SentinelOne, Inc.

Good afternoon. Thank you for attending the SentinelOne first quarter fiscal year 2025 earnings conference call. My name is Cameron and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Doug Clark, Vice President of Investor Relations. You may proceed.

Good afternoon, everyone, and welcome to SentinelOne's earnings call for the first quarter of fiscal year 2025, which ended April 30th. With us today are Tomer Weingarten, CEO, and Dave Bernhardt, CFO. Our press release and the shareholder letter were issued earlier today and are posted on the investor relations section of our website. This call is being broadcast live via webcast, and an audio replay will be available on our website after the call concludes. Before we begin, I would like to remind you that during today's call, we will be making forward-looking statements about future events and financial performance. including our guidance for the second fiscal quarter and our full fiscal year 25, as well as long-term financial targets. We caution you that such statements reflect our best judgment based on factors currently known to us and that our actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC in particular, our annual report on Form 10-K and our quarterly reports on Form 10-Q. 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 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 could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. During this call, we will discuss non-GAAP financial measures unless otherwise stated. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results other than with respect to our non-GAAP financial outlook, is provided in today's press release and in our shareholder letter. These non-GAAP measures are not intended to be a substitute for our GAAP results. Our financial outlook excludes stock-based compensation expense, employer payroll tax on employee stock transactions, amortization expense of acquired intangible assets, acquisition-related compensation costs, restructuring charges, and gains and losses on strategic investments. which cannot be determined at this time and are therefore not reconciled in today's press release. And with that, let me turn the call over to Tomer Weingarten, CEO of SentinelOne.

Good afternoon, everyone, and thank you for joining our fiscal first quarter earnings call. Our first quarter performance surpassed our revenue, gross margin, and operating margin expectations. Once again, we delivered industry-leading revenue growth and margin expansions. Revenue grew 40% year over year, distinguishing SentinelOne as one of the fastest growing companies in the public markets. Our gross margin increased back to our record high of 79%, and Q1 marked the 11th consecutive quarter with more than 25 points of operating margin expansion, which we believe is also one of the most sustained and significant margin improvement stories in public markets. I'm pleased to share that we achieved positive free cash flow margin for the first time in a company's history. an incredible milestone. We delivered on our commitment to generate positive free cash flow well ahead of our prior target. In Q1, we achieved a rule of 58 on a free cash flow basis, generating a substantial positive 18% free cash flow margin. We also achieved our first quarter of break-even earnings per share. This shows an impressive combination of growth, operating leverage, and cash management. I'm proud of our teams for leading us to this remarkable achievement. These results reflect the strong demand of Sentinel-1's autonomous cybersecurity platform, unit economics, and scalability of our business model. Our pace of innovation and AI-driven autonomous security are setting new benchmarks across the industry. In Q1 alone, we amplified our cloud security offering with full CNAP integration, introduced the first of its kind AI security system through Purple AI, and dramatically enhanced the security experience by launching the new Singularity Operations Center. Our industry-leading growth and margin expansion shows an extraordinary financial profile. Still, we have the opportunity to enhance our go-to-market execution and evolve related processes to support increasing scale and diverse growth. I'll share more on this later. As always, please also read our shareholder letter published on the Investor Relations website, which provides more detail. Let's dig into our first quarter performance. Structurally, the threat landscape is intensifying. This is evident by a sharp rise in cyber attacks and breaches. The total cost of breaches and operational disruptions are reaching new highs. More and more enterprises are turning to SentinelOne for best-in-class security, simplification, and savings. We are the leader in autonomous security. Our AI-based security platform enables new and existing customers to defend against modern attacks and consolidate disjointed ecosystems of subpar solutions and outcomes. This is driving strong demand for our endpoint, cloud, and data solutions, as well as unprecedented interest in our AI capabilities. Our momentum with large enterprises remains strong. Customers with more than $100,000 in ARR grew 30% year over year, and customers with more than $1 million in ARR reached a new company record. We're helping enterprises reduce complexity and optimize costs, all while significantly enhancing their security posture. Platform adoption and success with larger enterprises continue to drive higher ARR per customer, which increased double digits year over year to a record high. Customer expansion rates remain healthy. Similar to last quarter, a larger portion of our business mix was driven by new customer additions in the quarter, which we believe will open doors for significant expansion over time. Traction with our platform capabilities is leading to new growth channels and diversifying