These extend widening to and consolidation in and a preview of include competitive our overall for enable for more opportunity to-date. which consolidate their more our us support

query and enable of We our across to customers a becoming announced which our available will support from query also next new it to cases ESQL, us and to on for make solutions platform use all migrate enable competing offerings. year. anticipate richer semantics to platform easier also ESQL our will us later language, additional We

workloads. supporting unveiled short workloads control, we current will duration roadmap great a serverless for for optimized bursty broaden product, fully new complement This is which which will Lastly, for our cloud market. or a be our long flexibility Cloud experience to performance managed Elastic service, for provide a and will and a running new offering addressable

cloud of and is power for Observability entire critical craft SIEM capabilities malicious hunting, that and build additional will I and enable recently It their sources, we about share business Now, for correlate They quarter, ongoing Starting across defense and logic data to enterprise been detection behaviors surface Security, examining renewed across threat behaviors. platform. Search have this with and team with Elastic to innovations Security provides and their wins Elastic response expanded Elastic integral using use details customer their to security expanded Uber. interfaces our solutions. journey. some security investigation their to logs Security, Enterprise

already XX Cloud for benchmark-based newest of than are customers free cases security, use and posture business Elastic now Agency management available. More the approach analytics. cloud They deployed security customers unified U.S. just newer on XX% security the security the which our using their and threat Elastic XDR also using case, our generally expanded We our over Kubernetes, focusing environment, visibility operations for of for validating have in CIS became modern recently security on across Federal We SIEM with use security use previously version cloud center. that our open Elastic. insider now

and quarters, entity in have sort the next-gen capabilities Over hybrid intelligence including our SIEM, last several and two host threat released user analytics. new management, we

to Elastic the provided security Year threat of teams Elastic in Intelligence by using Breakthrough insights to Last was Gartner addition report Quadrant showcased Security. that Award also the the and for released first Global for this, Cybersecurity month, Compiled customer conducted the intelligence honored Magic we data, the threats. the Threat Security cutting-edge telemetry I customers. to the Elastic cybersecurity Report, was evolving of share first-party the named unique our with Elastic In details Threat of a of which nature XXXX recently visionary our recognition in capabilities Platform research And research am excited SIEM.

Elastic multiyear spent applications and business multinational on services which Elastic The Security. on on XXXX threat company, enable X-figure to Observability, relies and centers quarter, Elastic data uses company migration to company’s Elastic the moving Azure an Security Global to we tracing and with distributed time Now Elastic Observability a for uses reduce financial expanded this piece Observability to Microsoft significantly the Cloud from thousands hunting. of the of of Google

In With We using also can in of synthetic locations which APM and consistent gain have at with functions QX, they tools. operations companies, and APJ. include competitive QX, ensure using the been ingesting have such of quarter capability WiFi, traction wins park log analytics we we saw synthetic open are critical open using now added in Elastic clusters monitor location to best leading Observability runs. clusters the point-of-sale expanded Elastic, In capabilities solution test experience as additional of the systems our to to growth an Elastic additional and see to in Observability Xx park to Elastic business addition world’s XX% APM telemetry IT Observability to we And one customers virtual the and and strength. the strength. the to to seek two U.S. continue protocol. this telemetry provide growth as monitoring APM general, one park U.S. expanded the our theme lines Elastic are protocol XX% beta data consolidate continues and uptime media visitor possible. almost entertainment in and open seen standards has in in

a instrumentation, profiling lightweight private requiring of beta code. other Profiling, multinational performance to a solutions an optimization Universal use X-figure to access and Enterprise the their Enterprise documentation innovative launched on time proper the Elastic digital customers zero saving to due renewed needed fleet we real-time with by to is We changes of Search ensure Search, In limitations aircraft this quarter the with delays. overcoming to They maintenance cost within requires also multiyear the ground reduce and company. aerospace and provide maintenance deal capability. no Universal the Profiling application recently

and help in and using Search We and mission-critical adverse their evaluate CDC. new partnership event with vaccine to rapidly the the also agency. for quarter submission approval reporting with U.S. monitor Enterprise approval renewed center existing vaccines business vaccines of the access government They expedite data this are Elastic to

front, hybrid updates vector search On of search combines search results. vector recently the as improve scoring availability relevant general we as to more that traditional deliver announced search to innovation search well the with accurate relevance through and

seen machine a We capabilities. last of increase an learning have XX% deployments model language quarter, indicating adoption processing the natural our running in and actively wider

Our and cases functionality and product accessible complex around making across search strategy in this use centered area segments. scalable is

