What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-07 compared with 2023-03-09 · 130 added, 154 removed, 257 unchanged (52% of the section changed)

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When we started CrowdStrike, cyberattackers had an asymmetric advantage over legacy cybersecurity products that could not keep pace with the rapid changes in adversary tactics.

We took a fundamentally different approach to solve this problem with the CrowdStrike Falcon platform – the first, true cloud-native platform capable of harnessing vast amounts of security and enterprise data to deliver highly modular solutions through a single lightweight agent.

Our pioneering platform approach keeps customers ahead of attackers by automatically detecting and preventing threats to stop breaches.

We took a fundamentally different approach to solve this problem with the AI-native CrowdStrike Falcon XDR platform – the first, true cloud-native platform built with AI at the core, capable of harnessing vast amounts of security and enterprise data to deliver highly modular solutions through a single lightweight agent.

We believe our approach has defined a new category called the Security Cloud, which has the power to transform the cybersecurity industry the same way the cloud has transformed the customer relationship management, human resources, and service management industries.

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We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.

Subscription Customers

We define a subscription customer as a separate legal entity that has entered into a distinct subscription agreement for access to Falcon platform for which the term has not ended or with which we are negotiating a renewal contract.

We do not consider our channel partners as customers, and we treat managed service security providers, who may purchase our products on behalf of multiple companies, as a single customer.

While initially we focused our sales and marketing efforts on large enterprises, in recent years we have also increased our sales and marketing to small and medium sized businesses.

The following table sets forth the number of our subscription customers as of the dates presented:

As of January 31,

Subscription customers 23,019 16,325

Year-over-year growth 41 % 65 %

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 ” )

ARR is calculated as the annualized value of our customer subscription contracts as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms.

To the extent that we are negotiating a renewal with a customer after the expiration of the subscription, we continue to include that revenue in ARR if we are actively in discussion with such an organization for a new subscription or renewal, or until such organization notifies us that it is not renewing its subscription.

To the extent that we are negotiating a renewal with a customer after the expiration of the subscription, we continue to include that revenue in ARR if we are actively in discussion with such organization for a new subscription or renewal, or until such organization notifies us that it is not renewing its subscription.

The following table sets forth our ARR as of the dates presented (dollars in thousands):

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ARR increased 34% year-over-year and grew to $3.4 billion as of January 31, 2024, of which $875.5 million was net new ARR added during fiscal 2024.

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 acquisitions 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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We then divide the Current Period ARR by the Prior Period ARR to arrive at our dollar-based net retention rate.

Our dollar-based net retention rate was above 120% throughout fiscal years 2023 and 2022.

Our dollar-based net retention rate can fluctuate from period to period due to large customer contracts in a given period, which may reduce our dollar-based net retention rate in subsequent periods if the customer makes a larger upfront purchase and does not continue to increase purchases.

For the purposes of calculating our dollar-based net retention rate, we define a subscription customer as a separate legal entity that has entered into a distinct subscription agreement for access to our Falcon platform for which the term has not ended or with which we are negotiating a renewal contract.

We do not consider our channel partners as customers, and we treat managed service security providers, who may purchase our products on behalf of multiple companies, as a single customer.

As of January 31,

Dollar-based net retention rate 119 % 125 %

Our dollar-based net retention rate has varied from quarter to quarter due to a number of factors, and we expect that trend to continue.

In addition, we have seen strong success with our strategy to land bigger deals with more modules, and we are also seeing an acceleration in our acquisition of new customers.

While we view these two trends as positive developments, they have a natural trade off on our ability to expand business with existing customers in the near term.

Components of Our Results of Operations

Subscription Revenue.

Subscription revenue primarily consists of subscription fees for our Falcon platform and additional cloud modules that are supported by our cloud-based platform.

Subscription revenue is driven primarily by the number of subscription customers, the number of endpoints per customer, and the number of cloud modules included in the subscription.

We recognize subscription revenue ratably over the term of the agreement, which is generally one to three years.

