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Elastic N.V. Reports Strong Fourth Quarter and Fiscal 2019 Financial Results

MOUNTAIN VIEW, Calif. & AMSTERDAM, The Netherlands--(BUSINESS WIRE)--

Q4 Revenue of $80.6 million; Up 63% year-over-year (68% in constant currency)

FY19 Revenue of $271.7 million; Up 70% year-over-year (72% in constant currency)

Announced proposed acquisition of Endgame, an endpoint security company

Elastic N.V. (ESTC) (“Elastic”), the company behind Elasticsearch and the Elastic Stack, today announced strong results for the fourth quarter and full fiscal year ended April 30, 2019.

Fourth Quarter Fiscal 2019 Financial Highlights

  • Total revenue was $80.6 million, an increase of 63% year-over-year, or 68% on a constant currency basis.
  • Calculated billings was $115.4 million, an increase of 57% year-over-year, or 63% on a constant currency basis.
  • Deferred revenue was $170.7 million, growing 66% year-over-year.
  • GAAP operating loss was $32.1 million; GAAP operating margin was -40%.
  • Non-GAAP operating loss was $17.5 million; Non-GAAP operating margin was -22%.
  • GAAP net loss per share was $0.48; Non-GAAP net loss per share was $0.28.
  • Operating cash flow was -$19.8 million with free cash flow of -$20.9 million.
  • Cash and cash equivalents were $298.0 million as of April 30, 2019.

Full Fiscal 2019 Financial Highlights

  • Total revenue was $271.7 million, an increase of 70% year-over-year, or 72% on a constant currency basis.
  • GAAP operating loss was $101.4 million; GAAP operating margin was -37%.
  • Non-GAAP operating loss was $55.7 million; Non-GAAP operating margin was -21%.
  • GAAP net loss per share was $1.86; Non-GAAP net loss per share was $1.11.
  • Operating cash flow was -$23.9 million with free cash flow of -$27.4 million, or -10% free cash flow margin.

“Q4 was an incredible ending to a strong fiscal year,” said Shay Banon, founder and chief executive officer at Elastic. “We are seeing strong demand across our products and solutions worldwide. We continue to invest heavily across all parts of the business to drive growth and we look forward to continued momentum in fiscal 2020.”

In a separate news release issued today, we announced the proposed acquisition of Endgame, Inc. (“Endgame”), a security company focused on endpoint protection, detection, and response.

Fourth Quarter Fiscal 2019 Key Metrics and Recent Business Highlights

  • Total subscription customer count was over 8,100.
  • Total customer count with ACV greater than $100,000 was over 440.
  • Subscription revenue represented 91% of total revenue.
  • Net Expansion Rate remained over 130% for the tenth consecutive quarter.
  • Released version 6.7 of the Elastic Stack introducing two new solutions: Elastic Maps, for advanced, layered visualization of geospatial data on a map, and Elastic Uptime, for real-time monitoring and availability of systems and services.
  • Version 6.7 of the Elastic Stack made many proprietary features generally available, including cross-cluster replication, index lifecycle management, Elasticsearch SQL (including ODBC and JDBC clients), Canvas, and Functionbeat.
  • Released version 7.0 of the Elastic Stack delivering improvements to query speed and relevance with the introduction of new query types in Elasticsearch, a fully revamped cluster coordination framework that hardens resiliency, and a completely redesigned Kibana interface that simplifies the user experience and navigation.
  • Released version 2.2 of Elastic Cloud Enterprise (ECE) adding many of the recent Elastic Stack features in a native way to ECE, and providing better security and management in multitenant environments.
  • Announced an expanded partnership with Google Cloud (GCP) and a new global partnership with Tencent Cloud.
  • Made certain core security features free, further differentiating our proprietary, free features in the Basic version of the Elastic Stack. Users can now encrypt network traffic, create and manage users, define roles that protect index and cluster level access, and fully secure Kibana with Spaces.
  • Released Elastic Cloud on Kubernetes (ECK) in the Basic version of the Elastic Stack. ECK is an orchestration product based on the Kubernetes Operator pattern that lets users provision, manage, and operate Elasticsearch clusters on Kubernetes.
  • Announced the Beta version of Elastic Enterprise Search, a product that allows teams and organizations to search all the data scattered across the many tools that power the productivity of their workforce.
  • Announced SOC 2 Type 2 and CSA Star Level 2 Attestation for Elastic Cloud.
  • Held six successful Elastic{ON} Tour events to engage with our community of users, customers, and partners in Beijing, Seattle, San Francisco, São Paolo, Tokyo, and Zurich with waitlists driven by strong demand.
  • Appointed Caryn Marooney to the Elastic Board of Directors. Caryn recently led global communications for Facebook. Prior to joining Facebook, Caryn co-founded OutCast Communications.

Financial Outlook

The Company is providing the following guidance:

For its first quarter of fiscal 2020 (ending July 31, 2019):

  • Total revenue is expected to be between $82 million and $84 million.
  • Non-GAAP operating margin is expected to be between -34% and -32%.
  • Non-GAAP net loss per share is expected to be between $0.44 and $0.42, assuming between 74 and 75 million weighted average ordinary shares outstanding.

For its fiscal year 2020 (ending April 30, 2020):

  • Total revenue is expected to be between $397 million and $403 million.
  • Non-GAAP operating margin is expected to be between -25% and -23%, including approximately -2% related to the proposed acquisition of Endgame.
  • Non-GAAP net loss per share is expected to be between $1.49 and $1.33, assuming between 76 and 80 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.

Conference Call and Webcast

Elastic’s executive management team will host a conference call today beginning at 2:00 p.m. PT/ 5:00 p.m. ET/ 11:00 p.m. CEST 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. As the creators of the Elastic Stack (Elasticsearch, Kibana, Beats, and Logstash), Elastic builds self-managed and SaaS offerings that make data usable in real time and at scale for use cases like application search, site search, enterprise search, logging, APM, metrics, security, business analytics, and many more.

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 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 which include, but are not limited to, expected financial results for the fiscal quarter ending July 31, 2019 and the fiscal year ending April 30, 2020. These forward-looking statements are subject to the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Our expectations and beliefs regarding these matters may not materialize. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of uncertainties, risks, and changes in circumstances, including but not limited to risks and uncertainties related to: our ability to continue to deliver and improve our offerings and successfully develop new offerings; customer acceptance and purchase of our existing offerings and new offerings; our ability to maintain and expand our customer base; the market for our products not continuing to develop; competition from other products; the impact of foreign currency exchange rate and interest rate fluctuations on our results; our business strategy and our plan to build our business; our ability to effectively manage our growth; the pace of change and innovation in the markets in which we participate and the competitive nature of those markets; our international expansion strategy; our service performance and security, including the resources and costs required to prevent, detect and remediate potential security breaches; our operating results and cash flows; our strategy of acquiring complementary businesses and our ability to successfully integrate acquired businesses and technologies; our relationships with third parties, including partners; our ability to protect our intellectual property rights; our ability to develop our brands; our ability to attract and retain qualified employees and key personnel; the impact of expensing stock options and other equity awards; the sufficiency of our capital resources; our proposed acquisition of Endgame, including the potential impact on our operating margin; the impact of the transaction on Elastic’s future product offerings, and general market, political, economic and business conditions. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included under the caption “Risk Factors” and elsewhere in our most recent filings with the Securities and Exchange Commission (the “SEC”), including our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2019 and any subsequent reports on Form 10-K, Form 10-Q or Form 8-K 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 after the date of this release, except as required by law.

Contact Information

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

Deborah Wiltshire
Elastic Corporate Communications
press@elastic.co

   

Elastic N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

 
Three Months Ended April 30, Year Ended April 30,
2019   2018 2019   2018
Revenue
License - self-managed $ 12,624 $ 8,839 $ 39,474 $ 25,759
Subscription - self-managed and SaaS   60,999   37,337   208,780   123,623
Total subscription revenue 73,623 46,176 248,254 149,382
Professional services   6,976   3,396   23,399   10,553
Total revenue   80,599   49,572   271,653   159,935
Cost of revenue
Cost of license - self-managed 97 97 387 387
Cost of subscription - self-managed and SaaS   16,548   9,302   53,560   27,920
Total cost of revenue - subscription 16,645 9,399 53,947 28,307
Cost of professional services   6,797   4,201   24,063   12,433
Total cost of revenue   23,442   13,600   78,010   40,740
Gross profit   57,157   35,972   193,643   119,195
Operating expenses
Research and development 31,004 17,543 101,167 55,641
Sales and marketing 45,044 27,927 147,296 82,606
General and administrative   13,194   9,737   46,536   28,942
Total operating expenses   89,242   55,207   294,999   167,189
Operating loss (32,085 ) (19,235 ) (101,356 ) (47,994 )
Other income (expense), net   704   (544 )   3,441   (1,357 )
Loss before income taxes (31,381 ) (19,779 ) (97,915 ) (49,351 )
Provision for income taxes   3,454   1,624   4,388   3,376
Net loss $ (34,835 ) $ (21,403 ) $ (102,303 ) $ (52,727 )

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

$ (0.48 ) $ (0.66 ) $ (1.86 ) $ (1.65 )

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

  72,307,990   32,638,830   54,893,365   32,033,792
 
 

Elastic N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

 
April 30,
Assets 2019   2018
Current assets:
Cash and cash equivalents $ 298,000 $ 50,941
Restricted cash 2,280 668

Accounts receivable, net of allowance for doubtful accounts of $1,411 and $776 as of April 30, 2019 and April 30, 2018, respectively

81,274 53,233
Deferred contract acquisition costs 17,215 12,125
Prepaid expenses and other current assets   30,872   15,261
Total current assets 429,641 132,228
Property and equipment, net 5,448 4,536
Goodwill 19,846 19,182
Intangible assets, net 6,723 8,297
Deferred contract acquisition costs, non-current 8,935 5,954
Deferred offering costs - 242
Deferred tax assets 1,748 3,946
Other assets   13,397   8,628
Total assets $ 485,738 $ 183,013

Liabilities, Redeemable Convertible Preferred Shares and Shareholders’ Equity (Deficit)

Current liabilities:
Accounts payable $ 4,450 $ 2,176
Accrued expenses and other liabilities 18,740 11,816
Accrued compensation and benefits 22,147 15,191
Deferred revenue   158,243   95,929
Total current liabilities 203,580 125,112
Deferred revenue, non-current 12,423 6,632
Other liabilities, non-current   6,723   3,877
Total liabilities   222,726   135,621
Commitments and contingencies

Redeemable convertible preference shares, par value €0.001 per share;
No shares authorized, issued, or outstanding as of April 30, 2019;
29,026,193 shares authorized; 28,939,466 shares issued and
outstanding as of April 30, 2018

  -   200,921
Shareholders’ equity (deficit):

Convertible preference shares, €0.01 par value; 165,000,000 shares authorized, 0 shares
issued and outstanding as of April 30, 2019; 0 shares authorized, issued and
outstanding as of April 30, 2018

- -

Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized;
73,675,083 shares issued and outstanding as of April 30, 2019

754 -

Ordinary shares, par value of €0.001 per share; 72,000,000 shares authorized;
0 and 33,232,955 shares issued and outstanding as of April 30, 2019
and April 30, 2018, respectively

- 33

Treasury stock, 35,937 shares (repurchased at an average price of $10.30 per share)

(369 ) (369 )
Additional paid-in capital 581,135 62,542
Accumulated other comprehensive loss (1,431 ) (961 )
Accumulated deficit   (317,077 )   (214,774 )
Total shareholders’ equity (deficit)   263,012   (153,529 )

Total liabilities, redeemable convertible preference shares and shareholders’
equity (deficit)

$ 485,738 $ 183,013
 
   

Elastic N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

 
Three Months Ended

April 30,

Year Ended

April 30,

2019   2018 2019   2018
Cash flows from operating activities
Net loss $ (34,835 ) $ (21,403 ) $ (102,303 ) $ (52,727 )

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation and amortization 1,309 1,501 5,695 5,066
Amortization of deferred contract acquisition costs 6,656 3,933 21,374 12,731
Stock-based compensation expense 11,927 4,164 39,942 12,742
Other 3 (1 ) 69 1

Changes in operating assets and liabilities, net of impact of business acquisition:

Accounts receivable, net (27,576 ) (18,426 ) (29,804 ) (21,606 )
Deferred contract acquisition costs (9,592 ) (9,388 ) (30,006 ) (20,497 )
Prepaid expenses and other current assets (8,451 ) (2,811 ) (18,049 ) (6,920 )
Other assets (3,725 ) (5,320 ) (1,094 ) (7,842 )
Accounts payable 2,592 (5,149 ) 2,226 (23 )
Accrued expenses and other liabilities 1,998 (1,324 ) 8,728 4,397
Accrued compensation and benefits 5,339 6,189 7,409 8,045
Deferred revenue   34,565   24,128   71,876   45,814
Net cash used in operating activities   (19,790 )   (23,907 )   (23,937 )   (20,819 )
Cash flows from investing activities
Purchases of property and equipment (1,088 ) (1,127 ) (3,447 ) (2,968 )
Maturities of short-term investments - - - 15,000
Business acquisitions, net of cash acquired - - (1,986 ) (3,702 )
Other   (2,850 )   -   (2,850 )   -
Net cash (used in) provided by investing activities   (3,938 )   (1,127 )   (8,283 )   8,330
Cash flows from financing activities

Net proceeds from issuance of common stock in initial public offering

- - 269,514 -

Proceeds from issuance of ordinary shares upon exercise of stock options

15,015 595 18,552 2,337

Proceeds from the issuance of ordinary shares related to early exercise of stock options

- 1,066 - 1,566
Repurchase of ordinary shares - - - (344 )
Repurchase of early exercised options - - (500 ) -
Repayment of notes payable (33 ) (42 ) (106 ) (132 )
Payments of deferred offering costs   1   -   (5,672 )   -
Net cash provided by financing activities   14,983   1,619   281,788   3,427

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

  535   (488 )   (897 )   781

Net (decrease) increase in cash, cash equivalents, and restricted cash

  (8,210 )   (23,903 )   248,671   (8,281 )
Cash, cash equivalents, and restricted cash, beginning of period   308,490   75,512   51,609   59,890
Cash, cash equivalents, and restricted cash, end of period $ 300,280 $ 51,609 $ 300,280 $ 51,609
 
   

Elastic N.V.

REVENUE BY TYPE

(amounts in thousands, except percentages)

(Unaudited)

 
Three Months Ended April 30, Year Ended April 30,
2019   2018 2019   2018
    % of     % of     % of     % of
Total Total Total Total
Amount Revenue Amount Revenue Amount Revenue Amount Revenue

Self-managed subscription

$ 59,855   74 % $ 38,043   77 % $ 202,419   74 % $ 123,898   77 %
License 12,624 16 % 8,839 18 % 39,474 14 % 25,759 16 %
Subscription 47,231 58 % 29,204 59 % 162,945 60 % 98,139 61 %
SaaS   13,768   17 %   8,133   16 %   45,835   17 %   25,484   16 %
Total subscription revenue 73,623 91 % 46,176 93 % 248,254 91 % 149,382 93 %
Professional services   6,976   9 %   3,396   7 %   23,399   9 %   10,553   7 %
Total revenue $ 80,599   100 % $ 49,572   100 % $ 271,653   100 % $ 159,935   100 %
 
   

Elastic N.V.

RECONCILIATION OF GAAP TO NON-GAAP DATA

CALCULATED BILLINGS

(amounts in thousands)

(Unaudited)

 
Three Months Ended April 30, Year Ended April 30,
2019     2018 2019   2018
Total revenue $ 80,599 $ 49,572 271,653 $ 159,935

Add: Increase in total deferred revenue

34,565 24,128 71,876 45,814

Less: Decrease (increase) in
unbilled accounts receivable

  223   (382 )   (571 )   (25 )
Calculated billings $ 115,387 $ 73,318 $ 342,958 $ 205,724
 
   

Elastic N.V.

RECONCILIATION OF GAAP TO NON-GAAP DATA

FREE CASH FLOW

(amounts in thousands, except percentages)

(Unaudited)

 
Three Months Ended April 30, Year Ended April 30,
2019   2018 2019   2018
Net cash used in operating activities $ (19,790 ) $ (23,907 ) $ (23,937 ) $ (20,819 )
Less: Purchases of property and equipment   (1,088 )   (1,127 )   (3,447 )   (2,968 )
Free cash flow $ (20,878 ) $ (25,034 ) $ (27,384 ) $ (23,787 )
Net cash (used in) provided by investing activities $ (3,938 ) $ (1,127 ) $ (8,283 ) $ 8,330
Net cash provided by financing activities $ 14,983 $ 1,619 $ 281,788 $ 3,427

Net cash used in operating activities
(as a percentage of total revenue)

(25 )% (48 )% (9 )% (13 )%

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

  (1 )%   (3 )%   (1 )%   (2 )%
Free cash flow margin   (26 )%   (51 )%   (10 )%   (15 )%
 
             

Elastic N.V.

RECONCILIATION OF GAAP TO NON-GAAP DATA

For the three months ended April 30, 2019

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

(Unaudited)

 
GAAP Stock-Based

Compensation

Expense

Employer
Payroll
Taxes on
Employee
Stock
Transactions

Amortization

of Acquired

Intangibles

Acquisition

Related

Expenses

Tax

Adjustment(1)

Non-GAAP(2)
Cost of revenue

Cost of license - self-managed

$ 97 - - (97 ) - - $ -

Cost of subscription - self-managed
and SaaS

$ 16,548 (1,195 ) (28 ) (570 ) - - $ 14,755

Total cost of revenue - subscription

$ 16,645 (1,195 ) (28 ) (667 ) - - $ 14,755

Cost of professional services

$ 6,797 (440 ) (10 ) - - - $ 6,347
Total cost of revenue $ 23,442 (1,635 ) (38 ) (667 ) - - $ 21,102
Gross profit $ 57,157 1,635 38 667 - - $ 59,497
Gross margin (2) 70.9 % 2.0 % 0.0 % null