Q1 2023 CrowdStrike Holdings Inc Earnings Call
Hello, Thank you for standing by and welcome to the crowd strike fiscal first quarter 2023 results conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question during that session Press star one on your telephone keypad.
As a reminder, today's call is being recorded.
I would now like to turn the conference over to your host MS. Maria Riley 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 Bert pod 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 growth and expected performance, including our outlook for the second quarter and fiscal year 2023 are 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 Companys financial results is included in the filings, we make with SEC from time to time.
Including the section titled Risk factors in the company's quarterly and annual reports.
Additionally, unless otherwise stated excluding revenue all financial measures discussed on this call will be non-GAAP .
A discussion of why we use non-GAAP financial measure and a reconciliation schedule showing GAAP versus non-GAAP results is currently available in our press release, which may be found on our Investor Relations website at IR docs, how chegg dot com or on our form 8-K filed with the SEC today.
That I will now turn the call over to George to begin.
Thank you Maria and thank you all for joining us.
I will start todays call by summarizing three key points first fiscal 2023 is off to a fantastic start.
We believe our Q1 results exemplify that we have a winning formula that includes scale growth profitability and free cash flow.
Second we saw strength across the platform, including a record quarter for module is deployed in the public cloud and over 100% year over year, ending our our growth for our emerging products group, which includes our discover spotlight identity protection and log management modules.
And third we are seeing more and more customers standardize on the Falcon platform the number of customers adopting six or more and seven or more modules, both grew more than 100% year over year.
We believe this underscores our wide competitive moat and our opportunity to drive long term sustainable growth in both our core and expansion markets.
Now, let's discuss our results in more detail.
The crowd strike team achieved another outstanding first quarter.
Building on our historic Q4, this quarter, we delivered net new <unk> of $190 million topping our expectations we.
We delivered ending a growth of 61% year over year to exceed $1 9 billion record non-GAAP operating profit of $83 million and free cash flow margin of 32%.
In eight out of the last 10 quarters, we have delivered a 30% or greater free cash flow margin.
Our powerful combination of growth profitability and cash flow is reflected in our continued performance well in excess of the SaaS industries rule of 40 benchmark.
In Q1, we achieved a rule of 78 on a non-GAAP operating income basis.
And when calculated on a free cash flow basis, a rule of 93.
Given our market opportunity platform subscription business model and high unit economics, we believe we have the ability to continue to grow at scale generate cash and invest in initiatives that will further widen the gap between crowd strike and the competition, especially at a time when companies are forced to reduce.
They're spending and hiring plans.
I'd like to thank those of you who joined our Investor briefing in April where we showcase the simplicity and the power of the Falcon platform.
We also demonstrated how our differentiated single agent architecture that does not require a reboot enables a frictionless go to market motion with an E Commerce engine.
We believe this is unique to crowd strike and translates to increased module adoption deal sizes, AOR growth and sales efficiency and in Q1, we saw the flywheel effect and strong differentiation of the Falcon platform in motion.
The demand environment, we see is more robust today than this time last year as cyber security is not discretionary.
Additionally, the competitive environment has remained favorable the crowd strike our growing leadership in the market is reflected in Idc's. Most recent report where crowd strike leapfrog to the number one position amongst all vendors in the 2021 market share for worldwide corporate endpoint security and once again took the <unk>.
Top spot in modern endpoint security.
In Q1, we executed well across all market segments with over 600 subscription customers of all sizes choosing crowd strike for the fourth consecutive quarter.
This brings the total number of customers that rely on Falcon to protect their business to 17945, 57% increase year over year.
The first quarter was a record quarter for our E. Commerce engine late in Q4, we significantly expanded our trial program increasing the number of modules available for trial to 12 up from just four modules in the prior quarter.
The expanded trial program provides an even larger foundation to drive velocity through our E Commerce engine and makes it even easier for companies to trial and purchase more modules on the Falcon platform and we're very pleased with our record performance in Q1.
Our ability to rapidly innovate on the Falcon platform and solve a growing number of security imperatives for our customers with a single agent platform provides crowd strike strong differentiation wide competitive moat and multiple growth engines in both our core and expansion markets.
Our frictionless adoption motion drives larger deal sizes, among both large and small customers over time and has translated to increasing module adoption metrics quarter after quarter.
In Q1 subscription customers with four or more.
However, more than six or more modules increased to 71%, 59% and 35% respectively.
Given subscription customers with four or more modules surpassed the 70% milestone and is now commonplace. We are retiring this disclosure and raising the bar by introducing a new metric customers with seven or more modules, which reached 19% at the end of Q1.
We are pleased with our strong module performance across the Falcon platform in both our core and expansion markets I'd.
I'd like to highlight a few standouts in Q1.
First as Falcon complete our industry, leading full turnkey managed detection and response offering that uniquely blends technology and services to stop breaches for customers of all sizes.
Q1 was a record breaking quarter for Falcon complete with net new <unk>, reaching an all time high.
Falcon complete has continued to gain momentum in the market as companies look to address the growing cyber security imperative and can turn with the cyber security skills gap.
By leveraging the advanced automation in the platform Falcon complete offers customers and partners are way too quickly and cost effectively scale.
Fortify their cyber defenses with gold standard expertise and technology.
We believe our massive success with Falcon complete is a testament to the increasing trust customers place and crowd strike every day.
As one of our largest customers recently posted on Linkedin.
Crowds strikes complete team allows our team to focus on the bigger picture without sacrificing the quality in detail of tier one response end quote.
Our growing leadership in the MTR market is also recognized by market research firms.
And gardeners recent market share managed security services worldwide 2021 report crowd strike was ranked number one by market share.
As we have added modules to the Falcon platform, we have introduced new complete offerings that extend beyond core endpoint, including fleet for cloud workload protection and complete for identity protection.
This ability to create new extended offerings within the complete product line generates new multi dimensional avenues to drive our growth.
Moving to the public cloud building on top of a strong Q4, the first quarter was a record quarter with ending a growth for public cloud deployments accelerating quarter over quarter.
As organizations are moving more workloads to the cloud the adversaries are quickly following and traditional security tools are not enough to keep pace with the ever changing nature of cloud environments.
Browse strikes cloud capabilities stand alone in the market by delivering agent base and <unk> solutions delivered natively from the Falcon platform and a single user interface with a shared data backend and threat graph.
The combination of agent based and agent list capabilities in the cloud enables pre runtime and runtime protection, whereas agent list only solutions can only offer partial visibility and lack of remediation capabilities.
Additionally, the amex of the public cloud put in even higher emphasis on the importance of a lightweight agent.
The time, we took at the inception of crowd strike to design the agent with the lightest footprint amongst all competitors and that doesn't require a reboot makes our agent perfectly suited for cloud deployments.
One of our marquee wins this quarter was a global financial software company that was looking to protect its private cloud and growing public cloud environment.
In this cloud win proud strike was chosen over the competition given Falcons unified interface across public hybrid and multi cloud assets ease of use superior performance and speed of Detections.
In the quarter, we introduced new cloud native application protection platform.
We're seeing app capabilities to accelerate threat hunting for cloud environments, and workloads and reduce the mean time to respond.
The new capabilities, we announced provide the visibility.
Automation and cloud hygiene necessary to defend against today's adversaries.
Identity protection is another emerging area, where we are seeing growing success in the market with a number of customers subscribing to these modules growing more than 30% quarter over quarter.
Our identity protection solution is a game changer in the fight against Ransomware.
And preventing lateral movement.
This was demonstrated in the recent Mitre prevention evaluation, and which Falcon achieved 100% prevention and our identity protection module stopped the would be attacker before it could even gain access to the target environment redefining what it means to stop the breach.
In terms of opportunity we see many similarities between this new emerging market in the edr market at its inception with customers not knowing how much they needed until they saw it in action.
To demonstrate this point I'd like to share feedback I personally received via text from a longstanding falcon customer.
Well, we are doing our POC of identity protection and has alerted us that all members of domain users early had permissions to reset the machine for for one of our domain controllers, we fixed it immediately and identified the root cause we never would have found this in a million years and it could have been used to do great harm.
We really are in love with this product.
Thanks to you and the team for building these amazing tools for us.
And quote.
And on the <unk> front, we are seeing increasing momentum in the log management space with customers. Additionally, our resellers Msp's and technology partners are excited about building their businesses with <unk> with.
With the recent sales enablement and quota assignment for the global crowd strike sales team our pipeline of log management opportunity rapidly growing specifically in Q1, we secured wins with new and existing crowd strike customers, including a fortune 100 industrial company, a fortune 500 materials manufacturer.
And a large health services provider.
Moving to the market dynamics and threat environment, we continue to see powerful tailwind fueling our market and we do not currently see any indication that these trends will abate anytime soon these tail wins include a rapidly expanding attack surface and digital supply chains as organizations embrace digital transformation and move more work.
Close to the cloud the cyber security skills gap and a heightened threat environment.