our business mix. Emerging solutions continue to grow at a faster pace than the overall business. In Q1, Singularity Data Lake remained our fastest-growing solution, once again growing triple digits, followed by cloud, identity, and others. We're just scratching the surface of a massive addressable market ripe for disruption. On the competitive front, enterprises continue to select Sentinel-1 against legacy and next-gen security vendors in a majority of evaluations. Our technology comes out on top across every capability, be it endpoint, cloud, data, or AI. Singularity outperforms both point products and disjointed platforms alike. For years running, SentinelOne has led objective evaluations like MITRE, as well as industry reviews from Gartner and others. In a market riddled with complexity and substandard solutions, we're empowering our customers and partners with the industry's most advanced AI power protection to one data architecture, one platform, one agent, and one user interface. We focus on better security outcomes in real time, offering a unique combination of a premier security platform and lower cost of ownership to customers. It's important to understand the structural forces surrounding cybersecurity and some of the hard realities the industry faces. Point products, data silos, and disjointed platforms leave gaps that are regularly exploited. Large next-gen vendors try to sell endless lists of products and modules. This approach may enhance their own profits, but it does not ensure the cybersecurity of their customers. A rising number of security breaches serves as clear evidence of this unfortunate reality. The status quo is failing. Breaches continue to happen at a faster pace. It's impossible to ignore that vendors with leading market share are not preventing the very breaches they claim to stop. Deploying more and more modules is not solving the problem, and enterprises increasingly understand it. After evaluating Sentinel-1's technology, customers quickly realized that the marketing-laden, empty promises of half-baked alternative offerings do not translate to real usable outcomes. The difference between competitors' technology in the market and Sentinel-1 is stark and visible. When technology alone can't win, competitive solutions often rely on other tactics. No matter how tempting the price point might be, more and more practitioners are testing products and understand the real price of choosing an unproven capability, even from an established vendor. Marketing claims for these solutions to modernize operations are built on an already obsolete architecture. Choosing this path is a recipe for disaster that can actually send back their security operations years into the past. We lead with facts, not fiction, education and collaboration, no propaganda. It is imperative to think differently about cybersecurity in the age of AI. This is why we purpose-built the Singularity platform with a holistic approach to security, data-driven and autonomous. At SentinelOne, we focus our resources, investments, and innovations on transforming how security teams can better prepare and protect against the threats of tomorrow, evolving and simplifying enterprise infrastructure to gain control over their parameters. The best security is invisible, working autonomously to defend you at all times. We're already a leader in AI-based security and the only platform with multiple layers of AI, which give enterprises higher efficiency, better protection, and more automation. Singularity is secure by design with fully integrated threat intelligence by default. Our platform's best-in-class efficacy connects the dots automatically without requiring overlay services. Let me provide a few examples to showcase the transformative power of singularity. In the coming years, AI is going to consolidate many point solutions and feature products across the entire security landscape. With our advances around Purple AI, we're significantly widening the competitive gap even more in preparing for this future. Purple AI is natively integrated across our entire platform. With our open platform approach, Purple touches every aspect of managing security and has the ability to see and manage all security events, including those of competing products. These create compounded value for customers wishing to enhance existing security investments while benefiting from best of breed security products. Purple detects anomalies, enforces policies, takes mitigation, remediation, and orchestration actions autonomously with full control and audit by the human user. Doing so across all security ecosystem products is a dramatic force multiplier and allows for a central responsive control plane. Purple AI also radically simplifies and accelerates the more complex tasks of cybersecurity, threat hunting, and investigations. It helps core security teams detect threats earlier, respond faster, and stay ahead of attacks. Purple also enjoys real-time access to two of the best threat intelligence sources in the world. Our first-class threat intelligence is fully integrated for no charge into Purple. We've also teamed up with Google's trusted and world-leading threat intelligence by Mandiant, available on the Singularity platform. More security, more trust. One would be hard-pressed to find better security intelligence than this. Best of all, Purple AI works in real time. This is not a vision. This is the new reality for cybersecurity. This is what we're delivering today. To experience it firsthand, I encourage you to take a look at the Purple AI demo linked on page six of our Q1 shareholder letter. The combination of Purple AI and enterprise-wide data analytics completely simplifies, streamlines, and transforms every aspect of the security journey. This is the true objective of modern cybersecurity, simplification over platformization. The