Hi all,
Really strong quarter from CRWD. Revenue growth is impressive, although slowing compared to previous quarters. It’s so high at 85% I can probably forgive them.
Like everything, EV/S has shot up over the past bit, but with these earnings, CRWD is a little ‘cheaper’ compared to yesterday.
Current EV = $18.5b.
TTM revenue = $441m so EV/S = 37.5.
Q4 FY guidance ($731.4m) EV/S = 25.3.
Q1 FY guidance ($772.6m) EV/S = 23.95.
Symantec seem to be dropping the ball all over the place.
The most interesting takeaway I found from the quarter was the discussion of “other usecases”. I’ve always thought of CRWD as “next-next gen anti-virus” which is sort of fair, but there was several mentions of moving outside of that space using the same agent.
“Thinking about Endpoints is a bit limiting. We’re focussed on workload protection (cloud environments, containers, ephemeral workloads, IoT, mobile devices)”
and a discussion about new usecases, particularly from Falcon Discover
“Discover Module - IT hygiene. Asset discovery, configuration.”
There was also an interesting ROI tidbit about:
“We get $3.73 of subscription ARR from every $1 spent on initial incident response as@ Jan 2020” {GD: ie, companies have a breach, contact CRWD to help, and then sign up for Falcon - not sure what ‘Spent’ means}
FCF was very strong, SBC was 13% which is positively reasonable compared to ZS for example.
cheers
Greg
ps. As always, copy and paste into dillinger.io for a pretty version.
Q1 2021
Other discussions
Checklist
Q: What is revenue doing yoy?
A: hard to complain, although growth is dropping at the same time theres theoretically COVID tailwinds and increased module purchasing.
| Q2 | Q3 | Q4 2020 | Q1 |
| -------- | -------- | -------- | -------- |
| $108,108 | $125,119 | $152,109 | $178,078 |
| +94% | +88% | +89% | +85% |
Q: What are customers doing q-1?
A: Hmm. Its great! But not quite what I was expecting. I guess I was expecting more of a COVID bump.
| | Q2 | Q3 | Q4 2020 | Q1 |
| --------- | ---- | ---- | ------- | ---- |
| Customers | 3789 | 4561 | 5431 | 6261 |
| yoy | 111% | 112% | 116% | 105% |
| q-1 | 24% | 20% | 19% | 15% |
Q: DBNER?
A: >120%
Q: What is free cash flow doing?
A: ??
| | Q2 | Q3 | Q4 2020 | Q1 |
| ---------- | ------- | ----- | ------- | ------ |
| FCF | -29,158 | 7,048 | 50,676 | 87,001 |
| FCF Margin | -27% | 6% | 33% | 49% |
Impressive.
Q: Revenue per customer up or down (either revenue/customers or ARR)?
A:
| | Q2 | Q3 | Q4 2020 | Q1 |
| -------------------- | ----- | ----- | ------- | ----- |
| ARR growth % yoy | 104% | 97% | 92% | 88% |
| Revenue per customer | 28532 | 27432 | 28008 | 28442 |
Solid, not quite as indicative of the increase in modules as I might have thought?
Q: Expenses as percent of revenue going up or down (ie, any sign of leverage)?
A: Expenses as percent of revenue:
| | | | | | | | | | |
| --- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ |
| R&D | 17,615 | 18,963 | 25,968 | 22,005 | 23,875 | 31,630 | 35,992 | 38,691 | 40,578 |
| | 37% | 34% | 39% | 27% | 25% | 29% | 29% | 25% | 23% |
| S&M | 36,617 | 40,113 | 46,614 | 49,338 | 56,843 | 65,274 | 68,675 | 75,803 | 88,138 |
| | 77% | 72% | 70% | 61% | 59% | 60% | 55% | 50% | 49% |
| G&A | 6,777 | 8,477 | 13,614 | 13,349 | 11,861 | 30,261 | 21,615 | 25,331 | 25,043 |
| | 14% | 15% | 21% | 17% | 12% | 28% | 17% | 17% | 14% |
Looks pretty solid, some drop in G&A as travel etc comes down a bit. Some slight signs of leverage.
