Press Release

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Elastic Reports Strong First Quarter Fiscal 2022 Financial Results

08/25/2021

Q1 Revenue of $193.1 million, Up 50% year-over-year
Q1 Elastic Cloud Revenue of $61.5 million, Up 89% year-over-year

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)-- Elastic (NYSE: ESTC) (“Elastic”), the company behind Elasticsearch and the Elastic Stack, announced strong results for its first quarter of fiscal 2022 (ended July 31, 2021).

First Quarter Fiscal 2022 Financial Highlights

  • Total revenue was $193.1 million, an increase of 50% year-over-year, or 45% on a constant currency basis
  • Elastic Cloud revenue was $61.5 million, an increase of 89% year-over-year, or 85% on a constant currency basis
  • Calculated billings was $165.0 million, an increase of 27% year-over-year, or 23% on a constant currency basis
  • Deferred revenue was $364.4 million, an increase of 31% year-over-year
  • GAAP operating loss was $31.0 million; GAAP operating margin was -16%
  • Non-GAAP operating profit was $7.2 million; non-GAAP operating margin was 4%
  • GAAP net loss per share was $0.38; non-GAAP earnings per share was $0.04
  • Operating cash flow was $14.1 million with free cash flow of $12.4 million
  • Cash and cash equivalents were $991.3 million as of July 31, 2021

“The first quarter was a strong start to the fiscal year driven by crisp execution, the continued robust growth of Elastic Cloud, and our investments against the rich market opportunity ahead of us,” said Shay Banon, Elastic founder, and chief executive officer. “Our release of Elastic Limitless XDR is a significant milestone in our efforts to bring actionable security to every organization, powered by our unified search platform.”

First Quarter Fiscal 2022 Key Metrics and Recent Business Highlights

Key Customer Metrics:

  • Total subscription customer count was over 16,000, compared to over 15,000 in Q4 FY21, and over 12,100 in Q1 FY21
  • Total customer count with Annual Contract Value (ACV) greater than $100,000 was over 780, compared to over 730 in Q4 FY21, and over 630 in Q1 FY21
  • Net Expansion Rate was consistent with Q4 FY21 and slightly below 130%

Product Releases and Other Business Highlights

In Q1 Elastic continued to accelerate its pace of innovation, with the launch of Elastic 7.14, featuring new capabilities across the company’s enterprise search, observability, and security solutions. Designed to offer new levels of integration, 7.14 provides customers with greater levels of visibility, control, and security across their organizations, all with a single platform.

A key component of Elastic 7.14 was the general availability of the industry’s first free and open, Limitless Extended Detection and Response (XDR). Part of Elastic Security, Elastic Limitless XDR modernizes security operations by unifying the capabilities of security information and event management (SIEM) for detecting threats and endpoint security for protecting and remediating issues on all endpoints, including in the cloud, all in a single platform.

Elastic 7.14 also featured the general availability of Elastic Agent — a single, unified agent that simplifies the management and monitoring of data from a growing volume of diverse sources, centrally managed in Fleet to give users broad visibility and control over their environments. With Elastic Agent, customers can simplify data onboarding, enable faster telemetry collection, reduce mean time to resolution and detection, and even respond to threats. All through unified and centralized agent management that is fully integrated across Elastic Observability and Security.

Expanded capabilities within 7.14 include:

Elastic Enterprise Search

  • Announced centralized management of Elastic Enterprise Search, delivering optimized search experiences and deeper search experience insights for customers through Kibana
  • Introduced precision tuning in App Search for customized web and application search results
  • Provided customers with synonym support in Workplace Search as well as data ingestion flexibility with out-of-the-box content sources

Elastic Observability

  • Announced the general availability of Elastic Agent for optimized data onboarding and simple and fast telemetry collection with secure centralized agent management
  • Allowed customers to seamlessly deploy endpoint security across their infrastructure with Fleet, without slowing down application development
  • Enhanced APM correlations to enable customers to further reduce mean-time-to-resolution (MTTR) with automated root cause analysis of application issues

