Quick Elastic (ESTC) quarterly results

Revenue growth up 58% year-over-year, 62% on a constant currency basis

GAAP loss of $0.56/share, non-GAAP loss of $0.32/share

OCF of -$1.7M and FCF of -$3.3M, so virtually break-even cash-wise

Shares up about 6.76% so far to $85.55 at the moment of refreshing (about 4:13 pm eastern).

long ESTC, including some September $90 calls bought on Monday


Raised FY guidance (they just finished Q1 with this ER) from $403 on high-end to $412.
I guessed they would eventually finish the year at $425, and that still appears to be on track with 2 more raises likely in next 2 ERs.

First Quarter Fiscal 2020 Key Metrics and Recent Business Highlights

Total subscription customer count was over 8,800.
Total customer count with ACV greater than $100,000 was over 475.
Subscription revenue represented 92% of total revenue.
Net Expansion Rate continued to be greater than 130%.
Released version 7.2 of the Elastic Stack introducing:
Elastic SIEM product (preview), which introduces a new set of data integrations for security analytics use cases, and a new dedicated app in Kibana.
Elastic App Search (generally available) as a downloadable, self-managed search product.
Many new features including support for .NET in Elastic APM (preview), new Beats modules that strengthen Kubernetes monitoring, and Metrics Explorer UI providing a more intuitive, interactive analysis of infrastructure metrics.
Released version 7.3 of the Elastic Stack introducing:
Elastic Maps product (GA) giving users a powerful Kibana application that opens up new ways to visually explore location data available in Elasticsearch.
Many new features including initial integration of ML jobs into Elastic SIEM enhancing threat detection and threat hunting workflows; Continuous Data Frames (beta) enabling users to create live entity-centric indexes; and Kerberos support in Kibana and Elasticsearch providing single sign-on access.
Released version 2.3 of Elastic Cloud Enterprise (ECE) featuring role-based access control (GA) giving users more visibility and control without having to hand over admin privileges, as well as improved diagnostics, automation, and integration capabilities.
Released Elastic Enterprise Search Beta 2, introducing three new connectors: Jira, Jira Server, and Confluence Server, as well as expanded custom API sources giving users greater flexibility to address the unique characteristics of their particular content platforms.
Announced that the Elasticsearch Service on Elastic Cloud is now available on Google Cloud Platform (GCP) in Tokyo, and on AWS in the London region.
Joined forces with Perched, a security analytics, operations, and threat hunting company, further expanding and advancing Elastic’s product, consulting, and training capabilities in the security analytics space.
Held three successful Elastic{ON} Tour events to engage with Elastic’s community of users, customers, and partners in Austin, Berlin, and Sydney with waitlists driven by strong demand.
Financial Outlook

The Company is providing the following guidance:

For its second quarter of fiscal 2020 (ending October 31, 2019):

Total revenue is expected to be between $95 million and $97 million.
Non-GAAP operating margin is expected to be between -23.5% and -21.5%.
Non-GAAP net loss per share is expected to be between $0.32 and $0.30, assuming between 77 million and 78 million weighted average ordinary shares outstanding.
For its fiscal year 2020 (ending April 30, 2020):

Total revenue is expected to be between $406 million and $412 million.


Personal notes on the release.

Cloud/SaaS accelerate slightly from last quarter. About 71% growth. Reported as 69% growth last quarter.

20% of revenue up from 18% last quarter. This is what I was looking for. And they did it!

Ok a couple of other key metrics I track for Elastic.
Pro services trended down as percentage of overall revenue for first time. Down to 8%. Pro services grew at 45% vs greater than 100% in all previous public quarters. This is lumpy and has an impact on Billings.

This also means that for the first time subscription revenues outpaced the overall growth. 59.6%.

I believe the SaaS & Cloud strategy that Mujii and I and others have been discussing are showing up here.



Sorry meant to add. This means that subscription revenues saw ZERO deceleration from last quarter. Might even be a fraction acceleration.


1 Like

I am a little concerned over cost control:

R & D Expenses growth: 85% yoy (39% of revenue)
S & M expenses growth: 71% yoy (58% of revenue)
Admin growth: 84% yoy (20% of revenue)

So much for operational leverage. It is early days, but I would like to see S & M expenses growth slow. It has been consistently higher than revenue growth since the IPO.

I’ll try to take a deep dive into this and report back if I find anything.


A big impact to the S&M at least is they moved the Big Elastic ON conference to Q1 this year. So that won’t be a factor for remaining quarters this year.


I am a little concerned over cost control:

With regard to expenses, management has repeatedly indicated that they are not looking to maximize profitability (yet) and will continue to invest heavily in growth to acquire more customers/market share. It’s not terribly surprising as management has indicated previously that they would spend heavily this FY. I would expect that of course over time, operating expenses would trend down as a % of revenue as they scale further…



Yes looking at Call Slides.

Subscription Revenue accelerated from +59% in Q4 to 60% in Q1.

SaaS accelerated from 69% to 71%.

Pro Services decelerated from 105% growth to 45% growth and was basically flat over Q4. I believe this reflects the traction in SaaS and less need for consulting contracts for new deployments and expansion.

Q2 guidance $97M on top line. Q2 year ago $63.6M implying 52.5% growth.

They beat this quarter’s top line guidance by $5.7M. A $5M beat (typical) on top line guidance in Q2 gives 60.4% Revenue Growth.

R & D Expenses growth: 85% yoy (39% of revenue)
S & M expenses growth: 71% yoy (58% of revenue)
Admin growth: 84% yoy (20% of revenue)

These must be GAAP numbers which we don’t normally use.
Non-GAAP is as follows.

R & D Expenses growth: 76% yoy (33% of revenue)
S & M expenses growth: 65% yoy (52% of revenue)
Admin growth: 55.6% yoy (15% of revenue)

Much of this was due to timing of major Conferences moved to this quarter.

Listened to call, need the transcript to give a better run down.

It was extremely positive. They are killing it. One note on last question. Elastic says they are not experiencing any impacts from global macro events unlike some other companies that have highlighted this as a headwind.



Thanks Darth (and others) for sharing notes. I couldn’t take cc live, so looking forward to transcript later.

One thing I noticed last ER CC, and it seems reinforced with the talk of how ESTC changed their pricing (to per node) and how Splunk has changed theirs to try and compete better: I believe Elastic will have accelerated growth in their Q3 and Q4.

Last CC, either CEO or CFO highlighted that the pricing changes created y/y headwind for “another 2 Q’s” which should end after their next Q, which is their Q2.

My reasoning is in their guidance, which doesn’t make sense any other way I look at it.
They have guided for 52% y/y growth on high-end for Q2.
They have guided for 52% y/y growth on high-end for full-year. ($412m)

I can’t think of any other companies we follow that have full year guidance equal to, or above, the guidance for the coming Q. Usually this is sandbag territory, allowing them an easy win by being able to “raise” guidance for full-year each subsequent ER.

Assuming they beat-and-raise in Q2 and Q3, then I believe they finish Q4 closer to $425m, which is about 55% growth y/y. They can likely beat this with 3 Q’s of beats to still get baked in, but I think $425m is a safe number. At the time of their Q4 ER in June 2020, they will be over $500m runrate while growing still at 55% y/y.

And this is before SIEM becomes material.
And this is with their SaaS sub-category within Subscriptions growing faster than the rest of subscription business. While I wouldn’t equate this to Atlas or the “hidden growth” of Twilio previously, I would classify it as “sneaky growth” that should serve as a tailwind for well over a year as the SaaS component of the business matures.

The stock price got beat up and down pretty good, so I can’t predict if the 10% AH gain will even hold tomorrow morning, but I feel good holding the stock as the investment thesis seems intact.

Now on to MDB and ZS ER’s!




I think next Q they lose the y/y headwind. From the Q1 earnings call transcript;

Tyler Radke – Citi – Analyst

Great. And then maybe a follow-up, as we think about the guidance for next year, maybe just help us understand your expectations for the SaaS revenue business. I know you made some changes with the warm-hot architecture, which I think offered more favorable pricing to customers based on their memory usage. But just help us understand the context of that as we think about the growth in that line for next year.

Janesh Moorjani – Chief Financial Officer

Hey, so this is Janesh. Happy to do that. Overall, we remain very bullish about the SaaS opportunity that we see ahead of us. You’ll see that for the past few quarters, our SaaS business has continued to grow faster than the self-managed business.

Broadly, I’d say we’d expect that trend to continue in the future. We don’t do anything that tries to influence customer behavior one way or another. We are relatively agnostic when it comes to customer preference in that regard. And so we’ll continue to serve the customer in the best way that makes sense for them, but we do expect that that business will grow a little bit faster than what we’ve seen before.

The other piece I’ll just take the opportunity here to point out is that we made the architecture changes that you talked about around three quarters ago. And in conjunction with that, we had launched our revised pricing model. And so we’ve still got one quarter of that pricing headwind to go before we lap that at the start of Q2 of this fiscal.


Thanks for catching…that means we should see solid growth next 3 Qs.

I hate when companies dont use standard Calendar Qs…just confusing to remember.


1 Like

I hate when companies dont use standard Calendar Qs…just confusing to remember.

When everybody needs to get things done at the same time, it puts a strain on getting the proper attention.

At least it gives them a bit more room to negotiate better contracts and take some budget before the others.

Some of the stupid things we’d do at the end of our standard calendar Qs would hurt future business.


Below, I’m updating my usual ESTC quarterly report: https://discussion.fool.com/estc-apr19-q-update-34224536.aspx Pardon the lines in the first column – not pretty, but it makes formatting dramatically easier for me.

I’d also like to point to Greg’s great report on ESTC’s quarter: https://discussion.fool.com/estc-conference-call-notes-34283382… Treat my info below as a supplement.

Quarter_________	Oct17	Jan18	Apr18	Jul18	Oct18	Jan19	Apr19	Jul19
Fiscal Q_________							FiscQ4	FiscQ1
Calc Bill_________	51.3	47.5	73.3	59.2	88.5	79.8	115.4	89.4
YoY Ch%_________				76.2%	72.5%	68.0%	57.4%	51.0%
Revenue_________	37,038	41,681	49,572	56,644	63,575	70,835	80,599	89,710
QoQ Ch%_________	17.0%	12.5%	18.9%	14.3%	12.2%	11.4%	13.8%	11.3%
YoY Ch%_________	73.8%	80.2%	82.4%	79.0%	71.6%	69.9%	62.6%	58.4%
Gross Prof_______	28,078	30,915	35,972	41,087	44,988	50,411	57,157	63,459
OpEx____________	35,204	43,374	55,207	59,502	72,058	74,197	89,242	105,761
YoY Ch%_________		9.6%	76.3%	78.1%	104.7%	71.1%	61.6%	77.7%
Op Loss_________	-7,126	-12,459	-19,235	-18,415	-27,070	-23,786	-32,085	-41,371
StockBasedComp__	2,770	3,554	4,164	5,665	11,239	11,111	11,927	12,771
Customer Count___				5,500	6,300	7,200	8,100	8,800
Cust w ACV > 100k				300	340	380	440	475
Net Expansion Rate	130%+	130%+	130%+	130%+	130%+	130%+	130%+	130%+
FY Guidance_____					258.0	267.0	403.0	412.0
YoY Ch%_________							48.4%	51.7%
Q Guidance______					66.0	76.0	84.0	97.0
YoY Ch%_________					78.4%	82.3%	48.4%	52.5%
Shares Outstanding							72.30	74.60
Share price_______							80.01	88.50
Cash (in mil)______							298.00	315.20
TTM Revenue_____							271.65	304.72
TTM Billings______							342.90	373.10
EV/S____________							20.20	20.63
EV/Billings________							16.00	16.85


Growth Rates
Calculated Billings grew 51%, and Revenue grew 58%. I was hoping for more, but there were several good explanations and hope for the future:

  1. Guidance for revenue growth next quarter is higher than it was for this quarter
  2. As DreamerDad and RetirementDough mentioned, the headwind they’ve been having in Calculated billings will be gone next quarter:
    As a reminder, we launched a significant update to our SaaS services in Q2 of last year…Those changes last year present a headwind to calculated billings growth. It’s hard to precisely quantify that headwind, but we estimate that it was in the mid-single digits in terms of your over year growth…Q1 was the last quarter of this billings headwind.
  3. As Darth mentioned a couple times, subscription growth (60%) was greater than overall growth, and within that, SaaS growth was about 70%. And prof services growth (45%) was slower that overall growth, which is good – it’s negative margin, so we want it to diminish.
  4. As Dreamer mentioned, SIEM revenue isn’t material yet. https://discussion.fool.com/thanks-darth-and-others-for-sharing-…
  5. They also said the Endgame acquisition should close in Q3, so that could have potential eventually, though they said it would be insignificant this year. They added: As a reminder, our primary investment thesis is to integrate the Endgame product into the Elastic Stack and apply our community-based go-to market model to it. Therefore, the revenue opportunity for us is much longer term in nature, and the current levels of Endgame revenue are not discreetly additive to our revenue for future years.

Operating Expenses grew 78%, which is pretty gnarly. But as Darth mentioned a couple times, the [Expense increase] was due to timing of major Conferences moved to this quarter.
Here’s what they said in the call: As a reminder, we changed the timing of certain events and hosted our global all-hands meeting in Orlando in May. This was reflected in all the operating expense lines. This shift in timing towards Q1 does not impact the full-year expense total.
Even with that, the ongoing level of investment is still a bit staggering, but not unprecedented. Twilio’s OpEx spend in the most recent quarter was 162% of Gross Profit, and Elastic’s this quarter was 167%. Seems crazy high to me, but these companies are trying to take full advantage of their opportunities…so I’ll keep watching this, but not without trepidation.

My impression of the quarter

All in all, this was another great quarter. Love the lack of headwinds going forward, higher guidance, etc. Looks like wins all around. I expect Elastic to keep growing at around 60%…maybe even a little faster.

And even after the bump today, their EV/S is still below many of our others. Seems like a bargain to me. With today’s price increase, it’s now roughly tied with Mongo as my top position (12% each).