CrowdStrike Holdings, Inc.

Good day, ladies and gentlemen. Thank you for your patience. You've joined the CrowdStrike Holdings Incorporated Q1 Fiscal Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question and answer session. At that time, to queue up for a question, you may press star, then 1 on your touchtone telephone. To remove yourself from the question queue, press the pound key. Should you require any additional assistance during the call, please press star then zero on your touchstone telephone, and an operator will assist you. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, V.D. of Strategic Finance, Peter Daly. Sir, you may begin.

Good afternoon, and thank you for your participation today. With me on the call are George Kurtz, President, Chief Executive Officer, and co-founder of CrowdStrike. and Bert Podbear, Chief Financial Officer. Before we get started, I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives, and expected performance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of the date of this call. While we believe any forward-looking statements we have made are reasonable, actual results could differ materially because the statements are based on our current expectations and are subject to risks and uncertainties. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether it is a result of new information, future events, or otherwise. Further information on these and other factors that could affect the company's financial results is included in filings we make with the SEC from time to time, including the section titled Risk Factors in the company's Form S-1 previously filed with the SEC. Also, unless otherwise stated, excluding revenue, all financial measures discussed on this call will be non-GAAP. A discussion of why we use non-GAAP financial measures and a reconciliation schedule showing GAAP versus non-GAAP results is currently available in our press release which may be found on our investor relations website at ir.crowdstrike.com or on our Form 8K filed with the SEC today.

Now I will turn over the call to George to begin. Thank you, Peter, and thank you all for joining our first earnings conference call as a public company. I would like to begin by also thanking all of our employees, customers, partners, and investors for the hard work and dedication in helping us reach the important milestone of becoming a public company. We had a very strong start to the fiscal year. Consistent with the preliminary financial results of our IPO perspectives, we achieved 103% year-over-year total revenue growth and added a record number of net new customers while meaningfully improving operational leverage in the first quarter. Bert will discuss the details of our Q1 financial performance in a few moments, but first, for those new to the CrowdStrike story, I will provide some background on our technology, business, and markets. Our success to date and rapid growth are the results of close to a decade-long mission to stop breaches and pioneer a new category, the security cloud. Nearly every breach you've ever heard of has two things in common. the victims had both a firewall and an antivirus solution. Today, companies and government agencies face the constant threat of cyber attacks from a variety of threat actors, ranging from highly advanced nation states to organized crime, activists, and even terrorist organizations. These attacks aim to not only steal money and intellectual property, but increasingly they seek to disrupt and destroy it. Using highly sophisticated tools and techniques, today's cyber adversaries run circles around fossilized legacy technologies. This is what led us to start CrowdStrike back in 2011. We set out to create a modern endpoint security platform with a cloud-native architecture built from the ground up to stop breaches. Like other cloud disruptors, CrowdStrike started with a clean slate to build not only a scalable cloud architecture, but also a scalable, frictionless, and highly efficient business model. Our platform is composed of two tightly integrated proprietary technologies. Our easily deployed intelligent lightweight agent in our cloud-based dynamic graph database called ThreatGraph. Our Falcon platform integrates 10 cloud modules via software as a service subscription-based model that spans multiple large markets, including endpoint security, security and IT operations, and threat intelligence to deliver comprehensive breach protection even against today's most sophisticated attacks. We believe our cloud-native platform gives us a fundamental competitive advantage as we capture data once and reuse it and monetize it many times over. our customers can try new modules already populated with their data for free. This creates a high-velocity, cross-selling model. In fact, there are a number of key attributes that we believe set the Falcon platform apart from other solutions in the market. First, our solution is rapidly deployable, easy to use, and unlocks the power of crowdsourced data. It gets smarter the more data it consumes. increasing our effectiveness, intelligence, and competitive advantage with each new customer and endpoint or workload joining our crowdsourced network. Second, all of our cloud modules are powered by a single intelligent agent, allowing customers to consolidate and remove numerous agents from their infrastructure and restore endpoint performance. Our lightweight agent is designed to be automatically installed and operational on an endpoint, in less than 30 seconds. That's without any reboots. This is an important attribute for customers as they do not want to reboot their entire business to adopt a new solution. Solving this engineering challenge was critical for providing immediate time to value for our customers. Another key aspect of our agent is its ability to dynamically capture high fidelity data with our proprietary smart filtering technology. What matters to stopping breaches is the quality and the type of data that we obtain and analyze. Smart filtering is critical to capturing the right data on both real-world attacks and benign behavioral patterns to continually train and enhance our algorithms, resulting in industry-leading threat detection and low false positive rates. CrowdStrike's smart filtering technology also allows us to take full advantage of the cloud, Our cloud-native approach outperforms other solutions that may be forced to store their data locally or inefficiently stream unfiltered data from endpoints to on-premise controllers which crush networks and endpoint performance. And third, all the data we collect is stored in one place, not on-premise or stuck on the endpoint itself, but in the cloud, where it is analyzed almost instantaneously across our entire customer base. To handle all this telemetry, we built our own proprietary distributed graph database that we call ThreatGraph. We like to think of ThreatGraph as the brain of our system. It is capable of dynamically scaling to meet demand. Every week it processes, correlates, and analyzes over one trillion events across our global customer base in real time. What makes our ThreatGraph so unique is and powerful is its ability to very quickly discover and identify relationships and patterns within the data to see and stop attacks that are invisible and undetectable using conventional legacy solutions. ThreatGraph lets us apply cloud-scale AI to this data to stop breaches in real time. Today, we serve over 3,000 subscription customers We protect many large organizations across all major verticals, including nine of the top 20 banks, over 40% of the Fortune 100, and government agencies around the world. Our ease of use, rapid deployment, and exceptional efficacy also makes our solution a natural fit for small and mid-sized organizations, which often do not have large internal security teams. In the first quarter, we saw strong customer momentum. I will take a moment to highlight a few of the notable customer wins that showcase initial adoption drivers of the Falcon platform, as well as our ability to expand within existing accounts. Key themes we often hear from customers are the need to simplify their security stack, reduce the number of agents on their endpoints, and gain the advantage of a true cloud-native endpoint security platform. Take the example from this quarter of a health insurance provider that was using a number of tools from other security vendors, including EDR from a next-gen vendor, AV from a legacy vendor, and a variety of tools embedded in the operating systems of their servers and workstations. Yet this company had issues with alert fatigue and had difficulty scaling its patchwork of solutions as the business was growing. To solve these problems, they dropped the old setup and rolled out CrowdStrike's Falcon platform given its ease of deployment, single-agent architecture, and ability to take advantage of crowdsourced data by adding our threat hunting module, Overwatch. In Q1, we also displaced a legacy AV vendor at a mid-sized pharmaceutical company. The board and leadership team at this company had a growing concern about their current state of security and the level of adversary activity they were seeing. They also knew they had limited cybersecurity personnel and a skills gap, which is another demand driver we commonly see among prospective customers. This company quickly identified our turnkey Falcon Complete offering to help them easily address their skills gap and fortify their cyber defenses. Next, I will highlight a win that represents our tremendous opportunity to expand within our customer base. This customer is in the public sector, which also speaks to our growing success in that segment of the market. We initially engaged with this large U.S. city back in 2016 on a small deployment of 15,000 endpoints to replace a fossilized AV vendor that was failing to provide protection and value. We replaced that vendor with our combined EDR next-gen AV offering, plus Overwatch. Based on the success of the initial deployment, we expanded our footprint to over 250,000 endpoints the following year. And I'm pleased to report that in Q1 of this year, we have increased coverage to 400,000 endpoints and sold additional cloud modules, including Falcon Discover for IT hygiene, Falcon Device Control, Falcon Spotlight for vulnerability management, and Falcon X for integrated threat intelligence. This is a great example of how we can land a new customer and expand that relationship by adding endpoints and modules over time. Our Falcon platform is one of the most strategic security purchases they have made in many years. These wins represent just a few of the 543 net new subscription customers that selected CrowdStrike in G1 to help them stop breaches and protect their organizations. Driving the adoption of our platform is a robust sales and marketing engine that continues to deliver an increasing number of new logos while consistently removing friction from the sales process. Increasing our customer base is a key component of our growth strategy, and we will continue to invest in customer acquisition programs, channel partnerships, and frictionless go-to-market programs, including free and in-app trials. In addition to winning new customers at a rapid pace, we are also focused on expanding our relationship with existing subscription customers by deploying additional cloud modules and protecting more of their endpoints. Our dollar-based net retention rate speaks to the efficacy of our solution in our successful land and expand sales model. As of January 31, 2019, we had a dollar-based net retention rate of 147%. While this metric can fluctuate quarter to quarter, our benchmark is 120% or above, which we again exceeded in Q1. While we started in the endpoint security market, given the nature of our cloud-native architecture, we're able to rapidly innovate on top of our platform and build new modules for additional functionality and use cases not typically associated with endpoint security. Since 2016, we have launched seven new cloud modules, and today we address five markets, corporate endpoint security, threat intelligence, security and vulnerability management, IT service management software, and managed security services. Combining these market segments, we estimate that our global market opportunity is $24.6 billion in 2019 and growing to over $29 billion in 2021. To help drive future growth, we plan to continue to develop new cloud modules to address broader endpoint use cases, such as IT configuration management and IT operations. To measure our success executing on our platform strategy, we look at the percentage of all subscription customers who have adopted four or more cloud modules. This percentage rapidly grew to 30% by the end of fiscal 2018, and grew to 47% by the end of fiscal 2019. In Q1, we continue to see an upward trend in this metric. In looking at our future growth prospects, it is common for those new to the CrowdTrack story to only think about the opportunity as endpoints, such as desktops and servers. However, we think about the opportunity differently and more broadly than that. We expanded our market opportunity by securing a wider array of workloads, which includes desktops and servers, virtualized and cloud environments, IoT devices, and containers. In Q1, we expanded our market opportunity even further when we introduced Falcon for Mobile that supports Android and iOS. This is a powerful vector for growth. These workloads need to be protected, and they are growing with every new connected device and every new cloud instance. We also intend to grow by broadening our reach into new international markets and customer segments, including smaller organizations, as well as acquiring customers in the federal government vertical. And lastly, we see significant longer-term opportunity with new workloads and applications within the CrowdStrike store. The CrowdStrike store offers the first and only unified security cloud ecosystem of trusted third-party applications. This sets the stage for us to further expand our TAM and grow in segments outside of security, such as IT operations and compliance. In summary, we cannot be prouder of our important mission, protecting our customers from devastating attacks, business disruption, and a theft of IP and financial resources. In addition to stopping breaches, we also help our customers reduce cost and complexity, which differentiates us in the security marketplace. We have built a high-performing and enduring business with multiple engines for growth and a frictionless go-to-market strategy. We are excited by our future opportunities and look forward to your support as we advance on our journey to become the leading endpoint security platform and ultimately the de facto endpoint platform of the future. With that, I'll turn the call over to Bert.