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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended July 31, 2022
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-40531
SENTINELONE, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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99-0385461 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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444 Castro Street, Suite 400, Mountain View,
California
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94041 |
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(Address of Principal Executive Offices) |
(Zip Code) |
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(855) 868-3733
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Registrant's telephone number, including area code) |
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Not Applicable |
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(Former name, former address and former fiscal year, if changed
since last report) |
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Securities registered pursuant to
Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Class A common stock, par value $0.0001 |
S |
The New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports); and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). Yes ☒ No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer”
“smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
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As of August 26, 2022, the registrant had 205,756,251 shares of
Class A common stock and 75,159,338 shares of Class B common stock
outstanding.
Special Note About Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 17A of the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended,
or the Exchange Act, about us and our industry that involve
substantial risks and uncertainties. All statements contained in
this Quarterly Report on Form 10-Q, other than statements of
historical fact, including statements regarding our future
operating results and financial condition, our business strategy
and plans, market growth, and our objectives for future operations,
are forward-looking statements. The words “believe,” “may,” “will,”
“potentially,” “estimate,” “continue,” “anticipate,” “intend,”
“could,” “would,” “project,” “target,” “plan,” “expect,” and
similar expressions are intended to identify forward-looking
statements.
Forward-looking statements include, but are not limited to,
statements about:
•our
future financial performance, including our expectations regarding
our total revenue, cost of revenue, gross profit or gross margin,
operating expenses, including changes in operating expenses and our
ability to achieve and maintain future profitability;
•the
impact of the continuing COVID-19 pandemic on our operations,
financial results, and liquidity and capital resources, including
on customers, sales, expenses, and employees;
•our
business plan and our ability to effectively manage our
growth;
•our
total market opportunity;
•anticipated
trends, growth rates, and challenges in our business and in the
markets in which we operate;
•our
ability to maintain the security and availability of our
platform;
•market
acceptance of our platform and our ability to increase adoption of
our platform;
•beliefs
and objectives for future operations;
•our
ability to further penetrate our existing customer base and
attract, retain, and expand our customer base;
•our
ability to timely and effectively scale and adapt our
platform;
•our
ability to develop new products and services and bring them to
market in a timely manner and make enhancements to our
platform;
•our
expectations concerning relationships with third
parties;
•our
ability to maintain, protect, and enhance our intellectual
property;
•our
ability to continue to expand internationally;
•the
effects of increased competition in our markets and our ability to
compete effectively;
•future
acquisitions or investments in complementary companies, products,
services, or technologies and our ability to integrate such
acquisitions or investments;
•our
ability to stay in compliance with laws and regulations that
currently apply or become applicable to our business both in the
United States and internationally;
•economic
and industry trends, projected growth, or trend
analysis;
•the
impact of natural or man-made global events on our business,
including wars and other armed conflicts, such as Russia’s invasion
of Ukraine;
•expenses
associated with being a public company; and
•other
statements regarding our future operations, financial condition,
and prospects and business strategies.
We caution you that the foregoing list may not contain all of the
forward-looking statements made in this Quarterly Report on Form
10-Q.
These forward-looking statements are subject to a number of risks,
uncertainties, and assumptions, including those described in the
section titled “Risk Factors” and elsewhere in this Quarterly
Report on Form 10-Q. Moreover, we operate in a very competitive and
rapidly changing environment, and new risks emerge from time to
time. It is not possible for our management to predict all risks,
nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements we may make. In light of these risks,
uncertainties, and assumptions, the forward-looking events and
circumstances discussed in this Quarterly Report on Form 10-Q may
not occur, and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking
statements.
You should not rely upon forward-looking statements as predictions
of future events. The events and circumstances reflected in the
forward-looking statements may not be achieved or occur. We
undertake no obligation to update publicly any of these
forward-looking statements for any reason after the date of this
report or to conform these statements to actual results or to
changes in our expectations, except as required by law. Our
forward-looking statements do not reflect the potential impact of
any future acquisitions, partnerships, mergers, dispositions, joint
ventures, or investments we may make.
You should read this Quarterly Report on Form 10-Q and the
documents that we reference in this Quarterly Report on Form 10-Q
and have filed with the SEC as exhibits to this report with the
understanding that our actual future results, performance, and
events and circumstances may be materially different from what we
expect.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
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SENTINELONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
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July 31,
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January 31,
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2022
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2022
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Assets
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Current assets:
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Cash and cash equivalents |
$ |
269,493 |
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$ |
1,669,304 |
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Short-term investments
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949,883 |
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374 |
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Accounts receivable, net
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106,380 |
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101,491 |
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Deferred contract acquisition costs, current
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30,894 |
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27,546 |
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Prepaid expenses and other current assets
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33,348 |
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18,939 |
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Total current assets
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1,389,998 |
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1,817,654 |
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Property and equipment, net
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33,031 |
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24,918 |
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Operating lease right-of-use assets |
25,270 |
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23,884 |
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Deferred contract acquisition costs, non-current |
44,429 |
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41,022 |
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Intangible assets, net |
159,677 |
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15,807 |
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Goodwill |
540,308 |
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108,193 |
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Restricted cash, non-current |
64,207 |
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2,747 |
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Other assets |
8,174 |
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7,956 |
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Total assets
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$ |
2,265,094 |
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$ |
2,042,181 |
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Liabilities and Stockholders’ Equity |
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Current liabilities:
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Accounts payable |
$ |
14,469 |
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$ |
9,944 |
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Accrued liabilities
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31,913 |
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22,657 |
|
Accrued payroll and benefits
|
38,576 |
|
|
61,150 |
|
Operating lease liabilities, current
|
4,004 |
|
|
4,613 |
|
Deferred revenue, current |
244,207 |
|
|
182,957 |
|
Total current liabilities
|
333,169 |
|
|
281,321 |
|
Deferred revenue, non-current |
100,844 |
|
|
79,062 |
|
Operating lease liabilities, non-current |
25,261 |
|
|
24,467 |
|
Other liabilities |
66,004 |
|
|
6,543 |
|
Total liabilities
|
525,278 |
|
|
391,393 |
|
Commitments and contingencies (Note 9) |
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock; $0.0001 par value; 50,000,000 shares authorized as
of July 31, 2022 and January 31, 2022, and no shares
issued and outstanding as of July 31, 2022 and
January 31, 2022
|
— |
|
|
— |
|
Class A common stock; $0.0001 par value; 1,500,000,000 shares
authorized as of July 31, 2022 and January 31, 2022;
205,329,881 and 162,666,515 shares issued and outstanding as of
July 31, 2022 and January 31, 2022,
respectively
|
20 |
|
|
16 |
|
Class B common stock; $0.0001 par value; 300,000,000 shares
authorized as of July 31, 2022 and January 31, 2022;
75,246,506 and 107,785,100 shares issued and outstanding as of
July 31, 2022 and January 31, 2022,
respectively
|
8 |
|
|
11 |
|
Additional paid-in capital |
2,549,614 |
|
|
2,271,980 |
|
Accumulated other comprehensive income (loss) |
(2,013) |
|
|
454 |
|
Accumulated deficit |
(807,813) |
|
|
(621,673) |
|
Total stockholders’ equity |
1,739,816 |
|
|
1,650,788 |
|
Total liabilities and stockholders’ equity |
$ |
2,265,094 |
|
|
$ |
2,042,181 |
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue
|
$ |
102,505 |
|
|
$ |
45,750 |
|
|
$ |
180,760 |
|
|
$ |
83,145 |
|
Cost of revenue |
36,261 |
|
|
18,788 |
|
|
63,400 |
|
|
37,071 |
|
Gross profit |
66,244 |
|
|
26,962 |
|
|
117,360 |
|
|
46,074 |
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development
|
54,989 |
|
|
31,037 |
|
|
100,870 |
|
|
58,857 |
|
Sales and marketing
|
79,000 |
|
|
40,970 |
|
|
139,641 |
|
|
77,150 |
|
General and administrative
|
40,447 |
|
|
22,110 |
|
|
75,337 |
|
|
38,834 |
|
Total operating expenses
|
174,436 |
|
|
94,117 |
|
|
315,848 |
|
|
174,841 |
|
Loss from operations |
(108,192) |
|
|
(67,155) |
|
|
(198,488) |
|
|
(128,767) |
|
Interest income |
3,222 |
|
|
21 |
|
|
4,309 |
|
|
44 |
|
Interest expense |
(607) |
|
|
(479) |
|
|
(612) |
|
|
(782) |
|
Other income (expense), net |
427 |
|
|
(373) |
|
|
136 |
|
|
(966) |
|
Loss before provision for income taxes |
(105,150) |
|
|
(67,986) |
|
|
(194,655) |
|
|
(130,471) |
|
Provision for income taxes |
(8,844) |
|
|
177 |
|
|
(8,515) |
|
|
326 |
|
Net loss |
$ |
(96,306) |
|
|
$ |
(68,163) |
|
|
$ |
(186,140) |
|
|
$ |
(130,797) |
|
Net loss per share attributable to Class A and Class B common
stockholders, basic and diluted
|
$ |
(0.35) |
|
|
$ |
(0.57) |
|
|
$ |
(0.68) |
|
|
$ |
(1.59) |
|
Weighted-average shares used in computing net loss per share
attributable to Class A and Class B common stockholders, basic and
diluted |
277,417,227 |
|
|
120,520,061 |
|
|
273,424,105 |
|
|
82,394,440 |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
(in thousands) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net loss
|
$ |
(96,306) |
|
|
$ |
(68,163) |
|
|
$ |
(186,140) |
|
|
$ |
(130,797) |
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
Change in unrealized losses on investments |
(1,230) |
|
|
— |
|
|
(2,467) |
|
|
— |
|
Foreign currency translation adjustments |
— |
|
|
100 |
|
|
— |
|
|
290 |
|
Total comprehensive loss
|
$ |
(97,536) |
|
|
$ |
(68,063) |
|
|
$ |
(188,607) |
|
|
$ |
(130,507) |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2022
|
|
Redeemable Convertible Preferred Stock |
|
|
Class A and Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Accumulated Deficit |
|
Total Stockholders’ Equity |
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
Balance as of April 30, 2022
|
— |
|
|
$ |
— |
|
|
|
272,496,624 |
|
|
$ |
27 |
|
|
$ |
2,309,505 |
|
|
$ |
(783) |
|
|
$ |
(711,507) |
|
|
$ |
1,597,242 |
|
Issuance of common stock upon exercise of stock options |
— |
|
|
— |
|
|
|
1,350,556 |
|
|
— |
|
|
3,291 |
|
|
— |
|
|
— |
|
|
3,291 |
|
Vesting of restricted stock units |
— |
|
|
— |
|
|
|
291,442 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Issuance of common stock under employee purchase plan |
— |
|
|
— |
|
|
|
405,534 |
|
|
— |
|
|
8,682 |
|
|
— |
|
|
— |
|
|
8,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with acquisition |
— |
|
|
— |
|
|
|
6,032,231 |
|
|
1 |
|
|
186,332 |
|
|
— |
|
|
— |
|
|
186,333 |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
41,804 |
|
|
— |
|
|
— |
|
|
41,804 |
|
Other comprehensive income (loss) |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(1,230) |
|
|
— |
|
|
(1,230) |
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(96,306) |
|
|
(96,306) |
|
Balance as of July 31, 2022
|
— |
|
|
$ |
— |
|
|
|
280,576,387 |
|
|
$ |
28 |
|
|
$ |
2,549,614 |
|
|
$ |
(2,013) |
|
|
$ |
(807,813) |
|
|
$ |
1,739,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2021
|
|
Redeemable Convertible Preferred Stock |
|
|
Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Accumulated Deficit |
|
Total Stockholders’ Deficit |
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
Balance as of April 30, 2021
|
167,058,113 |
|
|
$ |
621,139 |
|
|
|
50,504,590 |
|
|
$ |
3 |
|
|
$ |
166,974 |
|
|
$ |
355 |
|
|
$ |
(413,206) |
|
|
$ |
(245,874) |
|
Conversion of redeemable convertible preferred stock to common
stock upon initial public offering |
(167,058,113) |
|
|
(621,139) |
|
|
|
169,787,200 |
|
|
10 |
|
|
621,129 |
|
|
— |
|
|
— |
|
|
621,139 |
|
Issuance of common stock upon initial public offering and private
placement, net of underwriting discounts and
commissions |
— |
|
|
— |
|
|
|
41,678,568 |
|
|
4 |
|
|
1,380,956 |
|
|
— |
|
|
— |
|
|
1,380,960 |
|
Issuance of common stock upon exercise of options |
— |
|
|
— |
|
|
|
1,975,381 |
|
|
— |
|
|
2,617 |
|
|
— |
|
|
— |
|
|
2,617 |
|
Issuance of common stock upon exercise of warrants |
— |
|
|
— |
|
|
|
940,953 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Vesting of early exercised stock options |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
537 |
|
|
— |
|
|
— |
|
|
537 |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
24,152 |
|
|
— |
|
|
— |
|
|
24,152 |
|
Issuance of restricted stock for services provided |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
500 |
|
|
— |
|
|
— |
|
|
500 |
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
100 |
|
|
— |
|
|
100 |
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(68,163) |
|
|
(68,163) |
|
Balances as of July 31, 2021
|
— |
|
|
$ |
— |
|
|
|
264,886,692 |
|
|
$ |
17 |
|
|
$ |
2,196,865 |
|
|
$ |
455 |
|
|
$ |
(481,369) |
|
|
$ |
1,715,968 |
|
|
|
|
SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2022
|
|
Redeemable Convertible Preferred Stock |
|
|
Class A and Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Accumulated Deficit |
|
Total Stockholders’ Equity |
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
Balance as of January 31, 2022
|
— |
|
|
$ |
— |
|
|
|
270,451,615 |
|
|
$ |
27 |
|
|
$ |
2,271,980 |
|
|
$ |
454 |
|
|
$ |
(621,673) |
|
|
$ |
1,650,788 |
|
Issuance of common stock upon exercise of stock options |
— |
|
|
— |
|
|
|
3,369,153 |
|
|
— |
|
|
8,381 |
|
|
— |
|
|
— |
|
|
8,381 |
|
Vesting of restricted stock units |
— |
|
|
— |
|
|
|
317,854 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Issuance of common stock under employee purchase plan |
— |
|
|
— |
|
|
|
405,534 |
|
|
— |
|
|
8,682 |
|
|
— |
|
|
— |
|
|
8,682 |
|
Vesting of early exercised stock options |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
18 |
|
|
— |
|
|
— |
|
|
18 |
|
Issuance of common stock in connection with acquisition |
— |
|
|
— |
|
|
|
6,032,231 |
|
|
1 |
|
|
186,332 |
|
|
— |
|
|
— |
|
|
186,333 |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
74,221 |
|
|
— |
|
|
— |
|
|
74,221 |
|
Other comprehensive income (loss) |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(2,467) |
|
|
— |
|
|
(2,467) |
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(186,140) |
|
|
(186,140) |
|
Balance as of July 31, 2022
|
— |
|
|
$ |
— |
|
|
|
280,576,387 |
|
|
$ |
28 |
|
|
$ |
2,549,614 |
|
|
$ |
(2,013) |
|
|
$ |
(807,813) |
|
|
$ |
1,739,816 |
|
|
|
|
SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2021
|
|
Redeemable Convertible Preferred Stock |
|
|
Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Accumulated Deficit |
|
Total Stockholders’ Deficit |
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
Balance as of January 31, 2021
|
167,058,113 |
|
|
$ |
621,139 |
|
|
|
39,242,316 |
|
|
$ |
2 |
|
|
$ |
29,869 |
|
|
$ |
165 |
|
|
$ |
(350,572) |
|
|
$ |
(320,536) |
|
Conversion of redeemable convertible preferred stock to common
stock upon initial public offering |
(167,058,113) |
|
|
(621,139) |
|
|
|
169,787,200 |
|
|
10 |
|
|
621,129 |
|
|
— |
|
|
— |
|
|
621,139 |
|
Issuance of common stock upon initial public offering and private
placement, net of underwriting discounts and
commissions |
— |
|
|
— |
|
|
|
41,678,568 |
|
|
4 |
|
|
1,380,956 |
|
|
— |
|
|
— |
|
|
1,380,960 |
|
Issuance of common stock upon exercise of options |
— |
|
|
— |
|
|
|
4,625,342 |
|
|
— |
|
|
5,827 |
|
|
— |
|
|
— |
|
|
5,827 |
|
Issuance of common stock upon exercise of warrants |
— |
|
|
— |
|
|
|
940,953 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Vesting of early exercised stock options |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
554 |
|
|
— |
|
|
— |
|
|
554 |
|
Issuance of common stock assumed in connection with
acquisition |
— |
|
|
— |
|
|
|
7,277,214 |
|
|
1 |
|
|
120,318 |
|
|
— |
|
|
— |
|
|
120,319 |
|
Issuance of restricted stock awards |
— |
|
|
— |
|
|
|
1,315,099 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
37,712 |
|
|
— |
|
|
— |
|
|
37,712 |
|
Issuance of restricted stock for services provided |
— |
|
|
— |
|
|
|
20,000 |
|
|
— |
|
|
500 |
|
|
— |
|
|
— |
|
|
500 |
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
290 |
|
|
— |
|
|
290 |
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(130,797) |
|
|
(130,797) |
|
Balances as of July 31, 2021
|
— |
|
|
$ |
— |
|
|
|
264,886,692 |
|
|
$ |
17 |
|
|
$ |
2,196,865 |
|
|
$ |
455 |
|
|
$ |
(481,369) |
|
|
$ |
1,715,968 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
2022
|
|
2021
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
Net loss |
$ |
(186,140) |
|
|
$ |
(130,797) |
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation and amortization
|
10,794 |
|
|
3,637 |
|
Amortization of deferred contract acquisition costs
|
32,532 |
|
|
9,087 |
|
Non-cash operating lease costs
|
1,609 |
|
|
1,408 |
|
Stock-based compensation expense
|
72,631 |
|
|
34,830 |
|
Other
|
(1,619) |
|
|
105 |
|
Changes in operating assets and liabilities, net of effects of
acquisition |
|
|
|
Accounts receivable |
480 |
|
|
(10,339) |
|
Prepaid expenses and other assets
|
(9,151) |
|
|
(11,190) |
|
Deferred contract acquisition costs
|
(39,287) |
|
|
(16,477) |
|
Accounts payable |
6,094 |
|
|
(5,108) |
|
Accrued liabilities |
4,148 |
|
|
6,559 |
|
Accrued payroll and benefits
|
(23,669) |
|
|
6,864 |
|
Operating lease liabilities |
(2,737) |
|
|
(1,919) |
|
Deferred revenue
|
31,285 |
|
|
37,707 |
|
Other liabilities |
(8,447) |
|
|
2,842 |
|
Net cash used in operating activities
|
(111,477) |
|
|
(72,791) |
|
CASH FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
Purchases of property and equipment |
(4,101) |
|
|
(1,685) |
|
Purchases of intangible assets
|
(194) |
|
|
— |
|
Capitalization of internal-use software
|
(6,028) |
|
|
(2,852) |
|
Purchases of short-term investments
|
(1,243,594) |
|
|
— |
|
Maturities of short-term investments |
291,845 |
|
|
— |
|
Cash paid for acquisition, net of cash and restricted cash
acquired
|
(281,032) |
|
|
(3,449) |
|
Net cash used in investing activities
|
(1,243,104) |
|
|
(7,986) |
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
Payments of deferred offering costs |
(186) |
|
|
(5,068) |
|
Repayment of debt |
— |
|
|
(20,000) |
|
Proceeds from exercise of stock options
|
8,382 |
|
|
5,827 |
|
Proceeds from issuance of common stock under the employee stock
purchase plan |
8,682 |
|
|
— |
|
Proceeds from initial public offering and private placement, net of
underwriting discounts and commissions
|
— |
|
|
1,388,563 |
|
Net cash provided by financing activities
|
16,878 |
|
|
1,369,322 |
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
|
— |
|
|
1,146 |
|
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH
|
(1,337,703) |
|
|
1,289,691 |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–Beginning of
period
|
1,672,051 |
|
|
399,112 |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–End of
period
|
$ |
334,348 |
|
|
$ |
1,688,803 |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
Interest paid |
$ |
8 |
|
|
$ |
403 |
|
Income taxes paid (refunded), net of payments |
$ |
(69) |
|
|
$ |
74 |
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: |
|
|
|
Stock-based compensation capitalized as internal-use
software |
$ |
1,590 |
|
|
$ |
2,882 |
|
Property and equipment purchased but not yet paid |
$ |
836 |
|
|
$ |
93 |
|
Internal-use software capitalized but not yet paid |
$ |
383 |
|
|
$ |
— |
|
Vesting of early exercised stock options |
$ |
18 |
|
|
$ |
544 |
|
Deferred offering costs accrued but not yet paid |
$ |
— |
|
|
$ |
2,535 |
|
Issuance of common stock and assumed equity awards in connection
with acquisition |
$ |
186,332 |
|
|
$ |
120,319 |
|
Conversion of redeemable convertible preferred stock to common
stock upon initial public offering |
$ |
— |
|
|
$ |
621,139 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
1.ORGANIZATION
AND DESCRIPTION OF BUSINESS
Business
SentinelOne, Inc. (SentinelOne, we, our, or us) was incorporated in
January 2013 in the State of Delaware. On March 29, 2021, we
amended our certificate of incorporation to change our name from
Sentinel Labs, Inc. to SentinelOne, Inc. 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, 2022 filed with the SEC on
April 7, 2022.
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 six months ended July 31, 2022, as
compared to the use of estimates disclosed in our Annual Report on
Form 10-K for the fiscal year ended January 31, 2022 filed with the
SEC on April 7, 2022.
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 on Form 10-K filed with the SEC on
April 7, 2022.
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.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31,
|
|
As of January 31
|
|
2022 |
|
2022 |
Cash and cash equivalents |
$ |
269,493 |
|
|
$ |
1,669,304 |
|
Restricted cash, current |
648 |
|
|
— |
|
Restricted cash, non-current |
64,207 |
|
|
2,747 |
|
|
$ |
334,348 |
|
|
$ |
1,672,051 |
|
Recently Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU) No. 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with
Customers.
The new guidance requires contract assets and contract liabilities
(i.e., deferred revenue) acquired in a business combination to be
recognized in accordance with Accounting Standards Codification
Topic 606 as if the acquirer had originated the contracts.
Previously, contract assets and contract liabilities were measured
at fair value. The standard is effective for fiscal years beginning
after December 15, 2022, including interim periods within those
fiscal years, and early adoption is permitted. We early adopted
this guidance on February 1, 2022, which did not have a material
impact at the time of adoption on our condensed consolidated
financial statements.
3.REVENUE
AND CONTRACT BALANCES
Disaggregation of Revenue
The following table summarizes revenue by geography based on the
shipping address of end customers for the periods presented (in
thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2022
|
|
Three Months Ended July 31, 2021
|
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
United States |
$ |
68,392 |
|
|
67 |
% |
|
$ |
31,207 |
|
|
68 |
% |
International |
34,113 |
|
|
33 |
|
|
14,543 |
|
|
32 |
|
Total |
$ |
102,505 |
|
|
100 |
% |
|
$ |
45,750 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2022
|
|
Six Months Ended July 31, 2021
|
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
United States |
$ |
120,948 |
|
|
67 |
% |
|
$ |
57,383 |
|
|
69 |
% |
International |
59,812 |
|
|
33 |
|
|
25,762 |
|
|
31 |
|
Total |
$ |
180,760 |
|
|
100 |
% |
|
$ |
83,145 |
|
|
100 |
% |
No single country other than the United States represented 10% or
more of our revenue during the three and six months ended
July 31, 2022 and 2021.
The following table summarizes revenue by sales channel for the
periods presented (in thousands, except percentages):
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2022
|
|
Three Months Ended July 31, 2021
|
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
Channel partners |
$ |
92,785 |
|
|
91 |
% |
|
$ |
42,126 |
|
|
92 |
% |
Direct customers |
9,720 |
|
|
9 |
|
|
3,624 |
|
|
8 |
|
Total |
$ |
102,505 |
|
|
100 |
% |
|
$ |
45,750 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2022
|
|
Six Months Ended July 31, 2021
|
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
Channel partners |
$ |
164,237 |
|
|
91 |
% |
|
$ |
76,238 |
|
|
92 |
% |
Direct customers |
16,523 |
|
|
9 |
|
|
6,907 |
|
|
8 |
|
Total |
$ |
180,760 |
|
|
100 |
% |
|
$ |
83,145 |
|
|
100 |
% |
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
$7.1 million and $1.5 million as of July 31, 2022 and
January 31, 2022, 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 $345.1 million and $262.0
million as of July 31, 2022 and January 31, 2022,
respectively. We recognized revenue of $55.4 million and $24.5
million during the three months ended July 31, 2022 and 2021,
respectively, and $115.4 million and $53.6 million during the six
months ended July 31, 2022 and 2021, 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 from
one to three 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.
As of July 31, 2022, our remaining performance obligations
were $444.7 million, of which we expect to recognize 84% as revenue
over the next 24 months, with the remainder to be recognized
thereafter.
We periodically review deferred contract acquisition costs to
determine whether events or changes in circumstances have occurred
that could impact the period of benefit. We did not recognize any
impairment of deferred contract acquisition costs during the three
and six months ended July 31, 2022 and 2021.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
4.CASH
AND CASH EQUIVALENTS, INVESTMENTS, AND FAIR VALUE
MEASUREMENTS
The following table summarizes information about our cash and cash
equivalents, and short-term investments by investment category (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31, 2022
|
|
Fair Value Level |
|
Amortized Cost |
|
Gross Unrealized Gains |
|
Gross Unrealized Losses |
|
Estimated Fair Value |
Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
Cash |
|
|
$ |
34,662 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
34,662 |
|
Money market funds |
Level 1 |
|
224,854 |
|
|
— |
|
|
— |
|
|
224,854 |
|
Corporate notes and bonds |
Level 2 |
|
5,001 |
|
|
— |
|
|
(2) |
|
|
4,999 |
|
U.S. agency securities |
Level 2 |
|
4,982 |
|
|
— |
|
|
(4) |
|
|
4,978 |
|
Total cash and cash equivalents |
|
|
$ |
269,499 |
|
|
$ |
— |
|
|
$ |
(6) |
|
|
$ |
269,493 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
— |
|
Commercial paper |
Level 2 |
|
452,520 |
|
|
— |
|
|
(1,278) |
|
|
451,242 |
|
Corporate notes and bonds |
Level 2 |
|
34,276 |
|
|
— |
|
|
(168) |
|
|
34,108 |
|
U.S. agency securities |
Level 2 |
|
91,380 |
|
|
4 |
|
|
(309) |
|
|
91,075 |
|
U.S. Treasury securities |
Level 1 |
|
374,167 |
|
|
37 |
|
|
(746) |
|
|
373,458 |
|
Total short-term
investments |
|
|
$ |
952,343 |
|
|
$ |
41 |
|
|
$ |
(2,501) |
|
|
$ |
949,883 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
Indemnity Escrow |
Level 2 |
|
$ |
61,264 |
|
|
$ |
— |
|
|
$ |
(3,022) |
|
1 |
$ |
58,242 |
|
Total other liabilities |
|
|
$ |
61,264 |
|
|
$ |
— |
|
|
$ |
(3,022) |
|
|
$ |
58,242 |
|
_______________________
(1)
Represents imputed interest
As of July 31, 2022, we determined that the declines in the
market value of our investment portfolio were not driven by credit
related factors. During the three and six months ended
July 31, 2022 and 2021, we did not recognize any losses on our
investments due to credit related factors. As of July 31,
2022, the aggregate fair value of our cash equivalents and
short-term investments approximated amortized cost and, as such,
there were no unrealized gains or losses, either individually or in
the aggregate.
The following table summarizes the respective fair value and the
classification by level within the fair value hierarchy (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2022
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
Money market funds |
$ |
1,641,642 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,641,642 |
|
Short-term investments: |
|
|
|
|
|
|
|
Certificates of deposit |
— |
|
|
374 |
|
|
— |
|
|
374 |
|
Total assets measured and recorded at fair value |
$ |
1,641,642 |
|
|
$ |
374 |
|
|
$ |
— |
|
|
$ |
1,642,016 |
|
There were no transfers between the levels of the fair value
hierarchy during the three and six months ended July 31, 2022
and 2021.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
5.ACQUISITIONS
On May 3, 2022, we acquired 100% of the issued and outstanding
equity securities (the Acquisition) of Attivo Networks, Inc.
(Attivo), an identity security and lateral movement protection
company. Attivo expands our coverage of critical attack surfaces.
Identity is an adjacent security solution that complements our core
endpoint solution. The Acquisition closed on May 3, 2022 and has
been accounted for as a business combination in accordance with ASC
Topic 805,
Business Combinations.
We had post-combination expense with a fair value of
$32.9 million that was not included in the total purchase
consideration, which is comprised of 307,396 of restricted common
stock with an aggregate fair value of $10.0 million, and
378,828 assumed options with an aggregate fair value of
$11.5 million. Restricted common stock and assumed options
will be recognized as stock-based compensation expense. In
addition, in connection with the acquisition, certain employees who
were promised compensation related to their previous employment
agreements will be paid $11.4 million in cash based on
continued employment which will be recognized on a straight-line
basis as acquisition-related compensation costs. All
post-combination expense is expected to be recognized through May
2026. Post-combination compensation expense is subject to
adjustment based on continuing service obligations to the Company
of certain stockholders of Attivo.
