Earnings call transcript Q1 2024

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Operator

Good afternoon, and thank you for joining the SentinelOne First Quarter Fiscal Year 2024 Earnings Conference Call. My name is Elissa, and I will be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to your host, Doug Clark, Head of Investor Relations. Mr. proceed. may you Clark,

Douglas Clark

Bernhardt, and and SentinelOne's April Fiscal are and us everyone, the XX. Call First today Dave CEO; Weingarten, Quarter Year Tomer welcome afternoon, Earnings to for With CFO. Good 'XX ended

Our our today our are earlier were and and press section posted of the release Relations letter issued shareholder Investor website. on

after audio made available be call being live broadcast will is via our replay the website This concludes. webcast, and an call on

today's our during we like events and to the as remind making targets. long-term 'XX we statements will second well year Before I forward-looking financial that be begin, would and you financial guidance quarter call, about future as fiscal performance, full including for

the our events report and the known report in our other annual we factors factors those actual particular, may and that We the documents Form information results risk refer to forward-looking or XX-Q. us results time currently with quarterly on that our our materially SEC, our you cause statements. caution such on on statements to and actual that differ important contained from differ from These time documents reflect to materially. our XX-K contain could file identify to Please based best Form in and judgment

or call information future. if the to during differ Except even new from update presented reasons information. Any today. could the we forward-looking statements, update not materially in becomes forward-looking this available to the replayed the accurate or in anticipated actual assume after these statements by call the information law, no statements made as are obligation current publicly of those made contain results forward-looking is being reviewed during as If this or may required call

in A today's substitute measures we call, intended financial non-GAAP of for unless GAAP in non-GAAP will press accepted results non-GAAP is and in GAAP These be shareholder not with generally stated. measures financial letter. results. not this a our These prepared provided accordance discuss accounting release are reconciliation measures, are the principles. During otherwise and non-GAAP to

stock-based on this Our release. compensation not intangible of tax payroll and me excludes cannot determined today's reconciled turn to at assets are, call let stock over financial amortization outlook of in CEO compensation therefore, And with transactions, employer acquired and be acquisition-related time costs, Tomer Weingarten, expense expense, which SentinelOne. employee that, the press

Tomer Weingarten

and targets. and improvement. and quarter Good you another growth for first our earnings revenue and of afternoon, thank joining Customer fiscal margin quarter call. long-term We above significant our remains strong retention everyone, expansion delivered

to continue consolidating most which our win stable with now platform, companies. high on half The rates XX We the achieve pricing. discerning their of are includes Fortune best-of-breed enterprises security

first continued margin points XX the trends, we Despite underlying our operating progress a business more was than making many expected We of in macroeconomic quarter, lower of global percentage top continue persist. towards than to first quarter our pressures quarter as consecutive seventh growth profitability improvement. line

path taking efficiencies drive to our believe environment this measures business. to improving our our structure and business Furthermore, on across in cost by focus profitability. actions we're will execution. requires Succeeding sharpened our fortify growth ensuring go-to-market a We these

market innovation future. is On going security world transformation. charge for optimizing the measures. digital one, profitability, especially We're and continuously recent must-have which how areas: of details dynamics; enterprise and we're our a quarterly progress security focus saving leading I'll call, in on for external includes the enterprises, Cybersecurity cost business towards platform and mission-critical all through ensuring two, our with our performance AI the building a today's and two key the

impact We fiscal revenue. will made better reduce to our volatility the making address did or ARR our growth historical move on, 'XX. with year revenue and ARR align we not onetime change Before briefly believe we throughout let bookings. this me This adjustment adjustment

our this of onetime ARR-related of adjustment. reported forward-looking All impact and the metrics include statements QX

will this. on detail provide more Dave

driven our solutions. our Singularity the a QX and by demand by of platform economic dive margin net growth new details of We environment. environment. into strong let's in performance We Now ARR of high adjacent million, adoption across $XX cloud delivered and added rate of economics. XX% continued strong and any of XX%, record achieved revenue endpoint, a growth supported efficiency data gross We unit

Our XX in QX. percentage operating points by expanded margin

targets. me double-click Let progress We're that. profitability rapid towards on making our

significantly. flow also outflows improvement a dollar percentage In cash free our year-over-year losses cash points. we margin, and improved We showing absolute significantly operating our of terms, free flow XX reduced

With internal growth of that ARR QX revenue said, fell our short and our expectations.

head Let factors QX me results. our impacted address key the that on two

First, macroeconomic budgetary scrutiny deal size is cycles. renewal for sizes both contracts. conditions Incrementally, are new deal to customers and sales leading and further adjustments impacting

We're evaluate usage on renewals. seeing rightsize customers and

are enterprises decisions. deferring wait-and-see Some taking approach by a purchase

these While pronounced was from not entirely conditions more impact new, the this quarter.

late-stage operating bar on contract execution to few were challenges disappointed to some in a raises caused that large Second, slip next We quarter. environment this deals with deals for the execution.

