SentinelOne, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) 79 Consolidated Balance Sheets 83 Consolidated Statements of Operations 84 Consolidated Statements of Comprehensive Loss 85 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) 86 Consolidated Statements of Cash Flows 88 Notes to Consolidated Financial Statements 90 78 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of SentinelOne, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SentinelOne, Inc. and subsidiaries (the “Company”) as of January 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended January 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 29, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Acquisitions – Acquisition of Attivo — Refer to Notes 2 and 15 to the financial statements Critical Audit Matter Description On May 3, 2022, the Company completed the acquisition of Attivo Networks, Inc. for consideration of $534.8 million. The Company accounted for the acquisition as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including $77.6 million of customer relationships and $63.2 million of developed technology. 79 Table of Contents We identified forecasted revenue used in the valuation of customer relationships and developed technology as a critical audit matter because it requires management to make significant estimates and assumptions. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasted revenue. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the forecasted revenue included the following, among others: • Assessed the reasonableness of forecasted revenue, by performing a retrospective review of the forecasted revenue and comparing it to (1) historical revenue results of the acquired business, (2) historical and forecasted revenue of peer companies in industry, and (3) communications with the Board of Directors. Revenue Recognition — Refer to Notes 2 and 3 to the financial statements Critical Audit Matter Description The Company generates substantially all its revenue from subscriptions to its Singularity Platform. This includes subscription, premium support and maintenance and other Singularity Modules, which are distinct performance obligations and are recognized ratably over the subscription term as the performance obligations are satisfied. To determine the amount and pattern of revenue recognition, management identifies and evaluates the relevant contractual terms in its customer contracts based on its accounting policy (collectively “contract terms and conditions”). Given the significance of the proper identification and evaluation of contract terms and conditions to the amount and pattern of revenue recognition, performing audit procedures to evaluate whether management properly identified the relevant contract terms and conditions that impact the amount and pattern of revenue recognition required a high degree of auditor judgment and an increased extent of effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the evaluation of management’s identification of the relevant contract terms and conditions that impact the amount and pattern of revenue recognition included the following, among others: • We assessed management’s significant accounting policies related to revenue recognition for compliance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. • We selected a sample of recorded revenue transactions and contracts entered into during the period and performed the following procedures: ◦ Obtained and read customer source documents and the contract, including master agreements and related amendments, to evaluate if relevant contract terms and conditions have been appropriately identified by management. ◦ Evaluated the appropriateness of management’s determination of the impact of those terms and conditions on the amount and pattern of revenue recognition. /s/ DELOITTE & TOUCHE LLP San Jose, California March 29, 2023 We have served as the Company’s auditor since 2018. 80 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of SentinelOne, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of SentinelOne, Inc. and subsidiaries (the “Company”) as of January 31, 2023 and 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2023, of the Company and our report dated March 29, 2023, expressed an unqualified opinion on those financial statements. As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Attivo Networks, which was acquired in May 2022, and whose financial statements constitute approximately 0.5% of total assets as of January 31, 2023 and approximately 7% of total revenue during the year ended January 31, 2023. Accordingly, our audit did not include the internal control over financial reporting at Attivo Networks. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 81 Table of Contents /s/ DELOITTE & TOUCHE LLP San Jose, California March 29, 2023 82 Table of Contents SENTINELONE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) January 31, 2023 2022 Assets Current assets: Cash and cash equivalents $ 137,941 $ 1,669,304 Short-term investments 485,584 374 Accounts receivable, net 151,492 101,491 Deferred contract acquisition costs, current 37,904 27,546 Prepaid expenses and other current assets 101,812 18,939 Total current assets 914,733 1,817,654 Property and equipment, net 38,741 24,918 Operating lease right-of-use assets 23,564 23,884 Long-term investments 535,422 6,000 Deferred contract acquisition costs, non-current 55,536 41,022 Intangible assets, net 145,093 15,807 Goodwill 540,308 108,193 Other assets 5,516 4,703 Total assets $ 2,258,913 $ 2,042,181 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 11,214 $ 9,944 Accrued liabilities 100,015 22,657 Accrued payroll and benefits 54,955 61,150 Operating lease liabilities, current 3,895 4,613 Deferred revenue, current 303,200 182,957 Total current liabilities 473,279 281,321 Deferred revenue, non-current 103,062 79,062 Operating lease liabilities, non-current 23,079 24,467 Other liabilities 2,788 6,543 Total liabilities 602,208 391,393 Commitments and contingencies (Note 13) Stockholders’ equity: Preferred stock; $ 0.0001 par value; 50,000,000 shares authorized as of January 31, 2023 and 2022, and no shares issued and outstanding as of January 31, 2023 and 2022 — — Class A common stock; $ 0.0001 par value; 1,500,000,000 shares authorized as of January 31, 2023 and 2022; 222,951,206 and 162,666,515 shares issued and outstanding as of January 31, 2023 and 2022, respectively 21 16 Class B common stock; $ 0.0001 par value; 300,000,000 shares authorized as of January 31, 2023 and 2022; 63,812,651 and 107,785,100 shares issued and outstanding as of January 31, 2023 and 2022, respectively 8 11 Additional paid-in capital 2,663,394 2,271,980 Accumulated other comprehensive income (loss) ( 6,367 ) 454 Accumulated deficit ( 1,000,351 ) ( 621,673 ) Total stockholders’ equity 1,656,705 1,650,788 Total liabilities and stockholders’ equity $ 2,258,913 $ 2,042,181 The accompanying notes are an integral part of these consolidated financial statements. 83 Table of Contents SENTINELONE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year Ended January 31, 2023 2022 2021 Revenue $ 422,179 $ 204,799 $ 93,056 Cost of revenue 144,177 81,677 39,332 Gross profit 278,002 123,122 53,724 Operating expenses: Research and development 207,008 136,274 62,444 Sales and marketing 310,848 160,576 77,740 General and administrative 162,722 93,504 29,059 Total operating expenses 680,578 390,354 169,243 Loss from operations ( 402,576 ) ( 267,232 ) ( 115,519 ) Interest income 21,408 202 231 Interest expense ( 1,830 ) ( 787 ) ( 1,401 ) Other expense, net ( 1,293 ) ( 2,280 ) ( 424 ) Loss before income taxes ( 384,291 ) ( 270,097 ) ( 117,113 ) Provision (benefit) for income taxes ( 5,613 ) 1,004 460 Net loss $ ( 378,678 ) $ ( 271,101 ) $ ( 117,573 ) Net loss per share attributable to Class A and Class B common stockholders, basic and diluted $ ( 1.36 ) $ ( 1.56 ) $ ( 3.31 ) Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted 277,802,861 174,051,203 35,482,444 The accompanying notes are an integral part of these consolidated financial statements. 84 Table of Contents SENTINELONE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Year Ended January 31, 2023 2022 2021 Net loss $ ( 378,678 ) $ ( 271,101 ) $ ( 117,573 ) Other comprehensive income (loss): Changes in unrealized losses on investments ( 6,821 ) — — Foreign currency translation adjustments — 289 366 Total comprehensive loss $ ( 385,499 ) $ ( 270,812 ) $ ( 117,207 ) The accompanying notes are an integral part of these consolidated financial statements. 85 Table of Contents SENTINELONE, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (in thousands, except share data) Redeemable Convertible Preferred Stock Class A and Class B Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit) Shares Amount Shares Amount Balances as of January 31, 2020 113,523,948 $ 201,826 33,550,809 $ 1 $ 8,986 $ ( 201 ) $ ( 232,999 ) $ ( 224,213 ) Issuance of Series E Preferred Stock, net of issuance costs of $ 0.1 million 31,405,183 152,539 — — — — — — Issuance of Series F Preferred Stock, net of issuance costs of $ 0.1 million 22,128,982 266,774 — — — — — — Issuance of common stock upon exercise of options — — 5,358,692 1 4,607 — — 4,608 Issuance of common stock upon exercise of warrants — — 321,802 — 200 — — 200 Issuance of common stock for services provided — — 11,013 — 47 — — 47 Vesting of early exercised options — — — — 71 — — 71 Stock based compensation expense — — — — 15,958 — — 15,958 Foreign currency translation adjustments — — — — — 366 — 366 Net loss — — — — — — ( 117,573 ) ( 117,573 ) Balances as of January 31, 2021 167,058,113 $ 621,139 39,242,316 $ 2 $ 29,869 $ 165 $ ( 350,572 ) $ ( 320,536 ) Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 167,058,113 ) ( 621,139 ) 169,787,200 10 621,129 — — 621,139 Issuance of common stock upon initial public offering and private placements, net of underwriting discounts and commissions — — 41,678,568 4 1,380,956 — — 1,380,960 Issuance of common stock upon exercise of options — — 9,793,331 10 14,611 — — 14,621 Issuance of common stock upon exercise of warrants — — 940,953 — — — — — Vesting of restricted stock units — — 15,218 — — — — — Issuance of common stock under employee stock purchase plan — — 381,716 — 11,356 — — 11,356 Vesting of early exercised options — — — — 572 — — 572 Issuance of common stock and awards assumed in connection with acquisition — — 7,277,214 1 120,319 — — 120,320 Issuance of restricted stock awards — — 1,315,099 — — — — — Stock-based compensation — — — — 92,668 — — 92,668 Issuance of restricted stock for services provided — — 20,000 — 500 — — 500 Foreign currency translation adjustments — — — — — 289 — 289 Net loss — — — — — — ( 271,101 ) ( 271,101 ) Balances as of January 31, 2022 — — 270,451,615 $ 27 $ 2,271,980 $ 454 $ ( 621,673 ) $ 1,650,788 86 Table of Contents SENTINELONE, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (in thousands, except share data) Issuance of common stock upon exercise of options — — 7,650,525 1 17,334 — — 17,335 Vesting of restricted stock units — — 1,303,854 — — — — — Issuance of common stock under employee stock purchase plan — — 1,335,183 — 19,159 — — 19,159 Cancellation of holdback shares — — ( 9,551 ) — — — — — Vesting of early exercised options — — — — 103 — — 103 Issuance of common stock in connection with acquisition — — 6,032,231 1 186,332 — — 186,333 Stock-based compensation — — — — 168,486 — — 168,486 Other comprehensive loss — — — — — ( 6,821 ) — ( 6,821 ) Net loss — — — — — — ( 378,678 ) ( 378,678 ) Balance as of January 31, 2023 — — 286,763,857 29 2,663,394 ( 6,367 ) ( 1,000,351 ) 1,656,705 The accompanying notes are an integral part of these consolidated financial statements. 87 Table of Contents SENTINELONE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended January 31, 2023 2022 2021 CASH FLOW FROM OPERATING ACTIVITIES: Net loss $ ( 378,678 ) $ ( 271,101 ) $ ( 117,573 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 29,721 7,909 2,837 Amortization of deferred contract acquisition costs 36,417 21,670 11,518 Non-cash operating lease costs 3,559 2,862 3,085 Stock-based compensation expense 164,466 87,889 15,912 Loss on investments, accretion of discounts, and amortization of premiums on investments, net ( 12,217 ) — — Other ( 1,187 ) ( 456 ) ( 22 ) Changes in operating assets and liabilities, net of effects of acquisition Accounts receivable ( 44,442 ) ( 59,082 ) ( 8,320 ) Prepaid expenses and other current assets ( 14,499 ) ( 7,319 ) ( 9,438 ) Deferred contract acquisition costs ( 61,289 ) ( 53,565 ) ( 26,934 ) Accounts payable 3,670 ( 2,076 ) 7,429 Accrued liabilities 4,976 18,080 1,374 Accrued payroll and benefits ( 7,205 ) 41,462 7,758 Operating lease liabilities ( 5,320 ) ( 3,139 ) ( 3,261 ) Deferred revenue 92,496 115,142 49,065 Other liabilities ( 3,755 ) 6,136 — Net cash used in operating activities ( 193,287 ) ( 95,588 ) ( 66,570 ) CASH FLOW FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 4,953 ) ( 3,653 ) ( 3,283 ) Purchases of intangible assets ( 407 ) ( 802 ) ( 224 ) Capitalization of internal-use software ( 13,452 ) ( 5,839 ) ( 2,758 ) Purchases of investments ( 1,938,007 ) ( 6,000 ) — Maturities of investments 925,185 — — Cash paid for acquisition, net of cash acquired ( 281,032 ) ( 3,449 ) — Net cash used in investing activities ( 1,312,666 ) ( 19,743 ) ( 6,265 ) CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from issuance of Series E redeemable convertible preferred stock, net of issuance costs — — 152,539 Proceeds from issuance of Series F redeemable convertible preferred stock, net of issuance costs — — 266,774 Payments of deferred offering costs ( 186 ) ( 7,416 ) — Proceeds from revolving line of credit — — 19,857 Repayment of debt — ( 20,000 ) ( 20,000 ) Proceeds from exercise of stock options 17,335 14,622 4,608 Proceeds from exercise of warrants — — 200 Proceeds from issuance of common stock under the employee stock purchase plan 19,159 11,356 — Proceeds from initial public offering and private placement, net of underwriting discounts and commissions — 1,388,562 — Net cash provided by financing activities 36,308 1,387,124 423,978 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS — 1,146 289 NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 1,469,645 ) 1,272,939 351,432 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–Beginning of period 1,672,051 399,112 47,680 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–End of period $ 202,406 $ 1,672,051 $ 399,112 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 17 $ 409 1,379 Income taxes paid, net $ 500 $ 583 298 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock-based compensation capitalized as internal-use software $ 4,020 $ 4,779 46 Property and equipment purchased but not yet paid $ 203 $ 913 78 88 Table of Contents SENTINELONE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Vesting of early exercised stock options $ 103 $ 575 71 Deferred offering costs accrued but not yet paid $ — $ 186 — Issuance of common stock and assumed equity awards in connection with acquisition $ 186,332 $ 120,319 — Conversion of redeemable convertible preferred stock to common stock upon initial public offering $ — $ 621,139 — The accompanying notes are an integral part of these consolidated financial statements. 89 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Business SentinelOne, Inc. (SentinelOne, we, our, or us) was incorporated in January 2013 in the State of Delaware. On March 29, 2021, we amended our certificate of incorporation to change our name from Sentinel Labs, Inc. to SentinelOne, Inc. We are a cybersecurity provider that delivers an artificial intelligence-powered platform to enable autonomous cybersecurity defense. Our headquarters is located in Mountain View, California with various other global office locations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of SentinelOne and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Fiscal Year Our fiscal year ends on January 31. References to fiscal 2023, 2022 and 2021 refer to the fiscal years ended January 31, 2023, January 31, 2022 and January 31, 2021, respectively. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates include, but are not limited to, stock-based compensation, the period of benefit for deferred contract acquisition costs, useful lives of long-lived assets and intangibles, the valuation of intangibles acquired as part of a business combination, and accounting for income taxes. Actual results could differ from those estimates. As the impact of the COVID-19 pandemic continues to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the consolidated financial statements as new events occur and additional information becomes known. To the extent our actual results differ materially from those estimates and assumptions, our future financial statements could be affected. Segment and Geographic Information We have a single operating and reportable segment. Our chief operating decision maker (CODM) is our Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and assessing financial performance. For information regarding our revenue and long-lived assets by geography, see Notes 3 and 12, respectively. Foreign Currency During fiscal 2022, we changed the functional currency of certain subsidiaries from their respective local currency to the U.S. dollar. The change in functional currency is due to increased exposure to the U.S. dollar as a result of a change in facts and circumstances in the primary economic environment in which these subsidiaries operate. The effects of the change in functional currency were not significant to our consolidated financial statements. 90 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Subsequent to the change, our reporting currency and the functional currency of our foreign subsidiaries is the U.S. dollar. Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations and were not material for any periods presented. Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. Revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for the subscriptions and services. We apply the following five-step approach to recognize revenue: (i) Identification of the Contract, or Contracts, with the Customer —We determine that we have a contract with a customer when the contract is approved, the payment terms for the services can be identified, each party’s rights regarding the services to be transferred can be identified, the customer has the ability and intent to pay, and the contract has commercial substance. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information of the customer. We sell through our indirect relationships with our channel partners or direct relationships with end customers through our internal sales force. Apart from certain sales arrangements where channel partners are determined to be our customers, we have concluded that the end customer is our customer. (ii) Identification of the Performance Obligations in the Contract —Performance obligations in a contract are identified based on the services that will be transferred to a customer that are both capable of being distinct, where the customer can benefit from the service either on its own or together with other resources that are readily available to the customer, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, we apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation. We have concluded that our contracts with customers do not contain warranties that give rise to a separate performance obligation. (iii) Determination of the Transaction Price —The transaction price is the amount of consideration we expect to be entitled from a customer in exchange for providing the subscriptions and services. Variable consideration is included in the transaction price if, in our judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur. Some of our end customers are entitled to receive service level commitment credits, in which we may be contractually obligated to provide partial refunds, and in rare instances, each representing a form of variable consideration. We have historically not experienced any significant incidents affecting the defined guarantees of performance levels or service response affecting the defined guarantees of performance levels or service response rates, and accordingly, estimated refunds related to service level commitment credits in the consolidated financial statements were not material during fiscal 2023, 2022 and 2021. None of our contracts contain a significant financing component. The transaction price excludes amounts collected on behalf of third parties, such as sales taxes. (iv) Allocation of the Transaction Price to the Performance Obligations in the Contract —If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation 91 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS of the transaction price to each performance obligation based on relative SSP. Certain arrangements include variable consideration that is typically a function of transaction volume or another usage-based measure. Depending upon the structure of a particular arrangement, we may allocate the variable amount to each distinct service period within the series (i.e. direct allocation). (v) Recognition of Revenue when, or as, Performance Obligations are Satisfied —Revenue is recognized when control of the related performance obligation is transferred to the customer in an amount that reflects the consideration expected to be received in exchange for the subscriptions or services. We generate substantially all of our revenue from subscriptions to our Singularity Platform. Our Singularity Platform delivers artificial intelligence-powered threat prevention, detection, and response capabilities, enabling an automatic protection against a full spectrum of cyber threats. We built our Singularity Platform to be deployed as a cloud service or in private and hybrid clouds. Customers can extend the functionality of their subscription to our platform by subscribing to