Elastic reaps 93% Revenue from Subscriptions

Elastic N.V. has recently released its 10-Q report, revealing insights into its financial condition and operations. The company, based in Amsterdam, is a data analytics firm that offers solutions designed to run in public or private clouds in multi-cloud environments. Its primary product is the Elastic Stack, a set of software products that ingest and store data from various sources and formats, and perform search, analysis, and visualization on that data.

In the 10-Q report, Elastic discusses its business model, which is primarily based on a combination of a paid Elastic-managed hosted service offering and paid and free proprietary self-managed software. The company generates revenue primarily from sales of subscriptions to its platform, with subscriptions accounting for 93% and 92% of total revenue in the nine months ended January 31, 2024 and 2023, respectively. Additionally, Elastic also generates revenue from consulting and training services.

The report also mentions that as of January 31, 2024, Elastic had approximately 20,800 customers compared to approximately 19,900 customers as of January 31, 2023. The majority of new customers use Elastic Cloud, the company's family of cloud-based offerings. Elastic's sales teams are organized primarily by geography and secondarily by customer segments, focusing on both prospecting to land new customers and additional sales to existing customers.

Elastic has also been impacted by macroeconomic events, including inflation, slower economic growth, and political unrest, which have negatively impacted worldwide economic activity. The company has experienced longer and more unpredictable sales cycles, increased scrutiny of deals, and slowing consumption and overall customer expenditures due to these events.

Furthermore, the report discusses the company's restructuring efforts, which began in November 2022 to align investments more closely with strategic priorities by reducing its workforce by approximately 13% and implementing certain facilities-related cost optimization actions. Elastic incurred $0.8 million in restructuring and other related charges during the nine months ended January 31, 2024.

Elastic also emphasizes the importance of increasing adoption of Elastic Cloud, growing the Elastic community, developing new features for the Elastic Stack, converting users of its software to paid subscribers, and expanding within its current customer base as key factors affecting its performance and future success.

The market reacted to these announcements by moving the company's shares -12.6% to a price of $117.01. For the full picture, make sure to review Elastic's 10-Q report.

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