SEC Filing | CrowdStrike Holdings, Inc.

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crwd-20200731

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, 2020


☐			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 August 31, 2020, the number of shares of the registrant’s Class A common stock outstanding was 184,410,223, and the number of shares of the registrant’s Class B common stock outstanding was 35,038,535.

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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 July 31, 2020 and January 31, 2020	5
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2020 and July 31, 2019	6
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended July 31, 2020 and July 31, 2019	7
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended July 31, 2020 and July 31, 2019	8
	Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended July 31, 2020 and July 31, 2019	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53
Item 4.	Controls and Procedures	53

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Shares of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	86
Item 6.	Exhibits	87
	Signatures	88

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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:

◦the impact of the COVID-19 pandemic on our operations, financial results, and liquidity and capital resources, including on customers, sales, expenses, and employees;

◦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 develop, maintain, and improve our internal control over financial reporting;

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

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)


	July 31,		January 31,
	2020		2020
Assets
Current assets:
Cash and cash equivalents	$	1,064,734	$	264,798
Marketable securities	—		647,266
Accounts receivable, net of allowance for doubtful accounts of $1.3 million and $1.1 million as of July 31, 2020 and January 31, 2020, respectively	149,236		164,987
Deferred contract acquisition costs, current	53,837		42,971
Prepaid expenses and other current assets	48,174		51,614
Total current assets	1,315,981		1,171,636
Strategic investments	2,000		1,000
Property and equipment, net	153,303		136,078
Operating lease right-of-use assets	40,454		—
Deferred contract acquisition costs, noncurrent	81,186		71,235
Goodwill	8,131		7,722
Intangible assets, net	347		527
Other assets	15,550		16,708
Total assets	$	1,616,952	$	1,404,906
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	10,118		$	1,345
Accrued expenses	19,211		30,355
Accrued payroll and benefits	36,099		36,810
Operating lease liabilities, current	8,643		—
Deferred revenue	515,081		412,985
Other current liabilities	14,140		11,601
Total current liabilities	603,292		493,096
Deferred revenue, noncurrent	174,759		158,183
Operating lease liabilities, noncurrent	36,134		—
Other liabilities, noncurrent	10,752		11,020
Total liabilities	824,937		662,299
Commitments and contingencies (Note 11)
Stockholders’ Equity
Preferred stock, $0.0005 par value; 100,000 shares authorized as of July 31, 2020 and January 31, 2020; no shares issued and outstanding as of July 31, 2020 and January 31, 2020	—		—
Class A common stock, $0.0005 par value; 2,000,000 shares authorized as of July 31, 2020 and January 31, 2020, respectively; 183,609 shares and 107,666 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively; Class B common stock, $0.0005 par value; 300,000 shares authorized as of July 31, 2020 and January 31, 2020, respectively; 35,585 shares and 105,282 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively	110		106
Additional paid-in capital	1,476,323		1,378,479
Accumulated deficit	(686,583)		(637,487)
Accumulated other comprehensive income	1,115		1,009
Total CrowdStrike Holdings, Inc. stockholders’ equity	790,965		742,107
Non-controlling interest	1,050		500
Total stockholders’ equity	792,015		742,607
Total liabilities and stockholders’ equity	$	1,616,952	$	1,404,906

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,
	2020		2019		2020		2019
Revenue
Subscription	$	184,256	$	97,575	$	346,478	$	183,566
Professional services	14,715		10,533		30,571		20,619
Total revenue	198,971		108,108		377,049		204,185

Cost of revenue
Subscription	44,037		24,946		81,281		48,637
Professional services	10,354		6,636		20,005		12,219
Total cost of revenue	54,391		31,582		101,286		60,856

Gross profit	144,580		76,526		275,763		143,329

Operating expenses
Sales and marketing	95,127		65,274		183,265		122,117
Research and development	50,483		31,630		91,061		55,505
General and administrative	28,961		30,261		54,004		42,122
Total operating expenses	174,571		127,165		328,330		219,744

Loss from operations	(29,991)		(50,639)		(52,567)		(76,415)
Interest expense	(174)		(164)		(317)		(165)
Other income (expense), net	732		(451)		5,265		(56)

