Q1 2022 CrowdStrike Holdings Inc Earnings Call
Good day, and thank you for standing by and welcome to the crowd strike Holdings first quarter fiscal of 'twenty 'twenty 2 financial results call for.
Call at this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
Ask the question during the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded.
And if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Maria Riley.
The president of Investor Relations. 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 for Hot Bear Chief Financial Officer before we get started I would like to know.
Note that certain statements made during this conference call that are not historical facts, including those regarding our future plans objectives growth and expected performance.
Including our outlook for the second 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 make are reasonable actual results could differ materially because of 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 in filings, we make with the SEC from time to time, including the section titled Risk factors in the company's quarterly and annual reports that we file with the SEC.
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 measure and a reconciliation schedule showing GAAP versus non-GAAP results.
Currently available in our press release, which may be found on our Investor Relations website at IR, the crowd Chegg dot com or on our form 8-K filed with the SEC today.
Please also note that in light of our recent acquisition of <unk> management will provide additional information into our first quarter results. We do not intend to provide this additional information on an ongoing basis.
With that I'll turn the call over to George to begin.
Thank you Maria and thank you all for joining US today, we delivered an outstanding first quarter and fiscal year 2022 is off to a record start for crowd strike.
Building on last year's milestone performance, we started and finished the first quarter with strong momentum and results exceeding our expectations we.
We saw strength in multiple areas of the business added $143.8 million and net new <unk>.
Drew ending air or 74% to exceed $1, $1.9 billion for it will provide the details of our financial performance and I will focus my remarks on 3 key points.
The first customers are increasingly turning to crowd strike as their trusted security cloud platform of record.
As we extend the platform beyond core protection, we're seeing strong momentum in cloud workloads.
At the operations and our expansion into Dev ops. Our platform includes 19 modules and easily allows customers to consolidate agents and reduce spend.
Second our leadership is recognized by both customers and industry analysts such as Gartner and Forrester.
Our growing brand has become the cyber security gold standard translating into a broad customer base that is scaling rapidly deeper penetration within verticals and our strong financial success and third the demand environment is robust driven by strong secular trends.
<unk> digital and security transformation.
Cloud adoption and an ongoing heightened threat environment.
This includes the massive influx of ransomware and the operational impact of these attacks that have been seen over the past 2 years. We believe these dynamics will provide the craft for lack of runway for long term sustainable growth.
Now, let's discuss these topics in more detail.
It only takes of quick glance at current headlines to know that the threat landscape is fierce and growing in intensity every day.
High profile breaches and vulnerabilities like sunburst pipeline and infrastructure attacks and zero day vulnerabilities in Microsoft Exchange are only the tip of the spear <unk>.
Bad actors are well resource and becoming more sophisticated.
At the same time ransomware the service sites are making it easier for even novice E criminals to run successful and lucrative campaigns, which is contributing to the proliferation of ransomware activity. Our 2020 crowd strike global security attitude survey revealed that more than half of.
<unk> surveyed worldwide at suffered a ransomware attack within the previous 12 months at the same time organizations need to transform their businesses in order to keep up with evolving business needs such as work from anywhere and moving their critical applications and workloads to the cloud both of these factors exponentially.
Spanned the company threat landscape.
And increase their risk of a breach of today's threat environment highlights the need for organizations around the world to transform their security and adopted zero Trust architecture in order to protect their digital assets identities and core infrastructure. The lessons learned from recent attacks emphasize why leg.
C or perceived good enough next Gen Tech is no match for today's adversaries, leading to a crisis of trust. Among these vendors, whereas the crowd strike has emerged as the trusted leader craft for a commission the stop breaches has never been more relevant the fan.
<unk> platform is at the epicenter of restoring trust to the security posture of companies worldwide. The integration of threat intelligence and threat hunting into the Falcon platform provides us deep insight into the adversary in how they operate the extensive capabilities of the Falcon platform significantly said Craig.
Strike apart from both legacy and next Gen. Vendors. This includes our acquisition of preempt, an email, which could not have been more timely as companies are looking for new ways to share of protection of their active directories.
<unk> lateral movement and have even greater real time visibility on search into their endpoints identities applications network edge and cloud from a single data layer.
Customers are increasingly turning to zero trust solutions to combat threat actors debt leverage identity based attacks and move laterally within their targeted environments.
We won multiple Falcons zero trust deals in the quarter, including a global leader in auto manufacturing of <unk>.
Fortune 500 manufacturer of high Tech materials and equipment, a provider of it management software and the municipality among others.
Additionally, when it comes to log management companies are looking for technologies with the same characteristics as their security.
The reliability scalability speed in real time queries in a cost efficient manner.
Even though we just acquired <unk> in March customer interest is very high end of Q1, we already secured new deals across the multiple industries, including financial services technology and law enforcement.
Our new Humira on customer that I would like to highlight is a fortune 500 company that was using multiple legacy on Prem log management products to manage a variety of use cases across their security and Dev teams.
In addition to the complexity of using multiple products. This company was struggling with increasing data ingestion cost.
Looking to migrate to a cloud based solution that would reduce cost enhanced visibility and the easy to implement day chose <unk> over of leading competitor in the space Gmail was selected for its index free ingestion capabilities faster search speeds and customizable dashboards that provide them with <unk>.
Greater insights and automation than any of the competitive products they evaluated.
This customer is now able to meet their daily 3 terabyte data ingest needs with a single solution.
Allowing them to take full advantage of their data at the speed and scale of the cloud.
Since our inception, driving innovation has been at the core of craft strikes mission.
As a result, we pioneered cloud endpoint security and have extended debt to include workload protection on.
Our determined focus and uncompromising commitment to excellence has led to a trusted leadership position and a platform that encompasses 19 module spanning multiple markets, including identity Xdr and log management.
Driving innovation throughout our product offering and bringing new functionality into the market that leads to better and faster outcomes for our customers. We will continue to be a top priority.
In May we announced the Falcon infusion of unified and extensible cloud scale framework that provides easy to use custom automation to simplify enterprise security workflows and help security teams solve real world problems with fewer resources and greater accuracy and speed.
We also recently announced an expanded partnership with Google cloud through a series of product integrations with the Falcon platform and Google Cloud suite of security products.
These integrations will help security and Dev ops teams increased visibility of threat actors across cloud and hybrid deployments and enable them to act much more quickly to address them.
As customers have begun adopting our cloud workload protection and cloud security posture management demand for integrations with the GC piece of security suite has accelerated we are confident that the partnership with Google will drive additional value and adoption by those who are standardizing on <unk> as well as.
Those employing of hybrid cloud strategy, we continue to extend our cloud leadership position by announcing new features to our cloud security posture management module Falcon horizon. These.
These new capabilities provides security teams the ability to easily manage and protect multiple cloud environments from a single cloud based console.
Powered by crowd strikes industry, leading threat intelligence Falcon horizon is the first see SPM solution to deliver of behavioral detection using I always of threats to the cloud control plane.
Horizon utilizes an adversary focused approach for continuous in depth control plane threat detection.
The organizations cloud accounts services and users for AWS and Azure.
The expansion of our Falcon platform and growth of our brand leadership has brought in new customers at a rapid pace driven incredible momentum with industry analysts and partners and translated into strong financial results.
Gaining strong industry recognition across multiple well respected sources.
Our most recent achievements included.
Once again, taking the leader position in the 'twenty 'twenty, 1 Gartner magic quadrant for endpoint protection platforms.
In the report we are not just in the leaders quadrant, we are leading the pack on the completeness of vision with craft for it by far the furthest to the right.
We believe that our position in the magic quadrant shows that we have clearly separated from the competition and that we and Rarified territory as the leader that continues to outpace legacy and next gen competitors in execution strategy innovation and vision.
We also received the highest score for leaned forward organizations and Gartner is critical.
The ability for endpoint protection platforms report.
Likewise Forrester research named crowd strike a leader in endpoint security software as a service in the Forrester wave of Q2.2021 report.
We also received the highest scores possible within 17 criteria and the report of course.
We're also named crowd strike of leader in both the Forrester wave for Q1, 2021 managed detection and response and external threat intelligence services reports.
We were also recognized as best of cloud Computing security solution and best managed security service at the 2021 SC Awards, where Sean Henry our President of services and Chief Security Officer received the security executive of the year Award as well.
Falcon achieved 100% detection coverage in all 20 steps of the Mitre attack evaluations showcasing the effectiveness of our platform.
And lastly, the Falcon platform achieved 100% protection rate in the Avi comparative business real World Protection Test for the March April 2021 period, and the highest AAA rating in the Q1 enterprise endpoint protection of evaluation from independent testing organization.
<unk> SC labs, we are proud of our continued strong track record of proven efficacy our participation highly regarded industry evaluations showcase our commitment to stop breaches and drive transparency with customers a crucial part of our commitment is to continually test our solution validated the case.
The abilities and find opportunities to improve.
It's unfortunate that some vendors declined to compete in these public tests, including so called Nextgen players is lack of scrutiny of the significant dis service to all customers, who would benefit from greater transparency.
We believe the industry is strong recognition of crowd strike validates our vision empowering organizations to embrace security transformation and stop sophisticated adversaries through the power of our cloud Native platform. We believe the rapid expansion of our partner ecosystem also demonstrates our growing leadership position.
<unk>.
Partners naturally gravitate to the market leaders as it helps us bring in new customers and likewise customer choice helps propel vendor prominence within the partner community.
Our leadership position is driving strong engagement with partners of all sizes, which is contributing to our growing presence among the highest levels, including boards and cio's.
As we announced a couple of weeks ago, we strengthened our alliance with another trusted industry leader you why.
Falcon is now of 1 of <unk> preferred cyber security platforms. The expanded collaboration also introduces extension into new geography areas as well as 3 new joint offerings with these new offerings, we expect the leverage E wise consultants to drive crowd strike subscription sales.