closing not solution a a enhancing have platform deployed multimillion QX go-to-market execution, we opportunity adapt to on the with deal and contract example, We're enterprise our fully For our our in our due who focused could approach. scale, quickly. close already streamlining had to process further dollar including customer delays. up-leveling our At

is difficult. We remain into fundamental as factors win a but the XX% our the opportunity, expect as well like selling efficient revenue emphasis environment. macro worsening full now rightsizing, the and There deal outlook. assuming in In grow change more rates or particular, a year to growth environment midpoint. We're strong, pipeline at business on is incorporated conversion our we've higher lower no

with customers. we still expanding new business adding significant and To existing be are clear,

the significant growth and foundation We're a margins outlook give us solid and With calibrate future. assumptions at these gross for majority operating opportunities. record competitive we our of winning

our... scale we As

Operator

patience. you Please our gentlemen, your holding gentlemen, as your our you we and Ladies and Please for hold reconnect remain as thank reconnect Ladies patience. for again, speaker. we speaker. thank

have reconnected. speakers been Our

Tomer Weingarten

become and resilient. we durable toward business continue in Business billion and to more ARR beyond, $X will even believe our

continue focused opportunity. long-term domains adjacent expansion as and and in cloud such security. into the early security analytics on We're We we this journey, our remain

billion innovative bringing we a protected solutions composed enterprises of best for sizes. way At disruption. stay AI to cyber have to technology and SentinelOne, ripe $XXX The addressable security. of only attacks We're leading the and legacy to from value is for to companies leverage market to deliver protection all

about to customers the results, of quarter, technology for deeper our we Customers We encouraged strengths and SentinelOne and geographies important industry-leading new than grew across year-over-year, superior exceeding XX,XXX. customer total treat business. added platform QX Digging in sizes into by several are all continue XXX and value. our XX% more count

account year-over-year, served customers is MSSP in our our so faster customer our total you not with does grew XX% partners dramatically As Customers the include ARR than much $XXX,XXX know, understated. over by platform number Customers now $X customer, the security the XX growth. cyber half Fortune Fortune and grew choice customer of mark even million faster. above new the XX. we're a for QX, In added of we the

the and Singularity cloud financial world's security to largest stringent ranging to enterprises Our most retail in global institutions brands. requirements from to and other wins, manageability footprints, detection with the platform iconic spend privacy from outperforms prominent controls, endpoint scales customer and

by and offerings. well as remained particularly enterprises broader strong points with demonstrating percentage success some adoption enterprises platform more increased our year-over-year mid-market in per increasing of than pressure across as customer momentum downsizing, budgetary XX even with our ARR Our QX, large

and remains expand customer and strategy as land is Our expansion resilient. retention working

exceeded driven expansion adoption. NRR Our module and expansion This XXX%. was footprint by

by in Our contributions fastest-growing cloud as one and from our of capabilities strong our bookings remained third MDR adjacent Ranger. meaningful than emerging Singularity momentum followed solution more represented quarterly adjacent QX, of such other capabilities demonstrating solutions. Vigilance,

remains in There business adoption. state increase terms module expansion our customers is improve our platform clear opportunity underpenetrated to of Our and durability.

achieved market quarter our enhance of as unlock MSSP resilient growth to scale managed in businesses partner-supported security We increasingly Our continues another model position. go-to-market partners to protection. turned one and our from

such have expansions, Ranger started Beyond Vigilance, MDR, adopt to others. as modules endpoint license broader platform partners many and our MSSP

expect MSSP to growth gains, forward. and We drive attach base going share installed meaningful continued replacement module

security, makes customizable for MSSPs. fully control access critical SentinelOne multi-tenancy partner a large autonomous and Our

security Together, enhanced with of enterprise-grade technology our we're the protection customers deeper experience we've Wiz, customer cloud partnership integration. Expanding all through sizes. to providing upon

visibility threats protect them integrated our enterprises into security cloud-hosted provides and Now cloud-based speed. with to complete machine allows their cloud at against form infrastructure

cloud launched and is partner campaign in strong creating increasing cloud. marketing customer Singularity momentum, recently interest security Our

Looking This hasn't continue pricing. compromise competitive to record and we changed, gross landscape, having without at maintain disciplined and on the to strong value margins. pricing win in our rates our reflected is

execution. our competitive these against significant we of pipeline, evaluations, to and is transparency, SentinelOne's our Our trust on and ASPs every expect and continue. Customers ecosystem we We're leveraging trends remain our focused of majority continue value to bring channel stable, a philosophy relationship. we vendors and next-gen win refining legacy which culture expanding to and in

environments. SentinelOne's systems customers realize consolidate cloud outcomes cost resources. and platform diverse coverage better across is using to purpose-built business to security them We're helping and optimize point fewer multiple help operating security enterprises with solutions, enabling and

me ensure balancing investments how profitability. taking path and specific share to actions our Let our we're towards

can regardless optimize drive In the margin and improvements. delivering execution accordingly. economic improvement current as and swiftly, adapt of operational is QX By vital scenarios our commitment that current our resources margin our by it we to enhance acting economic We're landscape, expansion we and demonstrated our reiterating overachievement.

adjusting to growth, as to and profitability. ensure result, efficient a our needed we're resiliency enhance As more drive our path cost

few a provide me Let specific examples.

our workforce that employees is plan to First, pace current headcount about plans. our to we're of and growth a our expected implementing future X% optimize impact

We and the tools operational also leverage teams make see efficiencies more our help productive company. opportunities drive AI to for to

optimizing and that facilities. spend for greatest on value. Second, to business we're discipline. focus variable includes potential our sharpening as delivering core locations as This We're talent and customer reducing needs hold business-critical the prioritizing well substantial cost products

current right We business. cost with and are long-term to market believe closely align sacrificing steps outlook structure is opportunities. without These our the more our potential growth streamline initiative this our

continuing growth a profitability. are and maintain between balance We to

a has last an endpoint few comprehensive platform. solution Reflecting enterprise upon security years, security to evolved SentinelOne from

growth, solution been of has we source tremendous endpoint expect in this the Our continue and years. to coming a

our market identity business across endpoint endpoint Beyond mix cloud data. our of have emerging diversified solutions our growth success, and

a cybersecurity. position holistic shift scale a security new put are possible and large changing among was advancements and most operations a approach is in innovations across imagined markets. completely leading innovation. addressable and cybersecurity in potential strong in midst way, technological Artificial leading growth are Our time we the has paradigm We're of and our through to the long-term cybersecurity multiple technologies to intelligence enterprise for what the of once us the for among charge disruptive

on, good. force combating early attacks networks use platform, specific digital of developed cyber security case, fully automated life a From a is and we to for way serve AI-based a integrating our protecting neural

is attack multiple platform protect by lake to Singularity data proprietary surfaces. security powered Our a single

best-in-class AI-based Our in third-party consistently delivers approach autonomous where and we've led critical Gartner protection, evaluations capabilities.

real-world experiences when impacted global scale attack. in proven few we recently, X a also had attack whether that years Our ago supply operator chain more be the is smooth success the [indiscernible] customers global or

Here threat protection. And again, prevented we're again, enterprise security is response security, from from our the AI, successfully leading autonomous launched incorporating generative users the cybersecurity. recently and real-time and discovered platform SentinelOne's This that was cybersecurity one-of-a-kind identified all speed security well before of in supercharges We attack AI-based visibility vendors. the the a to into unmatched industry by of to executing AI potential other leading true control with once innovation efficiency. Purple by Singularity aspects

demo assistant. positive. more live Customers innovator. of Street us The prospects and feedback RSA, analysts superhuman the a were extremely called AI sidecar largest out Wall event. It an given at is levels. any much cybersecurity to than as Journal can Purple hands-on AI to was And access upgrade security a world's This

announced CSO top of at the at on CRN list one cybersecurity to see XXXX. the us Conference RSA most And of magazine of tools cool the XX XXXX. products put us RSA named new interesting

has are differentiator. to AI positioned a engine We to more AI-based well SentinelOne's customers. been detection bring always

efficient with we're security bringing from step taking generative a AI petabytes any purple, operations in professionals, easier, big faster making source. security to across Now and data of

safely cutting-edge and ensuring ethically, to our responsibly. committed are are technologies used we Importantly,

hands keeping complete sensitive data, allows platform to in Singularity our the their customers of to information its of reinforcing rightful owners. maintain Our control dedication

further let leading development. years across of and exciting value joined help an brand and Officer. our amplifying Before brands XX mention our over high solidify April in growth market companies. She our Sally's multiple define segments. Marketing me Jenkins presence remarks, will our experience, expand brings SentinelOne marketing as new scaled growth at proposition, my Chief concluding Sally leadership

security next-generation the are cloud data to to analytics. believe conclusion, We're security Sally welcome not challenges leading we We is endpoint, and across in team. critical and In SentinelOne macro permanent enterprise that address its needs leadership transformation well today's enterprise infancy. positioned

innovate empowering We win we adapt, with committed AI platform and cybersecurity lead. to security innovation, performance and also you the convert to and believe the deliver support our customers, is partners and this continue Dave market and pioneered and our will North they especially for approach stakeholders, operating all Star. With all towards the enterprise for when I shareholders Bernhardt, me to Financial commitment. and value improving by Officer. We're continue resources. over that, companies stakeholders, let continued Chief enterprise-wide and your call SentinelOne's our best driven Ultimately, our turn to customers thank

David Bernhardt

Tomer, thank about quarterly our QX financials fiscal for you. our context and 'XX. I'll and additional discuss guidance year provide

non-GAAP, margins reminder, and year-over-year a all unless stated. As discussed all are otherwise comparisons made are

for fiscal discuss a Before 'XX. digging the adjustment QX made ARR to we results, details will of our year onetime into the I

by had ARR. accounted real-time seen large increasing and usage patterns context. First, consumption we steadily past which customers, In years, we and quarterly some our few the for

as the a first usage, macro we the which progressed, current we to persist. these consumption in experienced quarter expect environment, usage light in and trends decline In May. notable However, of continued lower

this cleaner beyond. change expect the volatility also in should changes on now, and a view to elected consumption usage-based and contract the to committed and growth be for ARR. to and have magnified we It ARR values. agreements dynamic, provides more for ARR Due of to could to impact This methodology closely this compared reduce fiscal calculating for a reflect new prior 'XX ARR usage revenue where By making tighten methodology, consumption aligned. we

ARR the subscription onetime of also million. fiscal we certain million a As considering $XX upsell now ARR, discovered are these $XXX QX this approximately we to historical or adjustment corrected. ARR recording relating ARR and inaccuracies consumption ending renewal and contracts, resulting on in which resulted reduction X% methodology, 'XX factors, in reviewed of of After

periods. remaining a quarters applying year in the the fiscal estimated we which in comparable of believe impact are a We those approximation adjustment is to 'XX, reasonable

revenue this clearer a and on be Importantly, to adjustment impact upfront this transparent wanted did historical bookings. forward We to address or not move path.

