SentinelOne Inc

Previous wording

Our Singularity Platform is used globally by organizations of all sizes across a broad range of industries. We had 1,193 customers with annualized recurring revenue (ARR) of $100,000 or more as of April 30, 2024, up from 917 as of April 30, 2023. We define ARR as the annualized revenue run rate of our subscription and consumption and usage-based agreements at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under contracts with us. As of April 30, 2024, no single end customer accounted for more than 3% of our ARR. Our revenue outside of the U.S. represented 37% and 35% for the three months ended April 30, 2024 and 2023, respectively, illustrating the global nature of our solutions.

Current wording

Our Singularity Platform is used globally by organizations of all sizes across a broad range of industries. We had 1,233 customers with annualized recurring revenue (ARR) of $100,000 or more as of July 31, 2024, up from 994 as of July 31, 2023. We define ARR as the annualized revenue run rate of our subscription and consumption and usage-based agreements at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under contracts with us. As of July 31, 2024, no single end customer accounted for more than 3% of our ARR. Our revenue outside of the U.S. represented 37% and 36% for the three months ended July 31, 2024 and 2023, respectively, illustrating the global nature of our solutions.

Previous wording

We have grown rapidly since our inception. Our revenue was $186.4 million and $133.4 million for the three months ended April 30, 2024 and 2023, respectively, representing year-over-year growth of 40%. During this period, we continued to invest in growing our business to capitalize on our market opportunity. As a result, our net loss for the three months ended April 30, 2024 and 2023 was $70.1 million and $106.9 million, respectively.

Current wording

We have grown rapidly since our inception. Our revenue was $198.9 million and $149.4 million for the three months ended July 31, 2024 and 2023, respectively, representing year-over-year growth of 33%. Our revenue was $385.3 million and $282.8 million for the six months ended July 31, 2024 and 2023, respectively, representing year-over-year growth of 36%. During this period, we continued to invest in growing our business to capitalize on our market opportunity. As a result, our net loss for the three months ended July 31, 2024 and 2023 was $69.2 million and $89.5 million, respectively, and our net loss for the six months ended July 31, 2024 and 2023 was $139.3 million and $196.4 million, respectively.

Previous wording

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior. Worsening economic conditions, including inflation, interest rate volatility, slower growth, potential recession, fluctuations in foreign exchange rates, actual or perceived instability in the global banking industry, potential uncertainty with respect to the federal debt ceiling and budget and potential government shutdowns related thereto, and other changes in economic conditions, and the impact of natural or man-made global events, including wars and other regional geopolitical armed conflict, such as the conflicts in the Middle East, Ukraine and tensions between China and Taiwan, may result in decreased sales productivity and growth and adversely affect our results of operations and financial performance. As a result of the current macroeconomic environment, we have recently experienced certain impacts on our business, including a decline in usage and consumption patterns from certain customers, especially larger enterprise customers, longer sales cycles, and deal downsizing by new customers and of renewals by existing customers, especially larger enterprises.

Current wording

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior. Worsening economic conditions, including inflation, interest rate volatility, slower growth, potential recession, fluctuations in foreign exchange rates, actual or perceived instability in the global banking industry, potential uncertainty with respect to the federal debt ceiling and budget and other changes in economic conditions, and the impact of natural or man-made global events, including wars and other regional geopolitical armed conflict, such as the conflicts in the Middle East, Ukraine and tensions between China and Taiwan, may result in decreased sales productivity and growth and adversely affect our results of operations and financial performance. As a result of the current macroeconomic environment, we have recently experienced certain impacts on our business, including a decline in usage and consumption patterns from certain customers, especially larger enterprise customers, longer sales cycles, and deal downsizing by new customers and of renewals by existing customers, especially larger enterprises.

Previous wording

We maintain an office in Tel Aviv, Israel and had approximately 12% of our personnel in Israel as of April 30, 2024. We are closely monitoring the unfolding events of the armed conflict in the Middle East which began in October 2023. While this conflict is still evolving, to date, the conflict has not had an adverse impact on our business and results of operations. However, if the conflict continues to worsen or intensify, any business interruptions or spillover effects could adversely affect our business and operations.

