Summary
SentinelOne's fiscal third quarter, ended October 31, 2021, brought revenue of $56.0 million, up 128% from $24.6 million in the same quarter a year earlier. New customers accounted for 43% of the increase, existing customers for 39% and MSP, MSSP and OEM channel partners for 18%. Year to date revenue was $139.2 million, up 120% from $63.2 million. Gross profit was $35.7 million, up 151%. GAAP gross margin was 63.7%, up from 57.9%, and non-GAAP gross margin was 66.8% against 58.2%. Management credited the margin gain to higher revenue, greater scale and improved processing efficiency.
Costs and losses scaled up faster than gross profit in absolute terms. The GAAP operating loss widened to $67.4 million from $29.7 million a year earlier. The GAAP net loss widened to $68.6 million from $30.2 million. Operating margin was negative 120.3%, up 0.6 percentage points from negative 120.9%. For the nine months, the net loss widened to $199.4 million from $79.7 million. Stock-based compensation is the big swing factor: $27.4 million in the quarter against $4.6 million a year earlier, a consequence of headcount growth and the shift to life as a public company. Diluted loss per share narrowed to $0.26 from $0.85. Non-GAAP operating loss was $38.7 million, compared with $25.1 million.
Key operating metrics held up. Annualized recurring revenue was $237 million as of October 31, 2021, up 131% year over year. That is the third consecutive quarter of triple-digit ARR growth, and it accelerated from 127% in the prior quarter. Total customer count grew more than 75% to over 6,000, while the number of customers with ARR above $100,000 grew 140% to 416. The dollar-based net retention rate set a record at 130%, up from 115%, and gross retention held at 97%. International revenue was 33% of the total and grew 159% year over year. No single end customer accounted for more than 3% of ARR. Cloud workload protection, Ranger and the data modules all grew in the triple digits.
Cash generation remains negative as spending scales. Net cash used in operating activities was $17.2 million in the quarter, versus $17.8 million a year earlier, and $90.0 million for the nine months, versus $43.3 million. Capital expenditures were $1.6 million in the quarter, reported as a cash outflow. Free cash flow, a non-GAAP measure defined as operating cash flow less purchases of property and equipment and capitalized internal-use software, was negative $20.7 million, against negative $19.8 million a year earlier. Cash, cash equivalents and short-term investments totaled $1.7 billion, including roughly $1.4 billion of net proceeds from the IPO and concurrent private placement. Deferred revenue was $206.9 million and remaining performance obligations were $265.5 million.
For the fourth quarter of fiscal 2022, management set the top line at $60 million to $61 million and non-GAAP gross margin at 62% to 63%. For the full fiscal year 2022, top line guidance is $199 million to $200 million and non-GAAP gross margin guidance is 61% to 62%. The company said it expects to keep triple-digit year-over-year revenue growth in the fourth quarter and sees room for margin expansion over the long term. Migration of existing customers to the Scalyr backend will bring duplicative storage and processing costs, and the pace picks up in the fourth quarter and the first half of the next fiscal year. Named risks include a limited operating history, a history of losses, intense competition, fluctuations in operating results, network or security incidents against the company, defects or vulnerabilities in the platform, difficulties managing rapid growth, the continuing impact of COVID-19, and securities class action litigation. Headcount went from about 600 to over 1,080 in the past year, and the IPO lock-up expires on December 9, 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $56.0M | $45.8M | +22.4% | — | — |
| Gross profit | $35.7M | $27.0M | +32.3% | — | — |
| Gross margin | 63.7% | 58.9% | +4.7 pp | — | — |
| Research & development | $34.8M | $31.0M | +12.0% | — | — |
| Sales & marketing | $41.3M | $41.0M | +0.8% | — | — |
| General & administrative | $27.0M | $22.1M | +21.9% | — | — |
| Total operating expenses | $103.0M | $94.1M | +9.5% | — | — |
| Operating income (loss) | -$67.4M | -$67.2M | -0.3% | — | — |
| Operating margin | -120.3% | -146.8% | +26.5 pp | — | — |
| Net income (loss) | -$68.6M | -$68.2M | -0.6% | — | — |
| Net margin | -122.5% | -149.0% | +26.5 pp | — | — |
| Diluted EPS | -$0.26 | -$0.57 | +$0.31 | — | — |
| Net retention rate | 130.0% | 129.0% | +1.0 pp | — | — |
Risks
Revenue rose 128.1% year over year to $56.0 million in FY2022 Q3, but net loss widened to $68.6 million from $30.2 million in FY2021 Q3, and YTD net loss widened to $199.4 million from $79.7 million. The company expects operating expenses to increase as it invests in research and development, sales and marketing, and public company costs.
