CROWDSTRIKE HOLDINGS, INC.

TABLE OF CONTENTS


		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of April 30, ~~2019~~2023 and January 31, ~~2019~~2023	5 6
	Condensed Consolidated Statements of Operations for the Three Months Ended April 30, ~~2019~~2023 and April 30, ~~2018~~2022	6 7
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended April 30, ~~2019~~2023 and April 30, ~~2018~~2022	7 8
	Condensed Consolidated Statements of ~~Redeemable Convertible Preferred Stock and~~ Stockholders’ ~~Deficit~~Equity for the Three Months Ended April 30, ~~2019~~2023 and April 30, ~~2018~~2022	8 9
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, ~~2019~~2023 and April 30, ~~2018~~2022	9 10
	Notes to Condensed Consolidated Financial Statements	10 11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39 26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58 40
Item 4.	Controls and Procedures	59 40

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	60 40
Item 1A.	Risk Factors	60 41
Item 2.	Unregistered Shares of Equity Securities and Use of Proceeds	93 71
Item 3.	Defaults Upon Senior Securities	94 72
Item 4.	Mine Safety Disclosures	94 72
Item 5.	Other Information	94 72
Item 6.	Exhibits	95 72
	Signatures	96 74

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words ~~"believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect"~~“believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements concerning the following:

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development, and general and administrative expenses), and our ability to achieve, and maintain, future profitability;

~~market acceptance of our cloud platform;~~

~~the effects of increased competition in our markets and our ability to compete effectively;~~

~~our ability to maintain the security and availability of our cloud platform;~~

~~our ability to maintain and expand our customer base, including by attracting new customers;~~

~~our ability to develop new solutions, or enhancements to our existing solutions, and bring them to market in a timely manner;~~

~~anticipated trends, growth rates and challenges in our business and in the markets in which we operate;~~

~~our business plan and our ability to effectively manage our growth and associated investments;~~

~~beliefs and objectives for future operations;~~

~~our relationships with third parties, including channel partners and technology alliance partners;~~

~~our ability to maintain, protect and enhance our intellectual property rights;~~

~~our ability to successfully defend litigation brought against us;~~

~~our ability to successfully expand in our existing markets and into new markets;~~

~~sufficiency of cash to meet cash needs for at least the next 12 months;~~

~~our ability to expand internationally;~~

~~our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;~~

~~our ability to implement, maintain, and improve our internal control over financial reporting;~~

~~the attraction and retention of qualified employees and key personnel; and~~

•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development, and general and administrative expenses), and our ability to achieve, and maintain, future profitability;

•market acceptance of our cloud platform;

•the effects of increased competition in our markets and our ability to compete effectively;

•our ability to maintain the security and availability of our cloud platform;

•our ability to maintain and expand our customer base, including by attracting new customers;

•our ability to develop new solutions, or enhancements to our existing solutions, and bring them to market in a timely manner;

•anticipated trends, growth rates and challenges in our business and in the markets in which we operate;

•the impact of the COVID-19 pandemic on our operations, financial results, and liquidity and capital resources, including on customers, sales, expenses, and employees;

•our business plan and our ability to effectively manage our growth and associated investments;

•beliefs and objectives for future operations;

•our relationships with third parties, including channel partners and technology alliance partners;

•our ability to maintain, protect and enhance our intellectual property rights;

•our ability to successfully defend litigation brought against us;

•our ability to successfully expand in our existing markets and into new markets;

•sufficiency of cash and cash equivalents to meet cash needs for at least the next 12 months;

•our ability to expand internationally;

•our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;

•our ability to develop, maintain, and improve our internal control over financial reporting;

•macroeconomic factors, including inflation and instability in the global credit and financial markets;

•our ability to successfully close and integrate acquisitions to contribute to our growth objectives; and

•the attraction and retention of qualified employees and key personnel.

~~the expected date of the expiration of the lock-up agreements entered into in connection with our initial public offering.~~

These statements are based on our current plans, estimates and projections in light of information currently available to us. These forward-looking statements may be affected by risks, uncertainties and other factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under “Risk Factors.” Furthermore, new risks and uncertainties emerge from time to time, and it is impossible for us to predict all risks and uncertainties or how they may affect us. If any of these risks or uncertainties ~~occurs,~~materialize, our business, revenue and financial results could be harmed, and the trading price of our Class A common stock could decline. Forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.

We intend to announce material information to the public through the CrowdStrike Investor Relations website ir.crowdstrike.com, SEC filings, press releases, public conference calls, and public webcasts. We use these channels, as well as social media and our blog, to communicate with our investors, customers, and the public about our company, our offerings, and other issues. It is possible that the information we post on social media and our blog could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including the social media channels listed on our investor relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties, any one of which could materially adversely affect our business, results of operations, financial condition and growth prospects. Below is a summary of some of these risks. This summary is not complete, and should be read together with the entire section titled “Risk Factors” in this Quarterly Report on Form 10-Q, as well as the other information in this Quarterly Report on Form 10-Q and the other filings that we make with the SEC.

•We have experienced rapid growth in recent periods, and if we do not manage our future growth, our business and results of operations will be adversely affected.

•We have a history of losses, and while we have achieved profitability in a period, we may not be able to achieve or sustain profitability in the future.

•If organizations do not adopt cloud-based SaaS-delivered endpoint security solutions, our ability to grow our business and results of operations may be adversely affected.

•If we are unable to successfully enhance our existing products and services and introduce new products and services in response to rapid technological changes and market developments as well as evolving security threats, our competitive position and prospects will be harmed.

•If we are unable to attract new customers, our future results of operations could be harmed.

•If our customers do not renew their subscriptions for our products and add additional cloud modules to their subscriptions, our future results of operations could be harmed.

•Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense,

•We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition, and results of operations.

•If our solutions fail or are perceived to fail to detect or prevent incidents or have or are perceived to have defects, errors, or vulnerabilities, our brand and reputation would be harmed, which would adversely affect our business and results of operations.

•As a cybersecurity provider, we have been, and expect to continue to be, a target of cyberattacks. If our internal networks, systems, or data are or are perceived to have been breached, our reputation may be damaged and our financial results may be negatively affected.

•We rely on third-party data centers, such as Amazon Web Services, and our own colocation data centers, to host and operate our Falcon platform, and any disruption of or interference with our use of these facilities may negatively affect our ability to maintain the performance and reliability of our Falcon platform, which could cause our business to suffer.

•We rely on our key technical, sales and management personnel to grow our business, and the loss of one or more key employees could harm our business.

•If we are unable to attract and retain qualified personnel, our business could be harmed.

•Our results of operations may fluctuate significantly, which could make our future results difficult to predict and could cause our results of operations to fall below expectations.

•Claims by others that we infringe their proprietary technology or other intellectual property rights could result in significant costs and substantially harm our business, financial condition, results of operations, and prospects.

•If we are not able to comply with applicable data protection, security, privacy, and other government- and industry-specific laws, regulations, standards or requirements, our business, results of operations, and financial condition could be harmed.

•Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our results of operations and financial condition.

PART I. FINANCIAL INFORMATION

~~Item~~

ITEM 1. ~~Financial Statements~~

FINANCIAL STATEMENTS

CrowdStrike Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

April 30,

January 31,

2019

2019
Assets




Current assets:




Cash and cash equivalents

$
92,993

$
88,408
Marketable securities

82,066

103,247
Accounts receivable, net of allowance for doubtful accounts of $0.7 million and $1.0 million as of April 30, 2019 and January 31, 2019, respectively

87,355

92,476
Deferred contract acquisition costs, current

26,193

28,847
Prepaid expenses and other current assets

22,644

18,410
Total current assets

311,251

331,388
Property and equipment, net

86,349

73,735
Deferred contract acquisition costs, noncurrent

38,004

9,918
Goodwill

7,809

7,947
Intangible assets, net

879

1,048
Other assets

13,069

9,183
Total assets

$
457,361

$
433,219
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Deficit


Current liabilities:


Accounts payable

$
9,915

$
6,855
Accrued expenses

31,185

32,541
Accrued payroll and benefits

12,683

19,284
Deferred revenue

244,271

218,700
Other current liabilities

4,667

4,040
Total current liabilities

302,721

281,420
Deferred revenue, noncurrent

70,941

71,367
Other liabilities, noncurrent

10,964

10,313
Total liabilities

384,626

363,100
Commitments and contingencies (Note 11)


Redeemable Convertible Preferred Stock


Redeemable convertible preferred stock, $0.0005 par value; 137,419 shares authorized as of both April 30, 2019 and January 31, 2019; 131,268 shares issued and outstanding as of both April 30, 2019 and January 31, 2019; liquidation preference $545,000 as of both April 30, 2019 and January 31, 2019

557,912

557,912
Stockholders’ Deficit


Common stock, $0.0005 par value; 220,000 shares authorized as of both April 30, 2019 and January 31, 2019; 48,127, and 47,421 shares issued and outstanding as of April 30, 2019 and January 31, 2019, respectively

24

24
Additional paid-in capital

36,670

31,211
Accumulated deficit

(521,685)

(519,126)
Accumulated other comprehensive income (loss)

(186)

98
Total stockholders’ deficit

(485,177)

(487,793)
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit

$
457,361

$
433,219

April 30, January 31,
2023 2023
Assets
Current assets:
Cash and cash equivalents $ 2,829,677 $ 2,455,369
Short-term investments 100,000 250,000
Accounts receivable, net of allowance for credit losses of $3.0 million and $2.6 million as of April 30, 2023 and January 31, 2023, respectively 461,092 626,181
Deferred contract acquisition costs, current 186,901 186,855
Prepaid expenses and other current assets 131,100 121,862
Total current assets 3,708,770 3,640,267
Strategic investments 57,877 47,270
Property and equipment, net 523,721 492,335
Operating lease right-of-use assets 50,459 39,936
Deferred contract acquisition costs, noncurrent 254,397 260,233
Goodwill 430,755 430,645
Intangible assets, net 83,215 86,889
Other long-term assets 28,664 28,965
Total assets $ 5,137,858 $ 5,026,540
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 16,900 $ 45,372
Accrued expenses 91,494 137,884
Accrued payroll and benefits 151,099 168,767
Operating lease liabilities, current 16,215 13,046
Deferred revenue 1,788,304 1,727,484
Other current liabilities 16,052 16,519
Total current liabilities 2,080,064 2,109,072
Long-term debt 741,377 741,005
Deferred revenue, noncurrent 615,487 627,629
Operating lease liabilities, noncurrent 36,774 29,567
Other liabilities, noncurrent 29,797 31,833
Total liabilities 3,503,499 3,539,106
Commitments and contingencies (Note 8)
Stockholders’ Equity
Preferred stock, $0.0005 par value; 100,000 shares authorized as of April 30, 2023 and January 31, 2023; no shares issued and outstanding as of April 30, 2023 and January 31, 2023. — —
Class A common stock, $0.0005 par value; 2,000,000 shares authorized as of April 30, 2023 and January 31, 2023; 224,123 shares and 222,759 shares issued and outstanding as of April 30, 2023 and January 31, 2023, respectively; Class B common stock, $0.0005 par value; 300,000 shares authorized as of April 30, 2023 and January 31, 2023; 12,976 shares and 13,018 shares issued and outstanding as of April 30, 2023 and January 31, 2023, respectively. 118 118
Additional paid-in capital 2,752,716 2,612,705
Accumulated deficit (1,147,672) (1,148,163)
Accumulated other comprehensive income (loss) 139 (1,019)
Total CrowdStrike Holdings, Inc. stockholders’ equity 1,605,301 1,463,641
Non-controlling interest 29,058 23,793
Total stockholders’ equity 1,634,359 1,487,434
Total liabilities and stockholders’ equity $ 5,137,858 $ 5,026,540

The accompanying notes are an integral part of these condensed consolidated financial statements.

CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months Ended April 30,


2019

2018
Revenue




Subscription

$
85,990

$
39,758
Professional services

10,087

7,531
Total revenue

96,077

47,289

Cost of revenue




Subscription

23,691

15,171
Professional services

5,582

4,223
Total cost of revenue

29,273

19,394

Gross profit

66,804

27,895

Operating expenses




Sales and marketing

56,843

36,617
Research and development

23,875

17,615
General and administrative

11,861

6,777
Total operating expenses

92,579

61,009

Loss from operations

(25,775)

(33,114)
Interest expense

(1)

(192)
Other income (expense), net

394

(190)

Loss before provision for income taxes

(25,382)

(33,496)

Provision for income taxes

(595)

(121)

Net loss

$
(25,977)

$
(33,617)

Net loss per share attributable to common stockholders, basic and diluted

$
(0.55)

$
(0.77)

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

47,205

43,614


	Three Months Ended April 30,
	2023		2022
Revenue
Subscription	$	651,175	$	459,822
Professional services	41,405		28,012
Total revenue	692,580		487,834

Cost of revenue
Subscription	142,100		107,942
Professional services	27,130		18,890
Total cost of revenue	169,230		126,832

Gross profit	523,350		361,002

Operating expenses
Sales and marketing	281,107		193,532
Research and development	179,065		123,399
General and administrative	82,634		67,954
Total operating expenses	542,806		384,885

Loss from operations	(19,456)		(23,883)
Interest expense	(6,387)		(6,298)
Interest income	30,521		1,507
Other income, net	230		1,705

Income (loss) before provision for income taxes	4,908		(26,969)

Provision for income taxes	4,409		3,440

Net income (loss)	499		(30,409)
Net income attributable to non-controlling interest	8		1,114
Net income (loss) attributable to CrowdStrike	$	491	$	(31,523)

Net income (loss) per share attributable to CrowdStrike common stockholders:
Basic	$	0.00	$	(0.14)
Diluted	$	0.00	$	(0.14)

Weighted-average shares used in computing net income (loss) per share attributable to CrowdStrike common stockholders:
Basic	236,414		231,179
Diluted	240,598		231,179

The accompanying notes are an integral part of these condensed consolidated financial statements.

CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Comprehensive ~~Loss~~

Income (Loss)

(in thousands)

(unaudited)

Three Months Ended April 30,


2019

2018

Net loss

$
(25,977)

$
(33,617)
Other comprehensive loss:




Foreign currency translation adjustments

(280)

(332)
Unrealized loss on available-for-sale securities, net of tax

(4)

—
Other comprehensive loss

(284)

(332)
Total comprehensive loss

$
(26,261)

$
(33,949)


	Three Months Ended April 30,
	2023		2022
Net income (loss)	$	499	$	(30,409)
Other comprehensive income (loss):
Foreign currency translation adjustments	1,158		(2,948)

Other comprehensive income (loss)	1,158		(2,948)
Less: Comprehensive income attributable to non-controlling interest	8		1,114
Total comprehensive income (loss) attributable to CrowdStrike	$	1,649	$	(34,471)

The accompanying notes are an integral part of these condensed consolidated financial statements.

CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of ~~Redeemable Convertible Preferred Stock and~~ Stockholders’ ~~Deficit~~

Equity

Three Months Ended April 30, ~~2019~~

2023 and 2022

(in thousands)

(unaudited)

Redeemable

Accumulated

Convertible

Additional

Other

Total

Preferred Stock

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders'


Shares

Amount


Shares

Amount

Capital

Deficit

Income (Loss)

Deficit

Balances at January 31, 2019

131,268

$
557,912

47,421

$
24

$
31,211

$
(519,126)

$
98

$
(487,793)
Cumulative effect of accounting change

—

—

—

—

—

23,418

—

23,418
Issuance of common stock upon exercise of options

—

—

706

—

1,510

—

—

1,510
Vesting of early exercised options

—

—

—

—

144

—

—

144
Stock-based compensation expense

—

—

—

—

3,752

—

—

3,752
Capitalized stock-based compensation

—

—

—

—

53

—

—

53
Net loss

—

—

—

—

—

(25,977)

—

(25,977)
Other comprehensive loss

—

—

—

—

—

—

(284)

(284)
Balances at April 30, 2019

131,268

$
557,912

48,127

$
24

$
36,670

$
(521,685)

$
(186)

$
(485,177)

~~CrowdStrike Holdings, Inc.~~

~~Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit~~

~~Three Months Ended April 30, 2018~~

~~(in thousands)~~

~~(unaudited)~~

Redeemable

Accumulated

Convertible

Additional

Other

Total

Preferred Stock

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders'


Shares

Amount


Shares

Amount

Capital

Deficit

Income (Loss)

Deficit

Balance at January 31, 2018

118,693

$
351,016

44,231

$
22

$
8,482

$
(378,948)

$
970

$
(369,474)
Cumulative effect of accounting change

—

—

—

—

101

(101)

—

—
Issuance of common stock upon exercise of options

—

—

499

—

751

—

—

751
Issuance of common stock related to early exercise options

—

—

38

—

—

—

—

—
Issuance of restricted stock awards

—

—

6

—

—

—

—

—
Vesting of early exercised options

—

—

—

—

14

—

—

14
Stock-based compensation expense

—

—

—

—

1,719

—

—

1,719
Net loss

—

—

—

—

—

(33,617)

—

(33,617)
Other comprehensive loss

—

—

—

—

—

—

(332)

(332)
Balance at April 30, 2018

118,693

$
351,016

44,774

$
22

$
11,067

$
(412,666)

$
638

$
(400,939)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (loss)		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balances at January 31, 2023	235,777	$	118	$	2,612,705	$	(1,148,163)	$	(1,019)	$	23,793	$	1,487,434
Issuance of common stock upon exercise of options	375	—		2,651		—		—		—		2,651
Issuance of common stock under RSU and PSU release	933	—		—		—		—		—		—




Issuance of common stock for founders holdbacks related to acquisitions	13	—		1,649		—		—		—		1,649
Issuance of common stock for board of directors	1	—		79		—		—		—		79
Stock-based compensation expense	—	—		129,130		—		—		—		129,130
Capitalized stock-based compensation	—	—		6,502		—		—		—		6,502

Net income	—	—		—		491		—		8		499
Non-controlling interest	—	—		—		—		—		5,257		5,257
Other comprehensive income	—	—		—		—		1,158		—		1,158
Balances at April 30, 2023	237,099	$	118	$	2,752,716	$	(1,147,672)	$	139	$	29,058	$	1,634,359


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balances at January 31, 2022	230,706	$	115	$	1,991,807	$	(964,918)	$	(1,240)	$	11,879	$	1,037,643
Issuance of common stock upon exercise of options	407	1		3,104		—		—		—		3,105
Issuance of common stock under RSU and PSU release	886	—		—		—		—		—		—
Vesting of early exercised options	—	—		735		—		—		—		735
Issuance of common stock for founders holdbacks related to acquisitions	19	—		3,704		—		—		—		3,704
Stock-based compensation expense	—	—		100,776		—		—		—		100,776
Capitalized stock-based compensation	—	—		2,928		—		—		—		2,928

Net income (loss)	—	—		—		(31,523)		—		1,114		(30,409)
Non-controlling interest	—	—		—		—		—		1,463		1,463
Other comprehensive loss	—	—		—		—		(2,948)		—		(2,948)
Balances at April 30, 2022	232,018	$	116	$	2,103,054	$	(996,441)	$	(4,188)	$	14,456	$	1,116,997

The accompanying notes are an integral part of these condensed consolidated financial statements.

CrowdStrike Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended April 30,
2023 2022
Operating activities
Net income (loss) $ 499 $ (30,409)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 26,409 16,341
Amortization of intangible assets 4,174 4,088
Amortization of deferred contract acquisition costs 55,322 37,592
Non-cash operating lease cost 3,092 2,237
Stock-based compensation expense 130,856 102,494
Deferred income taxes (255) 1,752
Non-cash interest expense 754 669
Change in fair value of strategic investments — (2,208)
Changes in operating assets and liabilities, net of impact of acquisitions
Accounts receivable, net 165,089 (1,058)
Deferred contract acquisition costs (49,532) (51,354)
Prepaid expenses and other assets (8,542) 4,243
Accounts payable (18,596) (36,431)
Accrued expenses and other liabilities (36,576) (7,300)
Accrued payroll and benefits (17,281) 13,235
Operating lease liabilities (3,199) (2,210)
Deferred revenue 48,678 163,276
Net cash provided by operating activities 300,892 214,957
Investing activities
Purchases of property and equipment (62,264) (52,211)
Capitalized internal-use software and website development costs (10,902) (5,214)
Purchases of strategic investments (10,513) (2,825)
Purchases of intangible assets — (700)
Proceeds from sales of investments 150,000 —
Purchases of deferred compensation investments (290) —
Net cash provided by (used in) investing activities 66,031 (60,950)
Financing activities
Proceeds from issuance of common stock upon exercise of stock options 2,651 3,106
Capital contributions from non-controlling interest holders 5,257 1,462
Net cash provided by financing activities 7,908 4,568
Effect of foreign exchange rates on cash, cash equivalents and restricted cash (190) (2,472)
Net increase in cash, cash equivalents and restricted cash 374,641 156,103
Cash, cash equivalents and restricted cash at beginning of period 2,456,924 1,996,633
Cash, cash equivalents and restricted cash at end of period $ 2,831,565 $ 2,152,736
Cash, cash equivalents and restricted cash at the end of period:
Cash and cash equivalents $ 2,829,677 $ 2,152,736
Restricted cash included in prepaid expenses and other assets 1,888 —
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows $ 2,831,565 $ 2,152,736
Supplemental disclosure of cash flow information:
Interest paid $ 11,250 $ 11,265
Income taxes paid, net of refunds received 3,377 3,948
Supplemental disclosure of non-cash investing and financing activities:
Net increase (decrease) in property and equipment included in accounts payable and accrued expenses (22,479) 13,165
Vesting of early exercised stock options — 735
Operating lease liabilities arising from obtaining operating right of-use assets 13,847 —
Purchases of intangible assets included in accrued expenses and other liabilities 500 —

Three Months Ended April 30,


2019

2018
Operating activities




Net loss

$
(25,977)

$
(33,617)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:




Depreciation and amortization

4,873

2,983
Amortization of intangible assets

146

166
Amortization of deferred contract acquisition costs

7,345

5,596
Change in fair value of redeemable convertible preferred stock warrant liability

1,167

—
Allowance for doubtful accounts

(254)

85
Stock-based compensation expense

3,752

1,719
Accretion of marketable securities purchased at a discount

(513)

(7)
Other

(424)

47
Changes in operating assets and liabilities




Accounts receivable

5,375

20,684
Deferred contract acquisition costs

(8,471)

(5,026)
Prepaid expenses and other assets

(4,049)

1,202
Accounts payable

2,818

2,316
Accrued expenses and other current liabilities

(2,407)

(7,328)
Accrued payroll and benefits

(6,601)

(4,297)
Deferred revenue

24,812

9,395
Other liabilities, noncurrent

(177)

(311)
Net cash provided by (used in) operating activities

1,415

(6,393)
Investing activities




Purchases of property and equipment

(15,541)

(8,649)
Capitalized internal-use software

(1,984)

(1,707)
Purchases of marketable securities

(51,805)

—
Proceeds from sales of marketable securities

4,473

—
Maturities of marketable securities

68,995

2,600
Net cash provided by (used in) investing activities

4,138

(7,756)
Financing activities




Repayment of notes receivable from related parties

—

198
Payments of indemnity holdback

—

(500)
Payments of deferred offering costs

(2,392)

—
Proceeds from issuance of common stock upon exercise of stock options

1,510

751
Net cash provided by (used in) financing activities

(882)

449

Effect of foreign exchange rates on cash and cash equivalents

(86)

(74)

Net increase (decrease) in cash and cash equivalents

4,585

(13,774)

Cash and cash equivalents, beginning of period

88,408

63,179
Cash and cash equivalents, end of period

$
92,993

$
49,405

Supplemental disclosure of cash flow information:





Interest paid

$
1

$
191
Income taxes paid

114

187

Supplemental disclosure of non-cash investing and financing activities:





Indemnity holdback consideration associated with business combinations

—

1,799
Contingent consideration associated with business combinations

—

686
Net change in deferred offering costs, accrued but not paid

(1,210)

—
Net change in property and equipment included in accounts payable and accrued expenses

(54)

(539)

The accompanying notes are an integral part of these condensed consolidated financial ~~statements.~~

statements.

CrowdStrike Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and ~~Basis of Presentation~~

Significant Accounting Policies

Business

CrowdStrike Holdings, Inc. (the “Company”) was formed on November 7, 2011. The Company is a global cybersecurity leader that provides ~~a leading~~ cloud-delivered ~~solution for next-generation endpoint~~ protection ~~that offers 10~~of endpoints, cloud ~~modules on its Falcon platform~~workloads, identity, and data via a ~~SaaS~~software as a service (“SaaS”) subscription-based model that spans multiple ~~large~~ security markets, including ~~endpoint~~corporate workload security, security and vulnerability management, managed security services, IT operations ~~(including vulnerability management),~~management, threat intelligence services, identity protection, and ~~threat intelligence. The Company is headquartered in Sunnyvale, California.~~log management. The Company conducts its business in the United States, as well as locations internationally, including in Australia, Germany, India, Israel, Romania, and the United Kingdom.

The Company has funded its operations through several rounds of financings with net proceeds totaling $493.0 million through April 30, 2019. However, the Company has incurred losses and negative cash flows from operations since inception. As of April 30, 2019, the Company had an accumulated deficit of $521.7 million. Management of the Company expects that operating losses and negative cash flows from operations will continue for the foreseeable future. While management believes that the Company’s cash and cash equivalents and marketable securities as of April 30, 2019 are adequate to meet its needs for at least the next twelve months, the Company may need to borrow funds or raise additional equity to achieve its longer term business objectives.

On June 14, 2019, the Company closed its initial public offering ("IPO"), in which it sold 20,700,000 shares of Class A common stock. The shares were sold at a public offering price of $34.00 per share for net proceeds of $659.1 million, after deducting underwriters’ discounts and commissions and estimated offering expenses of $44.7 million. Immediately prior to the closing of the IPO, all outstanding shares of redeemable convertible preferred stock automatically converted into 131,267,586 shares of Class B common stock on a one-to-one basis. Additionally, in connection with the IPO all of the Company’s outstanding common stock was reclassified into shares of Class B common stock on a one-for-one basis. Redeemable convertible preferred stock warrants also converted into 336,386 warrants to purchase Class B common stock on a one-to-one basis.

~~2. Summary of Significant Accounting Policies~~

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in ~~accordance~~conformity with U.S. generally accepted accounting principles ~~in the United States of America, ("~~(“U.S. ~~GAAP"~~GAAP”), and applicable rules and regulations of the Securities and Exchange Commission ~~("SEC"~~(“SEC”), regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of January 31, ~~2019,~~2023, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by U.S. GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all ~~adjustments (consisting only of~~ normal recurring ~~adjustments)~~adjustments that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three months ended April 30, ~~2019~~2023 are not necessarily indicative of the results to be expected for the year ending January 31, ~~2020~~2024 or for any other interim period or for any other future year.

The accompanying interim unaudited condensed consolidated financial statements and related financial information should be read in conjunction with Item 8, “Financial Statements and Supplementary Data” included in the ~~audited consolidated financial statements and the related notes thereto~~Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2019 included in the Company’s prospectus dated June 11, 2019~~2023, filed with the SEC ~~pursuant to Rule 424(b) under the Securities Act of 1933, as amended.~~

on March 9, 2023.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable required disclosures and regulations of the SEC. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2019, included in the Company’s prospectus dated June 11, 2019.

~~JOBS Act Accounting Election~~

The Company is an "emerging growth company" ("EGC") as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). An EGC may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies, including, but not limited to, delayed adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act"), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

The Company may take advantage of these exemptions until it is no longer an EGC. The Company would cease to be an EGC upon the earliest to occur of: (i) the first fiscal year following the fifth anniversary of its initial public offering; (ii) the first fiscal year after annual gross revenue is $1.0 billion or more; (iii) the date on which the Company has, during the previous three-year period, issued more than $1.07 billion in non-convertible debt securities; or (iv) the date on which the Company qualifies as a "large accelerated filer," as defined in Rule 12b-2 under the Exchange Act, which would occur at the end of any fiscal year in which the market value of the Company’s common stock held by non-affiliates exceeded $700.0 million as of the end of the second quarter of that fiscal year, and as of the end of such fiscal year the Company has been a reporting company for at least 12 months.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company’s condensed consolidated financial statements and accompanying notes. These estimates are based on information available as of the date of the condensed consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Actual results may differ from these estimates and such ~~difference~~differences could be material to the Company’s condensed consolidated financial statements.

~~Significant estimates~~

Estimates and assumptions used by management ~~affect~~include, but are not limited to, revenue recognition, the allowance for ~~doubtful accounts, the carrying value of long-lived assets,~~credit losses, the useful lives of long-lived assets, the fair ~~value~~values of ~~financial instruments,~~strategic investments, the period of benefit for deferred contract acquisition costs, the discount rate used for operating leases, the recognition, measurement and disclosure of contingent liabilities, ~~the provision for~~ income ~~taxes and related deferred~~ taxes, stock-based compensation, and the fair value of ~~the Company’s common stock~~assets acquired and ~~redeemable convertible preferred stock warrants.~~

liabilities assumed in business combinations.

Concentration of Credit Risk and Geographic Information

The Company generates revenue from the sale of subscriptions to access its cloud platform and professional services. The Company’s sales team, along with its channel partner network of system integrators and value-added resellers (collectively, “channel partners”), sells the Company’s services worldwide to organizations of all sizes. Due to the nature of the Company’s services and the terms and conditions of the Company’s contracts with its channel partners, the Company’s business could be affected unfavorably if it is not able to continue its relationships with them.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, short-term investments, accounts receivable, and ~~accounts receivable.~~strategic investments. The Company’s cash is placed with high-credit-quality financial institutions and issuers, and at times ~~exceed~~exceeds federally insured limits. ~~The Company limits its concentration of risk in cash equivalents and marketable securities by diversifying its investments among a variety of industries and issuers.~~ The Company has not experienced any credit loss relating to its cash, cash equivalents, ~~and marketable securities.~~short-term investments, or strategic investments. The Company performs periodic credit evaluations of its customers and generally does not require collateral.

~~Outstanding accounts receivable from one~~

There were no channel partners or direct customers who represented 10% or more of the Company’s ~~channel partners accounted for 11% of its consolidated~~ accounts receivable as of April 30, ~~2019. No channel partner accounted for 10% or more of the Company’s consolidated accounts receivable as of~~2023 and January 31, 2019. Outstanding accounts receivable from one of the Company’s direct customers accounted for 11% of its consolidated accounts receivable as of April 30, 2019. Outstanding accounts receivable from two of the Company’s direct customers accounted for 10% and 19% of its consolidated accounts receivable as of January 31, 2019.

~~Revenue from sales to one of the Company’s~~2023.

There were no channel partners ~~accounted for 12% and 17% of its consolidated revenue for the three months ended April 30, 2019 and April 30, 2018, respectively.~~

~~There were no~~or direct customers who represented 10% or more of the Company’s total revenue ~~during~~for each of the three months ended April 30, ~~2019 or April 30, 2018.~~

~~Cash Equivalents~~2023 and ~~Marketable Securities~~

The Company considers all highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents. Cash equivalents as of April 30, 2019 and January 31, 2019 consisted of corporate debt securities and money market funds stated at fair value. The Company classifies investments in marketable securities as available-for-sale securities at the time of purchase, since it is the Company’s intent that these investments are available to support current operations. Marketable securities are classified as current or long-term based on the nature of the investments and their availability for use in current operations. Available-for-sale securities are carried at fair value with unrealized gains and losses, if any, included in accumulated other comprehensive income (loss). Unrealized losses are recorded in other income (expense), net, for declines in fair value below the cost of an individual investment that is deemed to be other-than-temporary. The Company did not identify any marketable securities as other-than-temporarily impaired as of April 30, 2019 and January 31, 2019. The Company determines realized gains or losses on the sale of marketable securities on a specific identification method and records such gains or losses in other income (expense), net. Marketable securities as of April 30, 2019 and January 31, 2019 consisted of corporate debt securities and U.S. treasury securities.

~~Fair Value of Financial Instruments~~

2022.

Significant Accounting Policies

The Company’s financial instruments consist of cash equivalents, marketable securities, accounts receivable, accounts payable, accrued expenses, redeemable convertible preferred stock warrant liability, and loans payable. The carrying values of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term nature.

~~The Company reports the redeemable convertible preferred stock warrant liability at fair value (see Note 3,~~ ~~Fair Value Measurements~~~~). The warrants issued by the Company for redeemable convertible preferred stock in January 2015, December 2016, and March 2017 (see Note 7,~~ ~~Redeemable Convertible Preferred Stock~~) have been recorded as a liability based on “Level 3” inputs, which consist of unobservable inputs and reflect management’s estimates of assumptions that market participants would use in pricing the liability. The fair value of the warrants was determined using the Black-Scholes option-pricing model, which is affected by changes in inputs to that model including the Company’s stock price, expected stock price volatility, risk-free rate, and contractual term.