Q: What does forward EV/S look like?
A: EV = 18.5b
next quarter TTM revenue: $161m => 28.67
and FY guidance: $772.6m => 23.95. High, but given the growth and the stickiness of the platform?
CC Summary
3 key points
- Another exceptional quarter - well exceeded. non-GAAP op income for the first time.
- WFH and Digital transformation are sustainable trends. Mission critical to protect workloads wherever they are.
- Continue to win new logos - as companies move to crowd native architectures. Market share of incumbents continue to erode.
$86m net new ARR in Q1
Net new subs customers: 830 +105% yoy
Strong momentum despite shelter-in-place. Good deal flow across large and SME customers.
Closed vast majority of 7 figure deals in 2nd half of quarter. Consistent with prior quarters.
Strong contributions across geographies - 2nd largest quarter in EMEA.
DBNER: >120%
Module adoption strong:
- 4+ modules = 55% of customers.
- 5+ modules = 35% of customers.
Crowdstrike in COVID
100% of workforce is now remote (70% of team is normally remote).
On-track with hiring plans - record number of accepted offers (hiring)
100x100 virtual customer tour:
- Strong increase in business meetings
- Ended quarter with record pipeline
COVID19 → Breeding ground for CyberCrime. “One of the most active threat environments we’ve ever seen”. Even more heightened for healthcare and frontline.
Helping in COVID
- Some special terms to a few customers in impacted industries.
- Surge relief plan - free
- Falcon Prevent for home use - free
New opportunities for CRWD.
CyberSecurity is mission-critical. Customers continue to prioritise CyberSecurity investments.
G2K - impacted sector.
“Adversaries will be more motivated than ever… Cannot afford an intrusion. CrowdStrike is the most effective most capable tech that we’ve ever used or seen.” - G2K customer in impacted industry.
WFH/Hybrid security challenges - best solved by cloud-native platform. Importantly, easy to deploy and manage.
“Crowdstrike - lightweight agent doesn’t require a reboot”
Product discussion
Falcon Discover for IT Module
“Customers can remotely run a wide variety of commands on any endpoint {GD: is this remote access?}”
Demand from IT teams who want to solve IT problems, eg: Configuration Management, Emergency Patching and password resets
45% Customers have adopted Falcon Discover for IT
Falcon for Mobile
Strength - major school districts securing mobile devices for remote education.
Falcon platform protects across enterprise and personal devices.
Partners
Increased AWS transactions. +75% q-1 ARR from AWS partnership.
“Significant demand from partners as Symantec abandons large segments of the market… customers desperately need to protect remote workforce”
Accepted deals from partners: +200% yoy
Very favourable competitive landscape.
Anecdotes
Leading European logistics company. Thought to build out security ops center, but realised Falcon Complete time to value = 7 days vs 6-12 months. Helped them prevent and remediate ransomware incident. Also needed to purchase laptops - so used Burst licensing. Purchased 7 modules.
Major food conglomerate - replaced 4 other vendors. Has dozens of subsidiaries using different tools. Vs entrenched incumbent. Ease-of-use, level of protection, low impact on performance. Adopted Falcon Prevent for next-gen AV, Insight visibility, and Discover for IT Ops. Expanding into additional modules.
“One of the largest” semiconductor chip operations.
Major US airline.
Comments
“We believe we’re positioned to be the fundamental endpoint platform of the future”
- 11 modules
- 11 app store partners
“CRWD routinely helps save money, some customers report 3x return in as little as 3 months”
“Rapid move to remote or hybrid workforce… investments by customers has remained strong… (in uncertain environments we believe) best companies continue to innovate focus on customer success…”
Finances
Non-GAAP
“We get $3.73 of subscription ARR from every $1 spent on initial incident response as@ Jan 2020” {GD: ie, companies have a breach, contact CRWD to help, and then sign up for Falcon - not sure what ‘Spent’ means}
| | | | |
| :-------------------- | :------ | :------------ | :------------------------------------------------------------------------------------ |
| Revenue | $178.1m | +85% yoy | |
| Subs Revenue | $162.2m | +89% yoy |
| Prof services Revenue | $15.9m | | Easily delivered remotely. Legacy tech users lead to breachers that we can remediate. |
| ARR | $686.1m | +88% yoy |
| Net new ARR | $85.7m | +65% yoy | "Well above expectation" |
| -- US | 73% |
| -- EMEA | 14% |
| -- APAC | 8% |
| -- Other | 5% |
| Gross Margin | 75% | vs 70% yoy | Significant operating leverage. GM will fluctuate as |
| Subscription GM | 78% | vs 73% yoy | 77% q-1 |
| OpExp | $133.0m | vs $89.2m yoy | 75% of revenue vs 93% yoy. -$1.5m decrease in travel. |
| Magic number | 1.2 | | {GD: whats this?} |
| Op Income | $1.2m | | First time in history |
| Op Margin | | +23% yoy |
| Net income | $4.5m | | |
| Net income/share | $0.02 | | |
| WA shares | 229.8m | | |
| Cash and equivs | >$1b | | |
| Operating Cash Flow | $99m | | Improved operating leverage, growth in deferred revenue and strong collections |
| Free Cash Flow | $87m | | |
Contract lengths consistent.
Expect >$5m savings because of travel reduction.
Continue to hire aggressively.
Guidance
| Guidance | | |
| :------------- | :----------------- | :-------------- |
| Q2 revenue | $185.8 to $190.3m | +72% to 76% yoy | Subscriptions dominant driver |
| Op Loss | -$3.1m to $0m | |
| Net Loss | -$3.8m to -$700k | |
| Net loss/share | -$0.02 to $0.00 | |
| Shares | 216m | | **If report +ve Net Income: use 232m shares** |
| FY2021 | | |
| Revenue | $761.2m to $772.6m | 58% to 60% | Raising guidance, assumptions below |
| Op loss | -$19.2m to -$11.1m | |
| Net loss | -$18.1m to -$9.9m | |
| Net loss/share | -$0.08 to -$0.05 | |
| Shares | 220m | |
F2021 assumptions
- Added Q1 ARR overperformance to expectation. “Modifying expectation that Q1 is lowpoint for ARR”
- No significant increase in churn to date, but assuming some increase in churn.
- Expect non-GAAP income breakeven.
- Increased hiring plan - R&D.
- Essential travel allowed in Q3.
- In Q1 converted securities to cash → no interest income.
- Cashflow
- expect slightly negative OCF and FCF in Q2.
- Op Cash and FCF +ve for full year.
Question-and-Answer Session
- Network security space, expectation of demand fading… WFH/A + hybrid model - won’t continue in the same way. See that as long-term opportunity. Part of Digital Transformation. Digital transformation being accelerated. Longer-term trend. 100x100 CIO eg: Had a 2 year road map, in 1 day executed on that. Long-term tailwind.
- Goto market - want to go deeper and bigger with existing partners or broader? Want bigger/deeper partners. People wanting to move off of incumbents. AWS fantastic partner for us, remove a lot of friction.
- Falcon for containers - greenfield opportunity. Beauty is simplicity. Lightweight, can run outside container and view every container (so don’t need to deploy to the container). Zero-friction. Added a ton of capabilities, understanding container config. Manage containers in multi-cloud and on-premise. Added much broader discovery capabilities.
- DBNRR >120% at what point do you see (bigger lands) start to impact metric. Don’t manage NRR. Noisy metric (down not necessarily bad). Q4 saw larger lands, going forward expect larger lands. Over time expand might take over. Still going after large lands, expansions. Paying salesforce the same.
- Shift in appetite for non-traditional usecases. Seen shift EDR (endpoint detection response), AV → Absolutely. Q1 a tipping point of usecases outside of security. Discover Module - IT hygiene. Asset discovery, configuration. Functionality drives a lot of automation into the IT stack. “So many customers… in a panic mode” - how to understand/touch these systems when WFH. Security team had solved the problem with CrowdStrike. Eye-opening for IT folks. Can save a lot of money for IT teams.
- Gross margins thresholds with growing datacenters - GM expansion a focus. To date, great success through new modules, opportunities in datacenter efficiency. See more opportunity to grow GM, datacenter costs. Q2Q might fluctuate. In middle of long-term range.
- Congrats of great momentum - how much growth from new endpoints? $ per endpoint. Thinking about Endpoints is a bit limiting. We’re focussed on workload protection (cloud environments, containers, ephemeral workloads, IoT, mobile devices). COVID → New laptops, WFH. Digital transformation, workloads move to Cloud. Accelerates move away from legacy environment.
- More modules is one of the growth drivers. Opportunity well in-front of us with all different type of workloads. All are accelerating for us.
- Customers desire to conserve capital - blockbuster cashflow quarter, CapExp lower than Street modelling. Why did capexp come down? Focussed on cash, coming off strong Q4, strong collections. CapExp overall, will spend 8% revenue on CapExp with majority in the 2nd half. Datacenter capacity driver.
- Rock star numbers - free onboarding, Falcon Home. Meaningful upsell opportunity? WFH/A meaningful opportunity. Continue to evaluate. Fantastic feedback. Customers asking from permanent WFH program. Corporate network disappearing.
- Spent lot of time/energy on Kubernetes - differentiated product. Can feedback into CICD? Ongoing journey, very strong in runtime security. Customers using visibility element to decide deployment. “Future opportunities” to feedback. So easy to deploy, so no friction. Now how do we add value? Huge release a few weeks ago. Many different linux flavours supported.
- Competitive displacement - Symantec. Displacing NextGen players - why? Symantec continue to displace - people looking for platforms and that work and stop breaches. Ransomware can’t be dealt with by AntiVirus. Last thing (healthcare) wants now is a ransomware attack. NextGen - we don’t have on-premise because thats not our model. Value is aggregating at scale → Threat graph. Module expansion can allow more modules not agents. People want simple, works, future-proof, and stops breach.
- Traction on 3rd party applications - adding partners, 11 now. Higher-quality, vetted. Customers don’t want more agents “underappreciated fact how painful more agents are”. Real strategic weapon - none of our competitors have the store. Flexibility.
- Congrats - vendor consolidation story. Cloud module adoption fantastic. New modules coming out? MORE Don’t talk about future modules, always working on new stuff, usecases. Beyond core security, Discover Module {GD: whats this}. Usecase above and beyond security. One of the beauties of platform, “new stuff just there”.
- Spotlight module - up this quarter for Spotlight. Compliance mandates don’t care if you’re at home or office. Realtime visibility into your vulnerabilities. People don’t want “yet another agent”. Some VM players have pushed their agent. We’ve already collected data so no overhead.
- Clearly a phenomenal quarter. Whats driving most? Mix, balance? Each customer a bit different, some customers want to simplify, others have suffered breaches. Others lookign for force multipliers (Falcon Complete). Lot of tailwinds. Incumbents losing market share, cloud adoption, Digital Transformation. Some is greenfields. Metered billing. Simple, just works, people can consume how they want to. Mobile - gets underrepresented. EDR for mobile, so one of the leaders - seen great traction.
- Churn - assuming more churn and contraction. Havent seen COVID19 impact yet, but assuming there will be → guidance derisking.
- Closer to normal - how will things be different at CRWD? Travel etc? We’ve never been more productive, customers aren’t travelling so always available for meetings. So able to close deals. We’ll travel, but think enterprise selling is different now.