Q4 2021 CrowdStrike Holdings Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the crowd strike for quarter and fiscal year 2021 financial results Conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer.
Session to ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded for Ya.
And any further assistance. Please press star zero and I would now like turn the conference over to your Speaker today Maria Riley Investor Relations for crowd strength. Please go ahead.
Good afternoon, and thank you for your participation today with me on the call are George Kurtz, President and Chief Executive Officer, and co founder of coach Inc, and Bert part Barrett Chief Financial Officer before we get started I would like to note that certain statements made during this conference call that are not historical facts.
Including those regarding our future plans objectives and expected performance.
And our outlook for the first quarter and fiscal year 2022, our forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements represent our outlook only as of the date of this call.
While we believe any forward looking statements. We have made are reasonable actual results could differ materially because the statements are based on current expectations and are subject to risks and uncertainties.
We do not undertake and expressly disclaim 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 company's financial results is included and filings we make with the SEC from time to time, including the section titled Risk factors and the company's quarterly and annual reports.
We filed with us he's seen.
Additionally, unless otherwise stated excluding revenue all financial measures discussed on this call will be non-GAAP, a discussion of why we use non-GAAP financial measures and a reconciliation schedule showing GAAP versus non-GAAP results is currently available and our press release, which may be found on our Investor relations.
Site at IR, Doc crowd check dot com or on our form 8-K filed with SEC today.
Please also note that in light of our recent acquisition of <unk> management will provide additional information and to our guidance assumption.
Do not intend to provide this additional information on an ongoing basis now.
Now I'll turn the call over to George and we get.
Thank you Maria and thank you all for joining us today.
We have a lot of ground to cover I will focus today's discussion on three key points first we delivered a phenomenal fourth quarter with results exceeding our expectations across the board as customers of all sizes are increasingly choosing crowd strike and theirs.
Security cloud platform of record.
And as recent events such as the sunburst software supply chain and attack highlight stopping the breach is no longer just about protecting endpoints.
It also encompasses cloud workload security and identity protection.
We continue to enhance our capabilities and invest and all of these areas, including our timely acquisition of preempt and as a result, we are driving strong momentum with customers.
Third our recent acquisition of <unk> is a key element of our strategy to drive long term growth.
We are building, what we believe will be the fastest and most cost efficient and extensible cloud data platform that will deliver best in class visibility for security as well and observe ability for it operations.
Now, let's discuss our results and get into these topic and more detail.
The fourth quarter tops off a banner year for crowd strike and which we delivered exceptional growth at scale.
Significantly improved our margins and generated meaningful positive free cash flow for the year.
We reached a significant new milestone with a R R surpassing $1 billion up 75% over last year.
We believe this makes us the third fastest cloud native SaaS company reported to reach 1 billion and a R. R. Following fellow pioneers sales force and zoom.
We already talked about zoom being a crowd strike customer and we are pleased to also add sales force to the roster in Q4.
The exceptional execution of the crowd strike team made reaching this significant milestone a reality.
Could not be more proud of our dedication and success as a team and helping customers achieve and maintain and advantage over adversaries as we leverage the cloud speed agility and visibility to digitally transform their security.
I would like to personally thank every crowd stryker for their unwavering support and congratulate the team on reaching our first billion dollars and a R. R.
Across the board, our fourth quarter results well exceeded our expectations.
During the quarter net new subscription customer growth accelerated to 70 per cent and year over year.
We added a record $143 million and net new E. R. R and achieved 77% subscription revenue growth.
We also continued to see rapid module adoption.
Crowd strike subscription customers that have adopted for or more modules, five or more modules and six or more modules increased to 63%, 47% and 24% respectively.
Organizations around the world are shedding legacy and inferior and Nextgen security technologies and accelerating their move to modern cloud native technologies to meet the demands of today's threat landscape.
Future proof their security architecture, and adopt zero Trust security model.
Our go to market strategy is executing on all fronts to seize on the strong secular tailwind and opportunities, we see and the market derma.
Demonstrating the power of our sales engine and our land and expand strategy. We added a record 1480, net new subscription customers and the quarter and now proudly serve 9896 per subscription customers worldwide.
We have gained incredible momentum with both marquee enterprise and small businesses alike and.
And total for the year 4000, and 465 net new customers chose Falcon.
The marquee customer stories that I will share with you today highlight our growth and leadership among large enterprises and include companies and the Fortune 50, Fortune 100, and Fortune 500.
I would like to note that while these are Q4 wins given customer delivery schedules and our our contribution will begin in Q1 further reflecting our exceptional Q4, net new a or our performance.
First I am pleased to report that Pfizer, a biopharmaceutical company and leader in COVID-19 vaccine research is a new crowd strike customer Pfizer selected crowd strike to help fortify its security posture with an initial purchase of seven Falcon modules.
The next way and I'd like to share with you is procter and gamble and executing their digital transformation plans and Procter and gamble recognize they needed to transform for security.
Procter and Gamble was attracted to crowd strikes tightly integrated cloud native single agent architecture.