~~Accounts Receivable and Allowance for Doubtful Accounts~~

~~Accounts receivable~~significant accounting policies are recorded at the invoiced amount and are non-interest bearing. Accounts receivable are stated at their net realizable value, net of an allowance for doubtful accounts. The Company has a well-established collections history from its customers. Credit is extended to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral from its customers; however, the Company may require payment prior to commencing service in certain instances to limit credit risk. The Company records an allowance for doubtful accounts based on management’s assessment of the collectability of accounts. Management regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoice, each customer’s expected ability to pay, and the collection history with each customer, when applicable, to determine whether the allowance is appropriate. Amounts deemed uncollectible are written off against the allowance for doubtful accounts. As of April 30, 2019 and January 31, 2019, the allowance for doubtful accounts was $0.7 million and $1.0 million, respectively.

~~Deferred Offering Costs~~

Deferred offering costs of $4.0 million and $2.9 million have been recorded as other assets on the condensed consolidated balance sheet as of April 30, 2019 and January 31, 2019, respectively, and consist of expenses incurred in connection with the Company’s IPO, including legal, accounting, printing, and other IPO-related costs. Upon closing of the IPO on June 14, 2019 these deferred offering costs were reclassified to stockholders’ equity and recorded against the proceeds from the offering.

~~Property and Equipment, Net~~

Property and equipment, net, is stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets as follows:


~~Data center and other computer equipment~~		~~3 – 5 years~~
~~Furniture and equipment~~		~~5 years~~
~~Purchased software~~		~~3 – 5 years~~
~~Capitalized internal-use software~~		~~3 years~~
~~Leasehold improvements~~		~~Estimated useful life or term of the lease, whichever is shorter~~

Expenditures for routine maintenance and repairs are charged to operating expense as incurred. Major renewals and improvements are capitalized and depreciated over their estimated useful lives. Upon retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is recorded in operating expenses in the condensed consolidated statements of operations.

~~Capitalized Internal-Use Software~~

The Company capitalizes certain development costs incurred in connection with its internal-use software. These capitalized costs are primarily related to the Company’s cloud-delivered solution for next-generation endpoint protection. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as property and equipment, net. Maintenance and training costs are expensed as incurred. Internal-use software is amortized to cost of revenue on a straight-line basis over its estimated useful life of three years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. There were no impairments of internal-use software during the three months ended April 30, 2019 and April 30, 2018. The Company capitalized $2.0 million and $1.7 million in internal-use software during the three months ended April 30, 2019 and April 30, 2018, respectively. Amortization expense associated with internal-use software totaled $1.5 million

and $1.1 million during the three months ended April 30, 2019 and April 30, 2018, respectively. The net book value of capitalized internal-use software was $12.0 million and $11.5 million as of April 30, 2019 and January 31, 2019, respectively.

~~Intangible Assets, Net~~

Intangible assets, net, consisting of developed technology, customer relationships, and non-compete agreements, are stated at cost less accumulated amortization. All intangible assets have been determined to have definite lives and are amortized on a straight-line basis over their estimated economic lives of three to five years. Amortization expense related to developed technology is included in cost of revenue, amortization expense related to customer relationships is included in sales and marketing expenses, and amortization expense related to non-compete agreements is included in research and development expenses.

~~Deferred Contract Acquisition Costs~~

The Company capitalizes contract acquisition costs that are incremental to the acquisition of customer contracts. Contract acquisition costs are accrued and capitalized upon execution of the sales contract by the customer. Sales commissions for renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract or follow-on upsell given the substantive difference in commission rates in proportion to their respective contract values. Commissions, including referral fees paid to channel partners, paid upon the initial acquisition of a contract or subsequent upsell are amortized over an estimated period of benefit of four years while commissions paid for renewal contracts are amortized over the contractual term of the renewals. Sales commissions associated with professional service contract are amortized ratably over an estimated period of benefit of six months. Amortization of deferred contract acquisition costs is recognized on a straight-line basis commensurate with the pattern of revenue recognition and included in sales and marketing expense in the condensed consolidated statements of operations. The Company capitalized contract acquisition costs of $8.5 million and $5.0 million, which is under ASC 605, during the three months ended April 30, 2019 and April 30, 2018, respectively. Contract acquisition cost amortization expense was $7.3 million and $5.6 million, which is under ASC 605, during the three months ended April 30, 2019 and April 30, 2018, respectively.

~~Impairment of Long-Lived Assets~~

The Company reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset (or asset group) may not be recoverable. Events and changes in circumstances considered by the Company in determining whether the carrying value of long-lived assets may not be recoverable, include, but are not limited to: significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, and changesdescribed in the Company’s ~~business strategy. Impairment testing is performed at an asset level that represents~~Annual Report on Form 10-K for the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (an “asset group”). An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset (or asset group) and its eventual disposition is less than its carrying amount. No impairment indicators were identified by the Company and no impairment losses were recorded by the Company during the three monthsyear ended ~~April 30, 2019 and April 30, 2018.~~

~~Deferred Revenue~~

~~The deferred revenue balance consists of subscription and professional services which~~January 31, 2023. There have been invoiced upfront and are recognized as revenue only when the revenue recognition criteria are met. The Company typically invoices its customers at the beginning of the term, or in some instances, such as in multi-year arrangements, in installments. Professional services are either invoiced upfront, invoiced in installments, or invoiced as the services are performed. Accordingly, the Company’s deferred revenue balance does not include revenues for future years of multi-year non-cancellable contractsno significant changes to these policies that have ~~not yet been billed.~~

The Company recognizes subscription revenue ratably over the contract term beginning on the commencement date of each contract, the date that services are made available to customers. Once services are available to customers, the Company records amounts due in accounts receivable and in deferred revenue. To the extent the Company bills customers in advance of the contract commencement date, the accounts receivable and corresponding deferred revenue amounts are netted to zero on the condensed consolidated balance sheets, unless such amounts have been paid as of the balance sheet date.

~~Redeemable Convertible Preferred Stock Warrants~~

~~Warrants related to the Company’s redeemable convertible preferred stock are classified as liabilities~~had a material impact on the Company’s ~~consolidated balance sheet. The warrants are subject to reassessment at each balance sheet date, and any change in fair value is recognized as a component of other income (expense), net, in the~~ condensed consolidated financial statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the expiration or exercise of the warrants, or upon their automatic conversion into warrants to purchase common stock in connection with a qualified initial public offering (as defined in Note 7, ~~Redeemable Convertible Preferred Stock~~~~) such that they qualify for equity classification~~ and ~~no further remeasurement is required.~~

~~Revenue Recognition – ASC 606~~

The Company adopted ASC 606 on February 1, 2019, using the modified retrospective transition method. Under this method, results for reporting periods beginning on February 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with prior accounting under Topic 605. The Company has shown the effect of applying ASC 606related notes for the three months ended April 30, ~~2019 in the disclosures below.~~

The Company recorded a cumulative effect adjustment to opening accumulated deficit of $23.4 million, net of tax, as of the date of adoption. The change resulted from a $23.7 million reduction in the amortization of deferred contract acquisition costs offset by a $0.3 million reduction in revenue.

The following tables summarize the effect of the adoption of Topic 606 on the Company’s select line items included in the condensed consolidated financial statements as of and for the three months ended April 30, 2019, as if the previous accounting was in effect:

April 30, 2019

January 31, 2019

As Reported

Impact of

Without Adoption

As Reported


(ASC 606)

Adoption

(ASC 605)

(ASC 605)

(in thousands)
Condensed Consolidated Balance Sheet
















Assets:








Deferred contract acquisition costs, current

$
26,193

$
1,815

$
28,008

$
28,847
Deferred contract acquisition costs, noncurrent

38,004

(30,337)

7,667

9,918








Liabilities:








Accrued expenses

31,185

(555)

30,630

32,541
Deferred revenue, current

244,271

(250)

244,021

218,700
Deferred revenue, noncurrent

70,941

—

70,941

71,367








Stockholders' Equity:








Accumulated deficit

(521,685)

(27,717)

(549,402)

(519,126)

2023.

Three Months Ended April 30, 2019

Three Months Ended April 30, 2018

As Reported

Impacts of

Without Adoption

As Reported


(ASC 606)

Adoption

(ASC 605)

(ASC 605)

(in thousands)
Condensed Consolidated Statement of Operations
















Revenue

$
96,077

$
(83)

$
95,994

$
47,289
Operating expenses:








Sales and marketing

56,843

4,216

61,059

36,617








Net loss

(25,977)

(4,299)

(30,276)

(33,617)








Net loss per share, basic and diluted

$
(0.55)



$
(0.64)

$
(0.77)

The adoption of Topic 606 had no impact on net cash provided by or used in operating, investing, or financing activities in the Company’s condensed consolidated statement of cash flows for the three months ended April 30, 2019.

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services. To achieve the core principle of this standard, the Company applies the following five steps:

~~Identify the contract with a customer~~

The Company considers the terms and conditions of contracts with customers and its customary business practices in identifying contracts under ASC 606. The Company determines it has a contract with a customer when the contract is approved, each party’s rights regarding the services to be transferred can be identified, payment terms for the services can be identified, it has been determined that the customer has the ability and intent to pay, and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.

~~Identify the performance obligations in the contract~~

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from the Company or from third parties, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. The Company’s performance obligations consist of (i) subscriptions and (ii) professional services.

~~Determine the transaction price~~

The transaction price is determined based on the consideration which the Company is expected to be entitled to in exchange for transferring services to the customer. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component.

~~Allocate the transaction price to performance obligations in the contract~~

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price ("SSP").

~~Recognize revenue when or as performance obligations are satisfied~~

Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised service to the customer. Revenue is recognized when control of the services is transferred to the customer, in an amount that reflects the consideration expected to be received in exchange for those services. The Company generates all its revenue from contracts with customers.

~~Subscription Revenue~~

The Company’s Falcon Platform technology solutions are subscription, software as a service (“SaaS”) offerings designed to continuously monitor, share, and mitigate risks from determined attackers. Customers do not have the right to take possession of the cloud-based software platform. Fees are based on several factors, including the solutions subscribed for by the customer and the number of endpoints purchased by the customer. The subscription fees are typically payable within 30 to 60 days after the execution of the arrangement, and thereafter upon renewal or subsequent installment. The Company initially records the subscription fees as deferred revenue and recognizes revenue on a straight-line basis over the term of the agreement.

The typical subscription term is one to three years. Most of the Company’s contracts are non-cancelable over the contractual term. Customers typically have the right to terminate their contracts for cause if the Company fails to perform in accordance with the contractual terms. Some customers have the option to purchase additional subscription at a stated price. These options generally do not provide a material right as they are priced at our SSP.

~~Professional Services Revenue~~

The Company offers several types of professional services including incident response and forensic services, surge forensic and malware analysis, and attribution analysis, which are focused on responding to imminent and direct threats, assessing vulnerabilities, and recommending solutions. These services are distinct from subscription services. Professional services do not result in significant customization of the subscription service. The professional services are available through hourly rate and fixed fee contracts, one-time and ongoing engagements, and retainer-based agreements. Revenue for time and materials arrangements is recognized as services are performed and revenue for fixed fees is recognized on a proportional performance basis as the services are performed.

~~Contracts with Multiple Performance Obligations~~

Some contracts with customers contain multiple promised services consisting of subscription and professional services that are distinct and accounted for separately. The transaction price is allocated to the separate performance obligations on a relative SSP basis. The SSP is the price at which the Company would sell promised subscription or professional services separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation. The Company determines SSP based on its overall pricing objectives, taking into consideration the type of subscription or professional service and the number of endpoints.

~~Variable Consideration~~

Revenue from sales is recorded at the net sales price, which is the transaction price, and includes estimates of variable consideration. The amount of variable consideration that is included in the transaction price is constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue will not occur when the uncertainty is resolved.

If subscriptions do not meet certain service level commitments, the Company’s customers are entitled to receive service credits, and in certain cases, refunds, each representing a form of variable consideration. The Company has historically not experienced any significant incidents affecting the defined levels of reliability and performance as required by its subscription contracts. Accordingly, any estimated refunds related to these agreements in the condensed consolidated financial statements is not material during the periods presented.

The Company provides rebates and other credits within its contracts with certain resellers, which are estimated based on the most likely amounts expected to be earned or claimed on the related sales transaction. Overall, the transaction price is reduced to reflect the Company’s estimate of the amount of consideration to which it is entitled based on the terms of the contract. Estimated rebates and other credits were not material during the periods presented.

~~Revenue Recognition – ASC 605~~

Prior to adopting ASC 606 on February 1, 2019, the Company recognized subscription and professional services when: (1) persuasive evidence of the contract exists in the form of a written contract, amendments to that contract, or purchase orders from a third party; (2) delivery has occurred, or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured based on customer creditworthiness and history of collection.

The timing and the amount the Company recognized as revenue was determined based on the facts and circumstances of each customer’s arrangements. Evidence of an arrangement consisted of a signed customer agreement. The Company considered that the delivery of its solution had commenced once it provided the customer with log-in information and the term of the contract had started. Fees were fixed based on stated rates specified in the customer agreement. The Company assessed collectability based on several factors, including the credit worthiness of the customer and transaction history. If collectability was not reasonably assured, revenue was deferred until the fees were collected.

For arrangements that involve the contemporaneous sale of subscription and professional services, the Company applied the multiple-element arrangement guidance to allocate the arrangement consideration to all deliverables based on their relative selling price. The Company determined that the cloud-based platform subscription has standalone value, because once access is given to the customer, the solutions are fully functional and do not require any additional development, modification, or customization. Professional services have standalone value because they are regularly sold by the Company in separate transactions. Additionally, the performance of these professional services generally does not require highly specialized or technologically skilled individuals and the professional services are not essential to the functionality of the solutions.

The Company used a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (‘‘VSOE’’); (ii) third-party evidence of selling price (‘‘TPE’’); and (iii) best estimate of selling price (‘‘BESP’’). BESP reflected the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis. The Company’s process for determining BESP involved management’s judgment and considered numerous factors including the nature of the deliverables themselves and historical discounting practices. The Company updated its estimates of BESP on an ongoing basis as events and circumstances required.

~~Research and Development Expense~~

Research and development costs are expensed when incurred, except for certain internal-use software development costs, which may be capitalized as noted above. Research and development expenses consist primarily of personnel and related headcount costs, costs of professional services associated with the ongoing development of the Company’s technology, and allocated overhead.

~~Advertising~~

All advertising costs are expensed as incurred and are included in sales and marketing expense in the condensed consolidated statements of operations. The Company incurred $1.1 million and $0.5 million of advertising costs during the three months ended April 30, 2019 and April 30, 2018, respectively.

~~Stock-Based Compensation~~

The Company accounts for stock-based awards granted to employees and directors based on the awards’ estimated grant date fair value. The Company estimates the fair value of its stock options using the Black-Scholes option-pricing model. The resulting fair value is recognized on a straight-line basis over the period during which the employee or director is required to provide service in exchange for the award, usually the vesting period, which is generally four years. The Company accounts for forfeitures as they occur.

Prior to the Company’s adoption of ASU 2018-07, stock-based awards issued to non-employees were accounted for at fair value determined by using the Black-Scholes option-pricing model. The Company believes that the fair value of the stock options is more reliably measured than the fair value of the services received. The fair value of each non-employee stock-based award is remeasured each period until a commitment date is reached, which is generally the vesting date. The Company early adopted ASU 2018-07 on February 1, 2019 and began accounting for stock-based awards issued to non-employees the same as it accounts for stock-based awards issued to employees. The effect on the Company’s condensed consolidated financial statements for the three months ended April 30, 2019 was not material.

