Q2 2022 CrowdStrike Holdings Inc Earnings Call
[music].
Thank you for standing by and welcome to the crowd strike Holdings second quarter fiscal year 2022 financial results Conference call. At this time, all participants are in a listen only mode Atkins.
After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press Star then one when you touch tone telephone.
As we're monitoring profit call is being recorded.
Now I'll turn the conference or at your House, It's Maria Rolli, Vice 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 proud strike and Burt pod bear chief.
Cancel 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 growth and expected performance.
<unk> our outlook for the third 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 the statements are based on current expectations and are subject to risks and uncertainty.
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 Companys financial results is included in filings, we make with the SEC from time to time, including the section entitled 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 measures and a reconciliation schedule showing GAAP versus non-GAAP results is currently available in our press release, which may be found on our Investor Relations website.
At IR docs, how chegg dot com or on our form 8-K filed with the SEC today.
With that I will now turn the call over to George to begin.
Thank you Maria and thank you all for joining us today.
We delivered an outstanding second quarter with rapid subscription revenue growth and record net new AAR are generated in the quarter, we saw strength in multiple areas of the business.
Added $156 million in net new <unk>, Andrew and being <unk>.
Our 70% to exceed 1.3 or $4 billion.
Our continued strong performance was driven by the groundswell of customers turning to crowd strike as Theres trusted security platform of record, we saw strong demand across the market, which Russ spans large enterprise mid market and SMB customers are.
Our success in gaining share in each of these market segments is reflected in our net new customer growth rate, which on an organic basis accelerated in the quarter. In total 1660, net new customers chose crowd strike as their security partner, bringing our customer count to 13000.
<unk> and <unk> the cross brand is viewed as the gold standard in security.
We designed the Falcon platform and our security cloud to add value and improve the security posture of any organization, regardless of size and sophistication.
Customers new to crash strike. This quarter included a household name in the consumer security space.
One of the largest nonprofit health care organizations in the United States.
Fortune 50, global insurance provider and our security partner proof point.
We are excited to deepen our relationship with as both a technology and security partner.
I'm also pleased to highlight that workday cloud pioneer and leading provider of enterprise cloud applications for finance and human resources.
<unk> crowd strike also users has now standardized on crowd strike falcon across their multi OS fleet.
The threat environment remains fierce as.
As expanding attack surface and inherent vulnerabilities and widely used operating systems, along with the complexity of active directory with companies of all sizes open to attack and provide a rich feeding ground for sophisticated and novice E criminals alike.
The lessons learned from recent attacks emphasize that a breach involves more than just malware, which is why companies need to employ a holistic breach prevention strategy rather than overly relying on malware prevention.
Cartilage, if its legacy or nexgen.
As I have said before nearly every breach you have ever heard of had two things in common the victims had both the firewall and an anti virus solution, which is why we built the Falcon platform from the ground up to stop reaches and not just prevent malware.
With this mission crash strike has turned the tables on the adversaries and has become a trusted leader in security.
While competitors fall further behind as they continue to blindly promote a strategy that relies on malware prevention versus a comprehensive solution focused on people process and technology that stops breaches occur.
According to recent data from our customer base index by threat graph more than half of Detections analyzed where not malware based attackers are increasingly attempting to accomplish their objectives without using malware. They are exploiting the proliferation of vulnerabilities and abusing systemic weaknesses and identity are.
Detector to get on the system and then moving laterally.
That's making it more difficult for legacy and next Gen malware focused products to be effective because they are not focused on breach prevention.
To further demonstrate my point I'd like to share a recent customer win with a fortune 500 company that was using Microsoft legacy security products that failed to rise to the challenges of today's adversaries and ended up unnecessarily costing them millions of dollars.
This company experienced a long and difficult deployment process, particularly in low bandwidth environments, where endpoint performance was critical.
Notably frustrated this company began to evaluate alternatives when it was unfortunately hit by ransomware that encrypted their primary and backup data, causing weeks of business disruption and a financial impact estimated to be in the tens to hundreds of millions of dollars.
This is when they turned to crowd strike <unk>.
First by bringing in our incident response team to remediate and stabilize their it operations and followed by deploying Falcon complete across their environment.
Our approach to stopping breaches with the Falcon platform is foundational to craft strikes leadership position in the market and the epicentre of restoring trust to the security posture of companies worldwide.
Using AI machine learning and in intelligent lightweight agent the Falcon platform defense against today's most sophisticated threats with unmatched speed and simplicity.
Cross strikes threat graph combines a massively scalable threat intelligence database with AI powered analytics to detect prevent predict and mitigate advanced attacks and zero day exploits threat.
Threat graph and Falcons xdr capabilities continuously ingest massive volumes of life telemetry data from Falcon endpoints and other sources at scale. The Falcon platform processes, approximately one trillion events per day for millions of agents delivering unprecedented.
Security insights.
