Crowdstrike $CRWD Q1 '23 Earnings

Surprised no one posted anything yet.

Pretty decent report, not the best, but mostly in line with previous reports:

Revenue: $487.8 M (+61.1% YoY, 13.2% QoQ)
Gross Margins: 76.7% (Down 16 basis points YoY)
ARR: $1.92 B (+61% YoY, 11% QoQ)
Customers: 17,945 (+57.1% YoY, 9.9% QoQ)
Q1 Operating Margin: 17% (vs. 9.8% last Q1 '22)
FCF Margin: 32.3% (vs. 38.7% last Q1 '22)
NRR: 120+

of customer adds was definitely the biggest red flag, slowest growth by a decent bit both YoY and QoQ.

Unit economics remain strong, showing solid operating leverage with S&M, G&A and R&D all in line with trends with no significant increases.

In this macro environment, seems like a Crowdstrike’s overall fundamentals seem better than SentinelOne’s. I personally think SentinelOne had a few more red flags (i.e. organic revenue growth, customer growth, general path profitability and FCF).

Long $CRWD


Thanks for posting RunnerGuy

I’m not sure if customer add should be looked at as a negative (?).

This quarter had 1620 customer adds. Their 4th consecutive qrt over 1600.

Fiscal 22 customer adds:

Q4 1638
Q3 1607
Q2 1660
Q1 1524


Q1 1480
Q2 1186
Q3 969
Q4 830

Yes, customer adds have plateaued QoQ, but, at a very high number. At this scale, as long as they continue to land and expand with customer module adds, they can hopefully maintain high enough revenue growth along with the other positive fundamentals they are showing. I thought their Q2 guidance came in light, but we’ll have to see how much sand is in the bag in their next ER.




I thought their Q2 guidance came in light, but we’ll have to see how much sand is in the bag in their next ER.

At first glance, I thought this too but when compared to their historical Q2 sequential growth rates, it does not appear to be as light as it seems. Here are their historical QoQ growth rates going back the last few years:

Fiscal 2020
Q1: 19.4%
Q2: 12.5%
Q3: 15.7%
Q4: 21.6%

Fiscal 2021
Q1: 17.1%
Q2: 11.7%
Q3: 16.8%
Q4: 14.0%

Fiscal 2022
Q1: 14.3%
Q2: 11.5%
Q3: 12.5%
Q4: 13.4%

Fiscal 2023
Q1: 13.2%
Q2: 11.0% (assuming a similar size beat as the last four quarters)

Clearly, there is some seasonality at play here and for whatever reason, Q2 is their weakest quarter each year for revenue growth. So while the guide does seem somewhat light, it looks to be on par with their previous Q2 growth rates. At their scale, it is inevitable for them to slowdown somewhat so I do not see any thing to be concerned with here. Just another great quarter, business as usual from what I can gather.

Long CRWD ~ 11%


CRWD always puts out a nice presentation.…
Here’s a nice summary of the qtr.

Here’s a nice summary of the qtr.…

On Worsening Macro:

“We haven’t seen any slowdown in deal velocity. This is not discretionary spend… we see no indication that tailwinds will slow.”

Founder/CEO George Kurtz

On RPO sequential growth weakness…

Last quarter, CFO Burt Podbere told us that sequential net new ARR growth as well as RPO growth would be challenged by multiple 8-figure deals closing in Q4 2022. That’s why sequential RPO growth especially was so slow.



I was notified off board that I had fiscal 21’ customer adds in wrong order. Thanks!

It read:

Q1 1480
Q2 1186
Q3 969
Q4 830

Should be

Q4 1480
Q3 1186
Q2 969
Q1 830


Some notes on earnings numbers and the earnings call.

Crowdstrike Earnings…

Earnings Call Transcript…

Supplemental Disclosures…

On 3/9/22 at Q4 earnings they told us they would make $485.4M max rev, guiding to grow 8% QoQ and 54% YoY. They delivered Q1 $487.7M, a beat of 4.8%, growing 13.2% QoQ and 61% YoY. They added $56.7M over the last Q.

     1Q23    4Q22    3Q22    2Q22    1Q22
REV  487.7   431.0   380.0   337.7   302.8
QoQ  13.2%   13.4%   12.5%   11.5%   14.3%
YoY  61%     63%     63%     70%     70%

This was their typical beat over the last quarters.

      1Q23    4Q22    3Q22    2Q22    1Q22
BEAT  4.8%    4.5%    4.0%    4.1%    3.7%

We are now at TTM revenue of $1636M, 13% more than last Q, and 64% YoY.

     1Q23    4Q22    3Q22    2Q22    1Q22
TTM  1636.4  1451.5  1285.4  1137.9  999.2
QoQ  13%     13%     13%     14%     14%
YoY  64%     66%     69%     74%     77%

Their Subscription Revenue was 94% of total revenue, same sustaining margin over the last few quarters.

Adjusted Gross Profit on Subscription Revenue was 79%, same sustaining over the last few Qs

ARR this Q came in lighter than last Q growth, in light of similar last Year Q1, They brought in $190.5M ARR, 32% YoY but 12% less than last Q of $217M.

      1Q23    4Q22    3Q22    2Q22    1Q22
TTM   190.5   217     170     150     144
QoQ   -12%    28%     13%     4%      1%
YoY   32%     52%     46%     44%     68%

Total ARR is now at $1922M, growing 11% over previous quarter, and 61% YoY.

RPO at $2420M, 7% QoQ growth, and 64% YoY.

Customers: Total 17945, they added 1620, 10% more than last quarter, and 57% YoY.

     1Q23    4Q22    3Q22    2Q22    1Q22
CC   17,945  16,325  14,687  13,080  11,420
QoQ  10%     11%     12%     15%     15%
YoY  57%     65%     75%     81%     82%

They disclosed that 71% of customers now use 4 or more modules, and they retired this metric. Instead they added a new metric, customers using 7 or more modules.

5 modules 59% of customers
6 modules 35% of customers
7 modules 19% of customers

Their land and expand strategy is working nicely I think

What about Operations numbers?

They told us they would make up-to $66.4M in Adjusted Operating Income, they delivered $83M, 3% more than last Q, with 15.3% adjusted operating margin. That’s 25% beat over expectation. (note to self: look at SBC for that bump, actually examine Stock Based Compensation from Q to Q and other companies.)

Cash From Operations was $215M, 35% more than last Q, at 37% margin (% of total rev), Free Cash Flow $157.5M, 35% more than last Q, at 44% margin (total % of rev)

Overall the numbers were great, I am happy holding 12% portfolio allocation. Why? They told us they would make up-to $516.8M revenue next Q, guiding for 6% growth next Q, with 53% YoY. With their usual beat of about 4 to 5% (guess) they may deliver optimistically $542M for 11% QoQ growth, and 69% YoY and I think that’s quite healthy, next Q growth will test my thesis; if I should continue holding this business.

They also told us that for the Full Year 2023 they would make $2205M, they raised their guidance of from last Q (was $2163.2M) by 2%. Given they will raise guidance by 2% every Q we could arrive at Q4 for about $2323M which would give us Full Year 2023 60% growth. That’s my thesis for the FY23, we’ll see how wrong I was.

As a disclosure, my investing style is based on the method of 3 things mainly.

  1. I am making a conjecture here, a guess on the future of the business, then 2) I model necessary calculations into the future based the numbers (the past beats, outlooks and business execution), the story, the industry, the competition, etc… 3) And finally at next Q earnings I get to see how wrong I was. If I was wildly wrong and they did’t deliver I would sell immediately, admitting my ‘thesis/theory’ did not work. It will depend on who wrong I was.

So far I have not been too wrong on holding this business since January of 2020. I may have been stupid NOT to sell when valuations went way way up in the fall of 2021, but I didn’t know, I was blind, so were you, probably.

Turning to Earnings Call:

When reading Prepared Remarks I am looking for ‘confidence’ from the management about what happened in last Q and what’s to come next Q (and possibly the Full Year), here are some examples of strong statements that support my investing thesis:

First, fiscal 2023 is off to a fantastic start. We believe our Q1 results exemplify that we have a winning formula that includes scale, growth, profitability, and free cash flow.
Second, we saw strength across the platform, including a record quarter for modules deployed in the public cloud, and over 100% year over year ending ARR growth for our emerging product group, which includes our Discover Spotlight, Identity Protection, and Log Management modules. And third, we are seeing more and more customers standardize on the Falcon platform. The number of customers adopting six or more and seven or more modules both grew more than 100% year over year. We believe this underscores our wide competitive moat and our opportunity to drive long-term sustainable growth in both our core and expansion markets

We demonstrated how our single-agent architecture that does not require reboot, enables a frictionless go-to-market motion with an e-commerce engine… We believe this is unique to CrowdStrike and translates to increased module adoption, deal sizes, ARR growth, and sales efficiency.

The demand environment we see is more robust today than this time last year as cybersecurity is not discretionary

Late in Q4, we significantly expanded our trial program, increasing the number of modules available for trial to 12, up from just four modules in the prior quarter. The expanded trial program provides an even larger foundation to drive velocity through our e-commerce engine and makes it even easier for companies to trial and purchase more modules on the Falcon platform, and we are very pleased with the record performance in q1

Identity protection is another emerging area where we are seeing growing success in the market with the number of customers subscribing to these modules growing more than 30% quarter over quarter

(example of customer win) This global business process service provider based in Europe was struggling with their Microsoft deployment as complexity and misconfiguration pitfalls were hampering their efforts to protect their heterogeneous environment. After months of continuous issues, they fell victim to a breach and turned to CrowdStrike for incident response and endpoint recovery services. During the remediation process, this customer was able to experience firsthand the value of trusted expertise and the ease and speed of deploying Falcon across their environment. This led them to adopt Falcon Complete, which was fully up and running only 24 hours after the expanded engagement was completed

Q1 net new ARR performance was ahead of our expectations and follows our unprecedented Q4 highlighting our continued strong momentum in the marked

We continue to see strong growth in the U.S. at 57%, and international revenue growth accelerated to 71% year over year

… also executing our 2023 hiring plan and pleased to report that we added a record number of net new hires during the quarter

last year, we delivered an exceptional Q1 with significantly muted Q4 to Q1 net new ARR seasonality when normalizing for the two accounts that contributed approximately eight figures each to our unprecedented Q4 results. As a result, looking to Q2, we expect to see seasonality off of Q1 to be similar to last fiscal year

second quarter is generally our lowest cash flow generation quarter of the year

Prepared Remarks from George Kurtz and Burt Podbere were satisfying, I can hear some light Q2 numbers in ARR and cash flow. I am ok with that.

Questions and Answers Section:

We’ve had 13 analysts on the call. I heard several ‘congrats’ and ‘great results’ from then when asking questions, but also some ‘worrying’ questions about Macro slowdowns.

Question: on Humio and alternatives to SIEM?

When we talk to customers, particularly legacy SIEM customers, there’s absolutely an appetite to explore something that’s different, modern, more scalable, and more cost effective. And again, we’ve been big fans of Humio.

And when you think about Humio, you also have to think about Falcon XDR, right, in terms of its ability to ultimately subsume SIEM

Question: … rank order your top three modules that you think will drive or have the most impact on your growth in this fiscal year?

April 7 webinar, we went through the module growth dynamics. And we highlighted some of our products like Complete, which has been very, very successful for us. Then we talked about Spotlight, and we talked about Identity Threat Detection, Horizon, Cloud Workload Protection. These are just some of the hyper-growth modules that we highlighted in the webinar. And that really means year-over-year growth rates are significantly higher than the overall customer growth. And so we’re excited about those

Question: … international growth pretty strong in the quarter.

we’ve got a great offering and the strong demand in all geographies.

When we talk about aggressive investing or investing aggressively, we think about not only product lines, but we think about GEOs… ultimately, we’d love to see 50-50 in terms of the split at some point. (USA and rest of world)

Question: on great new subscription customer growth this quarter …

our bigger customers, those over $1 million, as we talked about on the webinar in April… each of those customers has about seven, on average, just over seven modules. In terms of landing new, we talked about in FY '22, it’s 4.7. And that’s up from 4.3 from the year before

Question: it was not necessarily strong US Fed quarter …

we expect great things from Fed. And we also believe that, as I said before, 10 years in the making, we finally have these big contracts after we got the certifications that we needed. We think it’s going to be a long runway in federal, and not only federal, but state local, and then you have federal type organizations that are around the world. So we think we’re in a great spot there.

