CRWD Earnings May 2023
Here is a summary of the Q1 Earnings call.
In the latest conference call, CrowdStrike, a leader in cyber security, detailed its financial performance and discussed its future outlook.
The company is enjoying strong growth, with gross margin and cost discipline contributing to positive bottom-line results.
With CrowdStrike achieving GAAP profitability for the first time, this demonstrates the strength of the company's model.
Three mega-trends driving CrowdStrike's success are:
Artificial Intelligence (AI)
Industry consolidation
Migration to the cloud.
1 - AI has been instrumental in CrowdStrike's growth and profitability, particularly with their Falcon Complete offering, which utilizes AI to deliver superior product margins.
As a pioneer of AI-powered cyber security, CrowdStrike holds a substantial data advantage, which CEO George Kurtz believes will continue to provide a competitive edge.
2 - CrowdStrike recently introduced Charlotte AI, a generative AI security analyst, leveraging CrowdStrike's vast data resources.
This AI is expected to enhance security outcomes, streamline threat response, and reduce operational costs.
With its continuous feedback loop from CrowdStrike's human analysts, the company asserts no other cyber security provider can match their AI approach.
3 - Another driving force is industry consolidation.
Businesses are looking to reduce costs, vendor sprawl, and streamline security by choosing comprehensive platforms like CrowdStrike.
The firm recorded a growth in net-new Annual Recurring Revenue (ARR) from large customers and also had a successful Q1, closing more deals involving multiple modules compared to the previous year.
Cloud migration is another major trend that CrowdStrike is capitalizing on.
As the battleground for cyber security shifts to the cloud, CrowdStrike's Falcon cloud security offering, a unified agent and agentless cloud-native security capability, is enjoying strong customer uptake.
The company witnessed a 95% YoY increase in cloud service exploitation, and a 288% increase in threat actors skilled in cloud environments, emphasizing the importance of robust cloud security.
In summary, CrowdStrike's relentless innovation, leveraging AI, industry consolidation, and cloud migration, continues to widen the gap between itself and its competition.
The company has built a robust business model capable of generating rapid growth at scale, earnings, and durable free cash flow, providing investors with a strong investment opportunity in the cyber security space.
Burt Podbere, the CFO of CrowdStrike, recently addressed investors and stakeholders, highlighting the company's strong financial performance and plans for growth.
He outlined the company's financial milestones and future projections in a detailed briefing.
In the first quarter, CrowdStrike achieved record numbers in revenue, subscription gross margin, operating income, net income, and free cash flow, exceeding the company's initial forecasts.
Despite the persisting macroeconomic challenges, these results underlined the strength of CrowdStrike's business model and operational excellence.
The company reported net-new ARR (Annual Recurring Revenue) of $174.2 million in Q1, taking the ending ARR to $2.73 billion, marking a 42% year-on-year increase.
Podbere noted that the company's "land and expand" strategy continued to bear fruit, with strong balance between new and expansion deals contributing to the impressive figures.
Subscription customers with five or more modules comprised 60% of the customer base, while those with six or more and seven or more modules represented 40% and 23%, respectively.
Total revenue for the quarter reached $692.6 million, a 42% YoY increase, driven by both subscription revenue growth and professional services.
The latter set a new record for the 11th consecutive quarter, with revenue of $41.4 million, marking a 48% YoY increase.
International markets also displayed robust growth, particularly Europe, the Middle East, and Japan, with international revenue surging by 53%.
CrowdStrike's non-GAAP gross margin performance was also stellar, with total gross margin hitting 78% and subscription gross margin reaching 80% for the first time.
The latter was attributed to investments in data center and workload optimization.
Podbere pointed out that Q1 marked the first time CrowdStrike reached GAAP profitability, a significant achievement.
The company expects the financial model to deliver sustained GAAP profitability eventually, based on the promising Q1 results and the strong balance sheet.
Cash, cash equivalents, and short-term investments rose to about $2.93 billion. Operational cash flow and free cash flow also reached record levels, at $300.9 million and $227.4 million respectively.
Future Forecasts
Podbere announced that they're raising the revenue guidance for the fiscal year while maintaining their net-new ARR assumptions.
Their strong Q2 pipeline, momentum with large consolidation deals, and belief in year-over-year growth in net-new ARR gives them confidence in their projections.
They also expect their free cash flow margin to hit 30% for the fiscal year, taking into account various factors such as billings duration and cash taxes, operating leverage, interest income, and CapEx.
For Q2 of FY 2024, they forecast total revenue to be between $717.2 million and $727.4 million, with non-GAAP income from operations to be in the range of $116.4 million to $123.8 million.
Non-GAAP net income is expected to range from $129.5 million to $137.0 million, translating to a diluted non-GAAP net income per share of $0.54 to $0.57.
CrowdStrike also raised its revenue and profitability guidance for full fiscal year 2024.
Total revenue is expected to range from $3000.5 million to $3036.7 million, reflecting a growth rate of 34% to 35% over the prior fiscal year.
Non-GAAP income from operations is expected to be between $498.9 million and $526.2 million, with non-GAAP net income ranging from $562.8 million to $590.1 million.
Based on a weighted average of 243 million shares, the non-GAAP net income per share is expected to be in the range of $2.32 to $2.43.
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