Solid recurring growth

On Tuesday, CrowdStrike released another solid set of numbers. Sales grew by 20% while earnings declined slightly, which was expected. The consequences of last year's blackout are still filtering through the system. The highly-followed Annual Recurring Revenue (ARR) number came in 22% higher.

Their reaction to the infamous cyber shutdown of July 2024 has been commended by both clients and analysts. They cleverly offered clients new products at discounted rates as a form of apology. This resulted in slower revenue growth and lower margins today, but numbers will jump next year once the discounts expire. Upselling to existing clients who will most likely continue with the new product even after the discount lapses is genius.

Their pay-as-you-go product called Falcon Flex has been incredibly well-received. Clients can add modules as they need them instead of being forced to buy a package with software that is not required. Despite that, the average Flex client uses 9 product modules while the overall client base uses an average of 7. Again, very clever.

AI is making all of CrowdStrike's products more effective, and they have some world-class chatbots that focus on cybersecurity troubleshooting. AI itself has also put so much more data online which now needs cyber protection from CrowdStrike software.

The stock is trading near all-time highs. Uncertain geopolitical times are good for a company like CrowdStrike. This management team has proven itself and their tech is world-class.

CrowdStrike is one of our "future hero" stocks and we are happy so far.