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CrowdStrike's George Kurtz on why the company has been successful throughout the pandemic

CrowdStrike CEO George Kurtz joins Yahoo Finance Live to break down the company’s latest earnings report, why the company has been successful during the pandemic and discuss what the future of cloud computing will look like.

Video Transcript

ZACK GUZMAN: We've been talking a lot about companies today that have been hit by the pandemic, but let's talk about a few that have seen quite the boost here in 2020. We got results earlier this week from cybersecurity company CrowdStrike. Shares in that company up more than 200% on the year, and results in the latest quarter also once again beating estimates. Revenue rose to $232.5 million for the quarter. That was up 86% from a year ago and continues the trend of beats from CrowdStrike. And ahead-- it's looking ahead to the next quarter. CrowdStrike also boosting guidance there, seeing revenue up $245.5 million to $250 million, beating consensus estimates there of $230 million there.

For more on all the action at CrowdStrike, I want to welcome back the CEO. George Kurtz joins us here now. George, good to be chatting with you again.

I mean, it's another strong quarter. The trends here continue for you guys. Talk to me about why, though, that it's not just due to the pandemic here since we are now hitting the end of the year. I mean, you would think that that draw forward in demand would have evaporated by now. So what's going on?

GEORGE KURTZ: Well, that's right. If you think about COVID when it hit, you know, you certainly saw a tailwind from new laptops and things of that nature being purchased, but that is well behind us. And really what we see now is the continuation of digital transformation throughout the customer base. And as I like to say, the kindling was what people were going to do is transform and move to the cloud, and really COVID was the match that lit it all.

So, you know, we see sustainable trends. This isn't a one-time blip. And when we look at why we've been successful, we've got the right platform. We're solving really big problems in the security and IT space, and we're delivering a lot of value to customers. And that is something that we've seen, you know, in prior quarters, and it continues forward as we look into 2021.

AKIKO FUJITA: Yeah, so let's try and look ahead here and move the conversation forward, George. How much of the workload do you anticipate will ultimately be in the cloud moving into the next few years? If we're talking about roughly 30% I think is where it's at right now, how much more upside do you see?

GEORGE KURTZ: We see-- we see a lot of upside there. If you think about cloud workloads-- and this has been a particular focus for CrowdStrike. One of the things that we've seen is that workloads in the cloud are actually underprotected. And as people migrate their on-prem systems to the cloud, there generally isn't a one-to-one relationship.

So a good example of that is if I take a server that's on premise and I move it to the cloud, that may represent 10 new workloads, right? They could be ephemeral workloads. They could be serverless, et cetera. So all of those need protection, and all those can be protected with CrowdStrike Falcon. So we see it as a massive opportunity, and it's really in the early innings of that journey.

ZACK GUZMAN: Yeah, and George, when we talk about the early innings here, I mean, you guys upped your estimates for what the total addressable market here looks like in the cybersecurity space, you know, growing by billions even just since you guys IPOed. But where do you see those opportunities in terms of growing it out? Is it more companies that had never really been focusing in on cybersecurity at all, or do you kind of see more opportunities perhaps here to upsell as it becomes more important to companies that may have already been existing customers?

GEORGE KURTZ: Well, you have to look at our platform. Obviously we focus on protecting enterprises and small businesses up and down the line, but it's not just about security. Over the years, we've added things like hygiene, the ability for companies to actually drive cost out of their IT environment because they can touch and feel these endpoints and workloads across the cloud. We've added vulnerability management, intelligence, and lots of other modules. We're now 16 modules.

So a big part of our strategy has been obviously to land with big customers but also cross-sell into that customer base. And we have great net retention numbers above 120% that we reported this quarter.

And the beauty of our business model-- and you see it in our gross margins-- is that we collect data one time and we reuse it many times. So just about every new module is pure margin, and you see the results dropping to the bottom line.

AKIKO FUJITA: George, on the issue of security though, what are the vulnerabilities that you see right now now that we have seen this mass migration to the cloud in such a short period of time?

GEORGE KURTZ: Well, we've got a lot of bad actors out there, whether it's nation state. We saw some of the things happening over the last week with the vaccine. E-crime has been one of the biggest topics, ransomware.

But one of the areas is really making sure that these cloud workloads are secure, and it's in their configuration. And one of the things that we launched at our user conference about a month ago, Fal.Con, is CrowdStrike Falcon Horizon, which looks at the security posture and the configuration of these IS and PaaS service providers so they are not misconfigured. And we see that as a real vulnerability.

The cloud can be incredibly secured, and it is, and the hyperscalers do a great job there. But if you misconfigure it, you can shoot yourself in the foot. And that's what this new module is focused on, and we've seen a tremendous amount of interest in this module since we just launched it.

AKIKO FUJITA: Yeah, and those changing vulnerabilities no doubt only positive for CrowdStrike as you continue to grow in a significant way. George Kurtz is CEO of CrowdStrike. Good to talk to you today.

GEORGE KURTZ: Thank you very much.