UPDATE
When DuDil contacted Elastic about the revenue misstatement language and asked what prompted it or if a misstatement has been identified but not yet disclosed, Nikolay Beliov, Elastic's VP of Investor Relations, told us:

"We simply expanded on this to provide a more thorough explanation of some of the risks of a channel partner model. This is a very common risk factor for many technology companies; it’s not unique to us. It’s just highlighting possible risks in a channel model."
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For the first time in its four year history as a publicly traded company Elastic (ESTC), an analytics platform that allows companies to search structured and unstructured data for actionable insights, is citing accounting trouble as a potential consequence of its relationships with channel partners. Like other technology firms, Elastic’s channel partners resell the company’s solutions for a cut of the sales generated.

In its previous three annual reports, Elastic included the following language when warning investors of the possibility channel partners may, among other infractions, misrepresent the functionality of the company’s offerings:

“Our channel partner sales structure could subject us to lawsuits, potential liability, and reputational harm…”

In its latest annual report, Elastic inserted three new words:

“Our channel partner sales structure could subject us to lawsuits, potential liability, misstatement of revenue, and reputational harm…”

Later in the same sentence, Elastic again references revenue issues, inserting the following new language:

“... including our terms of business, which in turn could impact reported revenue, deferred revenue and remaining performance obligations.”

Elastic warned multiple times in the filing that the introduction of its consumption-based offering— which is recognized as revenue only when a customer actually uses a product rather than ratably over time like subscriptions— may make revenue recognition more unpredictable going forward.

Notably, Elastic disclosed later in the filing that during the quarter ended April 30, 2022 the company implemented a new revenue accounting system. Elastic also stated it modified certain existing controls and implemented new controls to maintain appropriate internal control over financial reporting during and after the system change.