Elastic N.V.

Good afternoon and welcome to the Elastic First Quarter Fiscal 2022 Earnings 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 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 first quarter fiscal 2022 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, our expectations regarding demand for our products and solutions, and our future revenue and other information. These forward-looking statements are based on factors currently known to us, speak only as of the day of this call, and are subject to risk 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 risk 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 most comparable GAAP measures, can be found in the press release and slides. A webcast replay of this call will be available for the next 60 days on our company website under the Investor Relations link. Our second quarter fiscal 2022 quiet period begins at the close of business Friday, October 15, 2021. During the week of September 13th, we will be participating in the Piper Sandler Global Technology Conference, the Jefferies Software Conference, and Citi's Global Technology Conference. With that, I'll turn it over to Shai.

Thank you, Anthony. Hello and welcome, everyone. I am happy to be here with all of you today to share our first quarter results. We are off to a very strong start of the year. We once again delivered strong performance driven by broad adoption of our offering and the continued growth of Elastic Cloud. In Q1, total revenue grew 50% year-over-year. Revenue from Elastic Cloud grew 89% year-over-year, and we once again saw robust customer acquisition and expansion metrics. We ended the quarter with more than 16,000 subscription customers. including over 780 with annual contract value more than $100,000. The strong performance was fueled by continued adoption and differentiation of our solutions and features, growth across all geographies, and increased strategic relevance and expansion across our customer base. Today's accelerated digital transformation is fueling the creation of an ever-increasing amount of data This, combined with the rise in advanced cyber attack techniques, means more organizations are falling victims to threats and attacks. And the number and size of breaches and attacks isn't slowing down. We believe that a unified search platform is the answer to these challenges. Every organization needs to be able to search across all of its data to find relevant information, keep systems up and performing, and protect against threats. Customers turn to Elastic to connect the dots between diverse data challenges, from SIEM and endpoint security to observability to enterprise search. Now, I would like to share some of the innovations we have made in our unified search platform, starting with our security and observability solution. Search has the power to converge data silos, to look around data corners, That's why we believe every data problem can be solved by looking at it through the prism of a search box. Years ago, even as we were building out our logging capabilities to help companies observe their applications and infrastructure, we acquired an APM company, OPPE, with the goal of integrating application traces into our platform. We recognize that keeping systems up and running is a search problem, regardless of the type of data used to do so. That was even before the term observability was widely used in the market. And as we continue to bring innovations to our search platform, our customers are seeing the benefits in our observability solution. For example, we recently released correlation capabilities built using advanced search techniques in Elastic APMs. It accelerates root cause analysis by automatically surfacing the attributes that have the most significant impact on service performance. The unifying power of our platform is always top of mind. We also just marked an important milestone for Elastic Security. As with observability, we recognize the convergence of SIEM and endpoint security early on. And two years ago, we acquired Endgame and As we did with Obbit and APM, we've integrated Endgame's endpoint technology into our platform. I'm thrilled to see the vision come to life in a major way with the market's first limitless XDR, providing end-to-end protection, detection, and response for any organization, not just large enterprises. XDR, what's in a name? A lot like observability, it's a broad concept. extended detection and response. We believe XDR means modernizing security operations by unifying the powerful capabilities of SIM for detecting threats and endpoint security for protecting and remediating issues on all endpoints, including in the cloud, all in a single platform. We take this a step further with limitless XDR. Customers can search years worth of data in our frozen data tier. They can investigate across multi-cloud environments with our cross-cluster search capabilities. They can ingest data of any type from any source. They can apply numerous built-in and community-driven detection and analysis techniques. All of that while paying only for the resources they use, not based on the number of endpoints, agents, seeds, or gigabytes of data ingested. All of these capabilities make our XVR offering limitless, differentiating it in the market. I couldn't be more proud of the team in delivering this innovation. To extend our limitless XDR to further support cloud application and services, we recently announced that we are joining forces with Build.Security, a policy definition and enforcement platform. I'm excited for our teams to integrate Build.Security technology into Elastic Security over the coming quarters. This will give our customers the ability to continuously monitor the cloud environment and validate their security posture against well-established standards like CIS benchmarks. In addition, as we announced today, we'll also be joining forces with CMD to accelerate our efforts in cloud workload runtime security. CMD is a leader in infrastructure detection and response, or IDR. Using extended Berkeley packet filter technology, Also called eBPF, CMD provides deep visibility into cloud workloads and performs expert detection and prevention on cloud-native data. With the technology and expertise we gain by teaming up with CMD, we will be able to expand our security capabilities even further for cloud-native application workloads, all implemented using the frictionless approach made possible with eBPF. With our investments in CMD and build-up security, we anticipate that our customers will be able to secure their cloud workloads at both runtime and deployment time. This will give customers even greater value from their existing security and observability use cases of the Elasticsearch platform. Another critical component in both observability and security is a single unified Elastic agent, which we recently GA'd. In a world where organizations need to manage an ever-increasing number of data sources, deploying, managing, and maintaining agents poses a significant challenge, especially when the resources being monitored can number in the tens of thousands. With Elastic Agents, customers can simplify data onboarding, enable faster telemetry collection, reduce mean time-to-resolution and detection, and even response to threats. all through unified and centralized agent management that is fully integrated across elastic observability and security. Because, well, while you observe, why not protect? We've been saying this for years, and it is resonating with both our existing and new customers. Security is shifting left. Observability is shifting right. And we're seeing that natural convergence happening now. This is important. Because today's increasingly distributed, complex, and data-driven organizations require a new standard of operation. Organizations need to invest in technology that enables them to simultaneously monitor their processes and systems to ensure nothing is slow or broken, while also protecting against threats and cyber attacks. A great example of this is a deal we closed in Q1 with one of the world's largest casual dining restaurant chains with over 700 global locations. They needed to be able to quickly identify potential threats across different systems and applications. They also wanted to leverage machine learning and anomaly detection, as well as our APM and infrastructure monitoring capabilities. They chose Elastic because of the significant value they find in using a single platform that can address their needs across their most important observability and security use cases. Moving on to Enterprise Search. With Elastic Enterprise Search, customers have a powerful solution for website application and workplace search that enables them to search everything, anywhere. We continue our efforts to make it simple and easy for customers to adopt and deploy Enterprise Search. In Q1, we expanded business with a large mutual insurance company. Their existing internal agent portal was difficult to use and lacked the ability to scale across multiple data sources. They were already using our observability and security solutions, and they chose to implement our Workplace Search product with a streamlined and intuitive interface out-of-the-box connectors, and easily configured APIs. This is another example of a customer who started with one solution and adopted another and another as they realized the benefit of the Elasticsearch platform. And a Fortune 50 multinational investment bank and financial services company expanded business with us in Q1. They turned to Elastic to power their global financial crimes and compliance unit with robust search capabilities. They also wanted to build a front-end search solution for analysts and investigators who are trying to connect to different data sources to identify and stop financial crimes. With Elastic, investigators are able to perform complex searches within milliseconds across years of wire transactions. And, of course, we continue to add new features and functionality to our enterprise search solution. The better release of a new slider in App Search allows customers to easily make search results as narrow or broad as they want. And it literally goes all the way up to 11, with 11 predefined options for search precision. We also announced that customers can now fully manage App Search and Workplace Search directly from Kibana. making it easier to access search insights and visualization. With Enterprise Search, now in the Kibana UI, we are bringing more unified management and navigation to our search platform, with access to all three elastic solutions in the same user interface. And we continue to be recognized for our innovation. We were recently named the leader by Forrester Research in the Forrester Wave for Cognitive Search. Now onto Elastic Cloud. We continue to expand our strategic partnership with cloud providers so we can meet our customers where they are and support them with a simple, worry-free, and easy-to-use cloud experience. During the quarter, we closed business with one of the world's leading social trading and brokerage companies, displacing an existing vendor. As the customer's popularity grew over the last year, They chose Elastic to help them balance cost, scale, and performance. The speed of Elastic Observability on Elastic Cloud, combined with our searchable snapshot capabilities, means the customer is now able to store years of data in cold and frozen storage tiers without losing the ability to search the data whenever they need to without breaking into banks. We have been investing heavily in building seamless cloud experiences for our customers. and we've seen that investment starting to pay off in recent quarters. It's gratifying when I talk with customers who never thought they'd move to the cloud, and they tell me they are now making the move with Elastic. Our recent product enhancements and marketplace integration are delivering a frictionless onboarding experience, resulting in more customers coming to us from these channels. Our traction with Microsoft Azure continues to grow, Building on our previous launch of our native marketplace integration, we announced the GA of Microsoft Azure Private Link, which provides one-click private connectivity from Azure virtual networks to Elastic Cloud deployment. Customers using Microsoft Azure Private Link with Elastic Cloud are provided an additional layer of security to meet their security policy and compliance requirements. We were also honored to receive the Microsoft US Partner Award in Business Excellence in the Commercial Marketplace. In addition, in Q1, we were named as the 2020 Google Cloud Technology Partner of the Year in the Data Management category. This is a wonderful recognition of the continued work we've been doing with Google Cloud to provide our customers with a seamless cloud experience. I'm thrilled with the momentum we are building with all of our partners to enable our customers with a unique cloud experience that is intuitively flexible, feature-packed, and use case ready. The power of the Elasticsearch platform extends beyond our solution, helping customers to achieve their business outcomes with our continuous innovation. We continue to invest in resources to scale our enterprise reach and to grow our teams from engineering to marketing to sales. And I'm very excited to share that we've just released the dates for our virtual Elasticon Global Conference, which will take place on October 5th through the 7th. This year's event will feature product announcements plus presentations from customers, partners, elasticians, and other guest speakers, including Scott Guthrie, EVP of Microsoft Cloud and AI Group. We've got a great lineup this year. I'm incredibly humbled as I think about all the people who make our continued momentum possible, from our employees to our community, customers, and partners. Now, over to you, Ginesh.