Current wording

We maintain an office in Tel Aviv, Israel and had approximately 12% of our personnel in Israel as of July 31, 2024. We are closely monitoring the events of the armed conflict in the Middle East which began in October 2023. While this conflict is still evolving, to date, the conflict has not had an adverse impact on our business and results of operations. However, if the conflict continues to worsen or intensify, any business interruptions or spillover effects could adversely affect our business and operations.

Previous wording

We are unable to predict the full impact that global macroeconomic or other geopolitical factors will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the actions that may be taken by government authorities across the US or other countries, changes in central bank policies and interest rates, rates of inflation, potential uncertainty with respect to the federal debt ceiling and budget and potential, government shutdowns related thereto, regional geopolitical conflicts, the impact to our customers, partners, and suppliers, and other factors described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Current wording

We are unable to predict the full impact that global macroeconomic or other geopolitical factors will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the actions that may be taken by government authorities across the U.S. or other countries, changes in central bank policies and interest rates, rates of inflation, potential uncertainty with respect to the federal debt ceiling and budget, regional geopolitical conflicts, the impact to our customers, partners, and suppliers, and other factors described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Previous wording

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), we use non-GAAP operating loss as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. We believe that non-GAAP operating loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this measure excludes, among other expenses, expenses that we do not consider to be indicative of our overall operating performance. Non-GAAP operating loss is calculated as GAAP operating loss adjusted to exclude amortization of acquired intangible assets, acquisition-related compensation, stock-based compensation expense, and payroll tax on employee stock transactions.

Current wording

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), we use non-GAAP operating loss as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. We believe that non-GAAP operating loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this measure excludes, among other expenses, expenses that we do not consider to be indicative of our overall operating performance. Non-GAAP operating loss is calculated as GAAP operating loss adjusted to exclude amortization of acquired intangible assets, acquisition-related compensation, stock-based compensation expense, payroll tax on employee stock transactions, and restructuring charges.

Previous wording

ARR grew 35% year-over-year to $762.2 million as of April 30, 2024, primarily due to high growth in the number of new customers purchasing our subscriptions and to additional purchases by existing customers.

Current wording

ARR grew 32% year-over-year to $806.0 million as of July 31, 2024, primarily due to high growth in the number of new customers purchasing our subscriptions and to additional purchases by existing customers.

Previous wording

Customers with ARR of $100,000 or more grew 30% year-over-year to 1,193 as of April 30, 2024, primarily due to growth in the ARR of existing customers from additional purchases and to growth in the average size of purchases by new customers.

Current wording

Customers with ARR of $100,000 or more grew 24% year-over-year to 1,233 as of July 31, 2024, primarily due to growth in the ARR of existing customers from additional purchases and to growth in the average size of purchases by new customers.

Previous wording

We believe that our ability to retain and expand our revenue generated from our existing customers is an indicator of the long-term value of our customer relationships and our potential future business opportunities. NRR measures the percentage change in our ARR derived from our customer base at a point in time. To calculate NRR, we first determine Prior Period ARR, which is ARR from the population of our customers as of 12 months prior to the end of a particular reporting period. We then calculate Net Retention ARR, which represents the total ARR at the end of a particular reporting period from the same set of customers that is used to determine Prior Period ARR. Net

Current wording

We believe that our ability to retain and expand our revenue generated from our existing customers is an indicator of the long-term value of our customer relationships and our potential future business opportunities. NRR measures the percentage change in our ARR derived from our customer base at a point in time. To calculate NRR, we first determine Prior Period ARR, which is ARR from the population of our customers as of 12 months prior to the end of a particular reporting period. We then calculate Net Retention ARR, which represents the total ARR at the end of a particular reporting period from the same set of customers that is used to determine Prior Period ARR. Net Retention ARR includes any expansion, and is net of contraction and attrition associated with that set of customers. NRR represents the quotient obtained by dividing Net Retention ARR by Prior Period ARR.

