Crowdstrike: 200% Revenue Growth By 2026

Most of this was written on Friday, April 8th. It looks like anyone interested in purchasing CRWD or LOW this week will get a better price than I did 😂

Housekeeping

The $10k to $1 million portfolio had a rough week down 8%. Since Feb 15, 2022, the portfolio is down 2.77% ending the week at a value of $21,613. I have now contributed $22,000 of the $370,000 I intend to contribute by 2032.

We’re at 6% of our total contributions so I should be rooting for a market pullback to let me accumulate more shares. I’m not celebrating anyone’s losses here, but I want to make that mindset clear because it’s important for long-term investors in the accumulation phase.

This week I made two purchases. I bought $1,505 of Crowdstrike (CRWD) at $223.98 and $1,505 of Lowe’s (LOW) at $201.34. I talked about why I bought each in a post (before I bought them).

These are now the two largest positions in the portfolio at 8% for LOW and 6% for CRWD. As always you can see my portfolio, trades, and performance against the indexes on Commonstock (link).

Crowdstrike (CRWD) Investor Event Notes

• Platform has grown from 10 modules at the time of IPO in 2019 to 22 modules today. Now covering endpoint and Cloud Security, XDR, Managed Services, Threat Intelligence, Security and IT Operations, Identity Protection, Log Management and Data Protection.

• In 2019, IDC estimated that CRWD had 7.9% share of the modern endpoint market. Starting in 2021 CRWD was the leader with 12.2% share. As of midyear 2021, Crowdstrike kept its leadership position with 14% marketshare and management sees plenty of opportunities ahead.

• In 2022, Crowdstrike’s platform, Falcon earned a “leader” position in the Forrester Wave for endpoint detection and response, which was published yesterday. Forrester ranks CrowdStrike above all other vendors with the strongest scores for current offering and strategy.

• CRWD consistently has its technology tested and evaluated by working with SE Labs, AV-Comparatives, MITRE, and many other independent third parties. Many of these are real-world tests that take false-positive rates into consideration. CRWD scored 100% in detection of attacks in SE Labs EDR test. 99.9% protection rate in AV-Comparatives real-world test, and on the just release MITRE evaluation, CRWD led the evaluation with 100% automated prevention.

• As of January 31, 2022, there were a total of 43 public enterprise software companies with more than $1 billion revenue in the last 12 months. Only 5 of those companies were growing 60% YoY or more: CrowdStrike, Datadog (DDOG), Snowflake (SNOW), Toast, and Twilio (TWLO).

• Of those 5 companies, only CrowdStrike delivered 30% LTM free cash flow margin with the second closest company delivering 24%. CRWD management believes they are “just getting started” and has a vision of achieving $5 billion-plus in ARR within FY '26.

• At the time of IPO in 2019, CRWD had a $25 billion TAM. Last year management estimated a TAM of $36 billion and we saw it growing to $44 billion in CY '23. Now, management estimates the TAM of their current portfolio has grown to $58 billion and sees that growing to $71 billion in CY '24.Longer-term, management believes there is a path to growing TAM to $126 billion in CY '25.

• Additionally, CRWD leverages its MSSP partner ecosystem to serve part of the market which is not reflected in its penetration estimates presented today. The public sector, which we define as federal, state, and local governments and education institutions within and outside of the U.S. is another area where we see significant opportunity.

• Key characteristics that management believes set CrowdStrike apart:

  • A single-agent design that is very lightweight. It is not uncommon for us to replace multiple agents on initial deployment and grow that over time. Agent bloat is a real concern for CIOs and Chief Information Security Officers and is probably underappreciated by nonoperators.

  • Our ability to collect data once and reuse many times to solve a growing number of use cases is a key contributor to our success in the market and enables us to scale into multiple hundred thousand seat environments with few, if any, operational challenges.

  • Low-friction deployment and scalability even today, I'm still fascinated by our speed and ability to seamlessly deploy our sensor across a very large and complex environments, whether they are traditional endpoints, hybrid server environments, or public clouds. The time we took to eliminate requiring a reboot to deploy the agent continues to significantly differentiate CrowdStrike in the field.

  • Collecting and streaming the data in real-time is a huge advantage over competitors that operate in batch mode and struggle with storing data on the endpoint, which makes their sensor heavy and a drain on performance. Streaming data to the threat graph in real-time also enables us and hunt for threats faster and provides greater protection for customers.

  • All of this is powered by our unified back-end Threat Graph. I'd also like to note that we built Threat Graph from the ground up without relying on a third party. It is proprietary to CrowdStrike. And history has shown that as both legacy and next-gen competitors have tried to rearchitect in mid-flight in an attempt to emulate what we have, it has only opened up their customer base of disruption as they try to shift them off older offerings, giving Falcon the opportunity to shine and take market share.

Burt W. Podbere CrowdStrike Holdings, Inc. – CFO

• We delivered an exceptional year in FY '22, setting new records in multiple areas. After surpassing $1 billion in ending ARR in FY '21, in just 1 year, we added another $681 million of net new ARR, growing ending ARR 65% to exceed $1.7 billion, marking an incredible year of growth at scale for CrowdStrike.

• We delivered an exceptional year in FY '22, setting new records in multiple areas. After surpassing $1 billion in ending ARR in FY '21, in just 1 year, we added another $681 million of net new ARR, growing ending ARR 65% to exceed $1.7 billion, marking an incredible year of growth at scale for CrowdStrike.

• FY '21, we achieved non-GAAP profitability for the first time with operating margins of 7% for the year. In FY '22, we nearly doubled that, ending the year at 13.5% operating margin and exiting Q4 at 19%, setting a new record for CrowdStrike. We also delivered 30% free cash flow margin. And when excluding a one-time IP transfer tax payment related to the Humio acquisition, free cash flow margin would have been even higher at 35% of revenue and over $0.5 billion only a few years after going public.

• Last year, we outlined the illustrative math to get us to $3 billion or more in ARR by FY '25, which by itself would put us among the top SaaS companies only a few years out from our IPO. Now let's walk through the simple math that illustrates our path to achieving the even bigger milestone of $5 billion or more in ending ARR. As you all know about me, I prefer to illustrate things as simply as possible.

• With our FY '22 ending ARR growing 65% to exceed $1.7 billion as the starting point and applying just a 10% CAGR to net new ARR, you can easily see the path to achieving and exceeding $5 billion in ending ARR by the end of fiscal year 2026. While I would reiterate that this math is intended to be illustrative and not guidance, given the growth at scale we have achieved to date, our growing market leadership, the significant opportunity ahead and our meaningful technology differentiation, this gives us confidence as we set our sights well past $3 billion and aim to grow this company to $5 billion in ARR and beyond.

• Not only does this math illustrate how we could achieve $5 billion by FY '26, using this framework also accelerates the achievement of the $3 billion ARR milestone from FY '25 into FY '24, a year ahead of the framework that we walked through last year. So after achieving our first $1 billion in ARR in FY '21 in just under 10 years since the founding of the company, we are now talking about tripling that number in 3 years and 5x-ing it in 5 years.

• We see strong growth across all 3 categories with the greater than $1 million ARR category, growing 66% year-over-year with a 5-year CAGR of 125%, the $100,000 to $1 million category, growing 58% year-over-year with a 5-year CAGR of 80%, and the less than $100,000 ARR category growing 78% year-over-year with a 5-year CAGR of 98%.

• Moving to our dollar-based net retention rate. We remained above our benchmark throughout FY '22, which further demonstrates the success of our land-and-expand strategy, especially in light of our growing scale. Similarly, our growth retention rate remained best-in-class throughout FY '22, exiting the year at 98.1%, which is the highest we've seen since going public. We've seen meaningful contributions to DBNR from both the expansion of the number of sensors as customers increase Falcon's footprint across their environment and from cross-selling as customers purchase additional modules. In FY '22, we saw close to a 50-50 split between expansion and module cross-sell compared with an approximately 60-40 split in FY '21 as customers are landing bigger with more endpoints across the estate and expanding with more modules.As we land bigger and see increasing module adoption across the board, there are some competing dynamics within our dollar-based net retention, but we continue to expect that we remain above the 120% benchmark in the near term. This is no small feat given our increasing scale and increasing customer land sizes and speaks to our significant upsell and cross-sell motion, as George mentioned earlier.

• Looking at this from a whitespace perspective, the question is, what does our total addressable market look like within our own customer base. In FY '21, we achieved over $1 billion in ending ARR with a healthy net retention rate as our upsell and cross-selling motions are very mature.Expanding on that cohort. If our FY '21 customers adopted the entire platform that was available to them at the time with the same number of endpoints and consistent ASPs, the full platform opportunity would be equal to more than 2.5x FY '21 ending ARR, showing a significant runway to add net new ARR from within our existing accounts. With the addition of new Falcon modules in new adjacencies, such as identity and log management, this methodology would value the full FY '22 platform opportunity of the customer base at approximately $7 billion, more than 4x our FY '22 ending ARR and approximately 150% growth in opportunity from the prior year. While we don't assume that every customer will adopt the full Falcon platform, the magnitude of expansion in the total opportunity speaks to the extent to which we are increasing the value we can provide to our customers and the rate at which we are expanding the capabilities of the platform.

I’m happy with the execution the Crowdstrike team has displayed so far. The stock has now pulled back to a point where I’ve started building a long term position as I believe the security industry tailwinds will continue working in Crowdstrikes’ favor.

If you enjoyed this update, I’d love for you to share it, and consider starting a paid subscription.

Paid members will be receiving a Snowflake (SNOW) deep dive this week.