To how we leverage our on professional services team, which in FY 'twenty..1 on average drove $5.51 since its subscription of IRR for every dollar spent on initial incident response or proactive service engagement among organizations debt first became a professional services customer.
After February 1.2019. Additionally, our partnership with Zee scalar continues to deepen as we both invest in our technology and commercial relationships.
We announced multiple new technology integrations with the scale or this quarter and are also excited to report that they are now of crowd strike customer.
Additionally, 1 of our marquee wins in the quarter was brought to us through our Tech Alliance with Zee scalar is fortunate on 100 global insurer chose crowd strike to help further its digital transformation initiatives and fortify its security, replacing a patchwork of for legacy and next Gen vendors.
Falcon was selected over Microsoft to replace these incumbents for its ability to consolidate multiple agents improved performance and protect their endpoints in cloud environments with 1 single agent.
The voice that matters, most is the customers and they are increasingly turning to crowd strike as their trusted security platform of record and validating our leadership in.
In the first quarter, we reached a new milestone as our subscription customers well surpassed the 10000, Mark we added 1524, net new subscription customers, including the customers we acquired from <unk> on an organic basis, the net new subscription customers added in the.
Quarter grew 69% year over year, we now proudly serve 11000.
420 subscription customers worldwide our growth across the market is very diversified as we are winning customers of all sizes and industries.
In Q1, we also saw a strong demand in the public sector lending several U S federal wins in both civilian and defense and expansion business with the largest health care agency. We are optimistic in our ability to expand within these accounts over time, especially given the renewed focus to bolster.
For the nation cyber defenses as outlined in the White house's cyber security executive order.
Adding customers at this rate and the among companies of all sizes and verticals is not an easy task. Our go to market engine is executing on all fronts to seize on the strong demand we see in the market. So we can help even more customers restore trust in their security posture. The investments we have made in the <unk>.
Frictionless deployment of our platform and frictionless sales motion, which includes trial to pay and the Nf trials have never been more important.
The same can be said for our strong partner ecosystem with leading partners like AWS and <unk>.
These advantages minimize barriers to adoption of <unk>.
Spanned our reach and shorten the sales process, which we believe provides us an edge over the competition.
We believe we can execute on market demand faster than any other vendor, whereas even nextgen competitors struggled with a complex sales process and even more complex deployments that are difficult to scale out of the lab.
Our growing leadership at the trusted security partner of choice is also reflected in our continued success in driving module adoption of subscription.
The customers that have adopted for or more modules 5 or more modules and 6 of them are modules increased to 64%, 50% and 27% respectively in the first quarter.
We're growing our footprint to cover more customer assets with new and existing customers alike.
This includes the adoption of newer technologies, such as Falcon Cloud run time protection Zero Trust in <unk>.
In the last quarter, we more than double the <unk>.
From our newly launched cloud workload modules.
We are rapidly scaling of our overall cloud footprint with greater than 20% of all servers, we protect being in the public cloud.
We are also expanding our dev ops capabilities and seeing success selling into Dev ops environments. As we continue to help customers reduce their attack surface and unified cloud security posture management and breach protection.
Let me share a few customer examples that demonstrate how the power of the Falcon platform translated into strategic customer wins for <unk>.
Q1 deal I'd like to highlight was an expansion with cloud era of cloud Native enterprise data company that provides insights using machine learning and analytics.
Viewing effective security as essential to their operations cloud there has been a crowd for a customer for their traditional endpoints for multiple years.
Looking to further leverage the crowd strike Falcon platform to protect their of femoral cloud environment.
There are purchased a fully managed solution for Falcon horizon cloud workload protection discover for cloud and container and Falcon complete to provide them with a fully managed and hassle free solution.
Our next customer win is with a fortune 150 multinational manufacturing company.
<unk> tried to deploy Microsoft defender for over a year. They found themselves frustrated with the level of complexity and the cumbersome agents, resulting in less than a third of their endpoints protected on top of that the recent zero day, Microsoft exchange vulnerabilities exposed on the risk of a potential breach and they would have to.
8 months before Microsoft could deliver a path to fully resolve the issue.
This is when they turned the crowd strike with our single lightweight agent that doesn't require a reboot, if new customer found falcon easy to deploy fast and effective as.
As a result, the purchased 5 modules and deployed globally in a matter of weeks.
The last customer win I will share with you is of health care services provider. This.
This new customer was looking to quickly move off theyre sitting on 1 implementation after experiencing several outages caused by sensor update impacting their critical business operations frustrated at the lack of scalability need for manual updates and continuous crashes with Sentinel won this customer.
<unk> crowd strike over other providers, including carbon black and Palo Alto networks.
Balqon outshine the competition given the ease of use and the frictionless fast and the re bootless deployment.
Purchasing 8 modules, including spotlight horizon and discover for cloud and containers Falcon is now protecting their multi OS of state of traditional endpoints as well as their previously unprotected cloud workloads.
In summary, the fundamental reasons why we have earned our leadership position and are winning customers at a rapid pace over both legacy and next gen vendors are the fab.