Now moving that revenue on we I our targets growth, and for team the of focus profitable and profitability proud to our am fact our QX. exceeded on both the

to business. demonstrates have our guidance operating I QX already our of Our than steps have growth. in the taken significantly profitability our operating and clearly better about margin inherent X.X% talked was accelerate the leverage we

thank greater to employees have our confident environment This and make, even also performance. those macroeconomic contribution customers, focus for areas navigate and want confidence. and with this their thank the have drive us ensure want that will summary, business are difficult investors and will to to both enable growth more support our expansion. Although and for their our operating we I changes these ones the to success for announced long-term. our the are to highest continued near partners in opportunity of we margin our In and that I on decisions dedication discipline through

our giving finally, consolidation have customers; one, opportunity; to strong current platform tool our ability our desire continue strategy, relevant before, of fourth, to team; ever to more the fundamentals. and increased than our generational for company confidence the our market solutions customers We criticality execution is our third, build given: by a our which two, environment; in in the

Janesh. over Now, to

Janesh Moorjani

Thanks, Ash.

We growth delivered commitments of ahead currency are pleased XX% year-over-year We for constant total that QX. revenue. we our in delivered

line previous momentum year-over-year quarter We current economic and despite Elastic the we in currency. revenue and total Cloud, top beat had constant greater On focus despite our internally to QX. trends in currency-neutral again current in environment sharply than once in more guidance of Ash similar derive year-over-year a XX% room on the guidance. our terms business growth in the our the headwinds the was and beat line grew high-end FX continued on QX In bottom described, both our Accordingly, that the which platform our We of climate basis, business. helping our consolidation revenue we in included business with we customers see also tool of benefits and single greater actions in drive onto efficiencies a specific are functions. in resources to taking all realign to for the to

better while address in automation our the in low-touch are emphasizing of towards SMB investments our needs coverage of we better some optimize segment and coverage. First, that segment, to sales the repurposing approaches to that customers enterprise investment focusing

such demand marketing. are other in priorities we and as invest in Second, our rebalancing investments digital to and architecture functions serverless gen and engineering across

in align efficiencies greater drive G&A and and also our to success will We functions. customer business priorities

‘XX We actions of us specific path XX% the on at Third, non-GAAP ahead near-term, for the us. margin but allow will help the already best these market the we fiscal profitability today to operating believe team opportunity announced importantly, in actions put and of our goal us adopting align not achieving to to are capture that. only a

for strategy the the in navigate mid confident near-term, we our we long-term. While remain and

used business model. class give flexibility to this rate. the have approximately our Customers in looking healthy world quarter And strategy. are customers and continue resource-based additions ACV, in market over customers net and adding core both our had $XX,XXX pool with which of and well tool pool mission-critical have approximately in consolidation in a to platform in ACV, also motion the We large this environment, opportunity land a adding the plays current customers with a prior in model consistent pricing for core solutions our expansion category increasingly $XXX,XXX customers cases. We and of category, enormous XX and expand over the XX We continues. consumption-based are use to customers we

quarter at outlook. and Cloud second year-over-year currency. ago from To professional to was Within by we deal and services XX% in XX% in expect totaled total or saw quarter. or basis, revenue currency, XX% in $XXX.X comprising revenue in revenue, XX% currency-adjusted in the given updated on results $XXX.X from year-over-year EMEA subscriptions, million, quarter than up up represented the We XX% geographies million, up year XX% Elastic XX% XX% in year-over-year increase get and the Americas year up healthy performance around growing second revenue the more significantly XX% quarter a or currency total Subscription Total a up Cloud constant revenue the XX% also $XX.X ago grew our quarter in mix. of context flow do revenue. from was the those $XXX.X prior add XX% let’s growing impacts Professional quarter, constant into subscription or was in in services APAC revenue represented million, second not Now QX of in from flow XX% currency. Elastic XX% of XX% constant year-over-year constant and faster currency. balanced in and region, the total a regions. across deal although million, in

The second segment additions vast in majority the approximately in with ended lower reflects in of number slowdown quarter customer the sequential total subscription again customers we described earlier. once quarter Cloud. metrics, SMB additions customer that we the at the of Looking with XX,XXX the Elastic the

on focusing QX ACV, provided data were in be We strategy nurturing prior have you’ll right see continues on that focusing propensity our over us. customers a quantity category for $XX,XXX and in additions once similar to higher the acquiring solely that than customers growth strategy that and confident are the quarters. rather again on We for of to

our We with over over contract second account portfolio the at in also underpinning customers of category strong in of prior a quarter values strategy larger success motion. over our quarter had account the reflecting saw annual end X,XXX reflected product expansion and of the the and customers expand ability the of $XXX,XXX end such this We across of of the the remains land this at X,XXX compared customers. customer The to our drive strength the solutions. to

