The following are my notes from the earnings call that ended approx. 55 minutes ago.
George Kurtz, CEO
CRWD has become the cloud security platform of choice
Stopping cloud security breaches encompasses cloud workload and ??? and no longer just/only endpoint security
CRWD is now 3rd fastest SaaS behind Salesforce and Zoom to reach $1B
77% subscription revenue growth
CRWD customers who have purchased 4 or more, 5, or 6 modules represent 63%, 43% and 24% respectively.
1,480 net new subscriptions to 9,866 customers world wide
4,465 net new customers chose Falcon in FY 2020
Fortune 50, 100 and 500 customer wins in Q4 and the revenue recognition from this will take place in
Q1FY21, which is typical
New large logos include Pfizer and Proctor and Gamble
Win w/ a large technology company to displace a legacy software (sentinel one)
CRWD also secured a foundational customer, a large defense contractor
Bank Leumi in Israel is now also a new CRWD Falcon customer
CRWD expanded routes to new customers through partners, significantly grew their partnership growth and
DOUBLED the number of transactions through partnerships
650% _____?? growth and +300% transaction growth
Falcon workload protection program can now run as an unprivileged container
Sunburst was NOT a significant contributor to Q4 revenue, but will serve as a tailwind to the security market that has put over 250,000 customers that were hacked at risk and George said that customers are wanting to dump Microsoft for CRWD security as a result so the fox is not guarding the henhouse.
Authentication is needed to reduce security compromises.
Pre-empt, CRWD’s new program will be launched at the end of Q1
Threatgraph analyzes +5 trillion threats per week.
Humio gives CRWD the ability to expand it’s datalake and will be built into most all of CRWD’s modules/programs to increase speed.
Humio broadens reach into TAM by $4.9B
CRWD is just 1 of 2 elite forensic teams in the industry able to analyze and work on the Sunburst hack.
In closing, Falcon platform is recognized by enterprises of all sizes and they believe they are still in the early innings of their expansion into new and larger markets.
Burt Podbere, CFO:
82% revenue growth
$293M FCF ($97M)
Good balance of new wins between large, medium and SMB
$142.7M in ARR
Net new ARR grew 30% Q/Q
75% ARR Growth to reach $1.05B
Gross retention is 98%
DBNR exceeded 125% , up from 124% Y/Y
$264.9M
77% subscription revenue growth
Professional services are a strong lead generation for the Falcon platform
Geographic growth in US and outside of the US is 74% US growth, 14% Europe growth and 10% Asia Pacific growth
Q4 Gross margin grew to 77% and 80% Y/Y
CRWD continued to invest aggressively during the quarter, as they see significant opportunity in the future.
In Q4, CRWD had a magic number of 1.3
Drove strong leverage in FY 21 Operating expenses improved by 17% allowing them to step up investments in growth-producing and ROI opportunities
Operational margin reached 13%
Ended 4th qtr w/ $1.9B in cash and cash equivalents
FCF $97.4M
From Q4 to Q1, they expect to see seasonality.
Humio will provide $2M revenue in Q1
Guidance: 1st Qtr $293.1M = 62-64% revenue growth with subscription revenue being the biggest driver
FY 22 Revenue $1,310M(B) to $1,324 M(B)
Analyst Q/A
Q Public cloud/Falcon Herizon and other security tools, how much cross selling opportunities?
A Done great job of cross selling into cloud workloads. This is becoming more and more important
and very well received by customers. Continuing to build this out.
Q Don’t guide to ARR for next year. How about ARR per customer and where is it trending?
A ARR per customer, there’s accelerated growth in mid-market SMB space. Accounts are expanding
per 125% Net expansion rate. RE: Net New logos, they’re able to sell to large, medium and
small customers. This is very difficult to make happen, and they’re doing it quite effectively.
Excited about expansion opportunities.
Q Sales through AWS…What % of net new ARR came from protecting cloud workloads vs. endpoints?
A Strong quarter thru AWS marketplace has grown into a very meaningful number. Seeing good pull
for new cloud modules. The number of containers they protect is a HUGE number. The better news
is that they’re still in a greenfield re: protecting new workflows. Speed of closing with AWS
is a huge advantage. If customer agrees to the standard customer, it speeds up the process by
80%.
Q Humio vs. XDR, are they going to become more of a SIM provider over time?
A Want to leverage AI technologies they’ve built. There was a lot of XDR–like technology that
CRWD was using before Humio, but it’s a very foundational and driving technology.
Q Humio: Revenue opportunity. Please expand on cost benefit and CRWD re-platforming the back end
w/ Humio related to CAPX and gross margin.
A Humio will be used throughout their product expansion. Ability to compress data w/o having to
re-hydrate the data, which is unique in the industry. They’ll know a lot more when they get
further into it. See margin expansion and optimization opportunities as a result.
Q ARR spill over into first Fiscal quarter –Discuss seasonality.
A Seasonality: Typically see this in ARR last year dip from Q4 to Q1 and they think this will be
the case again this coming FY. ARR relates to subscription start dates in the following
quarter, which does happen in every quarter. (stop and start of revenue recognition) Want to
go fast, but want/need to be sure the customer is ready to implement.
Q Humio: How different are they to scaler (ZS??) or is it repurposing their technology and what
they’re strategically aligned for?
A Technology is index-free ingestion, lots they can do in memory. Flexible architecture and data
models and data sovereignty. Agent does introspection, observability etc. that’s very valuable
to fight attacks.
Q Talk beyond just endpoint…
A CIO’s and Boards are concerned about more than just endpoint and realize they need to focus on
being able to protect Microsoft and being able to de-risk the fox guarding the hen house (a
zinger on MSFT)
Q Salesforce win. Was incumbent a legacy or next gen?
A It was a next gen provider that has been making a lot of noise in the investment market. Time
to value is just unbelievable compared to their competitors.
Q Talk about the legacy vendors you compete against? And what inning are you in re: Competing w/
Symantic.
A This will continue with taking work from McAffee as well. These older architectures are not
spending R&D dollars to improve their product.
Q You said that CRWD pipeline is record size. Talk about metrics and time to close deals. What
is time to first upsell look like? Now that you’re looking into the new year, what are your
hiring plans?
A Don’t normally give stats out. Some are 1 week on bigger deals and some are 6 months. It
varies all over the board. Treat environment is the worst they’ve ever seen. Overall, it’s
very variable and they’re proving value to their customers with a 3 month payback. Module
expansion is really taking off and this makes a very efficient sales model.
Constantly looking and investing aggressively. They have some room to aggressively invest
because they clearly see the opportunity.
Q Elaborate on E&Y partners and are there system integrators that work around /with CRWD
A P&G deal came from this and are operating at the board level and they have these relationships.
They’re excited about this world-wide relationship and they’re only in the beginning of this
relationship.
Q Regarding the international opportunity, if you think longer term, is there any magic in getting
to a 50/50 mix and could you see this longer-term?
A Yes. I (George) can see this becoming a 50/50 split longer-term (US vs. Outside the US).
George said THE ONLY WAY TO GO TO MARKET IS THROUGH PARTNESHIPS. These are VERY strategic
relationships and it’s critical to CRWD’s growth.
Q You said that you do not see solar winds as driver in Q4, but there is a tailwind to growth from
it in FY 22.
A We see it as a sustainable tailwind. This Solarwinds event was the most significant George has
seen in his 30 year career. When you look at the modules that can really benefit such as zero
trust, identity, etc. identity is a big element in protecting customers on-prem and in the
cloud. There’s not a conversation that they’re having with potential customers that doesn’t
include the subject of identity. Vulnerability and lots of it being experienced through the
MSFT product. They’re seeing lots of uptick as a result of MSFT.
Upcoming CRWD investor call/presentation on April 4(?)
Hoping this is helpful information for everyone on this fantastic board of thought leaders and givers willing to share their expertise. My appreciation and best wishes to you all for prosperity, safety, happiness and success.
sjo