Elastic N.V. — FY2022 Form 10-K
Reporting period: Fiscal year ended April 30, 2022 (not calendar-year Q4). Amounts below are in U.S. dollars.
Business context
Elastic sells search-based analytics software and subscriptions for Enterprise Search, Observability, and Security. Customers can use self-managed software or Elastic Cloud, hosted on major public cloud platforms. Subscriptions accounted for 93% of revenue. Elastic reported more than 18,600 customers, up from more than 15,000 a year earlier; no customer exceeded 10% of revenue.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $862.4 million | $608.5 million |
| Gross margin | 73% | 74% |
| Operating loss | $173.7 million | $129.5 million |
| Net loss | $203.8 million | $129.4 million |
| Net cash from operations | $5.7 million | $22.5 million |
| Cash and cash equivalents | $860.9 million | $400.8 million |
| Working capital | $570.4 million | Not stated here |
Subscription revenue rose 41% to $798.8 million; professional services revenue rose 55% to $63.6 million. Elastic Cloud revenue increased to $298.6 million, 35% of total revenue, from $166.3 million, or 27%, in FY2021. Operating expenses rose 39% to $803.9 million, including sales and marketing expense up 48% and research and development up 37%. Stock-based compensation was $141.2 million, versus $93.7 million.
Operating cash flow fell despite higher revenue, partly reflecting increased receivables and deferred contract acquisition costs; deferred revenue provided an offset. Investing used $127.3 million, primarily for acquisitions. Financing provided $602.1 million, including $575.0 million from senior notes. At year-end, the notes had $575.0 million principal outstanding, a 4.125% coupon, and a July 2029 maturity. The balance-sheet carrying amount, net of issuance costs, was $566.5 million. Cash, cash equivalents, and restricted cash totaled $863.6 million.
Changes, outlook, and material items
- Revenue grew 42%, matching the prior-year growth rate, while net loss widened by $74.4 million and operating cash flow declined by $16.9 million.
- Gross margin eased one percentage point. Management attributed subscription cost growth chiefly to higher cloud infrastructure costs; it expects the growing Elastic Cloud mix to weigh modestly on gross margin.
- Elastic acquired Cmd, build.security, and Optimyze for combined consideration of $135.0 million. Cash used for acquisitions, net of cash acquired, was $119.9 million. The acquisitions were intended to expand cloud security and continuous profiling capabilities.
- Remaining performance obligations were $932.3 million; the company expected to recognize approximately 87% as revenue within 24 months. Net Expansion Rate was slightly below 130%.
- Management said existing cash was expected to fund operating and capital needs for at least 12 months and planned further business investment in FY2023. The supplied filing text does not provide a specific FY2023 revenue or earnings guidance figure. Elastic expected continued losses for the foreseeable future.
- Commitments included $415.7 million of non-cancelable cloud-hosting purchase obligations, $36.2 million of other purchase commitments, and $29.8 million of future minimum lease payments.
- CEO transition: Shay Banon became CTO in January 2022; Ashutosh Kulkarni became CEO. Management identified risks from competition, Elastic Cloud adoption and consumption-based revenue variability, the 2021 licensing change for Elasticsearch and Kibana, cybersecurity and privacy, COVID-19, Russia’s invasion of Ukraine, foreign exchange, and execution of growth plans.
- No legal matter was identified as likely to have a material adverse effect. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting; the company reported effective controls.
Important facts for investors to verify
- Whether Elastic Cloud growth and customer expansion continue to offset rising hosting costs and support durable gross margins.
- How operating losses, stock-based compensation, and weak operating cash flow evolve relative to revenue growth and management’s investment plans.
- Cloud-hosting commitments, debt service on the 2029 notes, and liquidity under slower growth or higher cloud usage costs.
- Acquisition integration and the realized commercial contribution of Cmd, build.security, and Optimyze.
- Effects of the Elasticsearch and Kibana licensing model and competition from cloud providers and forked software.