What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-09 compared with 2022-03-16 · 72 added, 112 removed, 339 unchanged (35% of the section changed)

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The more data that is fed into our Falcon platform, the more intelligent our Security Cloud becomes, and the more our customers benefit, creating a powerful network effect that increases the overall value we provide.

In March 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic.

Since then, the COVID-19 pandemic has rapidly spread across the globe and has already resulted in significant volatility, uncertainty, and economic disruption.

Since the pandemic commenced, we have implemented several measures to help protect the health and safety of our employees around the globe.

In addition, in response to the uncertain macroeconomic environment, we converted all of our marketable securities to cash and cash equivalents during the three months ended April 30, 2020 and all of our investments were classified as cash and cash equivalents as of January 31, 2022.

Thus far, the impact of the pandemic has been modest.

Our gross retention rate for fiscal 2022 remained consistently high and our dollar-based net retention rate was above 120 percent throughout fiscal year 2022 as we continued to expand the number of endpoints and modules within existing customers.

We continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders.

The extent to which the COVID-19 pandemic may impact our longer-term operational and financial performance remains uncertain.

Furthermore, due to our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods, if at all.

The extent of the impact of the COVID-19 pandemic will depend on several factors, including the pace of reopening the economy around the world;

the possible resurgence in the spread of the virus;

the development cycle of therapeutics and vaccines;

the impact on our

customers and our sales cycles;

the impact on our customer, employee, and industry events;

and the effect on our vendors.

Please see Part I, Item IA, “Risk Factors” for a further description of the material risks we currently face, including risks related to the COVID-19 pandemic.

On March 5, 2021, we acquired Humio Limited (“Humio”), a privately-held company that is a leading provider of high-performance cloud log management and observability technology.

The acquisition was accounted for as a business combination.

The total consideration transferred was $370.3 million which consisted of $353.8 million in cash, net of $12.5 million cash acquired, and $4.0 million representing the fair value of replacement equity awards attributable to pre-acquisition service.

The purchase price was allocated to identified intangible assets, which include developed technology, customer relationships and trade names, of $75.6 million, net tangible assets acquired of $3.4 million and goodwill of $291.3 million, representing the excess of the purchase price over the fair value of net tangible and intangible assets acquired.

On November 29, 2021, we acquired Secure Circle, LLC (“SecureCircle”), a SaaS-based cybersecurity service that extends Zero Trust security to data on, from and to the endpoint.

The acquisition was accounted for as a business combination.

The total consideration transferred was $60.8 million, which consisted solely of cash..

The purchase price was allocated, on a preliminary basis, to identified intangible assets, which include developed technology and customer relationships of $18.3 million, net tangible assets acquired of $(0.5) million and goodwill of $43.0 million, representing the excess of the purchase price over the fair value of net tangible and intangible assets acquired.

Our Go-To-Market Strategy

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Our incident response and proactive services also help drive new customer acquisitions, as many of these professional services customers subsequently purchase subscriptions to our Falcon platform.

Many organizations have not yet adopted cloud-based

security solutions, and since our Falcon platform has offerings for organizations of all sizes, worldwide, and across industries, we believe this presents a significant opportunity for growth.

Many organizations have not yet adopted cloud-based security solutions, and since our Falcon platform has offerings for organizations of all sizes, worldwide, and across industries, we believe this presents a significant opportunity for growth.

Maintain Customer Retention and Increase Sales.

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We focus on increasing sales to our existing customers by expanding their deployments to more endpoints and selling additional cloud modules for increased functionality.

Over time we have transitioned our platform from a single offering into highly-integrated offerings of multiple SKU cloud modules.

Over time we have transitioned our platform from a single offering into highly-integrated offerings of multiple cloud modules.

Invest in Growth.

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As of January 31,

2022 2021 2020

Subscription customers 23,019 16,325

Year-over-year growth 41 % 65 %

We added 6,429 net new subscription customers during fiscal 2022, including 145 from the acquisitions of Humio and SecureCircle, for a total of 16,325 subscription customers as of January 31, 2022, representing 65% growth year-over-year.

We added 6,694 net new subscription customers during fiscal 2023, for a total of 23,019 subscription customers as of January 31, 2023, representing 41% growth year-over-year.

We added 6,429 net new subscription customers during fiscal 2022 for a total of 16,325 subscription customers as of January 31, 2022, representing 65% growth year-over-year.

