Revenue

6 Months Ended

Jul. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenue

2. Revenue

Product, Subscription and Support Revenue

The Company sells a collective defense software solution that is comprised of three product offerings, IronDefense, IronDome, and IronRadar. Through December 2022, the software platform was delivered through both on-premises licenses bundled with on-premises hardware and through subscription software. The Company stopped offering on-premises deployment options in December 2022.

The security appliance deliverables include proprietary operating system software and hardware together with regular threat intelligence updates and support, maintenance, and warranty. The Company combines intelligence dependent hardware and software licenses with the related threat intelligence and support and maintenance as a single performance obligation, as it delivers the essential functionality of the cybersecurity solution. The Company recognizes revenue for this single performance obligation ratably over the expected term. Judgment is required for the assessment of material rights relating to renewal options associated with the Company's contracts.

Revenue from subscriptions, which allow customers to use the Company's security software over a contracted period without taking possession of the software, and managed services, where the Company provides managed detection and response services for customers, is recognized over the contractual term. The cloud-based subscription revenue, where the Company also provides hosting, recognized for the three months ended July 31, 2023 and 2022 was $5,071 and $5,203, respectively, and for the six months ended July 31, 2023 and 2022 were $10,850 and $10,418, respectively. Overall product, subscription, and support revenue recognized for the three months ended July 31, 2023 and 2022, were $5,957 and $6,214, respectively, and for the six months ended July 31, 2023 and 2022, was $12,621 and $12,657, respectively.

Professional Services Revenue

The Company sells professional services, including cyber operations monitoring, security, training and tailored maturity assessments. Revenue derived from these services is recognized as the services are delivered. Revenue recognized from professional services for the three months ended July 31, 2023 and 2022, were $34 and $394, respectively. Revenue recognized from professional services for the six months ended July 31, 2023 and 2022, were $172 and $639, respectively.

Customer Concentration

For the six months ended July 31, 2023, 4 customers accounted for 51%, or $6,579, of the Company's revenue, and for the six months ended July 31, 2022, 2 customers accounted for 22%, or $2,943, of the Company’s revenue. Two customers represented 89% and 56% of the total accounts receivable balance as of July 31, 2023 and January 31, 2023, respectively. Customer B elected not to renew the contract with the Company that ended in September 2023. The Company continues to pursue a subsequent contract with Customer B.

Significant customers are those which represent at least 10% of the Company’s total revenue for a period. The following table presents customers that represented 10% or more of the Company’s total revenue:

	For the Three Months Ended July 31,		For the Six Months Ended July 31,
	2023	2022	2023	2022
Customer A	12%	12%	12%	11%
Customer B	12%	11%	11%	11%
Customer C	13%	*	14%	*
Customer D	15%	*	14%	*
	52%	23%	51%	22%

* - less than 10%

Deferred Costs

The Company defers contract fulfillment costs that include appliance hardware. The balances in deferred costs are as follows:

Balance at February 1, 2023	$	4,362
Amounts recognized in cost of revenue		(1,282	)
Costs deferred		117
Balance at July 31, 2023	$	3,197
Balance at February 1, 2022	$	4,604
Amounts recognized in cost of revenue		(6,104	)
Costs deferred		5,485
Balance at July 31, 2022	$	3,985

Capitalized costs are included in deferred costs on the consolidated balance sheet, of which $2,076 is current and $1,121 is long-term as of July 31, 2023. The balance of

deferred commissions at July 31, 2023 and January 31, 2023 were $1,154 and $1,751, respectively. Deferred commissions are included in the deferred costs on the condensed consolidated balance sheets, of which $793 is current and $361 is long-term as of July 31, 2023.

Deferred Revenue

Deferred revenue represents amounts received from and/or billed to customers in excess of revenue recognized. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue depending on whether the revenue recognition criteria have been met.

The balance in deferred revenue is as follows:

Balance at February 1, 2023	$	27,141
Revenue recognized		(12,793	)
Amounts deferred		8,532
Balance at July 31, 2023	$	22,880
Balance at February 1, 2022	$	33,566
Revenue recognized		(13,296	)
Amounts deferred		13,809
Balance at July 31, 2022	$	34,079

Of the revenue recognized in the six months ended July 31, 2023 and 2022, $10,469 and $9,903 was included in deferred revenue as of January 31, 2023 and 2022, respectively.

Remaining Performance Obligations

As of July 31, 2023, the remaining performance obligations totaled $30,417. The Company’s recognition of revenue in the future thereon will be in:

Years Ending January 31,
2024 (6 months)	$	10,766
2025		14,064
2026		4,511
2027		1,076
	$	30,417