Q4 2022 CrowdStrike Holdings Inc Earnings Call
[music].
Thank you for standing by and welcome to the crowd strike fourth quarter and fiscal year 'twenty 'twenty. Two result conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question at that time. Please press Star then one when you touched on telephone as.
As a reminder, today's call is being recorded.
I would now like turn the conference or your house, it's a real rally Vice President of Investor Relations. Please go ahead ma'am.
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 crowd strike and part part bear Chief Financial Officer.
Before we get started I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans objectives and expected performance, including our outlook for the first quarter and fiscal year 'twenty 'twenty three or four.
We're 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.
Put it in the filings we make with the SEC from time to time, including the section titled Risk factors in the company's quarterly and annual report.
Additionally, unless otherwise stated excluding revenue all.
All financial measures discussed on this call will be non-GAAP .
A discussion of why we use non-GAAP financial measures and a reconciliation schedule showing GAAP versus non-GAAP results is currently available in our press release, which may be found on our Investor Relations website at IR dot crowd check dot com or on our form 8-K filed with the SEC today.
With that I will now turn the call over to George to begin.
Thank you Maria and thank you all for joining US before we get started I would like to acknowledge the warrant you trade, our deepest thoughts and support our with all of those impacted by this tragedy as we are reminded of the terrible human toll that military conflict brain, we are hoping for peace in Ukraine, and the broader region.
Turning to our financial results I will start todays call by summarizing four key points first crowd strike delivered an exceptional fourth quarter that far exceeded our expectations.
This quarter's results are headlined by an acceleration in net new <unk> are our growth for the second consecutive quarter to reach $217 million.
Record, 19% non-GAAP operating margin and record free cash flow of $127 million or approximately $197 million when excluding the IP transfer tax payment related to the acquisition a few meal.
Second our success outside of traditional endpoint security is now punctuated by both scale and hyper growth as we surpassed the $150 million a are our milestones while growing in excess of 100% year over year for our hygiene vulnerability management identity protection.
And log management module collectively.
Third we exited the year with tremendous momentum for air are derived from Falcon deployments in the public cloud where are our eclipse the $100 million milestone and grew 20% quarter on quarter as we lead the effort to transform security for the public cloud.
And fourth as you can see from our outstanding results. Our growth engine is executing on all cylinders, which includes our thriving partner ecosystem.
One partner I'd like to highlight is AWS and.
In fiscal 2022, ending are transacted through the AWS marketplace grew more than 100% year over year.
Furthermore, craft strike ended the year as one of the top ISP partners by transaction volume on the AWS marketplace with partner sourced deals growing strongly throughout the year.
We believe this speaks to the success of our partnership with the world's largest public cloud provider and highlight the value we can provide to both partners and customers alike.
Now, let's discuss our results in more detail.
Net new AOR growth accelerated for the second quarter in a row to reach $217 million and for the first time in company history surpassed the $200 million milestone.
Demand was driven by expansion in the core endpoint market as well as a record quarter for cloud identity protection and EMEA.
Growth was also fueled by rapid customer expansion among companies of all sizes.
From large enterprises to small businesses.
We added over 1600 subscription customers for the third consecutive quarter, bringing the total number of customers that rely on crowd strike to protect their business the 16325.
65% increase year over year.
And in the quarter was broad based and new wins included.
Sizable deals with multiple top global financial services organization.
A record number of new Falcon complete customers, including Fortune 500, and multinational companies across the technology media telecommunications education and government sectors among many others.
Record lands for our cloud workload protection module and horizon.
Our agent list cloud security posture management module, including wins at a large U S insurance provider.
Fortune 250 software company and a fortune 50 energy company.
We achieved another record quarter for our identity protection modules, which significantly differentiate falcon in the field and continue to lead to higher win rates.
Wins included a global leader in customer experience management, a global financial services company public sector agencies in multiple wins in the Fortune 500.
Q4 was also another record quarter for Hugh meal with wins across multiple verticals, such as retail financial services manufacturing technology and transportation.
Our success with <unk>. This quarter included securing a seven figure deal with a financial services customer, whose existing log management solutions have become budget prohibited given the exponential growth of data being captured by their Dev ops team.
And lastly, we are thrilled to announce that Klaus we're a trusted cross Greg technology partner on a mission to build a better internet became a new customer in the quarter adopting both Falcon complete and horizon.
We look forward to deepening our natural partnership.
And identifying even more opportunities to work together.
Among these many fantastic recent wins, let me take a moment to share some additional detail about the expansion with a fortune 50 financial institution that I.
I think exemplifies our technology advantage inaction, and why scalability and trust matter midyear.
Mid year. This particular customer had chosen crowd strike to protect its traditional endpoints and displace the legacy incumbent.
At approximately the same time for relationship reasons. This organization had chosen and nextgen competitor to protect a server environment, but after six months they were still struggling to deploy the other vendors' product in a server environment.
They were plagued by forced reboot significant memory usage and unmet product roadmap promises.
While they struggled to get their service protected Falcon was fully deployed across their hundreds of thousands of endpoints in a matter of weeks without requiring a reboot.
