RISK FACTORS

In addition to the other information contained in this proxy statement/prospectus, including the matters addressed under the caption “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 13 of this proxy statement/prospectus, Elastic shareholders should carefully consider the following risks in deciding whether to vote for the approval of the Elastic Merger and Share Issuance Approval Proposal. You should carefully read this entire proxy statement/prospectus and its Annexes.

Risks Related to the Merger

Because the value of Elastic Ordinary Shares issuable in connection with the Merger is subject to a collar, the number of Elastic Ordinary Shares to be received by Endgame securityholders in connection with the Merger cannot be determined.

Each share of Elastic Ordinary Shares to be issued in the Merger will be valued at an amount equal to the volume weighted average price per share rounded to four decimal places of the Elastic Ordinary Shares on the NYSE for the 20 consecutive trading days ending with the complete trading day ending five trading days prior to the date upon which the Merger is consummated. Notwithstanding the foregoing, in no event shall an Elastic Ordinary Share be valued at more than $98.55 per share or less than $68.49 per share. As a result of such determination and such collar, the number of Elastic Ordinary Shares received in the Merger may not reflect the value of Elastic Ordinary Shares as traded on the NYSE at the time of consummation of the Merger. Changes in the trading price of Elastic Ordinary Shares may result from a variety of factors, including, among others, general market and economic conditions, changes in Elastic’s business, operations and prospects, market assessment of the likelihood that the Merger will be completed as anticipated or at all and regulatory considerations. Many of these factors are beyond Elastic’s control. As a result of any such changes in stock price, the market value of the Elastic Ordinary Shares at the time that the Merger is completed could vary significantly from the value of such shares immediately prior to the public announcement of the Merger, on the date of this proxy statement/prospectus or on the date on which Endgame securityholders actually receive Elastic Ordinary Shares issued in connection with the Merger. Accordingly, as of the date of this proxy statement/prospectus, the exact number of Elastic Ordinary Shares issuable upon consummation of the Merger to Endgame securityholders cannot be determined.

The ability of Elastic and Endgame to complete the Merger is subject to a number of conditions, including the clearance by CFIUS and the entry into an agreement with DCSA, which may impose conditions that could have an adverse effect on Elastic or Endgame or could delay or cause us to abandon the Merger.

Completion of the Merger is subject to a number of conditions that must be fulfilled, including, among others, the conditions that (i) the Elastic Merger and Share Issuance Approval Proposal be approved by the affirmative vote of the holders of a majority of the total votes of Elastic Ordinary Shares cast in person or by proxy at the Extraordinary Meeting, where at least one-third of the issued and outstanding shares are represented, pursuant to the terms of the Merger Agreement; (ii) the adoption of the Merger Agreement and the approval of the Merger by the requisite Endgame stockholders; (iii) the clearance by CFIUS; and (iv) the entry into an agreement with DCSA. In addition, if the Merger is not completed by December 31, 2019, either Elastic or Endgame may choose not to proceed with the Merger, and the parties can mutually decide to terminate the Merger Agreement at any time prior to the consummation of the Merger, before or after stockholder approval. In addition, Elastic or Endgame may elect to terminate the Merger Agreement in certain other circumstances. See “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 115 and “The Merger Agreement—Termination of the Merger Agreement” beginning on page 118 for a fuller

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description of these circumstances. These conditions and circumstances may impose conditions that could have an adverse effect on Elastic or Endgame or could delay or cause us to abandon the Merger.

Any delay in completing the Merger may reduce or eliminate the expected benefits from the transaction.

The Merger is subject to a number of conditions beyond Elastic’s and Endgame’s control that may prevent, delay or otherwise materially adversely affect its completion. Elastic and Endgame cannot predict whether and when these other conditions will be satisfied. There can be no assurance that Elastic, Endgame or both parties will waive any condition to closing that is not satisfied. Furthermore, the requirements for obtaining the required clearances and approvals and the time required to satisfy any other conditions to the closing could delay the completion of the Merger for a significant period of time or prevent it from occurring. Any delay in completing the Merger could cause Elastic not to realize some or all of the benefits that it expects to achieve if the Merger is successfully completed within the currently expected timeframe. See “What are the Conditions to Completion of the Merger” beginning on page vii.

Failure to complete the Merger could negatively impact the future business and financial results of Elastic and Endgame and the stock price of Elastic.

If the Merger is not completed, the ongoing businesses of Elastic or Endgame may be adversely affected and Elastic and Endgame will be subject to several risks, including the following:

In addition, if the Merger is not completed, Elastic and/or Endgame may experience negative reactions from the financial markets and from their respective customers and employees. Elastic and/or Endgame could also be subject to litigation related to any failure to complete the Merger or to enforcement proceedings commenced against Elastic or Endgame to perform their respective obligations under the Merger Agreement. If the Merger is not completed, Elastic and Endgame cannot assure their respective stockholders that these risks will not materialize or will not materially affect the business and financial results of Elastic and Endgame or the trading price of Elastic Ordinary Shares.

The Merger will involve substantial costs.

Elastic and Endgame have incurred and expect to continue to incur substantial costs and expenses relating directly to the Merger and the Elastic Share Issuance, including but not limited to professional fees and expenses, fees and costs relating to regulatory filings and notices, SEC filing

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fees, printing and mailing costs and other transaction-related costs, fees and expenses. If the Merger is not completed, Elastic and Endgame will have incurred substantial expenses for which no ultimate benefit will have been received by either company.

The pendency of the Merger and related uncertainty could adversely affect the relationships of Elastic and Endgame with employees, customers, commercial partners, financing parties and other third parties.

Uncertainty about the effect of the Merger on employees, customers, commercial partners and other third parties may have an adverse effect on Elastic and Endgame. These uncertainties may cause customers, suppliers, commercial partners, financing parties and others that deal with Elastic or Endgame to seek to change, delay or defer decisions with respect to existing or future business relationships. Retention, hiring and motivation of certain current and prospective employees by Elastic or Endgame may be challenging while the Merger is pending, as they may experience uncertainty about their future roles with Elastic or Endgame. If key employees, customers, commercial partners, financing parties and other third parties terminate or change, or seek to terminate or change, their existing relationships with Elastic or Endgame, Elastic’s business or Endgame’s business, and the Combined Company’s business as a result, could be harmed.

The consummation of the Merger may permit counterparties to other agreements with Endgame to terminate those agreements.

Endgame is party to certain agreements that give the counterparties to such agreements, including investors and commercial partners, certain rights, including notice, consent and other rights in connection with “change of control” transactions or otherwise, that may give rise to a default by Endgame under the agreements or may give rise to other rights of the counterparty, such as the right to terminate the agreement. Under certain of these agreements, the Merger may constitute a “change of control” or otherwise give rise to consent, termination rights or other rights, which the counterparties may assert. If the counterparties do claim a default of the agreements by Endgame, terminate the agreements, or assert other rights in connection with the Merger, such actions may adversely affect business and operations of Elastic and the value of Elastic Ordinary Shares following the Merger.

Until the completion of the Merger or the termination of the Merger Agreement in accordance with its terms, Endgame is prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Endgame and its stockholders.

Until the Merger is completed, the Merger Agreement restricts Endgame from taking specified actions without the consent of the other party, and requires Endgame to operate in the ordinary course of business consistent with past practices. Endgame is subject to a number of customary interim operating covenants relating to, among other things, its capital expenditures, incurrence of indebtedness, entry into or amendment of certain types of agreements, equity grants and changes in employee compensation. These restrictions may prevent Endgame from engaging in activities that would otherwise benefit its businesses or pursuing attractive business opportunities that may arise prior to the completion of the Merger. See “The Merger Agreement—Conduct of Business” beginning on page 109 for a description of the restrictive covenants applicable to Endgame.

Sales of substantial amounts of Elastic shares in the open market by former Endgame securityholders could depress its stock price.

Elastic Ordinary Shares that are issued to Endgame securityholders, including those shares issued upon the exercise of outstanding stock options, will be freely tradable without restrictions or further registration under the Securities Act. If the Merger is completed and if former Endgame

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securityholders sell substantial amounts of Elastic Ordinary Shares in the public market following consummation of the Merger, the market price of Elastic Ordinary Shares may decrease, and this may be accentuated by the relatively small public float of Elastic Ordinary Shares on the NYSE.

Risks Related to the Business of the Combined Company Following the Merger

Following the Merger, the Combined Company may be unable to integrate successfully the businesses and products of Elastic and Endgame and realize the anticipated benefits of the Merger or those benefits may take longer to realize than expected.

The Merger involves the combination of two companies which currently operate as independent companies. Following the Merger, the Combined Company will be required to devote significant management attention and resources to integrating its business practices and operations. The Combined Company may fail to realize some or all of the anticipated benefits of the Merger or may not realize within the anticipated time frame if the integration process takes longer than expected or is costlier than expected. Potential difficulties the Combined Company may encounter in the integration process include the following:

In addition, Elastic and Endgame have operated and, until the completion of the Merger, will continue to operate, independently. It is possible that the integration process could result in the diversion of each company’s management’s attention, the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, suppliers and employees or our ability to achieve the anticipated benefits of the Merger, or could reduce the earnings or otherwise adversely affect the business and financial results of the Combined Company.

Activities undertaken during the pendency of the Merger to complete the Merger and the other transactions contemplated by the Merger Agreement may divert management attention and resources.

If the efforts and actions required of Elastic and Endgame in order to consummate the Merger and the other transactions contemplated by the Merger Agreement are more difficult, costly or time consuming than expected, such efforts and actions could result in the diversion of each company’s management’s attention and resources or the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses, which could adversely affect their business and financial results.

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Current Endgame securityholders will have a substantially reduced ownership and voting interest in the Combined Company after the Merger and, as a result, would not be expected to exercise significant influence over the Combined Company’s management.

Current Elastic shareholders have the right to vote in the election of the Elastic Board and other matters affecting Elastic. Current Endgame stockholders have the right to vote in the election of the board of directors of Endgame (“Endgame Board”) and on other matters affecting Endgame. Based on estimates as of August 21, 2019, after the Merger is completed, it is expected that current Elastic shareholders will own between approximately 96.0% and 97.2% of the Elastic Ordinary Shares and current Endgame securityholders will own between approximately 2.8% and 4.0% of the outstanding Elastic Ordinary Shares.

As a result of the Merger, current Endgame securityholders would not be expected to exercise significant influence on the Combined Company’s management and policies as compared to the influence that they now have on the management and policies of Endgame.

The unaudited pro forma condensed combined financial data for Elastic included in this proxy statement/prospectus are preliminary, and Elastic’s actual financial position and operations after the Merger may differ materially from the unaudited pro forma financial data included in this proxy statement/prospectus.

The unaudited pro forma financial data for Elastic included in this proxy statement/prospectus are presented for illustrative purposes only and is not necessarily indicative of what Elastic’s actual financial position or operations would have been had the Merger been completed at the times assumed for purposes of preparing such unaudited pro forma financial data. Elastic’s actual results and financial position after the Merger may differ materially and adversely from the unaudited pro forma financial data included in this proxy statement/prospectus. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the Endgame identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Endgame as of the date of the completion of the Merger. Further, the Combined Company expects to recognize a significant amount of additional goodwill in the Merger. The goodwill will be subject to annual impairment assessments and a material charge may be necessary if the results of operations and cash flows are unable to support the goodwill subsequent to the Merger. For more information see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 134.

The Combined Company’s future results will suffer if it does not effectively manage its expanded operations following the Merger.

Following the Merger, the size and scope of operations of the business of the Combined Company will increase beyond the current size and scope of operations of either Elastic’s or Endgame’s current businesses. In addition, Elastic may continue to expand its size and operations through additional acquisitions or other strategic transactions. Elastic’s future success depends, in part, upon its ability to manage its expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that Elastic will be successful or that it will realize the expected economies of scale, synergies and other benefits currently anticipated from the Merger or anticipated from any additional acquisitions or strategic transactions that Elastic may undertake in the future.

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Elastic is expected to incur expenses related to the integration of Elastic and Endgame.

Elastic is expected to incur certain expenses in connection with the integration of the business, policies, procedures, operations, technologies and systems of Endgame with those of Elastic. There are a number of systems that must be integrated, including management information, purchasing, administrative, accounting and finance, sales, marketing, billing, payroll and benefits, installation, engineering, infrastructure and regulatory compliance, among others. While Elastic has assumed that a certain level of expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of all of the expected integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately at the present time. These integration expenses likely will result in Elastic taking significant charges against earnings following the completion of the Merger, but the amount and timing of such charges are uncertain at present, and if such charges are greater than expected, they could offset the cost synergies that Elastic expects to achieve from the Merger.

The trading price of Elastic Ordinary Shares is likely to continue to be volatile.

The trading price of Elastic Ordinary Shares has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, many of which are beyond Elastic’s control. Elastic Ordinary Shares have experienced an intra-day trading high of $104.10 per share and a low of $58.55 per share since Elastic’s IPO, and this volatility may be accentuated by the relatively small public float of Elastic Ordinary Shares on the NYSE. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including Elastic’s, regardless of actual operating performance.

The Elastic Ordinary Shares to be received by Endgame stockholders as a result of the Merger will have different rights from the shares of Endgame Capital Stock currently held by Endgame stockholders.

Upon completion of the Merger, Endgame stockholders will become Elastic shareholders and their rights as shareholders will be governed by Elastic’s articles of association. The rights associated with Elastic Ordinary Shares are different from the rights associated with Endgame Capital Stock, and afford former holders of Endgame preferred stock, who will receive Elastic Ordinary Shares upon the completion of the Merger, significantly fewer rights, preferences and privileges than they were afforded under Endgame’s charter documents. See “Comparison of the Rights of Holders of Elastic Ordinary Shares and Holders of Endgame Capital Stock” beginning on page 148 for a discussion of the different rights associated with Elastic Ordinary Shares.

Risks Related to Elastic’s Business and Industry

Our business and operations have experienced rapid growth, and if we do not appropriately manage future growth, if any, or are unable to improve our systems and processes, our business, financial condition, results of operations, and prospects will be adversely affected.

