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Elastic Reports Third Quarter Fiscal 2024 Financial Results

By Business Wire

Business Wire
Overall Rating

Q3 Revenue of $328 million, up 19% year-over-year (18% in constant currency)

Q3 Elastic Cloud Revenue of $143 million, up 29% year-over-year (29% in constant currency)

SAN FRANCISCO--(BUSINESS WIRE)--Elastic (NYSE: ESTC) (“Elastic”), the company behind Elasticsearch®, announced financial results for its third quarter of fiscal 2024 ended January 31, 2024.

Third Quarter Fiscal 2024 Financial Highlights

  • Total revenue was $328 million, an increase of 19% year-over-year, or 18% on a constant currency basis
  • Elastic Cloud revenue was $143 million, an increase of 29% year-over-year as reported and on a constant currency basis
  • GAAP operating loss was $26 million; GAAP operating margin was -8%
  • Non-GAAP operating income was $43 million; non-GAAP operating margin was 13%
  • GAAP diluted earnings per share was $1.69(1); non-GAAP diluted earnings per share was $0.36
  • Operating cash flow was $52 million with adjusted free cash flow of $63 million
  • Cash, cash equivalents, and marketable securities were $1.015 billion as of January 31, 2024

Elastic delivered another strong quarter and I'm pleased with our momentum and execution that drove our third quarter results,” said Ash Kulkarni, CEO, Elastic. “Customer interest in Generative AI, platform consolidation, and stability in cloud consumption patterns continued to drive momentum in our business in Q3. This reinforces our confidence in the business, and in our future growth as more companies choose our search analytics platform as a core part of their IT infrastructure stack for building GenAI applications.”

Third Quarter Fiscal 2024 Key Metrics and Recent Business Highlights

Key Customer Metrics

  • Total customer count with Annual Contract Value (ACV) greater than $100,000 was over 1,270 compared to over 1,220 in Q2 FY24, and over 1,110 in Q3 FY23
  • Total subscription customer count was approximately 20,800 compared to approximately 20,700 in Q2 FY24, and over 19,900 in Q3 FY23
  • Net Expansion Rate was approximately 109%

Product Innovations and Updates

  • Delivered scalar quantization for vector search, which provides significantly faster performance at a lower total cost
  • Introduced real time alerts with natural language interactions for the Elastic AI Assistant for security
  • Delivered cloud security posture management for Microsoft Azure, now integrated with the three largest cloud hyperscalers
  • Announced the general availability of the Elastic AI Assistant for observability, which provides site reliability engineers (SREs) with actionable operational insights that are specific to their IT environment
  • Delivered general availability of Service Level Objective (SLO) monitoring which allows SREs to manage business operations by tracking service performance, error budgets, reliability, and business goals
  • Delivered deeper integration between Elasticsearch and Hugging Face, to simplify the developer experience by allowing direct embedding of large language models and other machine learning models hosted on Hugging Face into custom GAI applications built with Elasticsearch

Other Business Highlights

  • Appointed Mark Dodds as Chief Revenue Officer to lead all customer facing functions
  • Participated in AWS re:Invent as a Diamond sponsor and hosted ElasticON London and Sydney events as part of our twelve city customer conference series

Financial Outlook

The Company is providing the following guidance:

For the fourth quarter of fiscal 2024 (ending April 30, 2024):

  • Total revenue is expected to be between $328 million and $330 million, representing 18% year-over-year growth at the midpoint (18% year-over-year constant currency growth at the midpoint)
  • Non-GAAP operating margin is expected to be between 7.4% and 7.8%
  • Non-GAAP diluted earnings per share is expected to be between $0.18 and $0.20, assuming between 105.5 million and 106.5 million diluted weighted average ordinary shares outstanding

For fiscal 2024 (ending April 30, 2024):

  • Total revenue is expected to be between $1.260 billion and $1.262 billion, representing 18% year-over-year growth at the midpoint (17% year-over-year constant currency growth at the midpoint)
  • Non-GAAP operating margin is expected to be approximately 11%
  • Non-GAAP diluted earnings per share is expected to be between $1.15 and $1.18, assuming between 103.0 million and 104.0 million diluted weighted average ordinary shares outstanding

The guidance assumes, among others, the following exchange rates: 1 Euro = 1.082 US Dollars; and 1 Great British Pound = 1.267 US Dollars.

See the section titled “Forward-Looking Statements” below for information on the factors that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. We present historical and forward-looking non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of these non-GAAP measures. A reconciliation of forward-looking non-GAAP measures to the corresponding GAAP measures for operating margin and net earnings/(loss) per share is not available without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of the costs and expenses that may be incurred in the future. These items necessary to reconcile such non-GAAP measures could be material and have a significant impact on the Company’s results computed in accordance with GAAP.