Given our initiatives to grow customers served through our managed service security provider partners, which are not included in our subscription customer metrics, and to move further down-market, as well as the growing number of smaller end customers that we serve, which tend to contribute significantly less ARR on a per customer basis when compared to larger enterprises, we believe that our subscription customer metric no longer provides valuable insight into the performance of our business.

As a result, beginning in the first quarter of fiscal 2024, we will no longer provide a number of subscription customers as a key metric on which to evaluate the strength of our business.

Annual Recurring Revenue ( “ ARR ” )

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As of January 31,

2022 2021 2020

Annual recurring revenue $ 2,559,694 $ 1,731,342

Year-over-year growth 48 % 65 %

ARR increased 65% year-over-year and grew to $1.7 billion as of January 31, 2022, of which $681.3 million was net new ARR added during fiscal 2022, including $4.5 million from the acquisition of Humio and SecureCircle.

ARR increased 48% year-over-year and grew to $2.6 billion as of January 31, 2023, of which $828.4 million was net new ARR added during fiscal 2023.

Dollar-Based Net Retention Rate

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As of January 31,

2022 2021 2020

Dollar-based net retention rate 125.3 % 123.9 %

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Professional services are available through hourly rate and fixed fee contracts, one-time and ongoing engagements, and retainer-based agreements.

For time and materials and retainer-

based arrangements, revenue is recognized as services are performed.

For time and materials and retainer-based arrangements, revenue is recognized as services are performed.

Fixed fee contracts account for an immaterial portion of our revenue.

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Our operating expenses consist of sales and marketing, research and development, and general administrative expenses.

For each of these categories of expense, employee-related expenses are the most significant component, which include salaries, employee bonuses, sales commissions, and employer payroll tax.

For each of these categories of expense, employee-related expenses are the most significant component, which include salaries,

employee bonuses, sales commissions, and employer payroll tax.

Operating expenses also include an allocated portion of overhead costs for facilities and IT.

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amortization of acquired intangibles, and cloud hosting and related services costs related to proof of value efforts.

We capitalize and amortize sales commissions and any other incremental payments made upon the initial acquisition of a subscription or upsells to existing customers to sales and marketing expense over the estimated customer life, and capitalize and amortize any such expenses paid for the renewal of a subscription to sales and marketing expense over the term of the renewal.

Sales and marketing expenses also include sales commissions and any other incremental payments made upon the initial acquisition of a subscription or upsells to existing customers, which are capitalized and amortized over the estimated customer life.

We also capitalize and amortize any such expenses paid for the renewal of a subscription over the term of the renewal.

We expect sales and marketing expenses to increase in dollar amount as we continue to make significant investments in our sales and marketing organization to drive additional revenue, further penetrate the market, and expand our global customer base.

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Interest Expense.

Interest Expense consists primarily of interest expense from amortization of debt issuance costs, contractual interest expense for our Senior Notes issued in January 2021, and amortization of debt issuance costs on our secured revolving credit facility.

Interest expense consists primarily of amortization of debt issuance costs, contractual interest expense for our Senior Notes issued in January 2021, and amortization of debt issuance costs on our secured revolving credit facility.

Interest Income.

Interest income consists primarily of income earned on our cash and cash equivalents and short-term investments.

Other Income, Net.

Other income, net, consists primarily of income earned on our cash and cash equivalents, if any;

gain on strategic investments and foreign currency transaction gains and losses.

Other income, net, consists primarily of gain and losses on strategic investments and foreign currency transaction gains and losses.

Provision for Income Taxes.

Provision for income taxes consists of state income taxes in the United States, foreign income taxes including taxes related to the intercompany sale of intellectual property from Humio and withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business.

Provision for income taxes consists of state income taxes in the United States, foreign income taxes, including taxes related to the intercompany sale of intellectual property, and withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct business.

We maintain a full valuation allowance on our U.S.

federal and state and UK deferred tax assets that we have determined are not realizable on a more likely than not basis.

federal and state and U.K.

deferred tax assets, which we have determined are not realizable on a more likely than not basis.

Net Income Attributable to Non-controlling Interest .

Net income attributable to non-controlling interest consists of the Falcon Funds’ non-controlling interest share of mark-to-market gains and interest income from our strategic investments.

Net income attributable to non-controlling interest consists of the Falcon Funds’ non-controlling interest share of mark-to-market gains and losses and interest income from our strategic investments.

Results of Operations

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Interest expense (25,319) (25,231) (1,559)

Interest income 52,495 3,788 4,968

Other income, net 3,053 3,968 1,251

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Net loss (182,285) (232,378) (92,629)

Net income attributable to noncontrolling interest 2,424 — —

Net income attributable to non-controlling interest 960 2,424 —

Net loss attributable to CrowdStrike $ (183,245) $ (234,802) $ (92,629)

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Interest expense (1) % (2) % — %

Interest income 2 % — % 1 %

Other income, net — % — % — %

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Net loss (8) % (16) % (11) %

Net income (loss) attributable to noncontrolling interest — % — % — %

Net income attributable to non-controlling interest — % — % — %

Net loss attributable to CrowdStrike (8) % (16) % (11) %

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The following shows total revenue from subscriptions and professional services for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

Year Ended January 31, Change

2023 2022 $ %

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Total revenue increased by $789.6 million, or 54%, in fiscal 2023, compared to fiscal 2022.

Subscription revenue accounted for 94% of our total revenue in fiscal 2022, and 92% in fiscal 2021.

Professional services revenue accounted for 6% of our total revenue in fiscal 2022 and 8% in fiscal 2021.

Subscription revenue increased by $554.9 million, or 69%, in fiscal 2022, compared to fiscal 2021.

This increase was primarily attributable to the addition of new subscription customers, as we increased our customer base by 65%, fro m 9,896 subscription customers in fiscal 2021 to 16,325 subscription customers in fiscal 2022.

S ubscription revenue from new customers, subscription revenue from the renewal of existing customers, and subscription revenue from the sale of additional endpoints and additional modules to existing customers accounted for 34% , 42%, and 24% of total subscription revenue in

fiscal 2022, respectively.

Subscription revenue from new customers, subscription revenue from the renewal of existing customers, and subscription revenue from the sale of additional endpoints and additional modules to existing customers accounted for 33%, 36%, and 31% of total subscription revenue in fiscal 2021, respectively.

Professional services revenue increased by $22.3 million, or 32%, in fiscal 2022 , compared to fiscal 2021, which was primarily attributable to an increase in the number of professional service hours performed and increase in services offerings that are not based on billable hours.

Subscription revenue accounted for 94% of our total revenue in each of fiscal 2023 and fiscal 2022.

Professional services revenue accounted for 6% of our total revenue in each of fiscal 2023 and fiscal 2022.

Subscription revenue increased by $752.1 million, or 55%, in fiscal 2023, compared to fiscal 2022, which was primarily driven by a combination of the addition of new customers and the sale of additional endpoints and modules to existing customers.

As of January 31, 2023, we had a total of 23,019 subscription customers, which represents 41% growth from January 31, 2022.

Professional services revenue increased by $37.5 million, or 41%, in fiscal 2023 , compared to fiscal 2022, which was primarily attributable to an increase in the number of professional service hours performed and an increase in services offerings that are not based on billable hours.

Cost of Revenue, Gross Profit, and Gross Margin

The following shows cost of revenue related to subscriptions and professional services for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

Year Ended January 31, Change

2023 2022 $ %

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Subscription cost of revenue increased by $189.8 million, or 59%, in fiscal 2023 , compared to fiscal 2022.

The increase in subscription cost of revenue was primarily due to an increase in cloud hosting and related services cost of $58.7 million driven by increased customer activity, an increase in employee-related expenses of $37.7 million driven by a 55% increase in average headcount, an increase in stock-based compensation expense of $10.3 million, an increase in amortization of intangible assets of $9.7 million, an increase in depreciation of data center equipment of $7.7 million, an increase in allocated overhead costs of $4.9 million, an increase in depreciation of internal-use software of $4.3 million, and an increase in employee health insurance costs of $1.8 million.

The increase in subscription cost of revenue was primarily due to an increase in cloud hosting and related services cost of $100.0 million driven by increased customer activity, an increase in employee-related expenses of $43.1 million driven by a 47% increase in average headcount, an increase in stock-based compensation expense of $10.0 million, an increase in amortization of internal-use software of $9.1 million, an increase in allocated overhead costs of $8.4 million, an increase in depreciation of data center equipment of $8.2 million, an increase in term-based software licenses of $3.9 million, an increase in amortization of intangible assets of $3.1 million, and an increase in employee health insurance costs of $2.8 million.

Professional services cost of revenue increased by $28.2 million, or 46%, in fiscal 2023 , compared to fiscal 2022.

