SEC Filing | CrowdStrike Holdings, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2019


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38933

CROWDSTRIKE HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or other jurisdiction of incorporation or organization)		45-3788918 (I.R.S. Employer Identification Number)
	150 Mathilda Place, Suite 300 Sunnyvale, California 94086 (Address of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class of securities	Trading symbol(s)	Name of each national exchange and principal U.S. market for the securities
Class A common stock, par value $0.0005 per share	CRWD	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Registrant’s telephone number, including area code: (888) 512-8906

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ◻ No ⌧

Indicate by check mark whether the registrant has submitted electronically every interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	◻	Accelerated Filer	◻
Non-accelerated Filer	⌧	Smaller reporting company	☐
(Do not check if a smaller reporting company)		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

As of August 31, 2019, the number of shares of the registrant’s Class A common stock outstanding was 20,700,000, and the number of shares of the registrant’s Class B common stock outstanding was 205,245,332.

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CROWDSTRIKE HOLDINGS, INC.

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		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of July 31, 2019 and January 31, 2019	5
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2019 and July 31, 2018	6
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 31, 2019 and July 31, 2018	7
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended July 31, 2019 and July 31, 2018	8
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2019 and July 31, 2018	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	65
Item 4.	Controls and Procedures	65

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Shares of Equity Securities and Use of Proceeds	100
Item 3.	Defaults Upon Senior Securities	101
Item 4.	Mine Safety Disclosures	101
Item 5.	Other Information	101
Item 6.	Exhibits	102
	Signatures	103

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect" and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements concerning the following:

o

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development, and general and administrative expenses), and our ability to achieve, and maintain, future profitability;

o

market acceptance of our cloud platform;

o

the effects of increased competition in our markets and our ability to compete effectively;

o

our ability to maintain the security and availability of our cloud platform;

o

our ability to maintain and expand our customer base, including by attracting new customers;

o

our ability to develop new solutions, or enhancements to our existing solutions, and bring them to market in a timely manner;

o

anticipated trends, growth rates and challenges in our business and in the markets in which we operate;

o

our business plan and our ability to effectively manage our growth and associated investments;

o

beliefs and objectives for future operations;

o

our relationships with third parties, including channel partners and technology alliance partners;

o

our ability to maintain, protect and enhance our intellectual property rights;

o

our ability to successfully defend litigation brought against us;

o

our ability to successfully expand in our existing markets and into new markets;

o

sufficiency of cash to meet cash needs for at least the next 12 months;

o

our ability to expand internationally;

o

our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;

o

our ability to implement, maintain, and improve our internal control over financial reporting;

o

the attraction and retention of qualified employees and key personnel; and

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o

the expected date of the expiration of the lock-up agreements entered into in connection with our initial public offering.

These statements are based on our current plans, estimates and projections in light of information currently available to us. These forward-looking statements may be affected by risks, uncertainties and other factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under “Risk Factors.” Furthermore, new risks and uncertainties emerge from time to time, and it is impossible for us to predict all risks and uncertainties or how they may affect us. If any of these risks or uncertainties occurs, our business, revenue and financial results could be harmed, and the trading price of our Class A common stock could decline. Forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CrowdStrike Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)


	July 31,		January 31,
	2019		2019
Assets
Current assets:
Cash and cash equivalents	$	732,808	$	88,408
Marketable securities		94,003		103,247
Accounts receivable, net of allowance for doubtful accounts of $1.0 million as of July 31, 2019 and January 31, 2019		115,256		92,476
Deferred contract acquisition costs, current		34,017		28,847
Prepaid expenses and other current assets		29,348		18,410
Total current assets		1,005,432		331,388
Property and equipment, net		107,989		73,735
Deferred contract acquisition costs, noncurrent		41,766		9,918
Goodwill		7,780		7,947
Intangible assets, net		738		1,048
Other assets		7,881		9,183
Total assets	$	1,171,586	$	433,219
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	1,126	$	6,855
Accrued expenses		32,568		32,541
Accrued payroll and benefits		20,057		19,284
Deferred revenue		279,951		218,700
Other current liabilities		8,079		4,040
Total current liabilities		341,781		281,420
Deferred revenue, noncurrent		89,811		71,367
Other liabilities, noncurrent		11,897		10,313
Total liabilities		443,489		363,100
Commitments and contingencies (Note 11)
Redeemable Convertible Preferred Stock
Redeemable convertible preferred stock, $0.0005 par value; no shares and 137,419 shares authorized as of July 31, 2019 and January 31, 2019, respectively; no shares and 131,268 shares issued and outstanding as of July 31, 2019 and January 31, 2019, respectively; liquidation preference $0 and $545,000 as of July 31, 2019 and January 31, 2019, respectively		—		557,912
Stockholders’ Equity (Deficit)
Preferred stock, $0.0005 par value; 100,000 shares and no shares authorized as of July 31, 2019 and January 31, 2019, respectively; no shares issued and outstanding as of July 31, 2019 and January 31, 2019, respectively		—		—
Common stock, $0.0005 par value, no share authorized issued, or outstanding as of July 31, 2019; 220,000 shares authorized and 47,421 issued and outstanding as of January 31, 2019				24
Class A common stock, $0.0005 par value; 2,000,000 shares and no shares authorized as of July 31, 2019 and January 31, 2019, respectively; 20,700 shares, and no shares issued and outstanding as of July 31, 2019 and January 31, 2019, respectively; Class B common stock, $0.0005 par value; 300,000 shares and no shares authorized as of July 31, 2019 and January 31, 2019, respectively; 205,193 shares, and no shares issued and outstanding as of July 31, 2019 and January 31, 2019, respectively		103		—
Additional paid-in capital		1,302,098		31,211
Accumulated deficit		(573,574)		(519,126)
Accumulated other comprehensive income (loss)		(530)		98
Total stockholders’ equity (deficit)		728,097		(487,793)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)	$	1,171,586	$	433,219

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended July 31,				Six Months Ended July 31,
	2019		2018		2019		2018
Revenue
Subscription	$	97,575	$	49,161	$	183,566	$	88,919
Professional services		10,533		6,540		20,619		14,071
Total revenue		108,108		55,701		204,185		102,990

Cost of revenue
Subscription		24,946		14,604		48,637		29,775
Professional services		6,636		3,971		12,219		8,194
Total cost of revenue		31,582		18,575		60,856		37,969

Gross profit		76,526		37,126		143,329		65,021

Operating expenses
Sales and marketing		65,274		40,113		122,117		76,730
Research and development		31,630		18,963		55,505		36,578
General and administrative		30,261		8,477		42,122		15,254
Total operating expenses		127,165		67,553		219,744		128,562

Loss from operations		(50,639)		(30,427)		(76,415)		(63,541)
Interest expense		(164)		(236)		(165)		(428)
Other expense, net		(451)		(1,852)		(56)		(2,042)

Loss before provision for income taxes		(51,254)		(32,515)		(76,636)		(66,011)

Provision for income taxes		(635)		(362)		(1,230)		(483)

Net loss	$	(51,889)	$	(32,877)	$	(77,866)	$	(66,494)

Net loss per share attributable to Class A and Class B common stockholders, basic and diluted	$	(0.40)	$	(0.75)	$	(0.87)	$	(1.52)

Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted		130,091		44,105		89,335		43,864

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended July 31,				Six Months Ended July 31,
	2019		2018		2019		2018

Net loss	$	(51,889)	$	(32,877)	$	(77,866)	$	(66,494)
Other comprehensive loss:
Foreign currency translation adjustments		(343)		(358)		(623)		(690)
Unrealized loss on available-for-sale securities, net of tax		(1)		(2)		(5)		(2)
Other comprehensive loss		(344)		(360)		(628)		(692)
Total comprehensive loss	$	(52,233)	$	(33,237)	$	(78,494)	$	(67,186)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Three Months Ended July 31, 2019 and 2018

(in thousands)

(unaudited)


	Redeemable										Accumulated
	Convertible						Additional				Other		Total
	Preferred Stock			Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Deficit		Income (Loss)		Equity (Deficit)

Balances at April 30, 2019	131,268	$	557,912	48,127	$	24	$	36,670	$	(521,685)	$	(186)	$	(485,177)
Issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs	—		—	20,700		11		659,207		—		—		659,218
Conversion of redeemable convertible preferred stock to common stock upon initial public offering	(131,268)		(557,912)	131,268		66		557,846		—		—		557,912
Reclassification of redeemable convertible preferred stock warrant liability to additional paid-in capital upon initial public offering	—		—	—		—		10,559		—		—		10,559
Net exercise of common stock warrants	—		—	322		—		—		—		—		—
Issuance of common stock upon exercise of options	—		—	3,739		2		7,055		—		—		7,057
Issuance of common stock related to early exercised options	—		—	1,037		—		—		—		—		—
Vesting of early exercised options	—		—	—		—		710		—		—		710
Stock-based compensation expense	—		—	—		—		29,859		—		—		29,859
Capitalized stock-based compensation	—		—	—		—		192		—		—		192
Net loss	—		—	—		—		—		(51,889)		—		(51,889)
Other comprehensive loss	—		—	—		—		—		—		(344)		(344)
Balances at July 31, 2019	—	$	—	205,193	$	103	$	1,302,098	$	(573,574)	$	(530)	$	728,097


