Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “Sumo Logic,” “the company,” “we,” “us,” and “our” in this prospectus refer to Sumo Logic, Inc. and its consolidated subsidiaries. Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal years ended January 31, 2018, 2019, and 2020 are referred to herein as fiscal 2018, fiscal 2019, and fiscal 2020, respectively.SUMO LOGIC, INC.
Overview
Sumo Logic empowers organizations to close the intelligence gap.
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 artificial intelligence and machine learning 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 live in the intelligence economy. Organizations can succeed or fail based on how well they understand and respond to what is happening inside their business. Reports, surveys, or monitoring alerts provided by traditional operational and security technologies and manual processes are no longer effective. Today, businesses generate data from multiple sources—every touchpoint, customer interaction, and digital connection across an entire business and ecosystem. This represents an unprecedented volume of data that is growing at an extraordinary pace, which is, at best, difficult to digest and, at worst, an impediment to driving the speed of decision-making needed to compete in today’s dynamic marketplaces.
The risk of ignorance is monumental to a business. C-suite executives and business leaders are under increasing pressure to know exactly what is happening inside their business the moment it happens. As a result, employees across organizations are increasingly accountable for the overall health and security of their businesses at all times, and can no longer credibly hide behind gaps of intelligence. Intelligence gaps are rampant inside organizations due to multiple disparate systems, departmental silos, and an antiquated set of partial solutions that add more noise, obscuring the signal of truth that organizations seek. Organizations that cannot close the intelligence gap will not only get left behind, they will get lapped. Addressing the intelligence gap by hiring more people or working longer hours is insufficient—organizations must increase their collective intelligence.
Businesses thriving in the intelligence economy are taking a completely different approach to solving the intelligence gap, by seeking out solutions that provide real-time continuous intelligence that improves how they
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collectively and collaboratively build, manage, and secure their digital services. Organizations that will be successful in the digital age must be able to utilize their most important resource: their data.
Our vision is to democratize machine data, making insights from this rich source available to all. Our Continuous Intelligence Platform gives our customers insights across a wide range of use cases. We help our customers: monitor and troubleshoot their applications and their cloud and on-premise infrastructure; manage audit and compliance requirements; rapidly detect and resolve modern security threats; and extract critical key performance indicators, or KPIs, from various types of machine data to gain visibility into customer behavior, engagement, and actions. We enable our customers to derive critical value from their data with advanced analytics based on our proprietary machine learning technology that identifies and predicts anomalies in real time.
Our multi-tenant, cloud-native platform was architected by big data and security experts and has been in operation continuously for nearly a decade. Our platform is built on a modern, microservices-based application and cloud architecture, leverages security-first principles, and incorporates artificial intelligence and machine learning, or AI/ML, algorithms to deliver real-time actionable insights. We started in 2010 with the mission to provide organizations with the ability to ingest and analyze complex unstructured machine data, such as logs, events, and security data for a cloud security information and event management, or SIEM, solution. However, we always had the vision to expand our data analytics capabilities to address less complex structured machine data, such as time-series metrics from applications and infrastructure, to provide a cloud-native operational intelligence solution. In 2012, when we released our service, we discovered that developers, IT operations, and security analysts were leveraging our platform to initially ingest and analyze log and event data in order to monitor and troubleshoot their mission-critical applications, systems, and services.
Our platform scans an average of 873 petabytes of data per day and an average of 18.6 billion events per second.1 Our platform integrates and analyzes structured, semi-structured, and unstructured machine data, both historically and in real time, to provide actionable intelligence around what happened, why it happened, and how to resolve business, technology, or cybersecurity issues.
We deliberately architected and built our analytics platform to address the technology challenges and gaps in intelligence that arise from siloed development, operations, and security teams in order to enable organizations to adopt a more modern DevSecOps operating model. DevSecOps is the philosophy of integrating security practices within the DevOps process, and involves ongoing, flexible collaboration among developers, release engineers, and security teams. DevOps is a combination of practices that automates the processes between software development and operations teams in order to build, test, and deploy modern applications faster. Ultimately, it enables teams to gain more insights and intelligence in order to release software faster, optimize processes, and better deliver digital solutions to customers. We offer a suite of solutions to address the intelligence gap: Operational Intelligence, Security Intelligence, Business Intelligence, and Global Intelligence.
