Q3 2025 CrowdStrike Holdings Inc Earnings Call
Conference call.
Speaker Change: Good afternoon, and thank you for your participation today with me on the call are George Kurtz, Chief Executive Officer, and 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.
Speaker Change: Those regarding our future plans objectives growth, including projections and expected performance, including our outlook for the fourth quarter and fiscal year 2025, and any assumptions for the physical periods beyond that are forward looking statements within the meaning of the private securities.
Speaker Change: Litigation Reform Act of 1995.
Speaker Change: These forward looking statements represent our outlook only as of the date of this call.
Speaker Change: While we believe any forward looking statements. We make are reasonable actual results could differ materially because the statements are based on current expectations and are subject to risks and uncertainty.
Speaker Change: 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.
Speaker Change: Further information on these and other factors that could affect the company's financial results is included in the filings we make with the SEC from time to time, including the section titled Risk factors in the company's quarterly and annual reports.
Speaker Change: Additionally, unless otherwise stated excluding revenue all financial measures disclosed on this call will be non-GAAP.
Speaker Change: 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 day crowd strike dot com or on our form 8-K filed.
George Kurtz: With the FCC today with that I will now turn the call over to George.
George Kurtz: Thank you Maria and thank you all for joining our third quarter FY 'twenty five earnings call I'd like to start today's comments by sharing three key themes that excite me about this quarter and our bright future first trust the trust that customers partners and the market have been proud of strikes we grew ending <unk>.
George Kurtz: More than 27% year over year and maintain stable gross retention rates.
George Kurtz: Widespread platform adoption.
George Kurtz: Falcon Flex subscription model is Supercharging Falcon platform adoption with crowd strike cyber securities consolidation is rapid and ROI is measurable.
Falcon Flex is increasing both our share of wallet and enterprise real estate furthering for outbreak as cyber securities AI native platform of record.
George Kurtz: And third Trailblazing innovation from cloud to device data to Gen AI application.
George Kurtz: <unk> application to identity and compliance to resilience, our innovation disrupts legacy markets and create new categories.
George Kurtz: <unk> is leading the future of AI powered cyber security.
George Kurtz: The themes of trust platform adoption and innovation guide crowd <unk> customer obsession and continued strong execution.
George Kurtz: Following this summer's incident as a company we were tested we responded with speed care and resolve.
George Kurtz: And we focused on becoming even better continuing to deliver industry, leading cyber protection on the Falcon platform proven resilient and scaled AI native architecture I'm.
I am encouraged by crowd <unk> Q3 results, our first full quarter post incident.
George Kurtz: First ending IRR surpassed $4 billion.
George Kurtz: Making cross rate the fastest pure play cyber security software company to achieve this reported milestone tracking to our $10 billion.
Our vision.
George Kurtz: Q3 revenue surpassed $1 billion.
George Kurtz: Subscription revenue grew 31% year over year, and total revenue surpassed $1 billion for the first time in company history.
George Kurtz: Third free cash flow of $231 million or 23% of revenue achieving a rule of 51 on a free cash flow basis.
George Kurtz: Fourth we closed more than 150 Falcon flex transactions with these customers representing more than $600 million and total deal value and fifth more recently, we announced and closed the acquisition of adaptive shield, adding SaaS posture management to our portfolio.
George Kurtz: Further differentiating and connecting the Falcon platform cloud security suite and identity protection offerings.
In addition to these achievements I'd like to provide some perspective on what we saw in Q3.
George Kurtz: First Falcon customers are staying with <unk> as their trusted cyber security platform of choice Q.
George Kurtz: Q3, gross retention was over 97% down less than a half a percentage point.
George Kurtz: Strengthen retention was driven by the value that customers receive from the Falcon platform.
George Kurtz: Second Falcon customers are growing with US Q3 dollar based net retention was 115%.
George Kurtz: Temporarily impacted by the incident and reflective of customers' stressing their commitment to craft right customers are leveraging our customer commitment package and flex subscription model to both increase their long term investment in cross rate and increase their adoption of the Falcon platform.
George Kurtz: And third we're seeing exceptional strength in key verticals and market segments.
George Kurtz: Health care saw a record quarter as providers are investing in cyber securities criticality base on heightened and targeted attacks our corporate sales team covering organizations below 2500 employees had their largest quarter ever benefiting from Falcon flex.
George Kurtz: As well as successful competitive takeouts.
George Kurtz: These successes are in the context of cross brakes sustained fortune 500 market leadership.
George Kurtz: Our track record of AI innovation in market, leading protection delivered on our highly resilient and cyber securities. Most performing architecture continues to resonate at scale.
George Kurtz: Our competitive win rates remained consistent to trending upwards in our total deal size for new business trended up over the last year, which we attribute to the continuous evolution of our platform solutions across cloud security next Gen Sim identity protection data security and AI are.
George Kurtz: Our revolutionary Falcon flex subscription model and crowd strikes amplified brand recognition and favorable market sentiment from our transparent and deliberate response to the summers incident.
George Kurtz: Through it all we remain laser focused on innovation, which is what drives our platform differentiation customer stickiness and superior protection outcomes.
George Kurtz: This fall, we hosted the largest events and crowd strikes history Alcon, our global flagship ecosystem event in Las Vegas, where 6000 attendees joined us for more than 60 countries and 100 exhibiting ecosystem partners showcased their Falcon integrated solutions.
George Kurtz: More recently, we hosted our inaugural Falcon in Europe in Amsterdam, where we welcomed more than 1700 attendees from more than 50 countries and showcase nearly 40 exhibiting ecosystem partners. These.
These events demonstrate our continued global momentum innovation and the strength of the crowd cyber securities ecosystem building with through and around vouch for it.
George Kurtz: Both events generated significant pipeline.
George Kurtz: And the platform innovations, we announced attendees were captivated by our novel subscription model Falcon Flex, we announced the Falcon Flex model a year ago at Falcon in 2023, and we shared at our Falcon in 2020 for analyst day that accounts that had adopted Falcon flex represented more than $700 million and total deal value.
