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CrowdStrike Benefits from Current Conditions

Posted on Tuesday, Apr 21st 2020

According to a Research and Markets report, the global endpoint security market is expected to reach $18.4 billion by 2024, growing at 8% CAGR from $12.8 billion in 2019. Analysts believe that given the recent lockdown conditions, as organizations enable more and more people to work from home, endpoint security players such as CrowdStrike (NASDAQ: CRWD) will see their market grow more rapidly than estimated earlier.

CrowdStrike’s Financials

CrowdStrike recently reported its fourth quarter results that surpassed market expectations. Total revenues grew 89% to $152.1 million, ahead of the Street’s forecast of $137.8 million. GAAP net loss was $28.4 million, compared with $31.2 million a year ago. On an adjusted basis, net loss was $0.02 a share, compared with the market’s forecast of a loss of $0.08 per share.

Subscription revenues grew 90% over the year to $138.5 million. Professional services for the quarter came in at $13.6 million compared with $7.6 million reported a year ago.

Annual Recurring Revenue (ARR) increased 92% to $600.5 million at the end of January, of which $98.7 million was net new ARR added in the quarter.

CrowdStrike ended fiscal year 2020 with revenues growing 93% to $481.4 million with subscription revenues growing 99% to $436.3 million. Net loss for the year was relatively flat at $141.8 million, compared to $140.1 million last year. On an adjusted basis, net loss was $0.42 per share compared with $2.65 in fiscal 2019.

For the first quarter, CrowdStrike expects revenue of $164.3-$167.6 million and non-GAAP net loss per share of $0.07-$0.06. It expects to end fiscal year 2021 with revenues of $723.3-$733.5 million and net loss of $0.14-$0.10 per share. Analysts were forecasting revenues of $148.9 million for the quarter with a net loss of $0.08 per share and revenues of $678.5 million for the year with a net loss of $0.18 per share.

CrowdStrike’s Expanding Offerings

CrowdStrike continued to expand its market reach through product enhancements. During the last quarter, it launched CrowdStrike Falcon Spotlight, an app for security operations that integrates real-time endpoint vulnerability data and patch validation with prioritization and response workflows. The app is well integrated with ServiceNow and relies on the workflows provided by ServiceNow. It is also available on the ServiceNow Store for its customers.

It also extended the capabilities of the CrowdStrike Falcon platform’s endpoint protection and endpoint detection and response (EDR) to provide visibility specific to workloads hosted on Google Cloud Platform (GCP) and Microsoft Azure. As part of the enhancements, the solution is now able to provide EDR and run-time protection for containers. Falcon can also now provide comprehensive visibility into all three leading public clouds.

Cyber security has become more essential in current times as it has become more essential and mission critical for organizations to meet their compliance requirements. To help its customers, CrowdStrike launched a coronavirus surge relief plan that allows its customers to search the number of endpoints for up to 60 days to allow them to quickly onboard new remote workers without having to worry about a procurement cycle. It also launched a Falcon Prevent for home use program that allows company administrators to install Falcon Prevent on their employees’ home systems.

CrowdStrike’s cloud-based security platform is also helping organizations who have had to move their workforce to remote, laptop-based, work-at-home solutions. Since CrowdStrike’s Falcon platform does not require physical infrastructure, customers can easily and remotely deploy, manage, and protect their workloads at scale irrespective of where their employees are located. Finally, CrowdStrike’s Falcon Complete, its fully managed endpoint protection offering, has been able to virtualize security operations and protect customers when they do not have the resources or the ability to do so. Falcon Complete enables customers to significantly increase their security resources and broaden their expertise across all time zones on a 24×7 basis.

CrowdStrike is also benefiting from last year’s $10.7 billion acquisition of Symantec by Broadcom. CrowdStrike claims that it has seen a significant increase in the number of queries coming from former Symantec customers as they evaluate new options. According to analysts, “the largest installed base of endpoint security in the corporate world belongs to Symantec and post its acquisition, customers and channel partners are driving significant share shift over to CRWD as the leading technology provider.”

The global cyber security market is a crowded space that continues to see rapid consolidation. It will not be surprising to see CrowdStrike being evaluated by other technology players as a potential acquisition target. I can think of two potential buyers – ServiceNow and Palo Alto Networks. ServiceNow. CrowdStrike is already well integrated with ServiceNow’s platform and an acquisition will enhance ServiceNow’s endpoint vulnerability management offerings. Palo Alto Networks is another potential buyer who has been growing rapidly through acquisitions. Palo Alto uses acquisitions not only to gain technological capabilities but also to add talent. An acquisition of CrowdStrike will add both to its portfolio.

Last year, CrowdStrike went public when it raised $659.1 million by pricing its stock at $34 apiece at a valuation of $6.6 billion. The stock is currently trading at $64.74 with a market capitalization of $13.8 billion. It has fallen to a 52-week low of $31.95 in the recent market turmoil. In August last year,  the stock was trading at 52-week high levels of $101.88.

Before going public, CrowdStrike had raised $481 million in funding from Accel Partners, CapitalG, March Capital Partners, Rackspace, Telstra Ventures, Warburg Pincus, IVP, General Atlantic, Instant Scale Ventures, and Cloud Apps Capital Partners. It had last raised $200 million in June 2018 at a valuation of $3 billion.

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