We have experienced rapid growth and increased demand for our offerings. Our employee headcount and number of customers have increased significantly, and we expect to continue to grow our headcount significantly over the next year. For example, our total number of customers has grown from over 2,800 as of April 30, 2017 to over 5,000 as of April 30, 2018 and to over 8,100 as of April 30, 2019. The growth and expansion of our business and offerings places a continuous significant strain on our management, operational, and financial resources. In addition, as customers adopt our

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technology for an increasing number of use cases, we have had to support more complex commercial relationships. We must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems, and our relationships with various partners and other third parties, and our ability to manage headcount and processes in an efficient manner to manage our growth to date and any future growth effectively.

We may not be able to sustain the diversity and pace of improvements to our offerings successfully or implement systems, processes, and controls in an efficient or timely manner or in a manner that does not negatively affect our results of operations. Our failure to improve our systems, processes, and controls, or their failure to operate in the intended manner, may result in our inability to manage the growth of our business and to forecast our revenue, expenses, and earnings accurately, or to prevent losses.

As we expand our business and operate as a public company, we may find it difficult to maintain our corporate culture while managing our employee growth. Any failure to manage our anticipated growth and related organizational changes in a manner that preserves our culture could negatively impact future growth and achievement of our business objectives. Additionally, our productivity and the quality of our offerings may be adversely affected if we do not integrate and train our new employees quickly and effectively. Failure to manage any future growth effectively could result in increased costs, negatively affect our customers’ satisfaction with our offerings, and harm our results of operations.

We have a history of losses and may not be able to achieve profitability or positive cash flows on a consistent basis. If we cannot achieve profitability or positive cash flows, our business, financial condition, and results of operations may suffer.

We have incurred losses in each year since our incorporation. We incurred a net loss of $102.3 million, $52.7 million and $52.0 million in the years ended April 30, 2019, 2018 and 2017, respectively. As a result, we had an accumulated deficit of $317.1 million as of April 30, 2019. We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to enhance our offerings, broaden our customer base, expand our sales and marketing activities, expand our operations, hire additional employees, and continue to develop our technology. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. Revenue growth may slow or revenue may decline for a number of possible reasons, including slowing demand for our offerings or increasing competition. Any failure to increase our revenue as we grow our business could prevent us from achieving profitability or positive cash flow at all or on a consistent basis, which would cause our business, financial condition, and results of operations to suffer.

We may not be able to compete successfully against current and future competitors.

The market for our products is highly competitive, quickly evolving, and subject to rapid changes in technology. We believe that our ability to compete depends upon many factors both within and beyond our control, including the following:

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We face competition from both established and emerging competitors. Our current primary competitors generally fall into the following categories:

Some of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger customer bases than we do. These factors may allow our competitors to respond more quickly than we can to new or emerging technologies and changes in customer preferences. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns, and adopt more aggressive pricing policies which may allow them to build larger customer bases than we have. New start-up companies that innovate and large competitors that are making significant investments in research and development may develop similar offerings that compete with our offerings or that achieve greater market acceptance than our offerings. This could attract customers away from our offerings and reduce our market share. If we are unable to anticipate or react to these competitive challenges, our competitive position would weaken, which would adversely affect our business and results of operations.

Our limited operating history makes it difficult to evaluate our current business and prospects and may increase the risks associated with your investment.

We were founded in 2012. Our limited operating history makes it difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth. We have

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encountered and will continue to encounter risks and difficulties frequently experienced by rapidly growing companies in constantly evolving industries, including the risks described in this proxy statement/prospectus. If we do not address these risks successfully, our business and results of operations will be adversely affected, and the market price of our ordinary shares could decline.

Further, we have limited historical financial data and we operate in a rapidly evolving market. As such, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.

If we are not able to keep pace with technological and competitive developments, our business will be harmed.

The market for search technologies is subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences. Our success depends upon our ability to enhance existing products, expand the use cases of our products, respond to changing customer needs, requirements and preferences, and develop and introduce in a timely manner new offerings that keep pace with technological and competitive developments. We have in the past experienced delays in releasing new products, deployment options and product enhancements and may experience similar delays in the future. As a result, in the past, some of our customers deferred purchasing our products until the next upgrade was released. Future delays or problems in the installation or implementation of our new releases may cause customers to forgo purchases of our products and purchase those of our competitors instead.

Additionally, the success of new product introductions depends on a number of factors including, but not limited to, timely and successful product development, market acceptance, our ability to manage the risks associated with new product releases, the availability of software components for new products, the effective management of development and other spending in connection with anticipated demand for new products, the availability of newly developed products, and the risk that new products may have bugs, errors, or other defects or deficiencies in the early stages of introduction. We have in the past experienced bugs, errors, or other defects or deficiencies in new products and product updates and may have similar experiences in the future. Furthermore, our ability to increase the usage of our products depends, in part, on the development of new use cases for our products, which is typically driven by our developer community and may be outside of our control. We also have invested, and may continue to invest, in the acquisition of complementary businesses, technologies, services, products and other assets that expand the products that we can offer our customers. We may make these investments without being certain that they will result in products or enhancements that will be accepted by existing or prospective customers. Additionally, even if we are able to develop new products and product enhancements, we cannot ensure that they will achieve market acceptance. If we are unable to successfully enhance our existing products to meet evolving customer requirements, increase adoption and usage of our products, develop new products, or if our efforts to increase the usage of our products are more expensive than we expect, then our business, results of operations and financial condition would be adversely affected.

The markets for some of our products are new, unproven and evolving, and our future success depends on the growth and expansion of these markets and our ability to adapt and respond effectively to evolving markets.

The markets for certain of our products, such as our security analytics and APM solutions, are relatively new, rapidly evolving and unproven. Accordingly, it is difficult to predict customer adoption and renewals for these products, customers’ demand for these products, the size, growth rate, expansion, and longevity of these markets, the entry of competitive products, or the success of existing competitive products. Our ability to penetrate these new and evolving markets depends on a number of

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factors, including the cost, performance, and perceived value associated with our products. If these markets do not continue to grow as expected, or if we are unable to anticipate or react to changes in these markets, our competitive position would weaken, which would adversely affect our business and results of operations.

Our operating results are likely to fluctuate from quarter to quarter, which could adversely affect the trading price of our ordinary shares.

Our results of operations, including our revenue, cost of revenue, gross margin, operating expenses, cash flow and deferred revenue, have fluctuated from quarter-to-quarter in the past and may continue to vary significantly in the future so that period-to-period comparisons of our results of operations may not be meaningful. Accordingly, our financial results in any one quarter should not be relied upon as indicative of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, may be difficult to predict, and may or may not fully reflect the underlying performance of our business. Factors that may cause fluctuations in our quarterly financial results include:

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The impact of one or more of the foregoing or other factors may cause our operating results to vary significantly. Such fluctuations could cause us to fail to meet the expectations of investors or securities analysts, which could cause the trading price of our ordinary shares to fall substantially, and we could face costly lawsuits, including securities class action suits.

If we are unable to increase sales of our subscriptions to new customers, sell additional subscriptions to our existing customers, or expand the value of our existing customers’ subscriptions, our future revenue and results of operations will be harmed.

We offer certain features of our products as open source software with no payment required, and also offer some of our proprietary features with no payment required. Customers purchase subscriptions in order to gain access to additional functionality and support. Our future success depends on our ability to sell our subscriptions to new customers and to expand the deployment of our offerings with existing customers by selling paid subscriptions to our existing users and expanding the value and number of existing customers’ subscriptions. Our ability to sell new subscriptions depends on a number of factors, including the prices of our offerings, the prices of products offered by our competitors, and the budgets of our customers. In addition, a significant aspect of our sales and marketing focus is to expand deployments within existing customers. The rate at which our customers purchase additional subscriptions and expand the value of existing subscriptions depends on a number of factors, including customers’ level of satisfaction with our offerings, the nature and size of the deployments, the desire to address additional use cases, and the perceived need for additional features, as well as general economic conditions. We rely in large part on our customers to identify new use cases for our products in order to expand such deployments and grow our business. If our customers do not recognize the potential of our offerings, our business would be materially and adversely affected. If our efforts to sell subscriptions to new customers and to expand deployments at existing customers are not successful, our total revenue and revenue growth rate may decline and our business will suffer.

If our existing customers do not renew their subscriptions, it could have an adverse effect on our business and results of operations.

We expect to derive a significant portion of our revenue from renewals of existing subscriptions. Our customers have no contractual obligation to renew their subscriptions after the completion of their subscription term. Our subscriptions for self-managed deployments typically range from one to three years, while many of our Elastic Cloud customers purchase subscriptions either on a month-to-month basis or on a committed contract of at least one year in duration.

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Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction with our products and our customer support, our products’ ability to integrate with new and changing technologies, the frequency and severity of product outages, our product uptime or latency, and the pricing of our, or competing, products. If our customers renew their subscriptions, they may renew for shorter subscription terms or on other terms that are less economically beneficial to us. We may not accurately predict future renewal trends. If our customers do not renew their subscriptions, or renew on less favorable terms, our revenue may grow more slowly than expected or decline and our Net Expansion Rate may decline.

Because of the rights accorded to third parties under open source software licenses, there are limited technological barriers to entry into the markets in which we compete and it may be relatively easy for competitors, some of whom may have greater resources than we have, to enter our markets and compete with us.

Anyone may obtain access to the source code for our open source features and then redistribute it (either in a modified or unmodified form) and use it to compete in our markets. Additionally, we make the source code of our proprietary features for the Elastic Stack available, which may enable others to compete more effectively. Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies, due to the permissions allowed under open source licensing. It is possible for competitors to develop their own software, including software based on our products, potentially reducing the demand for our products and putting pricing pressure on our subscriptions. For example, Amazon offers some of our open source features as part of its Amazon Web Services offering. As such, Amazon competes with us for potential customers, and while Amazon cannot provide our proprietary software, the pricing of Amazon’s offerings may limit our ability to adjust the price of our products. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure or the availability of new open source software will not result in price reductions, reduced operating margins and loss of market share, any one of which could harm our business, financial condition, results of operations and cash flows.

If we do not effectively expand and train our sales force, we may be unable to add new customers, increase sales to existing customers or expand the value of our existing customers’ subscriptions and our business will be adversely affected.

We depend on our sales force to obtain new customers and to drive additional sales to existing customers by selling them new subscriptions and expanding the value of their existing subscriptions. We believe that there is significant competition for sales personnel, including sales representatives, sales managers, and sales engineers, with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. New hires require significant training and may take significant time before they achieve full productivity. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. In addition, particularly if we continue to grow rapidly, a large percentage of our sales force will have relatively little experience working with us, our subscriptions, and our business model, and Endgame’s existing sales force is small and our existing salesforce will have no experience selling Endgame’s endpoint security products. If we are unable to hire and train sufficient numbers of effective sales personnel, our sales personnel do not reach significant levels of productivity in a timely manner, or our sales personnel are not successful in obtaining new customers or increasing sales to our existing customer base, our business will be harmed.

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Our ability to increase sales of our offerings is highly dependent on the quality of our customer support, and our failure to offer high quality support would have an adverse effect on our business, reputation and results of operations.

After our products are deployed within our customers’ IT environments, our customers depend on our technical support services to resolve issues relating to our products. If we do not succeed in helping our customers quickly resolve post-deployment issues or provide effective ongoing support and education on our products, our ability to sell additional subscriptions to existing customers or expand the value of existing customers’ subscriptions would be adversely affected and our reputation with potential customers could be damaged. Many larger enterprise and government entity customers have more complex IT environments and require higher levels of support than smaller customers. If we fail to meet the requirements of these enterprise customers, it may be more difficult to grow sales with them.

Additionally, it can take several months to recruit, hire, and train qualified technical support employees. We may not be able to hire such resources fast enough to keep up with demand, particularly if the sales of our offerings exceed our internal forecasts. To the extent that we are unsuccessful in hiring, training, and retaining adequate support resources, our ability to provide adequate and timely support to our customers, and our customers’ satisfaction with our offerings, will be adversely affected. Our failure to provide and maintain high-quality support services would have an adverse effect on our business, financial condition, and results of operations.

We rely significantly on revenue from subscriptions and, because we recognize a significant portion of the revenue from subscriptions over the term of the relevant subscription period, downturns or upturns in sales are not immediately reflected in full in our results of operations.

Subscription revenue accounts for the substantial majority of our revenue, comprising 91%, 93% and 90% of total revenue in the years ended April 30, 2019, 2018 and 2017, respectively. We recognize a significant portion of our subscription revenue monthly over the term of the relevant time period. As a result, much of the subscription revenue we report each fiscal quarter is the recognition of deferred revenue from subscription contracts entered into during previous fiscal quarters. Consequently, a decline in new or renewed subscriptions in any one fiscal quarter will not be fully or immediately reflected in revenue in that fiscal quarter and will negatively affect our revenue in future fiscal quarters. Accordingly, the effect of significant downturns in new or renewed sales of our subscriptions is not reflected in full in our results of operations until future periods.

A real or perceived defect, security vulnerability, error, or performance failure in our software could cause us to lose revenue, damage our reputation, and expose us to liability.

Our products are inherently complex and, despite extensive testing and quality control, have in the past and may in the future contain defects or errors, especially when first introduced, or not perform as contemplated. These defects, security vulnerabilities, errors or performance failures could cause damage to our reputation, loss of customers or revenue, product returns, order cancellations, service terminations, or lack of market acceptance of our software. As the use of our products, including products that were recently acquired or developed, expands to more sensitive, secure, or mission critical uses by our customers, we may be subject to increased scrutiny, potential reputational risk, or potential liability should our software fail to perform as contemplated in such deployments. We have in the past and may in the future need to issue corrective releases of our software to fix these defects, errors or performance failures, which could require us to allocate significant research and development and customer support resources to address these problems.

