UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON, DC~~Washington, D.C. 20549

FORM 10-Q

~~(Mark One)~~


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~January~~July 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File ~~Number:~~Number 001-38675

Elastic N.V.

(Exact name of registrant as specified in its Charter)


The Netherlands			Not Applicable
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

~~Elastic N.V.~~

~~The Netherlands~~

~~(State or other jurisdiction of~~

~~incorporation or organization)~~

~~Not Applicable~~

~~(I.R.S. Employer~~

~~Identification No.)~~

800 West El Camino Real, Suite 350

Mountain View, California 94040

(Address of principal executive ~~offices)~~offices, including zip code)

~~(650) 458-2620~~

(Registrant’s telephone number, including area ~~code)~~code: (650) 458-2620

Securities registered pursuant to Section 12(b) of the ~~Act~~:Act:

(Title of each ~~class~~class)

Trading Symbol(s)

(Name of each exchange on which ~~registered~~registered)

Ordinary shares, Par Value €0.01 Per Share

ESTC

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the ~~registrant~~registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

~~Emerging growth company~~

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~February 28,~~August 19, 2022, the registrant had ~~93,468,991~~94,986,619 ordinary shares, €0.01 par value per share, outstanding.

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		Page
	Note Regarding Forward-Looking Statements	3
PART I.	FINANCIAL INFORMATION	5

Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Shareholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows	109
	Notes to Condensed Consolidated Financial Statements (Unaudited)	1110
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2624
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4035
Item 4.	Controls and Procedures	4035

PART II.	OTHER INFORMATION	4236

Item 1.	Legal Proceedings	4236
Item 1A.	Risk Factors	4236
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7569
Item 3.	Defaults Upon Senior Securities	7570
Item 4.	Mine Safety Disclosures	7570
Item 5.	Other Information	7570
Item 6.	Exhibits	7670
Signatures		7771

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~~NOTE REGARDING FORWARD-LOOKING STATEMENTS~~Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risk and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,”, “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (which include changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve and maintain future profitability;

•our ability to continue to deliver and improve our offerings and successfully develop new ~~offerings, including hosted offerings and security-related product~~ offerings;

•customer acceptance and purchase of our existing offerings and new offerings, including the expansion and adoption of our ~~hosted~~cloud-based offerings;

•the impact of Russia’s invasion of Ukraine on our business and on the businesses of our customers and partners, including their spending priorities;

•��the impact of the 2019 coronavirus disease, including any current and future variants thereof (“COVID-19”), on our business, operations, hiring and financial results, and on the businesses of our customers and partners, including their spending priorities, the effect of governmental lockdowns, restrictions, new regulations and vaccine distribution and efficacy;

•the impact that increased adoption of consumption-based arrangements could have on our revenue or operating results;

•the impact of changes to our licensing of our products, specifically Elasticsearch and Kibana;

•our assessments of the strength of our solutions and products;

•our service performance and security, including the resources and costs required to prevent, detect and remediate potential security breaches or incidents, including by bad actors;

•our ability to maintain and expand our user and customer base;

•the market for our products continuing to develop;

•competition from other products and companies with more resources, recognition and presence in our industry;

•the impact of foreign currency exchange rate and interest rate fluctuations on our results;

•the pace of change and innovation in the markets in which we ~~participate~~operate and the competitive nature of those markets;

•our business strategy and our plan to build our business;

•our ability to effectively manage our growth, including any changes to our pace of hiring;

•our international expansion strategy;

•our operating results and cash flows;

•our strategy of acquiring complementary businesses and our ability to successfully integrate acquired businesses and technologies;

•the impact of acquisitions on our future product offerings;

•our beliefs and objectives for future operations;

•our relationships with and reliance on third parties, including partners;

•our ability to protect our intellectual property rights;

•our ability to develop our brands;

•the impact of expensing stock options and other equity awards;

•the sufficiency of our capital resources;

•our ability to successfully defend litigation brought against us;

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•our ability to successfully execute our go-to-market strategy, including the positioning of our solutions and products, and expand in our existing markets and into new markets;

•sufficiency of cash to meet cash needs for at least the next 12 months;

•our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;

•our ability to attract and retain qualified employees and key personnel;

•our ability to onboard, provide training to and integrate new employees;

•the effect of the loss of key personnel;

•our expectations about the impact of natural disasters and public health epidemics and pandemics, on our business, results of operations and financial condition;

•expectations about seasonality;

•the future trading prices of our ordinary shares;

•inflation;

•our ability to service our debt obligations; and

•general market, political, geopolitical, economic and business conditions (including developments and volatility arising from the ongoing COVID-19 pandemic and ~~the ongoing military conflict between Russia and~~Russia’s invasion of Ukraine).

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” in Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any additional or unforeseen effect from the ongoing COVID-19 pandemic may exacerbate these risks. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Elastic N.V.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


		As of January 31, 2022		As of April 30, 2021			As of July 31, 2022			As of April 30, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	864,363	$	400,814	Cash and cash equivalents	$	848,761		$	860,949
Restricted cash	Restricted cash	3,928		2,894		Restricted cash	2,387			2,688
Accounts receivable, net of allowance for credit losses of $2,729 and $2,344 as of January 31, 2022 and April 30, 2021, respectively		146,218		160,415
Accounts receivable, net of allowance for credit losses of $2,250 and $2,700 as of July 31, 2022 and April 30, 2022, respectively						Accounts receivable, net of allowance for credit losses of $2,250 and $2,700 as of July 31, 2022 and April 30, 2022, respectively	168,020			215,228
Deferred contract acquisition costs	Deferred contract acquisition costs	38,938		36,089		Deferred contract acquisition costs	44,636			43,628
Prepaid expenses and other current assets	Prepaid expenses and other current assets	39,405		37,002		Prepaid expenses and other current assets	36,410			41,215
Total current assets	Total current assets	1,092,852		637,214		Total current assets	1,100,214			1,163,708
Property and equipment, net	Property and equipment, net	6,739		8,881		Property and equipment, net	6,408			7,207
Goodwill	Goodwill	304,155		198,851		Goodwill	303,655			303,906
Operating lease right-of-use assets	Operating lease right-of-use assets	21,454		25,464		Operating lease right-of-use assets	24,904			25,437
Intangible assets, net	Intangible assets, net	49,948		36,286		Intangible assets, net	41,591			45,800
Deferred contract acquisition costs, non-current	Deferred contract acquisition costs, non-current	62,980		50,263		Deferred contract acquisition costs, non-current	74,720			74,419
Deferred tax assets	Deferred tax assets	3,765		3,697		Deferred tax assets	5,075			5,811
Other assets	Other assets	17,403		12,516		Other assets	14,452			16,643
Total assets	Total assets	$	1,559,296	$	973,172	Total assets	$	1,571,019		$	1,642,931
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	21,792	$	7,248	Accounts payable	$	38,062		$	28,403
Accrued expenses and other liabilities	Accrued expenses and other liabilities	42,110		28,909		Accrued expenses and other liabilities	47,300			53,930
Accrued compensation and benefits	Accrued compensation and benefits	56,181		52,525		Accrued compensation and benefits	56,054			68,002
Operating lease liabilities	Operating lease liabilities	8,983		8,528		Operating lease liabilities	11,408			11,219
Deferred revenue	Deferred revenue	362,287		352,805		Deferred revenue	407,499			431,776
Total current liabilities	Total current liabilities	491,353		450,015		Total current liabilities	560,323			593,330
Deferred revenue, non-current	Deferred revenue, non-current	33,395		44,895		Deferred revenue, non-current	27,553			33,518
Long-term debt, net	Long-term debt, net	566,271		—		Long-term debt, net	566,772			566,520
Operating lease liabilities, non-current	Operating lease liabilities, non-current	14,879		19,649		Operating lease liabilities, non-current	15,530			16,482
Other liabilities, non-current	Other liabilities, non-current	21,089		7,782		Other liabilities, non-current	7,303			17,648
Total liabilities	Total liabilities	1,126,987		522,341		Total liabilities	1,177,481			1,227,498
Commitments and contingencies (Note 8 and 9)		0		0
Shareholders’ equity:
Convertible preference shares, €0.01 par value; 165,000,000 shares authorized, 0 shares issued and outstanding as of January 31, 2022 and April 30, 2021		—		—
Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized; 93,420,927 and 90,533,985 shares issued and outstanding as of January 31, 2022 and April 30, 2021, respectively		982		948
Commitments and contingencies (Notes 8 and 9)						Commitments and contingencies (Notes 8 and 9)			0
0Shareholders’ equity:						0Shareholders’ equity:
Convertible preference shares, €0.01 par value; 165,000,000 shares authorized, 0 shares issued and outstanding as of July 31, 2022 and April 30, 2022						Convertible preference shares, €0.01 par value; 165,000,000 shares authorized, 0 shares issued and outstanding as of July 31, 2022 and April 30, 2022	—			—
Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized; 94,970,627 shares issued and outstanding as of July 31, 2022 and 94,174,914 shares issued and outstanding as of April 30, 2022						Ordinary shares, par value €0.01 per share: 165,000,000 shares authorized; 94,970,627 shares issued and outstanding as of July 31, 2022 and 94,174,914 shares issued and outstanding as of April 30, 2022	999			990
Treasury stock	Treasury stock	(369)		(369)		Treasury stock	(369)			(369)
Additional paid-in capital	Additional paid-in capital	1,197,570		1,071,675		Additional paid-in capital	1,300,379			1,250,108
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(14,318)		(8,105)		Accumulated other comprehensive loss	(20,754)			(18,130)
Accumulated deficit	Accumulated deficit	(751,556)		(613,318)		Accumulated deficit	(886,717)			(817,166)
Total shareholders’ equity	Total shareholders’ equity	432,309		450,831		Total shareholders’ equity	393,538			415,433
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	1,559,296	$	973,172	Total liabilities and shareholders’ equity	$	1,571,019		$	1,642,931

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Elastic N.V.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


		Three Months Ended January 31,				Nine Months Ended January 31,					Three Months Ended July 31,
		2022		2021		2022		2021			2022		2021
Revenue	Revenue									Revenue
License - self-managed		$	20,119	$	15,280	$	54,457	$	45,673
Subscription - self-managed and SaaS		189,495		131,969		522,599		357,127
Total subscription revenue		209,614		147,249		577,056		402,800
Professional services		14,330		9,866		45,963		28,079
Subscription										Subscription	$	231,814	$	177,185
Services										Services	18,267		15,910
Total revenue	Total revenue	223,944		157,115		623,019		430,879		Total revenue	250,081		193,095
Cost of revenue	Cost of revenue									Cost of revenue
Cost of license - self-managed		501		346		1,242		1,039
Cost of subscription - self-managed and SaaS		47,076		31,426		126,097		86,464
Total cost of revenue - subscription		47,577		31,772		127,339		87,503
Cost of professional services		13,707		10,196		37,491		27,744
Subscription										Subscription	53,551		37,520
Services										Services	19,428		12,142
Total cost of revenue	Total cost of revenue	61,284		41,968		164,830		115,247		Total cost of revenue	72,979		49,662
Gross profit	Gross profit	162,660		115,147		458,189		315,632		Gross profit	177,102		143,433
Operating expenses	Operating expenses									Operating expenses
Research and development	Research and development	71,749		51,400		194,894		143,766		Research and development	78,649		59,382
Sales and marketing	Sales and marketing	105,069		71,087		288,055		191,712		Sales and marketing	125,006		88,033
General and administrative	General and administrative	31,691		27,121		89,298		72,555		General and administrative	34,088		27,052
Total operating expenses	Total operating expenses	208,509		149,608		572,247		408,033		Total operating expenses	237,743		174,467
Operating loss	Operating loss	(45,849)		(34,461)		(114,058)		(92,401)		Operating loss	(60,641)		(31,034)
Other income (expense), net
Other expense, net										Other expense, net
Interest expense	Interest expense	(6,175)		(65)		(14,327)		(78)		Interest expense	(6,401)		(1,820)
Other income (expense), net		(861)		(2,312)		(509)		8,502
Other income, net										Other income, net	339		1,018
Loss before income taxes	Loss before income taxes	(52,885)		(36,838)		(128,894)		(83,977)		Loss before income taxes	(66,703)		(31,836)
Provision for income taxes	Provision for income taxes	3,841		1,136		9,344		2,156		Provision for income taxes	2,848		2,653
Net loss	Net loss	$	(56,726)	$	(37,974)	$	(138,238)	$	(86,133)	Net loss	$	(69,551)	$	(34,489)
Net loss per share attributable to ordinary shareholders, basic and diluted	Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.61)	$	(0.43)	$	(1.50)	$	(1.00)	Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.74)	$	(0.38)
Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted	Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted	93,015,185		88,341,038		92,140,919		86,296,028		Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted	94,621,365		91,201,372

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Elastic N.V.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


		Three Months Ended January 31,				Nine Months Ended January 31,					Three Months Ended July 31,
		2022		2021		2022		2021			2022		2021
Net loss	Net loss	$	(56,726)	$	(37,974)	$	(138,238)	$	(86,133)	Net loss	$	(69,551)	$	(34,489)
Other comprehensive loss:
Other comprehensive income (loss):										Other comprehensive income (loss):
Foreign currency translation adjustments	Foreign currency translation adjustments	(4,937)		3,346		(6,213)		(7,190)		Foreign currency translation adjustments	(2,624)		(1,864)
Other comprehensive loss		(4,937)		3,346		(6,213)		(7,190)
Other comprehensive income (loss)										Other comprehensive income (loss)	(2,624)		(1,864)
Total comprehensive loss	Total comprehensive loss	$	(61,663)	$	(34,628)	$	(144,451)	$	(93,323)	Total comprehensive loss	$	(72,175)	$	(36,353)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Elastic N.V.

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands, except share data)

(unaudited)


								Additional Paid-in Capital			Accumulated Other Comprehensive Loss							Total Shareholders' Equity								Ordinary Shares				Treasury Shares Amount				Additional Paid-in Capital				Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
		Ordinary Shares			Treasury Shares								Accumulated Deficit													Shares	Amount
		Shares	Amount				Additional Paid-in Capital			Accumulated Other Comprehensive Loss
Balances at October 31, 2021		92,566,025	$	972							$	(369)		$	1,153,408	$	(9,381)			$	(694,830)		$	449,800

Balances as of April 30, 2022																				Balances as of April 30, 2022							94,174,914					$	990					$	(369)		$	1,250,108		$	(18,130)		$	(817,166)		$	415,433
Issuance of ordinary shares upon exercise of stock options	Issuance of ordinary shares upon exercise of stock options	473,442	6		—						6,703			—						—			6,709		Issuance of ordinary shares upon exercise of stock options							225,263				3				—			3,394			—			—			3,397
Issuance of ordinary shares upon release of restricted stock units	Issuance of ordinary shares upon release of restricted stock units	381,460	4		—			(4)			—			—				—		Issuance of ordinary shares upon release of restricted stock units							570,450			6				—				(6)			—			—			—
Stock-based compensation	Stock-based compensation	—	—		—			37,463			—			—				37,463		Stock-based compensation							—			—				—				46,883			—			—			46,883
Net loss	Net loss	—	—		—			—			—			(56,726)				(56,726)		Net loss							—			—				—				—			—			(69,551)			(69,551)
Foreign currency translation	Foreign currency translation	—	—		—			—			(4,937)			—				(4,937)		Foreign currency translation							—			—				—				—			(2,624)			—			(2,624)
Balances at January 31, 2022		93,420,927	$	982	$	(369)		$	1,197,570		$	(14,318)		$	(751,556)			$	432,309
Balances as of July 31, 2022																				Balances as of July 31, 2022							94,970,627			$	999			$	(369)			$	1,300,379		$	(20,754)		$	(886,717)		$	393,538

								Additional Paid-in Capital			Accumulated Other Comprehensive Loss							Total Shareholders' Equity
		Ordinary Shares			Treasury Shares								Accumulated Deficit									Ordinary Shares					Treasury Shares Amount			Additional Paid-in Capital				Accumulated Other Comprehensive Loss				Accumulated Deficit			Total Stockholders' Equity
		Shares	Amount				Additional Paid-in Capital			Accumulated Other Comprehensive Loss																Shares			Amount
Balances at October 31, 2020		87,204,991	$	908							$	(369)		$	986,076	$	(11,914)			$	(532,043)		$	442,658
Balances as of April 30, 2021																Balances as of April 30, 2021										90,533,985	$	948		$	(369)					$	1,071,675				$	(8,105)		$	(613,318)		$	450,831
Issuance of ordinary shares upon exercise of stock options	Issuance of ordinary shares upon exercise of stock options	2,157,149	26		—						22,298			—						—			22,324		Issuance of ordinary shares upon exercise of stock options							840,208				10				—			10,969			—						10,979
Issuance of ordinary shares upon release of restricted stock units	Issuance of ordinary shares upon release of restricted stock units	282,800	3		—			(3)			—			—				—		Issuance of ordinary shares upon release of restricted stock units							396,035			5				—				(5)			—						—
Stock-based compensation	Stock-based compensation	—	—		—			25,227			—			—				25,227		Stock-based compensation							—			—				—				30,206			—						30,206
Net loss	Net loss	—	—		—			—			—			(37,974)				(37,974)		Net loss							—			—				—				—			—			(34,489)			(34,489)
Foreign currency translation	Foreign currency translation	—	—		—			—			3,346			—				3,346		Foreign currency translation							—			—				—				—			(1,864)						(1,864)
Balances at January 31, 2021		89,644,940	$	937	$	(369)		$	1,033,598		$	(8,568)		$	(570,017)			$	455,581
Balances as of July 31, 2021																				Balances as of July 31, 2021							91,770,228			$	963			$	(369)			$	1,112,845		$	(9,969)		$	(647,807)		$	455,663

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Elastic N.V.

Condensed Consolidated Statements of ~~Shareholders’ Equity~~Cash Flows

(in ~~thousands, except share data)~~

thousands)
(unaudited)

Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Shareholders' Equity
Ordinary Shares Treasury Shares Accumulated Deficit
Shares Amount
Balances at April 30, 2021 90,533,985 948 (369) 1,071,675 (8,105) (613,318) 450,831
Fair value of replacement equity awards attributable to pre-acquisition service — — — 1,266 — — 1,266
Issuance of ordinary shares upon exercise of stock options 2,004,188 24 — 27,516 — — 27,540
Issuance of ordinary shares upon release of restricted stock units 882,754 10 — (10) — — —
Stock-based compensation — — — 97,123 — — 97,123
Net loss — — — — — (138,238) (138,238)
Foreign currency translation — — — — (6,213) — (6,213)
Balances at January 31, 2022 93,420,927 $ 982 $ (369) $ 1,197,570 $ (14,318) $ (751,556) $ 432,309
Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Shareholders' Equity
Ordinary Shares Treasury Shares Accumulated Deficit
Shares Amount
Balances at April 30, 2020 82,856,978 $ 856 $ (369) $ 898,788 $ (1,377) $ (484,251) $ 413,647
Cumulative effect of accounting change — — — — — 367 367
Issuance of ordinary shares upon exercise of stock options 6,192,264 73 — 67,481 — — 67,554
Issuance of ordinary shares upon release of restricted stock units 595,698 8 — (8) — — —
Stock-based compensation — — — 64,634 — — 64,634
Reclassification of liability-classified awards — — — 2,703 — — 2,703
Net loss — — — — — (86,133) (86,133)
Foreign currency translation — — — — (7,191) — (7,191)
Balances at January 31, 2021 89,644,940 $ 937 $ (369) $ 1,033,598 $ (8,568) $ (570,017) $ 455,581


	Three Months Ended July 31,
	2022		2021
Cash flows from operating activities
Net loss	$	(69,551)	$	(34,489)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	5,214		4,404
Amortization of deferred contract acquisition costs	17,444		13,878
Amortization of debt issuance costs	252		77
Non-cash operating lease cost	3,005		1,854
Stock-based compensation expense, net of amounts capitalized	46,883		30,178

Deferred income taxes	667		(143)
Foreign currency transaction loss (gain)	1,779		(1,127)
Other	22		98
Changes in operating assets and liabilities:
Accounts receivable, net	45,991		48,324
Deferred contract acquisition costs	(19,676)		(14,781)
Prepaid expenses and other current assets	4,729		(4,597)
Other assets	2,114		(6,097)
Accounts payable	9,873		10,660
Accrued expenses and other liabilities	(16,741)		(170)
Accrued compensation and benefits	(11,521)		(1,454)
Operating lease liabilities	(3,204)		(1,945)
Deferred revenue	(26,985)		(30,619)
Net cash provided by (used in) operating activities	(9,705)		14,051
Cash flows from investing activities
Purchases of property and equipment	(479)		(660)

Capitalization of internal-use software	—		(974)

Net cash used in investing activities	(479)		(1,634)
Cash flows from financing activities
Proceeds from the issuance of debt	—		575,000
Proceeds from issuance of ordinary shares upon exercise of stock options	3,397		10,979
Payments of debt issuance costs	—		(7,188)
Repayment of notes payable	—		—

Net cash provided by financing activities	3,397		578,791
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(5,702)		(1,235)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(12,489)		589,973
Cash, cash equivalents, and restricted cash, beginning of period	863,637		403,708
Cash, cash equivalents, and restricted cash, end of period	$	851,148	$	993,681
Supplemental disclosures of cash flow information
Cash paid for interest	$	12,079	$	—
Cash paid for income taxes, net	$	2,558	$	629
Cash paid for operating lease liabilities	$	3,278	$	2,335
Supplemental disclosures of non-cash investing and financing information
Changes in property and equipment included in accounts payable	$	(158)	$	124
Operating lease right-of-use assets for new lease obligations	$	2,725	$	1,458
Debt issuance costs accrued, unpaid	$	—	$	2,048

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Elastic N.V.

Notes to Condensed Consolidated Financial Statements ~~of Cash Flows~~
(unaudited)

~~(in thousands)~~

~~(unaudited)~~

Nine Months Ended January 31,
2022 2021
Cash flows from operating activities
Net loss $ (138,238) $ (86,133)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization 14,558 12,856
Amortization of deferred contract acquisition costs 43,373 28,455
Amortization of debt issuance costs 554 —
Non-cash operating lease cost 6,259 5,256
Stock-based compensation expense, net of amounts capitalized 96,971 65,305
Deferred income taxes (219) (288)
Foreign currency transaction (gain) loss 1,707 (9,463)
Other 98 11
Changes in operating assets and liabilities:
Accounts receivable, net 9,801 15,246
Deferred contract acquisition costs (61,234) (54,612)
Prepaid expenses and other current assets (2,650) 4,817
Other assets (803) 5,237
Accounts payable 14,452 (6,321)
Accrued expenses and other liabilities 17,539 1,696
Accrued compensation and benefits 4,686 (5,859)
Operating lease liabilities (6,438) (5,402)
Deferred revenue 8,306 53,309
Net cash provided by operating activities 8,722 24,110
Cash flows from investing activities
Purchases of property and equipment (987) (2,732)
Capitalization of internal-use software (4,227) —
Business acquisitions, net of cash acquired (119,854) —
Other — 1,320
Net cash used in investing activities (125,068) (1,412)
Cash flows from financing activities
Proceeds from the issuance of debt 575,000 —
Proceeds from issuance of ordinary shares upon exercise of stock options 27,540 67,554
Payments of debt issuance costs (9,283) —
Net cash provided by financing activities 593,257 67,554
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (12,328) 5,848
Net increase in cash, cash equivalents, and restricted cash 464,583 96,100
Cash, cash equivalents, and restricted cash, beginning of period 403,708 299,389
Cash, cash equivalents, and restricted cash, end of period $ 868,291 $ 395,489
Supplemental disclosures of cash flow information
Cash paid for interest $ 12,785 $ —
Cash paid for operating lease liabilities $ 7,346 $ 6,628
Cash paid (refund received) for income taxes $ 3,059 $ (1,217)
Supplemental disclosures of non-cash investing and financing information
Property and equipment included in accounts payable $ 30 $ 175
Acquisition-related indemnity holdback $ 6,000 $ —
Operating lease right-of-use assets for new lease obligations $ 2,440 $ 1,120

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

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~~Elastic N.V.~~

~~Notes to Condensed Consolidated Financial Statements~~

(~~unaudited)~~

~~Table of Contents~~

1.Organization and Description of Business

Elastic N.V. (“Elastic” or the “Company”) was incorporated under the laws of the Netherlands in 2012. ~~Elastic is a search company. It~~The Company created the Elastic Stack, a powerful set of software products that ingest and store data from any source and in any format, and perform search, analysis, and visualization ~~in milliseconds or less.~~on that data. Developers build on top of the Elastic Stack to apply the power of search to their data and solve business problems. The Company ~~also~~ offers three software solutions built oninto the Elastic Stack: Enterprise Search, Observability, and Security. The Elastic Stack and the Company’s solutions are designed to run in public or private clouds, in hybrid environments, or in ~~traditional on-premises~~multi-cloud environments.

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated balance sheet as of ~~January~~July 31, 2022, the interim condensed consolidated statements of operations and of comprehensive loss, interim condensed statements of shareholders’ equity for the three ~~and nine~~ months ended ~~January~~July 31, 2022 and 2021 and the interim condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~January~~July 31, 2022 and 2021, are unaudited. These interim condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, include all adjustments necessary to fairly state the Company’s financial position as of ~~January~~July 31, 2022, and the results of the Company’s operations, its statements of shareholders’ equity for the three ~~and nine~~ months ended ~~January~~July 31, 2022 and 2021, and its statements of cash flows for the ~~nine~~three months ended ~~January~~July 31, 2022 and 2021. The financial data and other financial information disclosed in the notes to these interim condensed consolidated financial statements related to the three ~~and nine~~ month periods are also unaudited. The results for the ~~nine~~three months ended ~~January~~July 31, 2022 are not necessarily indicative of the operating results expected for the fiscal year ending April 30, ~~2022,~~2023, or any future period.

The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the financial statements of the Company and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.

Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited interim condensed consolidated financial statements and accompanying footnotes should be read in conjunction with the Company’s annual consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, ~~2021~~2022 filed with the SEC on June ~~25, 2021~~21, 2022 (“the Company's Annual Report on Form 10-K”).

Fiscal Year

The Company’s fiscal year ends on April 30. References to fiscal ~~2022,~~2023, for example, refer to the fiscal year ending April 30, ~~2022.~~2023.

Use of Estimates and Judgments

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Such estimates include, but are not limited to, allocation of revenue between recognized and deferred amounts, deferred contract acquisition costs, allowance for credit losses, valuation of stock-based compensation, fair value of ordinary shares in periods prior to the Company’s initial public offering, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, whether an arrangement is or contains a lease, the discount rate used for operating leases and valuation allowance for deferred income taxes. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events.

In March 2020, the World Health Organization declared ~~COVID-19~~the Coronavirus disease (“COVID-19”) a pandemic. The ongoing COVID-19 pandemic has resulted in a global slowdown of economic activity ~~that is likely to decrease~~and its impact has varied significantly across different industries with certain industries experiencing increased demand for ~~a broad variety of goods~~their products and services, ~~including from certain of the Company’s customers,~~ while ~~also disrupting sales channels~~others have struggled to maintain demand for their products and ~~marketing activities for an unknown period of time.~~services consistent with historical levels. The full extent to which COVID-19 may impact the Company’s financial condition or results of operations is uncertain.

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Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any

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specific event or circumstance that would require the Company to update its estimates, judgments or revise the carrying value of the Company’s assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.

Significant Accounting Policies

~~Other than as described below, there~~There have been no changes to the Company’s significant accounting policies described in the Company’s Annual Report on Form 10-K that have had a material impact on its consolidated financial statements and related notes.

~~Debt Issuance Costs~~

Costs incurred in connection with the issuance of debt are deferred and amortized as interest expense over the term of the related debt using the effective interest method. To the extent that the debt is outstanding, these amounts are reflected in the consolidated balance sheets as direct deductions from the carrying amount of the outstanding borrowings.

Recently Adopted Accounting Pronouncements

~~Income Taxes:~~Equity Awards: In ~~December 2019,~~May 2021, the FASB issued ASU No. ~~2019-12,~~ ~~Income Taxes~~2021-04, Earnings Per Share (Topic ~~740)~~260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): ~~Simplifying the~~Issuer’s Accounting for ~~Income Taxes~~Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU No. 2021-04”), ~~eliminating certain exceptions to~~which clarifies the ~~general principles in ASC 740 related to intra-period tax allocation, deferred tax liability~~accounting for modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another topic. It addresses how an entity should treat, measure the effect of, and ~~general methodology for calculating income taxes. Additionally,~~recognize the effect of a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. The Company adopted ASU ~~makes other changes for matters such as franchise taxes that are partially based~~No. 2021-04 on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods.~~The new guidance becomes effective for the Company for the fiscal year ending April 30,~~May 1, 2022. ~~Early adoption is permitted.~~The Company’s adoption of this ASU ~~had no~~did not have a material impact on ~~the Company’s condensed~~its consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

Acquisitions: In October 2021, the FASB issued ASU No. 2021-08,Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, improving consistency in accounting for acquired revenue contracts with customers in a business combination by requiring that acquirers apply ASC Topic 606 to recognize contract assets and contract liabilities as if it had originated the contracts. If the acquiree prepared its financial statements in accordance with GAAP, the resulting acquired contract assets and liabilities should generally be consistent with acquiree’s financial statements. The new guidance becomes effective for the Company for the fiscal year ending April 30, 2024. Early adoption is permitted. The Company does not expect the adoption of the new accounting standard to have a material impact on its consolidated financial statements.

3.Revenue and Remaining Performance Obligations

Disaggregation of Revenue

The following table presents revenue by ~~product~~ category (in thousands):


		Three Months Ended January 31,								Nine Months Ended January 31,									Three Months Ended July 31,
		2022				2021				2022				2021					2022				2021
		Amount		% of Total Revenue		Amount		% of Total Revenue		Amount		% of Total Revenue		Amount		% of Total Revenue			Amount		% of Total Revenue		Amount		% of Total Revenue
Elastic Cloud	Elastic Cloud	$	80,402	36	%	$	44,929	29	%	$	210,963	34	%	$	114,984	27	%	Elastic Cloud	$	97,729	39	%	$	61,530	32	%
Other subscription	Other subscription	129,212		58	%	102,320		65	%	366,093		59	%	287,816		66	%	Other subscription	134,085		54	%	115,655		60	%
Total subscription revenue		209,614		94	%	147,249		94	%	577,056		93	%	402,800		93	%
Professional services		14,330		6	%	9,866		6	%	45,963		7	%	28,079		7	%
Total subscription																		Total subscription	231,814		93	%	177,185		92	%
Services																		Services	18,267		7	%	15,910		8	%
Total revenue	Total revenue	$	223,944	100	%	$	157,115	100	%	$	623,019	100	%	$	430,879	100	%	Total revenue	$	250,081	100	%	$	193,095	100	%

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During the first quarter of fiscal 2022, the Company updated its disaggregation of revenue breakdown to present revenue by product category. The prior period presentation for the three and nine months ended January 31, 2021, has been updated to conform to the current period presentation.

Remaining Performance Obligations

As of ~~January~~July 31, 2022, the Company had ~~$860.6~~$912.5 million of remaining performance obligations. As of ~~January~~July 31, 2022, the Company expects to recognize approximately ~~86%~~88% of its remaining performance obligations as revenue over the next 24 months and the remainder thereafter.

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4.Fair Value Measurements

Financial Assets

The Company measures financial assets and liabilities that are measured at fair value on a recurring basis at each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

~~Financial Assets~~The following table summarizes assets that are measured at fair value on a recurring basis as of July 31, 2022 (in thousands):


	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents:
Money market funds	$	560,404	$	—	$	—	$	560,404

The following table summarizes assets that are measured at fair value on a recurring basis as of ~~January 31, 2022 and~~ April 30, ~~2021~~2022 (in thousands):

January 31, 2022 Level 1 Level 2 Level 3 Total
Financial Assets:
Cash and cash equivalents:
Money market funds $ 559,337 $ — — $ 559,337
Short-term bank deposit — 1,700 — 1,700
Total $ 559,337 $ 1,700 $ — $ 561,037


April 30, 2021		Level 1		Level 2	Level 3	Total
									Level 1		Level 2		Level 3		Total
Financial Assets:	Financial Assets:							Financial Assets:
Cash and cash equivalents:	Cash and cash equivalents:							Cash and cash equivalents:
Money market funds	Money market funds	$	175,007	—	—	$	175,007	Money market funds	$	559,462	$	—	$	—	$	559,462

The Company considers all highly liquid investments, including money market funds with an original maturity of three months or less at the date of purchase, to be cash equivalents. The Company uses quoted prices in active markets for identical assets to determine the fair value of its Level 1 investments in money market funds. The Company classifies its short-term bank deposit within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.

Financial Liabilities

In July 2021, the Company issued $575.0 million aggregate principal amount of 4.125% Senior Notes due July 15, 2029 (the “Senior Notes”) in a private placement. Based on the trading prices of the Senior Notes, the fair value of the Senior Notes as of ~~January~~July 31, 2022 was approximately ~~$537.8~~$519.5 million. While the Senior Notes are recorded at cost, the fair value of the Senior Notes was determined based on quoted prices in markets that are not active; accordingly, the Senior Notes are categorized as Level 2 for purposes of the fair value measurement hierarchy.

5. Acquisitions

5.Fiscal 2022 Acquisitions

~~Nine months ended January 31, 2022~~

cmdWatch Security Inc.

On September 17, 2021, the Company acquired 100% of the share capital of cmdWatch Security Inc. (“Cmd”) for a total purchase consideration of $77.8 million. The purchase consideration includes an amount of $13.4 million which is being held in an indemnity escrow fund for 18 months after the acquisition close date. Pursuant to the merger agreement, Cmd’s vested stock options were paid in cash and unvested stock options held by Cmd employees were assumed by the Company. The fair value of the replacement equity awards associated with pre-acquisition service period of $4.3 million, consisting of

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~~$3.0~~ $3.0 million paid in cash to vested option holders and $1.3 million of non-cash consideration, was included in the total purchase consideration. Approximately $6.6 million of the fair value of replacement equity awards was allocated to post-acquisition services that will be recognized as stock-based compensation expense over the remaining service period and was excluded from the total purchase consideration. Additionally, an amount of $6.5 million for post-combination services, which is payable at future dates upon completion of the underlying required service period, has been excluded from the purchase consideration. This amount will be recorded as a post-combination expense over the requisite service period.

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The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations, and accordingly, the total purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The total preliminary purchase price allocated to developed technology and goodwill was $15.5 million and ~~$59.0~~$58.7 million, respectively. The fair value assigned to developed technology was determined using the cost to recreate approach. The developed technology asset is being amortized on a straight-line basis over the useful life of 5 years, which approximates the pattern in which the developed technology is utilized. Goodwill resulted primarily from the expectation of enhancing the Company's current security solutions and is not deductible for income tax purposes.

Cmd has been included in the Company’s condensed consolidated results of operations since the acquisition date. Pro forma and historical results of operations for this acquisition have not been presented because they were not material to the condensed consolidated results of operations.

Other Acquisitions

On September 2, 2021 and November 1, 2021, the Company acquired 100% of the share capital of Build Security Ltd. (“build.security”) and Optimyze.cloud Inc. (“Optimyze”), respectively, for a combined total purchase consideration of $57.2 million. The purchase consideration includes an amount of $5.4 million held in Indemnity escrow and $6.0 million held back by the Company for indemnity and will be released upon the 18-month anniversary of the respective acquisitions. These acquisitions were accounted for as business combinations. The total preliminary purchase price allocated to developed technology and goodwill was $9.8 million and ~~$46.9~~$46.7 million, respectively. The developed technology intangible assets from these acquisitions are being amortized on a straight-line basis over a useful life of 5 years which approximates the pattern in which the respective developed technologies are utilized. Goodwill resulted primarily from the expectation of enhancing the Company's current security solutions and the value of the acquired workforce. This goodwill is not deductible for income tax purposes. Build.security and Optimyze have been included in the Company’s condensed consolidated results of operations since their respective acquisition dates. Pro forma and historical results of operations for these acquisitions have not been presented because they were not material to the condensed consolidated results of operations.

Excluded from the combined purchase consideration from these two acquisitions is an amount of $6.3 million, payable in equal installments at the first and the second anniversary of each of the acquisitions, to certain employees of build.security and Optimyze. These amounts are for post-combination services and will be recorded as a post-combination expense over the requisite service periods.

The purchase price allocation for the acquisitions is preliminary and is based on the best estimates of management. The Company continues to collect information with regard to its estimates and assumptions, primarily related to intangible assets and certain tax-related, contingent liability and working capital items. The Company will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the 12 month measurement period, if necessary.

6.Balance Sheet Components

~~Prepaid Expenses and Other Current Assets~~

~~Prepaid expenses and other current assets consisted of the following (in thousands):~~

As of
January 31, 2022 As of
April 30, 2021
Prepaid hosting costs $ 9,701 $ 11,122
Prepaid software subscription costs 7,656 5,636
Prepaid value added taxes 5,394 9,408
Deposits 2,538 2,410
Prepaid taxes 3,323 1,694
Other 10,793 6,732
Total prepaid expenses and other current assets $ 39,405 $ 37,002

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Property and Equipment, Net

The cost and accumulated depreciation of property and equipment were as follows (in thousands):


		Useful Life (in years)			As of January 31, 2022		As of April 30, 2021			Useful Life (in years)	As of July 31, 2022		As of April 30, 2022
Leasehold improvements	Leasehold improvements	Lesser of estimated useful life or remaining lease term			$	10,740	$	10,342	Leasehold improvements	Lesser of estimated useful life or remaining lease term	$	11,168	$	10,863
Computer hardware and software	Computer hardware and software		3		1,377		2,319		Computer hardware and software	3	2,104		1,473
Furniture and fixtures	Furniture and fixtures	3	-	5	5,418		5,971		Furniture and fixtures	3-5	5,914		5,753
Assets under construction	Assets under construction				345		707		Assets under construction		208		1,119
Total property and equipment	Total property and equipment				17,880		19,339		Total property and equipment		19,394		19,208
Less: accumulated depreciation	Less: accumulated depreciation				(11,141)		(10,458)		Less: accumulated depreciation		(12,986)		(12,001)
Property and equipment, net	Property and equipment, net				$	6,739	$	8,881	Property and equipment, net		$	6,408	$	7,207

Depreciation expense related to property and equipment was $1.0 million and ~~$0.8~~$1.0 million for the three months ended ~~January~~July 31, 2022 and 2021, ~~respectively and $2.9 million and $2.2 million for the nine months ended January 31, 2022 and 2021,~~ respectively.

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Intangible Assets, Net

Intangible assets consisted of the following as of ~~January~~July 31, 2022 ~~and April 30, 2021~~ (in thousands):


January 31, 2022		Gross Fair Value		Accumulated Amortization		Net Book Value		Weighted Average Remaining Useful Life (in years)
										Gross Fair Value		Accumulated Amortization		Net Book Value		Weighted Average Remaining Useful Life (in years)
Developed technology	Developed technology	$	70,130	$	28,406	$	41,724	3.5	Developed technology	$	70,130	$	34,319	$	35,811	3.8
Customer relationships	Customer relationships	19,598		12,090		7,508		2.2	Customer relationships	19,598		14,303		5,295		1.9
Trade names	Trade names	2,872		2,160		712		2.2	Trade names	2,872		2,368		504		1.9
Total	Total	$	92,600	$	42,656	49,944		3.3	Total	$	92,600	$	50,990	$	41,610	3.6
Foreign currency translation adjustment	Foreign currency translation adjustment					4			Foreign currency translation adjustment					(19)
Total	Total					$	49,948		Total					$	41,591

April 30, 2021 Gross Fair
Value Accumulated
Amortization Net Book
Value Weighted
Average
Remaining
Useful Life
(in years)
Developed technology $ 44,830 $ 20,850 $ 23,980 3.3
Customer relationships 19,598 8,382 11,216 2.4
Trade names 2,872 1,780 1,092 2.4
Total $ 67,300 $ 31,012 36,288 3.0
Foreign currency translation adjustment (2)
Total $ 36,286
Intangible assets consisted of the following as of April 30, 2022 (in thousands):


	Gross Fair Value		Accumulated Amortization		Net Book Value		Weighted Average Remaining Useful Life (in years)
Developed technology	$	70,130	$	31,355	$	38,775	3.9
Customer relationships	19,598		13,177		6,421		3.3
Trade names	2,872		2,263		609		3.3
Total	$	92,600	$	46,795	$	45,805	3.8
Foreign currency translation adjustment					(5)
Total					$	45,800

Amortization expense for the intangible assets for the three ~~and nine~~ months ended ~~January~~July 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
Cost of revenue—cost of license—self-managed $ 501 $ 346 $ 1,242 $ 1,039
Cost of revenue—cost of subscription—self-managed and SaaS 2,545 1,764 6,314 5,289
Sales and marketing 1,231 1,428 4,088 4,302
Total amortization of acquired intangible assets $ 4,277 $ 3,538 $ 11,644 $ 10,630

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	Three Months Ended July 31,
	2022		2021
Subscription	$	2,964	$	2,012
Sales and marketing	1,231		1,429
Total amortization of acquired intangible assets	$	4,195	$	3,441

The expected future amortization expense related to the intangible assets as of ~~January~~July 31, 2022 was as follows (in thousands, by fiscal year):


Remainder of 2022		$	4,147
2023		16,696
Remainder of 2023				Remainder of 2023	$	12,488
2024	2024	13,985		2024	13,985
2025	2025	8,017		2025	8,018
2026	2026	5,057		2026	5,057
2027	2027	2,046		2027	2,043
Thereafter				Thereafter	—
Total	Total	$	49,948	Total	$	41,591

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Goodwill

The following table represents the changes to goodwill (in thousands):


	Carrying Amount


Balance as of April 30, ~~2021~~2022	$	~~198,851~~
~~Additions from acquisitions~~	~~105,904~~303,906
Foreign currency translation adjustment	~~(600)~~(251)
Balance as of ~~January~~July 31, 2022	$	~~304,155~~303,655

There was no impairment of goodwill during the ~~nine~~three months ended ~~January~~July 31, 2022 and 2021.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):


		As of January 31, 2022		As of April 30, 2021			As of July 31, 2022		As of April 30, 2022
Accrued expenses	Accrued expenses	$	27,281	$	12,772	Accrued expenses	$	20,007	$	24,066
Value added taxes payable	Value added taxes payable	5,258		8,493		Value added taxes payable	3,896		8,926
Accrued interest on Senior Notes		989		—
Accrued interest						Accrued interest	988		6,918
Income taxes payable	Income taxes payable	3,519		1,596		Income taxes payable	8,235		4,286
Other	Other	5,063		6,048		Other	14,174		9,734
Total accrued expenses and other liabilities	Total accrued expenses and other liabilities	$	42,110	$	28,909	Total accrued expenses and other liabilities	$	47,300	$	53,930

Accrued Compensation and Benefits

Accrued compensation and benefits consisted of the following (in thousands):


		As of January 31, 2022		As of April 30, 2021			As of July 31, 2022		As of April 30, 2022
Accrued vacation	Accrued vacation	$	25,532	$	24,078	Accrued vacation	$	28,125	$	27,280
Accrued commissions	Accrued commissions	14,903		17,581		Accrued commissions	12,999		23,806
Accrued payroll taxes and withholding taxes		10,367		5,522
Accrued payroll and withholding taxes						Accrued payroll and withholding taxes	7,348		9,030
Other	Other	5,379		5,344		Other	7,582		7,886
Total accrued compensation and benefits	Total accrued compensation and benefits	$	56,181	$	52,525	Total accrued compensation and benefits	$	56,054	$	68,002

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to customers. For annual contracts, the Company typically invoices customers at the time of entering into the contract. For multi-year agreements, the Company generally invoices customers on an annual basis prior to each anniversary of the contract start date. The Company records unbilled accounts receivable related to revenue recognized in excess of amounts invoiced as the Company has an unconditional right to invoice and receive payment in the future related to those fulfilled obligations. Invoicing customers prior to performance creates a contract liability, deferred revenue, which is recognized in accordance with the Company’s revenue recognition policy.

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The following table provides information about unbilled accounts receivable, deferred contract acquisition costs, and deferred revenue from contracts with customers (in thousands):


		As of January 31, 2022		As of April 30, 2021			As of July 31, 2022		As of April 30, 2022
Unbilled accounts receivable, included in accounts receivable, net	Unbilled accounts receivable, included in accounts receivable, net	$	7,305	$	5,204	Unbilled accounts receivable, included in accounts receivable, net	$	4,389	$	9,244
Deferred contract acquisition costs	Deferred contract acquisition costs	$	101,918	$	86,352	Deferred contract acquisition costs	$	119,356	$	118,047
Deferred revenue	Deferred revenue	$	395,682	$	397,700	Deferred revenue	$	435,052	$	465,294

The following table summarizes the activity of the deferred revenue (in thousands):


	Deferred Revenue
	Three Months Ended July 31,
	2022		2021
Beginning balance	$	465,294	$	397,700
Increases due to invoices issued, excluding amounts recognized as revenue during the period	139,035		102,688


Revenue recognized that was included in deferred revenue balance at beginning of period	(169,277)		(136,028)
Ending balance	$	435,052	$	364,360

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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. The Company determines 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.

The Company periodically reviews the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. The Company did not recognize any impairment of deferred contract acquisition costs during the nine months ended January 31, 2022.

The following table summarizes the activity of the deferred contract acquisition costs (in thousands):


		Nine Months Ended January 31,					Three Months Ended July 31,
		2022		2021			2022		2021
Beginning balance	Beginning balance	$	86,352	$	43,549	Beginning balance	$	118,047	$	86,352
Capitalization of contract acquisition costs	Capitalization of contract acquisition costs	58,939		57,093		Capitalization of contract acquisition costs	18,753		14,144
Amortization of deferred contract acquisition costs	Amortization of deferred contract acquisition costs	(43,373)		(28,455)		Amortization of deferred contract acquisition costs	(17,444)		(13,878)
Ending balance	Ending balance	$	101,918	$	72,187	Ending balance	$	119,356	$	86,618

~~Deferred Revenue~~

~~Significant changes in~~The Company did not recognize any impairment of deferred contract acquisition costs during the ~~deferred revenue~~ ~~balances were as follows (in thousands):~~

Nine Months Ended January 31,
2022 2021
Beginning balance $ 397,700 $ 259,702
Increases due to invoices issued, excluding amounts recognized as revenue during the period 312,581 274,292
Increase from acquisition, net of revenue recognized 1,001 —
Amounts transferred to deferred revenue from accrued expenses and other liabilities upon entering into contracts with customers, net of revenue recognized during the period — 5,424
Revenue recognized that was included in deferred revenue balance at beginning of period (315,600) (205,408)
Ending balance $ 395,682 $ 334,010
three months ended July 31, 2022 and 2021.

Allowance for Credit Losses

~~The following is a summary of the changes in the Company’s allowance for credit losses (in thousands):~~


	Three Months Ended July 31,
	2022		2021
Beginning balance	$	2,700	$	2,344
Bad debt expense	186		524
Accounts written off	(636)		(294)
Ending balance	$	2,250	$	2,574

Nine Months Ended January 31,
2022 2021
Beginning balance $ 2,344 $ 1,247
Cumulative-effect adjustment from adoption of ASU 2016-13 — (367)
Provision 2,449 3,441
Write-offs (2,064) (2,490)
Ending balance $ 2,729 $ 1,831

7.Senior Notes

In July 2021, the Company issued $575.0 million aggregate principal amount of 4.125% Senior Notes due July 15, 2029 in a private placement.

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Interest on the Senior Notes is payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2022. The Company received net proceeds from the offering of the Senior Notes of $565.7 million after deducting underwriting commissions of $7.2 million and incurred additional issuance costs of $2.1 million. Total debt issuance costs of $9.3 million are being amortized to interest expense using the effective interest method over the term of the Senior Notes. The Company may redeem the Senior Notes, in whole or in part, at any time prior to July 15, 2024 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium and accrued and unpaid interest, if any. The Company may at its election redeem all or a part of the Senior Notes on or after July 15, 2024, on any one or more occasions, at the redemption prices set forth in the indenture governing the Senior Notes (the “Indenture”), plus, in each case, accrued and unpaid interest thereon, if any, to, but excluding, the applicable redemption date. In addition, at any time prior to July 15, 2024, the Company may on any one or more occasions redeem up to 40% of the aggregate principal amount of the Senior Notes outstanding under the Indenture with the net cash proceeds of one or more equity offerings at a redemption price equal to 104.125% of the principal amount of the Senior Notes then outstanding, plus accrued and unpaid interest thereon, if any, to, but excluding, the applicable redemption date. The Company may also at its election redeem the Senior Notes in whole, but not in part, at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, if certain changes in tax law occur as set forth in the Indenture.

If the Company experiences a change of control triggering event (as defined in the Indenture), the Company must offer to repurchase the Senior Notes at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest, if any, to the repurchase date.

The indenture governing the Senior Notes contain covenants limiting the Company’s ability and the ability of certain subsidiaries to create liens on certain assets to secure debt; grant a subsidiary guarantee of certain debt without also providing a guarantee of the Senior Notes; and consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of its assets to, another person. These covenants are subject to a number of limitations and exceptions. Certain of these covenants will not apply during any period in which the notes are rated investment grade by Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services. As of ~~January~~July 31, 2022, the Company was in compliance with all of its financial covenants under the Indenture associated with the Senior Notes.

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The net carrying amount of the Senior Notes was as follows:


	As of ~~January~~July 31, 2022
Principal	$	575,000
Unamortized debt issuance costs	~~(8,729)~~(8,228)
Net carrying amount	$	~~566,271~~566,772

The following table sets forth the interest expense recognized related to the Senior Notes:


	~~Nine~~Three Months Ended ~~January~~July 31, 2022
Contractual interest expense	$	~~13,441~~5,930
Amortization of debt issuance costs	~~554~~252
Total interest expense related to the Senior Notes	$	~~13,995~~6,182

8.Commitments and Contingencies

Cloud Hosting Commitments

During the ~~nine~~three months ended ~~January~~July 31, 2022, there were no material changes, outside the ordinary course of business, to the Company’s contractual obligations and commitments reported in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, ~~2021.~~ 2022.

Letters of Credit

The Company had a total of ~~$3.9~~$2.4 million in letters of credit outstanding in favor of certain landlords for office space as of ~~January~~July 31, 2022.

Legal Matters

From time to time, the Company has become involved in claims and other legal matters arising in the ordinary course of business. The Company investigates these claims as they arise. Although claims are inherently unpredictable, the Company is currently not aware of any matters that, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, results of operations, financial position or cash flows.

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The Company accrues estimates for resolution of legal and other contingencies when losses are probable and reasonably estimable.

Although the results of litigation and claims are inherently unpredictable, the Company does not believe that there were any matters under litigation or claims with a reasonable possibility of the Company incurring a material loss as of ~~January~~July 31, 2022.

Indemnification

The Company enters into indemnification provisions under its agreements with other companies in the ordinary course of business, including business partners, landlords, contractors and parties performing its research and development. Pursuant to these arrangements, the Company agrees to indemnify, hold harmless, and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party as a result of the Company’s activities. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is not material. The Company maintains commercial general liability insurance and product liability insurance to offset certain of the Company’s potential liabilities under these indemnification provisions.

In addition, the Company indemnifies its officers, directors and certain key employees against certain liabilities that may arise as a result of their affiliation with the Company. To date, there have been no claims under any indemnification provisions.

9.Leases

The Company’s leases are composed of corporate office spaces under non-cancelable operating lease agreements that expire at various dates through 2025. The Company does not have any finance leases.

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Lease Costs

Components of lease costs included in the condensed consolidated statement of operations were as follows (in thousands):


		Three Months Ended January 31,				Nine Months Ended January 31,					Three Months Ended July 31,
		2022		2021		2022		2021			2022		2021
Operating lease cost	Operating lease cost	$	2,432	$	2,234	$	7,203	$	6,518	Operating lease cost	$	3,133	$	2,285
Short-term lease cost	Short-term lease cost	581		507		1,571		1,859		Short-term lease cost	783		541
Variable lease cost	Variable lease cost	297		182		804		471		Variable lease cost	230		205
Total lease cost	Total lease cost	$	3,310	$	2,923	$	9,578	$	8,848	Total lease cost	$	4,146	$	3,031

Lease term and discount rate information are summarized as follows:


	As of ~~January~~ July 31, 2022
Weighted average remaining lease term (years)	~~3.17~~2.70
Weighted average discount rate	~~4.85~~4.83	%

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Future minimum lease payments under non-cancelable operating leases on an undiscounted cash flow basis as of ~~January~~July 31, 2022 were as follows (in thousands):


Years Ending April 30,	Years Ending April 30,			Years Ending April 30,
2022 (remaining three months)		$	2,516
2023		8,720
Remainder of 2023				Remainder of 2023	$	8,977
2024	2024	6,666		2024	10,110
2025	2025	5,104		2025	6,086
2026	2026	2,803		2026	3,523
2027				2027	—
Thereafter				Thereafter	—
Total minimum lease payments	Total minimum lease payments	25,809		Total minimum lease payments	28,696
Less imputed interest	Less imputed interest	(1,947)		Less imputed interest	(1,758)
Present value of future minimum lease payments	Present value of future minimum lease payments	23,862		Present value of future minimum lease payments	26,938
Less current lease liabilities	Less current lease liabilities	(8,983)		Less current lease liabilities	(11,408)
Operating lease liabilities, non-current	Operating lease liabilities, non-current	$	14,879	Operating lease liabilities, non-current	$	15,530

10.Ordinary Shares

The Company’s articles of association designated and authorized the Company to issue 165 million ordinary shares at a par value per ordinary share of €0.01 per share.

Each holder of ordinary shares has the right to 1one vote per ordinary share. The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of shares outstanding having priority rights to dividends. No dividends have been declared by the Company’s board of directors from inception through ~~January~~July 31, 2022.

Ordinary Shares Reserved for Issuance

The Company had reserved ordinary shares for issuance as follows:


	As of July 31, 2022	As of April 30, 2022
Stock options issued and outstanding	4,950,306	5,219,124
RSUs issued and outstanding	4,413,451	4,717,548
Remaining shares available for future issuance under the 2012 Plan	22,132,919	17,647,684
Total ordinary shares reserved	31,496,676	27,584,356

As of
January 31, 2022 As of
April 30, 2021
Stock options issued and outstanding 5,486,883 7,611,016
RSUs issued and outstanding 4,034,604 3,301,283
Remaining shares available for future issuance under the 2012 Plan 18,817,211 15,737,819
Total ordinary shares reserved 28,338,698 26,650,118

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Convertible Preference Shares

The ~~Company's~~Company’s board of directors has the authority, for a period of five years from October 10, 2018, without further action by the ~~Company's~~Company’s shareholders, to issue up to 165 million shares of undesignated convertible preference shares with rights and preferences, including voting rights, designated from time to time by the board of directors. As of ~~January~~July 31, 2022, there were no convertible preference shares issued or outstanding.

