Categories Analysis, Technology

After strong Q4, Elastic (ESTC) to focus more on long-term growth investments

The company expects to see strong growth in its SaaS business going forward

Elastic NV (NYSE: ESTC) ended its fiscal year 2020 on a strong note with double-digit increases in total revenue and strong gains in SaaS revenues. Total revenue in the fourth quarter of 2020 rose 53% to $123.6 million while SaaS revenue jumped 110% to $29 million. Calculated billings rose 52% year-over-year to $175.1 million.

The company witnessed strong renewal and expansion trends despite COVID-19, ending the quarter with over 610 customers with annual contract values above $100,000.

Elastic believes the business environment is evolving with an increased shift towards virtual workplaces and cloud solutions along with more pressure to consolidate tooling. The company feels it is well-positioned to address these changes through its free and open distribution model.  

Enterprise search

The company is seeing good momentum in its enterprise search business. The ability to put a fast and scalable search box on websites and applications has helped Elastic expand its customer base across various industries such as ecommerce, technology and financial services.

During the quarter, the company released version 7.7 of the Elastic Stack, which provides employees with a single point of search across common workplace tools such as Microsoft 365, G Suite or GitHub, making the search process easier.

On its quarterly conference call, Elastic stated that according to Forrester, the enterprise search market is expected to see a three-fold growth over the coming three years as companies look to replace their old search technologies.

Elastic believes that as observable systems and services continue to increase in order to meet the requirements of businesses, there will be a rising need to consolidate tools to optimize costs and increase efficiency.

“Our approach to observability eliminates data silos, reduces mean time to resolution, and allows customers to control costs without compromising on visibility.” – Shay Banon, CEO

Cloud

Elastic continues to invest in its cloud offerings. During the quarter, the company released its Elastic Cloud Enterprise 2.5 and rolled out expanded capabilities on Elastic Cloud. Elastic Cloud is available on AWS, Azure, JCP, Tencent Cloud and Alibaba.

The company is expanding its cloud partnerships with Google Cloud and Microsoft by extending its workplace search products with G Suite and making its annual subscription offerings available via the Google Cloud Marketplace.

Outlook

Looking ahead, Elastic expects to see strong growth in its SaaS business but the company expects to face challenges in terms of its calculated billings due to a slow recovery from the tough economic environment brought on by the pandemic. The company is focused on investing significantly in areas that will help drive growth in the long-term.

Elastic expects revenues of $119-122 million for the first quarter of 2021 and $530-540 million for fiscal year 2021.

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