This empowers falcon to benefit from Crowdsourcing and economies of scale. Unlike any other solution on the market today.
We believe enables our AI algorithms to be uniquely effective.
The success of our platform strategy and growing our leadership as the trusted security partner of choice is also reflected in our module adoption metrics, which we have continued to increase quarter after quarter.
Subscription customers that have adopted four or more modules, five or more modules and six or more modules increased to 66%, 53% and 29% respectively in the second quarter.
We believe that our extensible Falcon platform purpose built to collect data once and reuse. It many times to address multiple use cases, not only provides customers an advantage over adversaries and lowers Tcl is a cornerstone to building a durable growth business over the long term.
As we innovate on the platform customers can derive even more value from their crowd shrank investment take for example, a mid sized health care organization, who despite their limited budget and security staff was looking to bolster its security in the wake of repeated attacks against their peers.
This organization initially thought the only needed to add a sim solution, but quickly realized the implementation and maintenance would be a burden to their current security posture.
Crestwood <unk> Falcon complete Falcon Zero Trust and <unk>, they could transform their security posture have round, the clock monitoring gain identity visibility and risk, scoring and implement a highly effective log management solution for less than the cost of purchasing a standalone Sim product.
This customer was also amazed by Humana speed of ingestion and ability to query data in real time, which they deem critical given the rise in malicious cyber activity targeting the health care sector.
Customer interest in <unk> is very high as the ability to log everything and get answers in real time is a growing necessity.
In Q2, we secured new <unk> deals across multiple industries, including technology healthcare hospitality and financial services. Additionally, <unk> is already off to a great start in Q3 with a seven figure land and growing pipeline the.
The integration of <unk> into our already market, leading xdr capabilities is on track and we are encouraged by the growth opportunities we see in this area we.
We look forward to showcasing more of our leading xdr capabilities that Falcon in October.
I will now highlight several of our cloud modules that are gaining exceptional traction with customers as the threat landscape has intensified.
First as Falcon complete our turnkey managed detection and response subscription.
The heightened threat environment has put a significant strain on cyber resources and has exacerbated the skills gap in the industry.
Recent reports indicate that over $3 million cyber jobs are fulfilled.
<unk> is more than double the current number of professionals currently working in the field.
Falcon complete combines the advantages of our security cloud the technology in our Falcon platform and a team of threat hunters and responders to deliver gold standard security around the clock at scale with superior economics to organizations of all sizes. This translates to stopping breaches.
That extend far beyond the prevention of malware and that leverage legitimate software or services exploit system configurations or abuse legitimate credentials and.
In recent quarters, we have seen a significant increase in the Falcon complete customer base, which has grown approximately two and a half times year over year.
Additionally, just last week Falcon complete was named a leader in IDC market scale for U S managed detection and response services.
Within the report Falcon complete was recognized for strength and its breach prevention warranty.
Fully remote automated remediation breath of threat hunting capabilities and strong machine learning and artificial intelligence capabilities for detection and response.
The next module on the Falcon platform I would like to highlight is Falcon spotlight, which leverages the power of the cloud to provide real time vulnerability assessment.
And AI to prioritize vulnerability remediation without impacting performance of the network or endpoint.
Real time vulnerability management is becoming a necessity for a proactive security posture given the continued targeting of core functionality and vulnerabilities in the Microsoft ecosystem and increase in zero day exploits such as the recent Microsoft print Nightmare vulnerability.
Demonstrating the power of Falcons network effect, we leverage the massive amount of data and intelligence available and our security cloud and our AI model to predict that this newly discovered vulnerability would be exploited by adversaries using this data intelligence allowed us to provide customers with real time visibility into their <unk>.
Our ability to provide real time vulnerability management significantly differentiates crowd strike and it's directly attributable to the fundamental architecture of our cloud native Falcon platform that enables us to collect data once and reuse many.
We believe our success to date with spotlight is an excellent illustration of our ability to leverage the crowd strike security cloud to stop breaches and drive module adoption.
Spotlights ability to provide visibility and real time into print nightmare exposure.
Without deploying new agents or scanning was a significant driver of no touch trials generated through the cross rate store.
Spotlight has also become strategic and the sales process with a number of spotlight customers growing more than 150% year over year in Q2.
Next I will briefly discuss zero trust the.
The recent could say a breach which is reported to have impacted over 1000 companies from a single breach serves as a reminder to the far reaching impact on our supply chain breach and the importance of a zero Trust architecture.
It is also important to remember that most ransomware outbreaks have compromised identity components.
<unk> of this threat vector is critical to stopping breaches and lateral movement.
Customers are increasingly turning to our zero trust solution to combat threat actors that leverage identity based attacks and move laterally within their targeted environments.
Craft strike has the only zero trust solution on the market today that combines endpoint workload and identity visibility and behavioral analytics to secure environments and prevent lateral movement.
Moving to cloud.
And more organizations are waking up to the fact that adversaries do not draw much of a distinction between targeting data on an endpoint versus a cloud environment.
As an innovator in cloud security and operator of one of the largest clouds organizations are turning to crowd strike to protect their cloud of states I'd.
I'd like to share with you a recent customer win that demonstrates how cloud native organizations can leverage the Falcon platform to achieve best in class security that empowers their business model instead of clashing with it a cutting edge enterprise AI platform company.
A member of the Forbes cloud 100 was experiencing stability and scaling issues when trying to use a competitor's cloud security offering that was built through M&A.
As a company on a mission to reduce their own customer friction and deliver actionable intelligence. They felt it was critical that their security partner could match their speed and scale in the cloud instead of slowing them down.
With these requirements in mind this cloud innovator selected crowd strike for its ability to provide a fully integrated and fully managed cloud solution through a single pane of glass with a single team.
This customer purchased Falcon complete with cloud workload protection and Falcon horizon to fully manage both their traditional endpoints and cloud workloads.
This new customer found immense value in Falcon cloud offerings across their easy too and AWS far gate infrastructure, making crowd strike the perfect partner to scale with their business.
To summarize the power breadth and value of the Falcon platform provides and the importance of building trust with customers I will share two more customer wins with you.
The first is with a large media company that was using a legacy provider and was hit with a severe ransomware attack that quickly spiralled across their business.
They called on crowd strike services, who leverage both Falcon edr for visibility as well as our new module Falcon forensics, which automates the data collection and accelerates incident analysis to help them quickly locate the root cause and take back control of their environment.
Following remediation of this breach this new Crouch for a customer was eager to transform their security posture and adopted 11 Falcon modules, including Falcon complete discover spotlight Falcon X recon cloud workload protection and Falcon Zero Trust to proactively.
Secure and fully manage their workstations cloud workloads and identity layer as well as provide visibility into their it assets and vulnerabilities.
Next as a customer when I spoke about earlier with one of the largest nonprofit health care organizations in the United States.
Given this company is a nonprofit budget really matters, but not at the expense of breach protection.
This customer was looking to refresh its endpoint strategy and move away from their existing vendor silence given that lack the focus efficacy and the customer service they had been promised.
Without a security partner they can trust to protect them. They felt vulnerable as incidents were not identified or remediated at the speed required to stay ahead of today's threat actors the.
The competitive bake off initially included multiple next gen and legacy vendors.
The low cost next Gen product was quickly eliminated because of the Cisco realize the overly prevention focused approach was to similar to legacy Tech.
Ultimately this customer chose crowd strike as their trusted security partner, given Falcons low false positive rate manageability at scale.
He's of use and performance that stood out prominently over all others.
Additionally, our frictionless deployment was once again, a key differentiator as Falcon was deployed across nearly 400000 endpoints in just a few weeks.
Moving to our partners.
As we have discussed before we are a partner first company and believe the rapid expansion of our partner ecosystem is a direct reflection of our growing leadership position.
Partners naturally gravitate to market leaders as it helps them bring in new customers and likewise customer choice helps propel vendor prominence within the partner community.
Our leadership position is driving strong engagement with all partners of all sizes, which is contributing to our growing presence among the highest levels, including boards and CIO.
For the first half of fiscal 2022, our partner sourced ending <unk> nearly doubled year over year.
Investing in our partner ecosystem continues to be a key priority in July we teamed up with Telefonica Tech to bring the power of the Falcon platform to their hundreds of thousands of customers across Europe, and North and South America coupler.
Coupling crowd strike Falcon with Telefonica is next defense MTR offering our joint customers now have trusted and proven next Gen endpoint protection and World Class services.
We are also excited to announce a new strategic alliance with Verizon.
Through this collaboration the crowd strike Falcon platform will be positioned as part of Horizon's business security portfolio to provide comprehensive endpoint and workload protection that spans prevention detection and response capabilities.
Verizon business will be able to manage crowd strike through their managed detection and response.
And CRM services, and we are thrilled to team up with them to help joint customers stopped breaches and reduce cyber risk.
In summary, I couldn't be more confident in our leadership position and opportunities for growth.
I do not see another vendor in the market with our vision platform or ability to execute at scale.
Our leadership as a trusted security platform of record and strong financial performance stands as a testament to crowd strikes dedication to innovation protecting and delivering value to customers and transforming the security industry.
I'd like to thank every crowd Stryker for all 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 a quick reminder, unless otherwise noted all numbers, except revenue mentioned during my remarks today are non-GAAP.
We once again delivered exceptional results.
In addition to strong growth at scale in the second quarter. We continued to maintain very high unit economics drive leverage and remained very capital efficient generating strong operating and free cash flow.
Additionally, we continued to perform at a high level well in excess of the SaaS industry as a rule of 40 benchmark once again, achieving our rule of 80.
