Elastic N.V.

Good day and welcome to the Elastic Fiscal Third 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, press star, then one on your telephone keypad. 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 Anthony Luskri, Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic's third 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 assuming an obligation 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 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 comparable 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, everybody, to another Elastic Earnings Call. It's great to be here today and talk about the third fiscal quarter results. We once again delivered strong performance, driven by broad adoption of our offerings. Our results underscore the widespread and rapid adoption of the elastic stack in solving mission-critical problems for customers across segments and geographies. We believe our market opportunity across enterprise search, observability, and security is enormous, and that we are well-positioned to capture the long-term opportunity and deliver better outcomes for our customers and users. In Q3, revenue grew 60% year-over-year, And we once again saw robust customer acquisition and expansion metrics. We ended the quarter with more than 10,500 subscription customers, including over 570 with annual contract values of more than $100,000. And our net expansion rate continues to be over 130%. I commented on a recent company all-hands meeting that I'm amazed at how much the team accomplishes in-between calls. I feel the same way in this forum, and I'm super excited to share some of our Q3 highlights with you. For us, everything ties back to first principles. Why do we do the things that we do? How do they continue to make our company and our customers successful? Our free and open distribution model fuels rapid adoption and innovation. Our business model leverages proprietary features to drive product differentiation and customer growth. Our strong innovation delivers value to our customers, and our unified pricing model helps them grow with flexibility, not friction. All of this is realized through our focus on building enterprise search, observability, and security solutions on a single technology stack that can be deployed anywhere. Search is foundational to many experiences, finding documents, monitoring logs and infrastructure, protecting against security threats and beyond. And because Elastic is a search company, we're able to power a multitude of solutions in large markets that drive results for our customers in a way that other companies can't. This is because we engineer a search box you can put on just about anything. In the enterprise search space, we believe that putting a fast and scalable search box on your website, application, or workplace data should be simple. This contrasts with what you're probably used to with other vendors, a lack of scalability, poor relevance capabilities, insufficient connectivity, and long setup times that involve heavy integration services. The landscape has changed with the tremendous proliferation of SaaS services from Slack to Google G Suite, Office 365, ServiceNow, and Salesforce. Enterprise search solutions need to meet customer expectations for searching across these services easily. They need to be fast, scalable, and relevant. They need to be simple. We're delivering on this. Our investments in the enterprise search space continued in the quarter. We delivered highly requested platinum-level features like meta engines for our app search product. This helps enterprises better scale and manage multiple search deployments. We made our proprietary app search offering natively available through our Elasticsearch service on Elastic Cloud. This is yet another step toward our vision of Elastic Cloud being the single SaaS platform on which customers can deploy all of our solutions. For us, the innovation hasn't stopped in the enterprise search world. It continues to unfold on top of Elasticsearch, one of the most popular search engines in the world. in order to deliver on the speed, scale, and relevance capabilities our customers need and deserve. For example, materials science company Dow closed new business with us in the quarter for enterprise search. They're replacing a previous search product with Elastic to ultimately drive a better employee search experience by connecting to more data sources and delivering more relevant results. Another example from Q3 is international real estate franchisor, Remax. They closed new business with us for enterprise search, moving from a monthly Elastic Cloud subscription to an annual subscription. This gives them the flexibility to be more cost-effective while generating additional revenue and gaining a competitive edge for their business. Because our search technology is flexible and built on a single stack, it's easy and seamless for us to take a search box for full text and documents and apply it to log, metric, and APM data with our observability solution. As the amount of infrastructure, websites, and applications needed to support today's enterprises increases, so does the need to monitor and observe it. We deliver a unified approach to our customers with a single stack and curated observability solution. When all the data lives in one place, under one UI, it's easy to go from analyzing infrastructure metrics to analyzing server logs and application traces. This simplicity resonates with our customers. For example, in the quarter, we renewed and expanded business with a fleeting global investment back They use Elastic to get 360-degree visibility into their log, metric, and APM data. As a result, they can power multiple use cases that track customer activity on the website, back-end API consumption, and fraud detection. When all the data lives in one place, it's easy to apply our new platinum-level machine learning capabilities introduced in the quarter to observability workloads. Suddenly, millions of unstructured logs can be automatically categorized, helping practitioners get to root cause quickly and efficiently. When all the data lives in one place, it's easy to expand cloud monitoring and unlock more visibility into billing and usage metrics to help customers run more efficiently. But why stop there? While you observe, why not protect? which leads me to our