10-Q 1 s-20231031.htm 10-Q s-20231031
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2023
OR
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)
Delaware99-0385461
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
444 Castro Street, Suite 400, Mountain View, California
94041
(Address of Principal Executive Offices)(Zip Code)
(855) 868-3733
Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0001SThe 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.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
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 ☒
As of December 1, 2023, the registrant had 248,749,783 shares of Class A common stock and 49,924,995 shares of Class B common stock outstanding.


TABLE OF CONTENTS
Page


Special Note About Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (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,” or the negative of these words 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 global political, economic, and macroeconomic climate, whether in the cybersecurity industry in general, or among specific types of customers or within particular geographies, including but not limited to, the impacts related to instability in the banking industry, supply chain disruptions, a potential recession, inflation, government shutdowns and uncertainty with respect to the federal budget, and rising interest rates;
the impact of natural or man-made global events on our business, including wars and other regional geopolitical conflicts, including the conflicts in Ukraine and Israel;
the impact of actions that we are taking to improve operational efficiencies and operating costs, including the restructuring plan we approved in June 2023;
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;
cybersecurity incidents;
our ability to develop new products and services and bring them to market in a timely manner and make enhancements to our platform;
the ultimate success of technologies aimed at enhancing our platform, including through artificial intelligence (AI);
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;
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 Part II, Item 1A., “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)
SENTINELONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
October 31,
January 31,
2023
2023
Assets
Current assets:
Cash and cash equivalents$127,340 $137,941 
Short-term investments
670,632 485,584 
Accounts receivable, net
133,828 151,492 
Deferred contract acquisition costs, current
45,853 37,904 
Prepaid expenses and other current assets
91,770 101,812 
Total current assets
1,069,423 914,733 
Property and equipment, net
46,015 38,741 
Operating lease right-of-use assets20,969 23,564 
Long-term investments325,164 535,422 
Deferred contract acquisition costs, non-current60,178 55,536 
Intangible assets, net127,151 145,093 
Goodwill540,308 540,308 
Other assets6,659 5,516 
Total assets
$2,195,867 $2,258,913 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$13,793 $11,214 
Accrued liabilities
99,867 100,015 
Accrued payroll and benefits
52,777 54,955 
Operating lease liabilities, current
4,448 3,895 
Deferred revenue, current327,941 303,200 
Total current liabilities
498,826 473,279 
Deferred revenue, non-current94,631 103,062 
Operating lease liabilities, non-current18,492 23,079 
Other liabilities3,089 2,788 
Total liabilities
615,038 602,208 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Class A common stock; $0.0001 par value; 1,500,000,000 shares authorized as of October 31, 2023 and January 31, 2023; 244,532,935 and 222,951,206 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively
25 21 
Class B common stock; $0.0001 par value; 300,000,000 shares authorized as of October 31, 2023 and January 31, 2023; 53,374,518 and 63,812,651 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively
5 8 
Additional paid-in capital2,855,205 2,663,394 
Accumulated other comprehensive loss(7,344)(6,367)
Accumulated deficit(1,267,062)(1,000,351)
Total stockholders’ equity1,580,829 1,656,705 
Total liabilities and stockholders’ equity$2,195,867 $2,258,913 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended October 31,
Nine Months Ended October 31,
2023202220232022
Revenue
$164,165 $115,323 $446,979 $296,083 
Cost of revenue43,765 41,006 131,015 104,406 
Gross profit120,400 74,317 315,964 191,677 
Operating expenses:
Research and development
52,306 52,234 161,730 153,104 
Sales and marketing
98,249 83,953 295,682 223,594 
General and administrative
51,239 42,188 151,425 117,525 
Restructuring (Note 11)74  4,329  
Total operating expenses
201,868 178,375 613,166 494,223 
Loss from operations(81,468)(104,058)(297,202)(302,546)
Interest income11,877 7,193 33,901 11,502 
Interest expense(1)(613)(1,213)(1,225)
Other income (expense), net
605 (781)1,655 (645)
Loss before income taxes(68,987)(98,259)(262,859)(292,914)
Provision (benefit) for income taxes1,317 599 3,852 (7,916)
Net loss$(70,304)$(98,858)$(266,711)$(284,998)
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted
$(0.24)$(0.35)$(0.91)$(1.03)
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted296,650,848 280,635,022 292,755,742 275,867,765 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Three Months Ended October 31,
Nine Months Ended October 31,
2023
2022
2023
2022
Net loss
$(70,304)$(98,858)$(266,711)$(284,998)
Other comprehensive income (loss):
Change in unrealized gains (losses) on investments
1,627 (8,436)(977)(10,903)
Total comprehensive loss
$(68,677)$(107,294)$(267,688)$(295,901)
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Three Months Ended October 31, 2023
Class A and Class B Common Stock Additional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance as of July 31, 2023
294,898,606 $29 $2,795,019 $(8,971)$(1,196,758)$1,589,319 
Issuance of common stock upon exercise of stock options1,410,001 1 3,520 — — 3,521 
Vesting of restricted stock units1,598,846 — — — — — 
Vesting of early exercised stock options— — 9 — — 9 
Stock-based compensation— — 56,657 — — 56,657 
Other comprehensive loss— — — 1,627 — 1,627 
Net loss— — — — (70,304)(70,304)
Balance as of October 31, 2023
297,907,453 $30 $2,855,205 $(7,344)$(1,267,062)$1,580,829 

