Elastic N.V.

Good afternoon and welcome to the Elastic second quarter fiscal 2021 earnings 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 your touchtone 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 Anthony Loftley, 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 second quarter fiscal 2021 financial results. On the call, we have Shai Bannon, Founder and Chief Executive Officer, and Janesh Mojani, 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 unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides accompanying this webcast, 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 measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. Webcast replay of this call will be available for the next 60 days on our company website under the investor relations link. Our third quarter fiscal 2021 quiet period begins at the close of business on Friday, January 15, 2021. We'd also like to inform you that we will be virtually participating in the Barclays Global TMT Conference on December 9th. and the Goldman Sachs Technology and Internet Conference on January 12th. With that, I'll turn it over to Shai.

Thank you, Anthony. I'm glad to be here with everyone today and share the results of our second fiscal quarter. The end of 2020 is upon us, and what a year it has been. As we closed out Q2, I reflected on the importance of empowering our community of customers, partners, and users with the same resilience we strive for as a company. We are building a business for the long run, a business that is there for our customers today and tomorrow, and I feel fortunate to say that I believe we are well on our way. We had a great second quarter, as total revenue grew 43% year over year. We ended the quarter with more than 12,900 subscription customers, including over 650 with ACV of more than $100,000. I'm proud of how well the team executed in an ongoing mixed demand environment, delivering a strong quarter for us. This can't be done alone, so thank you to our entire community for joining us on this journey. In the quarter, it was fantastic to see so many of our users come together during our first virtual conference, Elasticon Global. More than 25,000 registrants from more than 80 countries signed up to participate. We had more than 300 sessions that showcased how our solutions help customers drive outcomes with data, insight, and action. We were pleased to have our strategic partners, Google and Microsoft, participate as sponsors and presenters at the event. I was especially excited to have Google Cloud CEO, Thomas Kurian, speak about our continued partnership during the opening keynote. It's wonderful to have that level of executive engagement. I was also happy to see so many of our customers speak and share their stories at Elastic on Global, including Cisco, Audi, Rocket Homes, and Wells Fargo, all of whom renewed business with us in Q2 as well. Achieving this level of engagement on a global scale doesn't just happen overnight. It all starts with the power of our developer community. We earn their mind share every day with openness and transparency as they adopt, shape, and champion our technology. Our three solutions, enterprise search, observability, and security, actually built into a single stack, make it possible for us to innovate once and apply everywhere. In turn, it's easier for customers to adopt one solution and expand to another. Combine that with the customer's power to choose where they run, cloud, on-premises, or in hybrid environments, and the simplicity that comes with a unified pricing model, they're able to grow with flexibility, not friction. And it's all underpinned by the power of search, the fastest way to go from data to insight to action. At our financial analyst meeting, I talked about a few innovations where we've built one in the Elastic Stack and applied everywhere. There's Elastic Agent, our unified agent, which is currently in beta. It allows for data collection across security and observability use cases in a single click. Kibana Lens, which became generally available in Q2, delivers powerful, intuitive, drag-and-drop visualizations anyone can create with any kind of data. And then there's searchable snapshots, a paid enterprise-level feature for storing more data on local storage options like S3 with the appropriate performance. It's now available in beta in our 7.10 release. I am super excited about the value this capability will unlock for our customers. Our journey with this new capability is just beginning. In Q2, We saw strong broad-based demand across our business and executed well across our diverse portfolio of customers, including the U.S. federal sector and global public sector. The team delivered great results across all of our solutions. I'd like to share a few highlights with you. I'll start with our enterprise search solution, which powers search across websites, applications, and workplaces. It's easy to use, easy to scale, and easy to connect. It helps increase productivity and improve customer engagement. We're creating a consumer experience built for the enterprise. With this solution, it's easier to find things than to lose them, including your slacks. In our 710 release for Elastic Workplace Search, we delivered more out-of-the-box connectors for more content sources. In a few clicks, Customers can search across Slack, Google Drive, Microsoft 365, ServiceNow, and more. This release also delivered enhanced controls for admins to personalize who can access what with our paid proprietary security capabilities. Security capabilities matter to our customers. For example, a prominent U.S. government entity closed new multi-year business with us in Q2. and they needed granular security controls to surface the right content to the right people for both their public and internal facing applications. Another example from Q2 where an enterprise consumer-like experience is being built comes from a leading U.S. aerospace company. They renewed business with us because Elastic powers the search for their aircraft maintenance program. This is a vital function that helps the team quickly find parts repair schematics, and anything else they need to keep their aircraft flying safely. To add to all the goodness, our recently released searchable snapshot capabilities opens up new potential for our customers by making application content and historical workplace records searchable. Want to search across years of email without breaking the bank? We're making this possible by unlocking search across cost-effective object stores like S3. Let's turn to our observability solution, which unifies log, metric, and APM data analysis into one place. It's easy to use, eliminates data silos, and lowers mean time to resolution. This is why customers like Singapore-based multinational ride-hailing and food delivery company Grab renewed and expanded business with us in Q2. They use Elastic for log analytics to monitor pickup and drop-off logistics, analyze the cost associated with waiting time and search latency across their taxi, white-sharing, and food and grocery delivery services. Another example from Q2 comes from a global payments company who renewed multi-year business with us. Elastic helps the company power multiple use cases from log analytics to APM to real-time business monitoring across high volumes of global transactions with a single technology stack and unified pricing. And we continue to innovate in this space, adding even more value to our customers. In our 7.10 release, we invested in helping organizations step into their end-user's shoes and monitor digital experiences with our User Experience app in Kibana. We've also made it easy to measure against core web vitals that help developers and website owners interpret digital experience signals. Additionally, we release one-click workflows that enable pre-built machine learning jobs to detect common infrastructure issues like CPU spikes in Kubernetes pods. And our new searchable snapshots capabilities help keep observability data from logs to metrics to traces online and searchable for longer. In fact, I recently met with several senior leaders at a large U.S. financial services company who renewed multi-year business with us for log analytics. They were very impressed by the journey we're taking with searchable snapshots. It can immediately add value to their log analytics workloads by allowing them to keep older logs online for longer and at a lower cost. They also see tremendous opportunity with other use cases like APM. Moving to our security solution, we made a number of investments in this space with our 710 release. Security practitioners are equipped better than ever to stop security threats at scale. New correlation rules help automate detection and prioritization of complex threats while reducing alert fatigue. We invested in helping eliminate blind spots by adding more security for cloud and remote users with pre-built detections for Azure, Google Cloud, and Zoom. And with our searchable snapshots, threat hunters and analysts have years of high-volume security data stored on object stores like S3 at their disposal for long-term historical search and analysis. We continue to see customers rapidly adopt Elastic for Security in Q2 We saw this with an expansion at a global online travel agency for lodging and reservations. Even in a challenging environment, they saw the value in investing in a unified security approach that helps them to manage total cost of ownership and focus on business outcomes while allowing for internal compliance and auditing mechanisms. And the theme of solving multiple use cases is alive and well. After all, while you observe, why not protect? Bell Canada renewed multi-year business with us in Q2 for operations and network security. Additionally, a large property, casualty, and auto insurer in the U.S. closed new multi-year business with us in Q2 for security. This use case complements their existing enterprise search and observability workloads with Elastic. The ability to address multiple business needs with a single technology has been a driver in helping them optimize costs and reduce complexity. Now to our cloud business. We make it easy to deploy and scale our solutions with Elastic Cloud, which is available on AWS, Google Cloud, and Microsoft Azure. The ease of use and simplified management that comes with adopting Elastic Cloud resonates with our customers. For example, Rocket Homes, whose parent company is Rocket Companies, renewed and expanded their business with us in Q2. They run on Elastic Cloud in order to simplify cluster management and get additional value from our ecosystem of proprietary features. They use Elastic to power application search across massive amounts of property data. With COVID and the current housing market, speed is literally the name of the game. They have to surface relevant results to their customers with remarkable speed in order to compete. We continue to invest in our cloud offering in Q2. We expanded into new regions, including AWS Mumbai and two Asia regions for Iowa and New South Wales. We also announced billing integrations with Azure Marketplace, making it simpler for customers to buy and scale for their use case and consolidate their bills. In looking at our company at large, we remain committed to creating inclusive, equitable, and diverse environment for business success. In Q2, we announced a program for supporting veterans in technology, held a panel at Elastic on Global on diversity and inclusion, and received third-party recognition as a great place to work for women in technology. We continue to build a diverse and distributed company. Diversity and being distributed applies to us on many levels, from the strength of our customer portfolio to the freedom we give our customers to run Elastic where and how they want. Diversity also applies to uniting disparate data sources into a single stack to solve multiple use cases and enable our unified pricing model. We'll continue to be where our users are, and we'll continue to help them solve the challenges they face. We have a large market opportunity before us. We continue to see our solutions align with customer spending priorities. This is validated across industries, geographic regions, and businesses of all sizes. As we discussed during our analyst meeting, if we look at our customers, over $100,000 ACV, over 50% just use one solution. But when you get to $1 million ACV, over 75% use two or more solutions. As a reminder, solutions in this context are enterprise search, observability, and security. For instance, if a customer uses log analytics and APM, that counts as one solution. Observability, not two. This shows we have strong vectors of growth to capture the significant opportunity before us. Taken together, All this is key to our resilience now and in the long term. I am proud of the team for their strong execution in the quarter. I'll hand it over to Jinesh.