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Item 7. Management’s Discussion and Analysis

2025-03-26 compared with 2024-03-27 · 90 added, 93 removed, 291 unchanged (39% of the section changed)

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We founded SentinelOne in 2013 with a dramatically new approach to cybersecurity.

We pioneered the world’s first purpose-built AI-powered extended detection and response (XDR) platform to make cybersecurity defense truly autonomous, from the endpoint and beyond.

We pioneered the world’s first purpose-built AI-powered security platform to make cyber defense truly autonomous, from the endpoint and beyond.

Our Singularity Platform instantly defends against cyberattacks — performing at a faster speed, greater scale, and higher accuracy than otherwise possible from a human-powered approach.

Our Singularity Platform ingests, correlates, and queries petabytes of structured and unstructured data from a myriad of ever-expanding disparate external and internal sources in real-time.

We build rich context and deliver greater visibility by constructing a dynamic representation of data across an organization.

As a result, our AI models are highly accurate, actionable, and autonomous.

We aim to build rich context and deliver greater visibility by constructing a dynamic representation of data across an organization.

As a result, our AI models are able to be highly accurate, actionable, and autonomous.

Our distributed AI models run both locally on every endpoint and every cloud workload, as well as on our cloud platform.

Our Static and vector-agnostic Behavioral AI models, which run on the endpoints themselves, provide our customers with protection even when their devices are not connected to the cloud.

In the cloud, our Streaming AI detects anomalies that surface when multiple data feeds are correlated.

By providing full visibility into the Storyline of every secured device across the organization through one console, our platform makes it very fast for analysts to easily search through petabytes of data to investigate incidents and proactively hunt threats.

In the cloud, our Streaming AI can detect anomalies that surface when multiple data feeds are correlated.

By providing full visibility into the Storyline of every secured device across the organization through one console, our platform can make it very fast for analysts to easily search through petabytes of data to investigate incidents and proactively hunt threats.

We have extended our control and visibility planes beyond the traditional endpoint to unmanaged IoT devices.

Our Singularity Platform can be flexibly deployed on the environments that our customers choose, including public, private, or hybrid clouds.

Singularity can be flexibly deployed on the environments that our customers choose, including public, private, or hybrid clouds.

Our feature parity across Windows, macOS, Linux, and Kubernetes offers best-of-breed protection, visibility, and control across today’s heterogeneous IT environments.

Together, these capabilities make our platform the logical choice for organizations of all sizes, industry verticals, and compliance requirements.

Our platform offers true multi-tenancy, which enables some of the world’s largest organizations and our managed security providers and incident response partners with an excellent management experience.

Our customers realize improved cybersecurity outcomes with fewer people.

We generate substantially all of our revenue by selling subscriptions to our Singularity Platform.

Our subscription tiers include Singularity Core, Singularity Control, and Singularity Complete.

We also offer product bundles that include Singularity Commercial and Singularity Enterprise.

Additionally, customers can extend the functionality of our platform through our subscription Singularity Modules.

Our platform offers true multi-tenancy, which allows us to serve the world’s largest organizations, managed security providers and incident response partners.

Our customers are able to realize improved cybersecurity outcomes with fewer people.

We generate most of our revenue by selling subscriptions to our Singularity Platform.

We generally price our subscriptions and modules on a per agent basis, and each agent generally corresponds with an endpoint, server, virtual machine, or container.

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Our sales organization is comprised of our enterprise sales, inside sales and customer solutions engineering teams.

It leverages our global network of independent software vendors (ISVs), alliance partners, and channel partners for prospect access.

Additionally, our sales teams work closely with our customers, channel partners, and alliance partners to drive adoption of our platform, and our software solutions are fulfilled

through our channel partners.

Our channel partners include some of the world’s largest resellers and distributors, managed service providers (MSPs), managed security service providers (MSSPs), managed detection and response providers (MDRs), original equipment manufacturers (OEMs), and incident response (IR) firms.

Once customers experience the benefits of our platform, they often upgrade their subscriptions to benefit from the full range of our extended detection and response (XDR), IT, and security operations capabilities.

It leverages our global network of ISVs, alliance partners, and channel partners for prospect access.

