Q3 2024 CrowdStrike Holdings Inc Earnings Call
Okay.
Yeah.
Thank you for standing by and welcome to crowd strike Holdings third quarter fiscal year 2024 earnings Conference call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again I would now like to hand, the call over to D T and the Investor Relations Maria Riley. Please.
Go ahead.
Good afternoon, and thank you for your participation today with me on the call are George Kurtz.
Isn't it and Chief Executive Officer, and co founder of crowd strike and Bert Pod Barrett 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.
Roes, including projections and expected performance, including our outlook for the fourth quarter and fiscal year 'twenty 'twenty, four and any assumptions for fiscal periods beyond that 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 company's financial results is included in the filings we make with.
That said 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 disclosed 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 earnings press release, which may be found on our Investor Relations website at IR dot crowd strike dot com or on our form 8-K filed with the SEC today.
With that I will now turn the call over to George.
Thank you Maria and thank you all for joining US today I would like to begin my remarks today by expressing gratitude to our customers, who proudly trust crowd strike at their cyber security platform consolidator for the AI era gratitude.
Gratitude to our partners.
<unk> crowd strike, taking our joint customers on Falcon platform transformation journeys from device to cloud to identity to data and beyond.
And to our team for their passionate dedication to our mission stopping breaches fighting adversary.
Delivering the very best cyber security outcomes.
Moving on to Q3.
Despite a challenging macro environment and geopolitical tension I am extremely proud of the resilience of our business.
We delivered a record Q3.
<unk> surpassed the $3 billion or milestone with an ending IRR of 315 billion growing 35% year over year.
<unk> is the fastest in OLED pure play cyber security software vendor in history to achieve this milestone.
In Q3, we delivered double digit net new <unk>.
<unk> at scale.
Third by customer demand for the depth and breadth of crowd strikes AI native xdr platform.
Terrific execution exemplified by rising win rates against our competitors.
And acceleration in our cloud security and identity businesses as well as a record quarter in our large scale Nextgen fin business.
Our standout topline performance came in tandem with P&L disciplined as our profitability soared to record highs.
Three was indeed, a quarter of records, let me share several of our financial highlights.
Record net new <unk> of $223 million, representing 13% year over year growth from acceleration of new and expansion business.
Record non-GAAP subscription gross margin.
Record GAAP and non-GAAP operating profitability.
Record free cash flow of $239 million.
Representing 30% free cash flow margin and achieving free cash flow rule of 66 up from 63 last quarter.
Share more color on our financial and platform adoption staff following my remarks.
This was a standout quarter and places us well on the path to $10 billion and there are that we outlined in our latest investor briefing.
The market continues to validate crowd strike widening leadership position.
Other scaled back R&D, we are increasing our investments and innovation is the lifeblood of our company.
We continue to make meaningful investments in go to market and profitable growth.
And we received multiple industry awards and accolades over the course of this quarter across industry analyst firms Cross rate is consistently top rated.
In Q3 cross strike was.
Awarded a perfect 100% across protection visibility and analytics detection and Midas latest attack testing an industry first recognized as Gardner customer choice and one of the highest rated in their latest peer insight voice of the customer for ETP report.
Named a leader in the Forrester wave for endpoint security.
And positioned as a leader in the IDC vulnerability management market scape.
Our leadership position is translating into record demand for our exposure management solution in its first quarter on the market.
Our market presence and open platform approach to Xdr is a uniting force in cyber security in Q3, we hosted Falcon, our flagship customer and ecosystem event with more than 4000 attendees and 70 sponsors. This was fast followed by our Falcon on the road series, where we have already hosted fell.
Tokyo and for Alcon, Sao Paulo with thousands in attendance.
The drumbeat of innovation with loud and clear with multiple releases and announcements showcase a crowd strike as the xdr leader, including.
The Falcon platform rapid release, which standardizes.
All of our customers are large scale.
This builds our platform data gravity coupling native Falcon data with third party data ingest.
Further, enabling our customers to realize Sim and xdr use cases on Falcon Falcon for it a new module to unify and tech ops from hygiene to passing Falcon for ITE less customers consolidate multiple use cases and replace legacy products with our single agent architecture, our new Falcon.
Data protection module that liberates customers from legacy DLP products with modern frictionless data security, which prevents data exploration Falcon foundry, a no code application development solution, enabling both customers and technology partners to build directly on talcott.
Andrey epitomize the true definition of a platform offering literalists apps, we announced the acquisition of biotic, bringing application security posture management to the Falcon cloud security suite.
Falcon cloud security is the industry's most comprehensive and innovative product security offering with integrated agents and agent list CSP M. D E <unk>.
DWP and now a SPM, we released the beta and pricing for Charlotte AI or AI powered stock analysts, which was incredibly well received perhaps rates generative AI leveraging multiple foundational models can turn hours of work into minutes while democracy.
