Crowdstrike Q4 - My Thoughts

Below are my thoughts on Crowdstrike’s Q4 FY2022, including both the numbers they posted and what came out of the conference call.

What I promise to any of you reading this is that I will continue to try to be as objective as I can and look and pros/cons through a lens that attempts to challenge assumptions, avoid confirmation bias, and certainly not in any way to be excessively celebratory or emotional about the results just because I hold a big position.

I already put together a pretty comprehensive look at Crowdstrike’s past performance, valuation, and Q4 expectations in this post here comparing CRWD to NET -….

Last thing I’ll say is that these are all MY expectations relative to the 16% position I hold (so I have pretty high standards given the position size)


1. Net New ARR – $217M was up 28% QoQ and 52% YoY (acceleration on both fronts)
2. SUBSCRIPTION Revenue – $405M, 66%YoY, but more importantly, 14% QoQ. The last 3 quarters have gone 12%, 13%, and now 14% QoQ respectively
3. Non-GAAP Operating Margin - was 19%, easily their best ever, and OpEx as a % of Revenue was down to 58%
4. Module Upsell – Customers with 4+, 5+, and 6+ hit 34%, 57%, and 69% respectively, each of which is best ever and each of which has gone up the last 5 quarters in a row.
5. Debt and Cash levels – Remarkably consistent even after large investments on many levels. They have $2B in cash and $750k in long term debt, and that’s almost exactly what they had last year. They are in NO danger whatsoever on their balance sheet.

”We exited the year with tremendous momentum for ARR derived from Falcon deployments in the public cloud, where ARR eclipsed the $100 million milestone and grew 20% quarter-on-quarter as we lead the effort to transform security for the public cloud.”

”In fiscal 2022, ending ARR transacted through the AWS marketplace grew more than 100% year-over-year.”

”We are thrilled to announce that Cloudflare, a trusted CrowdStrike technology partner, on a mission to build a better Internet, became a new customer in the quarter, adopting both Falcon Complete and Horizon.

”During the year, partner stores ending ARR grew 83% year-over-year with our MSSP (ie. Managed Security Service Providers) business growing more than 200%.”

” We are seeing tremendous growth from our emerging products that solve use cases outside of traditional endpoint protection. This includes our discover, spotlight, and identity protection modules as well as Humio. ARR for this group grew more than 100% over last year, contributing $157 million to FY 2022 ending ARR.”

”Our public cloud business surpassed the $100 million milestone in Q4 to reach $106 million in ending ARR….Ending ARR growth for our business when viewed through a cloud deployment lens outpaced the growth of our overall business, growing 20% quarter-over-quarter and represented approximately 8% of our Q4 net new ARR. Cloud workloads are increasingly targeted by adversaries and are largely under-protected, representing a significant growth opportunity in FY 2023 and beyond.”

”Cash flow from operations in the fourth quarter was a record $159.7 million, and free cash flow grew to a new record of $127.3 million or 30% of revenue. Excluding the approximately $70 million IP transfer tax payment related to the acquisition of Humio, free cash flow would have been approximately $197 million or 46% of revenue for Q4 and $512 million or 35% of revenue for the fiscal year.”


1. Total Revenue – $431M was up 13% QoQ and 63% YoY (flat on both fronts). Their last 4 quarters of QoQ growth (seasonality almost no factor) has now gone 14%, 12%, 13%, 13%. I think some people were expecting these numbers to keep falling off a cliff but their guidance never really indicated that would be the case.
2. Total Revenue Guide for Q1 – Top end of $465M. They’ve been pretty consistent with their beats for the better part of the last year and a half, and off the top line that’s usually a little over 4% (they beat this quarter by 4.5% on top line guide). An “in-line” beat next quarter would put them at $484M and 60% YoY and 12% QoQ growth.
3. FY 2023 Total Revenue Guide – $2.16B at the top end, which is 49% YoY. Consider this against their FY 2022 guide this same time last year, which was 52% YoY at the top end, and the actual results were 66%. So, a 3% decline in the guide doesn’t mean they will hit 63% YoY growth in actuality this year, but I don’t think 60% or high 50% is far fetched at all.
4. Total ARR – $1.7B, 62% YoY, 13% QoQ, mostly a mirror of revenue growth.
5. Gross Margins – 77% GAAP and 79% non-GAAP
6. Free Cash Flow – $127.3M with a FCF Margin of 30%. 30% margins here is their long term target and what they expect to continue to hit on a yearly average.
7. DBNRR – 123%. Steady

They mentioned a “Fortune 50 Financial Institution” chose Crowdstrike mid-year to displace a “legacy incumbent” that was in for “relationship reasons”. Knowing Kurtz, I expected at least one story like this, so I’m not shocked. They will continue to highlight competitive takeouts where they happen, whether it’s against legacy or the new blood, and I expect they will continue to get them.

They mentioned Humio hit 1 PB of streaming data ingestion per day. They are really tying Humio to their XDR differentiation, and I think they are on track here.

A reference to the times (eg. Russia/Ukraine) and Cybersecurity outlook, but we all expected this - ”There are powerful tailwinds driving our markets, and we do not currently see any indication that these trends will abate anytime soon.

Federal Business still mostly an unrealized opportunity - ”And when we think about CISA, it’s a fantastic validation for us in the Federal government. I’ve spent time in Washington, I was just there recently. And there’s a lot of excitement about our technology finally being able to be deployed there. As you know, you have to go through a lot of different compliance and accreditations to get to sell in the Federal government and we worked through those. We continue to work through those at different levels. And it opens up a massive opportunity for us that we’ve seen a big pull from customers’ interest in that particular vertical because of the aging technologies that they’ve been saddled with in the past. So more to come on that, but very excited about the opportunity today and in the future.’

There was a question of how much Fortune 500 runway still left to capture given they already have more than 50%. They basically tiptoed around this as I think they (and we) all know there’s only so much more they can do, but they also were pretty bullish about how their technology and processes scale down market (ie. to Mid-Market and SMB), which is pretty much what I was expecting to hear.


1. Subscription Customers – 16,325 was 65% YoY and 11% QoQ. Q4 is usually a strong one for subscription customer adds, so this was below what I was expecting. I’m under no delusions that the YoY or QoQ numbers will increase here, but I would like to see these numbers hold a bit better. Obviously the subscription revenue numbers looked great, which shows they are making every customer count, but I don’t think they can keep that above 60% if they lose the rate of customer adds like this.
2. RPO – $2.27B was 67% YoY and 19% QoQ. Typically Q4 is their best for RPO, so while this may seem like an amazing number, I had them higher here, and am not going to use sheer size as an excuse, because SNOW just put up a $2.6B number at 100% YoY

They are doing what they have to RE: Supply Chain, but it’s still CapEx they wouldn’t have to spend otherwise….”As we continue to invest for future growth and scale and invest to remain ahead of any potential supply chain delays, we expect capital expenditures as a percent of revenue to be between 10% and 12% in fiscal year 2023. We anticipate these investments will be more weighted to the first half of the year than the second. At the same time, we are planning to maintain free cash flow margin at 30% of revenue for the year, weighted more towards the second half.”

There was a fair question from an analyst about Subscription ARR per customer which had been declining sequentially and then accelerated in Q4 and whether investors could expect a continued upward trajectory. Management basically gave a non-answer to this, and it just felt like an opportunity to be more bullish if there was a case to make there, so I left assuming the sequential bump may just be a one time bump.

Similarly, I thought there was another good question (based on management’s own commentary) about forward ARR expectations relative to pipeline, and whether this was a “record” beyond just the raw number, and again management’s response was kind of a non answer. And again, part of the reason these questions were asked was because (1) The net new ARR was SO GOOD this quarter and (2) management chose to provide a “framework” for how to think about ARR next quarter, so I think analysts were trying to get a better handle on how to really understand that “framework”.

Another good question was around the 60% operating income guide and the factors in that guide outpacing the revenue guide. The question was introducing thoughtful consideration of macro economic factors (eg. inflation, wage increases, etc). And once again here, I thought the answers were just repeating cliche talking points and not really addressing the heart of the question. Not a huge deal overall since the guide is what it is and it’s great, but it would have been nice to have it underpinned by some specific, material reasons why they feel they can hit such a strong number.

All in all, Given I already had a 17% position in CRWD and I view this as a “met” my expectation quarter, I’m planning to sit tight, and if anything, add a little bit to my position, but certainly not considering selling any of my shares.

Hope you find this useful, and as always, hit me up with any contrarian views or questions.

Long CRWD ~17%


Thanks Chris.

Do you believe CRWD’s revenue and subscription growth adequately correlate to the greater Macro environment, which seems to be buzzing from cyber security threats related to the war in Ukraine? Granted, the war is only two weeks in, but the build up was months in the making, and I would have expected some of that anxiety would have been factored into the numbers somewhat.

Other factors such as compensation in a rising inflation, and higher borrowing costs may be offsetting profitability, but overall the top line guide seemed a bit meager. Just my initial blush.

Do you believe CRWD’s revenue and subscription growth adequately correlate to the greater Macro environment, which seems to be buzzing from cyber security threats related to the war in Ukraine? Granted, the war is only two weeks in, but the build up was months in the making, and I would have expected some of that anxiety would have been factored into the numbers somewhat.

Not Chris, but I will weight in here. Putin has been a flashing neon sign to corporations in terms of Cybersecurity for nearly a decade now. The fact that he was saber-rattling during the quarter just posted really was not all that unique. In fact, his closest neighbors really didn’t think he’d invade Ukraine until he did.

So no, I do not think that CRWD got any more tailwind in the December quarter than any of the previous quarters given how much hacking the Russians have done for some time.

I do believe they will get a bit this quarter and onward, and also that the Feds will step up their program rather quickly now as well. But I don’t think there was much of that in the numbers we just saw.

In hindsight, much like the pandemic, investors and corporations should have seen it coming.