CrowdStrike Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the CrowdStrike fiscal third quarter 2020 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Maria Riley.

Please go ahead. 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 as 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 Most Recent company's quarterly report on Form 10Q previously filed with the SEC. Also, unless otherwise stated, excluding revenue, all financial measures discussed on this call will be non-GAAP. 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 the call over to George to begin.

Thank you, Maria, and thank you all for joining us today. Across the board, we delivered an exceptional third quarter with record results well exceeding our expectations. Year over year, we increased the number of net new subscription customers by 112% and achieved 97% ARR growth, 98% subscription revenue growth, and 88% total revenue growth, which was above the high end of our guidance. I would also like to highlight two significant milestones we achieved in the quarter. First, ARR grew to over half a billion dollars, and second, we generated positive free cash flow in the quarter and added to our cash balance. In our view, these strong results and our continued rapid growth at scale, which is significantly outpacing others in the industry, demonstrate our increasing leadership in the security cloud category and our strong foundation to drive future growth. Our accelerating momentum in the market is the culmination of years of thoughtful innovation, focus and execution, and is a credit to the hard work of all our employees. I'd like to thank every member of the CrowdStrike team for their unwavering dedication to stopping breaches and serving our 4,561 customers. In Q3, we once again saw an acceleration in customer growth with the addition of a record 772 net new subscription customers versus 730 last quarter. This is our seventh consecutive quarter that we added a record number of net new customers. We also set a record for net new ARR of 77.9 million, representing 32% growth quarter over quarter. This was driven by strong sales, with both enterprise and SMB customers. The reason why our solution is winning with customers across diverse industries, geographies, and size is simple. Our proven efficacy in stopping breaches, our cloud-native platform with a lightweight single agent that is easy to use and rapidly deploy at scale, and we enable customers to consolidate agents and increase endpoint performance, all of which helps our customers realize immediate time to value. It is also important to remember that our solution unlocks the power of crowdsourced data and gets smarter the more data it consumes. Our proprietary threat graph is the brain of our system and is capable of dynamically scaling to meet demand. Every week it processes, correlates, and analyzes over 2.5 trillion events across our global customer base in real time. Each new customer and endpoint or workload joining our crowdsourced network increases our data lake, effectiveness, intelligence, and long-term competitive advantage. I would like to take a moment to highlight a few recent customer wins that showcase the power of the Falcon platform. The first customer win is a competitive displacement of both next-gen and legacy products at a Fortune 100 insurance company that highlights the superior performance of our solution. After a year of trying to deploy a cheaper and less effective next-gen vendor to this company's security team could not get it to scale beyond 60% of their environment. Additionally, when they attempted to deploy the other vendor's agent in the server environment, it was incompatible with their critical business applications and performance was negatively impacted. Their security team was understandably frustrated, prompting them to engage with CrowdStrike. They evaluated the Falcon platform alongside another vendor's legacy security technology built into the operating system. Even though this competitor had a strong prior relationship with the customer, their product was found to be too complex and incompatible across the customer's heterogeneous environment. During rigorous testing by the security team and application owners, CrowdStrike demonstrated superior ease of deployment, application compatibility, strong endpoint performance, and, of course, high efficacy in stopping breaches. We won the business successfully. and this customer is adopting seven cloud modules across the Falcon platform, including our next-gen AV, EDR, device control, IT hygiene, vulnerability management, threat intel, and our threat hunting module, Overwatch. CrowdStrike is helping protect this customer from breaches while significantly streamlining their security stack with our single-agent architecture. The next customer win I will share with you today is with a Fortune 100 retailer where we are displacing legacy and next-gen vendors with our single-agent Falcon platform. This new CrowdStrike customer was initially looking to replace one of their next-gen EDR vendors with a solution that would provide prevention capabilities along with a better user experience and greater visibility for the internal teams. CrowdStrike's tight technical integrations with Splunk and close relationships with their field sales team help position us as the leading contender to meet this customer's strategic priorities. This customer now subscribes to three Falcon Cloud modules that span endpoint security and IT operations, and in turn is removing multiple vendors and agents from their environment. The next one I will share with you today highlights how companies can derive high business value and ROI by consolidating agents with the Falcon platform. After two large enterprise companies merged, their security teams were faced with a patchwork of security tools that were ineffective and could not scale to meet their needs. These tools included four legacy AV providers, one next-gen EDR, and one peer-to-peer query-based technology that were partially deployed across dozens of business units. Additionally, the organization was overwhelmed with so many false positives that they estimated 30 employees would be needed to triage alerts and manage these disparate tools. This organization decided to evaluate CrowdStrike Because of our strong reputation in the marketplace, our ability to address a broad range of security challenges through a single agent in a modular platform. During the sales process, this customer deployed Falcon on over 15,000 endpoints over a weekend, where it had taken one of the incumbent vendors one year to reach a similar level. After seeing how quick and easy it was to deploy and scale the Falcon platform across their environments, They increased the scope of the deployment to include servers, significantly increasing the overall deployment to well over 100,000 endpoints and workloads. The CISO at this new CrowdStrike customer estimated that by replacing the software, hardware, and labor costs associated with these other vendors, they will attain a compelling ROI in less than eight months. And lastly, I would like to share a new customer win that demonstrates how incident response engagements from our services team can quickly lead to large multi-year Falcon platform subscription engagements. After being hit with a ransomware attack earlier this year, a company based in Europe who was not a CrowdStrike customer engaged the CrowdStrike services team. We were able to remediate the incident and rapidly restore normal operations eliminating the need for this customer to pay a stiff ransom to the hackers. Through this brief but urgent engagement, CrowdStrike built trust with the customer through our expertise, professionalism, and technology efficacy. Recognizing that they had limited internal security resources, this customer became interested in our Falcon Complete subscription module, which is our full turnkey solution that combines endpoint security with remediation and response capabilities. Even though our solution was priced at a premium to the competition, this customer selected Falcon Complete based on total value provided, completeness of our solution, and the deep trust built within our services team. The seven-figure ARR Falcon Complete deal was more than 13 times larger than our initial services engagement and closed within three weeks after the CrowdStrike services team completed the project. From the many conversations we have had with customers, the message that resonates loud and clear is that both CIOs and CISOs are looking for a strategic partner to help them bridge the skills gap and simplify their operations. They are also looking for ways to leverage enhanced automation in their security operations to increase efficacy and free up resources. Organizations are increasingly turning to the Falcon platform to protect an array of endpoints and workloads. stop breaches, and restore endpoint performance. To measure the success of our platform strategy, we look at the percentage of all subscription customers that have adopted multiple modules. Our platform strategy is clearly gaining momentum with customers. In the third quarter, the percentage of customers that have adopted four or more cloud modules increased beyond the 50% we reported last quarter. Additionally, I'm pleased to report that customers with five or more cloud modules increased to 30%. As customers adopt more modules that span a wide array of workloads, we believe it strengthens our customer relationship and increases our strategic value with the customer. The power of CrowdStrike's Falcon platform also continues to garner strong industry recognition. In the Gartner Customer Choice Peer Review that was released last week, CrowdStrike received the highest rating of all vendors based on customer satisfaction for the second year in a row with a rating of 4.9 out of 5. This builds on the recognition we received from Gartner in Q3, which includes being positioned as a leader in Gartner's Magic Quadrant for Endpoint Protection Platform and receiving the highest score for Lean Forward Organizations in Gartner's Second Critical Capabilities for Endpoint Protection Platforms report. Additionally, Forrester Research named CrowdStrike as a leader in endpoint security in the Forrester Wave Q3 2019 report. CrowdStrike received the highest ranking of all vendors in the strategy category and achieved the highest score possible within 17 of the criteria. And lastly, SE Labs named CrowdStrike the best new endpoint solution in its annual report. We believe the industry's strong recognition of CrowdStrike validates that our single-agent architecture proprietary threat graph database, and cloud modules represent the gold standard in securing the growing workloads of today and the future. We remain intensely focused on the success of our customers. Last month at our annual cybersecurity conference, Falcon, we announced a new firewall management module that will deliver simple, centralized host firewall management to help customers transition away from legacy endpoint suites to CrowdStrike's next generation platform. We expect this module to be generally available early next calendar year, at which time the Falcon platform will have 11 cloud modules that span endpoint security, security operations, and threat intelligence. We also introduced Falcon for Amazon Web Services, which will be available in the AWS Marketplace this month. Customers will be able to easily purchase and deploy the solution with integrated metered billing to optimize their security spend for elastic workloads. An increasing number of enterprise customers are migrating to the cloud and modernizing their applications. However, security teams responsible for protecting cloud workloads have had difficulty in providing security in an effective and cost-efficient manner that is as dynamic and flexible as AWS itself. CrowdStrike Falcon for AWS fulfills all of these demands. With integrated metered billing, we will allow customers to quickly and easily scale their consumption as their business needs change. Pay-as-you-go or metered billing is an important option for customers running applications with extreme fluctuations in usage, such as payroll batch processing and data analytic workloads. At Falcon, we also announced seven new applications and use cases coming to the CrowdStrike store. The CrowdStrike store is a unified security cloud ecosystem of trusted third-party applications. These new apps will allow our customers to leverage their existing investments in CrowdStrike to address a range of security use cases, including application whitelisting, patch management, and vulnerability risk prioritization. While still early, we are receiving strong interest from partners that want to develop apps on our platform, and we see significant longer-term opportunities with new applications. By using our platform as a service, our store partners can save on R&D time and investment, while at the same time dramatically expanding their go-to-market reach. We also continue to expand our ecosystem of partners and customer touchpoints. We recently announced a new international go-to-market partnership with WePro, a leading information technology, consulting, and business process services company with thousands of customers globally. WePro is utilizing the CrowdStrike Falcon platform to build out their new next-gen service offerings that will leverage our proprietary threat graph data and focus on specific use cases, such as detecting malicious insider behavior. We expect that this partnership will expand our go-to-market reach globally. As we continue to evaluate the competitive landscape, we recognize that this is a unique time in the industry. The seismic shift to cloud-native technologies and cloud workloads, including containers, has created an environment with massive greenfield opportunities. Additionally, the market has seen a rapid increase in consolidation among competitors, which has created uncertainty within their customer base. We believe these dynamics have contributed to an expansion in our pipeline and an acceleration in our overall customer adoption, which is driving our strong results and increased outlook. It is our view that the ultimate winner in endpoint or workload protection will be the company with a platform that leverages cloud-native technologies and delivers the most value to customers via its platform and rich partner ecosystem. We also believe that a tightly aligned go-to-market engine built to foster frictionless adoption across companies of all sizes is equally important. These are all attributes inherent in CrowdStrike's cloud-native platform and sales motion. While our competitors are distracted by retooling their on-prem offerings, trying to integrate acquired technologies, rationalizing their workforce, or simply learning the industry, we are intensely focused on protecting customers. We believe we have the first mover advantage and a high-performing and enduring business model with a frictionless go-to-market strategy and multiple engines for growth. We believe we are in a strong position to drive future success with customers, delivered continued rapid growth at scale with best-in-class unit economics, and continue to expand our lead over the competition. With that, I'll turn the call over to Bert.