The endpoint security market is intensely competitive and fragmented, with competitors including CrowdStrike, VMware, McAfee, Symantec, Microsoft, and Palo Alto Networks. Competitive pressures could cause price reductions, fewer orders, reduced revenue and gross margin, increased net losses, and loss of market share.
Substantially all sales are fulfilled through channel partners, which generated 92% of revenue for the three and nine months ended October 31, 2021. Exclusive Networks accounted for 18% and SHI International for 8% of revenue in the quarter, and partner agreements are non-exclusive and terminable at any time.
As a cybersecurity provider, SentinelOne faces particularly intense attack efforts and has faced and will continue to face cyber threats. A breach could lead to regulatory investigations, CCPA private rights of action, and GDPR fines of up to €20 million or 4% of annual global turnover.
The company relies on its management team and key employees and must hire, integrate, and retain personnel amid rapid headcount growth from over 600 employees as of October 31, 2020 to over 1,080 as of October 31, 2021. COVID-19 vaccine mandates may result in attrition and impede recruiting.
SentinelOne acquired Scalyr in February 2021 and invested in several private companies in November and December 2021. Future or completed acquisitions may be difficult to integrate, divert management attention, dilute stockholders, and cause unanticipated write-offs or accounting charges.
The Singularity Platform is hosted through Amazon Web Services. Interruptions, capacity constraints, or AWS actions such as changing terms, increasing pricing, or terminating services could disrupt platform availability and increase costs as the customer base grows.
Expanding internationally subjects SentinelOne to GDPR and U.K. GDPR, CCPA, tax, and data transfer rules. Government sales depend on FedRAMP certification and are subject to budgetary cycles, audits, and certification changes that could restrict sales.
Adverse economic conditions or reduced IT spending could lower demand, lengthen sales cycles, and increase channel partner defaults. COVID-19 has caused a modest adverse impact on sales cycles and services, and positive pandemic effects may slow as offices reopen.
Sales cycles for large organizations and government entities are long and unpredictable and require significant evaluation and approval time. Failure to close sales after investing resources would adversely affect business, operating results, and financial condition.
Gross margin decreased to 58.7% for the nine months ended October 31, 2021 from 59.6% in the prior-year period, while quarter gross margin increased to 63.7% from 57.9%. Cloud infrastructure expansion, support personnel growth, and higher stock-based compensation could pressure gross profits.
Class B common stock has 20 votes per share, and holders held approximately 96.3% of voting power as of October 31, 2021, with directors, executive officers, and pre-IPO holders of more than 5% holding approximately 70%. This limits stockholder influence and may cause index exclusion.
An aggregate of 4,230,000 shares of Class B common stock beneficially owned by CEO Tomer Weingarten are pledged as collateral for personal indebtedness. A forced sale or margin event could increase stock price volatility or pressure.
SaaS KPIs
All quarters →Annualized recurring revenue (ARR)
Non-GAAP operating margin
Free cash flow
Net New ARR
Total customers
Dollar-Based Net Retention Rate (NRR)
Customers Added
Customers with ARR over $100K
Summary, forecast, risks and KPIs are extracted from SentinelOne, Inc.'s SEC filings for Q3 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.