CrowdStrike at Morgan Stanley Conference: Cybersecurity and Strategic Growth

On Thursday, 06 March 2025, at the Morgan Stanley Technology, Media & Telecom Conference, CrowdStrike Holdings (NASDAQ: CRWD) discussed its strategic outlook amid both successes and challenges. CEO George Kurtz highlighted the company’s robust financial performance and strategic initiatives, while also addressing recent operational headwinds.

Key Takeaways

• CrowdStrike reported a $32 million beat in consensus ARR and $1 billion in free cash flow for the year.
• The company is focusing on expanding Falcon Flex, a flexible licensing model, with $2.5 billion in total contract value converted.
• Generative AI and CrowdStrike’s Charlotte AI are enhancing cybersecurity measures and analyst productivity.

Financial Results

• Q4 exceeded consensus by $32 million in ARR.
• Achieved $1 billion in free cash flow for the year.
• Public cloud ARR surpassed $600 million, growing 45%.
• LogScale achieved $330 million in ARR, with 115% growth.
• Customer Commitment Packages (CCP) totaled $86 million.

Operational Updates

• Falcon Flex adoption is increasing, with a focus on expanding customer conversion.
• Launch of FalconGo targets smaller businesses and MSSPs.
• Charlotte AI is improving security analysts’ productivity by saving 40 hours weekly with 98% accuracy.
• The July 2024 incident was managed effectively, bolstering customer trust.

Future Outlook

• CrowdStrike aims to accelerate net new ARR in Q3 and Q4.
• Continued investment in sales and go-to-market strategies.
• Innovation in AI and automation remains a priority to enhance security measures.
• Free cash flow is projected to return to 27% by year-end, targeting 30% next year.

Q&A Highlights

• Discussion on the impact of CCP and Falcon Flex on financials and growth.
• Insights into the evolving sales process for Falcon Flex.
• The role of generative AI in the cybersecurity threat landscape and CrowdStrike’s response.

CrowdStrike’s comprehensive approach to cybersecurity and strategic growth initiatives was a focal point of the conference. For more details, readers are invited to refer to the full transcript.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

Keith Weiss, Equity Research Analyst, Morgan Stanley: Excellent. Thank you everyone for joining us. My name is Keith Weiss.

I run The U. S. Software Equity Research franchise here at Morgan Stanley and very pleased to have with us from CrowdStrike’s CEO, George Kurtz. George, thanks so much for joining us.

George Kurtz, CEO, CrowdStrike: Great to be here.

Keith Weiss, Equity Research Analyst, Morgan Stanley: And so before we get started, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. Excellent. So with that out of the way, you reported earnings earlier this week. And I just want to start with maybe a State of the Union. How you’re feeling about sort of the overall demand environment as we head into FY 2026, how you’re feeling about sort of state of security and then CrowdStrike’s positioning to sort of capitalize against it?

George Kurtz, CEO, CrowdStrike: Sure. So again, great to be here and thanks for everybody’s early morning visit. So when we could just go back and recap Q4 in terms of top line, beat consensus by 32,000,000 ARR. We had a year of $1,000,000,000 in free cash flow. You look at the growth of some of our products, which we’re going to go through, outstanding some of the emerging technologies.

And overall, coming out of the incident in July, ’6 months later to be where we are and see the success and the engagement with customers, I think it’s fantastic. It far exceeds my expectations. So the demand environment is still very, very active right now. When we think about the geopolitical tensions, security needs only go up and there’s a lot of uncertainty in the market today. And I know there’s topics that we’ll cover.

So from a demand environment, we see it there. We look at products like next gen SIM and cloud, identity have been doing extremely well. And security is not going away. And I guess from the macro piece and as we dive into the details, what’s important to capture here is that security always parallels the slope of the innovation curve. So if we think about the early 90s, it was super simple.