Because the majority of our subscription customers are billed upfront, we have recorded significant deferred revenue.

Consequently, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to subscriptions that we entered into during previous periods.

The majority of our customers are invoiced annually in advance or multi-year in advance.

Professional Services Revenue.

Professional services revenue includes incident response and proactive services, forensic and malware analysis, and attribution analysis.

Professional services are generally sold separately from subscriptions to our Falcon platform, although customers frequently enter into a separate arrangement to purchase subscriptions to our Falcon platform at the conclusion of a professional services arrangement.

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.

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

Cost of Revenue

Subscription Cost of Revenue.

Subscription cost of revenue consists primarily of costs related to hosting our cloud-based Falcon platform in data centers, amortization of our capitalized internal-use software, employee-related costs such as salaries and bonuses, stock-based compensation expense, benefits costs associated with our operations and support personnel, software license fees, property and equipment depreciation, amortization of acquired intangibles, and an allocated portion of facilities and administrative costs.

As new customers subscribe to our platform and existing subscription customers increase the number of endpoints on our Falcon platform, our cost of revenue will increase due to greater cloud hosting costs related to powering new cloud modules and the incremental costs for storing additional data collected for such cloud modules and employee-related costs.

We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business.

The level and timing of investment in these areas could affect our cost of revenue in the future.

Professional Services Cost of Revenue.

Professional services cost of revenue consists primarily of employee-related costs, such as salaries and bonuses, stock-based compensation expense, technology, property and equipment depreciation, and an allocated portion of facilities and administrative costs.

Gross Profit and Gross Margin

Gross profit and gross margin have been and will continue to be affected by various factors, including the timing of our acquisition of new subscription customers, renewals from existing subscription customers, sales of additional modules to existing subscription customers, the data center and bandwidth costs associated with operating our cloud platform, the extent to which we expand our customer support and cloud operations organizations, and the extent to which we can increase the efficiency of our technology, infrastructure, and data centers through technological improvements.

We expect our gross profit to increase in dollar amount and our gross margin to increase modestly over the long term, although our gross margin could fluctuate from period to period depending on the interplay of these factors.

Demand for our incident response services is driven by the number of breaches experienced by non-customers.

Also, we view our professional services solutions in the context of our larger business and as a significant lead generator for new subscriptions.

Because of these factors, our services revenue and gross margin may fluctuate over time.

Operating Expenses

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.

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

Sales and Marketing.

Sales and marketing expenses primarily consist of employee-related expenses such as salaries, commissions, and bonuses.

Sales and marketing expenses also include stock-based compensation;

expenses related to our Fal.Con customer conference and other marketing events;

an allocated portion of facilities and administrative expenses;

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

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.

However, we anticipate sales and marketing expenses to decrease as a percentage of our total revenue over time, although our sales and marketing expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

Research and Development.

Research and development expenses primarily consist of employee-related expenses such as salaries and bonuses;

stock-based compensation;

consulting expenses related to the design, development, testing, and enhancements of our subscription services;

and an allocated portion of facilities and administrative expenses.

Our cloud platform is software-driven, and our research and development teams employ software engineers in the design, and the related development, testing, certification, and support of these solutions.

We expect research and development expenses to increase in dollar amount as we continue to increase investments in our technology architecture and software platform.

However, we anticipate research and development expenses to decrease as a percentage of our total revenue over time, although our research and development expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

General and Administrative.

General and administrative expenses consist of employee-related expenses such as salaries and bonuses;

stock-based compensation;

and related expenses for our executive, finance, human resources, and legal organizations.

In addition, general and administrative expenses include outside legal, accounting, and other professional fees;

and an allocated portion of facilities and administrative expenses.

We expect general and administrative expenses to increase in dollar amount over time.

However, we anticipate general and administrative expenses to decrease as a percentage of our total revenue over time although our general and administrative expenses may fluctuate as a percentage of our total revenue from period-to-period depending on the timing of these expenses.

Interest Expense.

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 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, 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 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 losses and interest income from our strategic investments.