George Kurtz: We saw a remarkable and accelerating Falcon flex adoption in Q3 bolstered by our customer commitment packages with over 150 Falcon flex deals in the quarter.
George Kurtz: Unpacking. This momentum we did to Falcon flex deals every business day of the quarter on average.
George Kurtz: Accounts that have adopted the Falcon flex model now represent more than one 3 billion of total deal value with the average Falcon flex subscription being multiples larger than our typical contract value.
Flex customers enjoy preferred pricing for both their contracted modules as well as other current and future modules in our portfolio.
George Kurtz: And it all comes with the flexibility of access to the products. They want when they are needed through flex platform consolidation is rapid and ROI is real.
George Kurtz: Falcon Flex also became the key delivery mechanism for our customer commitment package.
George Kurtz: We've already worked through a significant number of ccp's with the remainder to be concluded in the upcoming quarters.
George Kurtz: We see Falcon flex steel volume accelerating flexes.
George Kurtz: Flex has ushered in a new tempo of module adoption.
We've seen customers accelerate their platform demand plans across our existing as well as new products.
George Kurtz: For example, upon announcing adaptive shield, we had a slew of flex customers easily asking if they could use their flex dollars for adaptive shield S. S. P M adoption.
George Kurtz: <unk> enables us to rapidly commercialize innovation, whether organic or acquired across our global sales team and partner network.
George Kurtz: <unk> is already proving to be a rapid platform adoption accelerator across the customer base, giving us confidence in net new air or acceleration in the back half of next year.
George Kurtz: <unk> also broadens the customer audience for crowd strike as a whole.
George Kurtz: We've talked about cyber security moving from the backbone to the boardroom with flex we've expanded our customer stakeholder audience to include the CFO.
The flex subscription model align cyber security investment and more specifically platform consolidation with measurable dollars incentives.
George Kurtz: And with <unk> financial services, we bring even more tangible financial value to cfos deepening our relationship and relevance to this increasingly important see XO persona.
George Kurtz: As we steadily engage with more CFO over the past year. The feedback has been resoundingly consistent with Falcon flex CFO can see the economic benefits of platform consolidation.
George Kurtz: The flex model <unk>, today's customer needs, while seeding future growth flex customers demonstrate the following falcon platform characteristics.
George Kurtz: More Falcon platform adoption flex customers on average have adopted more than nine modules and we expect to see these numbers continue to rise faster Falcon platform adoption all of our flex licensing has happened in the past 12 months and looking at this customer cohort the amount of adoption, we've seen at speed and scale as <unk>.
George Kurtz: <unk> with flex, we have seen some customers more than double or even more than triple their module adoption increased investment in craft freight flex has allowed us to increase our share of wallet consolidating multiple point product vendors.
George Kurtz: Looking at Q3, the average craft for a customer spent hundreds of thousands while the average flex customer spent multimillion dollars.
George Kurtz: At the same time flex seamlessly takes cost out of cyber security programs, eliminating organizational and product inefficiencies from the long list of legacy disjointed point product cyber security tools.
Alongside Falcon Flex a success and larger transactions overall was the announcement of cross <unk> financial services.
George Kurtz: CFS, our financing arm that alliance customer cyber security and cash flow objectives.
George Kurtz: CFS gives customers financial flexibility, while driving larger deals faster deal cycles and longer subscription duration.
George Kurtz: And our first quarter of CFS, we closed more than $49 million in deal value, including two eight figure deals here are a few flex noteworthy wins and eight figure expansion deal with a fortune 500 travel leader, who saw it CCP pricing to do more with crowd strike growing their spend with us by over $15 million.
George Kurtz: Despite impact from this summer's incident, our response and partner assisted recovery solidified trust and inspired increased Falcon investment.
George Kurtz: From the board to executives to the cyber security team.
George Kurtz: Through flex this customer expanded their falcon demand plan to include Falcon cloud security file integrity monitoring firewall management and data protection going from eight modules to 14 modules and a single flex transaction.
George Kurtz: An eight figure new logo land with a global 2000 technology manufacturer, where Falcon displaced legacy AVB legacy Sim and the legacy vulnerability management product.
George Kurtz: <unk> reflects the customer was able to go all in on the Falcon platform for Edr Nextgen Sim Falcon complete MTR identity protection threat intelligence and exposure management consolidating four vendors in this initial flex purchase consolidation goals achieved protection outcomes.
George Kurtz: Livered and platform adoption success.
George Kurtz: Closing off on Falcon flex customers are spending more entering into longer subscription terms and taking the opportunity to achieve their consolidation objectives faster, we expect to see faster and larger <unk> uplift over time through the Falcon Flex model.
George Kurtz: Aligning the industry's leading cyber security platform with our revolutionary subscription model is a lightning in a bottle combination for current and future growth next I'd like to share our innovation progress, where we're trailblazing, new cyber security outcomes across cloud security identity protection and next Gen. Jim In addition to our day.
George Kurtz: <unk> AI and it investments.
George Kurtz: We're incredibly excited by the innovation, taking place within both our cloud and identity businesses.
Speaker Change: We recently announced the acquisition of adaptive shield, a leading vendor in the fast growing SaaS security posture management or S. S pm market Adair.
Speaker Change: Adaptive shield bills on our AI leadership, giving us unmatched coverage of the rapidly growing SaaS threat plane with more than 150 native integrations across everything from CRM tools to cloud backup to workforce productivity.
Speaker Change: More importantly, adaptive shield slots and perfectly as a complement to both our cloud and identity security businesses with multiple integrations already completed. Another example crowd strike charting the course ahead of the market within cloud security is the combination of adaptive shield with our core Falcon cloud security functionality gives us the broadest cloud.
Speaker Change: Security ecosystem coverage. This move builds on both our organic developments as well as the recent acquisition of Bionic and flow.
Speaker Change: With adaptive shield crowd Frank is the only platform delivering an end to end cloud security suite with run time at the center of everything from code data and now SaaS to run time.
Speaker Change: And with adaptive shield, we further enhance our ability to secure the enterprise's prolific adoption of AI.
Speaker Change: <unk> pioneered the use of AI for security through our on sensor model and threat graph and pioneer the use of Gen AI for improving stock analysts workflows through Charlotte AI. We've also recently introduced bespoke services for AI security pen testing AI models to reduce exposure weaknesses and data leakage rich.
Speaker Change: <unk>.
Speaker Change: At <unk>, we delivered both AI for security.
Speaker Change: And security for AI.
Speaker Change: While our recently launched AI SPM offering enables organizations to secure the adoption of AI within their cloud infrastructure adaptive shield works by protecting the enterprise from Jenny I risk.
Speaker Change: As more employees looked to leverage G&A AI tools for their everyday workflows data leakage data theft and adversary espionage are on the rise.
Speaker Change: The combination of AI SPM and adaptive shield gives our customers a more holistic AI protection from code to run time and now to the end user.
Speaker Change: AI powered cloud security wins in the quarter include.
Speaker Change: A unicorn AI leader that took their falcon deployment to the next level and an eight figure Falcon cloud security expansion deal.
Growing their cloud security footprint rapidly over the last few years, the combination of workload protection as well as our C. S. P. M C. I M and more recently, our posture management for AI data and applications solidified our position as this company's cloud security consolidator of choice once again this customer.
Speaker Change: Set a new largest transaction record or our corporate sales team a fortune 50 retailer expanded in an eight figure deployment of Falcon cloud security seeing the difference at runtime protection makes we seamlessly expanded from being the company's edr vendor of choice to its cyber security platform of record for the cloud in a.
Speaker Change: Era.
Speaker Change: Falcon cloud security goes well beyond narrow C. F. P. M use cases and associated alert fatigue Falcon complete CVR made securing their expansive multi cloud and hybrid cloud of state the easy and frictionless choice.
Speaker Change: Within identity protection adaptive shield builds on our continued organic innovation since.
Speaker Change: Since launching our identity protection module crowd, Frank has always had best in class coverage of active directory environments. However, with adaptive shield crowd strike is now capable of securing identity, where potentially malicious user behavior. It takes place.
Speaker Change: Whether on device in the cloud or in a SaaS application prospect offers holistic protection across critical identity touch points.
Speaker Change: And we're just getting started.
Speaker Change: We recently announced supportive Microsoft intra IV, formerly Azure active directory, making crowd strike capable of securing the rapidly emerging identity threat vector for all Microsoft customers from highly regulated enterprises to born in the cloud AI Disruptors, Here's a representative identity win from the quarter.
Speaker Change: <unk>.
Speaker Change: A fortune 500, new logo in the travel and hospitality space saw the difference that our robust identity protection technology makes and stopping prolific E crime actors.
Speaker Change: Replacing a patchwork of legacy technologies, we were able to showcase the differentiation of Falcon identity protection to land a sizable platform win across identity, Edr, Nextgen Sim and threat intelligence.
Speaker Change: Falcon Nexsan, Tim has been a game changer, and we're experiencing a hyper growth inflection point.
While we provide more granular detail during our Q2 and Q4 earnings calls next gens have performed exceptionally well this quarter with net new AOR growth accelerating to over 150% year over year at multi hundred million dollar scale.
Speaker Change: With 30 million fusion sore workflows per week and over 2000 next Gen same customers.
Speaker Change: Next Gen. Siem is quickly becoming our customers' data foundation. We've introduced several new groundbreaking features AI generated parsers take the guesswork and learning curve out of integrating third party data sources into next Gen Syn <unk>.
Speaker Change: AI investigator accelerates query speed and flattens analysts learning curves through a journey AI powered query builder.
Speaker Change: And AI.
Speaker Change: I alert triage automate end to end workflows at the speed of AI yet.
Yet the core differentiation for Nexgen Sim remains unchanged unmatched speed and scalability and an unmatched costs with Falcon data natively resident from the start.
Speaker Change: This is why more and more customers are ditching their legacy Sim vendors for crowd strike Nextgen same customer wins in the quarter include an eight figure major national health care provider.
Speaker Change: That replaced a competing sim expanding their falcon usage with Nextgen SIB.
Speaker Change: Using crowd for a financial services, we were able to close a sizable seven year deal.
Speaker Change: Working across the customer C suite, specifically with the CFO, we align cyber security innovation with cost reduction platform consolidation with protection outcomes and payment terms with ROI delivering eight figures of customer business value benefits within three years of purchase.
Speaker Change: <unk> is now firmly rooted as the organization cyber security data platform of choice.
Speaker Change: Near a figure expansion deal with a fortune 500 manufacturing giant where we replaced a hyperscale or Sim in a competitive deal against several Sim vendors.
Speaker Change: Multiple consoles and a lack of security workflows created inefficiencies for this customer.
Speaker Change: The transaction was also an opportune time to grow with crowd strike purchasing Charlotte AI and threat intelligence as Sim enhancements as well as other modules such as data protection.
Speaker Change: A single console in a single platform continues to differentiate falcon customer experiences.
Speaker Change: All the while our innovation investments continued to grow and show promise.
Speaker Change: Let me first talk about craft strikes AI innovation and the progress, we're making with Charlotte our AI agent much like peer company service now at Salesforce, where using advanced AI models to deliver proactive and autonomous outcomes.
Speaker Change: What AI is capable of taking actions based upon observed data to achieve specific security goals.
Speaker Change: Going well beyond the capabilities of a chatbot Charlotte addresses a critical skills gap in human capital need by automating detection triage <unk>.
Speaker Change: Traditionally a labor intensive process for all security personnel.
Speaker Change: Charlotte AI detection triage announced that Falcon it eliminates a significant amount of routine Edr investigation task.
