Q3 2022 CrowdStrike Holdings Inc Earnings Call

Thank you with anybody and walking through the crowd.

Holding Inc. Q3, 2020 financial results conference call at this time, all participants are in listen only mode.

After the Speakers' presentation, there'll be a question and answer session.

To ask a question at that time.

I didn't want when your touch tone telephone.

As a reminder, today's conference call is being recorded.

I would now like turn the call to the house with 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 of coach Inc, and Burt part Baird Chief Financial Officer.

Before we get started I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans objectives growth and expected performance, including our outlook for the fourth 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 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 Companys quarterly and annual reports that we file with the SEC.

Additionally, unless otherwise stated excluding revenue all financial measures included on this call will be non-GAAP.

A discussion of why we use non-GAAP financial measures and a reconciliation scheduled showing GAAP versus non-GAAP results is 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.

With that I'll turn the call over to George to begin.

Thank you Maria and thank you all for joining us.

We'll start today's call by summarizing three key points first we delivered an outstanding third quarter headlined by an acceleration in net new <unk> growth strong execution across the market.

From large enterprises to small businesses and expansion within the U S Federal government.

Second we are seeing an inflection in new products with growing demand for our identity protection and zero Trust <unk> and cloud security modules and third the competitive and pricing environment remains favorable to crowd strike, we continue to expand our lead over legacy and next gen vendors.

Of our scalability efficacy and differentiated offerings, such as Falcon complete.

Now, let's discuss our results and get into the topics in more detail.

We delivered a robust third quarter with net new AOR growth accelerating and adding a growing 67% to surpass the $1 5 billion dollar milestone.

We added $170 million in net new <unk>, which was ahead of our expectations and gained over 1600 net new subscription customers for the second consecutive quarter.

We proudly serve 14600 8700 subscription customers.

In addition to accelerating net new AOR growth, we delivered record bottom line results and free cash flow, reaching a new high watermark of $124 million.

In the third quarter, we saw broad based strength in multiple areas of the business and among SMB mid market and large enterprises are outstanding results. This quarter reflect continued strong customer adoption of our core products.

<unk> growing success with our newer product initiatives, including identity protection.

<unk> management and cloud <unk>.

Our growing leadership in the market with a continued groundswell of customers turning to crowd strike as their trusted platform of record with our 'twenty one modules.

We also gained significant momentum and delivered a record quarter in the public sector, including wins with educational institutions states and local governments and the U S Federal government.

Our performance on this front is highlighted by a large win with Cisco.

Cybersecurity and infrastructure security agency to secure a significant portion of endpoints and workloads for multiple federal agencies as they operationalize the whitehouse executive order to improve the nation's cyber resiliency.

This win represents the culmination of our dedication and hard work over the course of several years on our public sector strategy and government certifications.

We believe this significant win will create new opportunities and unlock additional business within the massive U S Federal government.

For additional information please visit my new post to the crowd strike block.

Moving to the competitive environment. We continue to believe we have a significant technology lead with no competitor matching our scalability performance ease of use and commitment to customers.

I could not be more excited by our opportunity, which has continued to grow.

This quarter, our win rates increased across the board and we saw a record number of wins against both legacy and next gen vendors with SMB mid market and large enterprise customers.

We also landed a record number of wins in displacements over a recently public next gen vendor sense, it'll one to be clear, we define a displacement as removing an incumbent's product and replacing it with Falcon.

Let me share a recent example, with one of the largest nonprofit hospital systems in the U S, which had initially chosen the recently public next Gen vendor based on price and promised features that were never delivered.

Just a few months into their multi year contract with the other vendor. This organization realized the product fail to scale caused major performance issues prohibit a critical processes from functioning properly and drove significant friction within the organization and its subsidiaries.

That is when they turn the crowd strike.

Multiple modules and a multimillion dollar <unk> deal and realized immediate improvement.

Gaining up to 30% performance increase.

Their servers alone and greater efficacy without intrusive false positive.

Another marquee win this quarter included call tricks a leader in experience management.

Customer focus and trust are key parts of Crawford DNA. Therefore, it was critical for them to adopt best of breed security capable of fortifying their entire estate of traditional endpoints and cloud workloads without sacrificing end user experience.

<unk> moved off the next Gen endpoint security provider to Falcon in order to have a single solution that can be easily deployed and scaled along with their fast growing business.

We look forward to continuing our relationship with <unk> as their trusted security partner.

We continue to see success, winning new customers among our larger competitors as well.

For example, a leading health care system that was using a combination of two legacy vendors, Microsoft and Symantec when it was hit with a massive ransomware attack that disrupted their business.

This organization turned to crowd strikes renown incident response services team to remediate the breach. They also came to realize that while Microsoft attempts to check most of the boxes on paper and appeal to the CFO office in reality when every second counts they needed crowd strike and standardized on Falcon complete.

With our leading technology unmatched platform, an adversary focused approach to stopping breaches, we continue to eclipse our competitors and extend our leadership.

Which was once again recognized by industry analysts and third party testing agencies, including.

IDC, which named crowd strike a leader in the IDC market scape worldwide modern endpoint security for enterprise 2021 vendor assessment.

Enterprise management Associates EMA granted <unk> their top three award and log management and observe ability.

Humira was recognized for its index research and its ability to ingest structured and unstructured data and real time and at scale.

Last month.

He laughs recognized crowd for like as the best endpoint detection and response product for the second year in a row.

And just this week crowd strike earned the highest rating in the October 2021 Gartner peer insights voice of the customer for endpoint protection platforms.

Cyber adversaries are increasingly attempting to accomplish their objectives without using malware as we cited in our 2021 threat hunting report.

Based on recent customer data indexed by threat graph, 68% of Detections analyzed where not malware base.

This is why companies need to employ a holistic breach prevention strategy, rather than overly relying on malware prevention, regardless, if its legacy nextgen.

This increasing trend in the adversary landscape is driving a generational shifts to zero trust technologies, including crowd strike Falcon.

We are seeing this trend play out in our module adoption metrics, which have continued to increase.

Our module adoption rates demonstrate the flywheel effect of our platform in motion with subscription customers that have adopted four or more modules, five or more modules and six or more modules, increasing to 68%, 55% and 32% respectively in the third quarter.

We believe high adoption rates of our modules drive high retention rates and reflect our growing position as the trusted platform of record with the average number of modules per customer also increasing quarter after quarter.

Our results have proven quarter after quarter that transformational differentiation built into the Falcon platform continues its technology dominance over legacy and next gen vendors alike, delivering strong results in the field.

On the cloud front, our footprint continues to grow even faster than our overall server endpoint growth with over 25% of the servers, we protect now in the public cloud.

Crossroads has redefined the approach to cloud security.

With Falcon horizon, we're selling into and enabling Dev ops teams to improve decision, making and innovate faster.

Falcon Horizon is API, driven and agent list, enabling customers to scan configurations and workloads across multiple cloud environments.

Falcon Horizon provides continuous control plane threat detection and machine learning and indicator of attack detection as well as guide at remediation for all cloud accounts.

<unk> and users across the cloud of state.

During the quarter, we extended Falcon horizon to support Google cloud environments now supporting the three largest clouds.

We also deepened our partnership with AWS with new features that work hand in hand with services from AWS to further protect customers from growing ransomware threat and increasingly complex cyber attacks.

Moving to the partner front as our leadership in the market increases our partnerships grow and deepen with large name brand system integrators, Vars and M. S. S piece of like building revenue streams for their businesses with Falcon.

Third quarter was a breakout quarter for our M. S. S. P ecosystem with our MSP business growing more than 30% quarter over quarter and triple digits year over year.

We also expanded our relationship with Google by joining their work safer program, which is designed to protect organizations, including small businesses enterprises and public sector institutions against modern cyber attacks.

Just as we usher the industry into a new era, when we launched E D R and pioneer Zero Trust for the endpoint with deep visibility, we are leading the industry forward and once again redefining security by focusing on the greatest source of enterprise risk and friction.

Unlike any other competitor in the market today, our identity protection modules give customers the ability to prevent the spread of ransomware and stopped lateral movement when credentials or stolen.

This is a major advantage to winning deals in the field and increasing deal size.

Third quarter marks the one year anniversary of our acquisition of preempt.

And in this one quarter alone we generated more net do a R. R from our zero trust modules than in the history of preempt before the acquisition.

Large identity driven deals in the quarter included AIA insurance, one of the largest public insurers in the Asia Pacific region multiple major airlines.

Fortunately <unk> hundred manufacturer.

Crush strike already natively enforces zero Trust protection at the device layer and the identity layer by harnessing technology from our recent acquisition of secure circle, we plan to take data protection to a new level by enforcing zero trust at the data layer.

Legacy point products like D. O P are aging brittle prone to false positives and require a high reliance on human intervention.

Based on IDC estimates, we believe the market for D O P and related technologies to be approximately $3 billion in calendar year 2022.

Our innovative approach to data protection will put power back into the hands of customers without changing the way users work.

Moreover, after we combined secure circles technology with crowd strike Zero trust modules customers will gain even more fine grained visibility and control as well as continuous risk monitoring to detect and respond to threats.

Do they manifest as a device.

Entity or data layer.

While the acquisition just closed it will take some time to integrate into the Falcon platform. We have already received a tremendous response from customers that would like to replace their legacy DLP products from the likes of Symantec with Falcon State of protection module delivered through our single lightweight.

Agent.

Crowd strike is the only platform in the market to connected machine to identity and to data.

It has been an unparalleled year of innovation at crowd strike.

At this year's Falcon user conference, we showcased our thought leadership.

Newest innovations and continued commitment to providing customers gold standard protection to stay ahead of adversaries today and in the future.