The increase in professional services cost of revenue was primarily due to an increase in employee-related expenses of $10.0 million driven by an increase in average headcount of 43%, an increase in stock-based compensation expense of $4.0 million, an increase in allocated overhead costs of $0.8 million, and an increase in employee health insurance costs of $0.6 million.

The increase in professional services cost of revenue was primarily due to an increase in employee-related expenses of $17.0 million driven by an increase in average headcount of 46%, an increase in stock-based compensation expense of $5.6 million, an increase in allocated overhead costs of $2.4 million, an increase in consulting expense of $2.0 million, and an increase in employee health insurance costs of $1.0 million.

The following shows gross profit and gross margin for subscriptions and professional services for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

Year Ended January 31, Change

2023 2022 $ %

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Total gross profit $ 1,640,005 $ 1,068,373 $ 571,632 54 %

Year Ended January 31, Change

Subscription gross margin 76 % 76 % — %

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Total gross margin 73 % 74 % (1) %

Subscription gross margin slightly decreased by 1%, in fiscal 2022 , compared to fiscal 2021.

The decrease in subscription gross margin was primarily due to higher intangibles amortization resulting from acquisitions, higher stock-based compensation expense, and higher cloud services costs per sensor, partially offset by continued expansion of module adoption during fiscal 2022 , compared to fiscal 2021.

As of January 31, 2022, 69% of our customer base had adopted four or more modules, 57% of our customer base had adopted five or more modules, and 34% of our customer base had adopted six or more modules.

As of January 31, 2021, 63% of our customer base had adopted four or more modules, 47% of our customer base had adopted five or more modules, and 24% of our customer base had adopted six or more modules.

Subscription gross margin was relatively flat for fiscal 2023 , compared to fiscal 2022.

Professional services gross margin decreased by 2% in fiscal 2023, compared to fiscal 2022 .

The decrease in professional services gross margin was primarily due to higher employee-related expenses and higher stock-based compensation, partially offset with an increase in the number of professional service hours performed and increase in services offerings that are not based on billable hours during fiscal 2022 compared to fiscal 2021.

The decrease in professional services gross margin was primarily due to higher employee-related expenses and higher stock-based compensation, partially offset by an increase in the number of professional service hours performed and an increase in service offerings that are not based on billable hours during fiscal 2023 compared to fiscal 2022.

Operating Expenses

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The following shows sales and marketing expenses for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

Year Ended January 31, Change

2023 2022 $ %

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Sales and marketing expenses increased by $287.9 million, or 47%, in fiscal 2023 , compared to fiscal 2022.

The increase in sales and marketing expenses was primarily due to an increase in employee-related expenses of $109.3 million driven by an increase in sales and marketing average headcount of 35%, an increase in marketing programs of $42.0 million, an increase in stock-based compensation of $39.1 million, an increase in allocated overhead costs of $8.2 million, and an increase in employee health insurance costs of $3.2 million during fiscal 2022 .

The increase in sales and marketing expenses was primarily due to an increase in employee-related expenses of $146.8 million driven by an increase in sales and marketing average headcount of 41%, an increase in stock-based compensation of $62.3 million, an increase in marketing programs of $21.8 million, an increase in allocated overhead costs of $18.6 million, an increase in travel expenses of $9.6 million, an increase in company events expenses of $6.7 million, an increase in employee health insurance costs of $6.4 million, and an increase in term-based software licenses of $2.7 million.

Research and Development

The following shows research and development expenses for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

Year Ended January 31, Change

2023 2022 $ %

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Research and development expenses increased by $237.1 million, or 64% in fiscal 2023 , compared to fiscal 2022.

This increase was primarily due to an increase in employee-related expenses of $81.2 million driven by an increase in research and development average headcount of 58%, an increase in stock-based compensation of $61.8 million, an increase in allocated overhead costs of $9.3 million, an increase in cloud hosting and related costs of $4.4 million, and an increase in employee health insurance costs of $2.6 million, partially offset by an increase of $9.6 million in software capitalization.

This increase was primarily due to an increase in employee-related expenses of $110.9 million driven by an increase in research and development average headcount of 53%, an increase in stock-based compensation of $72.7 million, an increase in allocated overhead costs of $17.0 million, an increase in cloud hosting and related costs of $13.5 million, an increase in company events expenses of $10.8 million, an increase in travel expenses of $4.9 million, an increase in employee health insurance costs of $4.8 million, and an increase in term-based software licenses of $3.2 million.