Elastic Security

  • Introduced the industry’s first free and open Limitless Extended Detection and Response (XDR) in Elastic Security to modernize security operations
  • Extended visibility across any environment to bring native endpoint security to every host with a single agent to eliminate security blind spots and stop threats at cloud scale on a single platform
  • Automated prevention to stop fast-evolving ransomware and malware with an extra layer of ransomware protection for Windows systems and data, defending organizations from opportunistic adversaries like DarkSide and REvil

Elastic Cloud

  • Announced general availability of support for Microsoft Azure Private link providing secure connectivity between Elastic Cloud and Azure environments
  • Launched new Google cloud region: Asia Pacific Northeast 3 (Seoul) region

Other Business Highlights

  • Announced agreement to acquire Cmd, a leader in infrastructure detection and response for cloud workloads
  • Announced agreement to acquire build.security, a policy definition and enforcement platform
  • Issued $575 million of senior unsecured notes, due 2029
  • Named a Leader by Forrester Research in The Forrester Wave™: Cognitive Search, Q3, 2021
  • Announced virtual ElasticON Global conference will take place October 5th-7th, 2021
  • Delivered 16 regional virtual ElasticON events, sponsored and exhibited at Google Cloud Retail and CPG Summit, and Black Hat
  • Received the Microsoft U.S. Partner Award in Business Excellence in the Commercial Marketplace this quarter
  • Named the 2020 Google Cloud Technology Partner of the Year in the data management category

Financial Outlook

The Company is providing the following guidance:

For the second quarter of fiscal 2022 (ending October 31, 2021):

  • Total revenue is expected to be between $193 million and $195 million
  • Non-GAAP operating margin is expected to be between -4.0% and -3.0%
  • Non-GAAP net loss per share is expected to be between $0.19 and $0.15, assuming between 92.0 million and 93.0 million weighted average ordinary shares outstanding

For fiscal 2022 (ending April 30, 2022):

  • Total revenue is expected to be between $808 million and $814 million
  • Non-GAAP operating margin is expected to be between -4.0% and -3.0%
  • Non-GAAP net loss per share is expected to be between $0.67 and $0.57, assuming between 92.0 million and 94.0 million weighted average ordinary shares outstanding

See the section titled “Forward-Looking Statements” below for information on the factors that could cause our actual results to differ materially. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of the costs and expenses that may be incurred in the future. These items necessary to reconcile such non-GAAP measures could be material and have a significant impact on the Company’s results computed in accordance with GAAP.

Conference Call and Webcast

Elastic’s executive management team will host a conference call today at 2:00 p.m. PT/ 5:00 p.m. ET to discuss the Company’s financial results and business outlook. A live audio webcast of the conference call will be available through Elastic’s Investor Relations website at ir.elastic.co. Slides will accompany the webcast. The replay of the webcast and slides will be available for two months.

About Elastic

Elastic is a search company built on a free and open heritage. Anyone can use Elastic products and solutions to get started quickly and frictionlessly. Elastic offers three solutions for enterprise search, observability, and security, built on one technology stack that can be deployed anywhere. From finding documents to monitoring infrastructure to hunting for threats, Elastic makes data usable in real time and at scale. Founded in 2012, Elastic is a distributed company with Elasticians around the globe. Learn more at elastic.co.

Elastic and associated marks are trademarks or registered trademarks of Elastic N.V. and its subsidiaries. All other company and product names may be trademarks of their respective owners.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to Elastic’s financial results as determined in accordance with U.S. GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of this press release titled “About Non-GAAP Financial Measures.”