Our new Falcon X Dr module headlining the event.

Xdr Leverages the technology, we acquired from <unk> and extends crowd strike industry, leading endpoint detection and response capabilities to deliver real time detection and automated response across the entire security stack.

We also launched the crowd Xdr Alliance, which is a groundbreaking partnership with industry leaders, including Google Cloud Okta service know Zee scalar proof point and mind cast among others we.

We invite you to learn more about xdr and our.

Other new capabilities as well as your discussions with our partners, AWS and et cetera, and our customers' zoom bye.

By tuning into our Falcon investor briefing, which is accessible on our Investor Relations website.

Turning to Jimmy O Q3 was a record quarter and we see increasing momentum in our log management space that has exceeded our expectations. In addition to the seven figure new customer land with the Dev ops team of a financial services company, We mentioned on our last call Humira wins in the third quarter.

Included a fortune 150 food brand.

A leading European cloud based ecommerce platform company and mind cast a leader in cloud based email management and security and it crashed strike technology partner.

We are also seeing strong uptake for our recently announced Hulio community edition, which gives users 16 gigabytes of streaming data ingestion per day with seven day retention for free.

In less than six weeks since our launch we have already reached 100% of our sixth month customer registration goal.

You mean, it was log management platform is unmatched and speed performance and storage abilities.

Jimmy Yolk Community addition offers customers unprecedented access to best in class log management that they won't see anywhere else.

We expect this program to be a strong avenue for lead generation as customers experience the power of email.

Before closing I would like to announce that we are promoting Jim <unk>, the chief sales officer, and he will be responsible for global sales Jim has been with crowd strike for over eight years and for the past five years has done an outstanding job, leading our America sales team, our largest region and contributor to United States revenue.

<unk>, which accounts for 73% of our total revenue.

Jim's tenure.

<unk> revenue has grown significantly and exceeded my expectations quarter after quarter and for the past four months, while Mike Carpenter was on leaf to welcome. The arrival of his child. Jim has served as acting head of global sales and field operations and true to form as you can see from the results, we published today, Jim deliberate and exceptional third quarter.

On a global basis Mike.

Mike is transitioning to an advisory role until its departure from the company to spend more time with his family.

Very grateful to Mike for his years of service and contributions to building a world class sales organization, Mike It's been a great partnership and I can't Thank you enough. We wish you all the best.

In closing, we delivered an outstanding third quarter that can be characterized by phenomenal execution across the board and accelerated net new AOR growth.

We continue to see a very favorable competitive environment today and into the future.

We continued to expand our leadership and rapidly innovate as we once again redefine security.

Looking forward I could not be more excited about our future opportunities for growth.

We have built a best in SaaS platform that not only significantly expands our reach beyond the core endpoint market, but also unifies the opportunity across cloud security log management and identity protection.

We see a long runway ahead in displacing legacy and Nextgen point product vendors.

In the fourth quarter is off to a great start it already includes a notable land with one of the world's largest financial institutions.

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.

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.

In addition to strong growth at scale with accelerated net new air our growth. We continued to maintain very high unit economics drive leverage and generate strong operating and free cash flow.

We also continued to perform at a high level well in excess of the SaaS industry rule of 40 benchmark achieving a rule of 77 and when calculated on a free cash flow basis, a rule of 96 at scale with over $1 5 billion.

Sure.

We believe our continued outstanding execution speaks to our ability to rapidly and efficiently scale across the business, our customer first and mission driven culture and our highly differentiated platform all of which we believe set us apart from others in the market and are difficult to replicate.

Demand in the quarter was broad based and well balanced fueled by strength in multiple areas of the business as we expanded our leadership across the market from large enterprises to small businesses.

We once again ended the quarter with our strongest pipeline to date, which we believe indicates a strong foundation for future growth.

In the quarter, we delivered 67% there are growth year over year to exceed $1 five 1 billion a new milestone.

Rapid new customer acquisition as well as expansion business within existing customers fueled an acceleration in net new air our growth on both an organic and as reported basis.

Net new air are 55% on an organic basis and 46% on a reported basis to reach a new all time high of $170.0 million with no outsized contribution from any one deal.

It was a standout quarter for large deals as we derived a record amount of net new <unk> for a million dollar deals.

We believe this reflects our continued leadership in the enterprise segment, expanding deal sizes, and the pricing leverage attributable to our distinct product differentiation.

As George mentioned, we signed a large deal with just in the quarter.

Which will make the U S federal government one of our top customers.

However, given this wind covers multiple agencies.

Each with their own deployment schedules the contribution to net new air or was not notable in Q3, and we will see it steadily fooled into a R. R over the coming quarters.

Our dollar based net retention rate was once again above our benchmark.

Our gross retention rate remained consistently high with prior quarters and contraction insurance decreased on both a dollar basis and percent of AOR.

Moving to the P&L total revenue grew 63% over Q3 of last year to reach $381 million.

Subscription revenue grew 67% over Q3 of last year to reach $357.0 million.

Professional services revenue was $23.0 million setting a new record for the fifth consecutive quarter, and representing 22% year over year growth.

Did your graphic mix of third quarter revenue consisted of approximately 73% from the U S, 13% from Europe Middle East and Africa.

10% from the Asia Pacific region, and approximately 4% from other markets.

Third quarter non-GAAP gross margin was 76% consistent with Q3 of last year.

Our non-GAAP subscription gross margin was 79% and in line with Q3 of last year.

We continue to be pleased with our strong subscription gross margin performance as we continue to invest for growing demand.

As planned we continued investing aggressively in our business during the quarter, including increasing investments in new technologies international geographies and marketing programs, while driving increased operating profit.

Total non-GAAP operating expenses in the third quarter were approximately $239.0 million or 63% of revenue versus $157.0 million last year or 68% of revenue.

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.

In Q3, we ended with a magic number of 1.3 as we continue to ramp investments to capture more of the market opportunity at hand and expand globally.

Our continued exceptional unit economics speaks to the efficiency of our go to market engine and our ability to rapidly onboard and support customers of all sizes.

We also believe that a magic number of 1.3 continues to indicate that we should increase investments even more given the massive market opportunity.

Third quarter non-GAAP operating income grew 168% year over year to reach a record $57 million in operating.

<unk> margin improved five percentage points over Q3 of last year to exceed 13%.

Non-GAAP net income attributable to crowd strike in Q3 was $41 1 million or 17 cents on a diluted per share basis.

Our weighted average common shares used to calculate third quarter non-GAAP EPS attributable to crowd strike was on a diluted basis totaled approximately 239 million shares.

We ended the third quarter with a strong balance sheet cash and cash equivalents increased to approximately $1 $91 billion.

Cash flow from operations in the third quarter was $159 1 million and re cash flow grew to a new record of $123 5 million or 32% of revenue.

Before we move to guidance I'd like to cover a few modeling notes.

First while we do not specifically guide to ending or net new <unk>. We continue to expect seasonality in net new <unk> to be less pronounced relative to prior years as we move from Q3 into Q4, given our steady climb at a much higher scale in recent quarters and outstanding performance throughout this fiscal year.

Our guidance includes the impact of our recent acquisition of secure circle, which closed on Monday.

We currently expect the acquired net new contribution from secure circle to be less than $1 million in the fourth quarter.

Actually the $70 million of IP transfer tax expenses related to the Humana acquisition will be reflected in the fourth quarter, which will impact operating and free cash flow results.

Lastly, we funded the acquisition of secure circle with cash.

The approximately $61 million cash payment net of cash acquired will be reflected in our Q4 cash balance.

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 third quarter performance and momentum into the fourth quarter. We are once again, raising our guidance for the fiscal year 2022.

For the fourth quarter of FY 'twenty, two we expect total revenue to be in the range of $406 five to $412 $3 million, reflecting a year over year growth rate of 53% to 56% with subscription revenue being the dominant driver of growth.

We expect non-GAAP income from operations to be in the range of 55 to $59 5 million and non-GAAP net income attributable to crowd strike to be in the range of $45 two to $49 4 million.

We expect diluted non-GAAP net income per share attributable to Crouch, Greg to be in the range of 19 to 21.

Utilizing our weighted average share count of 241 million shares on a diluted basis.

For the full fiscal year 2022, we currently expect total revenue to be in the range of $1427 one to $1432 9 million.

Reflecting a growth rate of 63% to 64% over the prior fiscal year.

Non-GAAP income from operations is expected to be between 171.0.

$75 3 million.

We.

Fiscal 2022, non-GAAP net income attributable to crouch rate to be between $135, four and $139 7 million.

Utilizing 238 million weighted average shares on a diluted basis, we expect non-GAAP net income per share attributable to common strike to beat in the range of 57 to 59.

George and I will now take your questions.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on your touch tone telephone again to ask a question. Please press star.

I didn't want.

One on their corporate question.

Our first question comes from Korea of Barclays Capital. Your line is open.

Okay, Great, Hey, George Hey, Bert Thanks for taking my questions here.

Okay.

Great to hear your voice yeah same here Burt.

I'll start with you just to sort of knock this out first.

I was wondering if you could speak to the pricing environment, a little bit and whether you feel like competitors are having an impact here with with potentially lower price strategies does that makes sense.

It's a good question.

But.

Congrats on pricing and it's been the same way for quite some time discounting has remained consistent with prior quarters and I think it highlights the differentiation of our platform and the value we bring to customers, we talk about value selling for quite some time, so it's allowing customers to center on us and pick off other.

Other vendors and that allows us to offer our customers lower total cost of ownership and that really matters in terms of the platform I'll turn it over to George to talk a little bit about that.