Loss before provision for income taxes	(29,433)		(51,254)		(47,619)		(76,636)

Provision for income taxes	(441)		(635)		(1,477)		(1,230)

Net loss	$	(29,874)	$	(51,889)	$	(49,096)	$	(77,866)

Net loss per share attributable to Class A and Class B common stockholders, basic and diluted	$	(0.14)	$	(0.40)	$	(0.23)	$	(0.87)

Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted	216,695		130,091		214,932		89,335

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,
	2020		2019		2020		2019

Net loss	$	(29,874)	$	(51,889)	$	(49,096)	$	(77,866)
Other comprehensive income (loss):
Foreign currency translation adjustments	2,119		(343)		1,426		(623)
Reversal of unrealized gain upon sale of debt securities	—		—		(1,320)		—
Unrealized loss on available-for-sale securities, net of tax	—		(1)		—		(5)
Other comprehensive income (loss)	2,119		(344)		106		(628)
Total comprehensive loss	$	(27,755)	$	(52,233)	$	(48,990)	$	(78,494)

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, 2020 and 2019

(in thousands)

(unaudited)


	Redeemable Convertible Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest	Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balances at April 30, 2020	—	$	—	215,505	$	108	$	1,409,758	$	(656,709)	$	(1,004)	$	1,000	$	753,153
Issuance of common stock upon exercise of options	—	—		2,633	2		10,206		—		—		—		10,208
Issuance of common stock under RSU release	—	—		491	—		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	—	—		565	—		17,284		—		—		—		17,284

Vesting of early exercised options	—	—		—	—		849		—		—		—		849
Stock-based compensation expense	—	—		—	—		37,713		—		—		—		37,713
Capitalized stock-based compensation	—	—		—	—		513		—		—		—		513
Net loss	—	—		—	—		—		(29,874)		—		—		(29,874)
Non-controlling interest	—	—		—	—		—		—		—		50		50
Other comprehensive income	—	—		—	—		—		—		2,119		—		2,119
Balances at July 31, 2020	—	$	—	219,194	$	110	$	1,476,323	$	(686,583)	$	1,115	$	1,050	$	792,015


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

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, 2020 and 2019

(in thousands)

(unaudited)


	Redeemable Convertible Preferred Stock				Common Stock						Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Non-controlling Interest	Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balances at January 31, 2020	—	$	—	212,948	$	106	$	1,378,479	$	(637,487)	$	1,009	$	500	$	742,607
Issuance of common stock upon exercise of options	—	—		4,689	4		16,597		—		—		—		16,601
Issuance of common stock under RSU release	—	—		992	—		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	—	—		565	—		17,284		—		—		—		17,284

Vesting of early exercised options	—	—		—	—		1,722		—		—		—		1,722
Stock-based compensation expense	—	—		—	—		61,351		—		—		—		61,351
Capitalized stock-based compensation	—	—		—	—		890		—		—		—		890
Net loss	—	—		—	—		—		(49,096)		—		—		(49,096)
Non-controlling interest	—	—		—	—		—		—		—		550		550
Other comprehensive income	—	—		—	—		—		—		106		—		106
Balances at July 31, 2020	—	$	—	219,194	$	110	$	1,476,323	$	(686,583)	$	1,115	$	1,050	$	792,015


	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	—	—		4,445	2		8,565		—		—		8,567
Issuance of common stock related to early exercise options	—	—		1,037	—		—		—		—		—
Vesting of early exercised options	—	—		—	—		854		—		—		854
Stock-based compensation expense	—	—		—	—		33,611		—		—		33,611
Capitalized stock0based 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

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,
	2020		2019
Operating activities
Net loss	$	(49,096)	$	(77,866)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	17,621		10,193

Amortization of intangible assets	207		285
Amortization of deferred contract acquisition costs	28,171		15,076
Non-cash operating lease cost	4,939		—
Change in fair value of redeemable convertible preferred stock warrant liability	—		6,022
Provision for bad debts	(269)		22
Stock-based compensation expense	61,351