CrowdStrike CEO sees 154% increase in cyber attacks YOY

CrowdStrike CEO George Kurtz joins Yahoo Finance's Zack Guzman to discuss the company's latest quarterly earnings results, which were better-than-expected.

Video Transcript

ZACK GUZMAN: Zeroing in on CrowdStrike today, we're seeing more weakness there. Their two-day losses stacking up to about more than 10% in this wider sell-off, even though they reported earnings earlier in the week that beat expectations. On that front, though, I mean, when you back up and look at it, it's been quite the year, 150% rally in 2020.

And in the latest quarter, they reported some pretty impressive numbers when we look into both the top and bottom-line beats, even beating the company's own expectations there, as well as record improvements in annual recurring revenue rising 87% to $791 million for the quarter. So really, it begs the larger question, is the pain that we've seen over the last few days in CrowdStrike undue?

Well, here to discuss that with us is the CEO of CrowdStrike. George Kurtz joins us once again. And George, I'm sure you would say that it is not justified, this sell-off here. But when you look at what you guys reported over the last quarter, some pretty big numbers there. And it seems like the trend that we discussed, more businesses shifting to working from home, dealing with everything online and more attacks through the internet seem to be stuck here in 2020. So what did you make of the quarter, and what did you see on the demand front?

GEORGE KURTZ: Well, I thought it was a fantastic quarter, just great execution by the entire CrowdStrike team, and I think the results speak for themselves, when you look at, you know, revenue being up 84%, annual recurring revenue being up, as you said, 87%. I mean, it was just outstanding. So you know, overall, when we look at the quarter in a challenging time like COVID, we couldn't be happier. And you know, the markets are going to fluctuate. They're going to go up. They're going to go down. But I think the only thing that we can control is our execution and how well we've done, and I think, you know, again, the numbers reflect that.

ZACK GUZMAN: Yeah, I mean, we've had you on for the last-- I think it's been three quarters we've had you on now on the show here. It's obviously been a hot sector, so that's why we've been showing so much focus on the cybersecurity sector. But when we've had you on, it's always been the question of how can you keep this up.

Each time you've said you're still seeing more and more demand out there. And you guys, this last quarter, upped your full-year guidance. So I mean, on that front, you added new customers. You continue to add new customers. But now I think more important on that is upselling the existing customers. So what are you seeing on both of those fronts and how well you guys are doing in terms of upselling existing customers?

GEORGE KURTZ: Well, we see strong trends in both areas. And I think when you look at the model that we've built, obviously, we're able to land new customers, right? We talked about landing 969 new customers, which was up 33% year over year. So it's fantastic growth on new customers. But then we also look at module adoption and module growth, and we continue to add customers with four and five more modules.

So part of the selling motion that we focus on at CrowdStrike is really being able to cross-sell to our existing customer base and basically increase our net retention. Once again, we reported net retention above 120%, which, again, is a good indication that we're able to cross-sell into that customer base. And we continue to add more value to each individual customer that we have.

ZACK GUZMAN: How much of that do you think is actually being led by the idea that more attacks are out there? Because that's something we discussed at the beginning of this all, too. And on the earnings call, you said that more breaches were attempted in the first half of this year than all of last year. So what are you seeing on maybe that trend, not just continuing but accelerating the more we see people stay working from home?

GEORGE KURTZ: Well, the threat environment continues to deteriorate-- not in a good way, obviously, for the defenders. So if you look at either nation-state attackers, e-crime, hacktivism, it's all up. We saw a 154% increase in attacks year over year, which, obviously, is substantial. And when folks are working from home, they don't have that comfort and safety of the corporate network. The firewall is not there.

Some of the other tools that people are using to try to protect those endpoints are not there. So you move them outside the firewall. They're sitting behind your cable modem, your router, and they're certainly subject to attack, which is, again, one of the reasons why we've seen companies move to CrowdStrike because of our cloud-based model and our ability to protect those endpoints and workloads, whether they're at home on your laptop or whether they're in a cloud environment. And that's what, you know, customers are ultimately looking for.

ZACK GUZMAN: Yeah, and as you mentioned, there's other options out there in the security space. Obviously, you guys aren't the only player there. And interestingly, you announced I guess teaming up with some of those other players out there-- Netskope, Okta, and Proofpoint-- coordinating to help clients out there implement some of these solutions. What does that mean, in terms of wanting to combine efforts here to bring, I guess, more solutions to your guys' clients, and what do you have planned on that front?

GEORGE KURTZ: Sure. Well, one of the things that we really pioneered at CrowdStrike is the security cloud. And again, our focus has been around endpoints and workloads. But there's other security technologies that are in use and needed. And what we have found from customer feedback is that what they want is best-of-breed platforms.

Over the years, people have talked about best-of-breed products or suites, but really, it's about best-of-breed platforms that can be assembled together to make the most effective security solution for a customer. Customers are tired of building their own technologies, right? It's just too costly and expensive, and they want a platform-- platforms that work together, that share data together, that get smarter working together. And that's really what we're focused on with some of these alliances.

ZACK GUZMAN: The other interesting thing here too, just to wrap up, is the growing cash and cash equivalents you guys have on hand, more than $1 billion now, as of the end of July. Curious to see what you might have planned there. If you're trying to continue this growth that you have, where are you looking to invest, and what potential acquisitions would make sense here, if now is the hot time for a company like yours?

GEORGE KURTZ: Well, we're delighted that we have a large cash position, over $1 billion, as you mentioned, on the balance sheet-- you know, little to no debt. And you know, from our perspective, we continue to look in the environment. And there are a lot of companies that-- our feature is not necessarily companies. And we've done some acquisitions before we went public. We continue to always look in the environment. We think it's a good time. And you know, we'll continue to evaluate that.

We like good teams. We like good technologies and things that can integrate into the back end of our Falcon platform. So we're always evaluating those markets, and, you know, we'll continue to see what happens in the future.