Release Date: June 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CrowdStrike Holdings Inc (CRWD, Financial) reported a record Q1 net new ARR of $212 million, growing 22% year over year.
- The company achieved a record ending ARR of $3.65 billion, growing 33% year over year.
- CrowdStrike Holdings Inc (CRWD) delivered a record subscription gross margin of 80%, growing 32 basis points year over year.
- The company reported a significant year-over-year increase in free cash flow to $322.5 million, representing 35% of revenue.
- CrowdStrike Holdings Inc (CRWD) continues to see strong adoption of its Falcon platform, with deals involving 8 or more modules growing 95% year over year.
Negative Points
- The macroeconomic environment remains challenging, which could impact future growth.
- Stock-based compensation (SBC) increased by 40%, which may raise concerns about dilution.
- Despite strong performance, the company acknowledges the ongoing talent war, which could affect hiring and retention.
- The company faces competition from legacy vendors in the SIM market, which could impact its market share.
- CrowdStrike Holdings Inc (CRWD) continues to invest heavily in growth, which may affect short-term profitability.
Q & A Highlights
Q: How are you thinking about the opportunity with your SIM solution going forward, and what are you seeing in terms of Splunk and QRadar displacements?
A: George Kurtz, CEO: The SIM market has seen more movement in the last year than in the previous decade, driven by M&A and partnerships. CrowdStrike's native integration of SIM capabilities into its platform provides data gravity, making it easier to convert customers. Dissatisfaction with current vendors and the desire for integrated solutions are driving interest in CrowdStrike's offerings.
Q: Can you expand on the relationship with AWS, particularly around cloud security?
A: George Kurtz, CEO: AWS is looking for the best cloud technology, and CrowdStrike's portfolio from code to cloud offers significant advantages. The relationship has expanded, including a Falcon Flex deal, reflecting customers' desire to buy more. CrowdStrike's architecture and technology, built from the start, are winning industry awards and customer trust.
Q: How are emerging products like log scale, identity, and cloud performing, and how is the go-to-market strategy evolving?
A: George Kurtz, CEO: While the platform is the primary focus, specific use cases often drive initial customer interest. Whether it's replacing a legacy SIM or improving cloud security, CrowdStrike addresses immediate needs while promoting the platform's broader value. This approach is effective for both new and existing customers.
Q: Can you discuss the increase in stock-based compensation (SBC) and the pricing environment for your platform?
A: Burt Podbere, CFO: SBC is viewed in terms of dilution, which is expected to be around 3% for the year, within internal expectations. The pricing environment remains consistent, with CrowdStrike's single platform offering a competitive advantage. Customers prefer consolidating multiple point solutions into CrowdStrike's comprehensive platform.
Q: How is the public sector pipeline trending, especially ahead of the September fiscal year closing?
A: George Kurtz, CEO: Momentum in the public sector is building, with additional budgets emphasizing cybersecurity. CrowdStrike's technologies, including the next-gen SIM, are well-positioned to capture opportunities in this market. The federal buying cycle peaks in the third quarter, and CrowdStrike is prepared to meet the demand.
Q: How are customers adopting Charlotte AI, and does it impact their broader AI journey?
A: George Kurtz, CEO: Charlotte AI significantly reduces operational workloads for SOC analysts, turning hours of work into minutes. It drives automation and efficiency, making cybersecurity faster and more effective. The high POV close rate and industry awards highlight its value, and customers are seeing real benefits in their AI-native SOCs.
Q: What factors could accelerate CrowdStrike's path to the $10 billion ARR target?
A: George Kurtz, CEO: Key drivers include the Falcon Flex program, which encourages broader and faster adoption, and the next-gen SIM, which leverages existing data within the platform. Other growth areas include data protection and Falcon for IT, which extend the platform's capabilities beyond security. Burt Podbere, CFO, adds that cloud, identity, and next-gen SIM are significant contributors to reaching the ARR target.
Q: How is the adoption of generative AI impacting cybersecurity budgets and strategies?
A: George Kurtz, CEO: The proliferation of new hardware for generative AI workloads presents a significant opportunity for CrowdStrike. The company's cloud workload protection is well-suited to secure these environments, providing real prevention capabilities. As AI adoption grows, so does the need for robust security solutions, positioning CrowdStrike for continued growth.
Q: What are the main challenges customers face in the current macro environment, and how is CrowdStrike addressing them?
A: George Kurtz, CEO: Customers are focused on consolidating and saving money, and CrowdStrike's platform offers significant cost savings and efficiency. Despite the challenging macro environment, CrowdStrike's technology and partner network provide compelling value, driving customer adoption and market share gains.
Q: What other levers can CrowdStrike pull to maintain its impressive performance if the macro environment remains challenging?
A: George Kurtz, CEO: CrowdStrike focuses on delivering value to customers, listening to their needs, and innovating accordingly. The Falcon Flex program, for example, was developed in response to customer feedback and has been a significant driver of growth. By continuing to prioritize customer needs and leveraging its comprehensive platform, CrowdStrike aims to sustain its strong performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
