Q4 2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the crowd strike holdings fourth quarter and fiscal year Twentytwenty financial results Conference call. At this time, all participants are not listen only mode. After the speakers presentation. There will be a question and answer session to ask the question do enough portion of the cool you wouldn't be compressed.

Our one on your telephone please be advised that today's conference is being recorded.

If you required any further assistance please press star in Seattle.

I would now on the conference over to your Speaker today, Maria Riley Investor Relations for Kraft strike.

Good afternoon, and thank you for your participation today.

With me on the call or George Kurtz, President and Chief Executive Officer, and cofounder of crowds right.

Bert Potbellys Chief Financial Officer.

Before we get started I would like to know that certain statements made during this conference call, but are not historical facts, including those regarding our future plans objectives and expected performance are forward looking statements within the meaning of the private Securities Litigation Reform Act was 1995.

These forward looking statements represent our outlook only adds jobs the data this call.

Well, we believe any forward looking statements we have made a reasonable actual results could differ materially because such statements are based on current expectations and are subject to risks and uncertainties.

We do not undertake expressly disclaims any obligation to update or alter our forward looking statements, whether as a result of new information future events or otherwise.

Further information on these and other factors that could affect the Companys financial results is included in filings, we make with the FCC from time to time, including the section quite old risk factors and the company's quarterly and annual reports, we file with the FCC.

Also unless otherwise stated excluding revenue all financial measures discussed on this call will be non-GAAP.

The discussion of why we use non-GAAP financial measures in a reconciliation schedule showing GAAP versus non-GAAP results. It's currently available in our press release, which may be found on the Investor Relations website and I are just how strikes dot com work on our form 8-K filed with as Cc today Yeah.

Now I'll turn the call over to George to begin.

Thank you Maria and thank you all for joining US today, we hope everyone is staying healthy or thoughts or whatever you want affected by the quota virus. Our top priority is ensuring that health and safety of all our colleagues customers and partners around the globe.

They implement it necessary safeguards help protect them, which includes hosting this call remotely.

We have a lot of rail to cover today and I will start by summarizing three key points first the dynamics of the competitive landscape are the best I have seen in my 27. Your career. We believe this is the beginning of a multiyear trend is being driven by the industry consolidation that took place last year, along with the seismic shift.

To cloud technology.

Second customers and partners are increasingly choosing crowd strike as their security cloud platform and partner of choice.

As a result, we're landing bigger with more modules and increasing the number of new customers that start with a are over $1 million.

And third regardless of the spending environment cyber security is not a discretionary purchase for organizations cyber security is mission critical to both the public and private sector.

Endpoint or workload security is also a central to protecting a remote workforce well the impact to the macro economy from the Corona viruses unfolding in real time, we know what is forcing companies to conduct business differently and rapidly shift to promote workforce with our cloud native platform, our lightweight agent that is easily.

Deployed at scale in our frictionless go to market engine crowd strike is uniquely positioned to meet their cyber security needs now, let's discuss our results and get into these topics in more detail.

Across the board, we delivered another exceptional quarter, a crowd strike with record results well exceeding our expectations during the quarter, we added a record $99 million, a net new air or and year over year, we increased the number of net new subscription customers by 116% achieve.

The 90% subscription revenue growth and 89% total revenue growth, which was above the high end up our guidance.

The fourth quarter cops off a historic year for crop strike in which we delivered exceptional growth at scale significantly improved our margins and achieve positive free cash flow for the year.

We ended the year at $600 million and they are up 92% over last year and revenue of $481 million up 93%, making us one of the fastest growing SAS companies at scale subscription revenue grew even faster up 99% to reach 400.

And $36 million.

We believe our robust results this year speak to our relentless commitment to stopping breaches are growing leadership in the security cloud category and our frictionless go to market engine.

Oh this is made possible by the exceptional execution of the crowd strike team. We have an amazing company I would like to personally think every crowd stryker for their unwavering dedication to protecting and empowering our customers I couldn't be more pleased with everything we've accomplished together or more excited about our future opportunities.

The seismic shift to cloud native technologies in cloud workloads, including containers has created an environment with massive greenfield opportunities.

Well our competitors are distracted trying to integrate acquired technologies rationalizing their workforce or retooling their on Prem offerings crowd strikes mission platform in brand are clearly resonating with customers and partners. Furthermore, as Broadcom began integrating symantec, we saw an increase in inquiries among both customers.

And partners. We believe these dynamics have contributed to an expansion in our pipeline an acceleration in our overall customer adoption and increased engagement with our partners.

More specifically on the partner front, we have seen significant demand as they look to protect customers who are left searching for better alternatives as semantic abandons large segments of the market several partners in the United States and abroad had lunch semantic replacement campaigns, we are closely collaborating with them to put together a robust solutions.

As compelling price points, one of our partner submitted a list of several thousand of their customers that will be migrating away from semantic into next year and we found that there was very little overlap between these prospects in our existing customer base.

This year, we more than doubled our customer base and now protect 5431 customers.

We added 870 net new customers in Q4, which is up 136% year over year. This is our eighth consecutive quarter at a record number of net new customers.

See I owed and see I ask those are looking for a strategic partner to help the bridge the skills gap and simplify their operations while at the same time, reducing costs. They were also looking for ways to leverage enhanced automation in their security operations increased efficacy and free up resources.

