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What changed in Elastic N.V.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Elastic N.V.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+534 added−590 removedSource: 10-K (2023-06-16) vs 10-K (2022-06-21)

Top changes in Elastic N.V.'s 2023 10-K

534 paragraphs added · 590 removed · 449 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

97 edited+15 added−20 removed75 unchanged
Biggest changeOur relationships within customer organizations often extend beyond the initial users of the technology and include technology and business decision-makers at various levels. We also engage with our customers on an ongoing basis through a customer success team, to ensure customer satisfaction and expand their usage of our technology.
Biggest changeWe also engage with our customers on an ongoing basis through a customer success team, to ensure customer satisfaction and expand their usage of our technology. Partners We maintain partner relationships that help us market and deliver our products to our customers and complement our community. Our partner relationships include the following: • Cloud providers.
Key use cases for Enterprise Search include: search applications, a foundation for building search experiences to support websites and portals, e-commerce, mobile app search, and customer support; and workplace search, an out-of-the-box search solution for the workplace that seamlessly connects to the most widely used enterprise systems and tools. • Observability.
Key use cases for Search include: search applications, a foundation for building search experiences to support websites and portals, e-commerce, mobile app search, and customer support; and workplace search, an out-of-the-box search solution for the workplace that seamlessly connects to the most widely used enterprise systems and tools. • Observability.
With our business model, where users can download and use many of our features for free, our sales prospects are often already familiar with or using our platform. We conduct low-touch campaigns to keep users and customers engaged once they have begun using Elastic Cloud or downloaded our software.
With our business model, where users can download and use many of our features for free, our sales prospects are often already familiar with or using our platform. We conduct low-touch campaigns to keep users and customers engaged once they have begun using Elastic Cloud or have downloaded our software.
We also conduct specific programs to develop managers and leaders at Elastic, including our flagship leadership development program - Leading Strategically, an externally-led program focused on high-performing leaders who have the potential to have a significant strategic impact on the achievement of our long-term objectives. Total Rewards Compensation, Benefits and Well-being .
We also conduct specific programs to develop managers and leaders at Elastic, including our flagship leadership development program - Leading Strategically, an externally-led program focused on high-performing leaders who possess the potential to have a significant strategic impact on the achievement of our long-term objectives. Total Rewards Compensation, Benefits and Well-being .
They may be able to leverage these resources to gain business in a manner that discourages customers from purchasing our offerings. Furthermore, we expect that our industry will continue to attract new companies, including smaller emerging companies, which could introduce new offerings. We may also expand into new markets and encounter additional competitors in such markets.
They may be able to leverage these resources to gain business in a manner that discourages customers from purchasing our offerings. We expect that our industry will continue to attract new companies, including smaller emerging companies, which could introduce new offerings. We may also expand into new markets and encounter additional competitors in such markets.
The principal competitive factors for companies in our industry are: • product capabilities, including speed, scale, and relevance, with which to power search experiences; • an extensible product “stack” that enables developers to build a wide variety of solutions; • powerful and flexible technology that can manage a broad variety and large volume of data; • ease of deployment and ease of use; • ability to address a variety of evolving customer needs and use cases; • strength and execution of sales and marketing strategies; • flexible deployment model across public or private clouds, hybrid environments, or multi-cloud environments; • productized solutions engineered to be rapidly adopted to address specific applications; • mindshare with developers and IT and security executives; • adoption of products by many types of users and decision makers (developers, architects, DevOps personnel, IT professionals, security analysts, and departmental and organizational leaders); • enterprise-grade technology that is secure and reliable; • size of customer base and level of user adoption; • quality of training, consulting, and customer support; • brand awareness and reputation; and • low total cost of ownership.
The principal competitive factors for companies in our industry are: • product capabilities, including speed, scale, and relevance, with which to power search experiences; 11 Table of Contents • an extensible product “stack” that enables developers to build a wide variety of solutions; • powerful and flexible technology that can manage a broad variety and large volume of data; • ease of deployment and ease of use; • ability to address a variety of evolving customer needs and use cases; • strength and execution of sales and marketing strategies; • flexible deployment model across public or private clouds, hybrid environments, or multi-cloud environments; • productized solutions engineered to be rapidly adopted to address specific applications; • mindshare with developers and IT and security executives; • adoption of products by many types of users and decision makers (developers, architects, DevOps personnel, IT professionals, security analysts, and departmental and organizational leaders); • enterprise-grade technology that is secure and reliable; • size of customer base and level of user adoption; • quality of training, consulting, and customer support; • brand awareness and reputation; and • low total cost of ownership.
We offer three search-powered solutions – Enterprise Search, Observability, and Security – that are built into the platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications running smoothly, and protecting against cyber threats.
We offer three search-powered solutions – Search, Observability, and Security – that are built into the platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications running smoothly, and protecting against cyber threats.
The source code of features in the Elastic Stack is generally visible to the public in the form of “open code.” Our Solutions We have built a number of solutions into the Elastic Stack to make it easier for organizations to use our software for common use cases. Our solutions include: • Enterprise Search.
The source code of features in the Elastic Stack is generally visible to the public in the form of “open code.” Our Solutions We have built a number of solutions into the Elastic Stack to make it easier for organizations to use our software for common use cases. Our solutions include: • Search.
Enterprise Search gives users the tools to bring search experiences to customers, partners and teams quickly and scale them seamlessly. • Search applications. Customers can bring the focused power of Elasticsearch to their company website, ecommerce site, or applications with a refined set of APIs and intuitive dashboards.
Search gives users the tools to bring search experiences to customers, partners and teams quickly and scale them seamlessly. • Search applications. Customers can bring the focused power of Elasticsearch to their company website, ecommerce site, or applications with a refined set of APIs and intuitive dashboards.
This makes it easy for users to discover all of the capabilities our solutions provide, and enables solution users to benefit from the core capabilities of Kibana. • Application framework. Kibana is designed to be extensible.
This makes it easy for users to discover all of the capabilities our solutions provide, and enables solution users to benefit from Kibana’s core capabilities. • Application framework. Kibana is designed to be extensible.
Having a distributed workforce gives us a global candidate pool, which gives us the opportunity to cast a wider recruiting net, a critical aspect of helping open our pipelines to a broader set of diverse talent.
Having a distributed workforce gives us a global candidate pool, which provides us the opportunity to cast a wider recruiting net, a critical aspect of helping open our pipelines to a broader set of diverse talent.
Metrics helps users deliver on infrastructure service level objectives (“SLOs”), and resolve downtime or performance issues by understanding how the state of individual components fits into the bigger picture. • APM. APM delivers insight into application performance at the code level. Developers can instrument apps and see the lifecycle of a transaction across services from front end to back end.
Metrics helps users deliver on infrastructure service level objectives (“SLO”), and resolve downtime or performance issues by understanding how the state of individual components fits into the bigger picture. • APM. APM delivers insight into application performance at the code level. Developers can instrument apps and see the lifecycle of a transaction across services from front end to back end.
We believe in the importance of an open software development model, and we develop the majority of our software in public repositories as open code under a proprietary license. Unlike some companies, we do not build an enterprise version that is separate from our free distribution. We offer a single code base across both our self-managed software and Elastic-hosted services.
We believe in the importance of an open software development model, and we develop the majority of our software in public repositories as open code under a proprietary license. Unlike some companies, we do not build an enterprise version that is separate from our free distribution. We maintain a single code base across both our self-managed software and Elastic-hosted services.
Since inception, we have provided most Elasticians with the ability to work from anywhere, as often as they would like. We also know that being face-to-face is important too, and we have physical offices around the world to provide a space for employees to work from if they wish. Community Involvement.
Since inception, we have provided most Elasticians with the ability to work from anywhere, as often as they would like. We also know that being face-to-face is important too, and we have physical offices around the world to provide a space for employees to work from if they wish to do so. Community Involvement.
In addition, as of April 30, 2022, we had numerous U.S. and international trademark registrations. The laws, procedures and restrictions on which we rely may provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
In addition, as of April 30, 2023, we had numerous U.S. and international trademark registrations. The laws, procedures and restrictions on which we rely may provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
It is designed for ease of use and for speed, and can help stop threats in early stages of an attack. Endpoint Security includes protection against ransomware, malware, phishing, exploits, fileless attacks, and more. • XDR. XDR extends detection and response across the entire attack surface.
It is designed for ease of use and for speed, and can help stop threats in early stages of an attack. Endpoint Security includes protection against ransomware, malware, phishing, exploits, fileless attacks, and other threats. • XDR. XDR extends detection and response across the entire attack surface.
Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K and inclusions of our website address in this Annual Report on Form 10-K are inactive textual references only.
Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K and references to our website address in this Annual Report on Form 10-K are inactive textual references only.
We will continue to engage with developers globally through a wide range of touch points such as community meetups, global community groups, hackathons, our global events, our user conferences, which we call ElasticON, and engagement on our website, user forums, and code repositories, to grow our user community. • Expand our customer base by acquiring new customers.
We will continue to engage with developers globally through a wide range of touch points such as community meetups, global community groups, hackathons, our global events, our user conferences, which we call ElasticON, and engagement on our website, user forums, and code repositories, to grow our user community. 5 Table of Contents • Expand our customer base by acquiring new customers.
We strive to embed DEI deep within our culture through various initiatives, projects and programs, the centerpiece of which is the Elastician Resource Groups (“ERGs”), which are organizationally sponsored, self-organized, Elastician-run groups.
We strive to embed DEI deep within our culture through various initiatives, projects and programs, the centerpiece of which is the Elastician Resource Groups (“ERG”), which are organizationally sponsored, self-organized, Elastician-run groups.
We are organized in small functional teams with a high degree of autonomy and accountability. Our distributed and highly modular team structure and well-defined software development processes also allow us to successfully incorporate technologies that we have acquired. We intend to continue to invest in our research and development capabilities to extend our products.
We are organized in small functional teams with a high degree of autonomy and accountability. Our distributed and highly modular team structure and well-defined software development processes also allow us to successfully incorporate technologies that we have acquired. 6 Table of Contents We intend to continue to invest in our research and development capabilities to extend our products.
Our Enterprise Search solution provides powerful search for documents and results living in applications, websites, and workplaces.
Our Search solution provides powerful search for documents and results living in applications, websites, and workplaces.
Through proactive monitoring, customers can detect troublesome components before they are reported by end users. Security delivers unified protection to prevent, detect, and respond to a variety of threats across the IT ecosystem. • SIEM. Elastic SIEM automates threat detection and remediation, reducing mean time to detect (“MTTD”) and mean time to respond (“MTTR”).
Through proactive monitoring, customers can detect troublesome components before they are reported by end users. 10 Table of Contents Security delivers unified protection to prevent, detect, and respond to a variety of threats across the IT ecosystem. • SIEM. Elastic SIEM automates threat detection and remediation, reducing mean time to detect (“MTTD”) and mean time to respond (“MTTR”).
Expansion includes increasing the number of developers and practitioners using our products, increasing the utilization of our products for a particular use case, and applying our products to new use cases. We focus some of our direct sales efforts on encouraging this type of expansion within our customer base, both within as well as across solutions.
Expansion includes increasing the number of developers and practitioners using our products, increasing the utilization of our products for a particular use case, and utilizing our products to address new use cases. We focus some of our direct sales efforts on encouraging this type of expansion within our customer base, both within as well as across solutions.
Its central management user interfaces (UIs) make it easier to operate the Elastic Stack at scale. • Home for Solutions. Kibana is where our users and customers access the user interfaces for our Enterprise Search, Observability, and Security solutions. Kibana provides core services, like security, alerting, and data visualization components.
Its central management user interfaces (“UI”) make it easier to operate the Elastic Stack at scale. • Home for Solutions. Kibana is where our users and customers access the user interfaces for our Search, Observability, and Security solutions. Kibana provides core services, like security, alerting, and data visualization components.
At the core of the Elastic Stack is Elasticsearch - a highly scalable document store and search engine, and the only data store for all of our solutions and use cases.
At the core of the Elastic Stack is Elasticsearch - a highly scalable document store and search engine, and the unified data store for all of our solutions and use cases.
We have fair and consistent compensation practices through our use of local third-party market data specific to each country, where available, so that we understand local compensation and cost of labor levels. We retain external experts to review our compensation outcomes on an ongoing basis to ensure they are bias-free and fairly reward employee performance and contributions.
We pursue fair and consistent compensation practices through our use of local third-party market data specific to each country, where available, so that we understand local compensation and cost of labor levels. We retain external experts to review our compensation outcomes on an ongoing basis in seeking to ensure they are bias-free and fairly reward employee performance and contributions.
Our users interact with us on our website forums and on Twitter, GitHub, Stack Overflow, Quora, Facebook, Weibo, WeChat, and more. In order to build products that best meet our users’ needs, we focus on, and invest in, building a strong community.
Our users interact with us on our website forums and on Twitter, GitHub, Stack Overflow, Quora, Facebook, Weibo, WeChat, and other platforms. In order to build products that best meet our users’ needs, we focus on, and invest in, building a strong community.
Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, business acquisitions, consumer and data protection, and taxes, could have a material impact on our business. Refer to Item 1A, “Risk Factors” of this Annual Report on Form 10-K for a discussion of these potential impacts.
Our compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, business acquisitions, consumer and data protection, and taxes, could have material impacts on our business. See Item 1A, “Risk Factors” of this Annual Report on Form 10-K for a discussion of these potential impacts.
Logstash enables centralized collection and extract, transformation, and load capabilities. Key features of Logstash include the following: • Data transformation engine. Logstash is a centralized data transformation engine that can receive and pull data from multiple sources, transform and filter that data, and send it to multiple outputs.
Logstash enables centralized collection and extract, transformation, and load capabilities. Key features of Logstash include the following: 9 Table of Contents • Data transformation engine. Logstash is a centralized data transformation engine that can receive and pull data from multiple sources, transform and filter that data, and send it to multiple outputs.
It covers the behaviors of the Elastic community in any forum, mailing list, wiki, website, code repository, IRC channel, private correspondence, or public meeting. It is designed to ensure that the Elastic community is a space where members and users can freely and openly communicate, collaborate, and contribute both ideas and code.
The Elastic community has a code of conduct that covers the behaviors of the Elastic community in any forum, mailing list, wiki, website, code repository, Slack channel, private correspondence, or public meeting. It is designed to ensure that the Elastic community is a space where members and users can freely and openly communicate, collaborate, and contribute both ideas and code.
In addition, we maintain a policy requiring our employees, contractors, and consultants to enter into confidentiality and invention assignment agreements. As of April 30, 2022, we had a number of active patents, issued in both the United States and outside of the United States, with expirations ranging from 2031 to 2039.
In addition, we maintain a policy requiring our employees, contractors, and consultants to enter into confidentiality and invention assignment agreements. As of April 30, 2023, we had a number of active patents, issued in both the United States and outside of the United States, with expirations ranging from 2031 to 2041.
Another key component of the Elastic Stack is Kibana, which delivers a single user interface across all of our solutions, with powerful drag-and-drop visual analytics, and centralized management of the platform.
Another component of the Elastic Stack is Kibana, which delivers a common user interface across all of our solutions, with powerful drag-and-drop visual analytics, and centralized management of the platform.
Community gives us an ability to get their candid feedback, creating a direct line of communication between our users and the builders of our products across all of our features—including both free and paid capabilities —enabling us to make our products simpler and better. The Elastic community has a Code of Conduct.
Community gives us an ability to get their candid feedback, creating a direct line of communication between our users and the builders of our products across all of our features — including both free and paid capabilities — and enabling us to make our products simpler and better.
Beats and Logstash have an extensible modular architecture. Elastic Agent is a single, unified way to add monitoring for logs, metrics, and other types of data to each host, and also includes integrated host protection and central management. Beats are lightweight agents purpose-built for collecting data on devices, servers, and inside containers. Key features include the following: • Data shippers.
Elastic Agent is a single, unified way to add monitoring for logs, metrics, and other types of data to each host, and also includes integrated host protection and central management. Beats are lightweight agents purpose-built for collecting data on devices, servers, and inside containers. Key features include the following: • Data shippers.
These programs include market competitive medical and dental programs, in addition to focus on mental health and holistic well-being. We provide market competitive paid time off (“PTO”) programs, including offering 16 weeks of paid leave to all new parents, life-planning benefits and other travel reimbursements for certain healthcare services.
These programs include market competitive medical and dental programs, in addition to a focus on mental health and holistic well-being. We provide market competitive paid time off programs, which feature 16 weeks of paid leave to all new parents, life-planning benefits and other travel reimbursements for certain healthcare services.