additional Singularity Modules. The nature of our promise to the customer under the subscription is to stand ready to provide protection for the duration of the contractual term. As a result, we recognize revenue for these performance obligations ratably over the contractual term. Premium support and maintenance and other Singularity Modules are distinct from subscriptions and are recognized ratably over the term as the performance obligations are satisfied. Certain arrangements include variable consideration related either to transaction volume or another usage-based measure. Depending upon the structure of a particular arrangement, we (1) recognize revenue as each distinct service period is performed, (2) recognize the estimate of variable consideration ratably over the period to which it relates, or (3) apply the ‘right to invoice’ practical expedient and recognize revenue based on the amount invoiced to the customer during the period. We generally invoice our customers upfront upon signing for the entire term of the contract, periodically, or in arrears. Most of our subscription contracts have a term of one to three years . Our payment terms typically range between 30 to 45 days. The invoiced amounts are treated as deferred revenue on the consolidated balance sheets and are recognized ratably over the term of the contract beginning on the date the customer is given access to our platform. Our contracts are generally non-cancelable over the contractual term. Contracts with Multiple Performance Obligations Our contracts with customers may contain multiple promised services consisting of subscriptions to our Singularity Platform, premium support and maintenance, and other Singularity Modules that are distinct and accounted for separately. The transaction price is allocated to separate performance obligations on a relative SSP basis. Our best evidence for SSP is the price we charge for the subscription or service when we sell it separately in similar circumstances to similar customers. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include, but is not limited to, product groupings or applying the expected cost-plus margin approach to estimate the price we would charge if the service was sold separately. Cost of Revenue Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with the hosting and maintenance of our platform, personnel-related costs associated with our customer support and services organization, including salaries, benefits, bonuses, and stock-based compensation, amortization of intangible assets, amortization of capitalized internal-use software, software and subscription services used by our customer support and services team, and allocated overhead costs. Research and Development Research and development costs are expensed as incurred, unless they qualify for recognition as capitalized internal-use software. Research and development expenses consist primarily of personnel-related costs, including 92 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS salaries, benefits, bonuses, and stock-based compensation, consulting fees, software and subscription services, third-party cloud infrastructure expenses incurred in developing our platform and modules, and allocated overhead costs. Advertising Expenses Advertising costs are expensed as incurred and included in sales and marketing expenses in the consolidated statements of operations. Advertising expenses were $ 12.3 million, $ 8.4 million, and $ 6.2 million for fiscal 2023, 2022 and 2021, respectively. Stock-Based Compensation We account for stock-based awards issued to employees, directors, and non-employee consultants based on the fair value of the awards at grant date. The fair value of stock option awards granted and rights to purchase shares under our employee stock purchase plan (ESPP) are generally estimated using the Black-Scholes option pricing model. Stock-based compensation expense for awards with only service-based vesting conditions is recognized on a straight-line basis over the requisite service period of the awards. Forfeitures are accounted for in the period in which they occur. We granted certain awards that have both service-based vesting conditions and performance-based milestones. We recognize stock-based compensation expense on a graded basis over the total requisite service period for each separately vesting portion of the performance tranches related to these performance milestone options. We also granted stock option awards with a service-based, performance-based, and market-based vesting conditions to our Chief Executive Officer and Chief Financial Officer. These stock options will vest upon the occurrence of our IPO (the performance-based vesting condition) and the achievement of certain milestone events and our share price targets (the market-based vesting conditions), subject to the executive’s continued service to us from the grant date through the milestone events. For these options, we used a Monte Carlo simulation to determine the fair value at the grant date and the implied service period. For these awards, stock-based compensation expense is recognized using the accelerated attribution method over the requisite implied service period when it is probable the performance-based vesting condition will be achieved. Income Taxes We are subject to income taxes in the United States and other foreign jurisdictions. We utilize the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, as well as from net operating loss carryforwards, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations, and risks associated with estimates of future taxable income in assessing the need for a valuation allowance. We recognize income tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. We recognize penalties and accrued interest related to unrecognized tax benefits as income tax expense, in the consolidated statements of operations. Net Loss per Share Attributable to Common Stockholders We compute basic and diluted net loss per share attributable to common stockholders using the two-class method required for participating securities. We consider our redeemable convertible preferred stock, restricted common stock, and shares issued upon the early exercise of stock options subject to repurchase to be participating securities. Under the two-class method, net loss is not allocated to redeemable convertible preferred stock, restricted 93 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS common stock, and early exercised stock options as the holders do not have a contractual obligation to share in our losses. Cash, Cash Equivalents, and Restricted Cash We consider all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist of amounts invested in money market funds. Restricted cash consists of the Attivo indemnity escrow fund and collateralized letters of credit established in connection with lease agreements for our office facilities. Restricted cash, current and non-current, are included within prepaid expenses and other current assets and other assets, respectively, on our consolidated balance sheets. The following table provides a reconciliation of cash, cash equivalents, and restricted cash to the total of these amounts shown in the consolidated statements of cash flows (in thousands): As of January 31, 2023 2022 Cash and cash equivalents $ 137,941 $ 1,669,304 Restricted cash, current 61,264 — Restricted cash, non-current 3,201 2,747 $ 202,406 $ 1,672,051 Investments We determine the appropriate classification of our investments at the time of purchase and reevaluate such determination at each balance sheet date. Investments not considered cash equivalents, and with maturities of one year or less from the consolidated balance sheet date, are classified as short-term investments. Investments with maturities greater than one year from the consolidated balance sheet date are classified as long-term investments. We classify our investments as available-for-sale securities and present them within assets. Our investments are recorded at fair value with unrealized gains and losses, if any, reported in accumulated other comprehensive income (loss). When evaluating whether an investment's unrealized losses are related to credit factors, we review factors such as the extent to which fair value is below its cost basis, any changes to the credit rating of the security, adverse conditions specifically related to the security, changes in market interest rates and our intent to sell, or whether it is more likely than not we will be required to sell, before recovery of cost basis. We invest in highly rated securities with a weighted average maturity of 18 months or less. In addition, our investment policy limits the amount of our credit exposure to any one issuer and requires investments to be investment grade, with the primary objective of preserving capital and maintaining liquidity. Fair values were determined for each individual security in the investment portfolio. We did not identify any credit losses on investments as of January 31, 2023 and 2022. Realized gains and losses on the sale of investments are determined on a specific identification method and are recorded in other income (expense), net in the consolidated statements of operations. There were no realized gains or losses on the sale of investments during fiscal 2023, 2022 and 2021. Strategic Investments Our strategic investments consist of non-marketable equity and debt investments in privately held companies. We elect to apply the measurement alternative and record non-marketable equity investments at cost, less any impairment, plus or minus observable price changes in orderly transactions for identical or similar investments of the same issuer. Non-marketable debt securities are classified as available-for-sale and are recorded at their estimated fair value with changes in fair value recorded through accumulated other comprehensive income (loss). Strategic investments are included within long-term investments on our consolidated balance sheets and adjustments to their carrying amounts are recorded in other income (expense), net in the consolidated statements of 94 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS operations. There were no material events or circumstances impacting the carrying amount of our strategic investments during fiscal 2023, 2022 and 2021. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The carrying amounts reported on the consolidated balance sheets for accounts receivable, accounts payable, accrued liabilities, and accrued payroll and benefits approximate their respective fair values due to their short-term nature. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, investments, and accounts receivable. We maintain our cash, cash equivalents, restricted cash, and investments with high-credit-quality financial institutions mainly in the U.S. and Israel. We have not experienced any credit losses relating to our cash, cash equivalents, restricted cash, and investments. For accounts receivable, we are exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the consolidated balance sheets. We perform periodic credit evaluations of our customers and generally do not require collateral. The only channel partner that represented 10% or more of accounts receivable, net for the periods presented was as follows: As of January 31, 2023 2022 Channel partner A 20 % 18 % There were no end customers that represented 10% or more of accounts receivable as of January 31, 2023 or 2022. Channel partners that represented 10% or more of our total revenue for the periods presented were as follows: Year Ended January 31, 2023 2022 2021 Channel partner A 18 % 18 % 19 % Channel partner B * * 13 % *Less than 10% There were no end customers that represented 10% or more of total revenue for fiscal 2023, 2022 and 2021. Accounts Receivable Accounts receivable are recorded at invoiced amounts and are non-interest bearing. We have a well-established collection history from our channel partners and end customers. We periodically evaluate the collectability of our accounts receivable and provide an allowance for doubtful accounts as necessary, based on the age of the receivable, expected payment ability, and collection experience. The allowance for doubtful accounts balance was $ 0.8 million and $ 0.3 million as of January 31, 2023 and 2022, respectively. Deferred Contract Acquisition Costs We capitalize sales commissions and associated payroll taxes that are incremental to obtaining a customer contract, which are recorded as deferred contract acquisition costs on the consolidated balance sheets. Sales 95 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS commissions for the renewal of a contract are not considered commensurate with commissions paid for the initial contracts, given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid on a new contract are amortized on a straight-line basis over an estimated period of benefit of four years , while commissions paid on renewal contracts are amortized over the average contractual term of the renewal. We determine the estimated period of benefit based on both quantitative and qualitative factors, including the duration of our relationships with customers and the estimated useful life of our technology. Amortization of deferred contract acquisition costs is included in sales and marketing expenses in the consolidated statements of operations. We periodically review these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. We did not recognize any impairment of deferred contract acquisition costs during fiscal 2023, 2022 and 2021. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets as follows: Estimated Useful Life Office furniture and equipment 5 years Computers, software, and electronic equipment 3 years Capitalized internal-use software 4 years Leasehold improvements Shorter of useful life or remaining term of lease Costs for maintenance and repairs are expensed as incurred. Capitalized Internal-Use Software We capitalize certain internal-use software development costs related to our cloud platform. Costs incurred in the preliminary stages of development and post-development are expensed as incurred. Internal and external costs incurred during the development phase, if direct, are capitalized until the software is substantially complete and ready for our intended use. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Maintenance and training costs are expensed as incurred. Capitalized internal-use software is included in property and equipment and is amortized to cost of revenue on a straight-line basis over its expected useful life. Impairment of Long-Lived Assets (Including Goodwill and Intangible Assets) Long-lived assets, including intangible assets with finite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the asset group. No impairment loss was recorded during fiscal 2023, 2022 and 2021. Goodwill is not amortized but tested for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may exist. The impairment test consists of a qualitative assessment to determine if the quantitative assessment is required. Goodwill impairment is recognized when the quantitative assessment results in the carrying value of the reporting unit exceeding its fair value, net of related income tax effect, in which case an impairment charge is recorded to goodwill to the extent the carrying value exceeds the fair value, limited to the amount of goodwill. We did not recognize any impairment of goodwill during fiscal 2023 and 2022. 96 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Business Combinations We account for our acquisitions using the acquisition method of accounting. We allocate the fair value of purchase consideration to the tangible and intangible assets acquired, and liabilities assumed, based on their estimated fair values. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain identifiable assets include, but are not limited to, the selection of valuation methodologies, forecasted revenue, discount rates, and useful lives. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Acquisition costs, such as legal and consulting fees, are expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations. See Note 15 for additional information regarding our acquisitions. Leases In accordance with ASC 842, we determine if an arrangement is or contains a lease at inception by evaluating various factors, including if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration and other facts and circumstances. Operating lease right-of-use (ROU) assets and operating lease liabilities are recognized on the consolidated balance sheets at the lease commencement date based on the present value of lease payments over the lease term, which is the non-cancelable period stated in the contract adjusted for any options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease payments consist of the fixed payments under the arrangement, less any lease incentives, such as tenant improvement allowances. Variable costs, such as maintenance and utilities based on actual usage, are not included in the measurement of operating lease ROU assets and operating lease liabilities and are expensed when the event determining the amount of variable consideration to be paid occurs. When the implicit rate of the leases is not determinable, we use an IBR based on the information available at the lease commencement date in determining the present value of lease payments. Lease cost for lease payments is recognized on a straight-line basis over the lease term. We account for lease components and non-lease components as a single lease component. In addition, we do not recognize operating lease ROU assets and operating lease liabilities for leases with lease terms of 12 months or less. In addition, we sublease certain of our unoccupied facilities to third parties. We recognize sublease income on a straight-line basis over the sublease term. We did not have any material finance leases during fiscal 2023, 2022 and 2021. Recently Adopted Accounting Pronouncement s In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized in accordance with Accounting Standards Codification Topic 606 as if the acquirer had originated the contracts. Previously, contract assets and contract liabilities were measured at fair value. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. We early adopted this guidance on February 1, 2022, which did not have a material impact at the time of adoption on our consolidated financial statements. 97 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. REVENUE AND CONTRACT BALANCES Disaggregation of Revenue The following table summarizes revenue by geography based on the shipping address of end customers who have contracted to use our platform for the periods presented (in thousands, except percentages): Year Ended January 31, 2023 2022 2021 Amount % of Revenue Amount % of Revenue Amount % of Revenue United States $ 276,443 65 % $ 140,034 68 % $ 65,497 70 % International 145,736 35 64,765 32 27,559 30 Total $ 422,179 100 % $ 204,799 100 % $ 93,056 100 % No single country other than the United States represented 10% or more of our revenue during fiscal 2023, 2022 and 2021. The following table summarizes revenue from contracts by type of customer for the periods presented (in thousands, except percentages): Year Ended January 31, 2023 2022 2021 Amount % of Revenue Amount % of Revenue Amount % of Revenue Channel partners $ 380,857 90 % $ 187,541 92 % $ 88,954 96 % Direct customers 41,322 10 17,258 8 4,102 4 Total $ 422,179 100 % $ 204,799 100 % $ 93,056 100 % Contract Balances Contract assets consist of unbilled accounts receivable, which arise when a right to consideration for our performance under the customer contract occurs before invoicing the customer. The amount of unbilled accounts receivable included within accounts receivable, net on the consolidated balance sheets was $ 1.5 million as of both January 31, 2023 and 2022. Contract liabilities consist of deferred revenue, which represents invoices billed in advance of performance under a contract. Deferred revenue is recognized as revenue over the contractual period. The deferred revenue balance was $ 406.3 million and $ 262.0 million as of January 31, 2023 and 2022, respectively. We recognized revenue of $ 195.9 million, $ 95.5 million and $ 53.8 million for fiscal 2023, 2022 and 2021, respectively, that was included in the corresponding contract liability balance at the beginning of the period. Remaining Performance Obligations Our contracts with customers typically range from one to three years . Revenue allocated to remaining performance obligations represents non-cancelable contract revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced in future periods. As of January 31, 2023, our remaining performance obligations were $ 609.4 million, of which we expect to recognize 85 % as revenue over the next 24 months, with the remainder to be recognized thereafter. Capitalized contract costs were $ 93.4 million and $ 68.6 million as of January 31, 2023 and 2022, respectively. Amortization expense of contract costs was $ 36.4 million, $ 21.7 million, and $ 11.5 million for fiscal 2023, 2022 and 2021 respectively. We periodically review deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. We did not recognize any impairment of deferred contract acquisition costs during fiscal 2023, 2022 and 2021. 98 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. FAIR VALUE MEASUREMENTS We measure fair value based on a three-level hierarchy, maximizing the use of observable inputs, where available, and minimizing the use of unobservable inputs, as follows: Level 1: Assets and liabilities whose values are based on observable inputs such as quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: Assets and liabilities whose values are based on inputs from quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3: Assets and liabilities whose values are based on unobservable inputs that are supported by little or no market activity and that are significant to the overall fair value measurement. 99 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about our cash, cash equivalents, and investments by investment category (in thousands): As of January 31, 2023 Fair Value Level Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Assets Cash and cash equivalents: Cash $ 35,055 $ — $ — $ 35,055 Money market funds Level 1 102,886 — — 102,886 Total cash and cash equivalents $ 137,941 $ — $ — $ 137,941 Short-term investments: U.S. Treasury securities Level 1 $ 144,392 $ 1 $ ( 501 ) $ 143,892 Commercial paper Level 2 230,305 30 ( 667 ) 229,668 Corporate notes and bonds Level 2 38,443 15 ( 148 ) 38,310 U.S. agency securities Level 2 74,060 3 ( 349 ) 73,714 Total short-term investments $ 487,200 $ 49 $ ( 1,665 ) $ 485,584 Long-term investments: U.S. Treasury securities Level 1 $ 192,337 $ — $ ( 2,460 ) $ 189,877 Corporate notes and bonds Level 2 233,946 178 ( 2,029 ) 232,095 U.S. agency securities Level 2 101,844 27 ( 921 ) 100,950 Total long-term investments $ 528,127 $ 205 $ ( 5,410 ) $ 522,922 Total assets measured at fair value $ 1,153,268 $ 254 $ ( 7,075 ) $ 1,146,447 The table above does not include the Company’s strategic investments in non-marketable debt and equity securities, which are classified as level 3 investments and were $ 12.5 million as of January 31, 2023. The following table summarizes the respective fair value and the classification by level within the fair value hierarchy (in thousands): As of January 31, 2022 Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market funds $ 1,641,642 $ — $ — $ 1,641,642 Short-term investments: Certificates of deposit — 374 — 374 Total assets measured and recorded at fair value $ 1,641,642 $ 374 $ — $ 1,642,016 We invest in highly rated securities with a weighted average maturity of 18 months or less. As of January 31, 2023, all of our investments will mature within 2 years. There were no transfers between the levels of the fair value hierarchy during fiscal 2023, 2022 and 2021. As of January 31, 2023, we determined that the declines in the market value of our investment portfolio were not driven by credit related factors. During the years ended January 31, 2023 and 2022, we did not recognize any 100 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS losses on our investments due to credit related factors. As of January 31, 2023, no unrealized losses were in a continuous unrealized loss position for more than twelve months. 5. PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted of the following (in thousands): As of January 31, 2023 2022 Office furniture and fixtures $ 2,110 $ 1,318 Computers, software, and equipment 4,603 4,895 Capitalized internal-use software 34,753 17,917 Leasehold improvements 13,188 7,490 Construction in progress 3 3,108 Total property and equipment 54,657 34,728 Less: Accumulated depreciation and amortization ( 15,916 ) ( 9,810 ) Total property and equipment, net $ 38,741 $ 24,918 We capitalized internal-use software costs of $ 17.5 million, $ 10.6 million and $ 2.8 million during fiscal 2023, 2022 and 2021, respectively. Depreciation and amortization expense related to property and equipment was $ 6.7 million, $ 4.6 million and $ 2.8 million for fiscal 2023, 2022 and 2021, respectively, including amortization expense related to capitalized internal-use software of $ 4.1 million, $ 2.1 million and $ 1.3 million for fiscal 2023, 2022 and 2021, respectively. 6. INTANGIBLE ASSETS Intangible assets, net as of January 31, 2023 consisted of the following (in thousands): As of January 31, 2023 2022 Developed technology 78,700 15,500 Customer relationship 79,100 1,500 Backlog 11,100 — Non-compete agreements 650 650 Trademarks 150 150 Patents 1,501 1,094 Total finite-lived intangible assets 171,201 18,894 Less: accumulated amortization ( 26,363 ) ( 3,342 ) Total finite-lived intangible assets, net 144,838 15,552 Indefinite-lived intangible assets - domain names 255 255 Total intangible assets, net 145,093 15,807 Amortization expense of intangible assets was $ 23.0 million and $ 3.3 million for fiscal 2023 and 2022, respectively. Amortization expense of intangible assets was not material for fiscal 2021. 101 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of January 31, 2023, estimated future amortization expense is as follows (in thousands): Fiscal Year Ending January 31, 2024 28,605 2025 24,206 2026 22,773 2027 22,773 2028 13,215 Thereafter 33,266 Total $ 144,838 7. LEASES We have entered into non-cancelable real estate operating lease agreements with various expiration dates through fiscal 2029. Our operating lease arrangements do not contain any restrictive covenants or residual value guarantees. Supplemental cash flow information related to our operating leases for fiscal 2023 and 2022 as well as the weighted-average remaining lease term and weighted-average discount rate as of January 31, 2023 and 2022 were as follows: Year Ended January 31, 2023 2022 2021 Supplemental Cash Flow Information Cash paid for amount included in the measurement of operating lease liabilities $ 5,266 $ 4,596 $ 3,999 Operating lease ROU assets obtained in exchange for operating lease liabilities $ 3,224 $ 8,558 $ 6,579 As of January 31, 2023 2022 Lease Term and Discount Rate Weighted-average remaining lease term (years) 5.55 6.56 Weighted-average discount rate 4.2 % 4.3 % The components of lease costs, net of sublease income, consisted of the following (in thousands): Year Ended January 31, 2023 2022 2021 Operating lease costs $ 4,905 $ 4,027 $ 3,844 Short-term lease costs 771 2,248 509 Variable lease costs 1,186 1,124 702 Total lease costs $ 6,862 $ 7,399 $ 5,055 Sublease income was $ 0.7 million, $ 0.6 million and $ 0.9 million for fiscal 2023, 2022 and 2021, respectively, and was recorded as a reduction of lease costs. 102 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The maturities of our non-cancelable operating lease liabilities as of January 31, 2023 were as follows (in thousands): Fiscal Year Ending January 31, Amount 2024 $ 4,805 2025 5,733 2026 5,580 2027 5,640 2028 5,702 Thereafter 2,916 Total operating lease payments $ 30,376 Less: Imputed interest ( 3,402 ) Present value of operating lease liabilities $ 26,974 8. COMMON STOCK We have two classes of common stock: Class A common stock and Class B common stock. In connection with the IPO, we amended and restated our certificate of incorporation and authorized 1,500,000,000 shares of Class A common stock and 300,000,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to twenty votes. Class A and Class B common stock each have a par value of $ 0.0001 per share, and are referred to collectively as our common stock throughout the notes to the consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors. Shares of Class B common stock may be converted to Class A common stock at any time at the option of the stockholder. Shares of Class B common stock automatically convert to Class A common stock at the earlier of: (i) the date specified by a vote of the holders of 66 2/3% of the then outstanding shares of Class B common stock, (ii) seven years from the date of our Final Prospectus, or June 29, 2028, (iii) the first date following the completion of our IPO on which the number of shares of outstanding Class B common stock (such calculations shall include shares of Class B common stock subject to outstanding stock options) held by Tomer Weingarten, including certain permitted entities that Mr. Weingarten controls, is less than 25 % of the number of shares of outstanding Class B common stock (such calculation shall include shares of Class B common stock subject to outstanding stock options) that Mr. Weingarten originally held as of the date of our Final Prospectus, (iv) the date fixed by our board of directors, following the first date following the completion of our IPO when Mr. Weingarten is no longer providing services to us as an officer, employee, consultant or member of our board of directors, (v) the date fixed by our board of directors following the date on which, if applicable, Mr. Weingarten is terminated for cause, as defined in our restated certificate of incorporation, and (vi) the date that is 12 months after the death or disability, as defined in our restated certificate of incorporation, of Mr. Weingarten. 103 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our common stock reserved for future issuance on an as-converted basis as of January 31, 2023 and 2022 were as follows: As of January 31, 2023 2022 Stock options outstanding 32,446,814 42,422,473 RSUs and PSUs outstanding 14,409,166 1,770,304 ESPP reserved for future issuance 8,043,936 6,674,603 2021 Plan available for future grants 40,175,515 38,055,572 Total shares of common stock reserved 95,075,431 88,922,952 9. STOCK-BASED COMPENSATION 2021 Equity Incentive Plan In May 2021, our board of directors and in June 2021, our stockholders approved our 2021 Equity Incentive Plan (2021 Plan) as a successor to our 2013 Equity Incentive Plan (2013 Plan) and 2011 Stock Incentive Plan (2011 Plan) with the purpose of granting stock-based awards to employees, directors, officers and consultants, including stock options, restricted stock awards, restricted stock units (RSUs), and performance-based restricted stock units (PSUs). A total of 35,281,596 shares of Class A common stock were initially available for issuance under the 2021 Plan. Our compensation committee administers the 2021 Plan. The number of shares of our Class A common stock available for issuance under the 2021 Plan is subject to an annual increase on the first day of each fiscal year beginning on February 1, 2022, equal to the lesser of: (i) five percent ( 5 %) of the aggregate number of outstanding shares of all classes of our common stock as of the last day of the immediately preceding fiscal year or (ii) such other amount as our board of directors may determine. The 2013 Plan and 2011 Plan (together, the Prior Plans) were terminated in June 2021, in connection with the adoption of our 2021 Plan, and stock-based awards are no longer granted under the Prior Plans. However, the Prior Plans will continue to govern the terms and conditions of the outstanding awards previously granted thereunder. Any shares underlying stock options that are expired, canceled, forfeited or repurchased under the Prior Plans will be automatically transferred to the 2021 Plan and be available for issuance as Class A common stock. Restricted Stock Units A summary of our RSU activity is as follows: Number of Shares Weighted-Average Grant Date Fair Value Outstanding as of January 31, 2022 1,770,304 $ 52.51 Granted 14,992,931 26.28 Released ( 1,303,854 ) 41.96 Forfeited ( 1,050,215 ) 36.19 Outstanding as of January 31, 2023 14,409,166 $ 27.37 As of January 31, 2023, we had unrecognized stock-based compensation expense related to unvested RSUs of $ 353.3 million that is expected to be recognized on a straight-line basis over a weighted-average period of 3.37 years. 