sumo-20210430
false2022Q10001643269January 31us-gaap:AccountingStandardsUpdate201602Member00016432692021-02-012021-04-30xbrli:shares00016432692021-05-31iso4217:USD00016432692021-04-3000016432692021-01-3100016432692020-02-012020-04-30iso4217:USDxbrli:shares0001643269us-gaap:CommonStockMember2021-01-310001643269us-gaap:AdditionalPaidInCapitalMember2021-01-310001643269us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-310001643269us-gaap:RetainedEarningsMember2021-01-310001643269us-gaap:CommonStockMember2021-02-012021-04-300001643269us-gaap:AdditionalPaidInCapitalMember2021-02-012021-04-300001643269us-gaap:RestrictedStockUnitsRSUMemberus-gaap:CommonStockMember2021-02-012021-04-300001643269us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-02-012021-04-300001643269us-gaap:RetainedEarningsMember2021-02-012021-04-300001643269us-gaap:CommonStockMember2021-04-300001643269us-gaap:AdditionalPaidInCapitalMember2021-04-300001643269us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-300001643269us-gaap:RetainedEarningsMember2021-04-3000016432692020-01-310001643269us-gaap:CommonStockMember2020-01-310001643269us-gaap:AdditionalPaidInCapitalMember2020-01-310001643269us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-310001643269us-gaap:RetainedEarningsMember2020-01-310001643269us-gaap:CommonStockMember2020-02-012020-04-300001643269us-gaap:AdditionalPaidInCapitalMember2020-02-012020-04-300001643269us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-012020-04-300001643269us-gaap:RetainedEarningsMember2020-02-012020-04-3000016432692020-04-300001643269us-gaap:CommonStockMember2020-04-300001643269us-gaap:AdditionalPaidInCapitalMember2020-04-300001643269us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-300001643269us-gaap:RetainedEarningsMember2020-04-300001643269sumo:COVID19PandemicMember2020-02-012021-01-3100016432692020-02-012021-01-3100016432692021-02-010001643269us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-01-310001643269us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2021-04-300001643269us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-04-300001643269us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2021-04-300001643269us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-04-300001643269us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-04-300001643269us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-04-300001643269us-gaap:FairValueInputsLevel3Memberus-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueInputsLevel1Membersumo:SupranationalSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269sumo:SupranationalSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-04-300001643269us-gaap:FairValueInputsLevel3Membersumo:SupranationalSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269sumo:SupranationalSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-04-300001643269us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-04-300001643269us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueMeasurementsRecurringMember2021-04-300001643269us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-01-310001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2021-01-310001643269us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-01-310001643269us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-01-310001643269sumo:RedeemableConvertiblePreferredStockWarrantsMember2020-09-210001643269sumo:RedeemableConvertiblePreferredStockWarrantsMember2021-02-012021-04-300001643269us-gaap:USTreasurySecuritiesMember2021-04-300001643269us-gaap:CorporateDebtSecuritiesMember2021-04-300001643269us-gaap:CommercialPaperMember2021-04-300001643269us-gaap:ForeignGovernmentDebtSecuritiesMember2021-04-300001643269sumo:SupranationalSecuritiesMember2021-04-300001643269us-gaap:CertificatesOfDepositMember2021-04-300001643269us-gaap:ComputerEquipmentMember2021-04-300001643269us-gaap:ComputerEquipmentMember2021-01-310001643269us-gaap:FurnitureAndFixturesMember2021-04-300001643269us-gaap:FurnitureAndFixturesMember2021-01-310001643269us-gaap:LeaseholdImprovementsMember2021-04-300001643269us-gaap:LeaseholdImprovementsMember2021-01-310001643269us-gaap:SoftwareDevelopmentMember2021-04-300001643269us-gaap:SoftwareDevelopmentMember2021-01-310001643269us-gaap:ConstructionInProgressMember2021-04-300001643269us-gaap:ConstructionInProgressMember2021-01-310001643269country:US2021-04-300001643269country:US2021-01-310001643269us-gaap:NonUsMember2021-04-300001643269us-gaap:NonUsMember2021-01-31xbrli:pure0001643269us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-02-280001643269srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:PrimeRateMember2021-02-012021-02-280001643269us-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberus-gaap:LineOfCreditMemberus-gaap:PrimeRateMember2021-02-012021-02-280001643269us-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberus-gaap:LineOfCreditMember2021-02-280001643269srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-02-280001643269us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-04-300001643269us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-01-310001643269country:US2021-02-012021-04-300001643269country:US2020-02-012020-04-300001643269us-gaap:NonUsMember2021-02-012021-04-300001643269us-gaap:NonUsMember2020-02-012020-04-3000016432692021-05-012021-04-300001643269sumo:CustomerOneMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-02-012021-04-300001643269sumo:CustomerOneMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2019-02-012020-01-3100016432692020-09-212020-09-2100016432692020-09-21sumo:votesumo:plan0001643269us-gaap:EmployeeStockOptionMember2021-02-012021-04-300001643269us-gaap:RestrictedStockUnitsRSUMember2021-02-012021-04-300001643269sumo:TwentyTwentyPlanMember2021-04-300001643269sumo:TwentyTwentyPlanMember2021-02-012021-04-300001643269sumo:EquityIncentivePlansMember2021-01-310001643269sumo:EquityIncentivePlansMember2020-02-012021-01-310001643269sumo:EquityIncentivePlansMember2021-02-012021-04-300001643269sumo:EquityIncentivePlansMember2021-04-300001643269sumo:EquityIncentivePlansMember2020-02-012020-04-300001643269sumo:EquityIncentivePlansMemberus-gaap:EmployeeStockOptionMember2021-02-012021-04-300001643269sumo:EquityIncentivePlansMemberus-gaap:RestrictedStockUnitsRSUMember2021-01-310001643269sumo:EquityIncentivePlansMemberus-gaap:RestrictedStockUnitsRSUMember2021-02-012021-04-300001643269sumo:EquityIncentivePlansMemberus-gaap:RestrictedStockUnitsRSUMember2021-04-300001643269sumo:EquityIncentivePlansMembersumo:RestrictedStockUnitsRSUsSubjectToServiceBasedAndPerformanceBasedVestingMember2021-02-012021-04-300001643269sumo:RestrictedPerformanceStockUnitsMembersumo:EquityIncentivePlansMember2021-04-300001643269sumo:JaskPlansMembersumo:JaskLabsIncMember2019-10-252019-10-250001643269sumo:JaskPlansMembersumo:JaskLabsIncMember2021-04-300001643269sumo:JaskPlansMembersumo:JaskLabsIncMember2021-01-310001643269sumo:JaskPlansMembersumo:JaskLabsIncMember2021-02-012021-04-300001643269us-gaap:EmployeeStockMember2020-09-170001643269us-gaap:EmployeeStockMember2020-09-172020-09-17sumo:period0001643269us-gaap:EmployeeStockMember2021-02-012021-04-300001643269us-gaap:EmployeeStockMember2021-04-300001643269us-gaap:CostOfSalesMember2021-02-012021-04-300001643269us-gaap:CostOfSalesMember2020-02-012020-04-300001643269us-gaap:ResearchAndDevelopmentExpenseMember2021-02-012021-04-300001643269us-gaap:ResearchAndDevelopmentExpenseMember2020-02-012020-04-300001643269us-gaap:SellingAndMarketingExpenseMember2021-02-012021-04-300001643269us-gaap:SellingAndMarketingExpenseMember2020-02-012020-04-300001643269us-gaap:GeneralAndAdministrativeExpenseMember2021-02-012021-04-300001643269us-gaap:GeneralAndAdministrativeExpenseMember2020-02-012020-04-300001643269sumo:JaskLabsIncMemberus-gaap:RestrictedStockMember2019-10-252019-10-250001643269sumo:JaskLabsIncMemberus-gaap:RestrictedStockMember2021-02-012021-04-300001643269sumo:JaskLabsIncMemberus-gaap:RestrictedStockMember2021-04-300001643269sumo:TwentyTenPlanMemberus-gaap:RestrictedStockUnitsRSUMember2020-09-212020-09-210001643269sumo:RestrictedPerformanceStockUnitsMembersumo:TwentyTenPlanMember2020-09-212020-09-210001643269sumo:CommonStockTransfersFormerEmployeesMember2020-02-012020-04-300001643269sumo:ShareBasedPaymentArrangementOptionExcludingOptionsFromAcquisitionMember2021-02-012021-04-300001643269sumo:ShareBasedPaymentArrangementOptionExcludingOptionsFromAcquisitionMember2020-02-012020-04-300001643269us-gaap:RestrictedStockUnitsRSUMember2021-02-012021-04-300001643269us-gaap:RestrictedStockUnitsRSUMember2020-02-012020-04-300001643269us-gaap:EmployeeStockMember2021-02-012021-04-300001643269us-gaap:EmployeeStockMember2020-02-012020-04-300001643269us-gaap:WarrantMember2021-02-012021-04-300001643269us-gaap:WarrantMember2020-02-012020-04-300001643269sumo:ShareBasedPaymentArrangementSharesSubjectToRepurchaseMember2021-02-012021-04-300001643269sumo:ShareBasedPaymentArrangementSharesSubjectToRepurchaseMember2020-02-012020-04-300001643269sumo:ShareBasedPaymentArrangementOptionOptionsFromAcquisitionMember2021-02-012021-04-300001643269sumo:ShareBasedPaymentArrangementOptionOptionsFromAcquisitionMember2020-02-012020-04-300001643269sumo:IssuableSharesFromBusinessAcquisitionMember2021-02-012021-04-300001643269sumo:IssuableSharesFromBusinessAcquisitionMember2020-02-012020-04-300001643269us-gaap:RedeemableConvertiblePreferredStockMember2021-02-012021-04-300001643269us-gaap:RedeemableConvertiblePreferredStockMember2020-02-012020-04-300001643269sumo:DFLabsSpAMemberus-gaap:SubsequentEventMember2021-05-242021-05-240001643269srt:ScenarioForecastMembersumo:SensuIncMember2021-05-272021-05-27


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to               
Commission File Number 001-39502               
Sumo Logic, Inc.
(Exact name of registrant as specified in its charter)
Delaware
27-2234444
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)
305 Main Street
Redwood City, California
94063
(Address of principal executive offices)(Zip Code)
(650) 810-8700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.0001 per shareSUMONasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes    No ☒
As of May 31, 2021, the number of outstanding shares of the registrant's common stock was 106,803,223 shares of common stock.


Table of Contents
Table of Contents
Page
PART II. OTHER INFORMATION
1

Table of Contents
Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions.

Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:

our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, including changes in sales and marketing, research and development, and general and administrative expenses, and key business metrics, and our ability to achieve and maintain future profitability;
the impact of the COVID-19 pandemic and any associated economic downturn on our business and results of operations;
our business model and our ability to effectively manage our growth and associated investments;
our beliefs about and objectives for future operations;
market acceptance of our platform;
our ability to maintain and expand our customer base, including by attracting new customers;
our ability to retain customers and expand their adoption of our platform, particularly our largest customers;
the effects of increased competition in our markets and our ability to compete effectively;
our ability to maintain the security and availability of our platform;
our ability to develop new platform features and functionality, or enhancements to our existing platform features and functionality, and bring them to market in a timely manner;
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
our relationships with third parties, including channel and technology partners;
our ability to successfully expand in our existing markets and into new markets, including internationally;
our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally, including with respect to privacy and data protection;
our expectations regarding our ability to obtain, maintain, enforce, defend, and enhance our intellectual property rights;
our ability to successfully defend litigation brought against us;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our ability to attract and retain employees and key personnel;
future acquisitions or investments; and
economic and industry trends or trend analysis.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should
2

Table of Contents
not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Risk Factor Summary

Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors,” together with the other information in this Form 10-Q. If any of the following risks actually occurs (or if any of those listed elsewhere in this Form 10-Q occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.
Our revenue growth rate and financial performance in recent periods may not be indicative of future performance, and we expect our revenue growth rate to decline compared to prior fiscal years;
We have a history of net losses and we may not be able to achieve or maintain profitability in the future;
We face intense competition and could face pricing pressure from, and lose market share to, our competitors, which would adversely affect our business, financial condition, and results of operations;
The markets for our offerings are evolving, and our future success depends on the growth of these markets and our ability to adapt to keep pace, and respond effectively to evolving markets;
We may fail to cost-effectively acquire new customers or obtain renewals, upgrades or expansions from our existing customers, which would adversely affect our business, financial condition, and results of operations;
Changes to our packaging and licensing models could adversely affect our ability to attract or retain customers;
Our results of operations vary and are unpredictable from period to period, which could cause the market price of our common stock to decline;
The global COVID-19 pandemic has harmed and could continue to harm our business and results of operations;
Our sales cycle can be long and unpredictable, and our sales efforts require considerable time and expense;
The loss of, or a significant reduction in use of our platform by, our largest customers would result in lower revenue and harm to our results of operations;
We depend on our sales force, and we may fail to attract, retain, motivate, or train our sales force, which could adversely affect our business, financial condition, and results of operations;
We utilize free trials and other go-to-market strategies, and we may not be able to realize the benefits of these strategies;
If our website fails to rank prominently in unpaid search results, traffic to our website could decline and our business, financial condition, and results of operations could be adversely affected;
We may be unable to build and maintain successful relationships with our channel partners or such channel partners may fail to perform, which could adversely affect our business, financial condition, results of operations, and growth prospects;
Our ability to increase sales depends, in part, on the quality of our customer support, and our failure to offer high quality support would harm our reputation and adversely affect our business and results of operations;
Our international operations and continued international expansion subject us to additional costs and risks, which could adversely affect our business, financial condition, and results of operations;
We may fail to effectively manage our growth, which would adversely affect our business, financial condition, and results of operations;
We depend on our management team and other highly skilled personnel, and we may fail to attract, retain, motivate, or integrate highly skilled personnel, which could adversely affect our business, financial condition, and results of operations;
We may be unable to make acquisitions and investments, successfully integrate acquired companies into our business, or our acquisitions and investments may not meet our expectations, any of which could adversely affect our business, financial condition, and results of operations;
Our reputation and brand are important to our success, and we may not be able to maintain and enhance our reputation and brand, which would adversely affect our business, financial condition, and results of operations;
We provide service level commitments under our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service, or face contract termination with refunds of prepaid amounts related to unused subscriptions, which could harm our business, financial condition, and results of operations;
A portion of our revenue is generated by sales to government entities, which subject us to a number of challenges and risks;
Our business could be adversely affected by economic downturns;
Our business could be adversely affected by pandemics, natural disasters, political crises, or other unexpected events;
We use certain third-party services to manage and operate our business, and any failure or interruption in the services provided by these third parties could adversely affect our business, financial condition, and results of operations;
We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our results of operations in the near term;
3

Table of Contents
Any actual or perceived security or privacy breach could interrupt our operations, harm our reputation and brand, result in financial exposure, and lead to loss of user confidence in us or decreased use of our platform, any of which could adversely affect our business, financial condition, and results of operations;
Real or perceived defects, errors, or vulnerabilities in our platform could harm our reputation and adversely affect our business, financial condition, and results of operations;
We rely on Amazon Web Services to deliver our platform to our customers, and any disruption of, or interference with, our use of Amazon Web Services could adversely affect our business, financial condition, and results of operations;
Any failure to obtain, maintain, protect, or enforce our intellectual property and proprietary rights, or claims by others that we infringed their proprietary technology or other intellectual property rights, could harm our business, financial condition, and results of operations;
Claims by others that we infringed their proprietary technology or other intellectual property rights would harm our business;
Our platform contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to deliver our platform or subject us to litigation or other actions;
The rapidly evolving framework of privacy, data protection, data transfers, or other laws or regulations worldwide may limit the use and adoption of our services and adversely affect our business;
We incorporate technology from third parties into our platform, and our inability to maintain rights to such technology would harm our business and results of operations;
Our platform may not interoperate with our customers’ infrastructure or with third-party offerings, which would adversely affect our business and results of operations;
We may be subject to claims that we have wrongfully hired an employee from a competitor, or that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers;
Remaining performance obligations and calculated billings may not be accurate indicators of business activity within a period;
We recognize a substantial portion of our revenue ratably over the term of the relevant subscription period, and as a result, downturns or upturns in sales may not be immediately reflected in our results of operations;
Our metrics and estimates used to evaluate our performance are subject to inherent challenges in measurement, and real or perceived inaccuracies in those estimates may harm our reputation and negatively affect our business;
Our loan and security agreement provides our lender with a first-priority lien against substantially all of our assets and contains restrictive covenants which could limit our operational flexibility and otherwise adversely affect our financial condition; and
Our executive officers, directors, and holders of 5% or more of our common stock continue to have substantial control over us, which will limit your ability to influence the outcome of important transactions, including a change in control.
4