Previous wording

Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with the hosting and maintenance of our platform. Cost of revenue also consists of personnel-related costs associated with our customer support and services organization, including salaries, benefits, bonuses, and stock-based compensation, amortization of acquired intangible assets, amortization of capitalized internal-use software, software and subscription services used by our customer support and services team, inventory-related costs, and allocated overhead costs.

Current wording

Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with the hosting and maintenance of our platform. Cost of revenue also consists of personnel-related costs associated with our customer support and services organization, including salaries, benefits, bonuses, and stock-based compensation, amortization of acquired intangible assets, amortization of capitalized internal-use software, software and subscription services used by our customer support and services team, inventory-related costs, and allocated facilities and IT overhead costs.

Previous wording

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel-related expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include allocated facilities and IT overhead costs.

Current wording

Our operating expenses consist of research and development, sales and marketing, general and administrative and restructuring expenses. Personnel-related expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include allocated facilities and IT overhead costs.

Previous wording

Interest income consists primarily of interest earned on our cash equivalents and investments.

Current wording

Interest income consists primarily of interest earned on our cash, cash equivalents and investments.

Previous wording

Other income (expense), net consists primarily of foreign currency transaction gains and losses.

Current wording

Other income (expense), net consists primarily of foreign currency transaction gains and losses and gains and losses on strategic investments.

Previous wording

Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. In connection with our global consolidated losses, we maintain a full valuation allowance against our U.S. and Israel deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized.

Current wording

Provision for income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. In connection with our global consolidated losses, we maintain a full valuation allowance against our U.S. and Israel deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized.

Previous wording

Revenue increased by $53.0 million primarily due to a combination of sales to new customers and sales of additional endpoints and modules to existing customers.

Current wording

Revenue increased by $49.5 million primarily due to a combination of sales to new customers and sales of additional endpoints and modules to existing customers.

Previous wording

Cost of revenue increased by $7.6 million primarily due to a $4.5 million increase in allocated customer support costs which were mostly personnel-related expenses, a $1.2 million increase in cloud hosting usage charges to support our expanding business, a $0.8 million increase in amortization of capitalized internal use-software due to the continued investment in our platform, and a $0.5 million increase in amortization of acquired intangible assets in connection with the PingSafe and Stride acquisitions. Gross margin increased to 73%, primarily due to revenue growth from existing and new customers outpacing growth in cost of revenue.

Current wording

Cost of revenue increased by $6.0 million primarily due to a $4.7 million increase in allocated customer support costs which were mostly personnel-related expenses, a $1.5 million increase in amortization of capitalized internal use-software due to the continued investment in our platform, and a $0.9 million increase in cloud hosting usage charges to support our expanding business. The increase is partially offset by a $0.9 million decrease in amortization of acquired intangible assets in connection with the acquisition of Attivo Networks, Inc. Gross margin increased to 75%, primarily due to revenue growth from existing and new customers outpacing growth in cost of revenue.

Previous wording

Research and development expenses increased by $3.1 million primarily due to an increase of $2.7 million related to stock-based compensation expense as a result of increased headcount and an increase of $1.5 million in allocated overhead costs. The increase is partially offset by $0.8 million decrease in general services expenses.

Current wording

Research and development expenses increased by $9.4 million primarily due to an increase in personnel-related expenses of $6.5 million, including an increase of $5.4 million related to stock-based compensation expense as a result of increased headcount and a $2.1 million increase in allocated overhead costs.

Previous wording

Sales and marketing expenses increased by $16.7 million primarily due to an increase in personnel-related expenses of $13.0 million, including an increase of $5.5 million in stock-based compensation expense as a result of increased headcount. In addition, there was an increase in sales and marketing expenses of $3.8 million due to overall business growth and further investment in marketing activities.

Current wording

Sales and marketing expenses increased by $21.4 million primarily due to an increase in personnel-related expenses of $13.8 million, including an increase of $5.2 million in stock-based compensation expense as a result of increased headcount. In addition, there was an increase in sales and marketing expenses of $6.2 million due to overall business growth and further investment in marketing activities.

Previous wording

General and administrative expenses decreased by $9.1 million primarily due to a decrease in personnel-related expenses of $6.7 million, including a decrease of $5.8 million in stock-based compensation expense due to the stock modifications during the three months ended April 30, 2023 that did not recur in the current period. In addition, there was a decrease of $0.9 million in allocated overhead costs, and a $0.8 million decrease in office-related expenses.

Current wording

General and administrative expenses decreased by $4.0 million primarily due to a decrease of $1.3 million in stock-based compensation expense due to the stock modifications during the three months ended July 31, 2023 that did not recur in the current period. In addition, there was a decrease of $3.1 million in legal expenses due to lower legal consulting fees related to prior year settlements.

Previous wording

Interest income increased $1.5 million as a result of higher interest rates on investments. Interest expense decreased primarily due to a reduction in the amortization of the discount related to acquisition-related liabilities. The change in other expense, net is primarily due to net foreign currency exchange fluctuations.

Current wording

Interest income increased $1.4 million as a result of higher interest rates during the three months ended July 31, 2024. Interest expense decreased primarily due to a reduction in the amortization of the discount related to acquisition-related liabilities. The change in other income (expense), net is primarily due to a decrease in net gains on strategic investments.

Previous wording

We have financed operations primarily through proceeds received from sales of equity securities, payments received from our customers, and borrowings under a now-terminated loan and security agreement, and we have generated operating losses, as reflected in our accumulated deficit of $1.4 billion and $1.3 billion as of April 30, 2024 and January 31, 2024, respectively. We expect these and other operating losses to continue for the foreseeable future. We also expect to incur significant research and development, sales and marketing, and general and administrative expenses over the next several years in connection with the continued development and expansion of our business. As of April 30, 2024 and January 31, 2024, our principal source of liquidity was cash, cash equivalents, and investments of $1.1 billion and $1.1 billion, respectively.

Current wording

We have financed operations primarily through proceeds received from sales of equity securities, payments received from our customers, and borrowings under a now-terminated loan and security agreement, and we have generated operating losses, as reflected in our accumulated deficit of $1.5 billion and $1.3 billion as of July 31, 2024 and January 31, 2024, respectively. We expect these and other operating losses to continue for the foreseeable future. We also expect to incur significant research and development, sales and marketing, and general and administrative expenses over the next several years in connection with the continued development and expansion of our business. As of July 31, 2024 and January 31, 2024, our principal source of liquidity was cash, cash equivalents, and investments of $1.1 billion and $1.1 billion, respectively.

Previous wording

Our largest source of operating cash is payments received from our customers. Our primary uses of cash from operating activities are for personnel-related expenses, sales and marketing expenses, third-party cloud infrastructure expenses, and overhead expenses. We have generated negative cash flows from operating activities and have supplemented working capital through net proceeds from the sale of equity securities.

Current wording

Our largest source of operating cash is payments received from our customers. Our primary uses of cash from operating activities are for personnel-related expenses, sales and marketing expenses, third-party cloud infrastructure expenses, and overhead expenses.

Previous wording

Cash provided by operating activities during the three months ended April 30, 2024 was $42.0 million, primarily consisting of our net loss of $70.1 million, offset by adjustments for non-cash items of $83.4 million and $28.7 million provided by net changes to our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $80.9 million decrease in accounts receivable due to timing of cash received from customers, a $3.9 million decrease in prepaid expenses and other assets, and a $2.4 million increase in accounts payable due to timing of invoices received from vendors. These amounts were partially offset by a $22.1 million decrease in deferred revenue, a $18.9 million decrease in accrued payroll and benefits, and a $15.2 million decrease in deferred contract acquisition costs.

Current wording

Cash provided by operating activities during the six months ended July 31, 2024 was $44.3 million, primarily consisting of our net loss of $139.3 million, offset by adjustments for non-cash items of $171.7 million and $11.9 million provided by net changes to our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $59.3 million decrease in accounts receivable due to timing of cash received from customers, a $8.9 million decrease in prepaid expenses and other assets and an increase of accrued liabilities of $5.4 million. These amounts were partially offset by a $34.9 million increase in deferred contract acquisition costs, a $12.6 million decrease in deferred revenue, a $10.6 million decrease in accrued payroll and benefits and a $2.8 million decrease in operating lease liabilities.

Previous wording

Cash used in operating activities during the three months ended April 30, 2023 was $28.1 million, primarily consisting of our net loss of $106.9 million, and $6.7 million provided by net changes to our operating assets and liabilities, partially offset by non-cash items of $72.1 million. The main drivers of the changes in operating assets and liabilities were a $12.1 million increase in deferred contract acquisition costs, and a $10.9 million decrease in accrued payroll and benefits. These amounts were partially offset by a$23.6 million decrease in accounts receivable due to timing of cash received from customers,$3.2 million decrease in prepaid expenses and other assets, and a$2.2 million increase in deferred revenue resulting primarily from increased subscription contracts.

Current wording

Cash used in operating activities during the six months ended July 31, 2023 was $40.0 million, primarily consisting of our net loss of $196.4 million, partially offset by $17.5 million provided by net changes to our operating assets and liabilities and non-cash items of $138.9 million. The main drivers of the changes in operating assets and liabilities were a$27.9 million decrease in accounts receivable due to timing of cash received from customers, a$15.1 million increase in deferred revenue resulting primarily from increased subscription contracts, and a$6.3 million decrease in prepaid expenses and other assets. These amounts were partially offset by a$30.3 million increase in deferred contract acquisition costs and a$4.4 million decrease in accrued payroll and benefits.

Previous wording

Cash used in investing activities during the three months ended April 30, 2024 was $106.3 million, consisting of $247.0 million of investment purchases, $61.6 million of net cash paid for the acquisitions of PingSafe and Stride, and a $7.4 million of capitalized internal-use software costs. These amounts were partially offset by $210.6 million of investment sales and maturities.

Current wording

Cash used in investing activities during the six months ended July 31, 2024 was $115.6 million, consisting of $442.6 million of investment purchases, $61.6 million of net cash paid for the acquisitions of PingSafe and Stride, and a $14.5 million of capitalized internal-use software costs. These amounts were partially offset by $404.7 million of investment sales and maturities.

Previous wording

Cash provided by investing activities during the three months ended April 30, 2023 was$31.1 million, consisting of$185.3 million of investment sales and maturities, partially offset by$150.6 million of investment purchases, and$2.9 million of capitalized internal-use software costs.

Current wording

Cash provided by investing activities during the six months ended July 31, 2023 was$14.7 million, consisting of$372.0 million of investment sales and maturities, partially offset by$350.4 million of investment purchases, and$6.2 million of capitalized internal-use software costs.

Previous wording

Cash provided by financing activities during the three months ended April 30, 2023 was $9.8 million, entirely consisting of proceeds from the exercise of employee stock options.

Current wording

Cash provided by financing activities during the six months ended July 31, 2024 was $21.6 million, primarily consisting of $12.8 million of proceeds from the exercise of employee stock options and $8.8 million of proceeds from the issuance of common stock under our Employee Stock Purchase Plan (ESPP).

Previous wording

Cash provided by financing activities during the three months ended April 30, 2024 was $6.5 million, primarily consisting of $6.6 million of proceeds from the exercise of employee stock options.

Current wording

Cash provided by financing activities during the six months ended July 31, 2023 was $20.3 million, consisting of $13.8 million of proceeds from the exercise of employee stock options and $6.4 million of proceeds from the issuance of common stock under our ESPP.