Elastic N.V. (ESTC) Earnings Call Transcript & Summary

Good morning, everybody. This is the home stretch of the BAML -- or I should say, Bank of America Global Technology Conference. We are excited to present to you Elastic, which is a company that we've known for quite a few years now. We have the honor of having Janesh Moorjani representing the company, who is the CFO of the company. He's been there for quite a few years now. Janesh, for generalists that might be listening to this presentation, can you just maybe give us a quick recap. What is Elastic? What is Elastic's mission in life? And what is the company's strategy going forward? And then we can jump into questions that are pertinent about the near-term or pertinent maybe to the long term as well if that's okay with you.

Yes, happy to. So Elastic was founded back in 2012. And by way of background, we're a search company, and we focus on enabling users to solve all kinds of problems using search technology. So traditionally, people would think about search as just a little text box and search is so much more than that. So since our very early days, we have driven massive adoption through open source. And we were used creatively by users for all kinds of use cases, everything from dating apps, which if you think about it is just one human being searching for another, to rideshare services where if you fire up a rideshare app and you're geo-located within the 4 corners of a screen and then there's a rider-driver matching service, which is essentially a form of search. Analyzing logs and machine data, that's also just another form of search and all kinds of creative ways in which people would use us, including one where we had a user that was analyzing data coming back from Mars, and that was NASA. So we were used in many different ways. And we always, from our very early days, had the view that to build a powerful commercial model on top of this, we needed to have a significant portfolio of proprietary features. And so we continue to build those. And over the past couple of years, we've really doubled down on our strategy of expanding our set of proprietary features and increasingly focusing on solutions, which include features that are specific to certain use cases, things like ease-of-use and more. And more recently, the solution areas on which we are focused, there's 3 of them: enterprise search, observability and security. And that's all built on top of the single unified Elastic Stack. And so internally, we refer to that moniker as a 3 plus 1. And you've seen our successes really over here over the past few quarters as we continue to leverage our distribution model. We offer a powerful hosted offering on the Elastic Cloud, and we continue to move up within the enterprise in each of those solution areas. And for folks that might not be entirely familiar with those, I'll touch on those really briefly and then happy to go into more detail, if you like, as well. But enterprise search is sort of the, well beyond the traditional view of enterprise search that used to exist several years ago. Because as workloads have moved to the cloud and enterprise data resides in the cloud, it's much more about being able to search enterprise data that doesn't sit within the 4 walls of an enterprise. Even in this environment of distributed working, if you think about the amount of knowledge and content that's getting generated in a distributed way; face-to-face interactions, by definition, there's a lot of intellectual knowledge or property that's lost, and when you have distributed interactions, a lot more content gets created from that standpoint. And that all needs to be searched and searched across multiple SaaS assets. So that's incredibly powerful for us. Observability is really an industry term around the coming together of logging an APM and monitoring. And we've had strengths traditionally in logging and increasing traction from an APM and monitoring perspective, so we feel pretty good about our positioning in observability overall. And then security, which is just another form of search, where we were used by users in many ways for security use cases early on. And we've expanded even further with the launch of our SIM product as well as the acquisition of Endgame a couple of quarters ago. So we're generally quite excited here about our track record of success. You'll see that reflected in all the results that we've got. And also excited about the market opportunity ahead of us.

Wonderful. Janesh, if you could just get back to search, which is the first product that the company or made a name for itself with the search functionality, a search as a big application of the core engine. Can you talk to us about the market opportunity ahead. How much of that is replacement of legacy search solutions, which have been around for 10, 15 years? How much of it is a greenfield? And what are the trends that are driving the search business for Elastic?