Rising cyber security unlocking value and adoption across the entire breadth of the Falcon platform.
<unk> asking for Falcon for ISG, our automation and hygiene module for ITE team is exciting to witness because it is something so intuitive that our customers want.
Like data protection.
And for IC solve a clear and long neglected pinpoint where customers are forced to rely on multiple legacy products that have long outstay. Their welcome customers are eager to consolidate their agent state, while reducing cost and complexity.
Falcon for it illustrates the power of craft strike single platform approach.
We have the real estate and data foundations itself ever evolving use cases.
Our customers, while disrupting vendors that have failed to evolve.
The resounding takeaway from my customer engagements at Alcon and throughout the quarter is that crowd strike is the right choice for Cisco's Cio's executive teams and boards, Here's what our bill by design single platform architecture requires no integration no stitching and no.
<unk> platform innovation.
Our unified cloud native platform and critical beachfront real estate within the customer state naturally create cyber security data gravity.
For today's challenges, while preparing for the unknown as of Tomorrow.
Organizations are looking for a trusted cyber security consolidator crowd strike is cyber securities AI consolidator liberating organizations from a litany of increasingly ineffective legacy tools multiple agents point products and fragmented pseudo platforms illustrating this point deals with eight.
Or more modules increased 78% year over year in the quarter.
This is what consolidation looks like and third stopping the breached matters more today than ever adversary has continued to evolve moving faster and increasing their use of dark AI, turning AI into a weapon for evil at the same time legislated and SEC regulatory oversight.
<unk> boards and executives to prioritize cyber security with these three takeaways in mind, let's start by expanding on the first white Kraft striking is the definitive single security platform.
Multiple fragmented platforms console and data silos force customers to focus on integrating not security outcomes, our relentless focus on innovation and commitment to a single built by design platform create cyber securities source of truth.
Built on this platform foundation, our cloud identity and large scale next Gen. <unk> products are examples of IPO worthy hyper growth businesses, let's take a look at our momentum in cloud security.
Both accelerated in the quarter and we're entering Q4 with a record pipeline.
Noteworthy wins in the quarter included an eight figure total deal value with our new Falcon customer in the hospitality vertical where we now secure their vast multi cloud a state as part of a broader Microsoft replacement.
A seven figure cloud security expansion with one of the largest enterprise SaaS providers, where we replaced multiple existing point products with Falcon cloud security.
A seven figure cloud security expansion with a major apparel brand, where we replaced a firewall hardware vendors cloud security with our unified Falcon cloud security offerings.
<unk> has one of the largest and fastest growing cloud security businesses by our customer count.
The number of customers, we protect the public cloud has increased 45% from last year as we rapidly replace other cloud security vendors in the ecosystem.
Point product API based <unk> have emerged as the easiest to replace as the market rapidly adopt our consolidated view that together agent and agent with security stops the breach combined with our recently completed Bionic acquisition.
The only vendor offering ASTM <unk>, DWP and <unk> under a single B nap umbrella moving.
Moving to identity threat protection, where we delivered a record quarter more and more companies are investing in protection from the growing number of identity based attacks with highly visible breaches permanently covered in the news over the past few months <unk>.
Identity threat protection wins in the quarter included an eight figure total deal value win in the federal government, where Falcon identity landed at the identity security solution of choice.
And multiple seven figure wins across diverse verticals, including financial services consumer packaged goods and manufacturing to name a few we see a long runway for guiding organizations on their zero trust transformation with our identity threat protection, given a rapidly growing threat vector.
A largely untapped market, where most organizations are protected and our frictionless unified architecture that secures identity across devices.
<unk> domain controllers and active directory.
<unk> pioneered the identity threat protection category and we are unmatched in the market as the only company with a single agent solution for both on Prem and cloud environments moving.
Moving to large scale or large scale nextgen thin business achieved new records in Q3, they are passing the $100 million AAR milestone the.
The combination of search speed data gravity and cost efficiencies all integrated within the Falcon platform.
Large scale miles apart from its competitors. However, it is the future of this business that really excites me are large scale nextgen Sim opportunity is supercharged by pervasive discontent with legacy <unk>.
Our recent M&A activity and crowd strike growing position as cyber securities platform of record.
We have seen a significant and pronounced increase in interest among customers looking to leapfrog their expensive cumbersome and slow legacy sales.
Our next Gen Sim offering is the right technology and the right place at the right time to benefit from market dynamics and the scale of crowd strike.
Q3 wins include a seven figure expansion in our major consumer Staples company selected large scale to ingest data from third parties correlate alerts and benefit from long term data retention, a seven figure financial services, new customer lands, where <unk> was called in to stop a breach.
With the desire to operationalize their high fidelity security data without compromising on cost Falcon log scale was an easy choice to replace the incumbent Microsoft.