As Bert said, a big part of what we're doing is being able to consolidate other vendors agent consolidation agent fatigue is a big issue that's out there.

And obviously, we have a broad platform, that's differentiated and works and that's the key aspect of the platform that it actually works and.

You've seen.

In the transcript that there was a large.

Nonprofit hospital that went with it.

And next Gen vendor on price in two.

Two months later was back with us in deploying because it didn't work and I think that's a big part of it you also have to look at things like identity look at things like.

Falcon complete these are truly differentiated services and when you look at the breadth of what we're doing.

Obviously, we're way more than just an endpoint company. When you look at what we're focused on and the value, we're delivering and Thats, how we continue to win and drive.

The right pricing for us and obviously at good value for our customers.

That makes a lot of sense, George maybe maybe just a follow up for you congrats on the on the on the on the <unk> contract I was wondering if you could just dig into that just one level deeper and maybe talk a little bit more broadly, but how much opportunity you feel like crowds tricast within the federal government on the whole.

Sure well, we're really proud of that win and I think it really.

As a signature win given the directives that came out of the U S. Government were certainly proud of protect the U S government.

When you look at Falcon as a whole and the platform. It was tailor made to help protect the government an adversary focused approach.

Using next Gen technologies AI powered very broad in what we're doing and again at the end of the day our goal is to stop breaches.

Again, a truly differentiated offering that we have is our intelligence.

Most vendors don't have what we have certainly not the next gen vendors and that's a key aspect of what we do and part of the whole data element to crowd strike. So.

We're excited about this when we believe it is a big opportunity for us.

Obviously, we got this win but theres more expansion capabilities and deployments in <unk>.

I think it will really showcase how we can.

The U S government as well as many governments around the world.

Makes sense thanks, guys.

Thank you. Our next question comes from Sterling Auty of JP Morgan Your line is open.

Yeah. Thanks, Hi, guys. Just one question from my side can you give us a sense of what percentage of the net new MRI that you added in the quarter really came from protecting cloud workloads and how does that compare to what it looked like maybe a year ago.

So I'll start hi, Sterling.

So when we think about our cloud workload protection so right.

Right now what we can tell you is that it's been it's growing at continuing to grow and we've seen growth in the the amount of opportunities that are available for us in the cloud right. Now we are we do talk about is.

This is the fact that 25% of our servers that we protected or in the cloud.

So that's just giving you an indication of where we're going maybe George has a couple of other comments on that yes, the 25% is up as well.

We've talked about in prior calls so when we think about cloud workload protection or cloud security is two pieces to it and we have both won his workload protection.

And that has really run time protection visibility across virtual environments containers et cetera, the second one.

Is.

Cloud security posture management people Falcon horizon, which we continue to really drive innovation through and Thats, an agent list technology that ties into many of the Apis are the cloud providers now we cover all three cloud providers.

It drives a lot of value very quickly and again.

We have a unique offering because it combines the visibility from an API perspective, with one time protection, which with a lot which is differentiated from a lot of the other competitors, including the private companies that are out there. So we feel really good about it and we continue to drive and sell into the <unk> space and I think we've we've really honed RF.

<unk> and being able to sell value into that space and get people up to speed without a lot of friction.

Makes sense. Thank you guys.

Thank you.

And ladies and gentlemen, we do ask could you. Please limit yourself to one question and then you may be able to rejoin the queue. Thank you. Our next question comes from Alex Henderson Needham Your line is open.

Thank you very much and.

Spectacular results again.

I wanted to.

Get a little bit clear on the concept of xdr.

It seems to me that you.

You guys had been pigeonholed by many people.

As a 10 point company, but youre really a platform and to the extent that that platform allows you to then.

And into other niches that have historically been seen as separate our end markets a lot of the companies that are in those end markets have turned around and redefined themselves as xdr are realizing that they needed to be a platform.

Taking the term xdr unplug or get in front of the <unk> companies.

Product does not make it a platform. So can you talk a little bit about that.

That's out there and whether that.

Fusion is spreading to any of your customers or whether they see through that issue and understand the importance of the extensible platform and the breadth of your product line.

Well, thanks, Alex It's a great question and I think.

Folks are looking at us as just an endpoint company pivotal endpoint company, they're really missing the big picture I mean, that's as simple as I can say it.

We've proven that we are a platform company as I said before the sales force of security 21 module you can look at the attach rates.

And when you talk to customers and the folks who really do their homework.

And they talk to customers they will see the value and they see how we can we're consolidating there. So when we think about E. X D are you have to start with the best Edr in the market, which is ours, it's been validated by Gartner and others in D. C. I mean down the list.

And the extension of Edr is xdr, right and as a company who pretty much pioneered cloud delivered endpoint security with the threat graph and the massive data moat that we have by combining that with some of the technology. We acquired from <unk> in our threat graph I think we're in a unique position to be able to drive additional threat detection outcomes as well as the.

<unk> of <unk>.

The threat narrative right the attack narrative.

And that's independent of <unk> as a standalone log management observe ability platform. So.

We're really driving a lot of innovation in this area and to your point. If you are just kind of a sim vendor now trying to Guam onto xdr is an acronym it's not going to work you have to start with the best ETR in the world and in my opinion that scratch right.

Thanks, I appreciate the clarity of the response.

Thank you. Thank you and next question is from Brent Thill of Jefferies. Your line is open.

Hey, guys you have Joe on for Brian. It really appreciate the question, but can you just walk through the puts and takes of margin I think guidance implied a 150 points of contraction at <unk> is that acquisition related travel investment and then maybe just how we should think about leverage going forward on an annual basis.

Yeah.

So first let me start with.

Operating margin in total so we're really really proud of where we were we came in this quarter and over 13% and a lot of it is attributable obviously to the unit economics that we're able to that we were able to garner certainly on the sales side. So whether you pick a magic number where you pick rule for you that we've talked about on the in the.

The prepared remarks, that's driving a lot of that operating margin when.

When we think about.

But the future think about a few things one is that we have opportunity starting at the gross margin level I think that we.

Not long ago I raised the long term range of our gross margin expansion capabilities and opportunities and I think that we have an opportunity to do that and we're investing to do that.

And then as you go down the <unk>.

The rest of the P&L I think that as we continue to grow in scale. We're looking for opportunities to continue to leverage our strong model, but at the same time, we want to invest aggressively we're not going to we're not going to move away from that.

From that strategy and then in R&D I think in investing.

Investing in.

And innovation is.

Is key and core to who we are so I think that we're going to continue to keep our eye on that and invest it exactly what I talked about to be able to go after that massive opportunity that we see ahead of us. So that's how we think about it.

Thank you.

Youre welcome. Thank you.

Our next question comes from Matt Hedberg of RBC capital markets. Your line is open.

Great guys. Thanks for taking my question George.

File vantage for file integrity monitoring it looks like a great addition to the platform can you talk about sort of what customers are saying I know it was just launched but that's sort of why is that such an important piece of our C. So sort of like data security fabric into sort of this new post Covid world.

Yeah. Thanks, Matt.

Good question and we're excited about this technology and again it goes to our strategy of consolidating agents and getting rid of other technologies that are costly and complex and weigh the system down and.

When you think about Sam its pure and simple compliance requirement when you think about things like PCI.

And then the financial services industry, you have to understand what files change in who changed them and implement controls around that so are.

We've been able to do a lot of that for a long time.

Enhanced some features put it into a module and you know it's.

It's been extremely well received because it is literally a check box.

For just about any company that's out there given the current regulatory frameworks and.

The various NIST standards that exist.

Thank you.

Thank you. Our next question comes from Roger Boyd of UBS. Your line is open.

Hey, Thank you for taking my question a follow up on the on the system contract can you talk a little more about the selection process here how competitive was in.

Really the role you mentioned threat intelligence, but the role that that incident response played in helping to achieve this.

Especially as the federal government gets more collaborative through programs like G. C D C.

Yeah anything in the federal government as competitive as you know that's by design, that's the way to do it and <unk>.

Certainly believe.

Great partnership with them and.

We believe it's a great technology choice and a proven technology choice and something that I've been saying for a long time that the government needs. So we're excited about the early partnership here and when you think about threat intelligence again, having a very unique group.

You know, there's maybe one other company that has an intelligence capability is as robust as ours.

And then.

Theyre not the endpoint security space anymore. So from my perspective, it drives value not only for the U S government, but it really is a differentiator across all of our customers right. We understand what the adversary is doing we understand how to identify.

These sort of attacks, we program that into our AI technologies and again, taking an adversary focused approach is important to stopping breaches and then you combine that with other services that we have in.

Some of the managed services again, very differentiated and I think going to be a great outcome for the government.

Thank you.

Next question comes from Brian.

And in fact your line is open.

Great. Thank you very much and thank you for taking the question.

Maybe George if I could just.

Have us unpack the new logo adds a little bit you know it looks like you had a nice increase in <unk>. It looks like the landed cost of the logos that you added were a bit higher.

Was it better strength.

Market, a little bit was it better.

Yes, Brett this sale into your cut into that into the pipeline, maybe if you could help us understand a little bit behind the drivers and what drove kind of the larger average customer.

In the quarter.

Hey, Brian I'll take that one so first we're really pleased with the yeah. No problem. We were very pleased with the with the net new logo adds in the quarter. It's also.

I think the fact that we were able to show acceleration in net new <unk> was it was a big deal for us.

<unk> thousand 600, new logos.

So that's the second time, we hit.

The high Watermarks again.

Really excited about the performance on the met with logos.

In terms of where they came in on I think that we had exceptional performance across the board.

If I was to kind of highlight anything in particular, we saw.

Some we saw some strength in the enterprise and the mid market.