ARR ended Customers to to and budgets net XX% revenue on total growing our million, revenue. quarter deal of representing XX% to added $XXX million. moving not with of new sizes. our Now of We continue This Revenue QX XX% ARR with year-over-year tighten $XX and total and grew the $XXX expectations. international did results. meet million

QX, better. new, were While they these factors are have not we the entirely execute opportunity in more to pronounced and

the top performance beyond QX areas line across the growth, showcased many Looking strength our of business.

and We continue to business see a healthy mix of customers. from new expanding customers existing

remains ARR our than north business dollar-based year, last strong reflecting Our rate customer enterprises among more platform. and our adoption retention of large Singularity XXX%. increased to per momentum of growing compared net Also, XX%

resilient to from our We as protection. turn achieved of increasingly growth MSSP in another partners quarter security manage QX businesses

resilient, platform of customers growth and solid broader by durable fueling remains regardless Our adoption base for our existing broader and partners conditions. a

and line and free and narrowed flows, lower despite achieved margin operating top all Turning our growth. In operating and gross cash our the to we quarter, costs margins. better loss

record XX%, seven points an of of percentage gross margin year-over-year. We delivered increase a

setting Just demonstrates solutions. XX%. after within target, two already we're of data great from adjacent continued benefits efficiencies our We're XX% the operating cross-sell seeing range margin gross years to economies progress. of scale, This processing and from long-term

enable to also data security of where the end integrated benefits our This fully more data once back analytics we capabilities. more underscores collect and importance and

substantial points delivered year-over-year expanding also to operating percentage We improvement, XX%. margin XX negative

have become evolved, selective have investments. conditions market As more about we

steps year-over-year quarter. our we in basis, in also cost with updated reduced a QX. improved On our our operating outlook. cash conversion our We've to losses the taken important structure first growth align We've dollar

of improvement to from flow this last million reduced year outflow our also cash percentage $XX points. a free free XX million reflecting margin $XX of quarter, in QX We cash

Moving 'XX. to our the guidance year for QX and fiscal full

difficult generating are cycles. a conditions stable strong selling At more worsen competitive win we're we momentum. rates, and the It's strong expect enterprise We macro sales environment. same maintaining pricing, time, pipeline impacting to and budgets

long-term pipeline SentinelOne assuming competitive are strongly that year only this the well The way the further as opportunity. to offers with leading is as best deal does protection, lower We security or value. remainder and our the not stay our from for conversion of cyber We security attacks platform protected and position downsizing. change for companies believe

expect second about XX% expect the in new of net ARR $XX we For QX. million, year-over-year, the range, quarter, million up we revenue $XXX and low consistent with

half half, expect second to net with than We new higher be ARR typical seasonality. first the consistent

at $XXX growing expect we to For million of XX% the midpoint. revenue million, full year, the $XXX

expect now from full year ARR ending fiscal ARR of the mid-XX% We the grow year 'XX to million. in $XXX adjusted range

progress expect While targets. continued rapid we and our growth lower than expectations, previous profitability towards our

outlook the to points improvement margin gross to Turning an about In XX.X%, we year-over-year. of expect be QX, margins. for percentage XX

remain year. margin in We expect of the remainder gross relatively to consistent the

a year XX% the we full our midpoint. guidance margin As up percentage increasing XX%, are to points to gross result, at two over year-over-year

We efficiencies expect improving data our increasing to continue scale benefiting our processing results. and

Finally, XX%, XX we more XX our a we our growth margin reiterating at guidance improvement than year, year-over-year. midpoint percentage between to improvement XX% QX the implying compared lower of of and an points an year XX%, margin 'XX. fiscal points negative be operating for to of negative expect operating Despite about the are negative expectation

reduction. our taking business optimizing variable emerge the a the generate invest ahead. year, locations, cloud We facility conditions. efficiently measured structure pace a lower the adapt, hiring Every of as costs, align and economic that in steps including company headcount and are forward hosting and on with growth in operating will and execution through to return. we X% this talent spend must cost end, our evolving total decreases we approximately execute must focused a We're better positive dollar improving years stronger To and

about cost once driving fiscal in potential breakeven accountability profitability these optimize savings achieve will of million while and year increase are on executed. growth We track the fully efforts to long-term $XX performance operating and right steps These believe expected market our efficiency, to remaining 'XX.

with substantial investments We provides balance is a to have no billion It strong profitability This longevity, a $X.X equivalents in our sheet flexibility ample and and debt. cash, targets. chest. very war runway achieve cash and

Before everything to has take here want which we for minute covered to lot. I summarize we Q&A, been a a today, open

revenue remain positive margins free our to significant achieved improvements. growth We results. with and XX% healthy. in delivered cash flow many Demand upside pipeline

have heavily are we customers hand, the to other the elevate execution. scrutinizing deals, and On our opportunity

a us to certain usage revenue also ARR our with in led adjust among better further customers, We mitigate slowdown consumption which and and experienced to align fluctuations.

Finally, optimization we're and continue executing our Thank meet us ensure to you actions workforce to cost and we growth. year deliver reduction 'XX disciplined joining margin all for fiscal today. targets

will questions. up take We the now open Operator, line. please

Operator

[Operator Instructions].

from The question the JPMorgan. comes with Brian first Essex line of

Brian Essex

Dave, a this little to guess, and clarity just bit adjustment I of get want there. address

we storage of just alluded consumption for and usage. Maybe you this You consumption-based the slowdown kind query? products as of explain can and does this that's remain be to is revenue look the related to the ARR, from Is basically underlying this -- And equation this out at models forecast in now? the then going ARR generated and to our try revenue. to

a extra need there kind it's of color to more an nature? in Maybe consider that's we help. layer little will of variable So revenue bit of

David Bernhardt

to discuss this. Yes. Happy

parts: the and decided and happened we of onetime QX ARR methodology of on contract one, changed is to reflect to conservative of the So calculating more ARR about two last $XX the had year. restate that consumption as usage-based It's we adjustment. we've ending of committed It's agreements value. a what's and the million be X%

data It's products. data and the about? that what's security the data and specifically ingestion about asked you the lake consumption set When

customers had early, ARR we digit been single excess we the for signing approximately they But seeing committed up are historically were of in and in contracts, were data of total those our that reflecting we were were ARR. renewing the seeing using was what So what balance. to, that

in May then to seen throughout As spend QX to likely and we've rightsizing decrease late QX, that into customers total. that QX even their and into seeing committed into something get early back June, and a we're and going

had seen seeing prior. outsized to were we end an opposite swing the that So we

by trying definition the swings what of basically it contract. our or had to this, detriment we're we're to and happened tighten doing lock So these eliminate our the to ARR was -- to to favor committed

ARR going this changed did It's we reduce that's more that to and So hasn't this. going The reason reason this we And it's the revenue. fluctuations. -- that the believe is any going historical ARR quarterly forward, bookings. to correlate

renewal had inaccuracies, terms of which we side seeing was included what a the and In we were motions of this, other that historical upsell was renewal. upsell

the adding component an that error we of it. in versus to historical And adding ARR the CRM. upsell This just was were our

the why it error statement. did We that cash and what overall it forward, this income have do have now. fixed both and we forward. be for flows, affect bookings, But externally revenue didn't didn't this didn't revenue is affect expectations external going didn't should That's set why not should adjustment total made what affect it that's affect going internally,

Brian Essex

use Okay. how store follow when the to data? the What posture's an with that process maybe that? might their award to choose enterprise and case trade is data And to at security posture their is risk? less your be to up, is security goes decision save practical costs ingest ingest And kind risk how managing of should can off and maybe way what there of around less the understand a of -- we we kind along thought

Tomer Weingarten

two We're this areas. different seeing in

companies. store. with they to now think I that, to what generally analytics look mean, want something a that's I more log trying approach one, ingest I they to when see, consumption-based lot take think, at a that prudent of people you and data,

that feel So them useful. the lot out don't you see filtering a of is data they

saw they of to we that wanted they rightsize dataset through some logs that user that's base the the downsize, where happening us, To one thing keep.

prevent of the something that of are really being we now, consumption consider other going into through was our with exercise that ARR part from vendors, future. of from us lot which companies a whether think I kind same just we to remove to kind why or elected

kind the better, obviously, that becomes aligns if to obviously, something upside. And of

you look security of when The story. other it same side it's much of the at data, is

sources are they're put for customers, into platform, as Some very the what healthy. generally and useful log they not now scrutinizing

when which just Just ARR, seeing, we're comes volatility is again, we do putting here that platform, could and from that's they after think felt, years remove obviously, the inverse the the something now to it I everything two of into behavior, result. prudent

Operator

Colville Patrick Scotiabank. with

Your line is now open.

Lory Luo

Hi, thanks taking my This for I Luo is question for just a on me? security. Patrick. the Lory Can hear quick question. you on cloud have

Douglas Clark

We can you, hear yes.

Operator

next America. from The the comes line question of Tal of Liani with Bank

line Your now open. is

Tal Liani

Great. you on hear Don't hang up me, I can me. please. hope

Tomer Weingarten

We're here.

Tal Liani

I know. I know.

Tomer Weingarten

It's hear not I you. she know can hopefully, us.

Tal Liani

to about quarter just question to is hand, on guidance? want guidance year things from On slippage, you why quarters? the a of I and second certain So said. a is ask that contracts few hand, QX the saying slippage other this this are On you if you're full next reducing one

guidance about And something the and then That's -- into expenses? from more why And the are just you it's slippage. and I that reducing your than workforce It into linearity. first environment from question is worse. have the in quarter and expenses to other actions the just is me seems

said I think April, you fine. in things that are

does contracts that you other spending from is, companies. question Did is comments I'm something So the more Or It's I about greater the strictly after? competition? guidance, trying other of mean about lower see it ask rate what things to or kind related that is right competition. from you of want points spending? data companies And The to And loss on impacted the me hard it to have it triangulate the really guidance? just same the space. it for to deteriorated

Tomer Weingarten

course. making It's not tried Of that just slippage. clear. deal We

last early witnessed QX slippage as we is that obviously QX I of deal think something as and year.

it think that into I we we that how known. factored generally, some So And of was some of pipeline. convert

macro think were execution able specifically have slip couple deals we've where execute this some of -- supposed just not hiccups we related, that -- in to weren't I is contracts time. to we these just a had not

do we better. something and was And to that that that's unfortunate, need

this our not me, slippage. It's So to execution. is bill own

what environment, in we beginning factor taking more was just the other end pipeline. cautious contract, feel really buy the approach why and customers The not reflecting to generally, we're this the the is intend to at are of entry of a they

So it end very be look overall. size is a if that we which predict the into always just what cautious pipeline, more able healthy, going to to our are we take at are don't deal

more to we're taking us, a I approach. So prudent just mean,

third consumption factor dynamic. that that is is we've in it's see of something The something ongoing mean had our that consumption ARR, obviously. play is we I our in operations, that part

So ARR part consumption and really as also obviously down us the take to guide taking our from out consider I consumption forces mentioned. as don't only of go-forward as upside,

environment are factors the three the much go competitive that into these So it. pretty The same. remains

over stabilized past Our have been win even rates quarters few the and before.

mean, when become of here. gun I estates. these compete up the we're of sometimes don't I for or things defensive, We things, not which especially the of we for more aggressive I I are of and think to of we're the will estates, on some providers and see and kind do mean call become aggressively don't that we on seeing anything out normalized highly the against, of But that, of ordinary competition comer the there. their kind outskirts outline we types they definitely transactions $X-deal point just do. come their front. outside of would We pretty the that

David Bernhardt

that of from have to to leading said was Tal, or make that to -- enable to the beginning, breakeven for build lowered part ARR and for goal latter about the cost these we've that do better our further initiatives to fiscal to expectations things place, talk the on we of And year, revenue get to happen. 'XX. with are These we've in put this into some and

the those results this we So to to Everything do what earlier line were bottom in we doing pencils. in said no that been growth we our going was. what going doing the said focused was achieving matter for and We've made today. on everything we're that the were year why longer sharpen action that to of kind were made be has the and that's those cuts past [indiscernible] ready week around everything actions really smaller and we've support that decisions over when been made similar we and edges, to term, we've we've

Operator

line Our question Kalia Barclays. comes with of next Saket from the

Saket Kalia

Saket. It's

hear you me? can Sorry,

David Bernhardt

Yes.

Saket Kalia

I'm it's could of to was was just bit. Microsoft on question. helpful versus I on around I that so just any I response obviously of mean double-click there very have sorry. how specifically hoping a on competitive is, Maybe times, the dig competitive little you're the I easy buy. referring calls just views part wondering the between you effective them been if bit. how a mean response a product specifically? little just lot how last but into questions or competitively? very just Tomer, to

Tomer Weingarten

Sure. is I a for a the think that security cut With said, they formidable mean solution. Obviously, it. vendor Microsoft doesn't can a have legacy that the coverage that fairly looking this four I pure-play portfolio. are expanded that customers and not Microsoft Look, just provide. competitor. signature-based security is capabilities

more on I I But triple-digit security doesn't are a what So really Moreover, that think whole, growth teams. as when parts opting of think I bit capabilities, security. cloud for customers. that year-over-year that in more for you a certain discerning the translate think see can palatable into market, them for cloud you at be one right us I would mentioned, customers now security look

is capability where set. not obviously something their would in prominent I as That Microsoft is say,

that's time go a people eventually again all CFO-type led all, time when Microsoft, still and decision. with We there. they're that So see do in

shying people from approach. more kind I of think that away and that more are

billion revenue you offerings billion as there market. we're overall, now with you're providers I'll leading between Microsoft one we all I addressable the X/X of look portfolio thing $XXX $XX is cybersecurity that have targeting think about last say in at Even different the I market. of mean, if looking of about our at The

up So a lot of grabs. for it is still up and

feel pretty with ability for MSSPs we especially that And about still our OpEx-driven good automated, security to professional, especially with with savvy solutions. looking are compete more Microsoft, more

feel vendor there. obviously, we positioned, a they're well but formidable out Microsoft, So

Operator

with from Raymond comes the question Tindle line next Our James. of Adam

Adam Tindle

the leading of wanted that know surprise coming logic if hey, stuff data I there's negative concerns the easier smaller of start the would business a to is But and a off think the broader piece. narrative get the be shutting to And I business. the about of be off. with lot quickly, Tomer, later just shut and part understand it's the here consumption to that concentration that we ingestion in we'll that, it's contractual a perhaps that indicator the ultimately challenges in for to could saying, start

bear Just would would you're preventing how about concerned that wondering, that? potential investors that or be kind that case, say or you with about narrative what to of thinking

Tomer Weingarten

is look of are GRR, I remained customers at separate customers, across quarters. don't mean, think at it leave our SentinelOne. the even if us. you At I referring completely I very day, the the things. end of of stable licenses, day, don't We at the we kind look looks that think which same these to you many two end what I rightsizing of the when mean to, churn

the I that mean aligned have. they getting these to just are workforce

intangible volatile. in And nature time. its don't I think obviously, about. thinking something out for just seen same something that happening the data the us. their that for very under they more companies with for over and something gun That's twice Consumption stable when is So there's can there, is core think very, they're security as I start we've not to material that posture, that save with licensing anything what's as

you into doesn't model ad an the are have that to have removed multiyear ARR Even we And some volatility projections. not if that from again, volatility have. volumes. remove our it that's that volatility, that create volatility would of the why, specifically factor in that some can you is that, once the you amount are close with imply it, data to hoc contracts. kind Obviously, if these Even these people tied we have even same that organization. Obviously, in of consumption of to rightsizing

Adam Tindle

Okay. that about ago, looking Dave, anything missed it, at? that I I we're the just And -- forward? quick know the Scalyr, you from talked million years consumption And like size follow-up. of any I'm or looking basis maybe piece sorry did size contractual business? that $XX it. but changes for that at if What's moving a you

David Bernhardt

of percentage ARR. single-digit total It's

going single-digit the side this anchoring as or total be forward we're What contractual. we're the everything moved either is number ARR. removing conservative shouldn't going around fluctuations -- a we've of having So We forward. doing fluctuations -- and percentage to as expect

Operator

of The next question the Scotiabank. comes from line Patrick with Colville

open. line is Your now

Lory Luo

Can hear you guys all Lory again is for me? on This Patrick.

David Bernhardt

Yes.

Lory Luo

So this very how to with you a you security is share I partnership want Last mentioned. cloud Wiz? update had just the traction, with product. you can ask And quarter, on good quarter? And us any

Tomer Weingarten

once also contribution for this again, ACV, same Wiz from customers movement It's a mean, ton security. us quarter, on growth I see represents, which proportion side. for of we opportunities. been remain and triple-digit cloud The that again, for shared the pipeline growth year-over-year course. existing great Of partnership, of new And cloud

in passes, business, not tightened generating integration continue with after that And quarter for We're cloud our every to more partnership. of dedicated it mean it. great dependent campaign more all, kind X. Generally partnership on shows it's signs We've and all up cloud of speaking, Phase grow I we whatsoever All cloud we're technical all, part and pipeline. that that in the to of we're early security. progression. With have a days

sales dedicated security. for have We cloud force

for maturing So company is us. of to to tip platform of the also a expand spear from evolve kind our obviously endpoint an we're the cloud sales company and in force

Operator

comes The next with Stanley. Morgan question Fodderwala Hamza from

Hamza Fodderwala

Dave, quick just a you. for one

to expectation the reaffirm in workforce be this million breakeven flow free you for the the in from about And sort of reflected talked You savings year exiting that cash Is full year? guidance? $XX reduction. willing would cost the

David Bernhardt

we plan. million EBIT that $XX prior that guidance provided deliver full ensures This reiterated we relative to earlier today. again then and expecting remain cost on savings year our to we're our achieve So track to

Specifically, $XX from [indiscernible], annualized the savings. in it's million about

to $X $X costs. I think million about million million in $X severance saves --

also top the said this of There's I for it things savings better year, that terms activity we hit expectations flow, looking at just reduced have could QX, in year, target cash where probably we and of free think will on year, thinking based facilities this lower I that line. think the that's 'XX this we a write-offs. potentially continue for say, think then in of other of will in I the line as the the That's fiscal inventory that in part off And the latter light guidance. top contemplated all We're forward. going

Operator

Tilton, next The Wolfe from of question Joshua comes the Research. line

Joshua Tilton

you me? Can hear

David Bernhardt

Yes.

Joshua Tilton

I'm feedback getting changing call. from So that here is like is guys investors quarter. seems during a this And the you lot the the of bullish just it that clearly, on came across pretty tone

I really just slowdown guys missed to the up? maybe when this, notice And exactly So when but you ARR the like you understand the business the of if historical apologize even pick issues disclosure? did notice I'm trying I did with

Tomer Weingarten

the us, consumption a more of of and see think To it, with at I end for generally, slips pronounced coupled and started the the the that at outcome when of was point where deals quarter different noticing where point a we quarter. kind changes. we a is you're look very we that looking suddenly, couple more

for generally, think, and what you our if line was I look at new So the much with in we just it upsell target pretty quarter, expected.

win XX%. very, just us, revenue then downsizing that a I consumption arrived when couple of with very sustained result. once you about And But rates growing again, still to at that you mean, different

looked consumption that very, out things I very mean have would take you if different. element, think I

business are where this, where humming. magnitude frankly, are which, today. is that, here kind the the of and we we by reason suddenly, that's surprised saw we of and really I So surprised think, were were we the parts And by

David Bernhardt

evaluating why I a really into of when ARR, shortfall. diving because was I was the And investigating as restatement, that, coming in up revenue it were we guess, terms rebasing was

it some that, into like one started And things that would deployments, revenue revenue. absent of you churn, and some did dive a out, we ARR obviously, So assume about typical. fourth goes that deep into slower absent are

on obviously, a our shortfall. -- still had results QX I based But

in deeper understand because moved scrubbing was. to expected an renewals that that that's did a by why uplift So of essentially were that essentially the XX,XXX everything customers ARR, not they where been because we noticed to we upsell. evaluate we dive as of out had that treated all that, had we And system

and essentially on but And that's where previous I fully renewal error identified on in of later upsell to was obviously and was this that and and end So the top renewal. it quarter up, in it, was quarter actually CRM. able an the customers. removing without came stacking we our post really fixed all the existing been We that an had scrub when

Operator

of comes Powell Gray BTIG. The with the from next question line

Gray Powell

hear Great. can And sure, okay? I you just make want me to

David Bernhardt

Yes.

Gray Powell

have do shot to to a a but may extent, have ask All This right, great. going just already it, it. like give I'm I be might one, it to but answered tough I And some anyway. you feel

like I And again? consumption should $XXX mostly ratable. on revenue at like to understand just can what talked was reiterate happen guess won't want then mean -- about like I components, dynamic. the And I revenue know I you guided driver that March but that make how the we've QX main sure why you [indiscernible] I So fully this about just and think guidance the is we XX missing million. you

Tomer Weingarten

In third that realizing I'll was of time. ad it's as we've to basically couple an kind had as adjustment try and consumption ARR, overstatement Dave both is past when But done ARR, which of to down us hoc consumption ARR to to and on drives always is years, grow. our the the going consumption for not for drives for basically, us which up that and we've up, was for internally be significantly iterate but expectation created it the because it so that goes consumption the speak, continuing ARR an revenue element up, well. of created up

it revenue was we the couple So mainly that reflecting hey, going was that he kind out, the when of we settled down. revenue? impacted ARR figuring and seeing part was should aren't again, that consumption as for why mentioned when have now mix. inaccuracies in well, And Dave that of the that started with, the And that seen quarter what was dust ended, reason big A the CRM revenue. some

the minus ARR was consumption Outside with what that that, again we expected, in for quarter line roughly downsizing. of the

the of So of all of consumption base. in happen cleaned will given all, from it again, was and never ARR and the that lot a removal rebasing

Operator

Deutsche with Bank. Brad of question Zelnick from next the comes line The

Brad Zelnick

Great. guys me? hear Can you

Tomer Weingarten

Yes can. we

Brad Zelnick

is The tough. Awesome. The ARR environment unfortunate. very is statement very

questions. you think I lot tough you're yourselves, it have guys being a asked and said of

as is what in most strategic So going I'm guess to forum, your add I long game? for mean this which those, end I appropriately, as we're you, Tomer, to

an facing You're and competitive increasingly end hostile macro market.

just cash. You're you're in worsening. of tough think, burning spot. mean many a different said I conditions a a are amount in it like a I in seems good of bit you yourself, that still recession, ways, And

where market different a you when envision about years versus the what ago out for the think the few years are you public do to coming alternatives how see what there? out So horizon, about and think on you you you can business the today

Tomer Weingarten

expected most to it's be home. Look, None and I us the and company it's the IPO point the TAM. we're that game. a of hope to our stay, profitable. next technology improving cutting-edge go got Sure. We've margins the to in $XXX mean to a long we're year market, here billion we

margin think, the our So making fairly market such in don't anybody front I on have progression, the see in all been incredible else all, and improvements I impressive.

for to company for a more And efficient from growth this a become approach, is company. efficient. real-time We to full want I setting public Obviously, seeing think you're into and eye balanced us the -- really full more growth efficient, is stage, seeing the what And you're what a I disciplined growth. the making think, growth not company the more a operate on in market company. for growth on a we're is best do adjustment

the even not platform. we're adding That's a This rapid this why right That's North sure to in put is to want want to is We're This fast. to here. and more customers. clip at continue efficient, we're environment. by make pretty the Star. build we customers doing to metal be the our pedal economy we our going we're to where just run our

of promising infrastructure cybersecurity at the of disrupt end the is landscape couple in mean, now. the So right AI. going itself in next all in on of say a fun lot to But We've We're we significantly in I growing. the keep all, very technology. it's day, years. leader got AI can't a I

see our All shareholders opportunity. And of an hopefully, will to that that, translates too.

David Bernhardt

reasonable -- still than profitable technological far We've I at a think on on If is going company X- and leader, to horizon is relaxing if we're you to a do a today. company, X-year look continue this growth at rates, growing play out. a we're let's been a that. to we're this more technology. And We're valuable to not continuing advance that. it us

still it's cybersecurity at So us. we this early innings for look in as

long we execute grow are have more to be runway We this a than a to company sizable execute to company and better to today.

Operator

Our final with question Ray McDonough comes the from line of Guggenheim.

Raymond McDonough

Can okay? me you hear

Tomer Weingarten

Yes, can. we

Raymond McDonough

finish you, Dave, off. Great. to just and for Maybe

retention a you guys You of mentioned gross renewals, that I mentioned also mentioned but actually rates couple that quarter, on stable. think last times customers ticked that remained are And rightsizing they up.

those So just retention to gross despite be remained stable comments? clear, dollar

new with the line that that's that, where or here new flip and expectations I'm lot is on rate? the guess, logos? the in How between I'm of kind of most not showed renewals, headwind, in upsell -- stable. a -- Is headwinds, that also accounted the was and the and side up renewal should that commentary And headwind think I consumption are that decipher for gross to consumption business we trying of renewals about expansion the the I guess were

David Bernhardt

on XXXs we've you If gone into rate, about the north from think approximately pure it a NRR XXX. of

year-over-year. us with to customers So our spend increase we're still seeing continue their

percent that We kind expect that future. the we of as to for persist. us, a We're and for see expecting foreseeable floor XXX-plus

it's affects GRR, In quarters GRR been deviated don't or so. think this our has point. than more essentially X terms for past flat how I eight of

step for customers of and buy things following volume. and deals, terms of endpoint counts have price us. tend for had about for talked the and for I'll leave may to What following use we I'm would price to have they on when stepped historically, the going up this minimum better rightsizing year year the employee better seen us, that they multiyear signed the Tomer one -- don't deals, of So we've based much that customers a in hey, and a up say, is

then they if a they're sizable come if flatten renewal, at on now And just to us more purchasing that employee now. out customers based counts the seeing We're back amount.

projections just forward our from were we we're seeing not seeing. customers historically that So that

Tomer Weingarten

dynamic to didn't lower that that for mean, we is I something almost to and did all it's the add help that is together. just Maybe to And and even the we we piece we see call started that granted. one is that it think stable And even what was can GRR. than of kind I you taking GRR. GRR planned get that that. planned GRR traditionally, maybe something

can't this and are in granted environment, for And mean, definitely But continue. expect that I we I best something again, the anymore. still that in we GRR, is in think one take NRR, once you of to that industry

Operator

like now to closing Tomer conference That comments. pass over concludes I the to back today's Q&A session. would for

Tomer Weingarten

Thank joining. for time. you, Appreciate everybody, your

Operator

That participation. for concludes your today's Thank you call.

may disconnect lines. now You your

SentinelOne (S) 1 Jun 232024 Q1 Earnings call transcript