Side by side, we showcased our differentiation on a broad scale and a real production environment.
This customer was able to see the rich telemetry Falcon provided in real time, and the power of our security cloud.
All resulting in better efficacy.
This customer terminated the other vendors contracted is now at the point Falcon to protect their servers globally.
This is just one of many customer stories that demonstrate the fundamental reason why we have earned our leadership.
With increased win rates and record displacement.
Efficacy scalability, manageability real time versus batch mode, and importantly, our ability to consolidate agents, while solving a growing number of real world business problems.
Q4 was also a record quarter for our partner ecosystem.
In total for fiscal year 2020, Q, we gained significant leverage from our partner ecosystem.
During the year partner stores and the E. R grew 83% year over year with our MSP business growing more than 200%.
Our architecture is fundamentally different from any other vendor we see in the market.
While our technology advantages are vast and it all starts with how we designed our platform from the beginning with smart filtering capabilities on the agent, which gives us the ability to dynamically adjust our aperture stream rich telemetry to the cloud in real time.
We believe these foundational architectural elements that.
At a high barrier to entry while competitors operate batch mode and struggled with storing data on the endpoint.
We continue to extend our technology leadership across the entire platform.
As we announced yesterday.
That's the standard for streaming index read data ingestion and reached a new benchmark of over one petabyte of data ingestion per day.
Crowd strike will continue to leverage the speed and scale of the Cuneo engine to extend our position in the xdr space.
You have heard me say that crowd strike is more than just endpoint provider. The success of our platform strategy is reflected in the hyper growth. We are deriving from many of our modules.
As well as our strong module adoption metrics, which have consistently increased quarter after quarter.
In Q4 subscription customers with four or more five or more and six or more modules.
Greece, 269%, 57% and 34% respectively.
As both new and existing customers increasingly trust Falcon to solve security challenges.
Outside of core endpoint, we have multiple product areas contributing significantly to our growth.
We are seeing tremendous growth from our emerging products that solve use cases outside of traditional endpoint protection.
This includes our discover spotlight.
Identity protection module as well as email.
E. R. R. For this group grew more than 100% over last year contributing $157 million to FY 2022 ending a R. R.
Modules are significant growth drivers for our overall business with ending air or for these modules growing 30% quarter over quarter and representing approximately 17% of our Q4 net new a are collectively.
Our success to date in these adjacent areas speaks to the extensibility of our platform outside of core next Gen AP and Edr the data, we collect and our ability to make meaningful inroads in accessing new towns.
Changing from a module perspective towards deployment environment view, our public cloud business surpassed the $100 million milestone in Q4 to reach $106 million in ending a R. R.
Milestone encompasses our module is deployed in the public cloud, including our cloud runtime protection and see SPM module.
We are seeing tremendous momentum in this business as we exit the year.
And the AOR growth for our business when viewed through a cloud deployment lands outpaced the growth of our overall business.
Growing 20% quarter over quarter and represented approximately 8% of our Q4 net new E. R. R cloud.
Cloud workloads are increasingly targeted by adversaries and are largely under protected representing a significant growth opportunity in FY 'twenty three and beyond.
Moving to the market dynamics.
There are powerful tailwind is driving our markets and we do not currently see any indication that these trends will abate anytime soon.
The adversary, they're certainly not slowing down actually quite the opposite as.
As we published in our most recent global threat report 2021 provided no rest of the weary with an 82% increase in ransomware related data leak.
As the nation state events of the past few weeks have demonstrated ciber.
Cyber space is center stage, joining land air Sea and space as the fifth dimension of warfare.
There are no borders in cyber space and the cyber blast radius has no balance putting every organization and government at risk.
Is it tax can extend far beyond their intended targets as we saw with not petrol.
Last year, 62% of attacks, we observed where malware list with most of these involving compromised identities.
We expect that both E criminals and nation state adversaries alike will continue to exploit vulnerabilities across endpoints in cloud environments and ramp up trade craft around the use of identity and stolen credentials to bypass legacy defensive.
In addition to advancing adversary tactics and a heightened threat environment.
Organisations must contend with the ongoing security skills gap, which we have seen drive increased demand for our Falcon complete offering.
To help companies combat the increasing threat of compromised identities last week, we launched Falcon identity threat protection complete the industry's first managed identity solution.
A new way to help customers scale their security teams to protect against sophisticated attacks and stop breaches.
Additionally, the attack surface is expanding rapidly and digital supply chain is ever growing as organizations embrace digital transformation and move more workloads to the cloud.
We believe our Tam continues to expand in all of these factors will lead to sustained market growth for the foreseeable future.
We also continued to see a very favorable competitive environment and multi year runway to displacing legacy endpoint vendors, which is bolstering our growth as companies look to transform their security stack.
Before I hand, it over to Bert I will provide some final thoughts on the big picture of what we see unfolding.
As I shared with you in my opening comments in addition to our growing leadership in the ETP market. We now have multiple vectors driving our growth and scale that are outside what some might consider our core.
We have been very deliberate and purposeful in choosing to enter markets and.
