Sumo Logic, Inc.: Sumo Logic Announces Third Quarter Fiscal 2023 Financial Results

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 [phone] from the United States or [phone] 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 [phone] from the United States or [phone] 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
[e-mail]

Media Contact
Carmen Harris
[e-mail]

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	)