Elastic had a another amazing quarter of phenomenal growth and show no signs of slowing down in Revenue growth, customer growth, or adoption of their various software offerings. Overall quarterly Revenue was $89.7m, which represents revenue growth of 62% Y/Y. I prefer to break out the revenue into recurring “subscription” revenue (SaaS) and Professional Services. The former is much higher margins and is recurring, while the latter is lower margins, custom and often one time (less desirable). Subscription revenues grew much more by 77% Y/Y vs Professional services at only 45% Y/Y. This is exactly what I would want to see and I love that subscription revenue makes up 92% of the revenue (most of it)…its recurring AND has much higher profit margins.. Deferred revenues (revenues not recognized in this period, but contractually obligated in future periods and therefore already in the basket, so to speak, waiting to be recognized) continued to increase up to $170m last quarter, which is an incredible 64% growth Y/Y. That bodes incredibly well for future growth, since this revenue (and growth) is already built in and more or less guaranteed to be recognized with little or no additional expense. The company has $315m in cash and equivalents and is only burning about $3.3m per quarter right now. In reality, a company like Elastic can flip to profitability tomorrow if it chooses, but continues to spend all its profits on Sales & Marketing to fund rapid growth and add new long term customers and thereby future recurring subscription revenues.
If that wasn’t enough, today after the close of market (AMC), they made what I view as a significant announcement that they are partnering with another company called ECS to provide an integrated dashboard solution to monitor and mitigate cyber threats and vulnerabilities for the Department of Homeland Security (DHS). If that is not a ringing endorsement, I don’t know what is…
The stock price screamed higher today on the quarterly earnings release, ending the day up 11% and before the DHS announcement, which came AMC. I currently have about a 6% position plus Call Options that make it an equivalent of around 7%. I am not adding or selling shares on these announcements, but am happy with my position and this continued growth.
Cheers!