If we think about where we are today, Sam just got done and think about all the complexity there and AI and what AI is going to mean in terms of security. You’re going to need players to be able to secure every layer of that. And Krauszweig is going to be one of those foundational platform players that’s going to be in the mix. There’s not just one, but obviously there’s room for a few big guys out there.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Got it. Got it. I want to touch on the VisualI outage, mainly because I think it was a great example of how to well react to an incident. You guys were very transparent. You were very proactive with the end customers.

And what we’ve heard from your customers, what we’ve heard from your partners was it actually engendered more confidence in the relationship with CrowdStrike, the partnership with CrowdStrike. Everyone’s going to have incidents, but it’s how you react to them. What was the learnings from the CrowdStrike side of the equation?

George Kurtz, CEO, CrowdStrike: Well, I mean, lots of learnings. I think if you take it from the top, it just goes to what I’ve said for a long, long period of time in my career, which is, I can never promise perfection. I aspire to it, but I always can promise a response. And I think the response that we had was fantastic. We just did what we would normally do.

This is we didn’t do anything special other than what we would normally do as crowd strikers, which was be open, communicate what happened very quickly. I was on two new shows pretty early on. And taking responsibility, communicating what it was. And then ultimately, making everything that we found very public. What I know is what everyone knows, it’s all on the website, right?

And taking that approach, I think, has been it’s the right thing to do. And two, it really has built even more trust with our customers. Our customers love us. They loved us before. They still love us after.

But in fair weather, everything looks good, right? The real true test of a partnership is when you have rocky weather. And we’ve had customer after customer, even CEOs after CEOs come to us and say, you guys did a fantastic job. We work with a lot of other vendors. We’ve had other issues with vendors.

No one in the industry has handled an issue like this like you guys. And that’s why we have 97% gross retention rates.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Okay. One of the ways that you sort of fostered that partnership with your customers was customer commitment packages. Can you walk us through some of the impact, the near term impact on the top line that CCP has? And then the opportunity to drive better growth longer term as the CCP impact start to roll off.

George Kurtz, CEO, CrowdStrike: Sure. So maybe we should talk about CCP, what it is. Essentially, we use and I want to make a distinction because I don’t want people to get confused. I know we’re going to talk about Falcon Flex. But Falcon Flex is the licensing mechanism, which is a commitment and then a burn down type model, right?

It’s very similar to hyperscaler. So what we did is we loaded Falcon Flex dollars into a pool and basically said to a customer like we know we had an impact, we want to make it right, and we talked about some new products. And for the most part, what we had to do was to put dollars in for products. And those customer commitment packages, we originally thought would be kind of $60,000,000 over two quarters. It turned out to be $86,000,000 But we view that as a good thing because the by and large of bulk of that is seeding the customer base with new products like identity, like cloud, like next gen SIM.

And that is what gives us confidence as we roll through the back half of this year because those dollars were designed to really burn off within that one year period and it gets somebody using our technology. So we wanted to do the right thing by customers. We got them comfortable. And the big element is we were down a path with FalconFlex to convert the customer base into a Falcon Flex licensing, which takes time and education by the sales force because it’s a more consultative sale. And we really just accelerated the adoption of Falcon Flex because if you wanted to take a product and FalconFlex dollars to use, you have to be converted into a FalconFlex license mechanism.

So it’s kind of a two really good things came out of it, the conversion of the license into FalconFlex from a traditional one and the fact that we’ve now seeded those technologies, which will essentially burn off in the back half of this year. Got it.

Keith Weiss, Equity Research Analyst, Morgan Stanley: So all in the pursuit of making it easier for your customers to adopt a broader sort of portion of the portfolio. This is just a near term instantiation of a longer term initiative that you guys have within FalconFlex.

George Kurtz, CEO, CrowdStrike: Correct. The strategy was always to convert the customers over to FalconFlex in a commitment model, which is the more they commit, the bigger discounts they get and they have a lot of flexibility in picking the module. So essentially, you open the entire product catalog up to our customers. Because they came to us and they said, we want to do more with CrowdStrike. You’ve got 29 modules, you keep adding more, you buy new companies.

