Elastic NV at Bank of America Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Koji Ikeda - BofA Global Research - Analyst : Of course, of course. So standard question, for those on the webcast, for those in the room that are unfamiliar with Elastic, just very, very high level, what is Elastic? What do you guys do? What is the opportunity? And maybe just a minute on yourself.

Question: Koji Ikeda - BofA Global Research - Analyst : So you guys just reported your results last week. So super excited to have you guys here today. And maybe talk about from a very high level some of the key takeaways from the earnings report. And I think a little bit more importantly is how have your discussions with investors been post and maybe the top one or two questions coming from them following the earnings. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 10:20PM, ESTC.N - Elastic NV at Bank of America Global Technology Conference

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah, let's focus on that guidance for a minute.

Question: Koji Ikeda - BofA Global Research - Analyst : So you guys -- fourth quarter, right? And so it's been an interesting, I would say, first half of this year, all things put together and hear you guys have to go and give guidance for a full year out from now. And so just walk us through kind of the components of the guidance. How are you guys thinking about it? New versus expand the [medium] environment, all that stuff put together, and how does that come up to the number that you gave?

Question: Koji Ikeda - BofA Global Research - Analyst : I want to ask you a question on demand, the demand environment. How are you guys thinking about or what are you guys seeing? Because it's been interesting in software with a lot of (multiple speakers)

Question: Koji Ikeda - BofA Global Research - Analyst : The companies, categories, all of it put together. I think it's easy to bucket front office, back office, infrastructure. But now I think investors overall are really beginning to dig in. What is it specifically about this part of the aspect of front office or back office and in your world infrastructure, right? So we thought you had a pretty good quarter.

Question: Koji Ikeda - BofA Global Research - Analyst : Great quarter, great quarter. And so what is it about the demand environment that you're seeing out there? How would you categorize it today versus six months ago versus a year ago. How much have things changed or maybe they haven't changed at all?

Question: Koji Ikeda - BofA Global Research - Analyst : You mentioned late calendar '22. And so when I think about software companies as a group and how they reported and how they talked about it, that feels pretty early, right? When you guys are actually calling it out, we are seeing some softness. And now you've been talking about things stabilizing, even maybe getting a little bit better out there. Stable is good, right. And so it feels like you're first to see demand get better. And so why is that? Is it something specific about what you're selling into like the end market or the opportunity? And what would in your view need to happen for things to get incrementally worse out there from what you're seeing?

Question: Koji Ikeda - BofA Global Research - Analyst : Okay. Okay. I wanted to dig in a little bit about these data points that you gave on the last quarter about customers using generative AI. You've got 1,000 plus. Overall paid, right? And then 145 of the 100,000-plus ACV customers. Are those use cases trying things out or are they actual production? Meaning these companies have chosen Elastic as core technology to drive some sort of digital experience. It's not -- we're trying -- not trying something new. Let's see what happens. And this is a paid customer that says, no, we have chosen Elastic. This is how we're going. This is a key piece for the next 5 to 10 years.

Question: Koji Ikeda - BofA Global Research - Analyst : I wanted to dig in a little bit more.

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah, I really like the 145 customer metric, the 100,000-plus. These are big companies, big budgets, making some very strategic decisions. And one of the aspects I really like about Elastic is you're very ubiquitous within a lot of enterprises. I mean, people know Elastic. Whether it's paid version, free version, you guys are literally at all over digital experience ecosystems out there. And so on one side, it's -- hey, it's very easy to say, I want to try something new with Elastic and let's just move in that direction. On the other side, and I think more importantly is with these bigger customers, they're making very strategic decisions, RFPs, trying other technologies out there. And so the question really becomes how many of the deals out there you're seeing is you are winning some in sort of RFP. Meaning this business has been a 10-plus year, whatever customer with Elastic. Maybe they're trying some other technologies out there. But at the end of the day, they're like, no, we're going to stick with you guys.

Question: Koji Ikeda - BofA Global Research - Analyst : Want to ask you one more question on AI and then just open up to the floor to see if there's any questions from the investors and the audience. So just last question from me, AI. Just thinking about all these customers that you sell into, and let's just focus on the biggest ones out there. Have they gotten really comfortable with generative AI, meaning they know what to do and now it's time to execute? Or are they really just trying to figure it all out still? What are you seeing out there?

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. Thank you. Any questions from the audience? Please raise your hand.

Question: Koji Ikeda - BofA Global Research - Analyst : No question.

Question: Koji Ikeda - BofA Global Research - Analyst : I wanted to ask you a question about vector databases and vector search. Calendar '23 was vector databases. What's going to happen to Elastic? And then that narrative kind of slowed down a little bit, but it feels like it's picking back up a little bit again. I definitely get the question more today than I did six months ago. I mean, similar to what I was doing last year. And so it really comes down to what I think is important here is performance of vector databases. I think that -- and you mentioned that you think of it as a feature. It does feel like if you're going to plan this opportunity, you're going to have to have vector, anyway, of some shape or form. And so now it becomes how does Elastic think about performance and scalability of vector? Maybe help shape what is it specifically about the technology that enables that? And how do you protect that for the next, gosh, 5 to 10 years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 10:20PM, ESTC.N - Elastic NV at Bank of America Global Technology Conference

Question: Koji Ikeda - BofA Global Research - Analyst : Switching topics a little bit, moving to Elastic Cloud, one of the very hotly debated parts of the Elastic business for sure.

Question: Koji Ikeda - BofA Global Research - Analyst : So I wanted to ask you a question of how these contracts kind of work, especially in infrastructure, software and consumption as we look at all these different types of businesses. I think one of the aspects that people are really trying to figure out is how exactly is that user spending with Elastic? How does that contract work? And you've said in the past, we've talked about it before, you guys have a very good understanding and visibility with these commitment contracts. And so maybe walk us through a typical contract. Size really doesn't matter. But how does that work with the commitment? How long does it take for revenue to show up? I mean, is it a big project, it's not a big project, but what does that look like?

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. We've got a couple of minutes left, but I do want to sneak in two questions with you. Just from a customer perspective, how big can a customer theoretically get with you just thinking about generative AI in the future? Could there be a time in the future where we're hearing about

Question: Koji Ikeda - BofA Global Research - Analyst : Okay. Last question for you, Janesh. Thanks so much for doing this. You are the CFO and Chief Operating Officer. So lots of responsibilities for you. And I think about Elastic and very attractively positioned and raise the opportunity here at generative AI, but you guys are also profitable, too. And so how do you think about balancing, maximizing your potential within this opportunity, but also generating free cash flow?

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. Thank you. We are all out of time, Janesh. This was fun. Thanks for doing this.