Three Months Ended October 31, 2022
Class A and Class
B Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Accumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance as of July 31, 2022
280,576,387 $28 $2,549,614 $(2,013)$(807,813)$1,739,816 
Issuance of common stock upon exercise of stock options1,254,653 — 2,900 — — 2,900 
Vesting of restricted stock units387,718 — — — — — 
Cancellation of holdback shares
(9,551)— — — — — 
Stock-based compensation— — 46,765 — — 46,765 
Other comprehensive loss— — — (8,436)— (8,436)
Net loss— — — — (98,858)(98,858)
Balance as of October 31, 2022
282,209,207 $28 $2,599,279 $(10,449)$(906,671)$1,682,187 





(continued)
8                

SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Nine Months Ended October 31, 2023
Class A and Class B Common Stock Additional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance as of January 31, 2023
286,763,857 $29 $2,663,394 $(6,367)$(1,000,351)$1,656,705 
Issuance of common stock upon exercise of stock options6,484,688 1 17,365 — — 17,366 
Vesting of restricted stock units4,090,297 — — — — — 
Issuance of common stock under employee stock purchase plan568,611 — 6,416 — — 6,416 
Vesting of early exercised stock options— — 178 — — 178 
Stock-based compensation— — 167,852 — — 167,852 
Other comprehensive loss— — — (977)— (977)
Net loss— — — — (266,711)(266,711)
Balance as of October 31, 2023
297,907,453 $30 $2,855,205 $(7,344)$(1,267,062)$1,580,829 
Nine Months Ended October 31, 2022
Class A and Class
B Common Stock
Additional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmount
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 options4,623,806 — 11,282 — — 11,282 
Vesting of restricted stock units705,572 — — — — — 
Issuance of common stock under employee stock purchase plan405,534 — 8,682 — — 8,682 
Cancellation of holdback shares
(9,551)— — — — — 
Vesting of early exercised stock options— — 18 — — 18 
Issuance of common stock in connection with acquisition6,032,231 1 186,331 — — 186,332 
Stock-based compensation— — 120,986 — — 120,986 
Other comprehensive loss— — — (10,903)— (10,903)
Net loss— — — — (284,998)(284,998)
Balances as of October 31, 2022
282,209,207 $28 $2,599,279 $(10,449)$(906,671)$1,682,187 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9                

SENTINELONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended October 31,
2023
2022
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss$(266,711)$(284,998)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
28,549 20,097 
Amortization of deferred contract acquisition costs
34,699 25,871 
Non-cash operating lease costs
3,010 2,547 
Stock-based compensation expense
163,308 118,318 
Accretion of discounts, and amortization of premiums on investments, net
(16,289)(5,620)
Net gain on strategic investments
(2,706) 
Other
637 (446)
Changes in operating assets and liabilities, net of effects of acquisition
Accounts receivable18,846 (12,699)
Prepaid expenses and other assets
10,075 (11,072)
Deferred contract acquisition costs
(47,289)(38,163)
Accounts payable1,935 (1,377)
Accrued liabilities(220)261 
Accrued payroll and benefits
(1,998)(18,786)
Operating lease liabilities(4,650)(4,296)
Deferred revenue
16,311 40,609 
Other liabilities301 (1,464)
Net cash used in operating activities
(62,192)(171,218)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment(1,117)(4,827)
Purchases of intangible assets
(3,436)(247)
Capitalization of internal-use software
(9,687)(10,279)
Purchases of investments
(462,539)(1,728,162)
Sales and maturities of investments
504,340 778,555 
Cash paid for acquisition, net of cash and restricted cash acquired
 (281,032)
Net cash provided by (used in) investing activities
27,561 (1,245,992)
CASH FLOW FROM FINANCING ACTIVITIES:
Payments of deferred offering costs (186)
Proceeds from exercise of stock options
17,366 11,282 
Proceeds from issuance of common stock under the employee stock purchase plan6,416 8,682 
Net cash provided by financing activities
23,782 19,778 
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(10,849)(1,397,432)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–Beginning of period
202,406 1,672,051 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–End of period
$191,557 $274,619 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid, net of refunds$3,021 $215 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock-based compensation capitalized as internal-use software$4,544 $2,668 
Property and equipment purchased but not yet paid$78 $205 
Internal-use software capitalized but not yet paid$25 $ 
Patents capitalized but not yet paid
$35 $ 
Vesting of early exercised stock options$178 $18 
Issuance of common stock and assumed equity awards in connection with acquisition$ $186,332 
The accompanying notes are an integral part of these condensed consolidated financial statements.
10

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1.ORGANIZATION AND DESCRIPTION OF BUSINESS
Business
SentinelOne, Inc. (SentinelOne, the Company, we, our, or us) was incorporated in January 2013 in the State of Delaware. We are a cybersecurity provider that delivers an artificial intelligence-powered platform to enable autonomous cybersecurity defense. Our headquarters is located in Mountain View, California with various other global office locations.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and applicable rules and regulations of the Securities and Exchange Commission (SEC), regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed with the SEC on March 29, 2023 (Annual Report).
In management’s opinion, the accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which reflect all normal recurring adjustments necessary to present fairly the results for the interim periods, but are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of SentinelOne and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ from these estimates, and such differences could be material to our condensed consolidated financial statements. There have been no material changes in our use of estimates during the nine months ended October 31, 2023, as compared to the use of estimates disclosed in our Annual Report.
Significant Accounting Policies
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.
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.
11