As well as our MSP and so when you put that altogether along with some of the prepared remarks on the increase in the million dollar deals you were able to see the performance that we were able to put on the board.

Remember I.

I talked about the fact that we had.

No outside I know oversized store outside deals that contribute to this this quarter.

That's the that's again talks to the strength of the platform and the broad based.

Success that we had this quarter.

Got it very helpful. Thank you very much.

Youre welcome.

Thank you. Our next question comes from Rob Owens with Piper Sandler Your line is open.

Hey, guys. This is Justin Roberts on for Rob just wanted to follow up around the cloud security solutions like your C. S. P M and CW piece have you guys seen any increase in competitive pressures in this area given the number of players coming out of it from both the network and the endpoint side or do you guys still view this as a largely greenfield opportunity.

I think it's largely a greenfield opportunity obviously you have a lot of early stage companies out there. But this is this is so early in the lifecycle and it's a massive opportunity for all the players that are out there.

We think we're in a great position because a lot of the players actually don't have the runtime protection, which is important you have to tie those two together. It's just it isn't just about connecting getting information from API is right and although we do that in a differentiated way because we've.

Basically pointed some of our indicator of attack technology across.

That agent less technology.

Tying them together I think is really important for customers.

A lot of these big wins involve cloud wins Burt talked about the number of servers that we have so tying together C. S. P M with cloud workload protection and things even like vulnerability management.

Have that technology, yes, it works against desktops, but we can be.

Be inserted in the.

See ICD pipeline, we can look for vulnerabilities that are in images, we can prevent them from being deployed. So these are all key elements of creating a technology that's widely adopted by Dev ops.

Got it thanks.

Thank you.

Our next question comes from Jonathan retailer of Baird. Your line is open.

Yeah, Hey, guys congrats on the strong execution.

You've talked about the benefits of <unk> as it relates to data ingestion and just the additive nature to threat graph. It obviously the push into broader <unk>, our use case and George you touched on this in your comments.

But just wondering if you could talk to if you could talk a little bit more around what you see.

The log management Absorbability use case, and how you see that contributing to the overall platform.

Term and longer term.

Well, we've had some big wins this past quarter with even outside.

Security and certainly security use case, but observe ability and telemetry. It really is the telemetry platform and if you think about.

Today's environment.

All of the various technologies out there all the information or gathering you have to have a telemetry platform like <unk> to make sense of it all at scale. So it's been it's been an amazing opportunity for us since acquiring the company.

I think we underappreciated, what a huge opportunity is out there, particularly a lot of dissatisfaction with current vendors and how open people are to wanting to switch into a technology like EMEA, we've got a lot of customers working with right now.

And I see that as I said before it really is a shining star as a massive business opportunity and revenue driver for us in the future.

When you say that is that including Falcon X D or is that more on the log management and observe ability use case.

Well, it's a good question Falcon Xdr is going to give you essentially a threat detection outcome in and some visibility into.

A tax scenario that that starts beyond the end point when you think about <unk> you can log everything you can store it pretty much forever you can connect it to whatever you want to connect it to and you can drive.

Observe ability.

Information.

From things that are outside just core security things like connecting it to your HR system to your performance management systems too.

All of the various workflows in your environment that that's not the use case of Xdr security use cases, xdr and you mean, it goes way beyond that.

Yes.

For context, thank you.

Okay.

Thank you. Our next question comes from Patrick Colville of Deutsche Bank. Your line is open.

Hey, Thank you so much for taking my question.

Could you just go where partnerships.

You hopefully said its system.

Operating remarks rounds.

Let's take a 30% sequential growth and partner sourced deals.

I guess is that right.

Okay.

The partnership dynamic and I guess, the reason I ask because I know that some investors.

A concern but.

The next Gen Edr vendors are.

More partner friendly so.

Any color you can give around.

Cost strike partnerships.

But to try to quantify the trends seem to be very helpful. Thank you.

Sure sure I, let me just clarify to be very specific it was 30% quarter over quarter on MSP growth.

Triple digits year over year, So we're extremely partner friendly I think.

A lot of noise in the system and people probably should talk to some of the larger partners that are out there.

Because that's where we're sourcing our business from our partner opportunities are up.

We're making a lot of money jointly with us.

Our goal is to be a partner first company, so and that's what we've done we've been very consistent with that and as you said is in.

And you rightly pointed out it's a lot of that's in the environment.

Great. Thank you so much I appreciate it.

Thank you. Our next question comes from Joshua Tilton of Wolfe Research. Your line is open.

Hi, This is strecker on for Josh. Thanks for taking my question I just have one for Burt.

So you mentioned in that new seasonality that new era, our seasonality will be less pronounced and that makes sense.

But as we start to model next year and the net new there are seasonality I'm not looking for guidance, but is there any is there a year, we should look to as framework.

This year, we had a sequential increase from <unk> to <unk>.

You know, we're not expecting that again, but just any color goalposts you provide.

Looking out to next year was very helpful. Thank you.

Sure. So first let me start with the Q4 is off to a great start.

We've got a record pipeline record momentum.

And we already Atlanta at a notable.

Financial large financial global financial institution, so off to a great start in Q4.

But again, we're coming off of a record Q3 at $170 million in any way or are super proud of.

That record and obviously really strong throughout this year. So when you when we look at comps obviously my comments are more to the fact that when we when we guide in two regarding revenue, we don't guide to running the tables.

We guide to what we know not to what we don't know and so that the comments just wanted to put everything into perspective for us the numbers are getting bigger and bigger and that's great for us, but as you know when you think about.

The law of large numbers then you are going to have and you don't guide to running the tables, that's why I put that comment in there.

Thank you.

Youre welcome.

Our next question comes from Mike Walkley of Canaccord, Genuity or something.

Hi, Good afternoon. This is Daniel on for Mark. Thanks for taking my question. So in the prepared remarks, you noted that your identity modules generated more.

Then preempt previously while they were standalone.

Are there any notable customer segments youre seeing the strength in order was the demand pretty broad based across the board.

Demand is broad based across the board and it really hit an inflection point.

We've seen massive growth in it as we said more than all of preempt that they had as a standalone company.

And the thing is we took the time and effort to do the integration right customers see the value of a single integrated agent.

Understand that identity is critical to security and we're the company that's putting together run time protection visibility with identity and now with data protection is that triumvirate that three legged stool and customers love. It. So we've seen some massive wins in.

Retail in financial services and manufacturing it is a massive problem across the board for any company and as we pointed out over 60% of the breaches don't even use malware, they're using things like identity, which.

When you look at the Sun burst attack from last year, obviously that was a key contributor. So people are looking to shore that up and it's actually a key element to stopping ransomware above and beyond any malware prevention. That's out there so customers understand the value of it and they understand that we have and in others don't and it's been a big driver for us.

Great. Thank you very much.

Thank you. Our next question comes from Shaul Eyal of Cowen and company. Your line is open.

Thank you good afternoon, guys congrats on the quarterly results and guidance.

George I know there was a prior question about partnerships. My question is actually about the lines.

<unk> has been meeting and joining over the course of the past things.

18 months give or take.

Is that beginning to have some impact on revenue and on net new customer additions specifically in light of the fact that you have been adding 600 customers two quarters and you're rolling out.

Michelle can you just repeat the main bulk of your question because it got garbled a little bit.

Sure apologies question about alliances.

But you've been leading joining over the past 12 18 months is that bird beginning to have some impact on revenue and a net new customer additions amassing a specific need given the 600 customers additional vehicles in the past quarter, Matt Cana row.

Well it has and when you look at some of the companies that we've talked about in the past I mean theres a lot.

And I'm sure you know I can't single, everyone out, but I think Zee scalar is a good example, you look at that partnership do you look at what we're doing you look at what Theyre doing on the network side.

Integrations that we're able to share data on what we're doing with from an <unk> perspective, and it makes sense, we're pulling them into deals they're pulling us into deals and we're meeting in the field and adding value to the customers and obviously getting a lot of traction with with those customers and that's just one example, we're doing that across the board in our technology.

The alliance partnerships.

Partnerships.

Thank you.

And our last question comes from Gray Powell of BPI D. Your line is open.

Oh, great. Thanks for thanks for taking the question and working in.

So yeah, I know you've talked about how you're more of a platform company than just a endpoint provider, but I'm going to ask a pinpoint question. If that's okay.

So just high level.

The last two years in the endpoint space, just been really strong I'd call. It almost like a near perfect storm.

How do you feel about the demand environment for the market as a whole looking into next year just on a relative basis like what do you think 2022 would be the same better or worse than 2021 for the market.

Ah I see an extremely strong and when you look at.

The market in in its totality right you have things like cloud adoption cloud expansion massive opportunity and we've proven that with servers and what we're doing there. When you look at the legacy players that are out there you know the replacement of the Symantec, Mcafee and Microsoft et cetera massive opportunity for us that that's a long tail.

You don't do that in one year. So we see that as a big driver for next year and as I pointed out even a I mean, it's a smaller base, but even the next gen players, we see those as opportunities.

Customers get.

Get to satisfied as I pointed out with some of the players that are out there. So you got to you got to bifurcate it a bit into pure endpoint and cloud and I see both as massive opportunities because again, if you look at our overall customer count.

Fantastic, but it's still small in the Grand scheme of customers that are out there and there's still a lot of legacy technologies that are out there that are are and will be displaced.

Alright, good answer thank you very much.

Thank you.

Thank you.

I'm showing no further questions at this time I'd like to turn the call back over to.

So what parts for any closing remarks.

I want to thank all of you for your time today and we certainly appreciate your interest and look forward to seeing you virtually at our upcoming investor events. Thanks, again be safe and we'll see you soon.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect.

Okay.

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Yeah.

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Thank you for standing by and walk them through the crowd strike holding Inc. Q3, 'twenty 'twenty financial results Conference call. At this time, all participants are in listen only mode.

After the Speakers' presentation, there'll be a question and answer session.

Ask the question at that time. Please press Star then one when you touch tone telephone.

As a reminder, today's conference call is being recorded.

I would now like to Telecom City House with 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 of prostrate and Burt Potbelly Chief Financial Officer.

Before we get started I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans objectives growth and expected performance, including our outlook for the fourth 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 uncertainties.

We do not undertake and expressly disclaim any obligation to update or alter our forward looking statement, 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 included on this call will be non-GAAP.

A discussion of why we use non-GAAP financial measures and a reconciliation scheduled showing GAAP versus non-GAAP results is currently available in our press release, which may be found on our Investor Relations website at IR Chegg dot com or on our form 8-K filed with the SEC today.

With that I'll turn the call over to George to begin.

Thank you Maria and thank you all for joining us.

We'll start today's call by summarizing three key points.

We delivered an outstanding third quarter headlined by an acceleration in net new <unk> growth strong execution across the market.

From large enterprises to small businesses.

And expansion within the U S Federal government.

Second we are seeing an inflection in new products with growing demand for our identity protection and zero Trust.

Oh, and cloud security modules and third the competitive and pricing environment remains favorable to crowd strike. We continued to expand our lead over legacy and next gen vendors because of our scalability efficacy and differentiated offerings such as Falcon complete.

Now, let's discuss our results and get into the topics in more detail.

We delivered a robust third quarter with net new AOR growth accelerating and adding a growing 67% to surpass the one $5 billion milestone.

We added $170 million and net new <unk>, which was ahead of our expectations and gained over 1600 net new subscription customers for the second consecutive quarter.

We proudly serve 14687 subscription customers.

In addition to accelerating net new AOR growth, we delivered record bottom line results and free cash flow, reaching a new high watermark of $124 million.

In the third quarter, we saw broad based strength in multiple areas of the business and among SMB mid market and large enterprises.

Our outstanding results this quarter reflect continued strong customer adoption of our core products.

Growing success with our newer product initiatives, including identity protection log management and cloud.

Our growing leadership in the market with a continued groundswell of customers turning to crowd strike as their trusted platform of record with our 'twenty one modules.

We also gained significant momentum and delivered a record quarter in the public sector, including wins with educational institutions states and local governments and the U S Federal government.

Our performance on this front is highlighted by a large win with Cisco.

Cybersecurity and infrastructure security agency to secure a significant portion of endpoints and workloads for multiple federal agencies as they operationalize the Whitehouse executive order to improve the nation cyber resiliency.

This win represents the culmination of our dedication and hard work over the course of several years on our public sector strategy and government certifications.

We believe this significant win will create new opportunities and unlock additional business within the massive U S Federal government.

For additional information please visit my new post to the crowd strike block.

Moving to the competitive environment. We continue to believe we have a significant technology lead with no competitor matching our scalability performance ease of use and commitment to customers.

I could not be more excited by our opportunity, which has continued to grow.

This quarter, our win rates increased across the board and we saw a record number of wins against both legacy and next gen vendors with SMB mid market and large enterprise customers.

We also landed a record number of wins in displacements over a recently public next gen vendor sense, it'll one to be clear, we define a displacement as removing an incumbent's product and replacing it with Falcon.

Let me share a recent example, with one of the largest nonprofit hospital systems in the U S, which had initially chosen a recently public next gen vendor based on price and promised features that were never delivered.

Just a few months into their multi year contract with the other vendor. This organization realized the product fail to scale cause major performance issues prohibited critical processes from functioning properly and drove significant friction within the organization and its subsidiaries.

That is when they turn the crowd strike.

Multiple modules and a multimillion dollar <unk> deal and realized immediate improvement.

Gaining up to 30% performance increase on their servers alone and greater efficacy without intrusive false positives.

Another marquee wins this quarter included call tricks a leader in experience management.

Customer focus and trust are key parts of Quadrex DNA. Therefore, it was critical for them to adopt best of breed security capable of fortifying their entire estate of traditional endpoint and cloud workloads without sacrificing end user experience.

<unk> moved off the next Gen endpoint security provider to Falcon in order to have a single solution that can be easily deployed and scaled along with their fast growing business.

We look forward to continuing our relationship with <unk> as their trusted security partner.

We continue to see success, winning new customers among our larger competitors as well take for example, a leading health care system that was using a combination of two legacy vendors, Microsoft and Symantec when it was hit with a massive ransomware attack that disrupted their business.

This organization turned to crowd strikes renown incident response services team to remediate the breach they.

They also came to realize that while Microsoft attempts to check most of the boxes on paper and appeal to the CFO office in reality when every second counts they needed crowd strike and standardized on Falcon complete.

With our leading technology unmatched platform, an adversary focused approach to stopping breaches, we continue to eclipse our competitors and extend our leadership, which was once again recognized by industry analysts and third party testing agencies, including I.

D C, which named crowd strike a leader in the IDC market scape worldwide modern endpoint security for enterprise 2021 vendor assessment.

Enterprise management Associates E M E granted shoe MEO their top three award and log management and observe ability.

Jimmy I was recognized for its index research and its ability to ingest structured and unstructured data and real time and at scale.

Last month.

He laughs recognized crowd strike as the best endpoint detection and response product for the second year in a row.

And just this week crowd strike earned the highest rating in the October 2021 Gartner peer insights voice of the customer for endpoint protection platforms.

Cyber adversaries are increasingly attempting to accomplish their objectives without using malware.

As we cited in our 2021 threat hunting report.

Based on recent customer data indexed by threat graph, 68% of Detections analyzed where not malware base.

This is why companies need to employ a holistic breach prevention strategy, rather than overly relying on malware prevention, regardless, if its legacy nextgen.

This increasing trend in the adversary landscape is driving a generational shifts to zero trust technologies, including crowd strike Falcon.

We are seeing this trend play out in our module adoption metrics, which have continued to increase.

Our module adoption rates demonstrate the flywheel effect of our platform in motion, which subscription customers that have adopted four or more modules, five or more modules and six or more modules, increasing to 68%, 55% and 32% respectively in the third quarter.

We believe high adoption rates of our modules drive high retention rates and reflect our growing position as the trusted platform of record with the average number of modules per customer also increasing quarter after quarter.

Our results have proven quarter after quarter that transformational differentiation built into the Falcon platform continues its technology dominance over legacy and next gen vendors alike.

<unk> strong results in the field.

On the cloud front, our footprint continues to grow even faster than our overall server endpoint growth with over 25% of the servers, we protect now in the public cloud.

Crossroads has redefined the approach to cloud security.

With Falcon horizon, we're selling into and enabling Dev ops teams to improve decision, making and innovate faster.

Falcon Horizon is API, driven and AGL is enabling customers to scan configurations and workloads across multiple cloud environments.

Falcon Horizon provides continuous control plane threat detection and machine learning and indicator of attack detection as well as guide at remediation for all cloud accounts.

Services and users across the cloud of state.

During the quarter, we extended Falcon horizon to support Google cloud environments now supporting the three largest clouds.

We also deepened our partnership with AWS with new features that work hand in hand with services from AWS to further protect customers from growing ransomware threat and increasingly complex cyber attacks.

Moving to the partner front as our leadership in the market increases our partnerships grow and deepen with large named brand system integrators, Vars and M. S. S piece of like building revenue streams for their businesses with Falcon.

Third quarter was a breakout quarter for our M. S. S. P ecosystem with our MSP business growing more than 30% quarter over quarter and triple digits year over year.

We also expanded our relationship with Google by joining their work safer program, which is designed to protect organizations, including small businesses enterprises and public sector institutions against modern cyber attacks.

Just as we usher the industry into a new era, where we launched E D R and pioneer Zero Trust for the endpoint with deep visibility, we are leading the industry forward and once again redefining security by focusing on the greatest source of enterprise risk and friction.

Unlike any other competitor in the market today, our identity protection modules give customers the ability to prevent the spread of ransomware and stopped lateral movement when credentials or stolen.

This is a major advantage to winning deals in the field and increasing deal size.

The third quarter marks the one year anniversary of our acquisition of preempt.

And in this one quarter alone we generated more net do a R. R from our zero trust modules than in the history of preempt before the acquisition.

Large identity driven deals in the quarter included a I a insurance one of the largest public insurers in the Asia Pacific region multiple major airlines.

Fortunately 100 manufacturer.

Crowd strike already natively enforces zero Trust protection at the device layer.

And the identity layer by harnessing technology from our recent acquisition of secure circle, we plan to take data protection to a new level by enforcing zero trust at the data layer.

Legacy point products like D. O P are aging brittle prone to false positives and require a high reliance on human intervention.

Based on IDC estimates, we believe the market for D O P and related technologies to be approximately $3 billion in calendar year 2022.

Our innovative approach to data protection.

We'll put power back into the hands of customers without changing the way users work.

Moreover, after we combined secure circles technology with crowd strike zero trust modules customers will gain even more fine grain visibility and control as well as continuous risk monitoring to detect and respond to threats.

Do they manifest as a device.

The entity or data layer.

While the acquisition just closed and it will take some time to integrate into the Falcon platform. We have already received a tremendous response from customers that would like to replace their legacy DLP products from the likes of Symantec with Falcon data protection module delivered through our single lightweight.

Agent.

Crowd strike is the only platform in the market to connected machine to identity and data.

It has been an unparalleled year of innovation at crowd strike.

This year's Falcon user conference, we showcased our thought leadership.