Seven figure new logo land in a business process outsourcing firm that had decided it was time to replace our antiquated Sim with large scale. While also adopting the falcon platform for xdr identity and cloud security.
Our advancement into the next Gen 10 market is accelerated by the Raptor release with strength log scale to the forefront of the Falcon platform experience with Raptor, we've made it significantly easier for customers to build their security and data Lake efforts on top of lock scale next Gen. Tim across our native first party data.
And that of any third party products, our single platform approach evolves and broadened the aperture of cyber security.
Sure Ikea cyber Securities AI consolidator liberating organizations for legacy Avi, thus far edr's at a hodgepodge of hygiene compliance vulnerability device management tools.
Lastly, and quantity Sims and a confusing alphabet soup of immature cloud point product.
This lengthy list of costly point products can be left behind saving tens of millions annually for businesses.
Most importantly, stopping the breach matters more today than ever before.
Adversaries don't discriminate no matter the industry vertical the geography or the business side stopping the breach is non negotiable.
The business disruption and financial losses from breaches are growing coming quarters on security is one of the most costly choices a business can make the.
Costs associated with cleaning up a breach can exceed $100 million.
Our seminal cyber security platform innovation as well as threat intelligence and service expertise delivers the best security outcomes. This is why we were stopping the breach is the security outcome that crowd straight delivers this makes our business incredibly durable and diverse economic cycles, we are a business necessity.
When this quarter exemplifying our unmatched capabilities is a large multinational who was using legacy edr until they were breached they called crowd strike and we quickly remediated breached seeing the power of the Falcon platform. This customer purchased Falcon complete identity complete and lock scale next gen.
Tim for hundreds of thousands of workloads.
This large multinational in their time of need showcases crowd strike differentiation.
Our AI trained on cyber securities richest dataset drives the industry's most comprehensive protection and automation.
A couple of the right technology platform with cyber security is best and brightest incident responders and the expertise that comes from Curating, the industry's leading threat intelligence the.
The need for stopping breaches is not just an enterprise concern.
Problem is just as pronounced in the F&B market, especially the S of F&B, where businesses remained stuck on legacy signature based AAV oftentimes not knowing that better exists for them.
Falcon go is fit for purpose delivering big protection for their small business.
With our latest release with Falcon go we delivered a whole new user experience, creating the easy button for cyber security removing the need for crowd strike users to have cyber or it skills. The new console is intuitive and pre configured for immediate F&B success.
We're always looking to remove the friction from the customer experience and this new release makes Falcon go as easy as one click to accelerate customer adoption.
Sal can go is a major step for F&B cyber security and we are now investing in go to market.
We launched sales of Falcon go on Amazon business, a marketplace, where over 6 million Smbs purchased everything for their businesses with Falcon go our mission of stopping breaches extends to businesses of all sizes large and small.
Our go to market is propelled by our partner ecosystem.
<unk> spring crowd strike into new accounts and drive platform adoption in existing customers.
Year to date, 62% of all our new logo wins were partner sourced.
The efficacy of success of our channel led growth was reported by <unk> the channels, leading industry analyst firm in their most recent cyber security research.
<unk> reported crowd strikes endpoint market share as number one ahead of Microsoft. In addition, the research highlights crowd strike is the fastest growing cyber security vendor in the channel ahead of Microsoft and Palo Alto networks among others.
We are setting new records, we announced surpassing $1 billion in AWS marketplace sales being the first and fastest cyber security vendor to reach this milestone exemplifies crowd strike leadership position as the cloud cyber security platform of choice and our AWS momentum is not slowing this past quarter.
A crowd strike record AWS marketplace quarter.
Our global systems Integrator Alliance partners are increasingly engaging with us across the entire Falcon platform. For example, <unk> built a 150 person strong and growing global large scale next Gen 10 practice based on the demand, they're seeing Chris Tim transformation and our technologic.
<unk> superiority. In addition, <unk> refers their clients the crowd strike for incident response engagements and secured digital transformation projects.
We have done over $160 million in business with E y across 24 countries.
In closing and a challenging macroeconomic environment, which impacted even the largest cyber security vendors, we delivered a record Q3.
Accelerating double digit net new <unk> growth record free cash flow and record profitability.
Passing $3 billion of <unk> as the fastest and only pure play cyber security software vendor in history to achieve this milestone validates crouch rates market leadership, our Q4 setup is strong with a record pipeline.
And the competitive gap between crowd strike and other players in the market continues to widen.
Excited about the path, we're on and the progress we are making to $10 billion in <unk>.
Today's cyber environment is exactly why I built crowd strike the adversary is moving faster and the rise of dark AI significantly increases attackers sophistication.
Falcon is made cyber security easy and effective for small businesses to the worlds largest enterprises.
Simply put crowd strike, a cyber securities platform consolidator of choice.