Our strategic partnerships with E Y and AWS were instrumental and Procter and gamble choosing crowd strike.
I'd also like to highlight a win with a large technology company, where we are replacing centered on one this customer was eager to find the true security partner to protect us and points as well as its cloud workloads across both its development and production environments.
In addition to efficacy issues since it'll one was not a scalable solution and dramatically degraded performance on the endpoint, causing instability and impacting developer productivity.
Crowd strike was selected given our proven efficacy breadth and depth of the Falcon platform performance and scalability across operating systems, including Mac and Windows workstations and Linux servers.
We also secured a foundational customer and the federal space with a major defense contractor standardizing on crowd strike for their internal infrastructure out shining a long standing relationship with the legacy vendor as well as and Nextgen Edr vendor for Falcon platform was selected as part of their digital transformation initiatives.
Increased efficiency enhanced visibility improved performance at scale and consolidate agents across their environment.
Our next customer story takes us to Israel <unk>.
After leveraging the Falcon for home use program earlier this year as a new customer bank Leumi, a leading bank and Israel selected crowd strike to protect their endpoints and implement a zero trust model for future proof their security architecture.
Crush strength was chosen over the competition after determining their solution was unable to adequately protect multiple versions of windows or match the performance and speed of the Falcon platform.
As one of the most respected security organizations operating in both and industry and country that have long been targets for a nation state actors and E crime. They focused on selecting a new security partner with a modern solution capable of preventing targeted attacks protecting their active directory and supporting.
The remote workers with the scale and performance of the cloud.
Expanding with Falcon and zero Trust along with several more modules bank Leumi is taking advantage of the extensive functionality offered by the Falcon platform and single agent architecture to protect its critical infrastructure.
Our outstanding performance and the enterprise sector was complemented by our strength with mid market and SMB customers as reflected in our net new customer growth rate, which accelerated in the quarter.
In addition to investing and our best in class sales team a key pillar of our strategy to efficiently grow our market share and leadership is to expand our routes to market through our partner ecosystem trial to pay platform and Crouch for a store.
We're seeing our investments in these areas over the past few years deliver meaningful results and fiscal 2021, we gained significant leverage from our partners growing our partnership count by 85% worldwide and doubling our partner source transactions.
Our partnership with AWS is a standout with both partner influenced deals and transactions fulfilled through the AWS marketplace growing significantly throughout the year and fiscal 2020, one ending a or are transacted through the AWS marketplace grew 600 and.
50% over the last year and transaction volume grew over 300 per cent.
We are also seeing positive momentum from our new alliance with E Y which is already influencing multiple deals as our clients look for modern cloud native security and to enable their digital transformation plans.
Adversaries do not draw on much of a distinction between targeting data on and endpoint versus the cloud environment and neither should organizations.
We operate and protect one of the largest clouds our security cloud.
And we naturally incorporate all this experience into our products.
We have been investing and innovating in this area for a number of years and as a result are also driving momentum with customers.
Building on the cloud workload module, we announced last year, we recently expanded the capabilities to provide customers greater control and visibility from build to run time.
And the Falcon cloud workload protection module now has the ability to secure applications with the new Falcon container sensor that is uniquely designed to run as and unproved, which container and a part of.
This brings broad support to contain and runtime secure even and manage container environments, such as AWS foggy for the customer cannot run at kernel mode sensor.
And one of the new capabilities and Falcon Horizon, our cloud security posture management solution now provides end to end visibility to azure.
This is an important tool to quickly identify privilege permissions and miss configurations, and Azure, a D, which is notoriously difficult to administer and protect.
Securing this threat vector can help limit attacks like sunburst.
Sunburst highlights the urgent need for organizations to modernize and transform their security and it should serve as a wake up call to organizations that rely on legacy technology because legacy Tech is no match for today's adversaries.
While it is challenging to measure specific pipeline effects events like Sun burst may have.
We do not believe it was a significant contributor to our strong Q4 results we.
We do believe it has raised awareness at the board level and will serve as an additional tailwind to the industry over the long term.
Furthermore, we are seeing a crisis of trust within the Microsoft customer base, driven by Sun burst and their more recent zero day vulnerabilities and exchange that has been reported to affect 250000 customers worldwide customers.
We're looking to Derisk their security architecture by choosing and alternative vendor to Microsoft.
Additionally for.
Following the sunburst campaign, we have seen customers become increasingly concerned about protecting their cloud directories, such as Azure a D. This is driving interest for identity protection technologies, such as our zero trust offering derived from our acquisition of premium.
As I communicated to the Senate Intelligence Committee last month.
On burst for their highlights the importance of the zero Trust posture.
Organizations need to incorporate new security protections focused on authentication in order to significantly reduce or prevent lateral movement and privilege escalation during a compromise.
And with preempt security crowd strike is leading the charge and delivering a zero trust solution focused on endpoints and workloads.
We believe combining workload security with identity protection is foundational for establishing true zero Trust environment.
Preempt expanse craft strike zero trust capabilities and incorporates critical identity behavior data and analysis to help customers fortify their defenses and prevent identity based attacks and insider threats.