only folks that care about platformization are the vendors themselves. Enterprises care about better security outcomes. With PRPL, there's no vendor lock-in or product compromises. Putting all eggs in the same basket is not advisable in security and does not ensure the benefit of the customer. While competitors are developing chatbot assistants, our vision is to deliver a fully autonomous AI-based security that is always on, securing the enterprise every day at all times. PRPL is an AI security partner for humans. In an age of AI-based attacks, Purple alleviates the challenges of machine speed response, talent shortage, alert fatigue, and frees up analyst time by doing the grunt work, all while autonomously securing the enterprise. The difference is vast. The feedback for enterprises has been overwhelmingly positive, and this is based on actual deployments, not just marketing demos. Early adopters of Purple AI have reported 80% faster threat hunting in investigations. One enterprise said Purple was saving its security team hours over the course of a single day. In other words, enthusiastic about not having to memorize Splunk queries any longer. Finally, and this is my favorite quote, Purple AI changes everything. I finally feel in control. Tasks are faster, incidents are clearer, and I don't have to guess how I'm going to prioritize my time. Coming out of RSA, the interest for Purple AI is growing rapidly. It's already leading to customer wins and competitive displacements. For instance, in Q1, a major insurance provider chose to replace Carbon Black after using it for 10 years and selected Sentinel-1 over other next-gen vendors. Purple AI was the game changer for this customer. It unified the entire enterprise security aperture and unlocked the efficiency needed to stay ahead of attacks. And as I've mentioned, the true value of Purple gets compounded when paired with other aspects of the Singularity platform. This particular customer selected endpoint cloud identity and data. Customers that choose Purple distinctly select a wider range of platform capabilities from Sentinel-1. And we're pairing Purple AI with our completely redesigned user interface. We call it the Singularity Operations Center. When security teams spend all day, every day interacting with a platform, the experience needs to be flawless and intuitive. Security analysts don't want to worry about an endless list of modules. We're building a seamless security experience that just works and results in better posture with one centralized view of all security workflows across the enterprise. Security teams can now manage all central one and non-central one security alerts in one place with comprehensive investigations that clarify clarity, origin, and context of an alert. It's like sitting in the cockpit of a modern spacecraft, fully autonomous experience while having complete visibility of all events as well as physical and virtual assets. including endpoints, cloud, identity, and network. Behind all of this is our Singularity Graph and Correlation Engine, which contextualizes all alerts, identifies patterns, and ultimately aid in earlier detection to prevent breaches. Together, we believe that Purple AI and our new Singularity Operations Center creates the most advanced security platform available for enterprises. Simple, automated, and secure with full visibility across the entire network. Also at RSA, we launched Singularity Cloud Native Security. In just a few months, we acquired and integrated PingSafe into our unified Singularity platform. I'm proud of the speed in which we were able to bring the solution to the market. Our new agentless cloud security helps enterprises prioritize their time and prevent attacks before they happen. Our cloud native security cuts through the noise using a unique offensive security engine that safely simulates attack paths and provides for active security. No other solution on the market takes this approach, removing the noise and making it more actionable than competing solutions. In a recent product evaluation by G2 and leading peer review marketplace used by millions of businesses around the world, Singularity Cloud ranked as the number one for ease of use and received 4.9 out of 5 on customer reviews. Even at this early stage, are seen up as receiving extremely positive customer response ahead of solutions from public and private competitors. In Q1, a Fortune 500 enterprise selected the Singularity platform for both the cloud and endpoint security. This company had been a longtime customer of a next-gen endpoint peer, but the protection and reliability of our cloud workload security completely changed the conversation. The CISO at this enterprise said, I couldn't believe what we had been missing. Singularity Cloud caught incidents we didn't even know existed. One other aspect of this interaction that's worth pointing out. The CISO of this enterprise said, I know I'm more protected now. And the experience was terrific. SentinelOne listened to what I wanted and needed and clearly showed how the platform can help. I didn't have to decode a list of SKUs. The cloud security space continues to be a clear green field opportunity to engage with new enterprises, regardless of endpoint incumbency. We've seen this time and again. Combined, we believe our cloud workload and cloud native security create the most advanced cloud security portfolio to protect critical enterprise infrastructure. We're excited about the growth potential as we move throughout the year. Finally, the momentum of our data capabilities remain extremely strong. After a record four quarter, Singularity Data Lake continued to grow triple digits in Q1. SentinelOne is not a newcomer to the SIEM market. For example, three years ago, SentinelOne was the first company to realize the transformation opportunity that would arise. We acquired