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Sumo Logic, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
April 30,
2021
January 31,
2021
Assets
Current assets:
Cash and cash equivalents$143,101 $404,140 
Marketable securities, current147,517  
Accounts receivable, net43,885 44,761 
Prepaid expenses9,918 10,509 
Deferred sales commissions, current13,779 12,790 
Other current assets2,159 3,110 
Total current assets360,359 475,310 
Marketable securities, noncurrent117,859  
Property and equipment, net4,445 4,156 
Operating lease right-of-use assets9,247 — 
Goodwill50,672 50,672 
Acquired intangible assets, net9,119 10,656 
Deferred sales commissions, noncurrent29,125 27,857 
Other assets1,668 1,856 
Total assets$582,494 $570,507 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$6,532 $4,832 
Accrued expenses and other current liabilities21,795 23,316 
Operating lease liabilities, current4,553 — 
Deferred revenue, current112,078 102,625 
Total current liabilities144,958 130,773 
Operating lease liabilities, noncurrent5,849 — 
Deferred revenue, noncurrent3,800 4,076 
Other liabilities3,233 4,246 
Total liabilities157,840 139,095 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock11 10 
Additional paid-in-capital849,438 829,238 
Accumulated other comprehensive loss(90)(45)
Accumulated deficit(424,705)(397,791)
Total stockholders’ equity424,654 431,412 
Total liabilities and stockholders’ equity$582,494 $570,507 
See Notes to Condensed Consolidated Financial Statements
5

Table of Contents
Sumo Logic, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except for per share data)
(unaudited)
Three Months Ended April 30,
20212020
Revenue$54,219 $47,202 
Cost of revenue15,395 14,426 
Gross profit38,824 32,776 
Operating expenses:
Research and development20,443 17,699 
Sales and marketing30,278 29,456 
General and administrative14,573 9,077 
Total operating expenses65,294 56,232 
Loss from operations(26,470)(23,456)
Interest and other (expense) income, net(16)228 
Interest expense(86)(159)
Loss before provision for income taxes(26,572)(23,387)
Provision for income taxes342 178 
Net loss$(26,914)$(23,565)
Net loss per share, basic and diluted$(0.26)$(1.28)
Weighted-average shares used to compute net loss per share, basic and diluted104,033 18,392 
See Notes to Condensed Consolidated Financial Statements
6

Table of Contents
Sumo Logic, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended April 30,
20212020
Net loss$(26,914)$(23,565)
Other comprehensive income (loss):
Foreign currency translation adjustments3 (128)
Unrealized gain (loss) on available-for-sale marketable securities(48) 
Total comprehensive loss$(26,959)$(23,693)
See Notes to Condensed Consolidated Financial Statements
7

Table of Contents
Sumo Logic, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands)
(unaudited)
Redeemable Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity (Deficit)
Shares
Amount
SharesAmount
Balance at January 31, 2021 $ 102,484 $10 $829,238 $(45)$(397,791)$431,412 
Issuance of common stock upon exercise of stock options — — 2,848 1 8,018 — — 8,019 
Exercise of common stock warrants— — 18 — — — — — 
Vesting of restricted stock units— — 842 — — — — — 
Vesting of early exercised stock options— — — — 49 — — 49 
Stock-based compensation — — — — 12,133 — — 12,133 
Other comprehensive income (loss)— — — — — (45)— (45)
Net loss— — — — — — (26,914)(26,914)
Balance at April 30, 2021 $ 106,192 $11 $849,438 $(90)$(424,705)$424,654 
Balance at January 31, 202063,762 $340,167 18,984 $2 $97,131 $(213)$(317,494)$(220,574)
Issuance of common stock upon exercise of stock options — — 288  871 — — 871 
Vesting of early exercised stock options — — — — 49 — — 49 
Common stock issued and awards assumed as consideration in connection with acquisitions— — 8 — — — — — 
Stock-based compensation— — — — 5,144 — — 5,144 
Foreign currency translation adjustments — — — — — (128)— (128)
Net loss — — — — — — (23,565)(23,565)
Balance at April 30, 202063,762 $340,167 19,280 $2 $103,195 $(341)$(341,059)$(238,203)
See Notes to Condensed Consolidated Financial Statements
8

Table of Contents
Sumo Logic, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended April 30,
20212020
Cash flows from operating activities
Net loss$(26,914)$(23,565)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization2,044 2,035 
Amortization of deferred sales commissions3,401 2,484 
Accretion (amortization) of marketable securities purchased at a premium (discount)566  
Stock-based compensation, net of amounts capitalized12,133 5,067 
Non-cash operating lease cost1,062  
Other23 5 
Changes in operating assets and liabilities
Accounts receivable837 3,093 
Prepaid expenses592 2,661 
Other assets1,144 250 
Deferred sales commissions(5,658)(2,938)
Accounts payable1,383 1,097 
Accrued expenses and other current liabilities(1,295)(1,853)
Deferred revenue9,177 102 
Operating lease liabilities(1,134) 
Other noncurrent liabilities(80)439 
Net cash used in operating activities(2,719)(11,123)
Cash flows from investing activities
Purchases of marketable securities(267,548) 
Maturities of marketable securities1,558  
Purchases of property and equipment(247)(15)
Capitalized internal-use software costs (471)
Net cash used in investing activities(266,237)(486)
Cash flows from financing activities
Proceeds from borrowings 24,250 
Payments of deferred offering costs(93)(294)
Proceeds from exercise of common stock options8,019 871 
Net cash provided by financing activities7,926 24,827 
Effect of exchange rate changes on cash and cash equivalents(9)(291)
Change in cash and cash equivalents and restricted cash(261,039)12,927 
Cash and cash equivalents and restricted cash:
Beginning of period404,440 101,813 
End of period$143,401 $114,740 
Supplemental disclosures of cash flow information
Cash paid for income taxes$272 $311 
Cash paid for interest21 132 
Supplemental non-cash investing and financing information
Vesting of early exercised options$49 $49 
Stock-based compensation capitalized as internal-use software costs 77 
Deferred offering costs accrued but not yet paid 1,168 
Property and equipment accrued but not yet paid575 176 
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets
Cash and cash equivalents$143,101 $114,440 
Restricted cash included in other current assets300 300 
Total cash, cash equivalents, and restricted cash$143,401 $114,740 
See Notes to Condensed Consolidated Financial Statements
9

Table of Contents
Sumo Logic, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)




NotePage
6.
10

Table of Contents
1. Description of Business and Basis of Presentation
Organization and Nature of Operations
Sumo Logic, Inc. (the “Company”) was incorporated in Delaware in March 2010. The Company provides, on a cloud-native software-as-a-service (“SaaS”) delivery model, a software platform that enables organizations of all sizes to address the challenges and opportunities presented by digital transformation, modern applications, and cloud computing. The platform enables organizations to automate the collection, ingestion, and analysis of application, infrastructure, security, and IoT data to derive actionable insights.
Basis of Presentation and Principles of Consolidation
The Company’s condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission, (“SEC”), regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of January 31, 2021, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by GAAP for complete consolidated financial statements.
The accompanying interim unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021, as filed with the SEC on March 12, 2021.
The Company’s condensed consolidated financial statements and accompanying notes include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three months ended April 30, 2021 are not necessarily indicative of the results to be expected for the year ending January 31, 2022 or for any other interim period or for any other future year.
Fiscal Year
The Company’s fiscal year ends on January 31. Unless otherwise stated, references to year in these condensed consolidated financial statements relate to the above described fiscal year rather than calendar year.
2. Summary of Significant Accounting Policies
Use of Estimates and Judgments
The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements, and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements and may involve subjective or significant judgment by the Company; therefore, actual results could differ from the Company’s estimates. The Company’s accounting policies that involve judgment include revenue recognition, period of benefit for deferred sales commissions, assumptions used for estimating the fair value of common stock to calculate stock-based compensation (prior to the closing of the Company’s initial public offering (“IPO”)), capitalization of internal-use software costs, valuation of goodwill and intangible assets, estimate of credit losses for accounts receivable and marketable securities, and valuation allowances associated with income taxes.
COVID-19
While the duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the duration and spread of the outbreak, the extent and effectiveness of containment actions, and the effectiveness of vaccination efforts, it has already had an adverse effect on the global economy and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. The Company may experience customer losses, including due to bankruptcy or customers ceasing operations, which may result in delays in collections or an inability to collect accounts receivable from these customers. The extent to which COVID-19 may continue to impact the Company’s financial condition, results of operations, or liquidity continues to remain uncertain, and as of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or an adjustment to the carrying value of the Company’s
11

Table of Contents
assets or liabilities. These estimates may change, as new events occur and additional information is obtained, which will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.
In May 2020, as part of the Company’s efforts to respond to the COVID-19 pandemic and ensure longer-term financial stability, the Company initiated cost reduction measures, including a headcount reduction. The headcount reduction resulted in $1.2 million of severance and benefits expense and $0.1 million in stock-based compensation expense for the year ended January 31, 2021.
Significant Accounting Policies
Other than those described below, there have been no changes to the Company’s significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021, that have had a material impact on its condensed consolidated financial statements and related notes.
Marketable Securities
Marketable securities consist of U.S. Treasury securities, corporate debt securities, commercial paper, foreign government obligations, supranational securities, and certificates of deposits. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. Interest receivable on these securities is presented in other current assets on the condensed consolidated balance sheets. All marketable securities are recorded at their estimated fair values. When the fair value of a marketable security declines below its amortized cost basis, the carrying value of the security will be reduced to its fair value if it is more likely than not that management is required to sell the impaired security before recovery of its amortized basis, or management has the intention to sell the security. If neither of these conditions are met, the Company determines whether any portion of the decline is due to credit losses. Any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in the Company’s condensed consolidated statement of operations. When the fair value of the security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in accumulated other comprehensive income (loss) and are recognized in the Company’s condensed consolidated statement of operations only if the Company sells or intends to sell the security before recovery of its cost basis. Realized gains and losses are determined based on the specific identification method and are reported in interest and other income (expense), net in the Company’s condensed consolidated statements of operations.
Leases
The Company enters into operating lease arrangements for real estate assets related to office space. The Company determines if an arrangement is or contains a lease at commencement by evaluating various factors, including whether a vendor’s right to substitute an identified asset is substantive. Lease classification is determined at the lease commencement date, which is the date the leased assets are made available for use. Operating leases are included in “Operating lease right-of-use assets”, “Operating lease liabilities, current”, and “Operating lease liabilities, noncurrent” in the condensed consolidated balance sheets. The Company did not have any financing leases in any of the periods presented.
Operating lease right-of-use assets (“RoU”) and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments consist of the fixed payments under the arrangement, less any lease incentives, such as tenant improvement allowances. The Company elected the practical expedient which allows the Company to not allocate consideration between lease and non-lease components. Variable costs, such as maintenance and utilities based on actual usage, are not included in the measurement of right-to-use assets and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs. The interest rate implicit in our operating leases is not readily determinable, and therefore an incremental borrowing rate (“IBR”) is estimated to determine the present value of future payments. The estimated IBR factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments. Lease expenses are recognized on a straight-line basis over the lease term.
The Company generally uses the non-cancelable lease term when recognizing the right-of-use assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised. The Company accounts for lease components and non-lease components as a single lease component.
Leases with a term of 12 months or less are not recognized on the condensed consolidated balance sheets but are recognized as expense on a straight-line basis over the term of the lease.
12

Table of Contents
Related Party Transactions
Certain members of the Company’s board of directors serve as directors of, or are executive officers of, and in some cases are investors in, companies that are customers or vendors of the Company. The Company received cash payments of $1.5 million from a related party for the year ended January 31, 2021. Related party transactions were not material as of April 30, 2021 or April 30, 2020.
Recently Adopted Accounting Pronouncements
The Company assesses the adoption impacts of recently issued accounting pronouncements by the Financial Accounting Standards Board (“FASB”) on its condensed consolidated financial statements. The sections below describe impacts from newly adopted pronouncements.
In February 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-02, Leases (Topic 842). This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about lease arrangements. In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which amended the effective date of the new guidance. The Company adopted this guidance using a modified retrospective approach as of February 1, 2021. The Company has elected to use the optional transition method which allows the Company to apply the guidance of ASC 840, including disclosure requirements, in the comparative periods presented. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification related to agreements entered prior to adoption.
The adoption of the new standard resulted in recognition of operating lease RoU assets and operating lease liabilities of $10.3 million and $11.5 million, respectively, as of February 1, 2021. There was no cumulative impact of transition to the Company’s accumulated deficit balance as of the adoption date.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and has since issued various amendments including ASU No. 2018-19, ASU No. 2019-04, and ASU No. 2019-05. The guidance and related amendments modify the accounting for credit losses for most financial assets and require the use of an expected loss model, replacing the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The Company adopted this guidance as of February 1, 2021, and the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
Under the JOBS Act, the Company meets the definition of an emerging growth company and can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the Company is no longer an emerging growth company or until the Company affirmatively and irrevocably opts out of the extended transition period.
3. Fair Value Measurements
The Company measures its financial assets and liabilities at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value, as follows:
Level 1    Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2    Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3    Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
13

Table of Contents
The Company uses the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The carrying amounts of the Company’s financial instruments, which include cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the short maturity of those instruments.
The following tables present the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis, based on the three-tier fair value hierarchy (in thousands):
As of April 30, 2021
Level 1Level 2Level 3Total
Financial Assets:
Cash equivalents:
Money market funds$133,693 $ $ $133,693 
Corporate debt securities 1,754  1,754 
Marketable securities:
U.S. Treasury securities 63,406  63,406 
Corporate debt securities 113,162  113,162 
Commercial paper 31,473  31,473 
Foreign government obligations 14,366  14,366 
Supranational securities 35,668  35,668 
Certificates of deposit 7,301  7,301 
Total financial assets$133,693 $267,130 $ $400,823 
As of January 31, 2021
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$397,200 $ $ $397,200 
The Company had $0.3 million of restricted cash invested in money market funds that is not included in the tables above as of April 30, 2021 and January 31, 2021.
In connection with the Loan and Security agreement, discussed in Note 7, the Company issued 32,276 warrants to purchase shares of the Company’s redeemable convertible preferred stock. The Company used a Black-Scholes option valuation model to value its redeemable convertible preferred stock warrant liability at inception and on subsequent valuation dates. Changes in the fair values of the redeemable convertible preferred stock warrant liability were recorded as interest and other (expense) income, net in the Company’s condensed consolidated statements of operations. All 32,276 warrants to purchase shares of redeemable convertible preferred stock converted into warrants to purchase common stock upon the closing of the Company’s IPO and the related liability was reclassified to additional-paid in capital in the Company’s condensed consolidated balance sheet. During the three months ended April 30, 2021, 21,746 warrants were exercised. There were no transfers out of level 3 during the three months ended April 30, 2021 and 2020.
The following is a summary of available-for sale marketable securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheet as of April 30, 2021 (in thousands):
As of April 30, 2021
Amortized CostUnrealized GainUnrealized LossFair Value
U.S. Treasury securities$63,390 $16 $ $63,406 
Corporate debt securities113,212 7 (57)113,162 
Commercial paper31,471 2  31,473 
Foreign government obligations14,374  (8)14,366 
Supranational securities35,677  (9)35,668 
Certificates of deposit7,300 1  7,301 
Total marketable securities$265,424 $26 $(74)$265,376 
14

Table of Contents
The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. No impairment loss has been recorded on the securities included in the table above, as the Company believes that the decrease in fair value of these securities is temporary.
The following table presents the contractual maturities of the Company’s marketable securities (in thousands):
April 30,
2021
Due in one year or less$147,517 
Due after one year and within five years117,859 
Total marketable securities$265,376 
The Company had no marketable securities as of January 31, 2021.
4. Property and Equipment, Net
Property and equipment, net, consisted of the following (in thousands):
April 30,
2021
January 31,
2021
Computer and hardware equipment$2,425 $2,206 
Furniture and fixtures1,855 1,773 
Leasehold improvements2,898 2,416 
Capitalized internal-use software3,386 3,386 
Gross property and equipment(a)
10,564 9,781 
Accumulated depreciation and amortization(6,119)(5,625)
Property and equipment, net$4,445 $4,156 
______________
(a)Gross property and equipment includes construction-in-progress of less than $0.1 million and $0.6 million that had not yet been placed in service as of April 30, 2021 and January 31, 2021, respectively. The costs associated with construction-in-progress are not amortized until placed in service.
Depreciation and amortization expense of property and equipment was $0.5 million and $0.3 million for the three months ended April 30, 2021 and 2020, respectively.
The following table presents the Company’s long-lived assets by geographic region for the periods indicated (in thousands):
April 30,
2021
January 31,
2021
United States$3,736 $3,381 
International709 775 
Total long-lived assets$4,445 $4,156 
The Company did not capitalize any internal-use software costs for the three months ended April 30, 2021. The Company capitalized $0.5 million of internal-use software costs for the three months ended April 30, 2020. Amortization of internal-use software costs was $0.3 million and $0.1 million during the three months ended April 30, 2021 and 2020, respectively. There were no impairments of capitalized internal-use software costs during the three months ended April 30, 2021 or 2020.
Fully amortized capitalized internal-use software was written off in the amount of $8.0 million during the three months ended April 30, 2020.
5. Intangible Assets and Goodwill
Acquired Intangible Assets
Intangible assets as of April 30, 2021 and January 31, 2021 consisted of developed technology with acquisition-date fair values of $19.1 million and $20.1 million, respectively.
15

Table of Contents
As of April 30, 2021 and January 31, 2021, the accumulated amortization of the developed technology was $10.0 million and $9.4 million, respectively. As of April 30, 2021 and January 31, 2021, the weighted-average remaining useful life of the developed technology was 1.5 years and 1.8 years, respectively. The Company recorded amortization expense of $1.5 million and $1.7 million during the three months ended April 30, 2021 and 2020, respectively. There was no impairment of intangible assets recorded for the three months ended April 30, 2021 or 2020. Fully amortized intangible assets were written off in the amount of $1.0 million during the three months ended April 30, 2021.
As of April 30, 2021, future amortization expense related to acquired developed technology was as follows (in thousands):
Amortization Expense
Remainder of fiscal 2022$4,609 
20234,510 
Total amortization expense$9,119 
As of January 31, 2021, future amortization expense related to acquired developed technology was as follows (in thousands):
Amortization Expense
20226,146 
20234,510 
Total amortization expense$10,656 
Goodwill
There was no impairment of goodwill recorded for the three months ended April 30, 2021 or 2020.
6. Leases
The Company leases office space globally under non-cancelable operating lease agreements that expire at various dates through fiscal 2026. The leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases include (i) renewal options at the election of the Company to renew or extend the lease for an additional 6 years, and/or (ii) options to terminate the lease early, subject to certain termination penalties and fees. These optional renewal and terminations periods have not been considered in the determination of the RoU asset and lease liabilities associated with these leases, as the Company did not consider it reasonably certain it would exercise the options.
The Company evaluated its contracts and determined each of its identified leases are classified as operating leases. The Company has no lease agreements that are classified as finance leases as of April 30, 2021.
The following table presents the components of operating lease expense (in thousands):
Three Months Ended April 30, 2021
Operating lease expense$1,144 
Variable lease expense149 
Short-term lease expense11 
Sublease income21 
As of April 30, 2021, the weighted average remaining lease term was 2.4 and the weighted average discount rate used to determine the net present value of the lease liability was 3.1%.
Rent expense under ASC 840 was $0.8 million for the three months ended April 30, 2020.
16

Table of Contents
Supplemental cash flow information and non-cash activity related to the Company’s operating leases were as follows (in thousands):
Three Months Ended April 30, 2021
Cash paid for amounts included in the measurement of lease liabilities$1,200 
As of April 30, 2021, remaining maturities of lease liabilities are as follows (in thousands):
Amount
Remainder of 2022$3,596 
20234,792 
20242,013 
2025350 
202654 
Total lease payments$10,805 
Less: imputed interest(403)
Present value of lease liabilities$10,402 
7. Debt
In February 2021, the Company entered into an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (“SVB Agreement”) which provides for a revolving line of credit facility. The SVB Agreement amends and restates the Loan and Security Agreement dated January 31, 2016. Under the SVB Agreement, the Company can borrow up to $50 million. Interest on any drawdown accrues at the prime rate minus a spread rate ranging from 0.25% to 0.75%, as determined by the Company’s adjusted quick ratio, subject to either a 3.00% or 2.50% floor depending on the adjusted quick ratio. The SVB Agreement is secured by substantially all of the Company’s assets and includes restrictive covenants, in each case subject to certain exceptions, that limit the Company’s ability to, among other things: incur debt, grant liens, make acquisitions, suffer changes in control, make investments, make certain dividends or distributions, repurchase or redeem stock, dispose of or transfer assets, and enter into transactions with affiliates. Pursuant to the SVB Agreement, the Company is required to maintain a minimum adjusted quick ratio of 1.25 to 1.00. The SVB Agreement also contains customary events of default, upon which Silicon Valley Bank may declare all or a portion of the Company’s outstanding obligations payable to be immediately due and payable. As of April 30, 2021 and January 31, 2021, the Company did not have any debt balance outstanding. The Company was in compliance with the financial covenants associated with the SVB Agreement as of April 30, 2021.
8. Commitments and Contingencies
Non-Cancellable Purchase Commitments
During the three months ended April 30, 2021, there were no material changes, outside the ordinary course of business, to the Company’s contractual obligations and commitments reported in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021.
Other Obligations
Litigation and Other Matters
From time to time, the Company may be a party to various legal matters, threatened claims, or proceedings in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies. Legal accruals are recorded when and if it is determined that a loss related to a certain matter is both probable and reasonably estimable.
Attorneys representing a purported class of current and former employees in various sales roles alleged potential claims of employee misclassification and related federal and state law claims, which the Company disputed. In response, the Company mediated the dispute, and in August 2020, the Company entered into a settlement agreement with the purported class counsel to resolve the dispute, which was handled in arbitration and resulted in the Company paying $4.5 million to resolve the class-wide claims during the
17

Table of Contents
three months ended April 30, 2021. As of January 31, 2021, the Company had recorded $4.5 million related to these claims within accrued expenses and other current liabilities on the condensed consolidated balance sheet.
The Company is not always able to reasonably estimate the amount or range of possible losses in excess of any amounts accrued. In management’s opinion, resolution of all current matters, including employment matters, is not expected to have a material adverse impact on the Company’s business, financial position, results of operations, or cash flows as of April 30, 2021 or January 31, 2021.
9. Revenue
Disaggregation of Revenue
The following table presents the Company’s revenue by geographic region, based on the billing address of the customer, for the periods indicated (in thousands):
Three Months Ended April 30,
20212020
United States$45,396 $39,345 
International8,823 7,857 
Total revenue$54,219 $47,202 
No individual foreign country contributed 10% or more of revenue for the three months ended April 30, 2021 and 2020.
No customer individually accounted for 10% or more of the Company’s revenue for the three months ended April 30, 2021 or 2020.
Deferred Revenue and Remaining Performance Obligations
The Company recognized revenue of $42.4 million and $38.0 million during the three months ended April 30, 2021 and 2020, respectively, that was included in the deferred revenue balance at the beginning of the respective periods.
As of April 30, 2021, future estimated revenue related to performance obligations from non-cancelable contracts that were unsatisfied or partially unsatisfied was $281.0 million and the Company expects to recognize revenue of $171.2 million for these remaining performance obligations over the next 12 months, with the remaining balance recognized thereafter.
Accounts Receivable, Net and Contract Assets
Accounts receivable are recorded at the invoiced amount, net of allowance for credit losses. The allowance is based upon historical loss patterns, the age of each past due invoice, and expectations of forward-looking loss estimates to determine whether the allowance is appropriate. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. As of April 30, 2021 and January 31, 2021, the allowance for credit losses was $0.1 million.
As of April 30, 2021, one customer accounted for 12% of total accounts receivable. As of January 31, 2021, one customer accounted for 10% of total accounts receivable.
Unbilled receivables are recorded when revenue recognized on a contract exceeds the billings to date for that contract and the right to consideration is unconditional when only passage of time is required before payment of that consideration is due, net of allowance for credit losses. Unbilled receivables totaled $1.0 million as of April 30, 2021 and January 31, 2021, and were recorded within accounts receivable, net on the condensed consolidated balance sheets.
Contract assets are recorded when revenue recognized on a contract exceeds the billings to date for that contract and the right to consideration is conditional. There are no contract assets on the condensed consolidated balance sheet as of April 30, 2021. Contract assets totaled $1.6 million as of January 31, 2021, and were recorded within other current assets on the condensed consolidated balance sheets.
18

Table of Contents
Deferred Sales Commissions
The Company capitalized sales commission of $5.7 million and $2.9 million during the three months ended April 30, 2021 and 2020, respectively. Amortized costs were $3.4 million and $2.5 million for the three months ended April 30, 2021 and 2020, respectively. There was no impairment loss in relation to deferred sales commissions for the three months ended April 30, 2021 or 2020.
10. Stockholders’ Equity and Equity Incentive Plans
Redeemable Convertible Preferred Stock
Upon the closing of the Company’s IPO, all 63,761,950 shares of redeemable convertible preferred stock were automatically converted into shares of common stock on a one-to-one basis, and the carrying value of $340.2 million was reclassified into common stock and additional paid-in-capital. As of April 30, 2021, there were no shares of redeemable convertible preferred stock issued and outstanding.
Common Stock
The Company’s Amended and Restated Certificate of Incorporation authorized the Company to issue 1,000.0 million shares of common stock at a par value of $0.0001 as of April 30, 2021 and January 31, 2021. As of April 30, 2021 and January 31, 2021, approximately 106.2 million and 102.5 million shares of common stock were issued and outstanding, respectively.
Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when and if declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding. As of April 30, 2021 and January 31, 2021, no dividends had been declared.
Stock Plans
The Company has two equity incentive plans: the 2010 Stock Plan (the “2010 Plan”) and the 2020 Equity Incentive Plan (the “2020 Plan”). In connection with the Company’s IPO in September 2020, the 2010 Plan was terminated and replaced by the 2020 Plan and all shares that remained available for issuance under the 2010 Plan at that time were reserved for issuance under the 2020 Plan. The number of shares of common stock available for issuance under the 2020 Plan will be increased by any shares of common stock subject to awards outstanding under the 2010 Plan that expire or otherwise terminate without having been exercised or issued in full, are tendered to or withheld by the Company for payment of an exercise price or for satisfying tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest.
The Company has issued stock options and restricted stock units (“RSUs”) to employees, directors, consultants, and advisors pursuant to both the 2010 Plan and 2020 Plan.
Employee stock options are granted with an exercise price no less than the fair value of the underlying common stock on the grant date, in general vest based on continuous service over four years, and expire 10 years from the date of grant. The value of RSUs is measured based on the grant date fair value of the awards and in general vest based on satisfying a service-based condition based on continuous service over four years.
As of April 30, 2021, there were 16.1 million shares available for grant under the 2020 Plan. The 2020 Plan provides that the number of shares reserved will automatically increase on the first day of each fiscal year, beginning on February 1, 2021, by an amount equal to the least of (i) 12,500,000 shares, (ii) 5% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (iii) such other amount as the administrator of the 2020 Plan may determine.
19

Table of Contents
Stock Options
The following table is a summary of option activity during the three months ended April 30, 2021:
Number of
Shares
Weighted Average
Exercise Price
Weighted Average Remaining Contractual TermAggregate
Intrinsic Value
(in thousands)(years)(in thousands)
Balance at January 31, 2021
24,768 $4.16 6.7$749,111 
Options granted $ 
Options exercised(2,836)$2.79 
Options cancelled(464)$8.37 
Balance at April 30, 2021
21,468 $4.26 6.5$327,213 
Options exercisable at April 30, 2021
15,251 $3.15 5.8$249,138 
No stock options were granted during the three months ended April 30, 2021. Stock options granted during the three months ended April 30, 2020 had a weighted-average grant-date fair value $6.00 per share. The aggregate intrinsic value of options exercised during the three months ended April 30, 2021 and 2020 was $51.4 million and $2.6 million, respectively.
No income tax benefits have been recognized for stock-based compensation arrangements. As of April 30, 2021, there was $29.4 million of total unrecognized compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of 2.2 years.
Early Exercise of Employee Options
As of April 30, 2021 and January 31, 2021, the Company had a liability of $0.2 million for 59,125 and 75,250 shares, respectively, of common stock that were unvested and early exercised by employees as of April 30, 2021 and January 31, 2021, respectively.
Restricted Stock Units
The following table is a summary of RSU activity for the three months ended April 30, 2021:
Number of
Shares
Weighted Average Grant Date Fair Value per Share
(in thousands)
Balance at January 31, 2021
3,757 $15.07 
Granted(a)
2,578 $21.97 
Released(842)$12.21 
Forfeited (137)$19.54 
Balance at April 30, 2021
5,356 $18.73 
RSUs expected to vest at April 30, 2021
5,356 $18.73 
______________
(a)During the three months ended April 30, 2021, of the 2.6 million RSUs granted, 0.1 million awards were subject to both service-based and performance-based vesting conditions.
As of April 30, 2021, there was $82.6 million of total unrecognized compensation expense related to unvested employee and director RSUs, of which $2.3 million is for the RSUs subject to certain other performance metrics. Total unrecognized compensation expense related to unvested RSUs is expected to be recognized over a weighted-average period of 3.4 years.
Jask Labs Plans
In connection with the acquisition of Jask Labs, the Company assumed 265,075 options to purchase shares of common stock, granted under the Jask Labs 2015 Stock Option and Grant Plan and the Jask Labs 2018 Equity Incentive Plan (together, the “Jask Plans”), at a weighted-average exercise price of $9.86 per share and weighted-average fair value of $6.39 per share, of which 127,194
20

Table of Contents
and 140,348 remained outstanding as of April 30, 2021 and January 31, 2021, respectively. As of April 30, 2021, 99,753 options were vested and exercisable with a weighted-average exercise price of $10.09, and the total unrecognized compensation expense related to these awards was $0.2 million. During the three months ended April 30, 2021, 12,478 options were exercised.
Employee Stock Purchase Plan
In September 2020, the board of directors adopted and the stockholders of the Company approved the 2020 Employee Stock Purchase Plan (“ESPP”), which became effective on September 17, 2020. The ESPP initially reserved and authorized the issuance of up to a total of 2,000,000 shares of common stock to participating employees. The number of shares reserved under the ESPP will automatically increase on the first day of each fiscal year, starting on February 1, 2021, in an amount equal to the least of (i) 2,500,000 shares, (ii) 1% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (iii) such other amount as the administrator of the ESPP may determine. The ESPP generally provides for 24-month offering periods beginning June 15 and December 15 of each year, with each offering period consisting of four six-month purchase periods, except for the initial offering period which began on September 17, 2020, and will end on December 15, 2022 and the second offering period will begin on June 15, 2021. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock as of the beginning of the offering period or (2) the fair market value of the Company’s common stock on the purchase date, as defined in the ESPP.
The Company recognized stock-based compensation expense related to ESPP of $0.8 million during the three months ended April 30, 2021. As of April 30, 2021, $4.1 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions. As of April 30, 2021, there was $5.8 million of unrecognized stock-based compensation expense related to the ESPP that is expected to be recognized over an average vesting period of 1.1 years.
There were no purchases for the three months ended April 30, 2021 related to the ESPP.
Stock-Based Compensation Expense
The following table presents total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):
Three Months Ended April 30,
20212020
Cost of revenue$173 $62 
Research and development(a)
4,547 2,029 
Sales and marketing3,472 1,527 
General and administrative3,941 1,449 
Total stock-based compensation expense$12,133 $5,067 
________________
(a)During the three months ended April 30, 2021, the Company did not capitalize any stock-based compensation related to internal-use software development costs. During the three months ended April 30, 2020, the Company capitalized stock-based compensation of $0.1 million related to internal-use software development costs. The research and development stock-based compensation amounts are presented net of the capitalized costs.
In connection with the acquisition of Jask Labs, the Company granted 130,180 shares of restricted common stock, with a fair value of $12.11683 per share at the time of grant, that vest over a period of two years. The Company recorded $0.2 million in stock-based compensation expense related to the vesting of the restricted common stock during the three months ended April 30, 2021 and 2020. As of April 30, 2021, the remaining unrecognized stock-based compensation expense of $0.4 million will be recognized over the remaining vesting period.
The RSUs granted under the 2010 Plan were subject to service-based and performance-based vesting conditions, which included a liquidity event condition. In certain cases the RSUs are also subject to certain other performance metrics. The liquidity event performance-based vesting condition was deemed probable of occurring upon the completion of the IPO. On that date the Company recorded cumulative stock-based compensation expense of $10.9 million using the accelerated attribution method. The remaining unrecognized stock-based compensation expense will be recorded over the RSUs remaining requisite service periods. Included within these amounts was $1.4 million for the RSUs subject to both the occurrence of a liquidity event and certain other performance metrics.
21

Table of Contents
Common Stock Transfers
During the three months ended April 30, 2020, certain of the Company’s existing investors acquired outstanding common stock from former employees of the Company, for a purchase price greater than the fair value of the common stock at the time of the transaction. In connection with these stock transfers, the Company waived its right of first refusal and other transfer restrictions applicable to such shares. As a result, the Company recorded stock-based compensation of $0.3 million for the three months ended April 30, 2020, in general and administrative expenses in the condensed consolidated statements of operations. The amount recorded as stock-based compensation represents the difference between the price paid and the estimated fair value at the date of the transaction.
11. Income Taxes
Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, adjusted for discrete items, if any, for the reporting period. The Company updates its estimate of the annual effective tax rate each quarter and records a cumulative adjustment in such period.
The Company recorded income tax expense of $0.3 million and $0.2 million for the three months ended April 30, 2021 and 2020. Income tax expense consists primarily of income taxes in foreign jurisdictions in which the Company conducts business. Due to the Company’s history of losses in the United States, a full valuation allowance on substantially all of the Company’s deferred tax assets, including net operating loss carryforwards, research and development tax credits, capitalized research and development, and other book versus tax differences was maintained.
The American Rescue Plan Act of 2021 (“American Rescue Plan”) was enacted by the United States on March 11, 2021. The American Rescue Plan did not have a material impact on the Company’s provision for income taxes for the three months ended April 30, 2021.
12. Net Loss per Share
Basic net loss per share attributable to the Company’s common stockholders is computed by dividing the net loss attributable to the Company’s common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is the same as basic net loss per share for all years presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss position in each period presented.
The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):
Three Months Ended April 30,
20212020
Net loss
$(26,914)$(23,565)
Weighted-average shares outstanding, basic and diluted
104,033 18,392 
Net loss per share, basic and diluted
$(0.26)$(1.28)
The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (in thousands):
Three Months Ended April 30,
20212020
Stock options
21,468 28,175 
RSUs
5,356 2,805 
ESPP246  
Warrants
11 32 
Shares subject to repurchase
124 254 
Assumed options for Jask Labs acquisition
127 204 
Issuable shares for Jask Labs acquisition
 791 
Redeemable convertible preferred stock
 63,762 
Total anti-dilutive securities
27,332 96,023 
22

Table of Contents
13. Subsequent Events
On May 24, 2021, we completed the acquisition of DF Labs S.p.A. (“DFLabs”), an Italian corporation and a leader in security orchestration, automation and response (“SOAR”) technology. The combination of Sumo Logic’s Cloud SIEM and DFLabs’ solution will provide customers with comprehensive cloud-native security intelligence solutions built for today’s digital businesses. The aggregate purchase consideration was $42.1 million, of which $35.3 million was paid in cash, and $6.8 million was comprised of 364,669 shares of the Company’s common stock. The Company is currently evaluating the purchase price allocation for this transaction and expects the acquisition to be accounted for as business combination.
In May 2021, the Company entered into a definitive agreement to acquire Sensu, Inc. (“Sensu”), a privately-held software company that is a leader in open source monitoring. The transaction is subject to customary closing conditions and is anticipated to close in the second quarter of fiscal 2022. The total amount to be paid by the Company in the transaction to acquire the shares and certain indebtedness of Sensu will be approximately $29.6 million, which amount will be subject to customary purchase price adjustments determined at closing. The purchase price for the shares of Sensu will be paid in a combination of cash and shares of the Company’s common stock, with the shares to be valued based on the average trading price of the Company’s common stock over a trailing period measured prior to the closing. The Company is currently evaluating the purchase price allocation for this transaction.

23

Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended January 31, 2021, filed with the SEC on March 12, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal year ending January 31, 2022 is referred to herein as fiscal 2022. Our fiscal years ended January 31, 2021 and 2020 are referred to herein as fiscal 2021 and fiscal 2020, respectively.
Overview
Sumo Logic is the pioneer of Continuous Intelligence, a new category of software, which enables organizations of all sizes to address the challenges and opportunities presented by digital transformation, modern applications, and cloud computing. Our Continuous Intelligence Platform enables organizations to automate the collection, ingestion, and analysis of application, infrastructure, security, and IoT data to derive actionable insights within seconds. Continuous Intelligence leverages AI/ML capabilities, and is provided as a multi-tenant cloud service that allows organizations to more rapidly deliver reliable applications and digital services, protect against modern security threats, and consistently optimize their business processes in real time. This empowers employees across all lines of business, development, IT, and security teams with the data and insights needed to address the technology and collaboration challenges required for modern business. With our Continuous Intelligence Platform, executives and employees have the intelligence they require to take prescriptive action in real time—a modern business imperative.
We generate revenue through the sale of subscriptions to customers that enable them to access our cloud-native platform. We recognize subscription revenue ratably over the term of the subscription, which is generally one year, but can be three years or longer. We offer multi-tiered paid subscription packages for access to our platform, the pricing for which differs based on a variety of factors, including volume of data to be ingested, duration of data retention, and breadth of access to platform features and functionalities. Our subscription packages encourage customers to expand their adoption of our platform by providing them with the flexibility to ingest and analyze large volumes of data and the ability to access a broad suite of platform features and functionalities without incurring overage fees, as well as insights into their usage patterns. We also deliver basic customer support with each of our paid subscription packages, and customers have the ability to purchase subscriptions to our premium support service.
Our go-to-market strategy consists of self-service adoption through our website, an inside sales team, a field sales team, and a partner channel. We offer free trials that enable potential customers to experience the benefits of our platform, and we see significant conversion from our trial users to paid customers, with approximately one-third of our new customers in fiscal 2021 having been free trial users who converted into paying customers. We leverage our user community to proactively identify trends, gather global insights, and create new use cases, thereby empowering us to deliver out-of-the-box value to our customers. We employ a land-and-expand business model centered around our platform offerings, which have a rapid time to value for our customers and are easily extensible to multiple use cases across a business. We utilize the analytical capabilities of our platform and our customer success team to understand how our customers use, and how they would benefit from expanding their use of, our platform. This understanding helps us successfully upsell and cross sell to our existing customers.
The power of our platform, and the benefits that it delivers to customers, has driven rapid growth in our revenue. For the three months ended April 30, 2021 and 2020, our revenue was $54.2 million and $47.2 million, respectively, representing a period over period growth rate of 15%. We generated GAAP operating losses of $26.5 million and $23.5 million for the three months ended April 30, 2021 and 2020, respectively. We define non-GAAP operating loss as loss from operations excluding stock-based compensation and related employer payroll taxes, amortization of acquired intangible assets, and acquisition-related expenses. We generated non-GAAP operating losses of $10.8 million and $16.7 million for the three months ended April 30, 2021 and 2020, respectively. See “Non-GAAP Financial Measures” for the reconciliation of GAAP operating loss to non-GAAP operating loss.
Impact of COVID-19
As a result of the COVID-19 pandemic, we have temporarily closed or reduced capacity at our offices, continue to require many of our employees and contractors to work remotely, and have reduced business travel, all of which represent a significant disruption in how we operate our business. Additionally, in May 2020, as part of our efforts to respond to the COVID-19 pandemic and ensure longer-term financial stability, we initiated cost reduction measures, including a headcount reduction. The operations of our partners and customers have likewise been disrupted, and we believe this has caused delays in renewal decisions for some of our
24

Table of Contents
existing customers, caused customers to request concessions such as extended payment terms or better pricing, and affected contraction or churn rates for our customers. While the duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the duration and spread of the outbreak, the extent and effectiveness of containment actions, and the effectiveness of vaccination efforts, it has already had an adverse effect on the global economy and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. We believe that the COVID-19 pandemic could also accelerate customer transformation into digital businesses, which we expect will generate additional opportunities for us in the future. Due to our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our revenue until future periods. See “Risk Factors — The recent global COVID-19 pandemic has harmed and could continue to harm our business and results of operations” for further discussion of the challenges and risks we have encountered and could encounter related to the COVID-19 pandemic.
Key Factors Affecting Our Performance
New Customer Acquisition
Our business depends, in part, on our ability to add new customers. As businesses transition to the public cloud and with the increasing number of cloud-native businesses, continuous intelligence will become even more of a strategic imperative. We believe this growing adoption of cloud infrastructure across all organizations will continue to drive demand for our platform and broaden our customer base. Since our platform has offerings for organizations of all sizes and across industries, including organizations of all stages of cloud maturity, we believe these market changes present a significant opportunity for growth. As of April 30, 2021, we had approximately 2,200 customers worldwide, spanning organizations of a broad range of sizes and industries. However, we expect that our ability to add new customers may be negatively impacted by current economic uncertainty in light of the COVID-19 pandemic. We will continue to focus on new customer acquisition by investing in sales and marketing to build brand awareness, expanding our community, and driving adoption of our platform as we further capture the opportunity in our addressable market.
We define a customer as a separate legal entity, such as a company or an educational or government institution, that is under a paid contract with us or with which we are negotiating a renewal contract at the end of a given period. To the extent we are negotiating a renewal with a customer after the expiration of the contract, we continue to include that customer in our customer count if we are in active discussions for a renewal or upgrade. Given our historical experience of customer renewals, if we are in active discussions for a renewal or upgrade, we continue to include customers with expired contracts in our customer count until the customer either renews its contract or negotiations terminate without renewal. In situations where an organization has multiple subsidiaries or divisions that separately contract with us, we typically treat only the parent entity as the customer instead of treating each subsidiary or division as a separate customer. However, we count each purchaser of our self-service offering as a unique customer, regardless of other subscriptions such organization may have.
Expanding within our Existing Customer Base
Our business depends, in part, on the degree to which our land-and-expand strategy is successful. Our customers often initially adopt our platform for a specific use case and subsequently increase their adoption as they realize the benefits and flexibility of our platform. We have been successful in expanding our existing customers’ adoption of our platform as demonstrated by our dollar-based net retention rate, which we consider an indicator of our ability to retain and expand revenue from existing customers over time. Our dollar-based net retention rate has fluctuated between approximately 115% and 130% for each of the past twelve quarters. In the first quarter of fiscal 2022, our dollar-based net retention rate declined a few percentage points below 115%. The decline was driven by the combination of slower than historic expansion in the install base and higher than historical churn. We anticipate that our dollar-based net retention may continue to decline and it will take several quarters before we start to see sustained improvement in our dollar-based net retention rate. Our efficient land-and-expand model has helped us accelerate adoption within our largest customers, as evidenced by our customers with over $100,000 of ARR, which was 376 as of April 30, 2021 and 329 as of April 30, 2020.
We define ARR as the annualized recurring revenue run-rate from all customers that are under contract with us at the end of the period or with which we are negotiating a renewal contract. Given our historical experience of customer renewals, if we are in active discussions for a renewal, we continue to include customers with expired contracts in our ARR until the customer either renews its contract or negotiations terminate without renewal. For certain customers whose revenue may fluctuate from month to month based upon their specific contractual arrangements, we calculate ARR using the annualized monthly recurring revenue, or MRR, run-rate (MRR multiplied by 12). This enables us to calculate our anticipated recurring revenue for all customers based on our packaging and licensing models, which we believe provides a more accurate view of our anticipated recurring revenue.
25

Table of Contents
We calculate our dollar-based net retention rate by first identifying customers, or the Base Customers, in a particular quarter, or the Base Quarter. We then divide the ARR attributable to the Base Customers in the same quarter of the subsequent year, or the Comparison Quarter, by the ARR attributable to those Base Customers in the Base Quarter. Our dollar-based net retention rate in a particular quarter is obtained by averaging the result from that particular quarter with the corresponding results from each of the prior three quarters.
Continued Investment in Technology Leadership and Innovation
We intend to extend our leadership position by continuing to innovate, bringing new technologies to market, honing best practices, and driving thought leadership. Our success depends, in part, on our ability to sustain innovation and technology leadership in order to maintain a competitive advantage. We expect to continue to invest in research and development to increase our revenue and achieve long-term profitability, and we intend to continue extending the applicability of our platform as well as improving the value of our offerings for our customers. We believe that our platform is highly differentiated and has broad applicability to a wide variety of use cases, and we will continue to invest in developing and enhancing platform features and functionality to further extend the adoption of our platform. Additionally, we will continue to evaluate opportunities to acquire or invest in businesses, offerings, technologies, or talent that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities. Once we complete acquisitions, we must successfully integrate and manage these acquisitions to realize their benefits.
International Expansion
We intend to continue to invest in our international operations to grow our business outside of the United States. We generated 16% and 17% of our revenue outside the United States during the three months ended April 30, 2021 and 2020, respectively. We believe that global demand for Continuous Intelligence and for the functionality of our platform will continue to increase as international businesses undergo digital transformations and adopt cloud-based technologies. We currently have a sales presence throughout Asia-Pacific-Japan, or APJ, and Europe, with sales offices in Sydney, Australia, Tokyo, Japan, and London, United Kingdom, and we further increase our global reach with our over 200 international channel partners. International expansion over the long term represents a significant opportunity and we plan to continue to invest in growing our presence internationally, both through expanding our sales and marketing efforts and leveraging channel and other ecosystem partners.
Components of Results of Operations
Revenue
We generate subscription revenue through the sale of subscriptions to customers that enable them to access our cloud-native platform. Subscription terms are generally one year, but can be three years or longer, and a substantial majority of our contracts are non-cancelable. Subscription revenue is driven by sales of our multi-tiered paid subscriptions, the pricing for which differs based on a variety of factors, including volume of data expected to be ingested, duration of data retention, and breadth of access to our platform features and functionalities. Due to the ease of using our platform, professional services revenue from configuration, implementation, and training services constituted approximately 1% of our total revenue for the three months ended April 30, 2021 and 2020.
Cost of Revenue
Cost of revenue includes all direct costs to deliver and support our platform, including personnel and related costs, third-party hosting fees related to our cloud platform, amortization of internal-use software and acquired developed technology, as well as allocated facilities and IT costs.
As new customers purchase access to our platform and our existing customer base expands their utilization of our platform, we will incur greater cloud hosting costs related to the increased volume of data being hosted. We will continue to invest additional resources in our platform infrastructure and customer support organizations to expand the capabilities of our platform features and ensure that our customers are realizing the full benefit of our platform. The level and timing of investment in these areas could affect our cost of revenue in the future.
Gross Profit and Gross Margin
Gross profit represents revenue less cost of revenue, and gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue fluctuates, and has been and will continue to be affected by various factors, including the timing and amount of investments to maintain or expand our cloud hosting capability, the continued growth of our platform and customer support teams, increased compensation expenses, as well as amortization of costs associated with capitalized internal-use software and acquired intangible assets. We expect our gross profit to increase and our gross margin to
26

Table of Contents
increase modestly over the long term due to the continued growth in the use of our platform and cost efficiencies related to our cloud hosting services, although our gross margins could fluctuate from period to period depending on the interplay between the factors described above.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel and related expenses are the most significant component of operating expenses and consist of salaries, employee benefit costs, payroll taxes, bonuses, sales commissions, travel-related expenses, and stock-based compensation expense, as well as the allocated portion of overhead costs for facilities and IT. Operating expenses also include cloud infrastructure fees and other services related to staging and development efforts for our platform.
Research and Development
Research and development expenses consist primarily of costs related to research, design, maintenance, and minor enhancements of our platform that are expensed as incurred. These costs consist primarily of personnel and related expenses, including allocated overhead costs, contractor and consulting fees related to the design, development, testing, and enhancement of our platform, and software, hardware, and cloud infrastructure fees for staging and development related to research and development activities necessary to support growth in our employee base and in the adoption of our platform. We expect that our research and development expenses will increase in dollar value as we continue to increase our investments in our platform. However, we anticipate research and development expenses will decrease as a percentage of our revenue over the long term, although they may fluctuate as a percentage of our revenue from period to period depending on the timing of expenses.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel and related expenses including allocated overhead costs and commissions, costs of general marketing and promotional activities, including free trials of our platform, fees for professional services related to marketing, and software and hardware to support growth in our employee base. Sales commissions earned by our sales force that are considered incremental costs of obtaining a subscription with a customer are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be five years. We expect that our sales and marketing expenses will increase in dollar value over the long term, though the dollar value of such expenses may fluctuate in the near term. We believe that sales and marketing expenses will continue to be our largest operating expense for the foreseeable future as we expand our sales and marketing efforts. We expect that our sales and marketing expenses will increase as a percentage of our revenue over the near term, but decrease over the long term, although they may fluctuate as a percentage of revenue from period to period depending on the timing of expenses.
General and Administrative
General and administrative expenses consist primarily of personnel and related expenses associated with our executive, finance, legal, human resources, information technology and security, and other administrative personnel. In addition, general and administrative expenses include non-personnel costs, such as fees for professional services such as external legal, accounting, and other consulting services, hardware and software costs, certain taxes other than income taxes, and overhead costs not allocated to other departments.
We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the Nasdaq Global Select Market, and increased expenses for insurance, investor relations, and fees for professional services. We expect that our general and administrative expenses will increase in dollar value as our business grows. However, we expect that our general and administrative expenses will decrease as a percentage of our revenue as our revenue grows over the long term, although they may fluctuate as a percentage of revenue from period to period depending on the timing of expenses.
Interest and Other (Expense) Income, Net
Interest and other (expense) income, net primarily consists of interest and investment income and foreign currency transaction gains (losses).
Interest Expense
Interest expense primarily consists of interest incurred in connection with our past borrowings under our revolving line of credit facility.
27

Table of Contents
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
Results of Operations
The following table sets forth our condensed consolidated statements of operations data for the periods indicated:
Three Months Ended April 30,
20212020
(in thousands)
Revenue$54,219 $47,202 
Cost of revenue(1)(2)
15,395 14,426 
Gross profit38,824 32,776 
Operating expenses:
Research and development(1)
20,443 17,699 
Sales and marketing(1)(3)
30,278 29,456 
General and administrative(1)(4)
14,573 9,077 
Total operating expenses65,294 56,232 
Loss from operations(26,470)(23,456)
Interest and other (expense) income, net(16)228 
Interest expense