Our initial phase of integration of preempt is on track and targeted for the end of Q1, and we are very encouraged by initial customer response and engagement. We believe crowd strike has the opportunity to be a key beneficiary as companies look to transform and bolster their security defenses in order to stay ahead of adversary and advancements.
We believe our pole position and the market has further strengthened with <unk>, a leading provider of high performance cloud log management and observe ability technology that we acquired several weeks ago.
And whether you are looking to secure traditional endpoints or cloud workloads and visibility and data are vital.
Security efficacy is directly related to the quantity and quality of data collected and the ability to analyze it in real time.
As a pioneer and Edr, we have spent the last decade building upon rich endpoint data.
Adding more network visibility and telemetry from all workloads, regardless, if they are on premise and the cloud or deployed and container.
All the data, we collect our stores and one place the threat graph, where it's analyzed across our entire customer base, providing real time protection and community immunity.
By streaming the telemetry to the cloud with our proprietary smart filtering technology. We believe we have a fundamental time and performance advantage over most vendors today threat graph processes over five trillion security related events per week.
With <unk>, we are now and redefining nextgen xdr through a platform that spans and points identities applications and network edge and the cloud crowd strike is building a unified data layer to power. The next generation of enterprise security and it.
<unk> provides us the ability to expand our data lake and to solve more security and non security use cases and real time.
Can't emphasize enough the power of index free data ingestion and when applied to security use cases.
And as it allows us to query the data and real time as it's being adjusted.
Additionally, <unk> capabilities will be built into the fabric of our Falcon Overwatch.
Fleet and threat intelligence modules as well as our professional services offerings, providing crowd strike with a greater time advantage over the competition and the adversary.
We believe that combining <unk> data ingestion and analysis engine with the crowd strikes agent technology, which provides OS and application process level telemetry introspection capabilities and smart filtering.
We'll create a powerful data platform with a new level of speed and efficiency.
This can be transformative and provide a fundamental advantage that has the potential to disrupt the log management and observe ability markets.
<unk> builds on the momentum we have already achieved with Falcon spotlight and Falcon discover to grow our total addressable market by solving broader use cases outside of traditional security.
On day, one <unk> broadens our reach into the log management market. This market alone is forecasted to be $4 $9 billion in 2020 three based.
Based upon IDC estimates and that does not include any potential adjacencies such as the massive observe ability market.
Looking forward, we have even greater plans for this new crowd strike business unit.
It will take some time and investment to deliver this powerful combination for the market. We believe it has the potential to open up massive new Tam for Crouch right provide a runway for growth well into the future and ultimately create another line of business on par with our security business and.
As you can probably tell we are very excited about the future opportunities and prospects Cuneo brings to crowd strike and are thrilled to welcome the team on board.
Before turning the call over to Bert I would like to take this opportunity to specifically applaud the outstanding work of our professional services team, which resulted in a record quarter. These outstanding professionals are widely respected across the industry as one of two elite forensic expert teams and the March.
Yes.
Our team of defenders are laser focused on helping organizations survive a breach and prepare for the next attack.
After being engaged by solar and wind to investigate the sunburst attack. This team rolled up their sleeves and worked tirelessly to protect customers in a dynamic threat environment.
Shortly thereafter, our services team released the crowd strike reporting tool for sure a free community tool to help other organizations quickly and easily review excessive for emissions and their azure environment determined configuration weaknesses and mitigate risk.
We share the intelligence and learnings we derive from our incident response work with our engineering product intelligence.
<unk> and complete and teams further enhancing our ability to protect our entire customer base.
We believe this is another factor that provides crowd strike a unique advantage over the adversaries and the competition.
In closing as you can see from the exceptional results. We reported today, our Falcon platform is increasingly recognized as a mainstream market choice for enterprises of all sizes around the world.
We believe we are still on the early innings of our growth journey.
Crush strength is positioned to continue our momentum and further expand our leadership as we build on our success expand our platform capabilities and extend our reach into new and adjacent markets.
With that I will 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 are non-GAAP.
We delivered another outstanding quarter and fiscal year on.
Our record performance highlights our continued exceptional execution and ability to rapidly scale our business while at the same time, maintaining best in class operations.
And fiscal year 2021, we delivered 82% revenue growth, 7% operating margin and $293 million and free cash flow or 33% of revenue.
We are exiting the year with a record fourth quarter, which includes record subscription gross margin at the high end of our target model and record free cash flow of $97 million.
In the fourth quarter, we saw broad based demand and strength in multiple areas of the business with multiple large deals none being outsized.
Similar to last quarter demand for our solutions was well balanced between new customers and expansion business and between large enterprises and mid market and smaller accounts.
We once again ended the quarter with a record pipeline, which we believe indicates a strong foundation for future growth.
And the fourth quarter, we delivered 75% AOR growth year over year to reach 1.15 billion.
Rapid new customer acquisition as well as expansion business within existing customers drove substantial growth in the quarter once again, resulting in another quarter and record net new <unk>, which came in at $142 $7 million.
