Matt Calitri

Matt Calitri asked if Elastic's advancements in search, like Jina reranking models, allow for increased customer charges or if they primarily serve as an acquisition vehicle. He also sought clarification on the mechanics of the full-year constant currency sales-led subscription revenue guide remaining unchanged despite a Q3 beat and raise.

Answer

Ash Kulkarni, CEO, confirmed that Elastic monetizes all platform usage, including newer models, through its consumption-based pricing (metered by compute, storage, and tokens for LLM/model-related activities), driving revenue as usage grows. Navam Welihinda, CFO, explained that the full-year sales-led subscription revenue guide was raised more than the Q3 beat, reflecting positive momentum, and the constant currency figure is a result of that overall adjustment.

Matt Calitri inquired about the mechanics of the guidance, specifically why the full-year constant currency guide remained unchanged despite beating the Q3 constant currency guide and raising the sales-led subscription revenue guide, given that the three fewer days in Q4 would have been factored into the prior guidance.

Answer

CFO Navam Welihinda reiterated that sales-led subscription revenue is the primary metric, which Elastic handily beat and subsequently raised more than the beat. He emphasized the positive momentum on the sales line and did not elaborate further on the full-year constant currency guide's specific mechanics beyond the general prudence and risk adjustment.

Matt Calitri asked for anecdotes regarding end-users' experiences with the rapid increase in AI-generated fraud attempts and how Allot's technology is adapting to these sophisticated attacks. He also inquired about any acceleration in pipeline progression, specifically if CSPs are losing deals or experiencing breaches due to a lack of security offerings.

Answer

CEO Eyal Harari noted an increased sophistication and speed in impersonation due to the ease of creating new applications and websites with AI, making consumers and small businesses more vulnerable. He explained that Allot leverages its unique network visibility to identify these frauds faster and more accurately. Eyal Harari confirmed seeing increased awareness and demand for cybersecurity services globally due to cybersecurity events affecting carriers, leading to more CSPs seeking to offer protection. He highlighted the launch of Firewall-as-a-Service and DDoS protection for SMBs as responses to this growing demand for higher-level protection.

Matt Calitri inquired about Verizon Live's penetration trending for CCAs, asking if it was linear or exponential. He also sought confirmation on the expectation for CCAs revenue to reach 30% of the business by year-end and asked about Terra 3's role in product revenue strength, new opportunities, and changing customer conversations.

Answer

CEO Eyal Harari stated he could not refer to specific customers but expressed overall satisfaction with progress across the customer base, reflected in quarterly numbers and raised yearly expectations for CCAs growth. CFO Liat Nahum confirmed that if current trends continue and guidance for over 60% year-over-year growth is met, CCAs revenue reaching 30% of the business by year-end is the expectation. Mr. Harari noted a good mix of new opportunities and discussions with existing customers for product revenue, emphasizing customer success and maximizing business value from solutions, with new logos joining both product lines.

Matt Calitri of Needham & Company asked for color on the go-to-market strategy with providers, internal efforts to convert pipeline, any macroeconomic impacts on sales cycles, and the progress of other multi-million dollar deals.

Answer

CEO Eyal Harari described the go-to-market strategy as a mix of sharing best practices with existing customers and using a dedicated sales team to hunt for new carrier partnerships. He stated that they see no significant macro influence, noting that long sales cycles (12-24 months) are typical for large telco deals. He attributed strong demand and a healthy pipeline to the new SG TerraThree platform and the company's 'security first' strategy.