We remain in a shields up threat environment with adversaries rapidly evolving their tactics.
Ransomware is no longer enough for advanced E criminals, they're now weaponized <unk> the data of the extract by periodically leaking it to the public in an effort to extort their victims and drive even higher pay days.
Over the past few months I spent significant time traveling to meet with customers prospects partners and fellow crowd Strykers I founded energizing and inspiring to resume in person engagement and I would like to share with you a few recurring themes from my conversations.
First cyber security is an essential technology that underpins modern business and we see this growing as regulators sharpen their lens on cyber security requirements. As a result, cyber security is a growing priority boards of directors and initiatives to fortify and organization security posture and reduced <unk>.
Enterprise risks are being discussed evaluated.
And funded at the highest levels.
In order to cope with the skills gap organizations are looking for technologies that help them achieve more with fewer human resources.
<unk> and <unk> are looking for a true platform that delivers on the promise to consolidate agents reduce complexity simplify operations and reduce operational costs. This includes replacing legacy log management and Sim products and that is why they are so excited about Falcon X D. R.
And that brings me to my third point Trust I.
<unk> directly from boards, Cio's and Cif shows that when it comes to cyber security the importance of trust increasingly eclipses price during the buying decision. In fact, we saw this exact dynamic in a key win with a leading edge Tech innovator and S&P 500 listed company, where we are.
We're competing against Microsoft.
Even though this new customer is a Microsoft first shop, we were told that the buying decision, which the board of directors was actively involved in ultimately came down to who they trusted to protect them from their worst day.
Before I hand, it over to Bert I will share one more recent new subscription customer when we're the incumbent vendor fell short of expectations. This global business process service provider based in Europe was struggling with their Microsoft deployment as complexity and mis configuration pitfalls were hampering their efforts to protect their.
Heterogeneous environment.
After months of continuous issues, they fell victim to a breach and turn to crowd strike for incident response and endpoint recovery services.
During the remediation process. This customer was able to experience firsthand the value of trusted expertise and the ease and speed of deploying falcon across their environment.
This led them to adopt Falcon complete which was fully up and running only 24 hours. After the expanded engagement west completed valves.
Falcon complete is highly differentiated in the market as competing offerings only notify the customer of a problem, whereas Falcon complete with fusion No code security automation will proactively remediate any issues.
In closing I would like to thank each and every crowd Stryker for your passionate focus on making crowd strike the trusted cyber security company.
That I will turn the call over to Bert to discuss our financial results in more detail.
Thank you George and good afternoon, everyone. As a quick reminder, unless otherwise noted all numbers, except revenue mentioned during my remarks today are non-GAAP moving to our results we delivered another outstanding quarter with strength in multiple areas of the business and superb execution by the crowd strike team translating to.
Rapid growth at an increased scale record non-GAAP profitability and record cash generation.
In the first quarter, we continued to maintain very high unit economics drive leverage and remain very capital efficient, even as we aggressively invest in the business.
Innovate on the Falcon platform expand into new markets and grow the crowd strike team.
Demand in the quarter was broad based and fueled by strength in multiple areas of the business.
These included continued strong customer adoption of our core products growing success with our emerging product category and cloud modules strong retention and expansion within our customer base and continued rapid new customer acquisition.
Net new <unk> grew 32% to reach $195 million.
Our exceptional Q1 net new air our performance was ahead of our expectations and follows our unprecedented Q4, highlighting our continued strong momentum in the market.
Additionally, the composition of net new <unk> in Q1 was very well balanced across deal size with no outsized contribution from any one deal.
Our dollar based net retention rate was once again above our benchmark and gross retention reached a new all time high.
Our consistently high gross retention rate reflects our strong commitment to stopping the breach delivering value to customers and restoring trust to the security posture of companies worldwide.
As George mentioned, we are also seeing more customers standardizing on the Falcon platform adopting more modules.
We believe these trends will create an enduring business opportunity for the years to come.
Moving to the P&L.
Total revenue grew 61% over Q1 of last year to reach $487.8 million.
Subscription revenue grew 64% over Q1 of last year to reach $459 8 million.
Professional services revenue was 28.0 million.
Setting a new record for the seventh consecutive quarter, and representing 30% year over year growth.
In terms of our geographic performance in Q1, we continued to see strong growth in the U S at 57% and international revenue growth accelerated to 71% year over year.
First quarter total and subscription non-GAAP gross margins remained relatively consistent at 77% and 79% respectively.
As we continue to invest for growing demand. We are pleased with our strong subscription gross margin performance, which remains within our target model range.
