Announces Management Changes
Initiates Restructuring of the Company to
Include Approximately 35% Further Headcount Reduction
Secures Convertible Debt Initial Commitment of
$10 Million
IronNet, Inc. (NYSE: IRNT) (“IronNet”), a leading provider of
solutions Transforming Cybersecurity Through Collective Defense℠,
announced today its financial results for the fiscal second quarter
ended July 31, 2022.
“We encountered unexpected headwinds in our transactional
business this quarter. To contain costs, we are undertaking a
further restructuring of the company with the support of our new
CFO Cameron Pforr,” said General (Ret.) Keith Alexander, Chairman
and co-CEO of IronNet. “We have decided to forego a call with
management this quarter, until we are better able to communicate on
our progress.”
Fiscal Second Quarter 2023 Financial & Operating
Results
- Annual Recurring Revenue (ARR): $26.5 million at July 31, 2022,
compared to $24.1 million at the end of the same quarter last
year.
- Revenue: $6.6 million compared to $6.1 million in the same
quarter last year. Cloud subscription revenue was $5.2 million, or
84% of product revenue, compared to 56% in the same quarter last
year.
- Gross Margin: 62.3% compared to 70.1% in the same quarter last
year.
- Net loss: $28.4 million compared to $17.2 million in the same
quarter last year. Excluding stock-based compensation expense and
transaction costs and fees, net loss for the second quarter would
be $20.6 million compared to $17.0 million in the same quarter last
year.
- Dollar-based average contract length: 3.2 years for the second
quarter, compared to 2.8 years in the same quarter last year.
- Cash and cash equivalents: $9.7 million at end of the second
quarter. Subsequent to the end of the quarter, the company entered
into an unsecured convertible debt facility with an institutional
investor pursuant to which it will borrow an initial $10 million
under a promissory note with an 18-month term and a 5% annual
interest rate. Upon the satisfaction of certain conditions set
forth in the convertible debt facility, including conditions
related to the outstanding principal balance and the prevailing
share price and trading volume of the company’s common stock, the
company may have the ability to borrow an additional $15 million
under the facility at a future date.
- Customer Count: 78 compared to 51 at the end of the same
quarter last year.
Management Update
- Co-CEO William Welch will resign as co-CEO and from the Board
of Directors in light of the restructuring of the business, and
indicated he will continue to support the company in the short
term. Chris Murphy, Head of Sales Operations, will lead the sales
team in the interim, reporting to GEN (Ret.) Keith Alexander.
- Experienced software and cybersecurity executive Cameron Pforr
has been appointed as IronNet’s new Chief Financial Officer (CFO),
replacing current CFO James Gerber who will be departing the
company to join a private cybersecurity company.
Mr. Welch commented regarding his resignation: “With costs in
focus, we determined that it made sense to eliminate the co-CEO
position. I am a true believer in Collective Defense, and I remain
firmly committed to the IronNet mission. I will continue to support
the company in any way I can be of service.”
Fiscal 2023 Outlook
- In light of the management transitions, further restructuring
of the company, and the underperformance of the transactional
business this quarter, the company is withdrawing its previously
issued revenue and ARR guidance for fiscal 2023.
About IronNet
Founded in 2014 by GEN (Ret.) Keith Alexander, IronNet, Inc.
(NYSE: “IRNT”) is a global cybersecurity leader that is
transforming how organizations secure their networks by delivering
the first-ever Collective Defense platform operating at scale.
Employing a number of former NSA cybersecurity operators with
offensive and defensive cyber experience, IronNet integrates deep
tradecraft knowledge into its industry-leading products to solve
the most challenging cyber problems facing the world today. For
more information, visit www.ironnet.com.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including, without
limitation, its ability to transform cybersecurity, execute on its
business strategy and increase market share, and the expansion of
the cybersecurity market and demand for IronNet’s products and
services. When used in this press release, the words “estimates,”
“projected,” “expects,” “anticipates,” “forecasts,” “plans,”
“intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,”
“propose” and variations of these words or similar expressions (or
the negative versions of such words or expressions) are intended to
identify forward-looking statements. These forward-looking
statements are not guarantees of future performance, conditions or
results, and involve a number of known and unknown risks,
uncertainties, assumptions and other important factors, many of
which are outside IronNet’s management’s control, that could cause
actual results or outcomes to differ materially from those
discussed in the forward-looking statements. Important factors,
among others, that may affect actual results or outcomes include:
IronNet’s ability to execute on its plans to develop and market new
products and the timing of these development programs; IronNet’s
estimates of the size of the markets for its products; the rate and
degree of market acceptance of IronNet’s products; the success of
other competing technologies that may become available; IronNet’s
ability to identify and integrate acquisitions; management changes;
the performance of IronNet’s products; potential litigation; and
general economic and market conditions impacting demand for
IronNet’s products. The foregoing list of factors is not
exhaustive. You should carefully consider the foregoing factors and
the other risks and uncertainties described under the heading “Risk
Factors” in IronNet’s Annual Report on Form 10-K for the year ended
January 31, 2022, filed with the SEC on May 2, 2022, as updated by
IronNet’s Quarterly Report on Form 10-Q for the quarter ended July
31, 2022, to be filed with the SEC on September 14, 2022, and its
subsequent filings with the SEC. These filings identify and address
other important risks and uncertainties that could cause actual
events and results to differ materially from those contained in the
forward looking statements. Forward-looking statements speak only
as of the date they are made. Readers are cautioned not to put
undue reliance on forward looking statements, and IronNet does not
undertake any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
Certain Definitions
Annual Recurring Revenue (ARR) -- Calculated at a
particular measurement date as the annualized value of our then
existing customer subscription contracts and the portions of other
software and product contracts that are to be recognized over the
course of the contracts and that are designed to renew, assuming
any contract that expires during the 12 months following the
measurement date is renewed on its existing terms.
Dollar-based average contract length: Calculated by
multiplying the average total length of our customer contracts,
measured in years or fractions thereof, by the respective revenue
recognized for the last three months of each reporting period, and
then dividing by the revenue attributable to software and product
customers for the same three-month period used in the numerator.
Because many of our customers have similar buying patterns and the
average term of our contracts is more than 12 months, this metric
provides a means of assessing the degree of built-in revenue
repetition that exists across our customer base. Declines in
average contract length are not reflective of the average lifetime
of a customer.
IronNet, Inc.
Condensed Consolidated
Statements of Operations
(amounts in thousands, except per
share amounts, unaudited)
Three Months Ended July
31,
Six Months Ended July
31,
2022
2021
2022
2021
Product, subscription and support
revenue
$
6,214
$
5,770
$
12,657
$
11,907
Professional services revenue
394
306
639
546
Total revenue
6,608
6,076
13,296
12,453
Cost of product, subscription and support
revenue
2,339
1,668
4,669
3,422
Cost of professional services revenue
149
147
314
331
Total cost of revenue
2,488
1,815
4,983
3,753
Gross profit
4,120
4,261
8,313
8,700
Operating expenses
Research and development
9,715
7,571
20,442
14,462
Sales and marketing
8,754
7,687
19,420
14,836
General and administrative
13,433
5,965
29,020
11,685
Total operating expenses
31,902
21,223
68,882
40,983
Operating loss
(27,782
)
(16,962
)
(60,569
)
(32,283
)
Other income
24
8
34
16
Other expense
(664
)
(248
)
(1,044
)
(377
)
Loss before income taxes
(28,422
)
(17,202
)
(61,579
)
(32,644
)
Benefit (provision) for income taxes
7
35
(5
)
(23
)
Net loss
$
(28,415
)
$
(17,167
)
$
(61,584
)
$
(32,667
)
Basic and diluted net loss per common
share
(0.28
)
(0.25
)
(0.61
)
(0.49
)
Weighted average shares outstanding, basic
and diluted
101,352
67,421
100,346
67,303
IronNet, Inc.
Condensed Consolidated Balance
Sheets
(amounts in thousands, except per
share amounts, unaudited)
July 31,
January 31,
2022
2022
Assets
Current assets
Cash and cash equivalents
$
9,650
$
47,673
Accounts receivable
5,430
1,991
Unbilled receivables
564
4,637
Related party receivables and loan
receivables
3,233
3,233
Accounts, related party and loans
receivable
9,227
9,861
Inventory
6,588
4,581
Deferred costs
2,712
2,599
Prepaid warranty
1,021
829
Prepaid expenses
2,565
3,660
Other current assets
2,382
1,458
Total current assets
$
34,145
$
70,661
Deferred costs
3,413
3,243
Property and equipment, net
6,228
5,606
Prepaid warranty
1,209
1,229
Deposits and other assets
2,688
493
Total assets
$
47,683
$
81,232
Liabilities and stockholders’
equity
Current liabilities
Accounts payable
$
3,253
$
2,348
Accrued expenses
10,762
4,709
Deferred revenue
20,461
16,049
Deferred rent
-
159
Income tax payable
468
542
Other current liabilities
1,469
689
Total current liabilities
36,413
24,496
Deferred revenue
13,618
17,517
Deferred rent
-
769
Warrants
4
7
Other long-term liabilities
2,355
-
Total liabilities
$
52,390
$
42,789
Stockholders’ equity
Preferred stock, $0.0001 par value;
100,000 shares authorized; none issued or outstanding
-
-
Common stock; $0.0001 par value; 500,000
shares authorized; 101,649 and 88,876 shares issued and outstanding
at July 31, 2022 and January 31, 2022, respectively
10
9
Additional paid-in capital
474,547
455,849
Accumulated other comprehensive income
6
271
Accumulated deficit
(479,270
)
(417,686
)
Total stockholders’ (deficit)
equity
(4,707
)
38,443
Total liabilities and stockholders'
(deficit) equity
$
47,683
$
81,232
IronNet, Inc.
Condensed Consolidated
Statements of Cash Flows
($ in thousands)
(unaudited)
Six Months Ended July
31,
2022
2021
Cash flows from operating
activities
Net loss
$
(61,584
)
$
(32,667
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
1,231
445
Gain on sale of fixed assets
(9
)
-
Employee stock based compensation
18,584
27
Change in fair value of warrant
liabilities
(3
)
-
Non-cash interest expense
165
-
Changes in operating assets and
liabilities:
Accounts, related party, and loans
receivable
634
(1,164
)
Deferred costs
(284
)
289
Inventories
(2,007
)
(137
)
Prepaid expenses
1,095
(486
)
Other current assets
(36
)
-
Prepaid warranty
(172
)
234
Deposits and other assets
504
(60
)
Accounts payable
905
(200
)
Accrued expenses
(580
)
2,951
Income tax payable
(74
)
15
Other current liabilities
(2
)
-
Deferred rent
-
(67
)
Deferred revenue
512
(425
)
Operating lease liability
(582
)
-
Net cash used in operating activities
(41,703
)
(31,245
)
Cash flows from investing
activities
Purchases of property and equipment
(1,666
)
(1,232
)
Proceeds from the sale of fixed assets
10
-
Net cash used in investing activities
(1,656
)
(1,232
)
Cash flows from financing
activities
Exercise of stock options and vesting of
restricted stock units
206
295
Statutory tax withholding related to
net-share settlement of restricted stock units
(91
)
-
Cash received to fund employee's tax
obligation for vested RSUs
19,823
-
Cash remitted to fund employee's tax
obligation for vested RSUs
(12,395
)
-
Payment of commitment fee
(1,750
)
-
Payment of common stock issuance costs
(96
)
-
Payment of finance lease obligations
(96
)
-
Proceeds from issuance of debt
-
15,000
Proceeds from stock subscriptions
-
293
Payment of deferred transaction costs
-
(486
)
Net cash provided by financing
activities
5,601
15,102
Effect of exchange rate changes on cash
and cash equivalents
(265
)
(61
)
Net change in cash and cash
equivalents
(38,023
)
(17,436
)
Cash and cash equivalents
Beginning of the period
47,673
31,543
End of the period
$
9,650
$
14,107
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220914005897/en/
IronNet Nancy Fazioli - ir@ironnet.com
IronNet (NYSE:IRNT)
Historical Stock Chart
From Aug 2024 to Sep 2024
IronNet (NYSE:IRNT)
Historical Stock Chart
From Sep 2023 to Sep 2024