Elastic N.V. 10-K

Item 8. Financial Statements and Supplementary Data. The supplementary financial information required by this Item 8, is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , under the caption “Quarterly Results of Operations Data,” which is incorporated herein by reference. The following financial statements are filed as part of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 69 Financial Statements: Consolidated Balance Sheets 71 Consolidated Statements of Operations 72 Consolidated Statements of Comprehensive Loss 73 Consolidated Statements of Shareholders’ Equity 74 Consolidated Statements of Cash Flows 75 Notes to Consolidated Financial Statements 76 68 T a b l e o f C o ntents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Elastic N.V. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Elastic N.V. and its subsidiaries (the “Company”) as of April 30, 2022 and 2021, and the related consolidated statements of operations, of comprehensive loss, of shareholders' equity and of cash flows for each of the three years in the period ended April 30, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 69 T a b l e o f C o ntents Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – Identification and Evaluation of Terms and Conditions in Contracts As described in Note 2 to the consolidated financial statements, management applies the following steps in their determination of revenue to be recognized: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when the Company satisfies each performance obligation. The Company’s contracts include varying terms and conditions, and identifying and evaluating the impact of these terms and conditions on revenue recognition requires significant judgment. For the fiscal year ended April 30, 2022, the Company’s revenue was $862.4 million. The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of terms and conditions in contracts, is a critical audit matter are the significant judgment by management in identifying and evaluating terms and conditions in contracts that impact revenue recognition. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating the audit evidence to determine whether terms and conditions in contracts were appropriately identified and evaluated by management. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls related to the identification and evaluation of terms and conditions in contracts that impact revenue recognition. These procedures also included (i) testing the completeness and accuracy of management’s identification and evaluation of the specific terms with customers by examining revenue contracts on a sample basis and (ii) assessing the terms and conditions of the contract including their impact on revenue recognition. /s/ PricewaterhouseCoopers LLP San Jose, California June 21, 2022 We have served as the Company’s auditor since 2018. 70 T a b l e o f C o ntents Elastic N.V. Consolidated Balance Sheets ( in thousands, except share and per share data ) As of April 30, 2022 2021 Assets Current assets: Cash and cash equivalents $ 860,949 $ 400,814 Restricted cash 2,688 2,894 Accounts receivable, net of allowance for credit losses of $ 2,700 and $ 2,344 as of April 30, 2022 and April 30, 2021, respectively 215,228 160,415 Deferred contract acquisition costs 43,628 36,089 Prepaid expenses and other current assets 41,215 37,002 Total current assets 1,163,708 637,214 Property and equipment, net 7,207 8,881 Goodwill 303,906 198,851 Operating lease right-of-use assets 25,437 25,464 Intangible assets, net 45,800 36,286 Deferred contract acquisition costs, non-current 74,419 50,263 Deferred tax assets 5,811 3,697 Other assets 16,643 12,516 Total assets $ 1,642,931 $ 973,172 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 28,403 $ 7,248 Accrued expenses and other liabilities 53,930 28,909 Accrued compensation and benefits 68,002 52,525 Operating lease liabilities 11,219 8,528 Deferred revenue 431,776 352,805 Total current liabilities 593,330 450,015 Deferred revenue, non-current 33,518 44,895 Long-term debt, net 566,520 — Operating lease liabilities, non-current 16,482 19,649 Other liabilities, non-current 17,648 7,782 Total liabilities 1,227,498 522,341 Commitments and contingencies (Note 8 and 9) Shareholders’ equity: Convertible preference shares, € 0.01 par value; 165,000,000 shares authorized, 0 shares issued and outstanding as of April 30, 2022 and April 30, 2021 — — Ordinary shares, par value € 0.01 per share: 165,000,000 shares authorized; 94,174,914 shares issued and outstanding as of April 30, 2022 and 90,533,985 shares issued and outstanding as of April 30, 2021 990 948 Treasury stock ( 369 ) ( 369 ) Additional paid-in capital 1,250,108 1,071,675 Accumulated other comprehensive loss ( 18,130 ) ( 8,105 ) Accumulated deficit ( 817,166 ) ( 613,318 ) Total shareholders’ equity 415,433 450,831 Total liabilities and shareholders’ equity $ 1,642,931 $ 973,172 The accompanying notes are an integral part of these consolidated financial statements. 71 T a b l e o f C o ntents Elastic N.V. Consolidated Statements of Operations ( in thousands, except share and per share data ) Year Ended April 30, 2022 2021 2020 Revenue License - self-managed $ 76,964 $ 67,994 $ 53,536 Subscription - self-managed and SaaS 721,806 499,345 338,634 Total subscription revenue 798,770 567,339 392,170 Professional services 63,604 41,150 35,450 Total revenue 862,374 608,489 427,620 Cost of revenue Cost of license - self-managed 1,548 1,386 948 Cost of subscription - self-managed and SaaS 176,656 121,127 84,819 Total cost of revenue - subscription 178,204 122,513 85,767 Cost of professional services 53,990 38,541 36,923 Total cost of revenue 232,194 161,054 122,690 Gross profit 630,180 447,435 304,930 Operating expenses Research and development 273,761 199,203 165,370 Sales and marketing 406,658 273,877 219,040 General and administrative 123,441 103,833 91,625 Total operating expenses 803,860 576,913 476,035 Operating loss ( 173,680 ) ( 129,478 ) ( 171,105 ) Other income (expense), net Interest expense ( 20,716 ) ( 185 ) — Other income (expense), net ( 3,393 ) 7,949 1,963 Loss before income taxes ( 197,789 ) ( 121,714 ) ( 169,142 ) Provision for (benefit from) income taxes 6,059 7,720 ( 1,968 ) Net loss $ ( 203,848 ) $ ( 129,434 ) $ ( 167,174 ) Net loss per share attributable to ordinary shareholders, basic and diluted $ ( 2.20 ) $ ( 1.48 ) $ ( 2.12 ) Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted 92,547,145 87,207,094 78,799,732 The accompanying notes are an integral part of these consolidated financial statements. 72 T a b l e o f C o ntents Elastic N.V. Consolidated Statements of Comprehensive Loss ( in thousands ) Year Ended April 30, 2022 2021 2020 Net loss $ ( 203,848 ) $ ( 129,434 ) $ ( 167,174 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 10,025 ) ( 6,728 ) 54 Other comprehensive income (loss) ( 10,025 ) ( 6,728 ) 54 Total comprehensive loss $ ( 213,873 ) $ ( 136,162 ) $ ( 167,120 ) The accompanying notes are an integral part of these consolidated financial statements. 73 T a b l e o f C o ntents Elastic N.V. Consolidated Statements of Shareholders’ Equity ( in thousands, except share data ) Ordinary Shares Treasury Shares Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity Shares Amount Balances as of April 30, 2019 73,675,083 $ 754 $ ( 369 ) $ 581,135 $ ( 1,431 ) $ ( 317,077 ) $ 263,012 Issuance of ordinary shares upon exercise of stock options 6,815,098 77 — 61,386 — — 61,463 Issuance of ordinary shares upon release of restricted stock units 152,688 2 — — — — 2 Ordinary shares issued in connection with the acquisition of Endgame 1,983,663 21 — 167,316 — — 167,337 Ordinary shares issued in connection with the acquisition of Endgame held in escrow 235,031 2 — 19,824 — — 19,826 Assumption of stock option plan as consideration for acquisition of Endgame — — — 9,309 — — 9,309 Repurchase of unvested RSAs ( 4,585 ) — — — — — — Vesting of ordinary shares subject to repurchase — — — 2,730 — — 2,730 Stock-based compensation — — — 57,088 — — 57,088 Net loss — — — — — ( 167,174 ) ( 167,174 ) Foreign currency translation — — — — 54 — 54 Balances as of April 30, 2020 82,856,978 856 ( 369 ) 898,788 ( 1,377 ) ( 484,251 ) 413,647 Cumulative-effect adjustment from adoption of ASU 2016-13 — — — — — 367 367 Issuance of ordinary shares upon exercise of stock options 6,989,222 83 — 77,175 — — 77,258 Issuance of ordinary shares upon release of restricted stock units 687,785 9 — ( 9 ) — — — Stock-based compensation — — — 93,018 — — 93,018 Reclassification of liability-classified awards — — — 2,703 — — 2,703 Net loss — — — — — ( 129,434 ) ( 129,434 ) Foreign currency translation — — — — ( 6,728 ) — ( 6,728 ) Balances as of April 30, 2021 90,533,985 948 ( 369 ) 1,071,675 ( 8,105 ) ( 613,318 ) 450,831 Fair value of replacement equity awards attributable to pre-acquisition service — — — 1,266 — — 1,266 Issuance of ordinary shares upon exercise of stock options 2,563,287 29 — 36,381 — — 36,410 Issuance of ordinary shares upon release of restricted stock units 1,077,642 13 — ( 13 ) — — — Stock-based compensation — — — 140,799 — — 140,799 Net loss — — — — — ( 203,848 ) ( 203,848 ) Foreign currency translation — — — — ( 10,025 ) — ( 10,025 ) Balances as of April 30, 2022 94,174,914 $ 990 $ ( 369 ) $ 1,250,108 $ ( 18,130 ) $ ( 817,166 ) $ 415,433 The accompanying notes are an integral part of these consolidated financial statements. 74 T a b l e o f C o ntents Elastic N.V. Consolidated Statements of Cash Flows ( in thousands ) Year Ended April 30, 2022 2021 2020 Cash flows from operating activities Net loss $ ( 203,848 ) $ ( 129,434 ) $ ( 167,174 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 19,728 17,237 12,859 Amortization of deferred contract acquisition costs 60,738 40,991 28,314 Amortization of debt issuance costs 803 — — Non-cash operating lease cost 8,636 7,927 7,422 Stock-based compensation expense, net of amounts capitalized 140,612 93,680 60,007 Non-cash acquisition expense settled with shares — — 8,834 Deferred income taxes ( 2,430 ) 33 ( 1,539 ) Foreign currency transaction (gain) loss 1,984 ( 9,507 ) — Other 98 ( 142 ) 1,123 Changes in operating assets and liabilities, net of impact of business acquisitions: Accounts receivable, net ( 62,187 ) ( 24,037 ) ( 46,753 ) Deferred contract acquisition costs ( 96,755 ) ( 81,137 ) ( 46,217 ) Prepaid expenses and other current assets ( 3,427 ) ( 4,192 ) ( 2,950 ) Other assets 825 ( 4,107 ) 5,603 Accounts payable 21,036 ( 4,775 ) 5,968 Accrued expenses and other liabilities 27,192 8,118 5,220 Accrued compensation and benefits 17,775 3,867 19,710 Operating lease liabilities ( 8,888 ) ( 7,914 ) ( 6,661 ) Deferred revenue 83,780 115,937 85,670 Net cash provided by (used in) operating activities 5,672 22,545 ( 30,564 ) Cash flows from investing activities Purchases of property and equipment ( 2,485 ) ( 3,912 ) ( 5,063 ) Business acquisitions, net of cash acquired ( 119,854 ) — ( 24,373 ) Capitalization of internal-use software ( 4,932 ) ( 317 ) — Other — 2,711 249 Net cash used in investing activities ( 127,271 ) ( 1,518 ) ( 29,187 ) Cash flows from financing activities Proceeds from the issuance of debt 575,000 — — Proceeds from issuance of ordinary shares upon exercise of stock options 36,410 77,258 61,463 Payments of debt issuance costs ( 9,283 ) — — Repayment of notes payable — — ( 90 ) Payment of withholding taxes related to acquisition expense settled in shares — — ( 2,834 ) Net cash provided by financing activities 602,127 77,258 58,539 Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 20,599 ) 6,034 321 Net increase (decrease) in cash, cash equivalents, and restricted cash 459,929 104,319 ( 891 ) Cash, cash equivalents, and restricted cash, beginning of period 403,708 299,389 300,280 Cash, cash equivalents, and restricted cash, end of period $ 863,637 $ 403,708 $ 299,389 Supplemental disclosures of cash flow information Cash paid for interest $ 12,995 $ — $ — Cash paid (refunds) for income taxes, net $ 3,979 $ ( 423 ) $ 3,497 Cash paid for operating lease liabilities $ 10,101 $ 8,957 $ 7,371 Supplemental disclosures of non-cash investing and financing information Purchases of property and equipment included in accounts payable $ 150 $ 10 $ 101 Operating lease right-of-use assets for new lease obligations $ 8,992 $ 1,120 $ 12,332 Acquisition-related indemnity holdback $ 6,000 $ — $ — Vesting of shares subject to repurchase $ — $ — $ 2,730 Issuance of ordinary shares for business acquisition $ — $ — $ 178,329 Assumption of stock option plan as consideration for business combination $ — $ — $ 9,309 The accompanying notes are an integral part of these consolidated financial statements. 75 T a b l e o f C o ntents Elastic N.V. Notes to Consolidated Financial Statements Note Page 1. Organization and Description of Business 77 2. Summary of Significant Accounting Policies 77 3. Revenue and Performance Obligations 85 4. Fair Value Measurements 86 5. Acquisitions 86 6. Balance Sheet Components 89 7. Senior Notes 92 8. Commitments and Contingencies 93 9. Leases 94 10. Ordinary Shares 94 11. Equity Incentive Plans 95 12. Net Loss Per Share Attributable to Ordinary Shareholders 98 13. Income Taxes 98 14. Employee Benefit Plans 101 15. Segment Information 102 76 T a b l e o f C o ntents 1. Organization and Description of Business Elastic N.V. (“Elastic” or the “Company”) was incorporated under the laws of the Netherlands in 2012. It created the Elastic Stack, a powerful set of software products that ingest and store data from any source and in any format, and perform search, analysis, and visualization on that data. Developers build on top of the Elastic Stack to apply the power of search to their data and solve business problems. The Company offers three software solutions built into the Elastic Stack: Enterprise Search, Observability, and Security. The Elastic Stack and the Company’s solutions are designed to run in public or private clouds, in hybrid environments, or in multi-cloud environments. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the financial statements of the Company and its wholly owned subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation. Fiscal Year The Company’s fiscal year ends on April 30. References to fiscal 2022, for example, refer to the fiscal year ending April 30, 2022. Use of Estimates and Judgments The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Such estimates include, but are not limited to, allocation of revenue between recognized and deferred amounts, deferred contract acquisition costs, allowance for credit losses, valuation of stock-based compensation, fair value of ordinary shares in periods prior to the Company’s initial public offering, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, whether an arrangement is or contains a lease, the discount rate used for operating leases and valuation allowance for deferred income taxes. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. In March 2020, the World Health Organization declared the 2019 novel Coronavirus Disease (“COVID-19”) a pandemic. The continuing COVID-19 pandemic has resulted in a global slowdown of economic activity and its impact has varied significantly across different industries with certain industries experiencing increased demand for their products and services, while others have struggled to maintain demand for their products and services consistent with historical levels. The full extent to which COVID-19 may impact the Company’s financial condition or results of operations is uncertain. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments or revise the carrying value of the Company’s assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements. Foreign Currency The reporting currency of the Company is the U.S. dollar. The Company determines the functional currency of each subsidiary in accordance with ASC 830, Foreign Currency Matters, based on the currency of the primary economic environment in which each subsidiary operates. Items included in the financial statements of such subsidiaries are measured using that functional currency. The Company periodically re-assesses its operations to determine if previous conclusions are still valid. Changes in functional currencies are applied prospectively if the operations encounter a significant and permanent change. For the subsidiaries where the U.S. dollar is the functional currency, foreign currency denominated monetary assets and liabilities are re-measured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets and liabilities are re-measured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency re-measurement and settlements are included in other income (expense), net in the consolidated statement of operations. For the years ended April 30, 2022, 2021 and 2020, the Company recognized a re-measurement loss of $ 3.6 million, a gain of $ 7.7 million, and a loss of $ 2.2 million, respectively. 77 T a b l e o f C o ntents For subsidiaries where the functional currency is other than the U.S. dollar, the Company uses the period-end exchange rates to translate assets and liabilities, the average monthly exchange rates to translate revenue and expenses, and historical exchange rates to translate shareholders’ equity, into U.S. dollars. The Company records translation gains and losses in accumulated other comprehensive loss as a component of shareholders’ equity in the consolidated balance sheet. Comprehensive Loss The Company’s comprehensive loss includes net loss and unrealized gains and losses on foreign currency translation adjustments. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments, including money market funds with an original maturity of three months or less at the date of purchase, to be cash equivalents. The carrying amount of the Company’s cash equivalents approximates fair value, due to the short maturities of these instruments. Our restricted cash consists primarily of cash deposits with financial institutions in support of letters of credit in favor of landlords for non-cancelable lease agreements. Cash, cash equivalents, and restricted cash as reported in the Company’s consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and the restricted cash as shown on the consolidated balance sheet. Cash, cash equivalents, and restricted cash as reported in the Company’s consolidated statements of cash flows consists of the following (in thousands): As of April 30, 2022 2021 Cash and cash equivalents $ 860,949 $ 400,814 Restricted cash 2,688 2,894 Cash, cash equivalents and restricted cash $ 863,637 $ 403,708 Short-Term Investments Investments with an original maturity of three months or less at the date of purchase are considered cash equivalents, while all other investments are classified as short-term or long-term based on the nature of the investments, their maturities, and their availability for use in current operations. The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. Bank deposits with original maturities greater than three months but less than twelve months and are classified as short-term investments within current assets in the consolidated balance sheet. The Company had no short-term investments as of April 30, 2022 and April 30, 2021. Fair Value of Financial Instruments The Company’s financial instruments consist of cash equivalents, accounts receivable, accounts payable, and accrued liabilities. Cash equivalents are stated at amortized cost, which approximates fair value at the balance sheet dates, due to the short period of time to maturity. Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheet consisting primarily of cash equivalents are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value: • Level 1: Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. • Level 2: Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 78 T a b l e o f C o ntents The carrying values of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values due to the short period of time to maturity, receipt or payment. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents, restricted cash, short-term investments, and accounts receivable. The primary focus of the Company’s investment strategy is to preserve capital and meet liquidity requirements. The Company maintains its cash accounts with financial institutions where, at times, deposits exceed federal insurance limits. The Company invests its excess cash in highly-rated money market funds and in short-term investments. The Company extends credit to customers in the normal course of business. The Company performs credit analyses and monitors the financial health of its customers to reduce credit risk. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Management performs ongoing credit evaluations of customers and maintains allowances for potential credit losses on customers’ accounts when deemed necessary. No customer represented 10% or more of net accounts receivable as of April 30, 2022 and 2021. No customer accounted for more than 10% of the Company’s total revenue for the years ended April 30, 2022, 2021 and 2020. Accounts Receivable, Unbilled Accounts Receivable and Allowance for Credit Losses Accounts receivable primarily consists of amounts billed currently due from customers. The Company’s accounts receivable are subject to collection risk. Gross accounts receivable are reduced for this risk by an allowance for credit losses. This allowance is for estimated losses resulting from the inability of the Company’s customers to make required payments. The Company determines the need for an allowance for credit losses based upon various factors, including past collection experience, credit quality of the customer, age of the receivable balance, and current economic conditions, as well as specific circumstances arising with individual customers. Accounts receivables are written off against the allowance when management determines a balance is uncollectible and the Company no longer actively pursues collection of the receivable. The Company does not typically offer right of refund in its contracts. The allowance for credit losses reflects the Company’s best estimate of probable losses inherent in the Company’s receivables portfolio. As of April 30, 2022 and 2021, the allowance for credit losses was $ 2.7 million and $ 2.3 million, respectively. Activity related to the Company’s allowance for credit losses was as follows (in thousands): Year Ended April 30, 2022 2021 2020 Beginning balance $ 2,344 $ 1,247 $ 1,411 Cumulative-effect adjustment from adoption of ASU 2016-13 — ( 367 ) — Bad debt expense 2,980 5,095 193 Accounts written off ( 2,624 ) ( 3,631 ) ( 357 ) Ending balance $ 2,700 $ 2,344 $ 1,247 Unbilled accounts receivable represents amounts for which the Company has recognized revenue, pursuant to the Company’s revenue recognition policy, for fulfilled obligations, but not yet billed. The unbilled accounts receivable balance was $ 9.2 million and $ 5.2 million as of April 30, 2022 and 2021, respectively. Capitalized Software Development and Implementation Costs Software development costs for software to be sold, leased, or otherwise marketed are expensed as incurred until the establishment of technological feasibility, at which time those costs are capitalized until the product is available for general release to customers and amortized over the estimated life of the product. Technological feasibility is established upon the completion of a working prototype that has been certified as having no critical bugs and is a release candidate. To date, costs to develop software that is marketed externally have not been capitalized as the current software development process is essentially completed concurrently with the establishment of technological feasibility. As such, all related software development costs are expensed as incurred and included in research and development expense in the consolidated statement of operations. Costs related to software acquired, developed, or modified solely to meet the Company’s internal requirements, with no substantive plans to market such software at the time of development and costs related to the development of web-based product are capitalized during the application development stage. Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation operational stage are expensed as incurred. Costs incurred during the application development stage of the project are capitalized. 