That form it's winning at scale, our customers are looking to Falcon for more more workloads more use cases and more security outcomes craft strike remains unrelenting in our focus and promise.
Stopping the bridge with that we have a busy and exciting Q4 ahead of us and I will now turn it over to Bert for commentary on our financial performance.
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.
Additionally, the results. We are reporting today include the acquisition of Bionic, which closed during the quarter and was de Minimis to revenue and <unk>.
Outstanding execution from the crowd strike team resulted in a record third quarter. Despite a continued challenging macro environment.
Financial highlights in the quarter included an acceleration in net new <unk> growth driving ending air are well above the $3 billion milestone.
96% year over year growth in operating income and record operating margin.
Record net income, which more than doubled year over year.
Record GAAP profitability for the third consecutive quarter and record free cash flow.
In the third quarter, we achieved record net new <unk> of $223 $1 million with year over year growth accelerating to 13%.
Demand in the quarter was broad based as we expanded our leadership across the market from large enterprises to small businesses.
New customer acquisition strong expansion business within existing customers and a record quarter with the U S. Federal government contributed to the acceleration in net new <unk> growth and ending <unk> reached 315 billion.
Up 35% year over year.
We continue to be very pleased with our platform strategy at subscription customers with fiber more six or more and seven or more modules now represent 63, 42, and 26% of subscription customers respectively.
Our gross retention rate remained high and our dollar based net retention rate was slightly below our benchmark in Q3 as the mix of net new <unk> from new customers has remained above our expectations and we continue to land bigger deals.
Moving to the P&L total revenue grew 35% over Q3 of last year to reach 786 zero million.
Subscription revenue grew 34% over Q3 of last year to reach $733 5 million.
Professional services revenue was a record $52 $6 million.
Representing 57% year over year growth.
The geographic mix of third quarter revenue consisted of approximately 69% from the U S.
15% from Europe, Middle East and Africa.
10% from the Asia Pacific region, and 6% from other markets.
Our investments in data center and workload optimization that we outlined in our Falcon investor briefing in September continued to bear fruit, resulting in record subscription gross margin performance above 80% in the third quarter.
Total non-GAAP operating expenses in the third quarter were $436 1 million or.
Or 55% of revenue versus $348 $6 million last year or 60% of revenue.
Q3 sales and marketing and R&D expenses grew 23% and 31% year over year, respectively.
We continue to invest aggressively in innovation and growth, while exceeding our profitability expectations.
Third quarter non-GAAP operating income grew 96% year over year to reach a record $175 7 million and.
And operating margin increased by seven percentage points year over year to reach a record 22%.
As we outlined during our Falcon on Investor briefing in September we have once again raised our target model, which now calls for subscription gross margin of 82% to 85%.
Operating margin of 28% to 32% and free cash flow margin of 34% to 38%.
We expect to achieve our new target model within the next three to five years as we also flagged the company to reach $10 billion of <unk> over the next five to seven years.
non-GAAP net income attributable to crowd strike in Q3 grew to a record $199 2 million or 82 on a diluted per share basis.
Each more than doubling year over year.
Our weighted average common shares used to calculate third quarter non-GAAP EPS attributable to cross rate was on a diluted basis and totaled approximately 244 million shares.
We ended the third quarter with a strong balance sheet cash and cash equivalents and short term investments totaled $3 $1 7 billion.
And reflects the $238 $7 million payment net of cash acquired for the acquisition of buy on it.
Cash flow from operations was a Q3 record of $273 5 million.
Free cash flow reached a record 239.0 million.
30% of revenue achieving a rule of 66 on a free cash flow basis.
Moving to our outlook as George outlined strong demand for the Falcon platform is driving our pipeline to new Heights. However, the macro environment remains challenging with continued increased budget scrutiny and as a result, we are not expecting to see the typical Q4 budget flush.
Balancing these factors we are maintaining our net new <unk> assumptions, which call for in line to modestly up net new <unk> for the full year and double digit year over year net new <unk> growth in the second half.
As our guidance reflects we are raising our full year revenue and profitability expectations for the year. Additionally.
Additionally, we are maintaining our target of 30% free cash flow margin for the full fiscal year.
More specifically for the fourth quarter of FY 'twenty four.
We expect total revenue to be in the range of $836 six to 840 points euro million dollars rich.
Reflecting a year over year growth rate of 31% to 32%.
We expect non-GAAP income from operations to be in the range of $186 five to 189 zero million.
And non-GAAP net income attributable to crowd strike to be in the range of $199 six to $202 1 million.
We expect diluted non-GAAP net income per share attributable to crowd strike to be approximately 81 to 82.
Utilizing our weighted average share count of 245 million shares on a diluted basis.
For the full fiscal year 2024, we currently expect total revenue to be in the range of $3046 eight to 3000 $52 million.
Reflecting a growth rate of 36% over the prior fiscal year.
non-GAAP income from operations is expected to be between $633, six and $636 2 million.
We expect fiscal 2024, non-GAAP net income attributable to crowds rig to be between $715, two and $717 7 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 $2 95.
To $2 96.
George and I will now take your questions.
Okay.
As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.
Our first question comes from the line.
<unk> Kalia of Barclays.
Okay, Great Hey, guys. Thanks for taking my question here and great to see the net new IRR.
Returned to growth in the quarter.
Okay.
George maybe maybe for you a lot of great stuff in your prepared remarks to run through but maybe I'll just stick to one question here.
You've talked about how the legacy Sim market is starting to feel kind of like the legacy market did.
And of course, we have recently seen some M&A in that market.
It's probably too early but but maybe the question is what are perspective, Sim customers, saying to you about log scale and their willingness to explore other solutions. Besides their traditional Sim does that makes sense.
It does yes, it's a great question. So when I look at the market today and I compare that to when I started crowd strike in 2011, and really talking to customers in 2012 in 2013 about replacing their legacy <unk>. It feels like it's the same conversation.
Just with a different context of replacing their legacy Sim.
What I found and I tend to like businesses and markets, where this is in play as we are the incumbents.
Our entrenched but have a high degree of dissatisfaction where the technology is legacy.
And where the complexity is type of patching all this stuff together and in talking to customers they want better better faster cheaper and they want something that works at cloud scale. If you look at what we've done with log scale. It's a much more modern version of a Sim and Nextgen Sim.
We got ahead of the curve a couple of years ago, when we bought <unk>, which network scale, we've now integrated into our platform and its extended out our xdr technology and it allows us to do log and Sim.
And the same platform so from our perspective, the feedback that we've got not only from customers, but partners like <unk>, who are building practices around this this is a massive opportunity for crowd strike and now is the right time for us given the level of dissatisfaction M&A and the environment and the customer's willingness to look for a much better solution.
Which also gives us data gravity in the platform.
Makes a lot of sense. Thanks, guys.
Thank you.
Our next question please standby.
It comes from the line of <unk>.
Joel Fishbein of truest.
Thanks for taking my question and good quarter on the net new <unk>, Georgia. Another question, along second line, but around.
The comments you made with regard to data protection.
The same can be said about the legacy DLP market and as you know I.
I would say thats, even longer in the tooth from some of the Sim market players out there love to hear how you are you didn't talk about it like you did cloud security identity protection log scale et cetera.
In that displacement market and how big do you think they are what's the competitive dynamics there would be really helpful. Thank you.
Sure well, we actually showed our data protection technology itself kind of couple of months ago. We're actively working with some of the largest enterprises in the world to.
To make sure that we count for all of their requirements and their ability to actually move off their legacy DLP product. There is not one customer that I've talked to you that says they liked the DLP product period and in today's environment with data in motion.
He goes through cloud services, the ability to actually be able to track from endpoint through cloud where data moves what type of data is out there leveraging our AI to understand.
Is it something that should be moving in certain places it can be incredibly important and the way. We look at it is the same way we looked at legacy JV. There is a better way to re imagine deal.
Into Falcon data protection.
And we're very very close to being able to release that as we continue to put defined touches on what customers are looking for and what they're willing to write a check for it so stay tuned but another massive market opportunity for us.
Thank you.
Our next question.
It comes from the line of Rob Owens of Piper Sandler.
Great. Good afternoon, George I guess staying on theme here with these extensible Adjacencies, maybe you can touch on Falcon for it what early response has been since.
I guess showing it to you.
<unk> user conference and where you see the opportunity on that front.
Well coming out of fall kind of I would say that was the number one.
Requested feedback item across all the great announcements that we had.
I think it's still redo in in the technology space to be able to unify it and security.
Sometimes the technology is in the harder part, it's the org structure, so having a single agent that both <unk>.
Security and.
And it can use a home for it I think.
Very important.
We're actually working with large customers right now gathering their feedback and then we look to have a.
Our product out probably in Q1, but so far the feedback has been amazing in terms of what we've already delivered and now we're capturing additional capabilities for our first release. So I think that one is has a lot of legs to it and certainly opens up a massive tam opportunity for us in it.
Well beyond anything in security.
Given the agent cloud architecture that we built we've got the real estate and we plan to monetize.
Thank you.
Our next question.
Comes from the line of Matthew Hedberg of RBC.
Great. Thanks for taking my question.
Bert I've got one for you obviously you didn't comment on fiscal 'twenty five I believe at this point last year, you did give a couple of bread crumbs on how to think about IRR I'm curious as we as we sort of sharpen our pencils on 25 are there any guidepost or things that we should think about whether it's growth or profitability.
Hey, Matt Great question, so for us we.
We're always looking to maximize our growth while at the same time paying attention to the bottom line. So that's never changed.
Absolutely going to continue to invest in innovation.
Got we announced so much at our last Alcon.
Got a lot of momentum we're going to continue to invest to continue that momentum, but also at the same time, we recognize that we want to make sure that we are a very well run company and people are seeing the output of that certainly on this quarter and we don't plan on changing that at.
At all for next year.
Thank you.
Our next question.
It comes from the line of John di Fucci of Guggenheim.
Thank you.
George it's impressive to really see the consistency of your team that scale here.
I'm just curious how did traction continue into the end of the October quarter, and then again I mean, we're almost through November relative to the October period, and the reason I'm asking this is that we've generally heard of a seed in business activity through October across the industry not necessarily with you I mean actually we didn't hear with you but across most.
Others, and it's actually sort of shown up in the results of some of your security peers. So just wondering maybe.
What are you seeing what did you see into the end of the quarter and what are you seeing at the beginning of the January period.
Yes, we certainly had a strong October.
As I said in my prepared remarks.
The macro environment is still is still challenging and we make no mistake about that deals take longer a lot more scrutiny lot of sign offs.
And Theres a lot more work that goes into these larger enterprise deals getting deals done even like Falcon flex, which are more enterprise like in their nature takes time so.
We had a great October but in general.
Buyers are still cautious and I think the fact that we're able to provide a real platform play that allows them to consolidate and other technologies and ultimately save money accrues values to us, but it certainly takes a lot of time and effort to get the deals over the goal line, but the team did a great job.
October was strong for us.
Thank you.
Our next question.
Comes from the line of Liana <unk> of Bank of America.
Hi, guys.
First question is Bionic contribution you said was de Minimis.
Can you define with de Minimis for net new the contribution to net new IRR.
And then quarter was phenomenal, but I do see some weakness across the board.
Of cyber companies with billings.
In your case it was down about 2% I also see some weakness in deferred revenues, how do I reconcile what I see with billings with deferred.
With with the.
Underlying drivers that are very strong and you have a strong execution.
Why is why are we seeing weakness not just with you maybe with the entire space with why are we seeing weakness with billings across the board.
Thanks, Todd Good question I'm going to start with billings.
Yes, you are correct for us specifically.
We don't manage the business to billings and we feel.
<unk> gives you the absolute best proxy to revenue and we felt that that's the right metric as you know since we've been public to give you more transparency into the health of our business and Thats the metric that really guide to Angel.
With respect to billings ourselves I mean, we think about billings.
Probably most of you out there is that billings typically for hardware companies use that when they don't disclose any sort of bookings metric and MFS models right. We think that billings has certain things that just are not as relevant as as a metric like IRR, you're comparing a balance sheet item to a P&L item for us.
The P&L is going to dictate the health of the business so for us billings.
Billings, obviously is going to be impacted by duration and there are many things that go into that.
And.
Remember also that when you think about on a year on year basis, we're still up on buildings and that's the one thing that you want you want to take away.
For us when we think about how we want to continue to be transparent.
There are really gives you that notion of where we're going and how we're doing and I think that that's the focus and it has been by the way since we went public even as a private company. That's the one that we manage the business to that's how we.
Look at how to.
Give out cortisol reps et cetera et cetera.
So for us that's not going to change.
And I hope that I hope that answers that question.
Thank you.
Our next question.
Comes from the line of Adam Borg with Stifel.
Awesome. Thanks, so much for taking the question maybe just for George on <unk> App, It's obviously great to hear the traction.
As we look ahead should we still gives us more of an upsell opportunity.
Existing customers are what needs to happen for this to be more of a tip of spear to drive net new logos. Thanks, so much.
I'm sorry.
And repeating your question.
Great can you hear me Okay now.
Yes, I can.
Great sorry about that maybe just unseen app.
Great to see the continued traction there and as the market matures should we view this.
As more of an upsell opportunity or what needs to happen for this to be more on the tip of spear to drive net new logos.
Yes.
It's really a bright star for us when you look at our C&I capabilities of cloud workload protection <unk> SPM now with Bionic, we really have I think the one of the most complete cloud security offerings in the industry and we're winning deals with it we're leading in many cases, particularly.
Really forward leaning cloud companies that we're selling too if you look at the latest threat environment and what's happening.
How identities are being abused in two.
Two factor authentication systems being bypass those sort of things it's important to have a full suite of cloud protection and I think this is this is sort of the awakening time for for that industry and that companies can't just say hey, we've got something.
From a cloud provider or we're going to go at it alone.
Remember many many many years ago.
Companies didn't run anti virus and you would you would say that's silly to everybody runs and anti virus type technology.
So silly, 30% 35, plus years ago, and I think this is kind of the inflection point in the cloud world, where youre going to have multiple levels of protection, both agent and agent list and the fact that we've been able to harmonize those two together and deliver a very robust agent list technology combined with the best cloud workload protection in the industry gives us a real advantage.
Thank you.
Our next question.
Comes from the line of Mike Walkley of Canaccord Genuity.
Great. Thanks, George you touched on the new releases Falcon go to better target SMB customers with more concise packaging can you just give us some color on how this segment of your business is trending as some of your competitors have called out sort.
Soft F&B spending due to the macro and also just how is this new release, helping address pain points for these smaller customers is it seems like youre starting to accelerate our win rates in this segment.
Well, we saw a very strong SMB segment, we've done a lot of work <unk>.
Starting with our partners.
Like <unk> and others Dell.
In that market, so meeting the customers, where they like to buy is really really important and then coming up with a very innovative and easy to use technology designed for the SMB. Our latest release of Falcon go is literally one click install and the feedback that we've gotten from customers are like Wow. This is the easiest thing I've seen it just works.
And I think youre going to see even more broad adoption because we've made it so easy to install you don't have to be an it professional and then we've got our partner network that are building services around it so they're able to generate dollars, we're able to solar product through their channels, where they meet the customers.
And I think we've taken a very innovative and effective approach in our partnering strategy and this is something that we've really worked on over the last year 18 months and we're bearing the fruit of it right now.
Thank you.
Our next question.
Comes from the line of Gray Powell <unk>.
Yeah.
Okay, great. Thank you for taking the question.
Yes, I was just wondering if you could repeat the commentary on the potential for a year end budget flush I think you said that it was not going to be a typical year and if I remember correctly last year. The commentary is more like theres going to be little or no budget flush. So I guess my question is like how does this year looking comparison is better same worse I'm just sort of what's.
What's your confidence level on trends.
I think we're looking at it saying.
It may not happen right. So we're not necessarily counting on that and if it does happen fantastic and you have to again keep in mind that.
Our fiscal year end is the beginning of a new budget cycle as well. So we have year end budget. If it comes in December and the new budgets in January.
But the macro environment.
I would say has remained steady.
As I said earlier is still challenging and.
We will see if a budget flush comes but that's not something that.
We're counting on.
Thank you.
Our next question comes from the line of Jonathan Ho of William Blair.
Okay.
Hi, congratulations on the strong quarter I, just wanted to get a little bit more color around the Charlotte AI revenue potential and maybe what customer use cases are seeing the most interest so far thank you.
Well, we announced our pricing and sell con that was actually well received with customers.
And.
In terms of the overall.
Use cases as as I've talked about in the past really it's helping a tier one stock analysts.
Up level themselves to be a tier three rate its really driving sock automation.
Is a big focus for us with things like Charlotte and things like Falcon foundry, how do you drive automation into organizations to give them better outcomes at the end of the day they would.
Would be willing to pay for something it's going to save them time or money or make their job easier.
And what we've seen in the customers who are using.
Charlotte right now in preview mode as they are able to do things way faster than they ever could and theyre able to explore and ask questions that they haven't been able to do in the past right.
It just makes it so easy to have Charlotte gather up all the information and then taken action on their behalf. So.
The pricing has resonated well with customers.
We'll see how it shakes out is as we get into full swing of things.
But overall, what we've put together and the fact that it isn't an independent chatbot, it's really a foundational platform services, it's wired into everything that we do.
It allows automation through all the modules I think is a homerun for us.
Thank you.
Our next question comes from the line of Gregg Moskowitz Mizuho.
Okay. Thank you for taking the question George in your prepared remarks, you expressed a lot of excitement for Falcon for it but in addition to better security better unification with it. It also strikes me as having the potential to be a real ROI driven sale for many customers do you agree with that and if so is that going to be an angle that can really go.
The answer from a go to market standpoint.
Well, it's exactly what we're hearing from customers with customer last night and they were saying we're still excited with Falcon for it because we've got to work we find the problems with document them and then we've got to work with the teams to get them fixed and a lot of times, they're tooling is well behind what we can do with Falcon.
Sort of ended up fixing it themselves with it because we just have the capabilities to do that so to be able to carve out a home for it.
Seamlessly help them understand their exposures on their assets that matter and then drive the automation to actually remediate those.
Is incredible and it goes beyond just kind of simple remediation. If you think about all the internal use cases in HR.
And employee.
It might have an issue they might have to investigate it might have to do forensics on systems systems or remote all over the world. We've got many many airlines that use our technology, they don't want to send out a.
Person to go fixed kiosks it has.
Microsoft Blue screen, so what can they do they can use falcon for it to bring it back to health tremendous.
Tremendous savings in terms of cost and travel and complexity. So.
This one I am really really excited about and again, we're working to get all the components of what customers need at least for this first release and then I think sort of the sky's the limit of what we can build out there.
Thank you our next question.
It comes from the line of Gabriela Borges of Goldman Sachs.
Good evening, Thank you Jordan.
I have a question for you as you think about your fiscal year 'twenty five planning assumptions you mentioned a couple of times that the macro environment is very consistent.
Clearly the execution on growth and profitability is very consistent.
Love your observations on what's incrementally changing meaning as you think about your priorities into next year, what can you versus this time last year. Thank you.
Well I'll start and then I'll, let Bert jump in I think from a priority perspective, just on go to market and product and let you talk about the fiscal piece Bert but.
We continue to drive innovation, our focus has been on innovation not integration.
And I think that's shown and what we've been able to deliver in the market how fast we've been able to come out products that alcon was our richest release of technologies. So we want to continue to be the innovation leader in security and I think customers will recognize that from a go to market perspective, there's a lot of work that we've done in.
Terms of really really making sure we've got the right hygiene across the enterprise and making sure that we can prestige.
Basically time in sales cycles to get deals done when we need to investor demand and then also as we go down market into SMB, creating the right products for that.
Segment, and then delivering it through the right channels. So what we have is working so it's going to continue to drive innovation continue to remove friction in a go to market motion and continue operational excellence.
Up and down the sales and the partner.
Organization versus thanks, George So in terms of how we think about the macro next year, we're not going to predict a change in the macro until we actually see it alright, I think thats going to be that wait and see game for most companies and that certainly the one that we're going to take.
But.
That's how I see it.
Thank you.
Our next question.
Comes from the line of Alex Henderson of Needham.
Great. Thank you so much.
Thanks for great print, but I was hoping you could give us some.
Some clarity around some of the key metrics that people use to track conditions.
As your rates.
Stable, improving or eroding cycle time.
No you've said your deal sizes up and I think that the.
At Falcon, you talked about a significant increase in pipeline build.
I think the comment was made on the stage that.
If your pipeline target.
Tried to build.
<unk>.
More than double the target.
So I was hoping you could talk about what the pipeline looks like.
Go into this quarter.
The new year.
Great well when we look at the current macro environment is stable, but as I talked about in the Q&A and in the prepared remarks, it's still a challenging environment takes a lot of effort to get deals done.
And again it depends on the segments some segments are going to be a little bit longer in enterprise and SMB.
A little bit shorter, but that being said when we look out and we look at things like our pipeline.
We have a record pipeline and we have that because I think we've got the best product.
Suite in the industry, we've got customers that are truly understanding the platform capabilities of what we've built they're coming to us and saying hey, let's sit down.
And go through your road map in our road map and let's figure out what we can consolidate so they are coming to us with the openness of wanting to buy more.
And leveraging things like Falcon flex to be able to.
I have bigger commits at crowd strike, which is important and.
Overall, as I said still a tough environment, but I think we've got some key metrics like the pipeline that is encouraging to us and when you look at large scale in our cloud business and our identity business I mean these are.
Absolutely bright stars across the entire platform and again keep in mind, we're not selling individual piece parts people are buying the platform.
And Thats whats driving the growth.
Thank you.
Our last question comes from the line of Eric Keith of Keybanc capital markets.
Great. Thanks for them in here, George I guess I'll come back to the same conversation. So I appreciate the color on the synergies of using large scale to do analytics on top of your first party data that you're already capturing makes a ton of sense.
I guess can you flush out a bit more as to why your AI engine in Europe proprietary endpoint data is a better approach to capture the next gen. Some opportunity that many seem to be targeting including those that tend to have more first party data sources.
Well when.
When you look at.
Just kind of the data gravity and what customers care about from a security perspective, I would say, 85% of really the value of the data and the data. That's generated comes from the endpoint that really is the richest source of data because that's where it is generated from as it goes across the network.
It gets down selected and you lose a lot of the fidelity. So we already have a lot of that data. So let's start there and then when you look at large scale large scale is very robust. It has the capabilities to adjust just about any type of third party data.
The product and very effectively with without creating an index, which is its unique capabilities index readjusted and which means you get immediate results.
So from a platform perspective, we sort of have the greatest data gravity already we've got that 85% of the data so customers would rather give us 15% that we don't have and leverage.
Block scale.
To replace their Sim.
And beyond replacing their Sim that's the security use case, we have customers. Many many customers that use it for all kinds of performance management logging their infrastructure logging their kubernetes clusters. So when you combine the fact that we're coming out with Falcon for it now.
Now with <unk> scale, which can log any data above and beyond security, we think thats a much broader opportunity than just Sim itself.
Turns up the entire data architecture of an organization to crowd strike.
Thank you I would now like to turn the conference back to George Kurtz for closing remarks, Sir.
Well, thank you and I first want to close by acknowledging the heroic dedication of our team in Israel, who continue to remain focused on proud strikes mission. Our thoughts are with each and every one of you in these trying times.
Thanks, All of you for your time today, we appreciate your interest and look forward to seeing you at our upcoming investor event and happy holidays.
This concludes today's conference call. Thank you for participating you may now disconnect.
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