CrowdStrike Holdings, Inc. — Q1 FY2023 Form 10-Q
Reporting period: Three months ended April 30, 2022; comparisons are to the three months ended April 30, 2021. Amounts are in U.S. dollars.
Business context and key metrics
CrowdStrike provides cloud-delivered cybersecurity subscriptions through its Falcon platform, supplemented by professional services. Growth is driven by new customers and expansion of deployments and modules within existing customers.
| Metric | Q1 FY2023 | Prior-year quarter | Change |
|---|---|---|---|
| Total revenue | $487.8 million | $302.8 million | +61% |
| Subscription revenue | $459.8 million | $281.2 million | +64% |
| Professional services revenue | $28.0 million | $21.6 million | +30% |
| Gross profit / gross margin | $361.0 million / 74% | $224.3 million / 74% | Gross profit +61%; margin flat |
| Operating loss | $23.9 million | $31.3 million | Loss narrowed |
| Net loss attributable to CrowdStrike | $31.5 million | $85.0 million | Loss narrowed |
| Basic and diluted loss per share | $0.14 | $0.38 | Loss per share narrowed |
| Cash provided by operating activities | $215.0 million | $147.5 million | +46% |
Financial position and material period changes
- Cash and cash equivalents were $2.15 billion at April 30, 2022, up from $2.00 billion at January 31, 2022. Total current assets were $2.73 billion and current liabilities were $1.50 billion.
- Deferred revenue totaled $1.69 billion, including $1.25 billion current. Remaining performance obligations were $2.4 billion; the company expected to recognize approximately 64% within the following 12 months.
- Long-term debt was $739.9 million on the balance sheet, reflecting $750 million principal of 3.00% Senior Notes due 2029, net of debt-related accounting. No borrowings were outstanding under the $750 million revolving facility; the company reported covenant compliance.
- Operating cash flow benefited substantially from noncash expenses, including $102.5 million of stock-based compensation, and a $163.3 million increase in deferred revenue. Investing cash outflow was $61.0 million, principally from $52.2 million of property and equipment purchases and $5.2 million of capitalized software costs.
- Operating expenses increased 51% to $384.9 million. Sales and marketing rose 43%, research and development 58%, and general and administrative 60%. Stock-based compensation expense increased to $102.5 million from $54.4 million.
- Subscription customers increased 57% year over year to 17,945. ARR increased 61% to $1.92 billion, including $190.5 million of net new ARR in the quarter. Dollar-based net retention was above 120%.
Management commentary, outlook, and risks
- Management attributed subscription growth to new customers and greater endpoint and module sales to existing customers. It expects gross profit to rise and gross margin to increase modestly over the long term; operating expenses are expected to rise in dollars as the company invests, while certain expense categories are expected to decline as a share of revenue over time.
- The filing provides no numerical full-year revenue or earnings guidance. Management says customer budget cycles may make net new ARR stronger in the second half, particularly the fourth quarter, and operating margins may be lower in the first half due to payroll taxes, hiring, and sales and marketing events.
- The company reported $662.1 million of backlog, but cautioned it is not a key internal management metric and is not necessarily indicative of future revenue.
- AWS commitments are significant: the company agreed to purchase at least $600 million of cloud services through September 2026 and had used $102.3 million by April 30, 2022. The company said it expected to meet the remaining commitment.
- Material risks include competition, sustaining customer renewals and expansion, cybersecurity incidents or service interruptions, scaling infrastructure, hiring and retaining talent, and macroeconomic or COVID-19 effects. A hypothetical 10% adverse currency move was estimated to increase quarterly operating loss by approximately $11.6 million.
- Webroot and Open Text sued in March 2022 alleging patent infringement; the company could not estimate the likelihood of success or potential loss. A separate FICO trademark dispute remained in discovery, with no material liability recorded. Management stated that no pending or threatened proceeding was likely to have a material adverse effect, while noting litigation outcomes are uncertain.
- Management reported effective disclosure controls as of April 30, 2022 and no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether rapid ARR and customer growth continues, and whether retention and customer expansion support that growth.
- Whether operating expense growth, particularly stock-based compensation, moderates enough to improve profitability without weakening growth.
- How much operating cash flow reflects durable operating performance versus advance customer billings and deferred revenue movements.
- The cost and capacity implications of data-center investment and the $600 million AWS minimum commitment.
- Developments in the Webroot/Open Text patent case and FICO trademark proceedings, as well as any changes in related contingencies.