Last month, CrowdStrike reported its third quarter results that surpassed market expectations. Revenues grew an impressive 86.9% to $232.46 million, surging ahead of the Street’s forecast of $214.36 million. On an adjusted basis, EPS was $0.08, compared with the market’s forecast of a break even quarter.
Subscription revenues grew 87% to $213.5 million. Professional services for the quarter grew 72% to $18.9 million.
Annual Recurring Revenue (ARR) increased 88% to $907 million, of which $117 million was net new ARR added in the quarter. It added 1,186 net new subscription customers to end with 8,416 subscription customers. CrowdStrike’s subscription customers that have adopted four or more modules, five or more modules and six or more modules increased to 61%, 44%, and 22%, respectively.
For the fourth quarter, CrowdStrike expects revenue of $245.5-$250.5 million with an adjusted net income per share of $0.08-$0.09. It expects to end the year with revenues of $855-$860 million and a net income of $0.21-$0.22 per share.
The endpoint security market is a highly fragmented one with several smaller players in the mix. CrowdStrike is looking at consolidating some of this market and it recently announced the acquisition of San Francisco-based Preempt Security for $96 million. Founded by Ajit Sancheti and Roman Blachman in 2014, Preemp Security is a conditional access technology that provides real-time access control and threat prevention. It is also a leading provider for Zero Trust solutions.
CrowdStrike plans to leverage the acquisition to provide a modern Zero Trust threat protection and security architecture intended to keep users, endpoints, and data of organizations safe from modern attacks, without having to compromise productivity or the user experience. The acquisition will allow CrowdStrike to offer customers enhanced Zero Trust security capabilities as well as strengthen its Falcon platform with conditional access technology. With the addition of Preempt Security’s technology, customers will be able to achieve end-to-end visibility and enforcement on identity data.
Prior to the acquisition, Preempt was privately held. It had raised $27.5 million in three rounds of funding from investors including Intel Capital, Blackstone Group, ClearSky, Rakesh K. Loonkar, Mickey Boodaei, and Paul Sagan.
According to an IDC estimate, the identity protection market will be a $2.2 billion market in 2021. CrowdStrike is a leading security provider in the market with a Zero Trust approach that combines endpoint and workload protection with identity protection, behavioral analytics, and AI. The addition of Preempt will help CrowdStrike make its position even stronger.
CrowdStrike is also releasing additional security products to cater to the growing security conscious world. It recently expanded its cloud capabilities with the launch of Falcon Horizon, which automates cloud security posture management across the application development life cycle for every major cloud provider. Horizon enables customers to securely deploy applications in the cloud with greater speed and efficiency while ensuring compliance and regulatory requirements. Customers get visibility into private, public, hybrid, and multi-cloud environments, and security teams can proactively minimize threats and ensure continuous compliance and governance against organizational security policies.
Its stock is currently trading at $223.73 with a market capitalization of $49.5 billion. It had climbed to a 52-week high of $228.80 earlier this month. The stock has recovered from the 52-week low of $31.95 it had fallen to in March last year.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.