Elastic N.V. (NYSE:ESTC) Q3 2023 Earnings Call Transcript

Raimo Lenschow : Yes. Okay. Perfect. Makes sense. And then the other question was on customer retention, et cetera. So if I look at the number of customers added this quarter, it was a little bit smaller, but then we do know that you don’t really focus on SMB that much anymore. Can you talk a little bit about the puts and takes to — for us to kind of think about this going forward in terms of like deemphasizing SMB? That kind of obviously might lower the new customer add number, but then you get more higher value-add customers in, which actually is better for the long run. Like what are the dynamics that you’re seeing there in terms of like customer renewal, attrition, et cetera?

Janesh Moorjani : Yes, Raimo, maybe I’ll take that one. Look, you hit it on the head, right? It’s — we are not trying to maximize the volume of the number of customer additions as we’ve shared before. We’re much more focused on the composition of our customer additions as we drive profitable growth. So the customer net adds reflect our focus on customers that have a higher propensity to spend. And we’ve seen pretty good momentum on that front, and so that’s something that we were pleased with. If you look at the customers that spend over $10,000 a year with us, that was an increase of approximately 100 customers versus the prior quarter. And that’s a little bit better than the prior quarter. So we exited with about — with over 4,000 customers in that category.

And then as you think about the larger customers in the more than $100,000 category, we reported net additions of over 60 customers there. And that customer count in that $100,000-plus group, that’s a critical part of the overall business underpinning of our land-and-expand motion. So this is all really just part of our focus on driving profitable growth, and we think a more efficient way to attract the right customers and grow our business over time. And then if I think about the total number of customers that we reported, that will bounce around every quarter. But as we said, that’s not our main focus in terms of the long tail of volume. It’s really on ensuring that we attract and grow high-quality customers over time, and we are quite happy with the outcome there.

Operator: The next question comes from Kash Rangan with Goldman Sachs.

Kash Rangan : Ash, I was curious to get your perspective on what’s happening at the top end of the funnel. And also since we’ve had the luxury of the — maybe not a luxury, but a month and a couple of weeks into the quarter, what are some of the trends that you’re seeing with respect to the front end of demand gen? And also, if you could just take a step back. When you look at cloud consumption, are you seeing any noticeable trends, large enterprise versus SMB, AWS versus Azure? Any color we can offer with respect to any trends you’re seeing within your customer base? That would be great.