Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CrowdStrike Holdings Inc (CRWD, Financial) achieved a milestone with ending ARR surpassing $4 billion, marking it as the fastest pure-play cybersecurity software company to reach this level.
- The company reported a significant increase in subscription revenue, growing 31% year over year, and total revenue surpassed $1 billion for the first time in company history.
- CrowdStrike's Falcon Flex subscription model is driving rapid platform adoption, with over 150 Falcon Flex transactions in Q3, representing more than $600 million in total deal value.
- The acquisition of Adaptive Shield enhances CrowdStrike's cloud security suite and identity protection offerings, further differentiating its platform.
- CrowdStrike's innovation in AI-powered cybersecurity continues to lead the market, with strong performance in cloud security, identity protection, and Next-Gen SIEM.
Negative Points
- The July 19 incident resulted in near-term headwinds, including extended sales cycles and increased contraction, impacting net new ARR.
- Sales cycles increased by approximately 15% year over year within enterprise accounts, indicating potential challenges in closing deals.
- The company experienced a decrease in dollar-based net retention rate to 115%, temporarily impacted by the incident.
- Visibility remains limited for Q4 due to ongoing headwinds from the July 19 incident, including delayed pipeline generation and extended sales cycles.
- CrowdStrike expects a significant impact on Q4 free cash flow due to flexible payment terms under customer commitment packages and other incident-related expenses.
Q & A Highlights
Q: What are customers telling you about security spending next year, considering factors like lower interest rates and federal policies?
A: George Kurtz, CEO, noted that the security environment is worsening, with e-crime and ransomware being significant threats. Customers are seeking the best products and platforms to stop breaches and reduce operational costs. Consolidation remains a priority to eliminate protection gaps, and regulatory pressures will likely drive spending on top technologies.
Q: Can you comment on the ARR or net new ARR seasonality for Q4, considering past trends?
A: Burt Podbere, CFO, explained that while Q4 is typically the largest quarter with many renewals, visibility is limited due to factors like extended sales cycles and customer commitment packages. These factors make it challenging to predict if Q4 will mirror past strong performances.
Q: What trends are you seeing in customer churn and adoption rates post-July 19 incident?
A: George Kurtz, CEO, mentioned that there hasn't been significant churn among larger customers. Conversations have focused on the recognition of CrowdStrike's superior technology and the company's response to the incident. The corporate business had its best quarter, indicating strong customer retention and platform adoption.
Q: How is CrowdStrike leveraging agentic AI internally and for customers?
A: George Kurtz, CEO, highlighted that Charlotte AI is designed to perform tasks on behalf of customers, going beyond a simple chatbot. It automates processes like detection triage, significantly reducing time and effort for security teams. Internally, CrowdStrike uses various GenAI technologies to enhance efficiency.
Q: How does Falcon Flex impact customer retention and ARR projections?
A: George Kurtz, CEO, stated that Falcon Flex increases platform stickiness as customers adopt more modules, making it harder to leave. This model accelerates adoption and allows for easier integration of new acquisitions like Adaptive Shield. Burt Podbere, CFO, added that this gives confidence in ARR reacceleration in the latter half of next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
