CrowdStrike Holdings, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the CrowdStrike fiscal third quarter 2021 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 our speaker today, Maria Riley. Please go ahead, ma'am.

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, including our outlook for the fourth quarter and fiscal year 2021, 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 risk and uncertainty. 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 company's quarterly and annual reports that we file with the SEC. Additionally, 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. Please also note that in light of our recent acquisition of Pre-Imp Security, management will provide additional information into our third quarter results and guidance assumptions. We do not intend to provide this additional information on an ongoing basis. Now I will turn the call over to George to begin.

Thank you, Maria, and thank you all for joining us today. CrowdStrike delivered a record third quarter with results exceeding our expectations across the board. Our robust growth at scale underscores our growing leadership in the security cloud category and the immense value we deliver to customers seeking to transform, consolidate, and fortify their security posture. A few of our accomplishments in the third quarter include setting a new record for net new ARR generated and ending the quarter with over $900 million in ARR, delivering strong 87% subscription revenue growth and setting a new record for professional services revenue, adding a record 1,186 net new subscription customers, generating non-GAAP operating income for the third consecutive quarter and positive operating and free cash flow for the fifth consecutive quarter. Introducing three new modules and driving strong module adoption among customers. Acquiring preempt security which expands CrowdStrike zero trust capabilities and incorporates critical identity behavior data and analysis to help customers fortify their defenses and prevent identity based attacks and insider threats. Joining forces with EY to help strengthen their client cybersecurity posture by using the Falcon platform. Our alliance with EY has already influenced multiple deals. And lastly, hosting a highly successful virtual user conference with six times the customers and prospects attending compared with our in-person event last year. It was an exceptional and active quarter. I can't emphasize enough that these results represent the phenomenal execution of our team, and I'm very proud of what we've achieved. Now let's discuss our results and the trends we are seeing in the market in more detail. Broad-based demand and strength in multiple areas of the business fueled our growth. We added $117 million in net new ARR in the third quarter to end the quarter with $907 million in ARR. Demonstrating the power of our sales engine and our land and expand strategy, our subscription customer base grew 85% year over year, and dollar-based net retention rate once again exceeded 120%. We believe we are well-positioned to expand our leadership and drive strong growth at scale. We have multiple avenues to drive sustained growth, including winning new customers at a rapid pace, cross-selling new modules to existing customers and protecting more of their cloud assets, growing our market opportunity with new modules and adjacencies, and growing our international business. Today I will focus on our ability to rapidly introduce new modules and drive adoption among both new and existing customers as we believe this is core to our competitive moat. Let me expand on this point in more detail. The very nature of our cloud-native architecture, powered by ThreatGraph, enables our ability to innovate and bring new modules to market that customers actually adopt. Our customers recognize that ThreatGraph is unique to CrowdStrike and differentiates us from others in the market. All the data we collect is stored in one place, the ThreatGraph. This is very different from other vendors, including Upstarts, that silo their data and limiting their ability to scale in the customer's environment. To be clear, any vendor with an on-prem solution is currently unable to replicate our ThreatGraph capabilities, which allows us to deepen our competitive mode. Our massive data lake within ThreatGraph grows and gets smarter by the minute, which also differentiates our managed detection services, providing visibility across all our customers. ThreatGraph processes over 4 trillion high-fidelity signals per week. Additionally, with the recent acquisition of Preempt Security, we will have access to a new set of user behaviors to drive new use cases such as preventing insider threats. With one data store, the data can be analyzed almost instantaneously across our entire customer base, providing real-time protection and community immunity and better training data for our AI algorithms. While others in the market like to claim like-for-like features on Slideware, customers know the difference, and as a result, CrowdStrike is rapidly expanding its leadership. In the last nine months alone, close to 3,000 net new subscription customers have chosen Falcon. In the third quarter, we announced three new modules, including Falcon Horizon for proactive management of cloud security posture, Falcon X Recon for increased situational awareness of dark web threats, and Falcon Forensics, which automates the analysis for incident response investigations. Combined with the cloud discovery and cloud workload protection features we previously introduced and recently formalized as standalone modules, the Falcon platform now encompasses 16 modules. In total, we believe our addressable market will reach $32.4 billion in calendar year 2021, compared to the estimated $24.6 billion in market in 2019, which we disclosed at the time of our IPO. In the third quarter, we also took our platform to the next level by building extensibility points in the platform for policy, detections, workflow, user experience, and third-party integrations. This enables each product group within CrowdStrike to accelerate the development of new modules. The same extensibility points are also being made available to our CrowdStrike store partners further reducing the investment they need to build a store app. Our industry-leading cloud native platform also gives us a fundamental business model advantage as we capture the data once and monetize it many times. Importantly, customers are able to quickly try and adopt new Falcon modules without deploying any new infrastructure or agents, making the process frictionless. To measure our success, we look at the percentage of all subscription customers that have four or more modules. In the third quarter, we continued to see rapid module adoption as the percentage of all subscription customers with four or more modules increased to 61% and those with five or more modules increased to 44%. I'm pleased to announce that in Q3, we reached a new milestone with 22% of our subscription customers having adopted six or more modules. Driving adoption of our expanding module lineup is a keystone to our growth strategy as it increases the strategic value we provide to customers, which also translates to higher retention rates. Moving to our markets, we continue to see a heightened threat environment, strong positive secular trends, and a favorable competitive landscape. Organizations around the world are shedding outdated systems and accelerating their move to modern cloud-native technologies to meet the demands of today's threat landscape, future-proof their security architecture, and adopt a zero-trust security model. Security is mission critical to businesses around the world, and security transformation is foundational to digital transformation. We believe these are positive long-term sustainable trends for our business. Stopping the breach is no longer just about protecting endpoints. it also encompasses cloud workload security and identity protection. We have been investing and innovating in both our cloud workload and zero trust capabilities, and we believe we will see significant growth opportunities in the years ahead. As more business is conducted virtually and more workloads move to the cloud, protecting those workloads is a priority for CIOs. However, heavy performance training agents built on legacy technology are often left behind because they can't keep up with the speed, agility, and scalability required in the cloud. As a result, we believe today's cloud workloads are massively underprotected, and this could represent a 10x market opportunity in 2023 compared to IDC's estimate of the cloud security market in 2020, as we've illustrated in our cloud security webinar for investors at our virtual Falcon conference in October. CrowdStrike Falcon was built in the cloud for the cloud, and a core differentiator of the Falcon architecture is that we offer one platform for all workloads. From March through October of 2020, we have seen more than 14x growth in protection for containers, and greater than 20% of all the servers we protect across our entire fleet of customers are in the public cloud. As briefly mentioned earlier, we recently expanded our cloud capabilities with the launch of Falcon Horizon, which automates cloud security posture management across the application development lifecycle for every major cloud provider. This enables customers to securely deploy applications in the cloud with greater speed and efficiency, as well as satisfying compliance and regulatory requirements. It also provides visibility into private, public, hybrid and multi-cloud environments and enable security teams to proactively minimize threats and ensure continuous compliance and governance against organizational security policies. With our recent acquisition of Preempt Security, CrowdStrike is leading the charge in delivering an end-to-end zero-trust solution. We believe combining workload security with identity protection is foundational for establishing true zero-trust environments. This is another area where the Falcon platform can provide a clear advantage for securing today's distributed workforce by providing enhanced protection against identity attacks and insider threats. This solves a huge problem and closes a considerable hole in security that conventional zero trust models can't address. Based on IDC estimates, we believe the identity protection market will be a $2.2 billion market in 2021. CrowdStrike is a leading security provider in the market with a zero trust approach that combines endpoint and workload protection with identity protection, behavioral analytics, and AI. As the pioneer in cloud-delivered endpoint and workload security, we believe CrowdStrike has created a winning formula to gain new customers at a rapid pace, displacing both legacy and next-generation vendors. As you may recall, last quarter, we joined forces with Okta to help customers adopt a modern, identity-centric, zero-trust security ecosystem. This quarter, we are thrilled to announce that Okta is now a CrowdStrike customer and excited by this opportunity to deepen our relationship. A few additional marquee wins include a win with Target that highlights how our single-agent cloud-native architecture, intuitive console, and rapid integration Rebootless deployment capabilities continue to be significant differentiators for us. Target Corporation was looking to rapidly move away from Symantec and transition to a single-agent cloud solution that could be deployed in days, not months or years. As a fast-growing company with a mature security organization, they were looking for a solution that would enhance their security posture without impacting performance across their expansive estate of business-critical systems. Falcon was deployed across their environment in less than 10 days, allowing them to immediately take advantage of the platform and drive ROI. Pella, a design and manufacturing firm in Iowa with more than 7,000 employees, was looking to fortify their endpoint defenses and is now a Falcon Complete customer. Another customer win I'd like to highlight in the quarter demonstrates the immense customer value that our Falcon platform has delivered to a Fortune 1000 company with dozens of independently operated subsidiaries and an equal number of disparate security teams and solutions. This customer needed a solution that could be rapidly deployed and managed by a diverse set of teams, bringing their security posture to a best-in-class level across the organization. This customer took advantage of multiple aspects of the Falcon platform, spanning traditional endpoints and servers, as well as cloud assets to solve several business problems and give the parent company and its board of directors peace of mind. With Falcon Complete, they were able to standardize their cybersecurity and rapidly deploy a single solution and remove multiple legacy and next-gen technologies, including Microsoft, Sentinel-1, Silence, Sophos, Symantec, McAfee, and Trend Micro. Additionally, with Falcon Discover for cloud and containers, they now have much-needed visibility into their AWS workloads and are leveraging our proactive incident response services. Despite having many competing solutions already deployed in their environment, this customer picked CrowdStrike for its clear value proposition, fast and frictionless deployment, and ease of use, making us one of the only technology standardized across the entire organization. Our next customer win is a leading healthcare services organization. It was mission critical for this customer to select a security partner that was fully compatible with their unique systems and did not impact performance or uptime. McAfee and SentinelOne had to be removed from their environment or could not be deployed because of performance and or interoperability problems. Unlike our competitors, CrowdStrike was able to deploy to thousands of endpoints and servers in just three days without a reboot. This customer adopted multiple modules including Prevent for Next Gen AV, Insight for Visibility, Overwatch for Managed Threat Hunting, Device Control, and our Elite Level Support Package. These are just a few of our 8,416 subscription customers as of the end of the quarter that have turned to CrowdStrike to help them stop breaches, transform their security posture, and streamline their IT operations. As you can see from the exceptional results we reported today, our Falcon platform is increasingly recognized as a mainstream market choice for enterprises around the world. We believe we are still in the early innings of our growth journey and are well positioned to continue our momentum and further expand our leadership. Lastly, before I turn the call over to Bert, I would like to welcome Laura Schumacher to our Board of Directors Laura has a distinguished career and is currently Vice Chairman, External Affairs, and Chief Legal Officer of AbbVie, a Fortune 100 global biopharmaceutical company. We believe her deep experience will be a critical asset to CrowdStrike as we continue to build the company into a global industry leader. With that, I'll turn the call over to Bert.