Forward-Looking Statements

This press release contains forward-looking statements that involve substantial risk and uncertainties, which include, but are not limited to, statements regarding our expected financial results for the fiscal quarter ending October 31, 2021 and the fiscal year ending April 30, 2022, our expectations regarding demand for our products and solutions and our future revenue, our assessments of the strength of our solutions and products, the expected performance or benefits of our offerings, our expectations regarding market opportunities, and our expectations regarding the benefits of our investments. These forward-looking statements are subject to the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Our expectations and beliefs in light of currently available information regarding these matters may not materialize. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements due to uncertainties, risks, and changes in circumstances, including but not limited to those related to: our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (which include changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve and maintain future profitability; our ability to continue to deliver and improve our offerings and develop new offerings, including security-related product and Elastic Cloud offerings; customer acceptance and purchase of our existing offerings and new offerings, including the expansion and adoption of our Elastic Cloud offerings; our inability to realize value from investments in the business, including R&D investments; our ability to maintain and expand our user and customer base; the impact of the COVID-19 pandemic, including any variants, on the macroeconomic environment, on our business, operations, hiring and financial results, and on businesses of our customers and partners, including their spending priorities, the effect of lockdowns, restrictions and new regulations; the impact of our licensing model on the use and adoption of our software; the impact of foreign currency exchange rate and interest rate fluctuations on our results; our international expansion strategy; our operating results and cash flows; our beliefs and objectives for future operations; the sufficiency of our capital resources; our ability to successfully execute our go-to-market strategy, including by expanding our relationships with our partners, and expand in our existing markets and into new markets, and our ability to forecast customer retention and expansion; and general market, political, economic and business conditions.

Any additional or unforeseen effect from the COVID-19 pandemic may exacerbate these risks. Additional risks and uncertainties that could cause actual outcomes and results to differ materially are included in our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 and any subsequent reports filed with the SEC. SEC filings are available on the Investor Relations section of Elastic’s website at ir.elastic.co and the SEC’s website at www.sec.gov. Elastic assumes no obligation to, and does not currently intend to, update any such forward-looking statements, except as required by law.

Contact Information

Anthony Luscri
Elastic Investor Relations
ir@elastic.co
(650) 695-1055

Lisa Boughner
Elastic Corporate Communications
lisa.boughner@elastic.co

Elastic N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended July 31,

 

2021

 

 

2020

 

Revenue

 

 

 

License - self-managed

$

16,221

 

 

 

$

14,879

 

 

Subscription - self-managed and SaaS

160,964

 

 

 

106,463

 

 

Total subscription revenue

177,185

 

 

 

121,342

 

 

Professional services

15,910

 

 

 

7,528

 

 

Total revenue

193,095

 

 

 

128,870

 

 

Cost of revenue

 

 

 

Cost of license - self-managed

346

 

 

 

346

 

 

Cost of subscription - self-managed and SaaS

37,174

 

 

 

25,890

 

 

Total cost of revenue - subscription

37,520

 

 

 

26,236

 

 

Cost of professional services

12,142

 

 

 

8,595

 

 

Total cost of revenue

49,662

 

 

 

34,831

 

 

Gross profit

143,433

 

 

 

94,039

 

 

Operating expenses

 

 

 

Research and development

59,382

 

 

 

45,678

 

 

Sales and marketing

88,033

 

 

 

56,151

 

 

General and administrative

27,052

 

 

 

21,729

 

 

Total operating expenses

174,467

 

 

 

123,558

 

 

Operating loss

(31,034

)

 

 

(29,519

)

 

Other income (expense), net

 

 

 

Interest expense

(1,820

)

 

 

(9

)

 

Other income, net (1)

1,018

 

 

 

10,894

 

 

Loss before income taxes

(31,836

)

 

 

(18,634

)

 

Provision for income taxes

2,653

 

 

 

367

 

 

Net loss

$

(34,489

)

 

 

$

(19,001

)

 

Net loss per share attributable to ordinary shareholders, basic and diluted

$

(0.38

)

 

 

$

(0.23

)

 

Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted

91,201,372

 

 

 

84,175,287

 

 

(1) Includes foreign currency transaction gains of $1.0 million and $10.1 million for the three months ended July 31, 2021 and July 31, 2020, respectively, arising primarily from foreign exchange remeasurement and settlement of intercompany balances. Intercompany balances are eliminated on consolidation.

