CrowdStrike is a cybersecurity company providing endpoint security and threat detection.
CrowdStrikeDecember 06, 2020
Thesis - CrowdStrike is a leader in cybersecurity. They specialise in endpoint security - their software sits across devices such as laptops and phones, constantly analysing data like memory usage, CPU and file signatures for potential threats. Unlike legacy endpoint security providers (Cisco, Palo Alto networks), CrowdStrike is a cloud native offering. From a product perspective, this gives them some interesting advantages. They can analyse data across a network of separate devices, across companies, building a larger picture of potential threats, whereas legacy providers treat each company as standalone entities. CrowdStrike does this using its AI enabled platform, which will get better as the company grows and consumes more data. It also means they can be installed and implemented more quickly at scale, with customers able to select specific modules from their platform based on need (rather than a set one-size fits all product). From a commercial perspective, the cloud-based approach also gives it a Saas revenue model. This company has been involved in a number high profile breaches already, helping to identify the Russian involvement of the Democratic Party cyberattack in 2016. They have benefitted from the increased digitisation in a work-from-home environment, with the market cap up 3x since its March low.
Leadership - CrowdStrike’s founder and CEO is serial entrepreneur George Kurtz. He is a veteran of the cybersecurity industry. Having started his career in the security team at PWC, he eventually started his own security consultancy, Foundstone, which he eventually sold to McAfee for almost $90m. He spent a number of years as a senior exec at McAfee before founding CrowdStrike. Having spent a number of years working for the legacy security providers, he seems well placed to take them on. On Glassdoor.com he has a 96% approval and he has even co-authored a book about cybersecurity.
Financials & Performance - CrowdStrike’s platform has been recognised as a security leader by Gartner in their 2019 Magic Quadrant report and by Forrester Wave. They have annual recurring revenue of $907m and in their third quarter report announced 86% revenue growth. They added 1,186 new subscription customers, for a total of 8,416 customers to date. 61% of their customers are now using 4 or more modules, a number that is also increasing and highlights an expansion model.
Risks - Cybersecurity is becoming a competitive and populated market with legacy providers (Cisco, Palo Alto, McAfee, FireEye) as well as new Security-as-a-service providers (ZScaler, CarbonBlack, etc). It is also possible that core cloud providers like Amazon, Google and Google could in theory move into the space. The company is also very richly valued at the moment, having enjoyed an impressive run over the last 6 months. Gross margins are 73%, having increased incrementally over the last 18 months.