CrowdStrike Goes Downmarket With Dell Pact, Small Biz BundleCEO George Kurtz Sees Dell Partnership, E-Commerce Portal as Central to SMB Success
CrowdStrike hopes to capture more small and midsized organizations through a new product bundle, revamped e-commerce portal and renewed partnership with Dell, CEO George Kurtz says.
The Austin, Texas-based company says becoming the exclusive endpoint security partner of personal computing giant Dell will help CrowdStrike reach small businesses through everything from a managed cybersecurity service to a subscription-based device-as-a-service model and traditional device resale. Kurtz says there's "immense demand" for CrowdStrike's technology, even among small, cost-conscious companies (see: CrowdStrike CEO on Why It's Tough to Defend Sensitive Assets).
"We're still in the early innings of our SMB journey," Kurtz tells investors during an earnings conference call Tuesday. "But customers are wanting this. They're telling the likes of Dell that they want our technology, which is why we were selected by Dell."
CrowdStrike first teamed up with Dell and Secureworks - whose stock is 82.5%-owned by Dell - all the way back in January 2019 to provide endpoint protection, managed security and incident response services around the company's laptops and desktops. But after VMware - which is majority-owned by Dell - bought Carbon Black in September 2019, Dell made Carbon Black its preferred endpoint security tool.
"We're still in the early innings of our SMB journey. But customers are wanting this."
– George Kurtz, co-founder and CEO, CrowdStrike
Now that VMware is under agreement to be acquired by semiconductor behemoth Broadcom for $61 billion, Dell is no longer wedded to Carbon Black's endpoint security technology. As a result, Dell clients can once again get CrowdStrike shipped on a new computer at the time of purchase by simply checking a box, according to Kurtz (see: Broadcom Beefs Up Security Business With $61B VMware Buy).
"There are various go-to-market motions with them, which we're really excited about," Kurtz says. "I think it showcases our technology leadership in the market and the customer pull because customers have been clamoring for this technology to Dell."
Serving Small Businesses From Antivirus to MDR
Kurtz says CrowdStrike has enjoyed tremendous success with its Falcon Go bundle, which is designed as a starter package for price-sensitive businesses with less than 100 endpoints. More than 1,000 net new organizations have signed up for Falcon Go since it launched a little over two quarters ago, Kurtz says. The next-generation antivirus offering costs $60 per device and can be bought for as few as five devices.
CrowdStrike in late January launched a revamped version of its e-commerce portal to remove friction from the buying process and improve no-touch conversion rates for digital customers. Kurtz says the company has seen a dramatic increase in no-touch digital conversion rates within weeks of launch (see: CrowdStrike's Michael Sentonas on Identity, Cloud and XDR).
"The market dynamics in the SMB are velocity-driven and very different from our traditional enterprise customer base," Kurtz says. "It's not only about delivering what we believe is the best technology but also making it the best go-to-market motion."
Kurtz says virtually all customers outside the enterprise have the same problem, which is that a firm generating $1 billion in annual revenue might have only one or two IT employees and half a full-time equivalent focused on cybersecurity. CrowdStrike's Falcon Complete managed detection and response tool is a good fit for organizations that face great security risk but aren't getting any more headcount (see: CrowdStrike Sales Growth Slows as SMB Clients Delay Spending).
"If they can't quite digest everything that we have, that's OK," Kurtz says. "What they're buying is an outcome. And that outcome is stopping breaches, reducing complexity and lowering the overall cost. And that is resonating with customers as we consolidate in this challenging macro environment."
Stock Rebounds as Sales, Earnings Beat Estimates
|Category||Quarter Ended Jan. 31, 2023||Quarter Ended Jan. 31, 2022||% Change|
|Professional Services Revenue||$39.1M||$25.6M||52.9%|
|Loss Per Share||$0.20||$0.18||-11.1%|
|Non-GAAP Net Income||$111.6M||$70.4M||58.5%|
|Non-GAAP Earnings Per Share||$0.47||$0.30||56.7%|
CrowdStrike's revenue of $637.4 million in the quarter ended Jan. 31 edged out Seeking Alpha's sales estimate of $626.8 million. Meanwhile, the company's non-GAAP earnings of $0.47 per share beat Seeking Alpha's non-GAAP estimate of $0.43 per share.
The company's stock climbed $7.32 - 5.86% - to $132.25 per share in after-hours trading Tuesday. That's the highest CrowdStrike's stock has traded since Nov. 29, 2022. CrowdStrike's sales in the Americas grew by 44%, while the company's international sales increased by 57%, says Chief Financial Officer Burt Podbere.
For the fiscal year ended Jan. 31, 2023, CrowdStrike's revenue surged to $2.24 billion, up 54.4% from $1.45 billion a year earlier. Net loss improved to $183.3 million, or $0.79 per share, 22% better than a net loss of $234.8 million, or $1.03 per share, last year. On a non-GAAP basis, net income skyrocketed to $368.4 million, or $1.54 per share, up 129.3% from $160.7 million, or $0.67 per share, the year prior.
For the fiscal quarter ending April 30, CrowdStrike expects non-GAAP net income of $121.1 million to $123.5 million, or $0.50 to $0.51 per share, on revenue of between $674.9 million to $678.2 million.