Elastic N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share amounts)

(Unaudited)

     

 

As of July 31,

 

As of April 30, 

Assets

2021

 

 

2021

Current assets:

 

 

 

 

Cash and cash equivalents

$

991,342

 

 

 

 

$

400,814

 

 

Restricted cash

2,339

 

 

 

 

2,894

 

 

Accounts receivable, net of allowance for credit losses of $2,574 and $2,344 as of July 31, 2021 and April 30, 2021, respectively

110,805

 

 

 

 

160,415

 

 

Deferred contract acquisition costs

34,433

 

 

 

 

36,089

 

 

Prepaid expenses and other current assets

41,068

 

 

 

 

37,002

 

 

Total current assets

1,179,987

 

 

 

 

637,214

 

 

Property and equipment, net

8,310

 

 

 

 

8,881

 

 

Goodwill

198,526

 

 

 

 

198,851

 

 

Operating lease right-of-use assets

24,993

 

 

 

 

25,464

 

 

Intangible assets, net

32,845

 

 

 

 

36,286

 

 

Deferred contract acquisition costs, non-current

52,185

 

 

 

 

50,263

 

 

Deferred tax assets

3,664

 

 

 

 

3,697

 

 

Other assets

19,375

 

 

 

 

12,516

 

 

Total assets

$

1,519,885

 

 

 

 

$

973,172

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

$

17,591

 

 

 

 

$

7,248

 

 

Accrued expenses and other liabilities

28,906

 

 

 

 

28,909

 

 

Accrued compensation and benefits

50,580

 

 

 

 

52,525

 

 

Operating lease liabilities

9,324

 

 

 

 

8,528

 

 

Deferred revenue

328,286

 

 

 

 

352,805

 

 

Total current liabilities

434,687

 

 

 

 

450,015

 

 

Deferred revenue, non-current

36,074

 

 

 

 

44,895

 

 

Long-term debt, net

565,842

 

 

 

 

 

 

Operating lease liabilities, non-current

18,281

 

 

 

 

19,649

 

 

Other liabilities, non-current

9,338

 

 

 

 

7,782

 

 

Total liabilities

1,064,222

 

 

 

 

522,341

 

 

Commitments and contingencies

 

 

 

 

Shareholders’ equity:

 

 

 

 

Convertible preference shares, €0.01 par value; 165,000,000 shares authorized, 0 shares issued and outstanding as of July 31, 2021 and April 30, 2021

 

 

 

 

 

 

Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized; 91,770,228 and 90,533,985 shares issued and outstanding as of July 31, 2021 and April 30, 2021, respectively

963

 

 

 

 

948

 

 

Treasury stock

(369

)

 

 

 

(369

)

 

Additional paid-in capital

1,112,845

 

 

 

 

1,071,675

 

 

Accumulated other comprehensive loss

(9,969

)

 

 

 

(8,105

)

 

Accumulated deficit

(647,807

)

 

 

 

(613,318

)

 

Total shareholders’ equity

455,663

 

 

 

 

450,831

 

 

Total liabilities and shareholders’ equity

$

1,519,885

 

 

 

 

$

973,172

 

 

Elastic N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended July 31,

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

Net loss (1)

$

(34,489

)

 

 

$

(19,001

)

 

Adjustments to reconcile net loss to cash provided by operating activities:

 

 

 

Depreciation and amortization

4,481

 

 

 

4,256

 

 

Amortization of deferred contract acquisition costs

13,878

 

 

 

9,013

 

 

Non-cash operating lease cost

1,854

 

 

 

1,674

 

 

Stock-based compensation expense, net of amounts capitalized

30,178

 

 

 

18,591

 

 

Deferred income taxes

(143

)

 

 

(367

)

 

Foreign currency transaction gains (2)

(1,127

)

 

 

(10,050

)

 

Other

98

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

48,324

 

 

 

45,211

 

 

Deferred contract acquisition costs

(14,781

)

 

 

(16,463

)

 

Prepaid expenses and other current assets

(4,597

)

 

 

341

 

 

Other assets

(6,097

)

 

 

1,693

 

 

Accounts payable

10,660

 

 

 

(612

)

 

Accrued expenses and other liabilities

(170

)

 

 

(5,099

)

 