	Redeemable										Accumulated
	Convertible						Additional				Other		Total
	Preferred Stock			Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Deficit		Income (Loss)		Deficit

Balance at April 30, 2018	118,693	$	351,016	44,774	$	22	$	11,067	$	(412,666)	$	638	$	(400,939)
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $104	12,150		199,896	—		—		—		—		—		—
Issuance of common stock upon exercise of options	—		—	699		—		763		—		—		763
Issuance of restricted stock awards	—		—	136		—		—		—		—		—
Vesting of early exercised options	—		—	—		—		90		—		—		90
Stock-based compensation expense	—		—	—		—		2,224		—		—		2,224
Repurchase of stock options	—		—	—		—		(2,330)		—		—		(2,330)
Net loss	—		—	—		—		—		(32,877)		—		(32,877)
Other comprehensive loss	—		—	—		—		—		—		(360)		(360)
Balance at July 31, 2018	130,843	$	550,912	45,609	$	22	$	11,814	$	(445,543)	$	278	$	(433,429)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Six Months Ended July 31, 2019

(in thousands)

(unaudited)


	Redeemable										Accumulated
	Convertible						Additional				Other		Total
	Preferred Stock			Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Deficit		Income (Loss)		Equity (Deficit)

Balances at January 31, 2019	131,268	$	557,912	47,421	$	24	$	31,211	$	(519,126)	$	98	$	(487,793)
Cumulative effect of accounting change	—		—	—		—		—		23,418		—		23,418
Issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs	—		—	20,700		11		659,207		—		—		659,218
Conversion of redeemable convertible preferred stock to common stock upon initial public offering	(131,268)		(557,912)	131,268		66		557,846		—		—		557,912
Reclassification of redeemable convertible preferred stock warrant liability to additional paid-in capital upon initial public offering	—		—	—		—		10,559		—		—		10,559
Net exercise of common stock warrants	—		—	322		—		—		—		—		—
Issuance of common stock upon exercise of options	—		—	4,445		2		8,565		—		—		8,567
Issuance of common stock related to early exercised options	—		—	1,037		—		—		—		—		—
Vesting of early exercised options	—		—	—		—		854		—		—		854
Stock-based compensation expense	—		—	—		—		33,611		—		—		33,611
Capitalized stock-based compensation	—		—	—		—		245		—		—		245
Net loss	—		—	—		—		—		(77,866)		—		(77,866)
Other comprehensive loss	—		—	—		—		—		—		(628)		(628)
Balances at July 31, 2019	—	$	—	205,193	$	103	$	1,302,098	$	(573,574)	$	(530)	$	728,097


	Redeemable										Accumulated
	Convertible						Additional				Other		Total
	Preferred Stock			Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Deficit		Income (Loss)		Deficit

Balance at January 31, 2018	118,693	$	351,016	44,231	$	22	$	8,482	$	(378,948)	$	970	$	(369,474)
Cumulative effect of accounting change	—		—	—		—		101		(101)		—		—
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $104	12,150		199,896	—		—		—		—		—		—
Issuance of common stock upon exercise of options	—		—	1,198		—		1,514		—		—		1,514
Issuance of common stock related to early exercise options	—		—	38		—		—		—		—		—
Issuance of restricted stock awards	—		—	142		—		—		—		—		—
Vesting of early exercised options	—		—	—		—		104		—		—		104
Stock-based compensation expense	—		—	—		—		3,943		—		—		3,943
Repurchase of stock options	—		—	—		—		(2,330)		—		—		(2,330)
Net loss	—		—	—		—		—		(66,494)		—		(66,494)
Other comprehensive loss	—		—	—		—		—		—		(692)		(692)
Balance at July 31, 2018	130,843	$	550,912	45,609	$	22	$	11,814	$	(445,543)	$	278	$	(433,429)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended July 31,
	2019		2018
Operating activities
Net loss	$	(77,866)	$	(66,494)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		10,193		6,424
Amortization of intangible assets		285		373
Amortization of deferred contract acquisition costs		15,076		11,991