XXX% reflecting quarter slightly, Our in overall the down trends and expansion approximately earlier. I rate was net was first mentioned the

profitability quarter was Gross non-GAAP prior turning the with with the which the margins. XX.X%, measures. change mainly the quarter. margin margin prior Now driven for services I’ll better gross in quarter, gross was discuss Subscription consistent to at XX.X% sequential versus professional by

in expenses manage we in our business the operating to second well. at Looking continue and investments quarter, expenses the

leverage Our X.X%, Free performance the million was in expected the again both operating once adjusted share $XX.X significantly model. operating was cash quarter. in an due and to second This than on the the second the in better our was flow demonstrates basis the quarter quarter in expense in inherent margin revenue Earnings quarter, per discipline. business tight was which $X.X.

expect full now and outlook. and not million restructuring be reflect in the included we between cash related we $XX onetime our prior free flow. which breakeven of announced, includes on adjusted to cash ‘XX, roughly million For fiscal $XX outflows payments outlook This to were

with approximately continue maintain position We from with comfortable to $XXX remain We We cash second operating balance cash a perspective. our equivalents cash of ended and an the strong also sheet. million. quarter

of the quarter color we third quarters. will and Before next outlook approaching on provide be fiscal few for ‘XX, like discussing to our I’d remainder the the how additional

and to our suited portion workforce reinvesting will into growth. rebalancing reducing we functions, best that announced, we drive across our a As of investments by XX% be areas

of for right ensure to roles we We to the set in successfully beyond. the and continue second ‘XX half fiscal will up ‘XX hire fiscal are for

in to decision us to committed, easy we non-GAAP increase It operating positions adjusted and XX% profitable us fiscal we cash expansion deliver margin free currently not we expect and previously to the margin investments margin better a allows reduce faster the deliver to and in for to was also flow future multiyear While make, and than commensurated ‘XX. had durable rebalance it believe deliver growth.

confident remain customer strength our trends record. our to track deliver healthy revenue given growth ability the also We expansion market opportunity, in products, new of and our our

Elastic revenue expect fourth XX% will We in also of exceed total continue quarter XXXX. of to fiscal Cloud the

strength to third a to the guidance, X% approximately to revenue present of dollar also expenses quarter to we strengthening impact the With total headwind operating growth year of ‘XX. we dollar, portion significant respect significant. ago so fiscal continued margin Turning the the other X% U.S. for dollar for natural year-over-year we U.S. currencies expect movements have since a in of against full rates, and with approximately the effectively hedge, from to than incurred a the operating margin, a is less our currency

guidance Our unchanged. stays overall philosophy

without on excessive We continue based know conservatism. to guide thoughtfully we what and

representing outlook of million business have a We half impact fiscal currency year, for background, With second range we $XXX Despite this third On the on the the to raising we at growth year-over-year XX% operating emphasis reflecting XX% considered year-over-year now of the revenue revenue the quarter full are impact, of total we our basis, expect growth. the million, in constant midpoint. outlook. ‘XX, for of that climate midpoint. our margin revenue total current at our the in expect growth $XXX

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

billion, of basis, fiscal representing total revenue For constant On at XX% now we growth the expect midpoint. currency total we midpoint. full year-over-year of ‘XX, year-over-year the $X.XX billion the revenue $X.XX to range XX% growth at in a expect

and for execution of range average XXX.X million fiscal XX.X ordinary remain and We that, focused and outstanding. shares million and $X.XX long-term for are shares And believe that $X.XX summary, go operating earnings with well weighted In margin take XX ahead of questions. full using non-GAAP we between share Operator? expect positioned on and profitability. X.X% between million durable in weighted ordinary diluted let’s and and XX million in we growth per ‘XX positive the to basic negative X.X% non-GAAP outstanding range the to average

Operator

Instructions] ahead. [Operator question the with And Please Tyler Citi. will come go first from Radke

Tyler Radke

for question. the taking thanks Hi,

out So changed I Day an in the months. magnitude the some think investors kind of to Analyst couple targets, of think put last long-term I given that of and are what’s you keen just had hear

the quarter So by Search whether the maybe could Security, seeing talk if case, could you’re use the if have or worsened it’s versus if And into kind slowdown throughout you. you just and on then Observability? from you’re about trends November, And targets comment just clarify wanted things November? the if where then you away in backing of to I you’re reaffirming those. Thank