Not everybody can keep track of it. And even our sales team, they have to keep track of each module and be experts. So customers came to us and said we want a new licensing model like a hyperscaler, but with more flexibility. And if we commit more, we want a bigger discount and we’re locked in for three to five years. So that’s worked out well since so we were going down that path anyway and it just turned out that we could use that vehicle to convert the customer base over and then deliver the customer commitments packages which we really wrapped up that program at the end

Keith Weiss, Equity Research Analyst, Morgan Stanley: of Q4. Right. Got it. And then just from an investor perspective and understanding those impacts, you wrapped it up in Q4. How should we think about the dynamic of when that headwind starts to turn to a tailwind?

George Kurtz, CEO, CrowdStrike: Yes. So you’re going to still see some headwinds in Q1 and Q2 just from an expense side because you’ve got things like sales commissions that being amortized over this next year. And as we’re paying commissions on the CCPs to make sure that we projected the sales team, right? I mean, it was the right thing to do. So those will ultimately burn off.

You had some headwinds from legal. Obviously, you have big expenses there. You’ve got consulting headwinds. But these are more one time costs in many of these areas at a higher rate in any way. And then they begin to burn off and then you start to see the ramp in operating profit as well as free cash flow.

And as I said, we talked about the exiting this year free cash flow of 27%. So we also have some larger bills that come due in terms of commission payments and deferred payments in Q1, which will Bert already talked about that in our earnings call. So again, what we’re looking at is getting through Q1 and Q2. We’ve got the ramp in Q3 and Q4 focused on net new ARR acceleration.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Got it. I want to sort of go to maybe a little bit of a higher level. When we think about Falcon Flex, sort of a taking away the frictions for customers to adopt a broader part of your portfolio. It speaks to a sort of a broader trend of consolidation of kind of more functionality with fewer vendors. And it speaks to sort of that debate of sort of platform versus best of breed.

And where does sort of CrowdStrike fall out on that? Like what’s the right balance in terms of trying to drive that platform consolidation versus kind of sustaining best of breed functionality?

George Kurtz, CEO, CrowdStrike: Well, you sort of have to do both. So let’s just maybe recap because if you go back in time and I’ve been doing this thirty plus years in security, you had best of breed products and you had best of suite products and now what I call best of platform. And what customers they don’t customers shouldn’t be construction workers. They shouldn’t have to assemble everything. They shouldn’t have to put all the pieces together and have tons of people that all they do is integration.

They should be able to take a platform like CrowdStrike, plug it into another platform like Zscaler, pick one and have it all work. And that’s what we’re focused on. That’s the best of platform. Now when we look at individual modules, our goal is to be first or second in any one of those categories. Many of the modules that we started with early on, the more mature ones, were certainly number one by a long shot.

And then as we come out with new modules, we keep adding new functionality, maybe we enter a new market and we keep adding to it until we’re able to replace other technologies that are out there. One of them I talked about in the last earnings call was exposure management, being able to replace some of the traditional vulnerability management vendors. We’ve done really well with that. So you want the best platform, but you also want to focus on what you really do well. And this is one of the things that I always say to the team at CrowdStrike and our customers, this is what we do really well.

These are the areas of security and data and cloud and everything that we do. And a lot of things we don’t do, like we’re not a firewall vendor. We don’t sell boxes. That’s not us. We’re not going to be doing that.

And it doesn’t mean you don’t need it, but that’s not us. So we focus on what we do well and we want to be number one or number two in any of those categories from a module perspective. Got it.

Keith Weiss, Equity Research Analyst, Morgan Stanley: And maybe you can give us sort of an update on kind of how far we’ve come with FalconFlex adoption. Any kind of sense you could give us in terms of what percentage of ARR or how penetrated that has become into the customer base?

