Summary
Elastic's fiscal 2021 first quarter, ended July 31, 2020, showed a business growing quickly through the pandemic. Total revenue was $128.9 million, up 43.7% from the prior-year quarter. Gross profit rose 48.2% to $94.0 million, and gross margin reached 73.0%, up 2.2 percentage points. Elastic Cloud, the company's SaaS family of products, contributed 25% of total revenue, up from 20% in the prior-year quarter, and subscription revenue represented 94% of the total. Calculated billings were $130.0 million, up 45%, or 47% in constant currency.
Profitability improved even as the company stayed deep in the red. GAAP operating loss was $29.5 million, narrower than the $42.3 million loss a year earlier, and operating margin improved to -22.9% from -47.2%. Net loss was $19.0 million, narrowed from $41.8 million, and diluted loss per share was $0.23, narrowed from $0.56. The improvement leans on a $10.1 million unrealized foreign currency gain from remeasuring intercompany balances, which the company said lifted GAAP loss per share by $0.12. On a non-GAAP basis, operating loss was $4.3 million and operating margin was -3.3%. Non-GAAP earnings per share was $0.06.
Cash generation was the quarter's clearest swing. Operating cash flow was $22.0 million, compared with $1.7 million used in operations a year earlier. Capital expenditures fell to $0.38 million from $1.58 million, leaving free cash flow of $21.6 million. Cash and cash equivalents stood at $350.4 million on July 31, 2020. Deferred revenue was $277.5 million, up 63.5% year over year, and remaining performance obligations were $576.4 million, up 58.9%. Those balances suggest contracted business is building faster than recognized revenue.
Customer counts moved steadily higher. Elastic had over 12,100 subscription customers at July 31, 2020, against over 11,300 at the end of the prior quarter and over 8,800 a year earlier. Customers with annual contract value above $100,000 numbered over 630, up from over 610 and over 475 in the same comparisons. The Net Expansion Rate held above 130%.
Product activity continued through the quarter. Elastic shipped versions 7.8 and 7.9 of the Elastic Stack, launched a beta of Elastic Agent, and reached FedRAMP Moderate authorization alongside general availability of a new AWS GovCloud region. The company appointed Paul Appleby as president, worldwide field operations, and held nine virtual ElasticON events. Headcount was 1,962 employees at July 31, 2020.
Guidance points to continuing growth with wider losses than the non-GAAP result just posted. For the second quarter of fiscal 2021, management guided revenue of $129 million to $131 million, a non-GAAP operating margin of -11.5% to -10.5%, and non-GAAP net loss per share of $0.22 to $0.20. For the full fiscal year, the company guided revenue of $544 million to $550 million, a non-GAAP operating margin of -13.5% to -11.5%, and non-GAAP net loss per share of $0.83 to $0.69.
Risks are mostly pandemic-driven. Elastic said COVID-19 has brought delays in purchasing decisions, longer sales cycles, delayed professional services projects, and reduced renewals, all of which create headwinds for calculated billings and the Net Expansion Rate. Management also warned that a rising share of Elastic Cloud revenue will pressure gross margin because of hosting and managing costs, and it plans to increase investment over the remainder of fiscal 2021 after temporarily slowing spending. The accumulated deficit reached $502.9 million, and the company expects to keep posting operating losses and negative annual operating cash flow for the foreseeable future.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $128.9M | $123.6M | +4.2% | $89.7M | +43.7% |
| Gross profit | $94.0M | $89.3M | +5.2% | $63.5M | +48.2% |
| Gross margin | 73.0% | 72.3% | +0.7 pp | 70.7% | +2.2 pp |
| Research & development | $45.7M | $45.6M | +0.2% | $35.2M | +29.8% |
| Sales & marketing | $56.2M | $58.2M | -3.5% | $52.0M | +8.0% |
| General & administrative | $21.7M | $20.2M | +7.8% | $18.6M | +17.0% |
| Total operating expenses | $123.6M | $123.9M | -0.3% | $105.8M | +16.8% |
| Operating income (loss) | -$29.5M | -$34.6M | +14.6% | -$42.3M | +30.2% |
| Operating margin | -22.9% | -28.0% | +5.1 pp | -47.1% | +24.2 pp |
| Net income (loss) | -$19.0M | -$31.2M | +39.0% | -$41.8M | +54.5% |
| Net margin | -14.7% | -25.2% | +10.5 pp | -46.6% | +31.8 pp |
| Customers | 12,100 | 11,300 | +7.1% | 8,800 | +37.5% |
Risks
The COVID-19 pandemic and containment measures have caused delays in purchasing decisions, longer sales cycles, delayed professional services implementations, reduced renewals, and headwinds for calculated billings and Net Expansion Rate. The MD&A states these impacts remain uncertain and could harm business.
The sales cycle can extend to more than a year for some customers and has been further impacted by COVID-19. Larger enterprise deals require greater configuration and negotiation, and the loss or delay of one or more large transactions could affect quarterly cash flows and results.
The market is highly competitive with established and emerging rivals such as Splunk, Datadog, Dynatrace, and Amazon Web Services. Amazon offers SaaS based on Elastic's open source components without proprietary features, which may reduce demand and limit pricing.
Open source licensing creates limited technological barriers to entry because anyone may obtain and redistribute the source code for open source features. Amazon Web Services already offers some open source features, and such third party offerings may reduce demand and put pricing pressure on subscriptions.
The role of Kevin Kluge, Senior Vice President of Engineering, has been modified, and the company intends to search for a Chief Product Officer to oversee engineering and product functions. The loss of key personnel, including CEO Shay Banon, could delay strategic objectives, and COVID-19 may make hiring and onboarding harder.
As of July 31, 2020, the company had 17 issued U.S. patents and 45 pending U.S. patent applications. It filed suits against floragunn GmbH and Amazon.com for copyright and trademark infringement, and IP litigation could be costly and divert management attention.
As a provider of security solutions, the company may be specifically targeted by bad actors seeking to circumvent its security capabilities. Security risks are heightened during the COVID-19 pandemic as more individuals work remotely.
Elastic Cloud contributed 25% of total revenue for the three months ended July 31, 2020 compared to 20% for the prior year period. The company expects Elastic Cloud's contribution to increase over time, which could adversely impact gross margin due to associated hosting and managing costs.
Customers have no contractual obligation to renew their subscriptions after the subscription term. If customers do not renew, renew for shorter terms, or renew on less favorable terms, revenue may grow more slowly or decline and Net Expansion Rate may decline.
Customer count grew from over 2,800 as of April 30, 2017 to over 12,100 as of July 31, 2020, and headcount reached 1,962. This rapid growth strains management, operational, and financial resources and requires improved systems and processes.
Professional services gross margin was negative 14% in the three months ended July 31, 2020 compared to negative 13% in the prior year period. The decline is partly attributable to delayed services projects due to COVID-19, and margin may fluctuate or decline near term.
SaaS KPIs
All quarters →Net Expansion Rate
Non-GAAP Operating Margin
Non-GAAP gross margin
Customers with ACV > $100,000
Calculated Billings
Free cash flow
Free Cash Flow Margin
Total Subscription Customers
Summary, forecast, risks and KPIs are extracted from Elastic N.V.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.