Elastic $ESTC 2Q22 Earnings 💪🏻
- Rev $206m +42% ↗️
- Gross Profit $152m +43% ↗️ margin 74% +38 bps✅
- NG EBIT $1m ⤴️ margin 1% +187 bps✅
- NG Net Income -$9m ↘️ margin -4% -249 bps↘️
- OCF -$10m margin -5% +689 bps✅
- FCF -$12m margin -6% +688 bps✅
- Rev $206m +42% ↗️
- Gross Profit $152m +43% ↗️ margin 74% +38 bps✅
- NG EBIT $1m ⤴️ margin 1% +187 bps✅
- NG Net Income -$9m ↘️ margin -4% -249 bps↘️
- OCF -$10m margin -5% +689 bps✅
- FCF -$12m margin -6% +688 bps✅
Business Metrics
Strong Customer Growth
>15,000 Subscription Customers
>730 customers with ACV >$100
>75 customers with ACV >$1M
- High Net Expansion ~130%
- Billings $231m +30% ↗️
- Deferred Rev $832m +29% ↗️
- RPO $832m +29% ↗️
- Avg contract length ~1.5Y ✅
Strong Customer Growth
>15,000 Subscription Customers
>730 customers with ACV >$100
>75 customers with ACV >$1M
- High Net Expansion ~130%
- Billings $231m +30% ↗️
- Deferred Rev $832m +29% ↗️
- RPO $832m +29% ↗️
- Avg contract length ~1.5Y ✅
1| Solid Q2
“Our strong second-quarter results were fueled by the rapid adoption of Elastic Cloud, the increased strategic relevance of our solutions, and continued expansion across our customer base.”
“Our strong second-quarter results were fueled by the rapid adoption of Elastic Cloud, the increased strategic relevance of our solutions, and continued expansion across our customer base.”
2 | The Problem of Unstructured and Endless Data
“…digital transformation…creating massive volume of data.
IDC estimates that by 2025…generating 480 exabytes of data per day and as much as 90% of that data is unstructured and with endless data comes endless possibility.”
“…digital transformation…creating massive volume of data.
IDC estimates that by 2025…generating 480 exabytes of data per day and as much as 90% of that data is unstructured and with endless data comes endless possibility.”
3 | High Recurring Revenue Model
- Total Rev: +42%
- Sub Rev: ~93% of total | +45% ◀️
- Self-Managed Rev ~66% of total | +34%
- SaaS Rev ~27% of total | +80% ◀️
- Total Rev: +42%
- Sub Rev: ~93% of total | +45% ◀️
- Self-Managed Rev ~66% of total | +34%
- SaaS Rev ~27% of total | +80% ◀️
4 | Story of the Cloud
➡️ Expects consumption-based Elastic Cloud (current ~34% up from 26% OYA) to ↗️ to >50% of revenues in 3Y.
“Cloud was once again the highlight, with strong new customer adds & robust consumption trends…expect cloud will remain a tailwind for the LT.”
➡️ Expects consumption-based Elastic Cloud (current ~34% up from 26% OYA) to ↗️ to >50% of revenues in 3Y.
“Cloud was once again the highlight, with strong new customer adds & robust consumption trends…expect cloud will remain a tailwind for the LT.”
5 | Revenue better measure going forward
“Monthly cloud business has no deferred revenue or RPO.”
“I think revenue is the best measure for us to reflect the performance of our business.”
“…consumption model, revenue reflects customers current consumption patterns…
“Monthly cloud business has no deferred revenue or RPO.”
“I think revenue is the best measure for us to reflect the performance of our business.”
“…consumption model, revenue reflects customers current consumption patterns…
5 | Revenue better measure going forward (cont’d)
it's not a time-based runoff of historical deals. So, revenue in fact in a consumption business is a very current measure of customer activity.”
it's not a time-based runoff of historical deals. So, revenue in fact in a consumption business is a very current measure of customer activity.”
6 | The Data Flywheel 🔄
“The consumption model faces no limits on how much data a customer can bring into our platform.”
“We shine when there's data in Elastic itself.”
“So the more data comes into Elastic, the more consumption is driven in our cloud...”
“The consumption model faces no limits on how much data a customer can bring into our platform.”
“We shine when there's data in Elastic itself.”
“So the more data comes into Elastic, the more consumption is driven in our cloud...”
7 | Inherent Operating Leverage with Scale resulting in improving profit margins as revenues grow
8 | Not Top Dog Yet: Elastic recognized as Challenger in the Forrester New Wave™: Extended Detection and Response (XDR) Providers, Q4 2021 (even before officially launching their Limitless XDR offering)
9 | Cash Flows - Positive in FY22
“…quarterly cash flow can be lumpy & affected by timing issues & seasonal variation, so we look at cash flow primarily for the full fiscal year…continue to expect our FCF margin to remain slightly positive on an unlevered basis in FY22.”
“…quarterly cash flow can be lumpy & affected by timing issues & seasonal variation, so we look at cash flow primarily for the full fiscal year…continue to expect our FCF margin to remain slightly positive on an unlevered basis in FY22.”
➡️ Final Takeaway Elastic $ESTC:
Still growing rapidly, extending beyond observability, to enterprise search & security. Faster growing Cloud to drive growth & shift to more recurring monthly revenue than lumpier annual revenues. Profit margins improving with operating leverage.
Still growing rapidly, extending beyond observability, to enterprise search & security. Faster growing Cloud to drive growth & shift to more recurring monthly revenue than lumpier annual revenues. Profit margins improving with operating leverage.
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