George Kurtz, CEO, CrowdStrike: Sure. So the latest stat is in terms of total contract value, we’ve got $2,500,000,000 converted over Falcon Flex. I think over yes, I mean it was a huge quarter in Q4. Okay. So when we think about the base of the customers, obviously these are bigger dollars, but the number of customers is still small.

So there’s still a long way to go in the conversion of Falcon Flex. And part of what we’re doing as well is investing in our channel or go to market around that because it took the sales team sort of call it last year to get their heads around how you sell Falcon Flex because it you move away from, hey, here’s another module to sell you to let’s sit down and create a demand plan. Let’s go through your roadmap. Let’s understand what we have. Let’s understand how we consolidate, how we save you money and what you’re going to use and when you’re going to use it.

That’s a different muscle, right? So you have to have that muscle memory. So we took last year to actually build that with our sales team. And now this is the year that we’re building it with our partners and channel. And I spoke to to most of the large GSIs or CEOs went to a few sales kickoffs and it was all about Falcon Flex and the investment there.

So we think that’s going to be an accelerant to the larger deals this year

Keith Weiss, Equity Research Analyst, Morgan Stanley: and then going forward. Got it. And how should investors think about the cash flow conversion impacts of kind of moving to this more flexible payment terms that come along with Falcon Flex?

George Kurtz, CEO, CrowdStrike: Well, from a cash flow perspective, I think if you have flexible payment terms because you went through a customer commitment package, right? That’s a little bit different. And we talked about the impact of some of those in Q1 as well. When we think about Falcon Flex, it doesn’t mean that there’s delayed payment terms, right? If I mean, there are payment terms either we’re getting paid all upfront or we’re getting paid annually or which one of the reasons why we created the Craftstrike Financial Services and we’ve done very well with it in some really big deals is that we can supersize the Falcon Flex deals and then we can actually finance it.

And we got some great results from that. And then obviously, that’s a very quick conversion.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Got it. Got it. I want to switch gears a little bit, start talking about some technology. I would lose my license as a software analyst if I didn’t start talking about generative AI pretty quickly. How do you see generative AI changing kind of the cybersecurity landscape, both in terms of what’s going on in the threat environment, but also the tools it gives you to better address those threats?

George Kurtz, CEO, CrowdStrike: So let’s talk about the threat environment for a little bit. So just to level set with everybody, when we think about the threat environment, we break it down into adversary kind of groups and you can think about it as a pyramid. So at the top of the pyramid, you’ve got nation state adversaries. So you’ve got the number of adversaries that are that sophisticated. Then in the middle band of this pyramid is your eCrime actors.

So you’ve got more of those, but not quite as sophisticated as the top. And at the bottom, you have Hacktivists. And those are the least sophisticated, but there’s lots of them. So we start there. So essentially, when we think about the nation state adversaries being the most sophisticated, what that means is, in the grand scheme of 8,000,000,000 people in the world is a handful of really smart folks that know what they’re doing and can create a lot of these technologies.

Now obviously, there’s a lot of them, but in the grand scheme of 8,000,000,000, it’s a small number. What AI does is it really democratizes that level of destruction. And it now is bringing these very sophisticated techniques the ability to rapidly create malware to disassemble patches and look for vulnerabilities to execute attacks to create end to end attacks very efficiently. It now brings that to the masses. So what you’re going to see is you’re going to see a proliferation of new attack groups.

So I’d like to say that the threat environment is going to get better. It never does every year and it’s going to even get worse I think at a faster rate. So that’s kind of the threat environment. When we think about generative AI with respect to CrowdStrike, Charlotte AI has been a big success for us. And we were building generative AI before it was called generative AI.

And it was really designed to go beyond just a chatbot and we wired it into the workflows that we have. And the whole idea is how do you save time and how do you take and money, of course, and how do you take a level one analyst and make them a level three analyst. Some of the results of that with our detection triage, we’re saving on average forty hours a week for customers in just this one area of detection with 98% accuracy. And customers continue to use it. My last point on that is we really thought it would be Tier one analysts and they are using it.