Any limitation of liability provisions that may be contained in our customer and partner agreements may not be effective as a result of existing or future applicable law or unfavorable judicial

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decisions. The sale and support of our products entail the risk of liability claims, which could be substantial in light of the use of our products in enterprise-wide environments. In addition, our insurance against this liability may not be adequate to cover a potential claim.

Incorrect implementation or use of, or our customers’ failure to update, our software could result in customer dissatisfaction and negatively affect our business, operations, financial results, and growth prospects.

Our products are often operated in large scale, complex IT environments. Our customers and some partners require training and experience in the proper use of and the benefits that can be derived from our products to maximize their potential. If our customers do not implement, update or use our products correctly or as intended, inadequate performance and/or security vulnerabilities may result. Because our customers rely on our software to manage a wide range of operations, the incorrect implementation, use of, or our customers’ failure to update, our software or our failure to train customers on how to use our software productively may result in customer dissatisfaction, negative publicity and may adversely affect our reputation and brand. Failure by us to effectively provide training and implementation services to our customers could result in lost opportunities for follow-on sales to these customers and decrease subscriptions by new customers, and adversely affect our business and growth prospects.

If third parties offer inadequate or defective implementations of our open source software, our reputation could be harmed.

Certain cloud infrastructure providers, including Amazon Web Services, provide SaaS offerings based on open source components of the Elastic Stack, using the names of those open source components in marketing such offerings. These offerings are not supported by us and come without any of our proprietary features. We do not control how these third parties may use or offer our open source technology. These third parties could inadequately or incorrectly implement our open source technology, or fail to update such technology in light of changing technological or security requirements, which could result in real or perceived defects, security vulnerabilities, errors, or performance failures with respect to their open source offerings. Users, customers, and potential customers could confuse these third party products with our own products, and attribute such defects, security vulnerabilities, errors, or performance failures to our products. Any damage to our reputation and brand from defective implementations of our open source software could result in lost sales and lack of market acceptance of our products and could adversely affect our business and growth prospects.

We rely on traditional web search engines to direct traffic to our website. If our website fails to rank prominently in unpaid search results, traffic to our website could decline and our business would be adversely affected.

Our success depends in part on our ability to attract users through unpaid Internet search results on traditional web search engines, such as Google. The number of users we attract to our website from search engines is due in large part to how and where our website ranks in unpaid search results. These rankings can be affected by a number of factors, many of which are not in our direct control, and they may change frequently. For example, a search engine may change its ranking algorithms, methodologies or design layouts. As a result, links to our website may not be prominent enough to drive traffic to our website, and we may not know how or otherwise be in a position to influence the results. Any reduction in the number of users directed to our website could reduce our revenue or require us to increase our customer acquisition expenditures.

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If our security measures are breached or unauthorized access to private or proprietary data is otherwise obtained, our software may be perceived as not being secure, customers may reduce the use of or stop using our products, and we may incur significant liabilities.

Any security breach, including those resulting from a cybersecurity attack, phishing attack, or any unauthorized access, unauthorized usage, virus or similar breach or disruption could result in the loss of confidential information, damage to our reputation, litigation, regulatory investigations or other liabilities. These attacks may come from individual hackers, criminal groups, and state-sponsored organizations. If our security measures are breached as a result of third-party action, employee error, defect or bug in our products, malfeasance or otherwise and, as a result, someone obtains unauthorized access to our confidential information or personal information or the confidential information or personal information of our customers, our reputation may be damaged, our business may suffer and we could incur significant liability. Even the perception of inadequate security may damage our reputation and negatively impact our ability to win new customers and retain existing customers. Further, we could be required to expend significant capital and other resources to address any data security incident or breach.

In addition, many of our customers may use our software for processing their sensitive and proprietary information, including business strategies, financial and operational data, personal or identifying information and other related data. As a result, unauthorized access or use of this data could result in the loss, compromise, corruption or destruction of our customers’ sensitive and proprietary information and lead to litigation, regulatory investigations and claims, indemnity obligations, and other liabilities. We have implemented administrative, technical and physical measures designed to protect the integrity of customer information and prevent data loss, misappropriation and other security breaches and incidents and may incur significant costs in connection with the implementation of additional preventative measures in the future.

We engage third-party vendors and service providers to store and otherwise process some of our and our customers’ data, including sensitive and personal information. Our vendors and service providers may also be the targets of cyberattacks, malicious software, phishing schemes, and fraud. Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our and our customers’ data, including sensitive and personal information.

Techniques used to sabotage or obtain unauthorized access to systems or networks are constantly evolving and, in some instances, are not identified until launched against a target. We and our service providers may be unable to anticipate these techniques, react in a timely manner, or implement adequate preventative measures.

Further, we cannot assure that any limitations of liability provisions in our customer and user agreements, contracts with third-party vendors and service providers or other contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security breach or other security-related matter. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover claims related to a security incident or breach, or that the insurer will not deny coverage as to any future claim. The successful assertion of claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

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Interruptions or performance problems associated with our technology and infrastructure, and our reliance on technologies from third parties, may adversely affect our business operations and financial results.

We rely on third-party cloud platforms to host our cloud offerings. If we experience an interruption in service for any reason, our cloud offerings would similarly be interrupted. An interruption in our services to our customers could cause our customers’ internal and consumer-facing applications to not function properly, which could have a material adverse effect on our business, results of operations, customer relationships and reputation.

In addition, our website and internal technology infrastructure may experience performance issues due to a variety of factors, including infrastructure changes, human or software errors, website or third-party hosting disruptions, capacity constraints, technical failures, natural disasters or fraud or security attacks. Our use and distribution of open source software may increase this risk. If our website is unavailable or our users are unable to download our products or order subscriptions or services within a reasonable amount of time or at all, our business could be harmed. We expect to continue to make significant investments to maintain and improve website performance and to enable rapid releases of new features and applications for our products. To the extent that we do not effectively upgrade our systems as needed and continually develop our technology to accommodate actual and anticipated changes in technology, our business and results of operations may be harmed.

We also rely on cloud technologies from third parties in order to operate critical functions of our business, including financial management services, relationship management services and lead generation management services. If these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices, our expenses could increase, our ability to manage our finances could be interrupted, our processes for managing sales of our offerings and supporting our customers could be impaired, and our ability to generate and manage sales leads could be weakened until equivalent services, if available, are identified, obtained and implemented, any of which could harm our business and results of operations.

We depend on our executive officers and other key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could harm our business.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly in engineering and sales, may seriously harm our business, financial condition, and results of operations. Although we have entered into employment offer letters with our key personnel, their employment is for no specific duration and constitutes at-will employment. We are also substantially dependent on the continued service of our existing engineering personnel because of the complexity of our products.

Our future performance also depends on the continued services and continuing contributions of our senior management, particularly our Chief Executive Officer and Chairman, Shay Banon, to execute on our business plan and to identify and pursue new opportunities and product innovations. We do not maintain key person life insurance policies on any of our employees. The loss of services of senior management could significantly delay or prevent the achievement of our development and strategic objectives, which could adversely affect our business, financial condition, and results of operations.

Additionally, the industry in which we operate is generally characterized by significant competition for skilled personnel as well as high employee attrition. We may not be successful in attracting,

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integrating, or retaining qualified personnel to fulfill our current or future needs. Also, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited, that they have divulged proprietary or other confidential information, or that their former employers own their inventions or other work product.

If we are not able to maintain and enhance our brand, especially among developers, our business and operating results may be adversely affected.

We believe that developing and maintaining widespread awareness of our brand, especially with developers, is critical to achieving widespread acceptance of our software and attracting new users and customers. Brand promotion activities may not generate user or customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. For instance, our continued focus and investment in Elastic{ON} and similar investments in our brand, user engagement, and customer engagement may not generate a sufficient financial return. If we fail to successfully promote and maintain our brand, we may fail to attract or retain users and customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our products.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and entrepreneurial spirit we have worked to foster, which could harm our business.

We believe that our culture has been and will continue to be a key contributor to our success. We expect to continue to hire aggressively as we expand. If we do not continue to maintain our corporate culture as we grow, we may be unable to foster the innovation, creativity, and entrepreneurial spirit we believe we need to support our growth. Moreover, many of our existing employees may be able to receive significant proceeds from sales of our ordinary shares in the public markets, which could lead to employee attrition and disparities of wealth among our employees that adversely affects relations among employees and our culture in general. Our substantial anticipated headcount growth and our continued transition from a private company to a public company may result in a change to our corporate culture, which could harm our business.

We rely on channel partners to execute a portion of our sales; if our channel partners fail to perform, our ability to sell our solution will be more limited, and our results of operations could be harmed.

A portion of our revenue is generated by sales through our channel partners, especially to U.S. federal government customers and in certain international markets. We provide certain of our channel partners with specific training and programs to assist them in selling our offerings, but there can be no assurance that these steps will be effective. In addition, our channel partners may be unsuccessful in marketing and selling our offerings. If we are unable to develop and maintain effective sales incentive programs for our channel partners, we may not be able to incentivize these partners to sell our offerings to customers.

Some of these partners may also market, sell, and support offerings that are competitive with ours, may devote more resources to the marketing, sales, and support of such competitive offerings, may have incentives to promote our competitors’ offerings to the detriment of our own or may cease selling our offerings altogether. Our agreements with our channel partners typically have a duration of one to three years, and generally may be terminated for any reason by either party with advance notice prior to each renewal date. We cannot assure you that we will retain these channel partners or that we will be able to secure additional or replacement channel partners. The loss of one or more of our significant channel partners or a decline in the number or size of orders from any of them could harm

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our results of operations. In addition, many of our new channel partners require extensive training and may take several months or more to achieve productivity. Our channel partner sales structure could subject us to lawsuits, potential liability, and reputational harm if, for example, any of our channel partners misrepresents the functionality of our offerings to customers or violates laws or our or their corporate policies. If our channel partners are unsuccessful in fulfilling the orders for our offerings, or if we are unable to enter into arrangements with and retain high quality channel partners, our ability to sell our offerings and results of operations could be harmed.

If we are unable to maintain successful relationships with our partners, our business operations, financial results and growth prospects could be adversely affected.

We maintain partnership relationships with a variety of partners, including cloud providers, systems integrators, channel partners, referral partners, OEM and MSP partners, and technology partners, to jointly deliver offerings to our end customers and complement our broad community of users. In particular, we work with systems integrators and referral partners to market and sell our subscriptions.

Our agreements with our partners are generally non-exclusive, meaning our partners may offer customers the offerings of several different companies, including offerings that compete with ours, or may themselves be or become competitors. If our partners do not effectively market and sell our offerings, choose to use greater efforts to market and sell their own offerings or those of our competitors, or fail to meet the needs of our customers, our ability to grow our business and sell our offerings may be harmed. Our partners may cease marketing our offerings with limited or no notice and with little or no penalty. The loss of a substantial number of our partners, our possible inability to replace them, or the failure to recruit additional partners could harm our results of operations.

Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our partners and in helping our partners enhance their ability to market and sell our subscriptions. If we are unable to maintain our relationships with these partners, our business, results of operations, financial condition or cash flows could be harmed.

The sales prices of our offerings may decrease, which may reduce our gross profits and adversely affect our financial results.

The sales prices for our offerings may decline for a variety of reasons, including competitive pricing pressures, discounts, anticipation of the introduction of new offerings, or promotional programs. For example, during the year ended April 30, 2019, we reduced prices for some of our Elastic Cloud offerings in conjunction with launching new offerings. Competition continues to increase in the market segments in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse offerings may reduce the price of offerings that compete with ours or may bundle them with other offerings. Additionally, currency fluctuations in certain countries and regions may negatively impact actual prices that customers and channel partners are willing to pay in those countries and regions. Any decrease in the sales prices for our offerings, without a corresponding decrease in costs or increase in volume, would adversely impact our gross profit. Gross profit could also be adversely impacted by a shift in mix of our subscriptions from self-managed to our cloud offering, which has a lower gross margin, as well as any increase in our mix of professional services relative to subscriptions. We cannot assure you that we will be able to maintain our prices and gross profits at levels that will allow us to achieve and maintain profitability.

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We expect our revenue mix to vary over time, which could harm our gross margin and operating results.

We expect our revenue mix to vary over time due to a number of factors, including the mix of our subscriptions for self-managed and our cloud offerings, and our professional services revenue. Due to the differing revenue recognition policies applicable to our subscriptions and professional services, shifts in our business mix from quarter to quarter could produce substantial variation in revenue recognized. Further, our gross margins and operating results could be harmed by changes in revenue mix and costs, together with numerous other factors, including entry into new markets or growth in lower margin markets; entry into markets with different pricing and cost structures; pricing discounts; and increased price competition. Any one of these factors or the cumulative effects of certain of these factors may result in significant fluctuations in our gross margin and operating results. This variability and unpredictability could result in our failure to meet internal expectations or those of securities analysts or investors for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our ordinary shares could decline.

The length of our sales cycle can be unpredictable, particularly with respect to sales through our channel partners or sales to large customers, and our sales efforts may require considerable time and expense.

Our results of operations may fluctuate, in part, because of the length and variability of the sales cycle of our subscriptions and the difficulty in making short-term adjustments to our operating expenses. Our results of operations depend in part on sales to large customers and increasing sales to existing customers. The length of our sales cycle, from initial contact with our sales team to contractually committing to our subscriptions can vary substantially from customer to customer based on deal complexity as well as whether a sale is made directly by us or through a channel partner. Our sales cycle can extend to more than a year for some customers. It is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. As a result, large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. The loss or delay of one or more large transactions in a quarter could affect our cash flows and results of operations for that quarter and for future quarters. Because a substantial proportion of our expenses are relatively fixed in the short term, our results of operations will suffer if revenue falls below our expectations in a particular quarter, which could cause the price of our ordinary shares to decline.

Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and results of operations.