Speaker Change: Charlotte continues to evolve through customer use leveraging the falcon platforms unique data advantage crowd strikes highly curated threat data and high fidelity security events.
Speaker Change: We had a record triple digit growth quarter for Charlotte AI fueled by customer demand for increased time savings and workflow automation Dave.
Speaker Change: Data security with our largest state of security quarter to date, driven by customer desire to replace legacy DLP without additional overhead.
Speaker Change: Falcon for it we're seeing continued demand from large enterprises seeking to unify security and it management, while eliminating vendors to further their consolidation objectives.
Speaker Change: The Falcon platform continues to resonate at scale with partners of all types and Q3, nearly 70% of our new subscription business was partner source illustrating the commitment and stickiness of our winning partner ecosystem.
Speaker Change: Our GSI partners are building next Gen Sim practices across the world.
Speaker Change: Our hyperscale or partners are seeing crowd strike records.
Speaker Change: With AWS marketplace transaction values up more than 100% year over year as organizations pursue their falcon flex licensing on their hyperscale or platforms of choice.
Speaker Change: Our technology partners continue to win with US, we announced a strategic partnership with Fortinet, the global firewall market share leader by shipments we're.
Speaker Change: We're already seeing Fortinet take us into their accounts and we're doing the same.
Speaker Change: Helping us reach the long tail of Smbs, our MSP business continues to expand at a rapid triple digit pace through the Pax eight marketplace Ninja want and leading msp's, who contract with crowd freight.
Speaker Change: And lastly in Q3 S. H I became our fourth $1 billion partner.
Speaker Change: The Falcon platform to their customers.
Speaker Change: This is highlighted by their success, bringing nexgen sym bio security identity protection and Falcon complete MTR to market. We ended Q3 with deal registrations up year over year.
Speaker Change: Mark turnaround from incident levels are.
Speaker Change: Our business results speak to the conviction partners have in the Falcon platform and the multi Tam transformation opportunity that only Kraft break offers.
Speaker Change: Our continued market and technology leadership isn't only recognized by customers and partners. It is also lauded by industry analysts.
Speaker Change: Several recent noteworthy accolades include.
Speaker Change: One the Gartner magic quadrant for endpoint protection.
Speaker Change: Even after the summer <unk> was placed highest for ability to execute and furthest for vision and the whole magic quadrant ahead of all competitors in every dimension.
Speaker Change: Two a garnish critical capabilities crowd strike earned the highest scores ahead of all vendors evaluated in both for endpoint protection and managed security services for the second year in a row.
Speaker Change: Three Falcon cloud security was recognized as a frost radar leader in cloud workload protection platforms for the second consecutive year ahead of C. S. P M startups and industry peers.
Speaker Change: For attack surface management was positioned as a leader in the Q3 2020 for Forrester wave showcasing our emergence in a new market category with significant Tam opportunity.
Speaker Change: And five Falcon Nextgen, Sam was named a major player in the latest.
Speaker Change: Sim IDC market scape underscoring our success displacing legacy sales.
Speaker Change: In closing customer and partners remain firmly committed to crowd strike as their cyber security platform of record.
Speaker Change: Our flex licensing model delivers accelerated platform adoption and Falcon innovation isn't stopping these themes setup. A Q4 have continued progress in an upcoming year of back half net new E. R. R acceleration growth.
Speaker Change: Our future is bright vivid example that struck me this past quarter is the scale and consistency of which we're doing substantial transactions. We set a new record of million dollar plus transactions closing more than 260 this quarter equating to an average of four or more million dollar plus deals every business.
Day.
Speaker Change: Results like these demonstrate the customer conviction partner commitment and market sentiment for crowd for Iqos Cyber Securities innovation leader and security platform of record.
Speaker Change: Before turning the call over to Bert I would like to thank all crowd fragrance for their dedication to our mission of stopping breaches our partners for helping us win and continuing to build large businesses with us and of course, our customers for their commitment and unwavering trust in crowd strike.
Speaker Change: I'll now turn the call over to our CFO bird part there.
Bert Part: 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.
Bert Part: We delivered third quarter results above our stated expectations across all guided metrics.
Bert Part: Our third quarter results reflect our focused execution and relentless customer first mindset, which drove a strong finish and quarter over quarter increase in pipeline. Despite continued headwinds and a pause in pipeline generation at the start of the quarter. Following July 19th.
Bert Part: In Q3, ending air or surpassed the $4 billion milestone growing 27% year over year to reach $4.02 billion of which $153 million was net new added in the quarter.
Bert Part: As expected the July 19th incident resulted in near term headwinds to net new air or as we experienced extended sales cycles with both existing and prospective customers and onetime incentives offered through our customer commitment packages, which resulted in increased contraction and muted upsell rates.
Bert Part: Sales cycles increased by approximately 15% year over year within enterprise accounts.
Bert Part: As of last Friday, we closed more than half of the push deals that had remained open at the time of our Q2 call.
Bert Part: While we normally recognize are our contraction in the quarter a transaction is subject to renew.
Bert Part: In Q3, FY 2025, we excluded approximately $26 million from air or after a distributor in the federal space provided notice of its intention to exercise transferability rights with respect to a transaction and we concluded that the transaction would not recur.
Bert Part: In compliance with U S. GAAP revenue recognition rules this transaction remains in revenue.
Bert Part: In total our Q3 dollar based gross retention rate of over 97% held resilient with less than half a percentage point decrease from Q2 strong performance and given the July 19th incident. We are also pleased with our Q3 dollar based net retention rate of 115%.
Bert Part: As customers embraced our customer commitment packages and more of the Falcon platform.
Bert Part: We estimate that customer commitment packages impacted net new air or by approximately $25 million in Q3 within our expectations.
The majority of deal value that closed in the quarter with customer commitment packages included additional product or flex dollars, rather than extended time and professional services.
Bert Part: That coupled with the timing and linearity of in quarter Q3 revenue limited the impact to Q3 revenue and contributed to the strong revenue beat in the quarter.
Our customer commitment packages are helping fuel an increase in platform and module adoption.
Subscription customers with five six and seven or more modules grew to 66, 47, and 31% of subscription customers, respectively, notably we reached a new milestone for module adoption in the quarter as customers with eight or more modules grew to 20% of subscription customers.
Bert Part: This momentum and increased module adoption and our Falcon Flex program gives us confidence in our customer commitment strategy and ability to Reaccelerate net new air our growth starting in the back half of fiscal year 2026.
Bert Part: Moving to the P&L total revenue grew 29% over Q3 of last year to reach one point or 1 billion ahead of our expectations in our first quarter exceeding the $1 billion milestone.
Bert Part: Subscription revenue grew 31% over Q3 of last year to reach $962 $7 million and professional services revenue was $47 4 million.
Total gross margin of 78% was flat year over year and subscription gross margin remained strong at 80% of revenue.
Bert Part: Total non-GAAP operating expenses in the third quarter were $591 7 million compared to $436 $1 million in the prior year.
Bert Part: As outlined in our last earnings call. We continued to invest in our FY 2025 plan and bolstered our R&D quality assurance and customer support programs.
Bert Part: In the third quarter non-GAAP operating income grew 11% year over year to $194 9 million and operating margin was 19%.
Bert Part: GAAP net loss attributable to crowd strike was $16 $8 million, primarily due to $33 $9 million in expenses related to the July 19th incident.
Bert Part: non-GAAP net income attributable to crowd strike grew 18% to $234 3 million or <unk> 93.
Bert Part: Diluted per share basis.
Bert Part: Cash and cash equivalents grew to $4 $26 billion.
Bert Part: Free cash flow was $236 million or 23% of revenue and was impacted by the July 19th incident as well as planned investments in data center, and workload optimization, R&D and sales and marketing.
Bert Part: Additionally, the $49 million in deals financed through crowd strike financial services had a de minimis impact to Q3 free cash flow as expected.
Bert Part: Turning to our outlook, we are encouraged by our continued high dollar based gross retention rate.
Success of our customer commitment packages with customers opting for more product or flex dollars.
Bert Part: The continued strong adoption of the Falcon platform and growing module adoption rates and quarter over quarter growth in pipeline.
Bert Part: All of these positive indicators give us confidence in our ability to reaccelerate net new air growth starting in the back half of FY 2026.
Bert Part: However, in the near term visibility remains limited given the headwinds related to the July 19th incident that we outlined last quarter, including the delay of the vast majority of outbound pipeline generation activities for a few weeks following the July 19th incident <unk>.
Bert Part: Extended sales cycles for both new and existing customers and continued deployment of customer commitment packages, resulting in muted upsell rates and potentially higher than typical levels of contraction.
Bert Part: While in Q3 customers strongly embraced the additional modules and flex options associated with our customer commitment packages rather than additional time.
It is still too early to determine if that trend will remain the same in Q4.
Bert Part: Recognizing our continued reduced visibility we are maintaining our estimated impact of approximately $30 million to both net new <unk> and subscription revenue in Q4 from our customer commitment packages.
Bert Part: As we discussed last quarter, the aforementioned headwinds are additive to the expected quantified impact.
Bert Part: While we do not typically comment on analyst estimates, we wanted to note that the vast majority of analysts are modeling Q3 to Q4 net new air our seasonality well above historical levels. We request that you keep historical sequential seasonality in mind when updating your models.
Bert Part: Additionally, as we discussed last quarter, the modeling of air or in subscription revenue should be decoupled in the short term given the customer commitment packages are Falco on 2024 Investor presentation has additional details on this dynamic.
Bert Part: Moving beyond the top line, we expect to incur additional GAAP tax expense in Q4 of approximately $58 million due to previous acquisitions.
Bert Part: Additionally, we closed our acquisition of adaptive shield last week, which is expected to have a one to two <unk> impact to non-GAAP EPS as reflected in our Q4 guidance moves.
Bert Part: Moving to cash we expect Q4 free cash flow to reflect a significantly more pronounced July 19th impact in comparison to Q3. This is due to collections impacted by increased flexible payment terms under customer commitment packages for deals closed in Q3, the incremental sales compensation.
Bert Part: Expenses, and the timing and size of G&A costs, all relating to July 19th.
Bert Part: As a result, we do not expect to see sequential free cash flow margin leverage in Q4.
Bert Part: We continue to expect crowd strike financial services to have a de minimis impact to free cash flow in Q4.
Bert Part: We remain committed to achieving $10 billion in ending <unk> by the end of fiscal year, 'twenty 31, and achieving our target non-GAAP operating model on an annual basis by fiscal year 'twenty 'twenty nine which includes a free cash flow margin target between 34 and 38%.
Bert Part: Moving to our guidance for the fourth quarter of FY 2025, we expect total revenue to be in the range of $1028 seven to $1035 $4 million, reflecting a year over year growth rate of 22%.
We expect non-GAAP income from operations to be in the range of 184.0 to 199.0 million and.
Bert Part: And non-GAAP net income attributable to Crouch Reg to be in the range of 210.9 to $215 $8 million, we expect diluted non-GAAP net income per share attributable to crowd strike to be approximately 84 to 86 utilizing.
Utilizing our weighted average share count of approximately 252 million shares on a diluted basis.
Bert Part: For the full fiscal year 2025, we currently expect total revenue to be in the range of $3923 eight to 3930 $5 million.
Bert Part: Reflecting a growth rate of 28% to 29% over the prior fiscal year non-GAAP income from operations is expected to be between 804.4 and $809 $4 million we.
Bert Part: Fiscal 2025, non-GAAP net income attributable to crowd strike to be between 937.5 and $942 $6 million.
Bert Part: Utilizing approximately 251 million weighted average shares on a diluted basis, we expect non-GAAP net income per share attributable to the crowd strike to be in the range of $3.74 to $3 76.
Speaker Change: George and I will now take your questions.
Speaker Change: Thank you if you would like to ask a question. Please click on the raise hand button, which can be found at the bar bottom of yours and window.
Speaker Change: You may remove yourself from the queue at any time by lowering your hand.
Speaker Change: When it is your turn you'll hear your name called and receive a message on your screen notify you that you made on mute yourself in the interest of time participants will be limited to one question.
Speaker Change: Our first question comes from.
Speaker Change: Korea. Please on mute your line and ask your question.
Speaker Change: Second are you there.
Speaker Change: Okay.
Operator is there if not please go to the next yes, okay not a problem.
Speaker Change: We'll move forward with the next question No way Hey, guys can you hear me, Yeah, Hi Tech.
Yeah.
Speaker Change: Sorry about that absolutely so George maybe for you lots of helpful detail I wanted to start sort out just zooming out a little bit you spend a lot of time with customers. I guess the question is what are they telling you about some of the puts and takes the security spending next year I mean, you've got you've got plenty of tailwind like lower inter.
Speaker Change: First rates and potentially a better macro but also different policies out of the federal government. So how do you think about those factors as you maybe gauge the health of security spending next year.
Sure. Thanks, Jack It I think if you're an everyone probably is following some of the new as you see the security environment is only getting worse.
Speaker Change: E crime groups have been prolific and we continue to see ransomware and extortion, where it'd be very very successful for big dollars. So from a security environment perspective customers want the best products. They want the best platform.
Speaker Change: They want something that's going to stop the breach can be most effective that hasnt changed to they want to consolidate this isn't changed either this complexity normally breeds inconsistent season seems in protection gaps within multiple technologies. So a broad platform approach is something that.
Speaker Change: AIDS in stopping the breach.
Speaker Change: And they want to drive down their overall operational cost and that Hasnt changed and I don't think that is going to change based upon my interactions with companies.
Speaker Change: In the coming year, So we'll see how it all unfolds, but we're certainly encouraged by it.
Speaker Change: The forward looking environment.
Speaker Change: Based upon just what we see and companies, whether it's the threat environment or regulatory pressures theyre going to have to spend money on the best technologies, and we're certainly going to be there to be able to capitalize on them.
Speaker Change: Very helpful. Thanks, guys.
Speaker Change: Our next question comes from Hamzah firewall with Morgan Stanley. Please on mute your line and ask your question.
Speaker Change: Great can you hear me.
Speaker Change: Yes.
Speaker Change: Alright, great.
Speaker Change: Thank you so much for taking my question.
Speaker Change: Burt maybe maybe for you just to comment on the.
Speaker Change: On the on the air are near our seasonality that you spoke about for Q4, if I look at the last few years.
Speaker Change: Last Q4, we had a pretty strong budget flush pretty pretty strong Q4 overall the year before that I think it was a bit more muted when you speak on <unk>.
Speaker Change: Q4, net new there are seasonality this year.
Speaker Change: Is that assuming.
Speaker Change: That budget flush that we saw a year ago or something similar to what we saw maybe two years ago. Thank you.
Speaker Change: Hi, Hamzah. Thanks for your question.
Speaker Change: So when we think about Q4 I talked about some of the things that impact us and certainly one of them is the limited visibility that we have.
It's just too early to tell we have a lot of things that are going to be in play for Q4. The continued CCP packages that we have.
And with that it just limits our visibility in terms of how we think about Q4 generally it is of course, our biggest quarter and we have the most that subject to renew but we still need to sell through it.
Speaker Change: Our next question comes from Brian Essex with J P. Morgan. Please UN mute your line ask your question.
Hi, good afternoon, and thank you for taking the question.
George Kurtz: George Great to see the durability of the gross retention rates, particularly in light of the event on July 19.
George Kurtz: Is there anything that you can call out in terms of trends that youre seeing is youre speaking with customers. Both on the churn side like what tend to be some of the themes of customers that are churning off and then also on the better adoption side. What are some of the more durable factors that are leading to better adoption rates on the platform. Thank you.
Speaker Change: Well. Thank you and good question as you probably know I spent a lot of my time with the larger customers and really haven't had a lot of conversations around sugar and the conversations that I have had have been a recognition that we do have the best technology.
In the market and a recognition of how we handle the July 19th.
Outage and I think that's an area where return prices into a customer trust building opportunity.
Speaker Change: And of course, we're trying to make it right for customers. So from my perspective, I certainly haven't seen a lot in the larger to mid size deals. In fact are part of our corporate business as I called out I had the best quarter ever so from a churn perspective, you could see some churn in the very small MSP spaces.
Speaker Change: An area, where it really doesn't matter the vendor, it's easy to kind of move in and out.
Speaker Change: But I'm encouraged by the conversations that I'm, having with our largest customers and a reflection on the fact that they realize that we have the best Tech neck guest check in the industry and the ability to stop breaches and drive down the overall operational cost from a platform perspective.
Speaker Change: Next our next question comes from Patrick Colville with Scotiabank. Please on mute your line and ask a question.
Speaker Change: Yes.
Hey, Jim. Thank you so much for taking my question.
I guess I will ask George.
Speaker Change: I mean 2024 was the year copilots, including Charlotte AI in your prepared remarks towards you talked about kind of detection triage.
Speaker Change: I guess the topic Du jour amongst the investment community is agenda.
Speaker Change: You didn't mention that in your prepared remarks, so I guess, how it is.
Speaker Change: <unk> thinking about.
Speaker Change: Internal usage, which is okay.
Speaker Change: Possibly the ability for <unk> to help crushers customers. Thank you.
Speaker Change: Thanks, Patrick and I cover that a bit in the prepared remarks in the fact that Charlotte AI was built to be something more than a copilot, we probably built it before it even had a term.
Speaker Change: Which is now fast apologetic AI and the whole idea with short on AI.
Speaker Change: Not only to take the collective wisdom of crowds traded over the last decade, all of our threat indicators all of these sort of workflows that we've created around triaging.
Speaker Change: Events and.
Answer those questions, but go beyond that to actually do work on behalf of our customers. So today and it's the way we built it it actually will do work on behalf of customers and that's all that's the entire piece of chalk transformation.
And just to give you. An example, we talked about alert triage and some other things in your prepared remarks, but we had a customer that would take four days to create what's called the CIT wrap the situational report and that manually they would create these reports.
Speaker Change: And now it takes them one hour so thats the level of efficiency that we're seeing with Charlotte and you Couldnt do that if it was just the chatbot and see a gen sick nature of Charlotte AI and that's what we're delivering to customers internally, we're certainly leveraging a lot of what our great partners put together, whether that salesforce or service narrow what have you.
Speaker Change: There's many technologies that we leverage including.
Speaker Change: Many of the Gen AI technologies to help us.
Speaker Change: Create greater efficiencies.
Speaker Change: Our next question comes from Tal Leone with Bank of America. Please on mute your line ask your question.
Speaker Change: Hello, Thank you.
Bert Part: So Bert.
Speaker Change: I know you're cautious, but pure net new IRR was not bad at 150, given that we had $2 50 before the outage. It's there is some people expected it to be negative in <unk> and I here you know on for Q cautious again.
Speaker Change: And the question is what are the how are the factors changing in <unk>, meaning you said that you had a big renewal quarter outs.
Speaker Change: Outside of the renewal or can you speak about for example, what was your experience with the renewals this past quarter.
Speaker Change: I would have thought that <unk> would be better than <unk>, just because we don't have an outage in the middle So it eliminates this 10 days or 14 days that people were kind of unclear about what's Anthony.
Speaker Change: So I wanted to understand how for Q changes and why wouldn't for Q be actually better than the <unk>. Thanks.
Speaker Change: So although it's true that we are a little further from the Sun were still kind of fighting through the incident.
Speaker Change: But I'll give you some additional color in terms of the things that I went through when I thought about Q4, and we've talked a little bit about.
Speaker Change: The limited visibility with Hamzah. So one is.
Speaker Change: When we think about what happened shortly after the incident the delay of the vast majority of our outbound pipeline generated generating activities for the fourth for the first few weeks following that incident that certainly has an impact for Q4. So that's one I think we're still going to see extended sales cycles for both new and existing customers I think customers.
Speaker Change: Have additional scrutiny additional layers of approvals all of that sort of thing and I think we're going to continue to deploy customer commitment packages. This is going to result in a muted upsell rates.
Speaker Change: And potentially higher than typical levels of contraction.
Speaker Change: You factor all those things together.
Speaker Change: Don't want to be mindful of those things taking place and you know the activities that the sales team has to do to sell through all of that.
Speaker Change: Well I had a couple of other things so while in Q3 customers strongly embraced the additional modules and flex options associated with the <unk>.
Speaker Change: Rather than additional time it is still too early to determine if that trend will remain the same for Q4 I want to give caution in terms of what customers are going to choose with respect to CCP. We don't know yet we had one quarter and so that.
Speaker Change: That really impacts our ability to really understand what's going to happen to the dynamics in Q4.
Speaker Change: And then finally I do want to talk about the fact that we are maintaining our estimated impact of approximately $30 million to both net new <unk> and subscription revenue in Q4 from our customer commitment packages and remember the two of those you have to decouple both of them and we talked about that.
Speaker Change: Last quarter, and we talked about it in the press in our.
Speaker Change: On our Falcon 24, investor presentation, and it has the details on that dynamic.
Okay.
Speaker Change: Our next question comes from Joel Fishbein with truth. Please on mute your line and ask your question.
Speaker Change: Thanks for taking the question.
Speaker Change: I guess, one for Burt Burt when the.
Speaker Change: <unk> and flex it obviously it sounded like it was ahead of your guys expectations in terms of adoption and the one thing that I Didnt get which I'd love for you is the average deal term or duration of those deals that would be really helpful. Really appreciate it.
Speaker Change: Hey, Joe Thanks for the question, we didn't give a specific number but we did see deals being slightly longer.
And that's all that excited us for sure.
Speaker Change: Yeah.
Our next question comes from Gabriela Borges with Goldman Sachs. Please on mute your line and ask your question.
Speaker Change: Hi, good afternoon, Thanks for taking my question.
Speaker Change: Alright, I wanted to connect the dots on what you are saying about Fokker slacks.
<unk> is there anything you're seeing.
Speaker Change: Our complex right.
Speaker Change: <unk> breakfast that is before Orange line launch.
Speaker Change: In terms of average.
Speaker Change: As soon as average deal sizes et cetera.
Speaker Change: Conversion rates are the upsell rates from todays complex Jill could look different amount versus the baseline that you already have.
Speaker Change: Hi, Gary just talked a little bit about the fact that we've seen.
Speaker Change: Deals being slightly larger which is great still too early to tell what's going to happen.
Speaker Change: Renewals come due but.
It goes back to how we already thought about this and how we talked about it last quarter with respect to seeding the future.
Speaker Change: Having the ability to do upsells on the renewal and getting customers to enjoy his more than wanting to use more.
Speaker Change: We had over 155 complex deals and that's a that's a great number and then I think that we had accounts at the end of the day. The accounts that have adopted the parking pits Falcon flex model now represent more than $1 3 billion of total deal value and in there with an average Falcon flex subscription.
Speaker Change: Being multiples larger than our typical contract value. So those are important takeaways.
Speaker Change: <unk> customers on average have adopted more than nine modules. So if you factor all of those things together, we get encouraged again by Reacceleration in the back half of next year.
Speaker Change: Our next question comes from Matt Hedberg with RBC. Please on mute your line or ask your question.
Speaker Change: Okay.
Matt Hedberg: Thanks, guys can you hear me okay.
Matt Hedberg: Yeah, Hey, guys can you hear me, Okay, yes, okay great.
Speaker Change: Great George a question for you you talked about next Gen. Jim in the prepared remarks, it's really good to hear.
Speaker Change: The growth that Youre seeing there I guess I'm wondering what are you seeing really from a competitive perspective I think we all are thinking that there's a good opportunity there, but just wondering about that and then.
Speaker Change: What are pushing some customers to change I guess is ultimately the question.
Speaker Change: Yeah I think.
Speaker Change: When you look at the Nextgen Sim market and one of the things that we really again helped.
Speaker Change: I would say create and pioneer is.
Speaker Change: Greater efficiencies speed and scalability, which is just not available in legacy products.
The fact that we can basically give immediate outcomes because it's all built into our system right. This concept of first party data, which comes from cross ranking third party data well, we've created an incredible ecosystem and opened up the platform now and where these workflows.
Speaker Change: Can be done within the Falcon platform and an aided by Sharon AI, so customers are putting more and more data into the technologies and they've seen the performance and the speed and maybe even more importantly, the cost differences between some of the legacy providers that are out there and.
Speaker Change: We go into a P O V and we go through all of the staff.
Speaker Change: People kind of scratched our head some time ago Kayla prove it and then when we get through it there like we've never seen anything this fast or performance or get the outcome that we're looking for so we're really excited about it we keep broadening the ecosystem there and I think it represents a tremendous opportunity for us.
Speaker Change: In the short medium and long term, it's a huge business conviction, Tim and we're gonna be front and center in it.
Speaker Change: Our next call comes from our next question comes from Andy Nowinski with Wells Fargo. Please on your line and ask your question.
Okay. Good evening, thanks for taking the question.
Speaker Change: You know first off congrats on getting through what was likely your most challenging quarter, you probably had in company history.
Speaker Change: So I wanted to ask a question on again on South and Flex your I know you've booked $1 3 billion of deals and you talked about how it supercharging the adoption of your platform, but if I'm thinking about it correctly I would think it's also supercharging your customer retention rates because as customers deploy more modules like you said it seems like it makes it.
Speaker Change: Increasingly difficult to leave the platform. So I guess first am I thinking about that correctly in terms of customer retention and are you factoring in any any improvements at our art do develop and flex going forward.
Speaker Change: I'll take the first part and then Bert you can feel free to chime in.
Speaker Change: It absolutely makes the platform stickier the more modules. We know this is a fact more modules customers use the stickier the platform becomes.
Speaker Change: And Youre talking 910, we've talked about I think one of 2014 netting.
Speaker Change: And that's incredibly sticky because a lot of processes are built around that so from our perspective. It is a great opportunity for customers.
Speaker Change: For us makes it stickier, they get a better value and.
Speaker Change: Again.
Speaker Change: What we're seeing is in general we're seeing.
Speaker Change: Customers adopt more faster right, which if they adopt more and faster that gives us the opportunity to go back in and top up those Falcon flex pool. So we are excited about the.
Speaker Change: Licensing mechanism customers are we talked about.
Speaker Change: Adaptive shield the day, we announced that we were at Falcon Europe and customers said, okay. If I'm at Falcon flex customer can I use it day, one when it closes and we're like yes. Since we closed the deal and we get a skewed up youll be able to use it which again removes a lot of friction and AIDS in the adoption so and in the advert yes.
Speaker Change: Yes.
Speaker Change: All of the things that George said gives us more confidence in our ability to reaccelerate in the back half of next year.
Speaker Change: Our next question comes from Gregg Moskowitz.
Speaker Change: Moscowitz from Mizuho. Please on your line and ask your question.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: <unk> growth accelerated quite strongly this quarter and your appeal bookings growth, which at least by our best estimates at greater than 60% that appears to be the highest we've seen since fiscal 2022, now clearly the customer amendment packages and flex at a significant impact here and so I guess with that in mind I would just be helpful to get your prospect.
Speaker Change: On a how the CRP outperformance buys and B, how we should generally be thinking about what the strong bookings.
Speaker Change: It might mean for revenue recognition and.
When we look down the road thanks.
Thanks, Greg So I think ultimately when we think about our Apio and we think about the increase it does talk to just longer deals.
Speaker Change: No longer duration I think all the things that we've talked about whether it's CCP, whether it's <unk>.
Speaker Change: <unk> financial services, they all add in terms of helping customers do more with us for longer periods of time and that's reflected in our RPM number.
Speaker Change: Our next call comes from John Fucci with Guggenheim. Please on your line and ask your question.
Speaker Change: Thanks for taking my question.
Speaker Change: Listen you've always been really clear.
Speaker Change: Which is I think been great for investors in <unk>.
Speaker Change: <unk> two.
Speaker Change: And as always and revenue have always been a great had a great connection over time can you and I know theres some small print.
Speaker Change: Can you explain to us.
Speaker Change: What's what's making this coupling diverge and I don't know hopefully it's not a long explanation. It's probably why you haven't said it but can you do that can you give us like it even if it's temporary here because.
Speaker Change: I don't want to see our models works great for you and you were the first ones to do this and it's really clear and he put it right out there for everybody to see but why is that going to diverge why could it diverged in the short term.
Speaker Change: So thanks, John So number one for all your comments appreciate all your comments that you made so first big picture. It's temporary the divergence is temporary and I think it just talks to you when you have a CCP and out of the gate. There's for example extended time that's offered.
Speaker Change: There's going to be a more immediate hit on an IRR then revenue is going to lag and so that's how we think about it and that's how we've tried to be clear on explaining it hopefully that helps John.
Thank you. This concludes today's question and answer session I would now like to turn the call back over to George Kurtz for closing remarks.
George Kurtz: Okay. Thank you operator, so thank you all for your time today. We appreciate your continued support and look forward to seeing you at our upcoming investor events.