General and Administrative

The following shows general and administrative expenses for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

Year Ended January 31, Change

2023 2022 $ %

1 unchanged sentence

General and administrative expenses increased by $94.3 million, or 42%, in fiscal 2023 , compared to fiscal 2022.

The increase in general and administrative expenses was primarily due to an increase in stock-based compensation expense of $45.1 million, an increase in employee-related expenses of $18.5 million driven by an increase in general and administrative average headcount of 47%, an increase in legal expense of $14.1 million, an increase in consulting expense of $4.7 million, an increase in allocated overhead costs of $2.4 million, an increase in tax and licenses of $2.4 million, an increase in term-based software licenses of $2.3 million, an increase in corporate insurance costs of $2.0 million, and an increase in employee health insurance costs of $1.3 million during fiscal 2022 .

Interest Expense and Other Income, Net

The following shows interest and other expense, net, for fiscal 2022, as compared to fiscal 2021 (in thousands, except percentages):

Year Ended January 31, Change

The increase in general and administrative expenses was primarily due to an increase in stock-based compensation expense of $65.9 million, an increase in employee-related expenses of $21.7 million driven by an increase in general and administrative average headcount of 46%, an increase in allocated overhead costs of $4.7 million, an increase in facilities expenses of $2.5 million, an increase in term-based software licenses of $1.6 million, an increase in travel expenses of $1.6 million, and an increase in employee health insurance costs of $0.9 million , partially offset by a decrease in legal expense of $5.3 million, and a decrease in consulting expense of $4.3 million.

Interest Expense, Interest Income and Other Income, Net

The following shows interest expense, interest income, and other income, net, for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

2023 2022 $ %

Interest expense $ (25,319) $ (25,231) $ (88) — %

Interest income $ 52,495 $ 3,788 $ 48,707 1,286 %

Other income, net $ 3,053 $ 3,968 $ (915) (23) %

Interest expense consists primarily of interest expense from the amortization of debt issuance costs, contractual interest expense and accretion of debt discount for our Senior Notes issued in January 2021.

The change in other income, net, during fiscal 2022 compared to fiscal 2021, was primarily due an increase in fair value adjustments for our strategic investments, partially offset by the lower interest income earned on cash, cash equivalents and investments and fluctuations in foreign currency transaction gains and losses.

Interest expense consists primarily of amortization of debt issuance costs, contractual interest expense, and accretion of debt discount for our Senior Notes issued in January 2021.

The increase in interest income during fiscal 2023 compared to fiscal 2022 was driven by increases in market interest rates.

The decrease in other income, net during fiscal 2023 compared to fiscal 2022 was primarily due to a decrease in net positive mark-to-market adjustments of our strategic investments of $3.2 million, partially offset by a net increase of $2.3 million from foreign currency transaction gains.

Provision for Income Taxes

The following shows the provision for income taxes for fiscal 2023, as compared to fiscal 2022 (in thousands, except percentages):

Year Ended January 31, Change

2023 2022 $ %

Provision for income taxes $ 22,402 $ 72,355 $ (49,953) (69) %

The increase in the provision for income taxes of $67.6 million during fiscal 2022 compared to fiscal 2021 was primarily driven by the intercompany sale of intellectual property from Humio of $57.2 million and an increase in pre-tax foreign earnings.

The decrease in provision for income taxes during fiscal 2023 compared to fiscal 2022 was primarily due to a decrease in tax expense related to gains from the intercompany sale of intellectual property from acquisitions.

Liquidity and Capital Resources

Our primary sources of liquidity as of January 31, 2023, consisted of:

(i) $2.0 billion in cash and cash equivalents, (ii) cash we expect to generate from operations, and (iii) available capacity under our $750.0 million senior secured revolving credit facility (the “A&R Credit Agreement”).

We expect that the combination of our existing cash and cash equivalents, cash flows from operations, and the A&R Credit Agreement will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

(i) $2.5 billion in cash and cash equivalents, which mainly consists of cash on hand and highly liquid investments in time deposits and money market funds, (ii) $250.0 million in short-term investments, which consist of time deposits, (iii) cash we expect to generate from operations, and (iv) available capacity under our $750.0 million senior secured revolving credit facility (the “A&R Credit Agreement”).

We expect that the combination of our existing cash and cash equivalents, short-term investments, cash flows from operations, and the A&R Credit Agreement will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

Our short-term and long-term liquidity requirements primarily arise from:

(i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) interest and principal payments related to our outstanding indebtedness, (iv) research and development and capital expenditure needs, and (vi) license and service arrangements integral to our business operations.

(i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) interest and principal payments related to our outstanding indebtedness, (iv) research and development and capital expenditure needs, and (v) license and service arrangements integral to our business operations.

Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

Since our inception, we have generated operating losses, as reflected in our accumulated deficit of $964.9 million as of January 31, 2022.

Since our inception, we have generated operating losses, as reflected in our accumulated deficit of $1.1 billion as of January 31, 2023.

We expect to continue to incur operating losses for the foreseeable future due to the investments we intend to continue to make, particularly in sales and marketing and research and development.

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Deferred revenue primarily consists of billed fees for our subscriptions, prior to satisfying the criteria for revenue recognition, which are subsequently recognized as revenue in accordance with our revenue recognition policy.

As of January 31, 2022, we had deferred revenue of

$1.5 billion, of which $1.1 billion was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.

In January 2021, we issued and sold an aggregate principal amount of $750.0 million of 3.000% Senior Notes due 2029.

The net proceeds from the debt offering were $738.0 million after deducting the underwriting commissions of $9.4 million and $2.6 million of issuance costs.

In January 2021, we amended and restated our existing senior secured revolving credit facility (the “A&R Credit Agreement”) and increased the size of the credit facility from $150.0 million to $750.0 million, including a letter of credit sub-facility in the aggregate amount of $100.0 million, and a swingline sub-facility in the aggregate amount of $50.0 million.

In January 2022, we modified the A&R Credit Agreement (the “Amended A&R Credit Agreement”) to replace LIBOR with the Secured Overnight Finance Rate (“SOFR”) as the Eurodollar rate.

There were no changes to the borrowing amounts or maturity date.

No amounts were outstanding under the Amended A&R Credit Agreement as of January 31, 2022.

As of January 31, 2023, we had deferred revenue of $2.4 billion, of which $1.7 billion was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

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Net cash provided by operating activities during fiscal 2023 was $941.0 million, which resulted from a net loss of $182.3 million, adjusted for non-cash charges of $802.9 million and net cash inflow of $320.4 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $526.5 million in stock-based compensation expense, $170.8 million of amortization of deferred contract acquisition costs, $77.2 million of depreciation and amortization, $16.6 million of amortization for intangibles assets, $9.4 million of non-cash operating lease costs, and $2.8 million of non-cash interest expense, partially offset by a $1.8 million change in the fair value of strategic investments.

The net cash inflow from changes in operating assets and liabilities was primarily due to a $825.8 million increase in deferred revenue, a $58.9 million increase in accrued expenses and other liabilities, and a $65.2 million increase in accrued payroll and benefits, partially offset by a $298.7 million increase in deferred contract acquisition costs, a $258.1 million increase in accounts receivable, net, a $46.8 million increase in prepaid expenses and other assets, a $15.5 million decrease in accounts payable, and a $10.4 million decrease in operating lease liabilities.

Net cash provided by operating activities during fiscal 2022 was $574.8 million, which resulted from a net loss of $232.4 million, adjusted for non-cash charges of $485.4 million and net cash inflow of $321.7 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $310.0 million in stock-based compensation expense, $113.9 million of amortization of deferred contract acquisition costs, $55.9 million of depreciation and amortization, $12.9 million of amortization for intangibles assets, $9.1 million of non-cash operating lease costs and $2.5 million of non-cash interest expense, partially offset by a $14.0 million change in deferred income taxes and a $4.8 million change in the fair value of strategic investments.

The net cash inflow from changes in operating assets and liabilities was primarily due to a $616.4 million increase in deferred revenue, a $38.5 million increase in accrued expenses and other liabilities, a $33.2 million increase in accounts payable, and a $32.7 million increase in accrued payroll and benefits, partially offset by a $234.3 million increase in deferred contract acquisition costs, a $125.4 million increase in accounts receivable, net, a $29.5 million increase in prepaid expenses and other assets, and a $9.9 million decrease in operating lease liabilities.

Net cash provided by operating activities during fiscal 2021 was $356.6 million, which resulted from a net loss of $92.6 million, adjusted for non-cash charges of $262.7 million and net cash inflow of $186.5 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $149.7 million in stock-based compensation expense, $66.4 million of amortization of deferred contract acquisition costs, $38.7 million of depreciation and amortization, and $7.8 million of non-cash operating lease costs.

The net cash inflow from changes in operating assets and liabilities was primarily due to a $338.8 million increase in deferred revenue, a $33.2 million increase in accrued payroll and benefits, a $33.1 million increase in accrued expenses and other liabilities and a $11.3 million increase in accounts payable, partially offset by $151.0 million increase in deferred contract acquisition costs and a $73.0 million increase in accounts receivable, net.

Investing Activities

Net cash used in investing activities during fiscal 2023 of $556.7 million was primarily due to purchases of investments of $250.0 million, purchases of property and equipment of $235.0 million, capitalized internal-use software and website development costs of $29.1 million, purchases of strategic investments of $21.8 million, business acquisitions, net of cash acquired, of $18.3 million, which were primarily related to the Reposify acquisition, and purchases of intangible assets of $2.3 million.

Net cash used in investing activities during fiscal 2022 of $564.5 million was primarily due to the acquisitions of Humio and SecureCircle, net of cash acquired, of $414.5 million, purchases of property and equipment of $112.1 million, capitalized internal-use software and website development costs of $20.9 million, and purchase of strategic investments of $16.3 million.

Net cash provided by investing activities during fiscal 2021 of $495.4 million was primarily due to the sale of marketable securities of $639.6 million and the maturities of marketable securities of $91.6 million, partially offset by our acquisition of Preempt Security, net of cash acquired, of $85.5 million, purchases of marketable securities of $84.9 million, purchases of property and equipment of $52.8 million, and capitalized internal-use software of $10.9 million.

Financing Activities

Net cash provided by financing activities of $72.5 million during fiscal 2022 was primarily due to our proceeds from employee stock purchase plan of $50.3 million, proceeds from the exercise of stock options of $15.9 million, and $8.2 million capital contributions from non-controlling interest.

Net cash provided by financing activities of $77.4 million during fiscal 2023 was primarily due to our proceeds from the employee stock purchase plan of $59.4 million, $11.0 million of capital contributions from non-controlling interests, and proceeds from the exercise of stock options of $8.7 million, partially offset by the repayment of a loan acquired through Reposify of $1.6 million.

Net cash provided by financing activities of $800.1 million during fiscal 2021 was primarily due to $739.6 million related to the issuance of our Senior Notes, after deducting the underwriting commissions and issuance costs paid as of January 31, 2021, proceeds from our employee stock purchase plan of $34.3 million, and proceeds from the exercise of stock options of $28.8 million, partially offset by $3.3 million debt issuance costs related to the revolving credit facility.

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Summarized financial information is presented below for the Obligor Group on a combined basis after elimination of intercompany transactions and balances within the Obligor Group and equity in the earnings from and investments in any non-guarantor subsidiary.

The revenue amounts presented in the summarized financial information include substantially all of our consolidated revenue, and there are no intercompany revenue from the non-guarantor subsidiaries.

The revenue amounts presented in the summarized financial information include all of our consolidated revenue, and there is no intercompany revenue from the non-guarantor subsidiaries.

This summarized financial information has been prepared and presented pursuant to Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S.

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Net loss attributable to CrowdStrike (237,920)

Balance Sheets January 31, 2022

Balance Sheet January 31, 2023

(in thousands)

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In July 2019, we agreed to commit up to $10.0 million to a newly formed entity, CrowdStrike Falcon Fund LLC (the “Original Falcon Fund”) in exchange for 50% of the sharing percentage of any distribution by the Original Falcon Fund.

In December 2021, we agreed to commit an additional $50.0 million to a newly formed entity, CrowdStrike Falcon Fund II LLC (“Falcon Fund II”) in exchange for 50% of the sharing percentage of any distribution by the Falcon Fund II.

Further, entities associated with Accel also agreed to commit up to $10.0 million and $50.0 million, respectively, to the Original Falcon Fund and the Falcon Fund II (collectively, the “Falcon Funds”), and collectively own the remaining 50% of the sharing percentage of the Falcon Funds.

Further, entities associated with Accel also agreed to commit up to $10.0 million and $50.0 million, respectively, to the Original Falcon Fund and Falcon Fund II (collectively, the “Falcon Funds”), and collectively own the remaining 50% of the sharing percentage of the Falcon Funds.

Both Falcon Funds are in the business of purchasing, selling, and investing in minority equity and convertible debt securities of privately-held companies that develop applications that have potential for substantial contribution to us and our platform.

We are the manager of the Falcon Funds and control the investment decisions and day-to-day operations and accordingly have consolidated each of the Falcon Funds.

We are the manager of the Falcon Funds and control their investment decisions and day-to-day operations and accordingly have consolidated each of the Falcon Funds.

Each Falcon Fund has a duration of ten years and may be extended for three additional years.

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Our commitments consist of obligations under non-cancellable real estate arrangements on an undiscounted basis, of which $11.8 million is due in the next 12 months and $35.2 million is due thereafter.

In addition, we have debt obligations related to $750.0 million aggregate principal amount of Senior Notes due in fiscal 2030 and the interest payments associated with the Senior Notes of $22.5 million due in the next 12 months and $146.3 million due thereafter.

As of January 31, 2022, we have non-cancellable data center commitments payments of $20.8 million due in the next 12 months and $33.0 million due thereafter.

Also, as of January 31, 2022, we have non-cancelable purchase commitments with various parties to purchase products and services entered in the normal course of business payments of $62.7 million due in the next 12 months and $77.7 million due thereafter.

In addition, we have debt obligations related to $750.0 million aggregate principal amount of the Senior Notes due in fiscal 2030 and the interest payments associated with the Senior Notes of $22.5 million due in the next 12 months and $123.8 million due thereafter.

As of January 31, 2023, we have $179.9 million of non-cancellable data center commitments in excess of one year, of which $26.0 million is due in the next 12 months and $153.9 million due thereafter.

Also, as of January 31, 2023, we have $90.9 million of non-cancelable purchase commitments with various parties to purchase products and services, entered into in the normal course of business, in excess of one year, of which $52.1 million is due in the next 12 months and $38.8 million due thereafter.

We expect to fund these obligations with cash flows from operations and cash on our balance sheet.

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Obligations under contracts, including purchase orders, that we can cancel without a significant penalty are excluded.

Purchase orders issued in the ordinary course of business are not included above, as such purchase orders represent authorizations to purchase rather than binding agreements.

Other Obligations

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Pursuant to these agreements, we will indemnify, defend, and hold the other party harmless with respect to a claim, suit, or proceeding brought against the other party by a third party alleging that our intellectual property infringes upon the intellectual property of the third party, or results from a breach of our representations and warranties or covenants, or that results from any acts of negligence or willful misconduct.

The term of these indemnification agreements is generally perpetual any time after the execution of the agreement.

The term of these indemnification agreements is generally perpetual after the execution of the agreement.

Typically, these indemnification provisions do not provide for a maximum potential amount of future payments we could be required to make.

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The maximum amount of potential future indemnification is unlimited.

However, our director and officer insurance policy limits our exposure and enables us to recover a portion of any future amounts paid.

However, our director and officer liability insurance policy mitigates our exposure.

Historically, we have not been obligated to make any payments for these obligations, and no liabilities have been recorded for these obligations on our consolidated balance sheets as of January 31, 2023 or January 31, 2022.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based upon our financial statements and notes to our financial statements, which were prepared in accordance with GAAP.

The preparation of the financial statements requires our management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

See Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements and notes to our consolidated financial statements, which were prepared in accordance with U.S.

The preparation of the consolidated financial statements requires our management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

See Note 1, Description of Business and Significant Accounting Policies to our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

We base our estimates and judgments on our historical experience, knowledge of factors affecting our business and our belief as to what could occur in the future considering available information and assumptions that are believed to be reasonable under the circumstances.

The accounting estimates we use in the preparation of our financial statements will change as new events occur, more experience is acquired, additional information is obtained and our operating environment changes.

The accounting estimates we use in the preparation of our consolidated financial statements will change as new events occur, more experience is acquired, additional information is obtained, and our operating environment changes.

Changes in estimates are made when circumstances warrant.

Such changes in estimates and refinements in estimation methodologies are reflected in our reported results of operations and, if material, the effects of changes in estimates are disclosed in the notes to our financial statements.

By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.

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Revenue Recognition

We derive our revenue predominately from subscription revenue which is primarily based on the solutions subscribed for by the customer.

We derive our revenue predominately from subscription revenue, which is primarily based on the solutions subscribed to by the customer.

We recognize subscription revenue ratably over the contract term.

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Recently Issued Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, included in Part II, Item 8 of this Annual Report on Form 10-K for more information about the impact of certain recent accounting pronouncements on our consolidated financial statements.

See Note 1, Description of Business and Significant Accounting Policies, included in Part II, Item 8 of this Annual Report on Form 10-K for more information about the impact of certain recent accounting pronouncements on our consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis