ESTC the forgotten SAAS company - Q4 results

Elastic reported their Q4 yesterday and I see no mention here or the premium board. The performance was impressive and analysts were euphoric during the call.

Here are the quarterly yoy growth rates in % (most recent quarter at the end)
53, 44, 43, 39, 44

Here are the quarterly qoq growth rates in % (most recent quarter at the end)
9, 4, 12, 8, 13

Here are the quarterly SAAS yoy growth rates in % (most recent quarter at the end)
110, 86, 81, 79, 77

SAAS is now at a $200M/year run rate and is 29% of total rev this Q. Company was cash flow positive for FY 21 and is close to non GAAP margin break even. They announced they would get to $1B+ rev in style in 2022. See a long runway. They saw a big jump in total customer and enterprise ($100k+) customer adds. They have 15k total customers and 1200 enterprise customers. These numbers are similar to Datadog’s except enterprise is half which means they need to do some catch-up. They have 75 customers spending $1M+. The first time they revealed that 33% of their business is enterprise search, 40%+ is observability, 20% is security. They have added ransomware protection at endpoints. Their SIEM product is mature and they denoted several wins against Splunk both in logs and security.

Their license change from OS earlier this year to prevent Amazon from encroaching had not slowed them down at all. Mentioned a lot of partnerships with Azure. They feel that with data exploding search is the natural way to do observability, and security and so they see massive tailwinds. Guidance for next year was 29% but note that they guided to 25% and did 42% for the most recent fully covid affected FY (Their FY runs from 5/20 to 4/21). So, I expect 42%+ this FY.

Very satisfied with my position which is about half of that in Ddog even added a little to it. While it is unfair to compare its valuation with Datadog you can compare with MongoDB which is about the same rev size, poorer margins, growing slower but has a 60% higher mcap! So, I do see potential in multiple expansion. But long-term Elastic owners have known that for a while. So, remains to be seen if that will come to fruition.

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I’m game for sharing thoughts on this. I hold many of the stocks releasing earnings this week (MongoDB, Elastic, Asana, Crowdstrike, Zoom, Digital Turbine…), going into this week I was feeling that Elastic and MongoDB were closest to being cut followed by Asana.

In the end all of the results were exceptional - with the exception of Zoom. I’m happy to continue holding Elastic and MongoDB as well as Asana. I cut back on Zoom and reinvested in Digital Turbine, Upstart, Zoominfo and Mercadolibre.

I had been pretty worried about the growth profile of Elastic as well as its ability to fend off competition encroaching on its space but it has done very well. I’m not adding but happy to hold junior sized position.

Ant

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I too have been puzzling (for years) over the Elastic, Mongo discrepancy.

On the face of it, Elastic is the better company, more optionality, better leverage, far lower SBC as % revenue etc.

However, the major difference that I can see is that Atlas (MDBs SaaS off-premise offering) contributed $92m in the last quarter, while ElasticCloud (the SaaS component of Elastics offering) only contributed $51m.

That discrepancy pretty much reflects the enterprise value discrepancy between the two companies.

More customers are choosing to use the on-prem versions of ElasticSearch etc, versus the SaaS offering. The market appears to be weighting the SaaS performance highly. It’s unclear to me why SaaS (off-premise) dollars are more valuable than subscription (on-prem) dollars.

The other issue with Elastic is the ‘conservative’ guidance policy, which has underestimated by an average of 11% for the last 6 quarters.

cheers
Greg
long ESTC

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I’m a tech guy and we use Elastic where I work. At least we’ve been trying to.

It’s an on-premise installation and it’s been around for about a year, but I can’t get access to it even though it collects data on the systems I administrate! The reason is because there are so many problems with the implementation. The people trying to get it working are so busy with all the problems that they don’t want to compound their headaches by giving people access to a system that doesn’t work.

Based on my experience with it, I’d much rather place a bet with DDOG or SNOW.

I’d be interested in hearing about others’ experience with it, especially with on-premise installations.

My $0.02

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Interesting. I’ve used Elasticsearch for years, and it’s been a pretty rock-solid performer for me and the companies I’ve worked for. They had some initial issues, similarly to MDB with data consistency etc., but those afaik are pretty sorted.

Theres overhead in setting up clusters etc., similarly to any other cluster environment, but you’re the first person I’ve heard say it “doesn’t work”. I’ve even got junior programmers to set it up with AWS and they seem to get it going within an afternoon or so.

Are you using it for logs? analytics? nosql datastore? search? have you properly configured the cluster? Are you running out of space? Too much data for your cluster?

Obviously it works pretty well for a lot of people, so curious about your experience.

cheers
Greg

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Another interesting thing of note is that over the previous 9 quarters they added about 800 customers/Q. Average enterprise customer adds in the 4 Qs pre-Covid was 45 customers/Q. Suddenly this Q these numbers have jumped to 1200 customers and 60 customers which is an increase of 50% and 33% respectively. There have been no acquisitions. Is it due to the license change I wonder which has forced some of the AWS Open Distro users to come to Elastic? Shay said they have not noticed any noticeable revenue change but said the license change will continue to be a tailwind. Or is due to their new hire Paul Appleby who runs their GTM? Either way, it would be interesting to watch if it persists.

On Mongo, note that Atlas hit a run rate of $200M in 3/20 exactly 5 Qs before. Elastic stated tighter integrations with Azure. Will that help them maintain 70%+ rev grth in the ElastiCloud I wonder.

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