CrowdStrike Holdings Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Great. Thank you for taking my question, and congrats on the strong results. I wanted to commend you, George, Mike and the entire CrowdStrike team for your response and transparency since the outage event. So there's been a lot of talk, George, around whether Microsoft or customers perhaps may want to limit kernel access for future updates. I'm curious, in response to this outage, whether or not CrowdStrike will have to rearchitect their approach to the Falcon agent. And if so, would that be a meaningful undertaking that might push you away from the future innovation roadmap? Thank you.

Question: Brian Essex - JPMorgan - Analyst : Great. Good afternoon, and thank you for taking the question. Congratulations from me on -- one, a fantastic response to the incident and then two, execution on the back of that is impressive. I guess, George, for me, obviously, you've got peers out there talking about benefiting their pipeline, we still have to see that in their numbers, but from your perspective, we'd love to get some insight into what you're seeing from the pipeline. Obviously, you've called out the $60 million in deals that kind of pushed into 3Q, but from a competitive perspective, what are you seeing in terms of the number of peers that are invited into the process, maybe a little color around the conversations that you're having at the C level that are leading to some of those extended sales cycles, that would be really helpful to get that insight?

Question: Saket Kalia - Barclays - Analyst : Okay. Great. Can you hear me? -- Hey, George. Can you hear me? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 28, 2024 / 9:00PM, CRWD.OQ - Q2 2025 CrowdStrike Holdings Inc Earnings Call

Question: Saket Kalia - Barclays - Analyst : Okay. Sorry about that. Awesome, sorry about that guys. Thanks a ton for taking my question and offer my congrats as well just on the resilience here in the face of a very tough couple of weeks. George, maybe my question is for you. I'd love to just touch on Falcon Flex a little bit. This was something that you were investing in before the outage as well, but it sounds like it's something that can also be helpful for customers to maybe drive better security outcomes as well. Can you just maybe touch on that and how it's maybe helping that conversation post-outage? Sure. Well, when we think about Falcon Flex, this was born out of demand from our customers. If you look at our module attach rates, which we've gone through again many times in the past and they continue to go up as customers rely more and more on CrowdStrike, they came to us and said, hey, we want an easier and more flexible way to consume your Falcon platform. When you start with one module, when I started the company and you're at 28 today, there is a lot that you have to go through with a customer, and we wanted to meet customers where they wanted us to be, which is more CrowdStrike, make it easier through procurement cycles, and then ultimately allow them to consume it how and when they wanted to consume it. So we started down this journey a while back and it continues to gain a lot of traction with our customers. We've taken this and you heard this in my prepared remarks, and we are able now through our customer commitment package to be able to offer Falcon Flex. And again, some of the things that we went through, whether it's modules or time or what have you, we can allow our customers to be able to consume that as part of the customer commitment package. And we think overall, it's great for our customers because we're coming to the table and solving business problems. And also, it's great for CrowdStrike long-term because we're allowing them a very flexible model to continue to consume CrowdStrike, which they know and love.

Question: Tal Liani - Bank of America - Analyst : Here we go. Now you can hear me. Last night there was one of your competitors that said that customers would be more afraid now to buy -- to put all the eggs in one basket, meaning buy more modules from a single vendor and they'll opt for diversification of customers -- sorry, vendors. And for you, at least in previous quarters, I didn't calculate this quarter, but about two-thirds of your growth came from upsell to existing customers, and the question is whether you have any evidence if the event change the appetite of customers to buy from a single vendor -- to buy from you specifically? Have you seen any change of customers willing to buy up -- your ability to upsell to them, the other modules, etc.? And there is just -- I know it's one question, but there's just one thing that is a follow-up on something, Burt, the full year EPS guidance translates into a very big 4Q EPS, if you can somehow go over it to make sure that we have the right numbers. Thanks.

Question: Joel Fishbein - Truist - Analyst : Thanks for taking my question and also really great transparency, George and Burt. Thank you very much. My question is on guidance methodology. Burt, can you just go through a little bit of how you came up with the guide for the back half of the year considering all the moving pieces? And I guess the question, how it changed relative to how you've done your guidance before, that would be really helpful. Thank you.

Question: Gabriela Borges - Goldman Sachs - Analyst : Hi. Good afternoon. Thank you. I would love to get a little bit more detail, George and Burt, on the customer commitment packages. And you mentioned a couple of dynamics there alongside duration and concessions, maybe just a little more on how you came up with that $30 million REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 28, 2024 / 9:00PM, CRWD.OQ - Q2 2025 CrowdStrike Holdings Inc Earnings Call number in 3Q and 4Q, and what are some of the guardrails and how you think about the appropriate amount of duration or discounting or concessions that you want to give a customer to keep them happy and satisfied with the CrowdStrike platform? Thank you.

Question: Rob Owens - Piper Sandler - Analyst : Yeah, Burt. I guess as a follow-on to that -- thanks for taking my question here. The $60 million through the remainder of this year, but you talked about some of the weakness potentially persisting for a year in terms of net-new ARR. So I know you're not guiding to the out year, but as we kind of contemplate this, should we think about this more on a 12-month basis? And then as the selling of these customer commitment packages starts to anniversary or more normalizing relative to net new ARR growth and relative to maybe where margins were historically? Thanks.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Thanks for taking my questions. Actually, maybe a little bit of follow-up to Rob's question. I think, Burt, you kind of addressed it, but do you think part of that acceleration is some of these commitments then expanding usage? In other words, what's a bit of a headwind now is part of that broader commitment that just kind of compounds on itself? In other words, is that part of that tailwind that we should think about next year? Is this renewal cycle of these commitments? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 28, 2024 / 9:00PM, CRWD.OQ - Q2 2025 CrowdStrike Holdings Inc Earnings Call

Question: Fatima Boolani - Citi - Analyst : Good afternoon. Thank you for taking my questions. I appreciate it. George, and even Burt, please chime in, so on this procurement vehicle, Falcon Flex, clearly, you've seen a tremendous amount of positive data points, you shared them in the script, $700 million deal value created with just one year in the market. I'm wondering if this is now going to be the predominant go-to-market approach for you all in terms of incentivizing broader portfolio adoption. And then related to that, Burt, as we think about extrapolating some of the financial implications in the out years beyond your framed guidance, how should we think about renewal cycles and renewal conversations coming up that you could potentially steer towards these contracts such that you do still get an elongated period of maybe net new ARR growth. Can you help me sort of straddle those two? Thank you.

Question: Andrew Nowinski - Wells Fargo - Analyst : Okay. Good afternoon. Thank you for taking the question. And I'm sure every organization that was impacted appreciates the transparency and the contrite response you have today. So I wanted to ask about really on the renewal cycle as well. I was wondering if you could just give us any more color around the mix of renewals throughout the year. I would imagine Q4 is typically has the most renewals out of all four quarters, but maybe if you could just provide more color on the mix, maybe which quarter do you think there's more risk to a higher mix of renewals in case they don't potentially renew? Thank you.

Question: Roger Boyd - UBS - Analyst : Great. Thanks for taking the questions and I will add my congrats on the response and resilience demonstrated over the last month. George, just on the hypergrowth modules, nice to see that group past $100 billion collectively -- $1 billion collectively. It sounded like the timeline, you reiterated the $10 billion ARR target. It sounded like the timeline got pushed towards the longer side of the five to seven-year range you provided before. I would just love to get kind of your view on the durability of growth there. I get there's a lot of uncertainty, but just kind of any view on how you expect it to play out is the right view that you just see this as kind of a one-year speed bump towards those longer-term guidance?

Question: Joseph Gallo - Jefferies - Analyst : Hey, guys. Thanks for the question. Can you just update us on the federal momentum? You're entering their biggest quarter, and how should we think about that business? Does the IT outage slow momentum there given they're typically pretty conservative? Thanks.

Question: Gregg Moskowitz - Mizuho - Analyst : Okay. Thank you for taking the question and also well done in terms of transparency. I had a clarification just on the customer commitment packages and CrowdStrike's future expansion strategy. Is part of the plan effectively giving away modules to existing customers for upwards of a year? In other words, when you speak about an expectation of muted upsell dollar values and temporarily higher levels of contraction, is this part of the seeding strategy that you're referring to?