CrowdStrike Q1 2024 Earnings Review
$CRWD Q1'24 Results:
Financial Results:
↗️$921M rev (+33.0% YoY, +32.6% LQ) beat est by 1.8%
↗️GM* (78.3%, +0.3%pp YoY)
↗️Operating Margin* (21.6%, +4.8%pp YoY)
↗️FCF Margin (35.0%, +2.2%pp YoY)
↗️EPS* $0.93 beat est by 3.3%
*non-GAAP
Key Metrics
↗️ARR $3.65B (+33.4% YoY, +212 net new ARR)🟢
➡️Billings $936M (+26.3% YoY)🟡
Customer Engagement with Multiple Modules
↗️% of customers using 5+ Modules (65%, 64% LQ)
↗️% of customers using 6+ Modules (44%, 43% LQ)
↗️% of customers using 7+ Modules (28%, 27% LQ)
Operating expenses
↗️S&M*/Revenue 32.3% (28.8% LQ)
↗️R&D*/Revenue 18.2% (18.0% LQ)
↘️G&A*/Revenue 6.2% (6.2% LQ)
↘️Net New ARR $212M ($282 LQ)
↗️CAC* Payback Period 17.6 Months (13.3 LQ)
Dilution
↘️SBC/rev 20%, -1.0%pp QoQ
↗️Basic shares up 2.5% YoY, +0.0%pp QoQ
↘️Diluted shares up 4.0% YoY, -1.5%pp QoQ
Guidance
↗️Q2'24 $958.3 - $961.2M guide (+31.2% YoY) beat est by 0.6%
↗️$3,976.3 - $4,010.7M FY guide (+30.7% YoY) raised by 0.5% beat est by 0.6%
Key points from CrowdStrike’s First Quarter 2024 Earnings Call:
Financial Performance Highlights:
CrowdStrike reported a record Q1 with net new Annual Recurring Revenue (ARR) of $212 million, marking a 22% year-over-year increase.
The company's ending ARR reached $3.65 billion, growing 33% year-over-year.
Subscription gross margin was a record 80%, and free cash flow was $322 million, representing 35% of revenue.
CrowdStrike achieved GAAP profitability for the fifth consecutive quarter.
Falcon Platform Expansion and Utility:
The Falcon platform continues to expand its capabilities, consolidating more cybersecurity functions into a single AI-powered software platform.
New Subscription Model - Falcon Flex:
CrowdStrike introduced Falcon Flex, a new subscription model designed to simplify customer access to the Falcon platform. This model allows customers to access preferred products at optimal pricing while reducing the time and effort involved in procurement and legal negotiations.
This subscription model is highlighted as driving broader platform adoption and achieving significant deal value, representing over $500 million in just three quarters since its introduction.
Integration of Advanced AI Capabilities - Charlotte AI:
Charlotte AI, integrated into the Falcon platform, is designed to enhance the efficiency of security operations centers (SOC) by reducing the time required for threat detection and response from hours to minutes.
This AI-driven capability is emphasized for its ability to improve platform utility, making cybersecurity operations faster and more effective by leveraging AI to process security tasks.
LogScale Next-Gen SIEM Integration:
The Falcon platform now includes LogScale, a next-generation Security Information and Event Management (SIEM) system that is integrated into the platform for all customers. This integration is aimed at replacing legacy SIEM systems with a more modern, efficient, and cost-effective solution.
LogScale is highlighted for its ability to ingest and process large volumes of security data natively within the Falcon platform, enhancing data utilization and response capabilities.
Customers:
Significant Deals and Consolidation: CrowdStrike reported several significant customer wins, including a seven-figure deal with a Fortune-100 healthcare company, which adopted multiple modules after experiencing a breach.
Diverse Industry Penetration: CrowdStrike highlighted deals across various sectors, demonstrating the platform's broad appeal and utility. For example, a major Middle Eastern power and utilities provider consolidated five security vendors down to CrowdStrike's single platform solution.
Customer Trust and Expansion: The introduction of Falcon Flex has helped existing customers expand their utilization of the Falcon platform, indicating high trust and satisfaction with CrowdStrike's offerings.
Competitive Moat:
CrowdStrike’s competitive moat is significantly bolstered by the architectural design of the Falcon platform, which was built from inception to integrate various cybersecurity functionalities seamlessly.
The integration of advanced AI capabilities, such as Charlotte AI, into the Falcon platform enhances its competitive edge by significantly speeding up threat detection and response times, thereby offering superior security outcomes compared to competitors.
CrowdStrike continues to leverage its platform's capability to consolidate multiple security functions, which not only simplifies security management for customers but also displaces competing vendors, strengthening CrowdStrike’s position in the cybersecurity market.
Future Outlook:
The company expects to maintain strong performance through increased platform adoption and new customer acquisition.
CrowdStrike reiterated its target of reaching $10 billion in ARR, emphasizing the growth potential from its expanding suite of products and services.
Management comments on the earnings call.
Product Innovations:
George Kurtz: "Our AI native platform is consistently evolving to close the gap between detection and response, compressing alert to resolution time scales from days and hours to seconds in real-time... With Charlotte AI, customers are experiencing more platform utility at faster speeds, shrinking hours of their security work days into minutes."
Competitors:
George Kurtz: "Unlike vendors who pedal wasteful ELAs, our customers utilize what they purchase because when you buy what you want and need, when you want and need it, utilization is natural... We're not reclassifying, recounting, or repositioning existing business to concoct perceived platform value."
George Kurtz: "There's a widespread crisis of confidence among security and IT teams within the Microsoft security customer base. At the request of organizations saddled with Microsoft E5 licensing, we delivered Falcon for Defender, a platform on-ramp to help organizations of all sizes start utilizing Falcon to secure their Microsoft Defender usage."
Customers:
George Kurtz: "We're consistently hearing that customers want to partner with us as they consolidate, standardizing their cybersecurity future on the Falcon platform and investing their trust in CrowdStrike as cybersecurity's North Star."
Future Outlook:
George Kurtz: "We have the right technology, we've got the ability to reduce their costs. We've got a partner network which is delivering massive value for us. And when you put it all together, yes, it's challenging. But if you've got the right solution with the right offerings, we think we can be very successful... We have ample runway ahead of us to revolutionize, innovate, and, of course, consolidate this year and well into the future."
Thoughts on CrowdStrike ER $CRWD :
🟢 Pros:
+ Revenue rose by +33.0% YoY, accelerating from 32.6% in the last quarter.
+ ARR is growing faster than revenue.
+ Strong Net New ARR added (+211M, +22% YoY).
+ Customers are using more modules (5+, 6+, and 7+ modules +1pp QoQ).
+ Use of 8+ modules + 95% YoY.
+ Company increasing margins and profitability.
+ Beat Q4 revenue guidance by 1.7%.
+ FY guidance for 30.7% revenue growth, increased FY guidance by 0.5%.
+ Introduced New Subscription Model - Falcon Flex. The Falcon platform now includes LogScale - Next-Gen SIEM Integration.
🟡 Neutral:
+- SBC/rev at 19.9%. Diluted shares up 4.0% YoY.
+- Total calculated billings growing slower than revenue.
+- Company doesn’t provide RPO and DNBR numbers (“our dollar based gross and net retention rates were consistent with our expectations” - supposedly at 120%).