In connection with the Acquisition, we also granted restricted
stock units (RSUs) and performance share units (PSUs) 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):
|
|
|
|
|
|
|
Amount |
Consideration |
|
Cash |
$ |
348,917 |
|
Common Stock (6,032,231 shares)(1)
|
185,885 |
|
Fair value of total consideration transferred |
$ |
534,802 |
|
|
|
Cash and cash equivalents |
$ |
8,836 |
|
Accounts receivable |
4,867 |
|
Prepaid expense and other current assets |
3,880 |
|
Operating lease right-of-use assets |
260 |
|
Intangible assets |
151,900 |
|
Accrued liabilities |
(4,270) |
|
Accrued payroll and benefits |
(1,113) |
|
Operating lease liabilities |
(259) |
|
Deferred revenue |
(51,746) |
|
Other liabilities |
(2,357) |
|
Deferred tax liability |
(7,310) |
|
Total identifiable net assets |
102,688 |
|
Goodwill |
432,114 |
|
Total purchase consideration |
$ |
534,802 |
|
(1)
Consideration calculated using the fair value of the Company’s
common stock
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 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 product for both
new and existing customers and strengthen our competitive position.
Goodwill is not deductible for tax purposes.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
The following table sets forth the preliminary amounts allocated to
the intangible assets identified and their estimated useful lives
as of the date of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Useful Life |
|
(in thousands) |
|
(in years) |
Customer relationships |
$ |
77,600 |
|
|
10 |
Developed technology |
63,200 |
|
|
5 |
Backlog |
11,100 |
|
|
2 |
Total intangible assets acquired |
$ |
151,900 |
|
|
|
The preliminary fair value assigned to customer relationships was
determined using the multi-period excess earnings method of the
income approach. The fair value assigned to developed technology
was determined using the relief from royalty method under the
income approach. The fair value assigned to backlog was determined
using the multi-period excess earnings method of the income
approach. The intangible assets acquired are expected to be
amortized over their useful lives on a straight-line
basis.
Aside from $61.0 million, net, within restricted cash on the
condensed consolidated balance sheet, held in an indemnity escrow
expected to be paid out within 15 months of the Acquisition, there
are no other contingent consideration or cash consideration
expected to be paid out subsequent to the Acquisition. The
indemnity escrow is carried at fair value within other liabilities
in our condensed consolidated balance sheet. The results of
operations of Attivo have been included in our condensed
consolidated financial statements from the date of the
Acquisition.
We have incurred $3.3 million and $5.5 million of
transaction expenses in connection with the Acquisition during the
three and six months ended July 31, 2022, respectively.
$1.0 million and $3.2 million of these costs were
recorded as general and administrative expenses in our condensed
consolidated statements of operations during the three and six
months ended July 31, 2022, respectively, with the remainder
allocated to purchase price consideration.
Our consolidated statements of operations from the date of the
Acquisition to the period ended July 31, 2022 includes revenue
and net loss of Attivo of $9.3 million and $(9.3) million,
respectively.
The following unaudited supplemental pro forma financial
information is provided for informational purposes only and
summarizes our combined results of operations as if the Acquisition
occurred on February 1, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
Six Months Ended July 31, |
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
Revenue |
$ |
102,706 |
|
|
$ |
52,741 |
|
|
$ |
188,264 |
|
|
$ |
96,279 |
|
|
|
|
|
Net loss |
$ |
(100,853) |
|
|
$ |
(82,240) |
|
|
$ |
(208,032) |
|
|
$ |
(154,714) |
|
|
|
|
|
The unaudited supplemental pro forma results reflect certain
adjustments for the amortization of acquired intangible assets,
recognition of stock-based compensation, acquisition-related
transaction expenses, and acquisition-related compensation costs.
Such pro forma amounts are not necessarily indicative of the
results that actually would have occurred had the Acquisition been
completed on the date indicated, nor is it indicative of our future
operating results.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
6.INTANGIBLE
ASSETS
Intangible assets, net consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31, |
|
As of January 31, |
|
2022 |
|
2022 |
Developed technology |
$ |
78,700 |
|
|
$ |
15,500 |
|
Customer relationship |
79,100 |
|
|
1,500 |
|
Backlog |
11,100 |
|
|
— |
|
Non-compete agreements |
650 |
|
|
650 |
|
Trademarks |
150 |
|
|
150 |
|
Patents |
1,288 |
|
|
1,094 |
|
Total finite-lived intangible assets |
170,988 |
|
|
18,894 |
|
Accumulated amortization - developed technology |
(6,447) |
|
|
(2,165) |
|
Accumulated amortization - customer relationship |
(3,060) |
|
|
(734) |
|
Accumulated amortization - backlog |
(1,397) |
|
|
— |
|
Accumulated amortization - non-compete agreements |
(319) |
|
|
(212) |
|
Accumulated amortization - trademarks |
(111) |
|
|
(73) |
|
Accumulated amortization - patents |
(232) |
|
|
(158) |
|
Less: total accumulated amortization |
(11,566) |
|
|
(3,342) |
|
Total finite-lived intangible assets, net |
$ |
159,422 |
|
|
$ |
15,552 |
|
Indefinite-lived intangible assets - domain names |
255 |
|
|
255 |
|
Total intangible assets, net |
$ |
159,677 |
|
|
$ |
15,807 |
|
Amortization expense of intangible assets was $7.3 million and $0.9
million for the three months ended July 31, 2022 and 2021,
respectively, and $8.0 million and $1.6 million for the six months
ended July 31, 2022 and 2021, respectively.
As of July 31, 2022, estimated future amortization expense is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
Fiscal Year Ending January 31, |
|
|
Remainder of 2023
|
|
$ |
14,788 |
|
2024 |
|
28,532 |
|
2025 |
|
24,187 |
|
2026 |
|
22,753 |
|
2027 |
|
22,753 |
|
Thereafter |
|
46,409 |
|
Total |
|
$ |
159,422 |
|
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):
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
Six Months Ended July 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Cost of revenue |
$ |
2,399 |
|
|
$ |
840 |
|
|
$ |
4,247 |
|
|
$ |
1,223 |
|
Research and development |
13,495 |
|
|
8,823 |
|
|
23,958 |
|
|
15,962 |
|
Sales and marketing |
9,715 |
|
|
3,905 |
|
|
16,811 |
|
|
5,952 |
|
General and administrative |
15,392 |
|
|
7,825 |
|
|
27,615 |
|
|
11,693 |
|
Total |
$ |
41,001 |
|
|
$ |
21,393 |
|
|
$ |
72,631 |
|
|
$ |
34,830 |
|
Restricted Stock Units
A summary of our RSU activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Weighted-Average Grant Date Fair Value |
Outstanding as of January 31, 2022
|
1,770,304 |
|
|
$ |
52.51 |
|
Granted |
7,464,181 |
|
|
$ |
33.76 |
|
Released |
(317,854) |
|
|
$ |
40.74 |
|
Forfeited |
(214,093) |
|
|
$ |
42.51 |
|
Outstanding as of July 31, 2022
|
8,702,538 |
|
|
$ |
37.12 |
|
As of July 31, 2022, we had unrecognized stock-based
compensation expense related to unvested RSUs of $289.3 million
that is expected to be recognized on ratably over a
weighted-average period of 3.4 years.
Stock Options
A summary of our stock option activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options |
|
Weighted-Average Exercise Price |
|
|
|
|
Outstanding as of January 31, 2022
|
42,422,473 |
|
|
$ |
4.30 |
|
|
|
|
|
Granted |
— |
|
|
$ |
— |
|
|
|
|
|
Exercised |
(3,369,153) |
|
|
$ |
2.49 |
|
|
|
|
|
Forfeited |
(717,964) |
|
|
$ |
5.40 |
|
|
|
|
|
Assumed options from Attivo acquisition |
378,828 |
|
|
$ |
1.31 |
|
|
|
|
|
Outstanding as of July 31, 2022
|
38,714,184 |
|
|
$ |
4.41 |
|
|
|
|
|
Expected to vest as of July 31, 2022
|
38,714,184 |
|
|
$ |
4.41 |
|
|
|
|
|
Vested and exercisable as of July 31, 2022
|
20,030,216 |
|
|
$ |
3.04 |
|
|
|
|
|
As of July 31, 2022, we had unrecognized stock-based
compensation expense related to unvested options of $134.1 million
that is expected to be recognized on ratably over a
weighted-average period of 2.4 years.
Milestone Options
In March 2021, we granted 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 the 2013 Plan. These stock
options will vest 100% upon the occurrence of our initial public
offering (IPO) (the performance-based vesting condition) and the
achievement of certain milestone events and our share price targets
(the market-based vesting conditions), subject to the executive’s
continued service to us from the grant date through the milestone
events. For these options, we used a Monte Carlo simulation to
determine the fair value at the grant date and the implied service
period.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
During the three and six months ended July 31, 2022, we
recorded $0.9 million and $1.8 million, respectively, of
stock-based compensation expense related to these milestone
options. During the three and six months ended July 31, 2021,
we recorded $1.2 million of stock-based compensation expense. As of
July 31, 2022, we had unrecognized stock-based compensation
expense related to these milestone options of $14.5 million that is
expected to be recognized over the remaining vesting period of 4.1
years.
Performance Share Units
In connection with the acquisition of Attivo, we granted 71,003
shares of performance share units (PSUs) subject to service-based
and performance-based vesting conditions. These PSUs will vest 100%
upon the achievement of certain financial performance and
integration milestone events, subject to the employees’ continued
service to us from the grant date through the milestone events or
target dates.
During the three and six months ended July 31, 2022, we
recorded $0.2 million of stock-based compensation expense related
to these PSUs. As of July 31, 2022, we had unrecognized
stock-based compensation expense related to these PSUs of $1.4
million that is expected to be recognized over the remaining
vesting period of 1.4 years.
Restricted Common Stock
In connection with the acquisition of Attivo, restricted common
stock was issued to Attivo employees. See Note 5,
Acquisitions,
in the notes to our condensed consolidated financial statements for
more information regarding these restricted common
stock.
In connection with the acquisition of Scalyr, Inc. (Scalyr), we
issued 1,315,099 shares of restricted common stock with a fair
value of $14.59 per share at the time of grant, that vest over a
period of two years. During the three and six months ended
July 31, 2022, we recorded $2.1 million and $4.2 million,
respectively, of stock-based compensation expense related to
restricted common stock in connection with our acquisition of
Scalyr. During the three and six ended July 31, 2021, we
recorded $3.1 million and $5.5 million, respectively, of
stock-based compensation expense. As of July 31, 2022, we had
unrecognized stock-based compensation expense related to this
restricted common stock of $4.4 million that is expected to be
recognized over the remaining vesting period of 0.5
years.
Employee Stock Purchase Plan (ESPP)
The Company recognized stock-based compensation expense related to
ESPP of $3.8 million and $6.5 million, respectively, during the
three and six months ended July 31, 2022. The Company
recognized stock-based compensation expense related to ESPP of $1.0
million during both the three and six months ended July 31,
2021.
During the three months ended July 31, 2022 we recorded
$0.2 million in expense related to modification of our ESPP as
a result of the decrease in our stock price which triggered a reset
of the ESPP offering period in accordance with our plan. We expect
to record a total of $1.3 million in expense related to this
modification through the second quarter of 2024.
Attivo Acquisition
In connection with the Acquisition, we granted 539,795 shares of
restricted stock units (RSUs) under our 2021 Equity Incentive Plan
that will vest over a period of
3 years
contingent on continued employment of certain Attivo employees, for
which stock-based compensation expense will be recognized ratably
over the vesting period.
Attivo Equity Incentive Plan
In connection with our acquisition of Attivo Networks which closed
in May 2022, we assumed unvested stock options that were granted
under the Attivo 2011 Equity Incentive Plan ("Attivo Plan"). We do
not intend to grant any additional shares under the Attivo Plan and
the Attivo Plan will continue to govern the terms and conditions of
the outstanding awards previously granted thereunder. Any shares
underlying stock options that are expired,
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
canceled, forfeited or repurchased under the Attivo Plan will be
automatically transferred to the Company’s 2021 Equity Incentive
Plan and be available for issuance as Class A common
stock.
8.INCOME
TAXES
We compute our tax provision for interim periods by applying the
estimated annual effective tax rate to year-to-date income from
recurring operations and adjusting for discrete items arising in
that quarter.
We had an effective tax rate of 8.4% and (0.3)% for the three
months ended July 31, 2022 and 2021, respectively, and 4.4%
and (0.2)% for the six months ended July 31, 2022 and 2021,
respectively. We have incurred U.S. operating losses and have
minimal profits or offsetting loss carryforwards in certain foreign
jurisdictions.
We compute our tax provision for interim periods by applying the
estimated annual effective tax rate to year-to-date income from
recurring operations and adjusting for discrete items arising in
that quarter. In connection with the Attivo business
combination, we recorded a net deferred tax liability primarily
attributable to identifiable acquired intangibles. This net
deferred tax liability is considered an additional source of income
to support the realizability of the Company's deferred tax
asset, and as a result we released a portion of the valuation
allowance and recorded a one-time discrete tax
benefit of $9.7 million for the three and six months ended
July 31, 2022
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,
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, |
|
Six Months Ended July 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Numerator: |
|
|
|
|
|
|
|
Net loss attributable to Class A and Class B common
stockholders |
$ |
(96,306) |
|
|
$ |
(68,163) |
|
|
$ |
(186,140) |
|
|
$ |
(130,797) |
|
Denominator: |
|
|
|
|
|
|
|
Weighted-average shares used in computing net loss per share
attributable to Class A and Class B common stockholders, basic and
diluted |
277,417,227 |
|
|
120,520,061 |
|
|
273,424,105 |
|
|
82,394,440 |
|
Net loss per share attributable to Class A and Class B common
stockholders, basic and diluted |
$ |
(0.35) |
|
|
$ |
(0.57) |
|
|
$ |
(0.68) |
|
|
$ |
(1.59) |
|
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31,
|
|
2022 |
|
2021 |
|
|
|
|
Stock options |
38,316,073 |
|
|
48,385,470 |
|
|
|
|
|
Shares subject to repurchase |
298,374 |
|
|
63,492 |
|
RSUs and PSUs |
1,343,582 |
|
|
346,483 |
|
ESPP |
109,217 |
|
|
85,827 |
|
Restricted common stock |
405,620 |
|
|
1,315,099 |
|
Contingently issuable shares |
1,317,079 |
|
|
1,317,079 |
|
Total |
41,789,945 |
|
|
51,513,450 |
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.
BlackBerry Litigation
Starting in October 2019, BlackBerry Corp. and its subsidiary
Cylance, Inc. (BlackBerry) filed a total of nine proceedings (seven
lawsuits and two arbitrations) against us and certain former
BlackBerry employees who joined our company. In these proceedings,
BlackBerry alleges that it has viable legal claims as a result of
its former employees joining us. Many of these proceedings have now
been dismissed. The status of each of the currently pending
proceedings is discussed below. We have defended against these
claims and expect to continue to defend against these
claims.
BlackBerry Corp., et al. v. Coulter, et al.
On October 17, 2019, BlackBerry commenced an action
captioned
BlackBerry Corp., et al. v. Coulter, et al.,
No. 953-10-19 (Vt. Super. Ct.) (Vermont Action) against Chris
Coulter, an employee on our Vigilance services team. On October 23,
2019, BlackBerry filed an amended complaint that added us as a
defendant. The amended complaint asserts claims against us for
conspiracy, tortious interference with contract, aiding and
abetting breach of fiduciary duties, and misappropriation of trade
secrets. The court entered a preliminary injunction order enjoining
Mr. Coulter from working for us through February 2021. As a result
of the court’s order, Mr. Coulter chose to seek other employment
and is no longer employed by us. On January 15, 2021, the court
entered an order narrowing the scope of the case and limiting the
claims against us in order to avoid conflict with a similar action
that was previously filed in California and was dismissed. The
Vermont Action is currently pending. On October 25, 2019,
BlackBerry commenced an action captioned
BlackBerry Corp., et al v. Coulter, et al.,
No. 2019-0854-JTL (Del. Ch.) against Mr. Coulter and us in Delaware
Chancery Court. The court stayed this case pending resolution of
the Vermont Action, and on February 7, 2020, BlackBerry voluntarily
dismissed without prejudice all claims against Mr. Coulter and us.
On December 3, 2019, BlackBerry initiated a largely duplicative
action in arbitration solely against Mr. Coulter administered by
JAMS, an alternative dispute resolution provider. That arbitration
action, however, was dismissed on or about March 30, 2021, with
JAMS informing us that they had closed their files on this matter
on April 30, 2021.
BlackBerry Corp., et al. v. Page, et al.
On November 18, 2019, BlackBerry commenced an action
captioned
BlackBerry Corp., et al. v. Page, et al.,
No. 2019-CP-07-2552 (S.C. Cir. Ct.) against Barnaby Page, a
go-to-market employee, and us, in a South Carolina state court. The
complaint asserts claims against us for aiding and abetting breach
of fiduciary duties, tortious interference with contract, and
misappropriation of trade secrets. Following initial discovery, on
August 27, 2020, we and Mr. Page filed a joint motion for judgment
on the pleadings. Following initial discovery, the parties agreed
to stipulate to a dismissal of this lawsuit without prejudice, and
a dismissal order was entered by the court on January 31,
2022.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
Blackberry Corp. et al. v. Sentinel Labs, Inc., et al.
On January 16, 2020, BlackBerry commenced the action
captioned,
BlackBerry Corp., et al. v. Sentinel Labs, Inc., et al.,
No. 20CV361950 (Cal. Super. Ct. Santa Clara Cnty.) (Current
California Action), against us and unnamed “Doe” defendants,
asserting claims against us for trade secret misappropriation and
unfair business practices. We filed counterclaims that, in part,
seek to invalidate any agreements allegedly supporting BlackBerry’s
claims against its former employees. On December 14, 2020, we filed
a motion requesting that BlackBerry sufficiently identify any trade
secrets it alleges we misappropriated in accordance with California
law. On February 12, 2021, the court granted that motion in part,
including striking BlackBerry’s expert testimony, and limiting the
scope of discovery to customer lists and sales-related information.
On March 15, 2021, BlackBerry re-filed a statement identifying its
trade secrets to pursue broader claims and discovery. In response,
on April 5, 2021, we again filed a motion requesting that
BlackBerry sufficiently identify any trade secrets under California
law. On June 2, 2021, the court granted the motion in our favor,
absent a few discrete areas permitted by the court. On July 2,
2021, Blackberry filed its third amended trade secret
identification. In response, on July 16, 2021, we submitted a
motion challenging these claims. In its third trade secret
statement, in response to our motion again challenging the
sufficiency of its trade secret disclosures, Blackberry voluntarily
dropped various claims. The parties are currently in the early
stages of discovery over the revised trade secret disclosures
approved by the court on August 31, 2021. We continue to litigate
this action, including actively pursuing our counterclaims against
them.
BlackBerry Corp., et al. v. Quinn, et al.
On February 17, 2020,
BlackBerry commenced the action captioned BlackBerry Corp., et al.
v. Quinn, et al.,
No. D-1-GN-20-00096 (Tex. Civ. Ct. – Travis Cnty.) against Sean
Quinn, a go-to-market employee, and us, in Texas state court. On
August 8, 2020, we and Mr. Quinn moved to stay or dismiss the case
in light of the overlapping issues between this case and the
Current California Action. On September 21, 2020, the court stayed
this case pending resolution of the Current California Action. This
lawsuit remains stayed and is pending in abeyance before the Texas
court.
BlackBerry Corp., et al. v. Kaylan Brown Coulter.
