CrowdStrike Holdings, Inc.

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

Good afternoon, and thank you for your participation today. With me on the call are George Kurtz, President and 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 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 and the company's quarterly and annual reports that we file with the SEC. Also, unless otherwise stated, excluding revenue, all financial measures discussed on this call will be non-GAAP. The discussion of why we use non-GAAP financial measures in a reconciliation schedule showing GAAP versus non-GAAP results is currently available in our press release, which may be found on the investor relations website at ir.crowdstrike.com or on our form 8K filed with SEC today. Now I will turn the call over to George to begin.

Thank you, Maria, and thank you all for joining us today. We hope everyone is staying healthy. Our thoughts are with everyone affected by the coronavirus. Our top priority is ensuring the health and safety of all our colleagues, customers, and partners around the globe. We have implemented necessary safeguards to help protect them, which includes hosting this call remotely. We have a lot of ground to cover today, and I will start by summarizing three key points. First, the dynamics of the competitive landscape are the best I have seen in my 27-year career. We believe this is the beginning of a multi-year trend that is being driven by the industry consolidation that took place last year, along with the seismic shift to cloud technologies. Second, Customers and partners are increasingly choosing CrowdStrike as their security cloud platform and partner of choice. As a result, we are landing bigger with more modules and increasing the number of new customers that start with ARR over $1 million. And third, regardless of the spending environment, cybersecurity is not a discretionary purchase for organizations. Cybersecurity is mission critical to both the public and private sector. Endpoint or workload security is also essential to protecting a remote workforce. While the impact to the macro economy from the coronavirus is unfolding in real time, we know it is forcing companies to conduct business differently and rapidly shift to a remote workforce. With our cloud-native platform, our lightweight agent that is easily deployed at scale, and our frictionless go-to-market engine, CrowdStrike is uniquely positioned to meet their cybersecurity needs. Now let's discuss our results and get into these topics in more detail. Across the board, we delivered another exceptional quarter at CrowdStrike with record results well exceeding our expectations. During the quarter, we added a record $99 million in net new ARR, and year over year, we increased the number of net new subscription customers by 116%, achieving 90% subscription revenue growth and 89% total revenue growth, which was above the high end of our guidance. The fourth quarter tops off a historic year for CrowdStrike, in which we delivered exceptional growth at scale, significantly improved our margins, and achieved positive free cash flow for the year. We ended the year at $600 million in ARR of 92% over last year, and revenue of $481 million of 93%, making us one of the fastest-growing SaaS companies at scale. Subscription revenue grew even faster, up 99% to reach $436 million. We believe our robust results this year speak to our relentless commitment to stopping breaches, our growing leadership in the security cloud category, and our frictionless go-to-market engine. All of this is made possible by the exceptional execution of the CrowdStrike team. We have an amazing company, and I would like to personally thank every CrowdStriker for their unwavering dedication to protecting and empowering our customers. I couldn't be more pleased with everything we've accomplished together or more excited about our future opportunities. The seismic shift to cloud-native technologies and cloud workloads, including containers, has created an environment with massive greenfield opportunities. While our competitors are distracted trying to integrate acquired technologies, rationalizing their workforce, or retooling their on-prem offerings, CrowdStrike's mission, platform, and brand are clearly resonating with customers and partners. Furthermore, as Broadcom began integrating Symantec, we saw an increase in inquiries among both customers and partners. We believe these dynamics have contributed to an expansion in our pipeline, an acceleration in our overall customer adoption, and increased engagement with our partners. More specifically, on the partner front, we have seen significant demand as they look to protect customers who are left searching for better alternatives as Symantec abandons large segments of the market. Several partners in the United States and abroad have launched Symantec replacement campaigns. We are closely collaborating with them to put together robust solutions at compelling price points. One of our partners submitted a list of several thousand of their customers that will be migrating away from Symantec in the next year and we found that there was very little overlap between these prospects and our existing customer base. This year, we more than doubled our customer base and now protect 5,431 customers. We added 870 net new customers in Q4, which is up 136% year-over-year. This is our eighth consecutive quarter to add a record number of net new customers. CIOs and CISOs are looking for a strategic partner to help them bridge the skills gap and simplify their operations, while at the same time reducing costs. They are also looking for ways to leverage enhanced automation in their security operations to increase efficacy and free up resources. These organizations are increasingly turning to the Falcon platform to protect an array of workloads, stop breaches, and restore system performance. Our platform strategy is gaining momentum. We hear this from the many conversations we've had with customers, prospects, and partners every day, and we see it in our metrics. Within new enterprise customers, we are landing bigger with more modules. In this quarter, we more than doubled the number of new customers starting out with greater than $1 million of ARR compared to Q4 of last year. Additionally, across all new customers, we saw the average number of modules increase in every quarter this past fiscal year. We also continue to expand module adoption within our existing customer base. This quarter, the percentage of all subscription customers with four or more modules once again increased, and those that adopted five or more cloud modules grew to one-third of our customer base. 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. Let me share a few customer examples that demonstrate how the power of the Falcon platform translated into strategic customer wins and provided immediate value to the customer. The first customer win is with a leading online marketplace where we displaced an autonomous next-gen antivirus vendor. The security team at this company was frustrated by the incumbent's product due to the large volume of false positives insufficient endpoint fidelity to triage and remediate alerts, and limited functionality across operating systems. On top of that, lackluster customer support. While the lead for this opportunity came from the AWS marketplace, this organization was initially looking for a platform that encompassed EDR and AV to protect their enterprise workstations and servers in a phase one rollout to their cloud assets. In the customer's words, CrashRag, quote, crushed customers. end quote, the competitive bake-off against both NextGen and legacy players and won the business. Additionally, this customer quickly realized the value our platform provides by consolidating functions with our intelligent single agent and AI-powered threat graph. Expanding this deal beyond the initial RFP of EDR and NextGen AV, this new CrowdStrike customer adopted six modules, which included Discover for IT operations and FalconX for intelligence. Additionally, we still have the opportunity to expand further into the AWS production environment. The next one I will share with you showcases how the Falcon platform helped the Global 2000 manufacturer enhance and streamline its security posture as well as bridge the security resource gap. This new CrowdStrike customer was previously using an operating systems ATP service and two next-gen vendors for EDR and AV. This patchwork of disparate vendors was ineffective and a burden on their resource constrained security team. Because a large percentage of the customer's environment was not on the latest build of Windows, they could not update to newer versions of their ATP solution. Additionally, the EDR vendor did not provide user level visibility on alerts or provide advanced remediation features. This resulted in a cumbersome manual remediation process and often required the security team to reach out to users directly. With one year left on the NextGen EDR's vendor's contract, this customer kicked off a reevaluation and called in CrowdStrike. They replaced all three endpoint security solutions with the Falcon platform and adopted seven modules, providing them with comprehensive protection and visibility in their environment and freeing up internal resources. The next customer win I will share with you was also looking to consolidate its legacy endpoint security stack and gain better protection and visibility across its full environment. This global manufacturer chose to evaluate CrowdStrike because we are viewed as the market leader with a reputation of deploying across large complex environments quickly. During the sales process, their existing legacy vendor failed and they fell victim to malicious activity, shutting down production at one of their major international facilities. The customer rushed to deploy the CrowdStrike solution to more than 90,000 endpoints over a weekend and was able to quickly identify and contain the adversary. The ability to deploy the solution quickly saved the customer millions in manufacturing line productivity losses. Beyond the immediate value provided by remediating the breach, this customer realized additional value by significantly streamlining their security stack. With the Falcon platform, they eliminated seven legacy tools and considerably improved their visibility and security posture. The final customer win I would like to share with you is Splunk. They were using an autonomous next-gen vendor and were frustrated with the fidelity of alerts and the difficulty of ongoing maintenance and upgrades. Splunk kicked off a competitive evaluation of other next-gen solutions ultimately consolidating on the CrowdStrike platform. Splunk chose the Falcon platform for its ease of use, low false positive rate, and single agent. Splunk adopted multiple modules across the platform, including Spotlight, Discover for IT operations, as well as Falcon X for integrated threat intelligence. To summarize, we are winning with customers across diverse industries, geographies, and size because of our proven efficacy in stopping breaches, our cloud-native platform and lightweight single agent that is easily deployed at scale across public, private, and hybrid cloud environments, our ability to provide security and visibility across all workloads end-to-end, the predictive power of our AI-driven threat graph that gets smarter the more data it consumes. In real time, our threat graph now processes over 3 trillion events per week. Each new endpoint joining our crowdsourced network increases our data mode and long-term competitive advantage. And we enable customers to consolidate agents, increase workload performance, and bridge the security skills gap as a force multiplier, all of which helps our customers realize immediate time to value and reduce costs. Before I turn the call over to Bert, I would like to make a few comments on the current environment as it relates to the impact from the coronavirus outbreak. We have implemented several measures to ensure the safety of the Kraft-Streik family And given we are a company built to thrive with a remote workforce, we do not expect these measures to lead to a disruption in our workflow. On a regular basis, approximately 70% of our employees work remotely. From inception, the company was designed to accommodate a remote workforce that is geographically dispersed and highly nimble. As it relates to the demand environment, at this point in time, we have not experienced an impact in our ability to close business due to the coronavirus. As many of you on this call would agree, we are in an uncertain macroeconomic environment and the situation is fluid. However, there are four key facets to our business that we believe are important to investors to remember. First, while coronavirus is having an impact on the global economy, it will not stop cyber adversaries. Cyber security has and will remain essential and mission critical to organizations as it provides business resiliency and and meets compliance requirements. In times of crisis, adversaries will try to exploit the situation, prey on the public's fear, and escalate new attacks. I know it's difficult to imagine, but we've already seen nation-state adversaries and e-criminals launch phishing campaigns using coronavirus as bait. We allow our customers to stay ahead of these threats, whether they are at home, in the office, or in the cloud. To further protect and aid the CrowdStrike community, we launched a coronavirus surge relief plan that allows our customers to surge the number of endpoints for up to 60 days. This will enable existing customers to quickly onboard new remote workers without having to worry about a procurement cycle. Additionally, we launched a Falcon Prevent for Home Use program that allows company administrators to install Falcon Prevent on their employees' home systems. These free-of-charge programs have been well-received by customers in their time of need. Second, as organizations move their workforce outside of physical offices, their threat landscape grows exponentially. They need to rapidly provision fleets of new endpoints, such as laptops and mobile devices, and spin up new cloud workloads while ensuring that every workload everywhere is protected with real-time security, even when the user is offline. To put this in perspective, I will note that one of our large enterprise customers recently rushed to buy 12,000 laptops for newly remote employees and will be protecting those with Falcon. The security challenges associated with the remote workforce are best solved by a cloud native security platform. Because CrowdStrike's Falcon platform is cloud native and does not require physical infrastructure, it allows customers to easily and remotely deploy, manage, and protect their workloads at scale irrespective of where their employees are located. Third, When organizations are pressured to reduce costs, they will look for the security platform that not only provides them with the highest level of protection and visibility, but one that also consolidates agents, reduces hardware and operating costs, and streamlines operations. This is exactly how CrowdStrike routinely helps customers save money, with some customers citing a 3x return on their CrowdStrike investments. Fourth, with Falcon Complete, our fully managed endpoint protection offering, we virtualize security operations and protect customers when they do not have the resources or ability to do so. In a time when customer security teams may be short-staffed or working from home, Falcon Complete is a force multiplier for customers as it enables them to significantly increase their security resources and broaden their expertise across all time zones on a 24-by-7 basis. While we are unable to predict what will happen in the macro economy, we believe these elements and the fact that security is mission critical to organizations gives us significant advantages in any environment. We are aligning our resources to reach customers in light of the current environment, which includes shifting marketing investment more towards our digital channel for the near term. Additionally, Mike Carpenter, CrowdStrike's President of Global Sales and Field Operations, and I are kicking off a new 100x100 international tour where we will meet with 100 of our customers and prospects in 100 days, all remotely via Zoom. It is our view that during times like this, the best companies continue to innovate, focus on customer success, and emerge stronger than ever before. And when we look past the short term, we believe the powerful combination of our cloud-native platform and frictionless go-to-market engine, which includes trial-to-pay and in-app trial offerings, as well as emerging channels such as AWS Marketplace, position us well as the fundamental endpoint platform of the future. We will continue to focus on driving customer success and expanding our lead over the competition. With that, I'll turn the call over to Bert.