Our success depends to a significant degree on our ability to protect our proprietary technology, methodologies, know-how and brand. We rely on a combination of trademarks, copyrights, patents, contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property rights may be inadequate. We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our proprietary technology and our business may be harmed. In addition, defending our intellectual property rights might entail significant expense. Any patents, trademarks, or other intellectual property rights that we have or may obtain may be challenged by others or invalidated through administrative process or litigation. As of April 30, 2019, we had 7 issued U.S. patents, 32 pending U.S. patent applications, and 8 pending non-U.S. filings, including 7 patent cooperation treaty patent applications. There can be no assurance that our patent applications will result in issued patents. Even if we continue to seek patent protection in the future, we may be unable to obtain further patent protection for our technology. In

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addition, any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create offerings that compete with ours. Effective patent, trademark, copyright, and trade secret protection may not be available to us in every country in which our products are available. We may be unable to prevent third parties from acquiring domain names or trademarks that are similar to, infringe upon, or diminish the value of our trademarks and other proprietary rights. The laws of some countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. As we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information will likely increase. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other parties. No assurance can be given that these agreements will be effective in controlling access to and distribution of our proprietary information. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products, impair the functionality of our products, delay introductions of new products, result in our substituting inferior or more costly technologies into our products, or injure our reputation.

We could incur substantial costs as a result of any claim of infringement, misappropriation or violation of another party’s intellectual property rights.

In recent years, there has been significant litigation involving patents and other intellectual property rights in the software industry. Companies providing software are increasingly bringing and becoming subject to suits alleging infringement, misappropriation or violation of proprietary rights, particularly patent rights, and to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement, misappropriation or violation claims. We do not currently have a large patent portfolio, which could prevent us from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. The risk of patent litigation has been amplified by the increase in the number of a type of patent holder, which we refer to as a non-practicing entity, whose sole or principal business is to assert such claims and against whom our own intellectual property portfolio may provide little deterrent value. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third party that claims that our products infringe, misappropriate or violate their rights, the litigation could be expensive and could divert our management resources.

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Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:

If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement, misappropriation or violation claims against us or any obligation to indemnify our customers for such claims, such payments or actions could harm our business.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, misappropriation, violation and other losses.

Our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, misappropriation or violation, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services or other contractual obligations. Large indemnity payments could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such indemnity obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.

Our use of open source software could negatively affect our ability to sell our products and subject us to possible litigation.

Our technologies incorporate open source software, and we expect to continue to incorporate open source software in our products in the future. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products. Moreover, we cannot assure you that we have not incorporated additional open source software in our software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures. If we fail to comply with these licenses, we may be subject to certain requirements, including requirements that we offer our solutions that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our products that contained the open source software and required to comply with onerous conditions or restrictions on these products, which could disrupt the distribution and sale of these products. In addition, there have been claims challenging the ownership rights in open source software against companies that incorporate open source software into their products, and the licensors of such open source software provide no warranties or indemnities with respect to such

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claims. In any of these events, we and our customers could be required to seek licenses from third parties in order to continue offering our products, and to re-engineer our products or discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis. We and our customers may also be subject to suits by parties claiming infringement, misappropriation or violation due to the reliance by our solutions on certain open source software, and such litigation could be costly for us to defend or subject us to an injunction. Some open source projects have known vulnerabilities and architectural instabilities and as provided on an “as-is” basis which, if not properly addressed, could negatively affect the performance of our product. Any of the foregoing could require us to devote additional research and development resources to re-engineer our solutions, could result in customer dissatisfaction, and may adversely affect our business, results of operations and financial condition.

One of our marketing strategies is to offer open source and free trials of our products, and we may not be able to realize the benefits of this strategy.

We are dependent upon lead generation strategies, including offering open source and free trials of our products, to generate sales opportunities. These strategies may not be successful in continuing to generate sufficient sales opportunities necessary to increase our revenue. Many users never convert from the open source or free trials to the paid versions of our products. To the extent that users do not become, or we are unable to successfully attract, paying customers, we will not realize the intended benefits of these marketing strategies and our ability to grow our revenue will be adversely affected.

Our software development and licensing model could be negatively impacted if the Apache License, Version 2.0 is not enforceable.

Important components of our software have been provided under the Apache License 2.0. This license states that any work of authorship licensed under it, and any derivative work thereof, may be reproduced and distributed provided that certain conditions are met. It is possible that a court would hold this license to be unenforceable or that someone could assert a claim for proprietary rights in a program developed and distributed under it. Any ruling by a court that this license is not enforceable, or that open source components of our products may not be reproduced or distributed, may negatively impact our distribution or development of all or a portion of our products.

In connection with the operation of our business, we may collect, store, transfer and otherwise process certain personal data and personally identifiable information. As a result, our business is subject to a variety of government and industry regulations, as well as other obligations, related to privacy, data protection and information security.

Privacy, data protection and information security have become significant issues in various jurisdictions where we offer our products. The regulatory frameworks for privacy, data protection and information security issues worldwide are rapidly evolving and are likely to remain uncertain for the foreseeable future. Federal, state, or non-U.S. government bodies or agencies have in the past adopted, and may in the future adopt, new laws and regulations or may make amendments to existing laws and regulations affecting data protection, data privacy and/or information security and/or regulating the use of the Internet as a commercial medium. For example, the California Consumer Privacy Act (the “CCPA”), which provides new data privacy rights for California residents, is expected to take effect on January 1, 2020. The CCPA provides for civil penalties, as well as a private right of action, for violations, which may increase our compliance costs and potential liability. The CCPA was amended in September 2018, and it is anticipated that it may be amended again before it goes into effect. Other states also are considering or have enacted privacy legislation that is similar to the CCPA. Many obligations under the CCPA and these other laws and legislative proposals remain uncertain, and we cannot fully predict their impact on our business. Industry organizations also regularly adopt and advocate for new standards in these areas. If we fail to comply with any of these

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laws or standards, we may be subject to investigations, enforcement actions, civil litigation, fines and other penalties, all of which may generate negative publicity and have a negative impact on our business.

In the United States, we may be subject to investigation and/or enforcement actions brought by federal agencies and state attorneys general and consumer protection agencies. We publicly post policies and other documentation regarding our practices concerning the processing, use and disclosure of personally identifiable information. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policy and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices.

Internationally, most jurisdictions in which we operate have established their own data security, privacy and data protection legal frameworks with which we or our customers must comply. Within the European Union, the European General Data Protection Regulation, or GDPR, became fully effective on May 25, 2018, and applies to the processing (which includes the collection and use) of certain personal data. As compared to previously-effective data protection law in the European Union, the GDPR imposes additional obligations and risk upon our business and increases substantially the penalties to which we could be subject in the event of any non-compliance. Administrative fines under the GDPR can amount up to 20 million Euros or four percent of the group’s annual global turnover, whichever is higher. We have incurred substantial expense in complying with the obligations imposed by the GDPR and we may be required to make significant changes in our business operations, all of which may adversely affect our revenue and our business overall. Additionally, because the GDPR lacks a substantial enforcement history, we are unable to predict how GDPR’s standards may be applied to us. Despite our efforts to attempt to comply with the GDPR, a regulator may determine that we have not done so and subject us to fines and public censure, which could harm our company.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States. We have undertaken certain efforts to conform transfers of personal data from the European Economic Area, or EEA, to the United States and other jurisdictions based on our understanding of current regulatory obligations and the guidance of data protection authorities, including standard contractual clauses approved by the European Commission. Despite this, we may be unsuccessful in maintaining conforming means of transferring such data from the EEA, in particular as a result of continued legal and legislative activity within the European Economic Area that has challenged or called into question existing means of data transfers to countries that have not been found to provide adequate protection for personal data.

Some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of delivering our services. We may also experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use our products due to the potential risk exposure to such customers as a result of shifting business sentiment in the EEA regarding international data transfers and the data protection obligations imposed on them. We may find it necessary to establish systems to maintain personal data originating from the EEA in the EEA, or may need to take other, additional steps to provide for local data processing, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business. We and our customers may face a risk of enforcement actions taken by European data protection authorities until the time, if any, that personal data transfers to us and by us from the EEA are legitimized under European law.

In June 2016, a referendum was passed in the United Kingdom to leave the European Union, commonly referred to as “Brexit.” This creates an uncertain political and economic environment in the

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United Kingdom and other European Union countries, even though the formal process for leaving the European Union may take years to complete. For example, a Data Protection Act that substantially implements the GDPR became law in the United Kingdom in May 2018. It remains unclear, however, how United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated. The full effect of Brexit is uncertain and depends on, among other factors, any agreements the United Kingdom may make to retain access to European Union markets. Consequently, no assurance can be given about the impact of the outcome and our business may be seriously harmed.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may legally or contractually apply to us. One example of such a self-regulatory standard is the Payment Card Industry Data Security Standard, or PCI DSS, which relates to the processing of payment card information. In the event we fail to comply with the PCI DSS, fines and other penalties could result, and we may suffer reputational harm and damage to our business. Further, our customers may expect us to comply with more stringent privacy and data security requirements than those imposed by laws, regulations or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data on or by our offerings. We also expect that there will continue to be changes in interpretations of existing laws and regulations, or new proposed laws, regulations, and other obligations concerning privacy, data protection and information security, which could impair our or our customers’ ability to collect, use or disclose information relating to consumers, which could decrease demand for our offerings, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.

Because the interpretation and application of many laws and regulations relating to privacy, data protection and information security, along with industry standards, are uncertain, it is possible that these laws and regulations may be interpreted and applied in manners that are, or are alleged to be, inconsistent with our data management practices or the features of our products, and we could face fines, lawsuits, regulatory investigations and other claims and penalties, and we could be required to fundamentally change our products or our business practices, any of which could have an adverse effect on our business. Any inability to adequately address privacy, data protection and data security concerns, even if unfounded, or any actual or perceived failure to comply with applicable privacy, data protection or information security laws, regulations and other obligations, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products. Privacy, data protection and information security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and countries outside of the United States. If we are not able to adjust to changing laws, regulations and standards related to the Internet, our business may be harmed.

We may acquire other businesses which could require significant management attention, disrupt our business, dilute shareholder value and adversely affect our results of operations.

As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies. We have in the past acquired, and expect in the future to acquire, businesses that we believe will complement or augment our existing business (for example, our proposed acquisition of Endgame, Inc.). The identification of suitable acquisition candidates is difficult, and we may not be able to complete such acquisitions on favorable terms, if at all. If we do complete future acquisitions, we may not ultimately strengthen our competitive position or achieve our goals and business strategy, we may be subject to claims or liabilities assumed from an acquired company, product, or technology, and any acquisitions we complete could be viewed negatively by our customers, investors, and securities analysts. In addition, if we are unsuccessful at integrating future

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acquisitions, or the technologies associated with such acquisitions, into our company, the revenue and results of operations of the Combined Company could be adversely affected. Any integration process may require significant time and resources, which may disrupt our ongoing business and divert management’s attention, and we may not be able to manage the integration process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges. We may have to pay cash, incur debt, or issue equity or equity-linked securities to pay for any future acquisitions, each of which could adversely affect our financial condition or the market price of our ordinary shares. The sale of equity or issuance of equity-linked debt to finance any future acquisitions could result in dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. The occurrence of any of these risks could harm our business, results of operations, and financial condition.

Unfavorable conditions in our industry or the global economy or reductions in information technology spending could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments by our customers and potential customers, including spending on information technology, and negatively affect the growth of our business. To the extent our offerings are perceived by customers and potential customers as discretionary, our revenue may be disproportionately affected by delays or reductions in general information technology spending. Also, customers may choose to develop in-house software as an alternative to using our products. Moreover, competitors may respond to market conditions by lowering prices. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate do not improve, or worsen from present levels, our business, results of operations and financial condition could be adversely affected.

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate these controls.

Our software may be subject to U.S. export control laws and regulations including the Export Administration Regulations, or EAR, and trade and economic sanctions maintained by the Office of Foreign Assets Control, or OFAC. As such, an export license may be required to export or reexport our products to certain countries, end-users and end-uses. Because we incorporate encryption functionality into our products, we also are subject to certain U.S. export control laws that apply to encryption items. If we were to fail to comply with such U.S. export controls laws and regulations, U.S. economic sanctions, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges. Obtaining the necessary export license for a particular sale or offering may not be possible and may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and economic sanctions prohibit the export of products to certain U.S. embargoed or sanctioned countries, governments and persons, as well as for prohibited end-uses. Monitoring and ensuring compliance with these complex U.S. export

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control laws is particularly challenging because our offerings are widely distributed throughout the world and are available for download without registration. Even though we take precautions to ensure that we and our partners comply with all relevant export control laws and regulations, any failure by us or our partners to comply with such laws and regulations could have negative consequences for us, including reputational harm, government investigations and penalties.

In addition, various countries regulate the import of certain encryption technology, including through import permit and license requirements, and have enacted laws that could limit our ability to distribute our products or could limit our end-customers’ ability to implement our products in those countries. Changes in our products or changes in export and import regulations in such countries may create delays in the introduction of our products into international markets, prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay the export or import of our products to certain countries, governments or persons altogether. Any change in export or import laws or regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing export, import or sanctions laws or regulations, or change in the countries, governments, persons, or technologies targeted by such export, import or sanctions laws or regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations. Any decreased use of our products or limitation on our ability to export to or sell our products in international markets could adversely affect our business, financial condition and operating results.

Our international operations and expansion expose us to several risks.

As of April 30, 2019, we had customers located in over 100 countries, and our strategy is to continue to expand internationally. In addition, as a result of our strategy of leveraging a distributed workforce, as of April 30, 2019, we had employees located in over 35 countries. Our current international operations involve and future initiatives will involve a variety of risks, including:

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If we are unable to address these difficulties and challenges or other problems encountered in connection with our international operations and expansion, we might incur unanticipated liabilities or we might otherwise suffer harm to our business generally.

If we are not successful in sustaining and expanding our international business, we may incur additional losses and our revenue growth could be harmed.

Our future results depend, in part, on our ability to sustain and expand our penetration of the international markets in which we currently operate and to expand into additional international markets. We depend on direct sales and our channel partner relationships to sell our offerings in international markets. Our ability to expand internationally will depend upon our ability to deliver functionality and foreign language translations that reflect the needs of the international clients that we target. Our ability to expand internationally involves various risks, including the need to invest significant resources in such expansion, and the possibility that returns on such investments will not be achieved in the near future or at all in these less familiar competitive environments. We may also choose to conduct our international business through other partnerships. If we are unable to identify partners or negotiate favorable terms, our international growth may be limited. In addition, we have incurred and may continue to incur significant expenses in advance of generating material revenue as we attempt to establish our presence in particular international markets.

Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new offerings could reduce our ability to compete and could harm our business.

We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next twelve months. After that, we may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. If we raise additional equity financing, our shareholders may experience significant dilution of their ownership interests and the per share value of our ordinary shares could decline. Furthermore, if we engage in debt financing, the holders of debt would have priority over the holders of our ordinary shares, and we may be required to accept terms that restrict our ability to incur additional indebtedness. We may also be required to take other actions that would otherwise be in the interests of the debt holders and force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations, and financial condition. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

Our failure to have sufficient capital to do any of these things could harm our business, financial condition, and results of operations.

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Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.

We are subject to the Foreign Corrupt Practices Act, or FCPA, the U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and abroad. We leverage third parties, including channel partners, to sell our offerings and conduct our business abroad. We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedure to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. government contracts, all of which may have an adverse effect on our reputation, business, operating results and prospects.

A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

Sales to government entities are subject to a number of risks. Selling to government entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Government certification requirements for products like ours may change, thereby restricting our ability to sell into the U.S. federal government, U.S. state government, or non-U.S. government sectors until we have attained the revised certification. Government demand and payment for our offerings may be affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings.

Additionally, we rely on certain partners to provide technical support services to certain of our government entity customers to resolve any issues relating to our products. If our partners do not effectively assist our government entity customers in deploying our products, succeed in helping our government entity customers quickly resolve post-deployment issues, or provide effective ongoing support, our ability to sell additional offerings to new and existing government entity customers would be adversely affected and our reputation could be damaged.

Government entities may have statutory, contractual, or other legal rights to terminate contracts with us or our channel partners for convenience or due to a default, and any such termination may adversely affect our future results of operations. Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our subscriptions, a reduction of revenue, or fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could adversely affect our results of operations in a material way.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could expose us to greater than anticipated tax liabilities.

Our income tax obligations are based in part on our corporate structure and intercompany arrangements, including the manner in which we develop, value, and use our intellectual property and the valuations of our intercompany transactions. The tax laws applicable to our business, including the laws of the Netherlands, the United States and other jurisdictions, are subject to interpretation and

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certain jurisdictions may aggressively interpret their laws in an effort to raise additional tax revenue. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial position and results of operations. It is possible that tax authorities may disagree with certain positions we have taken and any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. Further, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made.

Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our results of operations.

Based on our current corporate structure, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents. In the United States, legislation enacted in December 2017 commonly referred to as the Tax Cuts and Jobs Act introduced a number of changes to U.S. federal income tax laws, the impact of which is uncertain. In addition, the authorities in the jurisdictions in which we operate could review our tax returns or require us to file tax returns in jurisdictions in which we are not currently filing, and could impose additional tax, interest and penalties. These authorities could also claim that various withholding requirements apply to us or our subsidiaries, assert that benefits of tax treaties are not available to us or our subsidiaries, or challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing. The relevant taxing authorities may determine that the manner in which we operate our business does not achieve the intended tax consequences. If such a disagreement was to occur, and our position was not sustained, we could be required to pay additional taxes, and interest and penalties. Any increase in the amount of taxes we pay or that are imposed on us could increase our worldwide effective tax rate and harm our business and results of operations.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

As of April 30, 2019 and 2018, we had net operating loss carryforwards in various jurisdictions of $485.7 million and $223.0 million, respectively, which may be utilized against future income taxes. Limitations imposed by the applicable jurisdictions on our ability to utilize net operating loss carryforwards could cause income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such net operating loss carryforwards to expire unused, in each case reducing or eliminating the benefit of such net operating loss carryforwards. Furthermore, we may not be able to generate sufficient taxable income to utilize our net operating loss carryforwards before they expire. If any of these events occur, we may not derive some or all of the expected benefits from our net operating loss carryforwards.

Catastrophic events, or man-made problems such as terrorism, may disrupt our business.

A significant natural disaster, such as an earthquake, fire, flood, or significant power outage could have an adverse impact on our business, results of operations, and financial condition. We have a number of our employees and executive officers located in the San Francisco Bay Area, a region

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known for seismic activity. In the event our or our partners abilities are hindered by any of the events discussed above, sales could be delayed, resulting in missed financial targets for a particular quarter. In addition, acts of terrorism and other geo-political unrest could cause disruptions in our business or the business of our partners, customers or the economy as a whole. Any disruption in the business of our partners or customers that affects sales in a given fiscal quarter could have a significant adverse impact on our quarterly results for that and future quarters. All of the aforementioned risks may be further increased if our disaster recovery plans prove to be inadequate.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.

A portion of our subscriptions are generated and operating expenses are incurred outside the United States and denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. The strengthening of the U.S. dollar increases the real cost of our offerings to our customers outside of the United States, leading to delays in the purchase of our offerings and the lengthening of our sales cycle. If the U.S. dollar continues to strengthen, this could adversely affect our financial condition and results of operations. In addition, increased international sales in the future, including through our channel partners, may result in greater foreign currency denominated sales, increasing our foreign currency risk. Moreover, operating expenses incurred outside the United States and denominated in foreign currencies are increasing and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with currency fluctuations, our financial condition and results of operations could be adversely affected. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited and we may not be able to successfully hedge our exposure, which could adversely affect our financial condition and results of operations.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the trading price of our ordinary shares.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Elastic Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this proxy statement/prospectus, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our ordinary shares. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, measurement of stock-based compensation expense, accounting of intangible assets, goodwill impairment test, and accounting for income taxes including deferred tax assets and liabilities.

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Risks Related to Endgame’s Business and Industry

Endgame has incurred significant operating losses since inception and may not be able to achieve profitability.

Endgame has incurred net losses since its inception in October 2010. For the years ended December 31, 2017 and 2018, and for the six months ended June 30, 2019, Endgame had net losses of $30.3 million, $19.9 million and $11.3 million, respectively. As of June 30, 2019, Endgame had an accumulated deficit of $157.4 million. To date, Endgame has financed its operations primarily through private placements of its equity securities, certain debt-related financing arrangements and from sales of its products. Endgame has devoted substantially all of its resources to the acquisition of products, the research and development of products and sales and marketing activities. Endgame’s ability to generate sufficient revenue from its existing products, and to transition to profitability and generate consistent positive cash flows is uncertain. Endgame may need to raise additional funds in the future, and such funds may not be available on a timely basis, or at all. Endgame expects that its operating expenses may increase as it continues to build its commercial infrastructure, develop, enhance and commercialize its products and incur additional costs associated with integrating with Elastic, a public company. As a result, Endgame may incur operating losses for the foreseeable future and may never achieve profitability.

Endgame’s future operating results may fluctuate significantly, Endgame has recently transitioned its business model and its recent operating results may not be a good indication of its future performance.

On March 10, 2017, as part of a strategic shift of Endgame’s business plans, Endgame sold substantially all of its assets and certain liabilities of its Federal Services Business to Accenture Federal Services, LLC. The Federal Services Business was approximately 76% of Endgame’s assets as of December 31, 2016 and generated revenue of approximately 85% of Endgame’s total revenue for the year ended December 31, 2016.

Since Endgame’s sale of its Federal Services Business, Endgame has experienced a period of rapid growth in its headcount and operations. Endgame has also significantly increased the size of its customer base over the last few years. Endgame anticipates that it will continue to significantly expand its operations and headcount in the near term. Endgame’s growth has placed, and future growth will place, a significant strain on its management, administrative, operational and financial infrastructure. Endgame’s success will depend in part on its ability to manage this growth effectively. To manage the expected growth of operations and personnel, Endgame will need to continue to improve its operational, financial and management controls and its reporting systems and procedures. Failure to effectively manage its growth could result in difficulty or delays in deploying the Endgame platform to customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties. Any of these difficulties could adversely impact its business performance and results of operations.

Endgame’s strategic shift followed by its rapid growth makes it difficult to evaluate its future prospects. Endgame’s ability to forecast its future operating results is subject to a number of uncertainties, including its ability to plan for and model future growth. If Endgame’s assumptions regarding these uncertainties, which it uses to plan its business, are incorrect or change in reaction to changes in its markets, or if Endgame does not address these risks successfully, its operating and financial results could differ materially from its expectations and its business could suffer.

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If Endgame is unable to sustain its revenue growth rate, it may not achieve or maintain profitability in the future.

Endgame has experienced revenue growth with revenue of $5.2 million and $19.8 million in 2017 and 2018, respectively. Although Endgame has experienced rapid revenue growth the past two years, it may not continue to grow as rapidly in the future and its revenue growth rates may decline. Any success that Endgame may experience in the future will depend in large part on its ability to, among other things:

If Endgame is unable to maintain consistent revenue or revenue growth, it may be difficult to achieve and maintain profitability. You should not rely on Endgame’s revenue for any prior quarterly or annual periods as any indication of its future revenue or revenue growth.

Endgame may not be able to scale its business quickly enough to meet its customers’ growing needs, and if it is not able to grow efficiently, its operating results could be harmed.

As usage of the Endgame platform grows, Endgame may need to devote additional resources to improving its software architecture, integrating with third-party systems, and maintaining infrastructure performance. In addition, Endgame will need to appropriately scale its internal business, including its professional services organization and operations, to serve its growing customer base, particularly as its customer base expands over time. Any failure of or delay in these efforts could cause impaired system performance and reduced customer satisfaction. These issues could reduce the attractiveness of the Endgame platform to customers, resulting in decreased sales to new customers, lower renewal rates by existing customers, or result in the issuance of service credits, or requested refunds, which could hurt Endgame’s revenue growth and reputation. Even if Endgame is able to upgrade its systems and expand its staff, any such expansion will be expensive and complex, requiring management time and attention. Endgame could also face inefficiencies or operational failures as a result of its efforts to scale its infrastructure and integrate its infrastructure and processes with Elastic. Moreover, there are inherent risks associated with upgrading, improving and expanding Endgame’s information technology systems, as well as integrating its information technology systems with Elastic’s information technology systems. Endgame cannot be sure that the expansion and improvements to and integration of its infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. These efforts may reduce revenue and margins and adversely impact Endgame’s financial results.

If Endgame is unable to further penetrate its existing industry verticals or expand its customer base, Endgame’s revenue may not grow and its operating results may be harmed.

Currently, a significant majority of Endgame’s revenue is derived from the U.S. federal government, and from companies in the health care, financial services and information technology industries. Endgame is investing substantial resources to expand and train its sales force to enable it to

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better understand these industry verticals and drive sales to customers in these industry verticals, but there can be no assurance that these investments will be successful. Further, an important part of Endgame’s strategy is to expand its customer base in a wide variety of industries. Endgame has less experience in some industries and its expansion may require it to grow its expertise in certain areas and add sales and support personnel possessing familiarity with the relevant industries. There may be competitors in these verticals that may be entrenched and difficult to dislodge. As a result of these and other factors, Endgame’s efforts to expand its customer base may be expensive and may not succeed, and Endgame therefore may be unable to grow its revenue. If Endgame fails to further penetrate its existing industry verticals or expand its customer base, Endgame may be unable to grow its revenue and its operating results may be harmed.

Endgame’s sales cycles can be long and unpredictable, and its sales efforts require considerable time and expense.

Endgame’s revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for the Endgame platform, particularly with respect to large organizations and government entities. Customers often view the subscription to the Endgame platform as a significant strategic decision and, as a result, frequently require considerable time to evaluate, test and qualify the Endgame platform prior to entering into or expanding a relationship with Endgame. Large enterprises and government entities in particular often undertake a significant evaluation process that further lengthens Endgame’s sales cycle.

Endgame’s direct sales team develops relationships with its customers, and works with its channel partners on account penetration, account coordination, sales and overall market development. Endgame spends substantial time and resources on its sales efforts without any assurance that its efforts will produce a sale. Security solution purchases are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. As a result, it is difficult to predict whether and when a sale will be completed. The failure of Endgame’s efforts to secure sales after investing resources in a lengthy sales process could adversely affect its business and results of operations.

Endgame faces intense competition and could lose market share to its competitors, which could adversely affect its business, financial condition, and results of operations.

The market for security and IT operations solutions is intensely competitive, fragmented, and characterized by rapid changes in technology, customer requirements, industry standards, increasingly sophisticated attackers, and by frequent introductions of new or improved products to combat security threats. Endgame expects to continue to face intense competition from current competitors, as well as from new entrants into the market. If Endgame is unable to anticipate or react to these challenges, its competitive position could weaken, and it could experience a decline in revenue or reduced revenue growth, and loss of market share that would adversely affect its business, financial condition, and results of operations. Endgame’s ability to compete effectively depends upon numerous factors, many of which are beyond its control, including, but not limited to:

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Endgame’s competitors include the following by general category:

Many of these competitors have greater financial, technical, marketing, sales, and other resources, greater name recognition, longer operating histories, and a larger base of customers than Endgame. They may be able to devote greater resources to the development, promotion, and sale of services than Endgame can, and they may offer lower pricing than Endgame. Further, they may have greater resources for research and development of new technologies, the provision of customer support, and the pursuit of acquisitions, or they may have other financial, technical, or other resource advantages. Endgame’s larger competitors have substantially broader and more diverse product and services offerings as well as routes to market, which may allow them to leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing the Endgame platform. Conditions in the market could change rapidly and significantly as a result of technological advancements, partnering or acquisitions by Endgame’s competitors or continuing market consolidation. Some of Endgame’s current or potential competitors have made or could make acquisitions of businesses or establish cooperative relationships that may allow them to offer more directly competitive and comprehensive solutions than were previously offered and adapt more quickly to new technologies and customer needs. These competitive pressures in the market or Endgame’s failure to compete effectively may result in price reductions, fewer orders, reduced revenue and gross margins, increased net losses and loss of market share. Further, many competitors that specialize in providing protection from a single type of security threat may be able to deliver these targeted security products to the market quicker than Endgame can or convince organizations that these limited products meet their needs. Even if there is significant demand for cloud-based security solutions like ours, if Endgame’s competitors include functionality that is, or is perceived to be, equivalent to or better than Endgame’s in legacy products that are already generally accepted as necessary components of an organization’s IT security architecture, Endgame may have difficulty increasing the market penetration of its platform. Furthermore, even if the functionality offered by other security and IT operations providers is different and more limited than the functionality of the Endgame platform, organizations may elect to accept such limited functionality in lieu of adding products from additional vendors like Endgame. If Endgame is unable to compete successfully, or if competing successfully requires Endgame to take aggressive pricing or other actions, its business, financial condition, and results of operations would be adversely affected.

