Elastic Reports Third Quarter Fiscal 2024 Financial Results

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)

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.

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

[email protected]

Madge Miller

Elastic Corporate Communications

[email protected]

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