On or about April 7, 2022, BlackBerry commenced an action captioned
BlackBerry Corp., et al. v. Kaylan Brown Coulter, No. 22-cv-01249
(Vt. Super. Ct.) (Brown-Coulter Action) against Kaylan Brown
Coulter, the wife of Chris Coulter (referenced above), alleging
breach of non-disclosure and non-solicitation agreements, breach of
covenant of good faith and fair dealing, breach of fiduciary
duties, and civil conspiracy. While this is part of the same series
of lawsuits by BlackBerry, we were not named in this action. On May
6, 2022, Ms. Brown-Coulter removed the case to the United States
District Court for the District of Vermont, No. 5:22-cv-98 (D.
Vt.). Shortly thereafter, on May 13, 2022, Ms. Brown-Coulter filed
a motion to dismiss all claims under Federal Rule of Civil
Procedure 12(b)(6). This motion is currently pending before the
court.
We have not recorded any accruals for loss contingencies associated
with these legal proceedings, determined that an unfavorable
outcome is probable, or determined that the amount or range of any
possible loss is reasonably estimable. 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 entered into an
insurance policy to cover our potential liability arising from this
limited warranty arrangement. 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 July 31, 2022 and
January 31, 2022.
|
|
|
SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
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 $0.9 million and $1.4 million, respectively, matching
contributions for the three and six months ended July 31,
2022, and no matching contributions by us for the three and six
months ended July 31, 2021.
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 consolidated balance
sheets. We recorded severance expenses related to these employees
of $1.0 million and $1.0 million for the three months ended
July 31, 2022 and 2021, respectively, $2.0 million and $1.8
million for the six months ended July 31, 2022 and 2021,
respectively.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with our
unaudited condensed consolidated financial statements and related
notes appearing elsewhere in this Quarterly Report on Form 10-Q and
our audited consolidated financial statements and the related notes
and the discussion under the heading “Management's Discussion and
Analysis of Financial Condition and Results of Operations” included
in our Annual Report on Form 10-K for the fiscal year ended January
31, 2022 filed with the U.S. Securities and Exchange Commission, or
the SEC, on April 7, 2022. This discussion, particularly
information with respect to our future results of operations or
financial condition, business strategy and plans, and objectives of
management for future operations, includes forward-looking
statements that involve risks and uncertainties as described under
the heading “Special Note About Forward-Looking Statements” in this
Quarterly Report on Form 10-Q. You should review the disclosure
under the heading “Risk Factors” in this Quarterly Report on Form
10-Q for a discussion of important factors that could cause our
actual results to differ materially from those anticipated in these
forward-looking statements. Our fiscal year ends on January 31, and
our fiscal quarters end on April 30, July 31, October 31, and
January 31. Our fiscal years ended January 31, 2022 and January 31,
2023 are referred to herein as fiscal 2022 and fiscal 2023,
respectively.
Unless the context otherwise requires, all references in this
report to “SentinelOne,” the “Company,” “we,” “our,” “us,” or
similar terms refer to SentinelOne, Inc. and its
subsidiaries.
Overview
We founded SentinelOne in 2013 with a dramatically new approach to
cybersecurity.
We pioneered the world’s first purpose-built artificial
intelligence, or AI,-powered extended detection and response, or
XDR, platform to make cybersecurity defense truly autonomous, from
the endpoint and beyond. Our Singularity Platform instantly defends
against cyberattacks - performing at a faster speed, greater scale,
and higher accuracy than otherwise possible from a human-powered
approach.
Our Singularity XDR Platform ingests, correlates, and queries
petabytes of structured and unstructured data from a myriad of
ever-expanding disparate external and internal sources in
real-time. We build rich context and deliver greater visibility by
constructing a dynamic representation of data across an
organization. As a result, our AI models are highly accurate,
actionable, and autonomous. Our distributed AI models run both
locally on every endpoint and every cloud workload, as well as on
our cloud platform. Our Static and vector-agnostic Behavioral AI
models, which run on the endpoints themselves, provide our
customers with protection even when their devices are not connected
to the cloud. In the cloud, our Streaming AI detects anomalies that
surface when multiple data feeds are correlated. By providing full
visibility into the Storyline of every secured device across the
organization through one console, our platform makes it very fast
for analysts to easily search through petabytes of data to
investigate incidents and proactively hunt threats. We have
extended our control and visibility planes beyond the traditional
endpoint to unmanaged IoT devices.
Our Singularity Platform can be flexibly deployed on the
environments that our customers choose, including public, private,
or hybrid clouds. Our feature parity across Windows, macOS, Linux,
and Kubernetes offers best-of-breed protection, visibility, and
control across today’s heterogeneous IT environments. Together,
these capabilities make our platform the logical choice for
organizations of all sizes, industry verticals, and compliance
requirements. Our platform offers true multi-tenancy, which enables
some of the world’s largest organizations and our managed security
providers and incident response partners with an excellent
management experience. Our customers realize improved cybersecurity
outcomes with fewer people.
We generate substantially all of our revenue by selling
subscriptions to our Singularity Platform. Our subscription tiers
include Singularity Core, Singularity Control, and Singularity
Complete. Additionally, customers can extend the functionality of
our platform through our subscription Singularity Modules. We
generally price our subscriptions and modules on a per agent basis,
and each agent generally corresponds with an endpoint, server,
virtual machine, or container.
Our subscription contracts typically range from one to three years.
We recognize subscription revenue ratably over the term of a
contract. Most of our contracts are for terms representing annual
increments, therefore contracts generally come up for renewal in
the same period in subsequent years. The timing of large multi-year
enterprise contracts can create some variability in subscription
order levels between periods, though the impact to our revenue in
any particular period is limited as a result of ratable revenue
recognition.
Our go-to-market strategy is focused on acquiring new customers and
driving expanded usage of our platform by existing customers. Our
sales organization is comprised of our enterprise sales, inside
sales and customer solutions engineering teams. It leverages our
global network of independent software vendors, or ISVs, alliance
partners, and channel partners for prospect access. Additionally,
our sales teams work closely with our customers, channel partners,
and alliance partners to drive adoption of our platform, and our
software solutions are fulfilled through our channel partners. Our
channel partners include some of the world’s largest resellers and
distributors, managed service providers, or MSPs, managed security
service providers, or MSSPs, managed detection and response
providers, or MDRs, original equipment manufacturers, or OEMs, and
incident response firms, or IR firms. Once customers experience the
benefits of our platform, they often upgrade their subscriptions to
benefit from the full range of our XDR and IT and security
operations capabilities. Additionally, many of our customers adopt
Singularity Modules over time to extend the functionality of our
platform and increase their coverage footprint. The combination of
platform upgrades and extended modules drives our powerful
land-and-expand motion.
Our Singularity Platform is used globally by organizations of all
sizes across a broad range of industries. As of July 31, 2022,
we had over 8,600 customers, increasing from over 5,400 customers
as of July 31, 2021. We had 755 customers with annualized run
rate, or ARR, of $100,000 or more as of July 31, 2022, up from
348 as of July 31, 2021. We define ARR as the annualized
revenue run rate of our subscription and capacity contracts 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, 2022, no single end customer accounted for more
than 4% of our ARR. Our revenue outside of the United States
represented 33% and 32% for the three months ended July 31,
2022 and 2021, respectively, illustrating the global nature of our
solutions.
We have grown rapidly since our inception. Our revenue was $102.5
million and $45.8 million for the three months ended July 31,
2022 and 2021, respectively, representing year-over-year growth of
124%. Our revenue was $180.8 million and $83.1 million for the six
months ended July 31, 2022 and 2021, respectively,
representing year-over-year growth of 117%. 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, 2022 and 2021 was $96.3 million and $68.2
million, respectively, and our net loss for the six months ended
July 31, 2022 and 2021 was $186.1 million and $130.8 million,
respectively.
Attivo Acquisition
On March 15, 2022, we signed a definitive merger agreement to
acquire 100% of the issued and outstanding equity securities of
Attivo Networks, Inc., or Attivo, an identity security and lateral
movement protection company. The acquisition closed on May 3, 2022.
The aggregate consideration transferred was comprised of
$351.5 million in cash, 6,032,231 shares of our Class A common
stock with an aggregate value of $185.9 million, and 378,828
assumed options to purchase shares of our Class A common stock. For
further details, see Note 5,
Acquisitions,
in the notes to our condensed consolidated financial
statements.
Impact of COVID-19
Beginning in January 2020, the COVID-19 pandemic resulted in travel
restrictions, prohibitions of non-essential activities, disruption
and shutdown of certain businesses worldwide, as well as greater
uncertainty in global financial markets. The full extent to which
the COVID-19 pandemic will directly or indirectly impact our
business, operating results, cash flows, and financial condition
will depend on future developments that are highly uncertain and
cannot be accurately predicted. As a result of the COVID-19
pandemic, we have experienced, and may continue to experience, a
modest adverse impact on certain parts of our business, including a
lengthening of the sales cycle for some prospective customers and
delays in the delivery of professional services and trainings to
our customers.
We have also experienced, and may continue to experience, a
positive impact as a result of the COVID-19 pandemic. For example,
in connection with the travel restrictions, shelter-in-place, and
work-from-home policies resulting from the COVID-19 pandemic, we
have seen an increase in usage and subscriptions from smaller
customers, many of whom are small or medium sized businesses. We
have also seen slower growth in certain operating expenses due to
reduced business travel and the virtualization or cancellation of
customer and employee events. While a reduction in operating
expenses may have an immediate positive impact on our operating
results, we do not yet have visibility into the full impact this
will have on our business.
We cannot predict how long we will continue to experience the
impact of the COVID-19 pandemic including any new variants, vaccine
mandates, and further travel and office restrictions. Our operating
results, cash flows, and financial condition have not been
adversely affected to date. However, as certain of our customers or
partners experience downturns or uncertainty in their own business
operations or revenue resulting from the spread of COVID-19, our
operating results, cash flows, and financial condition could be
adversely affected. In addition, in response to the spread of
COVID-19, we previously required substantially all of our employees
to work remotely to minimize the risk of the virus to our employees
and the communities in which we operate. Most of our employees
continue to work remotely and we have slowly opened up our offices
at minimal capacity. We may take further actions as may be required
by government authorities or that we determine are in the best
interests of our employees, customers, and business
partners.