<unk> platforms ability to fully utilize the power of the cloud and AI the stop breaches and provide community immunity.
Our ability to easily and rapidly deploy our lightweight agent at scale across both endpoints and workloads without requiring a reboot while other next gen vendors fail to scale and require reboots.
Our platform is easy to use and easy to manage all from a single user interface.
And our ability to leverage the power of the cloud to collect data of 1 and solved many real world business problems that deliver better outcomes and immediate ROI for customers.
Customers recognize that threat graph and our ability to stream data to the cloud in real time, our unique to Crouch right. This is very different from other vendors, including upstart that silo of their data and upload data and delayed batches.
Any vendor with an on Prem solution is currently unable to fully utilize the power of the cloud.
With 1 data store crowd strike analyzes data almost instantaneously across our entire customer base, providing real time protection community of immunity and better training data for our AI algorithms. This allows us to deepen our competitive moat.
While the robust demand environment may serve as a temporary lifeline to inferior technologies.
I look at the competitive landscape I couldn't be more confident in our leadership position I do not see another vendor in the market with our vision platform scale or ability to execute at scale, our leadership as a trusted security platform of record and strong financial performance stands as a testament to the crowd strikes dedication to <unk>.
Innovation protecting customers and transforming the security industry.
To think every crowd strike or for all of that they do day in and day out to make us the best in the business with that I will turn the call over to Bert to discuss our financial results in more detail.
Thank you George and good afternoon, everyone as of <unk>.
Quick reminder, unless otherwise noted all numbers, except revenue mentioned during my remarks today are non-GAAP before we get started I will note that the results. We are reporting today include the acquisition of Humana.
To assist with your models, we will share select details regarding <unk> impact on Q1, However, we do not intend to disclose these details on an ongoing basis the.
The acquired net new air are from Humira was approximately $3.6 million, which is reflected in both the ending of net new air our results we are reporting today.
From the acquisition of <unk>. We also gained 119 net new customers in the quarter.
Given the acquisition closed during the quarter and the impact of fair value purchase accounting adjustments related to deferred revenue. The GAAP revenue recognized from him was de minimis to our results.
The acquisition also added approximately $5 million to operating expenses in the quarter.
Which again represents about 2 months of quarterly expenses moving to our results.
We delivered an exceptional first quarter.
In addition to the strong growth of upscale in the first quarter. We continued to maintain very high unit economics drive leverage and remain very capital efficient.
Generating record operating and free cash flow.
Additionally, we continue to perform at a high level well in excess of the SaaS industries rule of 40 benchmark achieving a rule of AE.
Demand in the quarter was broad based and fueled by strength in multiple areas of the business 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 with.
We once again ended the quarter with a record pipeline, which we believe indicates a strong foundation for future growth.
In the quarter, we delivered 74% <unk> growth year over year to reach $1, 1.9 billion.
In the last 12 months, we have added more than half of $1 billion.
Sure.
Rapid new customer acquisition as well as expansion business within existing customers drove substantial growth in the first quarter. Once again, resulting in very strong net new <unk>, which came in at $143.8 million.
Our dollar based net retention rate once again exceeded 120%.
Moving to the P&L total revenue grew 70% over Q1 of last year to reach $302.8 million.
Subscription revenue grew 73% over Q1 of last year to reach $281.2 million.
Professional services revenue was $21.6 million setting a new record for the third consecutive quarter and representing 36% year over year growth.
In terms of of our geographic performance from Q1, we continued to see strong growth in the U S as well as international markets.
Revenue growth in the U S increased to 70% and contributed approximately 73% of first quarter revenue.
Approximately 14% of revenue was derived from Europe, Middle East and Africa markets, 10% from Asia Pacific and approximately 3% from other markets.
We remain focused on building of long term business with sustainable growth and compelling margins.
In Q1, we recognized strong operating leverage in our SaaS model on the benefits of scale, even as we increased investments in our global reach and cloud platform.
First quarter non-GAAP gross margin was 77% up approximately 150 basis points from Q1 of last year.
Our non-GAAP subscription gross margin was 79% compared with 78% in Q1 of last year.
We continue to be pleased with our strong subscription gross margin performance.
While we expect gross margin to fluctuate quarter to quarter, we expect it to remain solidly within our increased target model range of 77% to 82% or more as we March fiscal year 2025.
Total non-GAAP operating expenses in the first quarter were $202.9 million or.
For 67% of revenue versus the $133.0 million last year or <unk>, 75% of revenue.
As planned we continued investing aggressively in our business during the quarter, including increasing investments in new technologies international geographies and marketing programs.
We believe the investments we are making today will lead to sustained growth over the long term and maintain our pole position of the trusted security partner of choice.
Scaling our business efficiently remains of top priority, which is why we intensely focused on our unit economics, including magic number.
In Q1, we ended with the magic number of 1 point for <unk>.
The increase over last quarter and indicates that we should continue investing on our large and growing market opportunity.
First quarter non-GAAP operating income was $29.8 million and operating margin improved 9 percentage points over Q1 of last year to reach 10%.
Non-GAAP net income attributable to crowd strike in Q1 was $23.3 million for 10 on a diluted per share basis.
Our weighted average common shares used to calculate first quarter non-GAAP EPS attributable to crowd strength was on a diluted basis and totaled 237 million shares.
We ended the first quarter with a strong balance sheet cash.
Cash and cash equivalents totaled approximately $1.6 8 billion.
This takes into account the $352 million net cash consideration, we invested to acquire Humana cash.
Cash flow from operations in the first quarter due to a $147.5 million on free cash flow increased to $117.3 million for 39% of revenue setting New records for both measures.
As a reminder, given the timing of expenses seasonality of new hires and the midyear ESP purchase the second quarter is generally our lowest cash flow generation quarter.
Moving to our guidance.
We continue to remain optimistic about the demand for our offerings record pipeline on the powerful secular trends fueling our growth.
Given the growth drivers of our business as well as our exceptional first quarter performance and momentum into the second quarter, we are raising our guidance for the fiscal year 2022, while we do not specifically guide to ending or net new <unk>, we expect seasonality in net new <unk> to be less pronounced relative to prior years as.
We move from Q1 into Q2, given the outstanding outperformance in Q1.
Additionally, recall that in Q2 of last year net new Air are included the second largest deal in the company's history, which contributed low 8 figures.
For the second quarter of FY 'twenty 2.
We expect total revenue to be in the range of $318.3 to $324.4 million.
Reflecting a year over year growth rate of 60% to 63%.
With subscription revenue being the dominant driver of growth.
We expect non-GAAP income from operations to be in the range of $26.3 to $30.7 million and non-GAAP net income attributable to crowd strike to be in the range of $17.7 to $22.1 million.
We expect diluted non-GAAP net income per share attributable to crowd strike to be in the range of 7 and 9.
Utilizing a weighted average share count of 238 million shares on a diluted basis.
For the full fiscal year 2022, we currently expect total revenue to be in the range of 1000.347.0 to $1365.7 million.
Reflecting the growth rate of 54% of 56% over the prior fiscal year.
Non-GAAP income from operations is expected to be between $115, 7 and $129.6 million.
We expect fiscal 2022, non-GAAP net income attributable to crowd strike to be between $83..1 of 97 points of zero million.
Utilizing 239 million weighted average shares on a diluted basis, we expect non-GAAP net income per share attributable to crowd strike to be in the range of 35 to <unk> 41.
George and I will now take your questions.
Ladies and gentlemen, if you'd like to ask the question at this time.
Please press star 1 on your telephone.
To withdraw your question press, the pound key and the <unk>.
Just the time, please limit yourself to 1 question. Please standby with compile the Q&A roster.
The first question on comes from the line of second Calia from Barclays You may begin.
Okay, Great Hey, guys. Thanks for taking my question here.
George maybe maybe for you.
A lot of a lot of nice.
Simple wins, you mentioned in your prepared remarks, particularly.
In the cloud portfolio of part of the business.
Understanding it's still early with some of those tools I was wondering if you could share what customers of customers of said about their willingness to use third party security tools for for public cloud workloads and also about the competitiveness of Falcon in the public cloud.
Sure So haystack of good to connect here.
Customers are very willing to use our technology as we've talked about many times, they're looking for a holistic solution across multiple clouds not just 1 cloud provider. They are looking for a single agent debt not only can give visibility and protection in there in the corporate enterprise, but also in the cloud environment.
In terms of the willingness to use it it's extremely competitive product we.
We continue to add more and more capabilities.
Including drift.
Detection now if these workloads drift and the containers drift, which is a real.
Boon for the Dev ops team. So we've spent a lot of time selling into that group. We've got a lot of traction there and as I mentioned before of 1 of our cloud technology. So on this.
The only new product, particularly things like horizon, because we built it for internal use before we actually deliver.
The delivered into the market so.
In general, it's the Greenfield opportunity of the cloud Theres not a lot of competitors.
And the existing technologies, we have to displace and.
We're really excited about the momentum we've seen in that debt.
Particular category.
Great. Thanks very much.
Our next question will come from the line of Sterling Auty from Jpmorgan you may begin.
Yes, Thanks, George maybe just on on the cloud side I think this is an area that people have are struggling.
To understand the different pieces of what fits to make our cloud security stack can you maybe help us understand what pieces of the puzzle will crowd strike provide going forward, where will you partner and what parts will be.
Delivered by others in the industry.
Sure. So you have to separate again the network components out from the workload components and there are other players that have virtual firewalls and network technology. So we need to separate that out because we don't actually supply that so specific to workloads containers.
Virtual instances, we have the ability to protect at runtime. So similar to what we do today in the normal environment kind.
Identify threats and prevent those using machine learning and behavioral technologies, we've got the.
The ability to understand the stream data Edr data if you will and we also have.
Cloud security posture management, which gives you the configuration of that infrastructure and what's different than a normal corporate environment is that since customers in the cloud don't control of the infrastructure, it's mostly set up.
On the policy settings in a lot of the settings can go awry or be mis configured. So we're handling the policy piece and the configuration of the infrastructure as well as the workload protection piece as well as understanding the configurations of these containers as an example to understand if their vulnerabilities of drips. So in our mind in terms.
Of workload protection, we're covering our full suite of protection capabilities that a customer would need.
That makes sense. Thank you.
The next question on comes from the line of Matt Hedberg from RBC capital markets you may begin.
Alright, guys. Thanks for taking my question Congrats on a really strong Q1.
George you've got over 11000 customers and Youre seeing acceleration there on customer ads and I think what strikes me in the it was really coming out of your last financial update was.
It still looks like you're early in.
Essentially could 10 extra customers and still not be fully penetrated into that global opportunity I guess I'm wondering from a high level could you talk about your strategy in going after the next 10000, how might that change versus the first 10000, and where do you see the biggest opportunities for share gains.
Sure.
We've talked about in the past, we built a tremendous sales machine and we spent a lot of time, obviously focusing on the scalability of the technology, but also the scalability of the sales machine and things like that trial to pay in the trials.
Creating frictionless ways to actually cross sell into our customer base. So it's really important for what we do and when we think about the next 10000 or beyond and as you said 10 of 11000 is fantastic, but when you look at other competitors over the many many years.
They've had hundreds of thousands so we certainly think we can be in that arena in the future and it goes to I think the very efficient go to market motion for talked about our magic number.
1 for and it also combines with the fact that we built an e-commerce platform behind or below if you will the Falcon platform. So the platform is designed to sell itself and to get new customers and we spent a lot of time on digital to trial, the pay and then conversions and whether it's the small customer whether it's a large 1 of the enterprise.
Once we get them on the door, we certainly can't convert them with the credit card, but obviously the bigger customers will engage on the sales team on the partner.
Closed deals and now with things like AWS and TCP and why we've expanded our partner network. So we feel really good about the flywheel that we've built.
On the scalability of sales scalability built into the platform.
Thanks, guys.
Our next question on comes from the line of Shaul Eyal from Cowen you may begin.
Thank you good afternoon, guys. Congrats on the strong set of results.
George the oral Bert when looking at your on net new 5100, plus customer of that even when you exclude the hue me a little bit can you outlined to us whether they are predominantly mid size or high end enterprises.
If you had to put a ballpark on the average number of module of their current to deploy is it 3 or even more than that for.
For new subscribe for new customer.
Hi, so great to hear your voice.
So I'll take the second part of your question first.
Number 1.
As new customers come on board, we are seeing them deploy more and more modules that goes also to talk out to talk to the fact that we have more modules for customers to purchase on.
On the second part in terms of where we see.
With respect to.
New customers New logos, you know obviously a lot of the velocity is coming from some of the smaller.
SMB and mid market because it does take less time for contract the deal but the good news is that we're we're capturing deals both of the large enterprise level of mid market and F&B across the board.
Thank you for that.
And our next question on come from the line of Brian Essex from Goldman Sachs. You may begin.
Hi, good afternoon, and thank you for taking the question and congrats on a.
The good set of results.
George I wanted to dig into your in your prepared remarks, you mentioned the partnership with the scalar and I know zee scalar called out.
But I think I think you brought them into a large investment bank deal and then here you called out that they pulled you into an insurance deal.
Maybe if you could if we could take a step back more sabbaticals and understand the driver behind those deals as it is at the 2 of you going together with an end to end endpoint the networks through network Security Zero Trust the deal or maybe the better understand the go to market behind some of these partnerships and what's driving those deals would be helpful.
Sure I think.
It's dramatically its customers are looking for a next gen endpoint workload technology platform like crop strength combined with.
The next Gen network technology, and they're looking to replace their legacy Palo Alto networks, and we spent or others and we spent a lot of time and the.
And we set up.
Compensation structures between the 2 organizations were.
Both sales teams are intended to help each other out which is always good in the field and we've done the integration. So when we think about understanding what happens on the network. Obviously went out of network company.
That information can be supplied to us and the Falcon platform and we've got tremendous visibility on the endpoints that youll be on anything on network company can happen that's useful to Zee scalar.
So when you put the 2 of them together, we think it's better together and.
We've got a huge hotel company that uses both the zee scalar crowd strike in.
It has just been amazing to see the technologies work together and make the big fan of the big proponent of us.
Putting these integrations together so I think it's good for customers and it's good for both parties.
Got it very helpful. Thank you very much.
Our next question on comes from the line of Andrew Nowinski from D. A Davidson you may begin.
Great. Thank you and congrats on another fantastic quarter.
I wanted to just get the question on the net new <unk>. This quarter. So you again.
Saw no seasonality from Q4 to Q1, which I think is the first time at least the last 3 years, where net new <unk> has not declined sequentially.
Clearly, indicating a significant change on the spending environment in the past I think you've talked about AWS driving a significant percentage of that net new <unk>. So I was curious.
Was that again the key driver of this quarter that enabled crowd strike too.
Define normal seasonality.
Hey, Andy this is for.
So I think it's just more broad based demand I don't think it's necessarily focused in.
The interest AWS I think the great news is we essentially delivered on <unk>.
In Q4 and Q1 for your point you have been following us closely.
I think it's the continuation of trends we.
Been seeing for quite some time George talked about them.
Digital digital digital and security transformation of cloud adoption this robust threat landscape.
We are in the buying environment and so we're really excited to be able to post such strong Q1, but I think again it goes back to the broad based demand, but thanks for tracking that information.
Great. Thanks Bruce.
Our next question on comes from the line of Rob Owens from Piper Sandler you may begin.
Great. Thanks for taking my question could you kind of elaborate on some of the success youre seeing in the public sector.
The growing commitment from the administration towards Zero Trust and you mentioned a couple of wins.
Maybe just help us understand the success, you're seeing on how big that opportunity could be thanks.
Sure good too good to connect year.
When you look at the.
Some of the orders that have come out of the White house that wheel of if you will it's like.
The lines up with our strategy and lines up with what we do and I think certainly the federal government can benefit of it hasnt benefiting from our technology we spent.
Our initial foray into the civilian agencies and that gives you a beachhead into some.
Some of the the broader intelligence agencies. So we've gotten a lot of our certifications as took debt has taken some time. That's just the process that anyone has to go through we put the effort.
Spent the money to do it and we think we're set up for success. So we said, it's a really nice wins big.
The big wins in the federal space and.
That's going to continue the carryforward and when we think about federal that's just 1 piece of the government, obviously state and local.
We've had tremendous wins a lot of a lot of the states in the U S. Certainly have adopted crowd strike a lot of municipalities and communities and as you've seen with ransomware and some of the other the forest attacks that are out there typically they are on their protected in the new technologies like crowd strike and they typically don't have the people power to do it so we feel.
Really good about fed state and local for.
The platform perspective.
Thanks George.
And then the next question will come from the line of.
Mike Walkley from Canaccord Genuity you may begin.
Great. Thanks, and my congrats on the strong results I guess George question for me is just with the sale of Mcafee, the enterprise business and the lack of innovation out there and growing industry concerns for legacy solutions I was hoping you could maybe share your thoughts on what inning, you think youre in regards to taking share from the legacy vendors.
And how all of these recent ransomware attacks might be accelerating.
The transition from legacy solutions to yours.
Sure. It's a good question and.
I think we're still in the early innings and you know maybe maybe second inning in terms of.
Our ability to continue to take share and actually just today IDC released an updated worldwide market share stats for modern endpoint security and crowd strike was ranked number 1 and of Microsoft and other legacy vendors. So we feel really good about where we are but as we talked about earlier on the call 11000 plus customers fantastic.
But.
There's a lot of companies out there big and small and we still think we've got a lot of runway and still continue the migration of.
Sure from Symantec and Mcafee the crowd strike so still early on but obviously lots of progress that we're proud of.
Great. Thank you.
The next question comes from the line of Alex Henderson from Needham you may begin.
Great. Thanks.
There's been a lot of tax and some pretty high visibility 1 of late and in fact the.
Intensity and repeatedly of these attacks seem to be escalating as items going into the meeting with the.
I was wondering if you could give us some <unk>.
Clarity on the efficacy of your system.
Which is I think probably be the.
Important variables to look at relative to any security company.
In terms of handling those attacks that have recently occurred and how it has or has not impacted your.
Customers.
Thanks.
Yes sure so.
We went through some of the prepared remarks in terms of our efficacy in some of the latest results that we've seen with the testing organizations I'll point you back to those 100% for the last couple of months.
Obviously, that's just 1 piece of it right you have to look at the entire system and it's designed to stop breaches.
And we stopped last year, the 65000 for 75000, I should say in process breaches.
So we know the technology works, we know has extremely high efficacy.
The Mitre of tax we had 100% coverage across the 20 different groups and.
There's a reason why were winning the technology works the technology scales and it's designed to.
To catch things across the kill chain, even if something slip.
Slipped through 1 part of the kill chain is designed to catch it in the second part and stop breaches and that's what we've done from the beginning of that's what we're going to continue to do.
Our next question on comes from the line of John and growth.
Taylor for them.
Maybe.
Yeah, Hi, good afternoon.
George I think this 1 is for you.
The Gartner.
Some of Gartner research I was reading recently noted growing competition commoditization or on log management of offerings across a lot of companies.
All of it can private and obviously important to contributing to the richness of breadth of data sources.
So I could see how it is very important for applications like Edr xdr.
Et cetera, but just wondering your thoughts looking forward how do you maintain differentiation on the day that side given some of those those voices around the commoditization.
Sure.
I mean, you can any company that lots of data at which the value of what you do with it and I think Kraft strike has proven our ability to utilize the data and whether thats in training, our AI algorithms or whether thats, creating a product that can actually be quickly searched and insights the gains with.