The Tier three analysts are using it more than anyone because they actually understand how to get the most out of it. Got it.

Keith Weiss, Equity Research Analyst, Morgan Stanley: So that starts to go after what has been one of the real constraints within cybersecurity is enough security analysts to be able to handle all the volume to be able to respond. So Charlotte AI, you’re basically massively improving the productivity of those security analysts and trying to get at that fundamental shortage.

George Kurtz, CEO, CrowdStrike: Correct. Just not enough smart people in the world from a security perspective. And we always want to grow more of them. And as the threats proliferate, you need more smart folks. And you can’t like anything else, you just can’t keep adding people.

It’s really hard to find them and keep them, but you can’t keep adding them. So anything for me when I look at Gen AI, it’s like, well, what’s a kind of a road task that I can automate? Like lots of data, lots of things to go through. You understand what patterns are. It’s a perfect use case for it.

And then you can focus the humans on the higher order task. So it doesn’t mean you’re getting rid of a whole bunch of people, maybe not hiring as many, but you’re focusing them on what humans do really well.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Got it. Got it. When I think about generative AI and sort of the we’re seeing I think we’re about to come into sort of a proliferation of new use cases, new applications that are being driven by the expansion of the capabilities of generative AI. But that was also to your point creates more surface area to be protected. You described the endpoint as the beachfront real estate within cybersecurity.

Why is that? Why is the endpoint so important? And how does that help CrowdStrike in this broader AI conversation?

George Kurtz, CEO, CrowdStrike: Well, it’s a beachfront real estate because when you look at stopping breaches, right, which is our tagline, where does the breach happen? It doesn’t happen in the network, because the network is the highway. The bad guys just drive the highway and then they get to the server or the workloads and then they exploit those and get data, take them down, encrypt them whatever. So that is the last mile of stopping a breach. A, that’s why it’s important.

Two is you can get the most visibility and data out of the endpoint. If you think about a network device, there’s only so many things you can glean from the network, right? And a lot of it is encrypted. So you’re getting some basic information as packets flow. But on the endpoint or in a workload, you actually know what’s happening.

And that level of data goes beyond just threat data. So when we first started the company, again, our goal was to do something different. We really pioneered cloud based EDR and these sort of things. It wasn’t even called EDR, okay. We’re collecting data and then figuring out where threats and threat actors were and stopping them.

But what we found is we built one of the most scalable agent cloud architectures on the planet. And we can collect security telemetry and IT telemetry at scale. So we actually collect asset information, the health of the system, the user IDs. I mean, there’s a whole bunch of things that go beyond just threat data. And that has allowed us to be able to monetize all these new modules.

So the whole business model is really collect once, reuse many. But you have to have the agent. That’s why it’s Beachfront real estate. So whenever we add a new module, we’re not building a new product. We’ve already collected the data, right?

We’re just building a new workflow.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Got it. So the data becomes the connective tissue through the entire portfolio. Exactly. I want to step through the portfolio. And starting kind of where you guys started in terms of endpoint protection, CrowdStrike came into the marketplace and fundamentally disrupted how we’re doing endpoint protection with that cloud based EDR.

How much runway is left from sort of the older endpoint protection systems to EDR. Is that still a opportunity for you? There’s still legacy replacements left to go in that core part of the business?

George Kurtz, CEO, CrowdStrike: Yes. So when we think about sort of endpoint protection, I’m just going to bucket that. We have a few modules that focus on endpoint protect, like protecting the endpoint and getting EDR data. It’s just a few out of the 29. But that market, almost half the market is still using legacy technologies, almost half.

So there’s still a long way to go. We’ve been very successful in the enterprise over the and we started in the enterprise. And over the years, we’ve gone down into the SMB market and have had success with MSSPs, but there’s still a long way to go. There’s a lot, a lot of legacy technology out there that needs to be converted. And that’s why there’s still a long runway in those areas.

And then when you convert them, then obviously you keep adding new modules, exposure management or cloud or what have you. Got it. So the push into small businesses, that’s FalconGo? It’s FalconGo and it could be Falcon delivered through a managed service provider. Got it.

How does the go

Keith Weiss, Equity Research Analyst, Morgan Stanley: to market have to shift to address those smaller customers? Is it much different kind of selling process for a large enterprise, different set of requirements versus what a small business would be thinking about?

George Kurtz, CEO, CrowdStrike: Yes. From a small business perspective, they normally have relationships with some IT groups, a lot of managed service providers, right? And they typically just buy what they’re told to buy. I kind of use the I don’t know if you have home AV system, like you just you have a guy that makes it all work and half the time it doesn’t work, right? And then he tells you, you got to buy this and you go, okay, I buy that, right?

That’s the way it works in the SMB. They’re like, you just need CrowdStrike, put it in and don’t worry about it. So what we’ve done is we’ve worked with these managed service providers and massively expanded the business. And when they go into a customer, it could be three. We did a deal yesterday.

It was five endpoints. How do I know that? Because there was some wire fraud in a small company I know. And we actually found it and they’re like, we need Krausch, right? So it was five and we did it through a managed service provider.

And they were up and running in ten minutes. Unfortunately, I’m

Keith Weiss, Equity Research Analyst, Morgan Stanley: the one doing the AV in our household and none of it works. Works. Okay. You’re not alone. Can you talk to us about Falcon Complete?

It’s been gaining traction over the past couple of years. What’s the economic value for the end customer from Falcon Complete?

George Kurtz, CEO, CrowdStrike: So Falcon Complete, this is again one of these stories, you never know until you put it in the market. So the whole idea, you were talking about smaller businesses. Smaller businesses are key to larger businesses. And when we think about all the interactions, they need to be protected. And the larger companies are looking at them and from a supply chain perspective, third party risk is saying, hey, we’re doing business with you.

You might be $1,000,000,000 might be $500,000,000 you might be $10,000,000 but you have something that we’re doing business with you and we’re worried about what you have to do, whether it’s connected to a large enterprise or not. Think about all the wire transfer fraud. So, from that perspective, the small business still needs to be protected and Falcon Complete was designed to be able to protect those businesses who didn’t have even a full time CISO. Now, what we found is that the larger business is really like this as well. So what we do is we install it, we triage any alerts and we actually have the ability to take an action.

And we’ve built a lot of workflow and automation in the product. So customers go to bed at night, they don’t think about it. And if anything happens, we’re there to deal with it. We thought it would be really good for the kind of the medium sized business. And it turns out it is, but it’s really good for the enterprise.

Some of our largest customers are Falcon Complete customers. Because when they did the math on what it would take in terms of people and just the ability to deal with all the kind of threats, they’re like, you guys do that, we can’t replicate it and we’re going to have our folks focus on sort of the

Keith Weiss, Equity Research Analyst, Morgan Stanley: higher order bits. Got it. We talked a little bit about platform to be fair. It’s a question that I get a lot from investors and our bankers. Every company calls themselves a platform company.

How do you differentiate what the real platforms are from just kind of point solutions trying to fluff themselves up, if you will. My kind of point of view is you look at the results, you look at whether they’re able to sell in adjacent categories. And that’s been from my perspective, one of the most impressive parts of the CrowdStrike story is how you’ve been able to ramp up new product additions. You have over $100.1300000000.0 in ARR growing 50% from products beyond that core within endpoint protection. And you’ve done it without having to discount aggressively.

It’s not like you’re just giving the product away. So what’s been the secret sauce for CrowdStrike in proving out that platform of being able to go into these adjacencies so effectively?

George Kurtz, CEO, CrowdStrike: Yes, sure. So, first, when you talk about platform, everybody has their own PowerPoint with a platform. And as I say, I’ve never seen a PowerPoint that was wrong. Like, you just everyone has something and they never look wrong until you actually try to use it. So the real key to a platform is the number of module adoption.

When we first started and we first started reporting it was like one, two, three and then it was two, three, four, five. Now we’re actually we’re deprecating five or more because we’re at 67% adoption to customer base. So you have to look at what’s adopted and you have to actually look if it’s really a module or some like support offering or something. So first, we have that in spades. And then we look at these businesses that we talk about 1,300,000,000 collectively in these three areas of identity cloud and next gen SIM and you could see the growth rates on them.

That’s really the traditional definition in my mind of a platform, the ability to do that. Now, why are we able to do that? Well, I spent as much time on the technology architecture when I was building the company as I did the business architecture. The whole model is, if you believe security data can solve a security use case and can solve a lot of problems, if you collect that data, then you can reuse it in many different ways. So the key to our success is that we collect data one time, we create workflows on top of it and then we monetize those.

And by the way, it’s all integrated. We have one platform, our competitors have three or four or five or six, right? Pick one. So we have one, they have more. And when it’s all integrated, guess what we do?

We have in app trials. If someone wants to try identity or exposure management, they go in, they click it, it gives them a trial for fifteen to thirty days and then we follow-up, we make sure there’s success and then we convert it. Got it.

Keith Weiss, Equity Research Analyst, Morgan Stanley: I want to click into a couple of those, starting with the public cloud. Public cloud ARR surpassed $600,000,000 this quarter, it’s grown 45%. What’s the opportunity there as we see kind of the market consolidating to fewer vendors? And how does CrowdStrike differentiate to sort of ensure your continued success in that market?

George Kurtz, CEO, CrowdStrike: Yes. So when we think about public cloud, we did $600,000,000 in our cloud business. So one of the biggest cloud businesses around. We’ve got a lot of relationships with folks like AWS. We did over $1,000,000,000 in marketplace transactions through AWS in one year.

So we’ve got an incredible cloud platform offering everything from code to runtime. And one of the keys there is that if you want to stop breaches, you have to have runtime protection. And really that’s where we started. Like we are the best in that area. And, you have to it’s a lot of hard work.

You don’t shortcut your way to get there and have the high ground to be able to run on these critical servers. And over time, we’ve added things like CSPM, ASPM, DSPM, right, CIM, alphabet soup of INMs. But it’s what customers want. And by putting that together in a very cost efficient package, very easy to deploy and use, we’ve had tremendous success in those areas. Got it.

Keith Weiss, Equity Research Analyst, Morgan Stanley: I think the largest emerging module, identity protection identity protection from what we’re seeing is continuing to become more and more important within that security architecture. Why does it fit so well into the CrowdStrike portfolio? What’s the affinity between sort of the endpoint protection and the identity side of the equation?

George Kurtz, CEO, CrowdStrike: It goes back to when we acquired this company. It was preempted a number of years back. We took the time and effort to actually integrate their agent into ours. We actually rewrote it, but and we put it into ours, okay? Now why is that important?

Because we have a single agent architecture. It’s part of our brand promise, the single agent. Again, you look at our competitors, they got three, four, five different agents that are or they say one, but there are four of them sort of masked as one. They’re really not one. And this is really important because customers want less agents.

On average in an enterprise, there’s 13 agents that are there. You guys and gals, I see all the computers up here when you boot them up and it takes forever to run. These are all the things that kind of make it slow. Nobody wants that, right? They want to get less get rid of those.

So by being able to do that, we’ve integrated PREEMPT into the agent. So if you want identity, you know what you do? You turn it on. There’s no installation. It’s there.