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 October 31,
As of January 31,
20232023
Cash and cash equivalents$127,340 $137,941 
Restricted cash, current61,264 61,264 
Restricted cash, non-current2,953 3,201 
$191,557 $202,406 
Restricted cash, current and restricted cash, non-current is presented within other current assets and other assets in the condensed consolidated balance sheets, respectively.
3.REVENUE AND CONTRACT BALANCES
Disaggregation of Revenue
The following table summarizes revenue by geography based on the shipping address of end customers who have contracted to use our platform for the periods presented (in thousands, except percentages):

Three Months Ended October 31, 2023
Three Months Ended October 31, 2022
Amount% of RevenueAmount% of Revenue
United States$103,461 63 %$73,657 64 %
International60,704 37 41,666 36 
Total$164,165 100 %$115,323 100 %
Nine Months Ended October 31, 2023
Nine Months Ended October 31, 2022
Amount% of RevenueAmount% of Revenue
United States$284,917 64 %$194,606 66 %
International162,062 36 101,477 34 
Total$446,979 100 %$296,083 100 %
No single country other than the United States represented 10% or more of our revenue during the three and nine months ended October 31, 2023 and 2022.
Substantially all of our sales are fulfilled our through channel partners, including distributors, resellers, managed security service providers, and others.
Contract Balances
Contract assets consist of unbilled accounts receivable, which arise when a right to consideration for our performance under the customer contract occurs before invoicing the customer. The amount of unbilled accounts receivable included within accounts receivable, net on the condensed consolidated balance sheets was $3.3 million and $1.5 million as of October 31, 2023 and January 31, 2023, 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 $422.6 million and $406.3 million as of October 31, 2023 and January 31, 2023, respectively. We recognized revenue of $128.5 million and $46.5 million during the three months ended October 31, 2023 and 2022,
12

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
respectively, and $259.3 million and $161.8 million during the nine months ended October 31, 2023 and 2022, 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.
For capacity contracts with non-cancelable commitments, remaining performance obligations are determined based on the ratable recognition of the remaining commitment over the remaining contract term. The amount and timing of revenue recognition are generally dependent on customers’ future consumption, which is inherently variable at the customers’ discretion.

As of October 31, 2023, our remaining performance obligations were $776.0 million, of which we expect to recognize 87% as revenue over the next 24 months, with the remainder to be recognized thereafter.
4.CASH AND CASH EQUIVALENTS, INVESTMENTS, AND FAIR VALUE MEASUREMENTS
The following tables summarizes information about our cash, cash equivalents, and investments by investment category as of October 31, 2023 and January 31, 2023 (in thousands):
As of October 31, 2023
Fair Value LevelAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Assets
Cash and cash equivalents:
CashLevel 1$37,654 $ $ $37,654 
Money market fundsLevel 176,323   76,323 
U.S. Treasury securities
Level 16,418   6,418 
Commercial paper
Level 26,946  (1)6,945 
Total cash and cash equivalents$127,341 $ $(1)$127,340 
Short-term investments:
U.S. Treasury securitiesLevel 1$249,557 $ $(2,178)$247,379 
Commercial paperLevel 240,884  (21)40,863 
Corporate notes and bondsLevel 2237,430  (2,275)235,155 
U.S. agency securitiesLevel 2148,302  (1,067)147,235 
Total short-term investments$676,173 $ $(5,541)$670,632 
Long-term investments:
U.S. Treasury securitiesLevel 1$61,514 $2 $(293)$61,223 
Corporate notes and bondsLevel 2123,215  (1,045)122,170 
U.S. agency securitiesLevel 2129,659  (920)128,739 
Total long-term investments$314,388 $2 $(2,258)$312,132 
Total assets measured at fair value$1,117,902 $2 $(7,800)$1,110,104 

13

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
As of January 31, 2023
Fair Value LevelAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Assets
Cash and cash equivalents:
CashLevel 1$35,055 $ $ $35,055 
Money market fundsLevel 1102,886   102,886 
Total cash and cash equivalents$137,941 $ $ $137,941 
Short-term investments:
U.S. Treasury securitiesLevel 1$144,392 $1 $(501)$143,892 
Commercial paperLevel 2230,305 30 (667)229,668 
Corporate notes and bondsLevel 238,443 15 (148)38,310 
U.S. agency securitiesLevel 274,060 3 (349)73,714 
Total short-term investments$487,200 $49 $(1,665)$485,584 
Long-term investments:
U.S. Treasury securitiesLevel 1$192,337 $ $(2,460)$189,877 
Corporate notes and bondsLevel 2233,946 178 (2,029)232,095 
U.S. agency securitiesLevel 2101,844 27 (921)100,950 
Total long-term investments$528,127 $205 $(5,410)$522,922 
Total assets measured at fair value$1,153,268 $254 $(7,075)$1,146,447 
We invest in highly rated securities with a weighted average maturity of 18 months or less. As of October 31, 2023, all of our investments will mature within 2 years.
There were no transfers between the levels of the fair value hierarchy during the three and nine months ended October 31, 2023 and 2022.
As of October 31, 2023, we determined that the declines in the market value of our investment portfolio were not driven by credit related factors. During the three and nine months ended October 31, 2023 and 2022, we did not recognize any losses on our investments due to credit related factors. As of October 31, 2023, we had $4.3 million in continuous unrealized loss positions for more than twelve months on securities with a total fair value of $395.9 million.
The tables above do not include the Company’s strategic investments in non-marketable debt and equity securities, recorded at cost, less any impairment, plus or minus observable price changes in orderly transactions for identical or similar investments of the same issuer (the Measurement Alternative) and were $13.0 million and $12.5 million as of October 31, 2023 and January 31, 2023, respectively.
During the three and nine months ended October 31, 2023, the Company recognized impairment charges on its non-marketable strategic investments of $0.8 million. During the three and nine months ended October 31, 2023, the Company recognized realized gains of $1.5 million and $3.5 million, respectively on its non-marketable strategic investments. Impairment charges and realized gains on strategic investments were recognized in other income (expense), net. The fair value was estimated on a non-recurring basis based on Level 3 inputs.
14

