EX-99.1 2 a22q4erex991.htm EX-99.1 Document
Exhibit 99.1
Elastic Reports Strong Fourth Quarter and Fiscal 2022 Financial Results

Q4 Revenue of $239.4 million, Up 35% year-over-year (37% in constant currency)
Q4 Elastic Cloud Revenue of $87.7 million, Up 71% year-over-year (72% in constant currency)
FY22 Revenue of $862.4 million, Up 42% year-over-year (41% in constant currency)

MOUNTAIN VIEW, Calif., June 1, 2022--(BUSINESS WIRE)-- Elastic (NYSE: ESTC) (“Elastic”), the company behind Elasticsearch and the Elastic Stack, announced strong results for its fourth quarter and full fiscal year (ended April 30, 2022).

Fourth Quarter Fiscal 2022 Financial Highlights

•Total revenue was $239.4 million, an increase of 35% year-over-year, or 37% on a constant currency basis
•Elastic Cloud revenue was $87.7 million, an increase of 71% year-over-year, or 72% on a constant currency basis
•GAAP operating loss was $59.6 million; GAAP operating margin was -25%
•Non-GAAP operating loss was $7.9 million; non-GAAP operating margin was -3%
•GAAP net loss per share was $0.70; non-GAAP net loss per share was $0.16
•Operating cash flow was -$3.1 million with adjusted free cash flow of -$5.3 million
•Cash and cash equivalents were $860.9 million as of April 30, 2022

Full Fiscal 2022 Financial Highlights

•Total revenue was $862.4 million, an increase of 42% year-over-year, or 41% on a constant currency basis
•Elastic Cloud revenue was $298.6 million, an increase of 80% year-over-year, or 79% on a constant currency basis
•GAAP operating loss was $173.7 million; GAAP operating margin was -20%
•Non-GAAP operating profit was $0.9 million; non-GAAP operating margin was 0%
•GAAP net loss per share was $2.20; non-GAAP net loss per share was $0.33
•Operating cash flow was $5.7 million with adjusted free cash flow of $10.7 million

“We had a strong fourth quarter and closed out an excellent year, driven by robust growth in Elastic Cloud, which grew 80% year-over-year in fiscal year 2022, and increased to 37% of total revenue in Q4,” said Ash Kulkarni, CEO, Elastic. “The strong momentum in Elastic Cloud puts us on the path to deliver over 50% of total revenue from Elastic Cloud exiting Q4 of fiscal year 2024, which is ahead of our prior outlook. The enormous market opportunity, the strategic relevance of our solutions to our customers and partners, and the momentum in Elastic Cloud make us confident that we can achieve $2 billion in total revenue in fiscal year 2025.”


Fourth Quarter Fiscal 2022 Key Metrics and Recent Business Highlights

Key Customer Metrics
•Total subscription customer count was over 18,600, compared to over 17,900 in Q3 FY22, and over 15,000 in Q4 FY21
•Total customer count with Annual Contract Value (ACV) greater than $100,000 was over 960, compared to over 890 in Q3 FY22, and over 730 in Q4 FY21
•Net Expansion Rate was just under 130%, and was flat compared to Q3 FY22



Cloud Partner Momentum
•Announced expanded collaboration with AWS to accelerate momentum and build, market, and deliver seamless access for shared customers
•Announced expanded strategic partnership with Microsoft to simplify cloud operations, launch co-selling activities, and make it easy to bring data from Azure services into Elastic, and added four new Azure regions in the Americas, Asia, and Africa
•Joined the Data Cloud Alliance, led by Google Cloud, as a founding member to accelerate the path to value creation and solve the modern data challenges of today’s enterprises

Product Innovations and Updates
•Announced Elastic 8.1 with new capabilities to help customers defend against cyberattacks and accelerate app development with expanded data integrations, faster indexing speeds, and more efficient storage utilization
•Announced Elastic 8.2 with new capabilities that enable customers to build seamless search experiences, accelerate troubleshooting of cloud-native services, and streamline security analyst workflows
•Enhanced machine learning and natural language processing capabilities across both releases to deliver more relevant results
•Achieved Payment Card Industry Data Security Standard (PCI-DSS) compliance across all Elastic Cloud regions