Excluding the acquired net new air are reported and Q3.
Net new <unk> grew approximately 30% quarter over quarter, which is an increase from the trend we saw last year.
We continue to be very pleased with the success of our land and expand strategy.
Our gross retention rate remains high and best in class at 98% at year end.
Our dollar based net retention rate exceeded the 120% benchmark throughout the year.
Net retention increased to 125% as of the end of FY 'twenty, one up from 124% at the end of FY 'twenty.
For the interim FY 'twenty, one quarter's net retention was 128% and Q3, 131% in Q2, and 126% and Q1.
Moving to the P&L total revenue grew 74% over Q4 of last year to reach $264 9 million.
Subscription revenue grew 77% or for Q4 of last year to reach $244 $7 million.
Professional service revenue was $23 million setting a new record for the second consecutive quarter and representing 49% year over year growth.
In addition to providing valuable breach remediation and forensic services to organizations around the world. Our professional services are a strong lead generation engine for the Falcon platform.
Among organizations from first became a professional services customer after February for 2019. The average subscription air are derived for every $1 spent on initial incident response or proactive service engagement grew to $5 and 51.
This is up significantly when compared to $3 and 73 reported last year.
In terms of our geographic performance in Q4, we continued to see strong growth and the U S as well as international markets.
Approximately 71% of fourth quarter revenue was derived from customers and the U S.
14% from Europe, Middle East and African markets 10 per cent from Asia Pacific and 5% from other markets.
Growing our international business is a key component to our plan for sustained growth over the long term.
We were pleased to see our investments in these markets deliver and fiscal 2021 with EMEA, posting 84% growth and APAC revenue more than doubling at 113% over last year.
We remain focused on building a long term business for sustainable growth and compelling margins.
In Q4, we recognized significant operating leverage and our SaaS model and the benefits of scale, even as we increase investments and our global reach and cloud platform.
Fourth quarter non-GAAP gross margin improved to a record 77% a 380 basis point increase from Q4 of last year.
Our non-GAAP subscription gross margin increased to 80 per cent compared with 77% and Q4 of last year.
Subscription gross margin reached the high end of our target range, we and.
For seeing the business advantage of our collect data once and we use many times strategy.
Total non-GAAP operating expenses and the fourth quarter were $173 million for 64% of revenue versus $118 $4 million last year for 78% of revenue.
We continued investing aggressively in our business during the quarter.
Kaling our business efficiently remains a top priority, which is why we intensely focused on our unit economics, including magic number.
And Q4, we ended with a magic number of 1.3, which remains very high.
We attribute this to our frictionless go to market engine, including our digital lead generation and self service e-commerce capabilities and while to a lesser degree some benefit from reduced travel due to COVID-19 restrictions.
We drove strong leverage in the quarter and fiscal year.
For FY 'twenty, one total operating expenses as a percentage of revenue improved by 17 percentage points with both R&D and G&A within our target operating model.
The leverage we generated this year demonstrates the efficiency and our model and enables us to step up investments and new technologies, New international geographies and other marketing programs as well as continuing to hire aggressively.
We believe this will lead to sustained growth over the long term, we look forward to sharing additional details about our model on our next investor Webinar scheduled for April eight.
Fourth quarter non-GAAP operating income was a record $34 4 million and operating margin improved 17 percentage points over Q4 of last year to reach 13%.
Q4 represents our ninth consecutive quarter of improving non-GAAP operating performance on both a dollar and margin basis.
Non-GAAP net income and Q4 was $31 2 million for.
<unk> 13 on a diluted per share basis.
Our weighted average common shares used to calculate fourth quarter non-GAAP EPS was on a diluted basis and totaled $236 7 million shares.
This brings our non-GAAP net income for fiscal 'twenty, 'twenty, one and $2 $62 6 million.
For 27.
On a per share diluted basis, using $234 4 million shares.
We ended the fourth quarter with a strong balance sheet.
Cash and cash equivalents totaled approximately $1 9 billion.
Our cash balance reflects approximately $740 million and net proceeds from the $750 million senior unsecured notes issued in January.
We also expanded our revolving credit facility to $750 million, providing crowd strike access to additional capital without diluting our shareholders.
Cash flow from operations and the fourth quarter grew to $114 5 million and free cash flow increased to $97 4 million setting new records for both measures.
Before we move to our guidance I would like to make a few modeling notes.
With respect to net new <unk> as is typical for software companies and similar to last year, we expect to see seasonality as we move from Q4 for Q1.
Our guidance includes the impact of our recent acquisition of female which closed on March five 2021.
We currently expect the acquired net new <unk> contribution from <unk> to be approximately $2 million and the first quarter.
We funded the cash portion of the humor, you'll acquisition with cash on hand.
The $352 million cash payment net of cash acquired will be reflected and our Q1 FY 'twenty two cash balance.
We expect interest expense and fees from the issuance of $715 million and senior unsecured notes and the $750 million Undrawn credit facility combined to be approximately $22 $6 million per year, excluding amortization of debt issuance costs and discount.
