Elastic N.V.

Good day, and welcome to the Elastic fourth quarter and full fiscal year 2020 financial conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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 your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Anthony Luskery, 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 fourth quarter and full 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 today after the close of market and is posted on our website. 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. Our discussion will include forward-looking statements, which may include predictions, estimates, or expectations regarding the impact of the COVID-19 pandemic and other information. These forward-looking statements are based on factors currently known to us, speak only as of the date of this call, and are subject to risks and uncertainties that could cause actual results to differ materially. We disclaim any obligation to update or revise these forward-looking statements. Please refer to the risks and uncertainties included in the press release that we issued earlier today and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. The webcast replay of this call will be available for the next 60 days on our company website under the Investor Relations link. Our first quarter fiscal 2021 quiet period begins at the close of business Friday, July 10, 2020. With that, I'll turn it over to Shai.

Thank you, Anthony. Hello and welcome to everyone. I am happy to be here with all of you today to share the results of our fourth quarter and full fiscal year. I feel fortunate to report that our business is strong and resilient. We continue to innovate rapidly, and we are executing well in this challenging environment. I am extremely proud of how the Elastic team continues to support our community of users, partners, and customers, and my heart goes out to those affected by the COVID-19 situation. The team did a fantastic job building on our Q3 results to achieve an amazing Q4 and strong finish to our fiscal year. And they did so during truly challenging times with the COVID-19 outbreak, which I will cover before touching on our results and business highlights. On our February earnings call, we said we would closely monitor the COVID-19 situation and respond as needed. As we learned more, we adapted quickly to manage for safety, cost efficiency, operations, and overall business continuity. We are resilient because of our source code and cultural traits. They form a foundation that we believe is unshakable in the face of adversity. Our company is distributed by design, so transitioning to work from home simply required sending an email. We've always had the infrastructure, tooling, discipline, and mindset for virtual work on a global scale. Engineering continues to ship products. Marketing continues to drive demand. Sales continues to close business. And our community of users and customers continue to engage with us. We are innovating and executing and adapting our go-to-market motion as needed. We continued to execute on our direct sales motion in a virtual environment, allowing us to keep closing new and renewed business. We pivoted all of our in-person training to the online format we've had for years. We shifted all our ElastiCon events to be virtual and free. We held three virtual events in Q4, and there are more on the way. When an event is no longer restricted to a physical location, we're able to reach and engage a broader audience. As a result of this shift, we are also seeing increased attendance. As for what comes next, our strengths will help us navigate that. From our distributed by design approach to our rapid pace of innovation, development of customer-focused solutions, our large and geographically diverse customer base, efficient go-to-market, solid customer expansions, and strong balance sheets. All of these gives us confidence to address the rich market opportunity ahead of us. Moving on to our results, looking at the full fiscal year, revenue grew 57% year over year. In Q4, we once again saw robust customer acquisition and expansion metrics and grew revenue 53%. We ended the quarter with more than 11,300 subscription customers, including over 610 with annual contract value of more than $100,000. And our net expansion rate continues to be over 130%. This is all made possible by our wonderful community of customers, partners, users, and employees. So thank you. You can see we continue to balance doing the right things for the near term with planning for the long term. Our company is relentlessly resilient. We believe we are well positioned to address the changing business landscape, more virtual teams and workplaces, a greater move to the cloud, and increased pressure to consolidate tooling. We're built on a free and open foundation, which has staying power in challenging times. Our free and open distribution model will continue to fuel rapid adoption and innovation. Our business model will continue to leverage proprietary software that delivers unique and compelling value to our customers. We will continue to invest in our three solutions built on a single stack that can be deployed anywhere under a unified pricing model. I'd like to share a few highlights with you. I'll start with our enterprise search solution because I'm particularly excited about this space. I've been in this industry for more than 15 years, and these are words I did not think I would say. That's because historically, enterprise search meant months to years of setup times to deliver a solution that didn't scale, didn't connect to everything you wanted, and had confusing and restrictive pricing. The engagement often involved success services, and in the end, the solution just didn't work all that well. You couldn't find anything. Our enterprise search solution is different. We believe in the ability to easily and quickly put a fast, scalable, powerful search box on websites, applications, and workplaces. This is validated by customers from across industries who continue to adopt us for this solution this quarter. From e-commerce to financial services, technology, and the public sector. We're a rapid-release company. We drop major features in minor releases. With our latest release, 7.7, we reached a significant milestone. Our proprietary elastic workplace search product became generally available. It's a completely new state of mind for the enterprise. It provides an intuitive, single point of search that lets employees find what they're looking for, whether that's across common workplace tools like Microsoft 365, G Suite, Slack, Salesforce, GitHub, and Zendesk, or custom applications. Our out-of-the-box connectors and flexible APIs cover a lot of ground, and there's more to come. And with resource-based pricing, we keep things simple and flexible. Customers pay for the resources their search consumes. Plus, we're making workplace search even easier to adopt with an upcoming free and proprietary tier and the ability to deploy on Elastic Cloud. Our product and go-to-market approach in this space is