Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 REVENUE 20.7 24.6 29.9 37.4 45.8 56.0 QoQ 15.1% 18.8% 21.6% 25.2% 22.3% 22.4% YoY 95.9% 102.6% 96.3% **108.2% 121.3% 128.1%** GM*** 64 58 54 **53 62 67** Op mar** -101% -102% -104% **-127% -98% -69%** FCF -14.5 -19.8 -25.6 -32.6 -44.7 -20.7 DBNRR 121% 115% 117% **124% 125% 130%** DBGRR 97% **97% 97% 97%** CUSTOMERS 3400 4700 5400 6000 YoY 74% ~58%* 75% ARR>100K 145 173 219 277 345 416 QoQ 18.9% 19.3% 26.6% 26.5% 24.6% 20.6% YoY 137.7% 124.7% 110.6% **127.1% 137.9% 140.5%** ***NonGAAP GM **NonGAAP operating margin *my estimated YoY customer count growth from a conference call snippet Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 ARR>1M 6 17 YoY __183% 225% >300%*__ ARR/cust 27720 30195 **34324 36666 39500** *Inferred from Barclays webcast **Mentioned on Q2 call
Note: Unfortunately, there are gaps in the table where customer counts are not broken out in the S1, quarterly releases, or conference calls. Unless anyone has that info, I couldn’t find them.
If I bolded a section of a row in the table above, it means I’d like to highlight something positively. And wow, is there a lot of things bolded.
Revenue and ARR growth YoY is accelerating.
Customers >100K ARR is acclerating.
Customer >1M ARR is accelerating!
ARR per customer has been increasing nonstop!!
Gross margins moving up nicely.
Operating margins are improving.
DBNRR continues to tick up significantly.
Gross retention rates remain 97%! [The numbers speak for itself. Crowdstrike CEO’s attempts to beat down on Sentinel One with their talk of a case where they stole a SentinelOne customer is clearly an edge case and is overblown]
Their guide for Q4-22 is $60.5M revenue at the midpoint. I bet they will hit 67M (12% beat and about 20% QoQ growth). They beat Q3-22 at 12% and have only positive commentary in their conference calls/fireside chat.
Q2 2022 CONFERENCE CALL HIGHLIGHTS
-“Enterprises represent about two thirds of our business today. In Q2, we added the highest number of customers with ARR over $1 million compared to prior quarters.”
-“Just looking at our modules that cover IoT, cloud and data, these grew more than 6x year-over-year in Q2 and represent over 10% of the quarters’ new business.”
-“we win more than 70% of POCs against the competition. We added the highest number of million dollar ARR customers this past quarter. In the past year, we’ve more than tripled (225% YoY) the number of customers with ARR over 1 million.”
-“In Q2, we added Storyline Active Response, or STAR. The chief information security officer of a Fortune 500 oil company captured it well saying SentinelOne’s storyline technology fundamentally changes EDR.”
-“We also expanded our marketplace ecosystem through new partnerships with Zscaler and Cloudflare, partnering with other zero trust leaders strengthens our customers’ security postures.”
-“Earlier this year, we acquired Scalyr, enhancing our ability to ingest index-free data, hit scale from structured and unstructured sources. Our goal is to optimize for scale performance and cost.”
-“our platform is a 100% cloud native. I mean we started in the cloud. We just, turns out to be a much more efficient model than the platforms that they’ve been using in the past which obviously, were more on-prem down. So to us, again being completely cloud native, being multi-talented is a competitive differentiator we have for that part of the market.”
Q3 2022 CONFERENCE CALL HIGHLIGHTS:
-“Revenue from international markets grew 159% year-over-year. International markets now represent 33% of our total revenue, up from 29% a year ago. As an example, in Q3, we secured a European conglomerate by replacing over 20 different antivirus products.”
-“Q4 is our [seasonally] strongest quarter.” An analyst also said “I would assume, somewhat weaker fiscal first quarter….It looks like over the past few years, 3Q has been a lighter – a seasonally lighter quarter for new logo adds.”
-“you beat the Q3 gross margin guidance by a little over 8 points. Is it fair to say that roughly 4 points of that beat was due to the timing of the Scalyr migration?” “Yes”
-gross margins: “long-term goal, which is in the 75% to 80%-plus range”
-“The vast majority of what we sold this quarter was the Complete package [the highest priced tier].”
-“year-over-year, our prices – our land prices are rising. with enterprise buyers, no customer selects a security vendor based solely on pricing. That just doesn’t happen.”
-“when you went public, some distributors or resellers were saying that your price level is lower than that of CrowdStrike. Is this still the case?” “I think it was never the case. I don’t know if it’s no longer the case. As a whole, again, if you look at our entire business, PPN is on the rise. in certain cases, you’ll see it’s more expensive than the competition. In some cases, you’ll see the competition actually coming in and discounting deeply to try and win against us.”
-“So I think one thing that constantly delights our customers is that they’re able to get automated technology that doesn’t require heavy handed services to deploy and maintain”
-“we have unique capabilities like true multi-tenancy. And that’s incredibly important if you think about the way a managed service platform works with hundreds or thousands of customers under one central tenant…pretty much every deal that we closed this quarter and in past quarters, always had an incumbent vendor in the mix…if we take a very conservative view at the overall TAM, I think it’s safe to assume that about over 50% of it is still in the hands of the incumbents”
-“Last quarter, we introduced Storyline Active Response, or STAR, for customized dynamic detection and response rules. This quarter, we began offering remote script orchestration, or RSO, to instantly investigate and triage threats on multiple endpoints across the entire organizations remotely. Together, these two capabilities deliver increased level of automation…”
-“It’s telling that we’re getting so much attention by our competitors [Crowdstrike], which speaks to the traction we’re having in the market.”
-“We do not compete with our partners. Instead, we equip them with industry-leading capabilities like multi-tenancy and open APIs.”
-"in our third fiscal quarter, ARR from our MSSP channel increased by 300% year-over-year."
SentinelOne is a simple case of ‘follow the numbers’ to me. I did not buy SentinelOne prior to their Q3 Dec 7 report as the company only had one earnings report under its belt, but its hypergrowth nature kept the ticker on my watchlist [note, it is why I do not own AMPL like others on this board. They have a ridiculously low/bad guidance for the next quarter…without a track record, I’d rather wait for more data than jump in with fingers crossed and hoping that they will have a monster beat].
The December 7 report showed S was accelerating growth, increasing DBNRR, strong customer adds, improving GM, DBGRR 97%, improving op margin, expanding the TAM, etc.
I’ve seen plenty of comments about CRWD vs SentinelOne expressed in places - well, sure, competition with CRWD is always there, definitely, but the numbers show they are executing regardless. And CRWD CEO’s constant talk of SentinelOne smells of fear and is a good sign. (Not saying that CRWD won’t do well, they still will grow, and of course the recent CISA selecting CRWD is going to be a nice tailwind for them.)
Anyway, with lockup expiry date done (December 9) and recent crashing share price already pulled down their market cap to $13B, I had no excuse why not to make S a full position. I bought last Thursday and Friday. And then added a little more today which oversized my position a bit.
Also, there’s been a notable lack of insider selling(Insight Partners and THird Point are 10%+ owners who would have to file Form 4 sales, and so far they have sold nothing since lockup expiry).
And, there was actually a board director purchase on the open market, which has only added more confidence for me. Board director Mark Peek filed Form 4 today showing he bought $1.4mil worth (30000 shares) on open market at $48/share on transaction date December 13. Correlates well with Third Point buying more shares on open market at $44 in July. Seems like the mid $40 share price range is an agreed upon ‘undervaluation’ among insiders/supporting venture capitalists.