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5.INTANGIBLE ASSETS
Intangible assets, net consisted of the following (in thousands):
As of October 31,As of January 31,
20232023
Developed technology$78,700 $78,700 
Customer relationship79,100 79,100 
Backlog11,100 11,100 
Non-compete agreements650 650 
Trademarks150 150 
Patents4,972 1,501 
Total finite-lived intangible assets174,672 171,201 
Less: accumulated amortization(47,776)(26,363)
Total finite-lived intangible assets, net$126,896 $144,838 
Indefinite-lived intangible assets - domain names255 255 
Total intangible assets, net$127,151 $145,093 
Amortization expense of intangible assets was $7.2 million and $7.3 million for the three months ended October 31, 2023 and 2022, respectively, and $21.4 million and $15.3 million for the nine months ended October 31, 2023 and 2022, respectively.
As of October 31, 2023, estimated future amortization expense is as follows (in thousands):
Fiscal Year Ending January 31,
Remainder of 2024
$7,292 
202524,606 
202623,172 
202723,172 
202813,613 
Thereafter35,041 
Total$126,896 
15

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6.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):
Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Cost of revenue$4,329 $2,835 $12,570 $7,082 
Research and development15,634 13,996 45,876 37,954 
Sales and marketing14,085 12,166 40,362 28,977 
General and administrative20,865 16,690 65,560 44,305 
Restructuring  (1,060) 
Total$54,913 $45,687 $163,308 $118,318 
Restricted Stock Units
A summary of our restricted stock unit (RSU) activity is as follows:
Number of SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 31, 2023
14,409,166 $27.37 
Granted19,229,577 16.32 
Released(4,090,297)26.77 
Forfeited(2,516,121)22.28 
Outstanding as of October 31, 2023
27,032,325 $19.86 
As of October 31, 2023, we had unrecognized stock-based compensation expense related to unvested RSUs of $473.0 million that is expected to be recognized on a straight-line basis over a weighted-average period of 3.1 years.
Stock Options
A summary of our stock option activity is as follows:
Number of OptionsWeighted-Average Exercise Price
Outstanding as of January 31, 2023
32,446,814 $4.71 
Exercised(6,484,688)$2.68 
Forfeited(583,334)$5.54 
Outstanding as of October 31, 2023
25,378,792 $5.22 
Expected to vest as of October 31, 2023
25,378,792 $5.22 
Vested and exercisable as of October 31, 2023
18,189,967 $4.10 
As of October 31, 2023, we had unrecognized stock-based compensation expense related to unvested options of $61.9 million that is expected to be recognized on a straight-line basis over a weighted-average period of 1.9 years.
16

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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 our 2013 Equity Incentive Plan. These stock options will vest 100% upon the occurrence of (a) our initial public offering (IPO) (the performance-based vesting condition), which was completed in June 2021, and (b) the achievement of certain 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. As of October 31, 2023, the share price targets have not been achieved, therefore, these stock options remain unvested. For these options, we used a Monte Carlo simulation to determine the fair value at the grant date and the implied service period.
During the three and nine months ended October 31, 2023, we recorded $0.9 million and $2.7 million, respectively, of stock-based compensation expense related to these milestone options. During the three and nine months ended October 31, 2022, we recorded $0.9 million and $2.7 million, respectively, of stock-based compensation expense. As of October 31, 2023, we had unrecognized stock-based compensation expense related to these milestone options of $10.0 million that is expected to be recognized over the remaining implied service period of 2.8 years.
Performance Share Units
In March and May 2023, we granted Performance Stock Units (PSU) covering 1,133,455 shares of Class A common stock at target to certain executives subject to service-based and performance-based vesting conditions. These PSUs may vest from 0% to 225% of the number of target shares based on the achievement of certain financial performance metrics and will vest over four years from the grant date. As of October 31, 2023, we have assessed the financial performance metrics for these PSUs and consider achievement to be improbable (0% of target shares to vest). As such, we have not recorded any stock-based compensation expense and have no unrecognized stock-based compensation expense related to these PSUs.
Restricted Common Stock
In connection with the acquisition of Attivo Networks, Inc. (Attivo), we issued 63,327 shares of restricted Class A common stock to Attivo’s employees. We recorded stock-based compensation expense related to these restricted shares of $0.1 million and $0.5 million, respectively, during the three and nine months ended October 31, 2023. We recorded stock-based compensation expense related to these restricted shares of $0.3 million and $0.6 million, respectively, during the three and nine months ended October 31, 2022. As of October 31, 2023, we had unrecognized stock-based compensation expense related to this unvested restricted common stock of $0.5 million.
In connection with the acquisition of Scalyr, Inc. (Scalyr) in February 2021, we issued 1,315,099 shares of restricted common stock. During the nine months ended October 31, 2023 we recorded $0.2 million of stock-based compensation expense related to these restricted shares. No expense was recorded during the three months ended October 31, 2023 related to these restricted shares. During the three and nine months ended October 31, 2022, we recorded $2.1 million and $6.4 million, respectively, of stock-based compensation expense. As of October 31, 2023, this restricted common stock had fully vested.
Employee Stock Purchase Plan
We recognized stock-based compensation expense related to the Employee Stock Purchase Plan (ESPP) of $3.2 million and $9.1 million, respectively, during the three and nine months ended October 31, 2023. We recognized stock-based compensation expense of $3.6 million and $10.1 million, respectively, during the three and nine months ended October 31, 2022.
During the nine months ended October 31, 2023, we recorded $0.3 million in expense related to modification of our ESPP as a result of the decrease in our stock price in July 2022 and January 2023, which triggered resets of the ESPP offering periods in accordance with the terms of the ESPP. No expense related to the modification was recorded during the three months ended October 31, 2023. During the three and nine months ended October 31,
17

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2022, we recorded $0.1 million and $0.3 million, respectively, in stock-based compensation expense. As of October 31, 2023, there is no remaining unrecognized stock-based compensation expense related to modification of our ESPP.
Attivo Acquisition
In connection with our acquisition of Attivo (Attivo Acquisition), we granted 539,795 shares of RSUs under our 2021 Equity Incentive Plan that will vest over a period of three 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 the Attivo Acquisition, 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, canceled, forfeited or repurchased under the Attivo Plan will be automatically available for issuance as Class A common stock pursuant to our 2021 Equity Incentive Plan.
Modification
During fiscal 2023 and fiscal 2024, certain members of our management team converted to non-employee consultants or to positions that no longer provide substantive service to the Company (Management Transitions). These Management Transitions have been accounted for as modifications, under which, the exercise period of certain vested awards has been extended and a certain number of unvested awards will vest through the end of the agreements entered into in connection with the Management Transitions.
During the three and nine months ended October 31, 2023, we recognized an incremental charge of $2.4 million and $6.4 million, respectively, related to the Management Transitions. During the three and nine months ended October 31, 2022, we recognized an incremental charge of $2.6 million.
7.INCOME TAXES
We compute our tax provision (benefit) for interim periods by applying the estimated annual effective tax rate to year-to-date income from continuing operations and adjusting for discrete items arising in that quarter.
We had an effective tax rate of (1.9)% and (0.6)% for the three months ended October 31, 2023 and 2022, respectively, and (1.5)% and 2.7% for the nine months ended October 31, 2023 and 2022, respectively. We have incurred U.S. operating losses and have profits or offsetting loss carryforwards in certain foreign jurisdictions.
In connection with the Attivo Acquisition, 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 $9.7 million for the nine months ended October 31, 2022.
8.NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic and diluted net loss per share attributable to common stockholders is computed in conformity with the two-class method required for participating securities. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, stock options, restricted common stock, RSUs, PSUs, shares purchased pursuant to our ESPP, and early exercised stock options are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive for all periods presented.
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SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each class of common stock and the resulting basic and diluted net loss per share attributable to common stockholders are, therefore, the same for both Class A and Class B common stock on both an individual and combined basis.
Basic and diluted net loss per share attributable to common stockholders was as follows (in thousands, except share and per share data):
Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Numerator:
Net loss attributable to Class A and Class B common stockholders$(70,304)$(98,858)$(266,711)$(284,998)
Denominator:
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted296,650,848 280,635,022 292,755,742 275,867,765 
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted$(0.24)$(0.35)$(0.91)$(1.03)
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 October 31,
20232022
Stock options25,378,792 36,340,742 
Shares subject to repurchase26,264 261,253 
RSUs and PSUs27,032,325 4,173,150 
ESPP shares774,853 446,539 
Restricted common stock19,594 405,620 
Contingently issuable shares 113,698 
Total53,231,828 41,741,002
9.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.
Securities Litigation
On June 6, 2023, a securities class action was filed against the Company, its Chief Executive Officer and its Chief Financial Officer, in the Northern District of California, captioned Johansson v. SentinelOne, Inc., Case No. 4:23-cv-02786. The suit is brought on behalf of an alleged class of stockholders who purchased or acquired shares of the Company’s Class A common stock between June 1, 2022 and June 1, 2023. The complaint alleges that defendants made false or misleading statements about the Company's business, operations and prospects, including its annual recurring revenues and internal controls, and purports to assert claims under Sections 10(b) and 20(a) of
19

SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
the Securities Exchange Act of 1934, as amended. A substantially similar suit was filed on June 16, 2023 in the same court against the same defendants asserting the same claims, captioned Nyren v. SentinelOne, Inc., Case No. 4:23-cv-02982. On October 4, 2023, the court issued an order consolidating both cases under the caption In re SentinelOne, Inc. Securities Litigation Case No. 4:23-cv-02786 and appointing a lead plaintiff. Lead plaintiff has until December 4, 2023 to file a consolidated or amended complaint. The deadline for defendants’ response to the consolidated amended complaint is February 2, 2024. We believe the case is without merit and intends to defend the suit vigorously. Once the consolidated or amended complaint is filed, we will file a motion to dismiss the action.
Fortis Litigation
In September 2023, Fortis Advisors LLC (Fortis), in its capacity as the representative for the stockholders of Attivo, filed an action against the Company in Delaware Chancery Court asserting claims arising out of the Attivo Acquisition. The case is captioned Fortis Advisors LLC v. SentinelOne, Inc., Case No. 2023-0946-VLM.
In June 2023, the Company sent a letter to Fortis seeking indemnification for certain claims, including for breaches by Attivo of its representations and warranties in the merger agreement. Fortis is now seeking a declaratory judgment that the Company is not entitled to indemnification for the claims it has asserted, and that Fortis should recover the funds held in escrow. Fortis also alleges that the Company breached its representations and warranties in the merger agreement because its SEC filings allegedly contained materially false or misleading statements about the Company’s annual recurring revenues. The Company believes Fortis’ claims are without merit and intends to defend the suit vigorously. On November 3, 2023, the Company filed its answer to Fortis’ complaint. On the same day, the Company filed counterclaims against Fortis, in its capacity as the representative of the stockholders of Attivo, based on Attivo’s breach of several of its representations, warranties and covenants in the merger agreement. The Company’s counterclaims seek an order directing Fortis to comply with its contractual obligations to release funds set aside to indemnify the Company for its losses and any additional damages in excess of the indemnity fund.
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 the Company. In these proceedings, BlackBerry alleged that it had viable legal claims as a result of its former employees joining us. Over the four years, all but three of these actions (a company-to company case and two cases in Vermont) were dismissed by BlackBerry. In September 2023, the Company and BlackBerry entered into a confidential settlement agreement pursuant to which BlackBerry agreed, among other things, to dismiss with prejudice and terminate the remaining actions, and which contained a comprehensive release to resolve any other potential disputes regarding the hiring of certain former employees of BlackBerry and any alleged misappropriation of BlackBerry’s alleged trade secrets.
We believe that there are no other pending or threatened legal proceedings that are likely to have a material adverse effect on our condensed consolidated financial statements.
Warranties and Indemnification
Our services are generally warranted to deliver and operate in a manner consistent with general industry standards that are reasonably applicable and materially conform with our documentation under normal use and circumstances. Our contracts generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights.
We also offer a limited warranty to certain customers, subject to certain conditions, to cover certain costs incurred by the customer in case of a cybersecurity breach. We have a cybersecurity liability policy that may cover our customers’ actual damages. We have not incurred any material costs related to such obligations and have not accrued any liabilities related to such obligations in the condensed consolidated financial statements as of October 31, 2023 and January 31, 2023.
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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.
10.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 $0.2 million and $0.6 million, in matching contributions for the three months ended October 31, 2023 and 2022, respectively. There were $2.0 million and $2.0 million, in matching contributions for the nine months ended October 31, 2023 and 2022, respectively.
Israeli Severance Pay
Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to Section 14 of the Severance Compensation Act, 1963 (Section 14), all of our employees in Israel are entitled to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary.
These payments release us from any future severance payment obligation with respect to these employees; as such, any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset on our condensed consolidated balance sheets. We recorded severance expenses related to these employees of $0.8 million and $1.0 million, respectively, for the three months ended October 31, 2023 and 2022. We recorded severance expenses related to these employees of $2.6 million and $2.9 million, respectively, for the nine months ended October 31, 2023 and 2022.
11.RESTRUCTURING
In June 2023, we announced a restructuring plan (Plan) as a result of a review of current strategic priorities, resource allocation, and cost reduction intended to reduce operating costs, improve operating margins and continue advancing our ongoing commitment to profitable growth. The Plan includes a reduction of our workforce by approximately 5%, or approximately 100 full-time employees. We incurred approximately $5.0 million in charges in connection with the Plan in the nine months ended October 31, 2023, which consists of $5.4 million in charges related to severance payments and employee benefits, $0.7 million related to inventory write-offs, offset partially by $1.1 million in savings related to the reversal on stock-based compensation expense. Note that the charges related to inventory write-offs are recognized as cost of sales and not restructuring operating expenses in our condensed consolidated financial statements of operations. These costs were substantially paid as of October 31, 2023. In addition, we expect certain exit charges associated with office space reductions to be recorded in future periods, contingent on vacating the office space. The actions associated with the Plan are expected to be fully complete by the end of fiscal 2025, subject to local law and consultation requirements, as well as our business needs.
12.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
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SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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 6. Stock-Based Compensation.
The following table presents the 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 receivable4,867 
Prepaid expense and other current assets3,880 
Operating lease right-of-use assets260 
Intangible assets151,900 
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 assets102,688 
Goodwill432,114 
Total purchase consideration$534,802 
(1) Consideration calculated using the fair value of the Company’s common stock
The valuation of intangible assets acquired are included in Note 5. Intangible Assets.
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.
We incurred $5.5 million of transaction expenses in connection with the Acquisition during the nine months ended October 31, 2022. $3.2 million of these costs were recorded as general and administrative expenses in our consolidated statements of operations, with the remainder allocated to purchase price consideration. No transaction expenses in connection with the Acquisition were recorded during the nine months ended October 31, 2023.
13.SUBSEQUENT EVENTS
On November 8, 2023, the Company acquired cybersecurity consulting firm Krebs Stamos Group LLC (KSG), pursuant to a Membership Interest Purchase Agreement as of such date between the Company, KSG and the other parties thereto, under which the Company acquired 100% of KSG’s issued and outstanding membership interests
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SENTINELONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(the KSG Acquisition). The aggregate consideration for the KSG Acquisition approximately $14.0 million in cash, subject to customary adjustments.
The KSG Acquisition will be accounted for as a business combination and, accordingly, the total purchase price will be allocated to the tangible and intangible assets acquired and the liabilities assumed based on their respective fair values on the date of the KSG Acquisition.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. 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, 2023 filed with the U.S. Securities and Exchange Commission, (SEC), on March 29, 2023. 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, 2024 and January 31, 2023 are referred to herein as fiscal 2024 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 AI-powered Singularity 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 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
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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 (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 (MSPs), managed security service providers (MSSPs), managed detection and response providers (MDRs), original equipment manufacturers (OEMs), and incident response (IR) firms. Once customers experience the benefits of our platform, they often upgrade their subscriptions to benefit from the full range of our extended detection and response (XDR) and IT (information technology) 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 October 31, 2023, we had over 11,500 customers, increasing from over 9,250 customers as of October 31, 2022. We had 1,060 customers with annualized recurring revenue (ARR) of $100,000 or more as of October 31, 2023, up from 797 as of October 31, 2022. 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 October 31, 2023, no single end customer accounted for more than 4% of our ARR. Our revenue outside of the United States represented 37% and 36% for the three months ended October 31, 2023 and 2022, respectively, illustrating the global nature of our solutions.
We have grown rapidly since our inception. Our revenue was $164.2 million and $115.3 million for the three months ended October 31, 2023 and 2022, respectively, representing year-over-year growth of 42%. Our revenue was $447.0 million and $296.1 million for the nine months ended October 31, 2023 and 2022, respectively, representing year-over-year growth of 51%. 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 October 31, 2023 and 2022 was $70.3 million and $98.9 million, respectively, and our net loss for the nine months ended October 31, 2023 and 2022 was $266.7 million and $285.0 million, respectively.
Impact of Global Macroeconomic and Geopolitical Conditions
Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior. Worsening economic conditions, including inflation, higher interest rates, slower growth, any recession, fluctuations in foreign exchange rates, instability in the global banking industry, uncertainty with respect to the federal budget, and other changes in economic conditions, and the impact of natural or man-made global events, including wars and other regional geopolitical armed conflict, such as the conflicts in Israel and Ukraine, may result in decreased sales productivity and growth and adversely affect our results of operations and financial performance. As a result of the current macroeconomic environment we have recently experienced certain impacts on our business, including a decline in usage and consumption patterns from certain customers, especially larger enterprise customers, longer sales cycles, and deal downsizing by new customers and of renewals by existing customers, especially larger enterprises.
We intend to continue to monitor macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions to the extent our business begins to be adversely impacted. For
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example, in June 2023, we announced a restructuring plan (the Plan) designed to improve operational efficiencies and operating costs and better align our workforce and operations with current business needs, priorities, and near-term growth expectations. The actions associated with the Plan are expected to be fully complete by the end of fiscal 2025, subject to local law and consultation requirements, as well as our business needs. We incurred approximately $5.0 million in charges in connection with the Plan in the nine months ended October 31, 2023, respectively, consisting of severance payments and employee benefits and inventory write-offs, offset partially by savings related to the reversal on stock-based compensation expense.
We maintain an office in Tel-Aviv, Israel and had approximately 14% of our personnel in Israel as of October 31, 2023. We are closely monitoring the unfolding events of the armed conflict in Israel which began in October 2023. While this conflict is still evolving, to date, the conflict has not had an adverse impact on our business and results of operations. However, if the conflict continues to worsen or intensify, any business interruptions or spillover effects could adversely affect our business and operations.
We are unable to predict the full impact that macroeconomic or other geopolitical factors will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the actions that may be taken by government authorities across the U.S. or other countries, changes in central bank policies and interest rates, rates of inflation, uncertainty with respect to the federal budget, government shutdowns, regional geopolitical conflicts, the impact to our customers, partners, and suppliers, and other factors described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.
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 an operational metric and is not a non-GAAP metric. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates, usage, renewal rates, and other contractual terms.
As of October 31,
2023
2022*
(in thousands)
Annualized recurring revenue$663,858 $463,440 
*ARR as of October 31, 2022 reflects the one-time ARR adjustment of approximately 5% made in the first quarter of fiscal 2024.
ARR grew 43% year-over-year to $663.9 million as of October 31, 2023, primarily due to high growth in the number of new customers purchasing our subscriptions and to additional purchases by existing customers.
As previously disclosed in our quarterly report on Form 10-Q for the quarter ended April 30, 2023, ARR for the prior period in fiscal 2023 presented above has been adjusted based on the same percentage adjustment rate identified in the first quarter of fiscal 2024 of approximately 5%. For more information, see the section titled “Key Business Metrics” in Part I, Item 2 of the Quarterly Report on Form 10-Q for the quarter ended April 30, 2023.
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.
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As of October 31,
2023
2022*
Customers with ARR of $100,000 or more
1,060 797 
*Customers with ARR of $100,000 or more as of October 31, 2022 reflects the one-time ARR adjustment of approximately 5% made in the first quarter of fiscal 2024.
Customers with ARR of $100,000 or more grew 33% year-over-year to 1,060 as of October 31, 2023, primarily due to growth in the ARR of existing customers from additional purchases and to growth in the average size of purchases by new customers.
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 (NRR) measures the percentage change in our ARR derived from our customer base at a point in time.
As of October 31,
2023
2022
Dollar-based net retention rate115%+130%+
Our NRR exceeded 115% as of October 31, 2023, driven by existing customers primarily from expansion of the number of endpoints and purchases of additional modules.
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. Our arrangements may include fixed consideration, variable consideration, or a combination of the two. Fixed consideration is recognized over the term of the arrangement or longer if the fixed consideration relates to a material right. Variable consideration in these arrangements is typically a function of transaction volume or another usage-based measure. Depending upon the structure of a particular arrangement, we (i) allocate the variable amount to each distinct service period within the series and recognize revenue as each distinct service period is performed (i.e., direct allocation), (ii) estimate total variable consideration at contract inception (giving consideration to any constraints that may apply and updating the estimates as new information becomes available) and recognize the total transaction price over the period to which it relates, or (iii) apply the “right to invoice” practical expedient and recognize revenue based on the amount invoiced to the customer during the period. Premium support and maintenance and other Singularity Modules are distinct from subscriptions and are recognized ratably over the term as the performance obligations are satisfied.
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, inventory write-offs, and allocated overhead costs.
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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 average 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, people team, 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 continue 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.
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Restructuring
Restructuring charges, related to the Plan, consist primarily of charges related to severance payments, employee benefits, and stock-based compensation. The actions associated with the Plan are expected to be fully complete by the end of fiscal 2025, subject to local law and consultation requirements, as well as our business needs.
Interest Income, Interest Expense, and Other Income (Expense), Net
Interest income consists primarily of interest earned on our cash equivalents and investments.
Interest expense consists primarily of the amortization of the discount related to Attivo indemnity escrow liability.
Other income (expense), net consists primarily of foreign currency transaction gains and losses and gains and losses on strategic investments.
Provision for Income Taxes
Provision (benefit) for income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business, and a one-time benefit during the nine months ended October 31, 2022 from the release of valuation allowance as a result of the Attivo business combination. 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.
29