104 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Option Information A summary of our stock option activity is as follows: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding as of January 31, 2022 42,422,473 $ 4.30 6.50 $ 1,714,821 Granted — — Exercised ( 7,650,525 ) 2.26 Forfeited ( 2,703,962 ) 4.68 Assumed options from Attivo acquisition 378,828 1.31 Outstanding as of January 31, 2023 32,446,814 $ 4.71 6.52 $ 337,214 Expected to vest as of January 31, 2023 32,446,814 $ 4.71 6.52 $ 337,214 Vested and exercisable as of January 31, 2023 19,645,571 $ 3.54 5.97 $ 227,200 The weighted-average grant-date fair value of options granted during fiscal 2022 and 2021 were $ 13.14 and $ 1.63 per share, respectively. There were no options granted during fiscal 2023. The aggregate grant-date fair value of options vested during fiscal 2023, 2022 and 2021 was $ 61.4 million, $ 32.0 million and $ 5.1 million, respectively. The aggregate intrinsic value is the difference between the exercise price and the estimated fair value of the underlying common stock. The aggregate intrinsic value of options exercised during fiscal 2023, 2022 and 2021 was $ 173.0 million, $ 333.7 million and $ 27.0 million, respectively. As of January 31, 2023, we had unrecognized stock-based compensation expense related to unvested options of $ 104.3 million that is expected to be recognized on a straight-line basis over a weighted-average period of 2.14 years. Milestone Options In March 2021, we granted 1,404,605 options to purchase shares of common stock subject to service-based, performance-based, and market-based vesting conditions to our Chief Executive Officer and Chief Financial Officer under the 2013 Plan. These stock options will vest 100 % upon the occurrence of our IPO (the performance-based vesting condition), which was completed in June 2021, and the achievement of certain share price targets (the market-based vesting conditions), subject to the executive’s continued service to us from the grant date through the milestone events. As of January 31, 2023, the share price targets have not yet been achieved, and therefore, these milestone options remain unvested. For these options, we used a Monte Carlo simulation to determine the fair value at the grant date and the implied service period. We recorded stock-based compensation expense related to these milestone options of $ 3.6 million and $ 3.1 million during fiscal 2023 and 2022, respectively. As of January 31, 2023, we had unrecognized stock-based compensation expense related to unvested milestone options of $ 12.7 million, that is expected to be recognized over the remaining implied service period of 3.6 years. Performance Share Units In connection with the acquisition of Attivo, we granted 71,003 shares of performance share units subject to service-based and performance-based vesting conditions. These PSUs will vest 100 % upon the achievement of certain financial performance and integration milestone events, subject to the employees’ continued service to us from the grant date through the milestone events or target dates. 105 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We recorded stock-based compensation expense related to these PSUs of $ 0.5 million during fiscal 2023. As of January 31, 2023, we had unrecognized stock-based compensation expense related to these PSUs of $ 0.5 million that is expected to be recognized over the remaining vesting period of 2.3 years. Restricted Common Stock In connection with the Attivo acquisition, restricted common stock was issued to Attivo employees. See Note 15, Acquisitions, for more information regarding these restricted common stock. We recorded stock-based compensation expense related to restricted common stock in connection with our acquisition of Attivo of $ 1.0 million during fiscal 2023. As of January 31, 2023, we had unrecognized stock-based compensation expense related to this unvested restricted common stock of $ 1.0 million. In connection with the Scalyr acquisition, we granted 1,315,099 shares of restricted common stock with a fair value of $ 14.59 per share at the time of grant, that vest over a period of two years . We recorded stock-based compensation expense related to restricted common stock in connection with our acquisition of Scalyr of $ 8.5 million and $ 10.9 million during fiscal 2023 and 2022, respectively. As of January 31, 2023, we had unrecognized stock-based compensation expense related to this unvested restricted common stock of $ 0.2 million that is expected to be recognized by the end of February 2023. Employee Stock Purchase Plan (ESPP) In May 2021, our board of directors, and in June 2021, our stockholders approved our ESPP, which became effective on the date of effectiveness of our Final Prospectus, or June 29, 2021. The ESPP initially reserved and authorized the issuance of up to a total of 7,056,319 shares of common stock to eligible employees. The number of shares reserved for issuance and sale under the ESPP will automatically increase on the first day of each fiscal year, starting on February 1, 2022 for the first ten calendar years after the first offering date, in an amount equal to (i) 1 % of the aggregate number of outstanding shares of all class our common stock on the last day of the immediately preceding fiscal year, or (ii) such other amount as the administrator of the ESPP may determine. The ESPP generally provides for six-month offering periods beginning January 6 and July 6 of each year, with each offering period consisting of single six-month purchase periods, except for the initial offering period which began on July 1, 2021, and will end on July 5, 2023 and the second offering period will begin on January 6, 2022. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85 % of the lesser of (1) the fair market value of our common stock as of the beginning of the offering period or (2) the fair market value of our common stock on the purchase date, as defined in the ESPP except for the initial offering period that has a 24-months look back to the IPO price of $ 35 . The following table summarizes assumptions used in estimating the fair value of employee stock purchase rights for the initial and subsequent offering periods under the 2021 ESPP using the Black-Scholes option pricing model: Year Ended January 31, 2023 2022 Expected term (in years) 0.5 - 1.0 0.5 - 2.0 Expected volatility 71.5 % - 95.8 % 52.3 % - 70.5 % Risk-free interest rate 2.6 % - 4.8 % 0.1 % - 0.3 % Dividend yield — % — % We recognized stock-based compensation expense related to ESPP of $ 12.7 million and $ 5.5 million during fiscal 2023 and 2022, respectively. As of January 31, 2023, $ 1.5 million amount has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions. 1,335,183 and 381,716 shares were issued under the ESPP for $ 19.2 million and $ 11.4 million during fiscal 2023 and 2022, respectively. 106 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During fiscal 2023, we recorded $ 0.4 million in expense related to modifications of our ESPP as a result of the decrease in our stock price in July 2022 and January 2023 which triggered resets of the ESPP offering periods in accordance with our plan. We expect to record the remaining $ 0.4 million in expense related to these modifications through the second quarter of 2024. Attivo Acquisition In connection with the Acquisition, we granted 539,795 shares of restricted stock units (RSUs) under our 2021 Equity Incentive Plan that will vest over a period of 3 years contingent on continued employment of certain Attivo employees, for which stock-based compensation expense will be recognized ratably over the vesting period. Attivo Equity Incentive Plan In connection with the Acquisition, we assumed unvested stock options that were granted under the Attivo 2011 Equity Incentive Plan (“Attivo Plan”). We do not intend to grant any additional shares under the Attivo Plan and the Attivo Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder. Any shares underlying stock options that are expired, canceled, forfeited or repurchased under the Attivo Plan will be automatically become available for issuance as Class A common stock pursuant to our 2021 Equity Incentive Plan. Modification During the third quarter of fiscal 2023, certain members of our management team converted to non-employee consultants. The transition has been accounted for as a modification, under which, the exercise period of certain vested awards has been extended and a certain number of unvested awards will vest through the end of the consulting agreements. During fiscal 2023, we recognized an incremental charge of $ 4.5 million related to the transition of these employees to non-employee consultants and expect to recognize an aggregate of an additional $ 6.2 million in expense over the requisite service period through the fourth quarter of 2024. Stock-Based Compensation Expense We estimate the fair value of stock options granted using the Black-Scholes option pricing model based on the following assumptions: Expected term – We determine expected term based on the average period the options are expected to remain outstanding using the simplified method, calculated as the midpoint of the options’ vesting term and contractual expiration period, until sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior becomes available. Expected volatility – Since there is little trading history of our common stock, expected volatility is estimated based on the historical volatilities of a group of comparable publicly traded companies. Risk-free interest rate – The risk-free interest rate is based on U.S. Treasury yields for a period that corresponds with the expected term of the award. Dividend yield – As we do not currently issue dividends and do not expect to issue dividends on our common stock in the foreseeable future, the expected dividend yield is zero . Fair value of underlying common stock – Prior to the completion of our IPO, the fair value of our common stock was determined by the board of directors by considering a number of objective and subjective factors including input from management and contemporaneous third-party valuations. After the completion of our IPO, the fair value of our Class A common stock is determined by the closing price of our Class A common stock, which is traded on the New York Stock Exchange. 