Conference Call and Webcast

Elastic’s executive management team will host a conference call today at 2:00 p.m. PT/5:00 p.m. ET to discuss the Company’s financial results and business outlook. A live audio webcast of the conference call will be available through Elastic’s Investor Relations website at ir.elastic.co. A presentation containing financial and operating information will be available at the same website. The replay of the webcast will also be available on the investor relations website.

(1)

GAAP diluted earnings per share includes the impact of a discrete income tax benefit of approximately $207 million related to the release of a valuation allowance against certain deferred tax assets. There was no impact to operating results, non-GAAP diluted earnings per share, adjusted free cash flow or cash and cash equivalents.

About Elastic

Elastic (NYSE: ESTC), the leading search analytics company, securely harnesses search-powered AI to enable everyone to find the answers they need in real-time using all their data, at scale. Elastic’s solutions for security, observability and search are built on the Elasticsearch platform, the development platform used by thousands of companies, including more than 50% of the Fortune 500. Learn more at elastic.co.

Elastic and associated marks are trademarks or registered trademarks of Elastic N.V. and its subsidiaries. All other company and product names may be trademarks of their respective owners.

Forward-Looking Statements

This press release contains forward-looking statements that involve substantial risks and uncertainties, which include, but are not limited to, statements regarding our expected financial results for the fiscal quarter and the fiscal year ending April 30, 2024, the expected performance or benefits of our offerings, expected market opportunities, and our expectations regarding our growth. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements due to uncertainties, risks, and changes in circumstances, including but not limited to those related to: our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (which include changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve and maintain future profitability; our ability to continue to deliver and improve our offerings and develop new offerings (including innovations around AI use cases); customer acceptance and purchase of our new and existing offerings; the expansion and adoption of our Elastic Cloud offerings; our ability to realize value from investments in the business; our ability to maintain and expand our user and customer base; the impact of the evolving macroeconomic and geopolitical environments on our business, operations, hiring and financial results, and on businesses and spending priorities of our customers and partners; the impact of our pricing model strategies on our business; the impact of foreign currency exchange rate fluctuations and the uncertain inflation and interest rate environment on our results; our international expansion strategy; our operating results and cash flows; the sufficiency of our capital resources; our ability to successfully execute our go-to-market strategy, our forecasts regarding our business; and general market, political, economic and business conditions.

Any additional or unforeseen effect from the evolving macroeconomic and geopolitical environments may exacerbate these risks. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those expressed or implied in our forward-looking statements are included in our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended April 30, 2023 and subsequent reports filed with the SEC. SEC filings are available on the Investor Relations section of Elastic’s website at ir.elastic.co and the SEC’s website at www.sec.gov. Elastic assumes no obligation to, and does not currently intend to, update any such forward-looking statements, except as required by law.

Statement Regarding Use of Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe the non-GAAP measures listed below are useful in evaluating our operating performance. We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Investors are encouraged to review the differences between GAAP financial measures and the corresponding non-GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Reconciliations of historical GAAP financial measures to their respective historical non-GAAP financial measures are included below. In relation to constant currency non-GAAP financial measures, the only reconciling item between GAAP financial measures and non-GAAP financial measures is the effect of foreign currency rate fluctuations. Further details on how we calculate such effects can be found in the definition of “Constant Currency” below.

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding stock-based compensation expense and related employer taxes and amortization of acquired intangible assets. We believe non-GAAP gross profit and non-GAAP gross margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Non-GAAP Operating Income and Non-GAAP Operating Margin

We define non-GAAP operating income and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, respectively, excluding stock-based compensation expense and related employer taxes, amortization of acquired intangible assets, acquisition-related expenses, and restructuring and other related charges. We believe non-GAAP operating income and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Non-GAAP Net Income and Non-GAAP Earnings Per Share

We define non-GAAP net income as GAAP income/(loss), excluding stock-based compensation expense and related employer taxes, amortization of acquired intangible assets, acquisition-related expenses, restructuring and other related charges, litigation settlement, the related income tax effect of the foregoing adjustments, and the income tax benefit from the release of any valuation allowance against deferred tax assets. We define non-GAAP earnings per share, basic, as non-GAAP net income divided by weighted average shares outstanding and non-GAAP earnings per share, diluted, as non-GAAP net income divided by weighted average diluted shares outstanding, which includes the potentially dilutive effect of the company’s employee equity incentive plan awards. We believe non-GAAP earnings per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin

Adjusted free cash flow is a non-GAAP financial measure that we define as net cash provided by operating activities adjusted for cash paid for interest less cash used for investing activities for purchases of property and equipment. Adjusted free cash flow margin is calculated as adjusted free cash flow divided by total revenue. Adjusted free cash flow does not represent residual cash flow available for discretionary expenditures since, among other things, we have mandatory debt service requirements.