Restricted stock units ("RSUs") granted under the 2011 Plan are subject to a service-based vesting condition and a performance-based vesting condition. The service-based vesting condition is generally satisfied based on one of three vesting schedules: (i) vesting of one-fourth of the RSUs on the first "Company vest date" (defined as March 20, June 20, September 20, or December 20) on or following the one-year anniversary of the vesting commencement date with the remainder of the RSUs vesting in twelve equal quarterly installments thereafter, subject to continued service, (ii) vesting in sixteen equal quarterly installments beginning on December 20, 2018, subject to continued service, or (iii) vesting in eight equal quarterly installments beginning on December 20, 2022, subject to continued service. The performance-based vesting condition is satisfied on the earlier of (i) a change in control, in which the consideration paid to holders of shares is either cash, publicly traded securities, or a combination thereof, or (ii) the first Company vest date to occur following the expiration of the lock-up period upon an IPO, subject to continued service through such change in control or lock-up expiration, as applicable. None of the RSUs vest unless the performance-based vesting condition is satisfied. As of April 30, 2019 the performance based vesting condition had not yet been met, and thus no stock-based compensation relating to these RSUs was recognized. In the quarter in which the performance-based vesting condition is met, the Company will begin recording stock-based compensation expense using the accelerated attribution method based on the grant date fair value of the RSUs. As of April 30, 2019, the total amount of stock-based compensation expense deferred related to this performance-based vesting condition was approximately $13.0 million.

~~Business Combinations~~

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the condensed consolidated statement of operations.

~~Goodwill and Intangible Assets~~

The Company evaluates and tests the recoverability of goodwill for impairment at least annually, on January 31, or more frequently if circumstances indicate that goodwill may not be recoverable. The Company performs the impairment testing by first assessing qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of its reporting unit is less than its carrying amount. The Company has one reporting unit. If, after assessing the totality of events or circumstances, the

Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs the first step of a two-step analysis by comparing the book value of net assets to the fair value of the reporting unit. To calculate any potential impairment, the Company compares the fair value of a reporting unit with its carrying amount, including goodwill. Any excess of the carrying amount of the reporting unit’s goodwill over its fair value is recognized as an impairment loss, and the carrying value of goodwill is written down. In assessing the qualitative factors, the Company considers the impact of certain key factors including macroeconomic conditions, industry and market considerations, management turnover, changes in regulation, litigation matters, changes in enterprise value, and overall financial performance. No impairment was recorded during the three months ended April 30, 2019 or April 30, 2018. The change in goodwill balance during the three months ended April 30, 2019 and April 30, 2018 was due to changes in foreign currency exchange rates.

Acquired intangible assets consisting of identifiable intangible assets, were comprised of developed technology, customer relationships, and non-compete agreements resulting from acquisitions. Acquired intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated economic lives following the pattern in which the economic benefits of the assets will be consumed which is on a straight-line basis. Acquired intangible assets are presented net of accumulated amortization on the condensed consolidated balance sheets. The Company reviews the carrying amounts of intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company measures the recoverability of intangible assets by comparing the carrying amount of each asset to the future undiscounted cash flows it expects the asset to generate. If the Company considers any of these assets to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value. In addition, the Company periodically evaluates the estimated remaining useful lives of long-lived assets to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation or amortization.

~~Leases~~

The Company leases its office space under various noncancelable operating lease agreements and recognizes related rent expense on a straight-line basis over the term of the lease. Certain lease agreements contain rent holidays, scheduled rent increases, lease incentives, and renewal options. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term. Lease incentives are recognized as a reduction of rent expense on a straight-line basis over the term of the lease. Renewals are not assumed in the determination of the lease term unless they are deemed to be reasonably assured at the inception of the lease. The Company begins to recognize rent expense on the date that the Company obtains the legal right to use and control the leased space.

~~Foreign Currency Translation~~

The functional currencies of the Company’s foreign subsidiaries are each country’s local currency. Assets and liabilities of the subsidiaries are translated into U.S. Dollars at exchange rates in effect at the reporting date. Amounts classified in stockholders’ deficit are translated at historical exchange rates. Revenue and expenses are translated at the average exchange rates during the period. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss). Foreign currency transaction gains or losses, whether realized or unrealized, are reflected in the condensed consolidated statements of operations within other expense, net, and have not been material for all periods presented.

~~Income Taxes~~

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company accounts for unrecognized tax benefits using a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company

establishes a liability for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The Company records an income tax liability, if any, for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on the Company’s tax returns. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The liability is adjusted considering changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of liability provisions and changes to the liability that are considered appropriate. As the Company maintained a full valuation allowance against its deferred tax assets, the changes resulted in no additional tax expense during the three months ended April 30, 2019 or April 30, 2018. As of April 30, 2019, the Company does not expect that changes in the liability for unrecognized tax benefits for the next twelve months will have a material impact on its condensed consolidated financial statements.

~~Sales Taxes~~

When sales and other taxes are billed, such amounts are recorded as accounts receivable with a corresponding increase to other current liabilities, respectively. The balances are then removed from the condensed consolidated balance sheet as cash is collected from the customer and as remitted to the respective tax authority.

~~Segment and Geographic Information~~

The Company’s chief operating decision maker (“CODM”) is its chief executive officer. The CODM reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating financial performance. Accordingly, management has determined that the Company operates as one operating and reportable segment. The Company presents financial information about its geographic areas in Note 12 to the condensed consolidated financial statements.

~~Net Loss per Share~~

Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. The Company considers all series of its redeemable convertible preferred stock to be participating securities. Net income is attributed to common stockholders and participating securities based on their participation rights. Net loss attributable to common stockholders is not allocated to the redeemable convertible preferred stock as the holders of the redeemable convertible preferred stock do not have a contractual obligation to share in any losses.

Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options and redeemable convertible preferred stock. As the Company has reported losses for all periods presented, all potentially dilutive securities including redeemable convertible preferred stock, stock options, and warrants, are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.

Recently ~~Issued~~Adopted Accounting Pronouncements

Under the JOBS Act, the Company meets the definition of an emerging growth company. The Company has elected to use the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

In ~~February 2016,~~October 2021, the FASB issued ASU ~~No. 2016-02,~~ ~~Leases~~. The new guidance supersedes current guidance related to accounting for leases and generally requires an entity to recognize on its balance sheet operating and financing lease liabilities and corresponding right-of-use assets. In July 2018, the FASB issued ASU No. 2018-10, ~~Codification Improvements to Topic 842~~. This ASU makes 16 technical corrections to the new lease standard and other accounting topics, alleviating unintended consequences from applying the new standard. It does not make any substantive changes

~~to the core provisions or principles of the new standard. In July 2018, the FASB also issued ASU No. 2018-11,~~ ~~Leases~~2021-08, Business Combinations (Topic ~~842)~~805): ~~Targeted Improvements~~. This ASU provides (1) an optional transition method that entities can use when adopting the standard and (2) a practical expedient that permits lessors to not separate non-lease components from the associated lease component if certain conditions are met. As an emerging growth company as defined in the JOBS Act, the Company has elected to delay adoption of this ASU until February 1, 2020. ASU No. 2016-02 can be adopted using either full or modified retrospective approach as of the earliest period presented or as of the adoption date with the cumulative effect adjustment to the opening balance recognized in retained earnings in the period of adoption. The Company is currently evaluating the potential impact of these ASUs on its condensed consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. This ASU simplifies the measurement of goodwill by eliminating step two of the two-step impairment test. Step two measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This ASU requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. As an emerging growth company defined in the JOBS Act, the Company has elected to delay adoption of this ASU until February 1, 2022. The Company is currently evaluating the potential impact of this ASU on its condensed consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~~~. This ASU modifies the disclosure requirements on fair value measurements in Topic 820,~~ ~~Fair Value Measurement~~. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. As an emerging growth company as defined in the JOBS Act, the Company has elected to delay adoption of this ASU until February 1, 2020. The Company is currently evaluating the potential impact of this ASU on its condensed consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-15,~~ ~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s~~ Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service~~ Contract (a consensus of the FASB Emerging Issues Task Force). This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. As an emerging growth company defined in the JOBS Act, the Company has elected to delay adoption of this ASU until February 1, 2021. Entities can choose to adopt this ASU prospectively or retrospectively. The Company is currently evaluating the potential impact of this ASU on its condensed consolidated financial statements.

~~Recently Adopted Accounting Pronouncements~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue~~Assets and Contract Liabilities from Contracts with Customers, ~~(Topic 606)~~, which ~~provides guidance for revenue recognition. Under the new guidance, revenue is recognized when~~requires that an entity recognize and measure contract assets and contract liabilities acquired in a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. In addition, the guidance requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Subsequently, the FASB has issued the following guidance to amend ASU 2014-09: ASU No. 2015-14, ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~~~; ASU No. 2016-08,~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~~~; ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing~~~~; ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~~~; and ASU No. 2016-20,~~ ~~Technical Corrections and Improvements to Topic 606~~, which clarifies narrow aspects of Topic 606 or corrects unintended application of the guidance. The Company must adopt ASU No. 2015-14, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-20 with ASU No. 2014-09, which are referred to collectively

as the “new revenue guidance.” On February 1, 2019, the company adopted ASU No. 2014-09 using the modified retrospective transition method. Under this method, results for reporting periods beginning on February 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reportedbusiness combination in accordance with our historical accounting under Topic 605. The Company recorded a cumulative effect adjustment to opening accumulated deficit of $23.4 million, net of tax, as of the date of adoption. The change resulted from a $23.7 million reduction in commissions expense that we capitalized under Topic 606 ~~but would have been recognized during~~as if it had originated the ~~period as commissions expense under our historical accounting practices under Topic 605 and a $0.3 million reduction in revenue that would have been recognized during the period under Topic 605.~~

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~, which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of transferred assets and activities is not a business. On February 1, 2019, the Company adopted ASU No. 2018-07, which did not have a material effect on the Company’s condensed consolidated financial statements.

~~In June 2018, the FASB issued ASU No. 2018-07,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.~~ ~~This ASU simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU is effective for~~contracts. For public business ~~entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other~~ entities, this ASU is effective for fiscal years beginning after December 15, ~~2019,~~2022, and interim periods within those fiscal ~~years beginning after December 15, 2020. Early adoption is permitted, but no earlier than the adoption date of Topic 606. On~~years. The Company adopted this guidance on February 1, ~~2019, the Company adopted ASU No. 2018-07,~~2023, which did not have a material effect on ~~the Company’s~~its condensed consolidated financial statements.

~~In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532,~~ ~~Disclosure Update~~

2. Investments and ~~Simplification~~. This release amends certain disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The final rule was effective November 5, 2018. The Company adopted this amendment as of February 1, 2019, including presenting the activity of the stockholder’s equity accounts in the accompanying Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the periods presented.

3. Fair Value Measurements ~~and Marketable Securities~~

The Company follows ASC 820, Fair Value Measurements, with respect to ~~marketable securities~~cash equivalents that are measured at fair value on a recurring basis. Under the standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability ~~developed~~ based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability ~~developed~~ based upon the best information available in the circumstances.

The hierarchy is broken down into three levels as follows:

~~Level 1~~

~~Assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in active markets~~

~~Level 2~~

~~Assets and liabilities whose values are based on quoted prices in markets that are not active or inputs that are observable for substantially the full term of the asset or liability~~

Level 1 Assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in active markets

Level 2 Assets and liabilities whose values are based on quoted prices in markets that are not active or inputs that are observable for substantially the full term of the asset or liability

Level 3 Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement

~~Level 3~~

~~Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement~~

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis are as ~~follows:~~

follows (in thousands):

April 30, 2019

January 31, 2019


Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

(in thousands)

(in thousands)
Assets
















Cash equivalents⁽¹⁾
















Money market funds

$
48,499

$
—

$
—

$
48,499

$
42,132

$
—

$
—

$
42,132
Corporate debt securities

—

33,861

—

33,861

—

27,941

—

27,941
US treasuries

—

5,493

—

5,493

—



—


Total cash equivalents

48,499

39,354

—

87,853

42,132

27,941

—

70,073
Marketable securities
















Corporate debt securities

—

75,124

—

75,124

—

91,796

—

91,796
US treasuries

—

6,942

—

6,942

11,451

—

—

11,451
Total marketable securities

—

82,066

—

82,066

11,451

91,796

—

103,247
Total assets

$
48,499

$
121,420

$
—

$
169,919

$
53,583

$
119,737

$
—

$
173,320
Liability
















Contingent consideration related to business combinations⁽²⁾

—

—

—

—

—

—

$
474

$
474
Redeemable convertible preferred stock warrant liability

—

—

5,704

5,704

—

—

4,537

4,537
Total liabilities

$
—

$
—

$
5,704

$
5,704

$
—

$
—

$
5,011

$
5,011

~~(1)~~

~~Included in “Cash and cash equivalents” on the condensed consolidated balance sheets.~~

~~(2)~~

The contingent consideration consists of development milestone payments. The fair value of the contingent consideration was estimated by developing the risk-adjusted discounted value as well as discounted probability-weighted expected payments. That measure is based on Level 3 inputs which are significant inputs that are not observable in the market. Key assumptions at the acquisition date included (a) a discount rate range of 3%-3.02% and (b) three probability-adjusted milestone payments, each $0.2 million. As of January 31, 2019, the first milestone payment of $0.2 million had been made. As of April 30, 2019, the remaining milestones were deemed not probable of being paid and the remaining contingent consideration of $0.5 million was written off to Other income (expense), net.


	April 30, 2023								January 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Assets(1)
Cash equivalents (2)
Money market funds	$	2,630,767	$	—	$	—	$	2,630,767	$	64,752	$	—	$	—	$	64,752
Other assets
Deferred compensation investments	359		—		—		359		64		—		—		64
Total assets	$	2,631,126	$	—	$	—	$	2,631,126	$	64,816	$	—	$	—	$	64,816

(1)$100.0 million and $250.0 million of time deposits, which are included in short-term investments, are excluded since they are carried at cost and approximate fair value as of April 30, 2023 and January 31, 2023, respectively.

(2)Cash equivalents exclude an immaterial amount of time deposits, which are carried at cost and approximate fair value, as of April 30, 2023. Cash equivalents exclude $1.6 billion of time deposits, which are carried at cost and approximate fair value, as of January 31, 2023.

There were no transfers between the levels of the fair value hierarchy during the ~~three months ended April 30, 2019 or April 30, 2018.~~

~~The remaining contractual maturities of marketable securities as of April 30, 2019 and January 31, 2019 were less than one year.~~

periods presented.

The following summarizes the changes in the ~~redeemable convertible preferred stock warrant liability,~~net carrying value of strategic investments, which ~~is classified as a~~are Level 3, ~~instrument:~~

Three Months Ended April 30,

2019

2018

(in thousands)

Balance at beginning of period

$
4,537

$
961
Adjustment resulting from change in fair value recognized in the consolidated statements of operations

1,167

—
Balance at end of period

$
5,704

$
961

~~The~~within the fair value of the redeemable convertible preferred stock warrant liability was estimated using the Black-Scholes option-pricing model and was based on significant inputs not observable in the market, and therefore was classified as a Level 3 instrument. The inputs include the Company’s preferred stock price, expected stock price volatility, risk-free interest rate, and contractual term. A loss of $1.2 million and $0 was recorded as a component of Other income (expense), net, because of the remeasurement of the redeemable convertible preferred stock warrant liability duringhierarchy for the three months ended April 30, ~~2019~~2023 and April 30, ~~2018,~~2022 (in thousands):
April 30, 2023 April 30, 2022
Carrying amount, beginning of period $ 47,270 $ 23,632
Adjustments related to non-marketable securities:
Purchases 10,607 2,825
Unrealized net gains due to changes in fair value — 2,207
Carrying amount, end of period $ 57,877 $ 28,665

Cumulative unrealized gains and losses for equity securities held as of April 30, 2023 are $9.6 million and $2.9 million, respectively.

3. Balance Sheet Components

~~Prepaid Expenses and Other Current Assets~~

~~Prepaid expenses and other current assets consisted of the following:~~

April 30,

January 31,

2019

2019

(in thousands)

Prepaid expenses

$
16,861

$
14,390
Prepaid hosting services

4,280

2,915
Other current assets

1,503

1,105
Prepaid expenses and other current assets

$
22,644

$
18,410

Property and Equipment, Net

Property and equipment, net consisted of the ~~following:~~

following (in thousands):

April 30,

January 31,

2019

2019

(in thousands)

Data center and other computer equipment

$
49,526

$
44,735
Capitalized internal-use software

24,247

22,209
Leasehold improvements

10,075

10,011
Purchased software

1,456

1,460
Furniture and equipment

3,442

2,553
Construction in process

29,147

19,455

117,893

100,423
Less: Accumulated depreciation and amortization

(31,544)

(26,688)
Property and equipment, net

$
86,349

$
73,735

April 30, 2023 January 31, 2023
Data center and other computer equipment $ 351,174 $ 297,585
Capitalized internal-use software and website development costs 128,263 113,276
Leasehold improvements 24,747 24,944
Purchased software 9,019 6,384
Furniture and equipment 7,395 7,412
Construction in progress 245,732 259,013
766,330 708,614
Less: Accumulated depreciation and amortization (242,609) (216,279)
Property and equipment, net $ 523,721 $ 492,335

Construction in ~~process mainly~~progress primarily includes data center equipment purchased that has not yet been placed in service. ~~As of April 30, 2019, $28.5 million of data~~Data center equipment that was purchased but not yet been placed into ~~service.~~

service was $226.1 million as of April 30, 2023.

