Elastic (NYSE:ESTC) Exceeds Q1 Expectations, Upgrades Full Year Guidance

Adam Hejl /
2021/08/25 4:17 pm EDT

Search software company Elastic (NYSE:ESTC) reported strong growth in the Q1 FY2022 earnings announcement, with revenue up 49.8% year on year to $193 million. Elastic made a GAAP loss of $34.4 million, down on its loss of $19 million, in the same quarter last year.

Is now the time to buy Elastic? Access our full analysis of the earnings results here, it's free.

Elastic (ESTC) Q1 FY2022 Highlights:

  • Revenue: $193 million vs analyst estimates of $173.2 million (11.4% beat)
  • EPS (non-GAAP): $0.04 vs analyst estimates of -$0.12 ($0.16 beat)
  • Revenue guidance for Q2 2022 is $194 million at the midpoint, above analyst estimates of $188.6 million
  • The company lifted revenue guidance for the full year, from $785 million to $811 million at the midpoint, a 3.31% increase
  • Free cash flow of $12.4 million, up from negative free cash flow of -$3.07 million in previous quarter
  • Net Revenue Retention Rate: 130%, in line with previous quarter
  • Customers: 16,000, up from 15,000 in previous quarter
  • Gross Margin (GAAP): 74.2%, in line with previous quarter

“The first quarter was a strong start to the fiscal year driven by crisp execution, the continued robust growth of Elastic Cloud, and our investments against the rich market opportunity ahead of us,” said Shay Banon, Elastic founder, and chief executive officer.

Founded in 2012 in the Netherlands, Elastic (NYSE:ESTC) helps companies integrate search into their products and monitor their cloud infrastructure.

Enterprises are struggling to keep up with the growing volume of data generated across their systems. That, coupled with the large number of users that are using search as their primary way to access information or functionality inside enterprise apps, is driving the demand for advanced search software.

Sales Growth

As you can see below, Elastic's revenue growth has been impressive over the last year, growing from quarterly revenue of $128.8 million, to $193 million.

Elastic Total Revenue

And unsurprisingly, this was another great quarter for Elastic with revenue up an absolutely stunning 49.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $15.4 million in Q1, compared to $20.4 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 25.3% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better than Elastic. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Customer Growth

You can see below that Elastic reported 16,000 customers at the end of the quarter, an increase of 1,000 on last quarter. That is a bit slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum.

Elastic Customers

Key Takeaways from Elastic's Q1 Results

With a market capitalization of $14.5 billion, more than $991.3 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by how strongly Elastic outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. On the other hand, there was a slight slowdown in customer growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 3.68% on the results and currently trades at $164 per share.

Should you invest in Elastic right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.