Elastic N.V.

Good day and welcome to the Elastic first quarter 2020 financial results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Anthony Luskri, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic's first quarter fiscal 2020 financial results. On the call, we have Shai Bannon, Founder and Chief Executive Officer, and Janesh Morjani, Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued after the close of market and is posted on our website where this call is being simultaneously webcast. Slides which accompany this webcast can be viewed in conjunction with live remarks and can also be downloaded at the conclusion of the webcast on the Elastic Investor Relations website, ir.elastic.co. On this call today, our discussion may include predictions, estimates, or other information that might be considered forward-looking statements within the safe harbor provisions of the U.S. federal securities laws. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include those set forth in the press release that we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission, including our Forms 10-K, 10-Q, and 8-K, and other filings we make with the SEC from time to time. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events unless required by law. In addition, during today's call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of elastics of performance, should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Our non-GAAP measures exclude the effect on our GAAP results of stock-based compensation, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, acquisition-related expenses, and non-GAAP tax rate adjustments. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with incomparable GAAP measures, in the press release and on our investor relations website in the slides accompanying this webcast. The webcast replay of this call and slides will be available for two months on our company website under the investor relations link. With that, I'll turn it over to Shai.

Thank you, Anthony. Welcome everyone to the call. It's great to be here and share the results of our first quarter in our new fiscal year. Overall, we saw a great start to fiscal 2020 with strong momentum and growth. We continued to execute well on our strategy, which is resonating with our users and customers. as they rapidly adopt our broad portfolio of products. In Q1, revenue grew 62% year-over-year on a constant currency basis. We had more than 8,800 subscription customers at the end of the quarter, which included over 475 with annual contract value of more than $100,000. And our net expansion rate continued to be over 130%. But before Ginesh covers our financial performance from the quarter, I'd like to talk about some highlights. And I thought I'd start with our preview of Elasticseam from our 7.2 release. This is a new product that gives users a curated security analytics experience for ingesting, analyzing, and visualizing security-related data. One thing I find exciting about Elasticseam is that you don't have to be a security analyst to get value from it. So say you're at DevOps doing logging with Elastic version 7.2. You can simply click over to the CMAP in Kibana and automatically see an overview of various datasets, including KPIs for number of hosts, failed logins, and more. You didn't have to install or configure anything. It's all just there and just works. You can even go a step further with an interactive drag-and-drop experience to deconstruct and document a timeline of events that you can then share with teammates from a single UI. Or as of our 7.3 release, you can use our platinum-level machine learning features to automatically detect and alert on cyber threats originating from events like unusual login activity. For this initial release, we collaborated extensively with the community. From working on integrations with enterprise-level firewall data sources like Palo Alto Networks and Cisco ASA to popular open source network monitoring and intrusion detection systems like Zik and Suricata, it's been humbling to see the level of contributions. We've also seen validation from other companies like Empow and Endgame, and we are excited that Perched, a security analytics operations and threat hunting company will be joining Elastic to further expand our product, consulting, and training capabilities in this space. There's a lot of excitement within the community as well. A few weeks back, I attended Black Hat, a premier cybersecurity conference in Las Vegas. I had a sense for what to expect, although I'm still processing the handful of actual magicians I saw on the conference floor But it was fascinating to see how prevalent the commercial and closed product approach is in the security market. I find it refreshing that we are offering a proprietary theme product that is both free and open through our basic subscription. Customers with a gold or platinum subscription can get additional value from paid features like machine learning as well as support. And for users looking to run it as a SaaS offering, Elasticseam is only available through our Elastic Cloud. So while what we demoed at our booth at Black Hat was an initial release focused on host and network data, the excitement from visitors at our booth was noticeable throughout the event. There was a lot of questions about integrations, including those for Endgame's endpoint security product. I also saw a lot of engagement around the Endgame's demo of a new integration with our stack, where users can run our elastic SIM experience on top of endpoint data. So this leads me to imagine all the possibilities for new and existing customers to streamline and enhance their security analytics use cases. For example, this could apply to the U.S. Navy or software company Smartsheet or French financial institution Group BPCE, all of whom closed business with us for this use case in Q1. or even ASB Bank in New Zealand, who expanded business with us this quarter, primarily for the use of security logging and analytics, effectively replacing their existing SIEM. In the U.S. public sector, we closed new business with the U.S. Defense Information Systems Agency. They replaced their legacy SIEM solution with Elastic to power security analytics for the Joint Regional Security Stack Program. This is a part of the DoD's strategy to modernize and improve network security, reduce attack surface, and improve situational awareness, ensuring timely delivery of critical information to warfighters around the globe. Elastic was also selected for use with the U.S. Department of Homeland Security's Continuous Diagnostic and Mitigation, or CDM, dashboard, as part of the solution proposed by our partner ECS. CDM deploys tools to every civilian agency to increase their cybersecurity posture by ingesting, analyzing, and visualizing data that provides insights into asset management, identity and access management, network security, and data protection management. So there is tremendous opportunity for our users and customers to take what they're already doing with our stack, quickly get more value out of it, and continue to grow with us over time. While it's still early days for Elastic SIM, it will only get better over time with more features like SIM detection rules, user analysis, and threat intelligence integration. Our product development approach for SIM and other use cases is iterative, The goal is to have this magical experience where you deploy Elastic in the context of logging and suddenly, through a single UI, you can do threat hunting or APM or infrastructure monitoring with very little effort. And to achieve this, we're continuing to streamline the ability to easily get started with and seamlessly transition between use cases. Another example of this iterative development approach is with Elastic Maps. our geo special analysis product. We made it generally available in our 7.3 release this quarter. This is exciting because Elasticsearch has a long history with geo data, going back to version 0.9.1 in 2010. And when we look at today, Elastic Maps delivers a curated experience in Kibana that allows users to answer questions like, Where are the attacks on my network coming from using a PewPew map? Or where do I need to scale up my sales force with a map of enriched sales territory information custom to their business? Or where are shipments delayed using a map that floats single points and their orientation in real time? We're seeing these use cases emerge among our customers, and it's exciting. Elastic Maps provides a highly dynamic, embeddable, customizable, and layered experience that is powerful and easy to get started with. Like Elasticseam, Elastic Maps is a proprietary product that is also free and open. And if a user wants to run it as a hosted offering, it is only available through our Elastic Cloud. On the topic of Elastic Cloud, we rolled out a new Amazon Web Services region in London and a new Google Cloud Platform region in Tokyo this quarter. This expands our presence across these two major cloud providers, and combined with our partnerships with Tencent and Alibaba, strengthens our commitment to being where our users are. In the logging, metrics, APM, and uptime monitoring spaces, also known as the observability space, the market is trending toward that convergence of these use cases. This plays to our advantage. Instead of users gluing UIs from separate tools together to solve a problem, they can instead store, search, and analyze all their data, all in one place, from one UI. And we've made this an even more powerful experience by providing our users and customers with a simple, unified pricing model that removes the friction for trying and adopting new products and features. I am excited to see early signs of this resonating with our user base. In the quarter, we added even more capabilities to our observability products. This included the highly requested Elastic APM .NET agent, which broadens the applicability of this product to even more users, more tooling for Kubernetes monitoring, and tighter integration between our products, such as Elastic Logs and Elastic APM. And we continued to see customers adopt us for observability use cases in the quarter, like NVIDIA, who closed new business with us, or take Dutch electronics company TomTom, who renewed and expanded their business with us. They replaced their Splunk deployment with Elastic to consolidate their logging and analytics environments for all of their online applications. Mortgage loan company Freddie Mac, who closed new business with us this quarter, is another example. They are replacing an incumbent logging solution with Elastic, for application and infrastructure logging and metrics collection, analysis, and visualization for the enterprise monitoring platform. So you can get a sense for the ongoing momentum behind us building simple, fast, easy-to-use experiences for addressing many use cases. This is also true in the enterprise and application search space this quarter. Similar to Elasticseam and Maps, This experience will just get better and easier and more powerful as we continue to iterate. With Elastic Enterprise Search, for example, we previewed more connectors, such as Atlassian's Jira and Confluence products. This broadens the applicability of this product to even more users and audiences. With Elastic App Search, we took our SaaS-based app search experience and made it available to users to run on-prem. This is yet another example of how we're giving our users the ease and flexibility to run our products in a way that makes sense for them. It's developments like these that provide customers already using us for this use case the opportunity to adopt a more tailored experience in the environment they choose. A few examples from the quarter include General Motors, who closed new business with us. to power search across the vehicle inventory visibility platform. Atlassian, who renewed their business with us for the search embedded in their Confluence application. And Japanese financial institutions Sumitomo Mitsui DS Asset Management, who uses Elastic to help fund managers quickly search their internal applications to make the best decisions possible for their clients. One last engineering investment I'd like to touch on is Elastic Cloud on Kubernetes, or ECK. This is our newest orchestration product that makes it easy to run and manage Elasticsearch and Kibana on Kubernetes for one use case or many at scale. The latest preview release this quarter broadens the applicability of ECK to more users. This release enables users to consume ECK through more distributions beyond vanilla Kubernetes. Red Hat OpenShift, Azure Kubernetes Service, Amazon's Elastic Container Service, and Google Kubernetes Engine. It also includes support for Elastic APM and custom security features. ECK is another product that is available through our basic offering with the ability to extend to paid enterprise-level capabilities and support. All of the things I've talked about today, theme, maps, APM, logs, infrastructure monitoring, app search, enterprise search, and so on, are significant engineering investments that have occurred under the proprietary elastic license. Our strategy as a company is to continue to put significant investments into proprietary products and features. Many of them are available under our free and default basic subscription. This means the user wanting to run our software through SAS can only deploy them via our Elastic Cloud. We believe this strategy is working, and this quarter is particularly indicative of our strength to deliver on it. Overall, it's been an exciting first quarter, and I am more confident than ever about our strategy and market position. I continue to be humbled by the team's work and how well they've executed. but there is more on the horizon, and I look forward to what's ahead. That's all from me. Janesh, over to you.