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Sumo Logic Announces Third Quarter Fiscal 2023 Financial Results

SUMO

Third quarter revenue grew 27% year over year to $79.0 million
Third quarter ARR grew 22% year over year to $298.9 million

REDWOOD CITY, Calif., Dec. 05, 2022 (GLOBE NEWSWIRE) -- Sumo Logic (NASDAQ: SUMO), the SaaS analytics platform to enable reliable and secure cloud-native applications, today announced financial results for the third quarter of its fiscal 2023 ended October 31, 2022.

“We delivered revenue growth of 27% year-over-year in the third quarter while also driving better operating efficiencies, and will continue to emphasize efficient growth as we drive towards future cash flow break even and profitability,” said Ramin Sayar, President and CEO of Sumo Logic. "Our unified cloud-native platform for reliability and security continues to resonate with our customers and industry analysts as more customers are seeking to provide best in class digital experiences to their end users.”

Third Quarter Fiscal 2023 Financial Highlights

  • Revenue was $79.0 million, an increase of 27% year over year
  • Annual Recurring Revenue ("ARR") was $298.9 million, an increase of 22% year over year
  • GAAP gross margin was 68%; non-GAAP gross margin was 73%
  • GAAP operating loss was $27.3 million; GAAP operating margin was (35)%
  • Non-GAAP operating loss was $5.5 million; non-GAAP operating margin was (7)%
  • GAAP net loss was $26.3 million, or $0.22 per share
  • Non-GAAP net loss was $4.4 million, or $0.04 per share
  • Net cash used in operating activities was $8.7 million; free cash flow was $(9.1) million
  • Cash and cash equivalents and marketable securities were $342.1 million as of October 31, 2022

Recent Highlights

  • Recognized as a Visionary in the 2022 Gartner Magic Quadrant for SIEM for the second year in a row.
  • Announced that Cloud SIEM is now available as part of the Sumo Logic FedRAMP-Moderate offering.
  • Announced Reliability Management, which helps organizations adopt a better approach to measure and improve the reliability of distributed applications.
  • Announced several enhancements to unlock greater insights and usability for the developer experience: Real User Monitoring, A Unified Entity Model, and Intelligent Alert Grouping.
  • Announced a new app for AWS Cost Explorer to help customers manage AWS performance and cloud costs.
  • Appointed Timothy Youngblood to our Board of Directors. Timothy is the SVP, Chief Security Officer and Product Security Officer of T-Mobile and has extensive cyber-security expertise with a deep understanding of the challenges faced by fellow CISOs. His expertise furthers our efforts to help CISOs and organizations address the increasing challenges with digital transformation and cloud migrations.

Financial Outlook

For the fourth quarter of fiscal 2023, Sumo Logic expects:

  • Total revenue between $77.0 million and $78.0 million, representing 15% to 16% growth year-over-year
  • Non-GAAP operating margin of (14)% to (13)%
  • Non-GAAP net loss per share of $0.09 to $0.08 on approximately 120.5 million weighted average shares outstanding

For the full fiscal year 2023, Sumo Logic expects:

  • Total revenue between $298.0 million and $299.0 million, representing 23% growth year-over-year
  • Non-GAAP operating margin of (16)% to (15)%
  • Non-GAAP net loss per share of $0.36 to $0.35 on approximately 117.5 million weighted average shares outstanding

These statements are forward-looking and actual results may differ materially. Please refer to Forward-Looking Statements below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Guidance for non-GAAP financial measures excludes stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, acquisition-related expenses, and expenses related to a cooperation agreement. We have not provided the most directly comparable GAAP measures because certain items are out of our control or cannot be reasonably predicted. Accordingly, a reconciliation for forward-looking non-GAAP operating loss and non-GAAP net loss per share is not available without unreasonable effort. Refer to Non-GAAP Financial Measures below.

Conference Call Details

The company will host a conference call and live webcast on Monday, December 5, 2022, at 1:30 p.m. Pacific time (4:30 p.m. Eastern time). The news release with the financial results will be accessible on Sumo Logic’s investor relations website at investor.sumologic.com prior to the conference call. To access the conference call, dial (877) 407-0784 from the United States or (201) 689-8560 internationally and reference the company name and conference title. Following the completion of the call, a replay will be available for approximately two weeks. The replay can be accessed by dialing (844) 512-2921 from the United States or (412) 317-6671 internationally and using the recording passcode 13734224. A live webcast and replay of the conference call can also be accessed from the Sumo Logic Investor Relations website at investor.sumologic.com.