Endgame derives a material portion of its revenue from a limited number of customers, and the loss of one or more of these customers could adversely impact Endgame’s business, results of operations and financial condition.

Endgame’s customer base is concentrated. For example, during the year ended December 31, 2018, revenue from Endgame’s top two customers, both of which are U.S. federal government agencies, represented 78% of total revenue for the year ended December 31, 2018. If Endgame were to lose one or more of its significant customers, its revenue may significantly decline. In addition, revenue from significant customers may vary from period to period depending on the timing of

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renewing existing agreements or entering into new agreements. The loss of one or more of Endgame’s significant customers could adversely affect its business, results of operations and financial condition.

A portion of Endgame’s revenue is generated from subscriptions sold to governmental entities and heavily regulated organizations, which are subject to a number of challenges and risks.

A significant portion of Endgame’s revenue is generated from subscriptions sold to governmental entities in the United States. Additionally, many of Endgame’s current and prospective customers, such as those in the health care and financial services industries, are highly regulated and may be required to comply with more stringent regulations in connection with subscribing to and implementing the Endgame platform. Selling subscriptions to these entities can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that Endgame will successfully complete a sale. Governmental demand and payment for the Endgame platform may also be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for the Endgame platform.

Further, governmental and highly regulated entities often require contract terms that differ from Endgame’s standard arrangements, including terms that can lead to those customers obtaining broader rights in Endgame products than would be standard. Governmental and highly regulated entities, impose compliance requirements that are complicated, require preferential pricing or “most favored nation” terms and conditions or are otherwise time-consuming and expensive to satisfy. In the United States, applicable federal contracting regulations change frequently. If Endgame undertakes to meet special standards or requirements and does not meet them, Endgame could be subject to significant liability from its customers or regulators. Even if Endgame does meet these special standards or requirements, the additional costs associated with providing the Endgame platform to government and highly regulated customers could harm its operating results. Moreover, changes in the underlying statutory and regulatory conditions that affect these types of customers could harm Endgame’s ability to efficiently provide them access to the Endgame platform and to grow or maintain its customer base. In addition, engaging in sales activities to foreign governments introduces additional compliance risks specific to the Foreign Corrupt Practices Act, the U.K. Bribery Act and other similar statutory requirements prohibiting bribery and corruption in the jurisdictions in which Endgame operates.

As a cybersecurity provider, Endgame has been, and expects to continue to be, a target of cyberattacks. If Endgame internal networks, systems, or data are or are perceived to have been compromised, its reputation may be damaged and its financial results may be negatively affected.

As a provider of security solutions, Endgame may in the past have been, and may in the future be, specifically targeted for attacks intended to circumvent its security capabilities or to exploit the Endgame platform as an entry point into customers’ endpoints, networks, or systems. Endgame is also susceptible to inadvertent compromises of its systems and data, including those arising from process, coding, or human errors. A successful attack or other incident that compromises Endgame’s or its customers’ data or results in an interruption of service could have a significant negative effect on its operations, reputation, financial resources, and the value of its intellectual property. Endgame cannot assure you that any of its efforts to manage this risk, including adoption of a comprehensive incident response plan and process for detecting, mitigating, and investigating security incidents that it regularly tests through table-top exercises, testing of its security protocols through additional techniques, such as penetration testing, debriefing after security incidents, to improve its security and responses, and regular briefing of its directors and officers on its cybersecurity risks, preparedness, and management, will be effective in protecting it from such attacks.

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It is virtually impossible for any enterprise, including Endgame to entirely eliminate the risk of such compromises, interruptions in service, or other security incidents affecting its internal systems or data. Organizations are subject to a wide variety of attacks on their networks, systems, and endpoints, and techniques used to sabotage or to obtain unauthorized access to networks in which data is stored or through which data is transmitted change frequently. Furthermore, employee error or malicious activity could compromise Endgame’s systems. As a result, Endgame may be unable to anticipate these techniques or implement adequate measures to prevent an intrusion into its networks, which could result in unauthorized access to customer data, intellectual property including access to its source code, and information about vulnerabilities in its product, which in turn, could reduce the effectiveness of its solutions, or lead to cyberattacks or other intrusions of its customers’ networks, litigation, governmental audits and investigations and significant legal fees, could damage its relationships with existing customers and could have a negative effect on its ability to attract and retain new customers. Endgame has expended, and anticipates continuing to expend, significant amounts and resources in an effort to prevent security breaches and other security incidents impacting its systems and data. Since its business is focused on providing reliable security services to its customers, Endgame believes that an actual or perceived security incident affecting, its internal systems or data or data of its customers would be especially detrimental to its reputation, customer confidence in its solution, and its business.

In addition, while Endgame maintains insurance policies that may cover certain liabilities in connection with a cybersecurity incident, Endgame cannot be certain that insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to it on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against it that exceed available insurance coverage, or the occurrence of changes in its insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on its business, including its financial condition, results of operation and reputation.

The converged endpoint security market is new and evolving, and may not grow as expected.

Endgame believes its future success will depend in large part on the growth, if any, in the market for endpoint security products. This market is new and evolving, and as such, it is difficult to predict important market trends, including its potential growth, if any. To date, enterprise and corporate cyber security budgets have allocated a majority of dollars to prevention-centric threat protection solutions, such as network, endpoint and web security products designed to stop threats from penetrating corporate networks. Organizations that use these security products may be satisfied with such existing security products and, as a result, these organizations may not adopt Endgame’s solutions in addition to, or in lieu of, security products they currently use.

Further, sophisticated cyber attackers are skilled at adapting to new technologies and developing new methods of gaining access to organizations’ sensitive business data, and changes in the nature of advanced cyber threats could result in a shift in IT budgets away from products such as ours. In addition, while recent high visibility attacks on prominent enterprises and governments have increased market awareness of the problem of cyber attacks, if cyber attacks were to decline, or enterprises or governments perceived that the general level of cyber attacks has declined, Endgame’s ability to attract new customers and expand its sales to existing customers could be materially and adversely affected. If products such as the Endgame platform are not viewed by organizations as necessary, or if customers do not recognize the benefit of such products as a critical element of an effective cyber security strategy, Endgame’s revenue may not grow as quickly as expected, or may decline.

In addition, it is difficult to predict customer adoption and retention rates, customer demand for Endgame’s products, the size and growth rate of the market for next-generation endpoint security, the

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entry of competitive products or the success of existing competitive products. Any expansion in the market depends on a number of factors, including the cost, performance and perceived value associated with Endgame’s products and those of its competitors. If these products do not achieve widespread adoption or there is a reduction in demand for products in the market caused by a lack of customer acceptance, technological challenges, competing technologies, products, decreases in corporate spending, weakening economic conditions or otherwise, it could result in reduced customer orders, early terminations, reduced customer retention rates or decreased revenue, any of which would adversely affect Endgame’s business operations and financial results.

If Endgame’s products fail or are perceived to fail to prevent or detect cyber attacks, or if its products contain undetected errors or defects, its brand and reputation could be harmed, which could have an adverse effect on its business and results of operations.

If Endgame’s products fail or are perceived to fail to prevent or detect cyber attacks in its customers’ endpoints, or if its products fail to identify and respond to new and increasingly complex methods of cyber attacks, its business and reputation may suffer. There is no guarantee that Endgame’s products will prevent or detect all cyber attacks, especially in light of the rapidly changing security landscape to which it must respond.

Endgame’s products, which are complex, may also contain undetected errors or defects. Endgame expects that these errors or defects may be found from time to time in the future in new or enhanced products after commercial release. Defects may cause its products to be vulnerable to attacks, cause them to fail to prevent or detect cyber attacks. Any errors, defects, disruptions in service or other performance problems with its products may damage Endgame’s customers’ business and could hurt its reputation. If its products fail to prevent or detect cyber attacks for any reason, Endgame may incur significant costs, the attention of its key personnel could be diverted, its customers may delay or withhold payment or elect not to renew or other significant customer relations problems may arise.

Endgame may also be subject to liability claims for damages related to errors or defects in its products. A material liability claim or other occurrence that harms its reputation or decreases market acceptance of its products may harm its business and operating results. Although Endgame has limitation of liability provisions in many of its customer contracts and in its terms and conditions of sale, they may not fully or effectively protect it from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the U.S. or other countries. Endgame maintains insurance to protect against certain claims associated with the use of its products, but its insurance coverage may not adequately cover any claim asserted against us. In addition, even claims that ultimately are unsuccessful could result in expenditure of funds in litigation, divert management’s time and other resources, and harm Endgame’s business and reputation.

Endgame relies on channel partners, such as managed security service providers, incident response firms and value-added resellers, to generate a significant portion of its revenue. If Endgame fails to maintain successful relationships with its channel partners, or if its channel partners fail to perform, its ability to market, sell and distribute its products will be limited, and Endgame’s business, financial position and results of operations will be harmed.

In addition to its direct sales force, Endgame relies on its channel partners to sell its products. A majority of its revenue is generated by its channel partners, including managed service security providers, incident response firms and value-added resellers. Endgame expects to continue to generate sales to new and existing customers through its channel partners as a part of its growth strategy.

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Endgame provides its sales channel partners with specific training and programs to assist them in selling its products, but there can be no assurance that these steps will be effective. In addition, its channel partners may be unsuccessful in marketing, selling and supporting Endgame’s products. If Endgame is unable to develop and maintain effective sales incentive programs for its third-party channel partners, it may not be able to incentivize these partners to sell its products to customers and, in particular, to large enterprises. Endgame’s agreements with channel partners are generally non-exclusive and these partners may also market, sell and support products that are competitive with it and may devote more resources to the marketing, sales and support of such competitive products. These partners may have incentives to promote a competitor’s product to the detriment of Endgame’s or may cease selling Endgame’s products altogether. Endgame’s channel partners may cease or deemphasize the marketing of its products with limited or no notice and with little or no penalty. Endgame’s agreements with its channel partners may generally be terminated for any reason by either party with advance notice prior to each annual renewal date. Endgame cannot be certain that it will retain these channel partners or that it will be able to secure additional or replacement channel partners. The loss of one or more of its significant channel partners or a decline in the number or size of orders from them could harm Endgame’s operating results. In addition, any new sales channel partner requires extensive training and may take several months or more to achieve productivity. Endgame channel partner sales structure could subject it to lawsuits, potential liability and reputational harm if, for example, any of its channel partners misrepresent the functionality of Endgame’s products, subscriptions or services to customers or violate laws or corporate policies.

If the general level of advanced cyber attacks declines, or is perceived by its current or potential customers to have declined, Endgame’s business could be harmed.

Endgame’s business is substantially dependent on enterprises and governments recognizing that advanced cyber attacks are pervasive and are not effectively prevented by legacy security products. High visibility attacks on prominent enterprises and governments have increased market awareness of the problem of advanced cyber attacks and help to provide an impetus for enterprises and governments to devote resources to protecting against advanced cyber attacks, such as testing Endgame’s products, purchasing them and broadly deploying them within their organizations. If advanced cyber attacks were to decline, or enterprises or governments perceived that the general level of advanced cyber attacks has declined, Endgame’s ability to attract new customers and expand sales of its products to existing customers could be materially and adversely affected. A reduction in the threat landscape could increase Endgame’s sales cycles and harm its business, results of operations and financial condition.

Endgame may need to reduce or change its pricing model to remain competitive.

Endgame generally sells its products on a subscription basis. Endgame expects that it may need to change its pricing from time to time. As competitors introduce new products that compete with Endgame’s products or reduce their prices, Endgame may be unable to attract new customers or retain existing customers based on its historical pricing. Endgame also must determine the appropriate price to enable it to compete effectively internationally. Moreover, enterprises may demand substantial price discounts as part of the negotiation of sales contracts. As a result, Endgame may be required or choose to reduce its prices or change its pricing model, which could adversely affect its business, operating results and financial condition.

Defects or disruptions in the rollout of the Endgame platform updates or enhancements could diminish demand for the Endgame platform, adversely affect Endgame’s reputation and subject Endgame to substantial liability.

Like many software companies, Endgame provides frequent incremental releases of software updates and functional enhancements to its platform. Despite extensive pre-release testing, such new

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versions may contain undetected errors when first introduced or released. Endgame has, from time to time, found errors in its software, and new errors in its existing software may be detected in the future. Since Endgame’s customers use the Endgame platform for important aspects of their business, any errors, defects, disruptions in the Endgame platform or other performance problems with Endgame’s solution could hurt Endgame’s reputation and may damage its customers’ businesses. If that occurs, Endgame customers may delay or withhold payment to it, elect not to renew, or make warranty claims or other claims against Endgame, and Endgame could lose future sales. The occurrence of any of these events could result in an increase in Endgame’s bad debt expense, an increase in collection cycles for accounts receivable, decreased future revenue and earnings, require Endgame to increase its warranty provisions or incur the risk or expense of litigation.

If governments or their agencies reduce their demand for the Endgame platform, Endgame’s business may suffer. Moreover, if Endgame fails to comply with government contracting regulations, Endgame could suffer a loss of revenue or incur price adjustments or other penalties.

Changes in governmental budget priorities could adversely affect Endgame’s business. U.S. agencies have purchased Endgame’s platform directly from Endgame. When the government changes budget priorities, Endgame’s subscription sales to government agencies and government-funded customers may be affected. Demand and payment for Endgame’s subscriptions and its customers’ products may be affected by public sector budgetary cycles or funding authorizations. Funding reductions or delays could negatively impact demand for the Endgame platform. If government funding is discontinued or significantly reduced, Endgame’s business could be materially adversely affected.

A material portion of Endgame’s revenue is derived from contracts with agencies of the U.S. government and subcontracts with its prime contractors. As a result, Endgame is subject to federal contracting regulations, including the Federal Acquisition Regulation, or the FAR, system. The FAR system governs, among other things, U.S. government contract pricing, including determination of the costs incurred by Endgame in the performance of its U.S. government contracts. Additionally, under the FAR system, the U.S. government is entitled, for years after final payment on certain negotiated contracts, to examine all of Endgame’s cost records with respect to such contracts and to seek a downward adjustment to the price of the contract if it determines that Endgame failed to furnish complete, accurate and current cost or pricing data in connection with the negotiation of the price of the contract.

In connection with Endgame’s U.S. government contracts, Endgame is also subject to government audits and review and approval of its policies, procedures and internal controls for compliance with contract terms, procurement regulations and applicable laws. In certain circumstances, if Endgame does not comply with the terms of a contract or with regulations or statutes, Endgame could be subject to contract termination or downward contract price adjustments or refund obligations, could be assessed civil or criminal penalties or could be debarred or suspended from obtaining future contracts for a specified period of time. Any such termination, adjustment, sanction, debarment or suspension could have an adverse effect on Endgame’s business.

Endgame’s business could be adversely affected if its customers are not satisfied with the deployment services Endgame provides.

The success of Endgame’s business depends on its customers’ satisfaction with the Endgame platform, the support that Endgame provides for its platform and the professional services that it provides to help its customers deploy and maintain the Endgame platform. If a customer is not satisfied with the quality of work performed by Endgame or the implementation of the Endgame platform, Endgame could incur additional costs to address the deficiency, which would diminish the profitability

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of the customer relationship. Further, a customer’s dissatisfaction with Endgame’s services could adversely affect the customer’s renewal or expansion of existing licenses. In addition, negative publicity related to Endgame’s customer relationships, regardless of accuracy, may further damage Endgame’s business by affecting its ability to compete for new business with actual and prospective customers.

Endgame is substantially dependent upon customer renewals, the addition of new customers and the continued growth of its subscription revenue.

Endgame derives, and expects to increasingly derive in the future, a substantial portion of its revenue from the sale of software subscriptions. The market for Endgame’s platform is still evolving, and competitive dynamics may cause pricing levels to change as the market matures and as existing and new market participants introduce new types of solutions and different approaches to enable customers to address their needs. As a result, Endgame may be forced to reduce the prices it charges for software and may be required to offer terms less favorable to Endgame for new and renewing agreements.

In order for Endgame to improve its operating results, it is important that its customers renew their subscriptions with Endgame when their initial term expires. In general, Endgame’s customers have no renewal obligation after their initial term expires, and Endgame cannot assure you that it will be able to renew subscriptions with any of its customers at the same or higher contract value.

Further, while Endgame offers access to the Endgame platform primarily through multi-year subscription agreements, some agreements may have shorter durations. Additionally, some of Endgame’s contracts limit the amount it can increase prices from period to period, or include pricing guarantees. If Endgame’s customers do not renew their agreements, terminate their agreements or renew their agreements on terms less favorable to Endgame, Endgame’s revenue may decline and Endgame’s operating results would likely be harmed as a result.

Endgame relies on the performance of highly skilled personnel, including senior management and engineering, professional services, sales and technology professionals; if Endgame is unable to retain or motivate key personnel or hire, retain and motivate qualified personnel, Endgame’s business would be harmed.

Endgame believes its success has depended, and continues to depend, on the efforts and talents of its senior management team, and its highly skilled team members, including its sales personnel, professional services personnel and software engineers. From time to time, there may be changes in Endgame’s senior management team resulting from the termination or departure of its executive officers and key employees. Endgame’s senior management and key employees are employed on an at-will basis, which means that they could terminate their employment with Endgame at any time. The loss of any of Endgame’s senior management or key employees, could adversely affect Endgame’s ability to build on the efforts they have undertaken and to execute Endgame’s business plan, and Endgame may not be able to find adequate replacements. Endgame cannot ensure that it will be able to retain the services of any members of its senior management or other key employees.

Endgame’s ability to successfully pursue its growth strategy also depends on its ability to attract, motivate and retain its personnel. Competition for well-qualified employees in all aspects of Endgame’s business, including sales personnel, professional services personnel and software engineers, is intense. Endgame’s recruiting efforts focus on elite universities and its primary recruiting competition are well-known, high-paying firms. Endgame’s continued ability to compete effectively depends on its ability to attract new employees and to retain and motivate existing employees. If Endgame does not succeed in attracting well-qualified employees or retaining and motivating existing employees, Endgame’s business would be adversely affected.

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Failure to effectively develop and expand Endgame’s sales and marketing capabilities could harm its ability to increase its customer base and achieve broader market acceptance of its solution.

Endgame’s ability to increase its customer base and achieve broader market acceptance of the Endgame platform will depend to a significant extent on its ability to expand its sales and marketing operations. Endgame plans to continue expanding its sales force and third-party strategic sales partners; however, there is no assurance that Endgame will be successful in attracting and retaining talented sales personnel or strategic partners or that any new sales personnel or strategic partners will be able to achieve productivity in a reasonable period of time or at all. Endgame also plans to dedicate significant resources to sales and marketing programs, including through electronic marketing campaigns and trade event sponsorship and participation. All of these efforts will require Endgame to invest significant financial and other resources and its business will be harmed if its efforts do not generate a correspondingly significant increase in revenue.

If Endgame is not able to maintain and enhance its brand, Endgame’s business and operating results may be adversely affected.

Endgame believes that developing and maintaining widespread awareness of its brand in a cost-effective manner is critical to achieving widespread acceptance of the Endgame platform and attracting new customers. Brand promotion activities may not generate customer awareness or increase revenue and, even if they do, any increase in revenue may not offset the expenses Endgame incurs in building its brand. If Endgame fails to successfully promote and maintain its brand, or incurs substantial expenses, Endgame may fail to attract or retain customers necessary to realize a sufficient return on its brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of the Endgame platform.

Endgame relies upon Amazon Web Services to operate its cloud offering; any disruption of or interference with its use of Amazon Web Services would adversely affect its business, results of operations and financial condition.

Endgame outsources a significant portion of the infrastructure relating to its cloud offering of the Endgame platform to Amazon Web Services, or AWS, which hosts the Endgame platform on Endgame customers’ behalf. Customers of Endgame’s cloud offering need to be able to access the Endgame platform at any time, without interruption or degradation of performance, and Endgame provides them with service level commitments with respect to uptime. AWS runs its own platform that Endgame accesses, and Endgame is, therefore, vulnerable to service interruptions at AWS. Endgame may experience interruptions, delays and outages in service and availability from time to time as a result of problems with Endgame’s AWS provided infrastructure. Lack of availability of Endgame’s AWS infrastructure could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks that Endgame cannot predict or prevent. Such outages could lead to the triggering of Endgame’s service level agreements and the issuance of credits to Endgame’s cloud offering customers, which may impact Endgame’s operating results.

In addition, if the security of the AWS infrastructure is compromised or believed to have been compromised, Endgame’s business, results of operations and financial condition could be adversely affected. It is possible that Endgame’s customers and potential customers would hold it accountable for any breach of security affecting the AWS infrastructure and Endgame may incur significant liability from those customers and from third parties with respect to any breach affecting AWS systems. Because Endgame’s agreement with AWS limits AWS’s liability for damages, Endgame may not be able to recover a material portion of Endgame’s liabilities to its customers and third parties from AWS. Customers and potential customers may refuse to do business with Endgame because of the

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perceived or actual failure of its cloud offering as hosted by AWS and Endgame’s operating results could be harmed.

If any of its arrangements with AWS are terminated, Endgame expects that it could receive similar services from other third parties; however, if any of its arrangements with AWS are terminated, Endgame could experience interruptions on the Endgame platform and in its ability to make the Endgame platform available to customers, as well as delays and additional expenses in arranging alternative cloud infrastructure services.

If the Endgame platform fails to perform properly, Endgame’s reputation could be adversely affected, Endgame’s market share could decline and Endgame could be subject to liability claims.

The Endgame platform is inherently complex and may contain material defects or errors. Any defects in functionality or that cause interruptions in the availability of the Endgame platform could result in:

The costs incurred in correcting any material defects or errors might be substantial and could adversely affect Endgame’s operating results.

If Endgame suffers extended periods of unavailability for the Endgame platform, Endgame may be contractually obligated to refund customers for prepaid amounts or Endgame could face contract terminations. Endgame’s revenue could be significantly affected if it suffers unscheduled downtime that exceeds the allowed downtimes under its agreements with its customers.

Because of the large amount of data that Endgame collects and manages, it is possible that hardware failures or errors in Endgame’s systems could result in data loss or corruption, or cause the information that Endgame collects to be incomplete or contain inaccuracies that its customers regard as significant. Furthermore, the availability or performance of the Endgame platform could be adversely affected by a number of factors, including customers’ inability to access the internet, the failure of its network or software systems, security breaches or variability in user traffic for Endgame services. For example, Endgame’s cloud offering customers access the Endgame platform through their internet service providers. If a customer’s service provider fails to provide sufficient capacity to support the Endgame platform or otherwise experiences service outages, such failure could interrupt Endgame customers’ access to the Endgame platform, adversely affect their perception of the Endgame platform’s reliability and reduce Endgame’s revenue. In addition to potential liability, if Endgame experiences interruptions in the availability of its cloud offering, Endgame’s reputation could be adversely affected and it could lose customers.

If Endgame fails to offer high-quality support, Endgame’s business and reputation would suffer.

Endgame customers rely on Endgame’s personnel for support of the Endgame platform. High-quality support is important for the renewal of agreements with existing customers. The importance of

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high-quality support will increase as Endgame expands its business and pursues new customers. If Endgame does not help its customers quickly resolve issues and provide effective ongoing support, Endgame’s ability to sell new software to existing and new customers would suffer and its reputation with existing or potential customers would be harmed.

Endgame employs third-party licensed software for use in or with its software, and the inability to maintain these licenses or errors in the software Endgame license could result in increased costs, or reduced service levels, which would adversely affect Endgame’s business.

Endgame’s software incorporates third-party software obtained under licenses from other companies. Endgame anticipates that it will continue to rely on such third-party software and development tools from third parties in the future. Although Endgame believes that there are commercially reasonable alternatives to the third-party software it currently licenses, including open source software, this may not always be the case, or it may be difficult or costly to migrate to other third-party software. Endgame’s use of additional or alternative third-party software would require it to enter into license agreements with third parties. In addition, integration of the third-party software used in Endgame’s software with new third-party software may require significant work and require substantial investment of time and resources. Also, any undetected errors or defects in third-party software could prevent the deployment or impair the functionality of Endgame software, delay new updates or enhancements to the Endgame platform, result in a failure of the Endgame platform and injure Endgame’s reputation.

Portions of the Endgame platform utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect Endgame’s business.

Endgame’s software contains software licensed to it by third parties under so-called “open source” licenses. From time to time, there have been claims against companies that distribute or use open source software in their products and services, asserting that such open source software infringes the claimants’ intellectual property rights. Endgame could be subject to suits by parties claiming that what Endgame believes to be licensed open source software infringes their intellectual property rights. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. In addition, certain open source licenses require that source code for software programs that are subject to the license be made available to the public and that any modifications or derivative works to such open source software continue to be licensed under the same terms.

Although Endgame monitors its use of open source software in an effort both to comply with the terms of the applicable open source licenses and to avoid subjecting its software to conditions Endgame does not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on Endgame’s ability to commercialize the Endgame platform. By the terms of certain open source licenses, Endgame could be required to release the source code of its software and to make its software available under open source licenses, if Endgame combines or distributes its software with open source software in a certain manner. In the event that portions of its software is determined to be subject to an open source license, Endgame could be required to publicly release the affected portions of its source code, re-engineer all, or a portion of, that software or otherwise be limited in the licensing of its software, each of which could reduce or eliminate the value of the Endgame platform. Many of the risks associated with usage of open source software cannot be eliminated, and could negatively affect Endgame’s business, results of operations and financial condition.

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Catastrophic events may disrupt Endgame’s business.

Endgame’s corporate headquarters are located in Arlington, Virginia. The area around Washington, D.C. could be subjected to terrorist attacks. Additionally, Endgame relies on its network and third-party infrastructure and enterprise applications, internal technology systems and its website for its development, marketing, operational support, hosted services and sales activities. In the event of a major hurricane, earthquake or catastrophic event such as fire, power loss, telecommunications failure, cyberattack, war or terrorist attack, Endgame may be unable to continue its operations and may endure system interruptions, reputational harm, delays in its software development, lengthy interruptions in its services, breaches of data security and loss of critical data, all of which could have an adverse effect on Endgame’s future operating results.

If the estimates or judgments relating to Endgame’s critical accounting policies prove to be incorrect, Endgame’s results of operations could be adversely affected.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Endgame bases its estimates on historical experience and on various other assumptions that Endgame believes to be reasonable under the circumstances, as provided in “Endgame Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing Endgame’s consolidated financial statements include those related to revenue recognition, income taxes and the related valuation allowance and stock-based compensation. Endgame’s results of operations may be adversely affected if its assumptions change or if actual circumstances differ from those in its assumptions, which could cause its results of operations to fall below the expectations of securities analysts and investors.

Adverse economic conditions may negatively impact Endgame’s business.

Endgame’s business depends on the overall demand for enterprise software and on the economic health of its current and prospective customers. If economic conditions in United States and other prospective markets for the Endgame platform deteriorate, many customers may delay or reduce their information technology spending. This could result in reductions in sales of the Endgame platform, a decrease in Endgame renewal rates, longer sales cycles, reductions in subscription duration and value, slower adoption of new technologies and increased price competition. Any of these events would likely have an adverse effect on Endgame’s business, operating results and financial position.