Because our business model provides access to all solutions with resource-based pricing, we make it easy for customers to expand across use cases. Our business has experienced rapid growth around the world. As of April 30, 2022, we had over 18,600 customers compared to over 15,000 customers and over 11,300 customers as of April 30, 2021 and 2020, respectively.
Because our business model provides access to all solutions with resource-based pricing, we make it easy for customers to expand across use cases. Our business has experienced rapid growth around the world. As of April 30, 2023, we had approximately 20,200 customers compared to over 18,600 customers and over 15,000 customers as of April 30, 2022 and 2021, respectively.
Research and development expense totaled $273.8 million and $199.2 million for the years ended April 30, 2022 and 2021, respectively. We plan to continue to devote significant resources to research and development. Sales and Marketing We make it easy for users to begin using our products in order to drive rapid adoption.
Research and development expense totaled $313.5 million and $273.8 million for the years ended April 30, 2023 and 2022, respectively. We plan to continue to devote significant resources to research and development. Sales and Marketing We make it easy for users to begin using our products in order to drive rapid adoption.
Through Elastic Cares, employees can support the charitable organizations that matter the most to them on a local and global level. Elastic Cares is a program consisting of donation matching, our nonprofit organization program which provides our technology for free to certain nonprofit organizations, and our volunteer time off (“VTO”) initiative.
Through our Elastic Cares program, employees can support the charitable organizations that matter the most to them on a local and global level. This program encompasses donation matching, our nonprofit organization program which provides our technology for free to certain nonprofit organizations, and our volunteer time off initiative.
Security includes: SIEM, with integrations to network, host, user, and cloud data sources, as well as workflow and operations, shareable analytics, incident management, and investigations; Endpoint Security, for prevention, detection and response with a single, stack-integrated agent; Extended Detection and Response (“XDR”), providing protection across infrastructure from SIEM to Endpoint; and Cloud Security, providing cloud posture assessment and protecting cloud workloads with one integrated solution Our Deployment Options The Elastic Stack and our solutions can be deployed in public or private clouds, in hybrid environments, or in multi-cloud environments, to satisfy various user and customer needs.
Security includes: Security Information and Event Management (“SIEM”), with integrations to network, host, user, and cloud data sources, as well as workflow and operations, shareable analytics, incident management, and investigations; Endpoint Security, for prevention, detection and response with a single, stack-integrated agent; Extended Detection and Response (“XDR”), providing protection across infrastructure from SIEM to Endpoint; and Cloud Security, providing cloud posture assessment, vulnerability management, and cloud workload protection with one integrated solution. 4 Table of Contents Our Deployment Options The Elastic Stack and our solutions can be deployed in public or private clouds, in hybrid environments, or in multi-cloud environments, to satisfy various user and customer needs.
Employee Engagement We are committed to ensuring that Elasticians have a voice in how we can collectively make Elastic a better place to work. New Employee Onboarding.
Employee Engagement We are committed to ensuring that Elasticians have a voice in how we can collectively make Elastic a better place to work. 13 Table of Contents New Employee Onboarding.
Our principal competitors include: • For Enterprise Search: offerings such as Solr (open source offering) and Lucidworks Fusion, search tools including Google Programmable Search Engine, and workplace search tools including Coveo, and Endeca (owned by Oracle). • For Observability: software vendors with specific observability solutions to analyze logging data, metrics, APM data, or infrastructure uptime, such as Splunk, New Relic, Dynatrace, AppDynamics (owned by Cisco Systems) and Datadog. • For Security: security vendors such as Splunk, Azure Sentinel (by Microsoft), CrowdStrike, Carbon Black (owned by VMware), McAfee and Symantec (owned by Broadcom). • Certain cloud hosting providers and managed service providers, including Amazon Web Services, that offer products based on a forked version of the Elastic Stack.
Our principal competitors include: • For Search and other platform use cases: offerings such as Solr (open source offering) and Lucidworks Fusion, search tools including Google, Coveo, and Algolia. • For Observability: software vendors with specific observability solutions to analyze logging data, metrics, APM data, or infrastructure uptime, such as Splunk, New Relic, Dynatrace, AppDynamics (owned by Cisco Systems), and Datadog. • For Security: security vendors such as Splunk, Azure Sentinel (by Microsoft), CrowdStrike, Carbon Black (owned by VMware), McAfee, and Symantec (owned by Broadcom). • Certain cloud hosting providers and managed service providers, including AWS, that offer products or services based on a forked version of the Elastic Stack.
The focus of our most recent acquisitions has been to enhance the technology underlying our Security and Observability offerings. We intend to continue to pursue acquisitions selectively. Customers Organizations of all sizes, across many industries, both private and public, purchase our products for a variety of use cases.
The focus of our most recent acquisitions has been to enhance the technology underlying our Security and Observability offerings. We intend to continue to pursue acquisitions selectively. Customers Organizations of all sizes, across many industries, including enterprises, educational institutions and government entities, purchase our products for a variety of use cases.
Intellectual Property We rely on a combination of patents, patent applications, registered and unregistered trademarks, copyrights, trade secrets, license agreements, confidentiality procedures, non-disclosure agreements with third parties, and other contractual 12 T a b l e o f C o ntents measures to safeguard our core technology and other intellectual property assets.
Intellectual Property We rely on a combination of patents, patent applications, registered and unregistered trademarks, copyrights, trade secrets, license agreements, confidentiality procedures, non-disclosure agreements with third parties, and other contractual measures to safeguard our core technology and other intellectual property assets.
Elasticsearch is designed to scale horizontally and be resilient to node or hardware failures. As nodes join a cluster, data is automatically re-balanced and queries and indexing are spread across the new nodes seamlessly. This makes it easy to add hardware to increase indexing throughput or improve query throughput.
As nodes join a cluster, data is automatically re-balanced and queries and indexing are spread across the new nodes seamlessly. This makes it easy to add hardware to increase indexing throughput or improve query throughput.
Elasticsearch is the heart of the Elastic Stack. It is a distributed, real-time search and analytics engine and data store for all types of data including textual, numerical, geospatial, structured, and unstructured. • Kibana. Kibana is the user interface for the Elastic Stack. It is the visualization layer for data stored in Elasticsearch.
The Elastic Stack The Elastic Stack is primarily composed of the following products: • Elasticsearch. Elasticsearch is the heart of the Elastic Stack. It is a distributed, real-time search and analytics engine and data store for all types of data, including textual, numerical, geospatial, structured, and unstructured. • Kibana. Kibana is the user interface for the Elastic Stack.
As of April 30, 2022, we had over 18,600 customers compared to over 15,000 customers and over 11,300 customers as of April 30, 2021 and 2020, respectively. No customer represented more than 10% of our total revenue for the years ended April 30, 2022, 2021, and 2020.
As of April 30, 2023, we had approximately 20,200 customers compared to over 18,600 customers and over 15,000 customers as of April 30, 2022 and 2021, respectively. No customer accounted for more than 10% of our total revenue for the years ended April 30, 2023, 2022, and 2021.
ITEM 1. BUSINESS. Elastic is a data analytics company built on the power of search. Our platform, which is available as both a hosted, managed service across public clouds as well as self-managed software, allows our customers to almost instantly find insights from large amounts of data and take action.
Item 1. Business Elastic is a data analytics company built on the power of search. Our platform, which is available as both a hosted, managed service across public clouds as well as self-managed software, allows our customers to find insights and drive artificial intelligence (“AI”) and machine learning use cases from large amounts of data.
This includes providing high-quality content, documentation, webinars, videos, and blogs through our website. We also drive high-touch engagement with qualified prospects and customers to drive further awareness, adoption, and expansion of our products with paid subscriptions. The majority of our new customers use Elastic Cloud. Many of these customers start with limited initial spending, but can significantly grow their spending.
This process includes providing high-quality content, documentation, webinars, videos, and blogs through our website. We also drive high-touch engagement with qualified prospects and customers to drive further awareness, adoption, and expansion of our products with paid subscriptions. The majority of our new customers use Elastic Cloud.
For additional information, see the section titled “Risk Factors—Risks Related to the Business.” In addition, our technology incorporates software components licensed to the general public under open source software licenses such as the Apache Software License Version 2.0 (“Apache 2.0”). We obtain many components from software developed and released by contributors to independent open source components of our technology.
In addition, our technology incorporates software components licensed to the general public under open source software licenses such as the Apache Software License Version 2.0 (“Apache 2.0”). We obtain many components from software developed and released by contributors to independent open source components of our technology.
Elasticians were highly engaged in providing feedback in fiscal years 2022 and 2021, with very high participation rates for the mid-year and annual surveys as well as high engagement scores across a spectrum of questions. 14 T a b l e o f C o ntents Learning and Development Our Learning & Organizational Development team’s mission to enable Elasticians to pursue their purpose, in work and life, makes for a better Elastic.
Elasticians were highly engaged in providing feedback in fiscal years 2023, 2022 and 2021, with high participation rates for the mid-year and annual surveys as well as high engagement scores across a spectrum of questions. Learning and Development Our Learning & Organizational Development team’s mission is to enable Elasticians to pursue their purpose, in work and life.
In fiscal year 2022, the created-by-women-for-women workplace review site, Fairygodboss, once again recognized Elastic as number one in the Best Technology Company for Women category, and as one of the best workplaces for women in two additional categories: Best Company for Women, and Best Company Where CEOs Support Gender Diversity. Elastician Resource Groups.
The created-by-women-for-women workplace review site, Fairygodboss, recognized Elastic as one of the best workplaces for women in three categories: Best Technology Company for Women, Best Company for Women, and Best Company Where CEOs Support Gender Diversity. Elastician Resource Groups.
It also covers our community ground rules: be considerate, be patient, be respectful, be nice, communicate effectively, and ask for help when unsure. 11 T a b l e o f C o ntents Competition Our market is highly competitive, quickly evolving, fragmented, and subject to rapid changes in technology, shifting customer needs, and frequent introductions of new offerings.
This Elastic Community code of conduct also covers our community ground rules: be considerate, be patient, be respectful, be nice, communicate effectively, and ask for help when unsure. Competition Our market is highly competitive, quickly evolving, fragmented, and subject to rapid changes in technology, shifting customer needs, and frequent introductions of new offerings.
As of April 30, 2022, we had a total of 2,978 employees in over 40 countries globally. In addition, over 30% of our workforce encompasses women and non-binary employees. None of our employees are represented by a labor union.
As of April 30, 2023, we had a total of 2,886 employees in over 40 countries globally. Over 30% of our workforce consists of women and employees who self-identify as non-binary. None of our employees are represented by a labor union.
We also offer software solutions built in the Elastic Stack that address a wide variety of use cases. The Elastic Stack and our solutions are designed to run in public or private clouds, in hybrid environments, or in multi-cloud environments. The Elastic Stack The Elastic Stack is primarily composed of the following products: • Elasticsearch.
The Elastic Stack can be used by developers to power a variety of use cases. We also offer software solutions built in the Elastic Stack that address a wide variety of use cases. The Elastic Stack and our solutions are designed to run in public or private clouds, in hybrid environments, or in multi-cloud environments.
Elasticsearch uses multiple analytical techniques to determine the similarity between stored data and queries, generating highly relevant results reflecting a deep understanding of text and context. Its sophisticated yet developer-friendly query language permits advanced search and analytics. Additionally, the speed of the Elastic Stack permits query iteration, further enhancing the relevance of search results. • Ease of Use.
Elasticsearch uses multiple analytical techniques, including both traditional and AI-powered relevance techniques, to determine the similarity between stored data and queries, generating highly relevant results reflecting a deep understanding of text and context. Its sophisticated yet developer-friendly query language permits advanced search and analytics.
We maintain a regular pulse on how our employees are feeling through two primary feedback mechanisms – an annual employee engagement survey and a mid-year pulse survey check-in. The results of these surveys are reviewed at the company, functional, team and manager level, with action plans put in place annually.
We monitor employee morale and attitudes through two primary feedback mechanisms – an annual employee engagement survey and a mid-year pulse survey check-in. The results of these surveys are reviewed at the company, functional, team and manager level, and are used to develop action plans put in place annually.
Immediately prior to the completion of our initial public offering (“IPO”) on October 10, 2018, we converted into a public company with limited liability ( naamloze vennootschap ) under Dutch law and changed our name to Elastic N.V.
Immediately prior to the completion of our initial public offering (“IPO”) on October 10, 2018, we converted into a public company with limited liability ( naamloze vennootschap ) under Dutch law and changed our name to Elastic N.V. We are a distributed company, which means our workforce is distributed globally. Accordingly, we do not have a principal executive office.
In certain countries in which we operate, such as France and Spain, we are subject to, and comply with, local labor law requirements which may automatically make our employees subject to industry-wide collective bargaining agreements. We have not experienced any work stoppages. Our Culture We describe our culture by the Elastic “source code,” the things that make Elastic, Elastic.
In certain countries in which we operate, such as France and Spain, we are subject to local labor law requirements that may automatically make our employees subject to industry-wide collective bargaining agreements. We have not experienced any work stoppages. Distributed Workforce Elastic originated as a distributed company and continues to be distributed by design.
Our revenue was $862.4 million, $608.5 million, and $427.6 million for the years ended April 30, 2022, 2021 and 2020, respectively, representing year-over-year growth of 42% for each of the years ended April 30, 2022 and 2021. Subscriptions accounted for 93%, 93% and 92% of our total revenue for the years ended April 30, 2022, 2021 and 2020, respectively.
Our total revenue was $1.1 billion, $862.4 million, and $608.5 million for the years ended April 30, 2023, 2022 and 2021, respectively, representing year-over-year growth of 24% for the year ended April 30, 2023 and 42% for the year ended April 30, 2022.
Examples of 8 T a b l e o f C o ntents these capabilities include tracking the top ten users by spend, looking at data week over week, analyzing data across geographies, and drilling down into details with specific filters all with a single search. • Vector search.
Examples of these capabilities include tracking the top ten users by expenditure level, looking at data week over week, analyzing data across geographies, and drilling down into details with specific filters all with a single search. • Developer friendliness.
The Elastic Stack can find matches for search criteria in milliseconds within even the largest structured and unstructured datasets. Its schema-less structure and inverted indices enable real-time search of high volumes of structured, unstructured, and time series data. • Scale. The Elastic Stack is a distributed system and can scale massively.
Its schemaless structure and inverted indices enable real-time search of high volumes of structured, unstructured, and time series data. • Scale. The Elastic Stack is a distributed system and can scale massively.
These capabilities enable the Elastic Stack to generate insights from a wide variety of data sources for a broad range of use cases. The flexibility of the Elastic Stack also enables users to begin using our products along with their existing systems, which lowers barriers to adoption. • Extensibility.
The flexibility of the Elastic Stack also enables users to begin using our products along with their existing systems, which lowers barriers to adoption. • Extensibility. Developers can use the Elastic Stack as a foundation for addressing a wide variety of use cases.
Open source licenses grant licensees broad permissions to use, copy, modify and redistribute our platform. As a result, open source development and licensing practices can limit the value of our software copyright assets. Human Capital Management Our employees (whom we call “Elasticians”) and our culture are vital to Elastic’s long-term success.
Open source licenses grant licensees broad permissions to use, copy, modify and redistribute our platform. As a result, open source development and licensing practices can limit the value of our software copyright assets.
Users interested in a highly specialized visualization type not distributed with Kibana by default can customize experiences through a Kibana plugin and make the plugin available to the community.
Users interested in a highly specialized visualization type not distributed with Kibana by default can customize experiences through a Kibana plugin and make the plugin available to the community. Dozens of Kibana plugins have been shared by the community via Elastic documentation and code sharing platforms such as GitHub.
We plan to continue to invest resources in increasing the adoption of Elastic Cloud. • Increase product adoption by improving ease of use and growing our user community. With our engineering efforts focused on the user experience, we will continue to develop software that makes our products easier to use and adopt for both developers and non-developers.
With our engineering efforts focused on the user experience, we will continue to develop software that makes our products easier to use and adopt for both developers and non-developers.
We often enter an organization through a single developer or a small team for an initial project or use case with an objective to quickly solve a technical challenge or business problem.
We view initial success with our products as a path to drive expansion to new use cases and projects and larger deployments within organizations. We often enter an organization through a single developer or a small team for an initial project or use case with an objective to quickly solve a technical challenge or business problem.
The Elastic Stack is engineered to take a user from data to dashboard or inquiry to insight in minutes. It offers an easy getting started experience, featuring streamlined download and deployment, sensible defaults, a simple and intuitive query language that just works, and no need to define a schema up front.
It offers an easy getting-started experience, featuring streamlined download and deployment, sensible defaults, a simple and intuitive query language that just works, and no need to define a schema up front. Administrative tasks such as securing the Elastic Stack are intuitive and integrated into the user experience, as are investigative tasks such as data visualization. • Flexibility.
Everything stored in Elasticsearch is indexed by default, such that users do not need to decide in advance what queries they will want to run. Our architecture optimizes throughput, time-to-data availability and query latency. Elasticsearch can easily index millions of events per second, and newly added data can be available for search nearly instantly. • High scale and availability.
Everything stored in Elasticsearch is indexed by default, so that users do not need to decide in advance what queries they will want to run. Our architecture optimizes throughput, time-to-data availability and query latency.
Because of the rapid success with our products, knowledge of Elastic often spreads within an organization to new teams of developers, architects, IT operations personnel, security personnel, and senior executives.
Because of the rapid success with our products, knowledge of Elastic often spreads within an organization to new teams of developers, architects, IT operations personnel, security personnel, and senior executives. We will continue to invest in helping users and customers be successful with our products. • Extend our product leadership through continued investment in our technology.
Our out-of-the-box solutions for fast time to value, paired with our developer-centric platform that is extensible and customizable, all built around a core data store and single user experience that we control, allow us to innovate fast and differentiate our offerings at every level.
Our out-of-the-box solutions deliver fast time to value for common use cases and, paired with our developer-centric platform which is extensible and customizable, allow us to innovate fast and differentiate our offerings at every level.
Developers can use the Elastic Stack as a foundation for addressing a wide variety of use cases. Our open approach to building the Elastic Stack empowers developers to innovate and utilize it to fit their specific needs. Additionally, our developer community actively engages with us to improve and expand the Elastic Stack.
Our open approach to building the Elastic Stack empowers developers to innovate and utilize it to fit their specific needs. Additionally, our developer community actively engages with us to improve and expand the Elastic Stack. Our Growth Strategies We pursue the following growth strategies: • Increase usage of Elastic Cloud.
Our customers can customize and extend our solutions to fit their needs by leveraging the power of the Elastic Stack and our developer capabilities. Technology Features of the Elastic Stack Elasticsearch is the heart of the Elastic Stack, where users store, search, and analyze data. Key features of Elasticsearch include the following: • Store any type of data.
Technology Features of the Elastic Stack Elasticsearch is the heart of the Elastic Stack, where users store, search, and analyze data. Key features of Elasticsearch include the following: • Store any type of data.
We expect we will continue to incur net losses for the foreseeable future. Our net cash provided by operating activities was $5.7 million and $22.5 million for the years ended April 30, 2022 and 2021, respectively, and cash used in operating activities for the year ended April 30, 2020 was $30.6 million.
Our net cash provided by operating activities was $35.7 million, $5.7 million, and $22.5 million for the years ended April 30, 2023, 2022, and 2021 respectively.
It is also the management and configuration interface for all parts of the Elastic Stack. The Elastic Stack also supports data ingest with a number of supporting products: • Elastic Agent. Elastic Agent is a single, unified way to add monitoring for logs, metrics, and other types of data to each host.
Elastic enables organizations to integrate generative AI and large language models by building key capabilities into its products. The Elastic Stack also supports data ingest with a number of products: • Elastic Agent. Elastic Agent is a single, unified way to add monitoring for logs, metrics, and other types of data to each host.
Our registered office is at Keizersgracht 281, 1016 ED Amsterdam, the Netherlands. 15 T a b l e o f C o ntents Our ordinary shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “ESTC”. Our website address is www.elastic.co.
We are registered with the trade register of the Dutch Chamber of Commerce under number 54655870. Our registered office is at Keizersgracht 281, 1016 ED Amsterdam, the Netherlands. Our ordinary shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “ESTC”. 14 Table of Contents Our website address is www.elastic.co.
We take great pride in our focus on fair pay and the positive results we’ve established. Our external review continues to validate that we have gender-based pay parity between male and female Elasticians globally. Code of Conduct .
We take great pride in our focus on fair pay and the positive results we’ve established. Code of Conduct .
Technology partners represent a deeper collaboration than community contributions and are distinct from distribution-oriented relationships like OEMs and MSP partners. Professional Services We offer consulting and training as part of our offerings.
Technology partners represent a deeper collaboration than community contributions and are distinct from distribution-oriented relationships like OEMs and MSP partners. Services We offer consulting and training as part of our offerings to assist customers in accelerating their success with our software. Our consulting team consists of engineers and architects who bring hands-on experience and deep technical knowledge to a project.
Employees are encouraged to volunteer for these organizations throughout the year using our VTO program which provides our employees with 40 hours of volunteer time each year.
Employees are encouraged to volunteer for these organizations throughout the year using our volunteer time off program which provides our employees with 40 hours of volunteer time each year. Government Regulations Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.
From simple Boolean operators to custom relevance functions, users can articulate exactly what they are looking for and bring their own definition of relevance. The query language also includes a composable aggregation framework that enables users to summarize, slice, and analyze structured or semi-structured datasets across multiple dimensions.
The query language also includes a composable aggregation framework that enables users to summarize, slice, and analyze structured or semi-structured datasets across multiple dimensions.
Elastic natively supports vector search, which enables a wide range of advanced search use cases that improve relevance, including sophisticated search ranking, image search, question answering, and more. Vector search relies on a next generation of machine learning models that can represent many types of content as vectors, including text, images, events, and more.
Vector search relies on a next generation of machine learning models that can represent many types of content as vectors, including text, images, events, and more. ESRE also supports integration with large language models.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe below summary does not contain all of the information that may be important to you, and you should read this summary together with the more detailed description of each risk factor contained in the subheadings below. • If we do not appropriately manage future growth or are unable to improve our systems and processes, our business and results of operations will be adversely affected. • We have a history of losses and may not be able to achieve profitability on a consistent basis or at all or positive cash flows on a consistent basis. • Our ability to grow our business will significantly depend on the expansion and adoption of our Elastic Cloud offerings. • Our future growth, business and results of operations will be harmed if we are not able to keep pace with technological and competitive developments, increase sales of our subscriptions to new and existing customers, renew existing customers’ subscriptions, increase adoption of our cloud-based offerings, respond effectively to evolving markets or offer high quality support services. • Russia’s invasion of Ukraine and resulting international political crisis could have significant negative economic consequences on the businesses of our customers and partners and negatively impact their spending on our offerings. • Any actual or perceived failure by us to comply with regulations or any other obligations relating to privacy, data protection or information security could adversely affect our business. • Due to political uncertainty and military actions associated with Russia’s invasion of Ukraine, we and our third-party vendors and service providers are vulnerable to a heightened risk of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches from nation-state and affiliated actors. 16 T a b l e o f C o ntents • The ongoing COVID-19 pandemic could harm our business and results of operations. • Our operating results may fluctuate from quarter to quarter. • Our decision to no longer offer Elasticsearch and Kibana under an open source license may harm the adoption of Elasticsearch and Kibana. • We could be negatively impacted if the Elastic License or the Server Side Public License under which some of our software is licensed is not enforceable. • Because of the permissive rights accorded to third parties under our open source and source available licenses, there are limited technological barriers to entry into the markets in which we compete. • We may not be able to effectively develop and expand our sales and marketing capabilities. • Because we recognize the vast majority of the revenue from subscriptions, either based on actual consumption or monthly, over the term of the relevant subscription period, downturns or upturns in sales are not immediately reflected in full in our results of operations. • We do not have an adequate history with a consumption-based arrangements for our Elastic Cloud offerings to accurately predict the long-term rate of customer adoption or renewal, or the impact it will have on our near-term or long-term revenue or operating results. • A real or perceived defect, security vulnerability, error, or performance failure in our software could cause us to lose revenue, damage our reputation, and expose us to liability. • Incorrect implementation or use of our software could negatively affect our business, operations, financial results, and growth prospects. • Third parties may offer inadequate or defective implementations of software that we have previously made available under an open source license and our reputation could be harmed. • Breaches of security measures or unauthorized access to, or other processing of, confidential information, including personal data, may result in our software being perceived as not secure, customers reducing or stopping usage of our products, and we may incur significant liabilities. • Interruptions or performance problems, and our reliance on technologies from third parties may adversely affect our business operations and financial results. • If our partners, including cloud providers, systems integrators, channel partners, referral partners, OEM and MSP partners, and technology partners, fail to perform or we are unable to maintain successful relationships with them, our ability to market, sell and distribute our solution will be more limited, and our results of operations could be harmed. • Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and results of operations. • We could incur substantial costs as a result of any claim of infringement, misappropriation or violation of another party’s intellectual property rights, including as a result of the indemnity provisions in various agreements. • Our use of third-party open source software within our products could negatively affect our ability to sell our products and subject us to possible litigation. • One of our marketing strategies is to offer some of our product features for free and to provide free trials to some of our paid features, and we may not be able to realize the benefits of this strategy. • Our international business exposes us to several risks, and if we are not successful in sustaining and expanding our international business, we may incur additional losses and our revenue growth could be harmed. • A portion of our revenue is generated by sales to government entities, and this creates a number of challenges and risks. • Our business is subject to a variety of government and industry regulations, as well as other obligations, including compliance with export control, trade sanctions, anti-bribery, anti-corruption, and anti-money laundering laws. • The market price for our ordinary shares has been and is likely to continue to be volatile. • The concentration of our share ownership with insiders will likely limit your ability to influence corporate matters. • Dutch law and our articles of association include certain anti-takeover provisions, which may impact the value of our ordinary shares. 17 T a b l e o f C o ntents • Claims of U.S. civil liabilities may not be enforceable against us. • We have a substantial amount of indebtedness and may not be able to generate sufficient cash to service all of our indebtedness. • If industry or financial analysts do not publish research or reports about our business, or if they issue inaccurate or unfavorable research regarding our ordinary shares, our share price and trading volume could decline. • We may fail to maintain an effective system of disclosure controls and internal control over financial reporting.
Biggest changeThe summary below does not contain all of the information that may be important to you, and you should read this summary together with the more detailed description of each risk factor in the following discussion. • If we do not appropriately manage our future growth or are unable to improve our systems and processes, our business and results of operations will be adversely affected. • We have a history of losses and may not be able to achieve profitability on a consistent basis or at all or positive operating cash flow on a consistent basis. • Our ability to grow our business will suffer if we do not expand and increase adoption of our Elastic Cloud offerings. • Information technology spending, sales cycles, and other factors affecting the demand for our offerings and our results of operations have been, and may continue to be, negatively impacted by current macroeconomic conditions, including declining rates of economic growth, supply chain disruptions, inflationary pressures, increased interest rates, and other conditions discussed in this report, and by Russia’s invasion of Ukraine and the resulting international political crisis and associated impacts. • Our future growth, business and results of operations will be harmed if we are not able to keep pace with technological and competitive developments, increase sales of our subscriptions to new and existing customers, renew existing customers’ subscriptions, increase adoption of our cloud-based offerings, respond effectively to evolving markets or offer high quality support services. • Any actual or perceived failure by us to comply with regulations or any other obligations relating to privacy, data protection or information security could adversely affect our business. • We and our third-party vendors and service providers are vulnerable to a risk of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches from nation-state and affiliated actors. • Our operating results may fluctuate from quarter to quarter. 15 Table of Contents • Actions that we are taking to reduce costs and rebalance investments under a plan we announced in November 2022 may not result in anticipated savings or operational efficiencies, could result in total costs and expenses that are greater than expected and could disrupt our business. • Our decision to no longer offer Elasticsearch and Kibana under an open source license may harm the adoption of those products. • We could be negatively impacted if the Elastic License or the Server Side Public License under which some of our software is licensed is not enforceable. • Limited technological barriers to entry into the markets in which we compete may facilitate entry by other enterprises into our markets to compete with us. • We may not be able to effectively develop and expand our sales, marketing and customer support capabilities. • Because we recognize the vast majority of our revenue from subscriptions, either based on actual consumption, monthly, or ratably, over the term of the relevant subscription period, downturns or upturns in sales are not immediately reflected in full in our results of operations. • Our limited history with consumption-based arrangements for our Elastic Cloud offerings is not adequate to enable us to predict accurately the long-term rate of customer adoption or renewal, or the impact those arrangements will have on our near-term or long-term revenue or operating results. • A real or perceived defect, security vulnerability, error, or performance failure in our software could cause us to lose revenue, damage our reputation, and expose us to liability. • Incorrect implementation or use of our software could negatively affect our business, operations, financial results, and growth prospects. • Our reputation could be harmed if third parties offer inadequate or defective implementations of software that we have previously made available under an open source license. • Interruptions or performance problems, and our reliance on technologies from third parties, may adversely affect our business operations and financial results. • If our partners, including cloud providers, systems integrators, channel partners, referral partners, OEM and MSP partners, and technology partners, fail to perform or we are unable to maintain successful relationships with them, our ability to market, sell and distribute our solution will be more limited. • Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and results of operations. • We could incur substantial costs as a result of any claim of infringement, misappropriation or violation of another party’s intellectual property rights, including as a result of the indemnity provisions in various agreements. • Our use of third-party open source software within our products could negatively affect our ability to sell our products and subject us to possible litigation. • We may not be able to realize the benefits of our marketing strategies to offer some of our product features for free and to provide free trials to some of our paid features. • Our international business exposes us to a variety of risks, and if we are not successful in sustaining and expanding our international business, we may incur additional losses and our revenue growth could be harmed. • We are subject to risks associated with our receipt of revenue from sales to government entities. • Our business is subject to a variety of government and industry regulations, as well as other obligations, including compliance with export control, trade sanctions, anti-bribery, anti-corruption, and anti-money laundering laws. • An investment in our company is subject to tax risks based on our status as a non-U.S. corporation. • The market price for our ordinary shares has been and is likely to continue to be volatile. • The concentration of our share ownership with insiders will likely limit your ability to influence corporate matters. • Dutch law and our articles of association include anti-takeover provisions, which may impact the value of our ordinary shares. • Claims of U.S. civil liabilities may not be enforceable against us. 16 Table of Contents • We have a substantial amount of indebtedness and may not be able to generate sufficient cash to service all of our indebtedness. • If industry or financial analysts do not publish research or reports about our business, or if they issue inaccurate or unfavorable research regarding our ordinary shares, our share price and trading volume could decline. • We may fail to maintain an effective system of disclosure controls and internal control over financial reporting.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, financial condition, operating results and prospects could be materially and adversely affected.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that could affect us. If any of the following risks occur, our business, financial condition, operating results and prospects could be materially and adversely affected.
We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to enhance our offerings, broaden our customer base and pursue larger transactions, expand our sales and marketing activities, expand our operations, hire additional employees, and continue to develop our technology.
We anticipate that our operating expenses will continue to increase substantially in the foreseeable future as we continue to enhance our offerings, broaden our customer base and pursue larger transactions, expand our sales and marketing activities, expand our operations, hire additional employees, and continue to develop our technology.
If we are not able to develop, market or deliver cloud-based offerings that satisfy customer requirements technically or commercially, or if our investments in cloud-based offerings do not yield the expected return, or if we are unable to decrease the cost of providing our cloud-based offerings, our business, competitive position, financial condition and results of operations may be harmed.
If we are not able to develop, market, or deliver cloud-based offerings that satisfy customer requirements technically or commercially, if our investments in cloud-based offerings do not yield the expected return, or if we are unable to decrease the cost of providing our cloud-based offerings, our business, competitive position, financial condition and results of operations may be harmed.
We have in the past experienced delays in releasing new products, deployment options and product enhancements and may experience similar delays in the future. As a result, in the past, some of our customers deferred purchasing our products until the next upgrade was released.
We have experienced delays in releasing new products, deployment options, and product enhancements and may experience similar delays in the future. As a result, in the past, some of our customers deferred purchasing our products until the next upgrade was released.
We also expect that there will continue to be changes in interpretations of existing or new laws and regulations, proposed laws, and other obligations, which could impair our or our customers’ ability to process personal data, which could decrease demand for our offerings, impact our marketing efforts, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.
We also expect that there will continue to be changes in interpretations of existing or new laws and regulations, proposed laws, and other obligations, which could impair our or our customers’ ability to process personal data, decrease demand for our offerings, impact our marketing efforts, increase our costs, and impair our ability to maintain and grow our customer base and increase our revenue.
If we do not effectively develop and expand our sales and marketing capabilities, including expanding and training and compensating our sales force, we may be unable to add new customers, increase sales to existing customers or expand the value of our existing customers’ subscriptions and our business will be adversely affected.
