SENTINELONE, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report on Form 10-Q and our audited consolidated financial statements
and the related notes and the discussion under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in our Annual Report on Form 10-K for the fiscal year ended January 31,
2022 filed with the U.S. Securities and Exchange Commission, or the SEC, on
April 7, 2022. This discussion, particularly information with respect to our
future results of operations or financial condition, business strategy and
plans, and objectives of management for future operations, includes
forward-looking statements that involve risks and uncertainties as described
under the heading "Special Note About Forward-Looking Statements" in this
Quarterly Report on Form 10-Q. You should review the disclosure under the
heading "Risk Factors" in this Quarterly Report on Form 10-Q for a discussion of
important factors that could cause our actual results to differ materially from
those anticipated in these forward-looking statements. Our fiscal year ends on
January 31, and our fiscal quarters end on April 30, July 31, October 31, and
January 31. Our fiscal years ended January 31, 2022 and January 31, 2023 are
referred to herein as fiscal 2022 and fiscal 2023, respectively.

Unless the context otherwise requires, all references in this report to “SentinelOne”, the “Company”, “we”, “us”, “our” or similar terms refer to
Sentinel One, Inc. and its subsidiaries.

Insight

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

We pioneered the world's first purpose-built artificial intelligence, or
AI,-powered extended detection and response, or XDR, platform to make
cybersecurity 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 XDR 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. 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. 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. 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. Additionally, customers can
extend the functionality of our platform through our subscription Singularity
Modules. 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.

                                       19

————————————————– ——————————

Contents

Our subscription contracts typically range from one to three years. We recognize
subscription revenue ratably over the term of a contract. Most of our contracts
are for terms representing annual increments, therefore contracts generally come
up for renewal in the same period in subsequent years. The timing of large
multi-year enterprise contracts can create some variability in subscription
order levels between periods, though the impact to our revenue in any particular
period is limited as a result of ratable revenue recognition.

Our go-to-market strategy is focused on acquiring new customers and driving
expanded usage of our platform by existing customers. 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, or 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, or MSPs, managed security service providers, or MSSPs, managed
detection and response providers, or MDRs, original equipment manufacturers, or
OEMs, and incident response firms, or IR firms. Once customers experience the
benefits of our platform, they often upgrade their subscriptions to benefit from
the full range of our XDR and IT and security operations capabilities.
Additionally, many of our customers adopt Singularity Modules over time to
extend the functionality of our platform and increase their coverage footprint.
The combination of platform upgrades and extended modules drives our powerful
land-and-expand motion.

Our Singularity Platform is used globally by organizations of all sizes across a
broad range of industries. As of April 30, 2022, we had over 7,450 customers,
increasing from over 4,700 customers as of April 30, 2021. We had 591 customers
with ARR of $100,000 or more as of April 30, 2022, up from 277 as of April 30,
2021. As of April 30, 2022, no single end customer accounted for more than 3% of
our ARR. We define ARR as the annualized revenue run rate of our subscription
contracts at the end of a reporting period, assuming contracts are renewed on
their existing terms for customers that are under subscription contracts with
us. Our revenue outside of the United States represented 33% and 30% for the
three months ended April 30, 2022 and 2021, respectively, illustrating the
global nature of our solutions.

We have grown rapidly since our inception. Our revenue was $78.3 million and
$37.4 million for the three months ended April 30, 2022 and 2021, respectively,
representing year-over-year growth of 109%. During this period, we continued to
invest in growing our business to capitalize on our market opportunity. As a
result, our net loss for the three months ended April 30, 2022 and 2021 was
$89.8 million and $62.6 million, respectively.

Acquisition of Attivo

On March 15, 2022, we signed a definitive merger agreement to acquire 100% of
the issued and outstanding equity securities of Attivo Networks, Inc. (Attivo),
an identity security and lateral movement protection company. The acquisition
closed on May 3, 2022. The aggregate consideration transferred was comprised of
$351.5 million in cash, 6,032,231 shares of our Class A common stock with an
aggregate value of $195.9 million, and 378,828 assumed options to purchase
shares of our Class A common stock.