Constant Currency

We compare the percent change in certain results from one period to another period using constant currency information to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. In presenting this information, current and comparative prior period results are converted into United States dollars at the exchange rates in effect on the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

Contact Information

Anthony Luscri
Elastic Investor Relations
ir@elastic.co

Madge Miller
Elastic Corporate Communications
PR-Team@elastic.co

Elastic N.V.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

Three Months Ended January 31,

Nine Months Ended January 31,

2024

2023

2024

2023

Revenue

Subscription

$

307,632

$

255,613

$

865,622

$

728,638

Services

20,325

18,953

66,700

60,410

Total revenue

327,957

274,566

932,322

789,048

Cost of revenue

Subscription

63,976

56,146

181,238

164,798

Services

20,666

19,062

60,970

58,146

Total cost of revenue

84,642

75,208

242,208

222,944

Gross profit

243,315

199,358

690,114

566,104

Operating expenses

Research and development

87,202

77,472

248,000

231,689

Sales and marketing

141,621

126,717

408,020

379,902

General and administrative

40,896

34,711

117,530

103,724

Restructuring and other related charges

29,805

754

29,805

Total operating expenses

269,719

268,705

774,304

745,120

Operating loss

(26,404

)

(69,347

)

(84,190

)

(179,016

)

Other income (expense), net

Interest expense

(6,368

)

(6,265

)

(19,023

)

(18,875

)

Other income, net

8,568

5,460

24,107

20,774

Loss before income taxes

(24,204

)

(70,152

)

(79,106

)

(177,117

)

(Benefit from) provision for income taxes

(200,328

)

2,422

(181,926

)

12,313

Net income (loss)

$

176,124

$

(72,574

)

$

102,820

$

(189,430

)

Net earnings (loss) per share attributable to ordinary shareholders

Basic

$

1.76

$

(0.76

)

$

1.04

$

(1.99

)

Diluted

$

1.69

$

(0.76

)

$

1.00

$

(1.99

)

Weighted-average shares used to compute net earnings (loss) per share attributable to ordinary shareholders

Basic

100,282,179

96,052,025

99,099,210

95,327,131

Diluted

104,503,290

96,052,025

103,149,384

95,327,131

Elastic N.V.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

As of
January 31, 2024

As of
April 30, 2023

Assets

Current assets:

Cash and cash equivalents

$

526,893

$

644,167

Restricted cash

2,774

2,473

Marketable securities

488,133

271,041

Accounts receivable, net of allowance for credit losses of $3,865 and $3,409 as of January 31, 2024 and April 30, 2023, respectively

229,946

260,919

Deferred contract acquisition costs

68,937

55,813

Prepaid expenses and other current assets

45,440

39,867

Total current assets

1,362,123

1,274,280

Property and equipment, net

5,512

5,092

Goodwill

319,546

303,642

Operating lease right-of-use assets

23,088

19,997

Intangible assets, net

23,822

29,104

Deferred contract acquisition costs, non-current

100,389

95,879

Deferred tax assets

218,693

7,412

Other assets

5,749

8,076

Total assets

$

2,058,922

$

1,743,482

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

10,935

$

35,151

Accrued expenses and other liabilities

64,835

63,532

Accrued compensation and benefits

78,049

76,483

Operating lease liabilities

12,788

12,749

Deferred revenue

561,665

528,704

Total current liabilities

728,272

716,619

Deferred revenue, non-current

23,521

34,248

Long-term debt, net

568,341

567,543

Operating lease liabilities, non-current

15,297

13,942

Other liabilities, non-current

15,654

12,233

Total liabilities

1,351,085

1,344,585

Shareholders’ equity:

Preference shares, €0.01 par value; 165,000,000 shares authorized, 0 shares issued and outstanding as of January 31, 2024 and April 30, 2023

Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized; 100,792,010 shares issued and outstanding as of January 31, 2024 and 97,366,947 shares issued and outstanding as of April 30, 2023

1,060

1,024

Treasury stock

(369

)

(369

)

Additional paid-in capital

1,676,493

1,471,584

Accumulated other comprehensive loss

(18,840

)

(20,015

)

Accumulated deficit

(950,507

)

(1,053,327

)

Total shareholders’ equity

707,837

398,897

Total liabilities and shareholders’ equity

$

2,058,922

$

1,743,482

Elastic N.V.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended January 31,

Nine Months Ended January 31,

2024

2023

2024

2023

Cash flows from operating activities

Net income (loss)

$

176,124

$

(72,574

)

$

102,820

$

(189,430

)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Depreciation and amortization

4,072

5,045

13,853

15,475

Amortization of discounts or premiums on marketable securities

(2,750

)

(6,396

)

Amortization of deferred contract acquisition costs

20,440

15,821

56,392

51,495

Amortization of debt issuance costs

269

257

798

763

Non-cash operating lease cost

2,878

2,705

8,148

8,354

Asset impairment charges

6,242

6,242

Stock-based compensation expense

62,762

54,456

176,344

148,626

Deferred income taxes

(210,705

)

148

(210,278

)

68

Foreign currency transaction loss

1,845

2,213

2,267

2,261

Other

(16

)

(34

)

67

Changes in operating assets and liabilities, net of impact of business acquisitions:

Accounts receivable, net

4,072

(11,143

)

31,044

14,050

Deferred contract acquisition costs

(30,668

)

(24,615

)

(74,089

)

(68,184

)

Prepaid expenses and other current assets

(7,655

)

(238

)

(5,512

)

7,671

Other assets

(917

)

2,297

639

7,106

Accounts payable

(25,330

)

(11,809

)

(25,212

)

511

Accrued expenses and other liabilities

2,821

(4,627

)

1,428

(6,272

)

Accrued compensation and benefits

12,282

5,786

1,509

(161

)

Operating lease liabilities

(2,902

)

(2,831

)

(9,096

)

(8,404

)

Deferred revenue

45,767

40,037

23,189

17,869

Net cash provided by operating activities

52,389

7,170

87,814

8,107

Cash flows from investing activities

Purchases of property and equipment

(1,077

)

(197

)

(2,605

)

(1,019

)

Purchases of marketable securities

(179,972

)

(358,273

)

Maturities of marketable securities

74,931

150,223

Business acquisitions, net of cash acquired

(18,951

)

(18,951

)

Net cash used in investing activities

(125,069

)

(197

)

(229,606

)

(1,019

)

Cash flows from financing activities

Proceeds from issuance of ordinary shares under employee stock purchase plan

9,111

Proceeds from issuance of ordinary shares upon exercise of stock options

8,847

4,510

19,490

12,234

Net cash provided by financing activities

8,847

4,510

28,601

12,234

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

1,008

9,940

(3,782

)

(2,914

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

(62,825

)

21,423

(116,973

)

16,408

Cash, cash equivalents, and restricted cash, beginning of period

592,492

858,622

646,640

863,637

Cash, cash equivalents, and restricted cash, end of period

$

529,667

$

880,045

$

529,667

$

880,045

Elastic N.V.

Revenue by Type

(in thousands, except percentages)

(unaudited)

Three Months Ended January 31,

Nine Months Ended January 31,

2024

2023

2024

2023

Amount

% of
Total
Revenue

Amount

% of
Total
Revenue

Amount

% of
Total
Revenue

Amount

% of
Total
Revenue

Elastic Cloud

$

143,379

44

%

$

110,743

40

%

$

399,540

43

%

$

311,709

40

%

Other subscription

164,253

50

%

144,870

53

%

466,082

50

%

416,929

52

%

Total subscription

307,632

94

%

255,613

93

%

865,622

93

%

728,638

92

%

Services

20,325

6

%

18,953

7

%

66,700

7

%

60,410

8

%

Total revenue

$

327,957

100

%

$

274,566

100

%

$

932,322

100

%

$

789,048

100

%

Elastic N.V.

Reconciliation of GAAP to Non-GAAP Data

Supplementary Information

(in thousands, except percentages)

(unaudited)

Three Months
Ended

January 31, 2024

% Change
Year Over
Year

% Change
Year Over Year
Excluding
Currency Changes

% Change
Quarter
Over
Quarter

% Change
Quarter Over
Quarter Excluding
Currency Changes

Revenue

Elastic Cloud

$

143,379

29

%

29

%

6

%

6

%

Other subscription

$

164,253

13

%

12

%

8

%

7

%

Total subscription

$

307,632

20

%

19

%

7

%

7

%

Total revenue

$

327,957

19

%

18

%

6

%

6

%

Total deferred revenue

$

585,186

21

%

21

%

9

%

9

%

Total remaining performance obligations

$

1,176,486

18

%

18

%

5

%

5

%

Nine Months
Ended

January 31, 2024

% Change
Year Over
Year

% Change
Year Over Year
Excluding
Currency Changes

Revenue

Elastic Cloud

$

399,540

28

%

28

%

Other subscription

$

466,082

12

%

11

%

Total subscription

$

865,622

19

%

18

%

Total revenue

$

932,322

18

%

17

%


Contacts

Anthony Luscri
Elastic Investor Relations
ir@elastic.co

Madge Miller
Elastic Corporate Communications
PR-Team@elastic.co


Read full story here

First published on Fri, Mar 1, 2024

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