Other Business Highlights
•Named a Strong Performer by Forrester Research in The Forrester Wave™: Endpoint Detection and Response (EDR) Providers, Q2 2022
•Appointed Carolyn Herzog as chief legal officer
•Appointed Janesh Moorjani as chief operating officer in addition to his role as chief financial officer


Financial Outlook

The Company is providing the following guidance:

For the first quarter of fiscal 2023 (ending July 31, 2022):

•Total revenue is expected to be between $244 million and $246 million, representing 27% year-over-year growth at the midpoint (32% year-over-year constant currency growth at the midpoint)
•Non-GAAP operating margin is expected to be between -3.8% and -2.8%
•Non-GAAP net loss per share is expected to be between $0.20 and $0.16, assuming between 94.0 million and 95.0 million weighted average ordinary shares outstanding

For fiscal 2023 (ending April 30, 2023):

•Total revenue is expected to be between $1,080 million and $1,086 million, representing 26% year-over-year growth at the midpoint (29% year-over-year constant currency growth at the midpoint)
•Non-GAAP operating margin is expected to be between 0.0% and 0.5%
•Non-GAAP net loss per share is expected to be between $0.36 and $0.28, assuming between 95.0 million and 97.0 million weighted average ordinary shares outstanding



See the section titled “Forward-Looking Statements” below for information on the factors that could cause our actual results to differ materially. We present forward-looking non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “About Non-GAAP Financial Measures” for an explanation of these non-GAAP measures. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures for operating margin and net loss per share is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of the costs and expenses that may be incurred in the future. These items necessary to reconcile such non-GAAP measures could be material and have a significant impact on the Company’s results computed in accordance with GAAP.


Conference Call and Webcast

Elastic’s executive management team will host a conference call today at 2:00 p.m. PT/5:00 p.m. ET to discuss the Company’s financial results and business outlook. A live audio webcast of the conference call will be available through Elastic’s Investor Relations website at ir.elastic.co. Slides will accompany the webcast. The replay of the webcast and slides will be available for two months.


About Elastic

Elastic (NYSE: ESTC) is a leading platform for search-powered solutions. We help organizations, their employees, and their customers accelerate the results that matter. With solutions in Enterprise Search, Observability, and Security, we enhance customer and employee search experiences, keep mission-critical applications running smoothly, and protect against cyber threats. Delivered wherever data lives, in one cloud, across multiple clouds, or on-premise, Elastic enables its customers to achieve new levels of success at scale and on a single platform. Learn more at elastic.co.
Elastic and associated marks are trademarks or registered trademarks of Elastic N.V. and its subsidiaries. All other company and product names may be trademarks of their respective owners.


Use of Non-GAAP Financial Measures

In relation to constant currency non-GAAP financial measures, the only reconciling item between GAAP financial measures and non-GAAP financial measures is the effect of foreign currency rate fluctuations. Further details on how we calculate such effects can be found in the definition of “Constant Currency” below. Reconciliations of other GAAP financial measures to their respective non-GAAP financial measures are included at the end of this press release following the accompanying financial data. For a description of non-GAAP financial measures, including the reasons management uses each measure, please see the section of this press release titled “About Non-GAAP Financial Measures.”




Forward-Looking Statements

This press release contains forward-looking statements that involve substantial risk and uncertainties, which include, but are not limited to, statements regarding our expected financial results for the fiscal quarter ending July 31, 2022 and the fiscal year ending April 30, 2023, our expectations regarding demand for our products and solutions and our future revenue, our assessments of the strength of our solutions and products, the expected performance or benefits of our offerings, our expectations regarding market and growth opportunities and our ability to address those opportunities, our expectations regarding the growth and adoption of our Elastic Cloud offering, and the expected benefits of our investments. These forward-looking statements are subject to the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Our expectations and beliefs in light of currently available information regarding these matters may not materialize. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements due to uncertainties, risks, and changes in circumstances, including but not limited to those related to: our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (which include changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve and maintain future profitability; the effects of currency movements on our financial results, our ability to continue to deliver and improve our offerings and develop new offerings, including security-related product and Elastic Cloud offerings; customer acceptance and purchase of our existing offerings and new offerings, including the expansion and adoption of our Elastic Cloud offerings; our inability to realize value from investments in the business, including R&D investments and strategic transactions; our ability to maintain and expand our user and customer base; the impact of the COVID-19 pandemic, including any variants, on the macroeconomic environment, on our business, operations, hiring and financial results, and on businesses of our customers and partners, including their spending priorities, the effect of lockdowns, restrictions and new regulations; the impact of our licensing model on the use and adoption of our software; our pricing model strategies and their anticipated impacts on our business and results of operations; the impact of foreign currency exchange rate and interest rate fluctuations on our results; our international expansion strategy; our operating results and cash flows; our beliefs and objectives for future operations; the sufficiency of our capital resources; our ability to successfully execute our go-to-market strategy, including by expanding our relationships with our partners, and expand in our existing markets and into new markets, and our ability to forecast customer retention and expansion; and general market, political, economic and business conditions (including impacts arising from the ongoing military conflict between Russia and Ukraine).