Impact of COVID-19

Beginning in January 2020, the COVID-19 pandemic resulted in travel
restrictions, prohibitions of non-essential activities, disruption and shutdown
of certain businesses worldwide, as well as greater uncertainty in global
financial markets. The full extent to which the COVID-19 pandemic will directly
or indirectly impact our business, operating results, cash flows, and financial
condition will depend on future developments that are highly uncertain and
cannot be accurately predicted. As a result of the COVID-19 pandemic, we have
experienced, and may continue to experience, a modest adverse impact on certain
parts of our business, including a lengthening of the sales cycle for some
prospective customers and delays in the delivery of professional services and
trainings to our customers.

We have also experienced, and may continue to experience, a positive impact as a
result of the COVID-19 pandemic. For example, in connection with the travel
restrictions, shelter-in-place, and work-from-home policies resulting from the
COVID-19 pandemic, we have seen an increase in usage and subscriptions from
smaller customers, many of whom are small or medium sized businesses. We have
also seen slower growth in certain operating expenses due to reduced business
travel and the virtualization or cancellation of customer and employee

                                       20

————————————————– ——————————

Contents

events. While a reduction in operating expenses may have an immediate positive
impact on our operating results, we do not yet have visibility into the full
impact this will have on our business. Moreover, as vaccines become widely
available and people begin to return to offices and other workplaces, any
positive impacts of the COVID-19 pandemic on our business may slow or decline
once the impact of the pandemic tapers.

We cannot predict how long we will continue to experience the impact of the
COVID-19 pandemic including any new variants, vaccine mandates, and further
travel and office restrictions. Our operating results, cash flows, and financial
condition have not been adversely affected to date. However, as certain of our
customers or partners experience downturns or uncertainty in their own business
operations or revenue resulting from the spread of COVID-19, our operating
results, cash flows, and financial condition could be adversely affected. In
addition, in response to the spread of COVID-19, we previously required
substantially all of our employees to work remotely to minimize the risk of the
virus to our employees and the communities in which we operate. Most of our
employees continue to work remotely and we have slowly opened up our offices at
minimal capacity, subject to local COVID-19 restrictions. We may take further
actions as may be required by government authorities or that we determine are in
the best interests of our employees, customers, and business partners.

The global impact of the COVID-19 pandemic continues to rapidly evolve, and we
will continue to monitor the situation and the effects on our business and
operations closely. We do not yet know the full extent of potential impacts on
our business or operations or on the global economy as a whole, particularly if
the COVID-19 pandemic continues and persists for an extended period of time.
Given the uncertainty, we cannot reasonably estimate the impact on our future
operating results, cash flows, or financial condition. For additional
information, see the section titled "Risk Factors."

Key business indicators

We monitor the following key metrics to help us assess our business, identify trends affecting our business, formulate business plans and make strategic decisions.

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 customers and to maintain
and expand our relationship with existing subscription customers. ARR represents
the annualized revenue run rate of our subscription contracts at the end of a
reporting period, assuming contracts are renewed on their existing terms for
customers that are under subscription contracts with us. ARR is not a forecast
of future revenue, which can be impacted by contract start and end dates and
renewal rates.

                                            As of April 30,
                                          2022           2021

                                             (in thousands)

Annualized recurring revenue (ARR) $338,962 $161,323


ARR grew 110% year-over-year to $339.0 million as of April 30, 2022, primarily
due to high growth in the number of new customers purchasing our subscriptions
and to additional purchases by existing customers.

Customers with ARR from $100,000 or more

We believe that our ability to increase the number of customers with ARR of
$100,000 or more is an indicator of our market penetration and strategic demand
for our platform. We define a customer as an entity that has an active
subscription for access to our platform. We count MSPs, MSSPs, MDRs, and OEMs,
who may purchase our products on behalf of multiple companies, as a single
customer. We do not count our reseller or distributor channel partners as
customers.

                                       21

————————————————– ——————————

  Table of Contents

                                              As of April 30,
                                            2022             2021

Customers with ARR of $100,000 or more     591               277


Customers with ARR of $100,000 or more grew 113% year-over-year to 591 as of
April 30, 2022, primarily due to new customers making purchases of greater than
$100,000, and partly due to existing customers who made additional purchases.

Net retention rate in dollars

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. Dollar-based net
retention rate measures the percentage change in our ARR derived from our
customer base at a point in time.

                                          As of April 30,
                                          2022           2021

Dollar-based net retention rate               131  %     124  %


Our net dollar retention rate was 131% at April 30, 2022driven by existing customers, mainly through the increase in the number of terminals, purchases of additional modules and upgrades to subscription levels.

