SentinelOne (NYSE:S) Q4 Sales Beat Estimates But Stock Drops

Radek Strnad /
2022/03/15 4:18 pm EDT
Add to Watchlist

Cyber security company SentinelOne (NYSE:S) beat analyst expectations in Q4 FY2022 quarter, with revenue up 119% year on year to $65.6 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $74.5 million at the midpoint, 8.31% above what analysts were expecting. SentinelOne made a GAAP loss of $71.7 million, down on its loss of $37.8 million, in the same quarter last year.

Is now the time to buy SentinelOne? Access our full analysis of the earnings results here, it's free.

SentinelOne (S) Q4 FY2022 Highlights:

  • Revenue: $65.6 million vs analyst estimates of $60.6 million (8.15% beat)
  • EPS (non-GAAP): -$0.17 vs analyst estimates of -$0.18
  • Revenue guidance for Q1 2023 is $74.5 million at the midpoint, above analyst estimates of $68.7 million
  • Management's revenue guidance for upcoming financial year 2023 is $368 million at the midpoint, beating analyst estimates by 6.27% and predicting 79.6% growth (vs 119% in FY2022)
  • Free cash flow was negative $7.07 million, compared to negative free cash flow of $20.6 million in previous quarter
  • Net Revenue Retention Rate: 129%, in line with previous quarter
  • Customers: 6,700, up from 6,000 in previous quarter
  • Gross Margin (GAAP): 63%, up from 53.6% same quarter last year

“We delivered ARR growth in the triple digits for a fourth consecutive quarter. Our extraordinary performance was driven by the strength of our XDR platform coupled with relentless focus on innovation and execution,” said Tomer Weingarten, CEO of SentinelOne.

With roots in the Israeli cyber intelligence community, SentinelOne (NYSE:S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.

Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks. As the volume of internet enabled devices grows, every device that employees use to connect to business networks represents a potential risk. Endpoint security software enables businesses to protect devices (endpoints) that employees use for work purposes either on a network or in the cloud from cyber threats.

Sales Growth

As you can see below, SentinelOne's revenue growth has been incredible over the last year, growing from quarterly revenue of $29.8 million, to $65.6 million.

SentinelOne Total Revenue

This was another standout quarter with the revenue up a splendid 119% year on year. Quarter on quarter the revenue increased by $9.61 million in Q4, which was roughly in line with the Q3 2022 increase. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates SentinelOne is expecting revenue to grow 99.2% year on year to $74.5 million, in line with the 108% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $368 million at the midpoint, growing 79.6% compared to 119% increase in FY2022.

There are others doing even better than SentinelOne. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

SentinelOne Net Revenue Retention Rate

SentinelOne's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 129% in Q4. That means even if they didn't win any new customers, SentinelOne would have grown its revenue 29% year on year. Trending up over the last year, this is a great retention rate and a clear proof of a great product. We can see that SentinelOne's customers are very satisfied with their software and are using it more and more over time.

Key Takeaways from SentinelOne's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on SentinelOne’s balance sheet, but we note that with a market capitalization of $7.88 billion and more than $1.66 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the very optimistic revenue guidance SentinelOne provided for the next quarter. And we were also excited to see the really strong revenue growth. On the other hand, the revenue guidance for next year indicates a little slowdown. Overall, we think this was still a really good quarter, that should leave shareholders feeling positive. But investors might have been expecting more and the company is down 9.05% on the results and currently trades at $28.06 per share.

Should you invest in SentinelOne right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.