Newest innovations and continued commitment to providing customers gold standard protection to stay ahead of adversaries today and in the future.

Our new Falcon X your module headlining the event.

Xdr Leverages the technology, we acquired from <unk> and extends crowd strike industry, leading endpoint detection and response capabilities to deliver real time detection and automated response across the entire security stack.

We also launched the crowd Xdr Alliance, which is a groundbreaking partnership with industry leaders, including Google Cloud Okta service know Zee scalar proof point and my cast among others.

We invite you to learn more about xdr and our other new capabilities as well as your discussions with our partners AWS and et cetera, and our customers' zoom bye.

By tuning into our Falcon investor briefing, which is accessible on our Investor Relations website.

Turning to EMEA Q3 was a record quarter and we see increasing momentum in the log management space that has exceeded our expectations. In addition to the seven figure new customer land with the Dev ops team of a financial services company, We mentioned on our last call Humira wins in the third quarter.

Included a fortune 150 food brand.

A leading European cloud based ecommerce platform company and mind cast a leader in cloud based email management and security and a crowd strike technology partner.

We are also seeing strong uptake for our recently announced Humi O community edition, which gives users 16 gigabyte of streaming data ingestion per day with seven day retention for free.

In less than six weeks since our launch we have already reached 100% of our sixth month customer registration goal.

You mean, it was log management platform is unmatched and speed performance and storage abilities.

Jimmy Yolk Community addition offers customers unprecedented access to best in class log management that they won't see anywhere else.

We expect this program to be a strong avenue for lead generation as customers experience the power of your meal.

Before closing I would like to announce that we are promoting Jim <unk>, the chief sales officer, and he will be responsible for global sales Jim has been with crowd strike for over eight years and for the past five years has done an outstanding job, leading our America sales team, our largest region and contributor to United States revenue.

<unk>, which accounts for 73% of our total revenue.

Jim's tenure America's revenue has grown significantly and exceeded my expectations quarter after quarter and for the past four months, while my Carpenter was on leave to welcome. The arrival of his child. Jim has served as acting head of global sales and field operations and true to form as you can see from the results we published today Jim deliberate.

Exceptional third quarter on a global basis Mike.

Mike is transitioning to an advisory role until its departure from the company to spend more time with his family, we're very grateful to Mike for his years of service and contributions to building a world class sales organization, Mike It's been a great partnership and I can't Thank you enough. We wish you all the best.

In closing, we delivered an outstanding third quarter that can be characterized by phenomenal execution across the board and accelerated net new a our growth we continue to see a very favorable competitive environment today and into the future.

We continued to expand our leadership and rapidly innovate as we once again to redefine security.

Looking forward I could not be more excited about our future opportunities for growth.

We have built a best in SaaS platform that not only significantly expands our reach beyond the core endpoint market, but also unifies the opportunity across cloud security log management and identity protection.

We see a long runway ahead in displacing legacy and Nextgen point product vendors.

In the fourth quarter is off to a great start and already includes a notable land with one of the world's largest financial institutions.

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.

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 with accelerated net new air our growth. We continued to maintain very high unit economics drive leverage and generate strong operating and free cash flow.

We also continued to perform at a high level well in excess of the SaaS industries rule of 40 benchmark achieving a rule of 77 and when calculated on a free cash flow basis, a rule of 96 at scale with over $1 5 billion and a R. R.

We believe our continued outstanding execution speaks to our ability to rapidly and efficiently scale across the business, our customer first and mission driven culture and our highly differentiated platform all of which we believe set us apart from others in the market and are difficult to replicate.

Demand in the quarter was broad based and well balanced fueled by strength in multiple areas of the business as we expanded our leadership across the market from large enterprises to small businesses.

We once again ended the quarter with our strongest pipeline to date, which we believe indicates a strong foundation for future growth.

In the quarter, we delivered 67% are our growth year over year to exceed $1.51 billion a new milestone.

Rapid new customer acquisition as well as expansion business within existing customers fueled an acceleration in net new air our growth on both an organic and as reported basis.

Net new air are 55% on an organic basis and 46% on a reported basis to reach a new all time high of $170.0 million with no outsized contribution from any one deal.

It was a standout quarter for large deals as we derived a record amount of net new <unk> for a million dollar deals.

We believe this reflects our continued leadership in the enterprise segment, expanding deal sizes, and the pricing leverage attributable to our distinct product differentiation.

As George mentioned, we signed a large deal with Cisco in the quarter.

Which will make the U S federal government one of our top customers.

However, given this wind covers multiple agencies.

Each with their own deployment schedules the contribution to net new air or was not notable in Q3, and we will see it steadily fooled into a R. R over the coming quarters.

Our dollar based net retention rate was once again above our benchmark.

Our gross retention rate remained consistently high with prior quarters and contraction insurance decreased on both a dollar basis and per cent of AOR.

Moving to the P&L total revenue grew 63% over Q3 of last year to reach $381 million.

Subscription revenue grew 67% over Q3 of last year to reach 357.0 million.

Professional services revenue was $23.0 million setting a new record for the fifth consecutive quarter, and representing 22% year over year growth.

Did your graphic mix of third quarter revenue consisted of approximately 73% from the U S, 13% from Europe Middle East and Africa.

10% from the Asia Pacific region, and approximately 4% from other markets.

Third quarter non-GAAP gross margin was 76% consistent with Q3 of last year.

Our non-GAAP subscription gross margin was 79% and in line with Q3 of last year.

We continue to be pleased with our strong subscription gross margin performance as we continue to invest for growing demand.

As planned we continued investing aggressively in our business during the quarter, including increasing investments in new technologies international geographies and marketing programs, while driving increased operating profit.

Total non-GAAP operating expenses in the third quarter were approximately $239.0 million or 63% of revenue versus $157.0 million last year or 68% abroad.

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.

In Q3, we ended with a magic number of 1.3 as we continue to ramp investments to capture more of the market opportunity at hand and expand globally.

Our continued exceptional unit economics speaks to the efficiency of our go to market engine and our ability to rapidly onboard and support customers of all sizes.

We also believe that a magic number of 1.3 continues to indicate that we should increase investments even more given the massive market opportunity.

Third quarter non-GAAP operating income grew 168% year over year to reach a record $57 million and operating margin improved five percentage points over Q3 of last year to exceed 13%.

Non-GAAP net income attributable to crowd strike in Q3 was $41 1 million or 17 cents on a diluted per share basis.

Our weighted average common shares used to calculate third quarter non-GAAP EPS attributable to crowd strike was on a diluted basis and totaled approximately 239 million shares.

We ended the third quarter with a strong balance sheet cash and cash equivalents increased to approximately $1 $91 billion.

Cash flow from operations in the third quarter was $159 1 million and free cash flow grew to a new record of $123 $5 million or 32% of revenue.

Before we move to guidance I'd like to cover a few modeling notes.

First while we do not specifically guide to ending or net new <unk>. We continue to expect seasonality in net new <unk> to be less pronounced relative to prior years as we move from Q3 into Q4, given our steady climb at a much higher scale in recent quarters and outstanding performance throughout this fiscal year.

Our guidance includes the impact of our recent acquisition of secure circle, which closed on Monday.

We currently expect the acquired net new contribution from secure circle to be less than $1 million in the fourth quarter.

Additionally, the $70 million of IP transfer tax expenses related to the Humana acquisition will be reflected in the fourth quarter, which will impact operating and free cash flow results.

Lastly, we funded the acquisition of secure circle with cash.

The approximately $61 million cash payment net of cash acquired will be reflected in our Q4 cash balance.

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 third quarter performance and momentum into the fourth quarter. We are once again, raising our guidance for the fiscal year 2022.

For the fourth quarter of FY 'twenty, two we expect total revenue to be in the range of $406 five to $412 $3 million, reflecting a year over year growth rate of 53% to 56% with subscription revenue being the dominant driver of growth.

We expect non-GAAP income from operations to be in the range of 55 to $59 5 million and non-GAAP net income attributable to crowd strike to be in the range of $45 two to $49 $4 million.

We expect diluted non-GAAP net income per share attributable to crowd strike to be in the range of 19 to 21.

Utilizing weighted average share count of 241 million shares on a diluted basis.

For the full fiscal year 2022, we currently expect total revenue to be in the range of 1000 427.1 to $1432 9 million.

Reflecting a growth rate of 63% to 64% over the prior fiscal year.

Non-GAAP income from operations is expected to be between 171.0.

$75 3 million.

We expect fiscal 2022, non-GAAP net income attributable to crouch rate to be between $135, four and $139 $7 million.

Utilizing 238 million weighted average shares on a diluted basis, we expect non-GAAP net income per share attributable to crown strike to beat in the range of 57 to 59 cents.

George and I will now take your questions.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on you touched on the telephone again to ask a question. Please press star.

I didn't want.

One on their corporate question.

Our first question comes from Korea of Barclays Capital. Your line is open.

Okay, Great, Hey, George Hey, Bert Thanks for taking my questions here.

Thanks, Mike.

Great to hear your voice yeah same here Burt.

Maybe I'll start with you just to sort of knock this out first.

I was wondering if you could speak to the pricing environment, a little bit and whether you feel like competitors are having an impact here with with potentially lower price strategies does that makes sense.

It's a good question.

But congrats with pricing and it's been the same way for quite some time discounting has remained consistent with prior quarters and I think it highlights the differentiation of our platform and the value we bring to customers, we talk about value selling for quite some time, so it's allowing customers to center on us and pick off.

Other other vendors and that allows us to offer our customers lower total cost of ownership and that really matters in terms of the platform I'll turn it over to George to talk a little bit about that.

As Bert said, a big part of what we're doing is being able to consolidate other vendors agent consolidation agent fatigue is a big issue that's out there.

And obviously, we have a broad platform, that's differentiated and works and that's the key aspect of the platform that it actually works and.

You've seen.

In the in the transcript that there was a large.

Nonprofit hospital that went with that.

And next Gen vendor on price and two.

Two months later was back with us in deploying because it didn't work and I think that's a big part of it you also have to look at things like identity look at things like.

Falcon complete these are truly differentiated services and when you look at the breadth of what we're doing.

Obviously, we're way more than just an endpoint company. When you look at what we're focused on and the value, we're delivering and Thats, how we continue to win and drive.

The right pricing for us and obviously, a good value for our customers.

That makes a lot of sense, George maybe maybe just a follow up for you congrats on the on the on the on the <unk> contract I was wondering if you could just dig into that just one level deeper and maybe talk a little bit more broadly about how much opportunity you feel like crowd strike has within the federal government on the whole.

Sure well, we're really proud of that win and I think it really.

You know as a signature win given the directives that came out of the U S. Government were certainly proud of protect the U S government.

When you look at Falcon as a whole in our platform. It was tailor made to help protect the government an adversary focused approach.

Using next Gen technologies AI powered a very broad in what we're doing and again at the end of the day our goal is to stop breaches.

Again, a truly differentiated offering that we have is our intelligence.

Most vendors don't have what we have certainly not the next gen vendors and that's a key aspect of what we do and part of the whole data element to crowd strike. So.

We're excited about this when we believe it is a big opportunity for us.

Obviously, we got this win but theres more expansion capabilities in deployments and.

I think it will really showcase how we can pre.

The U S government as well as many governments around the world.

Makes sense thanks, guys.

Thank you. Our next question comes from Sterling Auty JP.

Good morning line is open.

Yeah. Thanks, Hi, guys. Just one question from my side can you give us a sense of what percentage of the net new MRI that you added in the quarter really came from protecting cloud workloads and how does that compare to what it looked like maybe a year ago.

So I'll start hi, Sterling.

So when we think about our cloud workload protection so right.

Right now what we can tell you is that it's been it's growing at continuing to grow and we've seen growth in the the amount of opportunities that are available for us in the cloud right. Now we are what we do talk about.

Is the fact that 25% of our servers that we protect or in the cloud.

So that's just giving you an indication of where we're going maybe George has a couple of other comments on that the 25% is up as we've talked about in prior calls so when we think about cloud workload protection or cloud security is two pieces to it and we have both won his workload protection.

And that has really run time protection visibility across virtual environments containers et cetera, the second one.

Is.

Cloud security posture management, if you will Falcon horizon, which we continue to really drive innovation through and Thats, an agent list technology that ties into many of the Apis as a cloud provider. So now we cover all three cloud providers.

It drives a lot of value very quickly and again.

We have a unique offering because it combines.

The visibility from an API perspective, with run time protection with a lot, which is differentiated from a lot of the other competitors, including the private companies that are out there. So we feel really good about it and we continue to drive and sell into the <unk> space and I think we've we've really honed our skills in being able to sell value into that space.

Get people up to speed without a lot of friction.

Makes sense. Thank you guys.

Thank you.

And ladies and gentlemen, we do ask would you. Please limit yourself to one question and then you may be able to rejoin the queue. Thank you our next.

Question comes from Alex Henderson Needham Your line is open.

Thank you very much and.

<unk> results again.

I wanted to.

A little bit clear on the concept of xdr.

It seems to me that.

You guys had been pigeonholed by many people.

As a 10 point company, but youre really a platform.

And to the extent that that platform allows you to then extend into other niches that have historically been seen as a separate end markets a lot of the companies that are in those end markets have turned around and redefined themselves as xdr are realizing that they need.

To be a platform, but taking the term xdr unplug or get in front of the <unk> companies.

The product does not make it a platform. So can you talk a little bit about you know.

That flood thats out there and whether that confusion is spreading to any of your customers or whether they see through that issue.

I understand the importance of the extensible platform and the breadth of your product line.

Oh, well thanks, Alex it's a great question and I think.

Folks are looking at us as just an endpoint company pivotal endpoint company that they're really missing the big picture I mean, that's as simple as I can say it.

We've proven that we are a platform company as I've said before the sales force of security 21 module you can look at the attach rates and when you talk to customers and the folks who really do their homework.

And they talk to customers they will see the value and they see how we can we're consolidating there. So when we think about E. X D are you have to start with the best Edr in the market, which is ours, it's been validated by Gartner and others in D. C. I mean down the list and the extension of Edr is xdr, right and as a company who pretty much pioneer.

With cloud delivered endpoint security with the threat graph and the massive data moat that we have.

Combining that with some of the technology, we acquired from <unk> in our threat graph I think we're in a unique position to be able to drive additional threat detection outcomes as well as the decoration of.

The threat narrative right the attack narrative.

And that's independent of <unk> as a standalone log management and observe ability platform. So.

We're really driving a lot of innovation in this area and to your point. If you are just kind of a sim vendor now trying to glom onto xdr is an acronym it's not going to work you have to start with the best Edr and the world and in my opinion that scratch right.

Thanks, I appreciate the clarity of the response.

Thank you. Thank you and next question is from Brent Thill of Jefferies. Your line is open.

Hey, guys you have John for Brian It really appreciate the question Bert can you just walk through the puts and takes of margin I think guidance implied 150 points of contraction at <unk> is that acquisition related travel investment and then maybe just how we should think about leverage going forward on an annual basis. Thanks.

Yeah.

So first let me start with operating.

<unk> in total so we're really really proud of where we were we came in this quarter and over 13% and a lot of it is attributable obviously to the unit economics that we're able to that we were able to garner certainly on the sales side. So whether you pick a magic number where you pick rule for you that we've talked about on the in the.

In the prepared remarks, that's driving a lot of that operating margin when.

When we think about that.

The future.

Think about a few things one is that we have opportunity starting at the gross margin level I think that we are.

Not long ago I raised the long term range of our gross margin expansion capabilities and opportunities and I think that we have an opportunity to do that and we're investing to do that and then as you go down the road.

Rest of the P&L I think that as we continue to grow in scale. We're looking for opportunities to continue to leverage our strong model, but at the same time, we want to invest aggressively we're not going to we're not going to move away from that.

From that strategy and then in R&D I think in investing.

Investing in.

And innovation.

It is key and core to who we are so I think that we're going to continue to keep our eye on that and invest it exactly what I talked about to be able to go after that massive opportunity that we see ahead of us. So that's how we think about it.

Thank you.

Youre welcome. Thank you.

Our next question comes from Matt Hedberg of RBC capital markets. Your line is open.

Great guys. Thanks for taking my question George filings filed vintage four file integrity monitoring it looks like a great addition to the platform can you talk about sort of what customers are saying I know it was just launched but that's sort of why is that such an important piece of our C. So sort of like data security fab.

Eric.

This new post Covid world.

Yes, Thanks, Matt.

It's a good question and we're excited about this technology and again it goes to our strategy of consolidating agents and getting rid of other technologies that are costly and complex and weigh the system down.

When you think about film, it's pure and simple compliance requirements. When you think about things like PCI.

And in the financial services industry, you have to understand what files change in who changed them and implement controls around that so.

We've been able to do a lot of that for a long time we've.

Enhanced some features put it into a module and.

It's been extremely well received because it is literally a check box.

For just about any company thats out there given the current regulatory frameworks and the <unk>.

<unk> standards that exist.

Thank you.

Thank you. Our next question comes from Roger Boyd of UBS. Your line is open.

Hey, Thank you for taking my question a follow up on the on the system contract can you talk a little more about the selection process here how competitive it was.

Really the role you mentioned threat intelligence with the role that that incident response played in helping achieve this.

Especially as the federal government gets more collaborative through programs like J C. D C.

Yeah anything in the federal government as competitive as you know it just that's by design, that's the way to do it and <unk>.

Certainly believe in.

Great partnership with them and.

We believe it's a great technology choice and a proven technology choice and it's something that I've been saying for a long time that the government needs. So we're excited about the early partnership here and when you think about threat intelligence again, having a very unique group.

There's maybe one other company that has an intelligence capability is as robust as ours.

And theyre not the endpoint security space anymore. So from my perspective, it drives value not only for the U S government, but it really is a differentiator across all of our customers right. We understand what the atmosphere is doing we understand how to identify.

The sort of a tax we program that into our AI technologies and again, taking an adversary focused approach is important to stopping breaches and then you combine that with other services that we have in.

Some of the managed services again, very differentiated and I think going to be a great outcome for the government.

Thank you.

Next question comes from Brian.

And in fact your line is open.

Great. Thank you very much and thank you for taking the question.

Maybe George if I could just.

Help us unpack the new logo adds a little bit it looks like you had a nice increase in <unk>. It looks like the landed cost of the logos that you added were a bit higher.

Was it better strength from up market, a little bit was it better.

This breadth of sale into your car into that into the pipeline, maybe if you could help us understand a little bit behind the drivers and what drove kind of the larger average customer.

In the quarter.

Hey, Brian I'll take that one so first we're really pleased with the yeah. No problem. We were very pleased with the with the net new logo adds in the quarter. It's also.

I think the fact that we were able to show acceleration in net new <unk> was a big deal for us.

Over 600, new logos.

The second time, we hit that that.

That high watermark again.

Really excited about the performance on the on the met with logos.

In terms of where they came in on I think that we had exceptional performance across the board.

If I was to kind of highlight anything in particular, we saw.

We saw some strength in the enterprise and the mid market as.

As well as our MSP and so when you when you put that altogether along with some of the prepared remarks on the increase in the million dollar deals you were able to see the performance that we were able to put on the board.

