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 October 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

45-3788918

(State or other jurisdiction of
incorporation or organization)

(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 November 29, 2019, the number of shares of the registrant’s Class A common stock outstanding was 40,871,355, and the number of shares of the registrant’s Class B common stock outstanding was 164,673,516.

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CROWDSTRIKE HOLDINGS, INC.

TABLE OF CONTENTS


		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of October 31, 2019 and January 31, 2019	5
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2019 and October 31, 2018	6
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended October 31, 2019 and October 31, 2018	6
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended October 31, 2019 and October 31, 2018	8
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2019 and October 31, 2018	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	61
Item 4.	Controls and Procedures	61

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Shares of Equity Securities and Use of Proceeds	92
Item 3.	Defaults Upon Senior Securities	93
Item 4.	Mine Safety Disclosures	93
Item 5.	Other Information	93
Item 6.	Exhibits	94
	Signatures	95

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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:

◦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;

◦market acceptance of our cloud platform;

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

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

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

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

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

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

◦beliefs and objectives for future operations;

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

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

◦our ability to successfully defend litigation brought against us;

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

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

◦our ability to expand internationally;

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

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

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

◦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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We intend to announce material information to the public through the CrowdStrike Investor Relations website ir.crowdstrike.com, SEC filings, press releases, public conference calls, and public webcasts. We use these channels, as well as social media and our blog, to communicate with our investors, customers, and the public about our company, our offerings, and other issues. It is possible that the information we post on social media and our blog could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including the social media channels listed on our investor relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

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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)


	October 31,		January 31,
	2019		2019
Assets
Current assets:
Cash and cash equivalents	$	743,605	$	88,408
Marketable securities	90,083		103,247
Accounts receivable, net of allowance for doubtful accounts of $1.4 million and $1.0 million as of October 31, 2019 and January 31, 2019, respectively	145,694		92,476
Deferred contract acquisition costs, current	35,924		28,847
Prepaid expenses and other current assets	37,914		18,410
Total current assets	1,053,220		331,388
Property and equipment, net	129,504		73,735
Deferred contract acquisition costs, noncurrent	58,260		9,918
Goodwill	7,794		7,947
Intangible assets, net	637		1,048
Other assets	6,639		9,183
Total assets	$	1,256,054	$	433,219
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	5,244		$	6,855
Accrued expenses	29,460		32,541
Accrued payroll and benefits	36,905		19,284
Deferred revenue	335,801		218,700
Other current liabilities	8,194		4,040
Total current liabilities	415,604		281,420
Deferred revenue, noncurrent	111,838		71,367
Other liabilities, noncurrent	11,570		10,313
Total liabilities	539,012		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 October 31, 2019 and January 31, 2019, respectively; no shares and 131,268 shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively; liquidation preference $0 and $545,000 as of October 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 October 31, 2019 and January 31, 2019, respectively; no shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively	—		—
Common stock, $0.0005 par value, no shares authorized, issued, or outstanding as of October 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 October 31, 2019 and January 31, 2019, respectively; 20,761 shares, and no shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively; Class B common stock, $0.0005 par value; 300,000 shares and no shares authorized as of October 31, 2019 and January 31, 2019, respectively; 184,718 shares, and no shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively	103		—
Additional paid-in capital	1,326,116		31,211
Accumulated deficit	(609,079)		(519,126)
Accumulated other comprehensive income (loss)	(98)		98
Total stockholders’ equity (deficit)	717,042		(487,793)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)	$	1,256,054	$	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 October 31,						Nine Months Ended October 31,
	2019		2018		2019		2018
Revenue
Subscription	$	114,221	$	57,651	$	297,787	$	146,570
Professional services	10,898		8,728		31,517		22,799
Total revenue	125,119		66,379		329,304		169,369

Cost of revenue
Subscription	29,221		17,302		77,858		47,077
Professional services	8,134		4,972		20,353		13,166
Total cost of revenue	37,355		22,274		98,211		60,243

Gross profit	87,764		44,105		231,093		109,126

Operating expenses
Sales and marketing	68,675		46,614		190,792		123,344
Research and development	35,992		25,968		91,497		62,546
General and administrative	21,615		13,614		63,737		28,868
Total operating expenses	126,282		86,196		346,026		214,758

Loss from operations	(38,518)		(42,091)		(114,933)		(105,632)
Interest expense	(132)		—		(297)		(428)
Other income (expense), net	3,579		303		3,523		(1,739)

Loss before provision for income taxes	(35,071)		(41,788)		(111,707)		(107,799)

Provision for income taxes	(434)		(535)		(1,664)		(1,018)

Net loss	$	(35,505)	$	(42,323)	$	(113,371)	$	(108,817)

Net loss per share attributable to Class A and Class B common stockholders, basic and diluted	$	(0.17)	$	(0.93)	$	(0.89)	$	(2.45)

Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted	204,096		45,287		128,009		44,344

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 October 31,						Nine Months Ended October 31,
	2019		2018		2019		2018

Net loss	$	(35,505)	$	(42,323)	$	(113,371)	$	(108,817)
Other comprehensive loss:
Foreign currency translation adjustments	410		(415)		(213)		(1,105)
Unrealized gain (loss) on available-for-sale securities, net of tax	22		(11)		17		(13)
Other comprehensive income (loss)	432		(426)		(196)		(1,118)
Total comprehensive loss	$	(35,073)	$	(42,749)	$	(113,567)	$	(109,935)

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 October 31, 2019 and 2018

(in thousands)

(unaudited)


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

Balances at July 31, 2019	—	$	—	205,193	$	103	$	1,302,098	$	(573,574)	$	(530)	$	728,097




Issuance of common stock upon exercise of options	—	—		286	—		824		—		—		824

Vesting of early exercised options	—	—		—	—		962		—		—		962
Stock-based compensation expense	—	—		—	—		21,966		—		—		21,966
Capitalized stock-based compensation	—	—		—	—		266		—		—		266
Net loss	—	—		—	—		—		(35,505)		—		(35,505)
Other comprehensive income	—	—		—	—		—		—		432		432
Balances at October 31, 2019	—	$	—	205,479	$	103	$	1,326,116	$	(609,079)	$	(98)	$	717,042


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

Balance at July 31, 2018	130,843	$	550,912	45,609	$	22	$	11,814	$	(445,543)	$	278	$	(433,429)
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $104	425	7,000		—	—		—		—		—		—
Issuance of common stock upon exercise of options	—	—		1,220	1		1,277		—		—		1,278

Vesting of early exercised options	—	—		—	—		87		—		—		87
Stock-based compensation expense	—	—		—	—		13,460		—		—		13,460

Net loss	—	—		—	—		—		(42,323)		—		(42,323)
Other comprehensive loss	—	—		—	—		—		—		(426)		(426)
Balance at October 31, 2018	131,268	$	557,912	46,829	$	23	$	26,638	$	(487,866)	$	(148)	$	(461,353)

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)

Nine Months Ended October 31, 2019 and 2018

(in thousands)

(unaudited)


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

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	—	—		4,731	2		9,389		—		—		9,391
Issuance of common stock related to early exercised options	—	—		1,037	—		—		—		—		—
Vesting of early exercised options	—	—		—	—		1,816		—		—		1,816
Stock-based compensation expense	—	—		—	—		55,577		—		—		55,577
Capitalized stock-based compensation	—	—		—	—		511		—		—		511
Net loss	—	—		—	—		—		(113,371)		—		(113,371)
Other comprehensive loss	—	—		—	—		—		—		(196)		(196)
Balances at October 31, 2019	—	$	—	205,479	$	103	$	1,326,116	$	(609,079)	$	(98)	$	717,042


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

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	12,575	206,896		—	—		—		—		—		—
Issuance of common stock upon exercise of options	—	—		2,418	1		2,791		—		—		2,792
Issuance of common stock related to early exercise options	—	—		38	—		—		—		—		—
Issuance of common stock	—	—		106	—		—		—		—		—
Issuance of restricted stock awards	—	—		36	—		—		—		—		—
Vesting of early exercised options	—	—		—	—		191		—		—		191
Stock-based compensation expense	—	—		—	—		17,403		—		—		17,403
Repurchase of stock options	—	—		—	—		(2,330)		—		—		(2,330)
Net loss	—	—		—	—		—		(108,817)		—		(108,817)
Other comprehensive loss	—	—		—	—		—		—		(1,118)		(1,118)
Balance at October 31, 2018	131,268	$	557,912	46,829	$	23	$	26,638	$	(487,866)	$	(148)	$	(461,353)

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)


	Nine Months Ended October 31,
	2019		2018
Operating activities
Net loss	$	(113,371)	$	(108,817)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	16,023		10,199
Loss on disposal of fixed assets	—		223
Amortization of intangible assets	385		435
Amortization of deferred contract acquisition costs	24,125		19,312
Change in fair value of redeemable convertible preferred stock warrant liability	6,022		2,935
Allowance for doubtful accounts	413		485
Stock-based compensation expense	55,577		17,403
Accretion of marketable securities purchased at a discount	(1,313)		(625)
Non-cash interest expense	293		187
Changes in operating assets and liabilities
Accounts receivable	(53,631)		(17,936)
Deferred contract acquisition costs	(55,238)		(27,531)
Prepaid expenses and other assets	(19,883)		(2,307)
Accounts payable	(3,773)		(6,280)
Accrued expenses and other current liabilities	3,405		(2,331)
Accrued payroll and benefits	17,621		3,498
Deferred revenue	157,239		72,219
Other liabilities, noncurrent	(58)		155
Net cash provided by (used in) operating activities	33,836		(38,776)
Investing activities
Purchases of property and equipment	(66,848)