These organizations are increasingly turning to the Falcon platform to protect an array of workloads stopped breaches and restore system performance.

Our platform strategy is gaining momentum.

We hear this from the many conversations we've had with customers prospects in partners everyday and we see dinar metrics.

Within new enterprise customers, we are landing bigger with more modules and this quarter, we more than doubled the number of new customers starting out with greater than $1 billion of a are compared to Q4 of last year.

Additionally across all new customers, we saw the average number of modules increase in every quarter this past fiscal year.

We also continue to expand module adoption within our existing customer base. This quarter the percentage of all subscription customers with four or more modules. Once again increased and those that adopted five or more cloud modules grew to one third of our customer base.

That's customers adopt more modules that span a wide array of workloads, we believe it strengthens our customer relationship and increases our strategic value with the customer.

Let me share a few customer examples that demonstrate how the power the Falcon platform translated into strategic customer wins and provided an immediate value to the customer.

The first customer win is with a leading online marketplace, where we displaced an autonomous nexgen anti virus vendor the security team at this company was frustrated by the comments product due to the large volume of false positives insufficient endpoint fidelity to treat <unk> remediate alerts and limited functionality cross.

And on top of that lack luster customer support.

Well the lead for this opportunity came from the ADW S. marketplace. This organization was initially looking for platform and encompass DDR and easy to protect their enterprise workstations and servers in a phase one rollout to the cloud assets and the customers words, Crouse right quote crushed and for the competitive bake off.

Against both Nexgen and legacy players and won the business.

Additionally, this customer quickly realized the value our platform provides by consolidating functions with our intelligent single agent in AI powered threat graph.

Expanding the steel beyond the initial RSP of BDR, a nexsan easy this new crowds right customer adopted fix modules, which included discover for I.T. operations and Falcon X for intelligence.

Additionally, we still have the opportunity to expand further into the ADW s. production environment.

The next when I will share with you showcases how the Falcon platform helped a global 2000 manufacturer enhance and streamline it security posture as well as bridge the security resorts gap.

This new cross right customer was previously using an operating systems ATP surface and two nexgen vendors for E.D.R. and D.V.

This patchwork of disparate vendors with ineffective and the burden on their resource constrained security team.

Because a large percentage of the customers environment was not on the latest build of windows. They could not update to newer versions of their ATP solution.

Additionally, the EDI, our vendor did not provide user level visibility on alerts or provide advanced remediation features. This resulted in a cumbersome manual remediation process and often required the security team to reach out to users directly.

With one year left on the next Gen EDI ours vendors contract this customer kicked off a reevaluation and called and crowd strike. He replaced all three endpoint security solutions with the Falcon platform and adopted seven modules, providing them with comprehensive protection and visibility in their environment and freeing up internal research.

Courses.

The next customer when I will share with you was also looking to consolidate its legacy endpoint security stack and getting better protection and visibility across its full environment.

Global manufacturer chose to evaluate crouse right because we're viewed as the market leader with a reputation of deploying across large complex environments quickly.

During the sales process their existing legacy vendor failed and they fell victim to malicious activity shutting down production at one of their major international facilities.

The customer Russia deploy the crowd strikes solution to more than 90000 endpoints over a weekend and was able to quickly identify and contain the adversary.

The ability to deploy the solution quickly save the customer millions of manufacturing line productivity losses.

On the immediate value provided by Remediating. The breach this customer realized additional value by significantly streamlining their security staff with the Falcon platform be eliminated seven legacy tools and considerably improved their visibility and security posture.

The final customer when I would like to share with you with Splunk. They were using an autonomous nexgen vendor and we're frustrated with the fidelity of alerts and the difficulty of ongoing maintenance and upgrades.

Splunk kicked it off a competitive evaluation of other next Gen solutions ultimately consolidating on the crowds right platform.

Splunk chose it Falcon platform for its ease of use low false positive rate and single agent spoke adopted multiple modules across the platform, including spotlight discover for I.T. operations as well as Falcon extra integrated threat intelligence.

To summarize we are winning with customers across diverse industries geographies inside because of our proven efficacy and stopping breaches are cloud native platform in lightweight single agent and easily deploy that scale across public private and hybrid cloud environments, our ability to provide security <unk>.

Really across all workloads end to end.

The predictive power of our AI driven threat graph that gets smarter than more data it consumes in real time, our threat graph now processes over three trillion events per week, each new endpoint, joining our crowdsource network increases our data mode and long term competitive advantage.

And we enable customers to consolidate agents increased workload performance and bridge that security skills gap as a force multiplier all of which helps our customers realize and media time to value and reduce costs.

Before I turn the call over the bird I would like to make a few comments on the current environment as it relates to the impact from the Corona virus outbreak.

We have implemented several measures to ensure the safety of the craft strike family and given we're a company built to thrive with a remote workforce. We do not expect these measures to lead to a disruption in our work flow on a regular basis approximately 70% of our employees work remotely from inception. The company was designed to accommodate a remote worked.

Yes that is geographically dispersed and highly nimble.

As it relates to the demand environment at this point in time, we have not experience an impact in our ability to close business due to the Corona virus.

As many of you on this call would agree we are and then on certain macro economic environment and the situation is fluid. However, there are four key facets to our business that we believe are important to investors to remember.

First walk Corona virus is having an impact on the global economy, It will not stop cyber adversaries.