Depreciation and amortization expense of property and equipment was ~~$4.9~~$26.4 million and ~~$3.0~~$16.3 million during the three months ended April 30, ~~2019~~2023 and April 30, ~~2018,~~2022, respectively.

~~Intangible Assets, Net~~

~~Total intangible assets, net consisted~~

There was no impairment of property and equipment during the ~~following:~~

Weighted-Average

April 30,

January 31,

Remaining Useful

2019

2019

Life

(in thousands)

(in months)

Developed technology

$
1,250

$
1,269

17
Customer relationships

617

632

42
Non-compete agreement

123

126

18

1,990

2,027

Less: Accumulated amortization

(1,111)

(979)

Intangible assets, net

$
879

$
1,048

three months ended April 30, 2023 and April 30, 2022. The Company capitalized $16.6 million and $8.1 million in internal-use software and website development costs during the three months ended April 30, 2023 and April 30, 2022, respectively. Amortization expense ~~of intangible assets was $0.1~~associated with internal-use software and website development costs totaled $7.5 million and ~~$0.2~~$4.3 million during the three months ended April 30, ~~2019~~2023 and April 30, ~~2018,~~2022, respectively.

The net book value of capitalized internal-use software and website development costs was $75.5 million and $66.3 million as of April 30, 2023 and January 31, 2023, respectively.

Intangible Assets, Net

Total intangible assets, net consisted of the following (dollars in thousands):


	April 30, 2023						Weighted-Average Remaining Useful Life
	Gross Carrying Amount		Accumulated Amortization		Net Amount
							(in months)
Developed technology	$	101,467	$	29,458	$	72,009	65
Customer relationships	12,044		4,290		7,755		59
Other acquired intangible assets	5,220		1,769		3,451		144
Total	$	118,732	$	35,516	$	83,215


	January 31, 2023						Weighted-Average Remaining Useful Life
	Gross Carrying Amount		Accumulated Amortization		Net Amount
							(in months)
Developed technology	$	101,452	$	25,866	$	75,586	68
Customer relationships	12,032		3,831		8,201		61
Other acquired intangible assets	4,717		1,615		3,102		147
Total	$	118,201	$	31,312	$	86,889

Amortization expense of intangible assets was $4.2 million and $4.1 million during the three months ended April 30, 2023 and April 30, 2022, respectively.

The estimated aggregate future amortization expense of intangible assets as of April 30, ~~2019~~2023 is as ~~follows:~~

follows (in thousands):

Total

(in thousands)

Fiscal 2020 (remaining nine months)

$
332
Fiscal 2021

333
Fiscal 2022

126
Fiscal 2023

88
Fiscal 2024

—
Total amortization expense

$
879

Total
Fiscal 2024 (remaining nine months) $ 12,308
Fiscal 2025 16,409
Fiscal 2026 15,322
Fiscal 2027 13,147
Fiscal 2028 12,634
Thereafter 13,395
Total amortization expense $ 83,215

The developed technology, customer relationships, and ~~non-compete agreement~~other acquired intangible assets are ~~being~~ amortized over ~~3 years, 5 years, and 3 years, respectively.~~

their estimated useful lives, generally on a straight-line basis, for periods ranging from 2 to 20 years.

Goodwill

The changes in goodwill during the three months ended April 30, 2023 consisted of the following (in thousands):


	Amounts

Goodwill as of January 31, 2023	$	430,645


Foreign currency translation	110
Goodwill as of April 30, 2023	$	430,755

Accrued Expenses

Accrued expenses consisted of the ~~following:~~

April 30,

January 31,

2019

2019

(in thousands)

Web hosting services

$
10,621

$
12,224
Accrued purchases of property and equipment

6,258

7,042
Other vendor expenses

13,081

12,326
Amounts due for employee expenses

1,225

949
Accrued expenses

$
31,185

$
32,541

following (in thousands):


	April 30, 2023		January 31, 2023
Web hosting services	$	33,729	$	65,589
Accrued marketing	14,202		11,435

Accrued professional services	13,390		13,281
Other accrued expenses	11,596		11,247
Accrued purchases of property and equipment	8,204		20,157
Accrued partner commissions	5,623		5,800
Accrued interest expense	4,750		10,375
Accrued expenses	$	91,494	$	137,884

Accrued Payroll and Benefits

Accrued payroll and benefits consisted of the ~~following:~~

following (in thousands):

April 30,

January 31,

2019

2019

(in thousands)

Accrued payroll and related expenses

$
2,895

$
4,326
Accrued bonuses

5,223

5,459
Accrued commissions

4,565

9,499
Accrued payroll and benefits

$
12,683

$
19,284

5.
April 30, 2023 January 31, 2023
Accrued commissions $ 46,396 $ 77,287
Employee Stock Purchase Plan 40,814 17,475
Accrued payroll and related expenses 38,395 39,907
Accrued bonuses 25,494 34,098
Accrued payroll and benefits $ 151,099 $ 168,767

4. Debt

Secured Revolving Credit Facility

In April 2019, the Company entered into a Credit Agreement with Silicon Valley Bank and other lenders, to provide a revolving line of credit of up to $150.0 million, including a letter of credit sub-facility in the aggregate amount of $10.0 million, and a swingline sub-facility in the aggregate amount of $10.0 million.

On January 4, 2021, the Company amended and restated its existing credit agreement (the “A&R Credit Agreement” and the facility thereunder the “Revolving Facility”) among CrowdStrike, Inc., as borrower, CrowdStrike Holdings, Inc., as guarantor, and Silicon Valley Bank and the other lenders party thereto, providing the Company with a revolving line of credit of up to $750.0 million, including a letter of credit sub-facility in the aggregate amount of $100.0 million, and a swingline sub-facility in the aggregate amount of $50.0 million. The Company also has the option to request an incremental facility of up to an additional ~~$75.0~~$250.0 million from one or more of the lenders under the A&R Credit Agreement. The ~~amount~~A&R Credit Agreement is guaranteed by all of the Company’s material domestic subsidiaries. The A&R Credit Agreement extended the maturity date of April 19, 2022 to January 2, 2026.

On January 6, 2022, the Company ~~may borrow under~~modified the A&R Credit Agreement ~~may not exceed~~(the “Amended A&R Credit Agreement”) among CrowdStrike, Inc., as borrower, CrowdStrike Holdings, Inc., as guarantor, and Silicon Valley Bank and the ~~lesser of $150.0 million~~other lenders party thereto. There were no changes to the borrowing amounts or the Company’s ordinary course recurring subscription revenue for the most recent month, as determined under the Credit Agreement, multiplied by a number that is (i) 6, for the first year after entry into the Credit Agreement; (ii) 5, for the second year after entry into the Credit Agreement; and (iii) 4, thereafter.maturity date. Under the ~~terms of the~~Amended A&R Credit Agreement, revolving loans ~~may be either Eurodollar Loans or ABR~~are Alternate Base Rate (“ABR”) Loans. Outstanding Eurodollar Loans incur interest at the Eurodollar Rate, which is defined in the Credit Agreement as LIBOR (or any successor thereto), plus a margin between 2.75% and 3.25%, depending on usage. Outstanding ABR Loans incur interest at the highest of (a) the Prime Rate, as published by the Wall Street Journal, (b) the federal funds rate in effect ~~for~~on such day plus 0.50%, and (c) the ~~Eurodollar~~Term Secured Overnight Finance Rate (the “Term SOFR”) for a one-month tenor in effect on such day plus 1.00%, in each case plus a margin between ~~1.75%~~(0.25)% and ~~2.25%~~0.25%, depending on ~~usage. The applicable margin for Eurodollar Loans and ABR Loans will be reduced by 0.25% upon~~ the ~~completion of an initial public offering of at least $100.0 million in gross proceeds.~~senior secured leverage ratio. The Company will be charged a commitment fee of ~~0.2%~~0.15% to ~~0.3%~~0.25% per year for committed but unused ~~amounts.~~amounts, depending on the senior secured leverage ratio. The ~~Credit Agreement will terminate on~~financial covenants require the Company to maintain aminimum consolidated interest coverage ratio of 3.00:1.00, a maximum senior secured leverage ratio of 3.00:1.00 (through January 31, 2023), and a maximum total leverage ratio of 5.50:1.00 stepping down to 3.50:1.00 over time. The Company was in compliance with all of its financial covenants as of April ~~19, 2022.~~

30, 2023.

The Amended A&R Credit Agreement is ~~collateralized~~secured by substantially all of the Company’s current and future consolidated assets, property ~~rights,~~ and ~~assets,~~rights, including, but not limited to, intellectual property, cash, goods, equipment, contractual rights, financial assets, and intangible assets of the Company and certain of its subsidiaries. The Amended A&R Credit Agreement contains customary covenants limiting the Company’s ability and the ability of its subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock, and make investments, in each case subject to certain exceptions. ~~The~~

No amounts were outstanding under the Amended A&R Credit Agreement ~~also contains financial covenants requiring~~as of April 30, 2023 and January 31, 2023.

Senior Notes

On January 20, 2021, the Company ~~to maintain~~issued $750.0 million in aggregate principal amount of 3.00% Senior Notes maturing in February 2029. The Senior Notes are guaranteed by the ~~year-over-year growth~~Company’s subsidiary, CrowdStrike, Inc. and will be guaranteed by each of the Company’s existing and future domestic subsidiaries that becomes a borrower or guarantor under the A&R Credit Agreement. The Senior Notes were issued at par and bear interest at a rate of 3.00% per annum. Interest payments are payable semiannually on February 15 and August 15 of each year, commencing on August 15, 2021. The Company may voluntarily redeem the Senior Notes, in whole or in part, 1) at any time prior to February 15, 2024 at (a) 100.00% of their principal amount, plus a “make whole” premium or (b) with the net cash proceeds received from an equity offering at a redemption price equal to 103.00% of the principal amount, provided the aggregate principal amount of all such redemptions does not exceed 40% of the original aggregate principal amount of the Senior Notes; 2) at any time on or after February 15, 2024 at a prepayment price equal to 101.50% of the principal amount; 3) at any time on or after February 15, 2025 at a prepayment price equal to 100.75% of the principal amount; and 4) at any time on or after February 15, 2026 at a prepayment price equal to 100.00% of the principal amount; in each case, plus accrued and unpaid interest, if any, to but excluding, the date of redemption.

The net proceeds from the debt offering were $738.0 million after deducting the underwriting commissions of $9.4 million and $2.6 million of issuance costs. The debt issuance costs are being amortized to interest expense using the effective interest method over the term of the Senior Notes. Interest expense related to contractual interest expense, amortization of debt issuance costs, and accretion of debt discount was $6.0 million during both the three months ended April 30, 2023 and 2022.

In certain circumstances involving a change of control event, the Company will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s notes of that series at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

The indenture governing the Senior Notes (the “Indenture”) contains covenants limiting the Company’s ability and the ability of its ~~ordinary course recurring subscription revenue above specified rates~~subsidiaries to create liens on certain assets to secure debt; grant a subsidiary guarantee of certain debt without also providing a guarantee of the Senior Notes; declare dividends; and consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of its assets to, ~~maintain minimum liquidity at specified levels. The~~another person. These covenants are subject to a number of limitations and exceptions. Certain of these covenants will not apply during any period in which the notes are rated investment grade by Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Service, Inc. (“Moody’s”), and Standard & Poor’s Ratings Services (“S&P”).

As of April 30, 2023, the Company was in compliance with all of its financial covenants under the Indenture associated with the Senior Notes.

Based on the trading prices of the Senior Notes, the fair value of the Senior Notes was approximately $653.5 million and $645.4 million as of April 30, ~~2019. The Credit Agreement contains events of default that include, among others, non-payment of principal, interest, or fees, breach of covenants, inaccuracy of representations~~2023 and ~~warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, and material judgments.~~

~~No amounts were outstanding under the Credit Agreement as of April 30, 2019 or~~ January 31, ~~2019.~~

6.2023, respectively. While the Senior Notes are recorded at cost, the fair value of the Senior Notes was determined based on quoted prices in markets that are not active; accordingly, the Senior Notes are categorized as Level 2 for purposes of the fair value measurement hierarchy.

5. Income Taxes

The Company recognized an income tax expense of ~~$0.6~~$4.4 million and ~~$0.1~~$3.4 million for the three months ended April 30, ~~2019~~2023 and ~~2018,~~April 30, 2022, respectively. The tax expense for the three months ended April 30, ~~2019~~2023 and April 30, 2022 was primarily attributable to pre-tax foreign ~~earnings.~~earnings and withholding taxes related to customer payments in certain foreign jurisdictions in which the Company conducts business. The Company’s effective tax rates of ~~(2.3%)~~89.8% and ~~(0.4%)~~(12.7)% for the three months ended April 30, ~~2019~~2023 and April 30, ~~2018~~2022, respectively, differ from the U.S. statutory tax rate primarily due to ~~valuation allowance recorded against domestic~~U.S. losses for which there is no benefit and the tax rate differences between the United States and foreign countries.

~~Table~~board of ~~Contents~~

The Company has a full valuation allowance on its U.S. federal, U.S. state, and ~~state~~U.K. deferred tax assets. As a result, ~~consistent with the prior year,~~ the Company ~~is unable to~~does not record a tax benefit on these losses because ~~of uncertainty of future profitability.~~

~~7. Redeemable Convertible Preferred Stock~~

~~The following table summarizes~~it is more likely than not that the ~~authorized, issued,~~benefit will not be realized.

Total gross unrecognized tax benefits were $40.6 million and ~~outstanding redeemable convertible preferred stock of the Company~~$36.9 million as of April 30, ~~2019:~~

Shares

Net




Issue Price

Shares

Issued and

Carrying

Liquidation

Redemption
Class

per Share

Authorized

Outstanding

Value

Preference

Value

(in thousands, except per share values)

Series A-1

$
0.50000

52,300

52,300

$
76,325

$
52,300

$
823,725
Series B

1.40500

21,523

21,352

44,320

30,000

336,294
Series C

4.52972

22,275

22,077

99,900

100,000

347,713
Series D

5.69153

17,570

17,570

99,845

125,000

276,728
Series D-1

5.69153

5,394

5,394

30,626

30,700

84,956
Series E

16.46136

18,357

12,575

206,896

207,000

207,000
Total

137,419

131,268

557,912

545,000

2,076,416

2023 and January 31, 2023, respectively. As of April 30, 2023 and January 31, 2023, approximately $4.4 million and $4.2 million, respectively of unrecognized tax benefits, which, if recognized, would affect the Company’s effective tax rate due to the full valuation allowance. The ~~following table summarizes the authorized, issued,~~Company’s policy is to classify interest and ~~outstanding redeemable convertible preferred stock~~penalties related to unrecognized tax benefits as part of the income tax provision in the condensed consolidated statements of operations. The Company had incurred an insignificant amount of interest and penalties related to unrecognized tax benefits as of April 30, 2023 and January 31, ~~2019:~~

Shares

Net




Issue Price

Shares

Issued and

Carrying

Liquidation

Redemption
Class

per Share

Authorized

Outstanding

Value

Preference

Value

(in thousands, except per share values)

Series A-1

$
0.50000

52,300

52,300

$
76,325

$
52,300

$
623,678
Series B

1.40500

21,523

21,352

44,320

30,000

254,623
Series C

4.52972

22,275

22,077

99,900

100,000

263,765
Series D

5.69153

17,570

17,570

99,845

125,000

211,631
Series D-1

5.69153

5,394

5,394

30,626

30,700

64,607
Series E

16.46136

18,357

12,575

206,896

207,000

207,000
Total

137,419

131,268

557,912

545,000

1,625,304

~~Upon~~2023. During the ~~closing~~three months ended April 30, 2023, the net increase in uncertain tax benefits was a result of research and development credits. The potential change in unrecognized tax benefits during the next 12 months is not expected to be material.