If we do not effectively develop and expand our sales and marketing capabilities, including expanding, training, and compensating our sales force, we may be unable to add new customers, increase sales to existing customers or expand the value of our existing customers’ subscriptions and our business will be adversely affected.
Because our customers rely on our software to manage a wide range of operations, the incorrect implementation or use of our software, or our customers’ failure to update our software or our failure to train customers on how to use our software productively, may result in customer dissatisfaction, negative publicity and may adversely affect our reputation and brand.
Because our customers rely on our software to manage a wide range of operations, the incorrect implementation or use of our software, our customers’ failure to update our software, or our failure to train customers on how to use our software productively, may result in customer dissatisfaction or negative publicity and may adversely affect our reputation and brand.
We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover claims related to a security incident or breach, or that the insurer will not deny coverage as to any future claim.
We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover claims related to a security breach or incident, or that the insurer will not deny coverage as to any future claim.
In particular, stock prices of companies with significant operating losses have recently declined significantly, and in many instances more significantly than companies with operating profits.
In particular, stock prices of companies with significant operating losses have recently declined significantly, and in many instances more significantly than stock prices of companies with operating profits.
Additionally, the success of new product introductions depends on a number of factors including, but not limited to, timely and successful product development, market acceptance, our ability to manage the risks associated with new product releases, the availability of software components for new products, the effective management of development and other spending in connection with anticipated demand for new products, the availability of newly developed products, and the risk that new products may have bugs, errors, or other defects or deficiencies in the early stages of introduction.
The success of new product introductions depends on a number of factors including, but not limited to, timely and successful product development, market acceptance, our ability to manage the risks associated with new product releases, the availability of software components for new products, the effective management of development and other spending in connection with anticipated demand for new products, the availability of newly developed products, and the risk that new products may have bugs, errors, or other defects or deficiencies in the early stages of introduction.
As we continue to grow rapidly, a large percentage of our sales force will have relatively little experience working with us, our subscriptions and our business model. Additionally, we may need to evolve our sales compensation plans to drive the growth of our Elastic Cloud offerings with consumption-based arrangements. Such changes might have adverse consequences if not designed effectively.
As we continue to grow rapidly, a large percentage of our sales force will have relatively little experience working with us, our subscriptions, and our business model. Additionally, we may need to evolve our sales compensation plans to drive the growth of our Elastic Cloud offerings with consumption-based arrangements. Such changes may have adverse consequences if not designed effectively.
We and these third parties may have direct or indirect interactions with officials and employees of government agencies, or state-owned or affiliated entities, and we may be held liable for the corrupt or other illegal activities of our channel partners and third-party representatives, as well as our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
We and these third parties may have direct or indirect interactions with officials and employees of government agencies, or state-owned or affiliated entities, and we may be held liable for the corrupt or other illegal activities of our channel partners and third-party representatives, as well as our employees, representatives, contractors, partners, and agents, even if we do not authorize such activities.
Our success depends to a significant degree on our ability to protect our proprietary technology, methodologies, know-how and brand. We rely on a combination of trademarks, copyrights, patents, contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property rights may be inadequate.
Our success depends to a significant degree on our ability to protect our proprietary technology, methodologies, know-how and brand. We rely on a combination of trademarks, copyrights, patents, contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. The steps we take to protect our intellectual property rights may be inadequate.
If our partners do not effectively market and sell our offerings, choose to use greater efforts to market and sell their own offerings or those of our competitors, fail to provide adequate technical integration with their own offerings, fail to meet the needs of our customers, or fail to deliver professional services to our customers, our ability to grow our business and sell our offerings may be harmed.
If our partners do not effectively market and sell our offerings, choose to use greater efforts to market and sell their own offerings or those of our competitors, fail to provide adequate technical integration with their own offerings, fail to meet the needs of our customers, or fail to deliver services to our customers, our ability to grow our business and sell our offerings may be harmed.
If we do complete future acquisitions, we may not ultimately strengthen our competitive position or achieve our goals and business strategy, we may be subject to claims or liabilities assumed from an acquired company, product, or technology, and any acquisitions we complete could be viewed negatively by our customers, investors, and securities analysts.
If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals and business strategy, we may be subject to claims or liabilities assumed from an acquired company, product, or technology, and any acquisitions we complete could be viewed negatively by our customers, investors, and securities analysts.
The occurrence of any of these risks could harm our business, results of operations, and financial condition. Catastrophic events, or man-made problems such as terrorism, may disrupt our business. A significant natural disaster, such as an earthquake, fire, flood, or significant power outage could have an adverse impact on our business, results of operations, and financial condition.
The occurrence of any of these risks could harm our business, results of operations, and financial condition. Catastrophic events, or man-made events such as terrorism, may disrupt our business. A significant natural disaster, such as an earthquake, fire, flood, or significant power outage, could have an adverse impact on our business, results of operations, and financial condition.
The laws of some countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. As we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information will likely increase.
The laws of some countries are not as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. As we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information will likely increase.
We have in the past and may in the future need to issue corrective releases of our software to fix these defects, errors or performance failures, which could require us to allocate significant research and development and customer support resources to address these problems.
We have issued in the past, and may need to issue in the future, corrective releases of our software to fix these defects, errors or performance failures, which could require us to allocate significant research and development and customer support resources to address these problems.
These provisions include: • the staggered three-year terms of the members of our board of directors, as a result of which only approximately one-third of the members of our board of directors may be subject to election in any one year; • a provision that the members of our board of directors may only be removed by a General Meeting by a two-thirds majority of votes cast representing at least 50% of our issued share capital if such removal is not proposed by our board of directors; • a provision that the members of our board of directors may only be appointed upon binding nomination of the board of directors, which can only be overruled with a two-thirds majority of votes cast representing at least 50% of our issued share capital; • the inclusion of a class of preference shares in our authorized share capital that may be issued by our board of directors, in such a manner as to dilute the interest of shareholders, including any potential acquirer or activist shareholder, in order to delay or discourage any potential unsolicited offer or shareholder activism; • requirements that certain matters, including an amendment of our articles of association, may only be brought to our shareholders for a vote upon a proposal by our board of directors; and • minimum shareholding thresholds, based on nominal value, for shareholders to call General Meetings of our shareholders or to add items to the agenda for those meetings.
These provisions include: • the staggered three-year terms of the members of our board of directors, as a result of which only approximately one-third of the members of our board of directors may be subject to election in any one year; • a provision that the members of our board of directors may only be removed by a General Meeting by a two-thirds majority of votes cast representing at least 50% of our issued share capital if such removal is not proposed by our board of directors; • a provision that the members of our board of directors may only be appointed upon binding nomination of the board of directors, which can only be overruled with a two-thirds majority of votes cast representing at least 50% of our issued share capital; 41 Table of Contents • the inclusion of a class of preference shares in our authorized share capital that may be issued by our board of directors, in such a manner as to dilute the interest of shareholders, including any potential acquirer or activist shareholder, in order to delay or discourage any potential unsolicited offer or shareholder activism; • requirements that certain matters, including an amendment of our articles of association, may only be brought to our shareholders for a vote upon a proposal by our board of directors; and • minimum shareholding thresholds, based on nominal value, for shareholders to call General Meetings of our shareholders or to add items to the agenda for those meetings.
Gross profit could also be adversely impacted by a shift in the mix of our subscriptions from self-managed to our cloud offering, for which we incur hosting costs, as well as any increase in our mix of professional services relative to subscriptions.
Gross profit could also be adversely impacted by a shift in the mix of our subscriptions from self-managed to our cloud offering, for which we incur hosting costs, as well as any increase in our mix of services relative to subscriptions.
There have been and may continue to be significant supply chain attacks generally, and our third-party vendors and service providers may be targeted or impacted by such attacks, and they face other risks of security breaches and incidents.
There have been and may continue to be significant supply chain attacks generally, and our third-party vendors and service providers may be targeted or impacted by such attacks, and face other risks of security breaches and incidents.
Any disruption in the business of our partners or customers that affects sales in a given fiscal quarter could have a significant adverse impact on our quarterly results for that and future quarters.
Any disruption in the business of our partners or customers that affects sales in a fiscal quarter could have a significant adverse impact on our quarterly results for that and future quarters.
For instance, our continued focus and investment in ElasticON and similar investments in our brand, user engagement, and customer engagement may not generate the desired customer awareness or a sufficient financial return.
For instance, our continued focus and investment in our ElasticON user conferences and similar investments in our brand, user engagement, and customer engagement may not generate the desired customer awareness or a sufficient financial return.
The term “Qualifying Interest” means a direct or indirectly held interest either by an entity individually or jointly if an entity is part of a collaborating group ( samenwerkende groep ) that enables such entity or such collaborating group to exercise a definite influence over another entities' decisions, such as our company or an entity holding ordinary shares as the case may be, and allows it to determine the other entities' activities.
The term “Qualifying Interest” means a direct or indirectly held interest either by an entity individually or jointly if an entity is part of a collaborating group ( samenwerkende groep ) that enables such entity or such collaborating group to exercise a definite influence over another entity’s decisions, such as our company or an entity holding ordinary shares, as the case may be, and allows it to determine the other entity’s activities.
Due to the differing revenue recognition policies applicable to our subscriptions and professional services, shifts in our business mix from quarter to quarter could produce substantial variation in revenue recognized.
Due to the differing revenue recognition policies applicable to our subscriptions and services, shifts in our business mix from quarter to quarter could produce substantial variation in revenue recognized.
We may be at heightened risk of such retaliatory attacks due to our decision to no longer sell our products to companies in Russia or Belarus until further notice and to support Ukraine by, among other things, providing free access to Elastic Cloud solutions, including our platinum security capabilities, for organizations in Ukraine.
We may be at a heightened risk of such retaliatory attacks due to our decision to no longer sell our products to companies in Russia or Belarus until further notice, and to support Ukraine by, among other things, providing free access to Elastic Cloud solutions, including our platinum security capabilities, to organizations in Ukraine.
We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate do not improve, or worsen from present levels, our business, results of operations and financial condition could be adversely affected.
We cannot predict the timing, strength or duration of the current economic slowdown and instability or any recovery, generally or within our industry. If the economic conditions of the general economy or markets in which we operate do not improve, or worsen from present levels, our business, results of operations and financial condition could be adversely affected.
Our ability to restructure or refinance our debt will depend on, among other things, the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
Our ability to restructure or refinance our debt will depend on, among other factors, the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
We have in the past experienced bugs, errors, or other defects or deficiencies in new products and product updates and may have similar experiences in the future.
We have experienced bugs, errors, or other defects or deficiencies in new products and product updates and may have similar experiences in the future.
The rate at which our existing customers purchase additional subscriptions and expand the value of existing subscriptions depends on a number of factors, including customers’ level of satisfaction with our offerings, the nature and size of the deployments, the desire to address additional use cases, and the perceived need for additional features, as well as general economic conditions.
The rate at which our existing customers purchase additional subscriptions and expand the value of existing subscriptions depends on a number of factors, including customers’ level of satisfaction with our offerings, the nature and size of the deployments, the desire to address additional use cases, the perceived need for additional features, and general economic conditions.
Trends in our business, financial condition, results of operations and cash flows are impacted by seasonality in our sales cycle which generally reflects a trend to greater sales in our second and fourth quarters and lower sales in our first and third quarters, though we believe this trend has been somewhat masked by our overall growth.
Trends in our business, financial condition, results of operations and cash flows are impacted by seasonality in our sales cycle, which generally reflects a trend toward greater sales in our second and fourth quarters and lower sales in our first and third quarters, though we believe this trend has been somewhat masked by our overall growth.
In February 2021, with the release of version 7.11 of the Elastic Stack, we changed the source code of Elasticsearch and Kibana that had historically been licensed under Apache 2.0, to be dual licensed under Elastic License 2.0 and the Server Side Public License Version 1.0 (“SSPL”), at the user’s election.
In February 2021, with the release of version 7.11 of the Elastic Stack, we changed the source code of Elasticsearch and Kibana which had historically been licensed under Apache 2.0, to be dual licensed under Elastic License 2.0 and the Server Side Public License Version 1.0 (“SSPL”), at the user’s election.
Accordingly, public companies are required to disclose in their annual reports, filed in the Netherlands, whether they comply with the suggested governance provisions of the DCGC. If they do not comply with those provisions (e.g., because of a conflicting requirement), the company is required to give the reasons for such noncompliance.
Accordingly, public companies are required to disclose in their annual reports, filed in the Netherlands, whether they comply with the suggested governance provisions of the DCGC. If they do not comply with those provisions (e.g., because of a conflicting requirement), companies are required to give the reasons for such noncompliance.
Our success depends upon our ability to enhance existing products, expand the use cases of our products, anticipate and respond to changing customer needs, requirements and preferences, and develop and introduce in a timely manner new offerings that keep pace with technological and competitive developments.
Our success depends upon our ability to continue to innovate, enhance existing products, expand the use cases of our products, anticipate and respond to changing customer needs, requirements, and preferences, and develop and introduce in a timely manner new offerings that keep pace with technological and competitive developments.
The relevant taxing authorities may determine that the manner in which we operate our business does not achieve the intended tax consequences. If such a disagreement was to occur, and our position was not sustained, we could be required to pay additional taxes, and interest and penalties.
The relevant taxing authorities may determine that the manner in which we operate our business does not achieve the intended tax consequences. If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, and interest and penalties.
We have also filed registration statements on Form S-8 under the Securities Act registering all ordinary shares that we may issue under our equity compensation plans, which may in turn be sold and may adversely affect the market price for our ordinary shares.
We have also filed, and may file in the future, registration statements on Form S-8 under the Securities Act registering all ordinary shares that we may issue under our equity compensation plans, which may in turn be sold and may adversely affect the market price for our ordinary shares.
If one or more of the analysts who cover our company ceases to cover us, or fails to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our stock price or trading volume to decline and could adversely affect our business.
If one or more of the analysts who cover our company ceases to cover us, or fails to publish reports on us regularly, our profile in the financial markets could decrease, which in turn could cause our stock price or trading volume to decline and could adversely affect our business.
We do not have an adequate history with our consumption-based arrangements for our Elastic Cloud offerings to accurately predict the long-term rate of customer adoption or renewal, or the impact it will have on our near-term or long-term revenue or operating results.
We do not have an adequate history with our consumption-based arrangements for our Elastic Cloud offerings to predict accurately the long-term rate of customer adoption or renewal, or the impact those arrangements will have on our near-term or long-term revenue or operating results.
In addition, some developers and the companies for whom they work may be hesitant to download or upgrade to new versions of Elasticsearch or Kibana under the Elastic License or SSPL because of uncertainty around how these licenses may be interpreted and enforced.
In addition, some developers and the companies for whom they work may be hesitant to download or upgrade to new versions of Elasticsearch or Kibana under the Elastic License or SSPL because of uncertainty regarding how these licenses may be interpreted and enforced.
We believe that our ability to compete depends upon many factors both within and beyond our control, including the following: • product capabilities, including speed, scale, and relevance, with which to power search experiences; • an extensible product “stack” that enables developers to build a wide variety of solutions; • powerful and flexible technology that can manage a broad variety and large volume of data; • ease of deployment and ease of use; • ability to address a variety of evolving customer needs and use cases; • strength and execution of sales and marketing strategies; • flexible deployment model across public or private clouds, hybrid environments, or multi-cloud environments; • productized solutions engineered to be rapidly adopted to address specific applications; • mindshare with developers and IT and security executives; • adoption of products by many types of users and decision makers (developers, architects, DevOps personnel, IT professionals, security analysts, and departmental and organizational leaders); • enterprise-grade technology that is secure and reliable; • size of customer base and level of user adoption; • quality of training, consulting, and customer support; • brand awareness and reputation; and • low total cost of ownership.
We believe that our ability to compete depends upon many factors both within and beyond our control, including the following: • our product capabilities, including speed, scale, and relevance, with which to power search experiences; • our offerings of an extensible product “stack” that enables developers to build a wide variety of solutions; 18 Table of Contents • powerful and flexible technology that can manage a broad variety and large volume of data; • ease of deployment and ease of use; • ability to address a variety of evolving customer needs and use cases; • strength and execution of our sales and marketing strategies; • flexible deployment model across public or private clouds, hybrid environments, or multi-cloud environments; • development of solutions engineered to be rapidly adopted to address specific applications; • mindshare for our products with developers and IT and security executives; • adoption of our products by many types of users and decision makers (including developers, architects, DevOps personnel, IT professionals, security analysts, and departmental and organizational leaders); • enterprise-grade technology that is secure and reliable; • size of our customer base and level of user adoption; • quality of our training, consulting, and customer support; • brand awareness and reputation; and • low total cost of ownership.
