IronNet Reports Fiscal First Quarter 2023 Financial Results
IronNet, Inc. (NYSE:IRNT) ("IronNet"), a leading provider of solutions Transforming Cybersecurity Through Collective Defense℠, announced today its financial results for the fiscal first quarter ended April 30, 2022.
"In the past several months, President Biden and his cyber leaders have urged the market to embrace the concept of Collective Defense — that ‘you have to beat all of us to beat one of us.' We firmly believe this is the future of cybersecurity," said General (Ret.) Keith Alexander, Chairman and co-CEO of IronNet. "IronNet Collective Defense is the only anonymized threat detection collaboration solution available, giving our customers the advantage of higher efficiency in their cyber defense as they leverage the significant talent of organizations across the community."
William Welch, co-CEO of IronNet, commented: "I am proud of our team which delivered new transactional Annual Recurring Revenue (ARR) of $5.5 million in the quarter. Our topline results were consistent with our expectation that certain customers in our transactional business would be delayed in signing or renewing their contracts, resulting in reduced ARR and revenue from the prior quarter. We would like to reiterate that we see these opportunities as pending rather than lost. In addition to our transactional business, we believe that our strategic business pipeline of deals larger than $5 million in ARR remains strong, and our conviction is high that a number of these opportunities will materialize to support our growth for the year."
Fiscal First Quarter 2023 Financial & Operating Highlights
-
Annual Recurring Revenue (ARR): $30.1 million at April 30, 2022, compared to $25.6 million at the end of the same quarter last year.
-
Revenue: Revenue for the first quarter was $6.7 million compared to $6.4 million in the same quarter last year. Cloud subscription revenue was $5.2 million, or 81% of product revenue, compared to 65% in the same quarter last year.
-
Gross Margin: Gross margin for the first quarter was 62.7% compared to 69.6% in the same quarter last year, with 3.1% of the gross margin in the first quarter related to sensor inventory charges to support anticipated deployments this year.
-
Net loss: Net loss for the first quarter was $33.2 million compared to $15.5 million in the same quarter last year. Excluding stock-based compensation expense and transaction costs and fees, net loss for the first quarter would be $21.4 million compared to $14.9 million in the same quarter last year.
-
Dollar-based average contract length: 3.2 years for the first quarter, compared to 2.8 years in the same quarter last year.
-
Cash and cash equivalents: $31.4 million at end of the first quarter. IronNet has not yet drawn on its equity line facility.
- Customer Count: 91 compared to 44 at the end of the same quarter last year.
Business Highlights
- Honored with the 2022 Global Infosec Award in the category of Advanced Persistent Threat Detection and Response from Cyber Defense Magazine, the industry's leading electronic information security magazine.
- Announced as a flagship partner in the Mandiant® Cyber Alliance Program, an intelligence-led, multi-vendor approach to nation-grade intelligence, innovative integrated solutions and expert managed services.
- Detected a threat hijacking attack carrying Emotet malware against an organization located in the Asia Pacific region this May, likely part of a new campaign by the MUMMY SPIDER threat group, designed to test a new bypass for Microsoft disabling macros by default for use in future large-scale campaigns. These and other important findings by IronNet Threat Research can be found on our blog and included in our monthly Threat Intelligence Briefs.
Outlook
James Gerber, CFO of IronNet, stated: "We reaffirm our revenue and ARR guidance for the fiscal year based on the visibility we have today into the transactional side of the business as well as the continued health of our strategic pipeline of opportunities. With execution and a balanced approach to expense management, we expect to maintain the operational and strategic flexibility needed to continue to advance our market strategy."
For the fiscal year 2023, IronNet still expects:
- Revenue of approximately $34 million, representing nearly 25% growth year over year
- ARR of approximately $48 million at the end of the fiscal year, representing 50% growth year over year
Conference Call & Webcast Information
IronNet will host a conference call to discuss these results today, Tuesday, June 14, 2022, at 5:00 p.m. ET. A live webcast of the conference call and additional materials can be accessed on IronNet's Investor Relations website at https://www.ir.ironnet.com. A replay of the webcast will be available through the same link following the conference call.
Date: Tuesday, June 14, 2022
Time: 5:00 p.m. ET
Webcast: https://www.ir.ironnet.com
Dial-in number: 201-689-7807
About IronNet
Founded in 2014 by GEN (Ret.) Keith Alexander, IronNet, Inc. (NYSE: "IRNT") is a global cybersecurity leader that is transforming how organizations secure their networks by delivering the first-ever Collective Defense platform operating at scale. Employing a number of former NSA cybersecurity operators with offensive and defensive cyber experience, IronNet integrates deep tradecraft knowledge into its industry-leading products to solve the most challenging cyber problems facing the world today. For more information, visit www.ironnet.com.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding IronNet's fiscal 2023 revenue and ARR outlook, its ability to transform cybersecurity, execute on its business strategy and increase market share, and the expansion of the cybersecurity market and demand for IronNet's products and services. When used in this press release, the words "estimates," "projected," "expects," "anticipates," "forecasts," "plans," "intends," "believes," "seeks," "may," "will," "should," "future," "propose" and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside IronNet's management's control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: IronNet's ability to execute on its plans to develop and market new products and the timing of these development programs; IronNet's estimates of the size of the markets for its products; the rate and degree of market acceptance of IronNet's products; the success of other competing technologies that may become available; IronNet's ability to identify and integrate acquisitions; the performance of IronNet's products; potential litigation; and general economic and market conditions impacting demand for IronNet's products. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described under the heading "Risk Factors" in IronNet's Annual Report on Form 10-K for the year ended January 31, 2022, filed with the SEC on May 2, 2022, as updated by IronNet's Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, to be filed with the SEC on June 14, 2022, and subsequent filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward looking statements, and IronNet does not undertake any 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.
Certain Definitions
Annual Recurring Revenue (ARR) -- Calculated at a particular measurement date as the annualized value of our then existing customer subscription contracts and the portions of other software and product contracts that are to be recognized over the course of the contracts and that are designed to renew, assuming any contract that expires during the 12 months following the measurement date is renewed on its existing terms.
Dollar-based average contract length: Calculated by multiplying the average total length of our customer contracts, measured in years or fractions thereof, by the respective revenue recognized for the last three months of each reporting period, and then dividing by the revenue attributable to software and product customers for the same three-month period used in the numerator. Because many of our customers have similar buying patterns and the average term of our contracts is more than 12 months, this metric provides a means of assessing the degree of built-in revenue repetition that exists across our customer base. Declines in average contract length are not reflective of the average lifetime of a customer.
IronNet Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share amounts, Unaudited) |
|||||||
|
|
Three Months Ended April 30, |
|||||
|
|
2022 |
|
2021 |
|||
Product, subscription and support revenue |
$ |
6,443 |
|
$ |
6,137 |
|
|
Professional services revenue |
|
245 |
|
|
240 |
|
|
Total revenue |
|
6,688 |
|
|
6,377 |
|
|
Cost of product, subscription and support revenue |
|
2,330 |
|
|
1,754 |
|
|
Cost of professional services revenue |
|
165 |
|
|
184 |
|
|
Total cost of revenue |
|
2,495 |
|
|
1,938 |
|
|
Gross profit |
|
4,193 |
|
|
4,439 |
|
|
Operating expenses |
|
|
|
|
|||
Research and development |
|
10,727 |
|
|
6,891 |
|
|
Sales and marketing |
|
10,667 |
|
|
7,149 |
|
|
General and administrative |
|
15,586 |
|
|
5,720 |
|
|
Total operating expenses |
|
36,980 |
|
|
19,760 |
|
|
Operating loss |
|
(32,787 |
) |
|
(15,321 |
) |
|
Other income |
|
10 |
|
|
8 |
|
|
Other expense |
|
(380 |
) |
|
(129 |
) |
|
Loss before income taxes |
|
(33,157 |
) |
|
(15,442 |
) |
|
Benefit (provision) for income taxes |
|
(11 |
) |
|
(58 |
) |
|
Net loss |
$ |
(33,168 |
) |
$ |
(15,500 |
) |
|
Basic and diluted net loss per common share |
|
(0.33 |
) |
|
(0.23 |
) |
|
Weighted average shares outstanding, basic and diluted |
|
99,305 |
|
|
67,182 |
|
|
IronNet Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share amounts, Unaudited) |
||||||
|
|
April 30, |
|
January 31, |
||
|
|
2022 |
|
2022 |
||
Assets |
|
|
|
|
||
Current assets |
|
|
|
|
||
Cash and cash equivalents |
$ |
31,390 |
|
$ |
47,673 |
|
Accounts receivable |
|
10,213 |
|
|
1,991 |
|
Unbilled receivables |
|
1,198 |
|
|
4,637 |
|
Related party receivables and loan receivables |
|
3,233 |
|
|
3,233 |
|
Account and loan receivables |
|
14,644 |
|
|
9,861 |
|
Inventory |
|
5,416 |
|
|
4,581 |
|
Deferred costs |
|
2,349 |
|
|
2,599 |
|
Prepaid warranty |
|
1,138 |
|
|
829 |
|
Prepaid expenses |
|
3,130 |
|
|
3,660 |
|
Other current assets |
|
2,081 |
|
|
1,458 |
|
Total current assets |
$ |
60,148 |
|
$ |
70,661 |
|
Deferred costs |
|
3,838 |
|
|
3,243 |
|
Property and equipment, net |
|
6,077 |
|
|
5,606 |
|
Prepaid warranty |
|
1,294 |
|
|
1,229 |
|
Deposits and other assets |
|
2,811 |
|
|
493 |
|
Total assets |
$ |
74,168 |
|
$ |
81,232 |
|
Liabilities and stockholders' equity |
|
|
|
|
||
Current liabilities |
|
|
|
|
||
Accounts payable |
$ |
1,687 |
|
$ |
2,348 |
|
Accrued expenses |
|
12,633 |
|
|
4,709 |
|
Deferred revenue |
|
16,680 |
|
|
16,049 |
|
Deferred rent |
|
- |
|
|
159 |
|
Income tax payable |
|
523 |
|
|
542 |
|
Other current liabilities |
|
1,651 |
|
|
689 |
|
Total current liabilities |
|
36,174 |
|
|
24,496 |
|
Deferred rent |
|
- |
|
|
769 |
|
Deferred revenue |
|
18,851 |
|
|
17,517 |
|
Warrants |
|
7 |
|
|
7 |
|
Other long-term liabilities |
|
2,505 |
|
|
- |
|
Total liabilities |
$ |
57,537 |
|
$ |
42,789 |
|
Commitments and contingencies |
|
|
|
|
||
Stockholders' equity |
|
|
|
|
||
Preferred stock, $0.0001 par value; 100,000 shares authorized; none issued or outstanding |
|
- |
|
|
- |
|
Common stock; $0.0001 par value; 500,000 shares authorized; 100,426 and 88,876 shares issued and outstanding at April 30, 2022 and January 31, 2022, respectively |
|
10 |
|
|
9 |
|
Additional paid-in capital |
|
467,296 |
|
|
455,849 |
|
Accumulated other comprehensive income |
|
179 |
|
|
271 |
|
Accumulated deficit |
|
(450,854 |
) |
|
(417,686 |
) |
Total stockholders' equity |
|
16,631 |
|
|
38,443 |
|
Total liabilities and stockholders' equity |
$ |
74,168 |
|
$ |
81,232 |
|
IronNet Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands, Unaudited) |
||||||||
|
|
Three Months Ended April 30, |
||||||
|
2022 |
2021 |
||||||
Cash flows from operating activities |
|
|
|
|
|
|||
Net loss |
$ |
(33,168 |
) |
|
$ |
(15,500 |
) |
|
Adjustments to reconcile net loss to net cash (used in) operating activities: |
|
|
|
|
|
|||
Depreciation and amortization |
|
628 |
|
|
|
224 |
|
|
(Gain) on sale of fixed assets |
|
(3 |
) |
|
|
- |
|
|
Employee stock based compensation |
|
11,446 |
|
|
|
17 |
|
|
Non-cash interest expense |
|
90 |
|
|
|
- |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|||
Accounts receivable |
|
(4,783 |
) |
|
|
231 |
|
|
Deferred costs |
|
(346 |
) |
|
|
(929 |
) |
|
Inventories |
|
(835 |
) |
|
|
83 |
|
|
Prepaid expenses |
|
529 |
|
|
|
(687 |
) |
|
Other current assets |
|
265 |
|
|
|
- |
|
|
Prepaid warranty |
|
(373 |
) |
|
|
201 |
|
|
Deposits and other assets |
|
382 |
|
|
|
(44 |
) |
|
Accounts payable |
|
(661 |
) |
|
|
1,355 |
|
|
Accrued expenses |
|
(50 |
) |
|
|
728 |
|
|
Income tax payable |
|
(19 |
) |
|
|
58 |
|
|
Other current liabilities |
|
(99 |
) |
|
|
- |
|
|
Deferred rent |
|
- |
|
|
|
(33 |
) |
|
Deferred revenue |
|
4,965 |
|
|
|
2,184 |
|
|
Other long-term liabilities |
|
(350 |
) |
|
|
- |
|
|
Net cash used in operating activities |
|
(22,184 |
) |
|
|
(12,112 |
) |
|
Cash flows from investing activities |
|
|
|
|
|
|||
Purchases of property and equipment |
|
(912 |
) |
|
|
(741 |
) |
|
Proceeds from the sale of fixed assets |
|
2 |
|
|
|
- |
|
|
Net cash used in investing activities |
|
(910 |
) |
|
|
(741 |
) |
|
Cash flows from financing activities |
|
|
|
|
|
|||
Exercise of stock options and vesting of restricted stock units |
|
93 |
|
|
|
209 |
|
|
Statutory tax withholding related to net-share settlement of restricted stock units |
|
(91 |
) |
|
|
- |
|
|
Cash received to fund employee's tax obligation for vested RSUs |
|
17,909 |
|
|
|
- |
|
|
Cash remitted to fund employee's tax obligation for vested RSUs |
|
(9,066 |
) |
|
|
- |
|
|
Payment of commitment fee |
|
(1,750 |
) |
|
|
- |
|
|
Payment of common stock issuance costs |
|
(96 |
) |
|
|
- |
|
|
Payment of finance lease obligations |
|
(96 |
) |
|
|
- |
|
|
Proceeds from stock subscriptions |
|
- |
|
|
|
62 |
|
|
Net cash (used in) provided by financing activities |
|
6,903 |
|
|
|
271 |
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
(92 |
) |
|
|
11 |
|
|
Net change in cash and cash equivalents |
|
(16,283 |
) |
|
|
(12,570 |
) |
|
Cash and cash equivalents |
|
|
|
|
|
|||
Beginning of the period |
$ |
47,673 |
|
|
$ |
31,543 |
|
|
End of the period |
$ |
31,390 |
|
|
$ |
18,973 |
|
|
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