Elastic(ESTC) - 2026 Q1 - Quarterly Report

Note Regarding Forward-Looking Statements This section highlights the inherent uncertainties and risks associated with forward-looking statements concerning future financial and operational performance - This section contains forward-looking statements regarding future events or financial/operating performance, identified by words like "expects," "plans," "anticipates," etc. These statements are subject to substantial risks and uncertainties, including macroeconomic conditions, AI investments, future financial performance, product development, customer acceptance, geopolitical conditions, and foreign currency fluctuations[10][12][14] PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section provides Elastic N.V.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, shareholders' equity, and cash flows, along with explanatory notes Condensed Consolidated Balance Sheets This table presents a snapshot of the company's assets, liabilities, and shareholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands of US dollars) | Item | July 31, 2025 | April 30, 2025 | Change ($) | Change (%) | | :----------------------------------- | :------------ | :------------- | :--------- | :--------- | | Cash and cash equivalents | $662,338 | $727,543 | $(65,205) | -8.96% | | Marketable securities | $832,000 | $669,717 | $162,283 | 24.23% | | Accounts receivable, net | $221,989 | $375,613 | $(153,624) | -40.90% | | Total current assets | $1,878,311 | $1,931,007 | $(52,696) | -2.73% | | Total assets | $2,524,002 | $2,592,853 | $(68,851) | -2.66% | | Total current liabilities | $900,813 | $1,008,256 | $(107,443) | -10.66% | | Total liabilities | $1,552,646 | $1,665,619 | $(112,973) | -6.78% | | Total shareholders' equity | $971,356 | $927,234 | $44,122 | 4.76% | Condensed Consolidated Statements of Operations This table details the company's revenues, expenses, and net loss over specific three-month periods Condensed Consolidated Statements of Operations (in thousands of US dollars, except per share data) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Subscription Revenue | $388,583 | $323,774 | $64,809 | 20.02% | | Services Revenue | $26,705 | $23,646 | $3,059 | 12.94% | | Total Revenue | $415,288 | $347,420 | $67,868 | 19.54% | | Gross Profit | $318,542 | $255,663 | $62,879 | 24.59% | | Operating Loss | $(9,440) | $(33,838) | $24,398 | -72.09% | | Net Loss | $(24,603) | $(49,227) | $24,624 | -50.02% | | Net Loss Per Share (Basic and Diluted) | $(0.23) | $(0.48) | $0.25 | -52.08% | Condensed Consolidated Statements of Comprehensive Loss This table presents the net loss and other comprehensive income or loss components, leading to total comprehensive loss Condensed Consolidated Statements of Comprehensive Loss (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net loss | $(24,603) | $(49,227) | $24,624 | -50.02% | | Unrealized (loss) gain on available-for-sale securities, net of taxes | $(1,213) | $2,451 | $(3,664) | -149.49% | | Foreign currency translation adjustments | $(323) | $(279) | $(44) | 15.77% | | Other comprehensive (loss) income | $(1,536) | $2,172 | $(3,708) | -170.72% | | Total comprehensive loss | $(26,139) | $(47,055) | $20,916 | -44.45% | Condensed Consolidated Statements of Shareholders' Equity This table outlines the changes in shareholders' equity, including net loss, stock-based compensation, and other comprehensive income Changes in Shareholders' Equity (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Balances as of April 30 | $927,234 | $738,185 | | Issuance of ordinary shares upon exercise of stock options | $326 | $4,745 | | Issuance of ordinary shares upon release of restricted stock units | $0 | $0 | | Stock-based compensation | $69,935 | $63,543 | | Net loss | $(24,603) | $(49,227) | | Other comprehensive (loss) income | $(1,536) | $2,172 | | Balances as of July 31 | $971,356 | $759,418 | Condensed Consolidated Statements of Cash Flows This table summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands of US dollars) | Cash Flow Activity | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $104,835 | $52,754 | $52,081 | 98.72% | | Net cash used in investing activities | $(170,375) | $(3,520) | $(166,855) | 4740.20% | | Net cash provided by financing activities | $326 | $4,745 | $(4,419) | -93.13% | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(65,224) | $55,218 | $(120,442) | -218.11% | | Cash, cash equivalents, and restricted cash, end of period | $665,990 | $598,307 | $67,683 | 11.31% | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Organization and Description of Business This note describes Elastic N.V.'s incorporation, its core Search AI Platform, and its primary software solutions - Elastic N.V. was incorporated in the Netherlands in 2012 and developed Elastic's Search AI Platform, which ingests, stores, searches, analyzes, and visualizes data[33] - The platform offers three software solutions: Elasticsearch, Elastic Observability, and Elastic Security, designed for hybrid, public, or multi-cloud environments[33] 2. Summary of Significant Accounting Policies This note outlines the accounting principles used in preparing the financial statements and details new accounting pronouncements - The interim condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP, consistent with annual statements[34][35] - Management makes estimates and assumptions affecting reported amounts, which may differ from actual results[38][39] - No material changes to significant accounting policies were adopted in the three months ended July 31, 2025[40] - New Accounting Pronouncements Not Yet Adopted: - Income Taxes (ASU No. 2023-09): Effective for fiscal years beginning after April 30, 2025, requiring enhanced income tax disclosures, including disaggregation of tax rate reconciliation and income taxes paid by jurisdiction[42] The Company plans to adopt in Q4 fiscal 2026[42] - Financial Instruments—Credit Losses (ASU No. 2025-05): Effective for fiscal years beginning after April 30, 2026, provides a practical expedient for estimating expected credit losses for current accounts receivable and contract assets[43] Early adoption is permitted[43] - Comprehensive Income—Expense Disaggregation Disclosures (ASU No. 2024-03): Effective for fiscal years beginning after April 30, 2027, requiring more detailed disclosures about specified expense categories on the income statement[44] Early adoption is permitted[44] 3. Revenue This note provides a breakdown of revenue by category and details revenue recognition policies and remaining performance obligations Revenue by Category (in thousands of US dollars) | Category | Three Months Ended July 31, 2025 (Amount) | Three Months Ended July 31, 2025 (% of Total) | Three Months Ended July 31, 2024 (Amount) | Three Months Ended July 31, 2024 (% of Total) | | :------------------- | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------- | :-------------------------------------------- | | Annual Elastic Cloud | $145,912 | 35% | $111,031 | 32% | | Monthly Elastic Cloud | $49,862 | 12% | $46,250 | 13% | | Total Elastic Cloud | $195,774 | 47% | $157,281 | 45% | | Other subscription | $192,809 | 47% | $166,493 | 48% | | Total subscription | $388,583 | 94% | $323,774 | 93% | | Services | $26,705 | 6% | $23,646 | 7% | | Total revenue | $415,288 | 100% | $347,420 | 100% | - Revenue Recognition: The Company recognized $311.6 million and $261.4 million in revenue for the three months ended July 31, 2025 and 2024, respectively, from deferred revenue balances at the beginning of each period[47] - Remaining Performance Obligations (RPO): As of July 31, 2025, RPO was $1.461 billion[50] Approximately 65% is expected to be recognized as revenue over the next twelve months, and 91% over the next twenty-four months[50] - Deferred Contract Acquisition Costs: Amortization expense was $26.2 million for the three months ended July 31, 2025, up from $23.2 million in the prior year period[51] No impairment was recognized[51] 4. Fair Value Measurements This note details the fair value of financial assets and liabilities, including marketable securities and senior notes Financial Assets Measured at Fair Value (in thousands of US dollars) - July 31, 2025 | Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :------ | :------ | :------ | :------ | | Money market funds | $326,372 | — | — | $326,372 | | U.S. treasury securities | $21,986 | — | — | $21,986 | | U.S. agency securities | — | $46,528 | — | $46,528 | | Commercial paper | — | $7,958 | — | $7,958 | | Total cash equivalents | $348,358 | $54,486 | — | $402,844 | | Marketable securities (U.S. treasury) | $158,836 | — | — | $158,836 | | Marketable securities (Corporate debt) | — | $453,028 | — | $453,028 | | Marketable securities (Certificates of deposit) | — | $103,384 | — | $103,384 | | Marketable securities (International treasuries) | — | $44,881 | — | $44,881 | | Marketable securities (Municipal securities) | — | $36,669 | — | $36,669 | | Marketable securities (Commercial paper) | — | $25,125 | — | $25,125 | | Marketable securities (U.S. agency) | — | $10,077 | — | $10,077 | | Total marketable securities | $158,836 | $673,164 | — | $832,000 | | Mutual fund investments | $3,434 | — | — | $3,434 | | Total financial assets | $510,628 | $727,650 | — | $1,238,278 | - Interest Income: Interest income from cash, cash equivalents, and marketable securities increased to $15.1 million for the three months ended July 31, 2025, from $11.4 million in the prior year period[56] - Marketable Securities Maturity: As of July 31, 2025, $481.0 million of marketable securities are due within 1 year, and $350.992 million are due between 1 and 3 years[57] - Senior Notes Fair Value: The fair value of the $575.0 million Senior Notes was approximately $547.4 million as of July 31, 2025, categorized as Level 2[58] 5. Acquisitions This note describes the acquisition of Paladin Data Inc. and the allocation of its purchase price to developed technology and goodwill - On May 21, 2025, Elastic acquired Paladin Data Inc. (Keep) for $10.9 million[59] - The acquisition was accounted for as a business combination, with $4.0 million allocated to developed technology (amortized over 5 years) and $6.6 million to goodwill, primarily for enhancing Elastic's Search AI-powered solutions and the acquired workforce[60] 6. Balance Sheet Components This note provides detailed breakdowns of property and equipment, intangible assets, goodwill, accrued expenses, and credit loss allowances Property and Equipment, Net (in thousands of US dollars) | Item | July 31, 2025 | April 30, 2025 | | :-------------------------- | :------------ | :------------- | | Total property and equipment | $27,739 | $27,228 | | Less: accumulated depreciation | $(21,404) | $(20,639) | | Property and equipment, net | $6,335 | $6,589 | Intangible Assets, Net (in thousands of US dollars) | Item | July 31, 2025 (Net Book Value) | April 30, 2025 (Net Book Value) | | :-------------------------- | :----------------------------- | :------------------------------ | | Developed technology | $13,852 | $11,428 | | Foreign currency translation adjustment | $(24) | $(24) | | Total | $13,828 | $11,404 | | Weighted Average Remaining Useful Life (July 31, 2025) | 3.0 years | | | Amortization expense (3 months ended July 31, 2025) | $1,576 | | Goodwill (in thousands of US dollars) | Item | Amount | | :-------------------------- | :----- | | Balance as of April 30, 2025 | $319,417 | | Addition from acquisition | $6,637 | | Foreign currency translation adjustment | $27 | | Balance as of July 31, 2025 | $326,081 | Accrued Expenses and Other Liabilities (in thousands of US dollars) | Item | July 31, 2025 | April 30, 2025 | | :-------------------------- | :------------ | :------------- | | Accrued expenses | $37,579 | $36,585 | | Income taxes payable | $14,795 | $11,690 | | Value added taxes payable | $2,978 | $9,872 | | Accrued interest | $988 | $6,918 | | Other | $16,955 | $21,282 | | Total | $73,295 | $86,347 | Accrued Compensation and Benefits (in thousands of US dollars) | Item | July 31, 2025 | April 30, 2025 | | :-------------------------- | :------------ | :------------- | | Accrued vacation | $41,740 | $42,136 | | Accrued commissions | $15,903 | $28,051 | | Accrued payroll and withholding taxes | $5,667 | $10,007 | | Other | $19,516 | $13,520 | | Total | $82,826 | $93,714 | Allowance for Credit Losses (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Beginning balance | $5,510 | $4,979 | | Bad debt expense | $845 | $786 | | Accounts written off | $(1,117) | $(1,395) | | Ending balance | $5,238 | $4,370 | 7. Senior Notes This note details the Company's 4.125% Senior Notes, including their terms, carrying amount, and related interest expense - In July 2021, the Company issued $575.0 million in 4.125% Senior Notes due July 15, 2029[69] - Interest is payable semi-annually[70] - The Company may redeem the notes under certain conditions or repurchase them upon a change of control triggering event[71] - Covenants limit the Company's ability to create liens or grant subsidiary guarantees[72] Senior Notes Net Carrying Amount (in thousands of US dollars) | Item | July 31, 2025 | April 30, 2025 | | :-------------------------- | :------------ | :------------- | | Principal | $575,000 | $575,000 | | Unamortized debt issuance costs | $(4,984) | $(5,271) | | Net carrying amount | $570,016 | $569,729 | Interest Expense Related to Senior Notes (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Contractual interest expense | $5,930 | $5,930 | | Amortization of debt issuance costs | $287 | $275 | | Total interest expense | $6,217 | $6,205 | 8. Commitments and Contingencies This note outlines the company's contractual obligations, outstanding letters of credit, and ongoing legal matters - Cloud Hosting Commitments: No material changes to contractual obligations and commitments during the three months ended July 31, 2025[74] - Letters of Credit: $2.9 million in letters of credit outstanding for office space as of July 31, 2025[75] - Legal Matters: A shareholder complaint, "In re Elastic N.V. Securities Litigation," was filed on February 11, 2025, alleging materially false and misleading statements[77] An amended complaint was filed on August 1, 2025, extending the class period[77] The Company intends to vigorously defend the case and cannot predict the ultimate outcome or estimate possible losses at this early stage[77] - Indemnification: The Company enters into indemnification provisions in the ordinary course of business, but has not incurred significant costs to date and believes the fair value of these agreements is not material[79] 9. Leases This note provides details on lease costs, weighted-average lease terms, and future minimum lease payments Lease Costs (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $2,634 | $3,137 | | Short-term lease cost | $670 | $540 | | Variable lease cost | $475 | $402 | | Total lease cost | $3,779 | $4,079 | - Lease Term and Discount Rate: As of July 31, 2025, the weighted average remaining lease term is 5.2 years, and the weighted average discount rate is 5.4%[82] - Future Minimum Lease Payments: Total minimum lease payments under non-cancelable operating leases are $28.642 million, with a present value of $24.155 million as of July 31, 2025[82] 10. Ordinary Shares This note describes the authorized and reserved ordinary shares, voting rights, and dividend policy - Elastic N.V. has 165 million authorized ordinary shares (€0.01 par value), with each holder having one vote per share[83] - No dividends have been declared since inception[84] - The board is authorized to issue up to 20% of issued share capital until April 1, 2026[85] Ordinary Shares Reserved for Issuance | Item | As of July 31, 2025 | As of April 30, 2025 | | :----------------------------------- | :------------------ | :------------------- | | Stock options issued and outstanding | 1,752,632 | 1,775,723 | | Restricted stock units issued and outstanding | 6,699,912 | 6,523,077 | | Available for future grants | 27,681,290 | 23,291,765 | | Available for 2022 ESPP | 5,290,599 | 5,290,599 | | Total ordinary shares reserved | 41,424,433 | 36,881,164 | 11. Equity Incentive Plans This note details the company's employee stock purchase plan and stock option plan, including stock-based compensation expenses - 2022 Employee Stock Purchase Plan (ESPP): 6.0 million ordinary shares reserved[89] Employees can purchase shares at an 85% discount[90] Stock-based compensation expense was $2.0 million for the three months ended July 31, 2025[91] - 2012 Stock Option Plan: Grants stock options and RSUs to eligible employees, directors, and consultants, generally vesting over four years[92] Shares authorized for grant increased by 5,276,744 during the period[93] - Unrecognized Stock-Based Compensation: As of July 31, 2025, $2.6 million related to unvested stock options (0.68 years weighted-average period) and $573.3 million related to RSUs (2.49 years weighted-average period) remain unrecognized[95][96] Stock-Based Compensation Expense (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Cost of revenue – Subscription | $2,468 | $2,297 | | Cost of revenue – Services | $3,932 | $3,467 | | Research and development | $26,623 | $24,021 | | Sales and marketing | $23,067 | $21,079 | | General and administrative | $13,845 | $12,679 | | Total stock-based compensation expense | $69,935 | $63,543 | 12. Net Loss Per Share Attributable to Ordinary Shareholders This note presents the calculation of basic and diluted net loss per share and lists potentially dilutive shares Net Loss Per Share Attributable to Ordinary Shareholders (in thousands of US dollars, except per share data) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net loss | $(24,603) | $(49,227) | | Weighted-average shares (basic and diluted) | 105,961,879 | 102,284,435 | | Net loss per share (basic and diluted) | $(0.23) | $(0.48) | Potentially Dilutive Ordinary Shares Excluded from Diluted EPS (in thousands) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Stock options | 1,752,632 | 2,322,860 | | RSUs | 6,699,912 | 6,775,874 | | 2022 ESPP | 146,803 | 113,055 | | Total | 8,599,347 | 9,211,789 | 13. Income Taxes This note discusses the provision for income taxes, effective tax rate, and the impact of recent tax legislation - Provision for Income Taxes: The Company recorded a provision of $24.6 million for the three months ended July 31, 2025, an increase from $20.1 million in the prior year period[99] - Effective Tax Rate: The effective tax rate for the three months ended July 31, 2025, is not meaningful due to the exclusion of pre-tax losses in jurisdictions with valuation allowances[101] The prior year's effective tax rate was (69)%[101] - OBBBA Impact: The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, introduced significant changes to U.S. federal tax law, with some provisions impacting the current period and others effective in future periods[102] The Company is assessing its full impact[102] - Pillar Two Model Rules: The OECD's Pillar Two global minimum tax rules are being monitored[102] The Company determined Pillar Two did not have a material impact on its tax provision for the three months ended July 31, 2025[102] 14. Employee Benefit Plans This note outlines the company's contributions to its 401(k) plan and other employee benefit plans - 401(k) Plan: The Company contributed $5.7 million to its U.S. 401(k) Plan for the three months ended July 31, 2025, up from $5.2 million in the prior year period[103] - Other Employee Benefit Plans: Contributions to defined-contribution and other employee benefit plans in other countries totaled $4.3 million for the three months ended July 31, 2025, compared to $3.9 million in the prior year period[104] 15. Segment Information This note clarifies that the company operates as a single segment and provides revenue and long-lived asset breakdowns by geographic area - The Company operates in one operating segment, with the CEO serving as the chief operating decision maker, reviewing consolidated financial information to manage operations and allocate resources[105][106] Total Revenue by Geographic Area (in thousands of US dollars) | Geographic Area | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :---------------- | :------------------------------- | :------------------------------- | | United States | $230,263 | $198,289 | | Rest of world | $185,025 | $149,131 | | Total revenue | $415,288 | $347,420 | Long-Lived Assets by Geographic Region (in thousands of US dollars) | Geographic Region | As of July 31, 2025 | As of April 30, 2025 | | :------------------ | :------------------ | :------------------- | | United States | $15,377 | $16,514 | | The Netherlands | $2,725 | $2,824 | | United Kingdom | $2,707 | $2,817 | | Rest of world | $7,108 | $6,768 | | Total long-lived assets | $27,917 | $28,923 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Elastic's business, key performance drivers, and a detailed analysis of financial results, liquidity, and capital resources for the reported periods - Elastic, the Search AI Company, leverages its Search AI Platform to transform data into answers, actions, and outcomes[113] - The platform, built on Elasticsearch, offers solutions like Elastic Observability and Elastic Security, available as cloud services or self-managed software, and integrates with large language models (LLMs)[114][115][116] - Business Model: Primarily based on paid subscription offerings (Elastic Cloud Hosted and Serverless) and free/paid self-managed software (Elastic Self-Managed)[117] Subscriptions are sold via resource-based pricing, with most Elastic Cloud subscriptions being consumption-based[118] - Open Software Development: The core of Elasticsearch and Kibana is open source under an AGPL license, fostering community engagement and product-driven growth[119] The addition of AGPL in November 2024 aims to drive further adoption, especially in vector search for AI/ML use cases[121] - Customer Growth: The number of customers with over $100,000 in Annual Contract Value (ACV) increased from over 1,370 as of July 31, 2024, to over 1,550 as of July 31, 2025[124] - Net Expansion Rate: The Net Expansion Rate was approximately 112% as of July 31, 2025, indicating strong customer expansion[131] - Elastic Cloud Adoption: Elastic Cloud contributed 47% of total revenue for the three months ended July 31, 2025, up from 45% in the prior year, reflecting increasing adoption of cloud-based offerings[133] This growth is expected to continue but may modestly impact gross margin due to third-party hosting costs[133] - Macroeconomic Conditions: The Company continues to monitor macroeconomic events, which have led to longer sales cycles, increased scrutiny of sales, and impacts from changing foreign exchange rates[135] Revenue Comparison (in thousands of US dollars) | Category | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Subscription | $388,583 | $323,774 | $64,809 | 20% | | Services | $26,705 | $23,646 | $3,059 | 13% | | Total Revenue | $415,288 | $347,420 | $67,868 | 20% | - Subscription Revenue Growth: Driven by 24% growth in Elastic Cloud and 16% growth in Other subscriptions, with Annual Elastic Cloud increasing by 31%[155] - Services Revenue Growth: Attributable to increased adoption of service offerings[156] Cost of Revenue and Gross Margin Comparison (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Cost of subscription revenue | $69,418 | $68,347 | $1,071 | 2% | | Cost of services revenue | $27,328 | $23,410 | $3,918 | 17% | | Total cost of revenue | $96,746 | $91,757 | $4,989 | 5% | | Gross profit | $318,542 | $255,663 | $62,879 | 25% | | Subscription gross margin | 82% | 79% | 3% | | | Services gross margin | (2)% | 1% | -3% | | | Total gross margin | 77% | 74% | 3% | | - Subscription Gross Margin Improvement: Increased to 82% due to lower cloud infrastructure costs, despite increases in cloud infrastructure, personnel, and third-party costs[157] - Services Gross Margin Decline: Decreased to (2)% as personnel, travel, and subcontractor costs grew faster than services revenue, reflecting continued investments in the services organization[158] Operating Expenses Comparison (in thousands of US dollars) | Operating Expense | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Research and development | $109,122 | $89,332 | $19,790 | 22% | | Sales and marketing | $174,054 | $157,357 | $16,697 | 11% | | General and administrative | $44,806 | $42,673 | $2,133 | 5% | | Restructuring and other related charges | $0 | $139 | $(139) | -100% | - R&D Expense Increase: Primarily due to higher personnel and related costs ($12.3 million, including $8.3 million in salaries and $2.6 million in stock-based compensation), travel expenses, and cloud infrastructure costs, reflecting continued investment in new and existing offerings[159] - Sales & Marketing Expense Increase: Driven by higher personnel and related costs ($15.3 million, including $6.4 million in salaries, $4.0 million in commissions, and $2.0 million in stock-based compensation) and travel expenses, partially offset by lower marketing expenses[161] - G&A Expense Increase: Mainly due to higher personnel and related costs ($1.6 million, including $1.2 million in stock-based compensation) and legal/professional fees, partially offset by lower non-income based taxes[162] - Restructuring Charges: Decreased to zero as there were no employee-related severance and termination benefit charges in the current period[163] Other Income, Net Comparison (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Interest expense | $(6,351) | $(6,526) | $175 | -3% | | Other income, net | $15,782 | $11,208 | $4,574 | 41% | - Other Income, Net Increase: Primarily due to a $4.0 million increase in interest and other investment income from marketable securities and a $0.6 million increase in net foreign currency exchange gains[165] Provision for Income Taxes (in thousands of US dollars) | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Provision for income taxes | $24,594 | $20,071 | $4,523 | 23% | - Liquidity: As of July 31, 2025, principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $1.494 billion[169] The Company believes existing liquidity and future operations will fund needs for at least the next 12 months[170] - Operating Losses: The Company has an accumulated deficit of $1.124 billion as of July 31, 2025, and expects to continue incurring operating losses due to investments in growth[171] Cash Flows Summary (in thousands of US dollars) | Cash Flow Activity | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $104,835 | $52,754 | | Net cash used in investing activities | $(170,375) | $(3,520) | | Net cash provided by financing activities | $326 | $4,745 | - Operating