security solution. Here, we've made it easy to go from log analysis to threat hunting in a single click and also integrate with superior endpoint protection. In a market that is overrun with unintegrated, single-purpose legacy offering, we are redrawing the lines. Our security solution already offers a unified approach that reduces investigations from hours to minutes. but we continue to innovate on it. In the quarter, we deepened visibility for securing Windows endpoints, a popular choice for many enterprises. And when practitioners paired the new capability with our highly requested SIM detection engine that we released in this quarter, they now have enhanced layered prevention. This is exciting for a few reasons. First, Practitioners are armed with a curated list of nearly 100 prepackaged rules that automate threat detection, reduce dwell time, and align with MITRE ATT&CK industry standards. Second, because our SIEM is open, we have a wonderful opportunity with our community to further build out a rich library of detection rules. This creates a network effect for us that amplifies our ability to reach more users and use cases. I'm incredibly proud of the team's effort here. We've come a long way from the middle of last year when we previewed our SIM product, which is now generally available under the proprietary elastic license. And it will just keep getting better and better with each iteration. The excitement with each release is not only present in the developer world. I see it continue to get traction as we move up the enterprise as well. From hands-on practitioners and decision-makers visiting our booth at RSA this week to the CISO at a major financial institution I met with recently, they're hungry for something different. They're wary of the unintegrated tooling, restrictive pricing model, and the need for specialized expertise to operate. Our approach to security is different, and it's resonated with users across various industries and sizes of business. We had several strong security customer wins in the quarter from the public sector in the U.S. and globally, as well as in the banking, telecommunications, and higher education technology sectors. Across all our solution areas, customers are coming to us asking for the tools and resources to migrate their workloads to Elastic. And because data has gravity to it, it's important that they have the freedom to deploy where they choose. in the cloud, on-prem, or hybrid environments. We provide that. With Elastic Cloud, customers can get access to our proprietary offerings, like our SIEM and machine learning capabilities, on their preferred cloud provider, AWS, GCP, Azure, Tencent Cloud, or Alibaba Cloud. And we continue to invest in a growing number of regions each quarter. which included GCP in Montreal, Virginia, and Mumbai, and Azure in Tokyo in Q3. It's worth highlighting our partnership with Microsoft's cloud platform. They've been great supporters of our technology and community. They've committed to sponsoring our Elasticon tour events in the U.S., APAC, and South America, and we've sponsored several of their Ignite conferences. It's been really fantastic to watch this relationship grow. For customers that choose an on-prem or hybrid approach, we continued to make investments in the quarter to help customers orchestrate their Elastic deployments with ease. We continued to see strong customer adoption for our Elastic Cloud Enterprise product. For example, we closed new business with Switzerland's leading telco provider, Swisscom. A few years ago, they were running a few nodes of Elastic for logging. Today, they've grown to 40 instances of Elastic Cloud Enterprise to offer on-demand logging solutions. It's exciting to see them build out a strong foundation that sets up a path for even more growth. For users who prefer to run Kubernetes, I'm excited to share that our Elastic Cloud on Kubernetes product became generally available, and I'm happy to share it's already driving more adoption. For example, Japanese collaboration software company Sibosu is a knowledgeable user of Kubernetes. They adopted our Elastic Cloud on Kubernetes product when we first previewed it last year. It will be important to Sibosu to orchestrate their observability workloads with Elastic. As a result, they've closed new business with us in the quarter. Everything I've covered so far is very validating of our strategy. It is also very humbling as I think about the people who make it possible, from employees to our community, customers, partners, and beyond. And I'm excited to welcome two more people to the team as of this quarter, Allison Gleason and Sally Jenkins. Allison officially joined our board this quarter. bringing with her 20-plus years of strong experience at Cisco, where she led a successful go-to-market team of over 9,000 people. Sally joined us as our Chief Marketing Officer as we scale our marketing function for strong future growth. She is a result-driven marketing leader with many years of experience at companies like Informatica, VMware, and Symantec. They are both great additions to our company and I look forward to the impact they will have on our growth. Similar to the addition of Allison and Sally, looking ahead I see an opportunity to bring in a seasoned go-to market leader who has built and seen multi-billion dollar scale as we address the large and exciting market opportunity ahead of us. Accordingly, Aaron Katz will step down from his current role as Chief Revenue Officer and immediately moved to an advisory role. I would like to thank Aaron for his many contributions to Elastic over the years. During his tenure, we have delivered rapid growth and laid a strong foundation for the future. In the near term, Justin Hoffman will step in to lead our global sales efforts. I expect this to be a smooth transition since Justin has already been successfully running sales for the Americas and EMEA since he joined us almost seven years ago, and those two regions make up the vast majority of our global business. We remain focused on our efforts to provide more customer value through making solutions that are easy and enjoyable to use, delivering on differentiated product innovation and a strong go-to-market strategy through our sales force and partnerships. And with that, I'll hand it over to Janesh to cover the details of our financial performance.