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Cyber security company SentinelOne (NYNYSE:SE:S) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 28.3% year on year to $210.6 million. The company expects next quarter’s revenue to be around $222 million, coming in 0.6% above analysts’ estimates. Its GAAP loss of $0.25 per share was 22.3% below analysts’ consensus estimates.
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SentinelOne (S) Q3 CY2024 Highlights:
- Revenue: $210.6 million vs analyst estimates of $209.7 million (28.3% year-on-year growth, in line)
- Adjusted EPS: -$0.25 vs analyst expectations of -$0.20 (22.3% miss)
- Adjusted Operating Income: -$10.68 million vs analyst estimates of -$6.26 million (-5.1% margin, 70.7% miss)
- Revenue Guidance for Q4 CY2024 is $222 million at the midpoint, roughly in line with what analysts were expecting
- Adjusted Operating Margin Guidance for Q4 CY2024 is (3%) at the midpoint, in line with what analysts were expecting
- Operating Margin: -42.3%, up from -49.6% in the same quarter last year
- Free Cash Flow was -$12.65 million compared to -$5.44 million in the previous quarter
- Annual Recurring Revenue: $859.7 million at quarter end, up 29.5% year on year
- Market Capitalization: $8.74 billion
Company OverviewWith roots in the Israeli cyber intelligence community, SentinelOne (NYSE:S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.
Endpoint Security
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
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, SentinelOne’s 65.8% annualized revenue growth over the last three years was incredible. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.This quarter, SentinelOne’s year-on-year revenue growth of 28.3% was excellent, and its $210.6 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 27.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 25.8% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and suggests the market sees success for its products and services.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.SentinelOne’s ARR punched in at $859.7 million in Q3, and over the last four quarters, its growth was fantastic as it averaged 33.8% year-on-year increases. This performance aligned with its total sales growth and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes SentinelOne a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue.