CrowdStrike Holdings, Inc.

Good day and thank you for standing by. Welcome to the CrowdStrike Fiscal First Quarter 2024 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 the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Maria Riley, Vice President of Investor Relations.

Good afternoon, and thank you for your participation today. With me on the call are George Kirk, President and Chief Executive Officer and co-founder of CrowdStrike, and Bert Pogbear, 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, growth, and expected performance, including our outlook for the second quarter and fiscal year 2024, and any assumptions for fiscal periods beyond that 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 make 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 the filings we make with the SEC from time to time, including the section titled Risk Factors in the company's quarterly and annual reports. Additionally, unless otherwise stated, excluding revenue, all financial measures disclosed on this call will be non-GAAP. A discussion of why we use non-GAAP financial measures in the reconciliation schedule showing GAAP versus non-GAAP results is currently available in our earnings press release, which may be found on our investor relations website at ir.crowdtrack.com or on our form 8K filed with the SEC today. I would like to note that we are conducting today's call from one of our European offices and ask for your patience in the event of technical difficulties. With that, I will now turn the call over to George.

Thank you, Maria, and thank you all for joining us. Our continued execution, despite a challenging macro environment, translated to strong growth and exceptional margins, which drove record non-GAAP profitability, record free cash flow, and GAAP profitability for the first time in company history. We exceeded our guidance across both top and bottom line metrics, increased gross margin, cost discipline, and moderated headcount growth contributed to our strong bottom line results. Reaching gap profitability so early in our life as a public company provides insight into the strength of the model we have built and what we can achieve over time. Bert will cover the financial results in more detail. I will focus my comments on why we believe CrowdStrike has a clear and sustainable advantage as three megatrends continue to unfold, AI, consolidation, and cloud. Let's start with AI. Since inception, CrowdStrike has been and will continue to be at the forefront of leveraging AI to drive better customer outcomes and efficiencies within our own business. In addition to industry-leading detections and rapid remediation for customers, utilizing AI has benefited our business by lowering costs and yielding higher margins. One example of AI benefiting our financial model is Falcon Complete. For years, our use of AI has enabled us to rapidly scale that business to a leadership position with an exceptional product margin that exceeds our overall company gross margin. The margin profile and scale we have achieved for our managed offering would not have been possible without our innovations in AI. While others are just now jumping on the AI bandwagon, we have transformed cybersecurity with an AI-powered cloud business from inception. Generative AI is transforming the world, and security is no exception. Large language models, or LLMs, are only as good as the data on which they are trained, and human annotated content makes for the best training data. Driving better customer outcomes relies on having a data advantage and the context derived from that data. While we expect that LLMs will become commoditized over time, the data on which they are trained will not. CrowdStrike is uniquely positioned to benefit from this new technology. Our data set spans petabytes and captures trillions of new events daily from our global fleet of sensors. Combine that with our over 10 years of attack data and threat graph that has been paired with high-quality human analysis from Overwatch, complete intelligence and incident response services, and you get unrivaled telemetry. Simply put, we believe CrowdStrike has a sustainable data advantage, the most powerful and unique set of correlated human and machine generated data across all of cyber. Our data advantage creates a unique competitive mode, yielding better models, better automation, and better outcomes. We see the rapidly growing adoption of generative AI as a democratizing force within cybersecurity. from both an adversarial and protection standpoint. From an adversarial perspective, we expect that the adoption of LLMs will lower the barrier of entry for malicious actors to create sophisticated cyber attacks. Generative AI is expected to make it even easier for less advanced attackers to craft nation state caliber campaigns. We believe this will catalyze even greater demand for modern cybersecurity technologies like Falcon. From a protection standpoint, we see generative AI as a democratizing force by dramatically lowering the learning curve for practitioners, transforming even the novice analyst into a power user. With all of this in mind, we introduced Charlotte AI, an exciting new generative AI security analyst, utilizing CrowdStrike's high-fidelity data advantage. We believe Charlotte AI will empower a newly-mixed tier one analyst to yield the results of an advanced Tier 3 analyst, the net benefit to the customer, faster results, better security outcomes, and lower overall costs. Starlet AI represents CrowdStrike's latest innovation in helping security teams worldwide contend with the cybersecurity skills gap, respond to threats faster, and reduce operational costs. Charlotte AI will uniquely benefit from a continuous human feedback loop with our Overwatch, Falcon Complete, and Intel teams. This continuous feedback loop on human validated content is critical, and because of this, no other vendor in cyber will be able to match CrowdStrike's approach to generative AI. Demonstrating our commitment to lead and protect the industry through this next wave of innovation, we teamed up with AWS to develop powerful, new generative AI applications that help customers accelerate their cloud security and AI journey. Through this initiative, CrowdStrike and AWS will bring together their solutions and teams to keep customers safe across a range of AI services while meeting stringent security requirements. CrowdStrike already has a leadership position in helping protect AI innovators. A perfect example of this is a recent expansion with a B2B generative AI research and development company. This customer leverages significant public cloud resources to support their solutions. All too aware of the dangers others have faced from adversaries compromising cloud environments, this customer expanded to Falcon Cloud Security Complete to support their small team with fully managed coverage, provide both cloud runtime protection and posture monitoring, across their multi-cloud environment and scale seamlessly with their growth, all without having to deploy multiple products or hire more people. Another mega trend continuing to unfold in cybersecurity is consolidation. The macro backdrop has only accelerated the need for customers to reduce vendor sprawl, reduce agents, reduce costs, and protect their businesses with the best of SaaS platform. On average, enterprise customers can realize over 200% ROI with Falcon. With ROI results like this, it's no surprise companies turn to Kraft's right to protect, power, and drive efficiencies for their businesses. In Q1, net new ARR from our million-dollar-plus customers grew year over year, even as these larger, more complex deals can have longer sales cycles. We delivered $174.2 million in net new ARR for the quarter, which exceeded our stated assumptions. Our momentum with large customers, record Q2 pipeline, and success tracking deals to close gives us confidence in the back half of the year. In Q1, we closed over 50% more deals involving eight or more modules compared to a year ago. We believe this speaks to increasing customer demand for consolidation using the Falcon platform. When we look at our pipeline for the remainder of the year, we expect this trend to continue, giving us confidence in our ability to deliver net new ARR growth in the back half of the year. Over the past few months, I've personally met with many of our customers, prospects, and partners. These conversations all centered on the same topic. Customers want to consolidate the security stack with Falcon and drive greater cost efficiencies while unlocking new capabilities. Let me share a few recent customer wins highlighting ways companies use CrowdStrike to consolidate while improving their cybersecurity outcomes. First are wins with two new Fortune 100 customers. These organizations are consolidating on Falcon, a single modern XDR platform, unifying their approach to security across their different business units. Each of these new CrowdStrike customers purchased multiple modules with one adopting nine modules, displacing legacy and next-gen vendors in their environment and standardizing on CrowdStrike. One of my favorite customer wins this quarter was with a regional healthcare customer brought to us by our partner Dell. This organization was frustrated by the volume of false positives generated by their legacy security product, which hampered their security team's efficiency and obscured critical incidents. recognizing the increased value they could gain by modernizing their security stack and consolidating on CrowdStrike. This customer adopted eight Falcon modules, including Falcon Complete, Identity Threat Protection, and Log Scale, in a seven-figure total value deal. In addition, our managed services teams have catapulted CrowdStrike to a leader position in the Forrester way for managed detection and response and the number one market share position for the second consecutive year in Gartner's MDR for managed security service report. CrowdStrike's MDR leadership extends beyond our managed services and into our MDR partner ecosystem. Of the top 25 MDR vendors by market share defined by Gartner, 88% have built their MDR services on top of the Falcon platform, showcasing Falcon as their modern XDR platform of choice. We are proud that the Falcon platform powers so many different partners enabling them to build their businesses on top of CrowdStrike. Our industry leading partner ecosystem continues to expand rapidly, contributing meaningfully to our growth. CrowdStrike recently entered into a strategic partnership with Pax8, the leading MSP cloud marketplace with over 30,000 MSP partners across North America, EMEA and APJ, that serve the SMB market. This partnership provides CrowdStrike a born in the cloud route to market for MSP consumption and a prime opportunity to display the legacy AV and next-gen product vendors Pax8 partners use today. MSPs are increasingly turning to the Pax8 marketplace for ease of product purchase, rapid software deployment, and fully integrated billing to run their businesses, including cybersecurity. Pax8's MSP partner base will now be enabled to protect their end customers with the same cutting-edge XDR technology selected by the world's leading and largest enterprises. Our momentum in the public sector continues to expand. Public sector wins in the quarter included a Falcon Complete win at a top 20 U.S. government contractor and a win with a major U.S. federal agency. Today, we announced CrowdStrike was granted an impact level five or IL-5 provisional authorization from the Department of Defense. IL-5 certification positions as well to extend our reach into the massive defense, IT, and cybersecurity markets. The competitive environment has not changed since our deep dive in April, where we disclosed that eight out of ten times when an enterprise customer tests, they choose CrowdStrike over Microsoft, and our win rates across all competitors remain strong in the quarter. Organizations today, more than ever before, need security partners with deep expertise that can stop breaches while driving efficiencies in their security programs. However, from Microsoft, companies experience added complexity, less coverage, and higher costs. One enterprise customer with over 50,000 employees told us the upgrade cost of moving from Microsoft E3 to E5 would be at least $2.3 million more than their CrossRank subscription. and that's just for the upgrade. With Microsoft's excessive annual cost increases, this would grow to $4.7 million by year five, excluding the additional costs required for support or a SIM solution or increased staff to manage the extra complexity. When customers map it all out, they quickly realize that using Microsoft E5 for security is more expensive, requires more headcount, and increases their cyber risk. The cloud is the third megatrend representing a long and sustainable tailwind for our business. The cloud is rapidly emerging as the new adversary battleground. We have observed a 95% year-over-year increase in cloud service exploitation and a 288% increase in threat actors that know how to operate in cloud environments. Securing cloud assets is paramount today and will continue to grow in importance. As a leader in protecting some of the largest and most critical cloud companies, we have seen strong net new ARR growth for modules deployed in public clouds. Our Falcon cloud security offering unifies our agent and agentless cloud native security capabilities into a single offering that's easy to deploy from build to runtime across all major cloud environments and is driving incredible customer momentum as customers consolidate their cloud security replacing multiple cloud point products with Falcon. Tying this all together, the rapidly evolving and expanding threat environment demonstrates why it is so critical to have your endpoint cloud identity and data protection on one unified modern XDR platform, Falcon. We've covered a lot today, and you can see that our relentless innovation continues to widen the gap between CrowdStrike and the competition. In closing, I will reiterate a few key points. First, CrowdStrike has a clear data advantage built over the past 12 years by combining our unmatched AI and human threat intelligence expertise. For customers, CrowdStrike's advantage means better, faster, and more cost-effective cybersecurity. For our business, CrowdStrike's AI excellence shines through our differentiated business model efficiencies. Second, we ushered cybersecurity into a new era with the introduction of Charlotte AI. Third, companies must consolidate their security stack to reduce complexity, reduce agents, and reduce costs without sacrificing coverage or security. They need to protect their cloud environments from built-in runtime with a single unified platform. To achieve this, customers choose CrowdStrike. And fourth, we believe that in addition to building a winning platform, we built a robust business model capable of generating rapid growth at scale, earnings, and durable free cash flow. With that, I will turn the call over to Bert to discuss our financial results.