There’s some configuration. That’s why it’s been on fire. In fact, even the numbers that we reported are probably a little underrepresented because that was one of the most demanded CCP type modules. So I think we see the results of that down the road when those CCPs burn off. But it’s been phenomenal and it does what others can’t do integrated into the agent and stopping identity breaches at the agent.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Got it. The last product I want to sort of dig into LogScale, that’s the next generation SIEM solution from CrowdStrike, surpassed $330,000,000 in ARR in Q4, growing 115%. Why is now kind of the right time for kind of SIEM and bringing in the next generation SIEM? We’ve been talking about security analytics for decades now. Is there a technology kind of evolution?

Is there a better way of us addressing this problem that’s enabling you to come and displace this existing marketplace?

George Kurtz, CEO, CrowdStrike: I really do think we’re in an inflection point for next gen SIM and why are we is really the question. A few things. One, I think people understand the more data they have, the more use cases they can solve with security with that data. What that also means is that it’s right for AI automation. Let’s take a legacy SIEM.

There’s a lot of manual things that you have to go through. There’s a lot of triage. There’s a lot of pointing and clicking and hunting and filtering and querying, right? That takes time and expertise. There’s a lot of expertise when you’re using some of these legacy products and there’s a lot of cost.

So when you look at the traditional models of ingest costs that were just killing customers and you look at the fact that about 80% of the data that is being put into a SIEM was taken out of something like CrowdStrike. So customers are buying CrowdStrike and then they’re putting 80% of the data in the SIEM and paying for it in the SIEM and they already have it at CrowdStrike. So over the years, the customers have said, you guys should just ingest the 20% that you don’t have, things like firewall logs and network type devices. And with the Humio acquisition, which became LogScale, we did that. And now next gen SIM is built into the entire platform.

Guess what happens when we want to turn it on for the customer? We flip the switch. It’s there. So our competitors take six months to roll this stuff out. We’re up and running that day.

And that’s why we’re at the right time. Plus you’ve had acquisitions in the space. So you have a confluence of all this coming together. And this is one of the businesses I’m most bullish on. Every customer we’re talking to is talking about Next Gen SIM.

And by the way, every GSI from the CEO down is looking to build hundreds of million dollars of practice around our technology for Next Gen SIM in Locksdale.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Got it. We have about a minute left. I want to wrap this all up. I’m a big free cash flow guy. I like good free cash flow story.

You guys have been a great free cash flow story. There’s investments that you’re making today, investments in go to market. There’s been investments in terms of stuff like CCPs. I would look at it as an investment. But you guys have a lot of conviction of free cash flow margins exiting this year back at 27% and have room on a go forward basis.

Can you help us kind of construct that almost mechanical argument of why free cash flow margins are going to improve into the back half of the year? What gives you confidence in that forecast?

George Kurtz, CEO, CrowdStrike: Sure. Well, I mean, obviously, when you look at coming out of the incident, we had things that are going to hit in Q1 and Q2. You’ve got expenses like commissions, right? You’ve got some deferred payments, which we called out in our last earnings report. That’s all going to hit in Q1.

You’ve got sort of consultants and kind of legal fees. That’s all a drain in the early part of the year, right? That stuff begins to burn off. And then obviously, you got the reacceleration of ARR and the investments that we’re making obviously on the sales side, you’re going to ramp reps etcetera. So some investments early on that begin to pay off in the back half of the year and that’s what gives us conviction to get back to the 27%.

And then even Bert, which he normally doesn’t do, but he wanted to make sure that he was very clear getting back to the 30% for the following year, right? So we got to deal with the near term here. But I can tell you, Bert and I are maniacally focused on cash flow and we look at ARR and cash flow. That’s kind of our gauge. So that’s why we have confidence in the back half of the year and the 27% exit rate.

Outstanding.

Keith Weiss, Equity Research Analyst, Morgan Stanley: Really exciting times at CrowdStrike continues to be a really dynamic story. Thank you so much for coming

George Kurtz, CEO, CrowdStrike: and joining talking to us about it. Great. Thank you. Have a great

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