As planned we invested aggressively in our business during the quarter, including increasing investments in new technologies international geographies and marketing programs.
We are also executing our 2023 hiring plan I'm pleased to report that we added a record number of net new hires during the quarter.
We believe the investments we are making today will lead to sustained growth over the long term and maintain our position as a trusted security partner of choice.
Given our strong top line disciplined approach to investing and efficient sales motion, we were able to make these investments.
So driving increased leverage and profit.
Total non-GAAP operating expenses in the first quarter were approximately 291.0 million or 60% of revenue versus $202 $9 million last year or 67% of revenue.
In Q1, our magic number increased to $1 four reflecting the efficiency of our go to market engine and our ability to rapidly onboard and support customers of all sizes.
We have put as much thought into our go to market as we have into our technology, creating a new paradigm for enterprise cyber security sales.
The Falcon platform was designed from the start to foster module adoption and on top of that we built an E. Commerce engine that would not have been possible to achieve without the architectural choices made in crowd strikes early days.
We also have a thriving partner ecosystem, which includes MFS.
That is contributing to our ability to efficiently scale our business.
First quarter non-GAAP operating income more than doubled growing 179% year over year to reach a record 83.0 million.
Operating margin improved by over seven percentage points year over year to reach 17%.
non-GAAP net income attributable to crowd strike in Q1 also more than tripled.
Going to a record $74 8 million or <unk> 31 on a diluted per share basis.
Our weighted average common shares used to calculate first quarter non-GAAP EPS attributable to crowd shrink was on a diluted basis and totaled approximately 239 million shares.
We ended the first quarter with a strong balance sheet cash and cash equivalents increased to approximately $2 one 5 billion.
Cash flow from operations grew 46% year over year to a record 215.0 million.
Free cash flow grew 34% year over year to a new record of $157 5 million or 32% of revenue and reflects our planned increased capital investments, which more than doubled year over year.
Given the current geopolitical environment and growing regulatory requirements, such as GDP, our system reporting mandates and the forthcoming SEC cyber security disclosure requirements. We believe the essential nature of our offerings is increasing.
This along with our corporate customer base, our efficient sales motion are high growth retention rates and our SaaS model that includes subscription contracts and multi year customer relationships will provide consistent cash flow performance.
Further we believe these factors will provide resiliency and any type of environment as we build a durable cash generator for today and years to come.
Before moving to guidance I would like to cover a few modeling notes.
While we do not specifically guide to net new <unk>, we would like to provide a framework for how we view recent seasonality trends.
Similar to last year, we delivered an exceptional Q1 was significantly muted Q4 to Q1 net new <unk> seasonality when normalizing for the two accounts that contributed approximately eight bigger each to our unprecedented Q4 results.
As a result looking to Q2, we expect to see seasonality off of Q1 to be similar to last fiscal year.
Next is on operating leverage given our strong Q1 performance and as reflected in our increased guidance, which reflects 56% to 62% year over year growth in operating income, we expect to see the year over year operating margin leverage for the year materialize in the first half of fiscal 2023.
<unk> is primarily driven by our commitment to continue investing aggressively in our massive opportunity and leverage our unique leadership position in the market current demand.
And increased unit economics.
Lastly, I will touch on cash flow.
As a reminder, given the timing of expenses seasonality of new hires and the midyear ESP purchase the second quarter is generally our lowest cash flow generation quarter of the year.
Moving to our guidance.
We continue to remain optimistic about the demand for our offerings record pipeline and our ability to execute on the powerful secular trends fueling our markets and as a result, we are raising our guidance for fiscal 2023.
For the second quarter of FY 'twenty three we expect total revenue to be in the range of $512 seven to $516 8 million.
<unk> a year over year growth rate of 52% to 53% with subscription revenue being the dominant driver of growth.
We expect non-GAAP income from operations to be in the range of 74 to $73 3 million.
And non-GAAP net income attributable to crowd strike to be in the range of $64 nine to $67 9 million.
We expect diluted non-GAAP net income per share attributable to crowd strike to be in the range of 27 to 28 <unk>.
Utilizing a 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 2195.
With $2205 8 million, reflecting a growth rate of 51% to 52% over the prior fiscal year.
non-GAAP income from operations is expected to be between $306, five and $317 8 million.
We expect fiscal 2023, non-GAAP net income attributable to crowd strike to be between $283, three and $294 6 million.
Utilizing 241 million weighted average shares on a diluted basis, we expect non-GAAP net income per share attributable to <unk> to be in the range of $1 18 to $1 22.
George and I will now take your questions.
Thank you and as a reminder to ask a question simply press star one on your telephone and to withdraw your question press the pound or husky.
We ask that you please limit your questions to one please.
Please standby, while we compile the Q&A roster.
Your first question is from Keith <unk> with Barclays. Please go ahead.
Okay, Great Hey, guys. Thanks for taking my question here.
George maybe maybe I'll direct this one to you a lot of fun stuff to talk about from a product perspective, but maybe we could zero in on one.
Specifically hulio.
The question is what are you seeing from customers on their willingness to explore alternatives to Sim and how do you think <unk> is positioned there to just dropped.
Hey.
Yes, it's a great question, when we talk to customers, particularly legacy Sim customers, there's absolutely an appetite to explore something thats different.
Modern more scalable and more cost effective and again, we've been big fans of <unk>, we continue to get the technology integrated and expand its capabilities and when you think about <unk>. You also have to think about Falcon xdr right in terms of its ability to.
Ultimately subsumed, Tim and I think xdr in general, we'll do that from a category perspective, so its still in the early days, but we're excited about the customer interest what they want the expansions.
That we've done in the quarter and the ability to actually consume not only security data, but observe ability data.
<unk>.
We'll continue to iterate the product in.
Get it out through the Salesforce. So overall very excited about it.
Your next question comes from Andrew Nowinski with Wells Fargo. Please go ahead.
Great. Thank you congrats on a great quarter.
I had a similar question to the last one so you talked about on the call about Falcon complete preempt and Humulin I would imagine spotlight was also fairly strong given log for Jay this quarter, but I was wondering if you could.
Maybe just rank order your top three modules that you think will drive or have the most impact on your growth in this fiscal year.
Andy.
Great to hear your voice.
So as we talked about on our April 7th Webinar, we went through the module growth dynamics and we highlighted.
Some of our products like complete which has been very very successful for us.
When we talked about.
Spotlight and we talked about identity threat detection horizon cloud workload protection. These are just some of the hyper growth modules that we highlighted in.
In the webinar and that really means year over year growth rates that are significantly higher than the overall customer growth and so we're excited about we're excited about those.
And your next question comes from Brian Essex with Goldman Sachs. Please go ahead.
Yeah.
Hi, good afternoon, and thank you for taking the question Congrats from me as well.
On the results.
Yes.
Yes, I guess I wanted to dig in a little bit too it looks like international growth.
Pretty strong in the quarter and.
Given its an area of focused investment just wondering if you could peel that back a little bit and help us understand where some of the key drivers there how sustainable they are and specifically any color into what geos were the strongest for you.
Yeah, Hey, Brian It's George.
When we look at our capabilities outside North America again, we spent a lot of time building out the sales channels building out the partner network and you see that multiplier effect through our partners now, which we're really excited.
And we continue to expand our sales capabilities. There. So when you look at.
Where we'd like to be in terms of increasing that revenue.
And the split between North America, and rest of World. It was a great quarter for us. So I think Bert will probably add some other comments to it but I think it's reflective of the fact that we've got a great offering and there is strong demand.
In all geographies.
It's a great question and we're continually focused on.
Vesting in territories outside of the U S. When we talk about aggressive investing we're investing aggressively we think about not only product lines. When we think about GFS.
And that's one area certainly that is a focus for US. We also think about ultimately we'd love to see 50 50 in terms of the split at some point.
In order to do that we need to continue to invest.
The great thing about what we saw in the results for the rest of world is that it's keeping pace to an incredible.
Opportunity here in North America.
And so when you can keep pace with America, Youre doing really well and in this quarter, we saw a slight uptick in terms of rest of world sales. So we're excited about we're excited about where we're headed.
And your next question comes from Joel Fishbein with Truest. Please go ahead.
Thanks for taking my question.
Hey, guys great.
Execution this quarter.
George <unk>.
Had a great new customer subscription customer growth this quarter I'm just curious when when these guys are landing how many modules on average are they landing with net new customers.
Yes, so our bigger customers those over $1 million as we talked about on the webinar in April and October .
Each of those customers it was about 7%.
On average just over seven modules in terms of landing new we talked about in FY 'twenty two.
It's $4 7 million.
That's up from $4 three from the year before.
Your next question comes from Matt Hedberg with RBC capital markets. Please go ahead.
Great. Thanks for taking my question. Congrats from me on the results guys as well George I know this is not new.
As necessarily a strong U S fed quarter, but I think.
Flipped back on your Cisco win from last year is really a.
Sort of a watershed type deal can you talk about how that rollout has been going and how you think federal plays out U S. Fed plays out this year.
Yes, it's been going well key part of our strategy is because theres. Many agencies that can procure the product through through this just a contract if you will and the key area of focus is making sure that everyone's successful it's a great rollout.
Like any category you want to have your reference accounts and that's what we've been focused on so there's tremendous interest.
Folks understand our capabilities.
Where we can help protect them, particularly in areas like identity and they know it.
It's a leading product in the industry. So we expect great things from from Fed and we also believe that.
As I said before 10 years in the making we finally have these big contracts. After we got the certifications that we needed.
We think it's going to be a long runway in federal and not only federal but state local and then you have federal type organizations that are around the world. So we think we're in a great spot there.
And your next question comes from Rob Owens with Piper Sandler. Please go ahead.
Great. Thank you guys for taking my question I was wondering if you could address some of the competitive dynamics around cloud and when it represents the tip of the spear versus selling into the installed base. If we were looking at that net new <unk> cloud touches. Thanks.
Yes, so when you think about our cloud offerings.
A couple of points.
<unk> highlighted in the call is that we have both agent and agent list and that is the ability to actually gather cloud information at scale without an agent understand the posture of what's happening understand Ms configurations and go beyond what our competitors do is we actually look for active attacks with our indicator of attack technology applied to it and then you combine that with <unk>.
Our agent and our cloud workload protection and that really is the ultimate package snap, we talked about that in the call as well.
And that has been well received and as we pointed out in the in the April Investor call. We've had many lands and just cloud organizations, particularly in Big Financial services Company is planned in the cloud and then actually be able to cross sell it into the.
Internal network. So overall, we continue to iterate very rapidly got great capabilities, there and it's been really well received by our customers.
And your next question comes from Fatima <unk> with Citi. Please go ahead.
Yeah.
Fatima.
Please check your mute button.
Let's go to the next question, we can come back to peanuts.
Thank you and your next question is from Alex Henderson with Needham and company. Please go ahead.
Great. Thank you very much.
I was hoping you could talk a little bit about the implications of the Vmware acquisition by Broadcom and to what extent.
That has.
Positive impact on your ability to gain share in the endpoint slash.
Xdr space, but also.
Whether that has implications for your cloud.
Product lines and has there been any impact.
Immediately happened after that announcement thanks.
Yes, very good question and we're quite excited by the acquisition and I think.
Again, when you look at the share donor.
That symantec has as in part and on Us.
We were happy to see carbon black.
And then Vmware be acquired so we've continued to replace carbon black over the last few years and.
After the acquisition, we certainly had a lot of customer interest in <unk>.
What that means for carbon black customers in particular, how crowd strike in <unk>.
Help them.
And our long term relationships. So we'll see how it all plays out but given what we've seen in the past with Symantec.
We're pretty positive.
And your next question comes from Roger Boyd with UBS Securities. Please go ahead.
Thank you very much for taking my questions and congrats on the results.
Just on E. Commerce, you noted a record e-commerce quarter as you added a bunch of new trial. Both solutions can you just talk about how that might be benefiting your sales efficiency noted the strong magic number in the quarter.
And how you see that benefiting margins this year and beyond.
Yes, so as we've talked about in the in the April update to investors. We spent many many years working on our E Commerce platform and we're starting to really see the fruits of our labor. There was a magic number of one four with the increase in the number of trials that we can actually run through.
The E Commerce platform.
It's incredibly efficient not only to gain new customers, but also to continue to cross sell into the customer base and with 22 modules. It's important to be able to prioritize what customers are looking for for our channel partners as well as our sales team. So we spent a lot of time and effort there we're seeing the fruits of it.
It certainly has been a great addition to growing our SMB business as well.
We take credit card sales, it's very easy to get the product up and running and buy from us and I think that is a unique differentiation point between us and our competition.
Yes, no it's definitely part of the equation when we think about our long term operating margin target model.
As I think about hitting the 20% to 22% long term model. That's a piece of it right. I think we spent as much time on go to market execution inflating how thats all going to work just as much as we do on the tech and for us.
Beth I think.
Sure.
We think it's very very.
The risks and I think that we've got lots of examples where we've seen success.
Companies that are able to find it well none in security and so we believe that we've got a great opportunity.
And your next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.
Hey, guys. Good afternoon, it's Daniel on for Marty. Thanks for taking my question. So.
Your total fleet trials intrusion of 12 modules could you speak to how the strategy is echoing downstream, especially at the lower end of the market.
Typically this has been a segment where customers are really drawn with the good enough approach or in the past.
Yes, I think when customers look at the impact of ransomware, and and now you've got lock and leak, where they actually are disseminating this information and extorting customers.
Two critical to rely on an operating system vendor or the cheapest technology thats out there they're looking at the viability of their business being impacted they are looking at wire transfers that are going out fraudulent Lee I mean, you go down the list of E crime activities.
And it continues to mushroom so customers leveraging our trial.
Converting them into our e-commerce platform Upselling on modules, even upselling them into Falcon complete customers. We can take a few thousand dollars deal and turn it into a $50000 deal leveraging the full suite of ecommerce technology as well as our inside sales team and that is really driven efficiency.
Organization as well as its reflected in.
Things like our magic number that I talked about earlier.
And your next question comes from Joseph <unk> with Jefferies. Please go ahead.
Hey, guys really appreciate the question Ive alluded to it and so far the numbers appear to indicate that cyber in your business as resilient George and your combos of customers in <unk> and your guidance methodology in the world a little less rosy than it was a quarter ago are you seeing any change in the velocity of deals closing or hesitation from customers and if you could break that into <unk>.
Our deal size that'd be great. Thanks.
Yes, I'll try the first part no we haven't seen any any any slowdown in terms of willingness to buy security. It continues to be the number one risk factor for any board of directors.
Again, when you look at some of the <unk> impact and taking a business. It is not a discretionary spend.
It's.
In the hierarchy of corporate needs, it's probably.
<unk>, so we see that continuing and in fact, when you look at the current environment, we have customers, saying, we want to consolidate more we want we want to go.
In with all in with crowd strike, we want to get rid of this extra spend that we have in other areas too many agents.
And we can upsize our deals while decreasing their overall security spend by consolidating things like vulnerability management by consolidating.
Log management capabilities et cetera, we can put it together and give them a much more effective.
Technology was better outcomes lower cost and lower management concerns.
Yes, and to add I really don't see any additional discounting coming my way.
And when there is an opportunity on the table and there is discounting in both.
At a high level. It comes to me and I really haven't seen any change from the past.
Thank you and your next question comes from Shaul Eyal with Cowen. Please go ahead.
Thank you good afternoon, guys. Congrats on a strong start to the fiscal year.
My question is actually on the new E. R. R.
Maybe can you just provide us with some color I know you don't provide the actual numbers, but what portion of new <unk> came from a new business, new logos and what came from the existing base. Thank you.
Hey, great to hear your voice, it's a question I often get them I love because at this point, we're still seeing net new air are coming from both new logo and.
<unk>.
And cross sell and up sell and we feel we have a lot of runway in both we've got a tremendous we have a tremendous amount of headway in terms of new logos.
Had just numbers we have just under 18000 when you look at one of our competitors like Symantec that had over 300000 at one point and we've got a long way to go and then the machine of being able to cross sell into our existing base is there as well and so as we continue to add new logos. We are we continue to have opportunities to cross sell so we're getting.
It from both sides.
I see it both by equal opportunity.
And when we look at things like identity, which is part of the emerging module category.
Identity for me as the new Edr.
It wasn't that long ago that edr with something new for folks and now organizations routinely adopted.
And we see the same sort of buying pattern with identity. If you have <unk>.
Advanced endpoint protection using AI, if you add Edr and now you add identity, that's a winning formula. So we see a great opportunity to continue to sell into the installed base identity, and we talked about 30% quarter over quarter increase in identity and.
We see a long runway.
So when we think about <unk>.
<unk> the next iteration of that will be adding identity to it.
And your next question comes from <unk> <unk> with Citi. Please go ahead.
For me it looks like we lost it.
<unk> again.
Are you there okay.
Yes, sorry about that thanks for being patient with US Tonight, just bopping around a couple of calls.
George maybe one for you just start.
As you can get this question from investors.
Of lingering fear about the business, maybe having seeing some tailwind from that.
The sharp growth in endpoint volumes that a lot of corporations are realized over the course of the pandemic and so I'm curious if you can share some data points or anecdotes.
Help assuage some of the concerns around the trends with respect to.
Corporate input volume.
Yes. Please.
Yes.
Sure as we talked about over the course of the pandemic in prior earnings calls.
In the beginning saw some buying for people that were working at home, but that was short lived and I think.
On the back side, two years, plus in the pandemic and coming out of it.
If you look across the growth quarter over quarter.
Reflected in a strong demand environment.
Not related to anything Thats pandemic, so as we've talked about before digital transformations happening security transformations moving to cloud those are all long term sustainable trends and after pretty much the first quarter or so of the pandemic.
There is not much to talk about it in terms of corporate endpoints.
Next question is from Brad Reback with Stifel. Please go ahead.
Great. Thanks, very much George obviously, a lot of your high profile high multiple private peers have run into some issues here lately a lot of them were talking about head count reduction. So maybe two parts number one does it open up M&A opportunities for you and number two I know hiring was strong in the quarter, but can you get it.
Better thanks.
Sure.
It's certainly true we've seen a lot of high multiple companies.
I went through some layoffs.
And some challenges in trying to conserve cash I think from an M&A perspective, we're always looking at companies and we will buy good companies with good people irrespective of the current environment, obviously, as we think about what's coming up multiples compressing and in various areas, including the private markets.
Certainly we'll be disciplined as we look at those.
Then when we think about head count we are in a great position to be getting talent.
As some of these organizations are just forced to cut good people. So we will be opportunistic in both hiring great people as well as looking at potential M&A opportunities now and in the future.
And your next question comes from Gray Powell with BTG. Please go ahead.
Hi, This is Jonathan Zhang on shared great. Thank you so much for taking my question. So.
Line up Ron.
A question on the macro environment.
Generally speaking good companies tend to come out of the question in a better position well license less established companies might shovel Joseph Dubai, So with that in mind, if the economy does get worse, you see opportunities to expand and potentially accelerate that.
Yeah, I'll answer first and I'll turn it over to Bert but when.
When we think about where we are today and the success we've had.
I think it's one of the areas where security is not going to go away. The threats are going to continue to get worse, and we're going to continue to invest and that means getting the people that we need that means looking at module expansion.
And that means.
Looking at other opportunities as we just talked about in the last question potential M&A opportunities.
So for US, it's really about continuing to hit the gas and we've been successful.
We've seen a lot of our competitors fall by the wayside over the years.
By being diligent by being innovative and continuing to invest in getting stronger and stronger.
Irrespective of the.
Current climate and certainly.
If it gets worse, we think we're in a great position enterprise software SaaS security.
Long term contracts great.
Great cash flow I mean, these are all hallmarks of a very well run.
And great execution.
<unk> business of cross Frank anything to add yes. So it goes back to I think it starts with security right now.
Let's call it recession resilient.
We think we're in a great spot.
<unk> maintained our number one position market share and the endpoint.
And I think that we're going to continue to invest and really what does that mean, it means to enhance and gain in market share in 2019.
Had a market share of around six 3% and endpoints.
Today, we are in that 12.6% range from this is all IDC, we think theres a real opportunity to increase that we think by investing in the channel and people can go to market. We think we have an advantage over everybody else because we're such a well run company and we've got a lot of opportunity to invest our our balance sheet and our P&L are.
Allowing us to do that and we're going to press that advantage and we're going to go after some great people that have been let go by some of our competitors.
Thank you and our last question comes from Josh Tilton with Wolfe Research. Please go ahead.
Hi, This is Patrick on for Josh.
<unk> seen any noticeable changes to the competitive environment.
And sort of went away when rates excuse me.
Versus setting one in Microsoft and then also can you give us any more color on what you see as sort of the total size of the legacy.
That opportunity that remains.
Thanks.
Yes, we haven't seen any changes we continue to win at a very high rate we've talked about that in the past is a great competitive environment for us.
We continue to convert we talked about some of the Microsoft wins again, what customers are looking for is our solutions that solve problems stopping breaches deals with some of the the head count problems that they have they just can't find enough good people and ultimately saves them a lot of time and money by harmonizing.
Their security stack in one platform, which is which is crap right. So.
It's still a big market Bert talked about our market share in the last response.
You know were looking aggressively grow that and those opportunities for others out there, but we believe we have the best technology. The best platform the best AI Tech.
Testing results prove it as well and more importantly customer success, the testimonials and the proof is in the financial results. So.
And we feel confident going into the future that we've got the right platform.
And with that I will pass the call back to George <unk> for his final remarks.
Great well I'd like to thank everyone for their time today.
We feel it was a great quarter, and we look forward to chatting with everyone next quarter be safe and thank you so much.
And this concludes today's conference call. Thank you for participating and you may now disconnect.
Sure.
[music].
Okay.
Yes.
[music].
Right.
Okay.
Thank you.
Okay.
[music].
No.
[music].
Yes.
Okay.
Yeah.
Okay.