Cyber security has and will remain essential and mission critical to organizations as it provides business resiliency and meets compliance requirements.

In times of prices adversaries, we'll try to exploit the situation prey on the public fear and escalate new attacks I.

I know, it's difficult to imagine, but we've already seen nation state adversaries and he criminals launch phishing campaigns using corona viruses Pete.

We allow our customers to stay ahead of these threats whether they are at home in the office or in the cloud.

To further protect an aid the craft strict community, we launch a corona virus surge relief plan that allows our customers to surge the number of endpoints for up to 60 days.

This will enable existing customers you quickly onboard new remote workers without having to worry about a procurement cycle.

Additionally, we launched a falcon prevent for home use program that allows company administrators to install falcon prevent on their employees home systems.

These free of charge programs have been well received by customers in their time of need.

Second as organizations move their workforce outside of physical offices, there threat landscape grows exponentially they need to rapidly provision fleets of new endpoints, such as laptops and mobile devices and spin up new cloud workloads, while ensuring that every workload everywhere is protected with real time security.

Even when the users offline.

To put this in perspective I will note at one of our large enterprise customers recently rush to by 12000 laptops for new lead remote employees and will be protecting those with Falcon.

The security challenges associated with remote workforce, our best solved by a cloud native security platform.

Because crowd strikes Falcon platform is cloud native and does not require physical infrastructure. It allows customers to easily and remotely deploy managing protect their workloads at scale irrespective of where their employees are located.

Third when organizations are pressure to reduce costs. It will look for the security platform that not only provides them with the highest level of protection visibility, but one that also consolidates agents reduces hardware and operating cost and streamlined operations. This is exactly how crowd strike routinely helps cost.

From a save money with some customers, citing a three X return on their crops like investment.

Fourth with Falcon complete our fully managed endpoint protection offering we virtualized security operations and protect customers when they do not have the resources or ability to do so.

The time when customer security teams, maybe short staffed we're working from home Falcon complete as a force multiplier for customers as it enables them to significantly increase their security resources and broaden their expertise across all time zones on a 24 by seven basis.

While we are unable to predict what will happen in the macro economy. We believe these elements in the fact that securities mission critical to organizations gives us significant advantages in any environment.

We are aligning our resources to reach customers in light of the current environment, which includes shifting marketing investment more towards our digital channel for the near term.

Additionally might carpenter, perhaps ricks president of global sales and field operations and I are kicking off a new 100 by 100 International Tour, where we will meet with 100 of our customers and prospects in 100 days all remotely visium.

It is our view that during times like this the best companies continue to innovate focused on customer success and emerge stronger than ever before and when we look past. The short term. We believe the powerful combination of our cloud native platform and frictionless go to market engine, which includes trial to pay and in that trial.

Offerings as well as emerging channels, such as ADW s. marketplace position us well as the fundamental endpoint platform of the future. We will continue to focus on driving customer success and expanding our lead over the competition.

With that I'll turn the call over to Bert.

Thank you George and good afternoon, everyone. As a quick reminder, unless otherwise noted all numbers, except revenue mentioned during my remarks today our non-GAAP.

We delivered another outstanding quarter with strength in multiple areas of the business, including records, there are new customers and free cash flow.

In the fourth quarter, we delivered 92% they are our growth year over year to reach $600.5 million.

We added $98.7 million net new air are setting a new record for the fourth consecutive quarter, representing 69% year over year growth.

The growth in air our was driven by another strong quarter for new logo acquisition I'm expansion business, coupled with low contraction in churn within our existing customer base.

We've been very pleased with the success, we've seen with our land and expand strategy and with our continued best in class gross retention rate of 98% for Q4, and that's why 20.

Our dollar base net retention rate, which is intended to measure expansion in existing customers subscriptions over a 12 month period exceeded the 120% benchmark, we said at the beginning of the year.

Net retention came in at 124% as of the end of F 120, which compares to 147% indefinitely 19, and a 119% at the end of F. why 18.

For the Interims for 20 quarters net retention was 131% in Q3, 133% in Q2 and 142% in Q1.

As you May recall in Q4, that's why 19, we had an outsized expansion deal that contributed 11 percentage points toward net retention in that quarter.

Well, we once again expanded within this account in Q4 at roughly 20, the impact was smaller than the prior year as we have expected.

As George mentioned, we're seeing strong success with our strategy to lend bigger with more modules and we're also seeing an acceleration in new logo business, which further accelerated in Q4 as the dynamics and the competitive landscape shifted in our favor.

We view these two trends as positive developments and very healthy long term indicators for our business, but they have the natural trade off on expansions in the near term.

Moving to the piano total revenue grew 89% over Q4 last year to reach a $152.1 billion.

Subscription revenue grew 90% over Q4 of last year to reach a $130.5 million.

In terms of geographic breakdown, approximately 73% fourth quarter revenue was derived from customers in the U.S., 14% from Europe Middle East African markets, 9% from Asia Pacific and 4% from other markets.

We remain focused on building a long term business with sustainable growth and compelling margins.

In Q4, we continue to recognize operating leverage in our SaaS model and the benefits of scale, even as we increase investments in our global reach and club Platts.

Fourth quarter, non-GAAP gross margin improved to 73% from 67% a year ago.

Our non-GAAP subscription gross margin increased to 77% a 700 basis points increase from Q4 last year.