timely as a massive shift towards virtual workplaces unfolds. And I'm not alone in my thinking. Forrester estimates we'll see threefold growth in the enterprise search market in the next three years as companies look to replace old search technology. Forrester also noted that with the release of Elastic Workplace Search, we are well positioned as the transition unfolds. So there is definitely more to come. Now take that search box for enterprise search and apply it to observability with log, metric, and APM data. Our approach to observability eliminates data silos, reduces mean time to resolution, and allows customers to control costs without compromising on visibility. This is important because as observable systems and services continue to multiply to meet business needs, so will the pressure to consolidate a sprawling universe of tooling, whether that's because of cost, efficiency, or both. Leading American mortgage company, Ellie Mae, who is a customer of ours, comes to mind here. They used to have many different technology vendors deployed across their entire business to monitor various systems and services. Tooling bingo, they called it. By choosing Elastic's unified approach, not only did they cut their logging costs in half, they became more efficient in finding bugs faster. This has translated into a better customer experience and in turn, potentially higher revenue. One stack, one pricing model, and the ability to move between solutions. This resonates with our customers and we are constantly delivering more and differentiated value to them. In our 7.7 release, for example, The team shipped highly requested service maps capabilities for greater visibility in APM use cases. We also introduced many new out-of-the-box integrations, flexible search options over large data volumes and improvements to memory usage, and previewed our newly refactored alerting framework. And because features like alerting are implemented at the stack level, the foundation, they're applicable to all of our solutions. not just observability. If you think about all of this value in the context of our unified pricing model and ability to deploy multiple solutions on a single stack, it's a really powerful thing for our customers. In fact, we have business renew and expand in Q4 with two Fortune 50 companies, one in technology and the other in retail. to power various applications of enterprise search, observability, and security. As the business landscape evolves, the need to detect threats and protect endpoints is increasing along with the need to search across enterprises and observe infrastructure. For example, global financial services company BNP Parimba renewed and expanded business with us in the quarter. They've used Elastic for centralized logging and application search for a few years. Now, they are building out a large security operations center. This expansion opens up the opportunity to integrate SIEM into their Elastic use and helps them streamline costs and accelerate time to market with a single technology stack. Another example is Overdrive. a leading digital reading platform for e-books, audio books, and video from public libraries across the world. Elastic powers search within their customer-facing applications and log analytics on those applications. In Q4, they closed new business with us for security. Seeing the value that a single unified stack that powers threat hunting and endpoint protection in addition to their other use cases ultimately help them decide to make a multi-year investment with Elastic. In the same way that we believe any observability customer is a potential security customer, we believe that every SIM customer is a potential endpoint customer. This is why we're relentlessly executing on our vision of a fast, scalable security solution that unifies SIM and endpoint protection into a single foundation with unified pricing. And it just gets better and better with each release. In Q4, we introduced new features such as embedded case management workflows that also natively integrate with ServiceNow. This streamlines incident response and reduces mean time to respond, which is critical to the success of today's security practitioners. We also continued to invest in our cloud offerings. Our Elastic Cloud is available on AWS, GCP, Azure, Tencent Cloud, and Alibaba. In the quarter, we announced a preview release on AWS GovCloud and our FedRAMP in-process status. In addition to the availability of nine new global regions for Elastic Cloud, six on Google Cloud, two on Azure, and one on AWS. It's exciting to watch our cloud partnerships deepen, especially with Google Cloud and Microsoft. They worked with us to extend our workplace search product to G Suite, make our annual subscription offerings available via the Google Cloud Marketplace, and also recognized us as their 2019 Data Management Technology Partner of the Year. We were also fortunate to hear from Scott Guthrie, EVP for Microsoft's cloud and AI groups at our virtual sales kickoff. Our commitment to being where our users are remains strong. It starts with a great SaaS experience that drives customer adoption and retention. Take Nordic Digital Bank Collector Bank, for example, who renewed multi-year business with us in Q4 to run their logging and security workloads with our Elasticsearch service. And that commitment extends to bare metal or hybrid environments. Products like Elastic Cloud Enterprise and Elastic Cloud on Kubernetes, both of which have new releases in Q4, give customers the freedom to self-manage if they want to. We've closed multi-year business in Q4 with a Fortune 50 energy company who chose these options. They use us to monitor Kubernetes logs by running our Elastic Cloud on Kubernetes products. As you can see, the team hasn't lost a beat in terms of innovation or execution. I am honored to work with such an amazing group of people at Elastic and report on such a strong quarter and fiscal year. They made it possible to respond to the global crisis quickly and efficiently, to manage for safety, cost efficiency, and business continuity. We believe our company, our go-to market, our products, and our team are uniquely well-positioned. Our free and open approach makes us resilient during difficult times and helps us come out strong in the long run. Even when times are tough, people still need to solve the same challenges, put a search box on their application or workplace, on their infrastructure to observe it, and on their company to protect it. We are here for them. Throughout all of this, I remain determined as we head into FY21 and optimistic as I look at the future. We will continue to invest in building on a single stack and make it easier for customers to adopt new solutions. We will continue to be where our users are and deliver an unparalleled SaaS experience. We will continue to embrace and build on the amazing developer adoption of our technology as we move up in the enterprise. And we will stay focused on delivering value to our customers, community, and partners. And with that, I'll hand it over to Jinesh.