Ash Kulkarni

Yes. here. is I more invite to Tyler. Thanks for kick This also it. can the and add question, Ash Maybe off to things Janesh then

to we very things So than to what macro and that environment what all as was carefully, seen the just the act Financial differently October the we through Analyst saw talked September change saw, had had especially had terms we in FX started been in during in headwinds. Day, And of seen we what QX, that. prior given watching we we of

in obviously. Specifically lot are a in this couple places, very saw seeing we SMB, we tightening, and a of of belt

monthly be cloud construction of be Monthly SMB. to a tends First tends consumption there. is We it in lot to saw cloud. –

signing SMB customers also on We to saw platform. the fewer

was that one. So

way know, in had quarter, we of of October, month these the which well. we seen approval through second just international the you we The where And about geographies customers on as things, we where are the were thing deals impact thinking that dollar saw to tightening having certain processes. having more our sort continue increase compete last the a in customers is saw very dollar going significant

Some of these from into slipped deals out QX. QX

more them to forward. closed and expect we that approvals, have Some then. But of pattern that that, since even going see of continue we

making we’re that continue going time, pattern for said to some is SMB, remains assumptions effectively are that we that, strong. for competitive of deal our October to some position is in but very inspection going time. saw the having So what The continue

to continue well environments. in We competitive do

on talked And when the SMB, actions we that Day hopefully, are win based And had we we behavioral that they terms in to points. exactly are see. how change Analyst see the we we sure they of saw stayed as have watchful, those act in In and of healthy promised to you’ll been. we during to on be going of you We we to impact our that that what rates, based be terms some Financial and make thoughtful going data we some the we’re doing data saw way changes here. we are that’s we taking operate and

other of use difference cases. was use around more cases. the behaviors in terms question didn’t Your was see It segments. in really any terms around of We

in that building goal a changed. segment So I’ll and the what the always biggest $X Look, impact fact saw SMB business our was of we’re we target. strength where generational The company. say billion remains our the around strong. belt the tightening lastly, fundamental is hasn’t we’ve And about talked

given a always we that, expect to we that’s and journey. harder. business was And be are billion to milestone $X in company. that Clearly, with, be multibillion-dollar difficult, the that we environment a building dealing that. it’s going We’re going acknowledge

are we but guidance. that reaffirming, also not any are we of not So changing

not on compromising growth. pushing to are we said, going continue we We’re fundamentally, Like forward.

We our environment based get of we want focused the being reality best more to make we’re sure the we that on investments return. far we can that the macro believe are and just where are seeing, we putting

Janesh Moorjani

played Tyler, has because about on you out how had November a as I’ll Hey, well. add question just

think Ash other actually. I November been has so the nicely covered steady quite far. points all

customer terms the in any not November. play change to business of in have We as seen month continued of We’ve we expected. out meaningful tone see

reflected outlook obviously So I we’ve think that here the in that for half. the back

and specifically the we’ve back trends about incorporate half, we and the called for the accommodate into for of all guidance number these to for tried So we’ve the that half derisk pretty suitably back feel these. good the to guidance

seen good we’ve November we half So the and the for what outlook far. feel based in back on about so

Tyler Radke

And the the now? reduction detail specific guess, disruptive you terms the over prioritize if guess just Helpful. aspirations? mean, But market of be bit to a won’t changes continue that the these force our of on detail. and to go for areas I make confidence decision growth growth. do all in this to that necessarily And looking profitability Thanks I here, kind I we’ve why you’re seen you. into little more the Thank a obviously,

Ash Kulkarni

Yes. Thanks, Tyler.

As put be just could can The employees, that they success. reiterate that I’ll really Elastic everything difficult and to thankful these And their – our do, our everything decisions. they that efforts. you more imagine, we not very into are

that, the have in than wanted you Day even about carefully based sure that were we impact our seen And impact, be during told would And an doing. board. It all we And the near made the convert team not that making we that’s we us customers data have environment, in motion like we very is SMB were impact. we been in that we And had started But I a is macroeconomic across what the SMB effort expecting the of given being the And to the like piece, decisions sales very we about on traditionally customers is always what see And the SMB, then to Analyst would for where having are experienced it we been seeing have environment not like in regions. giving affect to had said understand sales-assisted into on watchful was we which once the we’ve across to the to Now and have those cloud SMB. the you FX we other of in told the all monthly nature this area either the that future. that’s is had have mentioned, because really business market, spend had SMB energy we on that contracts. observing we returns. September, annual use It we environment really we very the commensurate would then. area that, SMB. what trying biggest talked change and in in And not cases. careful now, you And means we data. land spent was was why

to be will where area that’s continued We the economy. going that stress an be in expect there

opportunity long-term on to do for continue us we well. to see hand, other side, the On enterprise continue to the

centered sales development majority so side, than side, And the go-to-market like on the It’s taken go-to-market even as or the actions look supporting teams Obviously, you when of more at on teams it been sellers. the the SMB. the we’ve marketing reps, SDR side. just these around it’s has the

more big adoption the change which us of motion. generation, to a drive better in of One bottom-up demand has been for areas towards really works digital much

create us that’s been has and the solution that investment talked has to three as engineering, important a limited. On around very and the towards I’ve areas all and serverless. rebalance strong. so marketing. that we priority areas cloud being the high strategically that change been us continue been there, make focus And in forward, very to happened the for And And overall change about of kind has that’s primarily going the sure change and remain for

we that where been that returns can that showing we it’s not the but making board, not specifically, parts business out across are growth to we SMB more call have been and And address focused the targeted. investing addressing drive finding have also we that or So the would they have very efficient been a and believe – profitability of for. hoped sure the ways areas greatest our on are I’d the they been changes have

Janesh Moorjani

we half thing prepare in entering to we and part go. half, we sure fiscal that tack the drive And for in Tyler, second make capacity ‘XX. Ash in so the are to the maybe that ourselves the that the but we’re growth. outcomes of as to want that so appropriately ready invest also is continue this have doing fiscal one to said, can right places to ensure with ‘XX we just We to on the invest And I’ll a the that right second right is,

Tyler Radke

you. Thank

Operator

The ahead. next come Pinjalim question go Bora will with JPMorgan. from Please

Pinjalim Bora

taking about bit points. for just the the thanks XXX constant seems coming Janesh, Hey, it’s to or guidance understand more. currency, point a It X like by – about of wanted I going little growth, quesiton. down

I at word makes model used the de-risk this you half. the the is think second you derisked for confident that point? What

Janesh Moorjani

talk that. happy I’m Pinjalim, Hey, to about

of guidance, on for top terms that the with, above in came we that that set bottom we and on start QX, to in the please approach both So took had expectations line. the we obviously, the

assumed of future. will economic from a couple considered One recent the we Ash the We’ve as foreseeable both the that as things. terms the In have climate. the Enterprise. thought guidance, in about the segments, we first of continue how October mentioned, trends is current for factored We’ve, trends in as SMB well

the considered have We across see geographies. we what

of changes the today as expansion we of new business. then we’ve, consumption course, the of from the considered looked trends factored it the have We that We’ve the seen also. motions and impact announced well. standpoint all we’ve at in of And in that

there, protection of we’ve outlook. into of guidance, So do, built additional these things in into out level to our then get as to balance of factored the worse in our always risks happen suitably we we’ve also case all some the unknown. And

change We but guide our we there. guide there no guidance conservatively, So court do to philosophy don’t prudently. is excessively

said, then So has good pretty November as feel far. we the nicely actually so And about I out outlook. played

the QX feel of and about year. So we the rest pretty good

Pinjalim Bora

one the And fair expansion retention the retention, Understood. want And impacted because I net getting SMBs? ask – has on that – to the that side? assume? it Janesh, rate growth the to that the tension of Is about then is another for or down, how the trending you, mainly is the [indiscernible], side,

Janesh Moorjani

Yes, Pinjalim. it’s question, a great

of So the thoughts a rate. terms there couple net in put that out of I’ll expansion

I But We renewal see individual specifically change any the gross of numbers significant the as our of don’t obviously didn’t the noise out actually very consistent into rates And terms saw the that think little the trends played what a we of expansion with seen some see dynamics, the about in the out slow when the of – partly of we how effect that I expansion that month did in October. we at we looked we the renewal terms that’s about measurement. for talked level because break rate before. renewals, some the internally, of were we’ve in subscriptions. gross bit, they think So projects introduce in and

expansion does consumption, rate and annualized that Within rate, net is the the for monthly effect of expansion include of some calculation. cloud purposes that SMB net which

have customers And rate. that are is in over the is on that seeing. think that think $XXX,XXX indicates way. momentum And also adverse the to look we the which way point a softer other we about that performance is current impact way even number expansion a at that’s pretty that. an about October that ACV, But would had the So when still data more at XXX%, a expansion, that in SMB world expansion continued it class you we we grow have solid the

I about multiple when continue underlying adopt where to us So continue think to the play across it to advantage broadly, customers trends more our solutions.

continue to move within further the enterprise. up We

the to are customers strategic closer to and businesses. We more their getting becoming

of actually the term all feel longer So, opportunity for those I about of good quite reasons, ahead us.

Pinjalim Bora

I queue. you. will Thank get in the it. back Got

Ash Kulkarni

Thank you.

Operator

The next Fishbein come with Securities. Truist question will from go Please ahead. Joel

Joel Fishbein

been second Thank to go government little Janesh, that, is you that for that monthly just of then you now? the deeper. on in happened And Thanks. to you call, trends? the question. it about business I what bit cohort? mentioned what for is a to that you do the business I my want something follow-up just would And is taking how guys I specifically? love here customer just percent think where know And

Janesh Moorjani

those, Yes, of to both take happy Joel.

in of performance, think And where in of quarters, that it’s that tick the a cloud Monthly XX% past. was XX% it So, and down revenue. was roughly from was just In cloud prior terms of about I been monthly total total revenue, some about, a revenue. in on in reflects talked dollars on million context, X% change the that trends customers lot a SMB the those of terms there are side translates obviously consumption particularly of And monthly cloud. we because of few to

be customers. cloud acquire way for meaningful. to quite monthly us is So, scale new and to continues great a it But

some have talked those focus as with already down making on particular, that investments are example. we demand, even one the in of to greater and digital We about changes in double and

So, cloud terms Federal those from practice And we are then strong saw perspective. some business, of a a the very for Fed continues us. monthly to in that be the trends of

are some invested have really now, been and ensuring and prosecuting Fed successful used team that mission-critical agencies. business for in that we across in workloads We QX, the time In in multiple many use cases has quite with the did performance Fed looking opportunity actually in team to excited we about were that our are we close pleased close, Fed. to looking ahead. business we in and the all The of were well

Joel Fishbein

much. so you Thank

Operator

Raimo from question will ahead. Please Barclays. Your come with Lenschow next go

Vinod Srinivasaraghavan

my taking on This Hi. is question. Srinivasaraghavan Vinod for Thanks Raimo. for

go year? are sense us give of that’s clusters sales XX% from you using now, a of last wondering And APM quarter progressed last how a Elastic or from could mentioned just had You newer if of APM scale perspective, and try and type kind or about you up of areas? in how customers use product this to more or your do on security environment some incentivizing of

Ash Kulkarni

can touch this. Vinod, Hey Yes. I maybe upon

of we Observability APM need are a and metrics so log within that consolidation. solution, customer in don’t We this the not but how because analytics we discretely solutions, being driving is growing a going been gave there just data percentage out on, So, so break from to terms across adoption, primarily as APM interest growth we in have seeing adopted. is point growing and

one large for pretty is time that lot all signed the that point giving solution traction. a is services data that a was Matter customer because one of one of of lot APM. gave traction, large And my so fact, about sort clear this we was of are deal first now our the I APM eight-figure really we gained in it’s has the that with prepared that institution examples a of remarks, financial gaining

in couple of So, tend that ways. scale. significant it’s being drive used to being way is motion expansion in we a right. used It’s the ways, very at And

scenario is because relevant to tends incredibly the is be one that in completely our So, model model consumption. based on pricing pricing

mentioned, that has like it’s where now APM with across familiarity They a in out it. how very just scenarios. point roll want with our and And to for those significant And viral typically a or if to getting tend suggest something using entire going I like we instrumenting that the capabilities all So, then tried it’s newer to some been use customer not with their we way, cases, that’s percentage, growing of time of the have a a it’s we in at play expansion real Observability And they expect few on estate. growing. shape customers form. they on to gotten the start continue the to Elastic in deciding that applications manner, any

starts land sure have to doing becoming centered then all other the Once that adoption I is in logs on. cloud, some APM our And Observability the the like the and land-and-expand driving talked on about SIEM seen focus motion all our we starting XDR also they with that XDR. sales up also around ends that past, real to play we tend the customer teams with cases. to we that sales of If customer around from making some in the from that lands with that’s our is It’s that, really customers. that focus The are are stats metrics. and expansion security, gave typically expansion. teams have going commercial SIEM to around security use thing that the and for enterprise about we specifically

well. starting that’s the So, nicely. really going be going see forward to to And focus we that as flywheel quite work are

Vinod Srinivasaraghavan

And Thanks. me. for more one just that. Appreciate

mainly that last attributed you too mentioned are on macro impact on-prem on the like you said cloud? or you migrations, an impact to from – now, weren’t slowdown from expansion to to from SMB quarter seeing lower cloud the seeing much I think you is there

Janesh Moorjani

that Maybe I will one. take

on are to XX% actually quarter. quite the performance which there. we grew side, prior with It favorably So, year-over-year pleased self-managed the currency, the constant in compares

saw we we So, what with were pleased there.

than perspective, cloud. for express would In call continuing overall preference other just nothing out in is terms of a the there particular to business I customers

to view where continue do fact, over as We that you generally positive the will long-term as growth grow. think mimic preference self-managed well. we in a know, And encourage that And for So, just as reside. the business. workloads should that that

effect. substitution So, it’s not a

trying The large is our just opportunity It’s march. than low. are and are a rates forced perspective we of do penetration it term any not kind We workloads. is longer on-prem our cloud that set workloads are about growing from way faster that to think

the cloud the have should of grow both So, we in plenty to self-managed and room formats.

Vinod Srinivasaraghavan

Understood. Thank you.

Operator

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

Matt Swanson

a Matt. maybe I to around more Yes. larger, the a but little Kind but Thanks. is I also complicated. would a obviously, this Matt is question for assume making deals, of this Swanson This on last is positive, mean also follow-up consolidation.

things be mentioned scrutiny cycles? you but you consolidation You this perspective? I just you the this And go-to-market macro. impacting this Could sales that are we seeing little bit, a just theme of from it in then increased kind might talk a bit are doing about into how went a to mean streamline

Ash Kulkarni

Yes.

deals approvals and ran that per So, more se. so actually on consolidation necessarily into the weren’t tied to

But mentioned, of regions between where just are be, the in a I so more there because several So, to thoughtful. customers accounting of has strengthening And be actually countries that. that’s QX of certain dollar that accounting like the consolidation not for. going for and that reason sales that those into correlation took in sort know to much and more seeing deals are sort now taking came the approvals already. U.S. that, is longer were We were necessarily deals given those our norm, And that actively way, the we are those something fact longer, deals more teams needed. by we

the just affected losing very were timing these in from deals them competitive So, well. things. us did of not was a We terms got that standpoint. It of

number was one. that So,

conversations the mind, do where desire else something ask, an And to something this I and And I that’s – conversations, organization. But The a we thoughtful second see that’s we that’s, that customers really about more consolidation what the that I and a like a forward. that’s is mentioned, into. And we natural cycles everybody’s the agree comes talking spending the sales of that greater those my you on. having field now point, because throughout incremental are be going I of we plays we a that that there more are change driving with I on going any is little can spend because down, really that, is in at is consolidation, we expect And way be ownership deal our seeing between my they in Elastic, are that how to such correlation how was do the cost as to are of right, somewhat that are those cycles, actively overall use can aspect do not leaning opportunity. is we that’s point what deal saw that – am on.

Matt Swanson

you migrating Elastic? changes guess quarters given either that have from tier macro helpful. extremely maybe or second the in over part, adoption any free That’s couple that in seen to Yes. companies the around you just additional sensitivity or usage and are the guys cost mentioned, this given down customers the of that new last quarter, I

Ash Kulkarni

one recognizing themselves the a We are Matter we is actually opposed becomes is, think that customers customers. fact, of everything are to have have one the seeing everyone service off free cloud we economic install remarks. as government such the as using managing cost that. and with a is environment seen I things mentioned fully to been about these inspecting things manage are they people have mean we that who agency, managed better trying seen not the prepared of their seeing themselves. and one spend, my – of of might actually and in I these that I referenced of what customers,

seen to the our tier, very of The tiers, between some impact really massive. simply our the adopting they tiers customers customers the saying haven’t and free see premium want higher significant. moat to where did is tier we we go free that because difference are So, is any and

are that any seen And an any advanced of you hurdle. haven’t high that if all of we of using behavior. is up our So, capabilities, giving extremely

Janesh Moorjani

of And there of there, weeks trial period. couple free cloud, no that course, is point a is Matt, know, thing is Everything on out then, would just of I as beyond tier. the the you other paid

Matt Swanson

Appreciate the color.

Operator

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

Koji Ikeda

Hey Thanks taking guys. for my question.

here. this me XXX,XXX than Just to one of here customer ACV really am I cohort and for less kind trying focus on

then two really that component I big ‘XX components being target. So, of $X repurposing billion generation. the just digital to category growth are some on investments about and enterprise really commentary potential of a the fairly and SMB self-serve SMB for revenue this understand guys to focus these higher spend really with the fiscal total want SMB sales, the that medium-term. you of given a I heard demand and for thinking the

of there. lot a So, and puts takes

thinking question the Is way should Does of growth about second does down sub this guess to the we a in quarter on sustainable go XXX,XXX this I think is, I about kind how about the of from So, be ACV here? it a net segment here? to add it the here? in how net think Any Thanks. category? from adds sort help mean go category? up this good

Janesh Moorjani

I try Yes. will and little a unpack maybe that bit. Koji,

of couple thoughts. a So,

has are which who XX,XXX focusing that ACV customers that long towards the propensity in focusing us, as of we of motions, In might tail that see threshold terms to And a greater the a to just that of those past done customer for dollars on month, hundred above have numbers. and smaller customers our meant quarters continue, spend on you over the acquisition we couple with on few a over focus driving spend less example. time customers have

than at look what at that more you additions subscription are ACV, $XX,XXX we customer added when in customers. consistent customer When we was you So, total that quarters. sequentially, in have look prior fewer the total done although the count, with customers

customers the motion to and good acquire the calculus work the we about acquisition customer try into we as as effectiveness driving feel pretty So, we that and are new the well. cost

that’s now. I quite working nicely So, think

those category, the of net you you rate If the than just XXX,XXX in couple – particular will eventually Obviously, that see at of how a that motions into the about sheer of metrics. that’s think expansion greater quite can category. where categories, also look you and think the in XXX,XXX those customers I then customers expansion nicely. we expand are then number than greater again, working And in both the count

have bit And little just that we about an broader think that perspective. trends would reflects we slower ideally have I liked. they the Here from talked enterprise were than a what in QX,

we terms have So, to drive investment suggests that working for that in expand growth been to into continue that nicely areas. continuing in does future need us, of what us those for the the to areas

right the customers a larger over acquire to bit So, pace investments we digital customers then into example, right selling invest marketing are where to pace are customers those kinds the at focusing customers shop the we two and to for those to can the continuing in in – in and the demand at were to of time. pulling expand where that continue invest while and in selling higher motions. right continue to and touch the gen continue of areas our back areas some in the And less further, other of productive some those motion and

Koji Ikeda

the taking Appreciate for Thanks it. question. Janesh. Thanks

Janesh Moorjani

Yes.

Of course.

Operator

Mielczarek Kamil ahead. Blair. The next question will Please William come go from with

Kamil Mielczarek

you competitive who change as competitive Hi, you for your environment. question. are are on coming And products, entering believe where Observability up But unchanged. against the some can number want across are on the seeing detail of said you pressure? rates most there a seeing the I you more just provide I you in double-click space, you three private taking thanks my win vendors to deals? are any is large look

Ash Kulkarni

Yes.

that. let maybe me touch So upon

is or to we segments, we haven’t that but have So in with that’s go the the already that’s Elastic ingesting Enterprise the that’s analytics change. where log with for trying with expand seen really customer but we are protection. the accounts we with to to and Enterprise help almost seen mentioned, for agents been motion, deployed or In new new see expand, Search. always we SIEM. can I actual the What either already And where to different across that when already we and vendors SIEM them XDR lead for three any terms to seen then either. platform not a us we get say typically like into Observability for the with SIEM are as we tend for really tend XDR, have that endpoint that have we any – as In land point we with haven’t security about same tend is, Search, analytics, log the a familiar in in talk security data of change we basically them analytics in space, that agents using they customer, expect

head-to-head different strength And just XDR the for other in we even area it kind of extreme to once against Observability, opposed analytics, area APM very with of vendors. well it’s has existing in been on because well with are have conversation customers, as be same have us. to log That’s area. going start tend We thing which we compete where made a advantage. been we progress start incredibly also right. So, an tend to We an that log tends a to has with the that And we the analytics, known.

to So for completely APM once like APM we APM land go don’t with log analytics, itself, for tend we scenarios will expand just from new alone. there, we into

competitive have at environment change all. not all any those meaningful of the way because of dynamics, it’s seen we So, in

Kamil Mielczarek

a us open have That’s really you in $XXX would versus decision transformative equivalents. buy? more how to private And helpful. about you just And follow-up, to build Can are on over you cash a in the update million well cash declining markets, quick the thinking given and you valuations acquisition? more be

Ash Kulkarni

work we long-term. very the sure Look, answer and expand that’s we just make believe to are the a of land a clear things we assembling When our that, the in not integrated a platform, been focused the have We portfolio. want that typically, perspective, platform, much better. from tends on building motion is well that have Yes. one you right to

terms improve market, even only in in to you to go tends efforts. of time efficiency engineering overall Your how of over your terms

consistent we with that. be So to want

so make that’s the have way don’t markets why markets, one have we happen seen private this as always looking that point, sure deeply for have the to point, when to future to markets. think corrected to traditionally because that has private technology be happens, It the the technology reasons the And to us will honest, But at we that in changes done public of us. I that time. are the going history integrate that forward, acquisitions. to That’s your in tuck-in bring a we we always have In be always happens, tend them shown what tuck-ins allow our we platform. consistent

you don’t new think the up you our I will So there. but in accomplish expect When us of strategy should being in kinds change. we lets how that into. that to terms that’s small always about that strategy tuck-in things, those say could transformative of what acquisitions get just us And transformative, those some of for on lookout lets be areas end

Kamil Mielczarek

That’s helpful. Thanks, guys.

Operator

ahead. This back any closing would turn concludes Kulkarni to I Please question-and-answer to like Ash conference remarks. go for over our the session.

Ash Kulkarni

us. The we build you the on we have is demonstrated things as say all absolutely we confident also in profitability, and ability in Well, remain I’d joining closing so company focused on are generational execution thank we through that all focus growth and to that have and drive continue thing our for done. a our both to

great day. you So Have a thank again.

Operator

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

disconnect. You may now

Elastic (ESTC) 1 Dec 222023 Q2 Earnings call transcript