Summary
CrowdStrike's fiscal second quarter produced revenue of $198.97 million, up 84.0% from $108.11 million in the prior-year quarter. Subscription revenue grew 89% year over year and professional services revenue rose 40%. Annual recurring revenue reached $790.6 million as of July 31, 2020, up 87% year over year, with net new ARR of $104.5 million in the quarter, a record for the company. CrowdStrike added 969 net new subscription customers, taking the total to 7,230, a 91% increase. Dollar-based net retention rate again exceeded 120%. Management pointed to a favorable competitive environment and to organizations shedding legacy systems in favor of cloud-native security. A large new customer acquisition helped lift ARR from April 30, 2020 to July 31, 2020. Module adoption kept climbing: 57% of customers run four or more cloud modules and 39% run five or more, compared with 50% and 27% a year earlier.
Profitability improved across the board. GAAP loss from operations narrowed to $29.99 million from $50.64 million in the prior-year quarter, and GAAP net loss narrowed to $29.87 million from $51.89 million. GAAP gross margin was 72.7%, up from 70.8%, and GAAP operating margin came in at negative 15.1%, up from negative 46.8%. Non-GAAP income from operations was $7.8 million, compared with a loss of $20.6 million a year earlier. Non-GAAP net income was $7.9 million, compared with a loss of $23.1 million. Non-GAAP subscription gross margin was 78%, compared with 76%. Cash generation was the standout. Operating cash flow was $55.0 million in the quarter, up from negative $6.2 million. Free cash flow, a separate non-GAAP measure, was $32.4 million, compared with negative $29.2 million. Capital expenditures were $20.64 million, down 4.5% year over year.
For the six months ended July 31, 2020, revenue rose 84.7% to $377.05 million. Gross profit was $275.76 million, up 92.4%. Operating loss narrowed to $52.57 million from $76.42 million, and net loss narrowed to $49.10 million from $77.87 million. Operating cash flow for the six months was $153.60 million. Deferred revenue rose 86.6% to $689.84 million, and remaining performance obligations rose 103.4% to $925.50 million. Backlog stood at roughly $235.6 million, of which about $78.8 million is not expected to be billed in the next twelve months. The accumulated deficit was $686.6 million as of July 31, 2020.
Guidance points to continued investment rather than near-term margin expansion. For the third quarter of fiscal 2021, CrowdStrike guided to non-GAAP income (loss) from operations of negative $1.4 million to $1.6 million, non-GAAP net income (loss) of negative $2.2 million to $0.9 million, and non-GAAP diluted earnings (loss) per share of negative $0.01 to $0.00. For the full fiscal year 2021, non-GAAP income from operations is projected at $3.6 million to $16.4 million, non-GAAP net income at $5.6 million to $18.4 million, and non-GAAP diluted earnings per share at $0.02 to $0.08. The company raised its full-year revenue guidance and now expects to deliver non-GAAP operating income for the fiscal year.
The main risk is the COVID-19 pandemic. CrowdStrike said the impact so far has been modest, though some customers in heavily impacted industries asked for special billing or payment terms. Gross retention stayed consistently high. The company converted its portfolio of marketable securities to cash in the first quarter of fiscal 2021 because of the economic uncertainty. Other disclosed risks include a limited operating history, the challenge of managing rapid growth, new product introductions, attracting and retaining customers, and the length of sales cycles. Seasonality is a real factor. Net new ARR generation is greater in the second half of the year, particularly in the fourth quarter, and operating margin is lower in the first half because of payroll taxes, new hires, and annual sales and marketing events. CrowdStrike ended the quarter with 2,838 full-time employees and had no amounts outstanding under its credit facility, staying in compliance with all covenants. It also contributed $2.0 million to the Falcon Fund.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $199.0M | $178.1M | +11.7% | $108.1M | +84.0% |
| Gross profit | $144.6M | $131.2M | +10.2% | $76.5M | +88.9% |
| Gross margin | 72.7% | 73.7% | -1.0 pp | 70.8% | +1.9 pp |
| Research & development | $50.5M | $40.6M | +24.4% | $31.6M | +59.6% |
| Sales & marketing | $95.1M | $88.1M | +7.9% | $65.3M | +45.7% |
| General & administrative | $29.0M | $25.0M | +15.6% | $30.3M | -4.3% |
| Total operating expenses | $174.6M | $153.8M | +13.5% | $127.2M | +37.3% |
| Operating income (loss) | -$30.0M | -$22.6M | -32.8% | -$50.6M | +40.8% |
| Operating margin | -15.1% | -12.7% | -2.4 pp | -46.8% | +31.8 pp |
| Net income (loss) | -$29.9M | -$19.2M | -55.4% | -$51.9M | +42.4% |
| Net margin | -15.0% | -10.8% | -4.2 pp | -48.0% | +33.0 pp |
| Net retention rate | 100.0% | 100.0% | ±0.0 pp | 100.0% | ±0.0 pp |
Risks
COVID-19 and related global economic uncertainty could materially and adversely affect results; MD&A notes some customers requested special billing or payment terms and the company converted all marketable securities to cash and cash equivalents during the three months ended April 30, 2020, while longer-term operational and financial impact remains uncertain.
Rapid revenue and headcount growth strains operations; headcount grew from 910 employees as of January 31, 2018 to 2,838 as of July 31, 2020, and MD&A shows sales and marketing average headcount up 39% and research and development average headcount up 52% for the three months ended July 31, 2020.
Revenue depends on renewals and module expansion; MD&A says gross retention remained consistently high and dollar-based net retention exceeded 120% in the second quarter of fiscal 2021, but also warns that landing bigger deals and accelerating new customer acquisition create a natural tradeoff on near-term expansion with existing customers.
ARR growth can depend on large transactions; MD&A states growth in ARR from April 30, 2020 to July 31, 2020 was driven in part by a large new customer acquisition, and notes dollar-based net retention can fluctuate due to large customer contracts.
Business has seasonal patterns; MD&A expects net new ARR generation to be greater in the second half, particularly the fourth quarter, and lower operating margin in the first half due to payroll taxes, new hires, and annual sales and marketing events, which can affect operating cash flow and free cash flow timing.
The company will cease to be an emerging growth company as of January 31, 2021 and become a large accelerated filer; it will no longer be exempt from SOX 404(b) auditor attestation, increasing compliance costs and internal control scrutiny.
The Falcon platform depends on third-party data centers, primarily AWS, and colocation facilities; MD&A reports data center commitments of $140.8 million as of July 31, 2020 and notes service interruptions could harm renewal rates and new customer acquisition.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Net New ARR
Free Cash Flow
Annual Recurring Revenue (ARR)
Non-GAAP Subscription Gross Margin
Backlog
Dollar-Based Net Retention Rate
Subscription Customers
Net New Subscription Customers
ARR Growth YoY
Subscription Customer Growth (YoY)
Summary, forecast, risks and KPIs are extracted from CrowdStrike Holdings, Inc.'s SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.