Apprise risk is coalescing around three critical areas.
Points of workloads identity and data all three areas, we have been investing innovating and see as core to crowd strike submission.
These areas represent the biggest risk for organizations.
And customers are increasingly looking to the Falcon platform to solve their most pressing security needs as legacy products and these markets are brittle complicated and struggled to deliver value to the customer.
Given our footprint on the endpoint or workload the data, we collect and the advantages our architecture in security cloud afford we see great alignment and great opportunity in our approach to solving a multitude of problems for customers.
As we innovate and disrupt in these emerging categories such as log management.
And in <unk> ability, which is reflected in our growing strength in these newer markets as well as the endpoint protection.
In closing I would like to thank every crowd strike or around the world for their tireless dedication to protecting our customers, which ultimately translates to the financial success of our company.
I'm humbled and inspired by the commitment level of execution and hard work crowd strykers exemplified on a daily basis.
They are the everyday champions that make results like the fourth quarter possible.
Thank you.
With that I will turn the call over to Bert to discuss our financial results in more detail.
Thank you George and good afternoon.
As a quick reminder, unless otherwise noted all numbers, except revenue mentioned during my remarks today are non-GAAP .
Before we get started.
I will note that the results. We are reporting today include the acquisition of secure circle, which was de minimis to both revenue and <unk> contributing less than $1 million in Q4.
The acquisition of secure circle resulted in the addition of 26 net new customers in the quarter.
We once again delivered exceptional results to top off the nominal year.
We finished the year with over $1 $73 billion and ending <unk>.
And in fiscal year 2022, we delivered 65% are our growth.
66% total revenue growth.
215% operating income growth.
<unk> hundred 57% net income growth and record free cash flow of $442 million or 30% of revenue.
This is the second year in a row crop strike delivered 30% or better free cash flow margin, which is in line with our target model.
Importantly, we accomplished these results while also aggressively investing in the business and expanding our remarkable team by 46%.
We believe our strong performance highlights then in addition to our clear and defined mission and our cloud native architecture, our business fundamentals possess the hallmark characteristics of SaaS leaders that have transformed and come to dominate their respective markets, including rapid growth at an ever increasing scale best.
Best in class gross retention rates.
Enduring market dynamics, and our growing leadership position as well as our highly leverage able model with the ability to the Liberals nominal free cash flow.
As we continue to capitalize on our unique market position I firmly believe crowd strikes best days are ahead.
Now moving to the fourth quarter.
Net new air our growth accelerated for the second consecutive quarter.
Demand in the quarter was broadbased fueled by strength in multiple areas of the business and reflects continued strong customer adoption of our core products growing success with our newer product initiatives, including identity protection log management and cloud record expansion business and continued rapid new car.
Customer acquisition.
Net new air or 52% to reach a new all time high of $216 9 million.
The composition of net new air or was very well balanced across deal size, even though to large accounts contributed approximately eight figures each to net new air or this quarter.
We believe this represents our continued leadership in the enterprise segment.
Spending deal sizes, and the pricing leverage attributable to our distinct product differentiation.
Our dollar based net retention rate was once again above our benchmark.
We continue to be very pleased with the success of our land and expand strategy.
Our gross retention rate remains high and best in class at 98, 1% at year end.
Our dollar based net retention rate was above the 120% benchmark throughout the year.
Net retention was 123, 9% as of the end of FY 'twenty two.
Which is essentially a similar level to last year, but on a much bigger base.
For the interim FY 'twenty two quarters net retention was 121, 8% in Q3, 124% in Q2 and 123, 4% in Q1.
Our professional services organization is a strong lead generation engine, so the Falcon platform.
Among organizations, who first become a customer after February one 2020 for each one dollar spend by those customers on their initial engagement for our incident response or proactive services as of January 31, 2022 we derived an average of $5 71.
And are are for both subscription contracts up from $5 51 reported last year.
Moving to the P&L.
Total revenue grew 63% over Q4 of last year to reach 431.0 million.
Subscription revenue grew 66% over Q4 of last year to reach $405 4 million.
Professional services revenue was $25 $6 million setting a new record for the sixth consecutive quarter and representing 26% year over year growth.
Fourth quarter total and subscription non-GAAP gross margins remained relatively consistent at 77% and 79% respectively.
We continue to be pleased with our strong subscription gross margin performance as we continue to invest for growing demand.
Total non-GAAP operating expenses in the fourth quarter were approximately $258 million or 58% of revenue versus $173 million last year or 64% of revenue.
In Q4, 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 one point to be continues to indicate that we should increase investments even more given the massive market opportunity.
The leverage we generated this year demonstrates the efficiency in our model and enables us to step up investments in new technologies, New international geographies and other marketing programs as well as continuing to hire aggressively.
We believe the investments we are making today will lead to sustained growth over the long term and maintain our pole position of the trusted security partner of choice.
Fourth quarter non-GAAP operating income more than doubled growing 134% year over year to reach a record $84 million and operating margin improved approximately six percentage points over Q4 of last year to reach 19%.
non-GAAP net income attributable to crowd strike in Q4 also more than doubled growing to a record $74 million or <unk> 30 on a diluted per share basis.
Our weighted average common shares used to calculate fourth quarter non-GAAP EPS attributable to crowd strike was on a diluted basis and totaled approximately 238 million shares.
We ended the fourth quarter with a strong balance sheet cash and cash equivalents increased to approximately $2 billion and reflects the $61 million cash payment.
Net of cash acquired for the acquisition of secure circle and the approximately $70 million cash payment for IP transfer tax related to the acquisition of <unk>.
Cash flow from operations in the fourth quarter was a record of $159 $7 million and free cash flow grew to a new record of $127 million or 30% of revenue.
Excluding the approximately $70 million of IP transfer tax payment related to the acquisition of Union.
Free cash flow would have been approximately $197 million or 46% of revenue for Q4, and $512 million or 35% of revenue for the fiscal year.
Before we move to guidance I'd like to cover a few modeling notes.
First I would like to note that we have entered the quarter with the strongest pipeline ever for Q1.
While we do not specifically guide to ending or net new air are given the incredible performance of Q4, which included two accounts that contributed approximately eight figures each to net new E. R. R.
To provide a framework for how to think about net new air or for Q1.
As you May recall last year, we significantly over performed in Q1 and it was not indicative of typical seasonality.
Consistent with years prior to that 11% to 13% sequential seasonality was more typical for net new <unk>, which we would expect this Q1 after adjusting for the two large contributors in Q4 and this is implied in our revenue guidance.
Second as we continue to invest for future growth and scale and invest to remain ahead of any potential supply chain believes.
We expect capital expenditures as a percent of revenue to be between 10 and 12% in fiscal year 2023.
We anticipate these investments will be more weighted to the first half of the year than the second.
At the same time, we are planning to maintain free cash flow margin at 30% of revenue for the year weighted more towards the second half.
Moving to our guidance.
We are starting the new year with a robust pipeline and we remain optimistic about the demand for our offerings and the powerful secular trends fueling our growth.
For the first quarter of FY 'twenty three we expect total revenue to be in the range of $458 nine to $465 $4 million, reflecting a year over year growth rate of 52% to 54% with subscription revenue being the dominant driver of growth.
We expect non-GAAP income from operations to be in the range of 61, 7% to $66 4 million and non-GAAP net income attributable to crowd strike to be in the range of 52 to $56 $7 million.
We expect diluted non-GAAP net income per share attributable to crash rate to be in the range of 22 to 24 cents utilizing our weighted average share count of 240 million shares on a diluted basis.
For the full fiscal year 2023, we currently expect total revenue to be in the range of $2133, one to $2163 2 million, reflecting a growth rate of 47% to 49% over the prior fiscal year.
non-GAAP income from operations is expected to be between 289.2 and $311 $8 million.
We expect fiscal 2023, non-GAAP net income attributable to crowd strike to be between $251, one and $273 6 million.
Utilizing 243 million weighted average shares on a diluted basis, we expect non-GAAP net income per share attributable to crowd strike to be in the range of $1 three.
Two $1.13.
We look forward to sharing additional details about our business on our next investor Webinar scheduled for April seven.
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 then one we do ask that you. Please limit yourself to one question and then rejoin the queue. Our first question comes from is the key to layer of Barclays. Your line is open.
Okay, Great Hey, guys. Thanks for taking my question here.
Maybe maybe for you George first of all a lot of.
Nice helpful disclosure on some of the non endpoint products, maybe if we could just zero in on one.
I was wondering if you could talk a little bit more about preempt. It feels like it's been a module that's been gaining traction over the last couple of quarters can you just talk a little bit about how you feel like a differentiate from your competition and also how it might contribute to deal sizes.
Sure. Thanks.
When you look at at our identity Zero Trust module, which came from the preempt acquisition has now been integrated into the platform, which makes it seamless.
It's obviously been a standout for us because when we think about the threat environment. We've seen many of these breaches abuse identity abuse directory services and Theres, a massive compliance issue and just understanding all of these accounts, where they live in and who has access to privileged accounts. So.
This is a highly differentiated module our competitors really don't have anything that's close to this.
The way it works the AI algorithms that we have.
And built around it that we got from the preempt team and the expertise that we have in this area. So it certainly is it is a big way for us to help differentiate the platform among many others.
And it has been a an absolute standout for us and I think we've taken the time and effort to do the integration right.
Which is an important part of the way crowd strike looks at its platform.
Thank you.
Thank you. Our next question comes from Sterling Auty of JP Morgan Your line is open.
Yeah. Thanks, Hi, guys I wanted to zero in on the cloud security.
Opportunity that you talked about and what I'm curious about is when you go in and sell what does that security stack look like in the cloud and what percentage of the wallet do you think you can capture versus the kind of capture rate that you get on Prem with endpoint.
Sure.
Thanks, Sterling when we look at the cloud.
Business in and I think we've put some good disclosures around our penetration there.
To us, it's still a greenfield opportunity and the beauty of our platform is that we cover two very important areas. One is run time protection.