Additionally, our sales teams work closely with our customers, channel partners, and alliance partners to drive adoption of our platform, and our software solutions are fulfilled through our channel partners.

Our channel partners include some of the world’s largest resellers and distributors, MSPs, MSSPs, MDRs, OEMs, and IR firms.

Once customers experience the benefits of our platform, they often expand their subscriptions to benefit from the full range of our platform solutions.

Additionally, many of our customers adopt Singularity Modules over time to extend the functionality of our platform and increase their coverage footprint.

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Our Singularity Platform is used globally by organizations of all sizes across a broad range of industries.

We had 1,133 customers with annualized recurring revenue (ARR) of $100,000 or more as of January 31, 2024, up from 872 customers with ARR of $100,000 or more as of January 31, 2023.

We had 1,411 customers with ARR of $100,000 or more as of January 31, 2025, up from 1,133 customers with ARR of $100,000 or more as of January 31, 2024.

We define ARR as the annualized revenue run rate of our subscription and consumption and usage-based agreements at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under contracts with us.

As of January 31, 2024 and 2023, no single end customer accounted for more than 3% of our ARR.

Our revenue outside of the US represented 36% and 35% for fiscal 2024 and 2023, respectively, illustrating the global nature of our solutions.

As of January 31, 2025 and 2024, no single end

customer accounted for more than 3% of our ARR.

Our revenue outside of the U.S.

represented 37% and 36% for fiscal 2025 and 2024, respectively, illustrating the global nature of our solutions.

We have grown rapidly since our inception.

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Our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on customer behavior.

Worsening economic conditions, including inflation, interest rate volatility, slower growth, potential recession, fluctuations in foreign exchange rates, actual or perceived instability in the global banking industry, potential uncertainty with respect to the federal debt ceiling and budget and potential government shutdowns related thereto, and other changes in economic conditions, and the impact of natural or man-made global events, including wars and other regional geopolitical armed conflict, such as the conflicts in the Middle East, Ukraine and tensions between China and Taiwan, may result in decreased sales productivity and growth and adversely affect our results of operations and financial performance.

Worsening economic conditions, including inflation, interest rate volatility, slower growth, potential recession, changes in tariffs and trade restrictions, fluctuations in foreign exchange rates, actual or perceived instability in the global banking industry, potential uncertainty with respect to the federal debt ceiling and budget, and other changes in economic conditions, and the impact of natural or man-made global events, including wars and other regional geopolitical armed conflict, such as the conflicts in the Middle East and Ukraine, and tensions between China and Taiwan, may result in decreased sales productivity and growth and adversely affect our results of operations and financial performance.

As a result of the current macroeconomic environment, we have recently experienced certain impacts on our business, including a decline in usage and consumption patterns from certain customers, especially larger enterprise customers, longer sales cycles, and deal downsizing by new customers and of renewals by existing customers, especially larger enterprises.

We intend to continue to monitor global macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions to the extent our business begins to be adversely impacted.

For example, in June 2023, we announced a restructuring plan (the Plan) designed to improve operational efficiencies and operating costs and better align our workforce and operations with current business needs, priorities, and near-term growth expectations.

The actions associated with the Plan are expected to be fully complete by the end of fiscal 2025, subject to finalizing the disposition of certain office space.

For example, in June 2023, we announced a restructuring plan (Plan) designed to improve operational efficiencies and operating costs and better align our workforce and operations with current business needs, priorities, and near-term growth expectations.

The actions associated with the Plan were substantially completed as of the end of fiscal 2025.

We incurred approximately $7.4 million in charges in connection with the Plan in fiscal 2024, consisting of severance payments and employee benefits, impairment charges related to excess facilities and inventory write-offs, offset partially by savings related to the reversal on stock-based compensation expense.

We maintain an office in Tel Aviv, Israel and had approximately 13% of our personnel in Israel as of January 31, 2024.

We are closely monitoring the unfolding events of the armed conflict in the Middle East which began in October 2023.

While this conflict is still evolving, to date, the conflict has not had an adverse impact on our business and results of operations.

However, if the conflict continues to worsen or intensify, any business interruptions or spillover effects could adversely affect our business and operations.

We are unable to predict the full impact that macroeconomic or other geopolitical factors will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the actions that may

be taken by government authorities across the US or other countries, changes in central bank policies and interest rates, rates of inflation, potential uncertainty with respect to the federal debt ceiling and budget and potential, government shutdowns related thereto, regional geopolitical conflicts, the impact to our customers, partners, and suppliers, and other factors described in the section titled “Risk Factors” in this Annual Report on Form 10-K.

or other countries, changes in central bank policies and interest rates, rates of inflation, potential uncertainty with respect to the federal debt ceiling and budget, regional geopolitical conflicts, the impact to our customers, partners, and suppliers, and other factors described in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Key Business Metrics and Non-GAAP Financial Measures

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We believe that non-GAAP operating loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this measure excludes, among other expenses, expenses that we do not consider to be indicative of our overall operating performance.

Non-GAAP operating loss is calculated as GAAP operating loss adjusted to exclude amortization of acquired intangible assets, acquisition-related compensation, restructuring charges, stock-based compensation expense, and payroll tax related to stock-based compensation.

Non-GAAP operating loss is calculated as GAAP operating loss adjusted to exclude amortization of acquired intangible assets, acquisition-related compensation, stock-based compensation expense, payroll tax on employee stock transactions, and restructuring charges.

Non-GAAP operating loss has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP, including GAAP operating loss.

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Non-GAAP operating loss $ (25,421) $ (118,225) $ (208,861)

Annualized Recurring Revenue (ARR)

Annualized Recurring Revenue

We believe that ARR is a key operating metric to measure our business because it is driven by our ability to acquire new subscription and consumption and usage-based customers, and to maintain and expand our relationship with existing customers.

ARR represents the annualized revenue run rate of our subscription and consumption and usage-based agreements at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under contracts with us.

ARR represents the annualized revenue run rate of our subscription, consumption, and usage-based agreements at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under contracts with us.

ARR is an operational metric and is not a non-GAAP metric.

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Annualized recurring revenue $ 920,056 $ 724,404 $ 521,652

*ARR as of January 31, 2023 and 2022 reflect the one-time ARR adjustment of approximately 5% made in the first quarter of fiscal 2024.

ARR grew 39% year-over-year to $724.4 million for fiscal 2024, primarily due to high growth in the number of new customers purchasing our subscriptions and to additional purchases by existing customers.

As a result of the decline in usage and consumption in the first quarter of fiscal 2024, we changed our methodology of calculating ARR for consumption and usage-based agreements to reflect committed contract values as opposed to based on consumption and usage.

By making this change, we expect future ARR and revenue growth to be more closely aligned.

It should also reduce volatility in ARR compared to the prior methodology where usage and consumption changes could have a magnified impact on ARR.

In addition, as part of our quarter-end review of ARR in connection with the preparation of our condensed consolidated financial statements for the quarter ended April 30, 2023, we discovered some historical upsell and renewal recording inaccuracies relating to ARR on certain contracts, which we have corrected.

As a result of the change in methodology and correction of historical inaccuracies, we made a one-time adjustment to ARR of $27 million or approximately 5% of total ARR, which we reflected in our total ARR as of January 31, 2023.

ARR for the prior periods in fiscal 2023 and 2022 presented above have been adjusted based on the same percentage adjustment rate identified in the first quarter of fiscal 2024.

This adjustment to ARR did not impact historical total bookings or revenue.

ARR grew 27% year-over-year to $920.1 million for fiscal 2025, primarily driven by a combination of new customer additions and adoption of adjacent platform solutions by existing customers.

Customers with ARR of $100,000 or More

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1,411 1,133 872

*Customers with ARR of $100,000 or more as of January 31, 2023 and 2022 reflect the one-time ARR adjustment of approximately 5% made in the first quarter of fiscal 2024.

Customers with ARR of $100,000 or more grew 30% year-over-year to 1,133 for fiscal 2024, primarily due to growth in the ARR of existing customers from additional purchases and to growth in the average size of purchases by new customers.

Based on the adjustments to ARR described above, customers with ARR of $100,000 or more for the prior periods presented above have been adjusted accordingly.

Dollar-Based Net Retention Rate (NRR)

Customers with ARR of $100,000 or more grew 25% year-over-year to 1,411 for fiscal 2025, primarily due to the growth in the ARR of existing customers from additional purchases and the growth in the average size of purchases by new customers.

Dollar-Based Net Retention Rate

We believe that our ability to retain and expand our revenue generated from our existing customers is an indicator of the long-term value of our customer relationships and our potential future business opportunities.

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2025 2024 2023

(in thousands)

Dollar-based net retention rate

110 % 114 % 132 %

Our NRR of 110% was driven by existing customers adoption of additional endpoint licenses and adjacent platform solutions.

A larger portion of our business mix was driven by new customers in 2024, which will open doors for platform adoption over time.

A larger portion of our business mix was driven by new customers in fiscal 2025, which we believe will open doors for platform adoption over time.

We see significant long-term expansion potential based on high customer retention rates, expanding product categories, and early-stage adoption from our installed base.

Components of Our Results of Operations

We generate substantially all of our revenue from subscriptions to our Singularity Platform.

We generate most of our revenue by selling subscriptions to our Singularity Platform.

Customers can extend the functionality of their subscription to our platform by subscribing to additional Singularity Modules.

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The nature of our promise to the customer under the subscription is to provide protection for the duration of the contractual term and as such is considered as a series of distinct services.

Our arrangements may include fixed consideration, variable consideration, or a combination of the two.

arrangements may include fixed consideration, variable consideration, or a combination of the two.

Fixed consideration is recognized over the term of the arrangement or longer if the fixed consideration relates to a material right.

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Depending upon the structure of a particular arrangement, we (i) allocate the variable amount to each distinct service period within the series and recognize revenue as each distinct service period is performed (i.e.

direct allocation), ii) estimate total variable consideration at contract inception (giving consideration to any constraints that may apply and updating the estimates as new information becomes available) and recognizes the total transaction price over the period to which it relates, or iii) apply the ‘right to invoice’ practical expedient and recognize revenue based on the amount invoiced to the customer during the period.

direct allocation), (ii) estimate total variable consideration at contract inception (giving consideration to any constraints that may apply and updating the estimates as new information becomes available) and recognize the total transaction price over the period to which it relates, or (iii) apply the ‘‘right to invoice’’ practical expedient and recognize revenue based on the amount invoiced to the customer during the period.

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.

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Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with the hosting and maintenance of our platform.

Cost of revenue also consists of personnel-related costs associated with our customer support and services organization, including salaries, benefits, bonuses, and stock-based compensation, amortization of acquired intangible assets, amortization of capitalized internal-use software, software and subscription services used by our customer support and services team, inventory-related costs, and allocated overhead costs.

Our third-party cloud infrastructure costs are driven primarily by the number of customers, the number of endpoints per customer, the number of modules, and the incremental costs for storing additional data collected for such cloud modules.

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Operating Expenses

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses.

Our operating expenses consist of research and development, sales and marketing, general and administrative and restructuring expenses.

Personnel-related expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions.

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Sales and marketing expenses consist primarily of employee salaries, commissions, benefits, bonuses, stock-based compensation, travel and entertainment related expenses, advertising, branding and marketing events, promotions, amortization of acquired customer relationships, and software and subscription services.

Sales and marketing expenses also include sales commissions paid to our sales force and referral fees paid to independent third parties that are incremental to obtain a subscription contract.

Sales and marketing expenses also include sales commissions paid to our sales force and referral fees paid to independent third

parties that are incremental to obtain a subscription contract.

Such costs are capitalized and amortized over an estimated period of benefit of four years, and any such expenses paid for the renewal of a subscription are capitalized and amortized over the average contractual term of the renewal.

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General and administrative expenses consist primarily of salaries, benefits, bonuses, stock-based compensation, and other expenses for our executive, finance, legal, people team, and facilities organizations.

administrative expenses also include external legal, accounting, other consulting, and professional services fees, software and subscription services, and other corporate expenses.

General and administrative expenses also include external legal, accounting, other consulting, and professional services fees, software and subscription services, and other corporate expenses.

We expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services.

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Restructuring charges, related to the Plan, consist primarily of charges related to severance payments, employee benefits, stock-based compensation, and impairment charges related to excess facilities.

The actions associated with the Plan are expected to be fully complete by the end of fiscal 2025, subject to finalizing the disposition of certain office space.

The actions associated with the Plan were substantially completed as of the end of fiscal 2025.

Interest Income, Interest Expense, and Other Income (Expense), Net

Interest income consists primarily of interest earned on our cash equivalents and investments.

Interest expense consists primarily of the amortization of the discount related to the Attivo indemnity escrow liability.

Interest expense consists primarily of the amortization of the discount related to the acquisition-related liabilities.

Other income (expense), net consists primarily of foreign currency transaction gains and losses, and gains and losses on strategic investments.

Provision for (Benefit From) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business, and a one-time benefit from the release of valuation allowance as a result of the Attivo acquisition during fiscal 2023.

In connection with our global consolidated losses, we maintain a full valuation allowance against our US and Israel deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized.

Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business.

In connection with our global consolidated losses, we maintain a full valuation allowance against our U.S.

and Israel deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized.

We expect our provision for income taxes to increase in fiscal year 2026 and beyond based upon increased foreign earnings and federal minimum taxes.

Additionally, as discussed in more detail in Part I, Item 1A, “Risk Factors” in this Annual Report, and Note 12, Income Taxes, to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, since 2022, we have been negotiating a bilateral Advance Pricing Agreement (APA) with the U.S.

and the Israeli governments, covering various transfer pricing matters for intercompany transactions relating to the intergroup ownership and utilization of our intellectual property.

As of January 31, 2025, the APA negotiations are ongoing with no finalized resolution.

If we agree to an APA, we may, as part of that agreement, be required to make significant payments to the Israeli government.

Results of Operations

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Loss before income taxes (34) (54) (91)

Provision (benefit) for income taxes 1 (1) —

Provision for (benefit from) income taxes

Net loss (35) % (55) % (90) %

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Revenue $ 821,461 $ 621,154 $ 200,307 32 %

Revenue increased by $199.0 million, or 47%, from $422.2 million for fiscal 2023 to $621.2 million for fiscal 2024, primarily due to a combination of sales to new customers and sales of additional endpoints and modules to existing customers.

Revenue increased by $200.3 million, or 32%, from $621.2 million for fiscal 2024 to $821.5 million for fiscal 2025, primarily due to a combination of sales to new customers and sales of additional licenses and platform solutions to existing customers.

Cost of Revenue, Gross Profit, and Gross Margin

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Gross margin 74 % 71 %

Cost of revenue increased by $35.1 million from $144.2 million for fiscal 2023 to $179.3 million for fiscal 2024, primarily due to a $23.9 million increase in allocated customer support costs which were mostly personnel-related expenses, a $4.4 million increase in amortization of acquired intangible assets in connection with the Attivo acquisition, $3.0 million increase in amortization of capitalized internal use-software due to the continued investment in our platform, and $2.2 million increase in cloud hosting usage charges to support our expanding business.

Cost of revenue increased by $31.8 million from $179.3 million for fiscal 2024 to $211.1 million for fiscal 2025, primarily due to an increase of $17.3 million in customer support costs which were primarily personnel-related expenses, a $9.6 million increase in cloud hosting usage charges to support our expanding business, and a $5.2 million increase in amortization of capitalized internal-use software due to the continued investment in our platform.

Gross margin increased from 71% for fiscal 2024 to 74% for fiscal 2025, primarily due to revenue growth from existing and new customers outpacing growth in cost of revenue.

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Research and development expenses $ 267,002 $ 218,176 $ 48,826 22 %

Research and development expenses increased from $207.0 million in fiscal 2023 to $218.2 million in fiscal 2024, primarily due to an increase in personnel-related expenses of $29.1 million, including an increase of $9.3 million related to stock-based compensation expense as a result of increased headcount, partially offset by a decrease of $14.2 million incurred in the prior year as a result of the migration of Scalyr into our platform.

Research and development expenses increased from $218.2 million in fiscal 2024 to $267.0 million in fiscal 2025, primarily due to an increase in personnel-related expenses of $36.7 million, including an increase of $22.9 million related to stock-based compensation expense as a result of increased headcount, a $9.2 million increase in allocated overhead costs, and an increase of $3.6 million in cloud hosting expenses driven by expanded research and development activities.

Sales and Marketing

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Sales and marketing expenses $ 487,225 $ 397,160 $ 90,065 23 %

Sales and marketing expenses increased from $310.8 million in fiscal 2023 to $397.2 million in fiscal 2024, primarily due to an increase in personnel-related expenses of $56.9 million, including an increase of $15.7 million in stock-based compensation expense as a result of increased headcount and increase of $7.0 million in commission expense.

In addition, there were increases in marketing expenses of $14.5 million due to overall business growth and further investment in marketing activities, and increases in allocated overhead costs of $5.4 million.

Sales and marketing expenses increased from $397.2 million in fiscal 2024 to $487.2 million in fiscal 2025, primarily due to an increase in personnel-related expenses of $62.6 million, including an increase of $24.7 million in stock-based compensation expense as a result of increased headcount and accelerated stock-based compensation expenses.

In addition, there was an increase in marketing-related expenses of $17.9 million, and a $5.9 million increase in sales-related expenses due to overall business growth and further investment in marketing activities.

General and Administrative

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General and administrative expenses $ 185,487 $ 198,247 $ (12,760) (6) %

General and administrative expenses increased from $162.7 million in fiscal 2023 to $198.2 million in fiscal 2024, primarily due to an increase in personnel-related expenses of $33.5 million, including an increase of $21.4 million in stock-based compensation expense as a result of increased headcount, and $9.7 million increase in litigation expenses due to settlements made during the period, partially offset by a $4.8 million decrease in office related expenditures.

General and administrative expenses decreased from $198.2 million in fiscal 2024 to $185.5 million in fiscal 2025, primarily due to a $6.4 million decrease in overhead expenses due to higher overhead cost being allocated out, a decrease of $4.2 million in legal expenses and a decrease in $2.7 million in litigation expenses due to lower legal consulting fees and lower settlement charges during fiscal 2025.

Restructuring

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Restructuring

$ 6,706 $ — $ 6,706 n/a

Restructuring charges increased by $6.7 million due to activities undertaken pursuant to the Plan.

This included severance and employee benefit charges of $5.4 million and impairment charges related to excess facilities of $2.4 million, partially offset by stock-based compensation savings of $1.1 million due to decreased headcount.

$ — $ 6,706 $ (6,706) (100) %

Restructuring charges decreased by $6.7 million due to activities undertaken pursuant to the Plan announced in June 2023.

The decrease included severance and employee benefit charges of $5.4 million and impairment charges related to excess facilities of $2.4 million incurred during fiscal 2024, partially offset by stock-based compensation savings of $1.1 million due to decreased headcount.

Interest Income, Interest Expense, and Other Income (Expense), Net

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Other income (expense), net $ (2,177) $ 918 $ (3,095) (337) %

Interest income increased $24.5 million as a result of higher interest rates on investments.

Interest expense decreased due to the amortization of the discount related to Attivo indemnity escrow liability through July 2023.

The change in other income (expense), net is primarily due to gains and losses on strategic investments, partially offset by net foreign currency exchange fluctuations.

Provision for (Benefit from) Income Taxes

Interest income increased $4.2 million as a result of higher income earned from investments in marketable securities in fiscal 2025 primarily due to a higher investment balance and increased yield.

Interest expense decreased primarily due to a reduction in the amortization of the discount related to acquisition-related liabilities.

The change in other income (expense), net is primarily due to a decrease in net gains on strategic investments.

Provision for Income Taxes

Year Ended January 31, Change

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(dollars in thousands)

Provision for (benefit from) income taxes

Provision for income taxes

$ 6,834 $ 5,859 $ 975 17 %

The provision for income taxes increased in fiscal 2024, compared to fiscal 2023, primarily as a result of the increase in foreign taxes related to operations in international subsidiaries and a one-time tax benefit from the application of our deferred assets with a full valuation allowance to net deferred tax liability of Attivo acquired intangibles recorded in fiscal 2023.

In connection with the acquisition of Attivo, which closed in May 2022, we recorded a net deferred tax liability primarily attributable to identifiable acquired intangibles.

This net deferred tax liability is considered an additional source of income to support the realizability of our deferred tax asset, and as a result we released a portion of the valuation allowance and recorded a one-time discrete tax benefit of $9.7 million in fiscal 2023.

The provision for income taxes increased in fiscal 2025, compared to fiscal 2024, primarily as a result of the increase in foreign taxes related to operations in international subsidiaries.

Liquidity and Capital Resources

In July 2021, upon completion of our IPO and the concurrent private placement, we received net proceeds of $1.4 billion, after deducting underwriters’ discounts and commissions and estimated offering expenses of $81.6 million.

We did not pay any underwriting discounts or commissions with respect to shares that were sold in the private placement.

We have financed operations primarily through proceeds received from sales of equity securities, payments received from our customers, and borrowings under a now-terminated loan and security agreement, and we have generated operating losses, as reflected in our accumulated deficit of $1.3 billion and $1.0 billion as of January 31, 2024 and 2023, respectively.

We have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers, and we have generated operating losses, as reflected in our accumulated deficit of $1.6 billion and $1.3 billion as of January 31, 2025 and 2024, respectively.

We expect these and other operating losses to continue for the foreseeable future.

We also expect to incur significant research and development, sales and marketing, and general and administrative expenses over the next several years in connection with the continued development and expansion of our business.

Additionally, if we agree to an APA, we may, as part of that agreement, be required to make significant payments to the Israeli government which may adversely affect our cash flows over the next several years.

As of January 31, 2025 and 2024, our principal source of liquidity was cash, cash equivalents, and investments of $1.1 billion and $1.1 billion, respectively.

In the short term, we believe that our existing cash, cash equivalents, and investments will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.

In the long term beyond the next 12 months, our future capital requirements will depend on many factors, including global

macroeconomic conditions, our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the price at which we are able to purchase third-party cloud infrastructure, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform.

In the long term beyond the next 12 months, our future capital requirements will depend on many factors, including macroeconomic conditions, our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the price at which we are able to purchase third-party cloud infrastructure, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform.

We have, and in the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies.

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We hold our cash, cash equivalents, and investments with a diverse group of banking partners.

However, any instability in the US or global banking system or relating to the federal budget may impact liquidity both in the short term and long term and may result in adverse impacts to our or our customers’ business, including in our customers’ ability to pay for our platform.

However, any instability in the U.S.

or global banking system or relating to the federal budget may impact liquidity both in the short term and long term and may result in adverse impacts to our or our customers’ business, including in our customers’ ability to pay for our platform.

The following table shows a summary of our cash flows for the periods presented:

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(in thousands)

Net cash used in operating activities $ (68,374) $ (193,287) $ (95,588)

Net cash provided by (used in) operating activities

$ 33,728 $ (68,374) $ (193,287)

Net cash provided by (used in) investing activities

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Our primary uses of cash from operating activities are for personnel-related expenses, sales and marketing expenses, third-party cloud infrastructure expenses, and overhead expenses.

We have generated negative cash flows from operating activities and have supplemented working capital through net proceeds from the sale of equity securities.

Cash used in operating activities primarily consists of our net loss adjusted for certain non-cash items, including stock-based compensation expense, depreciation and amortization, amortization of deferred contract acquisition costs, and changes in operating assets and liabilities during each period.

Historically, we have generated negative operating cash flow, but in fiscal 2025, we achieved positive operating cash flow, primarily due to higher customer collections, partially offset by increased cash payments for cost of revenue and operating expenses.

Our operating cash flow is influenced by seasonal billing patterns, with a concentration of annual billings in our fiscal fourth quarter due to enterprise buying and renewal cycles.

This makes our fiscal first quarter our strongest for collections and operating cash flow.

Acquisitions can also impact cash flow due to transaction costs, financing expenses, and lower initial contributions from acquired entities.

Cash provided by (used in) operating activities primarily consists of our net loss adjusted for certain non-cash items, including stock-based compensation expense, depreciation and amortization, amortization of deferred contract acquisition costs, and changes in operating assets and liabilities during each period.

Cash provided by operating activities during fiscal 2025 was $33.7 million, primarily consisting of our net loss of $288.4 million, and $46.6 million used in net changes to our operating assets and liabilities, offset by adjustments for non-cash items of $368.8 million.

The main drivers of the changes in operating assets and liabilities were a $90.9 million increase in deferred contract acquisition costs, a $21.2 million increase in accounts receivable due to timing of cash received from customers, and a $5.0 million decrease in operating lease liabilities.

These amounts were partially offset by a $56.9 million increase in deferred revenue resulting primarily from increased subscription contracts, a $5.3 million increase in accrued payroll and benefits and a $5.1 million increase in accrued liabilities and other liabilities.

Cash used in operating activities during fiscal 2024 was $68.4 million, primarily consisting of our net loss of $338.7 million, and $20.2 million used in net changes to our operating assets and liabilities, partially offset by non-cash items of $290.5 million.

The main drivers of the changes in operating assets and liabilities were a $81.0 million increase in deferred contract acquisition costs, a $61.9 million increase in accounts receivable due to timing of cash received from customers, and a $4.5 million decrease in accounts payable.

These amounts were partially offset by a $19.1 million increase in accrued payroll and benefits and a $108.2 million increase in deferred revenue resulting primarily from increased subscription contracts.

Cash used in operating activities during fiscal 2023 was $193.3 million, primarily consisting of our net loss of $378.7 million, and $35.4 million used in net changes to our operating assets and liabilities, partially offset by non-cash items of $220.8 million.

The main drivers of the changes in operating assets and liabilities were a $61.3 million increase in deferred contract acquisition costs, a $44.4 million increase in accounts receivable due to timing of cash received from customers, a $14.5 million increase in prepaid expenses and other assets primarily due to annual insurance renewal and prepaid sponsorship costs, and a $7.2 million decrease in accrued payroll and benefits.

These amounts were partially offset by a $92.5 million increase in deferred revenue resulting primarily from increased subscription contracts.

These amounts were partially offset by a $108.2 million increase in deferred revenue resulting primarily from increased subscription contracts and a $19.1 million increase in accrued payroll and benefits.

Investing Activities

Cash used in investing activities during fiscal 2025 was $218.4 million, consisting of $804.5 million of investment purchases, $123.8 million of net cash paid for the acquisitions of PingSafe, Stride, as well as payments

related to the release of escrow liabilities from the Attivo acquisition, and $25.1 million of capitalized internal-use software costs.

These amounts were partially offset by $737.1 million of investment sales and maturities.

Cash provided by investing activities during fiscal 2024 was $140.6 million, consisting of $639.2 million of investment sales and maturities, partially offset by $466.3 million of investment purchases, $14.0 million of capitalized internal-use software costs, $13.6 million of net cash paid for the KSG acquisition, $3.5 million for purchases of intangible assets, and $1.3 million of purchases of property and equipment to support additional office facilities.

Cash used in investing activities during fiscal 2023 was $1.3 billion, consisting of $1.9 billion of investment purchases, $281.0 million of net cash paid for the Attivo acquisition, $13.5 million of capitalized internal-use software costs, and $5.0 million of purchases of property and equipment to support additional office facilities, partially offset by $925.2 million of investment maturities.

Financing Activities

Cash provided by financing activities during fiscal 2025 was $55.9 million, consisting of $33.4 million of proceeds from the exercise of employee stock options and $22.5 million of proceeds from the issuance of common stock under our 2021 Employee Stock Purchase Plan.

Cash provided by financing activities during fiscal 2023 was $36.3 million, consisting of $19.2 million of proceeds from the issuance of common stock under our 2021 Employee Stock Purchase Plan, $17.3 million of proceeds from the exercise of stock options, partially offset by $0.2 million of payments of deferred offering costs.

Cash provided by financing activities during fiscal 2024 was $47.5 million, consisting of $28.3 million of proceeds from the exercise of employee stock options and $19.1 million of proceeds from the issuance of common stock under our 2021 Employee Stock Purchase Plan.

Contractual Obligations and Commitments

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles (GAAP) in the US.

Our consolidated financial statements are prepared in accordance with GAAP.

The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.

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Actual results could differ significantly from the estimates made by management.

To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, operating results, and cash flows will be affected.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

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We consider the terms and conditions of contracts with customers and our customary business practices in identifying contracts.

We determine 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 contract has commercial substance, and we have determined that the customer has the ability and intent to pay.

the contract has commercial substance, and we have determined that the customer has the ability and intent to pay.

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 pertaining to such customer.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis