CrowdStrike reported Q4 earnings per share of $0.47, beating the consensus estimates of $0.43 per share, and above $0.3 per share from a year ago. The earnings increase was fueled by a recent surge in new customer subscriptions that took the company’s average recurring revenue (ARR) to a new record high.
Q4 2022 hedge fund letters, conferences and more
ARR Continues Solid Growth
Annual recurring revenue (ARR), which measures how much revenue a company can expect based on subscription numbers and largely impacts a stock’s price, rose 48% year-over-year (YoY) to $2.56 billion, compared to analysts’ expectations of $2.52 billion.
CrowdStrike’s Q4 loss stood at $47.5 million, or 20 cents per share, slightly above the year-ago loss of $42 million, or 18 cents per share. The company added 1,873 net new subscription customers in the quarter, bringing the total figure for the year to 23,019, up 41% YoY.
“Highlights of the quarter included record net new ARR of $222M, record net new subscription customers of 1,873, record operating and free cash flow, and a rule of 81 on a free cash flow basis,” the company said.
The cloud software maker said its subscription users with five or more, six or more, and seven or more modules jumped 52%, 62%, and 75%, respectively, compared to last year. CrowdStrike said five or more modules accounted for 62% of users, while seven or more modules represented 22%.
Cloud-based companies have been taking advantage of their existing customer bases to adopt fresh modules as new user numbers have been declining recently due to recession fears.
In a bid to attract new customers, the Austin, Texas-based cybersecurity company said it is increasingly targeting small- to mid-size businesses (SMBs). It added the appointments of Daniel Bernard as a Chief Business Officer and Raj Rajamani as Chief Product Officer are key to implementing this strategy.
“We’re still in the early innings of our SMB journey, but again, customers are wanting this,” said CrowdStrike co-founder and CEO, George Kurtz.
Q4 Results Will Quell Investor Fears
For the current quarter, the company expects adjusted EPS in the range of 50c to 51c, exceeding analysts’ estimates of 42c per share. Revenue is expected to range between $674.9 million to $678.2 million, while analysts were looking for $663.3 million.
On a full-year basis, CrowdStrike anticipates EPS to be in the range of $2.21 to $2.39, also above Wall Street estimates of $1.99 per share. The company forecasts full-year revenue of $2.96 billion to $3.01 billion, higher than the consensus estimates of $2.95 billion.
“Doing more with fewer internal resources has become the new normal for many companies,” Kurtz said during the earnings call. “The outcome of stopping breaches remains the No. 1 priority for [chief technology officers.]”
CrowdStrike’s stock suffered a worst one-day decline last quarter after the firm sounded alarm bells about slowing subscriptions due to tough macro conditions and longer customer buying cycles.
Companies developing cloud software are struggling to strike deals in a more cost-conscious environment as businesses pull the breaks on spending. Instead, cloud-based companies are rushing to launch new services and encourage their customers to add more modules and features to their customized platforms.
Earlier this month, CrowdStrike published the 9th annual edition of its Global Threat Report, revealing the latest insights into threat actor behavior, tactics, and trends from 2022. After tracking over 200 cyber adversaries, the company unveiled numerous interesting findings, such as the shifting dynamics of ransomware attacks.
“2022 was a year of explosive, adaptive and damaging threats. Adversaries continue to be relentless in their attacks as they become faster and more sophisticated,” it is stated in the report.
Here are several highlights from the annual report.
- 71% of cyberattacks last year were malware-free, compared to 62% in 2021. Meanwhile, interactive intrusions rose by 50%, suggesting how sophisticated attackers have become as they continue to bypass antivirus protection and machine-only defense mechanisms.
- Access broker advertisements on the dark web jumped 112% YoY in 2022, emphasizing the demand for identity and access credentials in the internet underworld.
- Cloud exploitation increased by 95%, while the number of attacks led by ‘cloud-conscious’ actors almost tripled from 2021. This data point signals that attackers are increasingly targeting cloud-based environments.
- The number of attackers involved in data theft and extortion campaigns jumped by 20% last year, indicating that adversaries are moving beyond ransom payments for monetization.
- “China-nexus” adversary activity increased in all 39 global industry sectors and 20 geographic regions, indicating that all global organizations must be highly alert to Bejing-based threat actors.
- The average eCrime breakout time decreased from 98 minutes in 2021 to 84 minutes in 2022, suggesting how today’s threat actors are not only more efficient but faster as well.
Summary
CrowdStrike shares trade modestly higher after the cybersecurity business offered a better-than-feared guidance despite a challenging macro environment. Investor fears were mostly about the outlook following the weak forecast shared in November last year. However, the new guidance suggests that cybersecurity demand remains firm as ARR is expected to continue rising at a solid pace.
Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.