And the second one is cloud security posture management and there are companies that have one or the other we actually have both and they are integrated across our Falcon control plane.
Which makes it very effective we also have the ability to identify indicators of attack, which is much different than just missed configuration. So when you combine those together and you think about containers and kubernetes cluster configuration, whether they have vulnerabilities.
Whether it's just traditional virtualization and everything in between we're covering a big part of the overall security stack of what people are looking for.
And that runtime protection visibility so we still feel it's in the early innings.
We've got great technology in both the agent side, if you will and some of it is agent list with cloud security posture management, but we make it very easy and.
Effective for the Dev ops seemed to that's what we're selling through in these areas have gotten pretty good at it to be able to implement this as part of the C ICD pipeline.
Understood. Thank you.
Thank you. Our next question comes from Andrew <unk> of Wells Fargo. Your line is open.
Thank you congrats on another amazing quarter guys.
So in our last reseller survey crossroads had the top results. So I'm wondering if you're seeing any sort of inflection with resellers and channel partners and similarly, I'm wondering if that D. I S. A deal last quarter.
Maybe created an inflection within the U S federal market.
Sure. So so thanks.
When you think about our partner opportunities and crowd strike first we're a partner first company.
That's the way I built it we haven't wavered from that and there's many areas of partnering everything from traditional resellers to managed service providers to cloud providers and Hyperscale is like AWS that I talked about earlier. So why have we been successful there where we've taken the right approach to not compete with partners to augment what they're trying.
Thing to do and what we've seen is a managed service world is that the managed service providers.
Looking for the best endpoint platform that they can plug in and offer other services and I think we've figured out a way to complement the services that they have in those areas.
And it's been very effective and of course customers want our technology. So.
They're clamoring to these partners to work with US. So we will continue to do that and I think we've put some great proof points out and our success in managed service.
The cloud providers as well as traditional resellers and when we think about it.
A fantastic validation for us in the federal government.
I've spent time in Washington, It was just there recently.
And there's a lot of excitement about our technology finally being able to to be deployed there. As you know you have to go through a lot of different compliance and.
Credit nations to two to get to sell in the federal government that we've worked through those we continue to work through those at different levels and it opens up a massive opportunity for us that we've.
We've seen a big pool from customers interest in that particular.
Vertical because of the aging technology that they that they've been saddled with in the past so more to come on that but very excited about the opportunity today and in the future.
Thank you. Our next question comes from Joel Fishbein of choice. Your line is open.
Okay. Thank you and congrats on a fantastic execution.
Quick question for George and a follow up for Bert if I could George.
You're just a G. Eight documents TR module I think theres a lot of noise in the space can you talk about Falcon X D R and how it's different than the other products that are out there and why it's important going forward.
Sure what we think about xdr, it's more than just the marketing.
Acronym and what we've seen in the past is that organizations of all shapes and sizes security companies have tried to just slap xdr on what they have legs.
Legacy and we don't we don't think that's the right approach really you have to start with the best.
<unk> in the market and then you extend that we believe are Edr is the best it's been validated many times over in different places and what we've been able to do is to leverage the very powerful fast and efficient streaming engine. A few meal. We just talked about the petabyte benchmarks to be able to combine that with our threat graph apply AI on top.
Of it to get the best threat detection and response, leveraging our fusion technology. So.
We're still in the early days, obviously, we just launched it will work with a lot of customers, we're adding more integrations around that.
But we're really excited about that and we believe that's really.
Knowledge that will subsume, the Sim market and we think we're in a perfect a pole position to be able to capture it.
Thank you. Our next question comes from Brent Thill of Jefferies. Your line is open.
Hey, guys you have Joe on for Brent. Thanks for the question and really appreciate the additional disclosures.
Unreal results and Fantastic opening guide for revenue for fiscal 'twenty, three maybe just walk us through the methodology and has anything changed with how you would typically give an opening guidance and then maybe to what extent do we expect a mix shift of revenue outside of core endpoint and what were the inflationary impacts to revenue and Opex for fiscal 'twenty three.
Hey, Joe Thanks for that.
So it turns on a methodology nothing's really changed we guide to.
What we see we do not guide to running the tables. So so so absolutely no change there.
I think that you know the question about going in and capturing some of the additional markets outside of our core end point I.
I think we've given some good disclosures about some of our momentum we don't see any of that momentum.
Fading.
And we are excited about both core and some of our mortgage broker emerging products and so when we when we think about it and when you look at our look at our pipeline and we look at the opportunities in front of US we get really excited about both both opportunities and then you drill down even a little further in we get excited about being able to sell both those opportunities to both.
The largest enterprise companies in the world all the way down to some of those models. So that's how we that's how we think about it.
Thank you. Our next question comes from Matt Hedberg at all.
RBC capital markets Atlanta is open.
Great. Thanks for taking my question guys. Congrats lots of things to talk about here.
I guess Bert for you one of the things that really stood out to me was when we look at ending <unk> per subscription customer.
A decline sequentially for many quarters in Q3 was kind of flattish maybe up a little bit. The Q4. According to my math. It was up about 3% sequentially, a really really strong I think to me that that speaks to your cross sell ability I'm wondering when you think about the guide for next year.
What are some of the assumptions around ending <unk> per subscription customer should that continue this kind of upward sequential trajectory at this point.
Hey, Matt So we really don't look at it that way to be to be fair with you because when you think about net new a or it could come from anywhere it could come from new logos it could come from.
Our existing base our focus as you know has been and always will be met new air or wherever it comes from.
So when we think about.
Looking out into this year we're.
We're doing the same thing from a compensation perspective with our sales team as we have done last year, meaning were going to pay our sales team the same whether they bring in and that net new logo or.
Whether they bring it from an existing customer so we pay on net new air or we don't care, where it comes from the Great News is of course is that we have a tremendous amount of headroom in both right. Our expanding base really helps in terms of cross sell for sure, but we still have a tremendous amount of headroom in terms of being able to go after new logos and that's kind of a great position to be in and it.
He talks to the fact that we think about crowd strike in the early innings of our journey with a lot of headroom to go so hopefully hopefully that makes sense to you.
Thank you.
Our next question comes from Polyone of Bank of America. Your line is open.
Hi, guys great.
Great quarter I wanted to ask about competition and you have now the last count I have is 24 modules.
How is the landscape of competitors how is it changing with the additional modules and can you talk about the.
The acceptance rate I normally you give outcome kind of how many how.
How many or what percentage of customers have subscription customers have more than four five and six modules and I didn't hear it this quarter, maybe I just didn't hear it. So can you give an.
An update on the acceptance rates of your modules and speak a little bit about the take rate of the new modules and where do you see.
Kind of how do you see ramping versus historical trends et cetera. Thanks.
Yeah. Thanks, So George here.
You know when we look at the competition I think this quarter, we put a punctuation mark on the competitive point when you see the growth you see the cross sell.
You see some of the modules out sort of outside of just the core.
We've never seen a better competitive environment for us.
We're entering the quarter with the largest pipeline we've got lots of replacements in the legacy world lots of replacements in the Nextgen World.
And truly differentiated platform with our modules, we have 22 just to be clear and when you look at what we put together and the endpoint and workload protection visibility space combined with identity, which is very unique to us that others don't have combined that with data now with.
With secure circle.
It's a true platform that customers are looking to buy and understand that they can consolidate agents reduce cost and get much better outcomes and then you combine are world class.
Offerings like Falcon complete and Overwatch on top of it and it certainly is a winning combination so false.
Full steam ahead from us on the competitive side.
And we continue to out innovate and.
Build what we believe is the best platform in the industry.
Bert I'll, let you take the module take rates.
Sure.
Give them out again, because there were very proud of them. So the percentage of customers with former module for 69% five or more modules is 57% six or more modules is 30%, 34% all of which are increases over last quarter.
Thank you. Our next question comes from Alex Henderson with Needham Your line is open.
Thank you very much.
I actually got a clarification.
The first one just clarification I mean, you're talking about a Britain.
Record pipeline.
That's kind of a throw away considering your growth rate.
You're growing so fast you have to have a record pipeline to keep the growth going.
I was wondering if you were to look at your pipeline relative to for the expected net new E R or whether they are the ratio of your pipeline to the 40 <unk> is in fact, a record as well.
And then the question I have for you is really actually are on a smaller piece of your business, but I think a very important one which is the services business, which obviously did very well with the increase in.
Revenue.
Upsell.
With Mandy and haven't been bought out here.
Announced to be bought out.
They had been obviously one of the more successful companies and targeting.
And then so.
And coping with them does that open up a runway for you. It's my understanding that Google is planning on using that predominantly for internal products as opposed to.
What <unk> done in the past so does that open up a new opportunity for you to expand that further and become the preeminent.
Not that you're not already but even more of a preeminent player in the security. So you can get that up sell.
Hey, Alex it's Bert Thanks for your questions I'll take the first clarification point, and then I'll toss it to two to George to talk about the <unk> acquisition. So.
What we what we came out and said is that obviously that our pipe going into the year as the greatest pipe we've ever seen in company history, I think I'll leave it to everybody else. Some of you on the call to kind of figure out what that means in terms of net new <unk>, but.
Generally I think that combine that with.
The momentum that we've talked about in the business, we feel really good about starting starting the year and then I'll turn it over to George to for your second part of the question.
Yeah. So thank you Bert and first I want to congratulate Kevin and the entire team I've known and worked with Kevin Many years, it counts stone and they're fantastic organization one of the best in the business and we have a lot of respect for them. So.
We continue to work with them on a partnering opportunities. We think it's a great opportunity being part of Google who is also another big partner crowd strike. So.
I think both organizations make lot of sense, you've got world class capabilities across the board and we think our technology can be additive to the overall mandate solution.
And we look forward to seeing how that progresses and continuing to partner with them. So overall I think it's a positive net net for all parties.
Thank you.
Our next question comes from Fatima Delaney of Citi. Your line is open.
Good afternoon. Thank you for taking my questions.
I have just one for you I look at your operating income guidance for fiscal 'twenty, three and it implies close to 60% growth in operating income and I look at that in comparison to a kind of a 49% you've guided to the high end from a revenue standpoint, so what I wanted to ask you like what are some of the contributing factors.
To your operating income growth outstripping your revenue growth and what's your consideration here do you have in place he said the traveling expense.
Levels reverting to sort of pre COVID-19 levels, and frankly, some of the tahltan attention and talent acquisition costs and wage inflation that is may be bedeviled some of your peers.
Thoughts around there and how you think about that trend as contemplated in your guidance would be very helpful and that's it for me. Thank you.
Sure and thank you for your question. So first let me just start off by saying when we take a look at the guide we take a look at of course.
What we what we see not necessarily what we don't see somewhere on the revenue side and then when we think about the power of our model. We've got a lot of leverage in our model unit economics is really strong and it's pointing to one thing which is continue to.
To invest aggressively which we plan to do and it's reflected in the guide.
I think there are a few things that really shaped that guide right is one as you know I think that you know.
We've seen a lot of payer wins.
For us we see momentum in the business. So our scale and how we think about the revenue guide really plays a big role in terms of how we think about our our margin guide.
But we do take into consideration things like.
You know inflation.
We take into consideration what we're seeing out there in terms of talent. It is talent war that we're seeing on a day to day basis.
Not only for us, but for others in the space and we've got a differentiator and differentiate ourselves from others to attract folks to come and join us and we've done a we've done a really good job so far but pedal to the metal in terms of hiring and then your last piece of the question with respect to you know.
Travel I think that it's going to be more than it was last year.
Would you know obviously, it's resolved on how the pandemic because of the pandemic plays out this year, but the ideas that we do plan on more travel we want people to get together, we want people to collaborate we want to go and visit customers on the one hand on the other hand, I think every CFO out there.
Taking a look at what was done in the past and then how they think about the future and is looking for highest and best use of travel and I'm No exception, so I'm going to take the opportunity to make sure that we've got all the controls in place to make sure that we are doing just that making sure that we are you know looking at you know the highest and best use of our dollars for travel and I think everybody will.
We appreciate it and with that and I think that.
As a company it just goes to continue our story about being a really.
Really really well Flighted company in all aspects of the business from tax to go to market to finance I hope that answers your question.
Thank you. Our next question comes from Joshua Tilton of Wolfe Research. Your line is open.
Hey, guys. Thanks for thanks for taking my question.
You spoke a lot in the prepared remarks about the success of the non endpoint modules can you just comment on the demand environment as we enter the year, but more specifically compare and contrast, the demand for endpoint modules versus the demand for the cloud security and identity modules, where are you seeing the highest demand of those three categories and how does that maybe compare to this time a year ago.
When you look at the endpoint security modules and identity there.
They they go together so we see broad based demand on all of that people are buying.
The endpoint security modules, primarily for two reasons, one protection to visibility, which would get both.
In order to enhance the protection they add they add the identity module, which makes sense given that many of the breaches don't necessarily use lower today's environment. So we see them going together.
We see great opportunity for many customers, who have been with us for a long time.
Who don't have identity because they.
Thats, a newer module to be able to add identity to their existing platform.
Platform and again, there's not much really there's not much that they have to do other than activated given the architecture that we built so.
And then when you look at some of the other module just in general vulnerability management has done exceptionally well leased and lots of vulnerabilities in the environment understanding the assets in their configurations in the hygiene is very important to protecting them.
And then in a distributed world, which we have today right that there is no perimeter.
It's all you know.
Systems wherever they may reside theyre going to need this level of protection and visibility.
And.
Ability to even.
Understand their vulnerability so.
Overall, we are pleased with the the module growth outside of what we've called this core endpoint protection and we look forward to.
Continued growth in those areas.
Thank you. Our next question comes from Rob Owens with Piper Sandler Your line is open.
Great. Thanks for taking my question I was wondering if you could touch on the critical infrastructure Defense project that you recently announced just I guess, how it came about with these vendors and more broadly how under protected.
Are we in these verticals relative to next generation technologies.
Yes, sure Rob we thought it was appropriate with the sum of our parts.
In the industry to to see where we can help them. When you look at critical infrastructure and what the government is really concerned about hospitals.
Pipelines things of that nature.
It's super important that they are protected and there arent a whole bunch of enforce standards in some of these areas in a lot of times, they're under protected.
For a variety of reasons so.
We thought it was the right thing to do.
In terms of offering our technology out there for some period of time, and we think we're going to be able to hopefully move the needle at protection in places where it may have not has been as good.
And then obviously, we will look to see how that pans out from a business perspective, but first and foremost we're just trying to do the right thing.
Thank you.
Our next question comes from Jonathan will cover of Baird. Your line is open.
Yeah, Hey, guys congrats.
I'm wondering if you could just provide some color on the free tiers, whether it be the <unk> community. They shouldn't be introduced at some sort of capabilities as well just curious how youre thinking about that sales motion is there an opportunity to introduce those free tiers more broadly going forward.
Well, yeah, so let's talk about Falcon infusion for a bit which is our store capabilities. The beauty is it's built into the platform.
Just get it if you're a falcon customer, which has been extremely well by our customers and the amount of automation that we've been able to achieve we think far outstrips, what our competitors can do and it ties into our Xdr response strategy and it seamlessly built in it wasn't an acquisition that we have to bolt on so we're really happy with that but other than making sure everybody.
He knows we have it.
There's not a lot of motion that we have to go into there and it has been a differentiator for us when we think about the Jimmy <unk> Community addition, I think it it goes to the heart of where we've been able to make some really good inroads in the Dev ops world.
And cloud protection, but as well as observed ability.
We talked about some of the big wins with <unk>.
Some of them are not even security related they are simple simply observe ability the beauty of that technology is the ability to get data from just about any sorts and answer any question at scale.
Many of the addition, very well received.
People that are using it and then obviously, you're saying it's great technology.
We want to learn more we want to think about licensing it so well.
We're still the early innings on that but it goes to the heart of our ecommerce efforts and our platform that we built out which I think is candidly.
They are appreciated and in what we're able to do from a business perspective, and the sales efficiency that it actually brings to crowd strike.
Thank you. Thank you. Our next question comes from I pad Kid wine of Oppenheimer. Your line is open.
Thanks, Hey, guys, great quarter, and thanks for all the disclosures I have a couple George first for you on the new module has clearly you're making very good progress here, but can you tell us how much of the progress here is more upsell activity or do you have customers that are actually land first we view each of.
These solutions and for your birth, great job on the operating margin side, I guess, you're pretty much at your target operating margin.
A range so.
Is it time to raise it finally.
Alright, so I will take the first part.
When we think about how customers land, let's let's take it a couple of examples so cloud workload protection cloud security posture management horizon, absolutely. They can land their first before they they put falcon on any of their what we'd call traditional endpoints and we see that all the time, saying with email when you think about something like <unk>.
That becomes a driver for why they are calling us they're looking at their existing solution, saying, hey, we need a solution in the endpoint identity space.
You guys are the only folks that have it come in and talk to US and then traditionally we will land with that amongst something else right, probably the endpoint protection or Edr and the beauty again of our model is single agent collect data on one times.
All the modules become available so once we get the agent on that system everything else opens up to us from a module perspective, so there's different demand drivers and then.
Their specific technologies, which are just natural for us to lead with and sell and then be able to cross sell in other places in the organization like cloud workload protection and cloud security posture management Bert.
Thanks, George Thanks for the question so number one really happy with our performance on the top and the bottom I think that the guide really reflects what we really want to do this year, which is aggressively invest in the business. We've got this opportunity in front of US. We think there's a tremendous amount of demand there is a tremendous big opportunity for us.
We're going for it so I think that when we when we guided we took all that into consideration and so I feel really really good about where we are and of course, our unit economics are the metrics that we look at are all driving that decision in terms of how we guided right and that's the great thing about our business right.
Well flighted.
The model itself is as open to leverage and right now we're going to use some of that leverage to go invest aggressively into the business.
Thank you and our last question comes from grass.
Moscowitz of Mizuho Your line is open.
Alright. Thank you very much thanks for taking the question I'll keep it to one just in the interest of time so.
You now have more than half of the fortune 500 in total and based on our numbers you've added 77 of the fortune 500 over the past 12 months I mean, both of these are just remarkable statistics. So I guess two things relating to this first as you look ahead to fiscal 'twenty three how would you characterize your new customer pipeline specifically at the <unk>.
Enterprise level and then how much runway is there for your current fortune 500 customers to continue to expand with Patrick Thank you.
Great well, we still see a big runway of customers or potential customers in the fortune 500 that arent on crown striking we've seen obviously a lot of interest there and I think enterprise customers understand if theyre looking for the best protection at scale with the Manageability crowd strike is the technology of choice and.
We built our gold standard reputation in that in that arena.
So that's what I would say there.
Bert anything else to add I know, we're short on time.
Yes, it's a great question I think right now Greg look we're really happy that we have over 50% of those fortune 500.
We've got a whole bunch more to go and when George thinks about and George and I think about it.
The rest of our potential business for looking forward again tremendous success in enterprise, that's where George flooded the business and that's where we started and we're going to continue to I think see.
Lots of opportunities come our way and then on I'm going Downmarket right. I think we've had a lot of success in being able to to build a technology. The same agent for both our company Thats.
<unk> has a million endpoints versus one that has five but that's really hard to do and so we bought the beauty of where we are right now as we have over 16000 subscription customers. Those are all open to cross sell and upsell and then we've got this tremendous amount of new logos to be able to go after whether it's an enterprise mid market a recipe.
And that's the beauty of where we are and Thats why were you're hearing the excitement in our voices.
And now I'll turn it I'll turn it back over to the moderator.
Thank you I'd like to I'm.
I'm showing no further questions I'd like to turn the call back over to Mr. Kirk for any closing remarks.
Okay, well. Thank you so much and we appreciate everyone's time and attention and we wish.
The best everyone stay healthy and we look forward to seeing you next quarter. Thanks, so much.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.
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