Moving to our guidance.
We continue to remain optimistic about the demand for our offerings record pipeline and the powerful secular trends fueling our growth.
For the first quarter on FY 'twenty, two we expect total revenue to be and the range of 287 eight to $292 1 million.
Year over year growth rate of 62% to 64% with subscription revenue being the dominant driver of growth.
We expect non-GAAP income from operations to be and the range of $18 five to $21 7 million and <unk>.
Non-GAAP net income to be and the range of 10, 8% to $13 9 million.
We expect diluted non-GAAP net income per share to be and the range of five and six utilizing our weighted average share count of 238 million shares.
For the full fiscal year 2020. Two we currently expect total revenue to be and the range of 1000, and 310 point for to 1320 $7 million, reflecting a growth rate of 50% to 51% over the prior fiscal year.
Non-GAAP income from operations is expected to be between $94, eight and $102 $5 million.
We expect fiscal 2020, two non-GAAP net income between $63 eight and $71 4 million.
Utilizing weighted average shares used in computing diluted non-GAAP net income per share of $240 million, we expect non-GAAP net income per share to be and the range of 27% to 30.
The midpoint of our non-GAAP EPS guidance includes approximately <unk> <unk> per share and added operating expense for <unk> and <unk> <unk> per share and added interest expense for the debt. We previously discussed.
George and I will now take your questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
It's hard for your question principal balance sheet. Please standby on composites, you and arrows.
Our first question comes from Ken <unk> with.
Barclays You May proceed with your question.
Okay, Great Hey, Thanks, guys for taking my questions here.
On a lot a lot to sort of run through but but George maybe I'll, maybe on zero in on on the public cloud and Falcon Horizon and so the question is as customers take a look at Falcon horizon and your other security tools for the public cloud can you just talk about how much you're able to cross.
Sell those into your existing customer base and maybe how your conversations understanding it's early with new customers are trending around Falcon horizon and the other public cloud security tools.
<unk>.
Sure. Thanks.
Yeah.
Obviously, if you look at our model, we've done a great job of being able to cross sell our technologies and when you look at horizon, It's a perfect opportunity for us to cross sell into those cloud workloads, which as we've pointed out on.
Are increasingly becoming more and more important for all the companies as they as they digitally transform.
We've gotten tremendous feedback so far obviously still early days on horizon, but again, that's a that's something that we had built for ourselves over many years. So while it's new to the market. It's a it's been a proven technology and it's been very well received so far by our customers and we've gotten some nice traction.
And with it so.
We also pointed out.
Some additional.
Updates in the analytics modules, where we can run and a far gate environment. As an example, so overall very strong offering and the cloud workload runtime protection and visibility space and we continue to build that out and we'll continue to build that out over time.
Got it that's really helpful. Maybe for you for my follow up.
Understanding we don't guide to AOR for next year, maybe one component of that but I wanted to zero in on is that <unk> per customer, obviously, a tough metric to forecast because there are just so many different drivers inside of it but but as you look forward just broad brush how do you think about that debt AOR per customer sort of trending.
In fiscal 'twenty, two and I'm wondering maybe some other puts and takes to that.
Hey, Great question.
Great to hear your voice.
So when we think about <unk> per customer.
You can see that there is a mix shift that is happening I mean, thats evidenced by the accelerated growth, we saw and net new logos and and that was really driven by the midmarket and SMB space.
And as a reminder, when you think about our <unk> per customer.
Across the board accounts are expanding and Thats why evidenced by our 125% net retention rate.
And then finally, when you think about.
And the overall success.
Success of our net new logos and <unk>.
Losses that we're seeing with respect for net new logos.
We're seeing debt, we're able to sell to customers large and small this is very hard to do.
And getting great satisfaction from our customers.
Across the board is something that we absolutely strike too. So there are a lot of different dynamics that go into that equation.
Got the velocity from the smaller mid market.
Folks on in terms of the volume of new logos, but Youre also seeing you still be able to land those bigger deals. So excited about the opportunity and certainly excited about our expansion opportunities.
Absolutely it shows thanks guys.
Thank you. Our next question comes from Sterling Auty with Jpmorgan you May proceed with your question.
Yeah, Thanks, Hi, guys I.
And I appreciate the disclosure on the sales through AWS, but I'm just wondering if you can either quantitatively or qualitatively give us a sense of what percent of the net new air are and the quarter or even the year actually came from protecting cloud workloads. Just so we can get a sense of that use case for.
Our endpoint versus traditional ones.
Hey, Sterling it's Bert.
Still very very good question.
So remember.
I think that you know.
First of all we feel that.
And it was a strong quarter through AWS marketplace.
It has grown into a really meaningful number.
I think that one other things you want on.
Put into perspective is that we're probably one of the most transaction Isps on the marketplace.
And I think the key is that we're seeing good pull for our new cloud modules.
George talked about how many containers we secure.
And it's a big number.
And I think that when you combine that with almost more than 20% of our servers, we protect her and the cloud I think that youre starting to put the picture together.