In accordance with the guidance on the accounting for uncertainty in income taxes, for all U.S. and other tax jurisdictions, the Company recognizes potential liabilities for anticipated tax audit issues based on the Company’s estimate of whether, and the extent to which, additional taxes and interest will be due. If the Company’s estimate of income tax liabilities proves to be less than the ultimate assessment, a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the ~~Company’s IPO on June 14, 2019, all shares~~liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes in the condensed consolidated statements of ~~convertible preferred stock then outstanding, totaling 131,267,586 shares, were automatically converted into an equivalent number of shares of Class B common stock on a one-to-one basis~~operations. Accrued interest and ~~the carrying value, totaling $557.9 million, was reclassified into Class B common stock and additional paid-in capital~~penalties are included within other liabilities, noncurrent on the condensed consolidated balance ~~sheet.~~

~~8. Common Stock~~

The Company’s authorized capital consisted of 220,000,000 shares of common stock, par value $0.0005 per share, as of April 30, 2019 and January 31, 2019. The Company has also issued incentive stock options (see Note 9, sheets.

6. Stock-Based Compensation~~) that are exercisable into~~

Stock Incentive Plan

In May 2019, the Company’s ~~common stock.~~

~~The Company had reserved shares of common stock for future issuance as follows:~~

April 30,

January 31,

2019

2019

(in thousands)

Conversion of Series A-1 redeemable convertible preferred stock

52,300

52,300
Conversion of Series B redeemable convertible preferred stock

21,352

21,352
Conversion of Series C redeemable convertible preferred stock

22,077

22,077
Conversion of Series D redeemable convertible preferred stock

17,570

17,570
Conversion of Series D-1 redeemable convertible preferred stock

5,394

5,394
Conversion of Series E redeemable convertible preferred stock

12,575

12,575
Exercise and conversion of Series B redeemable convertible preferred stock warrants

171

171
Exercise and conversion of Series C redeemable convertible preferred stock warrants

165

165
Stock options issued and outstanding

26,200

26,535
RSUs issued and outstanding

4,753

4,059
Remaining shares available for future issuance under the 2011 Stock Incentive Plan

477

1,540
Total shares of common stock reserved

163,034

163,738

~~9. Stock-Based Compensation~~

~~Stock Incentive Plan~~

~~Effective November 18, 2011,~~directors adopted, and the ~~Company established~~stockholders approved the CrowdStrike Holdings, Inc. ~~2011 Stock~~2019 Equity Incentive Plan (the ~~“2011~~“2019 Plan”)~~. The Stock Incentive Plan provides for~~ with the ~~grant~~purpose of ~~incentive~~granting stock-based awards to employees, directors, officers, and ~~nonqualified~~consultants, including stock options, ~~and~~ restricted stock awards, ~~(“RSAs”) to qualified employees, officers, nonemployee directors,~~restricted stock units, and ~~consultants~~performance-based restricted stock units. A total of 8,750,000 shares of Class A common stock were initially available for issuance under the ~~Company.~~2019 Plan. The ~~maximum~~Company’s compensation committee administers the 2019 Plan. The number of shares of the Company’s common stock available for issuance under the 2019 Plan is subject to an annual increase on the first day of each fiscal year beginning on February 1, 2020, equal to the lesser of: (i) two percent (2.0%) of outstanding shares of the Company’s capital stock as of the last day of the immediately preceding fiscal year or (ii) such other amount as the Company’s board of directors may determine.

The 2011 Plan was terminated on June 10, 2019, which was the business day prior to the effectiveness of the Company’s registration statement on Form S-1 used in connection with the Company’s IPO, and stock-based awards are no longer granted under the 2011 Plan. Any shares underlying stock options that ~~may be issued pursuant to~~expire, terminate, or are forfeited or repurchased under the 2011 Plan ~~was 79,498,016 as~~will be automatically transferred to the 2019 Plan.

Table of ~~both April 30, 2019 and January 31, 2019.~~

Stock Options

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The expected term represents the period that the Company’s share-based awards are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise terms, and contractual lives of the options. The expected stock price volatility is based upon comparable public company data. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated option life.

~~The fair value of each option was estimated on the date of grant using the following assumptions~~

There were no stock options granted during the ~~period:~~

Three Months Ended April 30,

2019

2018

Expected term (in years)

6.05

6.05

Risk-free interest rate

2.4
%
2.6
%
Expected stock price volatility

37.9
%
38.4
%
Dividend yield

—
%
—
%

three months ended April 30, 2023 or April 30, 2022.

The following table is a summary of stock option activity for the three months ended April 30, ~~2019:~~

2023:

Weighted-

Average

Number of

Exercise Price

Shares

Per Share

(in thousands)

Options outstanding at January 31, 2019

26,535

$
3.87
Granted

880

$
14.65
Exercised

(706)

$
2.14
Canceled

(509)

$
7.34
Options outstanding at April 30, 2019

26,200

$
4.21
Options vested and expected to vest at April 30, 2019

26,200

$
4.21
Options exercisable at April 30, 2019

15,505

$
2.49

Number of
Shares Weighted-Average
Exercise Price
Per Share
(in thousands)
Options outstanding at January 31, 2023 2,869 $ 8.52
Exercised (376) $ 7.04
Canceled (3) $ 13.97
Options outstanding at April 30, 2023 2,490 $ 8.74
Options vested and expected to vest at April 30, 2023 2,490 $ 8.74
Options exercisable at April 30, 2023 2,216 $ 8.41

Options ~~exercisable~~outstanding include ~~2,291,556~~263,992 options that were unvested and exercisable as of April 30, ~~2019.~~

2023.

The aggregate intrinsic value of options vested and exercisable was ~~$188.5~~$247.4 million and ~~$181.1~~$247.2 million as of April 30, ~~2019~~2023 and January 31, ~~2019,~~2023, respectively. The weighted-average remaining contractual term of options vested and exercisable was ~~6.9~~4.7 years and ~~7.1~~4.8 years as of April 30, ~~2019~~2023 and January 31, ~~2019,~~2023, respectively.

~~The weighted-average grant date fair values of all options granted was $8.76 and $5.44 per share during the three months ended April 30, 2019 and April 30, 2018, respectively.~~

The total intrinsic value of all options exercised was ~~$8.8~~$45.1 million and ~~$1.0~~$81.2 million during the three months ended April 30, ~~2019~~2023 and April 30, ~~2018,~~2022, respectively. ~~The total fair value of all options vested was $4.2 million and $0.9 million during the three months ended April 30, 2019 and April 30, 2018, respectively.~~

The aggregate intrinsic value of stock options outstanding as of April 30, ~~2019~~2023 and January 31, ~~2019~~2023 was ~~$273.6~~$277.2 million and ~~$286.1~~$279.4 million, respectively, which represents the excess of the fair value of the Company’s common stock over the exercise price of the options multiplied by the number of options outstanding. The weighted-average remaining contractual term of stock options outstanding was ~~7.7~~4.8 years and ~~7.9~~5.0 years as of April 30, ~~2019~~2023 and January 31, ~~2019,~~2023, respectively.

Total unrecognized stock-based compensation expense related to unvested options was ~~$47.2~~$1.7 million as of April 30, ~~2019.~~2023. This expense is expected to be amortized ~~on a straight-line basis~~ over a weighted-average vesting period of ~~3.3~~1.4 years. Total unrecognized stock-based compensation expense related to unvested options was $45.8 million as of January 31, 2019. This expense is expected to be amortized on a straight-line basis over a weighted-average vesting period of 3.4 years.

Early Exercise of Employee Options

The 2011 Stock Plan allows for the early exercise of stock options for certain individuals as determined by the ~~Board~~board of ~~Directors.~~directors. The consideration received for an early exercise of an option is a deposit of the exercise price and the related dollar amount is recorded as a liability for early exercise of unvested stock options in the condensed consolidated balance sheets. This liability is reclassified to ~~additional~~Additional paid-in capital as the awards vest. If a stock option is early exercised, the unvested shares may be repurchased by the Company in case of employment termination or for any reason, including death and disability, at the price paid by the purchaser for such shares. ~~During the three months ended April 30, 2019, the Company did not issue any~~There were no issued shares of common stock related to early exercised stock ~~options.~~options during the three months ended April 30, 2023 or April 30, 2022. As of April 30, ~~2019, the number of~~2023 and January 31, 2023, there were no shares of common stock related to early exercised stock options subject to repurchase was 465,626 shares for $1.0 million. As of January 31, 2019, the number of shares of common stock related to early exercised stock options subject to repurchase was 545,941 shares for $1.2 million.repurchase. Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The Company includes unvested shares subject to repurchase in the number of shares outstanding onin the ~~statement~~condensed consolidated balance sheets and statements of ~~redeemable convertible preferred stock and~~ stockholders’ ~~deficit.~~

equity.

Restricted Stock Units

~~Beginning in September 2018,~~

RSUs granted under the ~~Company began issuing RSUs~~2019 Plan are generally subject to ~~certain employees. These RSUs include~~only a service-based ~~vesting condition and a performance-based~~ vesting condition. The service-based vesting condition is generally satisfied based on one of ~~three~~four vesting schedules: (i) vesting of one-fourth of the RSUs on the first “Company vest date” (defined as March 20, June 20, September 20, or December 20) on or following the one-year anniversary of the vesting commencement date with the remainder of the RSUs vesting in twelve equal quarterly installments thereafter, subject to continued service, (ii) vesting in sixteen equal quarterly installments, ~~beginning on December 20, 2018,~~ subject to continued service, or (iii) vesting in eight equal quarterly installments, ~~beginning on December 20, 2022,~~subject to continued service, or (iv) vesting in sixteen quarterly installments with 10% in the first year, 15% in the second year, 25% in the third year and 50% in the fourth year, subject to continued service. The valuation of these RSUs is based solely on the fair value of the Company’s stock on the date of grant.

Total unrecognized stock-based compensation expense related to unvested RSUs was $1.4 billion as of April 30, 2023. This expense is expected to be amortized over a weighted-average vesting period of 2.9 years.

Performance-based Stock Units

PSUs granted under the 2019 Plan are generally subject to both a service-based vesting condition and a performance-based vesting ~~condition is satisfied on~~condition. PSUs will vest upon the ~~earlier~~achievement of (i) a change in control, in which the consideration paid to holders of shares is either cash, publicly traded securities, or a combination thereof, or (ii) the first Company vest date to occur following the expiration of the lock-up period upon an IPO,specified performance targets and subject to continued service through ~~such change in control or lock-up expiration,~~the applicable vesting dates. The associated compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied.

Total unrecognized stock-based compensation expense related to unvested PSUs was $124.6 million as ~~applicable. None of the RSUs vest unless the performance-based vesting condition is satisfied. As~~ of April 30, 2023. This expense is expected to be amortized over a weighted-average vesting period of 1.6 years.

Special PSU Awards

In fiscal 2022 the Company’s board of directors granted 655,000 performance stock units (the “Special PSU Awards”) to certain executives under the 2019 Plan. The Special PSU Awards will vest upon the satisfaction of the Company’s achievement of specified stock price hurdles, which are based on the average of the closing stock price per share of the Company’s Class A common stock during any 45 consecutive trading day period during the applicable performance ~~based~~period, and a service-based vesting condition. The service condition ~~had not yet been met, and thus no stock-based compensation relating~~applicable to ~~these RSUs was recognized. In~~each tranche of the ~~quarter~~Special PSU Awards will be satisfied in ~~which the performance-based vesting condition becomes probable of being met,~~installments as follows, subject to continued employment with the Company through each applicable vesting date: (i) 50% of the Special PSU Awards underlying the applicable tranche will ~~begin recording stock-based compensation expense using~~service vest on the ~~accelerated attribution method based~~first anniversary of the vesting commencement date applicable to such tranche of the Special PSU Awards (i.e., February 1, 2022, February 1, 2023, February 1, 2024 and February 1, 2025) and (ii) the remaining PSUs with respect to such tranche will thereafter service vest in four equal quarterly installments of 12.5%.

The Company measured the fair value of the Special PSU Awards on the grant date ~~fair value~~using a Monte Carlo simulation valuation model. The risk-free interest rates used were 0.85% -1.51%, which were based on the zero-coupon-risk-free interest rate derived from the Treasury Constant Maturities yield curve for the expected term of the ~~RSUs. As~~award on the grant date. The expected volatility was a blended volatility rate of 54.89% - 55.36%, which includes 50% weight on the Company’s historical volatility calculated from daily stock returns over a 2.21- 2.58 year look-back from the grant date and 50% weight based on the Company’s implied volatility as of the grant date.

Total unrecognized stock-based compensation expense related to the unvested portion of the Special PSU Awards was $56.3 million as of April 30, ~~2019, the total amount~~2023. This expense is expected to be amortized over a weighted-average vesting period of ~~stock-based compensation expense deferred related to this performance-based vesting condition was approximately $13.0 million.~~

1.9 years.

The following table is a summary of ~~RSU activity~~RSUs, PSUs and the Special PSU Awards activities for the three months ended April 30, ~~2019:~~

2023:


	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
	(in thousands)
RSUs and PSUs outstanding at January 31, 2023	10,050	$	158.08
Granted	2,694	$	131.05
Released	(934)	$	135.06
Performance adjustment (1)	155	$	211.22
Forfeited	(636)	$	164.05
RSUs and PSUs outstanding at April 30, 2023	11,329	$	155.09
RSUs and PSUs ending vested and expected to vest at April 30, 2023	11,247	$	154.55

___________________________

Weighted-

Average Grant

Number of

Date Fair Value

Shares

Per Share

(in thousands)

RSUs outstanding at January 31, 2019

4,059

$
12.66
Granted

853

$
18.32
Vested

—

$
—
Forfeited

(159)

$
12.62
RSUs outstanding at April 30, 2019

4,753

$
13.33
RSUs expected to vest at April 30, 2019

4,753

$
13.33

(1)

The performance adjustment represents adjustments in shares outstanding due to the actual achievement of performance-based awards, the achievement of which was based upon pre-defined financial performance targets.

Employee Stock Purchase Plan

In May 2019, the board of directors adopted, and the stockholders approved the CrowdStrike Holdings, Inc. 2019 Employee Stock Purchase Plan (“ESPP”), which became effective on June 10, 2019, which was the business day prior to the effectiveness of the Company’s registration statement on Form S-1 used in connection with the Company’s IPO. A total of 3,500,000 shares of Class A common stock were initially reserved for issuance under the ESPP. The Company’s compensation committee administers the ESPP. The number of shares of common stock available for issuance under the ESPP is subject to an annual increase on the first day of each fiscal year beginning on February 1, 2020, equal to the lesser of: (i) one percent (1%) of the outstanding shares of the Company’s capital stock as of the last day of the immediately preceding fiscal year or (ii) such other amount as its board of directors may determine. In May 2021, the Company’s compensation committee adopted an amendment and restatement of the ESPP, which was approved by the Company’s stockholders in June 2021. The amended and restated ESPP clarified the original intent that the annual increase will in no event exceed 5,000,000 shares of the Company’s Class A common stock in any year.

The ESPP provides for consecutive offering periods that will typically have a duration of approximately 24 months in length and are comprised of four purchase periods of approximately six months in length. The offering periods are scheduled to start on the first trading day on or after June 11 and December 11 of each year. The first offering period commenced on June 11, 2019 and ended on June 10, 2021.

The ESPP provides eligible employees with an opportunity to purchase shares of the Company’s Class A common stock through payroll deductions of up to 15% of their eligible compensation. A participant may purchase a maximum of 2,500 shares of common stock during a purchase period. Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each six-month purchase period. The purchase price of the shares is 85% of the lower of the fair market value of the Class A common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the related offering period. Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment. The ESPP allows for up to one increase in contribution during each purchase period. If an employee elects to increase his or her contribution, the Company treats this as an accounting modification. The ESPP also offers a two-year look-back feature, as well as a rollover feature that provides for an offering period to be rolled over to a new lower-priced offering if the offering price of the new offering period is less than that of the current offering period. During the fiscal year ended January 31, 2023, there were ESPP rollovers because the Company’s closing stock price on the purchase date was lower than the Company’s closing stock price on the first day of the offering periods. As a result, these offering dates were rolled over to a new 24-month offering period through December 12, 2024. These rollovers were accounted for as a modification to the original offerings. The total incremental expense as a result of the rollover and contribution modifications was $58.6 million, which will be recognized over the new or remaining offering periods.

Employee payroll contributions ultimately used to purchase shares are reclassified to Stockholders’ equity on the purchase date. ESPP employee payroll contributions accrued as of April 30, 2023 and January 31, 2023 totaled $40.8 million and $17.5 million, respectively, and are included within Accrued payroll and benefits in the condensed consolidated balance sheets.