The global impact of the COVID-19 pandemic continues to rapidly
evolve, and we will continue to monitor the situation and the
effects on our business and operations closely. We do not yet know
the full extent of potential impacts on our business or operations
or on the global economy as a whole, particularly if the COVID-19
pandemic continues and persists for an extended period of time.
Given the uncertainty, we cannot reasonably estimate the impact on
our future operating results, cash flows, or financial condition.
For additional information, see the section titled “Risk
Factors.”
Key Business Metrics
We monitor the following key metrics to help us evaluate our
business, identify trends affecting our business, formulate
business plans, and make strategic decisions.
Annualized Recurring Revenue
We believe that ARR is a key operating metric to measure our
business because it is driven by our ability to acquire new
subscription and capacity customers and to maintain and expand our
relationship with existing customers. ARR represents the annualized
revenue run rate of our subscription and capacity contracts at the
end of a reporting period, assuming contracts are renewed on their
existing terms for customers that are under contracts with us. ARR
is not a forecast of future revenue, which can be impacted by
contract start and end dates and renewal rates.
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|
|
|
|
|
|
|
|
|
|
|
As of July 31,
|
|
2022
|
|
2021
|
|
|
|
|
|
(in thousands) |
Annualized recurring revenue (ARR) |
$ |
438,640 |
|
|
$ |
197,963 |
|
ARR grew 122% year-over-year to $438.6 million as of July 31,
2022, primarily due to high growth in the number of new customers
purchasing our subscriptions and to additional purchases by
existing customers.
Customers with ARR of $100,000 or More
We believe that our ability to increase the number of customers
with ARR of $100,000 or more is an indicator of our market
penetration and strategic demand for our platform. We define a
customer as an entity that has an active subscription for access to
our platform. We count MSPs, MSSPs, MDRs, and OEMs, who may
purchase our products on behalf of multiple companies, as a single
customer. We do not count our reseller or distributor channel
partners as customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31,
|
|
2022
|
|
2021
|
|
|
|
|
Customers with ARR of $100,000 or more |
755 |
|
|
348 |
|
Customers with ARR of $100,000 or more grew 117% year-over-year to
755 as of July 31, 2022, primarily due to new customers making
purchases of greater than $100,000, and partly due to existing
customers who made additional purchases.
Dollar-Based Net Retention Rate
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. Dollar-based net retention rate
measures the percentage change in our ARR derived from our customer
base at a point in time.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31,
|
|
2022
|
|
2021
|
|
|
|
|
Dollar-based net retention rate |
137 |
% |
|
129 |
% |
Our dollar-based net retention rate was 137% as of July 31,
2022, driven by existing customers primarily from expansion of the
number of endpoints, purchases of additional modules, and upgrades
of subscription tiers.
Components of Our Results of Operations
Revenue
We generate substantially all of our revenue from subscriptions to
our Singularity Platform. Customers can extend the functionality of
their subscription to our platform by subscribing to additional
Singularity Modules. Subscriptions provide access to hosted
software. The nature of our promise to the customer under the
subscription is to provide protection for the duration of the
contractual term and as such is considered as a series of distinct
services. We invoice our customers upfront upon signing for the
entire term of the contract, periodically, or in arrears. Most of
our subscription contracts have a term of one to three
years.
Cost of Revenue
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, and allocated overhead costs.
Our third-party cloud infrastructure costs are driven primarily by
the number of customers, the number of endpoints per customer, the
number of modules, and the incremental costs for storing additional
data collected for such cloud modules. We plan to continue to
invest in our platform infrastructure and additional resources in
our customer support and services organization as we grow our
business. The level and timing of investment in these areas could
affect our cost of revenue from period to period.
Operating Expenses
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.
Research and Development
Research and development expenses consist primarily of employee
salaries, benefits, bonuses, and stock-based compensation. Research
and development expenses also include consulting fees, software and
subscription services, and third-party cloud infrastructure
expenses incurred in developing our platform and
modules.
We expect research and development expenses to increase in absolute
dollars as we continue to increase investments in our existing
products and services. However, we anticipate research and
development expenses to decrease as a percentage of our total
revenue over time, although our research and development expenses
may fluctuate as a percentage of our total revenue from period to
period depending on the timing of these expenses. In addition,
research and development expenses that qualify as internal-use
software are capitalized, the amount of which may fluctuate
significantly from period to period.
Sales and Marketing
Sales and marketing expenses consist primarily of employee
salaries, commissions, benefits, bonuses, stock-based compensation,
travel and entertainment related expenses, advertising, branding
and marketing events, promotions, and software and subscription
services. Sales and marketing expenses also include sales
commissions paid to our sales force and referral fees paid to
independent third parties that are incremental to obtain a
subscription contract. Such costs are capitalized and amortized
over an estimated period of benefit of four years, and any such
expenses paid for the renewal of a subscription are capitalized and
amortized over the contractual term of the renewal.
We expect sales and marketing expenses to increase in absolute
dollars as we continue to make significant investments in our sales
and marketing organization to drive additional revenue, further
penetrate the market, and expand our global customer base, but to
decrease as a percentage of our revenue over time.
General and Administrative
General and administrative expenses consist primarily of salaries,
benefits, bonuses, stock-based compensation, and other expenses for
our executive, finance, legal, human resources, and facilities
organizations. General and administrative expenses also include
external legal, accounting, other consulting, and professional
services fees, software and subscription services, and other
corporate expenses.
We expect to incur additional expenses as a result of operating as
a public company, including costs to comply with the rules and
regulations applicable to companies listed on a national securities
exchange, costs related to compliance and reporting obligations,
and increased expenses for insurance, investor relations, and
professional services. We expect that our general and
administrative expenses will increase in absolute dollars as our
business grows but will decrease as a percentage of our revenue
over time.
Interest Income, Interest Expense, and Other Income (Expense),
Net
Interest income consists primarily of interest earned on our cash
equivalents and short-term investments.
Interest expense consisted primarily of interest on borrowings
associated with our now-terminated loan and security agreement,
which was repaid in June 2021.
Other income (expense), net consists primarily of foreign currency
transaction gains and losses.
Provision for Income Taxes
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.
Results of Operations
The following table sets forth our results of operations for the
periods presented:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Revenue |
$ |
102,505 |
|
|
$ |
45,750 |
|
|
$ |
180,760 |
|
|
$ |
83,145 |
|
Cost of revenue(1)
|
36,261 |
|
|
18,788 |
|
|
63,400 |
|
|
37,071 |
|
Gross profit |
66,244 |
|
|
26,962 |
|
|
117,360 |
|
|
46,074 |
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development(1)
|
54,989 |
|
|
31,037 |
|
|
100,870 |
|
|
58,857 |
|
Sales and marketing(1)
|
79,000 |
|
|
40,970 |
|
|
139,641 |
|
|
77,150 |
|
General and administrative(1)
|
40,447 |
|
|
22,110 |
|
|
75,337 |
|
|
38,834 |
|
Total operating expenses |
174,436 |
|
|
94,117 |
|
|
315,848 |
|
|
174,841 |
|
Loss from operations |
(108,192) |
|
|
(67,155) |
|
|
(198,488) |
|
|
(128,767) |
|
Interest income |
3,222 |
|
|
21 |
|
|
4,309 |
|
|
44 |
|
Interest expense |
(607) |
|
|
(479) |
|
|
(612) |
|
|
(782) |
|
Other income (expense), net |
427 |
|
|
(373) |
|
|
136 |
|
|
(966) |
|
Loss before provision for income taxes |
(105,150) |
|
|
(67,986) |
|
|
(194,655) |
|
|
(130,471) |
|
Provision for income taxes |
(8,844) |
|
|
177 |
|
|
(8,515) |
|
|
326 |
|
Net loss |
$ |
(96,306) |
|
|
$ |
(68,163) |
|
|
$ |
(186,140) |
|
|
$ |
(130,797) |
|
__________________
(1)Includes
stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Cost of revenue |
$ |
2,399 |
|
|
$ |
840 |
|
|
$ |
4,247 |
|
|
$ |
1,223 |
|
Research and development |
13,495 |
|
|
8,823 |
|
|
23,958 |
|
|
15,962 |
|
Sales and marketing |
9,715 |
|
|
3,905 |
|
|
16,811 |
|
|
5,952 |
|
General and administrative |
15,392 |
|
|
7,825 |
|
|
27,615 |
|
|
11,693 |
|
Total stock-based compensation expense |
$ |
41,001 |
|
|
$ |
21,393 |
|
|
$ |
72,631 |
|
|
$ |
34,830 |
|
The following table sets forth the components of our condensed
consolidated statements of operations as a percentage of revenue
for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
(as a percentage of total revenue) |
Revenue |
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
Cost of revenue |
35 |
|
41 |
|
35 |
|
45 |
Gross profit |
65 |
|
59 |
|
65 |
|
55 |
Operating expenses: |
|
|
|
|
|
|
|
Research and development
|
54 |
|
68 |
|
56 |
|
71 |
Sales and marketing
|
77 |
|
90 |
|
77 |
|
93 |
General and administrative
|
39 |
|
48 |
|
42 |
|
47 |
Total operating expenses |
170 |
|
206 |
|
175 |
|
210 |
Loss from operations |
(106) |
|
(147) |
|
(110) |
|
(155) |
Interest income |
3 |
|
— |
|
2 |
|
— |
Interest expense |
(1) |
|
(1) |
|
— |
|
(1) |
Other income (expense), net |
— |
|
(1) |
|
— |
|
(1) |
Loss before provision for income taxes |
(103) |
|
(149) |
|
(108) |
|
(157) |
Provision for income taxes |
(9) |
|
— |
|
(5) |
|
— |
Net loss |
(94) |
% |
|
(149) |
% |
|
(103) |
% |
|
(157) |
% |
Note: Certain figures may not sum due to rounding.
Comparison of the Three Months Ended July 31, 2022 and
2021
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Revenue |
$ |
102,505 |
|
|
$ |
45,750 |
|
|
$ |
56,755 |
|
|
124 |
% |
Revenue increased by $56.8 million
primarily due to
the expansion of our customer base, which grew about 60% as
compared to the same period last year. We also experienced
increased purchases from our existing customers as they expand the
number of endpoints, purchase additional modules from us, and
upgrade subscription tiers, as evidenced by our dollar-based net
retention rate of 137% as of July 31, 2022. We also had an
increase due to revenue received from the Attivo acquisition, which
closed in May 2022.
Cost of Revenue, Gross Profit, and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Cost of revenue |
$ |
36,261 |
|
|
$ |
18,788 |
|
|
$ |
17,473 |
|
|
93 |
% |
Gross profit |
$ |
66,244 |
|
|
$ |
26,962 |
|
|
$ |
39,282 |
|
|
146 |
% |
Gross margin |
65 |
% |
|
59 |
% |
|
|
|
|
Cost of revenue increased by $17.5 million primarily due to an
increase of $7.1 million in allocated overhead costs,
$4.8 million increase in amortization of acquired intangible
assets in connection with Scalyr and Attivo, and
higher third-party cloud infrastructure expenses of $5.2 million
from increased data usage. Gross margin increased
to 65%, primarily due to revenue growth from existing and new
customers outpacing growth in cost of revenue.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Research and development expenses |
$ |
54,989 |
|
|
$ |
31,037 |
|
|
$ |
23,952 |
|
|
77 |
% |
Research and development expenses increased by $24.0 million
primarily due to an increase in personnel-related expenses of $13.7
million, including an increase of $2.7 million related to
stock-based compensation expense as a result of increased
headcount, and an increase of $8.8 million in third-party cloud
infrastructure expenses incurred in developing our platform and
modules.
Sales and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Sales and marketing expenses |
$ |
79,000 |
|
|
$ |
40,970 |
|
|
$ |
38,030 |
|
|
93 |
% |
Sales and marketing expenses increased by $38.0 million primarily
due to an increase in personnel-related expenses of $24.8 million,
including an increase of $5.8 million in stock-based compensation
expense as a result of increased headcount and an increase of $3.5
million in commission expense as a result of an increase in sales
year over year. In addition, there was an increase in marketing
expenses of $5.5 million, allocated overhead costs of $2.6
million, and the remaining increase primarily the result of
increased travel as COVID-19 travel restrictions ease.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
General and administrative expenses |
$ |
40,447 |
|
|
$ |
22,110 |
|
|
$ |
18,337 |
|
|
83 |
% |
General and administrative expenses increased by $18.3 million
primarily due to an increase in personnel-related expenses of $14.7
million, including an increase of $7.6 million in stock-based
compensation expense as a result of increased headcount. In
addition, there was an increase of $3.1 million due to costs
incurred related to due diligence and planning associated with our
Attivo acquisition which closed in May 2022, with the remaining
increase primarily the result of additional operating costs as a
public company and software subscription services.
Interest Income, Interest Expense, and Other Income (Expense),
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Interest income |
$ |
3,222 |
|
|
$ |
21 |
|
|
$ |
3,201 |
|
|
15243 |
% |
Interest expense |
$ |
(607) |
|
|
$ |
(479) |
|
|
$ |
(128) |
|
|
27 |
% |
Other income (expense), net |
$ |
427 |
|
|
$ |
(373) |
|
|
$ |
800 |
|
|
(214) |
% |
Interest income increased $3.2 million as a result of interest
earned on investments, which we did not have in fiscal year 2022.
Interest expense decreased due to the repayment and termination of
the revolving line of credit in June 2021. The
increase in other income (expense), net is primarily
due to net foreign currency exchange gains.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Provision for income taxes |
$ |
(8,844) |
|
|
$ |
177 |
|
|
$ |
(9,021) |
|
|
(5097) |
% |
The provision for income taxes decreased primarily as a result of
the application of our deferred tax assets with a full valuation
allowance to net deferred tax liabilities of Attivo acquired
intangibles.
We compute our tax provision for interim periods by applying the
estimated annual effective tax rate to year-to-date income from
recurring operations and adjusting for discrete items arising in
that quarter. In connection with the Attivo business combination,
we recorded a net deferred tax liability primarily attributable to
identifiable acquired intangibles. This net deferred tax liability
is considered an additional source of income to support the
realizability of the Company's deferred tax asset, and as a result
we released a portion of the valuation allowance and recorded a
one-time discrete tax benefit of $9.7 million for the three and six
months ended July 31, 2022.
Comparison of the Six Months Ended July 31, 2022 and
2021
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Revenue |
$ |
180,760 |
|
|
$ |
83,145 |
|
|
$ |
97,615 |
|
|
117 |
% |
Revenue increased by $97.6 million, or 117%, from $83.1 million for
the six months ended July 31, 2021 to $180.8 million for six
months ended July 31, 2022, primarily due to the ongoing
demand for our platform and the acquisition of Scalyr in the first
quarter of fiscal 2022 and Attivo in the second quarter of fiscal
2023. The increase was primarily due to the ongoing demand for our
platform and the expansion of our customer base, which grew about
60% as compared to the same period last year.
Cost of Revenue, Gross Profit, and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Cost of revenue |
$ |
63,400 |
|
|
$ |
37,071 |
|
|
$ |
26,329 |
|
|
71 |
% |
Gross profit |
$ |
117,360 |
|
|
$ |
46,074 |
|
|
$ |
71,286 |
|
|
155 |
% |
Gross margin |
65 |
% |
|
55 |
% |
|
|
|
|
Cost of revenue increased by $26.3 million from $37.1 million for
the six months ended July 31, 2021 to $63.4 million for six
months ended July 31, 2022, primarily due to an increase of
$12.1 million in allocated overhead costs, higher third-party
cloud infrastructure expenses from increased data usage of
$8.6 million, and a $5.1 million increase in amortization
of acquired intangible assets in connection with the acquisition of
Scalyr and Attivo. Gross margin increased from 55% for the six
months ended July 31, 2021 to 65% for the six months ended
July 31, 2022 due to cloud infrastructure expansion driven by
fast customer adoption of our XDR platform, growth in support
personnel, and higher stock-based compensation.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Research and development expenses |
$ |
100,870 |
|
|
$ |
58,857 |
|
|
$ |
42,013 |
|
|
71 |
% |
Research and development expenses increased from $58.9 million for
the six months ended July 31, 2021 to $100.9 million for six
months ended July 31, 2022, primarily due to an increase in
personnel-related expenses and allocations of overheads of
$25.5 million, including an increase of $6.7 million
related to stock-based compensation expense as a result of
increased headcount, and an increase of $16.1 million in
third-party cloud infrastructure expenses incurred in developing
our platform and modules.
Sales and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Sales and marketing expenses |
$ |
139,641 |
|
|
$ |
77,150 |
|
|
$ |
62,491 |
|
|
81 |
% |
Sales and marketing expenses increased from $77.2 million for the
six months ended July 31, 2021 to $139.6 million for six
months ended July 31, 2022, primarily due to an increase in
personnel-related expenses of $44.2 million, including an
increase of $10.9 million in stock-based compensation expense
as a result of increased headcount. In addition, there was an
increase in allocated overhead costs of $4.8 million,
marketing expenses of $3.4 million, and the remaining increase
primarily the result of increased travel as COVID-19 travel
restrictions ease and increased general consulting, technical, and
outside services.
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
General and administrative expenses |
$ |
75,337 |
|
|
$ |
38,834 |
|
|
$ |
36,503 |
|
|
94 |
% |
General and administrative expenses increased from $38.8 million
for the six months ended July 31, 2021 to $75.3 million for
six months ended July 31, 2022, primarily due to an increase
in personnel-related expenses of $28.1 million, including an
increase of $15.9 million in stock-based compensation expense
as a result of increased headcount. In addition, there was an
increase of $6.3 million due to costs incurred related to due
diligence and planning associated with our Attivo acquisition which
closed in May 2022.
Interest Income, Interest Expense, and Other Income (Expense),
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
(dollars in thousands) |
|
|
Interest income |
$ |
4,309 |
|
|
$ |
44 |
|
|
$ |
4,265 |
|
|
9693 |
% |
Interest expense |
$ |
(612) |
|
|
$ |
(782) |
|
|
$ |
170 |
|
|
(22) |
% |
Other income (expense), net |
$ |
136 |
|
|
$ |
(966) |
|
|
$ |
1,102 |
|
|
(114) |
% |
Interest income increased $4.3 million as a result of interest
earned on investments, which we did not have in fiscal year 2022.
Interest expense decreased due to the repayment and termination of
the revolving line of credit in June 2021. The
increase in other income (expense), net is primarily
due to net foreign currency exchange gains.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Change |
|
2022
|
|
2021
|
|
$ |
|
% |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
Provision for income taxes |
$ |
(8,515) |
|
|
$ |
326 |
|
|
$ |
(8,841) |
|
|
(2712) |
% |
The provision for income taxes decreased primarily as a result of
the application of our deferred tax assets with a full valuation
allowance to net deferred tax liabilities of Attivo acquired
intangibles.
We compute our tax provision for interim periods by applying the
estimated annual effective tax rate to year-to-date income from
recurring operations and adjusting for discrete items arising in
that quarter. In connection with the Attivo business combination,
we recorded a net deferred tax liability primarily attributable to
identifiable acquired intangibles. This net deferred tax liability
is considered an additional source of income to support the
realizability of the Company's deferred tax asset, and as a result
we released a portion of the valuation allowance and recorded a
one-time discrete tax benefit of $9.7 million for the three and six
months ended July 31, 2022.
Liquidity and Capital Resources
In July 2021, upon completion of our IPO and the concurrent private
placement, we received net proceeds of $1.4 billion, after
deducting underwriters’ discounts and commissions and estimated
offering expenses of $81.6 million. We did not pay any
underwriting discounts or commissions with respect to shares that
were sold in the private pla