Results of Operations
The following table sets forth our results of operations for the periods presented:
Three Months Ended October 31,
Nine Months Ended October 31,
2023
2022
2023
2022
(in thousands)
Revenue$164,165 $115,323 $446,979 $296,083 
Cost of revenue(1)
43,765 41,006 131,015 104,406 
Gross profit120,400 74,317 315,964 191,677 
Operating expenses:
Research and development(1)
52,306 52,234 161,730 153,104 
Sales and marketing(1)
98,249 83,953 295,682 223,594 
General and administrative(1)
51,239 42,188 151,425 117,525 
Restructuring(1)
74 — 4,329 — 
Total operating expenses201,868 178,375 613,166 494,223 
Loss from operations(81,468)(104,058)(297,202)(302,546)
Interest income11,877 7,193 33,901 11,502 
Interest expense(1)(613)(1,213)(1,225)
Other income (expense), net
605 (781)1,655 (645)
Loss before income taxes(68,987)(98,259)(262,859)(292,914)
Provision (benefit) for income taxes1,317 599 3,852 (7,916)
Net loss$(70,304)$(98,858)$(266,711)$(284,998)
__________________
(1)Includes stock-based compensation expense as follows:
Three Months Ended October 31,
Nine Months Ended October 31,
2023
2022
2023
2022
(in thousands)
Cost of revenue$4,329 $2,835 $12,570 $7,082 
Research and development15,634 13,996 45,876 37,954 
Sales and marketing14,085 12,166 40,362 28,977 
General and administrative20,865 16,690 65,560 44,305 
Restructuring— — (1,060)— 
Total stock-based compensation expense$54,913 $45,687 $163,308 $118,318 
30

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 October 31,
Nine Months Ended October 31,
2023
2022
2023
2022
(as a percentage of total revenue)
Revenue100 %100 %100 %100 %
Cost of revenue27362935
Gross profit73647165
Operating expenses:
Research and development
32453652
Sales and marketing
60736676
General and administrative
31373440
Restructuring1
Total operating expenses123155137167
Loss from operations(50)(90)(66)(102)
Interest income7684
Interest expense(1)
Other income (expense), net
(1)
Loss before income taxes(42)(85)(59)(99)
Provision (benefit) for income taxes11(3)
Net loss(42)%(86)%(60)%(96)%

Note: Certain figures may not sum due to rounding.
Comparison of the Three Months Ended October 31, 2023 and 2022
Revenue
Three Months Ended October 31,
Change
2023
2022
$%
(dollars in thousands)
Revenue$164,165 $115,323 $48,842 42 %
Revenue increased by $48.8 million primarily due to a combination of sales to new customers and sales of additional endpoints and modules to existing customers.
Cost of Revenue, Gross Profit, and Gross Margin
Three Months Ended October 31,
Change
2023
2022
$%
(dollars in thousands)
Cost of revenue$43,765 $41,006 $2,759 %
Gross profit$120,400 $74,317 $46,083 62 %
Gross margin73 %64 %<