Demand in the quarter was broad based and well balanced fueled by strength in multiple areas of the business as we expand our leadership across the market from large enterprises to small businesses.
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 70% <unk> growth year over year to exceed 1.34 billion.
New customer acquisition as well as expansion business within existing customers drove substantial growth in the second quarter. Once again, resulting in very strong net new <unk>, which came in at an all time high of $156 million.
Our dollar based net retention rate was once again above our benchmark.
Moving to the P&L total revenue grew 70% over Q2 of last year to reach $344.0 million.
Subscription revenue grew 71% over Q2 of last year to reach $323.0 million.
Professional services revenue was $30.0 million setting.
Setting a new record for the fourth consecutive quarter, and representing 49% year over year growth.
In terms of our geographic performance in Q2, we continued to see strong growth in the U S as well as international markets.
Revenue growth in the U S was 73% and contributed approximately 72% of second quarter revenue.
Approximately 14% of revenue was derived from Europe, Middle East and Africa markets, 10% from Asia Pacific and approximately 4% from other markets.
Second quarter non-GAAP gross margin was 76% up more than 150 basis points from Q2 of last year.
Our non-GAAP subscription gross margin was 78% and up more than 90 basis points from Q2 of last year.
We continue to be pleased with our strong subscription gross margin performance.
We expect subscription 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 to fiscal year 2025.
Total non-GAAP operating expenses in the second quarter were $226.0 million or <unk>, 66% of revenue versus $149 million last year or 71% of revenue.
As planned we continued investing aggressively in our business during the quarter, including increasing investments 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 as the trusted security partner of choice.
Scaling our business efficiently remains a top priority, which is why we intensely focused on our unit economics, including magic number.
Our go to market engine is executing on all fronts to seize the strong demand we see in the market. So we can help even more customers restore trust in their security posture.
In Q2, we ended with a magic number of $1 four.
Our continued exceptional unit economics speaks to the efficiency of our go to market engine and frictionless sales motion, which we specifically designed to rapidly onboard and support customers of all sizes.
It also indicates that we should increase investments in order to capture even more of the market opportunity at hand, which is exactly what we are planning.
Second quarter non-GAAP operating income was $38.0 million and operating margin improved more than six percentage points over Q2 of last year to exceed 10%.
Non-GAAP net income attributable to crowd strike in Q2 was $34.0 million or 11 on a diluted per share basis.
Our weighted average common shares used to calculate second quarter non-GAAP EPS attributable to crowd strike was on a diluted basis and totaled 238 million shares.
We ended the second quarter with a strong balance sheet cash and cash equivalents increased to approximately $80.0 billion.
Cash flow from operations in the second quarter was $113.0 million and free cash flow was $79.0 million or 22% of revenue.
This brings our free cash flow as a percent of revenue to 30% for the first half of the year.
Moving to our guidance.
We remain optimistic about the demand for our offerings record pipeline and the powerful secular trends fueling our growth.
Given the growth drivers of our business as well as our exceptional second quarter performance and momentum into the third 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 air or to be less pronounced relative to prior years as we move from Q2 into Q3, given our steady climb at a much higher scale in recent quarters.
Additionally, please recall that our net new <unk> in Q3 of last year included approximately $14.0 million and acquired net new <unk>.
For the third quarter of FY 'twenty, two we expect total revenue to be in the range of 358 to $368.0 million, reflecting a year over year growth rate of 54% to 57% with subscription revenue being the dominant driver of growth.
We expect non-GAAP income from operations to be in the range of 29, four to $41.0 million and non-GAAP net income attributable crowd strike to be in the range of $19 seven to 25.0 million.
We expect diluted non-GAAP net income per share attributable to crowds rate to be in the range of eight to 10.
Utilizing our weighted average share count of 240 million shares on a diluted basis.
For the full fiscal year 2022, we currently expect total revenue to be in the range of 1391, two to $1413.0 million, reflecting a growth rate of 59% to 61% over the prior fiscal year.
Non-GAAP income from operations is expected to be between $138, five and $153.0 million.
We expect fiscal 2022, non-GAAP net income attributable to crowd strike to be between $102 nine and $121.0 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 43% to 49.
George and I will now take your questions.
Thank you again, ladies and gentlemen, like to ask a question. Please press Star then one on your Touchtone telephone.
And the interest of time, we do ask that you. Please limit yourself to one question.
Thank you our first question classrooms, the key pillar of Barclays Capital. Your line is open.
Hey, guys. Thanks for taking my question here.
George maybe maybe for you.
I was wondering if you could talk a little bit about the environment for big deals and what Youre seeing out there.
We all see the threat environment I think you called it fierce in your prepared remarks.
Im curious, how youre seeing that sort of manifest itself in bigger commitments with crowd.
That makes sense.
Sure sure good to hear from you. So as you indicated and as I talked about in the prepared remarks.