Supplemental Financial and Other Information

Supplemental financial and other information can be accessed through Sumo Logic’s investor relations website at investor.sumologic.com. Sumo Logic uses the investor relations section on its website as the means of complying with its disclosure obligations under Regulation FD. Accordingly, we recommend that investors should monitor Sumo Logic’s investor relations website in addition to following Sumo Logic’s press releases, SEC filings and social media.

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance. We use the following non-GAAP financial measures, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. We believe that non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, may be helpful to investors because they provide consistency and comparability with past financial performance and meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. The non-GAAP financial measures are presented for supplemental informational purposes only, have limitations as analytical tools, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP and may be different from similarly-titled non-GAAP financial measures used by other companies. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business, which it includes in press releases announcing quarterly financial results, including this press release.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP loss from operations, non-GAAP operating margin, non-GAAP net loss, and non-GAAP net loss per share: We define these non-GAAP financial measures as their respective GAAP measures, excluding stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, acquisition-related expenses, and expenses related to a cooperation agreement. We use these non-GAAP financial measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance.

Free cash flow: We define free cash flow as cash used in operating activities less purchases of property and equipment and capitalized internal-use software costs. We believe free cash flow is a useful indicator of liquidity that provides our management, board of directors, and investors with information about our future ability to generate or use cash to enhance the strength of our balance sheet and further invest in our business and pursue potential strategic initiatives.

Please see the reconciliation tables at the end of this release for the reconciliation of GAAP and non-GAAP results.

Forward-Looking Statements

This press release contains express and implied forward-looking statements including but not limited to, statements regarding our GAAP and non-GAAP guidance for the fourth fiscal quarter and full fiscal year 2023, expectations regarding the benefits of our offerings, our growth strategy and investments, our market opportunity, the potential impact of the macro environment, and our ability to achieve success. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to our ability to realize the anticipated benefits from our acquisitions, our ability to achieve and maintain future profitability, our ability to attract new customers and retain and sell additional functionality and services to our existing customers, our ability to sustain and manage our growth, our ability to successfully add new features and functionality to our platform, our ability to compete effectively in an increasingly competitive market, and general market, political, economic, and business conditions, including the impact of the recent economic downturn, inflation, and COVID-19, and other risks detailed in our Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2022, filed with the Securities and Exchange Commission (SEC) on August 26, 2022, and other filings and reports that we may file from time to time with the SEC. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended October 31, 2022 that will be filed with the SEC, which should be read in conjunction with this press release and the financial results included herein.

Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent our views as of the date of this press release. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release. We anticipate that subsequent events and developments could cause our views to change. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Sumo Logic

Sumo Logic, Inc. (NASDAQ: SUMO), empowers the people who power modern, digital business. Through its SaaS analytics platform, Sumo Logic enables customers to deliver reliable and secure cloud-native applications. The Sumo Logic Continuous Intelligence Platform™ helps practitioners and developers ensure application reliability, secure and protect against modern security threats, and gain insights into their cloud infrastructures. Customers around the world rely on Sumo Logic to get powerful real-time analytics and insights across observability and security solutions for their cloud-native applications. For more information, visit www.sumologic.com.

For more information, please contact:

Investor Relations Contact
Bryan Liberator
IR@sumologic.com

Media Contact
Carmen Harris
charris@sumologic.com

Sumo Logic, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Revenue $ 78,952 $ 62,016 $ 220,915 $ 175,076
Cost of revenue 25,114 20,384 75,222 55,557
Gross profit 53,838 41,632 145,693 119,519
Operating expenses:
Research and development 26,462 25,464 80,351 69,768
Sales and marketing 38,787 33,565 113,613 95,300
General and administrative 15,906 14,015 50,454 45,258
Total operating expenses 81,155 73,044 244,418 210,326
Loss from operations (27,317 ) (31,412 ) (98,725 ) (90,807 )
Interest and other income (expense), net 1,635 (19 ) 3,415 34
Interest expense (79 ) (44 ) (114 ) (133 )
Loss before provision for income taxes (25,761 ) (31,475 ) (95,424 ) (90,906 )
Provision (benefit) for income taxes 528 (639 ) 1,495 (1,107 )
Net loss $ (26,289 ) $ (30,836 ) $ (96,919 ) $ (89,799 )
Net loss per share, basic and diluted $ (0.22 ) $ (0.28 ) $ (0.83 ) $ (0.84 )
Weighted-average shares used to compute net loss per share, basic and diluted 119,124 110,409 116,712 107,479

Sumo Logic, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

October 31,
2022
January 31,
2022
Assets
Current assets:
Cash and cash equivalents $ 91,662 $ 79,986
Marketable securities, current 230,482 210,645
Accounts receivable, net 56,280 49,451
Prepaid expenses 9,791 9,792
Deferred sales commissions, current 18,790 17,110
Other current assets 2,526 2,865
Total current assets 409,531 369,849
Marketable securities, noncurrent 19,917 65,866
Property and equipment, net 4,848 4,960
Operating lease right-of-use assets 2,327 6,110
Goodwill 92,298 94,967
Acquired intangible assets, net 14,220 26,221
Deferred sales commissions, noncurrent 31,165 32,689
Other assets 1,773 1,469
Total assets $ 576,079 $ 602,131
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 17,970 $ 7,755
Accrued expenses and other current liabilities 21,726 25,425
Operating lease liabilities, current 2,551 4,619
Deferred revenue, current 144,641 131,329
Total current liabilities 186,888 169,128
Operating lease liabilities, noncurrent 168 2,346
Deferred revenue, noncurrent 3,396 5,944
Other liabilities 5,654 5,744
Total liabilities 196,106 183,162
Stockholders’ equity:
Common stock 12 11
Additional paid-in-capital 1,009,058 944,447
Accumulated other comprehensive loss (11,022 ) (4,333 )
Accumulated deficit (618,075 ) (521,156 )
Total stockholders’ equity 379,973 418,969
Total liabilities and stockholders’ equity $ 576,079 $ 602,131

Sumo Logic, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)

Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Cash flows from operating activities
Net loss $ (26,289 ) $ (30,836 ) $ (96,919 ) $ (89,799 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 4,048 4,282 12,567 9,889
Amortization of deferred sales commissions 5,101 4,188 14,819 11,353
Amortization (accretion) of marketable securities purchased at a premium (discount) 48 789 1,415 2,156
Stock-based compensation, net of amounts capitalized 17,717 12,937 49,933 39,127
Non-cash operating lease cost 945 1,038 2,998 3,132
Other (101 ) (806 ) (217 ) (1,852 )
Changes in operating assets and liabilities
Accounts receivable (5,469 ) (12,807 ) (6,922 ) 1,910
Prepaid expenses (1,567 ) (3,678 ) (18 ) (133 )
Other assets 461 (282 ) (538 ) 1,104
Deferred sales commissions (5,573 ) (6,762 ) (14,975 ) (16,252 )
Accounts payable 5,561 2,730 10,256 4,283
Accrued expenses and other current liabilities 86 5,874 (2,594 ) 1,806
Deferred revenue (2,887 ) 11,550 10,764 16,436
Operating lease liabilities (1,055 ) (1,124 ) (3,328 ) (3,371 )
Other liabilities 248 218 594 265
Net cash used in operating activities (8,726 ) (12,689 ) (22,165 ) (19,946 )
Cash flows from investing activities
Purchases of marketable securities (66,519 ) (67,917 ) (184,996 ) (359,587 )
Maturities of marketable securities 79,232 42,750 182,563 57,958
Sales of marketable securities 4,582 15,480 25,102 15,480
Purchases of property and equipment (498 ) (386 ) (1,799 )
Capitalized internal-use software costs (381 ) (986 )
Cash paid for acquisitions, net of cash and restricted cash acquired (43 ) (40,340 )
Net cash provided by (used in) investing activities 16,914 (10,228 ) 21,297 (328,288 )
Cash flows from financing activities
Payments of deferred offering costs (93 )
Proceeds from employee stock purchase plan 2,831 4,725
Proceeds from exercise of common stock options 1,732 4,647 11,479 17,974
Cash paid for holdback consideration in connection with acquisitions (456 )
Net cash provided by financing activities 1,732 4,647 13,854 22,606
Effect of exchange rate changes on cash and cash equivalents (469 ) (25 ) (1,310 ) (174 )
Change in cash and cash equivalents and restricted cash 9,451 (18,295 ) 11,676 (325,802 )
Cash and cash equivalents and restricted cash:
Beginning of period 82,511 96,933 80,286 404,440
End of period $ 91,962 $ 78,638 $ 91,962 $ 78,638

Sumo Logic, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data and percentages)
(unaudited)

Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Reconciliation of gross profit and gross margin
GAAP gross profit $ 53,838 $ 41,632 $ 145,693 $ 119,519
Add: Stock-based compensation and related employer payroll taxes 419 192 1,105 558
Add: Amortization of acquired intangible assets 3,335 3,614 10,395 8,157
Add: Acquisition-related expenses 76 97 228 151
Non-GAAP gross profit $ 57,668 $ 45,535 $ 157,421 $ 128,385
GAAP gross margin 68 % 67 % 66 % 68 %
Non-GAAP gross margin 73 % 73 % 71 % 73 %
Reconciliation of operating expenses
GAAP research and development $ 26,462 $ 25,464 $ 80,351 $ 69,768
Less: Stock-based compensation and related employer payroll taxes (7,583 ) (6,538 ) (21,889 ) (17,499 )
Less: Acquisition-related expenses (48 ) (297 ) (597 ) (535 )
Non-GAAP research and development $ 18,831 $ 18,629 $ 57,865 $ 51,734
GAAP sales and marketing $ 38,787 $ 33,565 $ 113,613 $ 95,300
Less: Stock-based compensation and related employer payroll taxes (5,304 ) (3,794 ) (14,111 ) (11,807 )
Less: Amortization of acquired intangible assets (150 ) (150 ) (450 ) (233 )
Less: Acquisition-related expenses (95 ) (95 ) (281 ) (181 )
Non-GAAP sales and marketing $ 33,238 $ 29,526 $ 98,771 $ 83,079
GAAP general and administrative $ 15,906 $ 14,015 $ 50,454 $ 45,258
Less: Stock-based compensation and related employer payroll taxes (4,595 ) (2,727 ) (13,530 ) (10,821 )
Less: Acquisition-related expenses (3,756 )
Less: Expenses related to a cooperation agreement (250 ) (2,604 )
Non-GAAP general and administrative $ 11,061 $ 11,288 $ 34,320 $ 30,681
Reconciliation of operating loss and operating margin
GAAP loss from operations $ (27,317 ) $ (31,412 ) $ (98,725 ) $ (90,807 )
Add: Stock-based compensation and related employer payroll taxes 17,901 13,251 50,635 40,685
Add: Amortization of acquired intangible assets 3,485 3,764 10,845 8,390
Add: Acquisition-related expenses 219 489 1,106 4,623
Add: Expenses related to a cooperation agreement 250 2,604
Non-GAAP operating loss $ (5,462 ) $ (13,908 ) $ (33,535 ) $ (37,109 )
GAAP operating margin (35)% (51)% (45)% (52)%
Non-GAAP operating margin (7)% (22)% (15)% (21)%
Reconciliation of net loss
GAAP net loss $ (26,289 ) $ (30,836 ) $ (96,919 ) $ (89,799 )
Add: Stock-based compensation and related employer payroll taxes 17,901 13,251 50,635 40,685
Add: Amortization of acquired intangible assets 3,485 3,764 10,845 8,390
Add: Acquisition-related expenses 219 489 1,106 4,623
Add: Expenses related to a cooperation agreement 250 2,604
Non-GAAP net loss $ (4,434 ) $ (13,332 ) $ (31,729 ) $ (36,101 )
GAAP net loss per share $ (0.22 ) $ (0.28 ) $ (0.83 ) $ (0.84 )
Non-GAAP net loss per share $ (0.04 ) $ (0.12 ) $ (0.27 ) $ (0.34 )
Weighted average shares outstanding, basic and diluted 119,124 110,409 116,712 107,479

Sumo Logic, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (Continued)
(in thousands)
(unaudited)

Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Reconciliation of cash used in operating activities to free cash flow
GAAP cash used in operating activities $ (8,726 ) $ (12,689 ) $ (22,165 ) $ (19,946 )
Less: Purchases of property and equipment (498 ) (386 ) (1,799 )
Less: Capitalized internal-use software costs (381 ) (986 )
Free cash flow $ (9,107 ) $ (13,187 ) $ (23,537 ) $ (21,745 )



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