CrowdStrike Holdings, Inc.is moving into the fourth quarter of its fiscal year 2020 on a strong note, nearly doubling subscription revenue and annualized recurring revenue during the third quarter for the period ended October 31, 2019. The company reported subscription revenue of $114.2 million, a 98% increase over the same period last year. The company also saw significant growth in annualized recurring revenue, reporting $501.7 million, a 97% increase year-over-year, and it set a record for net new ARR of $77.9 million, a 32% increase.

Third quarter results well exceeded our expectations and CrowdStrike delivered the best quarter yet in company history with strength in multiple areas of the business including 98% subscription revenue growth and record net new ARR. We achieved two significant milestones as ARR grew 97% year-over-year to exceed half a billion dollars and we generated positive cash flow in the quarter, said George Kurtz, CrowdStrike co-founder and CEO, in a December 5 news release.

Strong demand among organizations across diverse sizes and industries and our frictionless go-to-market engine drove our rapid growth at scale, which we believe continues to demonstrate our growing leadership in the Security Cloud category and ongoing growth potential, added Kurtz.

Other financial highlights for the quarter include:

• Total revenue was $125.1 million, an 88% increase compared to $66.4 million for Q3 FY2019.
• Subscriptions represent about 91.3% of total revenue with the balance coming from professional services.
• Subscription gross margin (GAAP) was 74%, compared to 70% for the same period last year. Non-GAAP gross margin was 76%, compared to 71% for the same period last year.
• Net cash flow from operations was $38.6 million, compared to $3.6 million in Q3 FY2019.
• GAAP loss from operations was $38.5 million, compared to $42.1 million in Q3 FY2019.
• GAAP net loss was $35.5 million, compared to $42.3 million in Q3 FY2019. GAAP net loss per share was $0.17.
• At the end of the quarter, the company had cash, cash equivalents and marketable securities of $833.7 million.

Operational highlights for the quarter include:

• The company added a record 772 net new subscription customers, bringing their total number of subscription customers to 4,561 at the end of the quarter – growth of 112%.
• The companys subscription customers that have adopted four or more cloud modules has increase to more than 50% and customers that have adopted five or more has grown to 30%.
• CrowdStrike announced seven new third-party applications for the CrowdStrike Store.

The company offered the following guidance for the fourth quarter of fiscal year 2020:

• Total revenue between $135.9 million and $138.6 million
• Non-GAAP loss from operations between $19.7 million and $21.6 million
• Non-GAAP net loss between $17.2 million and $19.1 million
• Non-GAAP net loss per share between $0.08 and $0.09

The company offered the following full year guidance for fiscal year 2020:

• Total revenue between $465.2 million and $468.0 million
• Non-GAAP loss from operations between $78.6 million and $80.5 million
• Non-GAAP net loss between $75.8 million and $77.7 million
• Non-GAAP net loss per share between $0.52 and $0.53

MarketWatch reports that CrowdStrikes stock dropped as much as 6% after the earnings report due to a typo in the quarterly results. As of 7:51 p.m. Eastern last night, Crowdstrike stock was valued at $47.30 per share, near its 52-week low of $44.58.

Insider Take:

CrowdStrike is seeing very strong subscription growth in terms of number of customers, products adopted, subscription revenue and annualized recurring revenue, yet the company is still projecting big losses for the year. This is quite a turn from the companys first quarter report, issued in July just six weeks after their IPO. It is still vulnerable and investors will be watching CrowdStrike carefully to see if they can continue to capitalize on their strengths.