Yes. It's a great question, Kash, because traditional enterprise search didn't really live up to its true promise. Because in the old days, you would have some enterprise search solution, and there would be heavy integration that you would have. You would have to go create and build data lakes and bring everything into one place. And then you would say, okay, I got all this data and now what do I do with it? And the search solutions were limited based on the problems around the implementation of those and the ability of users to extract value from that. Since then, things have actually changed quite a bit, if you think about how quickly users can be up and running with Elastic on search solutions, it's significantly better and faster than what it was before. But more importantly, as I mentioned earlier, a lot of the company's assets now sit outside of homegrown applications. They sit in different -- with different SaaS providers, whether you're talking about Salesforce or Google G Suites or GitHub or Slack or any of these folks. And so there's a lot of content and knowledge about the enterprise that's sitting in all of those different applications. And so the need to be able to search across all of those different SaaS assets is something that's very different than the world as it stood 10, 15, 20 years ago. And that presents a whole new layer of technical complexity and challenges in terms of being able to search across those. And that's why we're actually so excited about the resurgence of enterprise search. In fact, in our most recent release which we did, which was 7.7, we announced the general availability of workplace search that actually allows users to search across all these different kinds of SaaS assets that I talked about.

Got it. When I try to explain Elastic to clients, I always use the Yelp example and the Uber example as intuitive ways as to how Elastic search technology can be practically used. Now have we gotten beyond those kinds of use cases? Are there something more interesting by way of trends that are emerging as to what's really driving that search application as a use case for Elastic?

Yes. I think it touches in many different forms, right? Examples like Yelp and Uber are easier to relate to because they tend to be consumer applications, right? And folks that fire up their mobile phone or their smartphone, they've got dozens of apps on those and pretty much every app within your cell phone will have a search box. And chances are that in many of those cases, those search experiences will be powered by Elastic. So it's a great way to explain that from the standpoint of a consumer app. But we get used within the enterprise as well, in many different ways. I gave you a couple of examples of sort of traditional workplace search experiences across SaaS assets. It can take other forms as well, where you have, for example, e-commerce applications, where as a consumer, you're interacting with a business on its website and you're conducting a search in different forms. If you think about grocery shopping on Instacart, that's just another example of search, and that's powered by Elastic. And so you've got businesses that are using us creatively in different ways to bring search capabilities not just within their business for the benefit of their own enterprise, but to their customers as well.

Interesting. I had no idea that -- so pre-COVID, we were all using a lot of Uber and Yelp. Post-COVID, we're using Instacart, but you guys are in either of those situations.

Yes. And that's one of the strengths of the model for us. I touched on this a little bit yesterday when we released earnings, that we've got just this benefit of diversification in the business. Where although certain groups and verticals and segments might be affected in one, if you're in COVID, but there are others that are the beneficiary of those. And that diversification, whether it's across segments or verticals or geographies plays quite nicely to our advantage.

Got it. I suppose that if you had to go to a clothing store and look at 15 different items before you saw 1. And post-COVID, you're looking at 150 items before you settle on 1, so that's all goodness. We're searching, but searching more digitally, right? We're searching for grocery items, but more and more digitally. And so that, I guess, is nothing but goodness. On that note, you guys had a fantastic quarter yesterday. And the trends appear to have been very positive, especially the industry seems to have recovered from the late March impact of COVID. The month of April seems to have been solid for you guys, so has been the month of May presumably. So given that strength in the quarter, I would assume that the guidance assumed something else more conservative than what the quarter itself would imply, and what the trends so far in the month of May have implied. Can you just share a little bit light as to why the guidance was more conservative than The Street was expecting, Janesh?

Yes, happy to. So as you said, Kash, Q4 was strong for us across every dimension of the business. When you step back and look at all the financial metrics that we discuss around revenue and SaaS revenue growth, which grew in triple digits for the third quarter in a row, calculated billings and all the other measures as well around customers and customer accounts, expansion metrics, we were really pleased with the results in Q4, and that reflected in the P&L as well, with strong operating results. So overall, it was a great Q4. And I just want to thank the full team here at Elastic that delivered such strong results, and thanks to all of our customers that supported us as well. As we look ahead at fiscal '21, there wasn't anything specific to Elastic's business across all these metrics that I talked about that was of any particular concern. As I mentioned, new customer acquisition expansion, deal sizes, all of those continue to be humming along. And we had a pretty strong April coming off of what in mid to late March looked like we were hitting a pretty strong air pocket, but that lasted only a couple of weeks, and we finished March strong and then came back and finished April really strong as well. Generally speaking, when I think about fiscal '21, the thought process behind guidance was really a couple of things. One is that COVID-19 represents such a big economic shock, much bigger than we've ever experienced -- than any of us have ever experienced in our lifetimes. It goes back decades, to maybe even a century ago in terms of when we last experienced something so severe. So as we step back and look at all the different ways in which this could play out, some of our scenarios were a little bit more optimistic, where we said "Hey, things are opening back up again, and maybe this is a V-shaped recovery and things will all bounce back." There was a pessimistic view as well, saying this could be an L-shaped experience and that things won't recover. And in setting guidance, we actually took a middle of the road approach, where our underlying assumption was that the economic headwinds that we face will be the most severe over the next couple of quarters. When you think about the extent of GDP decline, when you think about the extent of job losses that have been experienced, on the one hand, this is not a universal impact, some parts of the economy have been much more severely affected than the other parts. But just in terms of sheer magnitude, we felt that the recovery would be much more gradual. So after the steep decline that we'd have a gradual improvement over the course of several quarters, and things would return to a degree of strength maybe 3 or 4 quarters down the road. And that's the approach that we essentially took in the guidance that we set. And so we anticipated some more headwinds here in the next couple of quarters. And then as I think about what that means from the standpoint of billings and revenue, a couple of other factors to keep in mind, one is that we are just initiating guide now for fiscal '21. So we don't have any particular previous number that we've necessarily indexed to or that we are bridging back toward, and the impact for us, if you have a billings impact in the first half of the year, you feel the revenue impact in all 4 quarters. And we are guiding for a full year as well, looking out a full 12 months. And so just from that standpoint, if we were midway through a year and were updating guidance for the year, then we'd be looking really only at the impact for a couple of quarters, but we are looking a full 4 quarters out. And so given all of those things, we felt it was best for us to take a measured and prudent approach with respect to how we set guidance, in anticipation of those impacts around COVID-19 that we think will be experienced more broadly in the industry, and it's nothing unique to us.

Got it. Got it. I think several people have come up with different alphabet, letter of the alphabet to describe the shape of the recovery: B, W, L. I just came up with one, O. An O-shaped recovery. We have a downswing, reach a bottom and swing right back up and get back to where we started before the whole pandemic happened. So...

That's a new one. I haven't heard that. Yes.

I just came -- and of course, we're part of the swoosh, Nike swoosh, recovery goes down and then the hockey stick kind of thing as opposed to. I thought the O is -- because I've seen the O in my life. I mean, I saw that 1998 brief macroeconomic crisis, which -- it went right back to [ those numbers ], it went right back to [ those neighbors ] it went right back. So hopefully, this is one of those things as well. A question through the webcast...

We hope so as well, but we just thought it's better to be conservative at this point in time.

That makes a ton of sense. On that particular topic, we have a question from the chat channel. Does the fiscal -- which I think is a really good question. Does the fiscal '21 guide assume economic headwinds are better, same or worse than May -- the month of May 2020?