107 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes assumptions used in estimating the fair value of stock options granted under the Black-Scholes pricing model in fiscal 2022 (no stock options were granted in fiscal 2023): Year Ended January 31, 2022 Expected term (in years) 6.0 Expected volatility 62.3 % - 66.0 % Risk-free interest rate 0.8 % - 1.1 % Dividend yield — % The components of stock-based compensation expense recognized in the consolidated statements of operations consisted of the following (in thousands): Year Ended January 31, 2023 2022 Cost of revenue $ 10,093 $ 3,618 Research and development 51,771 35,358 Sales and marketing 40,115 15,460 General and administrative 62,487 33,453 Total $ 164,466 $ 87,889 108 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. INCOME TAXES Our loss before provision for income taxes for fiscal 2023, 2022 and 2021 consisted of the following (in thousands) : Year Ended January 31, 2023 2022 2021 Domestic $ ( 432,235 ) $ ( 274,270 ) $ ( 18,159 ) Foreign 47,944 4,173 ( 98,954 ) Loss before provision for income taxes $ ( 384,291 ) $ ( 270,097 ) $ ( 117,113 ) The components of provision for income taxes for fiscal 2023, 2022 and 2021 consisted of the following (in thousands): Year Ended January 31, 2023 2022 2021 Current: State $ 53 $ 82 $ 62 Foreign 3,661 1,011 398 Total current 3,714 1,093 460 Deferred: Federal ( 6,754 ) — — State ( 2,913 ) — — Foreign 340 ( 89 ) — Total deferred ( 9,327 ) ( 89 ) — Total provision for income taxes $ ( 5,613 ) $ 1,004 $ 460 A reconciliation of the expected provision for (benefit from) income taxes at the statutory federal income tax rate to our recorded provision for income taxes consisted of the following (in thousands): Year Ended January 31, 2023 2022 2021 Benefit from income taxes at U.S. federal statutory rate $ ( 80,701 ) $ ( 56,720 ) $ ( 24,594 ) State taxes, net of federal benefit 53 82 49 Foreign tax rate differential 10,140 ( 1,297 ) ( 1,836 ) Stock-based compensation 2,734 ( 23,442 ) 1,195 Non-deductible expenses 1,780 322 84 Change in valuation allowance 60,145 81,739 25,564 Other 236 320 ( 2 ) Total provision for (benefit from) income taxes $ ( 5,613 ) $ 1,004 $ 460 109 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Significant components of our net deferred tax assets and liabilities as of January 31, 2023 and 2022 consisted of the following (in thousands): As of January 31, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 228,400 $ 174,646 Research and development expenses 72,432 36,989 Deferred revenue 25,643 14,748 Accruals and reserves 6,215 3,960 Operating lease liabilities 9,139 11,158 Stock-based compensation 17,528 7,936 Other 2,622 2,012 Gross deferred tax assets 361,979 251,449 Valuation allowance ( 291,751 ) ( 218,981 ) Total deferred tax assets 70,228 32,468 Deferred tax liabilities: Acquired intangibles, property and equipment ( 37,170 ) ( 6,235 ) Deferred contract acquisition costs ( 22,868 ) ( 16,722 ) Operating lease right-of-use assets ( 8,162 ) ( 9,422 ) Other ( 2,279 ) — Total deferred tax liabilities ( 70,479 ) ( 32,379 ) Net deferred tax assets (liabilities) $ ( 251 ) $ 89 Based upon available objective evidence, we believe it is more likely than not that the net U.S. and Israel deferred tax assets will not be fully realizable. Accordingly, we have established a valuation allowance for the U.S. and Israel gross deferred tax assets. As of January 31, 2023 and 2022, we had a valuation allowance of $ 291.8 million and $ 219.0 million, respectively, against our deferred tax assets. During fiscal 2023 and 2022, total valuation allowance increased by $ 72.8 million and $ 132.9 million, respectively, primarily due to additional net operating losses. As of January 31, 2023 , we had federal net o perating loss carryforwards of $ 651.1 million, which will begin to expire in 2031, and state net operating loss carryforwards of $ 338.3 million, which will begin to expire in 2024. We also had foreign net operating loss carryforwards of $ 289.8 million, which do not expire. In addition, we had federal research and development credit carryforwards of $ 2.0 million, which will begin to expire in 2037, and state research and development credit carryforwards of $ 2.0 million, which do not expire. Federal and state tax laws impose substantial restrictions on the utilization of the net operating loss carryforwards and tax credit carryforwards in the event of an ownership change as defined in Section 382 of the Internal Revenue Code of 1986, as amended. Accordingly, our ability to utilize these carryforwards may be limited as a result of such ownership change. Such a limitation could result in the expiration of carryforwards before they are utilized. The carryforwards are currently subject to a valuation allowance. Foreign withholding taxes have not been provided for the cumulative undistributed earnings of certain foreign subsidiaries of us as of January 31, 2023 and 2022 due to our intention to permanently reinvest such earnings. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our tax years generally remain open and subject to examination by federal, state, or foreign tax authorities. We are currently 110 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under examination by the Israel Tax Authorities for the 2017 through 2021 tax years. We are not currently under audit in any other tax jurisdictions. The changes in the gross amount of unrecognized tax benefits consisted of the following (in thousands): As of January 31, 2023 2022 2021 Balance at beginning of year $ 566 $ 534 $ 358 Gross increases for tax positions of current year 447 32 176 Balance at end of year $ 1,013 $ 566 $ 534 We recognize interests and penalties related to income tax matters as a component of income tax expense. No accrued interest of penalties have been recorded as of January 31, 2023, 2022, and 2021. We do not anticipate that its total unrecognized tax benefits will significantly change during the next 12 months. 11. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS Basic and diluted net loss per share attributable to common stockholders is computed in conformity with the two-class method required for participating securities. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, redeemable convertible preferred stock, stock options, restricted common stocks, RSUs, PSUs, ESPP, early exercised stock options, and common stock warrants are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive for all periods presented. The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each class of common stock and the resulting basic and diluted net loss per share attributable to common stockholders are, therefore, the same for both Class A and Class B common stock on both individual and combined basis. Basic and diluted net loss per share attributable to common stockholders was as follows (in thousands, except share and per share data): Year Ended January 31, 2023 2022 2021 Numerator: Net loss attributable to Class A and Class B common stockholders $ ( 378,678 ) $ ( 271,101 ) $ ( 117,573 ) Denominator: Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted 277,802,861 174,051,203 35,482,444 Net loss per share attributable to Class A and Class B common stockholders, basic and diluted $ ( 1.36 ) $ ( 1.56 ) $ ( 3.31 ) 111 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders because their inclusion would have been anti-dilutive: As of January 31, 2023 2022 2021 Redeemable convertible preferred stock — — 168,951,059 Stock options 32,446,814 42,422,473 37,231,191 Common stock warrants — — 954,884 Shares subject to repurchase 178,308 20,091 37,500 RSUs and PSUs 14,409,166 1,770,304 — ESPP 134,469 52,381 — Restricted common stock 451,444 1,142,496 — Contingently issuable shares — 1,317,089 — Total 47,620,201 46,724,834 207,174,634 12. GEOGRAPHIC INFORMATION Long-lived assets, consisting of property and equipment, net, and operating lease right-of-use assets, by geography were as follows (in thousands): As of January 31, 2023 2022 United States $ 27,990 $ 21,176 Israel 27,625 26,646 Rest of world 6,690 980 Total $ 62,305 $ 48,802 Revenue by geography is presented in Note 3, Revenue and Contract Balances . 13. COMMITMENTS AND CONTINGENCIES Legal Contingencies From time to time, we may be a party to various legal proceedings and subject to claims in the ordinary course of business. BlackBerry Litigation Starting in October 2019, BlackBerry Corp. and its subsidiary Cylance, Inc. (BlackBerry) filed a total of nine proceedings ( seven lawsuits and two arbitrations) against us and certain former BlackBerry employees who joined our company. In these proceedings, BlackBerry alleges that it has viable legal claims as a result of its former employees joining us. Many of these proceedings have now been dismissed. The status of each of the currently pending proceedings is discussed below. We have defended against these claims vigorously and expect to continue to do so. BlackBerry Corp., et al. v. Coulter, et al. On October 17, 2019, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Chris Coulter, in the Vermont Superior Court—Chittenden Unit, Case No. 953-10-19 Cncv, against Chris Coulter, a now-former employee who worked in our Vigilance services team (the “Vermont Action”). On October 23, 2019, BlackBerry filed an amended complaint that added the company as a defendant. The amended complaint asserts claims against us for conspiracy, tortious interference with contract, aiding and abetting breach of fiduciary duties, and misappropriation of trade secrets. On April 17, 2020, the court in the Vermont Action issued a preliminary injunction that enjoined Mr. Coulter from working at our company until after February 2021. 112 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As a result of the court’s order, Mr. Coulter chose to seek other employment and is no longer employed by us. On January 15, 2021, the court entered an order narrowing the scope of the case and limiting the claims against us to avoid conflict with a similar action that was previously filed in California and was dismissed. The Vermont Action is currently pending. The matter is set to be ready for trial by July 1, 2023; no trial date has been set. On October 25, 2019, BlackBerry commenced a separate action captioned BlackBerry Corp., et al v. Coulter, et al., No. 2019-0854-JTL (Del. Ch.) (the “Delaware Action”) against Mr. Coulter and the company in Delaware Chancery Court. The court stayed this case pending resolution of the Vermont Action. On February 7, 2020, BlackBerry voluntarily dismissed without prejudice all claims against Mr. Coulter and us in the Delaware Action. On December 3, 2019, BlackBerry initiated a largely duplicative arbitration solely against Mr. Coulter administered by JAMS, an alternative dispute resolution provider. That arbitration, however, was dismissed on or about March 30, 2021, with JAMS informing us that they had closed their files on this matter on April 30, 2021. BlackBerry Corp. et al. v. Sentinel Labs, Inc., et al. On January 16, 2020, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Sentinel Labs, Inc., et al., No. 20CV361950 in the California Superior Court of Santa Clara County, California against us and unnamed “Doe” defendants (who counsel understands are all former BlackBerry employees that we later employed), asserting claims for trade secret misappropriation and unfair business practices (the “California Action”). We filed counterclaims that, in part, seek to invalidate unlawful provisions under California law in BlackBerry’s agreements it entered into with its employees. Between December 2020 and August 2021, there were several rounds of motion practice, court hearings, and court orders relating to the sufficiency of BlackBerry’s identification of its alleged trade secrets in connection with its misappropriation of trade secrets claim, resulting in a narrowed scope of this claim. We are mid-discovery, and there have been court hearings and orders in connection with various discovery disputes. We continue to vigorously litigate this lawsuit, including our counterclaims against BlackBerry. Fact discovery is currently set to close by August 2023, and a trial has now been set for March 28, 2024. BlackBerry Corp., et al. v. Quinn, et al. On February 17, 2020, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Quinn, et al., Case No. D-1-GN-20-00096, in 459th Judicial District of Travis County, Texas, against Sean Quinn, our now-former employee, and the company. On August 8, 2020, we and Mr. Quinn moved to stay or dismiss this case in light of the overlapping issues between this lawsuit and the California Action. On September 21, 2020, the court stayed this case pending resolution of the California Action. This lawsuit remains stayed and is pending in abeyance before the Texas court. BlackBerry Corp., et al. v. Kaylan Brown Coulter. On April 7, 2022, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Kaylan Brown Coulter, Case No. 22-cv-01249, in the Superior Court - Chittenden Unit, Vermont, against Kaylan Brown-Coulter, the wife of Chris Coulter (referenced above), alleging breach of non-disclosure and non-solicitation agreements, breach of covenant of good faith and fair dealing, breach of fiduciary duties, and civil conspiracy. While this is part of the same series of lawsuits by BlackBerry, we were not named in this action. On May 6, 2022, Ms. Brown-Coulter removed the case to the United States District Court for the District of Vermont (Case No. 5:22-cv-98). Shortly thereafter, on May 13, 2022, Ms. Brown-Coulter filed a motion to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6). This motion is currently pending before the court, and the matter is currently set to be trial ready for April 2023 unless dispositive motions are filed. We have not recorded any accruals for loss contingencies associated with these legal proceedings, determined that an unfavorable outcome is probable, or determined that the amount or range of any possible loss is reasonably estimable. We believe that there are no other pending or threatened legal proceedings that are likely to have a material adverse effect on our consolidated financial statements. Warranties and Indemnification Our services are generally warranted to deliver and operate in a manner consistent with general industry standards that are reasonably applicable and materially conform with our documentation under normal use and circumstances. Our contracts generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. 113 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We also offer a limited warranty to certain customers, subject to certain conditions, to cover certain costs incurred by the customer in case of a cybersecurity breach. We have entered into an insurance policy to cover our potential liability arising from this limited warranty arrangement. We have not incurred any material costs related to such obligations and have not accrued any liabilities related to such obligations in the consolidated financial statements as of January 31, 2023 and 2022. In addition, we also indemnify certain of our directors and executive officers against certain liabilities that may arise while they are serving in good faith in their company capacities. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid. 14. EMPLOYEE BENEFIT PLAN Our U.S. employees participate in a 401(k) defined contribution plan sponsored by us. Contributions to the plan are discretionary. There was $ 2.8 million matching contributions by us for fiscal 2023. There were no matching contributions by us for fiscal 2022 and 2021. Israeli Severance Pay Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to Section 14 of the Severance Compensation Act, 1963 (Section 14), all of our employees in Israel are entitled to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary. These payments release us from any future severance payment obligation with respect to these employees; as such, any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset on our consolidated balance sheets. For fiscal 2023, 2022, and 2021, we recorded $ 3.9 million, $ 3.7 million, and $ 2.7 million, respectively, in severance expenses related to these employees. 15. ACQUISITIONS On May 3, 2022, we acquired 100 % of the issued and outstanding equity securities (the Acquisition) of Attivo Networks, Inc. (Attivo), an identity security and lateral movement protection company. Attivo expands our coverage of critical attack surfaces. Identity is an adjacent security solution that complements our core endpoint solution. The Acquisition closed on May 3, 2022 and has been accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. We had post-combination expense with a fair value of $ 32.9 million that was not included in the total purchase consideration, which is comprised of 307,396 of restricted common stock with an aggregate fair value of $ 10.0 million, and 378,828 assumed options with an aggregate fair value of $ 11.5 million. Restricted common stock and assumed options will be recognized as stock-based compensation expense. In addition, in connection with the acquisition, certain employees who were promised compensation related to their previous employment agreements will be paid $ 11.4 million in cash based on continued employment which will be recognized on a straight-line basis as acquisition-related compensation costs. All post-combination expense is expected to be recognized through May 2026. Post-combination compensation expense is subject to adjustment based on continuing service obligations to the Company of certain stockholders of Attivo. In connection with the Acquisition, we also granted restricted stock units (RSUs) and performance share units (PSUs) under our 2021 Equity Incentive Plan. For further details refer to Note 9, Stock-Based Compensation . 114 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the preliminary allocation of purchase consideration recorded on our consolidated balance sheet as of the acquisition date (in thousands): Amount Consideration: Cash $ 348,917 Common Stock ( 6,032,231 shares) (1) 185,885 Fair value of total consideration transferred $ 534,802 Cash and cash equivalents $ 8,836 Accounts receivable 4,867 Prepaid expense and other current assets 3,880 Operating lease right-of-use assets 260 Intangible assets 151,900 Accrued liabilities ( 4,270 ) Accrued payroll and benefits ( 1,113 ) Operating lease liabilities ( 259 ) Deferred revenue ( 51,746 ) Other liabilities ( 2,357 ) Deferred tax liability ( 7,310 ) Total identifiable net assets 102,688 Goodwill 432,114 Total purchase consideration $ 534,802 (1) Consideration calculated using the fair value of our common stock The estimates and assumptions regarding the fair value of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, and goodwill are subject to change as we obtain additional information during the measurement period, which usually lasts for up to one year from the acquisition date. The excess of the purchase price over the fair value of net tangible and intangible assets acquired has been assigned to goodwill. Goodwill represents the future benefits resulting from the acquisition that will enhance the value of our product for both new and existing customers and strengthen our competitive position. Goodwill is not deductible for tax purposes. 115 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the preliminary amounts allocated to the intangible assets identified and their estimated useful lives as of the date of acquisition: Fair Value Useful Life (in thousands) (in years) Customer relationships $ 77,600 10 Developed technology 63,200 5 Backlog 11,100 2 Total intangible assets acquired $ 151,900 The preliminary fair value assigned to customer relationships was determined using the multi-period excess earnings method of the income approach. The fair value assigned to developed technology was determined using the relief from royalty method under the income approach. The fair value assigned to backlog was determined using the multi-period excess earnings method of the income approach. The intangible assets acquired are expected to be amortized over their useful lives on a straight-line basis. Aside from $ 61.0 million, net, within restricted cash on the consolidated balance sheet, held in an indemnity escrow expected to be paid out within 15 months of the Acquisition, there are no other contingent consideration or cash consideration expected to be paid out subsequent to the Acquisition. The indemnity escrow was measured at fair value within other liabilities in our consolidated balance sheet at Acquisition and will be accreted to face value until paid out. The results of operations of Attivo have been included in our consolidated financial statements from the date of the Acquisition. We have incurred $ 5.5 million of transaction expenses in connection with the Acquisition during the year ended January 31, 2023. $ 3.2 million of these costs were recorded as general and administrative expenses in our consolidated statements of operations during the year ended January 31, 2023, with the remainder allocated to purchase price consideration. Our consolidated statements of operations from the date of the Acquisition to the period ended January 31, 2023 includes revenue and net loss of Attivo of $ 30.2 million and $ 36.4 million, respectively. The following unaudited supplemental pro forma financial information is provided for informational purposes only and summarizes our combined results of operations as if the Acquisition occurred on February 1, 2021 (in thousands): Year Ended January 31, 2023 2022 Revenue $ 429,683 $ 235,321 Net loss $ ( 393,773 ) $ ( 326,829 ) The unaudited supplemental pro forma results reflect certain adjustments for the amortization of acquired intangible assets, recognition of stock-based compensation, acquisition-related transaction expenses, and acquisition-related compensation costs. Such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the Acquisition been completed on the date indicated, nor is it indicative of our future operating results. 16. RECLASSIFICATION OF PRIOR YEAR PRESENTATION Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the consolidated balance sheets for fiscal year ended January 31, 2022, to reclassify $ 6.0 million in other assets to long-term investments. 116 Table of Contents SENTINELONE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. SUBSEQUENT EVENTS In February 2023, the Company entered into a non-cancellable agreement with a cloud infrastructure vendor, under which the Company committed to spend an aggregate of at least $ 860.0 million between March 2023 and February 2029. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None.