And the better news is that.
We're still we're still not a greenfield opportunity with respect to protecting cloud workloads and we're really really ahead of.
Anybody else that's out there and the marketplace.
For the marketplace is really a great vehicle for transacting business with both large and small customers.
And George often talks about the speed in terms of how we close on the process with them with AWS.
I think that with respect to.
For their governing contracts for their global contracts I think that.
This has been a real advantage for us with both the buyer and seller agreed to the standard contract.
And that just speeds up the process by 80%.
At the end of the day companies want our tech and they are buying and through the marketplace.
And one Avenue. So we see this as again I want to highlight we see this as a greenfield opportunity for us.
Got it makes sense and then just the other question on Humira.
George when you think about xdr, how would you kind of characterize any differences between xdr and Sim is this kind of the first step or do you see those as the same opportunity. So in other words are you going to be come more of a full blown sem provider overtime.
Well I think you have to look at the outcome and the outcome is two <unk>.
Find advanced threats and you don't want to create just bigger needle stacks right you want to be able to find those nuggets that are out there and you want to leverage the vast artificial intelligence technologies that we've built and we.
We've been even prior to Humira on I mean, we've built a lot of technology, which would be xdr like in terms of looking at different network flows and connectivity. So we feel really good about the technology. We've looked at just about everything else that's out there and and we were just blown away about how fast the technology works index free ingestion and.
But it's going to bring and as I pointed out and the script.
It's going to help and in multiple areas across the board that I pointed out and even the crush rate store to pull additional integrations and so I think it's a real foundational technology for us you'll hear more about it as we solidify the integration plans, but very excited.
Got it thank you.
Thank you. Our next question comes for my team on Bologna.
And <unk> with UBS you May proceed with your question.
Good afternoon, and thank you for taking my questions George maybe I'll start with you just stay on with respect to <unk> you.
You did talk a lot about the revenue opportunity associated with <unk> I'm wondering if you can expand upon the cost benefits opportunities and to the extent and we can think about.
Crowd strike re platforming the backend.
On on <unk>, and if that's a path.
That youre thinking about as it relates to them.
And Capex gross margin and just the way Youre thinking about your own backend infrastructure and then I have a follow up for Bart.
Hey.
Well certainly it will be a technology that will be used throughout the crowd strike platform.
You could see the more at the high end of our range for gross margin. So I think you know it could be a small impact but.
I'll, let Bruce comment on on anything further than that but overall, it's going to be.
A foundational technology for us its ability to compress data is.
Without actually having to rehydrate. It. So I mean, you can you can search and all of this information and even a very compressed format, which is very unique and the industry. I think is certainly going to help across the board and.
We'll know more and when we get into it.
Yeah. Good question for him and I think to Georges point, I mean, we're already and a good spot with respect to our subscription gross margin theres going to be a little help with respect to <unk> and.
And so we do anticipate and opportunity for increased margin expansion due to that but also due to other things like more modules that we're going to add to our platform and more optimization.
Fair enough and since I have you just with respect to some other remarks George made around <unk>.
And the script.
Where there might be some spillover into the first fiscal quarter can you just reconcile that and some other large deal and momentum you saw on this quarter versus some of the seasonality expectations that you pointed us towards for fiscal 'twenty two that would be really helpful. Thank you.
Sure first let me comment on seasonality, so I think that.
We typically see seasonality and our business and <unk> and.
And we saw last year or so.
And last year, we saw a dip from Q4 to Q1 and.
I think that's going to be the case again the good news is again.
No outsized deals and the quarter, we had a lot of large deals and so that was beneficial for us. When we think about you know our ability to continue to weigh on many large deals.
And some other things some of the remarks that George made with respect to R. R.
Going into Q1.
Really released for some of the subscription start dates.
So we would still land them in Q4, but the subscription start date would take place and the following quarter and that and that happens on every quarter and.
And we have many many many deals but.
And obviously land and the quarter and also start other subscription start date in the quarter as well.
And I think that the other thing is it really it really is dependent on the customer's deployment schedule right. We're ready to go anytime right, but we want to make sure that the customer is ready.
And so that's why we think about.
Large deals or small deals lending and one quarter, but the subscription start date and another.
Very clear thank you so much.
Youre welcome.
Thank you. Our next question comes from Brian Essex with Goldman Sachs. You May proceed with your question.
Hi, good afternoon, and thank you for taking the question George I was wondering maybe if you could touch on Hulio again, a little bit.
How do you I guess, who do they typically see competitively and environment or are they similar to scalar.
And and or is this maybe taking their technology and repurposing and a completely different direction and what day, where typically.
Or I guess strategically align for.
Well you know.
I think you've got a normal players and the Sim and log management space that are out there that they would consider competitors.
With respect to their technology and why it's differentiated and I really did talk about the index free ingestion and the fact that.
As a lot of things that they can do in memory, which is just amazingly how efficient the technology is and when we put it through its paces and.
Looked it up to our back end and it and handle all the data that we throw at it so.