The threat environment again continues to get worse, we spent a lot of the ransomware attacks.
And what it's done and in particular it has impacted business resiliency, it's no longer the case of encrypted computer and re imaging carry on its impacting massive amounts of business and costing hundreds of millions of dollars and I can tell you I've I've done more for briefings in the last two months and I've ever have it seems like.
One of the week the audit committees on this topic, particularly ransomware.
When you look at big deals. So how does this translate when you look at these big deals we've talked about the media company that.
That was 11 modules that we've landed with so big land.
And some real big commitments from customers, saying, we went all in on your platform and went all in on <unk> and we spent a lot of time consolidating other technologies and removing agents and driving value to customers. So the big deals the big enterprises Big lands continue to be there and I think we continue to get stronger and stronger every quarter and.
These areas.
Got it very helpful. Thanks, George.
Okay.
Thank you our next question Cosmos.
J P. Morgan your line is open.
Yeah, Thanks, Hi, guys. So.
No one went public I think the number one question I still get is what's happening with market share and what's the kind of competitive win rates, especially in different market segments. As you look to go down market I'm wondering if you could just kind of comment on what you're seeing.
Sure good to hear from you Sterling, we've actually seen an increase in our win rates across the board legacy of Nextgen.
You know obviously, we spent a lot of time in the enterprise, but we have a very robust submitted an SMB business and we've seen strong results across the board.
There's a lot of noise, but I think you have to look at the numbers that we put up on the board.
One quarter of our new Anr is probably 94% of the total IRR. So when we think about this it's a big market customers have a lot of choice and they're focused on breach prevention not just detecting malware and I think our platform are.
Ability to scale our ability to.
Get immediate value on rollout and Manageability. These are all things that are really important to not only large enterprises.
But also to the smallest SMB customers out there. So that's what we've seen so far.
Makes sense. Thank you.
Thank you. Our next question comes from Brent Thill of Jefferies. Your line is open.
Hey, guys. This is Joe on for Brent really appreciate the question, maybe if you look out over the next 18 months can you just rank your growth drivers is there any low hanging fruits still there in core endpoint or is it going to come from <unk>, whereas internationally opportunity.
That would be helpful.
I think I think it's across the board we're still in the early innings. If you look at the number of customers we have.
13000, and change versus some of our legacy competitors that have over 100000, I mean still lots of customers that are out there. When you look at things like SDR and you look at <unk> amazing.
Amazing growth drivers for us when you look at cloud we've done a lot of work on that last year, we did a little analysis on the opportunity. We think it's really undersize from a market perspective, if you will from the from the analyst and then when you look at things like identity.
We're the only folks that have.
Zero Trust identity module that came from preempt. That's it we were the only endpoint folks that have that so that's been extremely successful for us and when you look at the attacks.
A lot of them are identity based and you switch that to identity being abused in the cloud and our Falcon horizon module, which.
Has done an amazing job.
And we've seen amazing traction with that so I think there there's.
<unk> of opportunity.
Broad based across all the modules across all the geographies.
The momentum to get momentum.
We really have become the go to company in this space and that that gold standard brand reputation has served us well.
Thank you.
Thank you. Our next question comes from Rob Owens with Piper Sandler Your line is open.
Great and thank you for taking my question George to follow up there in terms of the growth drivers could you double click.
On the <unk> opportunity and whether this is the.
The tip of the spear for customers or Youre able to go back into the installed base I guess the spirit of the question is are you seeing clients be reactionary still at this point given the breach environment or are they starting to get more strategic in terms of how they're deploying those security dollars. Thanks.
Yes.
They are becoming more strategic and that's a lot of what we focus on how do we consolidate how do we.
Become the platform of record like we haven't many other companies for them and how do we eliminate cost and complexity what they have when do we think about xdr truly advanced threat detection, we've been doing that for a long time and now you're combining that with other people's data as well.
Fantastic that's great great growth driver, but we still have.
The humane a log.
Log management product as it is right and obviously there'd be more integration with that in our platform but.
That is an amazing product that allows you to log everything all the time and answer any questions in real time so.
There are two kind of two different products, if you will and between the two of them as I mentioned, we had a seven figure land in Q3.
You know I I think really we're just not really anything I'm. So excited about that technology.
And I can't wait to see how everything unfolds over the next couple of quarters.
Thank you.
Our next question comes from Matt Hedberg of RBC capital markets. Your line is helpful.
Great. Thanks, a lot for taking my questions guys George.
I noticed you launched Falcon complete for Globe Gov Cloud. This quarter can you remind us of your exposure to U S. Fed in and maybe how you guys are uniquely positioned to take share and kind of the overall public sector sector vertical.
Sure well, we kind of lump state local federal altogether, obviously fed is a it's a big focus for us and when we think about.
What's happening in the current environment and some of the moves that are being made in Washington, We think our technology is uniquely suited.
For solving some really big problems in those areas, we've seen success in the civilian agencies.
And we're all process for IL four certification, we're just waiting on the government to approve that.
And that allows us into other higher classified areas. If you will so.
That is a.
A segment that takes a lot of time and effort and government doesn't move so fast.
But we've made great strides there and really across the board state local.
As well I mean, we've got some amazing.
States that our customers many of them in.
In local government so as we look at those in totality.
We've done tremendously well there and we still think we're in the early innings.
Thank you.
Next question comes to acquire a.
Bank of America. Your line is open.
Hi, guys congrats on a great quarter I have.
Two questions on the market.
When we discuss with them.
Distributors there are two things that come up and I wanted to ask you about the importance of automation and thats as specific in relation to the selling point of Sentinel won.
And second about the price difference between your two as far as I understand and please correct me if I'm wrong. They compete with you with a lower price solution is price a significant factor in the sales process. Thanks.
Sure.
I think if you if you buy into the marketing hype Thats one thing, but if you look under the covers we have more automation by far.
And then any other competitor, including this one.
That's how we get the scale that's why the product is easily deployed that's why.
We can drive costs out of the customer base because it doesn't automatically.
When you look at the totality of all the services again, we're focused on stopping breaches not just.
We didn't come from a malware product that we try to bolt on other pieces. We built this from the ground up so on the pricing standpoint, we sell on value and we routinely win with a higher price point because the product works it doesn't blow up machines, it's scalable.
And <unk>.
People are talking to other customers, saying what are you using and how is it working and you know again, we're focused on stopping breaches not just dealing with malware and I think that served us well so low cost options I think you get what you pay for.
Difference between the.
Zero in a Ferrari and we happened to be the Ferrari model, and that's where a lot of customers want.
Do you feel any pricing pressure in the market aware and not yet at this stage.
You know.
I mean, there's always going to be competitive deals that are out there whether it's.
Nextgen competitors or legacy players and you have to play each deal by by ear. If you will but at the end of the day you know, we're going to we're going to compete on value, which we have and.
I can tell you there's a lot of deals we win where were a higher price than our competitors and I think the product is differentiated enough in true platform. You know when you look at the the technology only wanted with the forensic module is the only one with.
The identity module, we've got an amazing growth in spotlight.
Billy predictive vulnerability management. So when you when you strip out all the Powerpoint and noise, you've got to look at what really works and what are big customers focused on rolling out and its crowd strike.
Got it thank you.
Thanks.
Thank you. Our next question comes from Brian Essex with Goldman Sachs. Your line is open.
Yes, good afternoon, and thank you very much. Thank you for taking the question maybe.
Maybe burt.
As we see kind of like.
<unk> down market, how do you think about the model.
From our perspective.
Giving investors comfort that you can maintain retention rates module adoption margins what is it different in dynamics and do you have a sense of I don't know if you can quantify the mix and what youre seeing through the model.
Yes.
When you I think the first thing you got to look at is the is the new logos right. So we saw acceleration new logos and a lot of that is coming from down market and so what you're seeing down market as you see folks that can come in quickly we've taken out friction from the system to be able to allow onboarding to.
Really smooth efficient and then theyre getting a tremendous amount of value in the in the in the down market and certainly.
And you know folks in the SMB space, if they choose our Falcon complete offering which we monitor.
Mediate will remediate.
Directly for them they see the value in terms of billing that skills gap as well and so that talks to the retention rates that we're seeing with respect to that market. So very optimistic about our opportunities inbound market, we've done really well overall and we continue to win.
Fair share in that segment.
Okay Super helpful. Thank you.
Sure.
Our next question comes from Alex Henderson with Needham Your line is open.
Great. Thanks.
I was hoping you could talk a little bit about.
The average deal size in your pipeline.
Across strata in other words, if I look at the enterprise to enterprise mid market to mid market.
Lower end lower end.
Are your deal sizes, increasing across the pipeline.
And does it happen in the most recent quarter and similarly with the all of these attacks that we've been seeing can you talk a little bit about the other key metrics such as time to close.
And the overall strength of the pipeline.
Has the.
The attack rate.
Rate caused an uptick.
In those three metrics. Thanks.
Thanks, Alex So first let me comment that again as I said in the prepared remarks remarks, we've seen record momentum in the business heading into the heading into the second half. So we're excited about that and that's it.
Cumulation across the board in all the segments.
For us we don't give out specifics.
Into each of those different segments, but what we can tell you is that we're landing with with more modules.
SMB all the way up to enterprise you can refer to George's comments about one deal that had 11 modules and so we're seeing we're seeing more and more of that and that's also evidenced and as you look at the adoption rates.
Of our modules every quarter that we that we talk about adoption rates keep going up.
And I think that that's a testament to the strength of the platform. It talks to the fact that more and more customers want to buy a platform as opposed to point solutions and soon we're going to be giving out data on no longer 456 months by six seven modules because the fourth module is going to be.
Virtually.
The same as the.
Third as you know is in <unk>.
Adoption rates, so we're continuing to see momentum across the board and we're seeing those adoption rates continue to tick up because of folks trying to customers trying to buy the platform, which is all integrated and slated for them. So that's what we're seeing.
Alex can you comment on time to close the length of time to close deals.
I'll just comment that we don't we generally don't talk about that but we've talked about in the past, where we've had large enterprise deals that close over a weekend.
And we still see some of those that's not obviously every case, but where we're seeing.
Customers come to us.
Obviously more frequently by the number of logos and some are closing really really rapidly.
Even.
Even even seven figure deal type of customers.
Great. Thank you.
Sure.
Thank you. Our next question comes from Paul Here's one of Oppenheimer. Your line is open.
Thanks, Hey, guys great quarter.
Not that growing 64% is bad and into our international business on a year over year basis, but.
With it being only 28% of revenue.
Is it growing still slowly than the U S.
George maybe you could talk about the international progress your priorities there and he is there.
A different go to market approach, perhaps you need in order to really unlock the opportunity internationally.
Yeah, So when we're looking at international growth.
I think you've got to look at how strong the U S. So when you look at the U S growth, it's been on fire for sure and internationally I think that's.
You always continue to build out your capacity, they're your partner network and that's a key piece of it which is more mature in the U S with more mature partner. So we continue to focus and focus on that.
We've had some really great international went to big players that are out there.
We continue to focus on on the key areas in the key geographies.
Burt if you have any other comments on that piece.
Yes, so I mean this goes back to the fact that we're looking to continue to invest aggressively in international markets is one of those areas I think we've got opportunity out there to take more share.
When you're comparing it to the U S. We have a high grade problem, where the U S is still really super strong and as George already mentioned, we were still in early innings, and it's a number of logos and customers that we have 13000, it's great. We're really proud of that but it's a drop in the ocean. When you compare it to some of the legacy players that have over that I've had over 100000.
Customers. So we think about that opportunity internationally to be out there and we're going to aggressively go after it.
Good luck thanks.
Okay.
Thank you.
Our next question comes from Gray Powell of bps. Your line is open.
Alright, great. Thanks for thanks for taking the question and congratulations on the strong results.
So yes earlier this year you all seem pretty excited about the potential to gain incremental customers against Microsoft.
I know you had some comments in the prepared remarks, and obviously the headlines on Microsoft did not been not particularly great. This year and security. So yeah. Just just how are you seeing that opportunity play out and how big do you think it could be.
Sure. So obviously, Microsoft you have to take seriously as a competitor, which we do for all our competitors and it's a big market.
When customers.
Customers are looking for you know that salesforce of security to coming to crowd strike fully integrated covering multiple operating systems.
Again, focusing on on stopping breaches.
There has been a lot of talk again at the audit committee around risk and a monoculture and customers are becoming more and more uncomfortable with putting all their eggs in one basket. So I think we have a great opportunity there and we highlighted some of the big wins.
And at the end of the day, Microsoft Microsoft Theyre going to get customers, but I think with the best platform the best technology.
Our results speak for themselves and what we've been able to do and customers again, who want that ease of use ease of deployment and just have it work.
Got it that's really helpful. Thank you.
Thank you.
Our next question comes from Gregg Moskowitz Mizuho Your line is open.
Okay. Thank you for taking the question and very good quarter I had a follow up on Falcon complete, which I think you mentioned has a customer base up to two five X in recent quarters and similarly, we're hearing that demand has really been spiking for the solution over the past few months, including among larger organizations and so with that in mind can you talk about your.
Expectations for adoption of complete going forward across both large enterprises and governments.
Sure. It's a great question and when we originally built completely we thought it would be built for sort of that mid market customer that maybe had one security person or none or a half and the reality is it's we're selling it to the smallest SMB all the way up to the largest enterprises.
One of our largest enterprise customers the Falcon complete customer because the economics are so good for them. When you look at again getting back to automation. The automation. We've built in is second to none in how we operate the service. When you look at that we can really drive the cost out for our customers and provide a very high touch.
Engagement with them, which is what they what they're looking for again stopping breaches.
Being able to identify threats very quickly remediate there very quickly outside of any of the other automation that we have so.
That level of engagement is something that truly differentiates us and when you even think about this sort of market.
You know, it's a little bit more than MBR, but we were doing this before MTR was even coined the term. So we have a lot of experience here that pales in comparison to our competitors.
Terrific. Thank you.
Our next question comes from Mike Walkley of Canaccord Genuity. Your line is open.
Great. Thanks, Congratulations on the net new customers I was wondering if you could share roughly the number of modules on average new customer chooses today versus a year ago and also how is the percent of multiyear deals improving as shown by the strong RPM metrics.
Okay.
Thanks, Mike Good question so.