a true next-gen data analytics platform. All other vendors are trying to emulate. Our Data Lake superiority is tried, tested, and proven, fully integrated, empowering the Singularity platform and securing tens of thousands of enterprises across the world. Singularity Data Lake provides a modern next-gen alternative to legacy SEM solutions. Coupled with Purple AI, it is the preeminent AI SIEM. Enterprises no longer have to be burdened by the cost prohibitive and limited actionability of legacy SIEM. With Singularity Data Lake, they get lower cost and faster speeds at petabyte scale. Many of the newer SIEM solutions answer only the most basic use cases, have limited scalability out of the box, and are far from their advertised functionality. Enterprises are increasingly looking to move away from legacy SIMs, a technology that's decades old. In one customer example, a Fortune 500 financial services company selected Singularity Data Lake to augment part of its Splunk contract ahead of a full contract expiry next year. Deals like these create significant expansion opportunities for Singularity Data Lake and are opening doors for broader platform adoption. Data transformations are not trivial and take time, but are necessary to operate efficiently and securely. We've just begun to help companies navigate the transition. This trend of evaluations and migrations is picking up. Tying it all together, we're seeing great traction with our emerging solutions. The contribution from emerging solutions was a record in Q1, growing to about 40% of our bookings. Over time, our platform solutions will be an even more significant part of our business, driving diversity and long-term growth. As I reflect upon the last few years, Our advancements in data, AI, and cloud security clearly illustrate the success of our technology evolution from endpoint security to a comprehensive enterprise-wide cybersecurity platform. Moving forward, our goal is to replicate similar success across our go-to market. This is especially important in today's macro environment, which raises the bar for execution. Macroeconomic uncertainty and tighter financial conditions continue to impact customer buying behaviors. With better execution, we believe we can mitigate these factors and deliver higher growth. As you know, Michael Kremen recently joined Central One as Chief Revenue Officer to drive our go-to-market strategy for growth at scale. We've pinpointed several opportunities to enhance our performance and are already making progress. Together, we are streamlining every aspect of our go-to-market organizations. We're putting everything together in service of a better sales experience and stronger engagement. Our strategy is straightforward. First, we're appointing proven leaders with growth at scale to guide our teams to their full potential. Second, we're enhancing our processes and data analytics across the board, including scaling our renewals process, expanding our partner ecosystem, and evolving our marketing and sales enablement. These are high value and high return changes, which naturally take time to implement. At our scale, we can adapt quickly and be nimble. All of this is part of the growth journey, which requires constant evolution. To reflect the impact of macro dynamics in our go-to-market transition, we've modestly revised our full-year revenue outlook range. With that, we have a line of sight to stronger new business generation in the second half of the year. Our confidence stems from strong pipeline, ramping newer products, and leading indicators from our go-to-market improvements. We're expecting over 30% revenue growth this year, one of the fastest growth rates in public markets once again. combined with a charge towards profitability. Our business fundamentals and opportunities remain unchanged, and our win rates are strong. Even as we evolve, we continue to deliver industry-leading results every single year. Indeed, we are investing for the future and leaning into areas of significant growth potential, namely cloud, data, and AI. These are important growth levers for our business. We have long held the view that data and AI are the epicenter of security. Enterprise security will not look the same in the coming years. To reinforce both our commitment and conviction, we established the AI Security Innovation Center at our Tel Aviv office. This investment in people and technology will ensure that we continue to lead at the forefront of modern AI-based cybersecurity and enterprises get the absolute best of protection and experience. Our financial profile is incredibly strong. We delivered 40% top-line growth and parallel margin improvement in positive free cash flow quarters ahead of our original target. Achieving free cash flow rule of 58 shows that Sentinel-1 represents a rare combination of premium growth and returns. We're pleased with these milestones and excited by our future growth opportunities across massive end markets. The status quo of current cybersecurity offerings is failing, leaving enterprises vulnerable and riddled with unnecessary complexity and costs. The real solution to the modern cybersecurity problem is better security, simplification, and savings. Our technology across endpoint, cloud, data, and AI is cutting edge, and our platform experience is second to none. Enterprises deserve better, and we're delivering it. Lastly, none of this would have been possible without the extremely talented people of Sentinel-1. We work with purpose that fuels resilience. I'm deeply grateful for the hard work and dedication of all Sentinels. I also want to thank our customers and our partners for their trust and collaboration. AI is the new paradigm. Cybersecurity is the furthest frontier. And Sentinel-1 is its foremost outpost. With that, I will turn the call over to Dave Bernhardt, our Chief Financial Officer.