When you look at its flexible architecture and data models, it's different and others, where you can you can operated from the cloud you can have data in different places for data sovereignty. So I think gives us a lot of flexibility and then when you combine it with our agent.
Our agent is is more than just a forwarder of data its a very intelligent agent that does introspection and the system call analysis per.
<unk> information observe ability information that can be extremely valuable to it departments again outside of security. So when you combine our agent our smart filtering with their ability at scale to ingest data and real time, we really think it's a winning combination.
Got it that's super helpful and maybe maybe as a follow up you mentioned in your prepared remarks.
Prices of trust within the Microsoft customer base could you provide a little bit of context around that I mean is it is it strictly as regard to endpoint or do you see that across identity management and E Mail with recent exchange server attach I mean, how how pervasive do you think it is and how might that affect not just your business but.
Others across the ecosystem.
You know, it's I think it's across the board we're seeing it we're hearing it from Cisco's, we're hearing it from from Cio's boards are concerned when you look at the latest breaches around <unk>.
Sun burst and you look at the exchange Zero day vulnerabilities.
Just about every incident response, we do involves Microsoft technology. So obviously, we're focused on being able to protect it but theres a lot of customers that are looking at this and saying hey, we need to derisk, our environment and we need another provider.
And the proverbial and want to Fox guarding the Henhouse and you know I think just over the last couple of months is really highlighted.
On the risk and using sort of a monoculture for both security and operating systems.
Got it. Thank you very much for that color that's very helpful.
Yes.
Thank you for our next question comes from Andrew Nowinski with D. A Davidson you May proceed with your question.
Okay. Thank you for taking the questions and congrats on the consistently strong execution, which is not easy in this environment.
So I wanted to start with.
Question on a.
When you mentioned in your prepared remarks at sales force was that.
The event was the income and vendor that you displaced a legacy or on Nextgen provider and and why do they select crowd strike.
So thanks, Andy It was and Nextgen vendor.
One has been making a lot of noise and the investment community and they chose us because of the scalable platform low impact and and efficacy and I think that's across the board. That's what we're seeing whether it's and nextgen vendor, whether it's an incumbent vendor.
Is the ease of use time to value is incredible we've done some massive financial services companies and.
Its been a smooth rollout that they've seen.
And just works and the amount of visibility.
Debt we have is.
And it's unbelievable compared to our competitors. So you know a lot of things may sound and it seemed the same but when you actually get into the technology and the platform. This was built to scale and we've pioneered a lot of these technologies.
Over time, others have tried to copy us, but bad copy is still a copy.
Okay. Thanks, George and then maybe just a follow up as it relates to the legacy vendors that you compete against I would I would imagine the sale of the Mcafee enterprise business as a potential churn event for their customers. So just wondering if you could comment on that and and then when and what inning. Do you think you are in with regard to taking share from Symantec. Thanks.
Well, yeah, maybe I'll start with the later on the latter one we still are taking share.
And just.
And how the sales tactics work and how the renewals work its really great opportunity for us to continue to take share from Symantec and I think that sort of.
Play as you know again, we will continue with with Mcafee and enterprise business and whenever you see.
Disruption between owners and.
And.
Particularly if.
It's a financial sponsor.
We believe and I think that's been crew and over time, you're not going to see a lot of innovation on the R&D side and again, you're starting with an architecture that is just legacy. So there's a lot of work that would have to be done and we think it's a great opportunity for for us to continue to take share in that area.
That's great. Thanks, guys keep up the good work.
Thank you.
Yeah.
Thank you and as a reminder, please limit yourself to.
One question. Our next question comes from Alex Henderson with Needham You May proceed with your question.
Great. Thank you very much I appreciate you taking the question.
I wanted to talk a little bit about that.
And the pipeline.
Stated that you saw a record pipeline I think you're clearly seeing record deal sizes can you talk a little bit about some other metrics around time to close deals are you seeing any change and and.
And in that.
On timeline.
And what.
What is the time to first upsell look like and then in that context. As you are now at the end of the year and.
And looking into the new year can you give us some sense of what your expectations are around the sales staff build to.
And to drive that pipeline over the course of the new fiscal year.
Yeah, Hey, it's George Thanks for the question. So we don't normally give the stats out and it and candidly it's difficult to.
Give you something thats consistent.
And incident response engagement and it could be a week for a massive enterprise deal and you look at some of the other big financial services it could be six months and everything in between so I.
What's consistent is that when we get into a proof of value.
You know, we're winning it people are seeing ease of use it's super easy to deploy so we can get it out there very quickly and that does accelerate the sales cycle I talked about the threat environment.
Being the worst and I've ever seen and certainly the heightened awareness around that for boards and and.
Wanted to make sure they had things locked down so overall.
It's very variable, but I think.
We've done a good job of consistently proving value to our customers consolidating agents are proving a real ROI and sometimes its a three to six months payback on our technology as we rip out other technologies that are there and.
In terms of module expansion.
As we talked about in the past we've got in App trials, we went on out of customers try and new modules, even if they didn't buy them and then self selecting saying, hey, I want that.