We don't give out the specific numbers how many.
Modules each customer because what we do give out the percentage of customers with four or five and six plus.
Modules, which are respectively, $148.0.
And thats been increasing quarter over quarter, and so that just draw talks at a testament of our ability to continue to sell to <unk>.
Continuing to sell the platform.
We are focused on continuing to build out the platform and to give customers more and more choice in terms of.
What they have available to them.
And at the end of the Georgia has talked many times about.
Hey, we're going to make this thing seamless for you to deploy.
And at the end of the day easy to manage and and when you combine those things. It just makes it easier for customers to.
To adopt and so going back to our earlier comments about.
The ability to.
To scale and the ability to drive customer adoption. It all comes back to making it easy for the customer and where we're very focused in.
In that in that in that or in that area and thats part of our core and part of our DNA and we will never take our eye off that just similar.
Some of them that we're never going to take our eye off of efficiency right unit economics matters. However, we do know that we've got this opportunity in front of us to be able to go after more market share and we're going to we're going to invest.
In that area to be able to go after more and more.
New logos.
As we continue our journey.
Okay. Thank you.
Thank you our next question comes from.
Okay.
Your line is open.
Yeah. Thanks for taking my question and congrats on a good quarter.
I was curious about the crowd straight store.
That's that's been.
<unk> been adding partners.
Since the IPO certainly I.
I was wondering can you try to quantify or give us some context in terms of what revenue opportunity that is and then also I think rapid seven simplify where a couple of them.
Partners you highlighted can you talk a little bit about where your.
Your.
Organic capabilities and where they pick up.
<unk> technology.
Simplify in the spotlight.
Spotlight with with rapid seven.
Sure so from a partner store perspective.
I think been very well received by customers and they love the integration and again part of the strategy that we have with a single agent.
A single data store with threat graph.
And what I would call beachfront real estate is customers don't want more Egypt, they want less and they trust our agents there with performance and it works.
So the whole idea again is how do we leverage that architecture almost.
Agent as a service if you will for other partner so.
That includes data integration being able to interact with our agents things of that nature and we've done that for many of the partners that are out there and it's really based on customer demand and the technology that they are using they want to integrate in some of the names you mentioned fall into that area. When we think about spotlight and its capabilities, we are replacing a lot of other agents.
<unk> technology, that's out there and again remember we don't do the network scanning piece. We think we think that's a bit commoditized and what customers are looking for and we highlighted this with the printer nightmare vulnerability that Microsoft has.
They want push-button results instantly, which would give them and now using AI, we can actually prioritize what vulnerabilities are most likely to be exploited which really helps the it ops team. So.
We've got tremendous capabilities in those areas and <unk> as you know again, it's just been a shining star for US there hasn't been a customer or prospect I talked to that hasn't been extremely impressed with the capabilities. There. So we'll be leveraging that as part of the integrations for the store and I think we're still in the early innings there.
And that can be any.
<unk> was a big driver of revenue for us, but right now, it's very strategic and make sure our customers are happy.
Thank you.
Thank you. Our next question comes from Patrick Colville of Deutsche Bank. Your line is open.
Thank you for taking my question I guess my question is about the <unk>.
One of the things, we get a lot of incoming orders.
How far through that.
Anything displacement.
In mid 2021 would you say that based on the kind of conversations youre, having with customers and potential customers.
We're kind of in the late innings of that process.
Is that still kind of a lot to go in the weird and then early innings I mean, that's.
Would be helpful. Thank you.
Sure I still think we're in the early innings again, if you look at our customer count versus a mcafee or symantec or a trend.
<unk> impressive for a younger company, but it still pales in comparison to all the customers that they have so it's an ongoing effort, it's a multi year effort.
Lots of tailwind there for us and that's you know that's in the enterprise and when you get down into the SMB in the Midmarket you got a ton of other players that are out there.
Too many dimension here, so that's always going to be an ongoing opportunity.
Opportunity for us and in my opinion, it's still very early on it.
Very early innings, and I know that from the big deals that we're doing in the magazine to Symantec replacement I mean, it just happens every quarter kind of like clockwork.
Okay, and then just kind of go on I mean, when you know when do you think we'll get to the later innings of that displacement is it like.
Am I doing.
Doing kind of for you.
Sport and give forward guidance, but is it like anytime soon or was it quite far out.
Personally I think it's far out because you have to look at the renewal cycles for many of these customers right. It could be a year or two years or three years and it's it's always ongoing.
And I would look at the customer count compare that to other players that are out there and that'll give you a good idea of where we are versus you know.
What's available to us.
Thanks, so much.
Thank you.
And this does conclude the formal part of the conference call I'd like to turn the call back over to George Carter for closing remarks.
Great 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 think you'd be safe and have a great day.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all maybe didn't have a great day you may all disconnect.
[music].
Okay.
[music].
[music].
[music].