Results of Operations

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Other income, net 1,638 3,053 3,968

Loss before provision for income taxes (159,883) (160,023) (87,869)

Income (loss) before provision for income taxes 122,817 (159,883) (160,023)

Provision for income taxes 32,232 22,402 72,355

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

Net income (loss) 90,585 (182,285) (232,378)

Net income attributable to non-controlling interest 1,258 960 2,424

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

Net income (loss) attributable to CrowdStrike $ 89,327 $ (183,245) $ (234,802)

The following table presents the components of our consolidated statements of operations as a percentage of total revenue for the periods presented:

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Other income, net — % — % — %

Loss before provision for income taxes (7) % (11) % (10) %

Income (loss) before provision for income taxes 4 % (7) % (11) %

Provision for income taxes 1 % 1 % 5 %

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

Net income (loss) 3 % (8) % (16) %

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

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

Net income (loss) attributable to CrowdStrike 3 % (8) % (16) %

Comparison of Fiscal 2024 and Fiscal 2023

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Total revenue increased by $814.3 million, or 36%, in fiscal 2024, compared to fiscal 2023.

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.

Subscription revenue accounted for 94% of our total revenue in both fiscal 2024 and fiscal 2023.

Professional services revenue accounted for 6% of our total revenue in both fiscal 2024 and fiscal 2023.

Subscription revenue increased by $758.9 million, or 36% in fiscal 2024, compared to fiscal 2023, which was primarily driven by a combination of the addition of new customers and the sale of additional sensors and modules to existing customers.

Professional services revenue increased by $55.4 million, or 43%, in fiscal 2024 , compared to fiscal 2023, which was primarily attributable to an increase in the number of professional service hours performed.

Cost of Revenue, Gross Profit, and Gross Margin

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Subscription cost of revenue increased by $119.1 million, or 23%, in fiscal 2024 , compared to fiscal 2023.

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.

The increase in subscription cost of revenue was primarily due to an increase in employee-related expenses of $52.1 million driven by a 34% increase in average headcount, an increase in depreciation of data center equipment of $20.3 million, an increase in amortization of internal-use software of $15.8 million, an increase in allocated overhead costs of $12.6 million, an increase in stock-based compensation expense of $11.8 million, an increase in term-based software licenses of $5.2 million, and an increase in employee health benefits of $2.8 million.

Professional services cost of revenue increased by $35.4 million, or 40%, in fiscal 2024 , compared to fiscal 2023.

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 increase in professional services cost of revenue was primarily due to an increase in employee-related expenses of $17.2 million driven by an increase in average headcount of 27%, an increase in consulting expense of $8.8 million, an increase in stock-based compensation expense of $6.6 million, and an increase in allocated overhead costs of $3.1 million.

The following shows gross profit and gross margin for subscriptions and professional services for fiscal 2024, as compared to fiscal 2023 (in thousands, except percentages):

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Total gross margin 75 % 73 % 2 %

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 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.

Subscription gross margin increased by 2% in fiscal 2024 , compared to fiscal 2023.

The increase in subscription gross margin was primarily due to an increase in cloud hosting efficiency during fiscal 2024 compared to fiscal 2023.

Professional services gross margin increased by 1% in fiscal 2024, compared to fiscal 2023 .

The increase in professional services gross margin was primarily due to increased utilization during fiscal 2024 compared to fiscal 2023.

Operating Expenses

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Sales and marketing expenses increased by $236.2 million, or 26%, in fiscal 2024 , compared to fiscal 2023.

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.

The increase in sales and marketing expenses was primarily due to an increase in employee-related expenses of $119.9 million driven by an increase in sales and marketing average headcount of 20%, an increase in marketing programs of $45.3 million, an increase in stock-based compensation of $23.9 million, an increase in allocated overhead costs of $16.3 million, an increase in travel expenses of $6.7 million, an increase in company events expenses of $6.0 million, an increase in employee health benefits of $5.4 million, an increase in term-based software licenses of $2.6 million, an increase in taxes and licenses of $2.0 million, and an increase in marketing consulting expenses of $1.1 million.

