CrowdStrike Holdings, Inc.’s (CRWD) Management Presents at Jefferies Virtual Software Summit (Transcript)

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) Jefferies Virtual Software Summit January 11, 2022 5:00 PM ET Company

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) Jefferies Virtual Software Summit January 11, 2022 5:00 PM ET

Company Participants

Burt Podbere – Chief Financial Officer

Conference Call Participants

Brent Thill – Jefferies

Brent Thill

Welcome back. It’s Brent Thill from Jefferies. We’ve got Burt with us from CrowdStrike CFO. He’s been at the company since 2015, been instrumental in leading one of the fastest-growing stories in tech. Burt, Happy New Year, thanks for joining. And maybe you’ve been at the company now for quite some time. And if you can kind of set the stage, we’ve been asking all of our presenters just to give us kind of their view of 2022. And the most important things on your to do list or your strategy for this year, how do you frame ’22 and, yes, we’ll start there.

Burt Podbere

Great. So really happy to be here. Happy New Year, Brent, and to all your investors here today. Exciting to kind of come to you and talk to you about CrowdStrike and where we are and where we’re going.

So 2022, I’ve never been more excited. I think we’ve got a massive opportunity ahead of us in the years to come. Everybody is aware that security is just in the forefront. It’s mission critical. And the good news for us is that every quarter that’s gone by, including the last one, we’ve talked about record pipeline, just incredible demand for our solutions. And the fact of the matter is that we just keep knocking the ball out of the ballpark with record results.

We don’t believe there was anything out there that was unusual other than just the adversaries in the backdrop getting worse and worse. We don’t think there’s been any pull forward or anything like that with respect to what’s going on and what we see in the marketplace. So I think about CrowdStrike, I think about our market leadership role as it stands today. And we look at other companies that have been before us in their spaces, whether it’s Salesforce or ServiceNow, and see what happened with them as they increase their market share and leadership the competitors’ kind of fell by the wayside. And that’s what we’re kind of seeing. And that’s excited.

Obviously, we’re earlier days than those guys. But we see a similar path and for us we see a really long runway in 2022 and beyond for growth, whether it’s new logos, expansion, new geos we announced last quarter a nice Fed deal. All that’s great, of course, it’s offset by and balanced by our increased scale, but all those things put together get me really excited, especially the record pipe.

Question-and-Answer Session

Q -BrentThill

For all of our clients, if you’re on the last Okta session, you realized it was pretty entertaining. So the goal is to get you guys involved in any questions you have asked on the portal, obviously, ask those before I asked my set list of questions. And Burt, you nailed in on kind of the big question. I think the topic number one from investors, is this kind of great COVID pull forward? Is a pull forward? Or is it just, hey, we pulled demand and we’re still throttles down? Feels like your answer, which had you beat me to the punch on which was it feels like we’re still throttle down. And there are really no big barriers that you’re seeing.

Can you just maybe explain a little more why that is based on? I mean, last year, for example, right, Jefferies across straight shop. Martha, who works with me, never had a laptop because she never worked from home. Now she works at home full time. We gave her device. We gave 4,000 employees devices, more devices last year, and ultimately, the required protection goes higher on. So in that case, when clients asked me like, how is this not a pull forward, how – what is giving you that confidence that is not — that this is sustainable? Obviously, you’ll see renewals and all that excitement, but what are the levers that lead you to believe that that growth continues?

BurtPodbere

Yes, I think we saw an early bump when COVID first came out in terms of just new devices for work from home, and that’s so far beyond in their rearview mirror, I think what’s more important, if you’ve seen this secular trend, moving from legacy to next gen. And it’s not related to COVID whatsoever. It’s just there’s this movement or generation shift to cloud technology, which is going across the board, digital transformation, hybrid work models, they all need to embrace security transformation, and that’s where we fit. And then when CIOs, even your shop, I know the folks there quite well, when they think about the long-term view, it’s not — it’s no longer about speeds and feeds on refreshes. It’s about transformation, ease of use, stopping the breach.

And for us, I think the work from home movement just accelerated where we were going anyway. And so I think that’s helped in terms of people realizing more than anything else, that the old legacy technologies that’s not the answer, right? You need to be born in the cloud, you need to be cloud native, you need to be able to scale rapidly, you need to have time to value that’s immediate, you need to be able to have the best efficacy out there, all those things are things that we do.

And the reason we’re able to do it successfully is that the architecture that we build in the cloud is the premises, we collect data once and reuse it many times on a single, lightweight, intelligent agent. That has one, right? We’re able to give customers like you immediate value, easy to use, simple to deploy. And we’ve emerged as a platform company.

And as a leader, and we’ve got a differentiated platform, we’ve got things like zero trust, and Humio, which is log management, and XDR, which are game changers for us, increasing deal sizes, price leverage, high module adoptions and stickiness, all those things are as a result of all the work we did years ago to get where we are today. And it wasn’t easy, right?

We had other companies that are out there that we’re trying to get to market faster having mousetrap pointed prevention even faster than us. But we took a slower approach, we took a slower, more thoughtful, more methodical approach, we want to get the data first. And then we went to EDR, which was the detection. And then only then when we had it all flighted, then we go into prevention and then we just took off, and we saw the separation between us and everybody else. And then we saw us gaining a lot of traction against the legacy players.

Brent Thill

There are already a lot of questions in the Q&A about Humio. I know George has put a kind of a stake in the ground pretty hard on this one. And you guys are pushing this hard, it’s early days, but I’m curious if you can just frame what you’re seeing so far and ultimately, the long-term vision of what this can do for the company.

Burt Podbere

Yes. Obviously, we’re really excited about the acquisition of Humio. It’s fit nicely into our environment into our platform. And the reason that we’re excited about it is several fold. One is obviously the additional data we’re able to ingest, the ability to see more and then be more effective in what we do and what customers are looking forward, which is to stop the breach.

So fully integrated XDR model, a module that we announced in Falcon is expected to be GA within the next month. And what we’re seeing is this ability for us to move into SIMs and replace SIMs and log management. We see a real opportunity in log management to be able to offer a different type of technology that’s index-free that can give leverage to customers that are using other technologies.

And being able to be part of one singular platform, which you got one kind of beautiful UI that you can go in and have all this visibility and all this efficacies under one roof. And at the same time, you’re taking off different technologies, and we’re going to help drive you down your TCO.

So your CIOs of the world, CFOs, like myself, of the world get excited about being able to get better efficacy, better capabilities at less cost. So all those things combined together is why we’re excited about Humio. And some of the other acquisitions we’ve done, including Zero Trust, and with our Preempt acquisition and Identity. So those are the things that – those are the bets that we’ve made, and they’ve been paying off.

Brent Thill

I’ll go on – I’ll go straight into the questions here, Burt, we’re getting. There’s a lot of them. So I’ll just read – I’ll read them out, as I see them. We’ve been getting this may be more of a question for your technologist, but this Log4j impact in the industry, we keep gaining in all the presentations. And if you want to pass it on your technical team, we can do that. But it’s one question that keeps coming up. And I don’t know if there’s any thing you’ve heard on that or not as it relates to what’s happening in the industry.

Burt Podbere

Well, Log4j, for those who really aren’t aware of what it is. It’s basically the Internet on fire, right? So it’s this vulnerability that’s out there, that’s affecting so many environments. And for us, we’re able to come in, if you have us, you’re in good shape. We’re able to identify and protect against that vulnerability. And for us, it’s not just one thing, it’s a variety of things that we have on our platform that make us so compelling and be able to work against things like Log4j.

And it’s obviously early days as the vulnerability was identified late last year. And when people are only now realizing, man, I’m vulnerable, I got opportunity, there’s an opportunity for us to get breached and that’s where we come in. We come in with our things like our Identity and Preempt, that’s flighted for protecting against vulnerabilities, combined with our core, which is our detection, prevention, and overwatch groups.

And you combine all that together, and you get tremendous resiliency against things like Log4j. And many others, almost everybody out there would have been our competitors. They don’t – some of it obviously came from, we all know where it came from, and going to them to try and stop something that they created, that’s hard. Why would a CIO or a CSO want to do that? There’s this notion of trust issue with a company like Microsoft.

And for us, when we think about, what we’ve done, is that we’ve got an opportunity to create a methodical way to prevent things like that, whether it’s things like massive vulnerabilities, like print nightmare, or just other chaos in database environments, we’re there to be able to prevent things like that from happening.

And so that’s what Log4j has done again, for us as its shined, hey, look, there’s more vulnerabilities out there, you need the best that’s available. And that’s us and so —

Brent Thill

It can act as a tailwind, Burt, in some ways, where it’s like, hey, like; it’s just one more thing to add to it. That’s why I need CrowdStrike.

Burt Podbere

Yes, I mean, sure. I mean, anytime you see something like that, it does, it’s obviously early days. So in terms of pipe being generated from Log4j. But certainly, we’ve seen an uptick, even from our incident response or our services engagements, which if folks are familiar with our story, when we have incident responses, they generate over 5x in terms of the opportunity to gain a proxy.

So when you combine all those things together, we’re excited about the opportunity for us, that things like Log4j and more down the road are going to come, we know it. We know that every month, every week, there’s going to be more of these vulnerabilities that are out there. And where the good news is a company like CrowdStrike, we’re flighted to be able to prevent and detect against those types of things.

And as the adversaries get stronger and better and faster, as your team well knows, we’re there for them, right? We give the visibility, we give the ability to prevent and detect. And so whether it’s on-prem or like, or in the cloud, it doesn’t matter, right? So things like Log4j, when they come up, what they do is they put a spotlight again on security. And what that does is then everybody’s got to go, okay, scrambles, they lose the best out there. And more often than not, they’re coming for CrowdStrike.

Brent Thill

There was a question regarding the win at the CISA or the Cybersecurity and Infrastructure Security agency, and the kind of the relevance and impact over time and the question is couldn’t this just be like an elephant monster deal over time if this goes well for you?

Burt Podbere

Yes. The CISA deal, a little bit of background, it was extremely competitive, right? There were a lot of folks vying for that win. We won because of our efficacy, the government they test everything. They test everything as good as anybody else. And it’s a very arduous process. And we won, we came in, we showed our capabilities. And what that means is that we came in and we won the deal, and it’s for a few of the agencies, right, kind of think about it as a tip of the iceberg.

And then what happens from there is you’re able to then sell to more and more agencies certainly on the civilian side, and they’re a big, they’re a big seat at the table for all the agencies, the civilian side, in terms of what technology they use. So winning that is an on ramp into your point and to your or to the investors point into bigger things.

And the good news there, it’s not like just winning the deal and okay, walking away. We flighted our executive team, including myself, with some of the senior folks over at CISA, friends with the Deputy Director. We get together every quarter. We talk about what things are they concerned about, what things can be helped more on. And so there’s constant interaction between their leadership team and ours. And so we’re getting in front of the curve in terms of what’s needed in the government. And then of course there’s another opportunity, which is the non-civilian opportunities. And having CISA behind us on the civilian side, that’s just more ammunition to be able to go after the non-civilian potential opportunity.

So it’s all really good for us. And I mean, obviously, the deal itself was a significant deal. And we’ll see the ARR fall into play over time, maybe over the next three quarters, because agency, different agencies take different amounts of time to deploy. So that deal will roll into our ARR over time in terms of the revenue.

So that’s a good thing, right? And then as we continue to roll out and get success, then we’re able to leverage the CISA folks to sell it to more agencies. And then as you know with our platform, not only are we going to roll into other agencies, but then we’re able to roll other products into the agencies that don’t have all of our tech. And so it’s a win-win across the board for us and for CISA.

Brent Thill

The question was does CSPM and CWP can be sold together? Maybe if you can describe for those that don’t know what that is. I have heard it tends to be a little more commoditized versus CWP. Is that a fair statement?

Burt Podbere

Well, Cloud Workload Protection, and protection against configuration management, those are two different things. But having said that, they can be sold together, I think when you’re talking about cloud we’ve been already selling into the product protecting the cloud for quite some time. And so we think the cloud opportunity is still in Greenfield, there’s not like one of the big legacy players that’s already out there. And we’re ripping into place that’s not because they’re not even there, right. So this is kind of Greenfield, for us, we think the market is completely underserved, we’ve gone through many different sessions through investors, in terms of what we think the opportunity is, we think it’s a big one, we think there’s a pretty big tam out there, you pick a number or $10 billion, $15 billion, whatever it is to be able to go after on that cloud workload protection, and configuration management opportunity. And they can be sold, like many of our stuff, like many our modules on a platform that can be sold independently that can be sold together. And generally speaking we try and sell them together, we’d like anything else, we’re trying to sell as much as we can in our platform, and really help the customer, whether it’s on a cloud, whether it’s in the cloud, on-prem, but those two modules are exciting for us. But we’re still early days, with respect to the cloud opportunity. But 25% of our servers that we protect are not our servers, the customer servers that we protect part of the cloud. And we’re also protecting a billion instances every day as they spin them up. So there’s a lot of activity that’s happening in the file that we’re already there. And it’s exciting for us in terms of that cloud opportunity in the future. That’s definitely one of those opportunities that we see in the future for continued growth.

Brent Thill

One of the questions just around, can CWP becomes 50% of revenue in five to 10 years?

Burt Podbere

Sure, right, we think that there’s a real opportunity. In terms of net new, obviously, the base that’s already there, okay, it is going to be hard to overcome that. But on a net new basis, when we think five years out, sure. Cloud net new ARR could overpass on-prem. It’s still early days to tell, but sure, we invested in that technology. And we’re investing in the go-to-market to be able to capture that market as it comes to us. And as we go to it. So it’s again, one of those things where let’s go where the pucks going for hockey analogy, we think, we’ve got this huge opportunity, we think we’re the first mover to go into cloud protection and what we do with configuration management in the cloud, and that gives us the advantage, right and really hard to catch somebody who’s there first has the best tech, easy to deploy simple management, we have all those things. It’s really tough to go after, when you think about when CrowdStrike came to the market, there wasn’t a CrowdStrike in front of us, right? There were just some of the legacy players, right? We were the best out there. And then now fast forward. When we think of our opportunity, there’s no Crowd project. There’s us and we’re competing again against legacy folks who aren’t even in there. So that’s how we think about your question in terms of in the next five to 10 years can that be the lion’s share of the majority of our net new ARR? I think yes.

Brent Thill

Yes, another question, free cash flow is very strong given your growth profile, what are the key priorities for forecast usage? And how do you think about share dilution from stock comp going forward?

Burt Podbere

Yes, two different things there, right. So there’s free cash flow and their stock comp. So free cash flow is basically a byproduct of the strong model that we built, right? The subscription model, we flayed all our unit economics in such a way that generate cash, I’m trying to invest, believe me, I’m trying to invest and trying to invest aggressively. But when you’re growing at this pace the growth is outpacing my ability to invest in the business. Where’s the spending going? Well, I’m really trying to we, as a company, we’re trying to spend more in different fields, in R&D we think we bought an advantage with our balance sheet to continue to invest in R&D aggressively, even more so than S&M which might surprise some of your folks as a percentage of revenue, and where we’re going, I think, we’re going to see us — we are going to see the balance of scale move towards R&D, as opposed to anything else, as we go for it, because the opportunity is so big, in front of us. And other things that we think about in terms of where we would deploy our capital in international, right, we’ve got this opportunity to continue to invest and go after opportunity, whether it’s emerging markets or an existing markets, we think that we have a long way to go, we got a tremendous amount of headroom, whether you think about a Geo, whether it’s EMEA, whether it’s APJ, we’ve done well, in those environments, but we’ve just done really well in America, and the Americas. So we have tremendous headroom across the board. And then we are from a CapEx standpoint, we do look at continue to invest in our data centers and we continue to obviously, do invest in our T environment. So that’s another area of investment for us. With respect to stock comp I think that we’ve seen, your investors can look at the numbers, I was going to say, look forward I think that we’re going to be in that 5% range in terms of dilution, as we think about going forward, 5%, 6%, somewhere in there. Some of it we got to factor in, we have a great ESPP plan for our employees to take advantage of. And that all matters, right? I’m sure there’s a question out there lingering about talent, talent acquisition, talent, being able to maintain your talent and attrition it’s on, it is top of my mind, right. It’s the, for me, from where I sit, and an executive team, I worry about talent probably more than anything else, right. And we’re doing all those things to keep our folks in their seats that are already here, plus, we’re trying to attract others to come in it’s talent war. And the great news is, as I look at our attrition numbers, and I look at the competitors out there, we’re in a really good spot, right, we’re well ahead of some of the folks and the companies that are in our space, and be able to retain and attract the best that’s out there. And we’ll take advantage of it. Me personally, I’m looking at our annual operating plan and trying to over rotate in terms of what are the things that we can do, in terms of bringing in great people, and maintaining our great people, when I think about the budgets, and I’m doing more, I’m doing more there to be able to retain our folks doing different programs for folks thinking about total compensation differently, thinking about how we can make life better at CrowdStrike, certainly as us as a benchmark, but then against others. So that’s really top of mind. And I’m sure many of your of the listeners on this call that’s top of mind for them too.

Brent Thill

Go through the questions roughly, what percent of new deals are built on a three year multi year versus a one year?

Burt Podbere

Yes, so the good news there is that we’ve seen an uptick in three year deals, they might not all necessarily be paid upfront. But we’ve seen an uptick in customers locking in for three years with us. And I think it goes back to this platform well, people are making the big bet, that hey, we’re part of that foundation for security, right. And certainly, as a foundational platform, I get the question all the time is what is the security environment look like five years from now? And I think it’s going to be a few of the key platforms that are going to win. I think one is certainly on the endpoint and if that’s us, and then there might be one for example, on the network side pick a company could be Zscaler could be something else. Maybe on identity pick, an identity broker paying AKA, your listeners were on with AKA just before this one, and then there’s some bits and pieces after that, but that’s the core. And that’s where we think we’ve got leg up on everybody else certainly for the future. So great traction in our three year deals, not necessarily maybe paid upfront, but locking them in for sure. So that they can build on our platform.

Brent Thill

A question around what you’re seeing with the spotlight module, there were some enhancements at FALCON 21. Anything else needed before we start to see an inflection?

Burt Podbere

Well, I mean, the good news with our spotlight is every quarter, we’ve seen increased adoption rates. It’s been steady. And that’s great. And we keep enhancing the capabilities within our spotlight module. And we continue to get great feedback from our current investor, I’m sorry, our current customers, in terms of how much they love the product. And so it’s a steady increase in adoption rates. And that’s exciting. And I think we’ve got long way to go to really usurp that entire market, but we’re on the right path, we’re on a right trajectory. And I think that as it resonates to the fact that our founder, George Kurtz and CEO he thinks about vulnerability management, as something that’s core, the core to us. And where we can really make a difference when we think about the future.

Brent Thill

There was just a clarifying question you’re close to 40%, free cash flow margins. Now, any reason why you can’t keep that up?

Burt Podbere

It just comes down to investment, right? I think we’ve got this huge opportunity in front of us. And I want to go after it, right. So I think I’m very focused, the company’s very focused on our long-term growth, and our huge, huge opportunity, it’s a massive opportunity in front of us. So that’d be the only reason why we wouldn’t continue to talk about 40% cash flow margins, I gave up the long term model, and I talked about the long form model about it’s in that 30 plus range, for free cash flow, I think that’s a good benchmark for us it’s going to up and down in the near term, and then steady as it should goes up, I think the model just is such a powerful model, right, and the fact that we have such strong unit economics, the fact that we’re so much invested in automation, and taking friction out of this, as all those things come into play in terms of generating cash, it is one of the things that I focus on every quarter more than some other things. And for us we’re excited about what the model can bring. And we’re also excited about the opportunity to be able to use some of that cash to go and invest. And we will, and sometimes it’s hard to as I said, the talent wars, and trying to go after more R&D folks, and as much as I want to go out and spend that money, we still have an eye to prudency, we’ve always had that approach. And we’re not going to just bring in just anybody to get into our company. Certainly on the R&D side. It’s a process, right? We don’t, we never want to sacrifice quality for speed. But we are doing certain things to be able to increase the velocity in terms of getting great people in the door.

Brent Thill

Burt, you just mentioned that kind of the three feature platforms Identity, network endpoint, do you envision CrowdStrike expanding to those other platforms over time? Or do you have enough inside that bucket to keep going for a while?

Burt Podbere

Yes hand on heart; I can pretty much say that the network side that’s probably not where we’re ever going to go. I’ve been on both sides of the house from security. I’ve been on networking side I’ve been on obviously, now I’m in the endpoint side, there’s not really a good crossover. They’re two very, very different things. So I don’t see us ever going into the network side, I really don’t even see us going into the identity broker side. That’s not kind of our strength. So I don’t see that. But I do see adjacencies and identity like what we obviously did with Preempt. So there is more opportunity there to move into it. So that’s how we think about it.

Brent Thill

There’s a question around, when can we expect more disclosure in the ARR? For example, non endpoint versus endpoint on the comment was we do a lot to clear up some of the narrative and prove that this is becoming more of a platform story that was the comment. I’m just reading you verbatim what clients are saying so you know the spirit of the question.

Burt Podbere

Yes, no, I got it. Thanks, Brent. Obviously, I think we’ve done a really good job in terms of being able to show the adoption rates four plus, 68%, five plus, 55%, six plus 30%. And I say that tongue in cheek, right? I mean, when you think about it, and you think about four plus modules and it’s 68%, as many of your listeners know, like, many companies would be over the moon with 10% on the second module, adoption rate. So when you’re at 68%, on your fourth, that’s pretty incredible. And in terms of additional disclosure, in terms of the makeup of ARR, by the way, the mere fact that we’re giving out ARR to begin with, I think, is a great sign of how transparent we are, many companies don’t even give out ARR. We do, we think it’s the right forward looking metric that folks can go back into revenue and their modeling in terms of the slices and dices within ARR. Given some time, we’re going to think about what is the right kind of disclosure that we want to give out that we think is helpful as we continue to have dialogue with our investors, and we continue to have dialogue with them. We get a lot of different asks, in terms of the breakouts of our ARR. And we’re just going to be looking at, which are the ones that are going to be most helpful in terms of for our folks to get really comfortable in terms of making investments into us, and certainly, for them to stay with us for the long term. So we’re definitely thinking about it in terms of different slices and dices and more to come on that.

Brent Thill

This is where maybe you want Maria to turn her camera on, and she can take the question, then I know you probably don’t like to take. I’m kidding, Maria. But there’s 200 people on the line, there’s 200 questions on SentinelOne.

Burt Podbere

Yes. Is there a question in there?

Brent Thill

Brother, there are a lot of questions. I guess the question is just I think you’ve been pretty vocal about certain situations where you’ve replaced them. You’ve had I think, clearly that the view that the markets big enough and can support multiple vendors. But I think there are just a lot of questions about your strategy and where you’re going versus where they’re going. And I think everyone’s trying to understand are they have any impact in the field as it relates to your execution?

Burt Podbere

Yes, I mean, look, let’s just start with the facts and look at the scoreboard our net new ARR versus their net new ARR, since they’ve been public, we’ve only increased the lead in terms of actual dollars, right. And that gap is expanded quarter after quarter. And so let’s start there, right. So the fact that there was a lot of fun in the market never, never fan of that. And part of the reason I entered security was to comment in that FUD. We’ve been from the beginning. And I certainly have been so sure pretty transparent about our business. And we don’t, we talked about ourselves and let the scoreboard talk for itself, in terms of our win weights they’ve never been stronger against the competition. You see it in the numbers, right? And you can say, and throw it any kind of stats you want. But just go back to the scoreboard; just take a look at the net new ARR. That’s the metric for SaaS businesses, what are you bringing in each quarter? And is it growing? Is it growing as fast as somebody else’s total dollars, right? Like, you got to look at all of it. And when you look at any of those metrics, when you think about us versus the competitors, we’re front and center. And as we continue to what we’ve seen historically, as we’ve seen the gap between us and Sentinel grow in terms of the net new ARR I think that speaks for itself.

Brent Thill

Thanks for addressing that, there was a question around. There are a couple of questions that have come in, just why does the ARR per customer continue to go down as module adoption goes up?

Burt Podbere

Yes, so I mean, they’re certainly ARR per module, it’s a tough one per customer. It’s tough, because we’re serving both the large enterprise, we’re serving the SMB, as we do more and more on the SMB side, that’s where the velocity of our net new logos are coming from. Those are obviously smaller deals. So it can be skewed, right. And I think at the end of the day, one of the things that we’ve been transparent about is our net retention rate, it’s been over 120% since we’ve been public, and that goes to the proof that the customers are expanding, whether they’re SMB, mid market, or enterprise. And so you’ve got to, you can’t look at that just in isolation in terms of ARR per customer, because you have different swim lanes that we play in. But if you just look at our overall net retention, and that gives you an idea of how customers are thinking about, and it’s definitely it’s a function, average ARR is a function of mix shift. And so as we think about each quarter it could go either way. I mean, that’s the beauty of where we are in our journey is that we have so much more to go and SMB, we have so much more to go in enterprise, we currently have over 14,500 subscription customers, when we think about where we can go, those are early innings, right? We’ve got, if you take a look at the legacy players they have hundreds of 1000s of customers each. So when you think about the opportunity in front of us in terms of net new logos, it’s huge, right? Yes, we’re a $1.5 billion and a half of ARR; we’re thrilled that we were able to get here so fast. And we’re thrilled that we’re able to have a great customer base. But it’s a drop in the ocean about where we can go and how many more customers we can bring on board. And that’s part of the excitement that we have as a management team as a company, is that we have this tremendous headroom in terms of net new logos to go after. I’m glad that your listeners are firing questions at us. It’s highly entertaining for me as well.

Brent Thill

We got a lot. We might have to go to the very quick lightning round here, because there’s they keep building on. Is there a cut off where you’re seeing some of the competition, they’re just not scaling? I know, there’s been a couple situations, I’ve gotten a lot of questions that have come in are you seeing a cut off where we’re in these larger enterprise cases that some of the up and comers are really not able to scale? Are you hearing and seeing that not trying to pinpoint one or another?

Burt Podbere

Yes, 100% we’re definitely seeing them. We’re seeing that when the up and comers are not even up and comers, I’ll just call them if they’re not even up and comers, some of those up and comers start at the same time as us, right. So it’s not like, oh, we’re trying to come up with the next gen. We are the next gen. Others are, I think, not even the next gen. But what we’re seeing is some competitors who are smaller than market trying to go up market, they’re failing, right. And even if they get a signed contract, we find that as soon as the tech teams for customers trying to deploy, and they realize this thing doesn’t scale. They boomerang back to us. We’ve seen that time and time again.

Brent Thill

Yes. The question about splitting enterprise to SMB, I mean, the SMB piece, I think, is kind of a cool business, because it can be digitally deployed and low touch pretty high margin. Lot SMBs versus the time you invest into enterprise obviously can get really big. But when you think about the SMB side, the question was just are you seeing maybe even short term or the opportunity going to SMB versus enterprise? Or is that as a more enterprise versus SMB equal? How would you characterize the health of both those sectors?

Burt Podbere

On any given quarter, one could outpace the other; we’re still in that phase where we’ve got a long way to go on both. Right, super healthy on both sides of the house, the great news about the SMB is we found that the SMB space really loves our complete offering, which is our offering that manages monitors and re-mediates, on behalf of an SMB, or anybody. And so what you see is you might have an SMB that has a tech person in there who really is not a security expert whatsoever. And they go from a really weak security profile to overnight, the best that you can possibly buy overnight, and you’re helping to save money with respect to the talent shortage, that’s in security. So SMBs are saying why wouldn’t we just use CrowdStrike? They’re the best out there. They all know what they’re doing the live breathe, sleep security, advocate, and they’re watching us every single day, every single minute of every single day. So why wouldn’t we go with that versus trying to bring in somebody that’s more expensive, that may not have all the expertise we need. And that has been a big success factor for us in the debt market. 100%, by the way, and some of the largest customers that we have also use our complete offering, because we’re solving for that talent shortage. And folks are looking to us to be able to do it for them. And it’s worth.

Brent Thill

The minute that you said, this is entertaining. I got more entertaining questions in so they keep going, yes, I think Burt likes scheme. Someone asked me.

Burt Podbere

I was supposed to be with your bank this week to go skiing but I got caught up in helping already in business at this point. So but yes, that’s true. I’m a big skier.

Brent Thill

Here we go. I know we’re almost in Utah this week. The AWS is great partner. The question is I believe they drove expansion uptick in kind of how that’s going. Is there renewal coming up with them? What do they mean to you? Kind of you can take it any which way you’d like.

Burt Podbere

Yes, great partner, right? We’ve seen great momentum as a sell-to, sell-through, right? And we’re aligned all the way to the top to Andy Jassy, he and George are know each other, they have dialogue. And so we have alignment right at the top, and it goes all the way down. And we’ve got it’s, all our customers are important to us, don’t get me wrong. And the good news is no one customer out there is as material as we think about our $1.5 billion in ARR. Having said that we’re, me, personally, I’m deploying more budgets to help with the relationship, both on the sell-to and sell-through. And it’s worked. And I have no plan on putting on the brakes, in terms of making sure that AWS continues to be one of our top partners.

Brent Thill

There are a lot of questions around, there’s so many different ways you can go. But are there any new areas that you’ve entered recently, with your modular approach that you’re maybe even more surprised about this opportunity set that you didn’t see before? Many have asked about the insider threat, right? We know, there are bad guys trying to break in, but there’s I know you’re trying to go after the insider threat design area. Are there other areas that you’re excited by?

Burt Podbere

Well, Zero Trust is the winner, right for that? I mean, what we’re seeing, which is exciting is that customers who have known us for our core, which is detection, prevention and overwatch, they’re kind of looking at that Zero Trust offering and saying, oh, that really helps us with our insider. And for us that’s been a big win. We’ve seen larger deals come in and I think George talked about the Preempt business, and how well we’ve done since we’ve acquired it, versus all the deals that they’ve done prior to the acquisition, I think we’ve done more, since we’ve acquired them than they’ve done an entire history. And I think that goes to the model of our distribution model, and the ability to, again, be integrated into our platform. So really excited about that. And we’re seeing early days early security successes with Preempt, right, and we’re excited about; we’re really excited about that opportunity. No question. That’s a game changer for us and I think the ability to corner the market in data, which Humio was a big part of and users, which is the identity, and on the devices, which were already there, I mean you cornered the market on those three things, which we think we’ve done certainly with the addition of SecureCircle, and all of a sudden, you’ve got the triumvirate of the successful formula. And so we’re in early days and in all of it. And the great news is we flighted the front end, we flighted the back end, to be able to keep up with the front end. And as a CFO, I’m really excited about how well we’ve been able to do as a whole company, in terms of being able to be in lockstep front end, back end. And then even automation, even on the front end, and using all the other tools that are out there to give us the visibility and help customers get time to value being immediate, and helping customers with the sales process, all that stuff matters. And very few companies have been able to do that.

Brent Thill

All right, we’re gonna make you pick, I know; back when you started, you maybe had less than three modules. Now you got 21 modules or 21 children. Is there a favorite? Let’s say, who’s your favorite young child who’s the new comer?

Burt Podbere

My favorite personally, because I was very much involved with it was Complete, right. Complete, I think is a super winner. And I was involved from day one in terms of the architecture, how this is going to work, putting the right people in place to make this work involved in the playbooks pitching it to the earlier adopters, going through all the different models, and I was right in the middle of it. I didn’t outsource it to anybody. I personally was involved, and I’m just over the moon to see the success of that offering. And I think, again, early innings for that I think it’s just a game changer and winner.

Brent Thill

The Zero Trust from you displaced the privileged access management vendors or not?

Burt Podbere

Well, certainly there’s a case to be made that we can go into the privilege access market. I mean, here’s the reality, right? All these different technologies can overlap; we think that the beachfront real estate isn’t one. And when you start from there, and then you move out, it’s much easier than starting from the outside trying to get it. Because we’re right there, we’re on the endpoint. That’s where all the action is. And that’s where the gold data is. And so when you think about us starting from here, and then branching out, much easier than going the other way. But we think we have, we think we’re in the pole position for that.

Brent Thill

I’m going to go quick, and you can get quick one. So don’t feel like you got to be nice in the answers here. We’ll go quickly, okay. If you buy CWP, and you get breached, who’s on the hook, is there a warranty?

Burt Podbere

So the warranty that we have is with Complete, that’s the Complete offering that I was really excited about, that’s the product we have the warranty for, so you buy that and you’ve got an immediate warranty. And then on the other side we’ve been given our efficacy and where we’ve been the fact the matter is we’re driving the risk of being breached the CWP weigh down, right. And there could be something some other thing that’s impacted the potential breach. But given how we flight the detection, and how we see it we’ve dramatically just dropped the risk precipitously. So that’s how I think about that.

Brent Thill

Yes. A lot of questions on Varonis. Is this someone in your direct side or is this tangential.

Burt Podbere

Yes, we don’t see Varonis that much to be honest with you. It’s not something we think about every single day, we’ve got other things that we are focusing on. So it’s not really, those are the — those folks are we’re not seeing them in the marketplace.

Brent Thill

Federal opportunity, how you would believe what that could look like in the next few years? Is it going to take time or is this rapid maybe faster than you thought?

Burt Podbere

I’ll take the middle of the fairway approach. I think we’ve got great inroads with the CISA deal for sure.

Brent Thill

Good spot to hit the ball

Burt Podbere

Yes, I think we have tremendous opportunity with respect to Fed, those deals, the bigger mid-year deals obviously do take time. But we’re working on those now. It’s not like, okay, we’re going to get all the different certifications, and then go after we’re talking everybody now, right. And so when the certifications come, we’re already there, deals already — our pitch is already well understood by the buyers and the government. So that’s great news and then you CISA behind us, right, who is — you can just imagine the scrutiny that they put on, before they sign their name onto going with us.

Brent Thill

Question from a client, just you have this great motion where you can land and expand, but just this hey, like, I know who you are, I know I need the protection. I know I need to go larger out of the gate, just kind of not asking for what you’re about to close. But ultimately, this big deal pipeline of those customers that are coming and making bigger commitments right out of the gate, how would you describe what it looks like from your vantage point?

Burt Podbere

Well modules, right, the new logos that are coming in, they’re looking to really as I talked about earlier, they’re really to anchor with us.

Brent Thill

So like take one or two, they could take a handful of modules out of the gate.

Burt Podbere

Out of the gate, we’ve made it so easy for our customers to do that. And making us the anchor has been a winner. And there are customers out there or potential customers, there are actually actual customers who say to us, give us an insight into some of the things you’re thinking about, because I’m about to I know I need this piece of technology, whatever it is, but if you guys are coming out with I’m going to pass. I’m going to put things on hold for three, six months, knowing you’re coming out with it because your stuff works. You’ve made it easy to use, simple to manage, and it works better than anybody else. So let’s wait and pause. And then we have other customers who are like whatever you come up with on buying. Yes and that you rarely see. And that’s what we’re experiencing.

Brent Thill

A lot of questions where Cloudflare is headed, they talk I’ve seen how a big surface area they want to go and protect which is build a better internet. Yes, their mantra. So this ability to kind of provision as the service get going quick, obviously, architecturally really unique. Any thoughts there and what you’re seeing, what you’re seeing from them.

Burt Podbere

Now, George and Matt Prince have a good relationship. We don’t, as you know they’re on our website, part of the house. We don’t overlap with them. And so they’ve done a good job in terms of how they differentiate themselves in their market. And right now, there’s a good relationship between the two companies.

Brent Thill

And then we’ll hit one last one, can you give color on the modules outside the core endpoint? Where you’re seeing kind of the most adoption so far? What would you say kind is more mature in terms of the adoption cycle of those modules?

Burt Podbere

Look, we talked about some of that, I mean Spotlight has been a winner for us. Its adoption rate has just gone up every quarter. So that’s one of the older modules, the vulnerability management, which is outside endpoint security. And then you’ve got Identity, I think that’s going to be I’m really excited about identity. I think all of our customers and potential customers are asking about it. They want the Zero Trust; they think there’s super opportunity. And then on the Humio side, the log management, I think that absolutely can be a game changer. And we’re really excited about the TAM expansion within those areas.

Brent Thill

Burt, you got an about 20 more questions, but we got to cut it there. So thanks so much for taking all the questions. And again, thanks to clients for being as engaged and productive as you are. Makes it more engaging overall. So thank you.

Burt Podbere

Yes, Brent, that was exciting. A lot of questions that came through, it’s always more fun. So thanks for the platform to be able to talk about CrowdStrike and Happy New Year to all your listeners and to you.

Brent Thill

You too. Thanks. Thanks again, Maria. Thanks Burt.

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