The following table summarizes the assumptions used in the Black-Scholes option-pricing model to determine fair value of the Company’s common shares to be issued under the ESPP for the offering periods beginning in June 2020:


	Three Months Ended April 30,
	2023		2022
Expected term (in years)	0.5 - 2.0		0.5 - 2.0
Risk-free interest rate	0.2% - 4.7%		0.1% - 0.7%
Expected stock price volatility	50.2% - 61.2%		39.6% - 55.9%
Dividend yield	—	%	—	%

Stock-Based Compensation Expense

Stock-based compensation expense included in the condensed consolidated statements of operations is as ~~follows:~~

follows (in thousands):

Three Months Ended April 30,

2019

2018

(in thousands)

Cost of revenue

$
368

$
109
Sales and marketing

1,518

773
Research and development

681

448
General and administrative

1,185

389
Total stock-based compensation expense

$
3,752

$
1,719


	Three Months Ended April 30,
	2023		2022

Subscription cost of revenue	$	8,966	$	6,578
Professional services cost of revenue	4,630		3,001
Sales and marketing	35,739		26,710
Research and development	44,381		34,036
General and administrative	37,140		32,169
Total stock-based compensation expense	$	130,856	$	102,494

~~10.~~7. Revenue, Deferred Revenue and Remaining Performance Obligations

~~The following table summarizes the revenue from contracts by type of customer:~~

Three Months Ended April 30,

2019

Amount

% Revenue

(in thousands, except percentages)

Channel Partners

$
64,460

67
%
Direct Customers

31,617

33
%
Total revenue

$
96,077

100
%

The Company uses channel partners to complement direct sales and marketing efforts. The partners place an order with the Company after negotiating the order directly with an end customer. The partners negotiate pricing with the end customer and in some rare instances are responsible for certain support levels directly with the end customer. The Company’s contract is with the partner and payment to the Company is not contingent on the receipt of payment from the end customer. The Company recognizes the contractual amount charged to the partners as revenue ratably over the term of the arrangement once access to the Company’s solution has been provided to the end customer.

The Company also uses referral partners who refer customers in exchange for a referral fee. The Company negotiates pricing and contracts directly with the end customer. The Company recognizes revenue from the sales to the end customers, ratably over the term of the contract, once access to the Company’s solution has been provided to the end customer.

The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use the Company’s ~~cloud platform:~~

Three Months Ended April 30,

2019

Amount

% Revenue

(in thousands, except percentages)

United States

$
72,307

75
%
Europe, Middle East, and Africa

13,414

14
%
Asia Pacific

6,230

7
%
Other

4,126

4
%
Total revenue

$
96,077

100
%

platform or service (in thousands, except percentages):


	Three Months Ended April 30,
	2023				2022
	Amount		% Revenue		Amount		% Revenue

United States	$	474,825	69	%	$	345,593	71	%
Europe, Middle East, and Africa	104,552		15	%	70,625		14	%
Asia Pacific	72,219		10	%	48,079		10	%
Other	40,984		6	%	23,537		5	%
Total revenue	$	692,580	100	%	$	487,834	100	%

No single country other than the United States represented 10% or more of the Company’s total revenue during the three months ended April 30, ~~2019 or~~2023 and April 30, ~~2018.~~

2022.

Contract Balances

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. ~~For~~The Company recognized revenue of $596.4 million and $397.7 million for the three months ended April 30, ~~2019, the Company recognized revenue of $79.9 million that~~2023 and April 30, 2022, respectively, which was included in the corresponding contract liability balance at the beginning of the period.

The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically ~~30-60~~30 - 60 days. Contract assets include amounts related to the contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced.

Changes in deferred revenue ~~for the three months ended April 30, 2019~~ were as follows (in thousands):

Carrying Amount
Balance as of January 31, 2019

$
290,067
Additions to deferred revenue

121,222
Recognition of deferred revenue

(96,077)
Balance as of April 30, 2019

$
315,212


	Three Months Ended April 30,
	2023	2022
	Carrying Amount
Beginning balance	2,355,113	1,529,321
Additions to deferred revenue	741,258	651,110
Recognition of deferred revenue	(692,580)	(487,834)
Ending balance	2,403,791	1,692,597

Remaining Performance Obligations

The ~~Company's~~Company’s subscription contracts with its customers have a typical term of one to three years and most subscription contracts are non-cancelable. Customers ~~typically~~generally have the right to terminate their contracts for cause as a result of the Company’s failure to perform. As of April 30, ~~2019,~~2023, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$386.0 million.~~$3.3 billion. The Company expects to recognize ~~69%~~approximately 64% of the ~~transaction price~~remaining performance obligations in the 12 months following April 30, ~~2019,~~2023 and 35% of the remaining performance obligations between 13 to 36 months, with the remainder to be recognized thereafter.

Costs to Obtain and Fulfill a Contract

The Company capitalizes referral fees paid to partners and sales ~~commission~~commissions and associated payroll taxes paid to internal sales personnel, contractors or sales agents that are incremental to the acquisition of channel partner and direct customer contracts and would not have occurred absent the customer contract. These costs are recorded as deferred contract acquisition costs, current and deferred contract acquisition costs, noncurrent on the condensed consolidated balance ~~sheet.~~

sheets.

Sales commissions for renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract or follow-on upsell given the substantive difference in commission rates in proportion to their respective contract values. Commissions, including referral fees paid to ~~channel~~referral partners, ~~paid~~earned upon the initial acquisition of a contract or subsequent upsell are amortized over an estimated period of benefit of four years, while commissions ~~paid~~earned for renewal contracts are amortized over the contractual term of the renewals. Sales commissions associated with professional service contracts are amortized ratably over an estimated period of benefit of ~~six months. Amortization of deferred contract acquisition costs is recognized on a straight-line basis commensurate with the pattern of revenue recognition~~eight months and are included in sales and marketing expense in the condensed consolidated statements of operations. In determining the period of benefit for commissions paid for the acquisition of the initial contract, the Company took into consideration the expected subscription term and expected renewals of customer contracts, the historical duration of relationships with customers, customer retention data, and the life of the developed technology. The Company periodically reviews the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. The Company did not recognize any material impairment losses of deferred contract acquisition costs during the three months ended April 30, ~~2019.~~

2023 and April 30, 2022.

The following table summarizes the activity of deferred contract acquisition ~~costs:~~

Three Months Ended

April 30, 2019

(in thousands)

Balance, February 1, 2019

$
63,071
Capitalization of contract acquisition costs

8,471
Amortization of deferred contract acquisition costs

(7,345)
Balance, April 30, 2019

$
64,197

Deferred contract acquisition costs, current

$
26,193
Deferred contract acquisition costs, noncurrent

38,004
Total deferred contract acquisition costs

$
64,197

costs (in thousands):


	Three Months Ended April 30,
	2023		2022

Beginning balance	$	447,088	$	319,180

Capitalization of contract acquisition costs	49,532		51,354
Amortization of deferred contract acquisition costs	(55,322)		(37,592)
Ending balance	$	441,298	$	332,942

Deferred contract acquisition costs, current	$	186,901	$	135,681
Deferred contract acquisition costs, noncurrent	254,397		197,261
Total deferred contract acquisition costs	$	441,298	$	332,942

~~11.~~8. Commitments and Contingencies

~~Lease Commitments~~

The Company leases its office space under various non-cancelable operating lease agreements. Leases expire at various dates through fiscal year 2027. The aggregate future minimum payments under noncancelable operating leases as of April 30, 2019 were as follows:

Operating

Leases

(in thousands)

Fiscal 2020 (remaining nine months)

$
4,300
Fiscal 2021

5,469
Fiscal 2022

5,229
Fiscal 2023

4,365
Fiscal 2024

3,090
Thereafter

1,712
Total minimum lease payments

$
24,165

~~Rent expense was $1.8 million and $1.5 million during the three months ended April 30, 2019 and April 30, 2018, respectively.~~

Purchase Obligations

The Company enters into long-term non-cancelable agreements with providers to purchase data center capacity, such as bandwidth and colocation space, for the Company’s cloud platform. ~~The~~As of April 30, 2023, the Company is committed to spend ~~$207.4~~$194.9 million on such agreements in excess of one year through ~~2027.~~fiscal 2031. These obligations are included in purchase ~~obligations~~commitments below.

In the normal course of business, the Company also enters into non-cancelable purchase commitments with various parties to purchase products and services such as advertising, technology, equipment, office renovations, corporate events, and consulting services. A summary of ~~noncancelable~~non-cancelable purchase obligations in excess of one year as of April 30, ~~2019~~2023 with expected date of payment is as ~~follows:~~

follows (in thousands):

Total

Commitments

(in thousands)
Fiscal 2020 (remaining nine months)

$
45,693
Fiscal 2021

72,159
Fiscal 2022

87,183
Fiscal 2023

8,445
Fiscal 2024

7,330
Thereafter

1,540
Total purchase commitments

$
222,350

~~Letters~~
Total
Commitments
Fiscal 2024 (remaining nine months) $ 69,077
Fiscal 2025 57,270
Fiscal 2026 39,744
Fiscal 2027 32,902
Fiscal 2028 30,774
Thereafter 47,034
Total purchase commitments $ 276,801

In October 2021, the Company entered into a new private pricing addendum with Amazon Web Services (“AWS”), which provides the Company with cloud computing infrastructure. Under the new pricing addendum, the minimum commitment is $600.0 million of ~~Credit~~

cloud services from AWS through September 2026. As of April 30, ~~2019 and January 31, 2019,~~2023, the Company had anutilized $366.9 million of this commitment. The remaining commitment is excluded from the table above and the Company expects to meet its remaining commitment with AWS.

Letters of Credit

As of April 30, 2023, the Company had unused standby ~~letter~~letters of credit for ~~$0.5~~$0.7 million securing its ~~headquarters~~facility in Tel Aviv, Israel, $0.4 million securing its facility in Sunnyvale, California, and an$0.1 million securing its principal executive offices in Austin, Texas. As of January 31, 2023, the Company had unused standby ~~letter~~letters of credit for $0.8 million securing its principal executive offices in Austin, Texas and $0.4 million securing its facility in ~~Austin, Texas.~~

Sunnyvale, California.

Litigation

~~The~~

In June 2022, the Company ~~is currently involved in proceedings~~and Fair Isaac Corporation (“FICO”) resolved a trademark dispute that was pending before the Trademark Trial and ~~Appeal~~Appellate Board (“TTAB”) at the U.S. Patent and Trademark ~~Office (“USPTO”) regarding its U.S. trademark registrations for ``CrowdStrike Falcon”~~

Office. The TTAB dismissed all proceedings between the parties in July 2022.

Table of ~~April 30, 2019 or January 31, 2019.~~

In March 2022, Webroot, Inc. and ~~its U.S. application to register its ``Falcon OverWatch” trademark. On November 23, 2016, Fair Isaac Corporation (“FICO”~~Open Text, Inc. (collectively, “Webroot”) filed a ~~Petition for Cancellation~~lawsuit against the Company and CrowdStrike, Inc. in federal court in the Western District of Texas alleging that certain of the Company’s ~~"CrowdStrike Falcon” trademark registrations~~products infringe six patents held by them. In the complaint, Webroot sought unspecified damages, attorneys’ fees and a ~~Notice~~permanent injunction. In May 2022, CrowdStrike, Inc. asserted counterclaims alleging that certain of ~~Opposition against~~Webroot’s products infringe two of its patents. In the ~~Company’s "Falcon OverWatch” trademark application before the TTAB. On January 3, 2017, the Company filed answers~~filing, CrowdStrike, Inc. sought unspecified damages, reasonable fees and costs, and a permanent injunction. In September 2022, Webroot amended its complaint to both the cancellation and opposition proceedings, and the proceedings thereafter were consolidated. On November 21, 2018, the Company filed a Petition for Partial Cancellation or Amendment of one of FICO’s "Falcon” trademark registrations, and on December 10, 2018, the parties filed a joint request to consolidate the proceedings and adjust the schedule. On January 16, 2019, FICO moved to dismiss the Company’s petition, and the TTAB thereafter suspended all proceedings pending its ruling on the motions. On July 2, 2019, the TTAB issued an order granting the request to consolidate the proceedings, and granting the motion to dismiss with leave to file an amended petition by July 22, 2019. The order also set a schedule with trial proceedings to close no earlier than 2021. assert six additional patents.The Company isintends to vigorously ~~defending the case, but given the early stage, although a loss may reasonably be possible,~~defend against Webroot’s allegations. As of April 30, 2023, the Company is unable to predict the ~~likelihood~~outcome of ~~success of Fair Isaac’s~~Webroot’s claims or reasonably estimate a loss or a range of loss. ~~As a result,~~ ~~no liability has been recorded as~~

On October 3, 2022, the Company acquired 100% of ~~Contents~~

In addition, ~~from time to time~~ the Company is ~~a party to~~involved in various ~~litigation matters~~other legal proceedings and subject to claims that arise in the ordinary course of business. ~~In addition, third parties may from time to time assert claims against the Company in the form of letters and other communications.~~ For any claims for which the Company believes a liability is both probable and reasonably estimable, the Company records a liability in the period for which it makes this determination. There is no pending or threatened legal proceeding to which the Company is a party that, in the Company’s opinion, is ~~likely~~reasonably possible to have a material ~~adverse~~ effect on its condensed consolidated financial statements; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on the Company’s business because of defense and settlement costs, diversion of management resources, and other factors. In addition, the ~~expense~~costs of litigation and the timing of ~~this expense~~these costs from period to period are difficult to estimate, subject to change and could adversely affect the Company’s ~~results of operations.~~

condensed consolidated financial statements.

Warranties and Indemnification

The Company’s cloud computing services are typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and materially in accordance with the Company’s online help documentation under normal use and circumstances.

The Company’s arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third party’s intellectual property rights. In addition, for its Falcon Complete ~~module~~ customers, the Company offers a limited warranty, subject to certain conditions, to cover certain costs incurred by the customer in case of a cybersecurity breach. The Company has entered into an insurance policy to ~~cover~~reduce its potential liability arising from this limited warranty arrangement. To date, the Company has not incurred any material costs because of such obligations and has not accrued any liabilities related to such obligations in the condensed consolidated financial statements.

The Company has also agreed to indemnify its directors and certain executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions. No liabilities have been accrued associated with this indemnification provision as of April 30, ~~2019~~2023 or January 31, ~~2019.~~

2023.

9. Acquisitions

~~Table~~Reposify Ltd.

~~12. Geographic Information~~

the equity interest of Reposify Ltd. (“Reposify”), a privately-held company that provides an external attack surface management platform that scans the internet for exposed assets of an organization to detect and eliminate risk from vulnerable and unknown assets before attackers can exploit them. The ~~Company’s long-lived~~acquisition has been accounted for as a business combination. The total consideration transferred consisted of $18.9 million, net of cash acquired of $0.5 million, and an immaterial amount representing the fair value of replacement equity awards attributable to pre-acquisition service. The remaining fair value of these replacement awards is subject to the recipient’s continued service and thus were excluded from the purchase price. The purchase price was allocated on a preliminary basis, subject to working capital adjustment and continuing management analysis, to developed technology of $3.8 million, net tangible assets ~~are composed~~acquired of ~~property~~$0.9 million, and ~~equipment, net, and are summarized by geographic area as follows:~~

April 30,

January 31,


2019

2019

(in thousands)

United States

$
83,533

$
70,699
International

2,816

3,036
Total property and equipment, net

$
86,349

$
73,735

~~Other than the United States, no other country represented 10% or more~~goodwill of ~~our total property and equipment as of April 30, 2019 or January 31, 2019.~~

~~13. Related Party Transactions~~

~~Subscription and Professional Services Revenue from Related Parties~~

~~During the three months ended April 30, 2019 and 2018, certain investors and companies with whom~~$14.2 million, which was allocated to the Company’s ~~Board~~one reporting unit and represents the excess of ~~Directors are affiliated purchased subscriptions~~the purchase price over the fair value of net tangible and ~~professional services.~~intangible assets acquired. The ~~Company recorded revenue~~goodwill was primarily attributable to the assembled workforce of Reposify, planned growth in new markets, and synergies expected to be achieved from ~~subscriptions and professional services from related parties~~the integration of ~~$2.3~~Reposify. Goodwill was not deductible for income tax purposes.

The fair value of the developed technology acquired was $3.8 million ~~and $1.4 million~~with a useful life of 72 months.

Acquisition costs during the three months ended April 30, ~~2019~~2023 were not material and ~~April 30, 2018, respectively. Accounts receivable associated~~are recorded in research and development expenses on the Company’s condensed consolidated statements of operations.