Research and Development

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Research and development expenses increased by $160.1 million, or 26% in fiscal 2024 , compared to fiscal 2023.

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.

This increase was primarily due to an increase in employee-related expenses of $101.8 million driven by an increase in research and development average headcount of 24%, an increase in stock-based compensation of $31.2 million, an increase in cloud hosting and related costs of $26.0 million, an increase in allocated overhead costs of $19.0 million, an increase in depreciation of data center equipment of $8.1 million, an increase in employee health benefits of $4.6 million, an increase in consulting expense of $2.2 million, and an increase in term-based software licenses of $1.5 million, partially offset by an increase in software capitalization of $18.5 million, a decrease in company events expenses of $11.0 million, and a decrease in travel expenses of $3.2 million.

General and Administrative

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General and administrative expenses increased by $75.4 million, or 24%, in fiscal 2024, compared to fiscal 2023.

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.

The increase in general and administrative expenses was primarily due to an increase in stock-based compensation expense of $31.5 million, an increase in legal expense of $15.1 million, an increase in employee-related expenses of $15.0 million driven by an increase in general and administrative average headcount of 23%, an increase in allocated overhead costs of $3.7 million, an increase in labor and other expenses of $3.6 million, an increase in travel expenses of $2.3 million, an increase in taxes and licenses of $1.9 million, and an increase in consulting expense of $1.6 million.

Interest Expense, Interest Income and Other Income, Net

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Other income, net $ 1,638 $ 3,053 $ (1,415) (46) %

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.

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

The increase in interest income during fiscal 2024 compared to fiscal 2023 was driven by increases in market interest rates and an increase in our cash and cash equivalents.

The decrease in other income, net during fiscal 2024 compared to fiscal 2023 was primarily due to a decrease in mark to market adjustments of $3.3 million on our strategic investments and an increase in net foreign currency transaction losses of $2.3 million, partially offset by an increase in gains on sales of our strategic investments of $3.9 million.

Provision for Income Taxes

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Provision for income taxes $ 32,232 $ 22,402 $ 9,830 44 %

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.

The increase in provision for income taxes during fiscal 2024 compared to fiscal 2023 was primarily attributable to an increase in withholding taxes related to customer payments in certain foreign jurisdictions in which the Company conducts business.

Components of Our Results of Operations

Subscription Revenue.

Subscription revenue primarily consists of subscription fees for our Falcon platform and additional cloud modules that are supported by our cloud-based platform.

Subscription revenue is driven primarily by the number of subscription customers, the number of endpoints per customer, and the number of cloud modules included in the subscription.

We recognize subscription revenue ratably over the term of the agreement, which is generally one to three years.

Because the majority of our subscription customers are billed upfront, we have recorded significant deferred revenue.

The majority of our customers are invoiced annually in advance or multi-year in advance.

Professional Services Revenue.

Professional services revenue includes incident response and proactive services, forensic and malware analysis, and attribution analysis.

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.

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

Cost of Revenue

Subscription Cost of Revenue.

We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business.

The level and timing of investment in these areas could affect our cost of revenue in the future.

Professional Services Cost of Revenue.

Gross Profit and Gross Margin

Demand for our incident response services is driven by the number of breaches experienced by non-customers.

Also, we view our professional services solutions in the context of our larger business and as a significant lead generator for new subscriptions.

Because of these factors, our services revenue and gross margin may fluctuate over time.

Operating Expenses

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.

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

Sales and Marketing.

Sales and marketing expenses primarily consist of employee-related expenses such as salaries, commissions, and bonuses.

Sales and marketing expenses also include stock-based compensation;

expenses related to our Fal.Con customer conference and other marketing events;

an allocated portion of facilities and administrative expenses;

amortization of acquired intangibles;

and cloud hosting and related services costs related to proof of value efforts.

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

Research and Development.

Research and development expenses primarily consist of employee-related expenses such as salaries and bonuses;

stock-based compensation;

cloud hosting and related costs;

and an allocated portion of facilities and administrative expenses.

We expect research and development expenses to increase in dollar amount as we continue to increase investments in our technology architecture and software platform.

However, we anticipate research and development expenses to decrease as a percentage of our total revenue over time, although our research and development expenses may fluctuate as a percentage of our total revenue from period to period depending on the timing of these expenses.

General and Administrative.

General and administrative expenses consist of employee-related expenses such as salaries and bonuses;

stock-based compensation;

and related expenses for our executive, finance, human resources, and legal organizations.

In addition, general and administrative expenses include outside legal, accounting, and other professional fees;

and an allocated portion of facilities and administrative expenses.

We expect general and administrative expenses to increase in dollar amount over time.

However, we anticipate general and administrative expenses to decrease as a percentage of our total revenue over time, although our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period depending on the timing of these expenses.

Interest Expense.

Interest Income.

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

Other Income, Net.

Other income, net consists primarily of gain and losses on strategic investments, foreign currency transaction gains and losses, and gains and losses on cash and cash equivalents and short-term investments.

Provision for Income Taxes.

Provision for income taxes consists of state income taxes in the United States, foreign income taxes, 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 certain foreign deferred tax assets, including net operating loss carryforwards and tax credits, which we have determined are not realizable on a more-likely-than-not basis.

We regularly evaluate the need for a valuation allowance.

Due to recent profitability, a material reversal of our valuation allowance in U.S.

jurisdictions in the foreseeable future is reasonably possible.

Net Income Attributable to Non-controlling Interest .

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

Liquidity and Capital Resources

Our primary sources of liquidity as of January 31, 2024, consisted of:

(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”).

(i) $3.4 billion in cash and cash equivalents, which mainly consists of cash on hand and highly liquid investments in money market funds and U.S.

Treasury bills, (ii) $99.6 million in short-term investments, which consists of U.S.

Treasury bills, (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.

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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 $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.

We have historically generated operating losses prior to fiscal 2024, as reflected in our accumulated deficit of $1.1 billion as of January 31, 2024.

We expect to continue to make investments, particularly in sales and marketing and research and development.

As a result, we may require additional capital resources in the future to execute strategic initiatives to grow our business.

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Net cash provided by operating activities $ 1,166,207 $ 941,007 $ 574,784

Net cash (used in) provided by investing activities $ (556,658) $ (564,516) $ 495,427

Net cash used in investing activities (340,650) (556,658) (564,516)

Net cash provided by financing activities 93,158 77,437 72,531

Net change in cash, cash equivalents and restricted cash 920,673 460,291 78,025

Operating Activities

Net cash provided by operating activities during fiscal 2024 was $1.2 billion, which resulted from net income of $90.6 million, adjusted for non-cash charges of $1.0 billion and net cash inflow of $51.5 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $631.5 million in stock-based compensation expense, $238.9 million of amortization of deferred contract acquisition costs, $126.8 million of depreciation and amortization, $18.4 million of amortization of intangibles assets, $13.4 million of non-cash operating lease costs, and $3.2 million of non-cash interest expense, partially offset by $3.9 million of realized gains on strategic investments and a $3.4 million change in deferred income taxes.

The net cash inflow from changes in operating assets and liabilities was primarily due to a $696.6 million increase in deferred revenue, a $65.1 million increase in accrued payroll and benefits, a $14.6 million increase in accrued expenses and other liabilities, partially offset by a $371.6 million increase in deferred contract acquisition costs, a $217.7 million increase in accounts receivable, net, a $102.5 million increase in prepaid expenses and other assets, a $18.9 million decrease in accounts payable, and a $14.0 million decrease in operating lease liabilities.

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.

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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.

Investing Activities

Net cash used in investing activities during fiscal 2024 of $340.7 million was primarily due to business acquisitions, net of cash acquired, of $239.0 million, which was related to the Bionic acquisition, purchases of short-term investments of $195.6 million, purchases of property and equipment of $176.5 million, capitalized internal-use software and website development costs of $49.5 million, purchases of strategic investments of $17.2 million, purchases of intangible assets of $11.1 million, and purchases of deferred compensation investments of $2.0 million, partially offset by proceeds from maturities and sales of short-term investments of $348.3 million, and proceeds from sales of strategic investments of $2.0 million.

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.

Financing Activities

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.

Net cash provided by financing activities of $93.2 million during fiscal 2024 was primarily due to proceeds from our employee stock purchase plan of $76.4 million, proceeds from the exercise of stock options of $8.7 million, and capital contributions from non-controlling interests of $8.1 million.

Net cash provided by financing activities of $77.4 million during fiscal 2023 was primarily due to proceeds from our 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.

Supplemental Guarantor Financial Information

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We conduct our operations almost entirely through our subsidiaries.

Accordingly, the Obligor Group’s cash flow and ability to service the notes will depend on the earnings of our subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans, or otherwise.

Accordingly, the Obligor Group’s cash flows and ability to service the notes will depend on the earnings of our subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans, or otherwise.

Holders of the guaranteed registered debt securities will have a direct claim only against the Obligor Group.

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Loss from operations (60,789)

Net loss (237,920)

Net loss attributable to CrowdStrike (237,920)

Net income 35,530

Net income attributable to CrowdStrike 35,530

Balance Sheet January 31, 2024

(in thousands)

Current assets (excluding intercompany receivables from non-Guarantors) $ 3,541,670

Intercompany receivables from non-Guarantors 5,817

Noncurrent assets 1,443,684

Current assets (excluding current intercompany receivables from non-Guarantors) $ 4,563,521

Current intercompany receivables from non-Guarantors 24,716

Noncurrent assets (excluding noncurrent intercompany receivables from non-Guarantors) 1,605,308

Noncurrent intercompany receivables from non-Guarantors 280,426

Current liabilities 2,605,892

Noncurrent liabilities (excluding intercompany payable to non-Guarantors) 1,417,627

Intercompany payable to non-Guarantors 289,242

Noncurrent liabilities (excluding noncurrent intercompany payables to non-Guarantors) 1,586,566

Noncurrent intercompany payables to non-Guarantors —

Strategic Investments

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Contractual Obligations and Commitments

Contractual Obligations

Our commitments consist of obligations under non-cancellable real estate arrangements on an undiscounted basis, of which $15.3 million is due in the next 12 months and $41.0 million is 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 $101.3 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 have non-cancellable purchase commitments with various parties to purchase products and services entered in the normal course of business totaling $747.6 million as of January 31, 2024, with remaining terms in excess of 12 months.

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

The contractual commitment amounts above are associated with agreements that are enforceable and legally binding.

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

Other Obligations

In October 2021, we entered into a new private pricing addendum with Amazon Web Services (“AWS”), which provides us with cloud computing infrastructure.

Under the new pricing addendum, we committed to purchase a minimum of $600.0 million of cloud services from AWS through September 2026.

As of January 31, 2023, we have utilized $297.6 million of this commitment.

We expect to meet our remaining commitment with AWS.

Subsequent to January 31, 2024, we have committed to an additional $1.8 billion of non-cancellable purchase obligations from fiscal 2025 to fiscal 2031.

On March 3, 2024, we entered into a definitive agreement to acquire Flow Security Ltd., a privately held company.

The purchase price for the transaction will be approximately $115.0 million, subject to customary closing adjustments.

The acquisition is expected to close in the first quarter of fiscal 2025.

As of January 31, 2024, our unrecognized tax benefits included $12.7 million, which were classified as long-term liabilities due to the inherent uncertainty with respect to the timing of future cash outflows associated with our unrecognized tax benefits.

Indemnification

Our subscription agreements contain standard indemnification obligations.

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 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.

However, in the past we have not been obligated to make significant 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.

We also agreed to indemnify our directors and certain executive officers for certain events or occurrences, subject to certain limits, while the officer is or was serving at our request in such capacity.

The maximum amount of potential future indemnification is unlimited.

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

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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