SentinelOne, Inc.

Good afternoon. Thank you for attending today's Sentinel 1 Q2 fiscal year 2023 earnings conference call. My name is Hannah and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Doug Clark, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to Sentinel-1's earnings call for the second quarter of fiscal year 2023, ending July 31st. With us today are Tomer Weingarten, CEO, Nick Warner, President of Security, and Dave Bernhardt, CFO. Our press release and shareholder letter were issued earlier today and are posted on our website. This call is being broadcast live via webcast, and following the call, an audio replay will be available in the investor relations section of our website. I would like to remind you that during today's call, we'll be making forward-looking statements regarding future events and financial performance, including our guidance in the third fiscal quarter and full fiscal year 2023, as well as certain long-term financial targets. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the FCC, in particular our annual report for Form 10-K and our quarterly reports on Form 10-Q, including our filings for Q2. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. Any forward-looking statements made during this call are being made as of today. If this call is being replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. During this call, unless otherwise stated, we will discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of GAAP and non-GAAP results is provided in today's press release and in our shareholder letter. And with that, let me turn it over to Tomer Weingarten, CEO of SentinelOne.

Good afternoon, everyone, and thank you for joining our fiscal second quarter earnings call. I am pleased to share that we delivered another excellent quarterly performance, exceeding our expectations across the board. We delivered our sixth consecutive quarter of triple-digit growth, set new customer growth records, and continue to push the boundaries of autonomous security through innovation. Our results demonstrate strong execution against our strategy and success in delivering hyper-growth with substantial margin improvement. As always, please read our shareholder letter published on the Investor Relations website, which provides a lot more detail. On today's call, I'll focus on two key areas. One, details of our quarterly performance, including customer growth and expansion, as well as execution against our strategy. And two, an update on the demand environment and how we're optimally positioned to help enterprises with our autonomous XDR platform. Let's turn the discussion to our performance. We once again delivered substantial revenue and ARR growth. Both grew over 120% year-over-year, driven by strong demand for our XDR platform across endpoint, cloud, and identity. We outperformed all of our expectations in the quarter through strong focus and execution, platform innovation, and our partner-friendly go-to-market strategy. Looking forward, we're raising our full-year revenue growth guidance to 103% from prior 98%. We're combining this rapid growth with meaningful margin improvement, showcasing strong unit economics and operational efficiencies. We exceeded the rule of 60 in the quarter. Our gross margin expanded by 10 percentage points year over year and reached a new high of 72%. Our operating margin improved 42 percentage points compared to just a year ago. Our extraordinary performance reflects increasing scale and leverage in our business model. We expect to achieve the rule of 40 for the full year and are making meaningful progress towards profitability. For customer growth and retention, our land and expense strategy is reaching new heights. In the second quarter, we once again added a record number of new customers on an organic basis. And we're excited to engage with hundreds of additional Atevo customers. On top of this, our net retention rate reached a new record of 137%. We're seeing outsized growth from our strategic channel partners, as well as many of our expansion modules. We're protecting a growing number of the world's largest organizations. Among new customers, we secured an eight-figure multi-year deal, the largest new customer contract in Sentinel-1's history. This multinational industrial company wanted to consolidate legacy products and selected a broad range of our singularity platform capabilities, from endpoint and cloud protection, to modules such as Ranger, data retention, NDR services, and others. Singularity XDR clearly stood out among all evaluated vendors for leading efficacy, automation, and ease of use. This is a great example of how large enterprises are selecting more of the center-in-one platform, translating into larger deals and higher ARR per customer. As an example of expansion with existing customers, a major American retail chain significantly expanded its endpoint and cloud footprints by fully replacing Microsoft cybersecurity products. This customer preferred a full deployment of Sentinel-1's unified XDR platform instead of needing to manage multiple consoles and disjointed products. These examples demonstrate how our differentiated AI-based autonomous cybersecurity platform is becoming the solution of choice for enterprises around the world. We remained in a position of competitive strength and maintained extremely high win rates across all the competition, turning to our platform capabilities beyond the endpoint. We're seeing strong growth and customer adoption of our expanding platform. We're still in the early innings, and our platform approach should continue to fuel growth for years to come. Singularity Cloud remained our fastest-growing solution in Q2, followed by Data Retention and Ranger. Let me dig deeper into cloud security, where we're seeing tremendous demand for our best-of-breed cloud runtime protection. Enterprises are rapidly shifting workloads to the cloud, creating an emerging, yet critical, attack surface, and therefore a significant greenfield opportunity for protection. Cloud-linked companies, in particular, are choosing Singularity Cloud. We're even being selected in situations where the incumbent endpoint coverage may be from our closest competitors. Let me provide two examples. A new customer, a leader in global ride hailing, selected Singularity Cloud despite having deployed a competitive next-gen EDR solution on their endpoint footprint, reinforcing the superiority of our cloud-architectured workload protection. We closed the deal to the AWS marketplace, which is opening new opportunities for growth. We see meaningful expansion potential with the customer, making cloud multiple times larger than the endpoint opportunity. This is frequently the case with cloud-native companies. Next, an example of an existing customer expansion. A global e-commerce giant more than doubled the size of its cloud security coverage just one quarter after its initial deployment. There remains significant expansion potential beyond this. Our momentum in cloud security is strong, and we're encouraged by the early adoption from cloud-native enterprises in our strong competitor position. Shifting gears to innovation and platform breadth, I'm pleased to say that we've completed the integration and customer migration to the dataset backend. We're now delivering a one-of-a-kind unified XDR platform, offering a seamless experience from the backend to the user interface. This is a significant milestone and an important competitive differentiator for a few reasons. First, we have a single unified platform. We stand out from the crowd for being the only cybersecurity vendor that covers the essential attack surfaces of endpoint cloud and identity powered by our proprietary data ingestion and analytics technology. That means an even more powerful user experience with complete security visibility across the enterprise all in one place. Second, our platform is purpose-built to process all types of data at significant scale. We're living in the petabyte era, and data processing at scale is a must-have. Our Singularity platform is already running multiple petabytes of data every day in live environments, while other vendors can merely handle a fraction of such scale in test or benchmark scenarios. Finally, we offer unmatched data retention capabilities. Enterprises need to cost-effectively retain an increasing amount of data for long periods. We're helping them reduce operational and storage costs while maintaining access to critical information. In the past quarter, we've announced transformative innovations like XDR Ingest, Skylight, and a new process graph visualization. With these new capabilities, we continue to lead the XDR experience, consolidating data and security actions into a single platform with a single query language and hunting interface. Moving on, we completed the acquisition of Ativo in May. By adding Ativo's comprehensive identity security capabilities to our platform, we're now protecting customers both at the device and end-user level. Identity is one of the critical attack surfaces commonly leveraged by bad actors to breach enterprises. Ativo puts us in the front row of the identity security market and helps enterprises adopt a holistic zero-trust strategy. We're delivering on our mission to autonomously protect customers by harnessing the power of data analytics, machine learning, and artificial intelligence. The market opportunity in front of us remains massive across endpoint, cloud, and identity, as well as security data analytics. We're investing in our technology, people, and strategic partnerships. We remain agile, and our balanced approach is continuing to drive high growth and progress towards profitability. Let's turn to discussion to the demand environment for our XDR platform and the trends we're seeing in our markets. Cybersecurity remains a top priority for enterprise IT spending and must buy for all enterprises. We're encouraged by the broad-based strengths across customers, geographies, and capabilities in Q2. Our pipeline moves sequentially, reinforcing our conviction around the vast future opportunity. Demand is strong, and we remain extremely well-positioned. At the same time, enterprises across all sectors of the economy are being impacted in different ways by evolving macro-conditions. Like other software companies, we've seen some signs of cost consciousness and prudence around IT budgets. This has resulted in marginally longer sales cycles and more budgetary approvals. The impact has been quite modest so far. The risks of not being protected by a leading security solution are too costly. Through Singularity SDR, we deliver what customers need the most. Best-in-class protection and superior platform value. Our platform delivers leading efficacy, speed, and scale superior to legacy incumbents and competitors alike. We've led the MITRE ATT&CK evaluation for years and we further enhance our HDR platform with a unified proprietary data backend. We envision cybersecurity to be a catalyst for product consolidation, ATT&CK surface reduction, and operational efficiency. We're enabling enterprises to do more than ever before through automation and data analytics while driving down operational costs. In closing, There has never been a greater enterprise need for a modern cybersecurity platform like Singularity XDR, which means a tremendous business opportunity ahead. Our growth journey continues. I want to thank all Sentinels, customers, and partners. SentinelOne remains well positioned for continued success in market share expansion, even in today's economic environment. Our outstanding performance speaks for itself. Triple-digit revenue and ARR growth paired with double-digit margin expansions. With that, I will turn the call over to Nick Warner, President of Security.