For example, Amazon has launched an open source project called OpenSearch based on a forked version of the Elastic Stack, which is licensed under Apache 2.0, and rebranded their existing Elasticsearch Service to OpenSearch Service.
For example, Amazon has launched an open source project called OpenSearch based on a forked version of the Elastic Stack, which is licensed under Apache 2.0, and rebranded their existing Elasticsearch Service as OpenSearch Service.
As a result, unauthorized access to or use of our software or this data could result in the loss, compromise, corruption or destruction of our customers’ confidential information and lead to claims, demands, litigation, regulatory investigations, indemnity obligations, and other liabilities.
As a result, unauthorized access to or use of our software or such data could result in the loss, compromise, corruption, or destruction of our customers’ confidential information and lead to claims, demands, litigation, regulatory investigations, indemnity obligations, and other liabilities.
Furthermore, if we make downward revisions of our previously announced guidance or other expectations, if we withdraw our previously announced guidance or other expectations, or if our publicly announced guidance or other expectations of future operating results fail to meet expectations of securities analysts, investors or other interested parties, the price of our ordinary shares would decline.
Furthermore, if we make downward revisions of our previously announced guidance or other expectations, if we withdraw our previously announced guidance or other expectations, or if our publicly announced guidance or other expectations of future operating results fail to meet expectations of securities analysts, investors or other interested parties, the price of our ordinary shares could decline.
On February 2, 2022, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses to support personal data transfers out of the United Kingdom (“UK SCCs”), which went into effect on March 21, 2022.
On February 2, 2022, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses to support personal data transfers out of the United Kingdom (“UK SCC”), which went into effect on March 21, 2022.
It is possible for competitors to develop their own software, including software based on our products, potentially reducing the demand for our products and putting pricing pressure on our subscriptions. For example, Amazon offers some of the features that we had previously made available under an open source license as part of its Amazon Web Services offering.
It is possible for competitors to develop their own software, including software based on our products, potentially reducing the demand for our products and putting pricing pressure on our subscriptions. For example, Amazon offers some of the features that we had previously made available under an open source license as part of its AWS offering.
In addition, laws, regulations, government guidance, and industry standards and practices in the United States and elsewhere are rapidly evolving to combat these threats. We may face increased compliance burdens regarding such requirements with regulators and customers regarding our products and services and also incur additional costs for oversight and monitoring of our own supply chain.
Laws, regulations, government guidance, and industry standards and practices in the United States and elsewhere are rapidly evolving to combat cyber threats. We may face increased compliance burdens regarding such requirements with regulators and customers regarding our products and services and also incur additional costs for oversight and monitoring of our own supply chain.
Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), and similar applicable laws and regulations in other jurisdictions. If we are unable to address these difficulties and challenges or other problems encountered in connection with our international operations and expansion, we might incur unanticipated liabilities or we might otherwise suffer harm to our business generally.
Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), and similar applicable laws and regulations in other jurisdictions. 35 Table of Contents If we are unable to address these difficulties and challenges or other problems encountered in connection with our international operations and expansion, we might incur unanticipated liabilities or we might otherwise suffer harm to our business generally.
As such, Amazon competes with us for potential customers, and while Amazon cannot provide our proprietary software, Amazon’s offerings may reduce the demand for our offerings and the pricing of Amazon’s offerings may limit our ability to adjust the price of our products.
As such, Amazon competes with us for potential customers, and while Amazon cannot provide our proprietary software, Amazon’s offerings may reduce the demand for our offerings and the pricing of Amazon’s offerings may limit our ability to adjust the prices of our products.
Failure by us to effectively provide training and implementation services to our customers could result in lost opportunities for follow-on sales to these customers and decrease subscriptions by new customers, and adversely affect our business and growth prospects.
Failure by us to provide adequate training and implementation services to our customers could result in lost opportunities for follow-on sales to these customers and decrease subscriptions by new customers, and adversely affect our business and growth prospects.
Some open source projects have known vulnerabilities and architectural instabilities and as provided on an “as-is” basis which, if not properly addressed, could negatively affect the performance of our product.
Some open source projects have known vulnerabilities and architectural instabilities and are provided on an “as-is” basis which, if not properly addressed, could negatively affect the performance of our product.
Further, the determination of our worldwide provision for or benefit from, as applicable, income taxes and other tax liabilities requires significant judgment by management, and there are transactions where the ultimate tax determination is uncertain.
Further, the determination of our worldwide provision for, or benefit from, income taxes and other tax liabilities requires significant judgment by management, and there are transactions where the ultimate tax determination is uncertain.
Furthermore, U.S. export control laws and economic sanctions in many cases prohibit the export of software and services to certain U.S. embargoed or sanctioned countries, governments and persons, as well as for prohibited end-uses.
Furthermore, export control laws and economic sanctions in many cases prohibit the export of software and services to certain embargoed or sanctioned countries, governments and persons, as well as for prohibited end-uses.
Subject to compliance with applicable rules and regulations, we may issue ordinary shares or securities convertible into ordinary shares from time to time in connection with a financing, acquisition, investment, our share incentive plans or otherwise.
Subject to compliance with applicable rules and regulations, we may issue ordinary shares or securities convertible into ordinary shares from time to time in connection with a financing, acquisition, investment, our equity incentive plans or otherwise.
As such, based on currently applicable rates, the overall effective rate of withholding of Regular Dividend Withholding Tax and Alternative Withholding Tax will not exceed the highest corporate income tax rate in effect at the time of the distribution (currently 25.8%).
Based on currently applicable rates, the overall effective rate of withholding of Regular Dividend Withholding Tax and Alternative Withholding Tax will not exceed the highest corporate income tax rate in effect at the time of the distribution (currently 25.8%).
To assist us in complying with these requirements we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses. Despite significant investment, our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
To assist us in complying with these requirements, we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses. 47 Table of Contents Despite significant investment, our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
A non-U.S. corporation will generally be considered a passive foreign investment company (“PFIC”), for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets that produce or are held for the production of passive income (“the PFIC asset test”).
A non-U.S. corporation will generally be considered a passive foreign investment company (“PFIC”), for U.S. federal income tax purposes, in any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets that produce or are held for the production of passive income (“the PFIC asset test”).
These defects, security vulnerabilities, errors or performance failures could cause damage to our reputation, loss of customers or revenue, product returns, order cancellations, service terminations, or lack of market acceptance of our software.
These defects, security vulnerabilities, errors or performance failures could cause damage to our reputation, loss of customers or revenue, product returns, order cancelations, service terminations, or lack of market acceptance of our software.
We are subject to the Dutch Corporate Governance Code but do not comply with all the suggested governance provisions of the Dutch Corporate Governance Code. This may affect your rights as a shareholder. As a Dutch company, we are subject to the Dutch Corporate Governance Code (“DCGC”).
We are subject to the Dutch Corporate Governance Code but do not comply with all the suggested governance provisions of the Dutch Corporate Governance Code, which may affect your rights as a shareholder. As a Dutch company, we are subject to the Dutch Corporate Governance Code (“DCGC”).
For example, we may need to provide additional training and development to our sales personnel in relation to selling consumption-based arrangements and expanding customer usage of our offerings over time. New hires also require significant training and may take significant time before they achieve full productivity.
For example, we may need to provide additional training and development to our sales personnel in relation to understanding and selling consumption-based arrangements and expanding customer usage of our offerings over time. New hires also require extensive training which may take significant time before they achieve full productivity.
Any integration process may require significant time and resources, which may disrupt our ongoing business and divert management’s attention, and we may not be able to manage the integration process successfully.
Any integration process may require significant time and resources, which may disrupt our ongoing business and divert management’s attention from operations, and we may not be able to manage the integration process successfully.
In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business.
In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, our involvement could subject us to substantial costs, divert resources and the attention of management from our operations and adversely affect our business.
We have not paid a dividend on our ordinary shares in the past and we do not intend to pay any dividends to holders of our ordinary shares in the foreseeable future. See “We do not intend to pay dividends in the foreseeable future.
We have not paid a dividend on our ordinary shares in the past and we do not intend to pay any dividends to holders of our ordinary shares in the foreseeable future.
If a court held that the Elastic License or SSPL or certain aspects of these licenses are unenforceable, others may be able to use our software to compete with us in the marketplace in a manner not subject to the restrictions set forth in the Elastic License or SSPL.
If a court were to hold that the Elastic License or SSPL or certain aspects of these licenses are unenforceable, others may be able to use our software to compete with us in the marketplace in a manner not subject to the restrictions set forth in the Elastic License or SSPL.
Moreover, many of our existing employees may be able to receive significant proceeds from sales of our ordinary shares in the public markets, which could lead to employee attrition and disparities of wealth among our employees that adversely affects relations among employees and our culture in general.
Moreover, many of our existing employees may be able to receive significant proceeds from sales of our ordinary shares in the public markets, which could lead to employee attrition and disparities of wealth among our employees that might adversely affect relations among employees and our culture in general.
Competition continues to increase in the market segments in which we operate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse offerings may reduce the price of offerings that compete with ours or may bundle them with other offerings.
Competition continues to increase in the market segments in which we operate, and we expect competition to continue to increase, thereby leading to increased pricing pressures. Larger competitors with more diverse offerings may reduce the price of offerings that compete with ours or may bundle them with other offerings.
We believe that we must offer a family of cloud-based products to address the market segment that prefers a cloud-based solution to a self-managed solution and that there will be increasing demand for cloud-based offerings of our products. For the years ended April 30, 2022, 2021 and 2020, Elastic Cloud contributed 35%, 27% and 22% of our total revenue, respectively.
We believe that we must offer a family of cloud-based products to address the market segment that prefers a cloud-based solution to a self-managed solution and that there will be increasing demand for cloud-based offerings of our products. For the years ended April 30, 2023, 2022, and 2021, Elastic Cloud contributed 40%, 35%, and 27% of our total revenue, respectively.
If we were to fail to comply with such U.S. export controls laws and regulations, U.S. economic sanctions, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges.
If we were to fail to comply with such U.S. and foreign export control laws and regulations, trade and economic sanctions, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges.
We and our customers may also experience increased costs associated with security measures and increased risk of suffering cyberattacks, including ransomware attacks.
We and our customers may also experience increased costs associated with security measures and increased risk of suffering cybersecurity attacks, including ransomware attacks.
These offerings are not supported by us and come without any of our proprietary features. We do not control how these third parties may use or offer our open source technology.
These offerings are not supported by us and come without any of our proprietary features, whether free or paid. We do not control how these third parties may use or offer our open source technology.
Moreover, we cannot assure that we have not incorporated third-party open source software in our software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures.
Moreover, we may not have incorporated third-party open source software in our software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures.
In addition, there can be no assurance that a Dutch court would impose civil liability on us, the members of our board of directors, our officers or certain experts named herein in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in the Netherlands against us or such members, officers or experts, respectively.
In addition, there can be no assurance that a Dutch court would impose civil liability on us, the members of our board of directors, our officers or certain experts named in our filings with the SEC in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in the Netherlands against us or such members, officers or experts.
You should carefully consider the following risks, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes thereto, before making a decision to invest in our ordinary shares. The risks and uncertainties described below are not the only ones we face.
You should carefully consider the following risks, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes thereto, before deciding whether to invest in our ordinary shares. The risks and uncertainties described below are not the only ones we face.
We rely significantly on revenue from subscriptions and, because we recognize the vast majority of the revenue from subscriptions, either based on actual consumption or monthly, over the term of the relevant subscription period, downturns or upturns in sales are not immediately reflected in full in our results of operations.
Because we recognize the vast majority of the revenue from subscriptions, either based on actual consumption, monthly, or ratably, over the term of the relevant subscription period, downturns or upturns in sales are not immediately reflected in full in our results of operations.
Our international operations and expansion expose us to several risks. As of April 30, 2022, we had customers located in over 125 countries, and our strategy is to continue to expand internationally. In addition, as a result of our strategy of leveraging a distributed workforce, as of April 30, 2022, we had employees located in over 40 countries.
Our international operations and expansion expose us to a variety of risks. As of April 30, 2023, we had customers located in over 125 countries, and our strategy is to continue to expand internationally. In addition, as a result of our strategy of leveraging a distributed workforce, as of April 30, 2023, we had employees located in over 40 countries.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation has in the past and may in the future be necessary to enforce our intellectual property rights and to protect our trade secrets.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation has previously been, and may in the future be, necessary to enforce our intellectual property rights and to protect our trade secrets.
While we have policies and procedures to address compliance with such laws, we cannot assure that the channel partners, third-party representatives, our employees, contractors or agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA, U.K.
While we have policies and procedures to address compliance with such laws, our channel partners, third-party representatives, employees, contractors or agents may take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA, U.K.
We must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems, our relationships with various partners and other third parties, and our ability to manage headcount and processes in an efficient manner to manage our growth to date and any future growth effectively.
We must continue to improve our information technology and financial infrastructure, our operating and administrative systems, our relationships with various partners and other third parties, and our ability to manage headcount and processes in an efficient manner to manage our growth effectively.
Monitoring and ensuring compliance with these complex U.S. export control laws is particularly challenging because our offerings are widely distributed throughout the world, and information available on the users of these offerings is, in some cases, limited.
Monitoring and ensuring compliance with these complex U.S. export control laws involves uncertainties because our offerings are widely distributed throughout the world, and information available on the users of these offerings is, in some cases, limited.
If these holders of our ordinary shares, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our ordinary shares.
If these holders of our ordinary shares, by exercising their registration rights, sell a large number of shares, such sales could adversely affect the market price for our ordinary shares.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe intend to procure additional space in the future as we continue to add employees and expand geographically. We believe that our current facilities are adequate to meet our current needs and that, as we grow, suitable additional space will be available to either expand existing hubs or open new hubs in new locations.
Biggest changeWe believe that our current facilities are adequate to meet our current needs and that, if needed in the future, suitable additional space will be available either to expand existing offices or hubs or open offices or hubs in new locations.
Item 2. Properties. As a distributed company, we employ a distributed workforce with offices and employee hubs around the world. The largest of these hubs is located in Mountain View, California, where we lease approximately 40,000 square feet. All offices are leased and we do not own any real property.
Item 2. Properties. As a distributed company, we employ a distributed workforce with offices and employee hubs around the world. All offices are leased and we do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+1 added−0 removed2 unchanged
Biggest changeThe 49 T a b l e o f C o ntents results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Biggest changeThe results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, such litigation could have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures. Not applicable. 48 Table of Contents PART II
Item 3. Legal Proceedings. The information called for by this Item is incorporated herein by reference to Part II, Item 8. “Financial Statements and Supplementary Data,” Note 8, “Commitments and Contingencies” included in this Annual Report on Form 10-K.
Item 3. Legal Proceedings The information required by this Item is incorporated herein by reference to Part II, Item 8. “Financial Statements and Supplementary Data,” Note 8, “Commitments and Contingencies — Legal Matters” included in this Annual Report on Form 10-K.
In addition, third parties may from time to time assert claims against us in the form of letters and other communications. We are not currently a party to any legal proceedings that, if determined adversely to us, would, in our opinion, have a material adverse effect on our business, results of operations, financial condition or cash flows.
We are not currently a party to any legal proceedings that, if determined adversely to us, would individually or taken together, in our opinion, have a material adverse effect on our business, results of operations, financial condition or cash flows.
Added
In addition, third parties from time to time may assert claims against us in the form of letters and other communications.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph below compares the cumulative total shareholder return on our ordinary shares with the cumulative total return on the S&P 500 Index and the S&P 500 Information Technology Index. The graph assumes $100 was invested at the market close on October 5, 2018, which was our initial trading day, in our ordinary shares.
Biggest changeThe graph assumes $100 was invested at the market close on October 5, 2018, which was our initial trading day, in our ordinary shares. Data for the S&P 500 Index and the S&P 500 Information Technology Index assume reinvestment of dividends.
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Elastic N.V. under the Securities Act or the Exchange Act.
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing by Elastic N.V. under the Securities Act or the Exchange Act.
Our offering price of our ordinary shares in our IPO, which had a closing stock price of $70.00 on October 5, 2018, was $36.00 per share. 51 T a b l e o f C o ntents The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our ordinary shares.
The offering price of our ordinary shares in our initial public offering, which had a closing stock price of $70.00 on October 5, 2018, was $36.00 per share. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our ordinary shares.
Dividend Policy We have never declared or paid any dividends on our ordinary shares, and we do not anticipate declaring or paying dividends in the foreseeable future. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Dividend Policy We have never declared or paid any dividends on our ordinary shares, and we do not anticipate declaring or paying dividends in the foreseeable future. Stock Performance Graph The graph below compares the cumulative total shareholder return on our ordinary shares with the cumulative total return on the S&P 500 Index and the S&P 500 Information Technology Index.
Holders of Record As of June 16, 2022 there were 75 shareholders of record of our ordinary shares. Because many of our ordinary shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
Holders of Record As of May 31, 2023 there were 66 shareholders of record of our ordinary shares. The number of such holders does not include beneficial owners of our ordinary shares that are held of record by brokers and other institutions on behalf of such beneficial owners.
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Stock Performance Graph This performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act.
Removed
Data for the S&P 500 Index and the S&P 500 Information Technology Index assume reinvestment of dividends.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

86 edited+23 added−24 removed53 unchanged
Biggest changeYear Ended April 30, 2022 2021 2020 (in thousands) Revenue License - self-managed $ 76,964 $ 67,994 $ 53,536 Subscription - self-managed and SaaS 721,806 499,345 338,634 Total subscription revenue 798,770 567,339 392,170 Professional services 63,604 41,150 35,450 Total revenue 862,374 608,489 427,620 Cost of revenue (1)(2)(3) Cost of license - self-managed 1,548 1,386 948 Cost of subscription - self-managed and SaaS 176,656 121,127 84,819 Total cost of revenue - subscription 178,204 122,513 85,767 Cost of professional services 53,990 38,541 36,923 Total cost of revenue 232,194 161,054 122,690 Gross profit 630,180 447,435 304,930 Operating expenses (1)(2)(3)(4) Research and development 273,761 199,203 165,370 Sales and marketing 406,658 273,877 219,040 General and administrative 123,441 103,833 91,625 Total operating expenses 803,860 576,913 476,035 Operating loss (1)(2)(3)(4) (173,680) (129,478) (171,105) Other income (expense), net Interest expense (20,716) (185) — Other income (expense), net (3,393) 7,949 1,963 Loss before income taxes (197,789) (121,714) (169,142) Provision for (benefit from) income taxes 6,059 7,720 (1,968) Net loss $ (203,848) $ (129,434) $ (167,174) (1) Includes stock-based compensation expense as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Cost of revenue Cost of subscription - self managed and SaaS $ 8,368 $ 7,105 $ 4,147 Cost of professional services 6,463 4,824 2,980 Research and development 59,911 35,267 23,621 Sales and marketing 45,798 31,581 19,334 General and administrative 20,654 14,903 9,925 Total stock-based compensation expense $ 141,194 $ 93,680 $ 60,007 58 T a b l e o f C o ntents (2) Includes employer payroll taxes on employee stock transactions as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Cost of Revenue Cost of subscription - self managed and SaaS $ 681 $ 674 $ 349 Cost of professional services 712 661 178 Research and development 3,316 3,670 2,179 Sales and marketing 4,287 5,399 3,237 General and administrative 965 3,972 1,550 Total employer payroll tax on stock transactions $ 9,961 $ 14,376 $ 7,493 (3) Includes amortization of acquired intangible assets as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Cost of Revenue Cost of license - self-managed $ 1,548 $ 1,386 $ 948 Cost of subscription - self-managed and SaaS 8,955 7,051 5,820 Sales and marketing 5,280 5,730 3,300 Total amortization of acquired intangibles $ 15,783 $ 14,167 $ 10,068 (4) Includes acquisition-related expenses as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Research and development $ 6,104 $ — $ 34 Sales and marketing — — 522 General and administrative 1,528 — 17,418 Total acquisition-related expenses $ 7,632 $ — $ 17,974 59 T a b l e o f C o ntents The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue: Year Ended April 30, 2022 2021 2020 Revenue License - self-managed 9 % 11 % 13 % Subscription - self-managed and SaaS 84 % 82 % 79 % Total subscription revenue 93 % 93 % 92 % Professional services 7 % 7 % 8 % Total revenue 100 % 100 % 100 % Cost of revenue (1)(2)(3) Cost of license - self-managed 0 % 0 % 0 % Cost of subscription - self-managed and SaaS 21 % 20 % 20 % Total cost of revenue - subscription 21 % 20 % 20 % Cost of professional services 6 % 6 % 9 % Total cost of revenue 27 % 26 % 29 % Gross profit 73 % 74 % 71 % Operating expenses (1)(2)(3)(4) Research and development 32 % 33 % 39 % Sales and marketing 47 % 45 % 51 % General and administrative 14 % 17 % 21 % Total operating expenses 93 % 95 % 111 % Operating loss (1)(2)(3)(4) (20) % (21) % (40) % Other income (expense), net Interest expense (3) % 0 % 0 % Other income (expense), net 0 % 1 % 0 % Loss before income taxes (23) % (20) % (40) % Provision for (benefit from) income taxes 1 % 1 % (1) % Net loss (24) % (21) % (39) % (1) Includes stock-based compensation expense as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Cost of revenue Cost of subscription - self managed and SaaS 1 % 1 % 1 % Cost of professional services 1 % 1 % — % Research and development 7 % 6 % 6 % Sales and marketing 5 % 5 % 5 % General and administrative 2 % 2 % 2 % Total stock-based compensation expense 16 % 15 % 14 % 60 T a b l e o f C o ntents (2) Includes employer payroll taxes on employee stock transactions as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Cost of Revenue Cost of subscription - self managed and SaaS — % — % — % Cost of professional services — % — % — % Research and development — % — % 1 % Sales and marketing 1 % 1 % 1 % General and administrative — % 1 % — % Total employer payroll tax on stock transactions 1 % 2 % 2 % (3) Includes amortization of acquired intangible assets as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Cost of Revenue Cost of license - self-managed — % — % — % Cost of subscription - self-managed and SaaS 1 % 1 % 1 % Sales and marketing 1 % 1 % 1 % Total amortization of acquired intangibles 2 % 2 % 2 % (4) Includes acquisition-related expenses as follows: Year Ended April 30, 2022 2021 2020 (in thousands) Research and development 1 % — % — % Sales and marketing — % — % — % General and administrative — % — % 4 % Total acquisition-related expenses 1 % — % 4 % Comparison of Fiscal Years Ended April 30, 2022 and 2021 Revenue Year Ended April 30, Change 2022 2021 $ % (in thousands) Revenue License - self-managed $ 76,964 $ 67,994 $ 8,970 13 % Subscription - self-managed and SaaS 721,806 499,345 222,461 45 % Total subscription revenue 798,770 567,339 231,431 41 % Professional services 63,604 41,150 22,454 55 % Total revenue $ 862,374 $ 608,489 $ 253,885 42 % Total subscription revenue increased by $231.4 million, or 41%, for the year ended April 30, 2022 compared to the prior year.
Biggest changeYear Ended April 30, 2023 2022 2021 (in thousands) Revenue Subscription $ 984,762 $ 798,770 $ 567,339 Services 84,227 63,604 41,150 Total revenue 1,068,989 862,374 608,489 Cost of revenue (1)(2)(3) Subscription 219,306 178,204 122,513 Services 77,320 53,990 38,541 Total cost of revenue 296,626 232,194 161,054 Gross profit 772,363 630,180 447,435 Operating expenses (1)(2)(3)(4) Research and development 313,454 273,761 199,203 Sales and marketing 503,537 406,658 273,877 General and administrative 143,247 123,441 103,833 Restructuring and other related charges 31,297 — — Total operating expenses 991,535 803,860 576,913 Operating loss (1)(2)(3)(4) (219,172) (173,680) (129,478) Other income (expense), net Interest expense (25,159) (20,716) (185) Other income (expense), net 27,454 (3,393) 7,949 Loss before income taxes (216,877) (197,789) (121,714) Provision for income taxes 19,284 6,059 7,720 Net loss $ (236,161) $ (203,848) $ (129,434) (1) Includes stock-based compensation expense as follows: Year Ended April 30, 2023 2022 2021 (in thousands) Cost of revenue Subscription $ 8,308 $ 8,368 $ 7,105 Services 9,435 6,463 4,824 Research and development 80,170 59,911 35,267 Sales and marketing 68,943 45,798 31,581 General and administrative 37,183 20,654 14,903 Total stock-based compensation expense $ 204,039 $ 141,194 $ 93,680 55 Table of Contents (2) Includes employer payroll taxes on employee stock transactions as follows: Year Ended April 30, 2023 2022 2021 (in thousands) Cost of revenue Subscription $ 422 $ 681 $ 674 Services 423 712 661 Research and development 2,458 3,316 3,670 Sales and marketing 2,420 4,287 5,399 General and administrative 1,410 965 3,972 Total employer payroll tax on stock transactions $ 7,133 $ 9,961 $ 14,376 (3) Includes amortization of acquired intangible assets as follows: Year Ended April 30, 2023 2022 2021 (in thousands) Cost of revenue Subscription $ 11,781 $ 10,503 $ 8,437 Sales and marketing 4,887 5,280 5,730 Total amortization of acquired intangibles $ 16,668 $ 15,783 $ 14,167 (4) Includes acquisition-related expenses as follows: Year Ended April 30, 2023 2022 2021 (in thousands) Research and development $ 5,875 $ 6,104 $ — General and administrative 103 1,528 — Total acquisition-related expenses $ 5,978 $ 7,632 $ — 56 Table of Contents The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue: Year Ended April 30, 2023 2022 2021 Revenue Subscription 92 % 93 % 93 % Services 8 % 7 % 7 % Total revenue 100 % 100 % 100 % Cost of revenue (1)(2)(3) Subscription 21 % 21 % 20 % Services 7 % 6 % 6 % Total cost of revenue 28 % 27 % 26 % Gross profit 72 % 73 % 74 % Operating expenses (1)(2)(3)(4) Research and development 29 % 32 % 33 % Sales and marketing 47 % 47 % 45 % General and administrative 14 % 14 % 17 % Restructuring and other related charges 3 % — % — % Total operating expenses 93 % 93 % 95 % Operating loss (1)(2)(3)(4) (21) % (20) % (21) % Other income (expense), net Interest expense (2) % (3) % — % Other income (expense), net 2 % — % 1 % Loss before income taxes (21) % (23) % (20) % Provision for income taxes 1 % 1 % 1 % Net loss (22) % (24) % (21) % (1) Includes stock-based compensation expense as follows: Year Ended April 30, 2023 2022 2021 Cost of revenue Subscription 1 % 1 % 1 % Services 1 % 1 % 1 % Research and development 8 % 7 % 6 % Sales and marketing 6 % 5 % 5 % General and administrative 3 % 2 % 2 % Total stock-based compensation expense 19 % 16 % 15 % 57 Table of Contents (2) Includes employer payroll taxes on employee stock transactions as follows: Year Ended April 30, 2023 2022 2021 Cost of revenue Subscription — % — % — % Services — % — % — % Research and development 1 % — % — % Sales and marketing — % 1 % 1 % General and administrative — % — % 1 % Total employer payroll tax on stock transactions 1 % 1 % 2 % (3) Includes amortization of acquired intangible assets as follows: Year Ended April 30, 2023 2022 2021 Cost of revenue Subscription 1 % 1 % 1 % Sales and marketing 1 % 1 % 1 % Total amortization of acquired intangibles 2 % 2 % 2 % (4) Includes acquisition-related expenses as follows: Year Ended April 30, 2023 2022 2021 Research and development 1 % 1 % — % Total acquisition-related expenses 1 % 1 % — % Comparison of Fiscal Years Ended April 30, 2023 and 2022 Revenue Year Ended April 30, Change 2023 2022 $ % (in thousands) Revenue Subscription $ 984,762 $ 798,770 $ 185,992 23 % Services 84,227 63,604 20,623 32 % Total revenue $ 1,068,989 $ 862,374 $ 206,615 24 % Subscription revenue increased by $186.0 million, or 23%, for the year ended April 30, 2023 compared to the prior year.
Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the timing of our acquisition of new customers and our renewals with existing customers, the average sales price of our subscriptions and professional services, the amount of our revenue represented by hosted services, the mix of subscriptions sold, the mix of revenue between subscriptions and professional services, the mix of professional services between consulting and training, transaction volume growth and support case volume growth.
Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the timing of our acquisition of new customers and our renewals with existing customers, the average sales price of our subscriptions and services, the amount of our revenue represented by hosted services, the mix of subscriptions sold, the mix of revenue between subscriptions and services, the mix of services between consulting and training, transaction volume growth and support case volume growth.
The net cash outflow from changes in operating assets and liabilities was the result of an increase of $62.2 million in accounts receivable due to higher billings and timing of collections from our customers, an increase in deferred contract acquisition costs of $96.8 million as our sales commissions increased due to increased business volume, a decrease of $8.9 million in operating lease liabilities, and an increase of $2.6 million in prepaid and other assets.
The net cash outflow from changes in operating assets and liabilities was the result of an increase of $62.2 million in accounts receivable due to higher billings and timing of collections from our customers, an increase in deferred contract acquisition costs of $96.8 million as our sales commissions increased due to increased business volume, a decrease of $8.9 million in operating lease liabilities, and an increase of $2.6 million in prepaid expenses and other assets.
Our results of operations may fluctuate as we make these investments. Developing new features for the Elastic Stack. The Elastic Stack is applied to various use cases by customers, including through the solutions we offer. Our revenue is derived primarily from subscriptions of Enterprise Search, Observability and Security built into the Elastic Stack.
Our results of operations may fluctuate as we make these investments. Developing new features for the Elastic Stack. The Elastic Stack is applied to various use cases by customers, including through the solutions we offer. Our revenue is derived primarily from subscriptions of Search, Observability and Security built into the Elastic Stack.
We offer three search-powered solutions – Enterprise Search, Observability, and Security – that are built into the platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications running smoothly, and protecting against cyber threats.
We offer three search-powered solutions – Search, Observability, and Security – that are built into the platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications running smoothly, and protecting against cyber threats.
Net Cash Used in Investing Activities Net cash used in investing activities of $127.3 million during the year ended April 30, 2022 was primarily due to cash used in acquisitions of $119.9 million, capitalization of $4.9 million in internal-use software costs, and $2.5 million of capital expenditures during the period.
Net cash used in investing activities of $127.3 million during the year ended April 30, 2022 was primarily due to cash used in acquisitions of $119.9 million, capitalization of $4.9 million in internal-use software costs, and $2.5 million of capital expenditures during the year.
Contractual Obligations and Commitments Our principal commitments consist of our purchase obligations under non-cancellable agreements for cloud hosting, subscription software, and sales and marketing, future non-cancelable minimum rental payments under operating leases for our offices, and interest payments due on our Senior Notes.
Contractual Obligations and Commitments Our principal commitments consist of our purchase obligations under non-cancelable agreements for cloud hosting, subscription software, and sales and marketing, future non-cancelable minimum rental payments under operating leases for our offices, and interest payments due on our Senior Notes.
We believe in the importance of an open software development model, and we develop the majority of our software in public repositories as open code under a proprietary license. Unlike some companies, we do not build an enterprise version that is separate from our free distribution. We offer a single code base across both our self-managed software and Elastic-hosted services.
We believe in the importance of an open software development model, and we develop the majority of our software in public repositories as open code under a proprietary license. Unlike some companies, we do not build an enterprise version that is separate from our free distribution. We maintain a single code base across both our self-managed software and Elastic-hosted services.
It is a distributed, real-time search and analytics engine and data store for all types of data including textual, numerical, geospatial, structured, and unstructured. We make our platform available as a hosted, managed service. Customers can also deploy our platform across hybrid clouds, public or private clouds, and multi-cloud environments.
It is a distributed, real-time search and analytics engine and data store for all types of data, including textual, numerical, geospatial, structured, and unstructured. We make our platform available as a hosted, managed service across major cloud providers. Customers can also deploy our platform across hybrid clouds, public or private clouds, and multi-cloud environments.
We capitalize sales commissions and associated payroll taxes paid to internal sales personnel that are related to the acquisition of customer contracts. Sales commissions costs are amortized over the expected benefit period. General and administrative. General and administrative expense mainly consists of personnel costs for our management, finance, legal, human resources, and other administrative employees.
We capitalize sales commissions and associated payroll taxes paid to internal sales personnel that are related to the acquisition of customer contracts. Sales commissions costs are amortized over the expected benefit period. General and administrative. General and administrative expense primarily consists of personnel costs for our management, finance, legal, human resources, and other administrative employees.
These letters of credit renew annually and expire on various dates through 2023. Our contractual commitment amounts are associated with agreements that are enforceable and legally binding and do not include obligations under contracts that we can cancel without a significant penalty.
These letters of credit renew annually and expire on various dates through 2025. Our contractual commitment amounts are associated with agreements that are enforceable and legally binding and do not include obligations under contracts that we can cancel without a significant penalty.
Sales and marketing expense mainly consists of personnel costs, commissions, allocated overhead costs and costs related to marketing programs and user events. Marketing programs consist of advertising, events, brand-building and customer acquisition and retention activities. We expect our sales and marketing expense to increase in absolute dollars as we expand our salesforce and increase our investments in marketing resources.
Sales and marketing expense primarily consists of personnel costs, commissions, allocated overhead costs and costs related to marketing programs and user events. Marketing programs consist of advertising, events, brand-building and customer acquisition and retention activities. We expect our sales and marketing expense to increase in absolute dollars as we expand our salesforce and increase our investments in marketing resources.
This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the years ended April 30, 2022 and 2021 and year-to-year comparisons between the years ended April 30, 2022 and 2021.
This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the years ended April 30, 2023 and 2022 and year-to-year comparisons between the years ended April 30, 2023 and 2022.
We expect our gross margin to fluctuate over time depending on the factors described above. We expect our revenue from Elastic Cloud to continue to increase as a percentage of total revenue, which we expect will adversely impact our gross margin as a result of the associated hosting costs. Operating Expenses Research and development.
We expect our gross margin to fluctuate over time depending on the factors described above. We expect our revenue from Elastic Cloud to continue to increase as a percentage of total revenue, which we expect will adversely impact our gross margin as a result of the associated hosting costs. 53 Table of Contents Operating Expenses Research and development.
A customer’s annualized spend is measured as their ACV, or in the case of customers charged on usage-based arrangements, by annualizing the usage for that month.
A customer’s annualized spend is measured as its ACV, or in the case of customers charged on usage-based arrangements, by annualizing the usage for that month.
We drive high-touch engagement with qualified prospects and customers to drive further awareness, adoption, and expansion of our products with paid subscriptions. Expansion includes increasing the number of developers and practitioners using our products, increasing the utilization of our products for a particular use case, and applying our products to new use cases.
We drive high-touch engagement with qualified prospects and customers to drive further awareness, adoption, and expansion of our products with paid subscriptions. Expansion includes increasing the number of developers and practitioners using our products, increasing the utilization of our products for a particular use case, and utilizing our products to address new use cases.
With a distributed team spanning over 40 countries, we are able to recruit, hire, and retain high-quality, experienced technical and sales personnel and operate at a rapid pace to drive product releases, fix bugs, and create and market new products. We had 2,978 employees as of April 30, 2022.
With a distributed team spanning over 40 countries, we are able to recruit, hire, and retain high-quality, experienced technical and sales personnel and operate at a rapid pace to drive product releases, fix bugs, and create and market new products. We had 2,886 employees as of April 30, 2023.
For further information see Note 13 “Income taxes” of our accompanying Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For further information see Note 13, “Income taxes,” of our accompanying Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Cost of professional services revenue consists primarily of personnel costs directly associated with delivery of training, implementation and other professional services, costs of third-party contractors, facility rental charges and allocated overhead costs. We expect our cost of professional services revenue to increase in absolute dollars as we invest in our business and as professional services revenue increases.
Cost of services revenue consists primarily of personnel costs directly associated with delivery of training, implementation and other services, costs of third-party contractors, facility rental charges and allocated overhead costs. We expect our cost of services to increase in absolute dollars as we invest in our business and as services revenue increases. Gross profit and gross margin.
The number of customers who represented greater than $100,000 in annual contract value (“ACV”) was over 960, over 730, and over 610 as of April 30, 2022, 2021 and 2020, respectively. The ACV of a customer’s commitments is calculated based on the terms of that customer’s subscriptions, and represents the total committed annual subscription amount as of the measurement date.
The number of customers who represented greater than $100,000 in annual contract value (“ACV”) was over 1,160, over 960, and over 730 as of April 30, 2023, 2022, and 2021 respectively. The ACV of a customer’s commitments is calculated based on the terms of that customer’s subscriptions, and represents the total committed annual subscription amount as of the measurement date.
See Note 8 “Commitments and contingencies” and Note 9 “Leases” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional discussion of our cloud hosting obligations and future non-cancelable minimum rental payments, respectively.
See Note 8, “Commitments and contingencies,” and Note 9, “Leases,” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional discussion of our cloud hosting obligations and future non-cancelable minimum rental payments, respectively.
Subscriptions accounted for 93%, 93% and 92% of total revenue for the years ended April 30, 2022, 2021, and 2020, respectively. We also generate revenue from consulting and training services. We make it easy for users to begin using our products in order to drive rapid adoption.
Subscriptions accounted for 92%, 93%, and 93% of total revenue for the years ended April 30, 2023, 2022, and 2021, respectively. We also generate revenue from consulting and training services. 50 Table of Contents We make it easy for users to begin using our products in order to drive rapid adoption.
Net Cash Provided by Financing Activities Net cash provided by financing activities of $602.1 million during the year ended April 30, 2022 was due to the proceeds of $575.0 million from the issuance of our Senior Notes and $36.4 million of proceeds from stock option exercises, partially offset by $9.3 million payments of debt issuance costs.
Net cash provided by financing activities of $602.1 million during the year ended April 30, 2022 was due to the proceeds of $575.0 million from the issuance of long-term debt and $36.4 million of proceeds from stock option exercises, partially offset by $9.3 million payments of debt issuance costs.
The majority of our new customers use Elastic Cloud. We define a customer as an entity that generated revenue in the quarter ending on the measurement date from an annual or month-to-month subscription. Affiliated entities are typically counted as a single customer. Many of these customers start with limited initial spending, but can significantly grow their spending.
We define a customer as an entity that generated revenue in the quarter ending on the measurement date from an annual or month-to-month subscription. Affiliated entities are typically counted as a single customer. Many of these customers start with limited initial spending, but can significantly grow their spending.
Our gross margin for professional services may fluctuate, decline or be negative in the near-term as we seek to expand our professional services business.
Our gross margin for services may fluctuate or decline in the near-term as we seek to expand our services business.
For the year ended April 30, 2022, revenue from outside the United States accounted for 44% of our total revenue. For our non-U.S. operations, the majority of our revenue and expenses are denominated in currencies such as the Euro and British pound.
For the year ended April 30, 2023, revenue from outside the United States accounted for 41% of our total revenue. For our non-U.S. operations, the majority of our revenue and expenses are denominated in currencies such as the Euro and British Pound Sterling.
No customer represented more than 10% of our total revenue for the years ended April 30, 2022, 2021, and 2020. We have not been profitable to date. For the years ended April 30, 2022, 2021 and 2020, we incurred net losses of $203.8 million, $129.4 million and $167.2 million, respectively.
No customer accounted for more than 10% of our total revenue for the years ended April 30, 2023, 2022, and 2021. We have not been profitable to date. For the years ended April 30, 2023, 2022 and 2021, we incurred net losses of $236.2 million, $203.8 million and $129.4 million, respectively.
A discussion of our financial condition and results of operations for the year ended April 30, 2020 and year-to-year comparisons between years ended April 30, 2021 and 2020 that is not included in this Annual Report on Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended April 30, 2021, filed with the SEC on June 25, 2021, and is incorporated by reference herein.
A discussion of our financial condition and results of operations for the year ended April 30, 2021 and year-to-year comparisons between the years ended April 30, 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended April 30, 2022, filed with the SEC on June 21, 2022.
We believe that our existing cash and cash equivalents will be sufficient to fund our operating and capital needs for at least the next 12 months, despite the uncertainty in the changing market and economic conditions related to COVID-19.
We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operating and capital needs for at least the next 12 months, despite the uncertainty in the changing market and macroeconomic conditions.
Revenue from subscriptions that require access to the cloud or that are hosted and managed by us is recognized ratably over the subscription term or on a usage basis for consumption-based arrangements; both are presented within Subscription – self-managed and SaaS in our consolidated statements of operations. Professional services.
Revenue from subscriptions that require access to the cloud or that are hosted and managed by us is recognized ratably over the subscription term or on a usage basis for consumption-based arrangements; both are presented within Subscription revenue in our consolidated statements of operations. Services. Services is composed of consulting services as well as public and private training.
Overview Elastic is a data analytics company built on the power of search. Our platform, which is available as both a hosted, managed service across public clouds as well as self-managed software, allows our customers to almost instantly find insights from large amounts of data and take action.
Overview Elastic is a data analytics company built on the power of search. Our platform, which is available as both a hosted, managed service across public clouds as well as self-managed software, allows our customers to find insights and drive AI and machine learning use cases from large amounts of data.
Gross profit and gross margin. Gross profit represents revenue less cost of revenue.
Gross profit represents revenue less cost of revenue.
Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. We base our estimates, assumptions 65 T a b l e o f C o ntents and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances.
Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances.
Personnel and related costs increased by $64.9 million as a result of growth in headcount. In addition, cloud infrastructure costs related to our research and development activities increased by $3.1 million, consulting costs increased by $3.1 million, and travel costs increased by $2.6 million.
Personnel and related costs increased by $29.7 million as a result of growth in headcount. In addition, travel costs increased by $4.6 million, cloud infrastructure costs related to our research and development activities increased by $3.0 million, and consulting costs increased by $1.5 million.
We have experienced significant growth, with revenue increasing to $862.4 million for the year ended April 30, 2022 from $608.5 million for the year ended April 30, 2021 and $427.6 million for the year ended April 30, 2020, representing year-over-year growth of 42% for each of the years ended April 30, 2022 and 2021.
We have experienced significant growth, with revenue increasing to $1.1 billion for the year ended April 30, 2023 from $862.4 million for the year ended April 30, 2022 and $608.5 million for the year ended April 30, 2021, representing year-over-year growth of 24% for the year ended April 30, 2023 and 42% for the year ended April 30, 2022.
This increase was primarily due to an increase of $110.2 million in personnel related costs and a $4.1 million increase in software and equipment charges due to growth in headcount. In addition, marketing expenses increased by $9.3 million and travel costs increased by $7.4 million.
This increase was primarily due to an increase of $83.6 million in personnel and related costs and a $2.8 million increase in software and equipment charges due to growth in headcount. In addition, travel expenses increased by $6.2 million and marketing expense increased by $4.8 million.
The increase in personnel and related costs includes an increase of $60.1 million in salaries and related taxes, an increase of $23.8 million in commission expense, an increase of $14.2 million in stock-based compensation expense and an increase of $7.4 million in employee benefits expense.
The increase in personnel and related costs included an increase of $37.9 million in salaries and related taxes, an increase of $23.1 million in stock-based compensation, an increase of $10.7 million in commission expense, and an increase of $8.2 million in employee benefits expense.
As the impact of the COVID-19 pandemic continues to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the consolidated financial statements as new events occur and additional information becomes known.
Due to current macroeconomic developments and conditions, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the consolidated financial statements as new events occur and additional information becomes known.
We then divide the Current 55 T a b l e o f C o ntents Period Value by the Prior Period Value to arrive at an expansion rate. The Net Expansion Rate at the end of any period is the weighted average of the expansion rates as of the end of each of the trailing twelve months.
We then divide the Current Period Value by the Prior Period Value to arrive at an expansion rate. The Net Expansion Rate at the end of any period is the weighted average of the expansion rates as of the end of each of the trailing twelve months.
See Note 7 “Senior Notes” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Additionally, as of April 30, 2022, we had $2.5 million in letters of credit outstanding in favor of certain landlords for office space.
See Note 7, “Senior Notes,” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information about the Senior Notes. 62 Table of Contents As of April 30, 2023, we had $2.3 million in letters of credit outstanding in favor of certain landlords for office space.
Net cash provided by financing activities of $77.3 million during the year ended April 30, 2021 was due to proceeds from option exercises during the period.
Net Cash Provided by Financing Activities Net cash provided by financing activities of $17.5 million during the year ended April 30, 2023 was due to the proceeds from stock option exercises.
Our effective tax rate is affected by recurring items, such as tax rates in jurisdictions outside the Netherlands and the relative amounts of income we earn in those jurisdictions, and non-deductible stock-based compensation. 57 T a b l e o f C o ntents Results of Operations The following tables set forth our results of operations for the periods presented in dollars and as a percentage of our total revenue.
Our effective tax rate is affected by recurring items, such as tax rates in jurisdictions outside the Netherlands and the relative amounts of income we earn in those jurisdictions, non-deductible stock-based compensation, as well as one-time tax benefits or charges. 54 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented in dollars and as a percentage of our total revenue.
This increase was primarily due to an increase of $10.3 million in personnel related costs and a $1.1 million increase in software and equipment charges due to headcount growth. In addition, legal and professional fees increased by $7.0 million, consulting expense increased by $1.2 million and travel costs increased by $1.1 million.
This increase was primarily due to an increase of $27.7 million in personnel and related costs and a $0.8 million increase in software and equipment charges due to headcount growth. In addition, travel costs increased by $0.7 million.
We believe that a useful indication of how our customer relationships have expanded over time is through our Net Expansion Rate, which is based upon trends in the rate at which customers increase their spend with us.
We focus some of our direct sales efforts on encouraging these types of expansion within our customer base. 52 Table of Contents We believe that a useful indication of how our customer relationships have expanded over time is through our Net Expansion Rate, which is based upon trends in the rate at which customers increase their spend with us.
Operating Expenses Research and development Year Ended April 30, Change 2022 2021 $ % (in thousands) Research and development $ 273,761 $ 199,203 $ 74,558 37 % Research and development expense increased by $74.6 million, or 37%, for the year ended April 30, 2022 compared to the prior year as we continued to invest in the development of new and existing offerings.
Operating Expenses Research and development Year Ended April 30, Change 2023 2022 $ % (in thousands) Research and development $ 313,454 $ 273,761 $ 39,693 14 % Research and development expense increased by $39.7 million, or 14%, for the year ended April 30, 2023 compared to the prior year as we continued to invest in the development of new and existing offerings.
At the core of the Elastic Stack is Elasticsearch - a highly scalable document store and search engine, and the only data store for all of our solutions and use cases. The Elastic Stack can be used by developers to power a variety of use cases.
At the core of the Elastic Stack is Elasticsearch - a highly scalable document store and search engine, and the unified data store for all of our solutions and use cases.
Net cash provided by operating activities during the year ended April 30, 2021 was $22.5 million, which resulted from a net loss of $129.4 million adjusted for non-cash charges of $150.2 million and net cash inflow of $1.8 million from changes in operating assets and liabilities.
Net cash provided by operating activities during the year ended April 30, 2022 was $5.7 million, which resulted from a net loss of $203.8 million adjusted for non-cash charges of $230.2 million and net cash outflow of $20.6 million from changes in operating assets and liabilities.
This increase was primarily due to an increase of $7.6 million in personnel and related costs, including increases of $5.2 million in salaries and related taxes and $1.6 million in stock-based compensation driven by an increase in headcount in our professional services organization. In addition, subcontractor costs increased by $6.4 million and travel costs increased by $0.6 million.
This increase was primarily due to an increase of $15.5 million in personnel and related costs, including increases of $10.5 million in salaries and related taxes, $3.0 million in stock-based compensation, and $1.7 million in employee benefits expense driven by an increase in headcount in our services organization.
General and administrative Year Ended April 30, Change 2022 2021 $ % (in thousands) General and administrative $ 123,441 $ 103,833 $ 19,608 19 % General and administrative expense increased by $19.6 million, or 19%, for the year ended April 30, 2022 compared to the prior year.
General and administrative Year Ended April 30, Change 2023 2022 $ % (in thousands) General and administrative $ 143,247 $ 123,441 $ 19,806 16 % General and administrative expense increased by $19.8 million, or 16%, for the year ended April 30, 2023 compared to the prior year.
Customers who reduced their annual subscription dollar value (contraction) or did not renew their annual subscription (attrition) would adversely affect the Net Expansion Rate. Our Net Expansion Rate was slightly below 130% for the year ended April 30, 2022.
Customers who reduced their annual subscription dollar value (contraction) or did not renew their annual subscription (attrition) would adversely affect the Net Expansion Rate. Our Net Expansion Rate was approximately 117% as of April 30, 2023.
Customers often expand the use of our software within their organizations by increasing the number of developers using our products, increasing the utilization of our products for a particular use case, and expanding use of our products to additional use cases. We focus some of our direct sales efforts on encouraging these types of expansion within our customer base.
Customers often expand the use of our software within their organizations by increasing the number of developers using our products, increasing the utilization of our products for a particular use case, and expanding use of our products to additional use cases.
The following table summarizes our cash flows for the periods presented: Year Ended April 30, 2022 2021 2020 (in thousands) Net cash provided by (used in) operating activities $ 5,672 $ 22,545 $ (30,564) Net cash used in investing activities $ (127,271) $ (1,518) $ (29,187) Net cash provided by financing activities $ 602,127 $ 77,258 $ 58,539 Net Cash Provided By Operating Activities Net cash provided by operating activities during the year ended April 30, 2022 was $5.7 million, which resulted from a net loss of $203.8 million adjusted for non-cash charges of $230.2 million and net cash outflow of $20.6 million from changes in operating assets and liabilities.
The following table summarizes our cash flows for the periods presented: Year Ended April 30, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 35,662 $ 5,672 $ 22,545 Net cash used in investing activities $ (272,952) $ (127,271) $ (1,518) Net cash provided by financing activities $ 17,471 $ 602,127 $ 77,258 61 Table of Contents Net Cash Provided By Operating Activities Net cash provided by operating activities during the year ended April 30, 2023 was $35.7 million, which resulted from adjustments for non-cash charges of $307.2 million, mostly offset by a net loss of $236.2 million and net cash outflow of $35.4 million from changes in operating assets and liabilities.
The increase in personnel and related costs includes an increase of $5.8 million in stock-based compensation expense, an increase of $4.3 million in salaries and related taxes, an increase of $1.1 million in employee benefits expense which were partially offset by a decrease of $1.4 million in recruiting costs.
These increases were partially offset by a $9.2 million decrease in legal and professional fees and a $0.8 million decrease in consulting expense. The increase in personnel and related costs includes an increase of $16.5 million in stock-based compensation expense, an increase of $9.1 million in salaries and related taxes, and an increase of $2.1 million in employee benefits expense.
As of April 30, 2022, we had purchase commitments of $415.7 million related to cloud hosting services, future minimum lease payment commitments of $29.8 million, and purchase commitments of $36.2 million related to other contracts.
As of April 30, 2023, we had purchase commitments of $542.8 million related to cloud hosting services, future minimum lease payment commitments of $28.4 million, and purchase commitments of $43.8 million related to other contracts.
Cost of professional services revenue increased by $15.4 million, or 40%, for the year ended April 30, 2022 compared to the prior year.
Cost of services revenue increased by $23.3 million, or 43%, for the year ended April 30, 2023 compared to the prior year.
We conduct 53 T a b l e o f C o ntents low-touch campaigns to keep users and customers engaged once they have begun using Elastic Cloud or downloaded our software. As of April 30, 2022, we had over 18,600 customers compared to over 15,000 customers and over 11,300 customers as of April 30, 2021 and 2020, respectively.
We conduct low-touch campaigns to keep users and customers engaged once they have begun using Elastic Cloud or have downloaded our software. As of April 30, 2023, we had approximately 20,200 customers compared to over 18,600 customers and over 15,000 customers as of April 30, 2022 and 2021, respectively. The majority of our new customers use Elastic Cloud.
Provision for (Benefit from) Income Taxes Provision for (benefit from) income taxes consists primarily of income taxes related to the Netherlands, U.S. federal, state and foreign jurisdictions in which we conduct business.
Primarily consists of interest income, gains and losses from transactions denominated in a currency other than the functional currency, and miscellaneous other non-operating gains and losses. Provision for Income Taxes Provision for income taxes consists primarily of income taxes related to the Netherlands, U.S. federal and state, and foreign jurisdictions in which we conduct business.
Third-party expenses consist of cloud hosting costs and other expenses directly associated with our customer support. We expect our cost of subscription – self-managed and SaaS to increase in absolute dollars as our subscription revenue increases. Professional services.
Personnel and related costs, or personnel costs, comprise cash compensation, benefits and stock-based compensation to employees, costs of third-party contractors, and allocated overhead costs. Third-party expenses consist of cloud hosting costs and other expenses directly associated with our customer support. We expect our cost of subscription to increase in absolute dollars as our subscription revenue increases. Services.
We expect our research and development expense to increase in absolute dollars for the foreseeable future as we continue to develop new technology and invest further in our existing products. 56 T a b l e o f C o ntents Sales and marketing.
Research and development expense primarily consists of personnel costs and allocated overhead costs. We expect our research and development expense to increase in absolute dollars for the foreseeable future as we continue to develop new technology and invest further in our existing products. Sales and marketing.
For the years ended April 30, 2022, 2021 and 2020, Elastic Cloud contributed 35%, 27% and 22% of our total revenue, respectively. We believe that offering Elastic Cloud is important for achieving our long-term growth potential, and we expect Elastic Cloud’s contribution to our subscription revenue to increase over time.
We believe that offering Elastic Cloud is important for achieving our long-term growth potential, and we expect Elastic Cloud’s contribution to our subscription revenue to continue to increase over time.
These estimates can include, but are not limited to, future expected cash flows from acquired customers and acquired technology from a market participant perspective, costs to rebuild developed technology, useful lives and discount rates. While we use our best estimates and judgments, our estimates are inherently uncertain.
Acquired Intangible Assets We apply significant judgment in determining the fair value of the intangible assets acquired, which involves the use of significant estimates and assumptions. These estimates can include, but are not limited to, future expected cash flows from acquired customers and acquired technology from a market participant perspective, costs to rebuild developed technology, useful lives and discount rates.
We also consider if there are any additional material rights inherent in a contract, and if so, we allocate a portion of the transaction price to such rights based on a relative SSP.
We also consider if there are any additional material rights inherent in a contract, and if so, we allocate a portion of the transaction price to such rights based on a relative SSP. 63 Table of Contents Deferred Contract Acquisition Costs Deferred contract acquisition costs represent costs that are incremental to the acquisition of customer contracts, which consist mainly of sales commissions and associated payroll taxes.
Increasing adoption of Elastic Cloud. Elastic Cloud, our family of cloud-based offerings is an important growth opportunity for our business. Organizations are increasingly looking for hosted deployment alternatives with reduced administrative burdens. In some cases, users of our source available software that have been self-managing deployments of the Elastic Stack subsequently become paying subscribers of Elastic Cloud.
Organizations are increasingly looking for hosted deployment alternatives with reduced administrative burdens. In some cases, users of our source available software that have been self-managing deployments of the Elastic Stack subsequently become paying subscribers of Elastic Cloud. For the years ended April 30, 2023, 2022, and 2021, Elastic Cloud contributed 40%, 35%, and 27% of our total revenue, respectively.
Commissions paid on professional services are typically amortized in accordance with the associated revenue as the commissions paid on new and renewal professional services are commensurate with each other.
Commissions paid on services are typically amortized in accordance with the associated revenue as the commissions paid on new and renewal services are commensurate with each other. Amortization of deferred contract acquisition costs is recognized in sales and marketing expense in the consolidated statements of operations.
Sales and marketing Year Ended April 30, Change 2022 2021 $ % (in thousands) Sales and marketing $ 406,658 $ 273,877 $ 132,781 48 % Sales and marketing expense increased by $132.8 million, or 48%, for the year ended April 30, 2022 compared to the prior year.
Sales and marketing Year Ended April 30, Change 2023 2022 $ % (in thousands) Sales and marketing $ 503,537 $ 406,658 $ 96,879 24 % 59 Table of Contents Sales and marketing expense increased by $96.9 million, or 24%, for the year ended April 30, 2023 compared to the prior year.
Key Factors Affecting Our Performance We believe that the growth and future success of our business depends on many factors, including those described below. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations.
While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Increasing adoption of Elastic Cloud. Elastic Cloud, our family of cloud-based offerings, is an important growth opportunity for our business.
The increase in personnel and related costs includes an increase of $29.7 million in salaries and related taxes, an 62 T a b l e o f C o ntents increase of $24.6 million in stock-based compensation expense, an increase of $6.1 million in acquisition related compensation, and an increase of $2.8 million in employee benefits expense.
The increase in personnel and related costs includes an increase of $20.3 million in stock-based compensation, an increase of $6.9 million in salaries and related taxes, and an increase of $2.8 million in employee benefits expense.
Deferred Contract Acquisition Costs Deferred contract acquisition costs represent costs that are incremental to the acquisition of customer contracts, which consist mainly of sales commissions and associated payroll taxes. We determine whether costs should be deferred based on sales compensation plans if the commissions are in fact incremental and would not have occurred absent the customer contract.
We determine whether costs should be deferred based on sales compensation plans if the commissions are in fact incremental and would not have occurred absent the customer contract. Our sales commissions plan incorporates different commission rates for contracts with new customers and incremental sales to existing customers, and for subsequent subscription renewals.
Our net cash provided by operating activities was $5.7 million and $22.5 million for the years ended April 30, 2022 and 2021, respectively and cash used in operating activities for the year ended April 30, 2020 was $30.6 million.
Our net cash provided by operating activities was $35.7 million, $5.7 million, and $22.5 million for the years ended April 30, 2023, 2022 and 2021, respectively. We have experienced losses in each year since our incorporation and as of April 30, 2023, had an accumulated deficit of $1.1 billion.
Non-cash charges primarily consisted of $93.7 million for stock-based compensation expense, $41.0 million for amortization of deferred contract acquisition costs, $17.2 million of depreciation and intangible asset amortization expense and $7.9 million in non-cash operating lease costs, which were partially offset by net foreign currency transaction gains of $9.5 million and $0.1 million of other non-cash transactions.
Non-cash charges primarily consisted of $204.0 million for stock-based compensation expense, $68.9 million for amortization of deferred contract acquisition costs, $20.2 million of depreciation and intangible asset amortization expense, $10.9 million in non-cash operating lease costs, and $6.2 million of asset impairment charges .
Cost of subscription – self-managed and SaaS consists primarily of personnel and related costs for employees associated with supporting our subscription arrangements, certain third-party expenses, and amortization of certain intangible and other assets. Personnel and related costs, or personnel costs, comprise cash compensation, benefits and stock-based compensation to employees, costs of third-party contractors, and allocated overhead costs.
Revenue for services is recognized as these services are delivered. Cost of Revenue Subscription. Cost of subscription consists primarily of personnel and related costs for employees associated with supporting our subscription arrangements, certain third-party expenses, and amortization of certain intangible and other assets.
As digital transformation and cloud adoption drive mission critical business functions online and to the cloud, we believe that every company will need to build around a search-based data analytics platform, one which brings speed, scale, and relevance to the vast volumes of data being generated.
As digital transformation drives mission critical business functions to the cloud, we believe that every company will need to build around a search-based relevance engine to find the answers that matter, from all of their data, in real-time, and at scale.
The remainder of revenue from self-managed subscriptions is recognized ratably over the subscription term.
A portion of the revenue from self-managed subscriptions is generally recognized up front at the point in time when the license is delivered and the remainder is recognized ratably over the subscription term.
Other Income, Net Year Ended April 30, Change 2022 2021 $ % (in thousands) Other income (expense), net $ (24,109) $ 7,764 $ (31,873) (411) % Other expense was $24.1 million for the year ended April 30, 2022 compared to other income of $7.8 million in the prior year.
Other income (expense), net Year Ended April 30, Change 2023 2022 $ % (in thousands) Other income (expense), net $ 27,454 $ (3,393) $ 30,847 (909) % Other income, net was $27.5 million for the year ended April 30, 2023 compared to Other expense, net of $3.4 million for the prior year.
Net cash used in investing activities of $1.5 million during the year ended April 30, 2021 was primarily due to $3.9 million of capital expenditures and capitalization of $0.3 million in internal-use software costs during the period, partially offset by cash provided by other investing activities of $2.7 million.
Net Cash Used in Investing Activities Net cash used in investing activities of $273.0 million during the year ended April 30, 2023 was primarily due to the purchase of marketable securities of $270.3 million . In addition, we incurred $2.7 million of capital expenditures during the year.
We continue to monitor the major impacts of the COVID-19 pandemic and make changes in our business as appropriate, in response to such impacts. See “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of additional risks.
See “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of additional risks. Key Factors Affecting our Performance We believe that the growth and future success of our business depends on many factors, including those described below.
Our subscription agreements typically have terms of one to three years and we usually bill for them annually in advance. Elastic Cloud customers may also purchase subscriptions on a month-to-month basis without a commitment, with usage billed at the end of each month.
We sell subscriptions in various currencies, with the majority of our subscriptions contracted in US dollars, and a smaller portion contracted in Euro, British Pound Sterling, and other currencies. Elastic Cloud customers may also purchase subscriptions on a month-to-month basis without a commitment, with usage billed at the end of each month.
We continue to make substantial investments in developing the Elastic Stack and our solutions and expanding our global sales and marketing footprint.
We expect we will continue to incur net losses for the foreseeable future. There can be no assurance whether, or when, we may become profitable. We continue to make substantial investments in developing the Elastic Stack and expanding our global sales and marketing footprint.
Gross margin for professional services revenue was 15% for the year ended April 30, 2022 compared to 6% for the prior year. The increase in margin is primarily due to the increase in revenue, and a lower than proportionate increase in cost of professional services revenue.
In addition, subcontractor costs increased by $6.2 million and travel costs increased by $0.8 million. Gross margin for services revenue was 8% for the year ended April 30, 2023 compared to 15% for the prior year.
Our effective tax rate was (3.1)% and (6.3)% of our net loss before taxes for the years ended April 30, 2022 and 2021, respectively. 63 T a b l e o f C o ntents Liquidity and Capital Resources As of April 30, 2022, we had cash and cash equivalents and restricted cash of $860.9 million and $2.7 million, respectively, and working capital of $570.4 million.
Our effective tax rate was (8.9)% and (3.1%) of our net loss before taxes for the years ended April 30, 2023 and 2022, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−1 removed7 unchanged
Biggest changeWe have experienced and will continue to experience fluctuations in net loss as a result of transaction gains or losses related to remeasurement of certain asset and liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded.
Biggest changeAlthough changes to exchange rates have not had a material impact on our net operating results to date, we will continue to reassess our foreign exchange exposure as we continue to grow our business globally. 64 Table of Contents We have experienced and will continue to experience fluctuations in net loss as a result of transaction gains or losses related to remeasurement of certain asset and liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded.
To date, we have not had a formal hedging program with respect to foreign currency, but we may do so in the future if our exposure to foreign currency should become more significant.
To date, we have not had a formal hedging program with respect to foreign currency, but we may adopt such a program in the future if our exposure to foreign currency should become more significant.
Additionally, we carry the Senior Notes at face value less unamortized debt issuance cost on our balance sheet, and we present the fair value for required disclosure purposes only. Foreign Currency Risk Our revenue and expenses are primarily denominated in U.S. dollars.
Additionally, we carry the Senior Notes at face value less unamortized debt issuance cost on our balance sheet, and we present the fair value for required disclosure purposes only. Foreign Currency Risk Our revenue and expenses are primarily denominated in U.S. dollars, and to a lesser extent the Euro, British Pound Sterling, and other currencies.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We have operations both within the United States and internationally, and we are exposed to market risk in the ordinary course of our business. Interest Rate Risk We had cash, cash equivalents, and restricted cash of $863.6 million as of April 30, 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We have operations both within the United States and internationally, and we are exposed to interest rate risk and foreign currency risk in the ordinary course of our business. Interest Rate Risk We had cash, cash equivalents, restricted cash, and marketable securities totaling $917.7 million as of April 30, 2023.
As a component of other income, net, we recognized a foreign currency transaction loss of $3.6 million and a foreign currency transaction gain of $7.7 million for the years ended April 30, 2022 and April 30, 2021, respectively. As of April 30, 2022, our cash, cash equivalents, and restricted cash were primarily denominated in U.S. dollars, Euros, and British pounds.
As a component of other income, net, we recognized a foreign currency transaction loss of $0.4 million and $3.6 million for the years ended April 30, 2023 and 2022, respectively, and a foreign currency transaction gain of $7.7 million for the year ended April 30, 2021.
A 10% increase or decrease in current exchange rates would have an impact of approximately $20.2 million on our cash, cash equivalents, and restricted cash balances. 67 T a b l e o f C o ntents
A 10% increase or decrease in exchange rates as of such date would have had an impact of approximately $19.3 million on our cash, cash equivalents, restricted cash, and marketable securities balances. 65 Table of Contents
Removed
Changes to exchange rates therefore have not had a material impact on our operating results to date; however, we will continue to reassess our foreign exchange exposure as we continue to grow our business globally.
Added
As of April 30, 2023, our cash, cash equivalents, restricted cash, and marketable securities were primarily denominated in U.S. dollars, Euros, and British Pound Sterling.

Other ESTC 10-K year-over-year comparisons