Elastic Reports Strong Third Quarter Fiscal 2022 Financial Results

Q3 Revenue of $223.9 million, Up 43% year-over-year

Q3 Elastic Cloud Revenue of $80.4 million, Up 79% year-over-year

MOUNTAIN VIEW, Calif., March 03, 2022--(BUSINESS WIRE)--Elastic (NYSE: ESTC) ("Elastic"), the company behind Elasticsearch and the Elastic Stack, announced strong results for its third quarter of fiscal 2022 (ended January 31, 2022).

Third Quarter Fiscal 2022 Financial Highlights

• Total revenue was $223.9 million, an increase of 43% year-over-year, as reported and on a constant currency basis

• Elastic Cloud revenue was $80.4 million, an increase of 79% year-over-year, or 80% on a constant currency basis

• GAAP operating loss was $45.8 million; GAAP operating margin was -20%

• Non-GAAP operating profit was $0.2 million; non-GAAP operating margin was 0%

• GAAP net loss per share was $0.61; non-GAAP loss per share was $0.12

• Operating cash flow was $5.1 million with adjusted free cash flow of $15.8 million

• Cash and cash equivalents were $864.4 million as of January 31, 2022

"We delivered another record quarter and exceeded our revenue expectations, fueled by increasing consumption trends in Elastic Cloud. Our cloud business grew 79% year-over-year and now accounts for 36% of total revenue," said Ash Kulkarni, CEO, Elastic. "I look forward to us executing against the large and growing market opportunity ahead of us, particularly in cloud. I am confident that our demonstrated success, combined with the relevance of our solutions, enables us to capture this sizeable opportunity."

Third Quarter Fiscal 2022 Key Metrics and Recent Business Highlights

Key Customer Metrics

• Total subscription customer count was over 17,900, compared to over 17,000 in Q2 FY22, and over 13,800 in Q3 FY21

• Total customer count with Annual Contract Value (ACV) greater than $100,000 was over 890, compared to over 830 in Q2 FY22, and over 670 in Q3 FY21

• Net Expansion Rate was slightly above Q2 FY22 and just below 130%

Business Highlights

Cloud Momentum

• Delivered a more simplified Elastic Cloud on AWS onboarding and trial experience and expanded cloud-native AWS integrations which include AWS FireLens, Amazon S3 Storage Lens, the Elastic Serverless Forwarder in the AWS Serverless Application Repository, Elastic and AWS Web Application Firewall, and the Elastic and AWS Network Firewall

Product Innovations

• Announced Elastic 8.0 with major enhancements to Elasticsearch’s vector search capabilities, new native support for modern natural language processing models, increasingly simplified data onboarding, and a streamlined security experience

• Announced Elastic 7.16 with new features enabling simplified data ingestion into the Elastic Search Platform, including dozens of prebuilt Elastic Agent data integrations, and observability tooling for continuous integration and continuous delivery (CI/CD) pipelines

Community Momentum

• Hosted the second annual Elastic Community Conference with 2,000+ global attendees participating in more than 60 sessions

Financial Outlook

The Company is providing the following guidance:

For the fourth quarter of fiscal 2022 (ending April 30, 2022):

• Total revenue is expected to be between $230 million and $232 million

• Non-GAAP operating margin is expected to be between -5.5% and -4.5%

• Non-GAAP net loss per share is expected to be between $0.24 and $0.20, assuming between 93.1 million and 94.1 million weighted average ordinary shares outstanding

For fiscal 2022 (ending April 30, 2022):

• Total revenue is expected to be between $853 million and $855 million

• Non-GAAP operating margin is expected to be between -0.4% and -0.2%

• Non-GAAP net loss per share is expected to be between $0.42 and $0.38, assuming between 92.0 million and 93.0 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 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 and growth opportunities and our ability to address those opportunities, our expectations regarding the growth and adoption of our Elastic Cloud offering, and the expected 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 and strategic transactions; 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

Janice Oh
Elastic Investor Relations
ir@elastic.co

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 January 31,								Nine Months Ended January 31,
		2022				2021				2022				2021
Revenue
License - self-managed	$	20,119			$	15,280			$	54,457			$	45,673
Subscription - self-managed and SaaS		189,495				131,969				522,599				357,127
Total subscription revenue		209,614				147,249				577,056				402,800
Professional services		14,330				9,866				45,963				28,079
Total revenue		223,944				157,115				623,019				430,879
Cost of revenue
Cost of license - self-managed		501				346				1,242				1,039
Cost of subscription - self-managed and SaaS		47,076				31,426				126,097				86,464
Total cost of revenue - subscription		47,577				31,772				127,339				87,503
Cost of professional services		13,707				10,196				37,491				27,744
Total cost of revenue		61,284				41,968				164,830				115,247
Gross profit		162,660				115,147				458,189				315,632
Operating expenses
Research and development		71,749				51,400				194,894				143,766
Sales and marketing		105,069				71,087				288,055				191,712
General and administrative		31,691				27,121				89,298				72,555
Total operating expenses		208,509				149,608				572,247				408,033
Operating loss		(45,849	)			(34,461	)			(114,058	)			(92,401	)
Other income (expense), net
Interest expense		(6,175	)			(65	)			(14,327	)			(78	)
Other income (expense), net		(861	)			(2,312	)			(509	)			8,502
Loss before income taxes		(52,885	)			(36,838	)			(128,894	)			(83,977	)
Provision for income taxes		3,841				1,136				9,344				2,156
Net loss	$	(56,726	)		$	(37,974	)		$	(138,238	)		$	(86,133	)
Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.61	)		$	(0.43	)		$	(1.50	)		$	(1.00	)
Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted		93,015,185				88,341,038				92,140,919				86,296,028