Total non-GAAP operating expenses in the fourth quarter were $118.4 million or 78% of revenue versus $81.8 million last year or 102% of revenue.

Scaling our business efficiently as a top priority, which is why we focused on our unit economics, including Magic number.

In Q4, we ended with a magic number of 1.2, which we consider to be very strong and represents an improvement in our sales and marketing efficiency.

We reported a non-GAAP operating loss of $6.7 million as a result of our rapid topline growth expanding gross margin profile and continued disciplined approach to investing in our business, we feel strong operating leverage in the quarter.

Our non-GAAP operating margin improved 31 percentage points a year over year.

Q4 represents our fifth consecutive quarter of improving non-GAAP operating loss on both a dollar and a marching piece.

We have a proven history of disciplined investing and remain committed to maintaining a thoughtful balance between generating topline growth and achieving operating leverage.

Non-GAAP net loss in Q4 was $3.9 million or two cents on a per share basis, which compares to a non-GAAP net loss of $28.0 million were 60 cents per share in Q4 last year.

The weighted average common shares used to calculate fourth quarter EPS was 207.6 million shares in Q4 fiscal 2020, and 46.4 million shares into Q4 fiscal 2019 period.

Turning now to the balance sheet.

Cash cash equivalents and marketable securities increased to $912.1 million.

Our execution this quarter led to strong cash flow.

Cash flow from operations was positive $66.1 billion and free cash flow was positive $50.7 million, reflecting improved operating leverage relative deferred revenue and strong collections.

Before moving to our guidance I will provide several modeling points.

First as we had previously noted and as typical for enterprise software companies, we expect to see seasonality in that new air our generation moving from Q4 Q1.

We would also like you to keep in mind that we see operating margin seasonality in the first half of the year, given a step up it payroll taxes, new hires and annual events, including sales kick off an RFP.

And as you'd expect these factors will impact the timing of operating cash and free cash flow with Q twos experiencing the biggest seasonal impact.

This year, we expect to see negative operating and free cash flow in the second quarter.

And we are maintaining our guidance to be operating cash and free cash flow positive for the full year.

We implemented our employee stock purchase plan in July of 2019.

As a result, you saw a benefit to free cash flow of approximately $8 million in Q3 of 420 at a net decrease of approximately $4 million in Q4. It that's why 20 as we need the first purchase.

Looking into F. for 21, we currently expect to accrue between 10 million an $11 million per quarter for this bets.

With the corresponding offset of approximately $20 million reflective in both Q2 and Q4.

In summary, we expect to see benefits from employee contributions in Q1 in Q3 and net outflows for purchases in Q2 and Q4.

Moving to our guidance for the first quarter and full year fiscal 2021.

We continue to remain optimistic about the demand for our offerings, we have powerful secular trends fueling our growth, including a growing threat landscape a favorable competitive dynamic and the proliferation of cloud workloads combined with an increasing remote workforce.

Well the full impact of the macro economy from the Corona virus is still unfolding.

And we continue to closely monitor the business environment, we believe our guidance as a probably true based on what we know today.

For Q1.

Total revenue is expected to be in the range of 164.32 $167.6 million, reflecting a year over year growth rate of 71% to 74% with subscription revenue being the dominant driver of growth.

We expect non-GAAP loss from operations to be in the range of 16.2, just $13.9 million and non-GAAP net loss to be in the range of $14.0 million to $11.7 million.

Utilizing weighted average shares using computing non-GAAP net loss per share basic and diluted of 211.3 million, we expect non-GAAP net loss per share basic and diluted in the range of seven to success.

For the full fiscal year 2021.

We currently expect total revenue to be in the range of $723.3 million to $733.5 million, reflecting a growth rate of 50% to 52% over the 2020 fiscal year.

Non-GAAP loss from operations is expected to be between 37.1 and $29.9 million.

Additionally, we continue to expect to achieve non-GAAP operating income breakeven in the fourth quarter fiscal year 2021.

While at the same time, continuing to aggressively invest in our market opportunity.

We expect fiscal 2021, non-GAAP net loss to be between 29.3 and $22.1 million.

Utilizing weighted average shares used in computing non-GAAP net loss per share basic and diluted up 212.5 million.

We expect non-GAAP net loss per share to be in the range of 14 to 10 cents.

We're pleased with the strong results we are reporting today and believe we have to capacity in resources to continue driving the business for over the long term.

George and I will now take your questions.

Thank you and ladies and gentlemen, I semi mine there to ask a question you need to press star one on your telephone to withdraw your question press the pound key and we ask that you. Please limit yourself to one question and one follow up.

Hi, first question any some sterling Auty with JP Morgan. Please go ahead.

Yeah. Thanks, sorry, guys. So wondering admit that's the called about seeing situation that we're in a you touched upon some of that but I just want to make sure I put a finer point, how the sales processes and even more specifically the implementation process impacted and is there any concern Bob.

Maybe.

You know crowdstar excuse to working remote perhaps your customers are not so how do you mitigate some of those factors in terms of sales cycles.

Sure. Thanks, Sterling well as you as you mentioned and as we pointed out weve done a good job for many years working remotely, but we need to make sure that we'd get hold of the customers I think there a couple of things that are working in our favor a number one there's lots of folks that are actually home and working remotely and I think we've been big fans and users have seen we've been able to.

Move our sales operation to fully remote we've been able to actually increase our first business meetings by 13%.

Hi, just just by doing this is people are all around and home and were able to get in front of them. So from our perspective, whether it's the inside sales team or whether it's the field sales team I think we've done a good job of reaching out plus weve combine that with a additional additional advertising digital trial to pay and we continue to work the inside.

I'd sales motion so from that standpoint, I think we've been able to fully keep the machine operationalized and in many cases, you know where people have been busy during the day, there sort of at home and we actually have their focus so those Ah first business meetings have taken place and we're leveraging all of the remote technologies that we have.

To get to our customers.

Great and then one follow up for you Bert you know you mentioned that the guidance is prudent in light of what you've seen with just the again to make sure would the guidance have actually been higher if co bid 19 had not broken out into this pandemic that we've seen.

Hey, Sterling. Thanks, So just to really we do believe that we will probably be wrist our guidance, but as you know what's the fluid situation. We we believe our guidance as it will be prudent based on what we know today, including growers as of today, we haven't seen a change in our ability to close business a pipeline was at record levels, we talk to our sales.

Leaders and theaters, and we like where Ah, but we want to be prudent in light of the current macro situation and out of abundance of caution we de risk about guidance.

Excellent. Thank you.

You're welcome.

Thank you so much.

Our next question is from second Calia with Barclays.

Hey, George Hubert Thanks for taking my questions here.

George maybe just to start with you.

Yes, definitely hearing the customer displacement opportunities here.

With with what competitors like Symantec for example, but I got someone asked about the competitive opportunity from a different angle and I think you touched on in your prepared remarks, but is there an opportunity to really grow your share of the channel, while while others like symantec or are seeing disruption, so not the customer share, but I actually customer.

Rather share of the actual channel up there.

Well, thank socket and absolutely, yes, I as I mentioned in the prepared remarks, we are seeing many many.

Partners come our way, particularly from the semantic channel they realize that in today's environment. There you know their customers are demanding solutions that can easily be deployed frictionless to a remote workforce as well as an on premise or cloud workloads and there's a strong demand from the from the partners.

There's a lot of inbounds from partners I'm looking to move their customer base to us.

As at Symantec and Broadcom abandon many many of the customers that are out there. So they want to make sure their customers are taking care of and obviously, we've continued to evolve in mature or partner program and you know whether it's a managed service provider whether it's your traditional reseller.

Whether it's you know any number of partners that we have they're certainly looking to to be with a market leader and a someone who can solve that problem and.

No just given today's environment with the remote workforce you know it's hard to set up these on premise systems and you know it subsurface and things that nature remotely. So you know weve definitely seen an uptick in the remote workforce being provisioned and rolled out to organizations who their their workers are actually at home.

And I think were perfect position to do that.

Makes sense, maybe as my follow up for you know Bert.

Nice job hitting positive operating cash flow, I think faster and greater magnitude and though from a thought you know as the business continues to scale. How do you think about cash flow vis-a-vis or our or revenue are there any sort of rules of thumb that you'd have to think about with respect to other operating cash flow free cash flow as that recurring revenue.

Based kind of continues to grow.

Hi, socket Ah first though let me remark just on your comment about hitting positive cash flow faster than most of most of you thought you know I think you know the first thing that I just want to comment on that as the fact that we did have a strong over performance in the quarter.

And other things that kind of related to that we had strong gross margins. We had strong operating leverage and we also had a strong collections the corridor. So it all contributed.

So for reaching cash flow positive then well done than originally thought.

You know as it goes to with risk as your comment goes to how do we think about it in the future I think I want to just reiterate the fact that hey, we you said to a world that we're going to be free cash flow positive next year I'm on a quarterly basis, though there are going to be some quarters, where we have a negative Tesla and specifically Q2.

So as we think about you know seasonality it isn't the business from both no cash flow as well as they are with respect to air our Q4 going into Q1.

From an unprofitable going if you get which is consistent with what we've seen historically so as we think about you know cash flow and if we think about you know where we're going to end up right now we feel that we're in a really good spot with respect to work out position you got 912 million on the balance sheet and we have an additional credit facility of 150 million as well so.

Combined grew over a billion dollars and then in available cash so I think were pretty good spot.

And I think that you've got a good handle on on where we see the catheter Boeing from from here I suppose I just thought remark.

Very helpful. Thanks, guys.

Well thank you.

And our next question is some Brad Zelnick with credit Suisse.

Great. Thank you so much and congratulations on a on a really nice finished the year, but my question I know I hate to keep piling on to this but as it relates to covert 19, and the impact of the business specifically I wanted to ask about small businesses because maybe the headlines are are passing all of our screens and real.

Time, we're seeing certain sectors of the economy, just getting obliterated, whether it be restaurants airlines lodging et cetera, they seem to really hurting right now how does this change your thinking and if at all about investing down market for growth at this point.

Well. Thank you for your comments and I don't think it changes our investment at all we've we've seen an acceleration in SMB market I'm, obviously with a a trial to pay and you know sales motion that just encourages organizations to come to us and try it out we've been very successful and in fact.

Act, we've seen definitely an uptick in smaller businesses coming our way because they just they're not prepared.

For whats happening, obviously, you know with Cobot 19, a it's it's a serious situation for them and.

At the same time, they still need to keep running and I think one of the big drivers that we've seen as ransomware. There's so many small businesses that have been just obliterated by ransomware because they continue to use traditional signature based navy.

So I think we've been very successful in helping companies migrate away from that and deal with that that problem at the same time now they're they're struggling with you know just keeping open and I think as a company we've done a good job in helping organizations see the value and basically provide the outcome, they're looking for keep up and running not have to worry about security many to.

Keith is they don't actually have the personnel to deal with it and with our Falcon complete its been an absolute home run it in the SMB and the corporate market.

Because we're able to deal with a you know kind of human issue for them as a force multiplier. So we continue to invest there I think from a security perspective. It really is a foundational element they can't do without it can't keep their business is up and running and we're going to continue to support them in any anyway, we can.

Thanks, very much George and maybe one for Bert but in your prepared remarks, you talked about seasonality in air our from Q4 to Q1 can you maybe put a finer point to that of how we should think about air our seasonality throughout the year in and if at all we might expect Cove. It at least here in Q1.

To to be exceptional as we think about what it otherwise would've looked like if we were talking a month ago. Thanks.

Sure. So as you know we don't.

Hey are all that we can talk about revenue in the died feel.

We feel that we've probably guided for Q1, taking into consideration everything including call buyers I think about you know the seasonality in our or be fairly consistent with prior periods again, the dip, but we see there was you likely to feed in Q1 is consistent with what we've seen.

Got it periods and then there's you know there's an uptick as we go through the year.

Okay. Thanks, a lot.

Welcome.

Thank you.

Next question comes from Joelle fish, Spain with Suntrust.

Good after I mean, everybody I'm not congrats again on our <unk> on a great quarter I have a quick question on said I'm.

Just in this environment I know it might be a little premature, but had brant and how that that is adopting Patrick I would love to hear George how how that's going to you didn't really called out in and I've a follow up quickly for Cooper.

Sure, it's going really well fed as part of or overall state local and fed operation in general just the fed pieces up over 200% year over year customer acquisition is up and.

When you look at the concern in the federal government you look at the various tax that have been out there or the fed government, it's increasingly calling on crouch right because he guidance and understand the threat level and certainly you know <unk> adopting our technology to help protect protect against those.

Many persistent threats that are out there. So you know it's still a relatively small business for us as we just got the fed ramp certification.

You know a while back I guess, a short time ago over the last 18 months or so and we continue to grow that so that's a great market for US and then as you expand that out in the state local and we've got many states that are crowds right customers. They continue to adopt us.

Again, ransomware that big a issue for some of these small municipalities or even some of the larger state governments and crowd Frank has been a real critical part of their overall operation.

Thanks, George and Bert real quick follow up for you on the the message has been look you guys are Cohen very very fast here, you're you're gaining the you know customers and a very fast clip I think the one concern out there is for companies that aren't casual positive and I I can you actually found no cash flow positive this quarter that in the event.

Things do go South maybe you could talk about what leverage you can pull necessary to you know a big yourselves more profitable and it's been good goes down so that's good and after a little bit of confident there.

Yeah. Thanks, Joel Yeah, So as a reminder, Wifi and free cash flow positive for the last last two quarters and similarly, what I said, yeah. One annuity question is that we'd have a really strong feeling balance sheet at the moment right.

912 million on balance sheet cash cash equivalents and we've got an additional credit facility of 150 million. We see this you know even if things go south and we're continuing to go south from a macro or from a macro perspective, we still believe that we've got a great unit economics, we've got a you know the business very bio being.

Oh God opportunities to continue to go after you know that environment, that's opened up to us with respect to allow our competitors. So no. We're you know where it a really good spot in terms of being able to withstand a you know any you know it continued downturn in the environment and <unk>.

The good news for US is that we've seen several consecutive quarters of improving leverage.

So we're not going to stray from you know looking out our unit economics as we continue to invest even when there is a continued downturn in the macroeconomic environment.

Great. Thank you so much.

Welcome.

Thank you.

Our next question is some Alex Henderson with Needham.

Great. Thank you very much just quick bookkeeping. If you guys were profitable what would your share count be for evaluation purposes.

The question wanted to ask a really was around the pricing side of things.

Or the demand side of things too to what extent have you seen any of your customers.

Implement a broad.

Spending freezes and to what extent are you seeing your product line and Youre and security in particular against that backdrop.

Exempt from that spending freeze if you could help us out understanding that differential between.

The actions broadly that the company's you're taking versus what's your take relative to to security that would be really helpful. And then one other question whether it was added.

Just going back from bird to that.

In addition to continue to invest I assume you're you're still adding salespeople that are pretty aggressive rate I assume that the become more available in this environment I can you give us any sense of the rate Oh staffing up.

In the sales and marketing side of things and thank you very much.

Thanks, Alex first of all comment on your question about Oh I'm sure. So basically for valuation purposes, I would use 233 million shares.

With respect to you know you know the sales had no we're continuing to invest for sure in this environment you know there's going to be more that's going to be available in a in the group that we look at the hard for them.

So we're going to obviously take advantage of that and took advantage of their current landscape.

But having said all that again I want to go back to the point that I'd be making a long which is we're going to be in investing prudently.

We're going to continue our strong you can have a unit economics or we're not going to do anything that's on natural and so I think that with you know the model in place the competitive landscape I think we're in good spot to continue to go. After you know sales that's without all alternate over to George.

Okay great.

Thanks, Alex and I think when we look at security in General we have to put in perspective. It is mission critical and in the corporate hierarchy of needs cyber security the equivalent of shelter its fundamental it's a basic need and you can't live without it and obviously, there's going to be a you know industries that are more impacted than others, but at the end of the day.

They're going to need security, a it's a compliance mandate for many many large companies even not large companies right from the data privacy perspective, whether it's a state or federal government or any other government around the globe and they're going to still need to be able to purchase that I think again when they come to crowd strike a big part of what we do as we.

Helping consolidate what they have we can show them that three X or better return on your investment.

And in today's environment, obviously, a where they're going to be tremendous cost.

Pressure on these companies I think where the perfect solution to help optimize their head count help optimize their their spend on the hardware and software and security and people and putting all that together, it's a very compelling offering that we have for them and the time of need.

Okay. Thanks.

Thank you.

Our next question comes from Gur Talpaz with Stifel.

Okay, great. Thanks for taking my question well first off congrats on another strong quarter here, but George you alluded to is shifting demand here for a bump in complete and I think in the pace of all that's happened over the past few weeks, how do you think about the nature of the conversation around complete today, especially within the large enterprise.

Well, it's amazing because when we originally that's the first thank you very I think your question. When we think about Falcon complete and we originally constructed for organizations that might have been in the corporate space you know.

Recently sides organization, but not the enterprise or even SMB.

We had no idea the adoption would be so broad in the enterprise space and we have many many large enterprise customers that use us.

Because the offering is so compelling to be able to kind of take that tier one triage off their hands to be able to remediate any issues that come up with automation.

To be able to offer a you know a warranty on on what were what we're doing and the technology is very very compelling and you know I don't care within enterprise or whether you're in corporate SMB, everyone is looking to increase their overall efficiency no operations and reduce cost and when you look at the return of itself and complete they could never.

But we do 24 by seven with expertise we have.

Around the globe a it for anything close to what we're charging them. So it really is a forced multiplier for them and it really has been adopted widely whether it's a small SMB all the way to very large enterprises.

That's the that's very helpful and then bird maybe one for you.

Non-GAAP gross margins here continue to rise I think despite really nice growth in customers and cloud transaction volumes can you just walk us through the inputs again here as to why that's why that's the case and then I think no more importantly have you seen an increase in gross margin at land now given a rise in sort of been inside of customer as you have you see them Atlanta.

[noise] Baxter and thanks for your questions or so with respect to gross margins I mean, it continues to be the <unk>. The same story with respect to you know improvements on the operational side, you know a efficiencies and using both private and public clouds to.

Two it's the module expansion.

As we add new modules. After the first module is sold to a customer virtually every other module after that is a pure gross margin.

Those are that some of the key drivers and we've been consistent.

Throughout the last few years in terms of see why our gross margin method.

The the gross margin in how we think about it going forward I think youre right now in the middle of our long term a non-GAAP gross margin projections and you know I anticipate that we're going to stay within that band and I'm doing though in the long term.

We see US you know going over that 80 plus percent from us and part of the non-GAAP gross margin basis. So we're going to continue to do those things that we've done doing well on the optimization side, we're going to continue to bring in new modules.

Into a platform those two things combined you know will will lead us to where we want to go.

All right.

Yes.

All right.

Thank you Ma'am. Our next question is from Andrew Nowinski with D.A. Davidson.

Great. Thank you again, congrats on a great quarter since just to just two questions for me. So it's great to hear that you're offering programs help customers work from home it all and what we're hearing from resellers and see I always is that companies that are not cloud centric yet, but we're still running these legacy hub and spoke architectures are quickly realizing how it adequately.

Prepared they are so when people start returning to the office, which is hopefully soon do you think that could trigger an uptick in spending from these companies as they work toward transforming their infrastructure.

Well I think Andy and the answer is yes, I think if you look at what has taken place, which I think many of US would agree we've never seen in our life.

Hopefully, we won't see it again, but it's definitely going to transform the way people do business and everyone implemented emergency plan, everyone implement emergency spending and you know if you're working from home on zoom, you still need to be protected right. So I think what they figured out very quickly is you know kind of pushing.

Update signature files through VP ends or overloading things, it's just that whole management doesn't work and I think by leveraging something like crowd strike if he how easy it is it seamless it doesn't even have to go through their own network.

In terms of what we do and how we communicate with a with those endpoints I think there their eyes are wide open so not only do I believe we'll see an uptick in their remote workforce and this is going to be part of People's Resiliency plan is not going to go away. So we're gonna see that we see see iOS going in for emergency spending and relief and and they have to sell.

In this problem immediately, but then they're going to look at their overall business resilience either overall architecture and they realize that you know just trying to GM everything through VPN back to the mother ship is not going to work, you'll see more and more UBS your old Trust, which.

You know were perfect fit in that overall architecture and I do think it's going to fundamentally change would be the way people work and consume <unk> technologies, including security technology.

Great. Thanks, George and then in that same vein as more companies are forced to adapt to this remote workforce I was wondering if you've seen an uptick or via the eight ws channel a as companies look to push more infrastructure to Amazon versus trying to maintain an on premise infrastructure. Thanks.

And the answer is yes, you know Weve got a great partnership with ADW S. It cuts the sales cycle down when we use ADW us marketplace by almost 50%.

And you know just a quick step for money or our perspective I just in Q1 were up 32% quarter over quarter with our eight ws marketplace.

Deal. So you know it's been an amazing channel for us and at the end of the day I think you know people as their remote as you know procurement is not around it's a great channel for them I'm you know that the terms are pretty pretty much negotiated you can get a deal done very quickly and a it slots right in.

Into their overall environment and by the way they can buy it and still use it on their on Prem environment doesn't have to be used just in the eight w. as cloud. So it's been really a great channel for us.

That's great keep up skilled workers.

Okay. Thanks, Andy.

Thank you and ladies and gentlemen, I sent interests of time, please limit your questions to one.

Our next question is from that to head up there with RBC capital.

Hey, guys congrats on the results.

George You know you highlighted a number of reasons why crowd strike can do well in times of and certainly I think that's really helpful for us to consider one of them as your ability none we keep customer safe, but also save them money and I guess on that point can you give us a glimpse into whats yeah. Those are csos are saying right now about their security spend and if additional mindshare comes your way way from.

Your ship the beyond prevent or insight you know what do you sort of most excited about you know from like a new product attach perspective.

Sure well see iOS, ER and systems, but in particular CIO, they're looking for anything that will consolidate their footprint.

And reduce cost and complexity and you know we slot absolutely right into that I can tell you you know from when we started the company to where the conversation was it wasn't at the CIO level to where we are today as a true platform. Almost every large deal involves the CIO. So they're looking for this and you know as you pointed out you know beyond just the.

Next Gen avian LDR piece, we are things like discover with real time response, we added a tremendous amount of automation and ours say you might have been there. We showed how we can deploy emergency patches weekend basically I you know pull data you know brings system back to health and increasingly we're seeing the I.T. ops team leveraging.

The crowd trig technology, which is always grade because you know you want the ITD seem to be excited about security technologies, they get what they need the security team gets with what they want and overall, we're solving and we're selling an outcome, which is basically you know keeping customers from being breach, but at the same time, you know, giving them a consolidation and efficiency.

They need and saving money. So you wrap it all together, that's incredibly compelling offering and you know and in some of the earnings calls this one and some of the prior ones and talked about the consolidation 567 different technologies, we've been able to consolidate out things like a spotlight you know we have new release come out the into Q4.

Broader coverage and that we've seen the adoption.

Hi, you know pick a very rapidly and that module and customers really liking. It so whether it's that Falcon acts a across the board I mean, we have strong module adoption I continue to come back to discover in spotlight, though these are either real to Jim's.

That the I.T. team can leverage a you know tell me what the patch here you go and help me automate my systems with discover a it's a great I want to combination.

Super helpful, George well done guys.

Thank you I like my question.

Comes from Rob Owens with Piper Sandler.

Great and thanks for taking my question once you guys to drill down a little bit admitted color to some of the commentary around hiring potentially have you changed your hiring plans.

As you are a remote company your ability to higher virtually and how you see this playing out both in the next quarter in this fiscal year. Thanks.

Yeah. Thanks, Rob you know since I started the company I think part of the overall thesis was we need the best people wherever they were and that's where we started with when we had the first 20 launch employees. So we've been able to grow up as a remote company, we've been able to figure out how to make that work you don't get people in lots of different places and I think we will continue to do that we don't have any plans to change.

Our hiring certainly competitive environment out there, but when you're in a cutting edge with our data science teams with handling three trillion events at scale on a weekly basis with using the latest and greatest technologies, we need the very best people I believe we have the best people in the industry and you know what they've been able to do in the short period of time in a very stressful environment is just.

You know herculean, so I can't say enough about the great People's crowd strike and that we're going to continue to hire those folks around the globe and that's really important to have the very best people to make sure our customers are protected.

Thanks.

Thank you.

In our last question comes from Gregg Moskowitz with Mizuho.

Alright, Thank you for chicken near the question George It's hard not to take it take notice when somebody like yourself says, it's just the best competitive landscapes, you've encountered in your 27 year career and injuries Stokes on your prepared remarks around a interest level searching so steep brought kind of symantec integration what I'm wondering.

It was whether you've seen any changes in the rate of displacement activity around symantec's over the past few months or is that not yet actually kicked in.

Well, thanks, Greg I I think it's both <unk> again as I've said in the past what we've seen as a compression of you know someone who maybe a out a year in terms of renewals are now coming to us sooner because it's it's not even if it's a win in many cases.

You know they've been hit with some ransomware something that really has accelerated while they're coming to us.

In other cases, they just you know not happy with support their down on a the named list and they basically have come to us and said, Okay. Maybe we'll run out one part of the semantic license, but we're going to pick some piece of your sweet up we'll get that up and running now and then you know when these things start to run out will ultimately just move everything over to you. So.

It Greg, it's really a little bit of both.

Okay. That's helpful. Thanks and congrats.

Thank you.

Thank you.

And this concludes arguing for today I would like to trying to call back to charge card precedent teams that gets <unk> executive officer for his final remarks.

Alright, well thanks, Thanks to all of you for your time today, obviously, it's it as a very trying environment and our hearts and brands go out to all the folks that are affected by by this virus. We certainly appreciate your interest and we look forward to speaking with you next quarter. Thank you so much and if we stay safe.

And with that ladies and gentlemen, we thank you for participating in today's program. You may now disconnect have a wonderfully <unk>.

[noise].