Elastic N.V. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10-K. As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K. Our fiscal year end is April 30. This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the years ended April 30, 2025, 2024, and 2023, and year-to-year comparisons between the years ended April 30, 2025 and 2024. A discussion of our financial condition and results of operations for the year ended April 30, 2023 and year-to-year comparisons between the years ended April 30, 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended April 30, 2024, filed with the SEC on June 14, 2024. Overview Elastic, the Search AI Company, enables its customers to transform data into answers, actions, and outcomes with Search AI. Our platform combines the precision of search with the intelligence of AI to help our customers and community solve real-time business problems, unlock potential value, and achieve better outcomes. Our platform, available as either a cloud service or a self-managed software, allows our customers to find insights and drive AI and machine learning use cases from large amounts of data. We offer three Search AI-powered solutions—Elasticsearch, Elastic Observability, and Elastic Security—that are built on our platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications and infrastructure running smoothly and protecting against cyber threats. Our platform is able to ingest data from any source, in any format, and perform search, analysis, and visualization of that data. With Elasticsearch at its core, our platform is a highly scalable document store and search engine, and is the unified data store for all of our solutions and use cases. Featuring a common, solution-agnostic user interface with powerful drag-and-drop visual analytics, centralized management capabilities, and the world's most downloaded open source vector database, our platform gives developers a full suite of sophisticated retrieval algorithms and the ability to integrate with large language models (“LLM”). It delivers the comprehensive set of capabilities developers need to build, maintain, and secure next-generation applications and services. Our platform can be used by developers and IT decision makers to power a variety of use cases. We make our platform available as a service across major cloud providers. Customers can also deploy our platform across hybrid clouds, public or private clouds, and multi-cloud environments. As digital transformation continues to drive mission-critical business functions to the cloud, we believe that every company must incorporate search AI capabilities across IT and line-of-business organizations to find the answers that matter from all of its data in real time and at scale. Our business model is based primarily on a combination of paid service offerings (Elastic Cloud Hosted and Elastic Cloud Serverless) and free and paid proprietary self-managed software (Elastic Self-Managed). Our paid offerings for our platform are sold via subscription through resource-based pricing, and all customers and users have access to varying levels of features across all solutions. In Elastic Cloud, our family of cloud-based offerings, we offer various subscription tiers tied to different features. For users who download our software, we make some of the features of our software available free of charge, allowing us to engage with a broad community of developers and practitioners and introduce them to the value of our platform. We believe in the importance of an open software development model, and we develop the majority of our software in public repositories under an open source AGPL license, as well as under a proprietary license. Unlike some companies, we do not build an enterprise version that is separate from our free distribution. We maintain a single code base across both our self-managed software and Elastic-hosted services. All of these actions help us build a powerful commercial business model that we believe is optimized for product-driven growth. Elastic has always been committed to open source and an open development process with transparent and direct engagement with our community. The core of Elasticsearch and Kibana (a user interface) are open source under an AGPL license, and our open source code is housed in public repositories. 52 Table of Contents We generate revenue primarily from sales of subscriptions to our platform. We offer various paid subscription tiers that provide different levels of rights to use proprietary features and access to support. We do not sell support separately. Our subscription agreements typically range from one to three years and are usually billed annually in advance. Our subscription agreements are both term-based and consumption-based, with the vast majority of Elastic Cloud subscriptions being consumption-based. We sell subscriptions in various currencies, with the majority of our subscriptions contracted in U.S. dollars, and a smaller portion contracted in Euro, British Pound Sterling, and other currencies. Elastic Cloud customers may also purchase subscriptions on a month-to-month basis without a commitment, with usage billed at the end of each month. Subscriptions accounted for 93% of total revenue for the years ended April 30, 2025 and 2024. We also generate revenue from consulting and training services. We make it easy for users to begin using our products in order to drive rapid adoption. Users can either sign up for a free trial on Elastic Cloud or download our software directly from our website without any sales interaction, and immediately begin using the full set of features. Users can also sign up for Elastic Cloud through public cloud marketplaces. We conduct low-touch campaigns to keep users and customers engaged once they have begun using Elastic Cloud or have downloaded our software. As of April 30, 2025, we had approximately 21,500 customers