11.Equity Incentive Plans

In September 2012, the Company’s board of directors adopted and the Company’s shareholders approved the 2012 Stock Option Plan, which was amended and restated in September 2018 and further amended in December 2021 (as amended and restated, the “2012 Plan”). Under the 2012 Plan, the board of directors, the compensation committee, as administrator of the 2012 Plan, and a duly authorized committee may grant stock options and other equity-based awards, such as Restricted Stock Awards (“RSAs”) or Restricted Stock Units (“RSUs”), to eligible employees, directors, and consultants to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants, and to promote the success of the Company’s business. The Company’s board of directors, compensation committee or a duly authorized committee determines the vesting schedule for all equity-based awards. Stock options and RSUs granted to new employees under the 2012 Plan generally vest over four years with 25% of the option shares vesting one year from the vesting commencement date and then ratably over the following 36 months subject to the employees’ continued service to the Company. Refresh grants of stock options to existing employees generally vest ~~monthly~~ over four years, subject to the employees’ continued service to the Company. RSUs granted prior to December 8, 2021 to new employees generally vest over a period of four years with 25% vesting on the one-year anniversary of the vesting start date and the remainder vesting semi-annually over the next three years, subject to the employee’s continued service to the Company. RSUs granted prior to December 8, 2021 to existing employees generally vest semi-annually over a period of four years, subject to the employee’s continued service to the Company. RSUs granted to both new and existing employees on and after December 8, 2021 generally

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~~vest quarterly over a period of four years, subject to the grantee’s~~ continued service to the Company. The Company’s compensation committee may explicitly deviate from the general vesting schedules in its approval of an equity-based award, as it may deem appropriate. Stock options expire ten years after the date of grant. Stock options, RSAs and RSUs that are canceled under certain conditions become available for future grant or sale under the 2012 Plan unless the 2012 Plan is terminated.

The equity awards available for grant were as follows:


			~~Nine~~Three Months Ended ~~January~~ July 31, 2022
Available at beginning of ~~period~~fiscal year			~~15,737,819~~17,647,684
Awards authorized			~~4,526,699~~4,708,746
Options granted			~~(175,733)~~(37,620)
Options cancelled			80,462
RSUs granted			~~(2,136,065)~~(581,862)
~~Stock options cancelled~~			~~358,624~~
RSUs cancelled			~~505,867~~315,175
Shares withheld for taxes			334
Available at end of period			~~18,817,211~~22,132,919

Stock Incentive Plans Assumed in Acquisitions

In connection with ~~its~~ acquisitions ~~of Cmd and build.security,~~completed in prior years, the Company assumed certain unvested stock options ~~issued under the Cmd Stock Option Plan and Build 2020 Share Incentive Plan~~ that were outstanding on the date of the respective ~~acquisition.~~ acquisitions.

The assumed stock options will continue to be outstanding and will be governed by the provisions of their respective plan and are included in the stock option activity table below.

Stock Options

The following table summarizes stock option activity (in thousands, except share and per share data):


		Stock Options Outstanding							Stock Options Outstanding
		Number of Stock Options Outstanding	Weighted- Average Exercise Price		Remaining Contractual Term (in years)	Aggregate Intrinsic Value			Number of Stock Options Outstanding	Weighted- Average Exercise Price		Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Balance as of April 30, 2021		7,611,016	$	20.34	6.66	$	768,517
Stock options assumed in acquisitions		63,846	$	10.20

Balance as of April 30, 2022								Balance as of April 30, 2022	5,219,124	$	29.41	6.22	$	266,021
Stock options granted	Stock options granted	175,733	$	128.31				Stock options granted	37,620	$	78.30
Stock options exercised	Stock options exercised	(2,004,188)	$	13.70				Stock options exercised	(225,263)	$	15.19
Stock options cancelled	Stock options cancelled	(358,624)	$	31.70				Stock options cancelled	(80,462)	$	79.88
Stock options assumed in acquisition cancelled	Stock options assumed in acquisition cancelled	(900)	$	39.68				Stock options assumed in acquisition cancelled	(713)	$	41.88
Balance as of January 31, 2022		5,486,883	$	25.37	6.03	$	387,598
Exercisable as of January 31, 2022		4,148,435	$	17.51	5.66	$	316,800
Balance as of July 31, 2022								Balance as of July 31, 2022	4,950,306	$	29.61	5.98	$	267,301
Exercisable as of July 31, 2022								Exercisable as of July 31, 2022	3,941,611	$	20.31	5.52	$	240,555

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Stock options exercisable include ~~29,167~~4,167 stock options that were unvested as of ~~January~~July 31, 2022.

Aggregate intrinsic value represents the difference between the exercise price of the stock options to purchase ordinary shares and the fair value of the Company’s ordinary shares. The weighted-average grant-date fair value per share of stock options ~~assumed related to the Cmd and build.security acquisitions was $122.13 for the nine months ended January 31, 2022. The weighted-average grant-date fair value per share of stock options~~ granted was ~~$71.17 for each of the three and nine months ended January 31, 2022. The weighted-average grant-date fair value of stock options granted was $83.71 and $78.06~~$46.44 for the three ~~and nine~~ months ended ~~January~~July 31, ~~2021, respectively.~~2022.

As of ~~January~~July 31, 2022, the Company had unrecognized stock-based compensation expense of ~~$38.4~~$38.9 million related to unvested stock options that the Company expects to recognize over a weighted-average period of ~~1.84~~2.21 years.

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RSUs

The following table summarizes RSU activity ~~for~~under the 2012 Plan:


		Number of Awards	Weighted- Average Grant Date Fair Value			Number of Awards	Weighted-Average Grant Date Fair Value
Outstanding and unvested at April 30, 2021		3,301,283	$	98.74

Outstanding and unvested at April 30, 2022					Outstanding and unvested at April 30, 2022	4,717,548	$	108.44
RSUs granted	RSUs granted	2,136,065	$	133.30	RSUs granted	581,862	$	78.29
RSUs released	RSUs released	(896,877)	$	91.62	RSUs released	(570,784)	$	101.66
RSUs cancelled	RSUs cancelled	(505,867)	$	102.77	RSUs cancelled	(315,175)	$	110.83
Outstanding and unvested at January 31, 2022		4,034,604	$	117.60
Outstanding and unvested at July 31, 2022					Outstanding and unvested at July 31, 2022	4,413,451	$	105.18

As of ~~January~~July 31, 2022, the Company had unrecognized stock-based compensation expense of ~~$438.8~~$428.2 million related to RSUs that the Company expects to recognize over a weighted-average period of ~~3.06~~2.74 years.

Stock-Based Compensation Expense

Total stock-based compensation expense recognized in the Company’s condensed consolidated statements of operations was as follows (in thousands):

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
Cost of revenue—cost of subscription—self-managed and SaaS $ 2,064 $ 1,839 $ 6,262 $ 5,065
Cost of revenue—professional services 1,726 1,359 4,593 3,287
Research and development 16,029 9,516 41,784 24,309
Sales and marketing 12,545 8,372 30,798 22,519
General and administrative 5,029 4,141 14,116 10,125
Stock-based compensation expense, net of amounts capitalized 37,393 25,227 97,553 65,305
Capitalized stock-based compensation expense 70 — 152 —
Total stock-based compensation expense $ 37,463 $ 25,227 $ 97,705 $ 65,305

~~Total stock-based compensation expense for the nine months ended January 31, 2022 includes a charge of $0.5 million related to an expense arising from business combinations.~~


	Three Months Ended July 31,
	2022		2021
Cost of revenue
Subscription	$	2,160	$	2,134
Services	2,225		1,575
Research and development	18,710		12,097
Sales and marketing	15,647		9,850
General and administrative	8,141		4,522
Stock-based compensation expense, net of amounts capitalized	46,883		30,178
Capitalized stock-based compensation expense	—		28
Total stock-based compensation expense	$	46,883	$	30,206

12.Net Loss Per Share Attributable to Ordinary Shareholders

The following table sets forth the computation of basic and diluted net loss per share attributable to ordinary shareholders (in thousands, except share and per share data):


		Three Months Ended January 31,				Nine Months Ended January 31,					Three Months Ended July 31,
		2022		2021		2022		2021			2022		2021
Numerator:	Numerator:									Numerator:
Net loss	Net loss	$	(56,726)	$	(37,974)	$	(138,238)	$	(86,133)	Net loss	$	(69,551)	$	(34,489)
Denominator:	Denominator:									Denominator:
Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted	Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted	93,015,185		88,341,038		92,140,919		86,296,028		Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted	94,621,365		91,201,372
Net loss per share attributable to ordinary shareholders, basic and diluted	Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.61)	$	(0.43)	$	(1.50)	$	(1.00)	Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.74)	$	(0.38)

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Since the Company is in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods. The following outstanding potentially dilutive ordinary shares were excluded from the computation of diluted net loss per share attributable to ordinary shareholders for the periods presented because the impact of including them would have been antidilutive:

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		Nine Months Ended January 31,			Three Months Ended July 31,
		2022	2021		2022	2021
Stock options	Stock options	5,486,883	8,494,795	Stock options	4,950,306	6,698,415
RSUs	RSUs	4,034,604	3,345,305	RSUs	4,413,451	3,148,574
Contingently issuable shares		—	235,031

Total	Total	9,521,487	12,075,131	Total	9,363,757	9,846,989

13.Income Taxes

The Company is incorporated in the Netherlands but operates in various countries with differing tax laws and rates. The Company recorded a provision for income taxes of ~~$3.8~~$2.8 million and ~~$1.1~~$2.7 million for the three months ended ~~January 31, 2022 and 2021, respectively and $9.3 million and $2.2 million for the nine months ended January~~July 31, 2022 and 2021, respectively. The provision for income taxes was primarily due to foreign taxes. The calculation of income taxes is based upon the estimated annual effective tax rates for the year applied to the current period loss before tax plus the tax effect of any significant unusual items, discrete events or changes in tax law.

The Company assesses uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainties in Tax. The Company anticipates that the amount of reasonably possible unrecognized tax benefits that could decrease over the next twelve months due to the expiration of certain statutes of limitations and settlement of tax audits is not material to the Company’s interim unaudited condensed consolidated financial statements.

14.Employee Benefit Plans

The Company has a defined-contribution plan in the U.S. intended to qualify under Section 401 of the Internal Revenue Code (the “401(k) Plan”). The Company has contracted with a third-party provider to act as a custodian and trustee, and to process and maintain the records of participant data. Substantially all the expenses incurred for administering the 401(k) Plan are paid by the Company. This 401(k) Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company makes contributions to the 401(k) Plan up to 6% of the participating employee’s W-2 earnings and wages. The Company recorded ~~$3.7~~$4.6 million and ~~$2.7~~$3.5 million of expense related to the 401(k) Plan during the three months ended ~~January 31, 2022 and 2021, respectively and $10.8 million and $8.2 million for the nine months ended January~~July 31, 2022 and 2021, respectively.

The Company also has defined-contribution plans in certain other countries for which the Company recorded ~~$1.8~~$2.3 million and ~~$1.5~~$1.6 million of expense during the three months ended ~~January~~July 31, 2022 and 2021, ~~respectively and $5.1 million and $3.8 million for the nine months ended January 31, 2022 and 2021,~~ respectively.

15.Segment Information

The following table summarizes the Company’s total revenue by geographic area based on the billing address of the customers (in thousands):


		Three Months Ended January 31,				Nine Months Ended January 31,					Three Months Ended July 31,
		2022		2021		2022		2021			2022		2021
United States	United States	$	125,831	$	83,153	$	344,480	$	235,188	United States	$	145,367	$	103,140
Rest of world	Rest of world	98,113		73,962		278,539		195,691		Rest of world	104,714		89,955
Total revenue	Total revenue	$	223,944	$	157,115	$	623,019	$	430,879	Total revenue	$	250,081	$	193,095

Other than the United States, no other individual country exceeded 10% or more of total revenue during the periods presented.

2422

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The following table presents the Company’s long-lived assets, including property and equipment, net, and operating lease right-of-use assets, by geographic region (in thousands):


		As of January 31, 2022		As of April 30, 2021			As of July 31, 2022		As of April 30, 2022
United States	United States	$	19,724	$	23,443	United States	$	19,840	$	22,112
United Kingdom	United Kingdom	5,303		7,151		United Kingdom	3,853		4,478
The Netherlands		2,038		2,975
India						India	2,907		3,407
Rest of world	Rest of world	1,128		776		Rest of world	4,712		2,647
Total long-lived assets	Total long-lived assets	$	28,193	$	34,345	Total long-lived assets	$	31,312	$	32,644

2523

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Management’s Discussion and Analysis of Financial Condition and Results of Operations and audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended April 30, ~~2021.~~2022. As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q. Our fiscal year end is April 30, and our fiscal quarters end on July 31, October 31, January 31, and April 30. Our fiscal year ended April 30, ~~2021~~2022 is referred to as fiscal ~~2021,~~2022, and our fiscal year ending April 30, ~~2022~~2023 is referred to as fiscal ~~2022.~~2023.

Overview

Elastic is a ~~search company. We deliver technology that enables users~~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 ~~search through massive~~almost instantly find insights from large amounts of ~~structured~~data and ~~unstructured data for a wide range of use cases.~~ take action. 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.

Our ~~primary offering~~platform is built on the Elastic Stack, a powerful set of software products that ingest ~~and store~~ data from any source, ~~and~~ in any format, and perform search, analysis, and visualization ~~in milliseconds or less.~~of that data. 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 ~~is designed for direct use~~can be used by developers to power a variety of use cases. We also offer three software solutions – Enterprise Search, Observability, and Security – built on the Elastic Stack. Our solutions are designed to be deployed everywhere: in public or private clouds, in hybrid environments, or in traditional on-premises environments. Our products are used by individual developers and organizations of all sizes across a wide range of industries.

~~Elasticsearch is the heart of the Elastic Stack.~~ It is a distributed, real-time search and analytics engine and ~~datastore~~data store for ~~exploring~~ all types of data including textual, numerical, geospatial, structured, and unstructured. ~~The first~~

We make our platform available as a hosted, managed service. Customers can also deploy our platform across hybrid clouds, public ~~release~~or private clouds, and multi-cloud environments. 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 Elasticsearch was in 2010 by our co-founder Shay Banon as an open source project. The Company was formed in 2012. Since then, we have added new products, released new features, acquired companies, and created new solutions to expand the functionality of our products.data being generated.

Our business model is based primarily on a combination of ~~free~~a paid Elastic-managed hosted service offering and paid and free proprietary self-managed software. ~~We market~~Our paid offerings for our platform are sold via subscription through resource-based pricing, and ~~distribute the~~all customers and users have access to all solutions. In Elastic ~~Stack and~~Cloud, our ~~solutions using~~family of cloud-based offerings under which we offer our software as a ~~free and open distribution strategy. Developers are able~~hosted, managed service, we offer various subscription tiers tied to different features. For users who download our software, ~~directly from our website. Some~~we make some of the features of our software ~~can be downloaded~~available for free, allowing us to engage with a broad community of developers and ~~used free~~practitioners and introduce them to the value of ~~charge. Others are only available through paid subscriptions, which include access to specific proprietary features and also include support. These paid features can be unlocked without~~ the ~~need to re-deploy the software. There is no free subscription tier in our cloud offerings, where all subscriptions are paid.~~

Elastic Stack. 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 ~~open distribution strategy drives~~Elastic-hosted services. All of these actions help us build a ~~number of benefits~~powerful commercial business model that we believe is optimized for our users, our customers, and our company. It facilitates rapid and efficient developer adoption, particularly by empowering individual developers to download and use our software without payment, registration, or the friction of a formal sales interaction. It fosters a vibrant developer community around our products and solutions, which drives adoption of our products and increased interaction among users. Further, this approach enables community review of our code and products, which allows us to improve the reliability and security of our software.

During the nine months ended January 31, 2022, we acquired 100% of the share capital of Cmd, build.security and Optimyze for a combined total consideration of $134.9 million. With these acquisitions, we will be able to extend cloud security protections for our customers from endpoint to cloud workload and provide our customers with cloud security protections from build-time, to deployment-time, to runtime, and extend our Observability solution to enable “always on” continuous profiling for infrastructure, applications, and services.product-led growth.

We generate revenue primarily from sales of subscriptions ~~for~~to our ~~software.~~platform. We offer various paid subscription tiers that provide different levels of rights to use proprietary features and access to support. We do not sell support separately. Our subscription agreements ~~for self-managed and Elastic Cloud deployments typically have terms of~~range from one to three years and weare usually ~~bill for them~~billed annually in advance. Our subscription agreements are both term-based and consumption-based, with the vast majority of Elastic Cloud subscriptions being consumption-based. 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. Subscriptions accounted for 93% and 92% of total revenue ~~in each of~~for the ~~nine~~three months ended ~~January~~July 31, 2022 and ~~2021.~~2021, respectively. We also generate revenue from consulting and training services.

We ~~had~~ ~~over 17,900~~make it easy for users to begin using our products in order to drive rapid adoption. Users can either sign up for a free trial on Elastic Cloud or download our software directly from our website without any sales interaction, and immediately begin using the full set of features. Users can also sign up for Elastic Cloud through public cloud marketplaces. We conduct low-touch campaigns to keep users and customers asengaged once they have begun using Elastic Cloud or have downloaded our software. As of ~~January~~July 31, 2022, we had over 19,300 customers compared to over ~~13,800~~16,000 customers as of ~~January~~July 31, 2021. 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.

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Many of these customers start with limited initial spending, but can significantly grow their spending. 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. The number of customers who represented greater than $100,000 in annual contract value (“ACV”) was over 1,010 and over 780 as of July 31, 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. Month-to-month subscriptions are not included in the calculation of ACV. ~~The~~

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~~number of customers who represented greater than $100,000 in ACV was over 890 as of January 31, 2022 compared to over 670 as of January 31, 2021.~~

We engage in various sales and marketing efforts to extend our free and open distribution model. We employ multi-touch marketing campaigns to nurture our users and customers and keep them engaged after they download our software. Additionally, we maintain direct sales efforts focused on users and customers who have adopted our software, as well as departmental decision-makers and senior executives who have broad purchasing power in their organizations. Our sales teams are organized primarily ~~segmented~~ by ~~geographies~~geography and secondarily by ~~the employee count of our customers.~~customer segments. They focus on both initial conversion of users into customers and additional sales to existing customers. In addition to our direct sales efforts, we also maintain partnerships to further extend our reach and awareness of our products around the world.

We continue to make substantial investments in developing the Elastic Stack and our solutions and expanding our global sales and marketing footprint. With a distributed team spanning over 3540 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 ~~2,888~~3,056 employees as of ~~January~~July 31, 2022.

In July 2021, we issued $575.0 million aggregate principal amount of 4.125% Senior Notes due July 15, 2029 (the “Senior Notes”) in a private placement. We intend to use the net proceeds from the offering of the Senior Notes for general corporate purposes, which may include capital expenditures, investments and working capital. In addition, in the past we have considered, and may continue to consider, acquisitions and strategic transactions, and we may use the net proceeds of this offering for such purposes.

COVID-19

The ongoing COVID-19 pandemic continues to evolve and negatively impact worldwide economic activity. Efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide, including in many of the regions in which we sell our products and services and conduct our business operations, negatively impacting worldwide economic activity. The impact of the COVID-19 pandemic has varied significantly across different industries with certain industries experiencing increased demand for their products and services, while others have struggled to maintain demand for their products and services consistent with historical levels. The ongoing impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and spread of the virus, success of preventative measures to contain or mitigate the spread of the virus and emerging variants, effectiveness, distribution and acceptance of COVID-19 vaccines, impact on our customers and our sales cycles, impact on our customer, employee or industry events, effect on our vendors, and the uneven impact of the COVID-19 pandemic on certain industries, all of which continue to remain uncertain and cannot be predicted.

The continuing COVID-19 pandemic has resulted in a global slowdown of economic activity and its impact has varied significantly across different industries with certain industries experiencing increased demand for their products and services, while others have struggled to maintain demand for their products and services consistent with historical levels. There have been delays in purchasing decisions from existing and prospective customers, longer sales cycles, delayed implementation of professional services, reduced renewals of subscriptions by existing customers, and changes in approaches to creating sales pipeline in the absence of in-person marketing events, resulting in headwinds for calculated billings and our Net Expansion Rate.

Notwithstanding the potential and actual adverse impacts described above, as the pandemic has caused more of our customers to shift to a virtual workforce or accelerate their digital transformation efforts, we believe the value of our solutions has become even more evident. In addition, we have benefited from lower spending on travel by our employees due to COVID-19 travel restrictions and from holding events virtually, however we expect live events and travel costs to trend back higher in the near-term.

In response to the COVID-19 pandemic and in an effort to focus on maintaining business continuity and preparing for the future and long-term success of our business, we have taken precautionary measures intended to help minimize the risk of the virus to our employees, customers, and the communities in which we operate, including modifying our business practices, such as suspending employee travel, adapting employee work locations, and holding events and trainings virtually. Further, we also temporarily reduced the pace of investments in our business in response to the COVID-19 pandemic in the first quarter of fiscal 2021, but began to gradually increase our investments in our business ~~since then.~~in subsequent quarters. We intend to continue to ~~maintain a similar pace of~~make additional investments in the business ~~throughout~~in the remainder of fiscal ~~2022.~~2023. 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 II, Item 1A of this Quarterly Report on Form 10-Q 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. 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. 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 three months ended July 31, 2022 and 2021, Elastic Cloud contributed 39% and 32% 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. However, we expect that an increase in the relative contribution of Elastic Cloud to our business will have a modest adverse impact on our gross margin as a result of the associated third-party hosting costs.

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Growing the Elastic community.Our strategy consists of providing access to source available software, on both a ~~free~~paid and ~~paid~~free basis, and fostering a community of users and developers. Our strategy is designed to pursue what we believe to be significant untapped potential for the use of our technology. After developers begin to use our software and start to participate in our developer community, they become more likely to apply our technology to additional use cases and evangelize our technology within their organizations. This reduces the time required for our sales force to educate potential leads on our solutions. In order to capitalize on our opportunity, we intend to make further investments to keep the Elastic Stack accessible and well known to software developers around the world. We intend to continue to invest in our products and support and engage our user base and developer community through content, events, and conferences in the U.S. and internationally. 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. We believe that releasing additional features of the Elastic Stack, including our solutions, drives usage of our products and ultimately drives our growth. To that end, we plan to continue to invest in building new features and solutions that expand the capabilities of the Elastic Stack. These investments may adversely affect our operating results prior to generating benefits, to the extent that they ultimately generate benefits at all.

Growing our customer base by converting users of our software to paid subscribers. Our financial performance depends on growing our paid customer base by converting free users of our software into paid subscribers. Our distribution model has resulted in rapid adoption by developers around the world. We have invested, and expect to continue to invest, heavily in sales and marketing efforts to convert additional free users to paid subscribers. Our investment in sales and marketing is significant given our large and diverse user base. The investments are likely to occur in advance of the anticipated benefits resulting from such investments, such that they may adversely affect our operating results in the near term.

Expanding within our current customer base. Our future growth and profitability depend on our ability to drive additional sales to existing customers. 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.

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. To calculate an expansion rate as of the end of a given month, we start with the annualized spend from all such customers as of twelve months prior to that month end, or Prior Period Value. 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. We then calculate the annualized spend from these same customers as of the given month end, or Current Period Value, which includes any growth in the value of their subscriptions or usage and is net of contraction or attrition over the prior 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. The Net Expansion Rate includes the dollar-weighted value of our subscriptions or usage that expand, renew, contract, or attrit. For instance, if each customer had a one-year subscription and renewed its subscription for the exact same amount, then the Net Expansion Rate would be 100%. 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 three months ended ~~January~~July 31, 2022. Until April 30, 2021, Net Expansion Rate was based on ACV, regardless of customers’ actual usage, and also did not include customers on month-to-month subscriptions. To better reflect actual customer behavior, we modified our Net Expansion Rate calculation to incorporate customers’ actual spending patterns and include customers on month-to-month subscriptions. The impact of this change on prior reported periods is immaterial.

As large organizations expand their use of the Elastic Stack across multiple use cases, projects, divisions and users, they often begin to require centralized provisioning, management and monitoring across multiple deployments. To satisfy these requirements, our Enterprise subscription tier provides access to key orchestration and deployment management capabilities. We will continue to focus some of our direct sales efforts on driving adoption of our paid offerings.

~~Increasing adoption of Elastic Cloud.~~ Elastic Cloud, our family of hosted offerings that includes Elasticsearch Service and Site Search Service, 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. Elastic Cloud contributed 34% and 27% to our total revenue for the nine months ended January 31, 2022 and 2021, respectively. We believe that offering a hosted deployment alternative is important for achieving our long-term growth potential, and we expect Elastic Cloud’s contribution to our subscription revenue to increase over time. However, we expect that an increase in the relative contribution of Elastic Cloud to our business will have a modest adverse impact on our gross margin as a result of the associated third-party hosting costs.

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Components of Results of Operations

Revenue

Subscription. Our revenue is primarily generated through the sale of subscriptions to software, which is either self-managed by the user or hosted and managed by us in the cloud. Subscriptions provide the right to use paid proprietary software features and access to support for our paid and unpaid software.

A portion of the revenue from self-managed subscriptions is generally recognized up front at the point in time when the license is ~~delivered. This revenue is presented as License – self-managed in our consolidated statements of operations. The~~delivered and the remainder ~~of revenue from self-managed subscriptions~~ is recognized ratably over the subscription ~~term while revenue~~term. Revenue from subscriptions that require access to the cloud or that are hosted and managed by us ~~or by a partner on our behalf in the cloud~~ is recognized ratably over the subscription term or on a usage ~~basis;~~

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basis for consumption-based arrangements; both are presented within Subscription ~~– self-managed and SaaS~~revenue in our condensed consolidated statements of operations.

~~Professional services.~~ Services.~~Professional services~~ Services is composed of consulting services as well as public and private training. ~~Consulting services are generally time-based arrangements.~~ Revenue for ~~professional~~ services is recognized as these services are ~~performed.~~delivered.

Cost of Revenue

Subscription.~~Cost of license~~ – ~~self-managed consists of amortization of certain intangible assets.~~ 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. 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. ~~services~~. 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.

Gross profit and gross margin. ~~profitandgrossmargin~~. Gross profit represents revenue less cost of revenue. 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. 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~~development.. Research and development expense mainly consists of personnel costs and allocated overhead costs for employees and contractors. 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~~marketing.. 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. 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~~administrative.. General and administrative expense mainly consists of personnel costs for our management, finance, legal, human resources, and other administrative employees. Our general and administrative expense also includes professional fees, accounting fees, audit fees, tax services and legal fees, as well as insurance, allocated overhead costs, and other corporate expenses. We expect our general and administrative expense to increase in absolute dollars as we

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increase the size of our general and administrative functions to support the growth of our business. ~~We also anticipate that we will continue to incur additional costs for employees and third-party consulting services related to operating as a public company.~~

Other ~~Income (Expense),~~Expense, Net

Other ~~income,~~expense, net primarily consists of interest expense, gains and losses from transactions denominated in a currency other than the functional currency, ~~interest income~~ and interest ~~expense.~~income.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes related to the Netherlands, U.S. federal, state and foreign jurisdictions in which we conduct business. 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.