Question: On implications of VMWare Carbon Black in light of Broadcom acquisition?

we were happy to see Carbon Black and VMware to be acquired. So we’ve continued to replace Carbon Black over the last few years

On: So with your total free trials increasing at 12 module… ?

customers leveraging our trial, converting them into our e-commerce platform, upselling our modules, even upselling them into Falcon Complete customers, we can take a few thousand dollar deal and turn it into a $50,000 deal, leveraging the full suite of e-commerce technology, as well as our inside sales team. And that has really driven efficiency in our organization

We take credit card sales, it’s very easy to get the product up and running and buy from us. And I think that is a unique differentiation point between us and our competition

I think we spend as much time on go-to-market execution and flighting how that is all going to work just as much as we do on the tech

Question: is the world a little less rosy than it was a quarter ago?

No, we haven’t seen any slowdown in terms of the willingness to buy security. It continues to be the No. 1 risk factor for any board of directors. Again, when you look at some of the e-crime impact and taking out business, it is not a discretionary spend. – in the hierarchy of corporate needs, it’s probably shelter. So we see that continuing. And in fact, when you look at the current environment, we have a customer saying we want to consolidate more. We want to go in with – all in with CrowdStrike. We want to get rid of this extra spend that we have in other areas, too many agents

Question: On what portion of new ARR came from new business, new logos, and what came from the existing base?

If you have advanced endpoint protection using AI, if you add EDR and now you add identity, that’s a winning formula. So we see a great opportunity to continue to sell into the installed base identity, and we talked about 30% quarter-over-quarter increase in identity. And we see a long runway. So when we think about EDR, the next iteration of that will be adding identity to it.

Question: On lingering fear about the business, slowdown in endpoint volumes?

digital transformation is happening, security transformation, moving to cloud, those are all long-term sustainable trends

Question: On possible headcount reduction other companies are having issues with?

We’ve seen a lot of high-multiple companies go through some layoffs and some challenges in trying to conserve cash. I think from an M&A perspective, we are always looking at companies, and we will buy good companies with good people irrespective of the current environment

So we will be opportunistic in both hiring great people, as well as looking at potential M&A opportunities now and in the future

Question: On broader question of the macro environment (womp womp economic slowdown)?

security is not going to go away. The threats are going to continue to get worse, and we’re going to continue to invest.

security right now is, let’s call it, recession-resilient

In 2019, we had a market share of around 6.3% in endpoint. And today, we’re in that 12.6% range from – this is all IDC. We think there’s a real opportunity to increase that. We think by investing in the channel, in people, in go-to-market, we think we have an advantage over everybody else because we’re such a well-run company and we’ve got a lot of opportunity to invest. Our balance sheet and our P&L are allowing us to do that. And we’re going to press that advantage. And we’re going to go after some great people that have been let go by some of our competitors.

Question: On Win rates versus Sentinel One and Microsoft and legacy replacement?

We continue to win at a very high rate. We’ve talked about that in the past. It’s a great competitive environment for us. We continue to convert. We talked about some of the Microsoft wins. Again, what customers are looking for are solutions that solve problems, stopping breaches, deals with some of the headcount problems that they have.They just can’t find enough good people and ultimately saves them a lot of time and money by harmonizing their security stack in one platform, which is CrowdStrike. So it’s still a big market. Burt talked about our market share on the last response. We’re looking to aggressively grow that, and there’s opportunities for others out there. But we believe we have the best technology, the best platform, the best AI. Testing results prove it as well and more importantly, customer success, the testimonials. And the proof is in the financial results. So – and we feel confident going into the future that we’ve got the right platform

So there you have it. Crowdstrike Q1 Earnings kicking off 2023. The main theme I heard was that Security is here to stay, it’s recession-resilient, it’s necessary and Crowdstrike has bright future.

My next move is to compare and constrast this with Sentinel One Earnings, but I like what what I heard that this is a big market and there are opportunity for others as well.

Cheers, good luck to all longs.