SentinelOne Inc

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Business

SentinelOne, Inc. (SentinelOne, the Company, we, our, or us) was incorporated in January 2013 in the State of Delaware. We are a cybersecurity provider that delivers an artificial intelligence-powered platform to enable autonomous cybersecurity defense. Our headquarters is located in Mountain View, California with various other global office locations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and applicable rules and regulations of the Securities and Exchange Commission (SEC), regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024 filed with the SEC on March 27, 2024 (Annual Report).

In management’s opinion, the accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which reflect all normal recurring adjustments necessary to present fairly the results for the interim periods, but are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of SentinelOne and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ from these estimates, and such differences could be material to our condensed consolidated financial statements. There have been no material changes in our use of estimates during the three months ended April 30, 2024, as compared to the use of estimates disclosed in our Annual Report.

Significant Accounting Policies

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. We are currently evaluating the provisions of this ASU.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

Segment and Geographic Information

We have a single operating and reportable segment. Our chief operating decision maker (CODM) is our Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and assessing financial performance. For information regarding our revenue by geography, see Note 3, Revenue and Contract Balances.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash to the total of these amounts shown in the condensed consolidated statements of cash flows (in thousands):

Restricted cash, current and restricted cash, non-current is presented within other current assets and other assets in the condensed consolidated balance sheets, respectively.

3. REVENUE AND CONTRACT BALANCES

Disaggregation of Revenue

The following table summarizes revenue by geography based on the shipping address of end customers who have contracted to use our platform for the periods presented (in thousands, except percentages):

No single country other than the United States represented 10% or more of our revenue during the three months ended April 30, 2024 and 2023.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Substantially all of our sales are fulfilled through our channel partners, including distributors, resellers, managed security service providers, and others.

Contract Balances

Contract assets consist of unbilled accounts receivable, which arise when a right to consideration for our performance under the customer contract occurs before invoicing the customer. The amount of unbilled accounts receivable included within accounts receivable, net on the condensed consolidated balance sheets was $4.5 million and $3.8 million as of April 30, 2024 and January 31, 2024, respectively.

Contract liabilities consist of deferred revenue, which represents invoices billed in advance of performance under a contract. Deferred revenue is recognized as revenue over the contractual period. The deferred revenue balance was $493.1 million and $514.5 million as of April 30, 2024 and January 31, 2024, respectively. We recognized revenue of $148.0 million and $100.3 million during the three months ended April 30, 2024 and 2023, respectively, that was included in the corresponding contract liability balance at the beginning of the period.

Remaining Performance Obligations

Our contracts with customers typically range fromone tothree years. Revenue allocated to remaining performance obligations represents non-cancelable contract revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced in future periods.

For consumption and usage-based agreements with non-cancelable commitments, remaining performance obligations are determined based on the ratable recognition of the remaining commitment over the remaining contract term. The amount and timing of revenue recognition are generally dependent on customers’ future consumption, which is inherently variable at the customers’ discretion.

As of April 30, 2024, our remaining performance obligations were $874.9 million, of which we expect to recognize 89% as revenue over the next 24 months, with the remainder to be recognized thereafter.

4. ACQUISITIONS

PingSafe

On February 1, 2024, we completed our acquisition of PingSafe Pte. Ltd. (PingSafe) to provide customers with a fully integrated platform that drives better automation across their entire cloud footprint. We acquired 100% of the shares of PingSafe for total consideration of approximately $59.2 million in cash and 2,354,607 shares of our Class A common stock. The acquisition was accounted for as business combinations in accordance with ASC Topic 805, Business Combinations (ASC Topic 805).

The purchase price of the acquisition amounted to $83.0 million, which was primarily allocated to intangible assets of $11.3 million and goodwill of $72.9 million. We had post-combination expense with a fair value of $46.9 million that was not included in the purchase price for the acquisition, which is comprised of 1,497,212 shares of restricted common stock with an aggregate fair value of $41.2 million, and 214,976 assumed options with an aggregate fair value of $5.7 million of post-combination expense and $0.2 million included in the purchase price. Restricted common stock and assumed options will be recognized as stock-based compensation expense. All post-combination expense is expected to be recognized through February 2028. Post-combination compensation expense is subject to adjustment based on continuing service obligations to us of certain stockholders of PingSafe.

In connection with the acquisition of PingSafe, we also granted restricted stock units (RSUs) under our 2021 Equity Incentive Plan. For further details refer to Note 7, Stock-Based Compensation.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents the preliminary allocation of purchase consideration recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):

(1) Consideration calculated using the fair value of our Class A common stock. The fair value of the 2,354,607 shares of Class A common stock issued as part of the consideration paid for PingSafe was determined on the basis of the closing market price of our Class A common stock on the acquisition date.

The excess of the purchase price over the fair value of net tangible and intangible assets acquired has been assigned to goodwill. Goodwill represents the future benefits resulting from the acquisition that will enhance the value of our platform for both new and existing customers and strengthen our competitive position.

The following table sets forth the preliminary amounts allocated to the intangible assets identified as of the date of acquisition, their estimated useful lives, and the amortization classification in the condensed consolidated statements of operations:

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Stride

On February 1, 2024, we acquired 100% of the issued and outstanding equity securities of Stride Security Ltd. (Stride), a security automation company, to add hyper-automation across our Singularity platform. The acquisition was accounted for as business combinations in accordance with ASC Topic 805.

The purchase price of the acquisition amounted to $7.5 million, which was primarily allocated to developed technology of $0.4 million and goodwill of $7.3 million. Goodwill represents the future benefits as a result of the acquisition that will enhance our product available to both new and existing customers and increase our competitive position. Developed technology will be amortized to cost of revenue on a straight-line basis over the estimated useful life offive years.

We have incurred $1.9 million and $0.6 million of transaction expenses in connection with the PingSafe and Stride acquisitions, respectively, during the three months ended April 30, 2024. The costs were recorded as general and administrative expenses in our condensed consolidated statements of operations.

The estimates and assumptions regarding the fair value of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, and goodwill are subject to change as we obtain additional information during the measurement period, which usually lasts for up to one year from the acquisition date. The goodwill acquired in both acquisitions are not deductible in local jurisdictions.

The results of operations of PingSafe and Stride have been included in the condensed consolidated financial statements from the date of each acquisition and would not have had a material impact on our combined results of operation if the acquisitions had occurred on February 1, 2023.

The pro forma impact of all business combinations completed during the three months ended April 30, 2024 was not material to our historical consolidated operating results and is therefore not presented, except for stock-based compensation expense related to restricted common stock issued in connection with the acquisition of PingSafe as disclosed in Note 7, Stock-Based Compensation. During the three months ended April 30, 2024, we recorded $4.2 million of stock-based compensation expense related to the PingSafe acquisition.

5. INTANGIBLE ASSETS

Intangible assets, net consisted of the following (in thousands):

Amortization expense of intangible assets was $7.7 million and $7.0 million for the three months ended April 30, 2024 and 2023, respectively.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of April 30, 2024, estimated future amortization expense is as follows (in thousands):

6. CASH AND CASH EQUIVALENTS, INVESTMENTS, AND FAIR VALUE MEASUREMENTS

The following tables summarize information about our cash, cash equivalents, and investments by investment category as of April 30, 2024 and January 31, 2024 (in thousands):

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

We invest in highly rated securities with a weighted average maturity of 18 months or less. As of April 30, 2024, all of our investments will mature within 2 years.

There were no transfers between the levels of the fair value hierarchy during the three months ended April 30, 2024 and 2023.

As of April 30, 2024, we determined that the declines in the market value of our investment portfolio were not driven by credit related factors. During the three months ended April 30, 2024 and 2023, we did not recognize any losses on our investments due to credit-related factors. As of April 30, 2024, we had $1.4 million in continuous unrealized loss positions for more than twelve months on securities with a total fair value of $333.4 million.

The tables above do not include the Company’s strategic investments in non-marketable debt and equity securities, recorded at cost, less any impairment, plus or minus observable price changes in orderly transactions for identical or similar investments of the same issuer (the Measurement Alternative) and were $18.4 million and $16.1 million as of April 30, 2024 and January 31, 2024, respectively.

The Company incurredno impairment charges nor realized gains on its non-marketable strategic investments during the three months ended April 30, 2024 and April 30, 2023. The fair value was estimated on a non-recurring basis based on Level 3 inputs.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

7. STOCK-BASED COMPENSATION

Stock-Based Compensation Expense

The components of stock-based compensation expense recognized in the condensed consolidated statements of operations consisted of the following (in thousands):

Restricted Stock Units

A summary of our RSU activity is as follows:

As of April 30, 2024, we had unrecognized stock-based compensation expense related to unvested RSUs of $614.8 million that is expected to be recognized on a straight-line basis over a weighted-average period of 3.1 years.

Performance Stock Units

In March 2024, we granted Performance Stock Units (PSUs) to certain executives subject to predetermined service-based and performance-based vesting conditions. These PSUs may vest from 0% to 225% of the number of target shares based on the achievement of certain financial performance metrics and will vest over afour-year period, subject to continuous service with us. During the three months ended April 30, 2024, we have recorded $0.6 million of stock-based compensation expense related to these PSUs.

A summary of our PSU activity is as follows:

As of April 30, 2024, we had unrecognized stock-based compensation expense related to unvested PSUs of $7.4 million that is expected to be recognized on a straight-line basis over a weighted-average period of 1.6 years.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Stock Options

A summary of our stock option activity is as follows:

As of April 30, 2024, we had unrecognized stock-based compensation expense related to unvested options of $47.5 million that is expected to be recognized on a straight-line basis over a weighted-average period of 1.8 years.

Milestone Options

As of April 30, 2024, we had unvested milestone options to purchase 1,404,605 shares of Class B common stock subject to service-based, performance-based and market-based vesting conditions to our Chief Executive Officer and Chief Financial Officer under our 2013 Equity Incentive Plan. During the three months ended April 30, 2024 and 2023, we recorded $0.9 million and $0.9 million, respectively, of stock-based compensation expense related to these milestone options. As of April 30, 2024, we had unrecognized stock-based compensation expense related to these milestone options of $8.2 million that is expected to be recognized over the remaining implied service period of 2.3 years.

Restricted Common Stock

In connection with the acquisition of PingSafe, we issued 1,497,212 shares of restricted Class A common stock. We recorded stock-based compensation expense related to these restricted shares of $3.4 million during the three months ended April 30, 2024. As of April 30, 2024, we had unrecognized stock-based compensation expense related to this unvested restricted common stock of $37.8 million.

Employee Stock Purchase Plan

We recognized stock-based compensation expense related to the Employee Stock Purchase Plan (ESPP) of $1.7 million and $3.0 million, respectively, during the three months ended April 30, 2024 and 2023.

Modification

During fiscal 2024, certain members of our management team converted to non-employee consultants or to positions that no longer provide substantive service to the Company (Management Transitions). These Management Transitions have been accounted for as modifications, under which, the exercise period of certain vested awards has been extended and a certain number of unvested awards will vest through the end of the agreements entered into in connection with the Management Transitions.

We incurredno incremental charges related to the Management Transition during the three months ended April 30, 2024. During the three months ended April 30, 2023, we recognized an incremental charge of $2.0 million.

8. INCOME TAXES

We compute our tax provision (benefit) for interim periods by applying the estimated annual effective tax rate to year-to-date income from continuing operations and adjusting for discrete items arising in that quarter.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

We had an effective tax rate of (2.2)% and (1.0)% for the three months ended April 30, 2024 and 2023, respectively. We have incurred U.S. operating losses and have profits or offsetting loss carryforwards in certain foreign jurisdictions.

9. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

Basic and diluted net loss per share attributable to common stockholders is computed in conformity with the two-class method required for participating securities. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, stock options, restricted common stock, RSUs, PSUs, shares purchased pursuant to our ESPP, and early exercised stock options are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive for all periods presented.

The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each class of common stock and the resulting basic and diluted net loss per share attributable to common stockholders are, therefore, the same for both Class A and Class B common stock on both an individual and combined basis.

Basic and diluted net loss per share attributable to common stockholders was as follows (in thousands, except share and per share data):

The following potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders because their inclusion would have been anti-dilutive:

10. COMMITMENTS AND CONTINGENCIES

Legal Contingencies

From time to time, we may be a party to various legal proceedings and subject to claims in the ordinary course of business.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Securities Litigation

On June 6, 2023, a securities class action was filed against us, our Chief Executive Officer and our Chief Financial Officer, in the Northern District of California, captioned Johansson v. SentinelOne, Inc., Case No. 4:23-cv-02786. The suit is brought on behalf of an alleged class of stockholders who purchased or acquired shares of the Company’s Class A common stock between June 1, 2022 and June 1, 2023. The complaint alleges that defendants made false or misleading statements about the our business, operations and prospects, including its annual recurring revenues and internal controls, and purports to assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (Exchange Act). A substantially similar suit was filed on June 16, 2023 in the same court against the same defendants asserting the same claims, captioned Nyren v. SentinelOne, Inc., Case No. 4:23-cv-02982. On October 4, 2023, the court issued an order consolidating both cases under the caption In re SentinelOne, Inc. Securities Litigation Case No. 4:23-cv-02786 and appointing a lead plaintiff. Defendants have filed a motion to dismiss the consolidated complaint.. We believe the case is without merit and defendants intend to defend the suit vigorously.

Derivative Litigation

On January 10, 2024, a stockholder derivative complaint was filed, naming our board of directors, our Chief Executive Officer and our Chief Financial Officer as defendants, and us as nominal defendant. The action was filed in the United States District Court, District of Delaware, and captioned Stochevski v. Weingarten, et al., Case No. 4:24-cv-00024. The complaint alleges claims based on events similar to those in the securities class action and asserts causes of action against the individual defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, and for making false and misleading statements about our business, operations, and prospects in violation of Section 10(b) of the Exchange Act. Plaintiffs seek money damages, an accounting for damages, punitive damages, and fees and costs. On April 8, 2024, the action was transferred to the U.S. District Court for Northern District of California, and recaptioned Stochevski v. Weingarten, et al., Case No. 4:24-cv-02096. The time for defendants to respond to the complaint has not yet passed.

On March 29, 2024, a stockholder derivative complaint was filed, naming our board of directors, our Chief Executive Officer and our Chief Financial Officer as defendants, and us as a nominal defendant. The action was filed in the United States District Court, Northern District of California, and is captioned Newman v. Weingarten, et al, Case No. 4:24-cv-01934. The complaint alleges claims based on events similar to those in the securities class action and the earlier-filed and transferred derivative action now pending in the Northern District of California, and asserts causes of action against the individual defendants for breach of fiduciary duty, unjust enrichment, and control person claims under Section 20(a) of the Exchange Act. Plaintiffs seek corporate reforms, unspecified damages and restitution, and fees and costs. The time for defendants to respond to the complaint has not yet passed.

Fortis Litigation

In September 2023, Fortis Advisors LLC (Fortis), in its capacity as the representative for the stockholders of Attivo, filed an action against the Company in Delaware Chancery Court asserting claims arising out of the Attivo Acquisition. The case is captioned Fortis Advisors LLC v. SentinelOne, Inc., Case No. 2023-0946-VLM.

In June 2023, the Company sent a letter to Fortis seeking indemnification for certain claims, including for breaches by Attivo of its representations and warranties in the merger agreement. Fortis is now seeking a declaratory judgment that the Company is not entitled to indemnification for the claims it has asserted, and that Fortis should recover the funds held in escrow. Fortis also alleges that the Company breached its representations and warranties in the merger agreement because its SEC filings allegedly contained materially false or misleading statements about the Company’s annual recurring revenues. The Company believes Fortis’ claims are without merit and intends to defend the suit vigorously. On November 3, 2023, the Company filed its answer to Fortis’ complaint. On the same day, the Company filed counterclaims against Fortis, in its capacity as the representative of the stockholders of Attivo, based on Attivo’s breach of several of its representations, warranties and covenants in the merger agreement. The Company’s counterclaims seek an order directing Fortis to comply with its contractual obligations to release funds set aside to indemnify the Company for its losses and any additional damages in excess of the indemnity fund.

SENTINELONE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

We believe that there are no other pending or threatened legal proceedings that are likely to have a material adverse effect on our condensed consolidated financial statements.

Warranties and Indemnification

Our services are generally warranted to deliver and operate in a manner consistent with general industry standards that are reasonably applicable and materially conform with our documentation under normal use and circumstances. Our contracts generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights.

We also offer a limited warranty to certain customers, subject to certain conditions, to cover certain costs incurred by the customer in case of a cybersecurity breach. We have a cybersecurity liability policy that may cover our customers’ actual damages. We have not incurred any material costs related to such obligations and have not accrued any liabilities related to such obligations in the condensed consolidated financial statements as of April 30, 2024 and January 31, 2024.

In addition, we also indemnify certain of our directors and executive officers against certain liabilities that may arise while they are serving in good faith in their company capacities. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid.

11. EMPLOYEE BENEFIT PLAN

Our U.S. employees participate in a 401(k) defined contribution plan sponsored by us. Contributions to the plan are discretionary. There were $1.4 million and $1.5 million, in matching contributions for the three months ended April 30, 2024 and 2023, respectively.

Israeli Severance Pay

Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to Section 14 of the Severance Compensation Act, 1963 (Section 14), all of our employees in Israel are entitled to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary.

These payments release us from any future severance payment obligation with respect to these employees; as such, any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset on our condensed consolidated balance sheets. We recorded severance expenses related to these employees of $0.9 million and $1.0 million, respectively, for the three months ended April 30, 2024 and 2023.