Components of our operating results

Revenue

We generate substantially all of our revenue from subscriptions to our
Singularity Platform. Customers can extend the functionality of their
subscription to our platform by subscribing to additional Singularity Modules.
Subscriptions provide access to hosted software. 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.
We 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.

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. 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, 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.
We plan to continue to invest in our platform infrastructure and additional
resources in our customer support and services organization as we grow our
business. The level and timing of investment in these areas could affect our
cost of revenue from period to period.

Functionnary costs

Our operating expenses consist of research and development, sales and marketing,
and general and administrative expenses. Personnel-related expenses are the most
significant component of operating expenses and consist of salaries, benefits,
bonuses, stock-based compensation, and sales commissions. Operating expenses
also include allocated facilities and IT overhead costs.

                                       22

————————————————– ——————————

Contents

Research and development

Research and development expenses consist primarily of employee salaries,
benefits, bonuses, and stock-based compensation. Research and development
expenses also include consulting fees, software and subscription services, and
third-party cloud infrastructure expenses incurred in developing our platform
and modules.

We expect research and development expenses to increase in absolute dollars as
we continue to increase investments in our existing products and services.
However, we anticipate research and development expenses to decrease as a
percentage of our total revenue over time, although our research and development
expenses may fluctuate as a percentage of our total revenue from period to
period depending on the timing of these expenses. In addition, research and
development expenses that qualify as internal-use software are capitalized, the
amount of which may fluctuate significantly from period to period.

Sales and Marketing

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, 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. 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 contractual term of the
renewal.

We expect sales and marketing expenses to increase in absolute dollars as we
continue to make significant investments in our sales and marketing organization
to drive additional revenue, further penetrate the market, and expand our global
customer base, but to decrease as a percentage of our revenue over time.

General and administrative

General and administrative expenses consist primarily of salaries, benefits,
bonuses, stock-based compensation, and other expenses for our executive,
finance, legal, human resources, and facilities organizations. 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 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. We expect that our general and
administrative expenses will increase in absolute dollars as our business grows
but will decrease as a percentage of our revenue over time.

Interest income, interest expense and other income (expenses), net

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

Interest expense consisted primarily of interest on borrowings related to our loan and guarantee agreement.

Other income (expenses), net, consists mainly of gains and losses on foreign currency transactions.

Provision for Income Taxes

Provision for 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.

                                       23

————————————————– ——————————

Contents

Operating results

The following table sets forth our results of operations for the periods
presented:

                                                 Three Months Ended April 30,
                                                     2022                   2021

                                                        (in thousands)
Revenue                                   $        78,255                $  37,395
Cost of revenue(1)                                 27,139                   18,283
Gross profit                                       51,116                   19,112
Operating expenses:
Research and development(1)                        45,881                   27,820
Sales and marketing(1)                             60,641                   36,180
General and administrative(1)                      34,890                   16,724
Total operating expenses                          141,412                   80,724
Loss from operations                              (90,296)                 (61,612)
Interest income                                     1,087                       23
Interest expense                                       (5)                    (303)
Other income (expense), net                          (291)                    (593)
Loss before provision for income taxes            (89,505)                 (62,485)
Provision for income taxes                            329                      149
Net loss                                  $       (89,834)               $ (62,634)


__________________

(1)Includes stock-based compensation expense as follows:

                                                  Three Months Ended April 30,
                                                       2022                    2021

                                                         (in thousands)
Cost of revenue                            $         1,848                  $    383
Research and development                            10,463                     7,139
Sales and marketing                                  7,096                     2,047
General and administrative                          12,223                     3,868
Total stock-based compensation expense     $        31,630                  $ 13,437


                                       24

————————————————– ——————————

Contents

The following table sets forth the components of our condensed consolidated
statements of operations as a percentage of revenue for each of the periods
presented:

                                                  Three Months Ended April 30,
                                                        2022                    2021

                                               (as a percentage of total revenue)
Revenue                                                             100  %      100  %
Cost of revenue                                                         35          49
Gross profit                                                            65          51
Operating expenses:
Research and development                                                59  

74

Sales and marketing                                                     77  

97

General and administrative                                              45          45
Total operating expenses                                               181         216
Loss from operations                                                 (115)       (165)
Interest income                                                          1           -
Interest expense                                                         -         (1)
Other income (expense), net                                              -  

(2)

Loss before provision for income taxes                               (114)       (167)
Provision for income taxes                                               -           -
Net loss                                                           (115) %     (167) %


Note: Some numbers may not match due to rounding.