79 T a b l e o f C o ntents The Company also capitalizes qualifying implementation costs incurred in a hosting arrangement that is a service contract. These costs are amortized on a straight-line basis over the expected life of the service contract, including consideration of the reasonably certain renewal periods, and are presented in the same income statement line items as the service for the related hosting arrangement. The Company capitalized $ 5.1 million and $ 0.3 million of such costs in the years ended April 30, 2022 and 2021, respectively, and these costs are recorded in the other assets, non-current on the consolidated balance sheets. Amortization expense for the fiscal year ended April 30, 2022 was $ 0.2 million. No amortization expense related to capitalized implementation costs was recorded during the fiscal years ended April 30, 2021 and 2020 as the underlying implementation activities were not complete. Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the financial statements and any resulting gain or loss is reflected within the consolidated statement of operations. There was no material gain or loss incurred as a result of retirement or sale in the periods presented. Repair and maintenance costs are expensed as incurred. Leases Leases arise from contractual obligations that convey the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company determines whether an arrangement is or contains a lease at inception, based on whether there is an identified asset and whether the Company controls the use of the identified asset throughout the period of use. At the lease commencement date, the Company determines the lease classification between finance and operating and recognizes a right-of-use asset and corresponding lease liability for each lease component. A right-of-use asset represents the Company’s right to use an underlying asset and a lease liability represents the Company’s obligation to make payments during the lease term. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company accounts for lease components and non-lease components as a single lease component. The lease liability is initially measured as the present value of the remaining lease payments over the lease term. The discount rate used to determine the present value is the Company’s incremental borrowing rate unless the interest rate implicit in the lease is readily determinable. The Company estimates its incremental borrowing rate based on the information available at lease commencement date for borrowings with a similar term. The right-of-use asset is initially measured as the present value of the lease payments, adjusted for initial direct costs, prepaid lease payments to lessors and lease incentives. Acquisitions When the Company acquires a business, the Company allocates the purchase price, which is the sum of the consideration provided and may consist of cash, equity or a combination of the two, in a business combination to the identifiable assets and liabilities of the acquired business at their estimated respective fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including, but not limited to, the selection of valuation methodologies, estimates of future revenue and cash flows, costs to rebuild developed technology, discount rates and selection of comparable companies. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to other income, net in the consolidated statement of operations. When the Company issues stock-based or cash awards to an acquired company’s shareholders, the Company evaluates whether the awards are consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s shareholders beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post- acquisition services and recognized as expense over the requisite service period. Acquisition-related transaction costs incurred by the Company are not included as a component of consideration transferred, but are accounted for as an operating expense in the period in which the costs are incurred. The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. 80 T a b l e o f C o ntents Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for using the acquisition method for accounting and is not amortized. The Company tests goodwill for impairment at least annually, in the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that this asset may be impaired. For the purposes of impairment testing, the Company has determined that it has one operating segment and one reporting unit. The Company’s test of goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. If qualitative factors indicate that the fair value of the reporting unit is more likely than not less than its carrying amount, then a quantitative goodwill impairment test is performed. For the quantitative analysis, the Company compares the fair value of its reporting unit to its carrying value. If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. However, if the fair value of the reporting unit is less than book value, then goodwill will be impaired by the amount that the carrying amount exceeds the implied fair value. There was no impairment of goodwill recorded for the years ended April 30, 2022, 2021 and 2020. Acquired Intangible Assets Acquired amortizable intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. Useful life (in years) Developed technology 4 - 5 Customer relationships 4 Trade names 4 Impairment of Long-Lived Assets The Company evaluates the recoverability of long-lived assets, including property and equipment and amortizable acquired intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. Such events and changes may include: significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in the Company’s business strategy. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value. The Company determined that there were no events or changes in circumstances that indicated that its long-lived assets were impaired during the years ended April 30, 2022, 2021 and 2020. In addition to the recoverability assessment, the Company periodically reviews the remaining estimated useful lives of property and equipment and amortizable intangible assets. If the estimated useful life assumption for any asset is changed, the remaining unamortized balance would be depreciated or amortized over the revised estimated useful life, on a prospective basis. Revenue Recognition The Company generates revenue primarily from the sale of self-managed subscriptions (which include licenses for proprietary features, support, and maintenance) and from the sale of SaaS subscriptions. The Company also generates revenue from professional services, which consist of consulting and training. Under ASC Topic 606, Revenue from Contracts with Customers, the Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company’s contracts include varying terms and conditions, and identifying and evaluating the impact of these terms and conditions on revenue recognition requires significant judgment. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the contract with a customer; The Company contracts with its customers through order forms, which in some cases are governed by master sales agreements. The Company determines that it has a contract with a customer when the order form has been approved, each party’s rights regarding the products or services to be transferred can be identified, the payment terms for the services can be identified, the Company has determined the customer has the ability and intent to pay and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit, reputation and 81 T a b l e o f C o ntents financial or other information pertaining to the customer. At contract inception the Company evaluates whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. The Company has concluded that its contracts with customers generally do not contain warranties that give rise to a separate performance obligation. (ii) identification of the performance obligations in the contract; Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the products or services either on their own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products and services is separately identifiable from other promises in the contract. The Company’s self-managed subscriptions include both license providing the right to use proprietary features in its software, as well as an obligation to provide support (on both open source and proprietary features) and maintenance. The Company’s SaaS products provide access to hosted software as well as support, which the Company considers to be a single performance obligation. Services-related performance obligations relate to the provision of consulting and training services. These services are distinct from subscriptions and do not result in significant customization of the software. (iii) determination of the transaction price; The transaction price is the total amount of consideration we expect to be entitled to in exchange for the subscriptions and services in a contract. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component. (iv) allocation of the transaction price to the performance obligations; and If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price (‘SSP”). The SSP is determined based on the prices at which the Company separately sells these products assuming the majority of these fall within a pricing range. In instances where SSP is not directly observable, such as when we do not sell the software license separately, we derive the SSP using information that may include market conditions and other observable and unobservable inputs which can require significant judgment. There is typically more than one SSP for individual products and services due to the stratification of those products and services by quantity, term of the subscription, sales channel and other circumstances. If one of the performance obligations is outside of the SSP range, the Company allocates the transaction price considering the midpoint of the SSP range. The Company also considers if there are any additional material rights inherent in a contract, and if so, the Company allocates a portion of the transaction price to such rights based on a relative SSP. (v) recognition of revenue when the Company satisfies each performance obligation; Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to the customer. Revenue for SaaS offerings that relate to a specified amount of services is recognized on a consumption basis as the customers utilize the services. Revenue from SaaS offerings that are stand-ready arrangements is recognized ratably over the contract period as we satisfy the performance obligation. The Company’s self-managed subscriptions include both upfront revenue recognition when the license is delivered as well as revenue recognized ratably over the contract period for support and maintenance based on the stand-ready nature of these subscription elements. Professional services comprise consulting services as well as public and private training. Revenue from professional services is recognized as these services are delivered. The Company generates sales directly through its sales team and through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all the revenue recognition criteria above are met. To the extent that the Company offers rebates, incentives or joint marketing funds to such channel partners, recorded revenues are reduced by this amount. Channel partners generally receive an order from an end-customer prior to placing an order with the Company. Payment from channel partners is not contingent on the partner’s collection from end-customers. Contract Balances The timing of revenue recognition may differ from the timing of invoicing to customers. For annual contracts, the Company typically invoices customers at the time of entering into the contract. For multi-year agreements, the Company generally invoices customers on an annual basis prior to each anniversary of the contract start date. The Company records 82 T a b l e o f C o ntents unbilled accounts receivable related to revenue recognized in excess of amounts invoiced as the Company has an unconditional right to invoice and receive payment in the future related to those fulfilled obligations. Contract liabilities consist of deferred revenue which is recognized over the contractual period. Deferred Contract Acquisition Costs Deferred contract acquisition costs represent costs that are incremental to the acquisition of customer contracts, which consist mainly of sales commissions and associated payroll taxes. The Company determines whether costs should be deferred based on sales compensation plans, if the commissions are in fact incremental and would not have occurred absent the customer contract. Sales commissions for renewal of a subscription contract are not considered commensurate with the commissions paid for contracts with new customers and incremental sales to existing customers given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid for contracts with new customers and incremental sales to existing customers are amortized over an estimated period of benefit of five years while commissions paid for renewal contracts are amortized based on the pattern of the associated revenue recognition over the related contractual renewal period for the pool of renewal contracts. The Company determines the period of benefit for commissions paid for contracts with new customers and incremental sales to existing customers by taking into consideration its initial estimated customer life and the technological life of its software and related significant features. Commissions paid on professional services are typically amortized in accordance with the associated revenue as the commissions paid on new and renewal professional services are commensurate with each other. Amortization of deferred contract acquisition costs is recognized in sales and marketing expense in the consolidated statement of operations. The Company periodically reviews the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. Further disclosures with respect to the Company’s deferred contract acquisition costs are also included in Note 6, Balance Sheet Components. Cost of Revenue Cost of revenue consists primarily of costs related to providing subscription and professional services to the Company’s customers, including personnel costs (salaries, bonuses and benefits, and stock-based compensation) and related expenses for customer support and services personnel, as well as cloud infrastructure costs, third-party expenses, depreciation of fixed assets, amortization associated with acquired intangible assets, and allocated overhead. Research and Development Research and development costs are expensed as incurred and consist primarily of personnel costs, including salaries, bonuses and benefits, and stock-based compensation. Research and development costs also include depreciation and allocated overhead. Advertising Advertising costs are charged to operations as incurred and recorded in sales and marketing expense in the consolidated statement of operations. Advertising costs were $ 19.7 million, $ 16.7 million and $ 7.7 million for the years ended April 30, 2022, 2021 and 2020 respectively. Stock-Based Compensation Compensation expense related to stock awards issued to employees, including stock options and restricted stock units (“RSUs”) is measured at the fair value on the date of the grant and recognized over the requisite service period. The fair value of stock options is estimated on the date of the grant using the Black-Scholes option-pricing model. The fair value of RSUs is estimated on the date of the grant based on the fair value of the Company’s underlying ordinary shares. Compensation expense for stock options and RSUs is recognized on a straight-line basis over the requisite service period. The Company recognizes forfeitures as they occur. Debt Issuance Costs Costs incurred in connection with the issuance of debt are deferred and amortized as interest expense over the term of the related debt using the effective interest method. To the extent that the debt is outstanding, these amounts are reflected in the consolidated balance sheets as direct deductions from the carrying amount of the outstanding borrowings. 83 T a b l e o f C o ntents Net Loss per Share Attributable to Ordinary Shareholders The Company calculates basic net loss per share by dividing the net loss by the weighted-average number of ordinary shares outstanding during the period, less shares subject to repurchase. Diluted net loss per share is computed by giving effect to all potentially dilutive ordinary share equivalents outstanding for the period, including stock options and restricted stock units. Treasury Shares Ordinary shares of the Company that are repurchased are recorded as treasury shares at cost and are included as a component of shareholders’ equity. As of April 30, 2022 and 2021, the Company had 35,937 treasury shares that were repurchased at an average price of $ 10.30 per share. Segments Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”). The Company’s Chief Executive Officer is its CODM. The Company’s CODM reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable segment. The Company presents financial information about its operating segment and geographical areas in Note 15 to the consolidated financial statements. Income Taxes The Company is subject to income taxes in the Netherlands and numerous foreign jurisdictions. These foreign jurisdictions may have different statutory rates than the Netherlands. The Company records a provision for (benefit from) income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and the tax basis of assets and liabilities, as well as for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce its deferred tax assets to the net amount that it believes is more likely than not to be realized. The calculation of the Company’s tax obligations involves dealing with uncertainties in the application of complex tax laws and regulations. ASC 740, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company has assessed its income tax positions and recorded tax benefits for all years subject to examination, based upon the Company’s evaluation of the facts, circumstances and information available at each period end. For those tax positions where the Company has determined there is a greater than fifty percent likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is determined there is less than fifty percent likelihood that a tax benefit will be sustained, no tax benefit has been recognized. Although the Company believes that it has adequately reserved for its uncertain tax positions, the Company can provide no assurance that the final tax outcome of these matters will not be materially different. As the Company expands internationally, it will face increased complexity, and the Company’s unrecognized tax benefits may increase in the future. The Company makes adjustments to its reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for (benefit from) income taxes in the period in which such determination is made. Customer Deposits Certain of the Company’s contracts allow for termination at the customer’s convenience, or the Company may receive prepayments on master sales agreements. In these cases, the Company does not consider a contract to exist past the term in which enforceable rights and obligations exist. Amounts received related to these agreements are classified outside of deferred revenue in the consolidated balance sheet, and these amounts do not represent contract balances. The Company had $ 3.9 million and $ 3.2 million of customer deposits included in accrued expenses and other liabilities as of April 30, 2022 and 2021, respectively. Recently Adopted Accounting Pronouncements 84 T a b l e o f C o ntents Income Taxes: In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , eliminating certain exceptions to the general principles in ASC 740 related to intra-period tax allocation, deferred tax liability and general methodology for calculating income taxes. Additionally, the ASU makes other changes for matters such as franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The Company adopted ASU No.2019-12 on May 1, 2021. The Company’s adoption of this ASU did not have a material impact on its consolidated financial statements. New Accounting Pronouncements Not Yet Adopted Equity Awards: In May 2021, the FASB issued ASU No. 2021-4, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options , which clarifies the accounting for modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another Topic. It addresses how an entity should treat, measure the effect of, and recognize the effect of a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. The new guidance becomes effective for the Company for the fiscal year ending April 30, 2023. Early adoption is permitted, including in interim periods. The Company does not expect the adoption of the new accounting standard to have a material impact on its consolidated financial statements. Acquisitions: In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , improving consistency in accounting for acquired revenue contracts with customers in a business combination by requiring that acquirers apply ASC Topic 606 to recognize contract assets and contract liabilities as if it had originated the contracts. If the acquiree prepared its financial statements in accordance with GAAP, the resulting acquired contract assets and liabilities should generally be consistent with acquiree’s financial statements. The new guidance becomes effective for the Company for the fiscal year ending April 30, 2024. Early adoption is permitted. The Company does not expect the adoption of the new accounting standard to have a material impact on its consolidated financial statements. 3. Revenue and Remaining Performance Obligations Disaggregation of Revenue The following table presents revenue by category (in thousands): Year Ended April 30, 2022 2021 2020 Amount % of Total Revenue Amount % of Total Revenue Amount % of Total Revenue Elastic Cloud $ 298,615 35 % $ 166,319 27 % $ 92,290 22 % Other subscription 500,155 58 % 401,020 66 % 299,880 70 % Total subscription revenue 798,770 93 % 567,339 93 % 392,170 92 % Professional services 63,604 7 % 41,150 7 % 35,450 8 % Total revenue $ 862,374 100 % $ 608,489 100 % $ 427,620 100 % During fiscal 2022, the Company updated its disaggregation of revenue breakdown to present revenue by product category. The prior period presentation for the years ended April 30, 2021 and 2020, has been updated to conform to the current year presentation. Remaining Performance Obligations As of April 30, 2022, the Company had $ 932.3 million of remaining performance obligations. As of April 30, 2022, the Company expects to recognize approximately 87 % of its remaining performance obligations as revenue over the next 24 months and the remainder thereafter. 85 T a b l e o f C o ntents 4. Fair Value Measurements Financial Assets The Company measures financial assets and liabilities that are measured at fair value on a recurring basis at each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following table summarizes assets that are measured at fair value on a recurring basis as of April 30, 2022 (in thousands): Level 1 Level 2 Level 3 Total Financial Assets: Cash and cash equivalents: Money market funds $ 559,462 $ — $ — $ 559,462 The following table summarizes assets that are measured at fair value on a recurring basis as of April 30, 2021 (in thousands): Level 1 Level 2 Level 3 Total Financial Assets: Cash and cash equivalents: Money market funds $ 175,007 $ — $ — $ 175,007 The Company considers all highly liquid investments, including money market funds with an original maturity of three months or less at the date of purchase, to be cash equivalents. The Company uses quoted prices in active markets for identical assets to determine the fair value of its Level 1 investments in money market funds. Financial Liabilities In July 2021, the Company issued $ 575.0 million aggregate principal amount of 4.125 % Senior Notes due July 15, 2029 (the “Senior Notes”) in a private placement. Based on the trading prices of the Senior Notes, the fair value of the Senior Notes as of April 30, 2022 was approximately $ 502.2 million. While the Senior Notes are recorded at cost, the fair value of the Senior Notes was determined based on quoted prices in markets that are not active; accordingly, the Senior Notes are categorized as Level 2 for purposes of the fair value measurement hierarchy. 5. Acquisitions Fiscal 2022 Acquisitions cmdWatch Security Inc. On September 17, 2021, the Company acquired 100 % of the share capital of cmdWatch Security Inc. (“Cmd”) for a total purchase consideration of $ 77.8 million. The purchase consideration includes an amount of $ 13.4 million which is being held in an indemnity escrow fund for 18 months after the acquisition close date. Pursuant to the merger agreement, Cmd’s vested stock options were paid in cash and unvested stock options held by Cmd employees were assumed by the Company. The fair value of the replacement equity awards associated with pre-acquisition service period of $ 4.3 million, consisting of $ 3.0 million paid in cash to vested option holders and $ 1.3 million of non-cash consideration, was included in the total purchase consideration. Approximately $ 6.6 million of the fair value of replacement equity awards was allocated to post-acquisition services that will be recognized as stock-based compensation expense over the remaining service period and was excluded from the total purchase consideration. Additionally, an amount of $ 6.5 million for post-combination services, which is payable at future dates upon completion of the underlying required service period, has been excluded from the purchase consideration. This amount will be recorded as a post-combination expense over the requisite service period. The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations, and accordingly, the total purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The total preliminary purchase price allocated to developed technology and goodwill was $ 15.5 million and $ 58.7 million, respectively. The fair value assigned to developed technology was determined using the cost to recreate approach. The developed technology asset is being amortized on a straight-line basis over the useful life of 5 years, which approximates the pattern in which the developed technology is utilized. 86 T a b l e o f C o ntents Goodwill resulted primarily from the expectation of enhancing the Company's current security solutions and is not deductible for income tax purposes. Cmd has been included in the Company’s consolidated results of operations since the acquisition date. Pro forma and historical results of operations for this acquisition have not been presented because they were not material to the consolidated results of operations. Other Acquisitions On September 2, 2021 and November 1, 2021, the Company acquired 100 % of the share capital of Build Security Ltd. (“build.security”) and Optimyze.cloud Inc. (“Optimyze”), respectively, for a combined total purchase consideration of $ 57.2 million. The purchase consideration includes an amount of $ 5.4 million held in Indemnity escrow and $ 6.0 million held back by the Company for indemnity and will be released upon the 18 -month anniversary of the respective acquisitions. These acquisitions were accounted for as business combinations. The total preliminary purchase price allocated to developed technology and goodwill was $ 9.8 million and $ 46.7 million, respectively. The developed technology intangible assets from these acquisitions are being amortized on a straight-line basis over a useful life of 5 years which approximates the pattern in which the respective developed technologies are utilized. Goodwill resulted primarily from the expectation of enhancing the Company's current security solutions and the value of the acquired workforce. This goodwill is not deductible for income tax purposes. Build.security and Optimyze have been included in the Company’s consolidated results of operations since their respective acquisition dates. Pro forma and historical results of operations for these acquisitions have not been presented because they were not material to the consolidated results of operations. Excluded from the combined purchase consideration from these two acquisitions is an amount of $ 6.3 million, payable in equal installments at the first and the second anniversary of each of the acquisitions, to certain employees of build.security and Optimyze. These amounts are for post-combination services and will be recorded as a post-combination expense over the requisite service periods. The purchase price allocation for the acquisitions is preliminary and is based on the best estimates of management. The Company continues to collect information with regard to its estimates and assumptions, primarily related to intangible assets and certain tax-related, contingent liability and working capital items. The Company will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the 12 month measurement period, if necessary. Fiscal 2020 Acquisition Endgame, Inc. On October 8, 2019, the Company acquired all outstanding shares of Endgame, a security company offering endpoint protection technology, for a total acquisition price of $ 234.0 million. Elastic paid the purchase price through (i) the issuance of 2,218,694 ordinary shares in respect of Endgame’s outstanding capital stock, warrants, convertible notes, and certain retention awards, (ii) the cash repayment of Endgame’s outstanding indebtedness of $ 20.4 million, (iii) the assumption of Endgame’s outstanding stock options, (iv) a $ 0.4 million cash deposit to an expense fund for the fees and expenses of the representative and agent of Endgame securityholders, (v) the cash payment of Endgame’s transaction expenses of $ 5.9 million, and (vi) the cash payment of withholding taxes related to acquisition expense settled in shares of $ 2.8 million. Approximately 11 % of the ordinary shares issued, or 235,031 shares, were being held in an indemnity escrow fund for 18 months after the acquisition close date and were released in April 2021. For purposes of determining the total acquisition price of $ 234.0 million, the Company used the ordinary share price of $ 89.3836 which was determined on the basis of the volume weighted average price per share rounded to four decimal places for the twenty (20) consecutive trading days ending with the complete trading day ending five (5) trading days prior to the date upon which the acquisition was consummated. The fair value of the shares transferred as consideration was $ 84.12 per share and was determined on the basis of the closing stock price of the Company’s ordinary shares on the date of acquisition. The fair value of the assumed stock options was determined by using a Black-Scholes option pricing model with the applicable assumptions as of the acquisition date. The stock options assumed on the acquisition date will continue to vest as the Endgame employees provide services in the post-acquisition period. The fair value of these awards will be recorded as share-based compensation expense over the respective vesting period of each stock option. The acquisition was accounted for as a business combination and the total purchase price was allocated to the net tangible and intangible assets and liabilities based on their respective fair values on the acquisition date and the excess was recorded as goodwill. The following table summarizes the components of the U.S. GAAP purchase price and the allocation of the purchase price at fair value (in thousands): 87 T a b l e o f C o ntents Cash paid $ 26,633 Ordinary shares 178,331 Assumption of stock option plan 9,309 Total consideration $ 214,273 The above U.S. GAAP purchase price consideration does not include ordinary shares of Elastic issued as part of acceleration of equity awards and participation in the retention bonus pool. The following table summarizes the fair values of assets acquired and liabilities assumed (in thousands): Cash and cash equivalents $ 2,220 Restricted cash 40 Accounts receivable 2,661 Prepaid and other current assets 549 Operating lease right-of-use assets 4,363 Property and equipment 503 Intangible assets 53,800 Other assets 58 Goodwill 178,764 Accounts payable ( 1,112 ) Accrued expenses and other current liabilities ( 3,035 ) Accrued compensation and benefits ( 5,042 ) Operating lease liabilities, current ( 981 ) Deferred revenue, current ( 3,532 ) Deferred revenue, non-current ( 2,661 ) Operating lease liabilities, non-current ( 3,551 ) Other liabilities, non-current ( 8,771 ) Total purchase consideration $ 214,273 Identifiable intangible assets include (in thousands): Total Useful life (in years) Developed technology $ 32,700 5 Customer relationships 19,200 4 Trade name 1,900 4 Intangible assets $ 53,800 Developed technology consists of software products and security platform developed by Endgame. Customer relationships consists of contracts with platform users that purchase Endgame’s products and services that carry distinct value. Trade names represent the Company’s right to the Endgame trade names and associated design, as it exists as of the acquisition date. The fair value assigned to developed technology was determined primarily using the multi-period excess earnings model, which estimates the revenue and cash flows derived from the asset and then deducts portions of the cash flow that can be attributed to supporting assets otherwise recognized. Management applied significant judgment in estimating the fair value of the developed technology intangible asset, which involved the use of significant estimates related to the revenue growth rate assumption for both existing and any future product offerings. The fair value of the Company’s customer relationships was determined using the income approach, which discounts expected future cash flows to present value using estimates and assumptions related to revenue and customer growth rate as determined by management. The fair value assigned to trade name was determined using the relief from royalty method, where the owner of the asset realizes a benefit from owning the intangible asset rather than paying a rental or royalty rate for use of the asset. The acquired intangible assets are being amortized on a straight-line basis over their respective useful lives, which approximates the pattern in which these assets are utilized. 88 T a b l e o f C o ntents Recognized goodwill of $ 178.8 million is not deductible for tax purposes and is primarily attributed to planned growth in new markets, synergies arising from the acquisition and the value of the acquired workforce. Net tangible assets and liabilities assumed were valued at their respective carrying amounts as of the acquisition date, as the Company believes that these amounts approximate their current fair values. Endgame was included in the Company’s consolidated results of operations since the acquisition date. Endgame’s results were immaterial to the Company’s consolidated results for the year ended April 30, 2020. 6. Balance Sheet Components Property and Equipment, Net The cost and accumulated depreciation of property and equipment were as follows (in thousands): As of April 30, Useful Life (in years) 2022 2021 Leasehold improvements Lesser of estimated useful life or remaining lease term $ 10,863 $ 10,342 Computer hardware and software 3 1,473 2,319 Furniture and fixtures 3 - 5 5,753 5,971 Assets under construction 1,119 707 Total property and equipment 19,208 19,339 Less: accumulated depreciation ( 12,001 ) ( 10,458 ) Property and equipment, net $ 7,207 $ 8,881 Depreciation expense related to property and equipment was $ 3.9 million, $ 3.1 million and $ 2.8 million for the years ended April 30, 2022, 2021 and 2020, respectively. Intangible Assets, Net Intangible assets consisted of the following as of April 30, 2022 (in thousands): Gross Fair Value Accumulated Amortization Net Book Value Weighted Average Remaining Useful Life (in years) Developed technology $ 70,130 $ 31,355 $ 38,775 3.9 Customer relationships 19,598 13,177 6,421 3.3 Trade names 2,872 2,263 609 3.3 Total $ 92,600 $ 46,795 $ 45,805 3.8 Foreign currency translation adjustment ( 5 ) Total $ 45,800 Intangible assets consisted of the following as of April 30, 2021 (in thousands): Gross Fair Value Accumulated Amortization Net Book Value Weighted Average Remaining Useful Life (in years) Developed technology $ 44,830 $ 20,850 $ 23,980 3.3 Customer relationships 19,598 8,382 11,216 2.4 Trade names 2,872 1,780 1,092 2.4 Total $ 67,300 $ 31,012 $ 36,288 3.0 Foreign currency translation adjustment ( 2 ) Total $ 36,286 89 T a b l e o f C o ntents Amortization expense for the intangible assets for the years ended April 30, 2022, 2021 and 2020 was as follows (in thousands): Year Ended April 30, 2022 2021 2020 Cost of revenue—cost of license—self-managed $ 1,548 $ 1,386 $ 948 Cost of revenue—cost of subscription—self-managed and SaaS 8,955 7,051 5,820 Sales and marketing 5,280 5,730 3,300 Total amortization of acquired intangible assets $ 15,783 $ 14,167 $ 10,068 The expected future amortization expense related to the intangible assets as of April 30, 2022 was as follows (in thousands, by fiscal year): 2023 $ 16,696 2024 13,985 2025 8,018 2026 5,057 2027 2,044 Thereafter — Total $ 45,800 Goodwill The following table represents the changes to goodwill (in thousands): Carrying Amount Balance as of April 30, 2020 $ 197,877 Foreign currency translation adjustment 974 Balance as of April 30, 2021 198,851 Addition from acquisitions 105,428 Foreign currency translation adjustment ( 373 ) Balance as of April 30, 2022 $ 303,906 There was no impairment of goodwill during the years ended April 30, 2022, 2021 and 2020. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consisted of the following (in thousands): As of April 30, 2022 2021 Accrued expenses $ 24,066 $ 12,772 Value added taxes payable 8,926 8,493 Accrued interest 6,918 — Income taxes payable 4,286 1,596 Other 9,734 6,048 Total accrued expenses and other liabilities $ 53,930 $ 28,909 90 T a b l e o f C o ntents Accrued Compensation and Benefits Accrued compensation and benefits consisted of the following (in thousands): As of April 30, 2022 2021 Accrued vacation $ 27,280 $ 24,078 Accrued commissions 23,806 17,581 Accrued payroll and withholding taxes 9,030 5,522 Other 7,886 5,344 Total accrued compensation and benefits $ 68,002 $ 52,525 Contract Balances The following table provides information about unbilled accounts receivable, deferred contract acquisition costs, and deferred revenue from contracts with customers (in thousands): As of April 30, 2022 2021 Unbilled accounts receivable, included in accounts receivable, net $ 9,244 $ 5,204 Deferred contract acquisition costs $ 118,047 $ 86,352 Deferred revenue $ 465,294 $ 397,700 Significant changes in the unbilled accounts receivable and the deferred revenue balances were as follows (in thousands): Unbilled Accounts Receivable Year Ended April 30, 2022 2021 2020 Beginning balance $ 5,204 $ 2,622 $ 1,710 Amounts transferred to accounts receivable from unbilled accounts receivable presented at the beginning of the period ( 5,204 ) ( 2,622 ) ( 1,710 ) Revenue recognized during the period in excess of invoices issued 9,244 5,204 2,622 Ending balance $ 9,244 $ 5,204 $ 2,622 Deferred Revenue Year Ended April 30, 2022 2021 2020 Beginning balance $ 397,700 $ 259,702 $ 170,666 Increases due to invoices issued, excluding amounts recognized as revenue during the period 421,552 364,093 242,136 Amounts transferred to deferred revenue from accrued expenses and other liabilities upon entering into contracts with customers, net of revenue recognized during the period — 5,424 — Increase from acquisitions, net of revenue recognized 439 — 6,192 Revenue recognized that was included in deferred revenue balance at beginning of period ( 354,397 ) ( 231,519 ) ( 159,292 ) Ending balance $ 465,294 $ 397,700 $ 259,702 91 T a b l e o f C o ntents Deferred Contract Acquisition Costs The following table summarizes the activity of the deferred contract acquisition costs (in thousands): Year Ended April 30, 2022 2021 2020 Beginning balance $ 86,352 $ 43,549 $ 26,150 Capitalization of contract acquisition costs 92,433 83,794 45,713 Amortization of deferred contract acquisition costs ( 60,738 ) ( 40,991 ) ( 28,314 ) Ending balance $ 118,047 $ 86,352 $ 43,549 Deferred contract acquisition costs, current 43,628 36,089 19,537 Deferred contract acquisition costs, non- current 74,419 50,263 24,012 Total deferred contract acquisition costs $ 118,047 $ 86,352 $ 43,549 The Company did no t recognize any impairment of deferred contract acquisition costs during the years ended April 30, 2022, 2021 and 2020. 7. Senior Notes In July 2021, the Company issued $ 575.0 million aggregate principal amount of 4.125 % Senior Notes due July 15, 2029 in a private placement. Interest on the Senior Notes is payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2022. The Company received net proceeds from the offering of the Senior Notes of $ 565.7 million after deducting underwriting commissions of $ 7.2 million and incurred additional issuance costs of $ 2.1 million. Total debt issuance costs of $ 9.3 million are being amortized to interest expense using the effective interest method over the term of the Senior Notes. The Company may redeem the Senior Notes, in whole or in part, at any time prior to July 15, 2024 at a price equal to 100 % of the principal amount thereof plus a “make-whole” premium and accrued and unpaid interest, if any. The Company may at its election redeem all or a part of the Senior Notes on or after July 15, 2024, on any one or more occasions, at the redemption prices set forth in the indenture governing the Senior Notes (the “Indenture”), plus, in each case, accrued and unpaid interest thereon, if any, to, but excluding, the applicable redemption date. In addition, at any time prior to July 15, 2024, the Company may on any one or more occasions redeem up to 40 % of the aggregate principal amount of the Senior Notes outstanding under the Indenture with the net cash proceeds of one or more equity offerings at a redemption price equal to 104.125 % of the principal amount of the Senior Notes then outstanding, plus accrued and unpaid interest thereon, if any, to, but excluding, the applicable redemption date. The Company may also at its election redeem the Senior Notes in whole, but not in part, at a price equal to 100 % of the principal amount thereof plus accrued and unpaid interest, if any, if certain changes in tax law occur as set forth in the Indenture. If the Company experiences a change of control triggering event (as defined in the Indenture), the Company must offer to repurchase the Senior Notes at a repurchase price equal to 101 % of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest, if any, to the repurchase date. The indenture governing the Senior Notes contain covenants limiting the Company’s ability and the ability of certain subsidiaries to create liens on certain assets to secure debt; grant a subsidiary guarantee of certain debt without also providing a guarantee of the Senior Notes; and consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of its assets to, another person. These covenants are subject to a number of limitations and exceptions. Certain of these covenants will not apply during any period in which the notes are rated investment grade by Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services. As of April 30, 2022, the Company was in compliance with all of its financial covenants under the Indenture associated with the Senior Notes. The net carrying amount of the Senior Notes was as follows: As of April 30, 2022 Principal $ 575,000 Unamortized debt issuance costs ( 8,480 ) Net carrying amount $ 566,520 The following table sets forth the interest expense recognized related to the Senior Notes: 92 T a b l e o f C o ntents Year Ended April 30, 2022 Contractual interest expense $ 19,370 Amortization of debt issuance costs 803 Total interest expense related to the Senior Notes $ 20,173 8. Commitments and Contingencies Cloud Hosting Commitments The table below reflects the Company’s future minimum purchase obligations relating to non-cancellable agreements for cloud hosting as of April 30, 2022 (in thousands): Years Ending April 30, Purchase Obligations 2023 $ 97,390 2024 106,736 2025 92,587 2026 87,000 2027 32,000 Total $ 415,713 Actual timing may vary depending on services used and total payments under these capacity commitments may be higher than the total minimum depending on services used. Other Purchase Commitments The Company has future purchase obligations related to subscription software and sales and marketing contracts. As of April 30, 2022, the Company had purchase commitments of $ 36.2 million related to these contracts, primarily due within the next twelve months. Letters of Credit The Company had a total of $ 2.5 million in letters of credit outstanding in favor of certain landlords for office space as of April 30, 2022. Legal Matters From time to time, the Company has become involved in claims and other legal matters arising in the ordinary course of business. The Company investigates these claims as they arise. Although claims are inherently unpredictable, the Company is currently not aware of any matters that, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, results of operations, financial position or cash flows. The Company accrues estimates for resolution of legal and other contingencies when losses are probable and reasonably estimable. Although the results of litigation and claims are inherently unpredictable, the Company does not believe that there were any matters under litigation or claims with a reasonable possibility of the Company incurring a material loss as of April 30, 2022. Indemnification The Company enters into indemnification provisions under its agreements with other companies in the ordinary course of business, including business partners, landlords, contractors and parties performing its research and development. Pursuant to these arrangements, the Company agrees to indemnify, hold harmless, and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party as a result of the Company’s activities. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is not material. The Company maintains commercial general liability insurance and product liability insurance to offset certain of the Company’s potential liabilities under these indemnification provisions. 93 T a b l e o f C o ntents In addition, the Company indemnifies its officers, directors and certain key employees against certain liabilities that may arise as a result of their affiliation with the Company. To date, there have been no claims under any indemnification provisions. 9. Leases The Company’s leases are composed of corporate office spaces under non-cancelable operating lease agreements that expire at various dates through 2025. The Company does not have any finance leases. Lease Costs Components of lease costs included in the consolidated statement of operations were as follows (in thousands): Year Ended April 30, 2022 2021 Operating lease cost $ 9,894 $ 8,825 Short-term lease cost 2,448 2,319 Variable lease cost 857 527 Total lease cost $ 13,199 $ 11,671 Lease term and discount rate information are summarized as follows: As of April 30, 2022 Weighted average remaining lease term (years) 2.95 Weighted average discount rate 5.00 % Future minimum lease payments under non-cancelable operating leases on an undiscounted cash flow basis as of April 30, 2022 were as follows (in thousands): Years Ending April 30, 2023 $ 11,595 2024 8,788 2025 5,924 2026 3,523 2027 — Thereafter — Total minimum lease payments 29,830 Less imputed interest ( 2,129 ) Present value of future minimum lease payments 27,701 Less current lease liabilities ( 11,219 ) Operating lease liabilities, non-current $ 16,482 10. Ordinary Shares The Company’s articles of association designated and authorized the Company to issue 165 million ordinary shares at a par value per ordinary share of € 0.01 per share. Each holder of ordinary shares has the right to one vote per ordinary share . The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of shares outstanding having priority rights to dividends. No dividends have been declared by the Company’s board of directors from inception through the year ended April 30, 2022. 94 T a b l e o f C o ntents Ordinary Shares Reserved for Issuance The Company had reserved ordinary shares for issuance as follows: As of April 30, 2022 2021 Stock options issued and outstanding 5,219,124 7,611,016 RSUs issued and outstanding 4,717,548 3,301,283 Remaining shares available for future issuance under the 2012 Plan 17,647,684 15,737,819 Total ordinary shares reserved 27,584,356 26,650,118 Convertible Preference Shares The Company’s board of directors has the authority, for a period of five years from October 10, 2018, without further action by the Company’s shareholders, to issue up to 165 million shares of undesignated convertible preference shares with rights and preferences, including voting rights, designated from time to time by the board of directors. As of April 30, 2022, there were no convertible preference shares issued or outstanding. 11. Equity Incentive Plans In September 2012, the Company’s board of directors adopted and the Company’s shareholders approved the 2012 Stock Option Plan, which was amended and restated in September 2018 and further amended in December 2021 (as amended and restated, the “2012 Plan”). Under the 2012 Plan, the board of directors, the compensation committee, as administrator of the 2012 Plan, and a duly authorized committee may grant stock options and other equity-based awards, such as Restricted Stock Awards (“RSAs”) or Restricted Stock Units (“RSUs”), to eligible employees, directors, and consultants to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants, and to promote the success of the Company’s business. The Company’s board of directors, compensation committee or a duly authorized committee determines the vesting schedule for all equity-based awards. Stock options granted to new employees under the 2012 Plan generally vest over four years with 25 % of the option shares vesting one year from the vesting commencement date and then ratably over the following 36 months subject to the employees’ continued service to the Company. Refresh grants of stock options to existing employees generally vest monthly over four years subject to the employees’ continued service to the Company. RSUs granted prior to December 8, 2021 to new employees generally vest over a period of four years with 25% vesting on the one-year anniversary of the vesting start date and the remainder vesting semi-annually over the next 36 months, subject to the employee’s continued service to the Company. RSUs granted prior to December 8, 2021 to existing employees generally vest semi-annually over a period of four years , subject to the employee’s continued service to the Company. RSUs granted to both new and existing employees on and after December 8, 2021 generally vest quarterly over a period of four years , subject to the grantee’s continued service to the Company. The Company’s compensation committee may explicitly deviate from the general vesting schedules in its approval of an equity-based award, as it may deem appropriate. Stock options expire ten years after the date of grant. Stock options, RSAs and RSUs that are canceled under certain conditions become available for future grant or sale under the 2012 Plan unless the 2012 Plan is terminated. The equity awards available for grant were as follows: Year Ended April 30, 2022 2021 Available at beginning of fiscal year 15,737,819 12,461,850 Awards authorized 4,526,699 4,142,849 Options granted ( 495,460 ) ( 232,075 ) Options cancelled 386,656 890,561 RSUs granted ( 3,224,256 ) ( 1,965,644 ) RSUs cancelled 715,870 440,278 Shares withheld for taxes 356 — Available at end of period 17,647,684 15,737,819 Stock Incentive Plans Assumed in Acquisitions In connection with its acquisition of Endgame, the Company assumed all in-the-money stock options issued under Endgame’s Amended and Restated 2010 Stock Incentive Plan that were outstanding on the date of acquisition. In connection 95 T a b l e o f C o ntents with its acquisitions of Cmd and build.security, the Company assumed certain unvested stock options issued under the Cmd Stock Option Plan and Build 2020 Share Incentive Plan that were outstanding on the date of the respective acquisition. The assumed stock options will continue to be outstanding and will be governed by the provisions of their respective plan and are included in the stock option activity table below. Stock Options The following table summarizes stock option activity (in thousands, except share and per share data): Stock Options Outstanding Number of Stock Options Outstanding Weighted- Average Exercise Price Remaining Contractual Term (in years) Aggregate Intrinsic Value Balance as of April 30, 2020 15,260,506 $ 14.17 7.27 $ 767,795 Stock options granted 232,075 $ 139.68 Stock options exercised ( 6,989,222 ) $ 11.08 Stock options cancelled ( 890,561 ) $ 18.15 Stock options assumed in acquisition cancelled ( 1,782 ) $ 72.75 Balance as of April 30, 2021 7,611,016 $ 20.34 6.66 $ 768,517 Stock options granted 495,460 $ 94.46 Stock options assumed in acquisitions 63,846 $ 10.20 Stock options exercised ( 2,563,287 ) $ 14.18 Stock options cancelled ( 386,656 ) $ 32.04 Stock options assumed in acquisition cancelled ( 1,255 ) $ 40.35 Balance as of April 30, 2022 5,219,124 $ 29.41 6.22 $ 266,021 Exercisable as of April 30, 2022 3,929,577 $ 18.84 5.70 $ 230,199 Stock options exercisable include 16,667 stock options that were unvested as of April 30, 2022. Aggregate intrinsic value represents the difference between the exercise price of the stock options to purchase ordinary shares and the fair value of the Company’s ordinary shares. The weighted-average grant-date fair value per share of stock options assumed related to the Cmd and build.security acquisitions was $ 122.13 for the year ended April 30, 2022. The weighted-average grant-date fair value per share of stock options granted was $ 52.43 and $ 80.01 for the years ended April 30, 2022 and 2021, respectively. As of April 30, 2022, the Company had unrecognized stock-based compensation expense of $ 46.0 million related to unvested stock options that the Company expects to recognize over a weighted-average period of 2.16 years. RSUs The following table summarizes RSU activity under the 2012 Plan: Number of Awards Weighted-Average Grant Date Fair Value Outstanding and unvested at April 30, 2020 2,472,092 $ 66.78 RSUs granted 1,965,644 $ 123.48 RSUs released ( 696,175 ) $ 71.18 RSUs cancelled ( 440,278 ) $ 73.31 Outstanding and unvested at April 30, 2021 3,301,283 $ 98.74 RSUs granted 3,224,256 $ 113.91 RSUs released ( 1,092,121 ) $ 96.65 RSUs cancelled ( 715,870 ) $ 106.34 Outstanding and unvested at April 30, 2022 4,717,548 $ 108.44 96 T a b l e o f C o ntents During the year ended April 30, 2021, the Company cancelled 80,839 cash settled RSUs and contemporaneously granted 80,839 equity settled RSUs. The modification of the awards and related change in the classification of awards from liability-classified to equity-classified was accounted for under the provisions of ASC 718 - Stock Compensation. Prior to the conversion, the Company performed a final measurement of its stock-based compensation liability under the fair value method, which resulted in a non-cash stock-based compensation expense of $ 2.5 million. Additionally, upon modification of the awards, the Company reclassified $ 2.7 million stock-based compensation liability to additional-paid in capital. As of April 30, 2022, the Company had unrecognized stock-based compensation expense of $ 459.1 million related to RSUs that the Company expects to recognize over a weighted-average period of 2.77 years. Determination of Fair Value The determination of the fair value of stock-based options on the date of grant using an option pricing model is affected by the fair value of the Company’s ordinary shares, as well as assumptions regarding a number of complex and subjective variables. The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options, which requires the use of assumptions including actual and projected employee stock option exercise behaviors, expected price volatility of the Company’s ordinary shares, the risk-free interest rate and expected dividends. Fair Value of Ordinary Shares: Subsequent to the IPO on October 8, 2018, the fair value of the underlying ordinary shares is determined by the closing price, on the date of the grant, of the Company’s ordinary shares, which are traded publicly on the New York Stock Exchange. Prior to the IPO, the fair value of ordinary shares underlying the stock awards had historically been determined by the board of directors, with input from the Company’s management. The board of directors previously determined the fair value of the ordinary shares at the time of grant of the awards by considering a number of objective and subjective factors, including valuations of comparable companies, sales of redeemable convertible preference shares, sales of ordinary shares to unrelated third parties, operating and financial performance, the lack of liquidity of the Company’s ordinary shares, and general and industry-specific economic outlook. Expected Term: The expected term represents the period that options are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. Expected Volatility: Since the Company has limited trading history of its ordinary shares, the expected volatility is derived from the average historical stock volatilities of several unrelated public companies within the Company’s industry that the Company considers to be comparable to its own business over a period equivalent to the option’s expected term. Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term. Dividend Rate: The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans to do so. The Company’s expected volatility and expected term involve management’s best estimates, both of which impact the fair value of the option calculated under the Black-Scholes option pricing model and, ultimately, the expense that will be recognized over the life of the option. The fair value of stock options granted and assumed was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: Year Ended April 30, 2022 2021 2020 Expected term (in years) 5.52 - 6.08 6.02 - 6.08 2.00 - 7.27 Expected stock price volatility 59.6 % - 60.2 % 62.6 % - 63.9% 54.8 % Risk-free interest rate 1.4 % - 1.8 % 0.4 % - 1.1 % 1.4 % - 2.0 % Dividend yield 0 % 0 % 0 % 97 T a b l e o f C o ntents Stock-Based Compensation Expense Total stock-based compensation expense recognized in the Company’s consolidated statements of operations was as follows (in thousands): Year Ended April 30, 2022 2021 2020 Cost of revenue—cost of subscription—self-managed and SaaS $ 8,368 $ 7,105 $ 4,147 Cost of revenue—professional services 6,463 4,824 2,980 Research and development 59,911 35,267 23,621 Sales and marketing 45,798 31,581 19,334 General and administrative 20,654 14,903 9,925 Stock-based compensation expense, net of amounts capitalized 141,194 93,680 60,007 Capitalized stock-based compensation expense 188 10 — Total stock-based compensation expense $ 141,382 $ 93,690 $ 60,007 12. Net Loss Per Share Attributable to Ordinary Shareholders The following table sets forth the computation of basic and diluted net loss per share attributable to ordinary shareholders (in thousands, except share and per share data): Year Ended April 30, 2022 2021 2020 Numerator: Net loss $ ( 203,848 ) $ ( 129,434 ) $ ( 167,174 ) Denominator: Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted 92,547,145 87,207,094 78,799,732 Net loss per share attributable to ordinary shareholders, basic and diluted $ ( 2.20 ) $ ( 1.48 ) $ ( 2.12 ) Since the Company is in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods. The following outstanding potentially dilutive ordinary shares were excluded from the computation of diluted net loss per share attributable to ordinary shareholders for the periods presented because the impact of including them would have been antidilutive: Year Ended April 30, 2022 2021 2020 Stock options 5,219,124 7,611,016 15,260,506 RSUs 4,717,548 3,301,283 2,368,740 Contingently issuable shares — — 235,031 Total 9,936,672 10,912,299 17,864,277 13. Income Taxes The Company is incorporated in the Netherlands but operates in various countries with differing tax laws and rates. The geographical breakdown of income (loss) before provision for (benefit from) income taxes is summarized as follows (in thousands): Year Ended April 30, 2022 2021 2020 Dutch $ ( 261,097 ) $ ( 163,770 ) $ ( 173,338 ) Foreign 63,308 42,056 4,196 Loss before income taxes $ ( 197,789 ) $ ( 121,714 ) $ ( 169,142 ) 98 T a b l e o f C o ntents The components of the provision for (benefit from) income taxes were as follows (in thousands): Year Ended April 30, 2022 2021 2020 Current: Dutch $ 2,187 $ 1,125 $ 518 Foreign 6,892 3,896 ( 560 ) Total current tax expense (income) $ 9,079 $ 5,021 $ ( 42 ) Deferred: Dutch $ ( 105 ) $ — $ — Foreign ( 2,915 ) 2,699 ( 1,926 ) Total deferred tax expense (income) ( 3,020 ) 2,699 ( 1,926 ) Total provision for (benefit from) income taxes $ 6,059 $ 7,720 $ ( 1,968 ) The Company’s effective tax rate substantially differed from the Dutch statutory tax rate of 25% primarily due to the valuation allowance on the Dutch, United States and United Kingdom deferred tax assets, partially offset by a tax benefit from stock-based compensation. A reconciliation of income taxes at the statutory income tax rate to the provision for (benefit from) income taxes included in the consolidated statement of operations is as follows (in thousands, except for rates): Year Ended April 30, 2022 2021 2020 Tax Rate Tax Rate Tax Rate Dutch statutory income tax $ ( 49,448 ) 25.0 % $ ( 30,428 ) 25.0 % $ ( 42,286 ) 25.0 % Foreign income taxed at different rates ( 2,197 ) 1.1 % ( 486 ) 0.4 % 313 ( 0.2 ) % Stock-based compensation ( 31,372 ) 15.9 % ( 100,931 ) 82.9 % ( 53,050 ) 31.4 % Research and development credits ( 10,834 ) 5.5 % ( 11,020 ) 9.0 % ( 7,771 ) 4.6 % Change in valuation allowance 91,841 ( 46.4 ) % 146,571 ( 120.4 ) % 97,734 ( 57.8 ) % Deferred tax asset revaluation ( 302 ) 0.2 % ( 256 ) 0.2 % 1,991 ( 1.2 ) % Other 8,371 ( 4.4 ) % 4,270 ( 3.4 ) % 1,101 ( 0.6 ) % Provision for (benefit from) income taxes $ 6,059 ( 3.1 ) % $ 7,720 ( 6.3 ) % $ ( 1,968 ) 1.2 % Deferred Income Taxes Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Management assesses whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets are reduced by a valuation allowance where management has concluded it is more likely than not that the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with the Company’s plans and estimates. 99 T a b l e o f C o ntents Significant components of the Company’s deferred tax assets and liabilities are summarized as follows (in thousands): As of April 30, 2022 2021 Deferred tax assets: Accrued compensation $ 2,883 $ — Net operating loss carryforward 458,733 385,443 Deferred revenue 8,780 4,609 Stock-based compensation 12,063 11,614 Research and development credits 28,467 22,988 Lease liabilities 5,139 4,956 Other 9,239 3,156 Gross deferred tax assets 525,304 432,766 Less valuation allowance ( 498,996 ) ( 409,756 ) Total deferred tax assets $ 26,308 $ 23,010 Deferred tax liabilities: Accrued compensation $ — $ ( 41 ) Deferred contract acquisition costs ( 17,244 ) ( 13,173 ) Intangible assets ( 6,752 ) ( 8,191 ) Right of use assets ( 4,673 ) ( 4,523 ) Gross deferred tax liabilities ( 28,669 ) ( 25,928 ) Net deferred tax liabilities $ ( 2,361 ) $ ( 2,918 ) The valuation allowance for deferred tax assets as of April 30, 2022 and 2021 was $ 499.0 million and $ 409.8 million, respectively. As the Company has generated losses since inception in the Netherlands and California (United States) jurisdictions, management maintains a full valuation allowance against the net deferred tax assets in these jurisdictions. In addition, the United States and the United Kingdom jurisdictions are anticipated to have cumulative losses for the foreseeable future, and as such a valuation allowance has been established for these regions. The valuation allowance in the Netherlands, the United States and the United Kingdom jurisdictions increased by $ 53.8 million, $ 30.3 million and $ 5.1 million, respectively, during the year ended April 30, 2022 and $ 61.0 million, $ 113.1 million and $ 10.5 million, respectively, for the year ended April 30, 2021. The valuation allowance for the Dutch deferred tax assets as of April 30, 2022 and 2021 was $ 203.2 million and $ 149.4 million, respectively, the valuation allowance for the United States deferred tax assets as of April 30, 2022 and 2021 was $ 276.3 million and $ 246.0 million, respectively, and the valuation allowance for the United Kingdom deferred tax assets as of April 30, 2022 and April 30, 2021 was $ 19.5 million and $ 14.4 million, respectively. As of April 30, 2022, the Company had net operating loss (“NOL”) carryforwards for Dutch, United States (Federal and State, respectively) and United Kingdom income tax purposes of $ 758.4 million, $ 1,002.5 million, $ 651.8 million and $ 67.5 million, respectively, which begin to expire in the year ending, April 30, 2031 and April 30, 2025 in the United States (Federal and State, respectively), with Dutch and United Kingdom losses being carried forward indefinitely. The Company also has research and development tax credit carryforwards for United States (Federal and State, respectively) and Canada, income tax purposes of $ 20.0 million, $ 5.3 million and $ 0.7 million respectively, which begin to expire April 30, 2033, April 30, 2023, and April 30, 2039, respectively. Research and development tax credit carryforwards related to the UK of $ 0.6 million have an indefinite life. The deferred tax assets associated with the NOL carryforwards and other tax attributes in the Netherlands, the United States, and the United Kingdom are subject to a full valuation allowance. Uncertain Tax Positions The calculation of the Company’s tax obligations involves dealing with uncertainties in the application of complex tax laws and regulations. ASC 740, Income Taxes , provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company has assessed its income tax positions and recorded tax benefits for all years subject to examination, based upon the Company’s evaluation of the facts, circumstances and information available at each period end. Although the Company believes that it has adequately reserved for its uncertain tax positions, the Company can provide no assurance that the final tax outcome of these matters will not be materially different. As the Company expands, it 100 T a b l e o f C o ntents will face increased complexity, and the Company’s unrecognized tax benefits may increase in the future. The Company makes adjustments to its reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for (benefit from) income taxes in the period in which such determination is made. The Company had unrecognized tax benefits of $ 16.6 million as of April 30, 2022, of which none would impact the effective tax rate before consideration of any valuation allowance. The activity within the Company’s unrecognized gross tax benefits is summarized as follows (in thousands): As of April 30, 2022 2021 2020 Balance as of beginning of year $ 13,656 $ 9,706 $ 3,870 Increase (decrease) related to tax positions taken in prior periods ( 1,029 ) 432 2,283 Increase related to tax positions taken in the current period 3,995 3,518 3,553 Balance as of end of year $ 16,622 $ 13,656 $ 9,706 Approximately $ 1.0 million of the decrease in fiscal 2022 for tax positions taken in prior periods is due to the filing of tax returns during the current fiscal year and lapse of statute of limitations. Approximately $ 4.0 million of the increase in tax positions related to the current period is primarily from the research and development tax credits generated for fiscal 2022. The Company’s policy is to recognize penalties and interests accrued on any unrecognized tax benefits as a component of income tax expense. For the years ended April 30, 2022, 2021 and 2020 the Company recognized interest and penalties of $ 0.3 million, less than $0.1 million and less than $0.1 million, respectively. The amount of accrued interest and penalties recorded on the consolidated balance sheet as of April 30, 2022 and 2021 was $ 0.3 million and $ 0.1 million, respectively. The Company is subject to periodic examination of income tax returns by various domestic and international tax authorities. During the fiscal year, the Company was not subject to any new audits. The Company is currently under examination with the Internal Revenue Service for foreign withholding taxes for the calendar year 2018. The Company does not anticipate any significant increases or decreases in its uncertain tax positions within the next twelve months. The Company files tax returns in multiple jurisdictions, including the Netherlands and United States. The Company’s tax filings for fiscal years starting with the year ended April 30, 2017 remain open in various tax jurisdictions. Dutch income taxes and non-Dutch withholding taxes associated with the repatriation of earnings or for temporary differences related to investments in non-Dutch subsidiaries, excluding the U.S subsidiaries, have not been provided for, as the Company intends to reinvest the earnings of such subsidiaries indefinitely or the Company has concluded that an immaterial additional tax liability would arise on the distribution of such earnings. Earnings from the Company’s U.S. subsidiaries are being treated as being currently repatriated back to the Netherlands though no Dutch income taxes nor U.S. withholding taxes in regard to such repatriations are being recorded due to the Dutch participation exemption provisions and exemption from withholding taxes under the income tax treaty between the Netherlands and the United States. As of April 30, 2022, there were cumulative earnings of $ 104.8 million, from the non-U.S. subsidiaries. If such earnings were to be repatriated they would be exempt from taxation in the Netherlands and the amount of dividend withholding taxes from such foreign jurisdictions would be $ 2.4 million, due to the various income tax treaties between the Netherlands and the respective foreign jurisdictions. The Company is subject to Global Intangible Low Taxed Income (“GILTI”). Due to the Company’s net operating loss, GILTI provision was zero , $ 1.0 million and zero for the years ended April 30, 2022, 2021 and 2020, respectively. The GILTI provision did not have a material impact on the Company’s results for any of the years presented. 14. Employee Benefit Plans The Company has a defined-contribution plan in the U.S. intended to qualify under Section 401 of the Internal Revenue Code (the “401(k) Plan”). The Company has contracted with a third-party provider to act as a custodian and trustee, and to process and maintain the records of participant data. Substantially all the expenses incurred for administering the 401(k) Plan are paid by the Company. This 401(k) Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis The Company makes contributions to the 401(k) Plan up to 6 % of the participating employee’s W-2 earnings and wages. The Company recorded $ 15.2 million, $ 11.4 million and $ 8.3 million of expense related to the 401(k) Plan during the years ended April 30, 2022, 2021 and 2020, respectively. The Company also has defined-contribution plans in certain other countries for which the Company recorded $ 7.2 million, $ 5.1 million and $ 3.6 million of expense during the years ended April 30, 2022, 2021 and 2020, respectively. 101 T a b l e o f C o ntents 15. Segment Information The following table summarizes the Company’s total revenue by geographic area based on the billing address of the customers (in thousands): Year Ended April 30, 2022 2021 2020 United States $ 481,589 $ 331,769 $ 241,648 Rest of world 380,785 276,720 185,972 Total revenue $ 862,374 $ 608,489 $ 427,620 Other than the United States, no other individual country exceeded 10% or more of total revenue during the periods presented. The following table presents the Company’s long-lived assets, including property and equipment, net, and operating lease right-of-use assets, by geographic region (in thousands): As of April 30, 2022 2021 United States $ 22,112 $ 23,443 United Kingdom 4,478 7,151 India 3,407 — Rest of world 2,647 3,751 Total long-lived assets $ 32,644 $ 34,345 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.