compared to approximately 21,000 customers as of April 30, 2024. The majority of our new customers use Elastic Cloud. We define a customer as an entity that generated revenue in the quarter ending on the measurement date from an annual or month-to-month subscription. Affiliated entities are typically counted as a single customer. Many of these customers start with limited initial spending on our products but can significantly increase their spending over time. We drive high-touch engagement with qualified prospects and customers to drive further awareness, adoption, and expansion of our products with paid subscriptions. Expansion includes increasing the number of developers and practitioners using our products, increasing the utilization of our products for a particular use case, and utilizing our products to address new use cases. The number of customers who represented greater than $100,000 in annual contract value (“ACV”) was over 1,510 and over 1,330 as of April 30, 2025 and 2024, respectively. The ACV of a customer’s commitments is calculated based on the terms of that customer’s subscriptions, and represents the total committed annual subscription amount as of the measurement date. Month-to-month subscriptions are not included in the calculation of ACV. Our sales teams are organized primarily by geography and secondarily by customer segments. They focus on both seeking to obtain new customers and on pursuing additional sales to existing customers. In addition to our direct sales efforts, we maintain partnerships to further extend our reach and awareness of our products around the world. We have experienced significant growth, with revenue increasing to $1.483 billion for the year ended April 30, 2025 from $1.267 billion for the year ended April 30, 2024 and $1.069 billion for the year ended April 30, 2023, representing year-over-year growth of 17% for the year ended April 30, 2025 and 19% for the year ended April 30, 2024. For the years ended April 30, 2025, 2024 and 2023, revenue from outside the United States accounted for 44%, 42%, and 41% of our total revenue, respectively. We incurred net losses of $108.1 million and $236.2 million for the years ended April 30, 2025 and 2023, respectively, while we had net income of $61.7 million for the year ended April 30, 2024. Our net cash provided by operating activities was $266.2 million, $148.8 million, and $35.7 million for the years ended April 30, 2025, 2024 and 2023, respectively. We had an accumulated deficit of $1.100 billion as of April 30, 2025 due to losses in all but one of our prior years. We may incur net losses in the future and there can be no assurance whether, or when, we may become profitable on a consistent basis. We continue to make substantial investments in developing our platform and expanding our global sales and marketing footprint. With a distributed team spanning over 40 countries, we are able to recruit, hire, and retain high-quality, experienced technical and sales personnel and operate at a rapid pace to drive product releases, fix bugs, and create and market new products. We had 3,537 employees as of April 30, 2025. Current Economic Conditions Macroeconomic events, including a possible resurgence in inflation, fluctuations in economic growth, changes in and uncertainty of international trade policies, and political unrest, continue to evolve and impact worldwide economic activity. Governmental and corporate responses to these factors, including changing interest rates and unpredictable and decreased spending, will continue to affect the macroeconomic conditions. We have experienced and, if economic conditions deteriorate, may continue to experience longer and more unpredictable sales cycles, increased scrutiny of prospective sales, slowing consumption and overall customer expenditures, and the impacts of changing foreign exchange rates with a strengthening or weakening U.S. dollar. We continue to closely monitor the macroeconomic environment and its effects on our business and on global economic activity, including customer spending behavior. See “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of additional risks. 53 Table of Contents Key Factors Affecting our Performance We believe that the growth and future success of our business depends on many factors, including those described below. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Developing new features for Elastic’s Search AI Platform. Our platform is applied to various use cases by customers, including through the solutions we offer. Our revenue is derived primarily from subscriptions of Search, Observability and Security built into our platform. We believe that releasing additional features of our platform, including our solutions, drives usage of our products and ultimately drives our growth. To that end, we plan to continue to invest in building new features and solutions that expand the capabilities of our platform. These investments may adversely affect our operating results prior to generating benefits, to the extent that they ultimately generate benefits at all. Growing the Elastic community. Our strategy consists of providing access to source available software, on both a paid and free-of-charge basis, and fostering a community of users and developers. Our strategy is designed to pursue what we believe to be significant untapped potential for the use of our technology. After developers begin to use our software and start to participate in our developer community, they become more likely to apply our technology to additional use cases and promote our technology within their organizations. This reduces the time required for our sales force to educate potential customers on our solutions. To capitalize on our opportunity, we intend to make further investments to keep our platform accessible and well known to software developers around the world. We intend to continue to invest in our products and support and engage our user base and developer community through content, events, and conferences in the United States and internationally. Our results of operations may fluctuate as we make these investments. Growing our customer base by converting users of our software to paid subscribers. Our financial performance depends on growing our paid customer base by converting free users of our software into paid subscribers. Our distribution model has resulted in rapid adoption by developers around the world. We have invested, and expect to continue to invest, heavily in sales and marketing efforts to convert additional free users to paid subscribers. Our investment in sales and marketing is significant given our large and diverse user base. These investments are likely to occur before we realize the anticipated benefits of such investments, such that they may adversely affect our operating results in the near term. We recently added the Affero General Public License as an option to license the free part of our Elasticsearch and Kibana source code that has been available under the Elastic License 2.0 and Server Side Public License Version 1.0. AGPL is an Open Source Initiative approved open-source license. We anticipate that the addition of this license will drive further engagement and adoption of our software in areas such as vector search within our large community, further increasing our appeal for driving AI and machine learning use cases from large amounts of data. Subject to compliance with the conditions of AGPL, anyone may also redistribute our software in modified or unmodified form or use it to provide a competitive product or service offering. Expanding within our current customer base. Our future growth and profitability depend on our ability to drive additional sales to existing customers. Customers often expand the use of our software within their organizations by increasing the number of developers using our products, increasing the utilization of our products for a particular use case, and expanding use of our products to additional use cases. We focus some of our direct sales efforts on encouraging these types of expansion within our customer base. We believe that a useful indication of how our customer relationships have expanded over time is through our Net Expansion Rate, which is based upon trends in the rate at which customers increase their spend with us. To calculate an expansion rate as of the end of a given month, we start with the annualized spend from all such customers as of twelve months prior to that month end, or Prior Period Value. A customer’s annualized spend is measured as its ACV, or in the case of customers charged on usage-based arrangements, by annualizing the usage for that month. We then calculate the annualized spend from these same customers as of the given month end, or Current Period Value, which includes any growth in the value of their subscriptions or usage and is net of contraction or attrition over the prior twelve months. We then divide the Current Period Value by the Prior Period Value to arrive at an expansion rate. The Net Expansion Rate at the end of any period is the weighted average of the expansion rates as of the end of each of the trailing twelve months. The Net Expansion Rate includes the dollar-weighted value of our subscriptions or usage that expand, renew, contract, or experience attrition. For instance, if each customer had a one-year subscription and renewed its subscription for the same amount, the Net Expansion Rate would be 100%. Customers who reduced their annual subscription dollar value (contraction) or did not renew their annual subscription (attrition) would adversely affect the Net Expansion Rate. Our Net Expansion Rate was approximately 112% as of April 30, 2025. As large organizations expand their use of our platform across multiple use cases, projects, divisions and users, they often begin to require centralized provisioning, management and monitoring across multiple deployments. To satisfy these requirements, our Enterprise subscription tier provides access to key orchestration and deployment management capabilities. We will continue to focus some of our direct sales efforts on driving adoption of our paid offerings. 54 Table of Contents Increasing adoption of Elastic Cloud. Elastic Cloud, our family of cloud-based offerings, is an important growth opportunity for our business. Organizations are increasingly looking for hosted deployment alternatives with reduced administrative burdens. In some cases, users of our source available software that have been self-managing deployments of our platform subsequently become paying subscribers of Elastic Cloud. For the years ended April 30, 2025 and 2024, Elastic Cloud contributed 46% and 43% of our total revenue, respectively. We believe that offering Elastic Cloud is important for achieving our long-term growth potential, and we expect Elastic Cloud’s contribution to our subscription revenue to continue to increase over time. However, we expect that an increase in the relative contribution of Elastic Cloud to our business will continue to have a modest adverse impact on our gross margin as a result of the associated third-party hosting costs. Components of Results of Operations Revenue Subscription. Our revenue is primarily generated through the sale of subscriptions to software, which is either self-managed by the user or hosted and managed by us in the cloud. Subscriptions provide the right to use paid proprietary software features and access to support for our paid and unpaid software. Our subscription agreements are either term-based or consumption-based, with the vast majority of Elastic Cloud subscriptions being consumption-based. A portion of the revenue from self-managed subscriptions is generally recognized up front at the point in time when the license is delivered and the remainder is recognized ratably over the subscription term. Revenue from subscriptions that require access to the cloud or that are hosted and managed by us is recognized ratably over the subscription term or on a usage basis for consumption-based arrangements. Both are presented within Subscription revenue in our consolidated statements of operations. Services. Services is composed of implementation and other consulting services as well as public and private training. Revenue for services is recognized as these services are delivered. Cost of Revenue Subscription. Cost of subscription consists primarily of personnel and related costs for employees associated with supporting our subscription arrangements, certain third-party expenses, and amortization of certain intangible and other assets. Personnel and related costs comprise cash compensation, benefits and stock-based compensation to employees, costs of third-party contractors, and allocated overhead costs. Third-party expenses consist of cloud hosting costs and other expenses directly associated with our customer support. We expect our cost of subscription to increase in absolute dollars as our subscription revenue increases. Services. Cost of services revenue consists primarily of personnel costs directly associated with delivery of training, implementation and other services, costs of third-party contractors, facility rental charges and allocated overhead costs. We expect our cost of services to increase in absolute dollars as we invest in our business and as services revenue increases. Gross profit and gross margin. Gross profit represents revenue less cost of revenue. Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the timing of our acquisition of new customers and our renewals with existing customers, the average sales price of our subscriptions and services, the amount of our revenue represented by hosted services, the mix of subscriptions sold, the mix of revenue between subscriptions and services, the mix of services between consulting and training, transaction volume growth and support case volume growth. We expect our gross margin to fluctuate over time depending on the factors described above. We expect our revenue from Elastic Cloud to continue to increase as a percentage of total revenue, which we expect will continue to have a modest unfavorable impact on our gross margin as a result of the associated third-party hosting costs. Operating Expenses Research and development. Research and development expense primarily consists of personnel and related costs and allocated overhead costs. We expect our research and development expense to increase in absolute dollars for the foreseeable future as we continue to develop new technology and invest further in our existing products. Sales and marketing. Sales and marketing expense primarily consists of personnel and related costs, commissions, allocated overhead costs and costs related to marketing programs and user events. Marketing programs consist of advertising, events, brand-building and customer acquisition and retention activities. We expect our sales and marketing expense to increase in absolute dollars as we expand our sales force and increase our investments in marketing resources. We capitalize sales commissions and associated payroll taxes paid to internal sales personnel that are related to the acquisition of certain customer contracts. Deferred contract acquisition costs are amortized over the expected benefit period. 55 Table of Contents General and administrative. General and administrative expense primarily consists of personnel and related costs for our management, finance, legal, human resources, and other administrative employees. Our general and administrative expense also includes professional fees, accounting fees, audit fees, tax services and legal fees, as well as insurance, allocated overhead costs, and other corporate expenses. We expect our general and administrative expense to increase in absolute dollars as we increase the size of our general and administrative functions to support the growth of our business. Restructuring and other related charges. Restructuring and other related charges primarily consist of employee-related severance and other termination benefits as well as lease impairment and other facilities-related charges. Other Income, Net Interest expense. Interest expense primarily consists of interest on our Senior Notes. Other income, net. Other income, net primarily consists of interest income, gains and losses from transactions denominated in a currency other than the functional currency, and miscellaneous other non-operating gains and losses. Provision for (Benefit from) Income Taxes Provision for (benefit from) income taxes consists primarily of income taxes related to the Netherlands, U.S. federal and state, and foreign jurisdictions in which we conduct business. Our effective tax rate is affected by recurring items, such as tax rates in jurisdictions outside the Netherlands and the relative amounts of income we earn in those jurisdictions, non-deductible stock-based compensation, and one-time tax benefits, such as the release of a valuation allowance, or charges as well as the BEAT legislation in the United States. Results of Operations The following table sets forth our results of operations for the periods presented. Year Ended April 30, 2025 2024 2023 (in thousands) Revenue Subscription $ 1,384,520 $ 1,176,606 $ 984,762 Services 98,776 90,715 84,227 Total revenue 1,483,296 1,267,321 1,068,989 Cost of revenue (1)(2) Subscription 282,585 246,285 219,306 Services 97,288 83,794 77,320 Total cost of revenue 379,873 330,079 296,626 Gross profit 1,103,423 937,242 772,363 Operating expenses (1)(2)(3) Research and development 365,758 341,951 313,454 Sales and marketing 617,176 559,648 503,537 General and administrative 175,186 160,628 143,247 Restructuring and other related charges 225 4,917 31,297 Total operating expenses 1,158,345 1,067,144 991,535 Operating loss (1)(2)(3) (54,922) (129,902) (219,172) Other income, net Interest expense (25,307) (26,132) (25,159) Other income, net 48,660 33,278 27,454 Loss before income taxes (31,569) (122,756) (216,877) Provision for (benefit from) income taxes 76,545 (184,476) 19,284 Net (loss) income $ (108,114) $ 61,720 $ (236,161) 56 Table of Contents (1) Includes stock-based compensation expense and related employer taxes as follows: Year Ended April 30, 2025 2024 2023 (in thousands) Cost of revenue Subscription $ 10,161 $ 9,378 $ 8,730 Services 15,669 13,365 9,858 Research and development 102,180 98,174 82,628 Sales and marketing 90,973 82,023 71,363 General and administrative 50,932 47,519 38,593 Total stock-based compensation expense and related employer taxes $ 269,915 $ 250,459 $ 211,172 (2) Includes amortization of acquired intangible assets as follows: Year Ended April 30, 2025 2024 2023 (in thousands) Cost of revenue Subscription $ 9,213 $ 12,353 $ 11,781 Sales and marketing — 2,143 4,887 Total amortization of acquired intangibles $ 9,213 $ 14,496 $ 16,668 (3) Includes acquisition-related expenses as follows: Year Ended April 30, 2025 2024 2023 (in thousands) Research and development $ 76 $ 1,385 $ 5,875 General and administrative 606 1,065 103 Total acquisition-related expenses $ 682 $ 2,450 $ 5,978 57 Table of Contents The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue: Year Ended April 30, 2025 2024 2023 Revenue Subscription 93 % 93 % 92 % Services 7 % 7 % 8 % Total revenue 100 % 100 % 100 % Cost of revenue (1)(2) Subscription 19 % 19 % 21 % Services 7 % 7 % 7 % Total cost of revenue 26 % 26 % 28 % Gross profit 74 % 74 % 72 % Operating expenses (1)(2)(3) Research and development 25 % 27 % 29 % Sales and marketing 41 % 44 % 47 % General and administrative 12 % 13 % 14 % Restructuring and other related charges — % — % 3 % Total operating expenses 78 % 84 % 93 % Operating loss (1)(2)(3) (4) % (10) % (21) % Other income, net Interest expense (1) % (2) % (2) % Other income, net 3 % 3 % 2 % Loss before income taxes (2) % (9) % (21) % Provision for (benefit from) income taxes 5 % (14) % 1 % Net (loss) income (7) % 5 % (22) % 58 Table of Contents (1) Includes stock-based compensation expense and related employer taxes as follows: Year Ended April 30, 2025 2024 2023 Cost of revenue Subscription 1 % 1 % 1 % Services 1 % 1 % 1 % Research and development 7 % 8 % 9 % Sales and marketing 6 % 6 % 6 % General and administrative 3 % 4 % 3 % Total stock-based compensation expense and related employer taxes 18 % 20 % 20 % (2) Includes amortization of acquired intangible assets as follows: Year Ended April 30, 2025 2024 2023 Cost of revenue Subscription 1 % 1 % 1 % Sales and marketing — % — % 1 % Total amortization of acquired intangibles 1 % 1 % 2 % (3) Includes acquisition-related expenses as follows: Year Ended April 30, 2025 2024 2023 Research and development — % — % 1 % General and administrative — % — % — % Total acquisition-related expenses — % — % 1 % Comparison of Fiscal Years Ended April 30, 2025 and 2024 Revenue Year Ended April 30, Change 2025 2024 $ % (in thousands) Revenue Subscription $ 1,384,520 $ 1,176,606 $ 207,914 18 % Services 98,776 90,715 8,061 9 % Total revenue $ 1,483,296 $ 1,267,321 $ 215,975 17 % Subscription revenue increased by $207.9 million, or 18%, for the year ended April 30, 2025 compared to the prior year. This increase was primarily driven by continued adoption of Elastic Cloud, which grew 26% over the prior year and increased to 46% of total revenue for the year ended April 30, 2025 from 43% for the year ended April 30, 2024. Services revenue increased by $8.1 million, or 9%, for the year ended April 30, 2025 compared to the prior year. The increase in services revenue was attributable to increased adoption of our services offerings. 59 Table of Contents Cost of Revenue and Gross Margin Year Ended April 30, Change 2025 2024 $ % (in thousands) Cost of revenue Subscription $ 282,585 $ 246,285 $ 36,300 15 % Services 97,288 83,794 13,494 16 % Total cost of revenue $ 379,873 $ 330,079 $ 49,794 15 % Gross profit $ 1,103,423 $ 937,242 $ 166,181 18 % Gross margin: Subscription 80 % 79 % Services 2 % 8 % Total gross margin 74 % 74 % Cost of subscription revenue increased by $36.3 million, or 15%, for the year ended April 30, 2025 compared to the prior year. This increase was primarily due to an increase of $38.4 million in cloud infrastructure costs, partially offset by a decrease of $3.1 million in intangible assets amortization. Subscription gross margin increased nominally to 80% for the year ended April 30, 2025 compared to 79% the prior year. Cost of services revenue increased by $13.5 million, or 16%, for the year ended April 30, 2025 compared to the prior year. This increase was primarily due to increases of $6.8 million in personnel and related costs and $6.4 million in subcontractor costs. Gross margin for services revenue was 2% for the year ended April 30, 2025 compared to 8% for the same period of the prior year. The decrease in gross margin was primarily attributable to personnel and related costs and subcontractor costs growing at a higher rate than the growth in services revenue. We continue to make investments in our services organization that we believe will be needed to support our continued growth. Our gross margin for services may fluctuate or decline in the near-term as we seek to expand our services business. Operating Expenses Research and development Year Ended April 30, Change 2025 2024 $ % (in thousands) Research and development $ 365,758 $ 341,951 $ 23,807 7 % Research and development expense increased by $23.8 million, or 7%, for the year ended April 30, 2025 compared to the prior year as we continued to invest in the development of new and existing offerings. This increase was primarily due to increases of $22.2 million in personnel and related costs and $4.7 million in cloud infrastructure costs related to our research and development activities. These increases were partially offset by a decrease of $3.4 million in travel costs. The increase in personnel and related costs included increases of $16.5 million in salaries and related taxes, $3.8 million in stock-based compensation, and $3.1 million in employee benefits expense, partially offset by a decrease of $1.4 million in acquisition-related compensation. Sales and marketing Year Ended April 30, Change 2025 2024 $ % (in thousands) Sales and marketing $ 617,176 $ 559,648 $ 57,528 10 % Sales and marketing expense increased by $57.5 million, or 10%, for the year ended April 30, 2025 compared to the prior year. This increase was primarily due to an increase of $55.8 million in personnel and related costs. The increase in personnel and related costs included increases of $22.4 million in salaries and related taxes, $15.5 million in commission expense, $8.7 million in stock-based compensation, and $6.8 million in employee benefits expense. 60 Table of Contents General and administrative Year Ended April 30, Change 2025 2024 $ % (in thousands) General and administrative $ 175,186 $ 160,628 $ 14,558 9 % General and administrative expense increased by $14.6 million, or 9%, for the year ended April 30, 2025 compared to the prior year. This increase was primarily due to increases of $11.8 million in personnel and related costs and $2.0 million in software and equipment expense. The increase in personnel and related costs included increases of $5.8 million in salaries and related taxes, $3.2 million in stock-based compensation, and $1.5 million in employee benefits expense. Restructuring and other related charges Year Ended April 30, Change 2025 2024 $ % (in thousands) Restructuring and other related charges $ 225 $ 4,917 $ (4,692) (95) % Restructuring and other related charges decreased by $4.7 million for the year ended April 30, 2025 compared to the prior year due to lower employee-related severance and termination benefit charges. Other Income, Net Interest expense Year Ended April 30, Change 2025 2024 $ % (in thousands) Interest expense $ (25,307) $ (26,132) $ 825 (3) % Interest expense remained relatively flat for the year ended April 30, 2025 compared to the prior year. Other income, net Year Ended April 30, Change 2025 2024 $ % (in thousands) Other income, net $ 48,660 $ 33,278 $ 15,382 46 % Other income, net increased by $15.4 million, or 46%, for the year ended April 30, 2025 compared to the prior year. The increase was due to increases of $10.3 million in interest and other investment income primarily from our marketable securities and $5.4 million in net foreign currency exchange gains. Provision for (Benefit from) Income Taxes Year Ended April 30, Change 2025 2024 $ % (in thousands) Provision for (benefit from) income taxes $ 76,545 $ (184,476) $ 261,021 (141) % The provision for income taxes was $76.5 million for the year ended April 30, 2025 compared to a benefit from income taxes of $184.5 million for the prior year. Our effective tax rate was (242)% and 150% of our net loss before income taxes for the years ended April 30, 2025 and 2024, respectively. Our effective tax rate is affected by recurring items, such as tax rates in jurisdictions outside the Netherlands and the relative amounts of income we earn in those jurisdictions and non-deductible stock-based compensation as well as one-time tax benefits or charges. The benefit from income taxes for the year ended April 30, 2024 was driven primarily by a release of a valuation allowance against U.S. federal and certain states’ deferred tax assets of $250.7 million. 61 Table of Contents We maintain a full valuation allowance against our deferred tax assets in the Netherlands and the United Kingdom. To the extent sufficient positive evidence becomes available, the Company may release all or a portion of the Netherlands valuation allowance in one or more future periods. A release of the valuation allowance, if any, would result in the recognition of certain deferred tax assets and a material income tax benefit for the period in which such release is recorded. Liquidity and Capital Resources As of April 30, 2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $1.397 billion. Our cash, cash equivalents, and marketable securities consist of highly liquid investment-grade fixed-income securities. We believe that the credit quality of the securities portfolio is strong and diversified among industries and individual issuers. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1.100 billion as of April 30, 2025. We have historically incurred, and expect to continue to incur, operating losses and may generate negative cash flows from operations in the future due to the investments we intend to make. As a result, we may require additional capital resources to execute on our strategic initiatives to grow our business. We believe that our existing cash, cash equivalents, and marketable securities and cash from our future operations will be sufficient to fund our operating and capital needs for at least the next 12 months, despite the uncertainty in the changing market and macroeconomic conditions. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of, and our future capital requirements, both near-term and long-term, will depend on many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our solutions and services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. In July 2021, we issued long-term debt of $575.0 million, represented by our Senior Notes, and we may be required to seek additional equity or debt financing. As market conditions warrant, we may from time to time seek to purchase our outstanding debt securities or loans, including the Senior Notes, in privately negotiated or open market transactions, by tender offer or otherwise. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected. The following table summarizes our cash flows for the periods presented: Year Ended April 30, 2025 2024 2023 (in thousands) Net cash provided by operating activities $ 266,168 $ 148,762 $ 35,662 Net cash used in investing activities $ (118,668) $ (287,960) $ (272,952) Net cash provided by financing activities $ 40,947 $ 40,054 $ 17,471 Net Cash Provided By Operating Activities Net cash provided by operating activities during the year ended April 30, 2025 was $266.2 million, which resulted from adjustments for non-cash charges of $430.4 million, partially offset by net loss of $108.1 million and a net cash outflow of $56.2 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $257.8 million for stock-based compensation expense, $96.7 million for amortization of deferred contract acquisition costs, $57.4 million in deferred income taxes, and $12.3 million of depreciation and intangible asset amortization expense. The net cash outflow from changes in operating assets and liabilities resulted from a $106.7 million increase in deferred contract acquisition costs as our sales commissions increased due to increased business volume, a $48.9 million increase in accounts receivable, net, a $36.1 million increase in prepaid expenses and other assets, and a $11.9 million decrease in operating lease liabilities . These outflows were partially offset by inflows from a $147.1 million increase in deferred revenue. 62 Table of Contents Net cash provided by operating activities during the year ended April 30, 2024 was $148.8 million, which resulted from net income of $61.7 million and adjustments for non-cash charges of $123.7 million, partially offset by a net cash outflow of $36.6 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $239.1 million for stock-based compensation expense, $78.5 million for amortization of deferred contract acquisition costs, $18.0 million of depreciation and intangible asset amortization expense, $11.0 million in non-cash operating lease costs, $1.9 million from foreign currency transaction loss, and $1.1 million for amortization of debt issuance costs, the effects of which were partially offset by $217.2 million in deferred income taxes primarily related to the release of a valuation allowance, net and $8.8 million from amortization of premium and accretion of discount on marketable securities, net . The net cash outflow from changes in operating assets and liabilities resulted from an increase in deferred contract acquisition costs of $119.8 million as our sales commissions increased due to increased business volume, an increase of $63.5 million in accounts receivable, a decrease of $12.4 million in operating lease liabilities, and an increase of $1.0 million in prepaid expenses and other assets . These outflows were partially offset by inflows from a $134.6 million increase in deferred revenue and a net increase of $25.5 million in accounts payable, accrued expenses, and accrued compensation and benefits. Net Cash Used In Investing Activities Net cash used in investing activities of $118.7 million during the year ended April 30, 2025 was primarily due to purchases of marketable securities of $549.6 million and purchases of property and equipment of $4.3 million, partially offset by sales, maturities, and redemptions of marketable securities of $435.3 million. Net cash used in investing activities of $288.0 million during the year ended April 30, 2024 was primarily due to the purchase of marketable securities of $536.8 million, business acquisitions, net of cash acquired, of $19.1 million, and purchases of property and equipment of $3.5 million . These expenditures were offset by cash provided by maturities and redemptions of marketable securities of $271.4 million. Net Cash Provided By Financing Activities Net cash provided by financing activities of $40.9 million during the year ended April 30, 2025 was due to proceeds from stock option exercises and purchases under our employee stock purchase plan. Net cash provided by financing activities of $40.1 million during the year ended April 30, 2024 was due to proceeds from stock option exercises and purchases under our employee stock purchase plan. Contractual Obligations and Commitments Our principal commitments consist of our purchase obligations under non-cancelable agreements for cloud hosting, subscription software, sales and marketing, and general corporate services, future non-cancelable minimum rental payments under operating leases for our offices, and interest payments due on our Senior Notes. As of April 30, 2025, we had purchase commitments of $812.3 million related to cloud hosting services, future minimum lease payment commitments of $29.9 million, and purchase commitments of $73.2 million related to other contracts. See Note 8, “Commitments and contingencies,” and Note 9, “Leases,” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. In July 2021, we issued $575.0 million aggregate principal amount of Senior Notes in a private placement. Interest on the Senior Notes is payable semi-annually in arrears on January 15 and July 15 of each year. See Note 7, “Senior Notes,” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. As of April 30, 2025, we had $2.9 million in letters of credit outstanding in favor of certain landlords for office space. These letters of credit expire on various dates through 2028, with some of these obligations renewing annually. Our contractual commitment amounts are associated with agreements that are enforceable and legally binding and do not include obligations under contracts that we can cancel without a significant penalty. Purchase orders issued in the ordinary course of business are also excluded, as our purchase orders represent authorizations to purchase rather than binding agreements. We have also excluded unrecognized tax benefits from the contractual obligations. A variety of factors could affect the timing of payments for the liabilities related to unrecognized tax benefits. Therefore, we cannot reasonably estimate the timing of such payments. We believe that these matters will likely not be resolved in the next 12 months and accordingly we have classified the estimated liability as non-current in the consolidated balance sheets. See Note 13, “Income Taxes,” of our accompanying Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. 63 Table of Contents Critical Accounting Policies and Estimates In preparing our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, we are required to make estimates, assumptions and judgments that affect the amounts reported on our financial statements and the accompanying disclosures. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. These estimates may change in future periods and will be recognized in the consolidated financial statements as new events occur and additional information becomes known. Actual results could differ from those estimates and any such differences may be material to our financial statements. We believe that the critical accounting policies and estimates set forth below involve a higher degree of judgment and complexity in their application than our other significant accounting policies. Accounting policies that have a significant impact on our results are described in Note 2 “Summary of Significant Accounting Policies” to our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. The accounting policies discussed in this section are those that we consider to involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Due to current macroeconomic developments and conditions, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the consolidated financial statements as new events occur and additional information becomes known. To the extent our actual results differ materially from those estimates and assumptions, our future financial statements could be affected. Revenue Recognition Our contracts with customers include varying terms and conditions, and identifying and evaluating the impact of these terms and conditions on revenue recognition requires significant judgment. We apply 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, the customer’s credit, reputation, and financial or other pertinent information. At contract inception, we evaluate 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. We have concluded that our contracts with customers generally do not contain warranties that give rise to a separate performance obligation. Our contracts often contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. We apply significant judgment in identifying and accounting for each performance obligation based on our evaluation of the terms and conditions in contracts. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on the prices at which we separately sell these products assuming the majority of such prices fall within a pricing range. For instances in which the 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. Individual products and services typically have more than one SSP due to the stratification of such products and services by quantity, subscription term, sales channel, and other circumstances. If one of the performance obligations is outside of the SSP range, we allocate the transaction price considering the midpoint of the SSP range. We also consider whether there are any additional material rights inherent in a contract and, if so, we allocate a portion of the transaction price to such rights based on the relative SSP. 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. We determine 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. 64 Table of Contents Our sales commissions plan incorporates different commission rates for contracts with new customers and incremental sales to existing customers, and for subsequent subscription renewals. 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. We determine 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 services are typically amortized in accordance with the associated revenue as the commissions paid on new and renewal services are commensurate with each other. Amortization of deferred contract acquisition costs is recognized in sales and marketing expense in the consolidated statements of operations. Acquired Intangible Assets We apply significant judgment in determining the fair value of the intangible assets acquired, which involves the use of significant estimates and assumptions. These estimates can include, but are not limited to, future expected cash flows from acquired customers and acquired technology from a market participant perspective, costs to rebuild developed technology, useful lives, and discount rates. While we use our best estimates and judgments, our estimates are inherently uncertain. Income Taxes Deferred income tax balances reflect the effects of temporary differences between the financial reporting and tax bases of our assets and liabilities using enacted tax rates expected to apply when taxes are actually paid or recovered. In addition, deferred tax assets are recorded for net operating loss and credit carryforwards. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized based on all available positive and negative evidence. Such evidence, which requires management's judgment, includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for the utilization of deferred tax assets. To the extent sufficient positive evidence becomes available, we may release all or a portion of our valuation allowance in one or more future periods. Future valuation allowance releases, if any, would result in the recognition of certain deferred tax assets which may include a material income tax benefit for the period in which such release is recorded. See Note 13, “Income Taxes” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.