Any additional or unforeseen effect from the COVID-19 pandemic or ongoing conflict between Russia and Ukraine may exacerbate these risks. Additional risks and uncertainties that could cause actual outcomes and results to differ materially are included in our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 and any subsequent reports filed with the SEC. SEC filings are available on the Investor Relations section of Elastic’s website at ir.elastic.co and the SEC’s website at www.sec.gov. Elastic assumes no obligation to, and does not currently intend to, update any such forward-looking statements, except as required by law.





Contact Information


Nikolay Beliov
Elastic Investor Relations
ir@elastic.co


Lisa Boughner
Elastic Corporate Communications
lisa.boughner@elastic.co



Elastic N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share amounts)
(Unaudited)
 
 Three Months Ended April 30,Year Ended April 30,
 2022202120222021
Revenue  
License - self-managed$22,507 $22,321 $76,964 $67,994 
Subscription - self-managed and SaaS199,207 142,218 721,806 499,345 
Total subscription revenue221,714 164,539 798,770 567,339 
Professional services17,641 13,071 63,604 41,150 
Total revenue239,355 177,610 862,374 608,489 
Cost of revenue  
Cost of license - self-managed306 347 1,548 1,386 
Cost of subscription - self-managed and SaaS50,559 34,663 176,656 121,127 
Total cost of revenue - subscription50,865 35,010 178,204 122,513 
Cost of professional services16,499 10,797 53,990 38,541 
Total cost of revenue67,364 45,807 232,194 161,054 
Gross profit171,991 131,803 630,180 447,435 
Operating expenses  
Research and development78,867 55,437 273,761 199,203 
Sales and marketing118,603 82,165 406,658 273,877 
General and administrative34,143 31,278 123,441 103,833 
Total operating expenses231,613 168,880 803,860 576,913 
Operating loss(59,622)(37,077)(173,680)(129,478)
Other income (expense), net
Interest expense(6,389)(107)(20,716)(185)
Other income (expense), net(2,884)(553)(3,393)7,949 
Loss before income taxes(68,895)(37,737)(197,789)(121,714)
Provision for (benefit from) income taxes(3,285)5,564 6,059 7,720 
Net loss$(65,610)$(43,301)$(203,848)$(129,434)
Net loss per share attributable to ordinary shareholders, basic and diluted$(0.70)$(0.48)$(2.20)$(1.48)
Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted93,806,902 90,028,822 92,547,145 87,207,094 



Elastic N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share amounts)
(Unaudited)
 
As of
April 30, 2022		As of
April 30, 2021
Assets
Current assets:  
Cash and cash equivalents$860,949 $400,814 
Restricted cash2,688 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, respectively215,228 160,415 
Deferred contract acquisition costs43,628 36,089 
Prepaid expenses and other current assets41,215 37,002 
Total current assets1,163,708 637,214 
Property and equipment, net7,207 8,881 
Goodwill303,906 198,851 
Operating lease right-of-use assets25,437 25,464 
Intangible assets, net45,800 36,286 
Deferred contract acquisition costs, non-current74,419 50,263 
Deferred tax assets5,811 3,697 
Other assets16,643 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 liabilities53,930 28,909 
Accrued compensation and benefits68,002 52,525 
Operating lease liabilities11,219 8,528 
Deferred revenue431,776 352,805 
Total current liabilities593,330 450,015 
Deferred revenue, non-current33,518 44,895 
Long-term debt, net566,520 — 
Operating lease liabilities, non-current16,482 19,649 
Other liabilities, non-current17,648 7,782 
Total liabilities1,227,498 522,341 
Commitments and contingencies  
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 and 90,533,985 shares issued and outstanding as of April 30, 2022 and April 30, 2021, respectively990 948 
Treasury stock(369)(369)
Additional paid-in capital1,250,108 1,071,675 
Accumulated other comprehensive loss(18,130)(8,105)
Accumulated deficit(817,166)(613,318)
Total shareholders’ equity415,433 450,831 
Total liabilities and shareholders’ equity$1,642,931 $973,172 