Risks Related to Government Regulation, Data Collection, Intellectual Property and Litigation

Failure to comply with governmental laws and regulations could harm Endgame’s business.

Endgame’s business is subject to regulation by various federal, state, local and foreign governments. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could subject Endgame to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, injunctions or other collateral consequences. If any governmental sanctions are imposed, or if Endgame does not prevail in any possible civil or criminal litigation, Endgame’s business, results of operations, and financial condition could be materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement

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actions and sanctions could harm Endgame’s business, reputation, results of operations and financial condition.

Any failure to protect Endgame’s proprietary technology and intellectual property rights could substantially harm its business and operating results.

Endgame’s success and ability to compete depend in part on its ability to protect its proprietary technology and intellectual property. To safeguard these rights, Endgame relies on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the United States and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage.

Endgame has three issued patents relating to the Endgame platform and 12 patent applications pending in the United States relating to the Endgame platform. Endgame cannot assure you that any patents will issue from any patent applications, that patents that issue from such applications will give Endgame the protection that Endgame seeks or that any such patents will not be challenged, invalidated or circumvented. Any patents that may issue in the future from Endgame’s pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. Obtaining and enforcing software patents in the United States is becoming increasingly challenging. Any patents Endgame has obtained or may obtain in the future may be found to be invalid or unenforceable in light of recent and future changes in the law. Endgame has registered the “Endgame” name and logo in the United States. Endgame has registrations and/or pending applications for additional marks in the United States; however, Endgame cannot assure you that any future trademark registrations will be issued for pending or future applications or that any registered trademarks will be enforceable or provide adequate protection of Endgame’s proprietary rights. Endgame also licenses software from third parties for integration into the Endgame platform, including open source software and other software available on commercially reasonable terms. Endgame cannot assure you that such third parties will maintain such software or continue to make it available.

In order to protect Endgame’s unpatented proprietary technologies and processes, Endgame relies on trade secret laws and confidentiality and invention assignment agreements with its employees, consultants, strategic partners, vendors and others. Also, despite Endgame’s efforts to protect its proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, copy, reverse engineer or otherwise obtain and use them. In addition, others may independently discover Endgame’s trade secrets, in which case Endgame would not be able to assert trade secret rights, or develop similar technologies and processes. Further, the contractual provisions that Endgame enters into may not prevent unauthorized use or disclosure of its proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of its proprietary technology or intellectual property rights. Moreover, policing unauthorized use of Endgame’s technologies, trade secrets and intellectual property is difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. To the extent that Endgame expands its activities outside of the United States, Endgame’s exposure to unauthorized copying and use of its platform and proprietary information may increase. Endgame may be unable to determine the extent of any unauthorized use or infringement of the Endgame platform, technologies or intellectual property rights.

There can be no assurance that the steps that Endgame takes will be adequate to protect its proprietary technology and intellectual property, that others will not develop or patent similar or superior technologies, products or services, or that its trademarks, patents, and other intellectual

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property will not be challenged, invalidated or circumvented by others. Furthermore, effective trademark, patent, copyright, and trade secret protection may not be available in every country in which Endgame software is available or where Endgame has employees or independent contractors. In addition, the legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights in internet and software-related industries are uncertain and still evolving.

In order to protect its intellectual property rights, Endgame may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce Endgame’s intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of its intellectual property. Furthermore, Endgame’s efforts to enforce its intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of its intellectual property rights. Endgame’s failure to secure, protect and enforce its intellectual property rights could seriously adversely affect its brand and adversely impact its business.

Endgame may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require Endgame to pay significant damages and could limit Endgame’s ability to use certain technologies.

Companies in the software and technology industries, including some of its current and potential competitors, own significant numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. The litigation may involve patent holding companies or other adverse patent owners that have no relevant product revenue and against which Endgame’s patents may therefore provide little or no deterrence. Endgame may be subject to claims that it has misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent Endgame gains greater market visibility or faces increasing competition, Endgame faces a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to enterprise software companies. In addition, Endgame may be subject to claims that employees or contractors, or Endgame, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of Endgame’s competitors or other parties. To the extent that intellectual property claims are made against Endgame’s customers based on their usage of Endgame technology, Endgame may have certain obligations to indemnify and defend such customers from those claims. The term of Endgame’s contractual indemnity provisions often survives termination or expiration of the applicable agreement. Large indemnity payments, defense costs or damage claims from contractual breach could harm Endgame’s business, results of operations and financial condition.

There may be third-party intellectual property rights, including issued or pending patents that cover significant aspects of Endgame’s technologies or business methods. Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, could divert Endgame management’s attention and other resources and could result in adverse publicity. These claims could also subject Endgame to making substantial payments for legal fees, settlement payments, and other costs or damages, potentially including treble damages if Endgame is found to have willfully infringed patents or copyrights. These claims could also result in Endgame having to stop making, selling, offering for sale, or using technology found to be in violation of a third party’s rights. Endgame might be required to seek a license for the third-party intellectual property rights, which may not be available on reasonable terms or at all. Even if a license is available to Endgame, it may be required to pay significant upfront fees, milestones or royalties, which would increase its operating expenses. Moreover, to the extent Endgame only has a license to any intellectual property used in the Endgame platform, there may be no guarantee of continued access to

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such intellectual property, including on reasonable terms. As a result, Endgame may be required to develop alternative non-infringing technology, which could require significant effort and expense. If a third party is able to obtain an injunction preventing Endgame from accessing such third-party intellectual property rights, or if Endgame cannot license or develop technology for any infringing aspect of its business, Endgame would be forced to limit or stop sales of its software or cease business activities covered by such intellectual property, and may be unable to compete effectively. Any of these results would adversely affect Endgame’s business, results of operations, financial condition and cash flows.

Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for the Endgame platform, and could have a negative impact on Endgame’s business.

The future success of Endgame’s business, and particularly its cloud offering, depends upon the continued use of the internet as a primary medium for commerce, communication and business applications. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require Endgame to modify the Endgame platform in order to comply with these changes. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally, resulting in reductions in the demand for internet-based solutions such as the Endgame platform.

In addition, the use of the internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease of use, accessibility, and quality of service. The performance of the internet and its acceptance as a business tool have been adversely affected by “viruses,” “worms” and similar malicious programs and the internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet is adversely affected by these issues, demand for the Endgame platform could suffer.

Endgame’s operating results may be negatively affected if it is required to pay additional state sales tax, value added, or other transaction taxes, and Endgame could be subject to liability with respect to all or a portion of past or future sales.

Endgame currently collects and remits sales and use, value added and other transaction taxes in certain of the jurisdictions where Endgame does business based on its assessment of the amount of taxes owed by it in such jurisdictions. However, in some jurisdictions in which Endgame does business, Endgame does not believe that it owes such taxes, and therefore it currently does not collect and remit such taxes in those jurisdictions or record contingent tax liabilities in respect of those jurisdictions.

Further, due to uncertainty in the application and interpretation of applicable tax laws in various jurisdictions, Endgame may be exposed to sales and use, value added or other transaction tax liability. A successful assertion that Endgame is required to pay additional taxes in connection with sales of the Endgame platform, or the imposition of new laws or regulations requiring the payment of additional taxes, would create increased costs and administrative burdens for Endgame. If Endgame is subject to additional taxes and determines to offset such increased costs by collecting and remitting sales taxes from its customers, or otherwise passing those costs through to its customers, companies may be discouraged from using the Endgame platform. Any increased tax burden may decrease Endgame’s ability or willingness to compete in relatively burdensome tax jurisdictions, result in substantial tax liabilities related to past sales or otherwise harm its business and operating results.

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Endgame’s ability to use net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2018, Endgame had federal and state net operating loss carryforwards, or NOLs, of $143,719,114. Net operating loss carryforwards generated prior to 2018 expire at various times beginning in 2022. A lack of future taxable income would adversely affect Endgame’s ability to utilize these NOLs before they expire. Under the provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, substantial changes in its ownership may limit the amount of pre-change NOLs that can be utilized annually in the future to offset taxable income. Section 382 of the Internal Revenue Code, or Section 382, imposes limitations on a company’s ability to use NOLs if a company experiences a more-than-50-percent ownership change over a three-year testing period. The proposed merger with Elastic would be a more-than-50-percent ownership change for this purpose and may impair Endgame’s ability to use its NOLs prior to expiration, even if Endgame achieves profitability.

Endgame is subject to anti-corruption laws with respect to its domestic and international operations and non-compliance with such laws can subject Endgame to criminal and/or civil liability and materially harm its business.

Endgame is subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the United Kingdom Bribery Act 2010, and other anti-corruption laws in countries in which Endgame conducts activities. Anti-corruption laws are interpreted broadly and prohibit Endgame from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. Endgame uses third-party law firms, accountants, and other representatives for regulatory compliance, sales, and other purposes in several countries. Endgame can be held liable for the corrupt or other illegal activities of these third-party representatives, its employees, contractors, and other agents, even if Endgame does not explicitly authorize such activities. In addition, although Endgame has implemented policies and procedures to ensure compliance with anti-corruption laws, there can be no assurance that all of its employees, representatives, contractors, or agents will comply with these laws at all times. Noncompliance with these laws could subject Endgame to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if Endgame does not prevail in any possible civil or criminal litigation, Endgame’s business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm its business, results of operations, and financial condition. Moreover, as an issuer of securities, Endgame is also subject to the accounting and internal controls provisions of the FCPA. These provisions require Endgame to maintain accurate books and records and a system of internal controls sufficient to detect and prevent corrupt conduct. Failure to abide by these provisions may have an adverse effect on Endgame’s business, operations or financial condition.

Endgame is subject to governmental export and import controls and economic and trade sanctions that could impair its ability to conduct business in international markets and subject it to liability if Endgame is not in compliance with applicable laws and regulations.

The United States and other countries maintain and administer export and import laws and regulations, including various economic and trade sanctions including those administered by the Office

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of Foreign Assets Control, or OFAC, which apply to Endgame’s business. Endgame is required to comply with these laws and regulations. If Endgame fails to comply with such laws and regulations, it and certain of its employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on Endgame and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

Changes in the Endgame platform, or changes in applicable export or import laws and regulations may create delays in the introduction and sale of the Endgame platform in international markets or, in some cases, prevent the export or import of the Endgame platform to certain countries, governments or persons altogether. Any change in export or import laws and regulations or economic or trade sanctions, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of the Endgame platform, or in Endgame’s decreased ability to export or sell its platform to existing or potential customers. Any decreased use of the Endgame platform limitation on Endgame’s ability to export or sell the Endgame platform would likely adversely affect its business, financial condition, and results of operations.

Endgame incorporates encryption technology into the Endgame platform. Encryption products may be exported outside of the United States only with the required export authorization, including by license, license exception or other appropriate government authorization. Obtaining the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. In addition, various countries regulate the import of certain encryption technology, including import permitting and licensing requirements, and have enacted laws that could limit Endgame’s ability to distribute its products or could limit its customers’ ability to implement its products in those countries. Although Endgame takes precautions to prevent its products from being provided in violation of such laws, Endgame’s products may have been in the past, and could in the future be, provided inadvertently in violation of such laws, despite the precautions Endgame takes. Governmental regulation of encryption technology and regulation of imports or exports, or Endgame’s failure to obtain required import or export approval for its products, could harm Endgame’s international sales and adversely affect its revenues.

Moreover, U.S. export control laws and economic sanctions programs prohibit the provision of services to countries, governments and persons that are subject to U.S. economic embargoes and trade sanctions. Even though Endgame takes precautions to prevent its platform from being used by U.S. sanctions targets, the Endgame platform could be used by a sanctioned person or in an embargoed country despite such precautions. Any such shipment could have negative consequences, including government investigations, penalties and reputational harm.

If the Endgame platform fails to function in a manner that allows its customers to operate in compliance with regulations and/or industry standards, Endgame’s revenue and operating results could be harmed.

Governmental and other customers may require the Endgame platform to comply with certain privacy, security and other certifications and standards. The cloud implementation of the Endgame platform holds various security certifications from government agencies and industry organizations, including the Federal Risk and Authorization Management Program compliance, and meets the Payment Card Industry Data Security Standard and the United States Health Insurance Portability and Accountability Act standard. Governments and industry organizations may adopt new laws, regulations or requirements, or make changes to existing laws or regulations, that could impact the demand for, or value of, the Endgame platform. If Endgame fails to maintain its current security certifications and/or to continue to meet security standards, or if Endgame is unable to adapt the Endgame platform to

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changing legal and regulatory standards or other requirements in a timely manner, Endgame customers may lose confidence in the Endgame platform and Endgame’s business could be negatively impacted.

Endgame’s business could be adversely affected if its employees cannot obtain and maintain required security clearances or Endgame cannot maintain its facility security clearance.

If and when awarded, certain U.S. government contracts require Endgame’s employees to maintain various levels of security clearances, and Endgame would be required to maintain its facility security clearance, to comply with Department of Defense, or DoD, requirements. The DoD has strict security clearance requirements for personnel who work on classified programs. Obtaining and maintaining security clearances for employees involves a lengthy process, and it is difficult to identify, recruit and retain employees who already hold security clearances. If Endgame’s employees are unable to obtain security clearances in a timely manner, or at all, or if Endgame’s employees who hold security clearances are unable to maintain their clearances or terminate employment with Endgame, then a customer requiring classified work could terminate an existing contract or decide not to renew the contract upon its expiration. To the extent Endgame is not able to maintain its facility security clearance, Endgame may not be able to bid on or win new classified contracts. Classified contracts accounted for 39% of its revenue generated in the year ended December 31, 2018.

Risks Related to Ownership of Elastic Ordinary Shares

The market price for our ordinary shares has been and is likely to continue to be volatile or may decline regardless of our operating performance.

The stock markets, and securities of technology companies in particular, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business. The market price of our ordinary shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: