CrowdStrike: Q3 Earnings Review

(Subscribers Only)

Good morning

Today we are going to be breaking down the Q3 earnings results from Crowdstrike, one of my holdings.

Coverage of the year thus far:

Crowdstrike: Q1 Earnings Review

Crowdstrike: Q2 Earnings Review

Crowdstrike has been one of the few companies that has really excelled this year, due to the lockdowns that took place throughout 2020. It is more likely that this year has accelerated the trend for Crowdstrike, as opposed to artificially boosting it, like some might link to Peloton.

As companies realise that working from home, and the general shift to the cloud are evidently more important today, Crowdstrike stands to benefit from these tailwinds for the coming years. Cyber security is not going anywhere. There may be stiffer competition, that is for sure, but the trend itself has momentum behind it looking out to the next decade as legacy security systems make way for the new services like that of Crowdstrike. It’s more so a matter of execution on Crowdstrike’s part.

Some of the highlights from the performance of Q2 are shown below:

• Q2 Revenues: $199 Million +84%

• Q2 Subscription Revenues: $184.3 Million +89%

• Subscription Gross Margin: 76%

• Annual Recurring Revenues (ARR): $790.6 Million +87%

• Q2 Operating Loss: ($30 Million)

• Q2 Net Loss: ($29.9 Million)

Now let us unravel the performance of Q3.


Crowdstrike: Q3 Earnings Review

CrowdStrike delivered another record quarter in Q3, with results exceeding management’s expectations once again. The solid growth at scale highlights the company’s growing leadership in the security cloud space. Crowdstrike are helping organizations shift from their legacy security systems, and allowing them to improve and consolidate their security make-up.

During Q3, Crowdstrike posted record numbers for net new ARR, adding a record new 1,186 new subscription customers, and introduced three new modules. Moreover, during the quarter Crowdstrike were active in the M&A side with their acquisition of Preempt Security, for $96 Million. This was a stab at improving their Zero Trust offerings for users of the Crowdstrike system. I covered this acquisition back in September, and you can find the full newsletter using the below link.

Crowdstrike Acquire Preempt Security for $96 Million

The company posted some strong performance this quarter, as well as boasting an impressive liquidity position, and demonstrating their ability to generate some handsome cash flows. Operating and Net Losses are narrowing, and the level of free cash flow for Q3 stood at $76.1 million, suggesting Crowdstrike are already on a path that will allow them to generate internal investment, as opposed to raising capital from equity and debt offerings.

Crowdstrike continue the pace of attracting some big marque customers. Last quarter, we talked about Zoom. During Q3, Crowdstrike landed Target as a customer, that highlights how their single-agent, cloud-native architecture, intuitive console and rapid rebootless deployment capabilities continue to be significant differentiators for the company.

“Target was looking to rapidly move away from Symantec and transition to a single-agent cloud solution that could be deployed in days, not months or years. As a fast-growing company with a mature security organization, they were looking for a solution that would enhance their security posture without impacting performance across their expansive estate of business-critical systems. Falcon was deployed across their environment in less than 10 days, allowing them to immediately take advantage of the platform and drive ROI.”

Key Highlights

The following information will be as of FY20 Q3, unless stated otherwise. Any percentage comparisons will be on a YoY basis, unless otherwise stated.

• Q3 Revenues: $232.5 Million +86%

• Q3 Subscription Revenues: $213.53 Million +87%

• Subscription Gross Margin: 77%

• Annual Recurring Revenues (ARR): $907.4 Million +81%

• Q3 Operating Loss: ($24.2 Million)

• Q3 Net Loss: ($24.5 Million)

• Cash from Operations: $88.5 Million

• Free Cash Flow: $76.1 Million

• Total Subscriptions: 8,416 +85%

After the acquisition of Preempt Security, the Falcon Platform is looking like a solid portfolio of offerings to any existing and/or new customers. You can see the new identity protection element below. The Falcon Platform now supports cloud security, security & operations, managed services, endpoint security, identity protection, threat intel and CS store.

The proof is in the pudding. Crowdstrike continue to grow their subscription user base at impressive speeds. I highlight the subscription user base, as subscription revenues represent ~92% of Crowdstrike’s revenues, so they are a big deal.

During Q3, Crowdstrike added 1,186 net new subscription customers, with 64 of those coming from the acquisition of Preempt Security. This means that Crowdstrike now posses 8,416 subscription customers as of Q3, reflecting an 85% growth rate on an annual basis.

This customer base includes 49% of the fortune 100 companies, 55% of the top 20 banks, and 40% of the top 100 global companies.

The thesis would be that, with each additional component to the Falcon Platform, comes some incremental TAM growth for the company as a whole. Crowdstrike indicate that they suspect a $2.2 billion addition to their TAM, as well as citing a $38.7 billion market opportunity by 2023. This is great and all, but I prefer to take the TAM predications from the company themselves with a little pinch of salt. I would trust that management are somewhat cautious with their estimates, but still, my point stands.

Part of the parcel of subscribing to Crowdstrike’s services is the breadth of modules that the Falcon Platform offers. One of the core value-adds is the fact that Crowdstrike consolidate the cyber security space and offer all the necessary services that a customer needs under one roof. During Q3, Crowdstrike introduced three new modules including Falcon Horizon for proactive management of cloud security posture, Falcon X Recon for increased situational awareness of dark web threats and Falcon Forensics, which automates the analysis for incident response investigations. The number of modules now totals 16.

This also allows Crowdstrike to create a more ‘sticky’ environment for customers too. The number of customers adopting multiple modules has steadily increased over time with the number of customers opting to use 4 or more modules reaching 61% as of Q3 2020, up from 52% in Q3 2019, and 27% in Q3 2018.

The number of customers adopting 5 or more modules has now reached 44%.

The number of customers adopting 6 or more modules has now reached 22%.

More subscription customers equals more subscription revenues. When existing customers opt to sign up for additional modules this also contributes to the increase in subscription revenues. The cost of customer acquisition has been spent, thus that same customer opting to take on additional modules is all gravy towards the gross margin. Part of Crowdstrike’s ‘moat’ is their ability to cross-sell their modules to existing clients.

For the year thus far, subscription revenues stood at $560 million, up 88% on the year and, as we know, subscription revenues account for around 92% of overall revenues.

Why do we like subscription revenues? The fact of the matter is that these revenues are recurring, therefore, slightly more secure than that of your typical revenues that include the sale of some good or service.

Long ago, software companies would develop some form of software, and then sell that to customers. This would be a typical cyclical product in the fact that it would create ‘lumpy’ revenues. You know, company X develops software, they sell it to customers and then the sales slow down until a new form of the software has been created.

Nowadays, companies like Crowdstrike sell their services on a recurring basis, in effect renting out their offerings. This is beneficial for the customer and the company renting the offering. The customer receives the service without having to fork out the lump sum at the point of sale, instead gaining access to the service for a smaller subscription fee. The company benefits in that they have some greater certainty of the extent of their cash flows from these sales. Typically, the customer will enter a contract for X months, whereby Crowdstrike can possess some transparent idea about their sales numbers for the year.

ARR is calculated as the annualized value of customer subscription contracts as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms. To the extent that Crowdstrike are negotiating a renewal with a customer after the expiration of the subscription, they continue to include that revenue in ARR if they are actively in discussion with such an organization for a new subscription or renewal, or until such organization notifies us that it is not renewing its subscription.

The level of ARR increased 81% year-over-year and grew to $907.4 million as of Q3, of which $116.8 million was net new ARR added in the three months ended October 31, 2020, including $6.8 million in ARR from the acquisition of Preempt Security.

Crowdstrike’s revenues are 92% recurring, that is strong.

Crowdstrike’s dollar-based net retention rate compares their ARR from a set of subscription customers against the same metric for those subscription customers from the prior year.

The dollar-based net retention rate reflects customer renewals, expansion, contraction, and churn, and excludes revenue from incident response and proactive services. They calculate dollar-based net retention rate as of period end by starting with the ARR from all subscription customers as of 12 months prior to such period end, or Prior Period ARR. They then calculate the ARR from these same subscription customers as of the current period end, or Current Period ARR. Current Period ARR includes any expansion and is net of contraction or churn over the trailing 12 months but excludes revenue from new subscription customers in the current period. They then divide the Current Period ARR by the Prior Period ARR to arrive at dollar-based net retention rate.

Make sense?

The benchmark for net retention is set at 120%, and for some reason the company stopped reporting the exact figure in 2020, which is FY21 for Crowdstrike. They simple state that Q1, Q2, and Q3 exceeds 120%. Not sure why, perhaps I missed that somewhere, but its still above 120%, which is great.

Acquisition of Preempt

So, we know that Crowdstrike acquired Preempt earlier on the quarter for a sum of ~$96 million. It turns out that the final sum was $91.2 million, which was separated into $87.4 million in cash and $3.8 million representing the fair value of the replacement equity awards attributable to pre-acquisition service.

The purchase price was allocated to identified intangible assets, which include developed technology, customer relationships and trade names, of $16.4 million, net tangible assets acquired of $(0.4) million and goodwill of $75.2 million which represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired.

Crowdstrike claim that the goodwill was primarily attributable to the assembled workforce of Preempt Security, planned growth in new markets and synergies expected to be achieved from the integration of Preempt Security.

During the earnings call, George Kurtz, CEO, was asked what the general customer reaction had been around the acquisition and the technology. He responded stating that the reception has been great, and was a feature of cyber security that customers were actively searching for. You can find the full response below.

George Kurtz, CEO:

“It's been a fantastic reception from our customers. This is something that they've been looking for, for some time. They see this as a very unique property that we've acquired and integrated into our solution. They don't see others being able to do that. And combined with our platform, single-agent architecture, it's been a home run. So we're in the process now of field enablement and getting all the sales teams up and running, but early wins with Preempt, and we're really excited about the integration that's forthcoming.”

If you are looking to gain some more insight into what Preempt did as a company, or for an overview of what Zero Trust security is, then I’d advise you read over the newsletter I shared earlier. You can find it below.

Crowdstrike Acquire Preempt Security for $96 Million

Okay, so we have covered the high-level highlights for the quarter, now let us dive into the performance, liquidity and cash flow situation of the company.


Performance

Performance is looking stellar, in that Crowdstrike continue to deliver attractive top line growth, with some contracting losses in their operations and bottom line.

Revenues for the quarter stood at $232.46 million, up 86% from the $125.12 million they reported last year.

For the year thus far, revenues stand at $609.51 million, up 85% from the $329.3 million they reported last year.

In terms of our geographic performance, approximately 72% of third quarter revenue was derived from customers in the U.S., with 14% from Europe, Middle East and Africa markets, 9% from Asia Pacific, and 5% from other markets.

We already mentioned it, but ~92% of the revenues are derived from their subscription revenues. Subscription revenue primarily consists of subscription fees for their Falcon platform and additional cloud modules that are supported by the cloud-based platform. Subscription revenue is driven primarily by the number of subscription customers, the number of endpoints per customer, and the number of cloud modules included in the subscription. Crowdstrike recognize subscription revenue ratably over the term of the agreement, which is generally one to three years. Because subscription customers are generally billed upfront, they have recorded significant deferred revenue, we are going to get to that in the liquidity section.

The remaining 8% is derived from their services. Services revenue includes incident response and proactive services, forensic and malware analysis, and attribution analysis. Professional services are generally sold separately from subscriptions to the Falcon platform, although customers frequently enter into a separate arrangement to purchase subscriptions to the Falcon platform at the conclusion of a professional services arrangement.

For the quarter, subscriptions revenues were $213.53 million, up 86% from the $114.2 million last year. For the year thus far, subscription revenues were $560 million, up 88% from the $297.78 million they reported last year.

Services revenues for the quarter stood at $18.93 million, up 73% from the $10.89 million last year. For the year thus far, services revenues stand at $49.5 million, up 57% from the $31.5 million they reported last year.

The company reported $170 million in gross profit for the quarter, and $446.6 million for the year, up 94% and 93% respectively.

The gross margin on subscriptions is clearly superior.

Services Revenues Gross Margin YTD: 35.45%

Subscription Revenues Gross Margin YTD: 76.6%

For the year thus far, consolidated gross margin stands at ~73%, which has slowly been ticking upwards over the last two years.

If we observe the below chart, we can see that Crowdstrike are expecting further improvement in the gross margin as a whole, and the gross margin on the subscription segment. Note here that these are Non-GAAP gross margins.

Operating expenses were $195 million for the quarter, up from $126 million in 2019, For the year thus far, operating expenses stand at $523.4 million, versus $346.02 million in 2019.

If we want a cleaner way of observing the expenses relative to the rest of the income statement, we can observe the below table, which reflects every line item as a % of revenues.

Take a look at the primary operational expenses in sales and marketing, R&D and G&A.

On both a quarterly and annual basis, each expense is now a smaller portion of revenues than the previous period. Total operational expenses for the year thus far amount to 86% of revenues. In the previous year, they accounted for 105% of revenues.

Things are moving in the right direction, and I love to see it.

Operating losses for the quarter were $24.16 million, down from $38.51 million in the previous year. For the year thus far, operating losses stand at $76.72 million, down from $114.9 million in 2019.

Net losses stand at $24.5 million for the quarter, down from $35.5 million in 2019 Q3. For the year thus far, net losses stand at $73.6 million, down from $113.3 million in 2019.

Clearly, the operating and bottom line losses are contracting, which is a positive sign for future profitability. Now, the company does report that they are profitable in Non-GAAP terms, but i personally prefer to stick with GAAP.

Overall, solid performance. Top line is outpacing operational expenses, losses are narrowing, and margins are improving.

Liquidity

Crowdstrike currently hold ~$1.06 billion in cash, which includes their $87.4 million cash outflow for the acquisition of Preempt Security. Recall that early on in 2020, Crowdstrike liquidated their entire marketable securities book, which at the time represented a realized gain of $1.3 million.

Total current assets stand at $1.34 billion, which more than covers their $702 million in current obligations, and their $934.7 million in total obligations.

Total assets stand at $1.75 billion. We already discussed the surge in goodwill being related to the acquisition premium for Preempt Security.

You’ll notice one of the largest current obligations in Crowdstrike’s book is the deferred revenue line-item which stands at $579.67 million as of Q3, or ~82.5% of total current obligations.

Well Crowdstrike typically invoice the subscription charges to their subscription customers annually in advance. Thus, a pretty substantial source of their cash is for these prepayments, which are included on the balance sheet as deferred revenues. So, in accounting terms, if the customer pays for the service prior to actually receiving the service, then they have not satisfied the criteria for revenue recognition, which means Crowdstrike can’t report these advance payments as sales. Get it?

So these payments will be provided to Crowdstrike, and they will receive the cash, but the sums can’t be reported as revenue, instead being placed on the deferred revenue line item as a liability. As of October 31, 2020, Crowdstrike had deferred revenue of $762.7 million, of which $579.7 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met. The remaining $183 million is non-current deferred revenue, in that they don’t expect it to be recognized as revenue within 12 months.

Once Crowdstrike deliver the service that the customer has paid for, then they will be able to recognize the deferred revenues as actual revenues. If you are not familiar with this concept, it is quite normal, and does not pose any significant significant issues in my opinion. The onus is on Crowdstrike to deliver the product, the customer has already paid the cash.

I just wanted to explain that concept for those of you who may not be familiar with it.

Other than that, Crowdstrike boast a pretty squeaky clean balance sheet, with zero debt. As we are about to see, the company are on the path towards some significant free cash flow generation too, meaning they might not have to dip into debt markets in future if they fund their internal-investing from internal means.

Consensus: Solid balance sheet.

Cash Flows

Cash flows were surprisingly good for the quarter. Cash flows from operations stood at $88.5 million for the quarter, compared to $38.6 million in the previous year. Free cash flows stood at $76.1 million in Q3 compared to $7 million in the third quarter of last year.

For the year thus far, cash flows from operations were $242.1 million compared to $33.83 million last year. This was partly due to the tighter net loss posted during the year of $73.6 million, as well as adjustments for non-cash charges of $182.1 million and net cash inflow of $133.6 million from changes in operating assets and liabilities. Noncash charges primarily consisted of $102.0 million in stock-based compensation expense, $44.9 million of amortization of deferred contract acquisition costs, $27.7 million of depreciation and amortization, and $7.7 million of non-cash operating lease costs. The net cash inflow from changes in operating assets and liabilities was primarily due to a $189.6 million increase in deferred revenue, a $18.7 million increase in accrued payroll and benefits, a $7.9 million increase in other liabilities and a $6.6 million increase in accounts payable, partially offset by $84.7 million increase in deferred contract acquisition costs and a $6.2 million increase in accounts receivable

Free cash flows for the year thus far stand at $201.85 million compared to -$33 million last year.

Impressive free cash flows are a big deal. I say this all the time, but free cash flows reflects the cash flow that the company has free to utilize on paying down debt, internal investment, paying dividends, and buybacks, or simply holding as cash. Crowdstrike do not pay dividends, nor do they buybacks any significant amounts of shares. They also don’t own any debt at the moment, so this free cash flow is all free for business expansion and growth.

At such an early stage, Crowdstrike appear to have cracked the code. They have the early innings of a great cash flow generation model that will allow them to internally fund growth, as opposed to relying on debt and equity dilution via share issuance. At least in theory anyway.

Cash inflows from investing activities totaled $512.72 million for the 9 months of the year thus far. These inflows are primarily due to the sale of marketable securities of $639.6 million as well as the maturity of securities of $91.6 million. This was partially offset by the cash the net cash of business acquired of $85.5 million (Preempt Securities), the purchase of marketable securities of $85.5 million, $40.2 million in PPE and $6.3 million in capitalization of internal software. Investing cash flows represented the largest inflow for the year thus far.

Cash inflows from financing activities stood at $39.6 million, primarily due to the $21.5 million exercise of stock options and the proceeds from employee stock purchase plans of $17.3 million. What is nice here, is that the company are largely generating cash inflows via their own operations (operational cash flows) and their own liquidity management in their investing activities, which is largely the buying and selling of marketable securities. In terms of financing, they are not raising debt, or issuing shares.

This is a superb cash flow statement, and honestly a surprisingly clean one for a company as young as Crowdstrike, who are growing at a super fast clip.

Strong performance, strong liquidity, and an awesome cash flow statement.

Boding very well for Crowdstrike.


A Few Notes from the Call

Here i wanted to share a few interesting quotes from management during the conference call. During the question and answer session.

I have cherry picked some of the responses i found most interesting and useful for you.

QUESTION: “I want to ask about the bigger picture because I'm trying to see how will next year look like. Your growth this year, if I look at the last 4 quarters, it's very stable with 85%, 89%, extremely high. We did not even expect it to be that strong going into the year. As you look into next year, the question I have is, what do you think is -- how will the year look like when you start comparing it to the COVID quarters? Meaning 2Q, 3Q, was COVID such a big factor that we need to be careful with year-over-year comps? And then another question, which is the same but differently, when you look at the various components of your solutions, what are the things that you think will naturally slow down and things that will kick in to give you this great guidance, that's giving you the basis for your great guidance for next year?

And are you concerned of COVID uplift to the numbers this year that may create the difficult comp next year or was not -- this was not a big driver? “

BURT PODBERE, CFO: “Sure, Tal. Thanks for the question. I'll take the first part and turn it over to George for the second part. So of course, we don't specifically guide until next year. We're really excited about being able to go a little deeper in terms of what next year looks like next quarter. And so for us, we're extremely pleased with this quarter, and we're extremely pleased with the momentum that we've seen going into Q4. We entered Q4 with a record pipeline. And I think that, for us, that's a good signal in terms of what we're seeing out there, in terms of demand for our products.

So for us, we think about COVID as more of a catalyst to the acceleration, to the digital security transformation. I think a lot of folks and a lot of companies have purchased laptops to work from home in prior quarters, and we're through that. And so now we're seeing this kind of like steady state of acceleration continuing into the future with respect to demand for cloud products and digital transformation. That's how we see it overall as our broad-based strength continues, and so that's how we think about the future.”

I'll turn it over to George with respect to your second part of your question.”

GEORGE KURTZ, CEO: “Sure. I think just, in general, when you look at our cloud offerings and you look at the new modules that we're delivering at a rapid pace, I think things like Forensics, certainly, Horizon, are all winners for us. We continue to expand the capabilities across all the modules we have. We'll have more modules at some point next year. So it's broad-based demand from lots of modules, and we continue to see strong demand across the board, and we're excited about that. So thank you.”

QUESTION: “If you were to kind of grade the 2 kind of going into next year, where do you see the greatest opportunity? Is it -- do you still have, I guess, in your view, with incremental modules, I mean would you gauge your opportunity in your installed base larger than what you might realize from new customers? Or what do you think will be incrementally more impactful for growth or acceleration in growth over the next several quarters?”

GEORGE KURTZ, CEO: “Hey, Brian, George. I think when you look at our module expansion and you look at our ability to cross-sell with a frictionless process in that trial, things of that nature, I think it's across the board. And there isn't one particular area that just stands out, it's really broad-based strength across all the modules and all the customers. And even from the segment perspective, I mean enterprise all the way down to SMB, we certainly talk a lot about our enterprise deals, but our SMB business has been doing fantastic because of our cloud delivery modules -- or cloud delivery, I should say. It's very easy for smaller companies to adopt this. And in constrained cost times, they're looking for ways to drive efficiency. So across the board, I think broad-based modules, segments and even geographies.”

QUESTION: “I guess I want to start with the net customer additions and just the velocity that you're seeing. And I guess it's -- you touched on it a little bit earlier, but why here? I mean we probably saw the COVID trade or the play in the March quarter and the June quarter, yet you're showing even more meaningful acceleration here. Is there some reason you're hitting an inflection point in your business at this point?”

GEORGE KURTZ, CEO: “Hey, Rob, yes, George here. So you hit the nail on the head. To be clear, when we think about laptop purchases, that's well behind us, right? We're talking about real transformation, real adoption of our technology, consolidation of agents and winning in the market because we've got the best technology solving really big problems that are even beyond security. And that's why you've seen an acceleration in customer adoption. As I mentioned earlier, it's across the board. It's not just enterprise. It's not just mid-market. It's not just SMB. It is across all of those particular areas because the technology works and we're saving companies lots of money and delivering lots of value. So -- and when you think about sort of the COVID piece of it, as I mentioned, that's well behind us. And this is a much more sustainable trend that we see for the foreseeable future as people move to the cloud and transform digitally, they have to have their security transformation as part of that.”

QUESTION: “Okay. Maybe first, for you, George. We've seen Broadcom announce some end of support for some legacy Symantec Endpoint Protection agents. I guess the question is, what are you hearing from customers on that move? And to what extent do you think that encourages customers to maybe explore other options?”

GEORGE KURTZ, CEO: “Thanks, Saket. Well, whenever you have an agent that's being removed or deprecated, traditionally, there's a lift and shift where you have to install another agent and require all kinds of reboots. I think as we've articulated in some of our success stories, our ability to install and get up and running is unparalleled in the industry. So it's a forced function for companies as they think about what they need to do. And I think that's just another accelerator to why people are coming to CrowdStrike. Their unhappiness with some of their support, they're looking for a more modern architecture and a solution that has multiple legs to it, not just anti-malware, is why they're coming. And I think this is just an accelerant in terms of why they would talk to CrowdStrike and choose CrowdStrike.”


Forward Guidance

Crowdstrike have been revising their FY21 revenues all throughout the year. This quarter was no different.

Q1: They guided for $772.6 Million

Q2: They guided for $809.1 to $826.7 Million

Q3: They guided for $855 to $860 Million

For the upcoming quarter, Crowdstrike are guiding for $245.5 million to $250.5 million in revenues, with a $18.5 million to $22.1 million operating income on a non-GAAP basis. They are also guiding for a net incomes of $17.7 million to $21.3 million in non-GAAP terms.

For the full year, the revenue guidance has been raised to $855 million to $860 million, with positive non-GAAP operating and net incomes. Moreover, they are calculating these non-GAAP figures under the assumption of a share count that is 3 million lower.

Not every company is fortunate enough to be able to consistently during a year were the economy dipped into a recession, but Crowdstrike has managed it. Impressive stuff. Based on the historical occurrences, I would take a bet that Crowdstrike once again overdeliver when we arrive at the end of the financial year.

Under promise and over deliver. A sign of excellent management, but also of a company firing on all cylinders.


Summary

So, this was a pretty fantastic quarter for Crowdstrike, and its important to acknowledge the narrative here. The company are not reporting profits, and that is not a concern for me at this stage.

Performance is rocking, liquidity is super strong, and the cash flows are dramatically better than what I had imagined.

Management continue to impress in the earnings call. These guys and gals know their market very well, and the Crowdstrike business appears to be mile ahead of legacy providers. Customers can gain access to a cloud-native operator, who consolidates all their requirements across one platform, and allow for a fast and seamless onboarding process.

I am scoring Crowdstrike a 9 out of 10 for Q3.

Crowdstrike is one of the smaller positions in the portfolio, weighted at ~4.28% currently. Returns right now are hovering around the 140% range. This was once a larger component of my portfolio, but I felt I trimmed some weighting from growth at one stage back by around 5% and Crowdstrike and Square were trimmed. This was prior to Livongo’s merger unfortunately. If i had know about the merger sooner, I would not have sold any Square or Crowdstrike, but I did buy my trimmed shares in Square eventually.

So this was a lesson learned, and one I am thankful for learning all the same.

As time passes, my conviction in Crowdstrike remains strong, and might have even intensified. Conviction is nice, but it means nothing if you are wrong!

Current weighting is fine by me for now.

Overall, really impressed with this quarter.

Until next time,

IT