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    CrowdStrike Holdings Inc (CRWD)

    Q4 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$175.16October 31, 2023
    Final Price$292.50January 31, 2024
    Price Change$117.34
    % Change+66.99%

    What went well

    • CrowdStrike's cloud-native, single-agent, integrated platform provides a significant competitive advantage over competitors who struggle to integrate disparate products, enabling the company to easily integrate acquisitions like Flow Security into their platform. ,
    • Rapid growth in new markets, such as next-gen SIEM with LogScale, which saw ARR growth over 170% year-over-year, is displacing incumbents like Splunk, Elastic, and Azure Sentinel.
    • Strong customer excitement and demand for new products like Falcon for IT are expanding CrowdStrike's addressable market beyond security into IT operations, with customers eager to adopt these solutions due to their effectiveness and ease of use.

    What went wrong

    • Management expects Q1 net new Annual Recurring Revenue (ARR) growth to be the lowest for the year, with net new ARR growth anticipated to be only double digits up to the low teens, indicating a potential slowdown in growth momentum.
    • Competitors are adopting aggressive bundling and discounting strategies, referred to as "platformization," which could increase competitive pressures and potentially impact CrowdStrike's pricing power.
    • The company plans to increase hiring and expects operating leverage improvements to be more weighted towards the back half of FY'25, which may result in higher operating expenses and pressure on margins in the near term.

    Q&A Summary

    1. Competitive Landscape and Pricing Pressures
      Q: How do competitors’ strategies impact your go-to-market and pricing?
      A: George stated that competitors' "platformization" strategies are often just bundling and discounting products, which isn't new in the industry. CrowdStrike focuses on delivering value through a single-agent, single-console platform that reduces operational costs and provides better outcomes. Burt added they've never engaged in deep discounting or raised prices to drive ARR; instead, they aim to provide customers with the greatest outcomes at the lowest TCO.

    2. Impact of Competitors on XDR Pricing
      Q: Do you feel pricing pressure from competitors in the XDR market?
      A: George acknowledged the competitive environment but emphasized that customers seek solutions that prevent breaches costing hundreds of millions. He highlighted that CrowdStrike delivers value with every dollar spent yielding a sixfold return, and that "free is not free" and "good enough is not good enough".

    3. Acquisition of Flow and DLP Market Integration
      Q: How will the Flow acquisition be integrated, and what's its impact on the DLP market?
      A: George is excited about integrating Flow's data classification and runtime cloud protection into their data protection module. He sees similarities between legacy DLP and legacy AV, noting significant interest in replacing legacy DLP technologies. The acquisition will be integrated into their platform to enhance user experience, with the deal closing in the next few weeks.

    4. Partnerships with Dell and Pax8 Contributions
      Q: How did the Dell and Pax8 partnerships contribute to results, and are they in the FY '25 outlook?
      A: George noted that while it's early days, they're excited about the Dell partnership, already seeing wins from large enterprises to SMBs. The Pax8 partnership has shown tremendous success in the SMB market. Burt added that both partnerships represent additional routes to market and are expected to bring in deals; they're excited to have them as partners.

    5. Charlotte AI Product Monetization
      Q: What's the timeline for monetizing the Charlotte AI product?
      A: George stated they already have paying customers for Charlotte, having just released it. The product is a foundational component of their platform to drive automation in SOCs, and he's encouraged by customer responses highlighting time savings and value.

    6. Falcon for IT Development and Market Potential
      Q: How should we think about the development of Falcon for IT going forward?
      A: George shared that customer excitement for Falcon for IT is "off the charts". The product addresses the need for better IT solutions and leverages their single-agent architecture to solve IT problems. Feedback and interest are significant, expanding use cases beyond security data.

    7. ARR Guidance and Net New ARR Growth
      Q: Any guidance on net new ARR growth for the full year?
      A: Burt mentioned they don't guide on ARR but historically start the year in Q1 and build from there. He indicated that Q1 would be the low point for net new dollars for the year.

    8. Billings Duration and Contract Lengths
      Q: What's causing the step-up in billings duration and longer contracts?
      A: Burt explained that the increase is partly due to the platform, and that Q4 historically sees more multiyear deals and renewals. He noted that billings are influenced by duration and deal timing, and they manage the business to ARR, not billings.

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