CrowdStrike Reports Third Quarter Fiscal Year 2023 Financial Results

• Revenue grows 53% year-over-year to reach $581 million
• Ending ARR grows 54% year-over-year to reach $2.34 billion
• Achieves record cash flow from operations of $243 million and record free cash flow of $174 million

CrowdStrike Holdings, Inc. (Nasdaq: CRWD), a global cybersecurity leader that provides cloud-delivered protection of endpoints, cloud workloads, identity and data, today announced financial results for the third quarter fiscal year 2023, ended October 31, 2022.

“CrowdStrike delivered robust growth at scale, strong retention rates, growing module adoption, record net new ARR from emerging products and a record number of customers contributing at least $1 million to net new ARR,” said George Kurtz, CrowdStrike’s co-founder and chief executive officer. “However, total net new ARR was below our expectations as increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates, which delays ARR recognition until future quarters. As a platform consolidator with industry leading efficacy, we differentiate ourselves from the competition and empower customers, which we believe positions us to capture enduring industry trends and generate durable long-term growth.”

Commenting on the company's financial results, Burt Podbere, CrowdStrike’s chief financial officer, added, “In the face of increased macroeconomic headwinds, CrowdStrike delivered revenue and earnings results ahead of our guidance. We will continue to focus on delivering strong unit economics as we balance growth with profitability and free cash flow.”

Third Quarter Fiscal 2023 Financial Highlights

• Revenue: Total revenue was $580.9 million, a 53% increase, compared to $380.1 million in the third quarter of fiscal 2022. Subscription revenue was $547.4 million, a 53% increase, compared to $357.0 million in the third quarter of fiscal 2022.
• Annual Recurring Revenue (ARR) increased 54% year-over-year and grew to $2.34 billion as of October 31, 2022, of which $198.1 million was net new ARR added in the quarter. The acquisition of Reposify contributed less than $1.0 million to net new ARR in the third quarter of fiscal 2023.
• Subscription Gross Margin: GAAP subscription gross margin was 75%, compared to 76% in the third quarter of fiscal 2022. Non-GAAP subscription gross margin was 78%, compared to 79% in the third quarter of fiscal 2022.
• Income/Loss from Operations: GAAP loss from operations was $56.4 million, compared to $40.3 million in the third quarter of fiscal 2022. Non-GAAP income from operations was $89.7 million, compared to $50.7 million in the third quarter of fiscal 2022.
• Net Income/Loss Attributable to CrowdStrike: GAAP net loss attributable to CrowdStrike was $55.0 million, compared to $50.5 million in the third quarter of fiscal 2022. GAAP net loss per share attributable to CrowdStrike, basic and diluted was $0.24, compared to $0.22 in the third quarter of fiscal 2022. Non-GAAP net income attributable to CrowdStrike was $96.1 million, compared to $41.1 million in the third quarter of fiscal 2022. Non-GAAP net income attributable to CrowdStrike per share, diluted, was $0.40, compared to $0.17 in the third quarter of fiscal 2022.
• Cash Flow: Net cash generated from operations was $242.9 million, compared to $159.1 million in the third quarter of fiscal 2022. Free cash flow was $174.1 million, compared to $123.5 million in the third quarter of fiscal 2022.
• Cash and Cash Equivalents was $2.47 billion as of October 31, 2022.

Recent Highlights

• Added 1,460 net new subscription customers in the quarter for a total of 21,146 subscription customers as of October 31, 2022, representing 44% growth year-over-year.
• CrowdStrike’s subscription customers that have adopted five or more, six or more and seven or more modules was 60%, 36% and 21%, respectively, as of October 31, 2022.
• Acquired Reposify, an external attack surface management (EASM) platform, to help CrowdStrike's customers bolster visibility and reduce the risk exposure of external assets.
• Highlights of the sixth annual Fal.Con cybersecurity conference included Falcon Insight XDR, Falcon Discover for IoT, Falcon LogScale, Falcon Complete LogScale and new Cloud Native Application Protection Platform (CNAPP) capabilities.
• Expanded the CrowdStrike and EY global alliance to deliver Cloud Security and Observability services.
• Achieved 99% detection coverage of adversary behavior in the MITRE Engenuity ATT&CK Evaluations for Security Service Providers.
• Received a AAA rating in SE Labs Enterprise Advanced Security Ransomware Test and achieved 100% Protection with zero false positives.
• Chosen as a winner for the 2022 CRN Tech Innovator Awards for CrowdStrike Cloud Security, a Cloud Native Application Protection Platform (CNAPP) solution.
• Named One of the Best Workplaces for Women by Great Place to Work® and Fortune Magazine 2022.
• Expanded charitable giving strategy to include a partnership with Operation Motorsport Foundation and NextGen Scholarship awards.

These statements are forward-looking and actual results may differ materially as a result of many factors. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause the company's actual results to differ materially from these forward-looking statements.

Guidance for non-GAAP financial measures excludes stock-based compensation expense, amortization expense of acquired intangible assets, including purchased patents, amortization of debt issuance costs and discount, legal reserve and settlement charges or benefits, gain (loss) and other income from strategic investments, and acquisition-related expenses. The company has not provided the most directly comparable GAAP measures because certain items are out of the company's control or cannot be reasonably predicted. Accordingly, a reconciliation for non-GAAP income from operations, non-GAAP net income attributable to CrowdStrike, and non-GAAP net income per share attributable to CrowdStrike common stockholders is not available without unreasonable effort.

Conference Call Information

CrowdStrike will host a conference call for analysts and investors to discuss its earnings results for the third quarter of fiscal 2023 and outlook for its fiscal fourth quarter and fiscal year 2023 today at 2:00 p.m. Pacific time (5:00 p.m. Eastern time). A recorded webcast of the event will also be available for one year on the CrowdStrike Investor Relations website ir.crowdstrike.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding CrowdStrike’s future growth, and future financial and operating performance, including CrowdStrike’s financial outlook for the fiscal fourth quarter and fiscal year 2023. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: risks associated with managing CrowdStrike’s rapid growth; CrowdStrike’s ability to identify and effectively implement necessary changes to address execution challenges; CrowdStrike’s limited experience with new product and subscription and support introductions and the risks associated with new products and subscription and support offerings, including the risk of defects, errors, or vulnerabilities; length and unpredictability of sales cycles; CrowdStrike’s ability to attract new and retain existing customers; CrowdStrike’s ability to successfully integrate acquisitions; the failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing products and subscriptions and support; CrowdStrike’s ability to collaborate and integrate its products with offerings from other parties to deliver benefits to customers; industry trends; rapidly evolving technological developments in the market for security products and subscription and support offerings; and general market, political, economic, and business conditions, including those related to a deterioration in macroeconomic conditions, inflation, geopolitical uncertainty and COVID-19.

Additional risks and uncertainties that could affect CrowdStrike’s financial results are included in the filings CrowdStrike makes with the Securities and Exchange Commission (“SEC”) from time to time, particularly under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, including CrowdStrike’s most recently filed Annual Report on Form 10-K, most recently filed Quarterly Report on Form 10-Q and subsequent filings.

You should not rely on these forward-looking statements, as actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of such risks and uncertainties. All forward-looking statements in this press release are based on information available to CrowdStrike as of the date hereof, and CrowdStrike does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Use of Non-GAAP Financial Information

CrowdStrike believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to CrowdStrike’s financial condition and results of operations. For further information regarding these non-GAAP measures, including the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, please refer to the financial tables below, as well as the “Explanation of Non-GAAP Financial Measures” section of this press release.

Channels for Disclosure of Information

CrowdStrike intends to announce material information to the public through the CrowdStrike Investor Relations website ir.crowdstrike.com, SEC filings, press releases, public conference calls, and public webcasts. CrowdStrike uses these channels, as well as social media and its blog, to communicate with its investors, customers, and the public about the company, its offerings, and other issues. It is possible that the information CrowdStrike posts on social media and its blog could be deemed to be material information. As such, CrowdStrike encourages investors, the media, and others to follow the channels listed above, including the social media channels listed on CrowdStrike’s investor relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which CrowdStrike will announce information will be posted on the investor relations page on CrowdStrike’s website.

About CrowdStrike Holdings

CrowdStrike Holdings, Inc. is a global cybersecurity leader that provides cloud-delivered protection of endpoints, cloud workloads, identity and data.

Powered by the CrowdStrike Security Cloud and advanced artificial intelligence, the CrowdStrike Falcon® platform delivers better outcomes to customers through rapid and scalable deployment, superior protection and performance, reduced complexity and immediate time-to-value.

CrowdStrike Falcon leverages a single lightweight-agent architecture with integrated cloud modules spanning multiple security markets, including corporate workload security, managed security services, security and vulnerability management, IT operations management, threat intelligence services, identity protection and log management.

For more information, please visit: ir.crowdstrike.com

CrowdStrike, the CrowdStrike logo, and other CrowdStrike marks are trademarks and/or registered trademarks of CrowdStrike, Inc., or its affiliates or licensors. Other words, symbols, and company product names may be trademarks of the respective companies with which they are associated.

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(1) Includes stock-based compensation expense as follows (in thousands):

(2) Includes amortization of acquired intangible assets, including purchased patents, as follows (in thousands):

(3) Includes acquisition-related expenses as follows (in thousands):

(4) Includes legal reserve and settlement charges as follows (in thousands):

(5) Includes amortization of debt issuance costs and discount as follows (in thousands):

(6) Includes gains and other income from strategic investments as follows (in thousands):

(7) Includes tax costs for intellectual property integration relating to acquisitions as follows (in thousands):

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(1) CrowdStrike uses its GAAP provision for income taxes for the purpose of determining its non-GAAP income tax expense. The tax costs for intellectual property integration relating to acquisitions are included in the GAAP provision for income taxes. The income tax benefits related to stock-based compensation, amortization of acquired intangibles assets, including purchased patents, acquisition related expenses, amortization of debt issuance costs and discount, gains and other income from strategic investments attributable to CrowdStrike and legal reserve and settlement charges or benefits included in the GAAP provision for income taxes were not material for all periods presented.

(2) For periods in which CrowdStrike had diluted non-GAAP net income per share attributable to CrowdStrike common stockholders, the sum of the impact of individual reconciling items may not total to diluted Non-GAAP net income per share attributable to CrowdStrike common stockholders because the basic share counts used to calculate GAAP net loss per share attributable to CrowdStrike common stockholders differ from the diluted share counts used to calculate non-GAAP net income per share attributable to CrowdStrike common stockholders and because of rounding differences. The GAAP net loss per share attributable to CrowdStrike common stockholders calculation uses a lower share count as it excludes dilutive shares which are included in calculating the non-GAAP net income per share attributable to CrowdStrike common stockholders.

Explanation of Non-GAAP Financial Measures

In addition to determining results in accordance with U.S. generally accepted accounting principles (“GAAP”), CrowdStrike believes the following non-GAAP measures are useful in evaluating our operating performance. CrowdStrike uses the following non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes. CrowdStrike believes that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and facilitates period-to-period comparisons of operations, as these measures eliminate the effects of certain variables unrelated to CrowdStrike’s overall operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Other companies, including companies in CrowdStrike’s industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of CrowdStrike’s non-GAAP financial measures as tools for comparison. In addition, the utility of free cash flow as a measure of the company’s financial performance and liquidity is limited as it does not represent the total increase or decrease in our cash balance for a given period.

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate CrowdStrike’s business.

Non-GAAP Subscription Gross Profit and Non-GAAP Subscription Gross Margin

CrowdStrike defines non-GAAP subscription gross profit and non-GAAP subscription gross margin as GAAP subscription gross profit and GAAP subscription gross margin, respectively, excluding stock-based compensation expense and amortization of acquired intangible assets.

Non-GAAP Income from Operations

CrowdStrike defines non-GAAP income from operations as GAAP loss from operations excluding stock-based compensation expense, amortization of acquired intangible assets, including purchased patents, acquisition-related expenses and legal reserve and settlement charges or benefits.

Non-GAAP Net Income Attributable to CrowdStrike

The company defines non-GAAP net income attributable to CrowdStrike as GAAP net loss attributable to CrowdStrike excluding stock-based compensation expense, amortization of acquired intangible assets, including purchased patents, acquisition-related expenses, amortization of debt issuance costs and discount, gains and other income from strategic investments, legal reserve and settlement charges or benefits and the tax costs for intellectual property integration relating to acquisitions.

Non-GAAP Net Income per Share Attributable to CrowdStrike Common Stockholders, Diluted

CrowdStrike defines non-GAAP net income per share attributable to CrowdStrike common stockholders, as non-GAAP net income attributable to CrowdStrike divided by the weighted-average shares outstanding, which includes the dilutive effect of potentially diluted common stock equivalents outstanding during the period. CrowdStrike may periodically incur charges or receive payments in connection with litigation settlements. The company excludes these charges and payments received from non-GAAP net income attributable to CrowdStrike when associated with a significant settlement because CrowdStrike does not believe they are reflective of ongoing business and operating results.

Free Cash Flow

Free cash flow is a non-GAAP financial measure that CrowdStrike defines as net cash provided by operating activities less purchases of property and equipment and capitalized internal-use software and website development costs. CrowdStrike monitors free cash flow as one measure of its overall business performance, which enables CrowdStrike to analyze its future performance without the effects of non-cash items and allow CrowdStrike to better understand the cash needs of its business. While CrowdStrike believes that free cash flow is useful in evaluating its business, free cash flow is a non-GAAP financial measure that has limitations as an analytical tool, and free cash flow should not be considered as an alternative to, or substitute for, net cash provided by operating activities in accordance with GAAP. The utility of free cash flow as a measure of CrowdStrike’s liquidity is further limited as it does not represent the total increase or decrease in CrowdStrike’s cash balance for any given period. In addition, other companies, including companies in our industry, may calculate free cash flow differently or not at all, which reduces the usefulness of free cash flow as a tool for comparison.

Explanation of Operational Measures

Annual Recurring Revenue

ARR is calculated as the annualized value of CrowdStrike’s customer subscription contracts as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms. To the extent that CrowdStrike is negotiating a renewal with a customer after the expiration of the subscription, CrowdStrike continues to include that revenue in ARR if CrowdStrike is actively in discussion with such an organization for a new subscription or renewal, or until such organization notifies CrowdStrike that it is not renewing its subscription.

Magic Number

Magic Number is calculated by performing the following calculation for the most recent four quarters and taking the average: annualizing the difference between a quarter’s Subscription Revenue and the prior quarter’s Subscription Revenue, and then dividing the resulting number by the previous quarter’s Non-GAAP Sales & Marketing Expense. Magic Number = Average of previous four quarters: ((Quarter Subscription Revenue – Prior Quarter Subscription Revenue) x 4) / Prior Quarter Non-GAAP Sales & Marketing Expense.

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