Accrued compensation and benefits

(1,454

)

 

 

(7,204

)

 

Operating lease liabilities

(1,945

)

 

 

(1,716

)

 

Deferred revenue

(30,619

)

 

 

1,731

 

 

Net cash provided by operating activities (3)

14,051

 

 

 

21,998

 

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(660

)

 

 

(379

)

 

Capitalization of internal-use software costs

(974

)

 

 

 

 

Net cash used in investing activities

(1,634

)

 

 

(379

)

 

Cash flows from financing activities

 

 

 

Proceeds from the issuance of senior notes

575,000

 

 

 

 

 

Proceeds from issuance of ordinary shares upon exercise of stock options

10,979

 

 

 

29,252

 

 

Payments of debt issuance costs

(7,188

)

 

 

 

 

Net cash provided by financing activities

578,791

 

 

 

29,252

 

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(1,235

)

 

 

2,472

 

 

Net increase in cash, cash equivalents, and restricted cash

589,973

 

 

 

53,343

 

 

Cash, cash equivalents, and restricted cash, beginning of period

403,708

 

 

 

299,389

 

 

Cash, cash equivalents, and restricted cash, end of period

$

993,681

 

 

 

$

352,732

 

 

(1) Includes foreign currency transaction gains of $1.1 million and $10.1 million for the three months ended July 31, 2021 and July 31, 2020, respectively, arising primarily from foreign exchange remeasurement of intercompany balances. Intercompany balances are eliminated on consolidation.

(2) Removes the foreign currency transaction gains of $1.1 million and $10.1 million for the three months ended July 31, 2021 and July 31, 2020, respectively, included in net loss.

(3) Unaffected by foreign currency transaction gains.

Elastic N.V.

REVENUE BY TYPE

(amounts in thousands, except percentages)

(Unaudited)

 

 

 

Three Months Ended July 31,

 

2021

 

2020

 

Amount

 

% of

Total

Revenue

 

Amount

 

% of

Total

Revenue

Elastic Cloud

$

61,530

 

 

32

%

 

$

32,627

 

 

25

%

Other subscription

115,655

 

 

60

%

 

88,715

 

 

69

%

Total subscription revenue

177,185

 

 

92

%

 

121,342

 

 

94

%

Professional services

15,910

 

 

8

%

 

7,528

 

 

6

%

Total revenue

$

193,095

 

 

100

%

 

$

128,870

 

 

100

%

Elastic N.V.

RECONCILIATION OF GAAP TO NON-GAAP DATA

CALCULATED BILLINGS

(amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended July 31,

 

2021

 

 

2020

 

Total revenue

$

193,095

 

 

 

$

128,870

 

 

Add: Increase (decrease) in deferred revenue

(30,619

)

 

 

1,731

 

 

Less: Decrease (increase) in unbilled accounts receivable

2,573

 

 

 

(575

)

 

Calculated billings

$

165,049

 

 

 

$

130,026

 

 

Elastic N.V.

RECONCILIATION OF GAAP TO NON-GAAP DATA

FREE CASH FLOW

(amounts in thousands, except percentages)

(Unaudited)

 

 

Three Months Ended July 31,

 

2021

 

 

2020

 

Net cash provided by operating activities

$

14,051

 

 

 

$

21,998

 

 

Less: Purchases of property and equipment

(660

)

 

 

(379

)

 

Less: Capitalization of internal-use software

(974

)

 

 

$

 

 

Free cash flow

$

12,417

 

 

 

$

21,619

 

 

Net cash used in investing activities

$

(1,634

)

 

 

$

(379

)

 

Net cash provided by financing activities

$

578,791

 

 

 

$

29,252

 

 

Net cash provided by operating activities (as a percentage of total revenue)

7

 

%

 

17

 

%

Less: Purchases of property and equipment (as a percentage of total revenue)

 

%

 

 

%

Less: Capitalization of internal-use software (as a percentage of total revenue)

(1

)

%

 

 

%

Free cash flow margin

6

 

%

 

17

 

%

Elastic N.V.