Cash Flow Increase: Net cash provided by operating activities increased significantly due to non-cash charges and a net cash inflow from changes in operating assets and liabilities, primarily a decrease in accounts receivable[176][177] - Investing Cash Flow Increase: Net cash used in investing activities increased substantially, mainly due to higher purchases of marketable securities and business acquisitions[178][179] - Financing Cash Flow Decrease: Net cash provided by financing activities decreased due to lower proceeds from stock option exercises[180] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses Elastic N.V.'s exposure to interest rate risk on its investment portfolio and senior notes, as well as foreign currency risk on its operations and financial assets - Interest Rate Risk: The Company's cash, cash equivalents, restricted cash, and marketable securities totaled $1.498 billion as of July 31, 2025[184] A 10% change in interest rates is not expected to materially affect the fair value of the investment portfolio, but declines would reduce future interest income[184] - Senior Notes Interest Rate Risk: The fair value of the $575.0 million fixed-interest rate Senior Notes is subject to market interest rate fluctuations, increasing as rates fall and decreasing as rates rise, though this does not impact the Company's financial position or cash flows due to the fixed nature of the debt[185] - Foreign Currency Risk: The Company's revenue and expenses are primarily in U.S. dollars, with some exposure to Euro and British Pound Sterling[186] Foreign currency transaction losses of $0.7 million were recognized for the three months ended July 31, 2025[187] A 10% change in exchange rates could impact cash, cash equivalents, restricted cash, and marketable securities by approximately $7.3 million[188] Item 4. Controls and Procedures Management concluded that Elastic N.V.'s disclosure controls and procedures were effective as of July 31, 2025, with no material changes in internal control over financial reporting during the quarter - As of July 31, 2025, Elastic's disclosure controls and procedures were effective in ensuring timely and accurate reporting of information required under the Exchange Act[190] No material changes in internal control over financial reporting occurred during the quarter[191] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, insider trading arrangements, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that would materially adversely affect its business, financial condition, or cash flows - The Company is not currently involved in any legal proceedings that, if determined adversely, would have a material adverse effect on its business, results of operations, financial condition, or cash flows[194] Future litigation, however, could impact the company due to defense costs and diversion of management resources[195] Item 1A. Risk Factors No material changes to previously disclosed risk factors have occurred, though additional unknown or immaterial risks could still adversely affect the business - No material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K have occurred[196] The Company also acknowledges the existence of additional unknown or currently immaterial risks that could adversely affect its business[196] Item 5. Other Information This section discloses Rule 10b5-1 trading arrangements adopted by two executive officers for the sale of ordinary shares - Carolyn Herzog (Chief Legal Officer): Adopted a Rule 10b5-1 trading arrangement on June 2, 2025, for the sale of up to 17,135 ordinary shares, terminating by July 31, 2026[197] - Navam Welihinda (Chief Financial Officer): Adopted a Rule 10b5-1 trading arrangement on July 7, 2025, for the sale of up to 27,376 ordinary shares (underlying RSUs and PSUs), terminating by July 7, 2026[198] Item 6. Exhibits This section lists all documents incorporated by reference or filed as exhibits with this Quarterly Report on Form 10-Q - Key Exhibits Filed: Form of Restricted Stock Unit Agreement, Form of Performance Unit Agreement, Certifications of Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[201] Signatures This section confirms the official signing of the report by the Chief Executive Officer and Chief Financial Officer of Elastic N.V - The report was duly signed on August 29, 2025, by Ashutosh Kulkarni, Chief Executive Officer and Director, and Navam Welihinda, Chief Financial Officer, on behalf of Elastic N.V[204][205]