With our threat graph on the we pioneered.
<unk> delivered endpoint and graph technology specific to security. So I think that continues with <unk>, you've got fantastic technology extremely fast extremely efficient in memory index Shri.
Driving down the cost.
Compared to legacy technologies that are out there on the on the lock side and that will be.
A key part of our xdr.
The extension and our strategy and we've seen fantastic feedback from customers I called out some some big wins that we had with email.
As that gets integrated which we're working on we feel really good about having the ability to pull other information besides crowd strike data.
Into our data platform and our threat graph and make that available the customers. So.
I think it comes down to again, there's a lot of marketing and noise in the marketplace, but when you actually look at the technology, which we have and why we bought <unk>, we feel really good about it as the next Gen technology thats going to be.
Good fit for our platform.
That's helpful. Thank you.
Our next question comes from the line of Kindred from Oppenheimer.
To begin.
Thanks, Hey, guys, great quarter I want to go back to the cloud George if I may.
Can you talk about.
On the cloud workload and horizon, how often are the sole the sold in conjunction both of them together was there a high attach rate for those 2.
And with respect to your attach rates the for.
For years to 5.6 modules clearly those are doing very well for you, but how frequently.
Our cloud workload protection of horizon part of those for 5.6.
Well I would say much more frequently now obviously horizon is still a relatively new insurance into our portfolio as of last year, but we've talked about cloud era. The good example of that was the.
The company who had on traditional.
Endpoint protection and obviously.
Now adopted our cloud technology. So we have a big base that we can go into the cross sell which we are and.
Part of the conversation with any new customers about what are you doing in the cloud and how you're protecting it some companies they are of different time scale or.
Path to the cloud.
It may not line up exactly to what theyre doing internally or for the endpoints, but.
Every sales call certainly at the larger enterprise name of the medium we're talking about our cloud technology, its really about the platform play.
And.
Again, we've seen tremendous success in the overall adoption just over the last couple of quarters with it. So you know.
It's been out less than a year, but.
I think when you look at how fast we're debating that area and our ability to actually sell of the Dev ops.
We feel really good about its future.
Great. Thanks.
Yeah.
Our next question comes from the line of Gray Powell from BTG may begin.
Alright, Thanks for thanks for work on me in here and congratulations on the on the great results.
So yeah maybe.
Maybe focusing in on <unk>. So if I look at Q1, your net new <unk> of 144 million net that's up 68% year over year.
Q1 versus the 65% comp last year.
Just really impressive number.
Of your net new growth how much of that is coming from sort of the the.
Endpoints or edr space versus new product areas, whether that's Jim Yo preempts.
On the ability management IC operations or other stuff.
Hey, Greg.
Great question, so effectively our core is still.
The majority of our sales right that's the key.
For traditional workload, the NIM pump protection of these protection prevention at the Overwatch.
But we've seen some great traction coming in from the.
The thing is even like device control.
And then you throw in discover for it management of the need to go out also spot.
Spotlight, which is gaining some traction and so what we're really seeing across the board as companies coming in and buying more modules out of the gate because.
Because they see the value not only of the platform where they can go with the platform, but the total cost of ownership.
We're able to drive down those costs overall by taking out some other competitors.
That offer.
Other types of technologies, where we come on with better efficacy in the lower cost. So it's really.
It's really all about the the.
The opportunity for customers to purchase more of our modules.
And theyre doing sort of more more and more out of the get go. So that's how we look at it.
Understood. Okay. That's helpful. Thank you very much.
And then the last question on comes from the line of Patrick <unk> from Deutsche Bank, You may begin.
Thank you so much for squeezing me in.
A lot of impressive metrics this quarter I mean, 1 the kind of stood out to me was OPO billings, which if I'm not mistaken grew 79%.
In the fiscal first quarter, which is actually larger than any quarter of last year. Some type of understand why that metric might of been so strongly with us Barry.
Large multiyear deals signed in this quarter.
Yes, So Patrick Great question and the answer is yes, we're seeing.
We're seeing an uptick in the number of multiyear deals.
Versus where we've been historically customers want to lock in to us they want to use our platform and they see us of the platform that they can grow on the CFO of the platform of the future everyone. Today is looking for the modern day architecture, we supply it.
Usually to deploy simple to manage.
And we're able to show customers.
The hay.
Here to stay we're going to continue to invest in.
In R&D and we're going to use our our balance sheet to be able to do that.
We are seeing.
More and more.
Of those multi year deals will pay the annually.
Obviously, the impacts of deferred but the total ARPA of number has gone up because customers are willing to sign longer term contracts with us because they believe in what we're doing.
That's really good for us and we're really happy really happy to see that that uptick in RVO.
Great. Thank you so much for taking my question.
Youre welcome.
And then I'll turn it over to George Kurtz for any closing remarks.
Okay I want to thank all of you for your time today, we certainly appreciate your interest and look forward to seeing you virtually at our upcoming investor events stay safe and we'll talk soon thank you.
And this concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Okay.