Stock story –
Search software company Elastic (NYSE:) reported third-quarter 2024 results that exceeded Wall Street revenue expectations, with revenue up 17.6% year over year to $365.4 million. The company expects revenue next quarter to be around $368 million, close to analyst estimates. Non-GAAP earnings of $0.59 per share were 54.7% above analyst consensus estimates.
Is Now the Time to Buy Elastic? Find out by reading the original article on StockStory, it’s free.
Elastic (ESTC) Q3 CY2024 Highlights:
- Gain: $365.4 million vs. analyst estimates of $354.3 million (17.6% YoY growth, 3.1% better)
- Custom EPS: $0.59 vs. analyst estimates of $0.38 (54.7% better)
- Adjusted operating result: $64.28 million vs. analyst estimates of $46.03 million (17.6% margin, 39.6% profit)
- The company has slightly increased the turnover forecast for the full year from $1.44 billion to $1.45 billion at the center
- Management raised expectations for full-year adjusted earnings per share to $1.70 at the midpoint, up 10.4%
- Operating margin: -1.2%, compared to -6.9% in the same quarter last year
- Free cash flow margin: 10.3%, compared to 15% in the previous quarter
- Customers: 21,300, compared to 21,200 in the previous quarter
- Net Income Retention Rate: 112%, in line with the previous quarter
- Invoices: $383.2 million at quarter end, up 20.6% year over year
- Market capitalization: $9.10 billion
“Elastic delivered a strong second quarter, supported by solid sales execution, and exceeded our expectations across all revenue and profitability metrics,” said Ash Kulkarni, Chief Executive Officer of Elastic.
Company Overview Elastic (NYSE:ESTC), founded by Shay Banon as a search engine for his wife’s growing list of recipes at Le Cordon Bleu cooking school in Paris, helps companies integrate search capabilities into their products and monitor their cloud infrastructure.
Data infrastructure
Generating insights from system-level data is an increasing priority for most companies, but doing so requires connecting and analyzing large amounts of data stored in separate databases and silos. This is the driving force behind cloud-based data infrastructure software providers, which can integrate, distribute and process information more easily than older on-premise software providers.
Sales growth
Assessing a company’s long-term sales performance reveals insights into its quality. Any company can achieve short-term success, but a top company can continue to grow for years. Fortunately, Elastic’s revenue grew at a decent compound annual growth rate of 23.3% over the past three years. The growth was slightly above that of the average software company and shows that its offering is resonating with customers.
This quarter, Elastic reported year-over-year revenue growth of 17.6%, and revenue of $365.4 million exceeded Wall Street estimates by 3.1%. The company’s management is currently targeting a 12.2% year-over-year revenue increase in the next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 11.5% over the next twelve months, a slowdown from the past three years. This projection is still above average for the industry and implies that the market is seeing some success for its newer products and services.
Invoices
In addition to revenue, billings are a non-GAAP metric that sheds additional light on Elastic’s business quality. Billings is often called “cash revenue” because it shows how much money the company has collected from customers in a given period. This differs from revenue, which must be recognized in parts over the term of a contract.
Elastic’s billings last quarter were $383.2 million, and over the past four quarters, growth has been solid, with an average increase of 17.3% year over year. This performance was in line with overall revenue growth, indicating robust customer demand. The money raised from customers also improves liquidity and provides a solid foundation for future investment and growth.
Customer retention
One of the best parts of the software-as-a-service business model (and one reason they trade at high valuations) is that customers typically spend more on a company’s products and services over time.
Elastic’s net revenue retention, a key performance metric that measures how much money existing customers from a year ago are spending today, was 111% in the third quarter. This means that Elastic would have grown its revenue by 10.8% even if it had not acquired any new customers in the last twelve months.
Elastic has a good net retention rate, which proves that customers are happy with the software and are getting more value from it over time, which is always great to see.
Key takeaways from Elastic’s Q3 results
We were impressed with how significantly Elastic exceeded analyst expectations and earnings per share this quarter. We were also pleased that it increased its revenue and EPS guidance. Overall, we think this was a solid beat-and-raise quarter, with some key positives. The stock rose 18.8% to $112 immediately after the report.
