Elastic N.V. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We have operations both within the United States and internationally, and we are exposed to market risk in the ordinary course of our business. Interest Rate Risk We had cash, cash equivalents, and restricted cash of $403.7 million as of April 30, 2021. Our cash, cash equivalents, and restricted cash are held in cash deposits and money market funds. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these instruments, we do not believe that 71 an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our investment portfolio. Declines in interest rates, however, would reduce our future interest income. Foreign Currency Risk Our revenue and expenses are primarily denominated in U.S. dollars. To date, we have not had a formal hedging program with respect to foreign currency, but we may do so in the future if our exposure to foreign currency should become more significant. For business conducted outside of the United States, we may have both revenue and costs incurred in the local currency of the subsidiary, creating a partial natural hedge. Changes to exchange rates therefore have not had a significant impact on our operating results to date; however, we will continue to reassess our foreign exchange exposure as we continue to grow our business globally. We have experienced and will continue to experience fluctuations in net loss as a result of transaction gains or losses related to remeasurement of certain asset and liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. An immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies could have a material effect on our net loss. As a component of other income, net, we recognized a foreign currency transaction gain of $7.7 million and a foreign currency transaction loss of $2.2 million in the years ended April 30, 2021 and April 30, 2020, respectively. As of April 30, 2021, our cash, cash equivalents, and restricted cash were primarily denominated in U.S. dollars, Euros, and British pounds. A 10% increase or decrease in current exchange rates would have an impact of approximately $11.0 million on our cash, cash equivalents, and restricted cash balances. Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations. 72