And that obviously makes for very efficient efficient sales model for and anything to add.
Yes on your comment about hiring enough salespeople to go after that record pipeline going into the year. So like I've been talking about for a while and Alex we're constantly looking at you know on opportunities and we're going to invest aggressively when we see them and we clearly see them see them now obviously, it's we're really happy with our magic number at one.
One three.
But I think we have some room there to continue to.
Aggressively invest in the sales and marketing efforts, because we clearly see the opportunity in front of us.
Great. Thank you very much for the answer.
Youre welcome.
Thank you. Our next question comes from Joel Fishbein with curious you May proceed with your question.
Good afternoon, all and congrats again on a phenomenal execution and the quarter George for you and I want to highlight on E y.
<unk> talked about it a little bit last quarter.
System integrator seem to be playing a much bigger role in and this digital transformation.
<unk> and security transformation mature, obviously, a large part of wanted to see if you would elaborate a little bit on what's happening with the and why partnership and then if we should expect to see other system integrators like that develop go to market strategies strategies around crowd strike.
Thanks, Joel and I'll start with the latter one obviously, we continue to build out the system integrator partnership so you'll you'll see more over time.
When you look specifically at E. Why they've been great partners for us the P&G deal that I called out great relationships, there and as you know you very well know other operating at the board level, they've got deep and long relationships and as they're helping companies digitally transform as I've said many times you need to go through a security transformation is.
Well.
And.
They their hand and glove. So we're very excited about that relationship obviously, its a worldwide relationship and I think we're only at the beginning.
Of that and.
As that begins to ramp across the globe.
And we're excited about the potential opportunities that brings.
Great. Thank you so much.
Thank you for our next question comes from Rob Owens with Piper Sandler You May proceed with your question.
Great. Thanks for taking my question, Linda just a little bit on that last answer George I guess relative to the international opportunity and maybe the GSI is can be a great accelerator and loan growth has the pace I guess.
If you think about mix longer term.
Is there a governing factor and gaining factor relative to getting to kind of a 50 50.
And I look historically and companies in this space and revenue and domestic and international could you see that same trend for mixed language for and it was there anything that might prevent that.
Well I certainly could see that mix longer term, we continue quarter over quarter to expand our rest of world outside of North America as an example.
We continue to build the partnerships and the partnerships are very important outside while they're important everywhere, but in many geographic locales and that's really the only way to go to market is through through partnerships.
So we will continue to expand that out when you look at the wise AWS for the world broad reach across the globe. We've got many other worldwide partners.
And they're certainly very strategic for us and what we're seeing right now Rob is as strong customer pull to the partner community right. So it's one thing to have a part and network. It's another thing when you have customers their customers, saying, we want crowd strike and we wanted as our system of.
A record.
Great. Thanks.
Thank you. Our next question comes from Gray Powell with <unk>. You May proceed with your question.
Great. Thanks for taking the questions and congratulations on the quarter.
So I think and the prepared remarks, you mentioned that you did not see solar wind as a material driver to <unk>.
And Q4.
But I do think that everyone would probably agree with and it's there should be a tail.
On to growth and the Edr space from the breach and 2021, so I guess, how should we think about that this year and then beyond just edr and what what modules do you see that solar and you breach driving the most incremental demand for it.
Sure. So we certainly see it as a sustainable tailwind when you look at what happened I mean this.
Particular event was was probably most significant I've seen and almost 30 years and my security career. So.
That's going to drive a long term trend in terms of customers that want better technologies and want greater visibility that drive.
Edr and xdr. So that's that's all good and we see that.
You know when you.
When you look at the.
The modules that we think could really benefit something like our zero trust and really our preempt technology and we talked about identity being incredibly important obviously of Edr and there's a lot of technologies that find bad things, but identity is a is a big element protecting organizations, both on prem and and the cloud and.
I Couldnt think of a more well timed acquisition and preempt.
And because of what's happening right now so we've got there isn't a conversation we're having with the large enterprise. It doesn't involve identity, specifically again, where we operate on the endpoints and workloads and zero Trust again on the endpoints and the workloads.
Got it Okay, and then anything on the vulnerability management side or Ikea hygiene.
Well, yeah, the vulnerabilities side a lot of it is driven by the vulnerability of the week from the Microsoft perspective. So people are having a hard time just dealing with all the vulnerabilities where they are they patched.
You know if it's patches it really the latest as it fixed and our VM spotlight product is has really really matured and is very well received by our customers.
And that's actually been one that we've seen I think a really good uptake on as well.
Got it all right. Thank you very much.
Thank you.
Thank you and that concludes our Q&A session I would now like to turn the call back over to George Kurtz for any closing remarks.
Thank you that concludes our Q&A session and I would now like to turn the call back over to George Kurtz for any further remarks.
Yeah.
Okay.
Operator, let's go ahead and conclude the call and I'd like to thank everybody for joining us today and.
And we look forward to seeing you virtually at our upcoming events. Thank you.
Okay.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
I don't know.
Okay.
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And then.
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