Comparison of the three months ended April 30, 2022 and 2021

Revenue

                   Three Months Ended April 30,                   Change
                        2022                    2021           $            %

                             (dollars in thousands)
Revenue     $        78,255                  $ 37,395      $ 40,860       109  %


Revenue increased by $40.9 million primarily due to the expansion of our
customer base, which grew over 55% as compared to the same period last year. We
also experienced increased purchases from our existing customers as they expand
the number of endpoints, purchase additional modules from us, and upgrade
subscription tiers, as evidenced by our dollar-based net retention rate of 131%
as of April 30, 2022.

Cost of revenue, gross profit and gross margin

                         Three Months Ended April 30,                  Change
                        2022                        2021            $            %

                                   (dollars in thousands)
Cost of revenue   $      27,139                  $ 18,283       $  8,856        48  %
Gross profit      $      51,116                  $ 19,112       $ 32,004       167  %
Gross margin                 65  %                     51  %


Cost of revenue increased by $8.9 million primarily due to an increase of $5.0
million in allocated overhead costs and higher third-party cloud infrastructure
expenses of $3.3 million from increased data usage. Gross margin increased
to 65%, primarily due to revenue growth from existing and new customers
outpacing growth in cost of revenue.

                                       25

————————————————– ——————————

  Table of Contents

Research and Development

                                            Three Months Ended April 30,                          Change
                                              2022                  2021                  $                   %

                                                         (dollars in thousands)

Research and development costs $45,881 $27,820

         $   18,061                   65  %


Research and development expenses increased by $18.1 million primarily due to an
increase in personnel-related expenses of $8.2 million, including an increase of
$3.3 million related to stock-based compensation expense as a result of
increased headcount, and an increase of $7.3 million in third-party cloud
infrastructure expenses incurred in developing our platform and modules.

Sales and Marketing

                                        Three Months Ended April 30,                   Change
                                             2022                    2021           $            %

                                                  (dollars in thousands)
Sales and marketing expenses     $        60,641                  $ 36,180      $ 24,461        68  %


Sales and marketing expenses increased by $24.5 million primarily due to an
increase in personnel-related expenses of $19.4 million, including an increase
of $5.0 million in stock-based compensation expense as a result of increased
headcount and an increase of $3.9 million in commission expense as a result of
an increase in sales year over year. In addition, there was an increase in
allocated overhead costs of $2.2 million, with the remaining increase primarily
the result of increased travel as COVID-19 travel restrictions ease.

                                              Three Months Ended April 30,                          Change
                                                2022                  2021                  $                   %

                                                           (dollars in thousands)

General and administrative expenses $34,890 $16,724 $18,166

                  109  %


General and administrative expenses increased by $18.2 million primarily due to
an increase in personnel-related expenses of $13.4 million, including an
increase of $8.4 million in stock-based compensation expense as a result of
increased headcount. In addition, there was an increase of $2.3 million due to
costs incurred related to due diligence and planning associated with our Attivo
acquisition which closed in May 2022, with the remaining increase primarily the
result of additional operating costs as a public company and software
subscription services.

Interest income, interest expense and other income (expenses), net

                                           Three Months Ended April 30,                           Change
                                             2022                   2021                  $                    %

                                                        (dollars in thousands)
Interest income                       $          1,087          $       23          $    1,064                  4626  %
Interest expense                      $             (5)         $     (303)         $      298                   (98) %
Other income (expense), net           $           (291)         $     (593)         $      302                   (51) %


Interest income increased $1.1 million as a result of interest earned on
investments, which we did not have in fiscal year 2022. Interest expense
decreased due to the repayment and termination of the revolving line of credit
in June 2021. The decrease in other income (expense), net is primarily due to
net foreign currency exchange losses.

                                       26

————————————————– ——————————

  Table of Contents

Provision for Income Taxes

                                       Three Months Ended April 30,                   Change
                                             2022                     2021         $          %

                                               (dollars in thousands)
Provision for income taxes    $           329                        $ 149      $ 180       121  %

The provision for income taxes increased mainly due to the increase in foreign taxes related to the activities of the international subsidiaries.

Cash 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 $711.5 million and $621.7
million as of April 30, 2022 and January 31, 2022, 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. As of April 30,
2022 and January 31, 2022, our principal source of liquidity was cash, cash
equivalents, and short-term investments of $1.6 billion and $1.7 billion,
respectively.

In the short term, we believe that our existing cash, cash equivalents, and
short-term investments will be sufficient to support working capital and capital
expenditure requirements for at least the next 12 months. In the long term, our
future capital requirements will depend on many factors, including 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. We may be required to seek additional equity or debt
financing. In the event that we require additional financing, we may not be able
to raise such financing on terms acceptable to us or at all. If we are unable to
raise additional capital or generate cash flows necessary to expand our
operations and invest in continued innovation, we may not be able to compete
successfully, which would harm our business, operating results, and financial
condition.

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

                                                      Three Months Ended April 30,
                                                          2022                   2021

                                                           (in thousands)
Net cash used in operating activities          $        (49,351)              $ (30,798)
Net cash used in investing activities          $       (858,525)              $  (5,242)
Net cash provided by financing activities      $          4,904               $   1,917


Operating Activities

Our largest source of operating cash is payments received from our customers.
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.

                                       27

————————————————– ——————————

Contents

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.

Cash used in operating activities during the three months ended April 30, 2022
was $49.4 million, primarily consisting of our net loss of $89.8 million, and
$2.2 million used in net changes to our operating assets and liabilities,
partially offset by non-cash items of $42.7 million. The main drivers of the
changes in operating assets and liabilities were a $21.5 million decrease in
accrued payroll and benefits, a $9.3 million increase in deferred contract
acquisition costs, a $5.2 million increase in prepaid expenses and other assets
primarily due to annual insurance renewal and prepaid sponsorship costs. These
amounts were partially offset by a $14.8 million decrease in accounts receivable
due to timing of cash received from customers, a $13.6 million increase in
deferred revenue resulting primarily from increased subscription contracts, a
$5.1 million increase in accounts payable due to timing of invoices received
from vendors.

Cash used in operating activities during the three months ended April 30, 2021
was $30.8 million, primarily consisting of our net loss of $62.6 million,
adjusted for non-cash items of $19.6 million and net cash inflows of $12.3
million provided by changes in our operating assets and liabilities. The main
drivers of the changes in operating assets and liabilities were a $9.7 million
increase in deferred revenue resulting primarily from increased subscription
contracts, and a $6.3 million decrease in accounts receivable due to payment
from customers. These amounts were partially offset by a $5.5 million increase
in deferred contract acquisition costs.

Investing activities

Cash used in investing activities during the three months ended April 30, 2022
was $858.5 million, consisting of $853.0 million of investment purchases, $2.8
million of purchases of property and equipment to support additional office
facilities, and $2.6 million of capitalized internal-use software costs.

Cash used in investing activities during the three months ended April 30, 2021
was $5.2 million, consisting of $3.4 million of net cash paid for the
acquisition of Scalyr, $1.0 million of capitalized internal-use software costs
and $0.8 million of purchases of property and equipment to support additional
office facilities.

Financing Activities

Cash provided by financing activities during the three months ended April 30,
2022 was $4.9 million, consisting of $5.1 million of proceeds from the exercise
of employee stock options, partially offset by $0.2 million of payments of
deferred offering costs.

Cash provided by financing activities during the three months ended April 30,
2021 was $1.9 million, consisting of $3.7 million of proceeds from the exercise
of employee stock options, partially offset by a $1.8 million repayment of our
term loan.

Contractual obligations and commitments

There have been no material changes outside of the ordinary course of business in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K filed with the SECOND on April 7, 2022.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any
off-balance sheet financing arrangements or any relationships with
unconsolidated entities or financial partnerships, such as structured finance or
special purpose entities, that were established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes.

Significant Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with
United States generally accepted accounting policies, or GAAP. The preparation
of condensed consolidated financial statements requires us

                                       28

————————————————– ——————————

Contents

to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses, and related disclosures. We base our estimates
on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, and we evaluate our estimates and
assumptions on an ongoing basis. 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.

There have been no material changes in our critical accounting policies and estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10- K for the year ended January 31, 2022 filed with the SECOND on April 7, 2022.

Recently issued accounting pronouncements

See Note 2, Summary of Significant Accounting Policies, in the notes to our
condensed consolidated financial statements included in Part I, Item I of this
Quarterly Report on Form 10-Q for more information regarding recently issued
accounting pronouncements.

© Edgar Online, source Previews