Elastic N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)

 Three Months Ended April 30,Year Ended April 30,
 2022202120222021
Cash flows from operating activities  
Net loss $(65,610)$(43,301)$(203,848)$(129,434)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization5,170 4,381 19,728 17,237 
Amortization of deferred contract acquisition costs17,365 12,536 60,738 40,991 
Amortization of debt issuance costs249 — 803 — 
Non-cash operating lease cost2,377 2,671 8,636 7,927 
Stock-based compensation expense, net of amounts capitalized43,641 28,375 140,612 93,680 
Deferred income taxes(2,211)321 (2,430)33 
Foreign currency transaction (gain) loss 277 (44)1,984 (9,507)
Other— (153)98 (142)
Changes in operating assets and liabilities:
Accounts receivable, net(71,988)(39,283)(62,187)(24,037)
Deferred contract acquisition costs(35,521)(26,525)(96,755)(81,137)
Prepaid expenses and other current assets(777)(9,009)(3,427)(4,192)
Other assets1,628 (9,344)825 (4,107)
Accounts payable6,584 1,546 21,036 (4,775)
Accrued expenses and other liabilities9,653 6,422 27,192 8,118 
Accrued compensation and benefits13,089 9,726 17,775 3,867 
Operating lease liabilities(2,450)(2,512)(8,888)(7,914)
Deferred revenue75,474 62,628 83,780 115,937 
Net cash provided by (used in) operating activities (3,050)(1,565)5,672 22,545 
Cash flows from investing activities
Purchases of property and equipment(1,498)(1,180)(2,485)(3,912)
Capitalization of internal-use software costs(705)(317)(4,932)(317)
Business acquisitions, net of cash acquired— — (119,854)— 
Other— 1,391 — 2,711 
Net cash used in investing activities(2,203)(106)(127,271)(1,518)
Cash flows from financing activities
Proceeds from the issuance of senior notes— — 575,000 — 
Proceeds from issuance of ordinary shares upon exercise of stock options8,870 9,704 36,410 77,258 
Payments of debt issuance costs— — (9,283)— 
Net cash provided by financing activities8,870 9,704 602,127 77,258 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(8,271)186 (20,599)6,034 
Net increase (decrease) in cash, cash equivalents, and restricted cash(4,654)8,219 459,929 104,319 
Cash, cash equivalents, and restricted cash, beginning of period868,291 395,489 403,708 299,389 
Cash, cash equivalents, and restricted cash, end of period$863,637 $403,708 $863,637 $403,708 



Elastic N.V.
REVENUE BY TYPE
(amounts in thousands, except percentages)
(Unaudited)
 
 Three Months Ended April 30,Year Ended April 30,
 2022202120222021
Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount% of
Total
Revenue
Elastic Cloud$87,652 37 %$51,335 29 %$298,615 35 %$166,319 27 %
Other subscription134,062 56 %113,204 64 %500,155 58 %401,020 66 %
Total subscription revenue221,714 93 %164,539 93 %798,770 93 %567,339 93 %
Professional services17,641 7 %13,071 7 %63,604 7 %41,150 7 %
Total revenue$239,355 100 %$177,610 100 %$862,374 100 %$608,489 100 %




Elastic N.V.
RECONCILIATION OF GAAP TO NON-GAAP DATA
CALCULATED BILLINGS
(amounts in thousands)
(Unaudited)
 
Three Months Ended April 30,Year Ended April 30,
 2022202120222021
Total revenue$239,355 $177,610 $862,374 $608,489 
Add: Increase in deferred revenue75,474 62,628 83,780 115,937 
Less: Decrease (increase) in unbilled accounts receivable(1,939)632 (4,041)(2,582)
Calculated billings$312,890 $240,870 $942,113 $721,844 




Elastic N.V.
RECONCILIATION OF GAAP TO NON-GAAP DATA
ADJUSTED FREE CASH FLOW
(amounts in thousands, except percentages)
(Unaudited)
 
 Three Months Ended April 30,Year Ended April 30,
 2022202120222021
Net cash provided by (used in) operating activities$(3,050)$(1,565)$5,672 $22,545 
Less: Purchases of property and equipment(1,498)(1,180)(2,485)(3,912)
Less: Capitalization of internal-use software(705)(317)(4,932)(317)
Add: Interest paid on long-term debt— — 12,452 — 
Adjusted free cash flow$(5,253)$(3,062)$10,707 $18,316 
Net cash used in investing activities$(2,203)$(106)$(127,271)$(1,518)
Net cash provided by financing activities$8,870 $9,704 $602,127 $77,258 
Net cash provided by (used in) operating activities (as a percentage of total revenue)(1)%(1)%1 %4 %
Less: Purchases of property and equipment (as a percentage of total revenue)(1)%(1)%— %(1)%
Less: Capitalization of internal-use software (as a percentage of total revenue)— %— %(1)%— %
Add: Interest paid on long-term debt (as a percentage of total revenue)— %— %1 %— %
Adjusted free cash flow margin(2)%(2)%1 %3 %



Elastic N.V.
RECONCILIATION OF GAAP TO NON-GAAP DATA
(amounts in thousands, except percentages, share and per share amounts)
(Unaudited)

 
 Three Months Ended April 30,Year Ended April 30,
 2022202120222021
Gross Profit Reconciliation:  
GAAP gross profit$171,991 $131,803 $630,180 $447,435 
Stock-based compensation expense3,976 3,577 14,831 11,929 
Employer payroll taxes on employee stock transactions328 424 1,393 1,335 
Amortization of acquired intangibles2,947 2,109 10,503 8,437 
Non-GAAP gross profit$179,242 $137,913 $656,907 $469,136 
Gross Margin Reconciliation(1):
 
GAAP gross margin71.9 %74.2 %73.1 %73.5 %
Stock-based compensation expense1.7 %2.0 %1.7 %2.0 %
Employer payroll taxes on employee stock transactions0.1 %0.2 %0.2 %0.2 %
Amortization of acquired intangibles1.2 %1.2 %1.2 %1.4 %
Non-GAAP gross margin74.9 %77.6 %76.2 %77.1 %
Operating Loss Reconciliation: 
GAAP operating loss$(59,622)$(37,077)$(173,680)$(129,478)
Stock-based compensation expense43,641 28,375 141,194 93,680 
Employer payroll taxes on employee stock transactions1,327 3,940 9,961 14,376 
Amortization of acquired intangibles4,139 3,537 15,783 14,167 
Acquisition-related expenses2,633 — 7,632 — 
Non-GAAP operating income (loss)$(7,882)$(1,225)$890 $(7,255)
Operating Margin Reconciliation(1):
 
GAAP operating margin(24.9)%(20.9)%(20.1)%(21.3)%
Stock-based compensation expense18.2 %16.0 %16.4 %15.4 %
Employer payroll taxes on employee stock transactions0.6 %2.2 %1.2 %2.4 %
Amortization of acquired intangibles1.7 %2.0 %1.8 %2.3 %
Acquisition-related expenses1.1 %0.0 %0.9 %0.0 %
Non-GAAP operating margin(3.3)%(0.7)%0.1 %(1.2)%
Net Loss Reconciliation:
GAAP net loss$(65,610)$(43,301)$(203,848)$(129,434)
Stock-based compensation expense43,641 28,375 141,194 93,680 
Employer payroll taxes on employee stock transactions1,327 3,940 9,961 14,376 
Amortization of acquired intangibles4,139 3,537 15,783 14,167 
Acquisition-related expenses2,633 — 7,632 — 
Income tax(2)
(817)(200)(1,496)(777)
Non-GAAP net loss$(14,687)$(7,649)$(30,774)$(7,988)
Non-GAAP net loss per share attributable to ordinary shareholders, basic and diluted$(0.16)$(0.08)$(0.33)$(0.09)
Weighted-average shares used to compute net loss per share attributable to ordinary shareholders, basic and diluted93,806,902 90,028,822 92,547,145 87,207,094 
(1) Totals may not sum, due to rounding. Gross margin, operating margin, and earnings per share are calculated based upon the respective underlying, non-rounded data.
 
(2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.


Elastic N.V.
RECONCILIATION OF GAAP TO NON-GAAP DATA
(amounts in thousands)
(Unaudited)
 
 Three Months Ended April 30,Year Ended April 30,
 2022202120222021
Cost of revenue reconciliation:  
GAAP cost of license - self-managed$306 $347 $1,548 $1,386 
Amortization of acquired intangibles(306)(347)(1,548)(1,386)
Non-GAAP cost of license - self -managed$— $— $— $— 
GAAP cost of subscription - self-managed and SaaS$50,559 $34,663 $176,656 $121,127 
Stock-based compensation expense(2,106)(2,040)(8,368)(7,105)
Employer payroll taxes on employee stock transactions(207)(187)(681)(674)
Amortization of acquired intangibles(2,641)(1,762)(8,955)(7,051)
Non-GAAP cost of subscription - self-managed and SaaS$45,605 $30,674 $158,652 $106,297 
GAAP cost of professional services$16,499 $10,797 $53,990 $38,541 
Stock-based compensation expense(1,870)(1,537)(6,463)(4,824)
Employer payroll taxes on employee stock transactions(121)(237)(712)(661)
Non-GAAP cost of professional services$14,508 $9,023 $46,815 $33,056 
Operating expenses reconciliation: 
GAAP research and development expense$78,867 $55,437 $273,761 $199,203 
Stock-based compensation expense(18,127)(10,958)(59,911)(35,267)
Employer payroll taxes on employee stock transactions(400)(968)(3,316)(3,670)
Acquisition-related expenses(2,409)— (6,104)— 
Non-GAAP research and development expense$57,931 $43,511 $204,430 $160,266 
GAAP sales and marketing expense$118,603 $82,165 $406,658 $273,877 
Stock-based compensation expense(15,000)(9,062)(45,798)(31,581)
Employer payroll taxes on employee stock transactions(413)(1,905)(4,287)(5,399)
Amortization of acquired intangibles(1,192)(1,428)(5,280)(5,730)
Non-GAAP sales and marketing expenses$101,998 $69,770 $351,293 $231,167 
GAAP general and administrative expense$34,143 $31,278 $123,441 $103,833 
Stock-based compensation expense(6,538)(4,778)(20,654)(14,903)
Employer payroll taxes on employee stock transactions(186)(643)(965)(3,972)
Acquisition-related expenses(224)— (1,528)— 
Non-GAAP general and administrative expense$27,195 $25,857 $100,294 $84,958 
 


About Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe the non-GAAP measures listed below are useful in evaluating our operating performance. We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Investors are encouraged to review the differences between GAAP financial measures and the corresponding non-GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, and amortization of acquired intangible assets. We believe non-GAAP gross profit and non-GAAP gross margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin
We define non-GAAP operating income (loss) and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, respectively, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, and acquisition-related expenses. We believe non-GAAP operating income (loss) and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Non-GAAP Net Loss Per Share
We define non-GAAP net loss per share as GAAP net loss per share, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, acquisition-related expenses and the tax effects related to the foregoing. We believe non-GAAP net loss per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of certain variables from period to period for reasons unrelated to overall operating performance.

Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin
Adjusted free cash flow is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities adjusted for cash paid for interest less cash used for investing activities for purchases of property and equipment, and capitalized internal-use software costs.


Adjusted free cash flow margin is calculated as adjusted free cash flow divided by total revenue. Adjusted free cash flow does not represent residual cash flow available for discretionary expenditures since, among other things, we have mandatory debt service requirements.

Calculated Billings
We define calculated billings as total revenue plus the increase (decrease) in total deferred revenue as presented on or derived from our consolidated statements of cash flows less the (increase) decrease in total unbilled accounts receivable in a given period. Calculated billings exclude deferred revenue and unbilled accounts receivable acquired through acquisitions in the period of acquisition. We typically invoice our customers annually in advance, and to a lesser extent multi-year in advance, quarterly in advance, monthly in advance, monthly in arrears or upon delivery. Our management uses calculated billings to understand and evaluate our near-term cash flows and operating results.

Constant Currency
We compare the percent change in certain results from one period to another period using constant currency information to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. In presenting this information, current and comparative prior period results are converted into United States dollars at the exchange rates in effect on the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.