We address cloud-native businesses as well as traditional on-premise businesses that are seeking to build, manage, and secure modern applications as they undertake their digital transformation and cloud adoption initiatives. We serve organizations of all sizes, from large enterprises to small and mid-market businesses, regardless of their cloud, digital transformation, security analytics, or DevSecOps maturity. Representative customers include 23andMe, Alaska Airlines, Brown University, JetBlue, Land O’Lakes, LendingTree, Major League Baseball, Netflix, PagerDuty, Petco, Pitney Bowes, Qualtrics, Salesforce.com, Twilio, ULTA Beauty, and Xero. Our customer count changed from 1,626 as of January 31, 2018 to 1,900 as of January 31, 2019, to 2,137 as of January 31, 2020, and to 2,131 as of April 30, 2020.2 Customers that had annual recurring revenue, or
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ARR, greater than $100,000 or more grew from 187 as of January 31, 2018 to 234 as of January 31, 2019 to 323 as of January 31, 2020, and to 329 as of April 30, 2020.3 Customers that had ARR greater than $1 million or more grew from seven as of January 31, 2018 to 17 as of January 31, 2019 to 25 as of January 31, 2020, and to 27 as of April 30, 2020.
The power of our platform, and the benefits that it delivers to customers, has driven rapid growth in our revenue. For fiscal 2018, 2019, and 2020, our revenue was $67.8 million, $103.6 million, and $155.1 million, respectively, representing a year-over-year growth rate of 53% and 50%, respectively. For the three months ended April 30, 2019 and 2020, our revenue was $32.5 million and $47.2 million, respectively, representing a period-over-period growth rate of 45%. We generated net losses of $32.4 million, $47.8 million, $92.1 million, $15.3 million, and $23.6 million for fiscal 2018, 2019, 2020, and the three months ended April 30, 2019 and 2020, respectively, as we continued to invest in our business.
Industry Background
Nearly every business must transform into a digital business or be disrupted. Customers now expect real-time, instantaneous, always-on experiences. To meet these expectations, successful businesses need to continuously deliver updated information and improved services to their end customers, such as promotional offerings, pricing information, inventory levels, and service availability. Every business must continuously innovate.
Executives are accountable for the overall operational and financial health of the business and can no longer hide behind a gap in intelligence. This is especially true for security, as organizations must protect against breaches and reputational costs as they digitize. This accountability is not only the responsibility of executives. Employees across the organization are now expected to find ways to improve intelligence by integrating silos that exist across systems, applications, services, and processes.
Today, every company is becoming a software company by delivering more business services through modern applications, automating workflows, and leveraging data from digital signals to satisfy increasing customer expectations. To enable differentiated digital services, organizations must take a new approach to software architectures, tools, and development processes that span multiple public cloud providers while simultaneously securing their digital assets.
We believe all businesses require the following five pillars to be successful in the intelligence economy.
Modern application architectures
Multi-cloud adoption
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Continuous security
Continuous collaboration
Data-driven intelligence
Not only are these five pillars becoming more critical for success, but they also introduce additional challenges for organizations that existing solutions are not equipped to address.
Traditional Solutions Have Challenges Delivering Value
Many solutions today are not equipped to adequately address the evolving complexity of modern business.
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The Need for Continuous Intelligence
Organizational complexity is increasing, while organizational insights are decreasing. The result is the intelligence gap, where organizations can no longer understand what is happening inside their businesses.
The consequences of the intelligence gap include:
Continuous intelligence bridges this gap and equips executives and users across development, IT operations, security, and other lines of business with the insights their businesses require.