Yes. It's a little bit hard to tell because the bulk of the -- if you step back and look at sort of what the projections all look like, when folks are out there projecting economic impacts, whichever yardstick you pick, right, GDP growth, IT spending growth, unemployment, I think the general view is more focused around the quarters, and calendar Q2 will be obviously much worse than calendar Q1 was, just given the fact that COVID hit only late in calendar Q1. And that Q3 will then be gradually a little bit better, and Q4 will be even better and I'm talking calendar rather than fiscal quarters here. So that's the approach that we generally took. As I said, in terms of the activity that we experienced in the month of May, our top of funnel activity in the month of May was consistent with the top of funnel activity that we've seen in the month of April. And as I think about our actual selling motions and sales activity, April and May tend to be 2 very different months for us because of our fiscal year end. So in the month of April, the sales team is extremely focused. Many of them are on accelerators and want to close out the year strong and they are charging hard to bring deals over the finish line. And then you enter the month of May, and you've got things like quota assignments and territory changes and all of the things that are pretty normal for a sales force in a tech company. And again, nothing different on a year-on-year basis. We experience this every May. But I was just contrasting the 2 months, April versus May. The motions tend to be very different for those reasons. And so I think it's still early in the quarter for us to tell, we will see how it all plays out. But to the extent we see those headwinds, we will see it in the form of sales cycles potentially getting a little bit longer. And if this all comes to pass, we'll really experience that more in June and July. And we see this a little bit ourselves as well, right? Within Elastic, I've got responsibility, among other things, for our IT function as well. And when I talk to our IT team, we are squeezing vendors as hard as we can, and it's taking longer for vendors to close business with us. As we hold out for better terms and in conversations with them as they talk to their peers in the industry, they see a number of other companies doing that. Now we're by no means an economic bellwether, I'd love to be at that size and scale someday, but we are certainly not there today. But still, it's sort of a data point around a view from the ground that I'm hearing from IT practitioners. And so we just felt it's appropriate to factor that into our outlook.

That's very clearly stated. How about the month of May, not compared to April, but May last year? So would you say that activity -- the way activity levels are trending on a like-for-like basis; and that versus the guidance, is the guidance appropriately assuming more headwinds relative to what might be otherwise considered to be an early start nonetheless, an early good start for May, if it is one?

Yes. Again, top of funnel activities have been consistent in terms of the actual business results for May in terms of where we ended on in bookings and revenue and those kinds of things. I don't want to get -- get too far ahead of my skis on that just yet, we've still got a lot of business to close in June and July, so we'll have to see how Q1 picks up. But in terms of top of the funnel activities, it was generally consistent.

Got it. So the linearity, all that is not a surprise so far? It's shaping up to your liking, it sounds like.

Steady as she goes, is the way I would call it.

Got it. Got it. Okay. Excellent. Can we talk a little bit about the impact of COVID to your business? What is it that you saw in the quarter itself and more particularly, our friends at Splunk talked about how COVID has accelerated the transition to the cloud. It certainly looks like your numbers on the cloud side are just getting better and better, spectacular. I mean, triple-digit back-to-back 3 straight quarters -- 2 or 3 straight quarters. What is COVID doing to your pipeline of business? And how are customers changing their priorities to invest in Elastic as a result of COVID?

Yes. It's a great question. And I'll talk about that and also touch a little bit on the cloud piece, which you reference. So in terms of customer priorities and how they might be shifting. As I mentioned, we focus really on 3 main solution areas: enterprise search, observability and security. And the way we look at it, COVID-19 presents an opportunity really in each of those, those -- in each of those areas, the market transitions will play in our favor. I talked about how in a distributed working environment, there can be so much more enterprise content that is generated than before, and all of that needs to be searchable, and that's a potential tailwinds for the enterprise search solution. And then similarly, when you think about observability, if you think about all of the workers that used to be in 1 location, now working in a distributed way on different laptops, VPNing, and increased demand for cloud services associated with applications that they have to access. All of that generates a ton more machine data, and all of that data needs to be logged. And working in a distributed way, you certainly need to maintain the performance of applications, and you need to monitor your infrastructure ever more closely than before. So I think broadly speaking, moving to a distributed working environment actually presents a great tailwind for observability as well. And similarly, with respect to security, right, the bad actors actually take even greater advantage during these difficult times, unfortunately, or at least try to. And having workers work in a distributed way presents greater security risks to the enterprise IT environment than when they were working in a single location, for example, pre-COVID. And so all of those things play nicely to our advantage. And again, the tailwinds are strong from the standpoint of COVID. But COVID, as I said, it's a phenomenon that's nonuniversal. So it appears in different ways, and certain verticals are impacted more than other verticals and certain segments are impacted more than other segments, which is why despite the opportunity that it presents, we think that it will help accelerate the adoption of our solutions in the long term. And we feel like we are pretty well positioned from the standpoint of the long run. But we wanted to take a little bit more of a measured approach in the near-term here. On the cloud piece, again, we've been really excited about our growth there in cloud. We've made so many investments there, whether it's on the go-to-market side in terms of marketing activities, expanding our presence across cloud regions with different providers in the world. We've really doubled down on our partnerships with GCP and Azure as well as Tencent and Alibaba, and those are starting to bear fruit. We've had significant traction with GCP. We launched on their marketplace. We are working towards billing integration. Last month, as we had our virtual sales kickoff, we had Scott Guthrie from Microsoft, who presented and spoke to all of our salespeople around the world. So those partnerships are really working, and we're quite excited about those. And you combine that with a set of widening feature differentiation and a widening competitive moat as we expand on the proprietary feature sets. All of that works really nicely and presents great opportunity for us in the cloud. So we continue to see workloads shifting increasingly towards the cloud and continue to think that, that will grow faster than the overall business.