RECONCILIATION OF GAAP TO NON-GAAP DATA

(amounts in thousands, except percentages, share and per share amounts)

(Unaudited)

 

 

Three Months Ended July 31,

 

2021

 

 

2020

 

Gross Profit Reconciliation:

 

 

 

GAAP gross profit

$

143,433

 

 

 

$

94,039

 

 

Stock-based compensation expense

3,709

 

 

 

2,318

 

 

Employer payroll taxes on employee stock transactions

626

 

 

 

220

 

 

Amortization of acquired intangibles

2,012

 

 

 

2,109

 

 

Non-GAAP gross profit

$

149,780

 

 

 

$

98,686

 

 

Gross Margin Reconciliation(1):

 

 

 

GAAP gross margin

74.3

 

%

 

73.0

 

%

Stock-based compensation expense

1.9

 

%

 

1.8

 

%

Employer payroll taxes on employee stock transactions

0.3

 

%

 

0.2

 

%

Amortization of acquired intangibles

1.0

 

%

 

1.6

 

%

Non-GAAP gross margin

77.6

 

%

 

76.6

 

%

Operating Loss Reconciliation:

 

 

 

GAAP operating loss

$

(31,034

)

 

 

$

(29,519

)

 

Stock-based compensation expense

30,178

 

 

 

18,591

 

 

Employer payroll taxes on employee stock transactions

4,399

 

 

 

3,108

 

 

Amortization of acquired intangibles

3,441

 

 

 

3,550

 

 

Acquisition-related expenses

226

 

 

 

 

 

Non-GAAP operating income (loss)

$

7,210

 

 

 

$

(4,270

)

 

Operating Margin Reconciliation(1):

 

 

 

GAAP operating margin

(16.1

)

%

 

(22.9

)

%

Stock-based compensation expense

15.6

 

%

 

14.4

 

%

Employer payroll taxes on employee stock transactions

2.3

 

%

 

2.4

 

%

Amortization of acquired intangibles

1.8

 

%

 

2.8

 

%

Acquisition-related expenses

0.1

 

%

 

0.0

 

%

Non-GAAP operating margin

3.7

 

%

 

(3.3

)

%

Net Loss Reconciliation:

 

 

 

GAAP net loss

$

(34,489

)

 

 

$

(19,001

)

 

Stock-based compensation expense

30,178

 

 

 

18,591

 

 

Employer payroll taxes on employee stock transactions

4,399

 

 

 

3,108

 

 

Amortization of acquired intangibles

3,441

 

 

 

3,550

 

 

Acquisition-related expenses

226

 

 

 

 

 

Income tax(2)

(269

)

 

 

(92

)

 

Non-GAAP net income

$

3,486

 

 

 

$

6,156

 

 

Non-GAAP net earnings per share attributable to ordinary shareholders, basic

$

0.04

 

 

 

$

0.07

 

 

Non-GAAP net earnings per share attributable to ordinary shareholders, diluted

$

0.04

 

 

 

$

0.06

 

 

Weighted-average shares used to compute net earnings per share attributable to ordinary shareholders, basic

91,201,372

 

 

 

84,175,287

 

 

Weighted-average shares used to compute net earnings per share attributable to ordinary shareholders, diluted

98,157,087

 

 

 

96,059,560

 

 

(1) Totals may not sum, due to rounding. Gross margin, operating margin, and earnings per share are calculated based upon the respective underlying, non-rounded data.

(2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.

Elastic N.V.

RECONCILIATION OF GAAP TO NON-GAAP DATA

(amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended July 31,

 

2021

 

 

2020

 

Cost of revenue reconciliation:

 

 

 

GAAP cost of license - self-managed

$

346

 

 

 

$

346

 

 

Amortization of acquired intangibles

(346

)

 

 

(346

)

 

Non-GAAP cost of license - self -managed

$

 

 

 

$

 

 

GAAP cost of subscription - self-managed and SaaS

$

37,174

 

 

 

$

25,890

 

 

Stock-based compensation expense

(2,134

)

 

 

(1,366

)

 