Our Opportunity
We believe that as companies of all sizes and across all industries increase the amount of business they conduct digitally, they will continue to invest in solutions that help address the intelligence gap. Our platform is employed across a broad range of use cases to address this gap. Based on data from International Data Corporation, or IDC, Sumo Logic estimates its total addressable market opportunity to be approximately $55.1 billion. We calculated this estimate by aggregating 2020 projected revenue by organizations in the following IDC software categories: advanced and predictive analytics software; AI software platforms; content analytics and search software; end-user query, reporting, and analysis software; software change and configuration management; security analytics, intelligence, response, and orchestration; and IT operations management (ITOM) software, across on-premise and cloud environments.4 We believe that our platform currently addresses a significant portion of this market, and we intend to further expand our offerings to capture more of this market in the future.
Separately, we have calculated our total addressable market opportunity as approximately $49.3 billion. To arrive at this figure, we conducted a detailed process. First, we identified the total number of global companies broken down by size, which we determined by referencing independent industry data from the S&P Global Capital IQ database.5 We then segmented these companies into large enterprise, enterprise, and commercial categories based on revenue, and for commercial, a minimum number of employees. We then leveraged internal company data on current customer type and spend on our products and services to calculate average ARR for each category. Finally, we multiplied the average ARR by the number of companies within each category to determine our total addressable market opportunity.6 We define large enterprises as companies with revenue greater or equal to $1.5 billion in the last twelve months, enterprises as companies with revenue between $500 million and $1.5 billion, and commercial customers as companies with revenue between $100 million and $500 million and with greater than 250 employees.
For large enterprise customers, we applied the average ARR of our top 25 customers, which we believe represents the average spend of customers that have achieved widespread adoption of our platform across their
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organizations based on their size and use of cloud-based technology. For enterprise customers, we averaged the ARR across our top 26th to 250th customers, which we believe represents the average spend of substantial customers that have achieved moderate to high adoption of our platform, often across multiple use cases. Finally, for commercial customers, we averaged the ARR across our top 251st to 500th customers, which we believe represents the average spend of customers with more limited adoption of our platform among smaller businesses.
Our Solution
We unlock the power of data with advanced analytics based on our proprietary machine learning technology to identify and predict anomalies in real time, separating the signal from the noise, and allowing users to get continuous insights, even when they do not know what questions to ask.
We deliver analytics and insights across a wide range of use cases for a diverse user base of technical and non-technical individuals, from practitioners to executives. Our Continuous Intelligence Platform features user-friendly out-of-the-box or easily customized and personalized dashboards for a variety of purposes, and allows users to derive further insights and intelligence from integrations with domain-specific data science tools and technologies.
Our customers leverage our Continuous Intelligence Platform for four main solution areas:
Our Continuous Intelligence Platform is designed to collect and centralize data from a multitude of data sources by integrating seamlessly with other platforms and solutions. Our Continuous Intelligence Platform was architected to support massive scale, optimizing data ingestion, and processing, while providing powerful analytics. Our platform ingests and analyzes the machine data generated by applications, infrastructure, and microservices from cloud and on-premise environments, enabling actionable insights.
Benefits of Our Solution
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Competitive Strengths
Our Growth Strategies
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Risk Factors Summary
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, but are not limited to, the following:
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Channels for Disclosure of Information
Investors, the media, and others should note that, following the completion of this offering, we intend to announce material information to the public through filings with the Securities and Exchange Commission, or the SEC, the investor relations page on our website, press releases, our Twitter account (@SumoLogic), our Facebook page, our LinkedIn page, public conference calls, and webcasts.
The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Corporate Information
We were incorporated in Delaware in 2010. Our principal executive offices are located at 305 Main Street, Redwood City, California 94063, and our telephone number is (650) 810-8700. Our website address is www.sumologic.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus and inclusions of our website address in this prospectus are inactive textual references only. You should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.
Sumo Logic, our logo, and our other registered or common law trademarks, service marks, or trade names appearing in this prospectus are the property of Sumo Logic, Inc. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.
JOBS Act
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We may take advantage of these exemptions for so long as we are an emerging growth company, which could be as long as five full fiscal years following the completion of this offering. In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to use the extended transition period under the JOBS Act. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.