Got it. We have a slew of questions, believe it or not, from the chat channel, some of which you may have already covered. And so if they are redundant, you can just give a very brief answer. Given the pause and then subsequent strength in bookings, does it not mean that COVID is actually improving the business outlook? Question one.

Yes, potentially, right. Because it just depends on what you see there. So a lot of the deals that we had in the month of April were deals that were already in our pipeline, where budgets were committed, customers were focused on getting them done. Q4 always has a larger percentage of renewals in our installed base. And so a renewal is a great opportunity for us to also continue to expand our spend with the customer and contract with them for greater growth. So we saw a lot of those dynamics play out in April as well. And as I said, if you sort of think about the approach that enterprise IT buyers will take as they readjust their budgets and readjust their spending and start to focus on ensuring that they are getting great business value from their solutions, we feel like we are very well aligned with respect to our customers' business needs and the problems that they need to solve. But we just think that it's prudent to consider the fact that you could see these headwinds in the form of longer sales cycles, as folks just scrutinize things longer and deals go up to higher levels of authority for approvals and so forth. So that's the thought process there.

Got it. Got it. How does -- next question, how does Elastic fit into the observability marketplace? What are the benefits and trade-offs for a customer who chooses Elastic over a solution such as a Datadog? And how does that change 5 years from now?

Yes, it's a great question. So a couple of things. So first off, folks that might not be as familiar with observability, it's really the coming together of logging an APM and monitoring, as I mentioned. And that plays really well to our advantage because from our very early days, we were focused really on having a single stack on top of which we built many solutions. So the transition to observability is happening faster than many folks in the industry expected. And given that we were purpose-built to address many use cases on a single stack, and we've been architected as a unified stack from the ground up, that works really to our advantage. That's not necessarily true in the case of some other observability vendors, and that shows in their technology or in their pricing models. And the pricing is really an important second point there where in addition to just having a unified stack, we also have a unified resource-based pricing model that just helps with frictionless adoption. So when a customer buys a subscription, depending on the level of subscription that they buy, they will get several features included. And it's really easy for them to just start using those features, and they don't have to pay for them separately. There's no negotiation of a new budget. They don't have to go through another buying cycle. There's no friction of a buying process. It's right there. It's in Kibana, and they just start using it. And when their usage grows, that's when they'll realize they need more resources. And at that point, it's just a simple conversation based on the resources that they're actually consuming. And when you combine this unified stack with a unified pricing model, with the free and open distribution model that we've got, that goes hand-in-hand with the pricing model. It's really easy to get started. People can just get started for free. They start to derive significant value. And when they derive that value, that's when they are willing to pay, and that's when we're there for them, both on-prem as well as in the cloud. So I think those are some of the factors that differentiate us and why we believe we will win in the long run.

Got it. Another question, rough revenue mix or business use case mix between core search and observability in the long run for Elastic business?

Yes. So broadly, we're really pleased with the traction across all our solutions. And I touched on this earlier, but just as a reminder, we don't sell separate SKUs by solution. We've got different subscription levels with really fine-grained features across those subscription levels. And the pricing model itself is unified. So that's a real advantage to us. And so the usage across the different solutions is really directional in nature, and it's based on some level of sales reporting by our sales organization. So there's the grain of salt that I'll put out there before I comment on the mix. But in terms of that mix across the use cases or across the solutions, in the past, we've said that logging had been more than 1/3 of the business, and that continues to be the case. And very often, that's the reason we actually get adopted to begin with. That's very often the initial use case. But we are seeing a broader tilt towards observability, generally speaking. We've seen really strong traction on the APM side. We've got some great customer wins and stories over there. So observability is starting to increase in terms of that mix. And then in terms of the other solution areas, those were less than 1/3 of the business each. We -- as I think about security, it's obviously a promising solution area for us. We see strong traction there, too. In the early days, customers used us for security even before we had a formal solution. And then with SIM and endpoint security now coming in, there's enormous opportunity there for us. And I talked about enterprise search earlier as well and why we're excited there.

Got it. So the company's move beyond search, it's the original first killer application. Are you starting to see more of the likes of Dynatrace, Datadog, Splunk with their SignalFx acquisition, et cetera? Or is the world still very tightly divided between these companies and the distance between us is so large that you don't run into each other? But I would assume the former is going to happen eventually, if not today, but what are your thoughts on that?

Yes. It's a great question. I think it's -- the market is in transition at this point in time. And 6 months ago, 9 months ago, 1 year ago, you could have seen companies be in these different silos, but we increasingly see them. So with respect to Splunk, they're a pretty direct competitor for us on the logging side, and we are catching up quite quickly on the SIM side as well. We do see some of the other APM vendors, we do see Datadog as well, so I think the market is coming together in terms of observability. Those silos are breaking down faster than the industry expected, which is fantastic. As I said, that plays to our advantage. So we are keen to see that trend shift even faster. Because when those silos start to break down and customers recognize that they've got the benefits of a unified stack, and they don't have to worry about all kinds of complicated pricing models where they feel that they're having to get nickel and dimed on every piece and then end up having to suffer a bunch of hidden costs. It's pretty open and transparent with Elastic. And so customers appreciate that very much. So we do see the companies that you mentioned, and I think you're right. Over time, we will see them more, but we feel pretty good about both our technology and our commercial models on top that will help us win.

Got it. And 2 more questions from our clients. One is, do you think open source tools such as Elastic, in the observability space, are a sure beneficiary against proprietary products in a weak macro? And the other question is, which of the new products is likely to engage -- I'm sorry, is likely to drive usage upside in fiscal '21: search, SIM, APM or anything else? Thanks for the questions, by the way, guys. Makes me sound really smart.

Yes. So a couple of things. One is in terms of open source and paid for, so let me actually just draw a distinction, right? There's a distinction between open source and proprietary, and free and paid. And we have actually broken that distinction because with our basic offering, customers can get proprietary solutions for free. So that was a pretty important shift for us a couple of years ago. We have our roots in open source, our heritage in open source. We still contribute to open source in a meaningful way and we're big champions of that. But a couple of years ago, we embarked on a strategy to significantly widen our competitive differentiation by doubling down on proprietary features. And many of those proprietary features are free. So today, when somebody downloads our default distribution, it includes a significant mix of proprietary features, many of which are free and many of which are paid. And so it's -- even in this environment, it's really easy for folks to get started with Elastic. And to get started using proprietary features that are also free. And over time, I think what happens is, as they recognize the value in the paid proprietary features, then that's when they'll sign up for those subscriptions on the self-managed side. By the way, on the cloud side, there is nothing free beyond that initial trial period, right? Every proprietary feature, even every open source feature is monetized because it's all built into the price of the cloud service. So there's no free tier on cloud. You just get an initial trial period, but it's not a fundamentally free subscription. So everything is monetized there, and we've seen great traction on the cloud side as you see. And so over time, I think one of the benefits for us is that when customers see the value in the near-term as we solve their business problems focused with -- with the focus that we have on solutions, they are willing to pay for that. And once they pay for that, then it's pretty rare for them to go the other way. And as one example, we've not seen any significant churn from paid to free features, given COVID-19. And for customers that continue to prefer to be on the free tier for a period of time, more power to them. At the end of the day when they are ready and willing to commit money, they'll already be extremely familiar with Elastic. They'll have been using us for a while, and we think that will just set us up really nicely from a competitive standpoint. I'm sorry Kash, what was the second question?

Yes. The offerings between search, SIM, APM and other, which are the new products that's likely to drive usage upside in fiscal '21?

Oh, man. I've got 3 kids, and now you're asking me to pick which is my favorite kid.

Whoever is getting the best grades or whoever plays the best music or whoever holds the best note.

Yes. Well, I actually have 3 kids, and all 3 of them are equally talented. So that's a hard one. But I mean, look, I think the nice thing about our offerings is that a, we don't have to necessarily pick because we can be used in all of these different ways based on wherever the adoption is and problems that customers choose to solve. The other thing is that if you look out over the really long haul, and we are certainly not seeing this in a meaningful way today. But over the long haul, some of these solutions themselves start to come together. I'll give you an example. Every logging event or every log is also a security event, right? Because people analyze logs in the context of understanding what was happening from a security standpoint, so where does logging stop and where does security start? You start to see those lines get more blurred over time. So we think that we will continue to see strength clearly on the observability side. As I mentioned, we are seeing a greater tilt there. We are much more mature in terms of our offerings around observability, given our strong history with logging and the strength of the APM and metrics portfolio as well. And with security, it's a little bit newer for us. We've always been used in security use cases. But as the SIM product gets more mature, and as we complete the technical integration of Endgame into the stack, we think that, that can hold a great promise for us in the future as well.

Got it. Believe it or not, I have 2 more questions from clients, and we'll wrap it up with this. Any -- is the recent pricing changes at Splunk, that is infrastructure-based pricing, similar to how Elastic is charging, and any impact on your design wins from the result of Splunk's price changes? And there's one more question after that.

Yes. So we saw that announcement when it first came out. And it's obviously a fair amount of promotion that Splunk has done around the launch of that pricing model. But the practical reality is, we don't see it in any meaningful way in terms of our interactions in the field at this point in time. It's not been a headwind to us in terms of our competitive positioning against Splunk. More often than not when people adopt us, it's because they see the strength in the overall solution portfolio. They're really -- they find the unified stack really appealing and our pricing model. So it's not changed things for us from a competitive standpoint, at least just yet.

Got it. Is the -- the next question, next final question. Is the incremental weakness Elastic is seeing to start the year from new customer sales or from upsells and renewals?

Yes, neither really at this point. As I said earlier, the dynamics that we've seen across new customers as well as renewals and expansion and all the metrics surrounding that in terms of volume and expansion rates and deal sizes and so forth, it's really been consistent with where we've seen it before. To the extent we do see these headwinds associated with COVID-19 that I was referencing, that could show up in many different ways, that could show up in any or all of the above, but that's certainly not something that we experienced in any meaningful way in Q4. So at this point, we're just focused on delivering a strong Q1 and then reexamining the impacts of COVID-19 based on things we learn over the next couple of months.

Got it. On that note, Janesh, thank you very much. Sorry the questions ran over, but actually, I think that's a very good sign. We had well over 100 clients dialed in. So just imagine a room full of 100 people, how big that would have been. It's that big. Interest in Elastic is very high. Congratulations on the quarter. Completely understand your tone and conservatism with respect to the guidance, which is appropriate. I really enjoyed all the details coming out of this one-on-one interaction. And hopefully, next year when we get back to this conference, it's an in-person conference, and we can see each other in person.

Yes, great. I hope so, and thank you for all of the questions, and thank you for hosting us. We appreciate it.

Absolutely. Have a lovely day. And thanks to all the clients for dialing in as well. We're going to have the CFO of ServiceNow on in a few minutes, and after that we'll conclude with Marc Benioff from Salesforce.com. See you then. Talk to you soon. Bye-bye.

Thanks, everyone. Bye.