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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. The period to period comparison of results is not necessarily indicative of results for future periods. ~~The following tables set forth our results of operations for the periods presented in dollars:~~

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
(in thousands)
Revenue
License - self-managed $ 20,119 $ 15,280 $ 54,457 $ 45,673
Subscription - self-managed and SaaS 189,495 131,969 522,599 357,127
Total subscription revenue 209,614 147,249 577,056 402,800
Professional services 14,330 9,866 45,963 28,079
Total revenue 223,944 157,115 623,019 430,879
Cost of revenue (1)(2)(3)

Cost of license - self-managed 501 346 1,242 1,039
Cost of subscription - self-managed and SaaS 47,076 31,426 126,097 86,464
Total cost of revenue - subscription 47,577 31,772 127,339 87,503
Cost of professional services 13,707 10,196 37,491 27,744
Total cost of revenue 61,284 41,968 164,830 115,247
Gross profit 162,660 115,147 458,189 315,632
Operating expenses(1)(2)(3)(4)

Research and development 71,749 51,400 194,894 143,766
Sales and marketing 105,069 71,087 288,055 191,712
General and administrative 31,691 27,121 89,298 72,555
Total operating expenses 208,509 149,608 572,247 408,033
Operating loss (1)(2)(3)(4)
(45,849) (34,461) (114,058) (92,401)
Other income (expense), net
Interest expense (6,175) (65) (14,327) (78)
Other income (expense), net (861) (2,312) (509) 8,502
Loss before income taxes (52,885) (36,838) (128,894) (83,977)
Provision for income taxes 3,841 1,136 9,344 2,156
Net loss $ (56,726) $ (37,974) $ (138,238) $ (86,133)

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	Three Months Ended July 31,
	2022		2021
	(in thousands)
Revenue
Subscription	$	231,814	$	177,185
Services	18,267		15,910
Total revenue	250,081		193,095
Cost of revenue (1)(2)(3)
Subscription	53,551		37,520
Services	19,428		12,142
Total cost of revenue	72,979		49,662
Gross profit	177,102		143,433
Operating expenses (1)(2)(3)(4)
Research and development	78,649		59,382
Sales and marketing	125,006		88,033
General and administrative	34,088		27,052
Total operating expenses	237,743		174,467
Operating loss (1)(2)(3)(4)	(60,641)		(31,034)
Other expense, net
Interest expense	(6,401)		(1,820)
Other income, net	339		1,018
Loss before income taxes	(66,703)		(31,836)
Provision for (benefit from) income taxes	2,848		2,653
Net loss	$	(69,551)	$	(34,489)

(1) Includes stock-based compensation expense as follows:


		Three Months Ended January 31,				Nine Months Ended January 31,
		2022		2021		2022		2021				Three Months Ended July 31,
												2022		2021
		(in thousands)								(in thousands)
Cost of revenue	Cost of revenue										Cost of revenue
Cost of subscription - self managed and SaaS		$	2,064	$	1,839	$	6,262	$	5,065
Cost of professional services		1,726		1,359		4,593		3,287
Subscription											Subscription	$	2,160	$	2,134
Services											Services	2,225		1,575
Research and development	Research and development	16,029		9,516		41,784		24,309			Research and development	18,710		12,097
Sales and marketing	Sales and marketing	12,545		8,372		30,798		22,519			Sales and marketing	15,647		9,850
General and administrative	General and administrative	5,029		4,141		14,116		10,125			General and administrative	8,141		4,522
Total stock-based compensation expense	Total stock-based compensation expense	$	37,393	$	25,227	$	97,553	$	65,305		Total stock-based compensation expense	$	46,883	$	30,178

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(2)Includes employer payroll taxes on employee stock transactions as follows:

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
(in thousands)
Cost of revenue
Cost of subscription - self managed and SaaS $ 147 $ 267 $ 474 $ 487
Cost of professional services 113 322 591 424
Research and development 663 1,243 2,916 2,702
Sales and marketing 512 1,723 3,874 3,494
General and administrative 208 2,130 779 3,329
Total employer payroll taxes on employee stock-based transactions $ 1,643 $ 5,685 $ 8,634 $ 10,436


	Three Months Ended July 31,
	2022		2021
	(in thousands)
Cost of Revenue
Subscription	$	223	$	262
Services	144		364
Research and development	962		1,598
Sales and marketing	775		1,691
General and administrative	278		484
Total employer payroll tax on stock transactions	$	2,382	$	4,399

(3)Includes amortization of acquired intangible assets as follows:

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
(in thousands)
Cost of revenue
Cost of license - self-managed $ 501 $ 346 $ 1,242 $ 1,039
Cost of subscription - self-managed and SaaS 2,545 1,764 6,314 5,289
Sales and marketing 1,231 1,428 4,088 4,302
Total amortization of acquired intangibles $ 4,277 $ 3,538 $ 11,644 $ 10,630


	Three Months Ended July 31,
	2022		2021
	(in thousands)
Cost of Revenue
Subscription	$	2,964	$	2,012
Sales and marketing	1,231		1,429
Total amortization of acquired intangibles	$	4,195	$	3,441

(4) Includes acquisition-related expenses as follows:


		Three Months Ended January 31,				Nine Months Ended January 31,
		2022		2021		2022		2021				Three Months Ended July 31,
												2022		2021
		(in thousands)								(in thousands)
Research and development	Research and development	$	2,713	$	—	$	3,695	$	—		Research and development	$	2,480	$	—

General and administrative	General and administrative	18		—		1,304		—			General and administrative	37		226
Total acquisition-related expenses	Total acquisition-related expenses	$	2,731	$	—	$	4,999	$	—		Total acquisition-related expenses	$	2,517	$	226

3129

Table of Contents

The following table sets forth selected condensed consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:


		Three Months Ended January 31,				Nine Months Ended January 31,				Three Months Ended July 31,
		2022		2021		2022		2021				2022		2021
Revenue	Revenue										Revenue
License - self-managed		9	%	10	%	9	%	10	%
Subscription - self-managed and SaaS		85	%	84	%	84	%	83	%
Total subscription revenue		94	%	94	%	93	%	93	%
Professional services		6	%	6	%	7	%	7	%
Subscription											Subscription	93	%	92	%
Services											Services	7	%	8	%
Total revenue	Total revenue	100	%	100	%	100	%	100	%		Total revenue	100	%	100	%
Cost of revenue (1)(2)(3)	Cost of revenue (1)(2)(3)										Cost of revenue (1)(2)(3)
Cost of license - self-managed		0	%	0	%	0	%	0	%
Cost of subscription - self-managed and SaaS		21	%	20	%	20	%	20	%
Total cost of revenue - subscription		21	%	20	%	20	%	20	%
Cost of professional services		6	%	7	%	6	%	7	%
Subscription											Subscription	21	%	19	%
Services											Services	8	%	7	%
Total cost of revenue	Total cost of revenue	27	%	27	%	26	%	27	%		Total cost of revenue	29	%	26	%
Gross profit	Gross profit	73	%	73	%	74	%	73	%		Gross profit	71	%	74	%
Operating expenses(1)(2)(3)(4)	Operating expenses(1)(2)(3)(4)										Operating expenses (1)(2)(3)(4)
Research and development	Research and development	32	%	33	%	31	%	33	%		Research and development	31	%	31	%
Sales and marketing	Sales and marketing	47	%	45	%	46	%	45	%		Sales and marketing	50	%	45	%
General and administrative	General and administrative	14	%	17	%	15	%	17	%		General and administrative	14	%	14	%
Total operating expenses	Total operating expenses	93	%	95	%	92	%	95	%		Total operating expenses	95	%	90	%
Operating loss (1)(2)(3)(4)	Operating loss (1)(2)(3)(4)	(20)	%	(22)	%	(18)	%	(22)	%		Operating loss (1)(2)(3)(4)	(24)	%	(16)	%
Other income (expense), net
Other expense, net											Other expense, net
Interest expense	Interest expense	(3)	%	0	%	(2)	%	0	%		Interest expense	(2)	%	(1)	%
Other income (expense), net		0	%	(1)	%	0	%	3	%
Other income, net											Other income, net	0	%	1	%
Loss before income taxes	Loss before income taxes	(23)	%	(23)	%	(20)	%	(19)	%		Loss before income taxes	(26)	%	(16)	%
Provision for income taxes		2	%	1	%	2	%	1	%
Provision for (benefit from) income taxes											Provision for (benefit from) income taxes	2	%	2	%
Net loss	Net loss	(25)	%	(24)	%	(22)	%	(20)	%		Net loss	(28)	%	(18)	%

(1) Includes stock-based compensation expense as follows:

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
Cost of revenue
Cost of subscription - self managed and SaaS 1 % 1 % 1 % 1 %
Cost of professional services 1 % 1 % 1 % 1 %
Research and development 7 % 6 % 7 % 6 %
Sales and marketing 6 % 5 % 5 % 5 %
General and administrative 2 % 3 % 2 % 2 %
Total stock-based compensation expense 17 % 16 % 16 % 15 %

~~Table of Contents~~


	Three Months Ended July 31,
	2022		2021
Cost of revenue
Subscription	1	%	1	%
Services	1	%	1	%
Research and development	8	%	6	%
Sales and marketing	6	%	5	%
General and administrative	3	%	3	%
Total stock-based compensation expense	19	%	16	%

(2) Includes employer payroll taxes on employee stock transactions as ~~follows~~:follows:

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
Cost of revenue
Cost of subscription - self managed and SaaS 0 % 0 % 0 % 0 %
Cost of professional services 0 % 0 % 0 % 0 %
Research and development 1 % 1 % 0 % 0 %
Sales and marketing 0 % 1 % 1 % 1 %
General and administrative 0 % 2 % 0 % 1 %
Total employer payroll taxes on employee stock-based transactions 1 % 4 % 1 % 2 %


	Three Months Ended July 31,
	2022		2021
Cost of Revenue
Subscription	—	%	—	%
Services	—	%	—	%
Research and development	1	%	1	%
Sales and marketing	—	%	1	%
General and administrative	—	%	—	%
Total employer payroll tax on stock transactions	1	%	2	%

Table of Contents

(3) Includes amortization of acquired intangible assets as follows:

Three Months Ended January 31, Nine Months Ended January 31,
2022 2021 2022 2021
Cost of revenue
Cost of license - self-managed 0 % 0 % 0 % 0 %
Cost of subscription - self-managed and SaaS 1 % 1 % 1 % 1 %
Sales and marketing 1 % 1 % 1 % 1 %
Total amortization of acquired intangibles 2 % 2 % 2 % 2 %


	Three Months Ended July 31,
	2022		2021
Cost of Revenue
Subscription	1	%	1	%
Sales and marketing	—	%	1	%
Total amortization of acquired intangibles	1	%	2	%

(4) Includes acquisition-related expenses as follows:


		Three Months Ended January 31,				Nine Months Ended January 31,				Three Months Ended July 31,
		2022		2021		2022		2021				2022		2021
Research and development	Research and development	1	%	0	%	1	%	0	%		Research and development	1	%	—	%

General and administrative	General and administrative	0	%	0	%	0	%	0	%		General and administrative	—	%	—	%
Total acquisition-related expenses	Total acquisition-related expenses	1	%	0	%	1	%	0	%		Total acquisition-related expenses	1	%	—	%

Comparison of Three Months Ended ~~January~~July 31, 2022 and 2021

Revenue

Three Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Revenue
License - self-managed $ 20,119 $ 15,280 $ 4,839 32 %
Subscription - self-managed and SaaS 189,495 131,969 57,526 44 %
Total subscription revenue 209,614 147,249 62,365 42 %
Professional services 14,330 9,866 4,464 45 %
Total revenue $ 223,944 $ 157,115 $ 66,829 43 %


	Three Months Ended July 31,				Change
	2022		2021		$		%
	(in thousands)
Revenue
Subscription	$	231,814	$	177,185	$	54,629	31	%
Services	18,267		15,910		2,357		15	%
Total revenue	$	250,081	$	193,095	$	56,986	30	%

~~Total~~

Subscription revenue increased by ~~$66.8~~$54.6 million, or ~~43%~~31%, infor the three months ended ~~January 31, 2022, compared to the same period of the prior year.~~

~~Total subscription revenue increased $62.4 million, or 42%, in the three months ended January~~July 31, 2022 compared to the same period of the prior year. The increase in revenue was primarily caused by volume-driven increases from new business, as existing customers purchased additional subscriptions, and we grew our subscription customer base to over ~~17,900~~19,300 customers for the three months ended July 31, 2022 compared to over ~~13,800~~16,000 customers in the same period of the prior year.

~~Professional services~~Services revenue increased by ~~$4.5~~$2.4 million, or ~~45%~~15%, infor the three months ended ~~January~~July 31, 2022 compared to the same period of the prior year. The increase in ~~professional~~ services revenue was attributable to increased adoption of our ~~professional~~ services offerings.

Cost of Revenue and Gross Margin


	Three Months Ended July 31,						Change
	2022			2021			$		%
	(in thousands)
Cost of revenue
Subscription	$	53,551		$	37,520		$	16,031	43	%
Services	19,428			12,142			7,286		60	%
Total cost of revenue	$	72,979		$	49,662		$	23,317	47	%
Gross profit	$	177,102		$	143,433		$	33,669	23	%
Gross margin:
Subscription	77		%	79		%
Services	(6)		%	24		%
Total gross margin	71		%	74		%

Table of Contents

Cost of ~~Revenue and Gross Margin~~

Three Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Cost of revenue
Cost of license - self-managed $ 501 $ 346 $ 155 45 %
Cost of subscription - self-managed and SaaS 47,076 31,426 15,650 50 %
Total cost of revenue - subscription 47,577 31,772 15,805 50 %
Cost of professional services 13,707 10,196 3,511 34 %
Total cost of revenue $ 61,284 $ 41,968 $ 19,316 46 %
Gross profit $ 162,660 $ 115,147 $ 47,513 41 %
Gross margin:
License - self-managed 98 % 98 %
Subscriptions - self-managed and SaaS 75 % 76 %
Total subscription margin 77 % 78 %
Professional services 4 % (3) %
Total gross margin 73 % 73 %

~~Total cost of~~ subscription revenue increased by ~~$15.8~~$16.0 million, or ~~50%~~43%, infor the three months ended ~~January~~July 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of ~~$12.7~~$14.1 million in cloud ~~hosting costs, an increase of $1.2 million in personnel and related~~infrastructure costs and an increase of ~~$0.8~~$1.0 million in intangible asset amortization. In addition, personnel and related costs increased by $0.6 million. The increase in personnel and related costs includes an increase of ~~$1.0~~$0.5 million in salaries and related taxes and an increase of ~~$0.2~~$0.1 million in ~~stock-based compensation.~~

employee benefit expense. Total subscription margin decreased ~~slightly~~ to 77% for the three months ended ~~January~~July 31, 2022 compared to ~~78%~~79% for the same period of the prior year.

Cost of services revenue increased by $7.3 million, or 60%, for the three months ended ~~January 31, 2021.~~

~~Cost of professional services revenue increased by $3.5 million, or 34%, in the three months ended January~~July 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of ~~$1.8~~$4.1 million ~~in subcontractor costs and an increase~~ in personnel and related costs, including increases of ~~$1.3~~$2.7 million ~~mainly due to growth~~ in ~~headcount.~~salaries and related taxes, $0.6 million in stock-based compensation, and $0.3 million in employee benefits expense driven by an increase in headcount in our services organization. In addition, subcontractor costs increased by $2.5 million and travel costs increased by $0.3 million.

Gross margin for ~~professional~~ services revenue was ~~4% in the three months ended January 31, 2022 compared to (3)~~(6)% for the three months ended ~~January~~July 31, ~~2021.~~2022 compared to 24% for the same period of the prior year. The ~~increase~~decrease in margin is primarily due to the ~~increase in revenue, and a lower than proportionate increase in~~ cost of ~~professional~~services, including personnel and related costs and subcontractor costs, growing at a higher rate than services revenue. We continue to invest in headcount for our ~~professional~~ services organization that we believe will be needed as we continue to grow and expect travel related costs will increase in the future as COVID-19 risks and travel restrictions abate. Our gross margin for ~~professional~~ services may fluctuate ~~decline~~ or ~~be negative~~decline in the near-term as we seek to expand our ~~professional~~ services business.

Operating Expenses

Research and development

Three Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Research and development $ 71,749 $ 51,400 $ 20,349 40 %


	Three Months Ended July 31,				Change
	2022		2021		$		%
	(in thousands)
Research and development	$	78,649	$	59,382	$	19,267	32	%

Research and development expense increased by ~~$20.3~~$19.3 million, or ~~40%~~32%, infor the three months ended ~~January~~July 31, 2022 compared to the same period of the prior year as we continued to invest in the development of new and existing offerings. Personnel and related costs increased by ~~$17.8~~$16.2 million ~~primarily~~and software and equipment expense increased $0.4 million as a result of growth in headcount. ~~Consulting expense~~In addition, cloud infrastructure costs related to our research and development activities increased by ~~$0.8~~$1.3 million, ~~and cloud hosting~~consulting costs increased by ~~$0.8~~$0.7 million, and travel costs increased by $0.5 million. The increase in personnel and related costs includes an increase of ~~$7.6~~$6.6 million in stock-based compensation, an increase of $5.6 million in salaries and related taxes, an increase of ~~$6.5~~$2.5 million in ~~stock-based compensation expense, an increase of $2.7 million in acquisition-related~~acquisition related compensation, and an increase of ~~$0.5~~$1.0 million in employee benefits expense.

~~Table of Contents~~

Sales and marketing

Three Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Sales and marketing $ 105,069 $ 71,087 $ 33,982 48 %


	Three Months Ended July 31,				Change
	2022		2021		$		%
	(in thousands)
Sales and marketing	$	125,006	$	88,033	$	36,973	42	%

Sales and marketing expense increased by ~~$34.0~~$37.0 million, or ~~48%~~42%, infor the three months ended ~~January~~July 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of ~~$28.2~~$30.1 million in personnel ~~and~~ related costs and a ~~$1.3~~$1.6 million increase in software and equipment ~~expense as we continued~~charges due to ~~increase our sales and marketing~~growth in headcount. In addition, ~~marketing~~travel expenses increased by ~~$2.3~~$4.1 million and ~~travel~~consulting costs increased by ~~$1.7~~$0.8 million. The increase in personnel and related costs includes an increase of ~~$14.9~~$16.5 million in salaries and related taxes, an increase of ~~$6.0~~$5.8 million ~~commissions expense related to the amortization of contract acquisition costs,~~in stock-based compensation, an increase of ~~$4.2~~$3.6 million in ~~stock-based compensation~~commission expense, and an increase of ~~$1.9~~$2.8 million in employee benefits expense.

General and administrative

Three Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
General and administrative $ 31,691 $ 27,121 $ 4,570 17 %


	Three Months Ended July 31,				Change
	2022		2021		$		%
	(in thousands)
General and administrative	$	34,088	$	27,052	$	7,036	26	%

Table of Contents

General and administrative expense increased by ~~$4.6~~$7.0 million, or ~~17%~~26%, infor the three months ended ~~January~~July 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of ~~$3.1~~$8.2 million in ~~legal and professional expenses. Personnel and~~personnel related costs ~~also increased $1.7~~and a $0.4 million ~~and~~increase in software and equipment ~~expense increased $0.3 million~~charges due to ~~growth in headcount.~~headcount growth. In addition, insurance and ~~related~~other taxes increased by ~~$0.4 million and travel cost increased by $0.2~~$0.6 million. These increases were partially offset by a $2.5 million decrease ~~of $1.9 million~~ in ~~bad debt expense.~~legal and professional fees. The increase in personnel and related costs includes an increase of ~~$0.9~~$3.6 million in stock-based compensation expense, an increase of ~~$0.4~~$3.5 million in salaries and related taxes, and an increase of ~~$0.3~~$0.5 million in employee benefits expense.

Other Expense, Net

Three Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Other expense, net $ (7,036) $ (2,377) $ (4,659) 196 %


	Three Months Ended July 31,				Change
	2022		2021		$		%
	(in thousands)
Other expense, net	$	(6,062)	$	(802)	$	(5,260)	656	%

Other expense was $6.1 million for the three months ended July 31, 2022 compared to $0.8 million in the prior year. This was primarily due to a net ~~was $7.0~~increase in interest expense of $4.6 million primarily due to the issuance of our Senior Notes during the prior fiscal year. In addition, we recognized a foreign currency transaction loss of $1.0 million in the three months ended ~~January~~July 31, 2022 compared to ~~$2.4~~a foreign currency transaction gain of $1.0 million in the same period of the prior year. ~~This increase in other expense, net was primarily due to~~These were partially offset by an increase of ~~$6.1~~$1.3 million in interest ~~expense due to issuance of long-term debt during the first quarter of the current fiscal year. This increase was partially offset by a decrease of $1.4 million in foreign currency remeasurement loss.~~income from investments.

Provision for Income Taxes

Three Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Provision for income taxes $ 3,841 $ 1,136 $ 2,705 238 %


	Three Months Ended July 31,				Change
	2022		2021		$		%
	(in thousands)
Provision for income taxes	$	2,848	$	2,653	$	195	7	%

The provision for income taxes increased ~~by $2.7~~$0.2 million, inor 7%, for the three months ended ~~January~~July 31, 2022 compared to the same period of the prior year. Our effective tax rate was ~~(7)~~(4)% and ~~(3)~~(8)% of our net loss before taxes for the three months ended ~~January~~July 31, 2022 and 2021, respectively. 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. The increase in tax expense is driven primarily by growth in ~~income in~~ foreign jurisdictions for which we are not subject to valuation allowances or net operating losses.

~~Table of Contents~~

~~Comparison of Nine Months Ended January 31, 2022 and 2021~~

~~Revenue~~

Nine Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Revenue
License - self-managed $ 54,457 $ 45,673 $ 8,784 19 %
Subscription - self-managed and SaaS 522,599 357,127 165,472 46 %
Total subscription revenue 577,056 402,800 174,256 43 %
Professional services 45,963 28,079 17,884 64 %
Total revenue $ 623,019 $ 430,879 $ 192,140 45 %

~~Total revenue increased by $192.1 million, or 45%, in the nine months ended January 31, 2022, compared to the same period of the prior year.~~

Total subscription revenue increased $174.3 million, or 43%, in the nine months ended January 31, 2022 compared to the same period of the prior year. The increase in revenue was primarily caused by volume-driven increases from new business, as existing customers purchased additional subscriptions and we grew our subscription customer base to over 17,900 customers compared to over 13,800 customers in the same period of the prior year.

Professional services revenue increased by $17.9 million, or 64%, in the nine months ended January 31, 2022, compared to the same period of the prior year. The increase in professional services revenue was attributable to increased adoption of our professional services offerings.

~~Cost of Revenue and Gross Margin~~

Nine Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Cost of revenue
Cost of license - self-managed $ 1,242 $ 1,039 $ 203 20 %
Cost of subscription - self-managed and SaaS 126,097 86,464 39,633 46 %
Total cost of revenue - subscription 127,339 87,503 39,836 46 %
Cost of professional services 37,491 27,744 9,747 35 %
Total cost of revenue $ 164,830 $ 115,247 $ 49,583 43 %
Gross profit $ 458,189 $ 315,632 $ 142,557 45 %
Gross margin:
License - self-managed 98 % 98 %
Subscriptions - self-managed and SaaS 76 % 76 %
Total subscription margin 78 % 78 %
Professional services 18 % 1 %
Total gross margin 74 % 73 %

Total cost of subscription revenue increased by $39.8 million, or 46%, in the nine months ended January 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of $29.7 million in cloud hosting costs and an increase of $5.3 million in personnel and related costs due to growth in headcount in our support organization. In addition, partner fees expenses increased by $1.5 million, intangible asset amortization increased by $1.0 million, and consulting costs increased by $0.8 million. The increase in personnel and related costs includes an increase of $3.8 million in salaries and related taxes, an increase of $1.2 million in stock-based compensation expense, and an increase of $0.3 million in employee benefits expense.

~~Total subscription margin was flat at 78% for each of the nine months ended January 31, 2022 compared to the nine months ended January 31, 2021.~~

~~Table of Contents~~

Cost of professional services revenue increased by $9.7 million, or 35%, in the nine months ended January 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of $4.9 million in personnel and related costs, including an increase of $3.4 million in salaries and related taxes, and an increase of $1.3 million in stock-based compensation. In addition, subcontractor costs also increased by $4.0 million.

Gross margin for professional services revenue was 18% in the nine months ended January 31, 2022 compared to 1% in the nine months ended January 31, 2021. The increase in margin is primarily due to the increase in revenue, and a lower than proportionate increase in cost of professional services revenue. We continue to invest in headcount for our professional services organization that we believe will be needed as we continue to grow and expect travel related costs will increase in the future as COVID-19 risks and travel restrictions abate. 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.

~~Operating Expenses~~

~~Research and development~~

Nine Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Research and development $ 194,894 $ 143,766 $ 51,128 36 %

Research and development expense increased by $51.1 million, or 36%, in the nine months ended January 31, 2022 compared to the same period of the prior year as we continued to invest in the development of new and existing offerings. Personnel and related costs increased by $45.4 million and software and equipment expense increased by $1.0 million primarily as a result of growth in headcount. Cloud hosting costs also increased by $2.1 million and consulting expense increased by $1.9 million. The increase in personnel and related costs includes an increase of $21.5 million in salaries and related taxes, an increase of $17.5 million in stock-based compensation expense, an increase of $3.7 million in acquisition related compensation, and an increase of $1.6 million in employee benefits expense.

~~Sales and marketing~~

Nine Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Sales and marketing $ 288,055 $ 191,712 $ 96,343 50 %

Sales and marketing expense increased by $96.3 million, or 50%, in the nine months ended January 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of $78.1 million in personnel related costs and an increase of $2.9 million in software and equipment charges due to growth in headcount. In addition, marketing expenses increased $10.1 million, travel costs increased by $2.9 million and consulting expense increased by $2.0 million. The increase in personnel and related costs includes an increase of $44.0 million in salaries and related taxes, an increase of $18.0 million in commission expense related to the amortization of contract acquisition costs, an increase of $8.3 million in stock-based compensation expense and, an increase of $4.6 million in employee benefits expense.

~~General and administrative~~

Nine Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
General and administrative $ 89,298 $ 72,555 $ 16,743 23 %

General and administrative expense increased by $16.7 million, or 23%, in the nine months ended January 31, 2022 compared to the same period of the prior year. This increase was primarily due to an increase of $8.3 million in legal and professional fees. In addition, personnel and related costs increased by $5.9 million and software and equipment expense increased by $0.9 million due to headcount growth. Consulting costs also increased by $1.2 million. The increase in personnel and related costs includes an increase of $4.0 million in stock-based compensation expense, an increase of $2.2 million in salaries and related taxes, and an increase of $0.6 million in employee benefits expense which were partially offset by a decrease in other miscellaneous employee related expenses of $0.9 million.

~~Table of Contents~~

~~Other Income (Expense), Net~~

Nine Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Other income (expense), net $ (14,836) $ 8,424 $ (23,260) (276) %

Other expense, net was $14.8 million in the nine months ended January 31, 2022 compared to other income, net of $8.4 million for the same period of the prior year. This was due to a decrease in foreign currency gain of $8.9 million and an increase of $14.4 million in interest expense due to issuance of long-term debt during the first quarter of the current fiscal year.

~~Provision for Income Taxes~~

Nine Months Ended January 31, Change
2022 2021 $ %
(dollars in thousands)
Provision for income taxes $ 9,344 $ 2,156 $ 7,188 333 %

The provision for income taxes increased $7.2 million in the nine months ended January 31, 2022 compared to the same period in the prior year. Our effective tax rate was (7)% and (3)% of our net loss before taxes for the nine months ended January 31, 2022 and 2021, respectively. 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. The increase in tax expense from the prior year is due to an increase in income in foreign jurisdictions for which we are not subject to valuation allowances or net operating losses and an increase in withholding tax expense.

Liquidity and Capital Resources

As of ~~January~~July 31, 2022, we had cash and cash equivalents and restricted cash of ~~$864.4~~$848.8 million and ~~$3.9~~$2.4 million, respectively, and working capital of ~~$601.5~~$539.9 million. Our restricted cash consists primarily of cash ~~on deposit~~deposits with financial institutions in support of letters of credit in favor of landlords for non-cancelable lease agreements.

We have generated significant operating losses from our operations as reflected in our accumulated deficit of ~~$751.6~~$886.7 million as of ~~January~~July 31, 2022. We have historically incurred, and expect to continue to incur, operating losses and may generate negative cash flows from operations on an annual basis for the foreseeable future due to the investments we intend to make as described above, and as a result, we may require additional capital resources to execute on our strategic initiatives to grow our business.

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. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of, and our future capital requirements, both near-term and long-term, will depend on, many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our solutions and services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. In July 2021, we issued long-term debt of $575.0 million, and we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.

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The following table summarizes our cash flows for the periods presented:

Nine Months Ended January 31,
2022 2021
(in thousands)
Net cash provided by operating activities $ 8,722 $ 24,110
Net cash used in investing activities $ (125,068) $ (1,412)
Net cash provided by financing activities $ 593,257 $ 67,554

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	Three Months Ended July 31,
	2022		2021
	(in thousands)
Net cash provided by (used in) operating activities	$	(9,705)	$	14,051
Net cash used in investing activities	$	(479)	$	(1,634)
Net cash provided by financing activities	$	3,397	$	578,791

Net Cash Provided byBy (Used In) Operating Activities

Net cash ~~provided by~~used in operating activities during the ~~nine~~three months ended ~~January~~July 31, 2022 was ~~$8.7~~$9.7 million, which resulted from a net loss of ~~$138.2~~$69.6 million and net cash outflow of ~~$16.3~~$15.4 million from changes in operating assets and liabilities ~~offset by~~adjusted for non-cash charges of ~~$163.3~~$75.3 million. Non-cash charges primarily consisted of ~~$97.0~~$46.9 million for stock-based compensation expense, ~~$43.4~~$17.4 million for amortization of deferred contract acquisition costs, ~~$14.6~~$5.2 million of depreciation and intangible asset amortization expense, ~~$6.3~~$3.0 million in non-cash operating lease costs, ~~$1.7 million of~~ a net foreign currency transaction ~~losses, $0.6~~loss of $1.8 million, an increase of$0.7 million in deferred tax assets, and amortization of debt issuance costs ~~and $0.1 million~~ of ~~other expenses which were partially offset by an increase in deferred income taxes of $0.2~~$0.3 million. The net cash outflow from changes in operating assets and liabilities was the result of a $27.0 million decrease in deferred revenue, an increase in deferred contract acquisition costs of ~~$61.2~~$19.7 million as our sales commissions increased due to increased business volume, a net decrease of ~~$6.4 million in operating lease liabilities, and an increase of $3.5 million in prepaid expenses and other assets. These outflows were partially offset by a net increase of $36.7~~$18.4 million in accounts payable, accrued expenses and accrued compensation and benefits, and a decrease of ~~$9.8~~$3.2 million in operating lease liabilities. These were partially offset by a decrease of $46.0 million in accounts receivable and ~~an increase~~ a decrease of ~~$8.3~~$6.8 million in ~~deferred revenue.~~prepaid and other assets.

Net cash provided by operating activities during the ~~nine~~three months ended ~~January~~July 31, 2021 was ~~$24.1~~$14.1 million, which resulted from non-cash charges of $49.2 million and was partially offset by a net loss of ~~$86.1 million adjusted for non-cash charges of $102.1~~$34.5 million and net cash ~~inflow~~outflow of ~~$8.1~~$0.7 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of ~~$65.3~~$30.2 million for stock-based compensation expense, ~~$28.5~~$13.9 million for amortization of deferred contract acquisition costs, ~~$12.9~~$4.5 million of depreciation and intangible asset amortization expense, ~~and $5.3~~$1.9 million in non-cash operating lease costs, and $0.1 million of other which were partially offset by a foreign currency transaction gain of ~~$9.5~~$1.1 million and an increase in deferred income taxes of ~~$0.3~~$0.1 million. The net cash ~~inflow~~outflow from changes in operating assets and liabilities was the result of ~~an increase~~a decrease of ~~$53.3~~$30.6 million in deferred revenue, ~~a decrease in accounts receivable of $15.2 million, and a decrease of $10.1 million in prepaid expenses and other assets. These inflows were partially offset by~~ an increase in deferred contract acquisition costs of ~~$54.6~~$14.8 million as our sales commissions increased due to the addition of new customers, an increase of $10.7 million in prepaid expenses and ~~expansion~~other assets, and a $1.9 million decrease in operating lease liabilities. These outflows were partially offset by a decrease in accounts receivable of ~~our existing customer subscriptions,~~$48.3 million and a net ~~decrease~~increase of ~~$10.5~~$9.0 million in accounts payable, accrued expenses, and accrued compensation and ~~benefits, and a $5.4 million decrease in operating lease liabilities.~~benefits.

Net Cash Used in Investing Activities

Net cash used in investing activities of $0.5 millionduring the three months ended July 31, 2022 was due to capital expenditures during the period.

Net cash used in investing activities during the ~~nine~~three months ended ~~January~~July 31, ~~2022~~2021 was ~~$125.1~~$1.6 million due to ~~cash used in the acquisitions of $119.9 million,~~ capitalization of ~~$4.2~~$1.0 million in internal-use software costs and ~~$1.0~~$0.7 million of capital expenditures.

Net cash used in investing activities during the nine months ended January 31, 2021 was $1.4 million due to $2.7 million of capital expenditures, offset by cash provided by other investing activities of $1.3 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities of $3.4 million during the three months ended July 31, 2022 was due to the proceeds from stock option exercises.

Net cash provided by financing activities during the ~~nine~~three months ended ~~January~~July 31, ~~2022~~2021 was ~~$593.3~~$578.8 million due to the proceeds of $575.0 million from debt issuance and ~~$27.5~~$11.0 million of proceeds from ~~stock~~ option exercises during the period which were partially offset by ~~$9.3 million~~ payments of debt issuance ~~costs.~~costs of $7.2 million.

~~Net cash provided by financing activities during the nine months ended January 31, 2021 was $67.6 million due to proceeds from stock option exercises during the period.~~

~~Off Balance Sheet Arrangements~~

We did not have during the periods presented and we do not currently have any off balance sheet financing arrangements or any relationships with any unconsolidated entities or financial partnerships, including entities referred to as structured finance or special purpose entities, which were established for the purpose of facilitating off balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations and Commitments

Our principal commitments consist of obligations under our operating leases, which are primarily for office space, and purchase commitments to our cloud hosting providers. ~~Except for those disclosed in Note 7 “Senior Notes” of our accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q, there~~There have been no material changes to our contractual obligations and commitments discussed in our Annual Report on Form 10-K for the year ended April 30, ~~2021.~~2022.

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Recently Issued Accounting Pronouncements

Refer to Note 2 of our accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and new accounting pronouncements not yet adopted as of the date of this report.

ITEM 3. ~~QUANTITATIVE~~QUALITATIVE AND ~~QUALITATIVE~~QUANTITATIVE 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 ~~$868.3~~$851.1 million as of ~~January~~July 31, 2022. Our cash, cash equivalents, and restricted cash are held in cash deposits and money market funds. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these instruments, we do not believe that an immediate 10% increase or decrease in interest rates would have a material effect on the fair value of our investment portfolio. Declines in interest rates, however, would reduce our future interest income.

In July 2021, we issued $575.0 million aggregate principal amount of 4.125% Senior Notes due 2029 in a private placement. The fair ~~values~~value of the Senior Notes ~~are~~is subject to market risk. In addition, the fair market value of the Senior Notes is exposed to interest rate risk. Generally, the fair market value of our fixed interest rate Senior Notes will increase as interest rates fall and decrease as interest rates rise. The interest rate and market value changes affect the fair value of the Senior Notes, but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. 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

~~The majority of our~~Our revenue and expenses are primarily denominated in U.S. ~~dollars.~~dollars, and to a lesser extent the Euro, British Pound Sterling, and other currencies. 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. For business conducted outside of the United States, we may have both revenue and costs incurred in the local currency of the subsidiary, creating a partial natural hedge. Changes to exchange rates therefore have not had a ~~significant~~material impact on our net operating results to date; however, we will continue to reassess our foreign exchange exposure as we continue to grow our business globally.

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. An immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies could have a material effect on our revenue, operating expenses, and net loss. As a component of other income, net, we recognized a foreign currency transaction loss of ~~$0.6~~$1.0 million and a foreign currency transaction gain of ~~$8.3~~$1.0 million infor the ~~nine~~three months ended ~~January~~July 31, 2022 and 2021, respectively.

As of ~~January~~July 31, 2022, our cash, cash equivalents, and restricted cash were primarily denominated in U.S. dollars, Euros, and ~~Great~~ British ~~Pounds.~~Pound Sterling. A 10% increase or decrease in current exchange rates would have an impact of approximately ~~$17.4~~$13.9 million on our cash, cash equivalents, and restricted cash balances.

~~Inflation Risk~~

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. However, if our costs, in particular personnel, sales and marketing and hosting costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, operating results and financial condition.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that

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information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

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Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~January~~July 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms and (b) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information called for by this Item is incorporated herein by reference to Part I, Item 1. “Financial Statements,” Note 8, ~~of our accompanying Notes to Condensed Consolidated Financial Statements~~“Commitments and Contingencies” included ~~elsewhere~~ in this Quarterly Report on Form 10-Q.

From time to time, we may be subject to legal proceedings and claims that arise in the ordinary course of business, including patent, commercial, product liability, employment, class action, whistleblower and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. 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 individually or taken together, in our opinion, have a material adverse effect on our business, results of operations, financial condition or cash flows. Future litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights. The 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.

ITEM 1A. RISK FACTORS

A description of the risks and uncertainties associated with our business, industry and ownership of our ordinary shares is set forth below. You should carefully consider the following risks, together with all of the other information in this Quarterly Report on Form 10-Q, including our condensed 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. 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. In that event, the price of our ordinary shares could decline, and you

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could lose part or all of your investment. In addition, the impact of the COVID-19 pandemic and any worsening of the economic environment may exacerbate the risks described below, any of which could have a material impact on us and additional impacts that are currently not known to us may ~~arise that we are not currently aware of.~~arise.

The following is a summary of the key risks and uncertainties associated with our business, industry, and ownership of our ordinary shares. The 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 ~~hosted~~cloud-based offerings, respond effectively to evolving markets or offer high quality support services.

•~~Our ability to grow our business will depend, in part, on the expansion and adoption of our hosted offerings.~~

•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.

•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.

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•We could be negatively impacted if the Elastic License or the Server Side Public License under which some of our software is licensed ~~are~~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 ~~a significant portion~~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.

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•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, ~~or our other partners,~~ 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, ~~related to privacy, data protection and information security and~~including compliance with export control, trade sanctions, anti-bribery, anti-corruption, and anti-money laundering laws.

•~~We rely on channel partners to execute a portion of our sales, if our channel partners fail to perform, our results of operations and reputation could be harmed.~~

•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.

•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.

•~~Dutch law and our articles of association include certain anti-takeover provisions.~~

•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.

•~~Claims of U.S. civil liabilities may not be enforceable against us.~~

•We may fail to maintain an effective system of disclosure controls and internal control over financial reporting.

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Risks Related to our Business and Industry

Our business and operations have experienced rapid growth, and if we do not appropriately manage future growth, if any, or are unable to improve our systems and processes, our business, financial condition, results of operations, and prospects will be adversely affected.

We have experienced rapid growth and increased demand for our offerings. Our employee headcount and number of customers have increased significantly. For example, our total number of customers has grown from over 2,800 as of April 30, 2017 to over ~~17,900~~19,300 as of ~~January~~July 31, 2022. Further, while our employee headcount has grown as we have been implementing our growth plans, we may modify our pace of hiring to align with our growth plans. The growth and expansion of our business and offerings places a continuous and significant strain on our management, operational, and financial resources. In addition, as customers adopt our technology for an increasing number of use cases, we have had to support more complex commercial relationships. We may not be able to hire, train and retain enough qualified employees, and we may not be able to hire, train and onboard new employees fast or effectively enough to maintain our growth plans. 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 may not be able to sustain the diversity and pace of improvements to our offerings successfully or implement systems, processes, and controls in an efficient or timely manner or in a manner that does not negatively affect our results of operations. Our failure to improve our systems, processes, and controls, or their failure to operate in the intended manner, may

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result in our inability to manage the growth of our business and to forecast our revenue, expenses, and earnings accurately, or to prevent losses.

As we expand our business, we may find it difficult to maintain our corporate culture while managing our employee growth. Any failure to manage our anticipated growth and related organizational changes in a manner that preserves our culture could negatively impact future growth and achievement of our business objectives. Additionally, our productivity and the quality of our offerings may be adversely affected if we do not integrate and train our new employees quickly and effectively. Failure to manage any future growth effectively could result in increased costs, negatively affect our customers’ satisfaction with our offerings, and harm our results of operations.

We have a history of losses and may not be able to achieve profitability on a consistent basis or at all, and may not be able to achieve positive cash flows on a consistent basis. As a result, our business, financial condition, and results of operations may suffer.

We have incurred losses in all years since our incorporation. We incurred a net loss of ~~$138.2~~$69.6 million, $203.8 million, and $129.4 million for the ~~nine~~three months ended ~~January~~July 31, 2022 and ~~$129.4 million and $167.2 million in~~ the years ended April 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As a result, we had an accumulated deficit of ~~$751.6~~$886.7 million as of ~~January~~July 31, 2022. 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. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. Revenue growth may slow or revenue may decline for a number of possible reasons, including slowing demand for our offerings, increasing competition, or economic downturns, including as a result of the COVID-19 pandemic. You should not consider our revenue growth in recent periods as indicative of our future performance. Any failure to increase our revenue or grow our business could prevent us from achieving profitability at all or on a consistent basis, which would cause our business, financial condition, and results of operations to suffer. Additionally, although we generated positive operating cash flow in fiscal ~~2021,~~2022, any failure to grow our business could prevent us from achieving positive operating cash flow on a consistent basis, which would cause our business, financial condition, and results of operations to suffer.

Our ability to grow our business will depend significantly on the expansion and adoption of our Elastic Cloud offerings.

We believe our future success will depend significantly on the growth in the adoption of Elastic Cloud, our family of cloud-based offerings. We have and will continue to incur substantial costs to develop, sell and support our Elastic Cloud offerings. We have also entered into non-cancelable multi-year cloud hosting capacity commitments with certain third-party cloud providers, which require us to pay for such capacity irrespective of actual usage. 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 three months ended July 31, 2022 and the years ended April 30, 2022 and 2021, Elastic Cloud contributed 39%, 35%, and 27% of our total revenue, respectively. However, as the use of cloud-based computing solutions is rapidly evolving, it is difficult to predict the potential growth, if any, of general market adoption, customer adoption and retention rates of our cloud-based offerings. There could be decreased demand for our cloud-based offerings due to reasons within or outside of our control, including, among other things, lack of customer acceptance, technological challenges with bringing cloud offerings to market and maintaining those offerings, information security, data protection, or privacy concerns, our inability to properly manage and support our cloud-based offerings, competing technologies and products, weakening economic conditions, and decreases in corporate spending. 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.

We may not be able to compete successfully against current and future competitors.

The market for our products is highly competitive, quickly evolving, fragmented, and subject to rapid changes in ~~technology.~~technology, shifting customer needs, and frequent introductions of new offerings. 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;

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•ability to address a variety of evolving customer needs and use cases;

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•strength and execution of sales and marketing strategies;

•flexible deployment model across public or private clouds, hybrid environments, or ~~traditional on-premises~~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 face competition from both established and emerging competitors. Our current primary competitors generally fall into the following categories:

•For Enterprise ~~Search (app search, site search, and workplace search): incumbent~~Search: offerings such as Solr (open source offering), and Lucidworks Fusion, search tools including Google ~~Custom~~Programmable Search Engine, ~~(an advertisement-based site search tool with limited user controls),~~ and workplace search tools including Coveo and Endeca (owned by Oracle) ~~and Autonomy (owned by Micro Focus)~~.

•For ~~Observability (logging, metrics, application performance monitoring (“APM”), and uptime monitoring):~~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 (SIEM and endpoint security):~~Security: security ~~analytics solutions~~ vendors such as Splunk, ~~and~~ Azure Sentinel (by Microsoft) ~~and endpoint security vendors such as~~, 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. These offerings are not supported by Elastic and come without any of Elastic’s proprietary features, whether free or paid.

Some of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, stronger brand recognition, broader global distribution and presence, more established relationships with current or potential customers and partners, and larger customer bases than we do. These factors may allow our competitors to respond more quickly than we can to new or emerging technologies and changes in customer preferences. These competitors may engage in more extensive research and development efforts, undertake more far-reaching and successful sales and marketing campaigns, have more experienced sales professionals, execute more successfully on their go-to-market strategy and have greater access to more markets and decision makers, and adopt more aggressive pricing policies which may allow them to build larger customer bases than we have. New start-up companies that innovate and large competitors that are making significant investments in research and development may develop similar offerings that compete with our offerings or that achieve greater market acceptance than our offerings. This could attract customers away from our offerings and reduce our market share. If we are unable to anticipate or react to these competitive challenges, our competitive position would weaken, which would adversely affect our business and results of operations.

Our limited operating history makes it difficult to evaluate our current business and prospects and may increase the risks associated with your investment.

We were founded in 2012. Our limited operating history with the current scale of our business makes it difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth. We have encountered and will continue to encounter risks and difficulties frequently experienced by rapidly growing companies in constantly evolving industries, including the risks described in this Quarterly Report on Form 10-Q. If we do not address these risks successfully, our business and results of operations will be adversely affected, and the market price of our ordinary shares could decline.

Further, we have limited historical financial data at the current scale of our business, and we operate in a rapidly evolving market. As such, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.

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If we are not able to keep pace with technological and competitive developments, our business will be harmed.

The market for search technologies, including enterprise search, observability and security, is subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences. 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. 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. Future delays or problems in the installation or implementation of our new releases may cause customers to forgo purchases of our products and purchase those of our competitors instead.

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. 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. Furthermore, our ability to increase the usage of our products depends, in part, on the development of new use cases for our products, which is typically driven by our developer community and may be outside of our control. We also have invested, and may continue to invest, in the acquisition of complementary businesses, technologies, services, products and other assets that expand the products that we can offer our ~~customers, such as our recent acquisitions of build.security, Cmd and Optimyze and other past acquisitions.~~customers. We may make these investments without being certain that they will result in products or enhancements that will be accepted by existing or prospective customers. Additionally, even if we are able to develop new products and product enhancements, we cannot ensure that they will achieve market acceptance. If we are unable to successfully enhance our existing products to meet evolving customer requirements, increase adoption and usage of our products, develop new products, or if our efforts to increase the usage of our products are more expensive than we expect, then our business, results of operations and financial condition would be adversely affected.

~~Our ability to grow our business will depend, in part, on the expansion and adoption of our hosted offerings.~~

We believe our future success will depend, in part, on the growth in the adoption of Elastic Cloud, our family of hosted offerings. We have and will continue to incur substantial costs to develop, sell and support our Elastic Cloud offerings. We believe that we must offer a family of hosted 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. In the nine months ended January 31, 2022 and 2021 Elastic Cloud contributed 34% and 27% of our total revenue, respectively. For the years ended April 30, 2021 and 2020, Elastic Cloud contributed 27% and 22% of our total revenue, respectively. However, as the use of cloud-based computing solutions is rapidly evolving, it is difficult to predict the potential growth, if any, of general market adoption, customer adoption and retention rates of our cloud-based offerings. There could be decreased demand for our cloud-based offerings due to reasons within or outside of our control, including, among other things, lack of customer acceptance, technological challenges with bringing cloud offerings to market and maintaining those offerings, information security, data protection or privacy concerns, our inability to properly manage and support our cloud-based offerings, competing technologies and products, weakening economic conditions, and decreases in corporate spending. For example, Amazon Web Services offers hosted products based on a forked version of the Elastic Stack. 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. 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.

The markets for some of our products are evolving, and our future success depends on the growth and expansion of these markets and our ability to adapt and respond effectively to evolving markets.

The markets for certain of our products, such as our Enterprise Search, Observability and Security solutions, are evolving and our products are relatively new in these markets. Accordingly, it is difficult to predict continued customer adoption and renewals for these products, customers’ demand for these products, the size, growth rate, expansion, and longevity of these markets, the entry of competitive products, or the success of existing competitive products. Our ability to penetrate these evolving markets depends on a number of factors, including the cost, performance, and perceived value associated with our products. If these markets do not continue to grow as expected, or if we are unable to anticipate or react to changes in these markets, our competitive position would weaken, which would adversely affect our business and results of operations.

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In connection with the operation of our business, we collect, store, transfer, and otherwise process certain personal data. As a result, our business is subject to a variety of government and industry regulations, as well as other obligations, related to privacy, data protection and information security. Any actual or perceived failure by us to comply with such regulations or any other obligations relating to privacy, data protection or information security could adversely affect our business.

In the operation of our business, we collect, store, transfer, and otherwise process personal data. As a result, we are subject to a variety of federal, state, local and foreign laws and regulations governing privacy, data protection, information security, and the collection, storage, transfer, use, retention, sharing, disclosure, protection, and processing of personal data. Privacy, data protection, and information security are significant issues in various jurisdictions where we offer our products. The regulatory frameworks for these issues worldwide are rapidly evolving and are likely to remain uncertain for the foreseeable future. Federal, state, or non-U.S. government bodies or agencies have in the past adopted, and may in the future adopt, new laws and regulations or may make amendments to existing laws and regulations affecting data protection, data privacy and/or information security and/or regulating the use of the Internet as a commercial medium. For example, ~~on January 1, 2020, the~~ California (California Consumer Privacy Act ~~(the “CCPA”) went into effect~~ and ~~enforcement of the CCPA by~~ the California Attorney General commenced July 1, 2020. The CCPA imposes obligations on businesses that process California consumers’ personal data, including an obligation to provide certain disclosures to California consumers,Privacy Rights Act), Colorado (Colorado Privacy Act), Connecticut (An Act Concerning Personal Data Privacy and ~~affords California consumers new rights, including the right to opt out of certain sales of personal data. We cannot fully predict the impact of the CCPA on our business or operations, but we~~Online Monitoring), Utah (Utah Consumer Privacy Act) and Virginia (Virginia Consumer Data Protection Act) have ~~modified and~~enacted such legislation. Such legislation may be required to further modify our data processing practices and policies and to incur substantial costs and expenses in connection with our compliance or the compliance of our customers or vendors. The CCPA also provides for civil penalties andinclude a private right of action for certain data breaches, ~~which~~ may ~~increase our compliance costs~~provide for penalties and ~~potential liability. Additionally, the California Privacy Rights Act (“CPRA”) was approved by California voters in the November 3, 2020 election~~other remedies, and ~~significantly modifies the CCPA. The CPRA creates obligations relating~~may require us to consumer personal data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023. We will continue to monitor developments related to the CPRA and anticipate additionalincur substantial costs and expenses ~~associated~~and liabilities in connection with ~~CPRA~~our compliance. Other U.S. states ~~also~~and the U.S. federal government are considering or have enacted ~~omnibus~~ privacy legislation. ~~On March 2, 2021, Virginia enacted the Virginia Consumer Data Protection Act,~~Some of these laws and legislative proposals provide for penalties, private rights of action and other remedies, which ~~becomes effective on January 1, 2023,~~may increase our costs of compliance and ~~on June 8, 2021, Colorado enacted the Colorado Privacy Act, which becomes effective on July 1, 2023.~~potential liability. Many obligations under ~~the CCPA and~~ these ~~other~~ laws and legislative proposals remain uncertain, and we cannot fully predict their impact on our business. Further, industry organizations regularly adopt and advocate for new standards in these areas. If we fail to comply with any of these laws or standards, we may be

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subject to investigations, enforcement actions, civil litigation, fines and other penalties, all of which may generate negative publicity and have a negative impact on our business.

Additionally, in the United States, we may be subject to investigation and/or enforcement actions brought by federal agencies and state attorneys general and consumer protection agencies. We publicly post privacy statements and other documentation regarding our practices concerning the processing, use and disclosure of personal ~~data. Although we endeavor to comply with our published statements and documentation,~~data, however, we may ~~at times~~ fail, ~~to do so~~ or be alleged to have failed, to ~~do so. The publication of our privacy statement~~comply with such statements, and ~~other documentation that provide promises and assurances about privacy, data protection and information security can~~we could be subject us to potential state and federal action if they are found to be ~~deceptive,~~ unfair or misrepresentative of our actual practices.

Internationally, most jurisdictions in which we operate have established their own privacy, data protection and information security legal frameworks with which we or our customers must comply. Within the European Union, the General Data Protection Regulation (“GDPR”) became fully effective on May 25, 2018, and applies to the processing (which includes the collection and use) of personal data. The GDPR imposes significant obligations and risk upon our business, including imposing limitations on our marketing efforts, and provides for substantial penalties to which we could be subject in the event of any non-compliance. Administrative fines under the GDPR can amount up to 20 million Euros or four percent of the ~~group��s~~group’s annual global turnover, whichever is higher. Further, the United Kingdom has implemented legislation that substantially implements the GDPR in the United Kingdom, which legislation provides for penalties for violations of up to the greater of 17.5 million British ~~pounds~~Pound Sterling or four percent of the group’s annual global turnover. Following the exit of the United Kingdom from the European Union, however, aspects of ~~U.K.~~United Kingdom data protection law and the relationship of the United Kingdom and the European Union in the medium to longer term remain unclear, including with respect to how data transfers to and from the United Kingdom will be regulated. On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the United Kingdom ensures an equivalent level of data protection to the GDPR, which ~~provides some relief regarding the legality of~~permits continued personal data flows from the European Economic Area (“EEA”) to the United Kingdom. Some uncertainty remains, however, as this adequacy determination must be renewed after four years and may be modified or revoked in the interim.

We have incurred substantial expense in complying with privacy, data protection and information security legal frameworks and we may be required to make additional, significant changes in our business operations, all of which may adversely affect our revenue and our business overall. Additionally, because these new regimes lack a substantial enforcement history, we are unable to predict how emerging standards may be applied to us. Despite our efforts to attempt to comply with

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~~new data protection obligations, a regulator may determine that we have not done so and subject us to fines and public censure, which could harm our company.~~

Among other requirements, the GDPR regulates transfers of personal data ~~subject to the GDPR~~ to third countries that have not ~~been found to provide adequate protection to such personal data,~~received “adequacy” status, including the United States. Some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of delivering our services.

The regulatory environment applicable to handling of EEA residents' personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs. We have undertaken certain efforts to conform transfers of personal data from the EEA, to the United States and other jurisdictions based on our understanding of current regulatory obligations and the guidance of data protection authorities, including using ~~the~~ standard contractual clauses approved by the European Commission (the “SCCs”) and performing certain international transfer impact assessments. Despite this, we may be unsuccessful in maintaining conforming means of transferring such data from the EEA, Switzerland, or the United Kingdom, in particular as a result of continued legal and legislative activity that has challenged or called into question existing means ofassessments, however, international data transfers tomay still be challenged in countries that have not ~~been found to provide adequate protection for personal data.~~

~~The regulatory environment applicable to handling of EEA residents' personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs.~~received “adequacy” status from the European Commission. In the Schrems II decision issued by the Court of Justice of the European Union (“CJEU”) on July 16, 2020, the CJEU, among other things, imposed additional obligations on companies when relying on the SCCs. EEA regulators since have provided guidance regarding use of the SCCs, and on June 4, 2021, the European Commission issued new SCCs. 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”)~~. If approved by the United Kingdom Parliament, the UK SCCs will become effective~~, which went into effect on March 21, ~~2022,~~2022. In light of these and other developments relating to cross-border data transfer, we may, in addition to other impacts, experience additional costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing personal data on our behalf or localize certain personal data. As a result of these developments, we and our customers may face regulators in the EEA, Switzerland, and the United Kingdom applying different standards to certain data transfers or requiring additional steps in connection with data transfers, and may be required to engage in new contract negotiations with third parties that aid in processing data on our ~~behalf.~~behalf, and we may be required to implement additional contractual and technical safeguards for the lawful transfer of personal data. We may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the EEA, Switzerland, and the United Kingdom and our customers may face a risk of enforcement actions by European data protection authorities relating to such transfers. We may experience hesitancy, reluctance, or refusal by customers to continue to use our products due to the potential risk exposure to such customers as a result of sentiment in the EEA, Switzerland, and the United Kingdom regarding international data transfers and data protection obligations imposed on them. We may find it necessary to establish systems to maintain personal data originating from the EEA, Switzerland, or the United Kingdom in such regions, or may need to take other steps with respect to data handling and data transfers, including means to provide for local data processing, which may involve substantial expense and may require us to divert resources from other aspects of our business, all of which may adversely affect our business. We and our customers may face a risk of enforcement actions by European data protection authorities until the time, if any, that personal data transfers to us and by us from the EEA are legitimized under European law. These and the other risks described above could result in harm to our business, operating results and financial condition.

In addition to government regulation, ~~privacy advocates and~~ industry groups have established or may establish new and different self-regulatory standards that may legally or contractually apply to ~~us.~~us or our customers. One example of such a self-regulatory standard is the Payment Card Industry Data Security Standard (“PCI DSS”), which relates to the processing of payment card information. ~~In the event we or our payment processors fail to comply with the PCI DSS, fines and other penalties could result, and we may suffer reputational harm and damage to our business.~~ Further, our customers increasingly expect us to comply with more stringent privacy, data protection, and information security requirements than those imposed by laws, regulations, or self-regulatory requirements, and we may be

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obligated contractually to comply with additional or different standards relating to our handling or protection of data on or by our offerings. Any failure to meet our customers’ requirements may adversely affect our revenues and prospects for growth.

We also expect that there will continue to be changes in interpretations of existing or new laws and regulations, ~~or new~~ proposed laws, ~~regulations,~~ and other obligations, ~~concerning privacy, data protection and information security,~~ which could impair our or our customers’ ability to ~~collect, use or disclose information relating to consumers,~~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. Because the interpretation and application of many laws and regulations relating to privacy, data protection, and information security, along with industry standards, are uncertain, it is possible that these laws and regulations may be interpreted and applied in manners that are, or are alleged to be, inconsistent with our data management practices or the features of our products, and we could face fines, lawsuits, regulatory investigations, and other claims and penalties, and we could be required to fundamentally change our products or our business practices, any of which could have an adverse effect on our business. For example, on January 13, 2022, the Austrian data protection authority published a decision ruling that the collection of personal data and transfer to the United States through Google Analytics and other analytics and tracking tools used by website operators violates the GDPR. On February 10, 2022, the French data protection authority issued a press release that the French data protection authority had issued a similar decision. Other dataData protection authorities in the European Union increasingly are focused on the use of online tracking tools and have issued or indicated that they plan to issue ~~similar rulings.~~rulings which may impact our marketing practices. Any restrictions on using

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online analytics and tracking tools could lead to substantial costs, require significant changes to our policies and practices, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities.

We have incurred substantial expenses in complying with data protection legal frameworks and we may be required to make significant changes in our business operations, which may adversely affect our business. Because these new regimes lack a substantial enforcement history, we are unable to predict how emerging standards may be applied to us, and thus, a regulator may subject us to certain actions, fines or public censure. Any actual or perceived inability to adequately address, ~~privacy, data protection and information security concerns, even if unfounded,~~ or ~~any actual or perceived~~ failure to comply with ~~applicable privacy,~~ data protection ~~or information security laws, regulations and other obligations,~~requirements, even if unfounded, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products. Privacy, data protection and information security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and countries outside of the United States. If we are not able to adjust to changing laws, regulations and standards related to the Internet, our business may be harmed.

The ongoing COVID-19 pandemic could harm our business and results of operations.

The ongoing COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide, including in many of the regions in which we sell our products and services and conduct our business operations, negatively impacting worldwide economic activity. We have taken precautionary measures intended to help minimize the risk of the virus to our employees, our customers, and the communities in which we operate. The continued spread of the COVID-19 pandemic and the resurgence of infection rates in certain regions has caused us to continue to modify our business practices (including imposing restrictions on employee travel, adapting employee work locations, and holding events and trainings virtually), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. The full extent to which COVID-19 and our precautionary measures may continue to impact our business will depend on future developments, which continue to be ~~highly~~ uncertain and cannot be predicted at this time, including but not limited to, the duration and geographic spread of the pandemic, its severity, the actions to contain the virus or treat its impact, future spikes of COVID-19 infections resulting in additional preventative measures to contain or mitigate the spread of the virus, the effectiveness, distribution and acceptance of COVID-19 vaccines, including the vaccines’ efficacy against emerging and more transmissible COVID-19 variants or mutant strains, and how quickly and to what extent normal economic and operating conditions can resume.time. It has been and, until the COVID-19 pandemic is contained and global economic activity stabilizes, will continue to be more difficult for us to forecast our operating results. The magnitude and duration of the disruption and resulting decline in business activity remains uncertain and could negatively impact our sales and marketing efforts, our ability to enter into customer contracts in a timely manner, our international expansion efforts, our ability to deliver ~~professional~~ services, our ability to recruit employees across the organization which, in turn, could have longer term effects on our sales pipeline, or create operational or other challenges, any of which could harm our business.

We are ~~slowly~~ moving toward normal operations on a market-by-market basis in accordance with local guidelines. Our approach may vary among geographies depending on local guidelines, and may change at any time, including in response to new or reimposed precautionary measures as the pandemic evolves. We may incorporate into our ongoing business operations certain business practice modifications implemented in response to the COVID-19 pandemic. These business modifications have and may continue to result in inefficiencies, delays and additional costs, including increased tax compliance obligations, that may adversely affect our business. ~~In regions where we permit our employees to return to our offices and~~As we resume in-person meetings and events, we may face additional challenges and incur additional costs, including those associated with workplace safety protocols, disparate regional safety guidelines and workplace or labor disputes or claims related to COVID-19, which could also negatively impact our business.

In addition, the COVID-19 pandemic has disrupted, and may continue to disrupt, the operations of our customers, vendors, channel partners and government entities for an indefinite period of time, including in specific regions of the world or sectors of the economy and as a result of travel restrictions and/or business shutdowns, all of which could negatively impact our business and results of operations, including cash flows. Further, the impact of the COVID-19 pandemic has varied significantly across different industries with certain industries experiencing increased demand for their products and services as the needs of the economy shift, while others have struggled to maintain demand for their products and services consistent with historical levels. Because we have a limited history in understanding these impacts, our ability to adapt our sales and marketing initiatives to such changes may be uncertain and our ability to forecast rates of customer retention and expansion may be negatively impacted. Meanwhile, a shift towards more consumption-based arrangements for our Elastic Cloud offerings, where

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the timing of revenue recognition is tied to our customers’ actual usage of our products, may further exacerbate such uncertainty as well as the difficulty of forecasting customer retention and expansion rates.

Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession, economic downturn, or increased unemployment that has occurred or may occur in the future. There has been increased scrutiny of business (including technology) spending by our customers and prospective customers, particularly in industries most impacted by the COVID-19 pandemic, longer sales cycles, as well as reduced demand for our solutions, customers failing to pay us under the terms of our agreements, increased

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cyber threats, lower renewal rates by our customers and increased competition, all of which could result in a material adverse impact on our business operations and financial condition.

While we have developed and continue to develop plans intended to help mitigate the negative impacts of the pandemic on our business, these efforts may not be effective and a protracted economic downturn may limit the effectiveness of our mitigation efforts.

Our operating results are likely to fluctuate from quarter to quarter, and our financial results in any one quarter should not be relied upon as indicative of future performance.

Our results of operations, including our revenue, cost of revenue, gross margin, operating expenses, cash flow and deferred revenue, have fluctuated from quarter-to-quarter in the past and may continue to vary significantly in the future so that period-to-period comparisons of our results of operations may not be meaningful. These variations may be further impacted as more of our Elastic Cloud customers adopt consumption-based arrangements. Accordingly, our financial results in any one quarter should not be relied upon as indicative of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, may be difficult to predict, and may or may not fully reflect the underlying performance of our business. Factors that may cause fluctuations in our quarterly financial results include:

•our ability to attract new customers and retain existing customers;

•the loss of existing customers;

•customer renewal rates;

•our ability to successfully expand our business in the U.S. and internationally;

•general political, geopolitical, economic, industry and market conditions (including recessionary pressures or uncertainties in the global economy);

•our ability to foster an ecosystem of developers and users to expand the use cases of our products;

•our ability to gain new partners and retain existing partners;

•fluctuations in the growth rate of the overall market that our products address;

•fluctuations in the mix of our revenue, which may impact our gross margins and operating income;

•the amount and timing of operating expenses related to the maintenance and expansion of our business and operations, including investments in sales and marketing, research and development and general and administrative resources;

•network outages or performance degradation of Elastic Cloud;

•actual or perceived breaches of, or failures or incidents relating to, privacy, data protection or information security;

•additions or departures of key personnel;

•the impact of catastrophic events, man-made problems such as terrorism, natural disasters and public health epidemics and pandemics;

•~~general political, economic, industry~~Russia’s invasion of Ukraine and ~~market~~the related impact on macroeconomic conditions;

•increases or decreases in the number of elements of our subscriptions or pricing changes upon any renewals of customer agreements;

•changes in our pricing policies or those of our competitors;

•the budgeting cycles and purchasing practices of customers;

•decisions by potential customers to purchase alternative solutions;

•decisions by potential customers to develop in-house solutions as alternatives to our products;

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•insolvency or credit difficulties confronting our customers, which could adversely affect their ability to purchase or pay for our offerings;

•our ability to collect timely on invoices or receivables;

•delays in our ability to fulfill our customers’ orders;

•the cost and potential outcomes of future litigation or other disputes;

•future accounting pronouncements or changes in our accounting policies;

•our overall effective tax rate, including impacts caused by any reorganization in our corporate tax structure and any new legislation or regulatory developments;

•fluctuations in stock-based compensation expense;

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•fluctuations in foreign currency exchange rates;

•the impact of changing inflation and interest rates;

•the timing and success of new offerings introduced by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or partners;

•the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; and

•other risk factors described in this Quarterly Report on Form 10-Q.

The impact of one or more of the foregoing or other factors may cause our operating results to vary significantly. For example, the full impact of the COVID-19 pandemic is unknown and ~~continues to evolve rapidly, and~~ could result in material adverse changes in our results of operations for an unknown period of time as the virus and its related political, social and economic impacts spread. Such fluctuations could cause us to fail to meet the expectations of investors or securities analysts, which could cause the trading price of our ordinary shares to fall substantially, and we could face costly lawsuits, including securities class action suits, which could have an adverse effect on our business.

If we are unable to increase sales of our subscriptions to new customers, sell additional subscriptions to our existing customers, or expand the value of our existing customers’ subscriptions, our future revenue and results of operations will be harmed.

We offer certain features of our products with no payment required. Customers purchase subscriptions in order to gain access to additional functionality and support. Our future success depends on our ability to sell our subscriptions to new customers, including to large enterprises, and to expand the deployment of our offerings with existing customers by selling paid subscriptions to our existing users and expanding the value and number of existing customers’ subscriptions. Our ability to sell new subscriptions depends on a number of factors, including the prices of our offerings, the prices of products offered by our competitors, and the budgets of our customers. We also face difficulty in displacing the products of incumbent competitors. In addition, a significant aspect of our sales and marketing focus is to expand deployments within existing customers. 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. If our existing customers do not purchase additional subscriptions or expand the value of their subscriptions, our Net Expansion Rate may decline. We rely in large part on our customers to identify new use cases for our products in order to expand such deployments and grow our business. If our customers do not recognize the potential of our offerings, our business would be materially and adversely affected. If our efforts to sell subscriptions to new customers and to expand deployments at existing customers are not successful, our total revenue and revenue growth rate may decline and our business will suffer.

If our existing customers do not renew their subscriptions, it could have an adverse effect on our business and results of operations.

We expect to derive a significant portion of our revenue from renewals of existing subscriptions. Our customers have no contractual obligation to renew their subscriptions after the completion of their subscription term. Our subscriptions for self-managed deployments typically range from one to three years, while many of our Elastic Cloud customers purchase subscriptions either on a month-to-month basis or on a committed contract of at least one year in duration.

Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction with our products and our customer support, our products’ ability to integrate with new and changing technologies, the frequency and severity of product outages, our product uptime or latency, and the pricing of our, or competing, products. If our

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customers renew their subscriptions, they may renew for shorter subscription terms or on other terms that are less economically beneficial to us. We may not accurately predict future renewal trends. If our existing customers do not renew their subscriptions, or renew on less favorable terms, our revenue may grow more slowly than expected or decline.

Our decision to no longer offer Elasticsearch and Kibana under an open source license may harm the adoption of Elasticsearch and Kibana.

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, ~~(“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. Neither the Elastic License nor the SSPL has been approved by the Open Source Initiative or is included in the Free Software Foundation’s list of free software licenses. Further, neither has been interpreted by any court. While the vast majority of downloads of Elasticsearch and Kibana from mid-2018 through early 2021 were licensed under the Elastic License, the removal of the Apache 2.0 alternative could negatively impact certain developers for whom the availability of an open source license was important. In addition, some developers and the companies for whom they work may be hesitant to download or upgrade to new versions of Elasticsearch or

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Kibana under the Elastic License or SSPL because of uncertainty around how these licenses may be interpreted and enforced. Other developers, including competitors of Elastic such as Amazon, have announced that they have “forked” Elasticsearch and Kibana. 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. The combination of uncertainty around our dual license model and the potential competition from the forked versions of our software may negatively impact adoption of Elasticsearch and Kibana, which in turn could lead to reduced brand and product awareness, ultimately leading to a decline in paying customers, which could harm our ability to grow our business or achieve profitability.

We could be negatively impacted if the Elastic License or SSPL under which some of our software is licensed ~~are~~is not enforceable.

We make the source code of our products available under Apache 2.0, the Elastic License, or dual licensed under the Elastic License and SSPL, depending on the product and version. Apache 2.0 is a permissive open source license that allows licensees to freely copy, modify and distribute Apache 2.0-licensed software provided that they meet certain conditions. The Elastic License is our proprietary source available license. The Elastic License permits licensees to use, copy, modify and distribute the licensed software provided that they do not offer access to the software as a cloud service, interfere with the license key or remove proprietary notices. SSPL is a source available license that is based on the GNU Affero General Public License (“AGPL”) open source license and permits licensees to copy, modify and distribute SSPL-licensed software, but expressly requires licensees that offer the SSPL-licensed software as a third-party service to open source all of the software that they use to offer such service. We rely upon the enforceability of the restrictions set forth in the Elastic License and SSPL to protect our proprietary interests. It is possible that a court could hold that the Elastic License or SSPL are unenforceable. 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.

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 and it may be relatively easy for competitors, some of whom may have greater resources than we have, to enter our markets and compete with us.

Anyone may obtain access to source code for the features of our software that we have licensed under open source or source available licenses. Depending on the product and version of the Elastic software, this source code is either available under Apache 2.0, SSPL, or the Elastic License. Each of these licenses allow anyone, subject to compliance with the conditions of the applicable license, to redistribute our software in modified or unmodified form and use it to compete in our markets. Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies, due to the rights granted to licensees of open source and source available software. 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. 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. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure or the availability of new software will not result in price reductions, reduced operating margins and loss of market share, any one of which could harm our business, financial condition, results of operations and cash flows.

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If we do not effectively develop and expand our sales and marketing capabilities, including expanding, training, and ~~training~~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.

We dedicate significant resources to sales and marketing initiatives, which require us to invest significant financial and other resources, including in markets in which we have limited or no experience. Our business and results of operations will be harmed if our sales and marketing efforts do not generate significant revenue increases or increases that are smaller than anticipated.

We may not achieve revenue growth from expanding our sales force if we are unable to hire, train, and retain talented and effective sales personnel. We depend on our sales force to obtain new customers and to drive additional sales to existing customers. We believe that there is significant competition for sales personnel, including sales representatives, sales managers, and sales engineers, with the requisite skills and technical knowledge. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient sales personnel to support our growth, and as we introduce new products, solutions and marketing strategies, we may need to re-train existing sales personnel. 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. Our recent hires and planned

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hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. ~~In addition, particularly as~~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. If we are unable to hire and train sufficient numbers of effective sales personnel, our new and existing sales personnel are unable to achieve desired productivity levels in a reasonable period of time, our sales personnel are not successful in obtaining new customers or increasing sales to our existing customer base, or our sales and marketing programs, including our sales compensation plans, are not effective, our growth and results of operations could be negatively impacted and our business will be harmed.

Our ability to increase sales of our offerings is highly dependent on the quality of our customer support, and our failure to offer high quality support would have an adverse effect on our business, reputation and results of operations.

After our products are deployed within our customers’ IT environments, our customers depend on our technical support services to resolve issues relating to our products. If we do not succeed in helping our customers quickly resolve post-deployment issues or provide effective ongoing support and education on our products, our ability to renew or sell additional subscriptions to existing customers or expand the value of existing customers’ subscriptions would be adversely affected and our reputation with potential customers could be damaged. Many larger enterprise and government entity customers have more complex IT environments and require higher levels of support than smaller customers. If we fail to meet the requirements of these enterprise customers, it may be more difficult to grow sales with them.

Additionally, it can take several months to recruit, hire, and train qualified technical support employees. We may not be able to hire such resources fast enough to keep up with demand, particularly if the sales of our offerings exceed our internal forecasts. Due to the ongoing uncertainty related to the COVID-19 pandemic, there may also be more competition for qualified employees and delays in hiring, onboarding and training new employees. To the extent that we are unsuccessful in hiring, training, and retaining adequate support resources, our ability to provide adequate and timely support to our customers, and our customers’ satisfaction with our offerings, will be adversely affected. Our failure to provide and maintain, or a market perception that we do not provide or maintain, high-quality support services would have an adverse effect on our business, financial condition, and results of operations.

We rely significantly on revenue from subscriptions and, because we recognize ~~a significant portion~~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.

Subscription revenue accounts for the substantial majority of our revenue, comprising 93%~~, 93% and 92%~~ of total revenue infor the ~~nine~~three months ended ~~January~~July 31, 2022 and the years ended April 30, ~~2021~~2022 and ~~2020, respectively.~~2021. We recognize ~~a significant portion~~the vast majority of our subscription revenue, either based on actual consumption or monthly, over the term of the relevant time period. As a result, much of the subscription revenue we report each fiscal quarter is the recognition of deferred revenue from subscription contracts entered into during previous fiscal quarters. Consequently, a decline in new or renewed subscriptions in any one fiscal quarter will not be fully or immediately reflected in revenue in that fiscal quarter and will negatively affect our revenue in future fiscal quarters. Accordingly, the effect of significant downturns in new or renewed sales of our subscriptions is not reflected in full in our results of operations until future periods.

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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 expect that our consumption-based arrangements for our Elastic Cloud offerings will continue to increase, both in amount and as a percentage of our total revenue. Because we recognize revenue under a consumption-based arrangement based on actual customer consumption, we do not have the same visibility into the timing of revenue recognition as we do under subscription arrangements where revenue is recognized on a predetermined schedule over the subscription term. Additionally, customers may consume our products at a different pace than we expect. For these reasons, our revenue may be less predictable or more variable than our historical revenue, and our actual results may differ materially from our forecasts.

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.

Our products are inherently complex and, despite extensive testing and quality control, have in the past and may in the future contain defects or errors, especially when first introduced, or otherwise not perform as contemplated. 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. As the use of our products, including products that were recently acquired or developed, expands to more sensitive, secure, or mission critical uses by our customers, we may be subject to increased scrutiny, potential reputational risk, or potential liability should our software fail to perform as contemplated in such deployments. 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.

Any limitation of liability provisions that may be contained in our customer and partner agreements may not be effective as a result of existing or future applicable law or unfavorable judicial decisions. The sale and support of our products entail the risk of liability claims, which could be substantial in light of the use of our products in enterprise-wide environments. In addition, our insurance against this liability may not be adequate to cover a potential claim.

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Incorrect implementation or use of our software, or our customers’ failure to update our software, could result in customer dissatisfaction and negatively affect our business, operations, financial results, and growth prospects.

Our products are often operated in large scale, complex IT environments. Our customers and some partners require training and experience in the proper use of and the benefits that can be derived from our products to maximize their potential. If our products are not implemented, configured, updated or used correctly or as intended, or in a timely manner, inadequate performance, errors, loss of data, corruptions and/or security vulnerabilities may result. For example, there have been and may in the future continue to be, reports of our customers not properly securing implementations of our products, which can result in unprotected data. 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. 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.

If third parties offer inadequate or defective implementations of software that we have previously made available under an open source license, our reputation could be harmed.

Certain cloud hosting providers and managed service providers, including Amazon Web Services, offer hosted products based on a forked version of the Elastic Stack. 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 third parties could inadequately or incorrectly implement our open source technology, or fail to update such technology in light of changing technological or security requirements, which could result in real or perceived defects, security vulnerabilities, errors, or performance failures with respect to their offerings. Users, customers, and potential customers could confuse these third-party products with our products, and attribute such defects, security vulnerabilities, errors, or performance failures to our products. Any damage to our reputation and brand from defective implementations of our open source software could result in lost sales and lack of market acceptance of our products and could adversely affect our business and growth prospects.

We rely on traditional web search engines to direct traffic to our website. If our website fails to rank prominently in unpaid search results, traffic to our website could decline and our business would be adversely affected.

Our success depends in part on our ability to attract users through unpaid Internet search results on traditional web search engines, such as Google. The number of users we attract to our website from search engines is due in large part to how

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and where our website ranks in unpaid search results. These rankings can be affected by a number of factors, many of which are not in our direct control, and they may change frequently. For example, a search engine may change its ranking algorithms, methodologies or design layouts. As a result, links to our website may not be prominent enough to drive traffic to our website, and we may not know how or otherwise be in a position to influence the results. Any reduction in the number of users directed to our website could reduce our revenue or require us to increase our customer acquisition expenditures.

If our security measures are breached, a security incident occurs, or unauthorized access to or other processing of confidential information, including personal data, otherwise occurs, our software may be perceived as not being secure, customers may reduce the use of or stop using our products, and we may incur significant liabilities.

Any security breach or incident, including those resulting from a cybersecurity attack, phishing attack, unauthorized access, unauthorized usage, virus, malware, ransomware, denial of service, credential stuffing attack, supply chain attack, hacking or similar breach involving our networks and systems, or those of third parties upon which we rely, could result in the loss of confidential information, including personal data, disruption to our operations, significant remediation costs, lost revenue, increased insurance premiums, damage to our reputation, litigation, regulatory investigations or other liabilities. These attacks may come from individual hackers, criminal groups, and state-sponsored organizations, and security breaches and incidents may arise from other sources, such as employee or contractor error or malfeasance. Cyber threats are constantly evolving and becoming increasingly sophisticated and complex, increasing the difficulty of detecting and successfully defending against them. As a provider of security solutions, we have been and may continue to be specifically targeted by bad actors for attacks intended to circumvent our security capabilities as an entry point into customers’ endpoints, networks, or systems. Our industry is experiencing an increase in phishing attacks and unauthorized scans of systems searching for vulnerabilities or misconfigurations to exploit. If our security measures are breached or otherwise compromised as a result of third-party action, employee or contractor error, defect, vulnerability or bug in our products or products of third parties upon which we rely, malfeasance or otherwise, including any such breach or compromise resulting in someone obtaining unauthorized access to our confidential information, including personal data or the confidential information or personal data of our customers or others, or if any of these are perceived or reported to occur, we may suffer the loss, compromise, corruption, unavailability, or destruction of our or others’ confidential information and personal data, we may face a loss in intellectual property protection, our reputation may be damaged, our business may suffer and we could be subject to claims, demands, regulatory investigations and other proceedings, indemnity obligations, and otherwise incur significant liability. Even the perception of inadequate security may damage our

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reputation and negatively impact our ability to win new customers and retain existing customers. Further, we could be required to expend significant capital and other resources to address any security incident or breach, and we may face difficulties or delays in identifying and responding to any security breach or incident.

In addition, many of our customers may use our software for processing their confidential information, including business strategies, financial and operational data, personal data and other related data. 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. It could also hinder our ability to obtain and maintain information security certifications that support customers’ adoption of our products and our retention of those customers. We have implemented administrative, technical and physical measures designed to protect the integrity of our customers’ data and prevent data loss, misappropriation and other security breaches and incidents and may incur significant costs in connection with the implementation of additional preventative measures in the future.

We engage third-party vendors and service providers to store and otherwise process some of our and our customers’ data, including sensitive and personal data. 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. Our third-party vendors and service providers have been subject to phishing attacks and other security incidents, and we cannot guarantee that our or our third-party vendors and service providers’ systems and networks have not been breached or otherwise compromised or that they do not contain exploitable vulnerabilities, defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support us and our services. For example, in December 2021, a vulnerability in a popular logging software, Log4j, was publicly announced. If left unpatched, the Log4j vulnerability could be exploited to allow unauthorized actors to execute code remotely on a system using Log4j. We have taken steps to ensure these vulnerabilities have been patched in our systems, but we cannot guarantee that all vulnerabilities have been patched in every system upon which we are dependent or that additional critical vulnerabilities of Log4j or other open-source software upon which we rely will not be discovered. Our ability to monitor our third-party vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, or misuse, disclosure, loss, destruction, or other unauthorized processing of our and our customers’ data, including sensitive and personal data.

Techniques used to sabotage or obtain unauthorized access to systems or networks are constantly evolving and, in some instances, are not identified until launched against a target. We and our third-party vendors and service providers may be unable to anticipate these techniques, react in a timely manner, or implement adequate preventative measures. Security risks are

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also heightened during the ongoing COVID-19 pandemic as more individuals are working remotely and utilizing home networks for transmitting information, and reported ransomware incidents with significant operational impacts also appear to be escalating in frequency and degree. Also, 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, including attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products and ~~services.~~services as well as retaliatory cybersecurity attacks from Russian and Russian-affiliated actors against companies with a U.S. presence. 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. 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. We and our customers may also experience increased costs associated with security measures and increased risk of suffering cyberattacks, including ~~ransomware.~~ransomware attacks. Should we or the third-party vendors and service providers upon which we rely experience such attacks, including from ransomware or other security breaches or incidents, our operations may also be hindered or interrupted due to system disruptions or otherwise, with foreseeable secondary contractual, regulatory, financial, and reputational harms that may arise from such an incident.

Further, we cannot assure that any limitations of liability provisions in our customer and user agreements, contracts with third-party vendors and service providers or other contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security breach or other security incident. 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. The successful assertion of claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

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Interruptions or performance problems associated with our technology and infrastructure, and our reliance on technologies from third parties, may adversely affect our business operations and financial results.

We rely on third-party cloud platforms to host our cloud offerings. If we experience an interruption in service for any reason, our cloud offerings would similarly be interrupted. The COVID-19 pandemic could also disrupt the supply chain of hardware needed to maintain our third-party data center operations. An interruption in our services to our customers could cause our customers’ internal and consumer-facing applications to not function properly, which could have a material adverse effect on our business, results of operations, customer relationships and reputation.

In addition, our website and internal technology infrastructure may experience performance issues due to a variety of factors, including infrastructure changes, human or software errors, website or third-party hosting disruptions, capacity constraints, technical failures, natural disasters or fraud or security attacks. Our use of third-party open source software may increase this risk. If our website is unavailable or our users are unable to download our products or order subscriptions or services within a reasonable amount of time or at all, our business could be harmed. We expect to continue to make significant investments to maintain and improve website performance and to enable rapid releases of new features and applications for our products. To the extent that we do not effectively upgrade our systems as needed and continually develop our technology to accommodate actual and anticipated changes in technology, our business and results of operations may be harmed.

We rely on third-party service providers for many aspects of our business, and any failure to maintain these relationships could harm our business.

Our success depends upon our relationships with third-party service providers, including providers of cloud hosting infrastructure, customer relationship management systems, financial reporting systems, human resource management systems, credit card processing platforms, marketing automation systems, and payroll processing systems, among others. If any of these third parties experience difficulty meeting our requirements or standards, become unavailable due to extended outages or interruptions, temporarily or permanently cease operations, face financial distress or other business disruptions such as a security incident, increase their fees, if our relationships with any of these providers deteriorate, or if any of the agreements we have entered into with such third parties are terminated or not renewed without adequate transition arrangements, we could suffer liabilities, penalties, fines, increased costs and delays in our ability to provide customers with our products and services, our ability to manage our finances could be interrupted, receipt of payments from customers may be delayed, our processes for managing sales of our offerings could be impaired, our ability to generate and manage sales leads could be weakened, or our business operations could be disrupted. Further, supply chain disruptions due to Russian’s invasion of Ukraine and any impacts

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that may have on our third-party service providers may disrupt our business operations. Any of such disruptions may adversely impact our business and our financial condition, results of operations or cash flows could be adversely affected until we replace such providers or develop replacement technology or operations. In addition, if we are unsuccessful in identifying high-quality service providers, negotiating cost-effective relationships with them or effectively managing these relationships, it could adversely affect our business and financial results.

The length of our sales cycle can be unpredictable, particularly with respect to sales through our channel partners or sales to large customers, and our sales efforts may require considerable time and expense.

Our results of operations may fluctuate, in part, because of the length and variability of the sales cycle of our subscriptions and the difficulty in making short-term adjustments to our operating expenses. Our results of operations depend in part on sales to new customers, including large customers, and increasing sales to existing customers. The length of our sales cycle, from initial contact with our sales team to contractually committing to our subscriptions can vary substantially from customer to customer based on deal complexity as well as whether a sale is made directly by us or through a channel partner. Our sales cycle can extend to more than a year for some customers, and the length of sales cycles may be further impacted due to the COVID-19 pandemic. Some customers have been scrutinizing their spending more carefully given a challenging economic environment associated with the pandemic, and we generally expect this to continue. This might cause sales cycles to become longer or become more unpredictable. As we target more of our sales efforts at larger enterprise customers, we may face greater costs, longer sales cycles, greater competition and less predictability in completing some of our sales. A customer’s decision to use our solutions may be an enterprise-wide decision, which may require greater levels of education regarding the use cases of our products or prolonged negotiations. In addition, larger customers may demand more configuration, integration services and features. It is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. As a result, large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. The loss or delay of one or more large transactions in a quarter could affect our cash flows and results of operations for that quarter and for future quarters. Because a substantial proportion of our expenses are relatively fixed in the short term, our cash flows and results of operations will suffer if revenue falls below our expectations in a particular quarter, which could cause the price of our ordinary shares to decline.

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We depend on our senior management and other key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could harm our business.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly in engineering and sales, may seriously harm our business, financial condition, and results of operations. Further, our ability to attract additional qualified personnel may be impacted by the economic uncertainty and insecurity caused by the COVID-19 pandemic. The loss of services of any of our key personnel also increases our dependency on other key personnel who remain with us. Although we have entered into employment offer letters with our key personnel, their employment is for no specific duration and constitutes at-will employment. We are also substantially dependent on the continued service of our existing engineering personnel because of the complexity of our products.

Our future performance also depends on the continued services and continuing contributions of our senior management, particularly our Chief Executive Officer, Ashutosh Kulkarni, and Chief Technology Officer, Shay Banon, to execute on our business plan and to identify and pursue new opportunities and product innovations. We do not maintain key person life insurance policies on any of our employees. The loss of services of senior management could significantly delay or prevent the achievement of our development and strategic objectives, which could adversely affect our business, financial condition, and results of operations. Any search for senior management in the future or any search to replace the loss of any senior management may be prolonged, and we may not be able to attract a qualified candidate or replacement, as applicable, in a timely manner or at all, particularly as potential candidates may be wary to transition during the unstable economic conditions caused by the COVID-19 ~~pandemic.~~pandemic and geopolitical events. Furthermore, the COVID-19 pandemic could make it more difficult to onboard, provide training to and integrate any senior management or key employees, which could adversely affect their productivity and our business. If we are unable to mitigate these or other similar risks as we experience management turnover, our business, results of operation and financial condition may be adversely affected.

~~In January 2022, we announced the transition of~~Earlier this year, Shay Banon transitioned from the role of Chief Executive Officer ~~and Chairman of the Board~~ to the role of Chief Technology Officer, ~~subject to shareholder approval,~~ and ~~the transition of~~ Ashutosh Kulkarni transitioned from the role of Chief Product Officer to Chief Executive Officer. Mr. Kulkarni was also nominated to serve on the Board, and he was appointed to the Board by shareholders at an extraordinary general shareholder meeting on March 9, 2022. This appointment also automatically confirmed his position as Chief Executive Officer. Additionally, Chetan Puttagunta, Lead Independent Director, was appointed Chairman of the Board in January 2022. If we are not successful in managing the transition of our Chief Executive Officer, it could be viewed negatively by our customers, employees or investors and could have an adverse impact on our business.

Additionally, the industry in which we operate is generally characterized by significant competition for skilled personnel as well as high employee attrition. We may not be successful in attracting, integrating, or retaining qualified personnel to fulfill our current or future needs. We may need to invest significant amounts of cash and equity to attract and

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retain new employees, and we may never realize returns on these investments. Also, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited, that they have divulged proprietary or other confidential information, or that their former employers own their inventions or other work product.

If we are not able to maintain and enhance our brand, especially among developers, our ability to expand our customer base will be impaired and our business and operating results may be adversely affected.

We believe that developing and maintaining widespread awareness of our brand, especially with developers, is critical to achieving widespread acceptance of our software and attracting new users and customers. We also believe that the importance of brand recognition will increase as competition in our market increases. Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to maintain our customers’ trust, our ability to continue to develop new functionality and use cases, and our ability to successfully differentiate our products and platform capability from competitive products. Brand promotion activities may not generate user or customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. 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. If we fail to successfully promote and maintain our brand, we may fail to attract or retain users and customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our products, which would adversely affect our business and results of operations.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and entrepreneurial spirit we have worked to foster, which could harm our business.

We believe that our culture has been and will continue to be a key contributor to our success. We expect to continue to hire as we expand. If we do not continue to maintain our corporate culture as we grow, we may be unable to foster the

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innovation, creativity, and entrepreneurial spirit we believe we need to support our growth. 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. Additional headcount growth may result in a change to our corporate culture, which could harm our business.

We rely on channel partners to execute a portion of our sales; if our channel partners fail to perform or we are unable to maintain successful relationships with our channel partners, our ability to market, sell and distribute our solution will be more limited, and our results of operations and reputation could be harmed.

A portion of our revenue is generated by sales through our channel partners, especially to U.S. federal government customers and in certain international markets, and these sales may grow and represent a larger portion of our revenues in the future. We provide certain of our channel partners with specific training and programs to assist them in selling our offerings, but there can be no assurance that these steps will be effective. In addition, our channel partners may be unsuccessful in marketing and selling our offerings, particularly in light of the effects of the COVID-19 pandemic. If we are unable to develop and maintain effective sales incentive programs for our channel partners, we may not be able to incentivize these partners to sell our offerings to customers.

Some of these partners may also market, sell, and support offerings that compete with ours, may devote more resources to the marketing, sales, and support of such competitive offerings, may have incentives to promote our competitors’ offerings to the detriment of our own or may cease selling our offerings altogether. Our agreements with our channel partners typically have a duration of one to three years, and generally may be terminated for any reason by either party with advance notice prior to each renewal date. We may not be able to retain these channel partners or secure additional or replacement channel partners. The loss of one or more of our significant channel partners or a decline in the number or size of orders from any of them could harm our results of operations. In addition, many of our new channel partners require extensive training and may take several months or more to achieve productivity. Our channel partner sales structure could subject us to lawsuits, potential liability, misstatement of revenue, and reputational harm if, for example, any of our channel partners misrepresents the functionality of our offerings to customers or violates laws or our or their corporate policies, including our terms of business, which in turn could impact reported revenue, deferred revenue and remaining performance obligations. If our channel partners are unsuccessful in fulfilling the orders for our offerings, or if we are unable to enter into arrangements with and retain high quality channel partners, our ability to sell our offerings and results of operations could be harmed.

If we are unable to maintain successful relationships with our partners, our business operations, financial results and growth prospects could be adversely affected.

We maintain partnership relationships with a variety of partners, including cloud providers, systems integrators, channel partners, referral partners, OEM and MSP partners, and technology partners, to deliver offerings to our end customers

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and complement our broad community of users. In particular, we partner with various cloud providers to jointly market, sell and deliver our Elastic Cloud offerings, and in some instances this also involves technical integration with such cloud providers.

Our agreements with our partners are generally non-exclusive, meaning our partners may offer customers the offerings of several different companies, including offerings that compete with ours, or may themselves be or become competitors. 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, ~~particularly in light of the effects of the COVID-19 pandemic,~~ our ability to grow our business and sell our offerings may be harmed. Our partners may cease marketing our offerings with limited or no notice and with little or no penalty. The loss of a substantial number of our partners, our possible inability to replace them, or the failure to recruit additional partners could harm our results of operations.

Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our partners and in helping our partners enhance their ability to market and sell our subscriptions. If we are unable to maintain our relationships with these partners, our business, results of operations, financial condition or cash flows could be harmed.

The sales prices of our offerings may decrease, which may reduce our gross profits and adversely affect our financial results.

The sales prices for our offerings may decline or we may introduce new pricing models for a variety of reasons, including competitive pricing pressures, discounts, in anticipation of or in conjunction with the introduction of new offerings, or promotional programs.

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. Additionally, currency fluctuations in certain countries and regions, inflationary pressures and interest rate fluctuations, may negatively impact actual prices that customers and

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channel partners are willing to pay in those countries and regions. Any decrease in the sales prices for our offerings, without a corresponding decrease in costs or increase in volume, would adversely impact our gross profit. 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. We may not be able to maintain our prices and gross profits at levels that will allow us to achieve and maintain profitability.

We expect our revenue mix to vary over time, which could harm our gross margin and operating results.

We expect our revenue mix to vary over time due to a number of factors, and we expect that revenue from Elastic Cloud will continue to become a larger part of our revenue mix. 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. Our introduction of consumption-based arrangements for our Elastic Cloud offerings, where the revenue we recognize is tied to our customers’ actual usage of our products, may further exacerbate the variation in our revenue. Further, our gross margins and operating results could be harmed by changes in revenue mix and costs, together with numerous other factors, including entry into new markets or growth in lower margin markets; entry into markets with different pricing and cost structures; pricing discounts; and increased price competition. Any one of these factors or the cumulative effects of certain of these factors may result in significant fluctuations in our gross margin and operating results. This variability and unpredictability could result in our failure to meet internal expectations or those of securities analysts or investors for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our ordinary shares could decline.

Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and results of operations.

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. We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights. The source code of the proprietary features for the Elastic Stack is publicly available, which may enable others to replicate our proprietary technology and compete more effectively. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our proprietary technology and our business may be harmed. In addition, defending our intellectual property rights might entail significant expense. Any patents, trademarks, or other intellectual property rights that we have or may obtain may be challenged by others or invalidated through administrative process or litigation. ~~As of January 31, 2022, we had 40 issued U.S. patents, 1 issued non-U.S. patent, 58 pending U.S. patent applications, 16 pending non-U.S. filings and 1 open disclosure.~~ There can be no assurance that ~~our~~any

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ongoing patent applications we may have will result in issued patents. Even if we continue to seek patent protection in the future, we may be unable to obtain further patent protection for our technology. In addition, any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create offerings that compete with ours. Effective patent, trademark, copyright, and trade secret protection may not be available to us in every country in which our products are available. We may be unable to prevent third parties from acquiring domain names or trademarks that are similar to, infringe upon, or diminish the value of our trademarks and other proprietary rights. 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. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other parties. No assurance can be given that these agreements will be effective in controlling access to and distribution of our proprietary information. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products.

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 ~~be necessary~~ in the future be necessary to enforce our intellectual property rights and to protect our trade secrets. For example, on September 4, 2019, we filed suit against floragunn GmbH in the United States District Court for the Northern District of California for copyright infringement and contributory copyright infringement, and recently, we resolved a multi-year dispute over a suit we filed against Amazon.com, Inc. on September 27, 2019 in the United States District Court for the Northern District of California for trademark infringement and false advertising. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our

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intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products, impair the functionality of our products, delay introductions of new products, result in our substituting inferior or more costly technologies into our products, or injure our reputation.

We could incur substantial costs as a result of any claim of infringement, misappropriation or violation of another party’s intellectual property rights.

In recent years, there has been significant litigation involving patents and other intellectual property rights in the software industry. Companies providing software are increasingly bringing and becoming subject to suits alleging infringement, misappropriation or violation of proprietary rights, particularly patent rights, and to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement, misappropriation or violation claims. We do not currently have a large patent portfolio, which could prevent us from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. The risk of patent litigation has been amplified by the increase in the number of a type of patent holder, which we refer to as a non-practicing entity, whose sole or principal business is to assert such claims and against whom our own intellectual property portfolio may provide little deterrent value. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third party that claims that our products infringe, misappropriate or violate their rights, the litigation could be expensive and could divert our management resources.

Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:

•cease selling or using products that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate;

•make substantial payments for legal fees, settlement payments or other costs or damages;

•obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or

•redesign the allegedly infringing products to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible.

If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement, misappropriation or violation claims against us or any obligation to indemnify our customers for such claims, such payments or actions could harm our business.

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Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, misappropriation, violation and other losses.

Our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, misappropriation or violation, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services or other contractual obligations. Large indemnity payments could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such indemnity obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.

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.

Our technologies incorporate open source software from other developers, and we expect to continue to incorporate such open source software in our products in the future. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products. 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. If we fail to comply with these licenses, we may be subject to certain requirements, including requirements that we offer our solutions that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such

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allegations and could be subject to significant damages, enjoined from the sale of our products that contained the open source software and required to comply with onerous conditions or restrictions on these products, which could disrupt the distribution and sale of these products. In addition, there have been claims challenging the ownership rights in open source software against companies that incorporate open source software into their products, and the licensors of such open source software provide no warranties or indemnities with respect to such claims. In any of these events, we and our customers could be required to seek licenses from third parties in order to continue offering our products, and to re-engineer our products or discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis. We and our customers may also be subject to suits by parties claiming infringement, misappropriation or violation due to the reliance by our solutions on certain open source software, and such litigation could be costly for us to defend or subject us to an injunction. 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. Any of the foregoing could require us to devote additional research and development resources to re-engineer our solutions, could result in customer dissatisfaction, and may adversely affect our business, results of operations and financial condition.

One of our marketing strategies is to offer some of our product features for free and to provide free trials of some of our paid features, and we may not be able to realize the benefits of this strategy.

We are dependent upon lead generation strategies, including offering free use of some of our product features and free trials of some of our paid features. These strategies may not be successful in continuing to generate sufficient sales opportunities necessary to increase our revenue. Many users never convert from the free use model or from free trials to the paid versions of our products. To the extent that users do not become, or we are unable to successfully attract, paying customers, we will not realize the intended benefits of these marketing strategies and our ability to grow our revenue will be adversely affected.

Our international operations and expansion expose us to several risks.

As of ~~January~~July 31, 2022, we had customers located in over ~~100~~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 ~~January~~July 31, 2022, we had employees located in over 3540 countries. Our current international operations involve and future initiatives may involve a variety of risks, including:

•political and economic instability related to ~~the military conflict between Russia and~~international disputes, such as Russia’s invasion of Ukraine and the related impact on macroeconomic conditions as a result of such conflict, which may negatively impact our customers, partners, and vendors;

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•unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

•different labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;

•exposure to many stringent, particularly in the European Union, and potentially inconsistent laws and regulations relating to privacy, data protection and information security;

•changes in a specific country’s or region’s political or economic conditions;

•political, economic and trade uncertainties or instability related to the United Kingdom's withdrawal from the European Union (Brexit), including the effects of the Trade and Cooperation Agreement between the European Union, the European Atomic Energy Community and the United Kingdom signed in December 2020, on the economies of, and the relationships between, the United Kingdom, European Union, United States and other countries;

•the evolving relations between the United States and China;

•changes in relations between the Netherlands and the United States;

•risks resulting from changes in currency exchange rates and rising inflation;

•risks resulting from the migration of invoicing from local billing entities to centralized regional billing entities;

•the impact of public health epidemics or pandemics on our employees, partners and customers;

•challenges inherent to efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs;

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•risks relating to enforcement of U.S. export control laws and regulations including the Export Administration Regulations, and trade and economic sanctions, including restrictions promulgated by ~~the~~ OFAC, and other similar trade protection regulations and measures in the United States or in other jurisdictions;

•risks relating to our third-party vendors and service providers’ storage and processing of some of our and our customers’ data, including any supply chain cyber attacks;

•reduced ability to timely collect amounts owed to us by our customers in countries where our recourse may be more limited;

•limitations on our ability to reinvest earnings from operations derived from one country to fund the capital needs of our operations in other countries;

•limited or unfavorable intellectual property protection; and

•exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. 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.

If we are not successful in sustaining and expanding our international business, we may incur additional losses and our revenue growth could be harmed.

Our future results depend, in part, on our ability to sustain and expand our penetration of the international markets in which we currently operate and to expand into additional international markets. We depend on direct sales and our channel partner relationships to sell our offerings in international markets. Our ability to expand internationally will depend upon our ability to deliver functionality and foreign language translations that reflect the needs of the international clients that we target. Our ability to expand internationally involves various risks, including the need to invest significant resources in such expansion, and the possibility that returns on such investments will not be achieved in the near future or at all in these less familiar competitive environments. We may also choose to conduct our international business through other partnerships. If we are unable to identify partners or negotiate favorable terms, our international growth may be limited. In addition, we have incurred and may continue to incur significant expenses in advance of generating material revenue as we attempt to establish our presence in particular international markets.

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If we need to raise additional capital or generate the significant capital necessary to expand our operations and invest in new offerings, it could reduce our ability to compete and could harm our business.

We may need to raise additional funds in the future, and we may not be able to obtain additional debt or equity financing on favorable terms, if at ~~all.~~all, particularly during times of market volatility and general economic instability. If we raise additional equity financing, our shareholders may experience significant dilution of their ownership interests and the per share value of our ordinary shares could decline. Furthermore, if we engage in debt financing, the holders of debt would have priority over the holders of our ordinary shares, and we may be required to accept terms that restrict our ability to incur additional indebtedness. We may also be required to take other actions that would otherwise be in the interests of the debt holders and force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations, and financial condition. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

•develop or enhance our products;

•continue to expand our sales and marketing and research and development organizations;

•acquire complementary technologies, products or businesses;

•expand operations in the United States or internationally;

•hire, train, and retain employees; or

•respond to competitive pressures or unanticipated working capital requirements.

Our failure to have sufficient capital to do any of these things could harm our business, financial condition, and results of operations.

A portion of our revenue is generated by sales to government entities, and this creates a number of challenges and risks.

Sales to government entities are subject to a number of risks. Selling to government entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts

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will generate a sale. Government certification and security requirements for products like ours may change, thereby restricting our ability to sell into the U.S. federal government sector, U.S. state government sector, or government sectors of countries other than the United States until we have obtained the revised certification. For example, we hold a U.S. Federal Risk and Authorization Management Program Authority to Operate at a moderate impact level; however, such authority is costly to maintain and if we were to lose our certification inor met the ~~future, it would restrict our ability to sell to government customers. On May 12, 2021, the Biden Administration issued an Executive Order that will ultimately result in additional~~changed security ~~requirements for government agencies and their contractors, for example, multifactor authentication, encryption for data at rest and in transit, and broad log creation, preservation, and production~~ requirements. Furthermore, the Executive Order accelerates agency planning and implementation requirements for “zero trust architecture” and will establish a standards-development effort for a software bill of materials. This may increase compliance costs directly for government contracts and indirectly to the extent such requirements require changes or new efforts at an enterprise level. If we are unable to timely meet such requirements, our ability to compete for and retain federal government contracts may be diminished, which could adversely affect our business, results of operations and financial condition.

Government demand and payment for our offerings may be affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings. Contracts with government agencies, including classified contracts, are subject to extensive, evolving and sometimes complex regulations, as well as audits and reviews. Failure to comply with such regulations or unfavorable findings from government audits or reviews could result in contract terminations, reputational harm or other adverse consequences, including but not limited to adversely affecting our eligibility to sell to government agencies in the future. Additionally, we rely on certain partners to provide technical support services to certain of our government entity customers to resolve any issues relating to our products. If our partners do not effectively assist our government entity customers in deploying our products, succeed in helping our government entity customers quickly resolve post-deployment issues, or provide effective ongoing support, our ability to sell additional offerings to new and existing government entity customers would be adversely affected and our reputation could be damaged.

Government entities may have statutory, contractual, or other legal rights to terminate contracts with us or our channel partners for convenience or due to a default, and any such termination may adversely affect our future results of operations. ~~In addition,~~Government demand and payment for our offerings may be affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings or exercise of options under multi-year ~~contracts~~contracts. Contracts with government ~~entities~~agencies, including classified contracts, are ~~usually conditioned on annual fiscal funding actions that the relevant legislative or other decision-making body must take in order~~subject to ~~fund each year~~extensive, evolving and sometimes complex regulations, as well as audits and reviews of ~~a contract. Such legislative or decision-making bodies may elect not to fund each year of a contract. Governments routinely investigate and audit government~~ contractors’ administrative processes and other contract related compliance ~~obligations, and any~~obligations. Breaches of government contracts, failure to comply with applicable regulations or unfavorable ~~audit~~findings from government audits or reviews could result in contract terminations, reputational harm or other adverse consequences, including but not limited to ineligibility to sell to government agencies in the future, the government refusing to continue buying our subscriptions, a reduction of revenue, or fines or civil or criminal liability, ~~if the audit uncovers improper or illegal activities,~~ which could adversely affect our results of operations in a material way.

In September 2021, U.S. federal government agencies enacted guidelines and regulations that required us to ensure that all of our employees in the United States who perform work on or in connection with a federal contract or subcontract are fully vaccinated or are eligible for an exemption from the vaccination requirement. Enforcement of this vaccine mandate was enjoined by a federal court in December 2021, and appeal of that decision is pending. If the injunction is overturned and the vaccine mandate becomes enforceable again, some of our employees who fail or refuse to comply may be suspended or terminated or they may resign their employment, which could have a negative impact on our productivity, employee morale, sales, operating results and overall financial performance. If we experience difficulties or delays in complying with these guidelines, our sales to the U.S. federal government could be negatively impacted, and if we fail to comply we could be debarred from selling to the U.S. federal government and exposed to additional legal claims.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could expose us to greater than anticipated tax liabilities.

Our income tax obligations are based in part on our corporate structure and intercompany arrangements, including the manner in which we develop, value, and use our intellectual property and the valuations of our intercompany transactions. The tax laws applicable to our business, including the laws of the Netherlands, the United States and other jurisdictions, are subject to change and interpretation. These changes include the introduction of a global minimum tax at a rate of 15% under the Two-Pillar Solution to Address the Tax Challenges of the Digitalisation of the Economy, agreed upon by 137 jurisdictions under the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) ~~and~~, which is expected to ~~be implemented as from~~enter into force in 2023. The United States has recently enacted legislation implementing several changes to U.S. tax laws, including a 15% minimum tax on adjusted financial statement income (AFSI) in excess of $1 billion. In addition, on January 1, ~~2023.~~2022, a provision of the Tax Cuts and Jobs Act of 2017 went into effect that eliminates the option to deduct domestic research and development costs in the year incurred and instead requires taxpayers to amortize such costs over five years. Once we have taxable profits in the United States, this provision is expected to decrease cash flows from

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operations and increase net deferred tax assets by a similar amount for our U.S. operations. Any new legislation or interpretations of existing legislation could impact our tax obligations in countries where we do business or cause us to change the way we operate our business and result in increased taxation of our international earnings.

The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial position and results of operations. Tax authorities examine and may audit our income tax returns and other non-income tax

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returns, such as payroll, sales, value-added, net worth or franchise, property, goods and services, and excise taxes, in both the United States and foreign jurisdictions. It is possible that tax authorities may disagree with certain positions we have taken, and any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. 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. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made.

Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our results of operations.

Based on our current corporate structure, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents. In addition, the authorities in the jurisdictions in which we operate could review our tax returns or require us to file tax returns in jurisdictions in which we are not currently filing, and could impose additional tax, interest and penalties. These authorities could also claim that various withholding requirements apply to us or our subsidiaries, assert that benefits of tax treaties are not available to us or our subsidiaries, or challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing. 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. Additionally, both the COVID-19 pandemic and increased use of flexible work policies may increase the probability of payroll tax audits. Any increase in the amount of taxes we pay or that are imposed on us could increase our worldwide effective tax rate and harm our business and results of operations.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

As of April 30, ~~2021 and 2020,~~2022, we had net operating loss carryforwards ~~in various jurisdictions~~(“NOLs”) for Dutch, United States (Federal and State, respectively) and United Kingdom income tax purposes of ~~$2.2 billion~~$758.4 million, $1,002.5 million, $651.8 million and ~~$1.3 billion,~~$67.5 million, respectively, which may be utilized against future income taxes. Limitations imposed by the applicable jurisdictions on our ability to utilize ~~net operating loss carryforwards~~NOLs could cause income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such ~~net operating loss carryforwards~~NOLs to expire unused, in each case reducing or eliminating the benefit of such ~~net operating loss carryforwards.~~NOLs. Furthermore, we may not be able to generate sufficient taxable income to utilize our ~~net operating loss carryforwards~~NOLs before they expire. If any of these events occur, we may not derive some or all of the expected benefits from our ~~net operating loss carryforwards.~~NOLs.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.

A portion of our ~~subscriptions are~~subscription revenue is generated, and a portion of our operating expenses ~~are~~is incurred, outside the United States ~~and denominated~~ in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly against the ~~Euro.~~Euro and the British Pound Sterling. In part as a result of the COVID-19 pandemic and Russia’s invasion of Ukraine, foreign currency exchange rates have been and could continue to be subject to increased volatility. The strengthening of the U.S. dollar increases the real cost of our offerings to our non-U.S. dollar customers, leading to delays in the purchase of our offerings and the lengthening of our sales cycle. If the strength of the U.S. dollar increases, this could adversely affect our financial condition and results of operations. In addition, increased international sales in the future, including through our channel partners, may result in greater foreign currency denominated sales, increasing our foreign currency risk. Moreover, operating expenses incurred outside the United States ~~and denominated~~ in foreign currencies are increasing and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with currency fluctuations, our financial condition and results of operations could be adversely affected. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited and we may not be able to successfully hedge our exposure, which could adversely affect our financial condition and results of operations.

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Seasonality may cause fluctuations in our sales and results of operations.

Historically, we have experienced quarterly fluctuations and seasonality based on the timing of entering into agreements with new and existing customers and the mix between annual and monthly contracts entered in each reporting period. 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. We expect that this seasonality will continue to affect our results of operations in the future, and might become more pronounced as we continue to target larger enterprise customers.

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Risks Related to Regulatory Matters

We are subject to governmental export and import controls and economic sanctions programs that could impair our ability to compete in international markets or subject us to liability if we violate these controls.

Our software and services, in some cases, are subject to U.S. export control laws and regulations including the Export Administration Regulations (“EAR”), and trade and economic sanctions maintained by the Office of Foreign Assets Control (“OFAC”). As such, an export license may be required to export or reexport our software and services to certain countries and end-users for certain end-uses. 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. Obtaining the necessary export license for a particular sale or offering may not be possible and may be time-consuming and may result in the delay or loss of sales opportunities. 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. For example, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and ~~sever~~severe export control restrictions against Russia and Belarus, and the United States and other countries could impose wider sanctions and export restrictions and take other actions should the conflict continue or further escalate. 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. In addition, because we incorporate encryption functionality into our products, we are also subject to certain provisions of these laws that apply to encryption items. Even though we take precautions to ensure that we and our partners comply with all relevant export control laws and regulations, any failure by us or our partners to comply with such laws and regulations could have negative consequences for us, including reputational harm, government investigations and penalties.

In addition, various countries regulate the export and import of certain encryption software and technology, including through import permit and license requirements, and have enacted laws that could limit our ability to distribute our products and services or could limit our end-customers’ ability to implement our products in those countries. ~~Additionally,~~Specifically, export restrictions recently imposed on Russia and Belarus ~~specifically~~ limit the export of encryption software and related source code and technology to these ~~locations.~~locations, which severely limited and could continue to limit our ability to provide our software and services in these countries. Changes in our products or changes in export and import regulations in such countries may create delays in the introduction of our products and services into international markets, prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay the export or import of our products and services to certain countries, governments or persons altogether. The following developments could result in decreased use of our products and services by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations: any change in export or import laws or regulations, economic sanctions or related legislation; shift in the enforcement or scope of existing export, import or sanctions laws or regulations; or change in the countries, governments, persons, or technologies targeted by such export, import or sanctions laws or regulations. Any decreased use of our products or services or limitation on our ability to export to or sell our products or services in international markets could adversely affect our business, financial condition and operating results.

Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.

We are subject to the FCPA, the U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and abroad. We leverage channel partners to sell our offerings abroad and use other third parties, including recruiting firms, professional employer organizations, legal, accounting and other professional advisors, and local vendors to meet our needs associated with doing business abroad. 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. While we

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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. Bribery Act or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. government contracts, all of which may have an adverse effect on our reputation, business, operating results and prospects.

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Risks Related to Ownership of our Ordinary Shares

The market price for our ordinary shares has been and is likely to continue to be volatile or may decline regardless of our operating performance.

The stock markets, and securities of technology companies in particular, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. 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. The economic impact and uncertainty of the ongoing COVID-19 pandemic, as well as Russia’s invasion of Ukraine, have exacerbated this volatility in both the overall stock markets and the market price of our ordinary shares. A significant decline in the price of our shares could have an adverse impact on investor confidence and employee retention. 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. The market price of our ordinary shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

•actual or anticipated changes or fluctuations in our operating results;

•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•announcements by us or our competitors of new offerings or new or terminated significant contracts, commercial relationships or capital commitments;

•industry or financial analyst or investor reaction to our press releases, other public announcements, and filings with the SEC;

•rumors and market speculation involving us or other companies in our industry;

•a gain or loss of investor confidence in the market for technology stocks or the stock market in general;

•future sales or expected future sales of our ordinary shares;

•investor perceptions of us, the benefits of our offerings and the industries in which we operate;

•price and volume fluctuations in the overall stock market from time to time;

•changes in operating performance and/or stock market valuations of other technology companies generally, or those in our industry in particular;

•failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

•litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

•developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights;

•announced or completed acquisitions of businesses or technologies by us or our competitors;

•breaches of, or failures relating to, privacy, data protection or information security;

•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

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•any major changes in our management or our board of directors, ~~including~~such as the transition of our former Chief Executive Officer, Shay Banon, ~~transitioning~~ to the role of Chief Technology Officer and the transition of our former Chief Product Officer, Ash Kulkarni, ~~transitioning~~ to the role of Chief Executive Officer;

•general economic conditions and slow or negative growth of our markets, including as a result of the COVID-19 pandemic, Russia’s invasion of Ukraine, and the ~~ongoing military conflict between Russia~~general inflation and ~~Ukraine;~~interest rate environment; and

•other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which would cause our stock price to decline.

We have provided and may continue to provide guidance and other expectations in our quarterly and annual earnings conference calls, quarterly and annual earnings releases, or otherwise, regarding our future performance. Guidance, as well as other expectations, are forward-looking and represent our management’s estimates as of the date of release and are based upon

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a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies on our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. One of those key assumptions relates to the impact of the ongoing COVID-19 pandemic and the associated economic uncertainty on our business, which is inherently difficult to predict. Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our actual business results may vary significantly from such guidance or other expectations or that consensus due to a number of factors, many of which are outside of our control, including due to the global economic uncertainty and financial market conditions caused by the ongoing COVID-19 pandemic, and which could adversely affect our business and future operating results. There are no comparable recent events that provide insights as to the probable effect of the ongoing COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change. 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. In light of the foregoing, investors are urged not to rely upon our guidance or other expectations in making an investment decision regarding our ordinary shares.

Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section in this report could result in the actual operating results being different from our guidance or other expectations, and the differences may be adverse and material.

The concentration of our share ownership with insiders will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring shareholder approval.

Our executive officers and directors together beneficially ~~owned~~own a significant amount of our outstanding ordinary shares. As a result, these shareholders, acting together, will have significant influence over matters that require approval by our shareholders, including matters such as adoption of the financial statements, declarations of dividends, the appointment and dismissal of directors, capital increases, amendment to our articles of association and approval of significant corporate transactions. Corporate action might be taken even if other shareholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of us that other shareholders may view as beneficial.

The issuance of additional shares in connection with financings, acquisitions, investments, our share incentive plans or otherwise will dilute all other shareholders.

Our articles of association authorize us to issue up to 165 million ordinary shares and up to 165 million preference shares with such rights and preferences as included in our articles of association. On September 28, 2018, our extraordinary general meeting of shareholders (the “2018 Extraordinary Meeting”) empowered our board of directors to issue ordinary shares and preference shares up to our authorized share capital for a period of five years from October 10, 2018. 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. Any such issuance could result in substantial dilution to our existing shareholders unless pre-emptive rights exist and cause the market price of our ordinary shares to decline.

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Certain holders of our ordinary shares may not be able to exercise pre-emptive rights and as a result may experience substantial dilution upon future issuances of ordinary shares.

Holders of our ordinary shares in principle have a pro rata pre-emptive right with respect to any issue of ordinary shares or the granting of rights to subscribe for ordinary shares, unless Dutch law or our articles of association state otherwise or unless explicitly provided otherwise in a resolution by our general meeting of shareholders (the “General Meeting”), or—if authorized by the annual General Meeting or an extraordinary General Meeting—by a resolution of our board of directors. Our 2018 Extraordinary Meeting has empowered our board of directors to limit or exclude pre-emptive rights on ordinary shares for a period of five years from October 10, 2018, which could cause existing shareholders to experience substantial dilution of their interest in us.

Pre-emptive rights do not exist with respect to the issue of preference shares and holders of preference shares, if any, have no pre-emptive right to acquire newly issued ordinary shares. Also, pre-emptive rights do not exist with respect to the issue of shares or grant of rights to subscribe for shares to employees of the Company or contributions in kind.

Sales of substantial amounts of our ordinary shares in the public markets, or the perception that they might occur, could reduce the price that our ordinary shares might otherwise attain.

Sales of a substantial number of shares of our ordinary shares in the public market, particularly sales by our directors, executive officers and significant shareholders, or the perception that these sales could occur, could adversely affect the market

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price of our ordinary shares and may make it more difficult for you to sell your ordinary shares at a time and price that you deem appropriate.

In addition, holders of an aggregate of ~~17,341,361~~17,346,561 ordinary shares, based on shares outstanding as of ~~January~~July 31, 2022, are entitled to rights with respect to registration of these shares under the Securities Act pursuant to our amended and restated investors’ rights agreement, dated July 19, 2016. 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. 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.

Certain anti-takeover provisions in our articles of association and under Dutch law may prevent or could make an acquisition of our company more difficult, limit attempts by our shareholders to replace or remove members of our board of directors and may adversely affect the market price of our ordinary shares.

Our articles of association contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for shareholders to appoint directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. 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.

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”). The DCGC contains both principles and suggested governance provisions for management boards, supervisory boards, shareholders and general

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meetings, financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC is based on a “comply or explain” principle. 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. The DCGC applies to all Dutch companies listed on a government-recognized stock exchange, whether in the Netherlands or elsewhere, including the NYSE. The principles and suggested governance provisions apply to our board of directors (in relation to role and composition, conflicts of interest and independency requirements, board committees and remuneration), shareholders and the General Meeting (for example, regarding anti-takeover protection and our obligations to provide information to our shareholders) and financial reporting (such as external auditor and internal audit requirements). We comply with all applicable provisions of the DCGC except where such provisions conflict with U.S. exchange listing requirements or with market practices in the United States or the Netherlands. This may affect your rights as a shareholder, and you may not have the same level of protection as a shareholder in a Dutch company that fully complies with the suggested governance provisions of the DCGC.

We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our ordinary shares.

We have never declared or paid any cash dividends on our shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our ordinary shares in

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the foreseeable future. Were this position to change, payment of future dividends may be made only if our equity exceeds the amount of the paid-in and called-up part of the issued share capital, increased by the reserves required to be maintained by Dutch law or by our articles of association. Accordingly, investors must rely on sales of their ordinary shares after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Claims of U.S. civil liabilities may not be enforceable against us.

We are incorporated under the laws of the Netherlands and substantial portions of our assets are located outside of the United States. In addition, two members of our board of directors and certain experts named herein reside outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or such other persons residing outside the United States, or to enforce outside the United States judgments obtained against such persons in U.S. courts in any action, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, rights predicated upon the U.S. federal securities laws.

There is no treaty between the United States and the Netherlands for the mutual recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Therefore, a final judgment rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be enforceable in the Netherlands unless the underlying claim is re-litigated before a Dutch court of competent jurisdiction. In such proceedings, however, a Dutch court may be expected to recognize the binding effect of a judgment of a federal or state court in the United States without re-examination of the substantive matters adjudicated thereby, if (i) the jurisdiction of the U.S. federal or state court has been based on internationally accepted principles of private international law, (ii) that judgment resulted from legal proceedings compatible with Dutch notions of due process, (iii) that judgment does not contravene public policy of the Netherlands and (iv) that judgment is not incompatible with (x) an earlier judgment of a Dutch court between the same parties, or (y) an earlier judgment of a foreign court between the same parties in a dispute regarding the same subject and based on the same cause, if that earlier foreign judgment is recognizable in the Netherlands.

Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce against us or members of our board of directors, officers or certain experts named herein, who are residents of the Netherlands or countries other than the United States, any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

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.

U.S. persons who hold our ordinary shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company.

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

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assets that produce or are held for the production of passive income (“the PFIC asset test”). For purposes of the PFIC asset test, the value of our assets will generally be determined by reference to our market capitalization. Based on our past and current projections of our income and assets, we do not expect to be a PFIC for the current taxable year or for the foreseeable future. Nevertheless, a separate factual determination as to whether we are or have become a PFIC must be made each year (after the close of such year). Since our projections may differ from our actual business results and our market capitalization and value of our assets may fluctuate, we cannot assure you that we will not be or become a PFIC in the current taxable year or any future taxable year. If we are a PFIC for any taxable year during which a U.S. person (as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended) holds our ordinary shares, such U.S. person may be subject to adverse tax consequences. Each U.S. person who holds our ordinary shares is strongly urged to consult his, her or its tax advisor regarding the application of these rules and the availability of any potential elections.

If a U.S. person is treated as owning at least 10% of our ordinary shares, such U.S. person may be subject to adverse U.S. federal income tax consequences.

If a U.S. person is treated as owning (directly, indirectly, or constructively) at least 10% of the total combined voting power of our shares, or of the total value of our shares, such shareholder may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group (if any). ~~Under changes implemented by the legislation commonly referred to as the Tax Cuts and Jobs Act of 2017, because~~Because our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations (regardless of whether we are treated as a controlled

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foreign corporation). A United States shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist investors in determining whether we or any of our non-U.S. subsidiaries is treated as a controlled foreign corporation or whether any investor is treated as a United States shareholder with respect to any such controlled foreign corporation or furnish to any investor who may be a United States shareholder information that may be necessary to comply with the aforementioned reporting and tax paying obligations. Failure to comply with these reporting obligations may subject a shareholder who is a United States shareholder to significant monetary penalties and may prevent from starting the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due. A U.S. person should consult its advisors regarding the potential application of these rules to an investment in our ordinary shares.

We may not be able to make distributions or repurchase shares without subjecting our shareholders to Dutch withholding tax, and dividends distributed on our ordinary shares to certain related parties in low-tax jurisdictions might in the future become subject to an additional Dutch withholding tax.

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. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our ordinary shares.” However, if we ever do pay dividends or repurchase shares, then under current Dutch tax law, the dividend paid or repurchase price paid may be subject to Dutch dividend withholding tax at a rate of 15% under the Dutch Dividend Withholding Tax Act (Wet op de dividendbelasting 1965, “Regular Dividend Withholding Tax”), unless a domestic or treaty exemption applies.

The Dutch parliament has adopted a proposal of law pursuant to which an alternative withholding tax (“Alternative Withholding Tax”) will be imposed on dividends paid to related entities in designated low-tax jurisdictions, effective January 1, 2024. An entity is considered related if (i) it has a “Qualifying Interest” in our company, (ii) our company has a “Qualifying Interest” in the entity holding the ordinary shares, or (iii) a third party has a "Qualifying Interest" in both our company and the entity holding the ordinary shares. 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 Alternative Withholding Tax will be imposed at the highest Dutch corporate income tax rate in effect at the time of the distribution (currently 25.8%). The Alternative Withholding Tax will be reduced, but not below zero, with any Regular Dividend Withholding Tax imposed on distributions. 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%).

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If we cease to be a Dutch tax resident for the purposes of a tax treaty concluded by the Netherlands and in certain other events, we could potentially be subject to a proposed Dutch dividend withholding tax in respect of a deemed distribution of our entire market value less paid-up capital.

Under a proposal of law currently pending before the Dutch parliament, the Emergency act conditional exit dividend withholding tax (Spoedwet conditionele eindafrekening dividendbelasting “DWT Exit Tax”), we will be deemed to have distributed an amount equal to our entire market capitalization less recognized paid-up capital immediately before the occurrence of certain events, including if we cease to be a Dutch tax resident for purposes of a tax treaty concluded by the Netherlands with another jurisdiction and become, for purposes of such tax treaty, exclusively a tax resident of that other jurisdiction which is a qualifying jurisdiction. A qualifying jurisdiction is a jurisdiction other than a member state of the EU/EEA which does not impose a withholding tax on distributions, or that does impose such tax but that grants a step-up for earnings attributable to the period prior to us becoming exclusively a resident in such jurisdiction. This deemed distribution will be subject to a 15% tax insofar it exceeds a franchise of EUR 50 million. The tax is payable by us as a withholding agent. A full exemption applies to entities and individuals who are resident in an EU/EEA member state or a state that has concluded a tax treaty with the Netherlands that contains a dividend article, provided we submit a declaration confirming the satisfaction of applicable conditions by qualifying shareholders within one month following the taxable event. We will be deemed to have withheld the tax on the deemed distribution and have a statutory right to recover this from our shareholders. Dutch resident shareholders qualifying for the exemption are entitled to a credit or refund, and non-Dutch resident shareholders qualifying for the exemption are entitled to a refund, subject to applicable statutory limitations, provided the tax has been actually recovered from them.

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The DWT Exit Tax has been amended several times since the initial proposal of law and is under ongoing discussion. In addition, a very critical advice of the Council of State and a very critical reaction of the Dutch government to the latest proposal of law have been published. It is therefore not certain whether the DWT Exit Tax will be enacted and if so, in what form. If enacted in its present form, the DWT Exit Tax will have retroactive effect as from December 8, 2021.

Risks Related to our Outstanding Senior Notes

We have a substantial amount of indebtedness, which could adversely affect our financial condition.

We have a substantial amount of indebtedness and we may incur additional indebtedness in the future. As of ~~January~~July 31, 2022, we had $575.0 million aggregate principal amount of Senior Notes outstanding. Our indebtedness could have important consequences, including:

•limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

•requiring a portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

•increasing our vulnerability to adverse changes in general economic, industry and competitive conditions; and

•increasing our cost of borrowing.

In addition, the indenture that governs the Senior Notes contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our indebtedness.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and results of operations, which in turn are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, which could have a material adverse effect on our business, results of operations and financial condition.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. 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

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operations. The terms of existing or future debt instruments and the indenture that governs the Senior Notes may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Any of these circumstances could have a material adverse effect on our business, results of operations and financial condition.

Further, any future credit facility or other debt instrument may contain provisions that will restrict our ability to dispose of assets and use the proceeds from any such disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations and any such failure to meet our scheduled debt service obligations could have a material adverse effect on our business, results of operations and financial condition.

The indenture that governs the Senior Notes contains, and any of our future debt instruments may contain, terms which restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The indenture that governs the Senior Notes contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, among other things, restrictions on our ability to:

•create liens on certain assets to secure debt;

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•grant a subsidiary guarantee of certain debt without also providing a guarantee of the Senior Notes; and

•consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of our assets to, another person.

The covenants in the indenture that governs the Senior Notes are subject to important exceptions and qualifications described in such indenture.

As a result of these restrictions, we are limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants and may require us to maintain specified financial ratios and satisfy other financial condition tests. We cannot assure that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the relevant lenders and/or amend the covenants.

Our failure to comply with the restrictive covenants described above and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected. As a result, our failure to comply with such restrictive covenants could have a material adverse effect on our business, results of operations and financial condition.

We may be required to repurchase some of the Senior Notes upon a change of control triggering event.

Holders of the Senior Notes can require us to repurchase the Senior Notes upon a change of control (as defined in the indenture governing the Senior Notes) at a repurchase price equal to 101% of the principal amount of the Senior Notes, plus accrued and unpaid interest to, but excluding, the applicable repurchase date. Our ability to repurchase the Senior Notes may be limited by law or the terms of other agreements relating to our indebtedness. In addition, we may not have sufficient funds to repurchase the Senior Notes or have the ability to arrange necessary financing on acceptable terms, if at all. A change of control may also constitute a default under, or result in the acceleration of the maturity of, our other then-existing indebtedness. Our failure to repurchase the Senior Notes would result in a default under the Senior Notes, which may result in the acceleration of the Senior Notes and other then-existing indebtedness. We may not have sufficient funds to make any payments triggered by such acceleration, which could result in foreclosure proceedings and our seeking protection under the U.S. bankruptcy code.

General Risk Factors

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Unfavorable or uncertain conditions in our industry or the global economy or reductions in information technology spending, including as a result of ~~the Russian~~inflation, Russia’s invasion of Ukraine, or the COVID-19 pandemic, could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, international trade relations, changes in inflation and interest rates, energy costs, political instability or unrest and new developments resulting from recent elections and changes of administration, natural catastrophes, warfare, infectious diseases and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments by our customers and potential customers, including spending on information technology, and negatively affect the growth of our business. For example, Russia’s invasion of Ukraine and resulting international political crisis could have significant negative macroeconomic consequences, including on the businesses of our customers and partners and negatively impact their spending on our offerings.

In addition, the COVID-19 pandemic has curtailed business spending by our customers, resulted in business disruptions for us and/or our customers, restricted travel to customer sites and resulted in a quarantine of affected populations impacting our employees, partners and customers. Additionally, mitigation and containment measures adopted or reinstated by government authorities to contain the spread of COVID-19 in the U.S. and abroad may significantly impact business continuity for our partners and our customers, reduce our customers’ business operations, delay their engagement with us (including due to travel restrictions and restrictions on in-person meetings) and could thereby adversely affect our business and financial results. Further, these measures by government authorities may continue to remain in place for a significant period of time or, even if lifted, could be reinstated at any time, and additional and/or extended measures could significantly impact the ability of our employees and customers and vendors to work productively.

To the extent our offerings are perceived by customers and potential customers as discretionary, our revenue may be disproportionately affected by delays or reductions in general information technology spending. Also, customers may choose to

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develop in-house software as an alternative to using our products. Moreover, competitors may respond to market conditions by lowering prices. 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 may acquire other businesses which could require significant management attention, disrupt our business, or dilute shareholder value. We may be unable to integrate acquired businesses and technologies, and acquisitions could adversely affect our results of operations.

As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies. We have in the past acquired, and expect in the future to acquire, businesses that we believe will complement or augment our existing ~~business, such as our recent acquisitions of Build, CMD and Optimyze.~~business. The identification of suitable acquisition candidates is difficult, and we may not be able to complete such acquisitions on favorable terms, if at all. 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. In addition, if we are unsuccessful at integrating future acquisitions, or the technologies associated with such acquisitions, into our company, the revenue and results of operations of the combined company could be adversely affected. 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. We may not successfully evaluate or utilize acquired technology or personnel, realize anticipated synergies from acquisitions, or accurately forecast the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges. We may have to pay cash, incur debt, or issue equity or equity-linked securities to pay for any future acquisitions, each of which could adversely affect our financial condition or the market price of our ordinary shares. The sale of equity or issuance of equity-linked debt to finance any future acquisitions could result in dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. Additionally, we may acquire development stage companies that are not yet profitable, and that require continued investment, which could adversely affect our results of operations and liquidity. 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 impact of climate change may increase these risks

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due to changes in weather patterns, such as increases in storm intensity, sea-level rise, melting of permafrost and temperature extremes in areas where we or our suppliers and customers conduct business. We have a number of our employees and executive officers located in the San Francisco Bay Area, a region known for seismic activity and wildfires. In the event our or our partners’ abilities are hindered by any of the events discussed above, sales could be delayed, resulting in missed financial targets for a particular quarter. In addition, acts of terrorism, acts of war, including Russia’s invasion of Ukraine, other geo-political unrest or health issues, such as an outbreak of pandemic or epidemic diseases, such as the COVID-19 pandemic, or fear of such events, could cause disruptions in our business or the business of our partners, customers or the economy as a whole. 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. For example, the full extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted. In addition, the COVID-19 pandemic has adversely affected the economies of many countries, resulting in economic downturns that could affect demand for our products and likely impact our operating results. All of the aforementioned risks may be further increased if our disaster recovery plans prove to be inadequate. See the risk factor entitled “The ongoing COVID-19 pandemic could harm our business and results of operations.”

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the trading price of our ordinary shares.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included ~~elsewhere~~ in Part I, Item 2 of this Quarterly Report on Form 10-Q, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could

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cause our results of operations to fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our ordinary shares. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition ~~measurement of stock-based compensation expense,~~and accounting of intangible ~~assets, goodwill impairment test, and accounting for income taxes including deferred tax assets and liabilities.~~assets.

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, which could adversely affect our business.

The trading market for our ordinary shares is influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts, or the content and opinions included in their reports. If any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding our company, our stock price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts or public investors. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, our stock price may decline. Further, analysts could downgrade our ordinary shares or publish unfavorable research about us. 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.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain senior management and qualified board members.

As a public company, we are subject to the reporting and corporate governance requirements of the Exchange Act, the listing requirements of the NYSE and other applicable securities rules and regulations, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance with these rules and regulations has increased, and we expect will continue increasing our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources.

Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations, and the Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight is required. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition, results of operations and prospects. Although we have already hired additional personnel to help comply with these

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requirements, we may need to further expand our legal and finance departments in the future or hire outside consultants, which will increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including those related to climate change and other environmental, social and governance (“ESG”) related matters, are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business and prospects may be harmed. For example, increased efforts on and the involvement of advisors to assist with policies and disclosures practices on ESG matters may result in additional expenses. Further, our practices and public disclosures regarding ESG matters could impact our brand and reputation. If our ESG practices and disclosures do not meet evolving investor or other stakeholder expectations and societal and regulatory standards, or if we are unable to make progress on or achieve our goals and objectives in this area, then our reputation, our ability to attract or retain sales, marketing and other employees, and our attractiveness as an investment or business partner could be negatively impacted, which could adversely affect our operating results.

As a result of disclosure of information in the filings required of a public company and in this Quarterly Report on Form 10-Q, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, results of operations and prospects could be materially harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and materially harm our business, financial condition, results of operations and prospects. These factors could also make it more difficult for us to attract and retain qualified senior management or members of our board of directors, particularly to serve on our audit and compensation committees.

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If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ordinary shares may decline, which could adversely affect our business.

As a public company in the United States, we are subject to the Sarbanes-Oxley Act, which requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and anticipate that we will continue to expend significant resources, including accounting-related costs and significant management oversight. For example, since our IPO, we have hired additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to assist in our compliance efforts. We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. 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. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to implement or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that are required to be included in our periodic reports that we file with the SEC.

Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, subject us to sanctions or investigations by the NYSE, the SEC or other regulatory authorities, and would likely cause the trading price of our ordinary shares to decline, which could adversely affect our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

The documents listed below are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.

Incorporated by Reference

Filed Herewith

Exhibit No.

Incorporated by Reference

Filed Herewith

Description

Form

File No.

Exhibit

Filing Date

Description

Form

File No.

Exhibit

Filing Date

3.1

Articles of Association of Elastic N.V. (English translation).

10-Q

001-38675

3.1

12/12/2018

3.1

Articles of Association of Elastic N.V. (English translation).

10-Q

001-38675

3.1

12/12/2018

3.2

Deed of Amendment of the Articles of Association of Elastic N.V. (English translation).

10-Q

001-38675

3.2

12/12/2018

3.2

Deed of Amendment of the Articles of Association of Elastic N.V. (English translation).

10-Q

001-38675

3.2

12/12/2018

3.3

Deed of Conversion and Amendment of the Articles of Association of Elastic N.V. Articles of Association (English translation).

10-Q

001-38675

3.3

12/12/2018

3.3

Deed of Conversion and Amendment of the Articles of Association of Elastic N.V. Articles of Association (English translation).

10-Q

001-38675

3.3

12/12/2018

10.1

Amended Employment Letter between Elasticsearch, Inc. and Ashutosh Kulkarni, dated as of January 11, 2022.

10.1

Offer Letter between the Company and Ken Exner, dated as of July 19, 2022.

10.2

Amended and Restated Employment Agreement between Elasticsearch, Inc. and Shay Banon, dated January 11, 2022.

10.3

Separation and Transition Agreement between the Elasticsearch, Inc. and Paul Appleby, dated as of January 12 , 2022.

10.4

Amended and Restated 2012 Stock Option Plan and related form agreements.

10.5

Endgame, Inc. Amended and Restated 2010 Stock Incentive Plan, as amended, and related form agreements.

10-Q

001-38675

10.1

12/9/2021

10.6

Build Security Ltd. 2020 Share Incentive Plan, as amended, and related form agreements.

S-8

333-261544

4.2

12/8/2021

10.7

cmdWatch Security Inc. Stock Option Plan, as amended, and related form agreements.

S-8

333-261544

4.3

12/8/2021

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101).

104

Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101).

______________________


*			The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this ~~report~~Report to be signed on its behalf by the undersigned thereunto duly authorized.

Elastic N.V.

Date:

~~March 10,~~ August 29, 2022

By:

/s/ Ashutosh Kulkarni

Ashutosh Kulkarni

Chief Executive Officer and Director

(Principal Executive ~~Officer)~~Officer)

Date:

~~March 10,~~ August 29, 2022

By:

/s/ Janesh Moorjani

Janesh Moorjani

Chief Financial Officer

and Chief Operating Officer (Principal Financial and Accounting Officer)

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Note		Page
1.	Organization and Description of Business	11
2.	Summary of Significant Accounting Policies	11
3.	Revenue and Performance Obligations	12
4.	Fair Value Measurements	13
5.	Acquisitions	13
6.	Balance Sheet Components	14
7.	Senior Notes	17
8.	Commitments and Contingencies	18
9.	Leases	18
10.	Ordinary Shares	19
11.	Equity Incentive Plans	20
12.	Net Loss Per Share Attributable to Ordinary Shareholders	21
13.	Income Taxes	22
14.	Employee Benefit Plans	22
15.	Segment Information	22


	As of January 31, 2022		As of April 30, 2021
Prepaid hosting costs	$	9,701	$	11,122
Prepaid software subscription costs	7,656		5,636
Prepaid value added taxes	5,394		9,408
Deposits	2,538		2,410
Prepaid taxes	3,323		1,694
Other	10,793		6,732
Total prepaid expenses and other current assets	$	39,405	$	37,002