Elastic N.V. CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share and per share amounts) (Unaudited)
	As of January 31, 2022				As of April 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	864,363			$	400,814
Restricted cash		3,928				2,894
Accounts receivable, net of allowance for credit losses of $2,729 and $2,344 as of January 31, 2022 and April 30, 2021, respectively		146,218				160,415
Deferred contract acquisition costs		38,938				36,089
Prepaid expenses and other current assets		39,405				37,002
Total current assets		1,092,852				637,214
Property and equipment, net		6,739				8,881
Goodwill		304,155				198,851
Operating lease right-of-use assets		21,454				25,464
Intangible assets, net		49,948				36,286
Deferred contract acquisition costs, non-current		62,980				50,263
Deferred tax assets		3,765				3,697
Other assets		17,403				12,516
Total assets	$	1,559,296			$	973,172
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	21,792			$	7,248
Accrued expenses and other liabilities		42,110				28,909
Accrued compensation and benefits		56,181				52,525
Operating lease liabilities		8,983				8,528
Deferred revenue		362,287				352,805
Total current liabilities		491,353				450,015
Deferred revenue, non-current		33,395				44,895
Long-term debt, net		566,271				—
Operating lease liabilities, non-current		14,879				19,649
Other liabilities, non-current		21,089				7,782
Total liabilities		1,126,987				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 January 31, 2022 and April 30, 2021		—				—
Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized; 93,420,927 and 90,533,985 shares issued and outstanding as of January 31, 2022 and April 30, 2021, respectively		982				948
Treasury stock		(369	)			(369	)
Additional paid-in capital		1,197,570				1,071,675
Accumulated other comprehensive loss		(14,318	)			(8,105	)
Accumulated deficit		(751,556	)			(613,318	)
Total shareholders’ equity		432,309				450,831
Total liabilities and shareholders’ equity	$	1,559,296			$	973,172

Elastic N.V. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (Unaudited)
	Three Months Ended January 31,								Nine Months Ended January 31,
		2022				2021				2022				2021
Cash flows from operating activities
Net loss	$	(56,726	)		$	(37,974	)		$	(138,238	)		$	(86,133	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		5,233				4,290				14,558				12,856
Amortization of deferred contract acquisition costs		14,803				10,282				43,373				28,455
Amortization of debt issuance costs		247				—				554				—
Non-cash operating lease cost		2,417				1,822				6,259				5,256
Stock-based compensation expense, net of amounts capitalized		37,393				25,227				96,971				65,305
Deferred income taxes		30				(2	)			(219	)			(288	)
Foreign currency transaction (gain) loss		1,703				1,461				1,707				(9,463	)
Other		—				22				98				11
Changes in operating assets and liabilities:
Accounts receivable, net		9,282				15,183				9,801				15,246
Deferred contract acquisition costs		(21,957	)			(16,740	)			(61,234	)			(54,612	)
Prepaid expenses and other current assets		(4,868	)			3,717				(2,650	)			4,817
Other assets		2,534				1,197				(803	)			5,237
Accounts payable		3,967				(3,683	)			14,452				(6,321	)
Accrued expenses and other liabilities		820				2,757				17,539				1,696
Accrued compensation and benefits		863				(5,168	)			4,686				(5,859	)
Operating lease liabilities		(2,455	)			(1,867	)			(6,438	)			(5,402	)
Deferred revenue		11,768				18,877				8,306				53,309
Net cash provided by operating activities		5,054				19,401				8,722				24,110
Cash flows from investing activities
Purchases of property and equipment		(236	)			(1,076	)			(987	)			(2,732	)
Capitalization of internal-use software costs		(1,514	)			—				(4,227	)			—
Business acquisitions, net of cash acquired		(11,750	)			—				(119,854	)			—
Other		—				—				—				1,320
Net cash used in investing activities		(13,500	)			(1,076	)			(125,068	)			(1,412	)
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		6,709				22,324				27,540				67,554
Payments of debt issuance costs		(49	)			—				(9,283	)			—
Net cash provided by financing activities		6,660				22,324				593,257				67,554
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(8,921	)			3,529				(12,328	)			5,848
Net increase (decrease) in cash, cash equivalents, and restricted cash		(10,707	)			44,178				464,583				96,100
Cash, cash equivalents, and restricted cash, beginning of period		878,998				351,311				403,708				299,389
Cash, cash equivalents, and restricted cash, end of period	$	868,291			$	395,489			$	868,291			$	395,489

Elastic N.V. REVENUE BY TYPE (amounts in thousands, except percentages) (Unaudited)
	Three Months Ended January 31,								Nine Months Ended January 31,
	2022				2021				2022				2021
	Amount		% of Total Revenue		Amount		% of Total Revenue		Amount		% of Total Revenue		Amount		% of Total Revenue
Elastic Cloud	$ 80,402		36 %		$ 44,929		29 %		$ 210,963		34 %		$ 114,984		27 %
Other subscription	129,212		58 %		102,320		65 %		366,093		59 %		287,816		66 %
Total subscription revenue	209,614		94 %		147,249		94 %		577,056		93 %		402,800		...
Professional services	14,330		6 %		9,866		6 %		45,963		7 %		28,079		7 %
Total revenue	$ 223,944		100 %		$ 157,115		100 %		$ 623,019