Remember I.

I talked about the fact that we had.

No outside I know oversized or outside deals that contribute to this this quarter.

That's the that's again talks to the strength of the platform and the broad based.

Success that we have this quarter.

Got it very helpful. Thank you very much.

Youre welcome.

Thank you. Our next question comes from Rob Owens with Piper Sandler Your line is open.

Hey, guys. This is Justin Roberts on for Rob just wanted to follow up around the cloud security solutions like your C. S. P M and CW piece have you guys seen any increase in competitive pressures in this area given the number of players coming out of it from both the network and the endpoint side or do you guys still view this as a largely greenfield opportunity.

I think it's largely greenfield opportunity, obviously, you have a lot of early stage companies out there. But this is this is so early in the lifecycle and it's a massive opportunity for all the players that are out there.

We think we're in a great position because a lot of the players actually don't have the runtime protection, which is important you have to tie those two together. It's just it isn't just about connecting getting information from API is right and although we do that in a differentiated way because we've.

Basically pointed some of our indicator of attack technology across.

That agent less technology, tying them together I think is really important for customers.

A lot of these big wins involve cloud wins Burt talked about the number of servers that we have so tying together CSP M with cloud workload protection and things even like vulnerability management.

Have that technology, yes, it works against desktops, but we can be.

Be inserted in the.

See ICD pipeline, we can look for vulnerabilities that are in images, we can prevent them from being deployed. So these are all key elements of creating technology thats widely adopted by Dev ops.

Got it thanks.

Thank you.

Our next question comes from Jonathan retailer of Baird. Your line is open.

Yeah, Hey, guys congrats on the strong execution.

You've talked about the benefits of <unk> as it relates to data ingestion and just the additive nature to threat graph. It obviously the push into upper either <unk> or use case in George you touched on this in your comments.

But just wondering if you could talk to if you could talk a little bit more around what you see the odd man.

Its been that sort of ability use case, and how you see that contributing to the overall platform.

Near term and longer term.

Well, we've had some big wins this past quarter with even outside <unk>.

Security and certainly secures a use case, but observe ability and telemetry. It really is a telemetry platform and if you think about.

Today's environment.

All of the various technologies out there all the information or gathering you have to have a telemetry platform like <unk> to make sense of it all at scale. So it's been it's been an amazing opportunity for us since acquiring the company.

I think we underappreciated, what a huge opportunity is out there, particularly a lot of dissatisfaction with current vendors and how open people are to wanting to switch into a technology like EMEA, we've got a lot of customers working with right now.

And I see that as I said before it really is a shining star as a massive business opportunity and revenue driver for us in the future.

When you say that is that including Falcon X D or is that more on the log management and observe ability use case.

Well, it's a good question Falcon Xdr is going to give you essentially a threat detection outcome in and some visibility into.

A tax scenario that that starts beyond the endpoint. When you think about <unk> you can log everything you can store it pretty much forever you can connect it to whatever you want to connect it to and you can drive.

Observe ability.

Information.

Things that are outside just core security things like connecting into your HR system peer performance management systems too.

All of the various workflows in your environment, that's not the use case of Xdr and security use cases, xdr and you mean, it goes way beyond that.

That help.

For context, thank you.

Thank you.

Yeah.

Thank you. Our next question comes from Patrick Colville of Deutsche Bank. Your line is open.

Hey, Thank you so much for taking my question.

Can you just go where partnerships.

You hopefully set.

Opening remarks rounds.

Let's take a 30% sequential growth.

Partner sourced deals.

I guess is that right.

The partnership dynamic and I guess, the reason I ask because I know some investors.

Have a concern.

The next Gen Edr vendors are.

More partner friendly so.

Any color you can give around.

Carl strike partnerships.

But to try to quantify the trends seem to be very helpful. Thank you.

Sure sure I, let me just clarify to be very specific it was 30% quarter over quarter on MSP growth.

Triple digits year over year, So we're extremely partner friendly I think.

A lot of noise in the system and people probably should talk to some of the larger partners that are out there.

Because that's where we're sourcing our business from our partner opportunities are up.

We're making a lot of money jointly with us.

<unk>.

Our goal is to be a partner first company, so and that's what we've done we've been very consistent with that and as you said is in.

And you rightly pointed out a lot of that's in the environment.

Great. Thank you so much I appreciate it.

Thank you. Our next question comes from Joshua Tilton of Wolfe Research. Your line is open.

Hi, This is strecker on for Josh. Thanks for taking my question I just have one for Burt.

You mentioned in that new seasonality that new <unk> seasonality will be less pronounced and that makes sense, but as we start to model next year, and then that would be there are seasonality I'm not looking for guidance, but is there any is there a year, we should look to.

Framework.

This year.

The sequential increase from <unk> to <unk>.

You know, we're not expecting that again, but just any color goalposts you provide I'm looking out to next year was very helpful. Thank you.

Sure. So first let me start with the Q4 is off to a great start.

We've got a record pipeline record momentum.

And we already Atlanta at a notable.

Financial large financial global financial institution, so off to a great start in Q4.

But again, we're coming off of a record Q3 at $170 million in any way or are super proud of that.

Record and obviously really strong throughout this year. So when you when we look at comps obviously my comments are more to the fact that when we when we guide we're guiding to revenue, we don't guide to running the tables.

We guide to what we know not to what we don't know and so that the comments just wanted to put everything into perspective for us the numbers are getting bigger and bigger and that's great for us, but as you know when you think about the.

The law of large numbers, then youre going to have and you don't guide to running the tables, that's why I put that comment in there.

Thank you.

Youre welcome.

Our next question comes from Mike Walkley of Canaccord, Genuity or something.

Hey, guys. Good afternoon. This is Daniel on for Mark. Thanks for taking my question. So in the prepared remarks, you noted that your identity modules generated more.

Then preempt the previously while they were standalone.

Are there any notable customer segments youre seeing the strength in order was the demand pretty broad based across the board.

Demand is broad based across the board and it really hit an inflection point.

We've seen massive growth in it as we said more than all of preempt that they had as a standalone company.

And the thing is we took the time and effort to do the integration right customers see the value of a single integrated agent.

Understand that identity is critical to security and we're the company that's putting together run time protection visibility with identity and now with data protection is that triumvirate that three legged stool and customers love. It. So we've seen some massive wins in.

Retail in financial services and manufacturing it is a massive problem across the board for any company and as we pointed out over 60% of the breaches don't even use malware they are using things like identity, which.

When you look at the Sun burst attack from last year, obviously that was a key contributor. So people are looking to shore that up and it's actually a key element to stopping ransomware above and beyond any malware prevention. That's out there so customers understand the value of it and they understand that we have and in others don't and it's been a big driver for us.

Great. Thank you very much.

Thank you. Our next question comes from Shaul Eyal of Cowen <unk> Company. Your line is open.

Thank you good afternoon, guys congrats on the quarterly results and guidance.

George I know there was a.

Final question about partnership my question is actually about the lines.

<unk> has been meeting and joining over the course of the past 12 to 18 months give or take.

That's beginning to have some impact on revenue and on net new customer additions specifically in light of the fact that you have been adding 600 customers two quarters in your role now.

Michelle can you just repeat the main bulk of your question because it got garbled a little bit.

Sure Paul a.

Question about alliances.

She's been leading joining over the past 12 to 18 months is that bird beginning to have some impact on revenue and a net new customer additions I'm asking a specific need given the 600 customers additions or vertical over the past few quarters now actually in a row.

Well it has and when you look at some of the companies that we've talked about in the past I mean theres a lot.

And I'm sure you know I can't single, everyone out, but I think Zee scalar is a good example, you look at that partnership you look at what we're doing what Theyre doing on the network side.

Integrations that we're able to share data on what we're doing with from an xdr perspective, and it makes sense, we're pulling them into deals that are pulling us into deals and.

We're meeting in the field and adding value to the customers and obviously getting a lot of traction with with those customers and that's just one example, we're doing that across the board in our technology lines.

Partnerships.

Thank you.

And our last question comes from Gray Powell with <unk>. Your line is open.

Oh, great. Thanks for thanks for taking the question and working in.

So yeah, I know you've talked about how you're more of a platform company than just a endpoint provider, but I'm going to ask a pinpoint question. If that's okay.

So just I'm just high level.

The last two years in the endpoint space, just been really strong I'd call. It almost like a near perfect storm.

How do you feel about the demand environment for the market as a whole looking into next year just on a relative basis like what do you think 2022 would be the same better or worse than 2021 for the market.

Ah I see an extremely strong and when you look at.

The market in in its totality right you have things like cloud adoption cloud expansion massive opportunity and we've proven that with servers and what we're doing there. When you look at the legacy players that are out there you know the replacement of the Symantec, Mcafee and Microsoft et cetera massive opportunity for us that that's a long tail.

You don't do that in one year. So we see that as a big driver for next year and as I pointed out even though it's a smaller base, but even the next gen players, we see those as opportunities.

Customers get.

Get dissatisfied as I pointed out with some of the players that are out there. So you got to you got to bifurcate it a bit into pure endpoint and cloud and I see both as massive opportunities because again, if you look at our overall customer count.

It's fantastic, but it's still small in the Grand scheme of customers that are out there and there's still a lot of legacy technologies that are out there that are are and will be displaced.

Alright, good answer thank you very much thank.

Thank you.

Thank you.

I'm showing no further questions at this time I'd like to turn the call back over to.

So what cards for any closing remarks.

I want to thank all of you for your time today and we certainly appreciate your interest and look forward to seeing you virtually at our upcoming investor events. Thanks, again be safe and we'll see you soon.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.