Employer payroll taxes on employee stock transactions

(262

)

 

 

(143

)

 

Amortization of acquired intangibles

(1,666

)

 

 

(1,763

)

 

Non-GAAP cost of subscription - self-managed and SaaS

$

33,112

 

 

 

$

22,618

 

 

GAAP cost of professional services

$

12,142

 

 

 

$

8,595

 

 

Stock-based compensation expense

(1,575

)

 

 

(952

)

 

Employer payroll taxes on employee stock transactions

(364

)

 

 

(77

)

 

Non-GAAP cost of professional services

$

10,203

 

 

 

$

7,566

 

 

Operating expenses reconciliation:

 

 

 

GAAP research and development expense

$

59,382

 

 

 

$

45,678

 

 

Stock-based compensation expense

(12,097

)

 

 

(7,130

)

 

Employer payroll taxes on employee stock transactions

(1,598

)

 

 

(994

)

 

Non-GAAP research and development expense

$

45,687

 

 

 

$

37,554

 

 

GAAP sales and marketing expense

$

88,033

 

 

 

$

56,151

 

 

Stock-based compensation expense

(9,850

)

 

 

(6,192

)

 

Employer payroll taxes on employee stock transactions

(1,691

)

 

 

(1,157

)

 

Amortization of acquired intangibles

(1,429

)

 

 

(1,441

)

 

Non-GAAP sales and marketing expenses

$

75,063

 

 

 

$

47,361

 

 

GAAP general and administrative expense

$

27,052

 

 

 

$

21,729

 

 

Stock-based compensation expense

(4,522

)

 

 

(2,951

)

 

Employer payroll taxes on employee stock transactions

(484

)

 

 

(737

)

 

Acquisition-related expenses

(226

)

 

 

 

 

Non-GAAP general and administrative expense

$

21,820

 

 

 

$

18,041

 

 

About Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe the non-GAAP measures listed below are useful in evaluating our operating performance. We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In particular, free cash flow is not a substitute for cash used in operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation of our historical non-GAAP financial measures to their most directly comparable financial measure stated in accordance with U.S. GAAP has been provided in the financial statement tables included in this press release. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Investors are encouraged to review these reconciliations, and not to rely on any single financial measure to evaluate our business.

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, and amortization of acquired intangible assets. We believe non-GAAP gross profit and non-GAAP gross margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin

We define non-GAAP operating income (loss) and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, respectively, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, and acquisition-related expenses. We believe non-GAAP operating income (loss) and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Non-GAAP Net Earnings (Loss) Per Share

We define non-GAAP net earnings (loss) per share as GAAP net loss per share, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, acquisition-related expenses and the tax effects related to the foregoing. We believe non-GAAP net earnings (loss) per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Free Cash Flow and Free Cash Flow Margin

Free cash flow is a non-GAAP financial measure that we define as net cash (used in) provided by operating activities less purchases of property and equipment and capitalized internal-use software costs. Free cash flow margin is calculated as free cash flow divided by total revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our core operations that, after the purchases of property and equipment, can be used for strategic initiatives, including investing in our business and selectively pursuing acquisitions and strategic investments.

Calculated Billings

We define calculated billings as total revenue plus the increase in total deferred revenue as presented on or derived from our consolidated statements of cash flows less the (increase) decrease in total unbilled accounts receivable in a given period. Calculated billings exclude deferred revenue and unbilled accounts receivable acquired through acquisitions in the period of acquisition. We typically invoice our customers annually in advance, and to a lesser extent multi-year in advance, quarterly in advance, monthly in advance, monthly in arrears or upon delivery. Our management uses calculated billings to understand and evaluate our near-term cash flows and operating results.

Constant Currency

We compare the percent change in certain results from one period to another period using constant currency information to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. In presenting this information, current and comparative prior period results are converted into United States dollars at the exchange rates in effect on the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.

Anthony Luscri
Elastic Investor Relations
ir@elastic.co
(650) 695-1055

Lisa Boughner
Elastic Corporate Communications
lisa.boughner@elastic.co

Source: Elastic N.V.

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