SAN FRANCISCO--(BUSINESS WIRE)--Nov 21, 2024-- the company behind Elasticsearch®, announced financial results for its second quarter of fiscal 2025 ended October 31, 2024. “Elastic delivered a strong second quarter supported by solid sales execution, exceeding our guidance across all revenue and profitability metrics,” said Ash Kulkarni, Chief Executive Officer, Elastic. “In Q2 we saw strong customer commitments with key wins across all our solution areas, with continued momentum in GenAI and platform consolidation. Our clear product differentiation, and our relentless pace of innovation is helping us become a natural choice for customers building GenAI applications.” The Company is providing the following guidance: For the third quarter of fiscal 2025 (ending January 31, 2025): For fiscal 2025 (ending April 30, 2025): The guidance assumes, among others, the following exchange rates: 1 Euro = 1.060 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 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. Elastic also announced today that Janesh Moorjani, the Company’s Chief Financial Officer and Chief Operating Officer, will be leaving Elastic to pursue another opportunity and his last day with Elastic will be December 13, 2024. Eric Prengel, Elastic’s Group Vice President of Finance, has been appointed as interim Chief Financial Officer effective December 14, 2024. Prengel has been with Elastic for the past two years with broad responsibility for various FP&A and business partnership functions. Prior to joining Elastic, Prengel spent nearly 10 years at J.P. Morgan in various investment banking leadership roles. “I’d like to thank Janesh for all his contributions to Elastic over the past seven years. He has been a trusted colleague and a friend, and we wish him all the best as he pursues a new opportunity. Having worked closely with Eric during his time here, I am excited to have him step into the interim CFO role and I am confident in his disciplined leadership and ability to excel in this role,” said Kulkarni. 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. Elastic (NYSE: ESTC), the Search AI Company, enables everyone to find the answers they need in real-time using all their data, at scale. Elastic’s solutions for search, observability and security are built on the Elastic Search AI Platform, the development platform used by thousands of companies, including more than 50% of the Fortune 500. Learn more at elastic.co. 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. 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 ending January 31, 2025 and the fiscal year ending April 30, 2025, the expected performance or benefits of our offerings, our product strategy and innovation, changes in leadership, expected market opportunities, and our ability to execute on those market opportunities. 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 our licensing model on the use and adoption of our software; 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, 2024 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 . Elastic assumes no obligation to, and does not currently intend to, update any such forward-looking statements, except as required by law. 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. 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. 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. We define non-GAAP net income as GAAP loss, excluding stock-based compensation expense and related employer taxes, amortization of acquired intangible assets, acquisition-related expenses, restructuring and other related charges, and the related income tax effect of these adjustments as well as other significant tax adjustments. 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 is a non-GAAP financial measure that we define as net cash provided by (used in) 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. 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. Elastic Investor Relations Elastic Corporate Communications Revenue Subscription $ 340,807 $ 287,743 $ 664,581 $ 557,990 Services 24,554 22,869 48,200 46,375 Total revenue 365,361 310,612 712,781 604,365 Cost of revenue Subscription 69,941 59,996 138,288 117,262 Services 23,238 20,093 46,648 40,304 Total cost of revenue 93,179 80,089 184,936 157,566 Gross profit 272,182 230,523 527,845 446,799 Operating expenses Research and development 88,163 80,108 177,495 160,798 Sales and marketing 144,274 133,230 301,631 266,399 General and administrative 44,085 38,695 86,758 76,634 Restructuring and other related charges 86 29 225 754 Total operating expenses 276,608 252,062 566,109 504,585 Operating loss (4,426 ) (21,539 ) (38,264 ) (57,786 ) Other income, net Interest expense (6,462 ) (6,349 ) (12,988 ) (12,655 ) Other income, net 9,106 8,239 20,314 15,539 Loss before income taxes (1,782 ) (19,649 ) (30,938 ) (54,902 ) Provision for income taxes 23,668 5,147 43,739 18,402 Net loss $ (25,450 ) $ (24,796 ) $ (74,677 ) $ (73,304 ) Net loss per share attributable to ordinary shareholders, basic and diluted $ (0.25 ) $ (0.25 ) $ (0.73 ) $ (0.74 ) Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted 103,238,740 99,073,401 102,761,588 98,507,725 Current assets: Cash and cash equivalents $ 658,508 $ 540,397 Restricted cash 3,320 2,692 Marketable securities 539,062 544,002 Accounts receivable, net of allowance for credit losses of $4,992 and $4,979 as of October 31, 2024 and April 30, 2024, respectively 256,068 323,011 Deferred contract acquisition costs 77,129 78,030 Prepaid expenses and other current assets 41,667 42,765 Total current assets 1,575,754 1,530,897 Property and equipment, net 5,005 5,453 Goodwill 319,417 319,380 Operating lease right-of-use assets 16,433 20,506 Intangible assets, net 14,506 20,620 Deferred contract acquisition costs, non-current 106,120 114,509 Deferred tax assets 187,204 225,544 Other assets 7,061 5,657 Total assets $ 2,231,500 $ 2,242,566 Current liabilities: Accounts payable $ 23,557 $ 26,075 Accrued expenses and other liabilities 75,979 75,292 Accrued compensation and benefits 72,511 93,691 Operating lease liabilities 10,525 12,187 Deferred revenue 608,157 663,846 Total current liabilities 790,729 871,091 Deferred revenue, non-current 37,548 30,293 Long-term debt, net 569,165 568,612 Operating lease liabilities, non-current 9,621 12,898 Other liabilities, non-current 12,919 21,487 Total liabilities 1,419,982 1,504,381 Shareholders’ equity: Preference shares, €0.01 par value; 165,000,000 shares authorized, 0 shares issued and outstanding as of October 31, 2024 and April 30, 2024 — — Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized; 103,631,086 shares issued and outstanding as of October 31, 2024 and 101,705,935 shares issued and outstanding as of April 30, 2024 1,091 1,070 Treasury stock (369 ) (369 ) Additional paid-in capital 1,895,307 1,750,729 Accumulated other comprehensive loss (18,227 ) (21,638 ) Accumulated deficit (1,066,284 ) (991,607 ) Total shareholders’ equity 811,518 738,185 Total liabilities and shareholders’ equity $ 2,231,500 $ 2,242,566 Net loss $ (25,450 ) $ (24,796 ) $ (74,677 ) $ (73,304 ) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization 3,565 4,728 7,738 9,781 Amortization of premium and accretion of discount on marketable securities, net (1,926 ) (1,178 ) (4,126 ) (3,646 ) Amortization of deferred contract acquisition costs 23,994 18,380 47,175 35,952 Amortization of debt issuance costs 278 266 553 529 Non-cash operating lease cost 2,617 2,618 5,455 5,270 Stock-based compensation expense 64,065 56,455 127,608 113,582 Deferred income taxes 23,653 35 38,376 427 Unrealized foreign currency transaction loss (gain) 2,397 (778 ) 2,216 422 Other (14 ) 16 (14 ) (18 ) Changes in operating assets and liabilities: Accounts receivable, net (59,122 ) (48,899 ) 68,081 26,972 Deferred contract acquisition costs (23,278 ) (22,276 ) (37,178 ) (43,421 ) Prepaid expenses and other current assets 998 (2,753 ) 1,174 2,143 Other assets 487 876 (1,452 ) 1,556 Accounts payable 14,065 19,351 (2,335 ) 118 Accrued expenses and other liabilities 892 (982 ) (8,136 ) (1,393 ) Accrued compensation and benefits (3,691 ) (6,888 ) (21,480 ) (10,773 ) Operating lease liabilities (3,033 ) (3,094 ) (6,407 ) (6,194 ) Deferred revenue 17,880 6,532 (51,440 ) (22,578 ) Net cash provided by (used in) operating activities 38,377 (2,387 ) 91,131 35,425 Purchases of property and equipment (715 ) (896 ) (1,462 ) (1,528 ) Purchases of marketable securities (71,090 ) (94,722 ) (166,253 ) (178,301 ) Sales, maturities, and redemptions of marketable securities 86,092 46,176 178,482 75,292 Net cash provided by (used in) investing activities 14,287 (49,442 ) 10,767 (104,537 ) Proceeds from issuance of ordinary shares under employee stock purchase plan 10,464 9,111 10,464 9,111 Proceeds from issuance of ordinary shares upon exercise of stock options 1,782 6,800 6,527 10,643 Net cash provided by financing activities 12,246 15,911 16,991 19,754 Effect of exchange rate changes on cash, cash equivalents, and restricted cash (1,389 ) (4,832 ) (150 ) (4,790 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 63,521 (40,750 ) 118,739 (54,148 ) Cash, cash equivalents, and restricted cash, beginning of period 598,307 633,242 543,089 646,640 Cash, cash equivalents, and restricted cash, end of period $ 661,828 $ 592,492 $ 661,828 $ 592,492 Elastic Cloud $ 168,835 46 % $ 134,989 43 % $ 326,116 46 % $ 256,161 42 % Other subscription 171,972 47 % 152,754 50 % 338,465 47 % 301,829 50 % Total subscription 340,807 93 % 287,743 93 % 664,581 93 % 557,990 92 % Services 24,554 7 % 22,869 7 % 48,200 7 % 46,375 8 % Total revenue $ 365,361 100 % $ 310,612 100 % $ 712,781 100 % $ 604,365 100 % Elastic Cloud $ 168,835 25 % 25 % 7 % 7 % Other subscription $ 171,972 13 % 12 % 3 % 2 % Total subscription $ 340,807 18 % 18 % 5 % 5 % Total revenue $ 365,361 18 % 17 % 5 % 5 % $ 645,705 20 % 20 % 3 % 3 % $ 1,266,069 13 % 12 % 1 % — % Elastic Cloud $ 326,116 27 % 27 % Other subscription $ 338,465 12 % 12 % Total subscription $ 664,581 19 % 19 % Total revenue $ 712,781 18 % 18 % Net cash provided by (used in) operating activities $ 38,377 $ (2,387 ) $ 91,131 $ 35,425 Less: Purchases of property and equipment (715 ) (896 ) (1,462 ) (1,528 ) Add: Interest paid on long-term debt — — 11,859 11,859 Adjusted free cash flow (1) $ 37,662 $ (3,283 ) $ 101,528 $ 45,756 Net cash provided by (used in) investing activities $ 14,287 $ (49,442 ) $ 10,767 $ (104,537 ) Net cash provided by financing activities $ 12,246 $ 15,911 $ 16,991 $ 19,754 Net cash provided by (used in) operating activities (as a percentage of total revenue) 10 % (1 )% 13 % 6 % Less: Purchases of property and equipment (as a percentage of total revenue) — % — % — % — % Add: Interest paid on long-term debt (as a percentage of total revenue) — % — % 1 % 2 % Adjusted free cash flow margin 10 % (1 )% 14 % 8 % (1) Adjusted free cash flow includes cash paid for restructuring and other charges of $0.5 million and $3.5 million during the three and six months ended October 31, 2024, respectively, and less than $0.1 million and $0.8 million during the three and six months ended October 31, 2023, respectively. GAAP gross profit $ 272,182 $ 230,523 $ 527,845 $ 446,799 Stock-based compensation expense and related employer taxes 5,908 5,187 12,217 10,581 Amortization of acquired intangibles 2,835 2,977 6,110 5,953 Non-GAAP gross profit $ 280,925 $ 238,687 $ 546,172 $ 463,333 GAAP gross margin 74.5 % 74.2 % 74.1 % 73.9 % Stock-based compensation expense and related employer taxes 1.6 % 1.7 % 1.7 % 1.8 % Amortization of acquired intangibles 0.8 % 1.0 % 0.9 % 1.0 % Non-GAAP gross margin 76.9 % 76.8 % 76.6 % 76.7 % GAAP operating loss $ (4,426 ) $ (21,539 ) $ (38,264 ) $ (57,786 ) Stock-based compensation expense and related employer taxes 65,681 58,103 133,248 117,717 Amortization of acquired intangibles 2,835 3,888 6,110 8,096 Acquisition-related expenses 104 778 152 1,558 Restructuring and other related charges 86 29 225 754 Non-GAAP operating income $ 64,280 $ 41,259 $ 101,471 $ 70,339 GAAP operating margin (1.2 )% (6.9 )% (5.4 )% (9.6 )% Stock-based compensation expense and related employer taxes 18.0 % 18.7 % 18.7 % 19.5 % Amortization of acquired intangibles 0.8 % 1.3 % 0.9 % 1.3 % Acquisition-related expenses — % 0.3 % — % 0.3 % Restructuring and other related charges — % — % — % — % Non-GAAP operating margin 17.6 % 13.3 % 14.2 % 11.6 % GAAP net loss $ (25,450 ) $ (24,796 ) $ (74,677 ) $ (73,304 ) Stock-based compensation expense and related employer taxes 65,681 58,103 133,248 117,717 Amortization of acquired intangibles 2,835 3,888 6,110 8,096 Acquisition-related expenses 104 778 152 1,558 Restructuring and other related charges 86 29 225 754 Income tax effects related to the above adjustments (2) 19,650 183 34,964 8,768 Non-GAAP net income $ 62,906 $ 38,185 $ 100,022 $ 63,589 $ 0.61 $ 0.39 $ 0.97 $ 0.65 $ 0.59 $ 0.37 $ 0.94 $ 0.62 Weighted-average shares used to compute non-GAAP earnings per share attributable to ordinary shareholders, basic 103,238,740 99,073,401 102,761,588 98,507,725 Weighted-average shares used to compute non-GAAP earnings per share attributable to ordinary shareholders, diluted 105,827,936 102,493,070 106,006,894 102,066,719 (1) Totals may not sum, due to rounding. Gross margin, operating margin, and earnings per share are calculated based upon the respective underlying, non-rounded data. (2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP loss in calculating the non-GAAP financial measures presented above as well as other significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. GAAP subscription $ 69,941 $ 59,996 $ 138,288 $ 117,262 Stock-based compensation expense and related employer taxes (2,361 ) (2,208 ) (4,881 ) (4,589 ) Amortization of acquired intangibles (2,835 ) (2,977 ) (6,110 ) (5,953 ) Non-GAAP subscription $ 64,745 $ 54,811 $ 127,297 $ 106,720 GAAP services $ 23,238 $ 20,093 $ 46,648 $ 40,304 Stock-based compensation expense and related employer taxes (3,547 ) (2,979 ) (7,336 ) (5,992 ) Non-GAAP services $ 19,691 $ 17,114 $ 39,312 $ 34,312 GAAP research and development expense $ 88,163 $ 80,108 $ 177,495 $ 160,798 Stock-based compensation expense and related employer taxes (24,777 ) (22,562 ) (50,499 ) (45,967 ) Acquisition-related expenses (6 ) (395 ) (54 ) (1,175 ) Non-GAAP research and development expense $ 63,380 $ 57,151 $ 126,942 $ 113,656 GAAP sales and marketing expense $ 144,274 $ 133,230 $ 301,631 $ 266,399 Stock-based compensation expense and related employer taxes (21,434 ) (18,730 ) (43,883 ) (38,399 ) Amortization of acquired intangibles — (911 ) — (2,143 ) Non-GAAP sales and marketing expenses $ 122,840 $ 113,589 $ 257,748 $ 225,857 GAAP general and administrative expense $ 44,085 $ 38,695 $ 86,758 $ 76,634 Stock-based compensation expense and related employer taxes (13,562 ) (11,624 ) (26,649 ) (22,770 ) Acquisition-related expenses (98 ) (383 ) (98 ) (383 ) Non-GAAP general and administrative expense $ 30,425 $ 26,688 $ 60,011 $ 53,481 View source version on : CONTACT: Anthony Luscri Elastic Investor Relations Miller Elastic Corporate Communications KEYWORD: CALIFORNIA UNITED STATES NORTH AMERICA INDUSTRY KEYWORD: APPS/APPLICATIONS TECHNOLOGY SECURITY SOFTWARE NETWORKS INTERNET IOT (INTERNET OF THINGS) DATA MANAGEMENT ARTIFICIAL INTELLIGENCE SOURCE: Elastic N.V. 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