The results of operations for the acquisition have been included in the Company’s condensed consolidated financial statements from the date of acquisition. The acquisition did not have a material impact on the Company’s condensed consolidated financial statements, and therefore historical and pro forma disclosures have not been presented.

10. Net Income (Loss) Per Share Attributable to Common Stockholders

Basic and diluted net income (loss) per share attributable to CrowdStrike’s common stockholders is computed in conformity with ~~these related parties was $0.3 million~~the two-class method required for participating securities. Basic net income (loss) per share attributable to CrowdStrike common stockholders is computed by dividing the net income (loss) attributable to CrowdStrike by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to CrowdStrike common stockholders is calculated by dividing net income by the combination of the weighted-average number of common shares outstanding and ~~$0.2 million~~the weighted-average number of dilutive common share equivalents during the period. Diluted net loss per share is the same as ~~of April 30, 2019 and January 31, 2019, respectively.~~

~~Accounts Payable to Related Parties~~

~~During~~basic net loss per share for the three months ended April 30, ~~2019~~2022 because the effects of potentially dilutive items were antidilutive given the Company’s net loss position.

The rights of the holders of Class A and ~~2018,~~Class B common stock are identical, except with the ~~Company purchased goods~~respect to voting and ~~services totaling $0.6 million~~conversion rights. As such, the undistributed earnings are allocated equally to each share of common stock without class distinction and ~~$0.4 million, respectively, from certain investors~~the resulting basic and ~~companies with whom its Board~~diluted net income (loss) per share attributable to CrowdStrike common stockholders are the same for shares of ~~Directors are affiliated. Accounts payable to such vendors was less than $0.1 million as of both April 30, 2019~~Class A and ~~January 31, 2019.~~

~~14. Net Loss Per Share Attributable to Common Stockholders~~

Class B common stock.

The following table sets forth the computation of basic and diluted net ~~loss~~income (loss) per share attributable to CrowdStrike common ~~stockholders:~~

Three Months Ended April 30,

2019

2018

Net loss attributable to common stockholders

$
(25,977)

$
(33,617)

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

47,205

43,614

Net loss per share attributable to common stockholders, basic and diluted

$
(0.55)

$
(0.77)

~~Since the Company was in a net loss position for all periods presented, basic net loss~~stockholders (in thousands, except per share ~~is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been antidilutive.~~ data):


	Three Months Ended April 30,
	2023		2022
Numerator:
Net income (loss) attributable to Class A and Class B CrowdStrike common stockholders	$	491	$	(31,523)
Denominator:
Weighted-average shares used in computing net income (loss) per share attributable to Class A and Class B of CrowdStrike common stockholders, basic	236,414		231,179
Dilutive effect of common stock equivalents	4,184		—
Weighted-average shares used in computing net income (loss) per share attributable to Class A and Class B of CrowdStrike common stockholders, dilutive	240,598		231,179
Net income (loss) per share attributable to Class A and Class B CrowdStrike common stockholders, basic	$	0.00	$	(0.14)
Net income (loss) per share attributable to Class A and Class B CrowdStrike common stockholders, diluted	$	0.00	$	(0.14)

The potential shares of common stock that were excluded from the computation of diluted net ~~loss~~income (loss) per share attributable to common stockholders for the periods presented because including them would have been antidilutive are as ~~follows:~~

follows (in thousands):

April 30,

April 30,


2019

2018

(in thousands)

Shares of common stock issuable upon conversion of redeemable convertible preferred stock

131,268

118,693
Shares of common stock issuable upon conversion of redeemable convertible preferred stock warrants

336

336
Shares of common stock subject to repurchase from outstanding stock options

466

844
Shares of common stock issuable from stock options

26,200

24,109
Potential common shares excluded from diluted net loss per share

158,270

143,982

April 30, 2023 April 30, 2022
Shares of common stock subject to repurchase from outstanding stock options — 132
RSUs and PSUs subject to future vesting 5,832 8,881
Shares of common stock issuable from stock options 3 3,518
Share purchase rights under the Employee Stock Purchase Plan 1,020 610
Potential common shares excluded from diluted net income (loss) per share 6,855 13,141

The above table ~~above does not include 4,753,005 RSUs outstanding as of April 30, 2019, as these RSUs are subject to a performance-based vesting condition that had not yet been considered probable of being met.~~ ~~No RSUs were outstanding as of April 30, 2018.~~

~~15. Subsequent Events~~

~~Initial Public Offering~~

On June 14, 2019, the Company closed its IPO, in which it sold 20,700,000 shares of Class A common stock. The shares were sold at a public offering price of $34.00 per share for net proceeds of $659.1 million, after deducting underwriters’ discounts and commissions and estimated offering expenses of $44.7 million. Immediately prior to the closing of the IPO, all outstanding shares of redeemable convertible preferred stock automatically converted into 131,267,586 shares of Class B common stock on a one-to-one basis. Additionally, in connection with the IPO, all of the Company’s outstanding common stock was reclassified into shares of Class B common stock on a one-for-one basis. Redeemable convertible preferred stock warrants also converted into 336,386 warrants to purchase Class B common stock on a one-to-one basis.

In connection with the IPO, on June 14, 2019, the Company filed an Amended and Restated Certificate of Incorporation which authorizes the issuance of 2,000,000,000 shares of Class A common stock with a par value of $0.0005 per share, 300,000,000 shares of Class B common stock with a par value of $0.0005 per share, and 100,000,000 shares of undesignated preferred stock with a par value of $0.0005 per share. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible into one share of Class A common stock.

~~Deferred Offering Costs~~

As of April 30, 2019, there was $4.0 million of deferred offering costs which were classified as other assets on the condensed consolidated balance sheet. Upon the completion of the IPO, these costs were reclassified to stockholders’ deficit as a reduction of the net proceeds received from the IPO.

~~RSU Expense~~

~~As of April 30, 2019, the total amount of stock-based compensation expense deferred~~excludes founder holdbacks related to RSUs with a performance-based vesting condition was approximately $13.0 million. Upon the completion of the IPO on June 14, 2019, the performance-based vesting condition was met and the Company recognized all deferred expense related to RSUs as of that date in its condensed consolidated statement of operations.

~~2019 Equity Incentive Plan~~

In May 2019, the Company’s board of directors adopted, and the stockholders approved the CrowdStrike Holdings, Inc. 2019 Equity Incentive Plan (the "2019 Plan") with the purpose of granting stock-based awards to employees, directors, officers and consultants, including stock options, restricted stock awards and restricted stock units.business combinations. A ~~total of 8,750,000 shares of Class A common stock were initially available for issuance under the 2019 Plan. The Company’s compensation committee administers the 2019 Plan. The~~variable number of shares will be issued upon vesting to settle a fixed monetary amount of ~~our common stock available for issuance under~~$6.2 million, contingent upon continued employment with the ~~2019 Plan is subject to an annual increase~~Company. The share price will be determined based on the ~~first day of each fiscal year beginning on February 1, 2020, equal to~~Company’s average stock price or the ~~lesser of: (i) two percent (2%) of outstanding shares of the Company’s capital~~volume weighted average stock ~~as of the last day of the immediately preceding fiscal year or (ii) such other amount as our board of directors may determine.~~

~~The 2011 Plan was terminated on June 10, 2019, which was the business day~~price five days prior to each vesting date. During the ~~effectiveness of the Company's registration statement on Form S-1 used in connection with the Company's IPO, and stock-based awards are no longer granted under the 2011 Plan. Any~~three months ended April 30, 2023, 12,810 shares ~~underlying stock options that expire or terminate or are forfeited or repurchased under the 2011 Plan will be automatically transferred~~were issued to ~~the 2019 Plan.~~

~~Employee Stock Purchase Plan~~

In May 2019, the board of directors adopted, and the stockholders approved the CrowdStrike Holdings, Inc. 2019 Employee Stock Purchase Plan (“ESPP”), which became effective on June 10, 2019, which was the business day prior to the effectiveness of the Company's registration statement on Form S-1 used in connection with the Company's IPO. A total of 3,500,000 shares of Class A common stock were initially reserved for issuance under the ESPP. The Company’s compensation committee administers the ESPP. The number of shares of our common stock available for issuance under the ESPP is subject to an annual increase on the first day of each fiscal year beginning on February 1, 2020, equal to the lesser of: (i) one percent (1%) of outstanding shares of our capital stock as of the last day of the immediately preceding fiscal year or (ii) such other amount as our board of directors may determine.

~~The ESPP provides for consecutive offering periods that will typically have~~settle founder holdbacks at a duration of approximately 24 months in length and is comprised of four purchase periods of approximately six months in length. The offering periods are scheduled to start on the first trading day on or after June 11 and December 11 of each year. The first offering period commenced on June 11, 2019 and is scheduled to end on the first trading day on or before June 10, 2021.

$128.77 per share.

~~Item~~

ITEM 2. ~~Management’s Discussion~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and ~~Analysis of Financial Condition and Results of Operations~~

~~You should read the following discussion~~analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and ~~the~~related notes thereto included elsewhere in this Quarterly Report on Form ~~10-Q.~~10-Q and our Annual Report on Form 10-K for the year ended January 31, 2023, filed with the SEC. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading Special Note Regarding Forward-Looking Statements following the Table of Contents of this Quarterly Report on Form 10-Q. You should review the disclosure under ~~ITEM~~Part II, Item 1A, ~~- Risk Factors~~“Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal years ended January 31, 2017, January 31, 2018, and January 31, 2019 are referred to herein as fiscal 2017, fiscal 2018, and fiscal 2019, respectively.

Overview

~~We founded CrowdStrike~~

Founded in 2011, ~~to reinvent security~~CrowdStrike reinvented cybersecurity for the cloud ~~era.~~era and transformed the way cybersecurity is delivered and experienced by customers. When we started ~~the company,~~CrowdStrike, cyberattackers had ~~a decided,~~an asymmetric advantage over ~~existing security products.~~legacy cybersecurity products that could not keep pace with the rapid changes in adversary tactics. We ~~turned the tables on the adversaries by taking~~took a fundamentally ~~new~~different approach ~~that leverages~~to solve this problem with the network effects of crowdsourced data applied to modern technologies such as AI, cloud computing, and graph databases. Realizing that the nature of cybersecurity problems had changed but the solutions had not, we built our CrowdStrike Falcon platform – the first, true cloud-native platform capable of harnessing vast amounts of security and enterprise data to ~~detect~~deliver highly modular solutions through a single lightweight agent. Our pioneering platform approach keeps customers ahead of attackers by automatically detecting and preventing threats ~~and~~to stop breaches.

We believe ~~we are defining~~our approach has defined a new category called the Security Cloud, ~~with~~which has the power to transform the ~~security~~cybersecurity industry ~~much~~ the same way the cloud has transformed the ~~CRM, HR,~~customer relationship management, human resources, and service management industries. ~~With~~Using cloud-scale AI, our Security Cloud enriches and correlates trillions of cybersecurity events per week with indicators of attack, threat intelligence, and enterprise data (including data from across endpoints, workloads, identities, DevOps, IT assets, and configurations) to create actionable data, identify shifts in adversary tactics, and automatically prevent threats in real-time across our customer base. The more data that is fed into our Falcon platform, the more intelligent our Security Cloud becomes, and the more our customers benefit, creating a powerful network effect that increases the overall value we created the first multi-tenant, cloud native, intelligent security solution capable of protecting workloads across on-premise, virtualized, and cloud-based environments running on a variety of endpoints such as desktops, laptops, servers, virtual machines, and IoT devices. Our Falcon platform is composed of two tightly integrated proprietary technologies: our easily deployed intelligent lightweight agent and our cloud-based, dynamic graph database called Threat Graph. Our solution benefits from crowdsourcing and economies of scale, which we believe enables our AI algorithms to be uniquely effective. We call this cloud-scale AI. We initially provided intelligence and incident response services while we developed our Falcon platform. In June 2013, we first began providing EDR capabilities as a single solution. In February 2017, as we executed on our Falcon platform expansion strategy, we began offering these and additional capabilities as separate cloud modules. This strategic move facilitated new customer adoption and allowed us to further expand within our customer base. Today, we offer 10 cloud modules on our Falcon platform via a SaaS subscription-based model that spans multiple large security markets, including endpoint security, security and IT operations (including vulnerability management), and threat intelligence.

On June 14, 2019 we closed our initial public offering, or IPO, in which we issued and sold 20,700,000 shares of Class A common stock. The price per share to the public was $34.00. We received aggregate proceeds of $665.1 million from the IPO, net of underwriters’ discounts and commissions and before deducting estimated offering costs of $6.0 million. Upon the closing of the IPO, all shares of our outstanding preferred stock automatically converted into 131,267,586 shares of Class B common stock. In connection with our IPO, all shares of our common stock outstanding prior to our IPO were automatically converted into shares of Class B common stock. Our condensed consolidated financial statements as of April 30, 2019 do not reflect the impact of our IPO.

provide.

Our Go-To-Market Strategy

We sell subscriptions to our Falcon platform and cloud modules to organizations across multiple industries. We primarily sell subscriptions to our Falcon platform and cloud modules through our direct sales team that leverages our network of channel partners. Our direct sales team is comprised of field sales and inside sales professionals who are segmented by a customer’s number of endpoints.

We have a low friction land-and-expand sales strategy. When customers deploy our Falcon platform, they can start with any number of cloud modules and ~~we can activate~~easily add additional cloud modules in real time on the same agent already deployed on the endpoint. This architecture has also allowed us to begin to offer a free trial of our Falcon Prevent module directly from our website or the AWS Marketplace, and we plan to extend this capability to additional modules in the future.modules. Once customers experience the benefits of our Falcon platform, they often expand their adoption over time by adding more endpoints or purchasing additional modules. We also use our sales team to identify current customers who may be interested in free trials of additional cloud modules, which serves as a powerful driver of our land-and-expand model. By segmenting our sales teams, we can deploy a low-touch sales model that efficiently identifies prospective customers.

We began as a solution for large enterprises, but the flexibility and scalability of our Falcon platform has enabled us to seamlessly offer our solution to customers of any ~~size—from those with hundreds of thousands of endpoints to as few as three.~~size. We have expanded our sales focus to include any sized organization without the need to modify our Falcon platform for small and medium sized businesses.

A substantial majority of our customers purchase subscriptions with a term of one year. Our subscriptions are generally priced on a per-endpoint and per-module basis. We recognize revenue from our subscriptions ratably over the term of the subscription. We also generate revenue from our incident response and proactive professional services, which are generally priced on a time and materials basis. We view our professional services business primarily as an opportunity to cross-sell subscriptions to our Falcon platform and cloud modules.

Table of Contents

Certain Factors Affecting Our Performance

Adoption of Our Solutions. We believe our future success depends in large part on the growth in the market for cloud-based SaaS-delivered endpoint security solutions. Many organizations have not yet abandoned the on-premise legacy products in which they have invested substantial personnel and financial resources to design and maintain. As a result, it is difficult to predict customer adoption rates and demand for our cloud-based solutions.

New Customer Acquisition. Our future growth depends in large part on our ability to acquire new customers. If our efforts to attract new customers are not successful, our revenue and rate of revenue growth may decline. We believe that our go-to-market strategy and the flexibility and scalability of our Falcon platform ~~have allowed~~allow us to rapidly expand our customer base. Our incident response and proactive services ~~have~~ also ~~helped~~help drive new customer acquisitions, as many of these professional services customers subsequently purchase subscriptions to our Falcon platform. Many organizations have not yet adopted cloud-based security solutions, and since our Falcon platform has offerings for organizations of all sizes, worldwide, and across industries, we believe this presents a significant opportunity for growth.

Maintain Customer Retention and Increase Sales. Our ability to increase revenue depends in large part on our ability to retain our existing customers and increase the ARR of their subscriptions. We focus on increasing sales to our existing customers by expanding their deployments to more endpoints and selling additional cloud modules for increased ~~functionality In February 2017,~~functionality. Over time we have transitioned our platform from a single offering into highly-integrated offerings of multiple ~~SKU~~ cloud modules. We initially launched this strategy with our IT hygiene, next-generation antivirus, EDR, managed threat hunting, and intelligence modules, and added five additional modules between February 2017 and October 2018.

Invest in Growth. We believe that our market opportunity is large and requires us to continue to invest significantly in sales and marketing efforts to further grow our customer base, both domestically and internationally. Our open cloud architecture and single data model have allowed us to rapidly build and deploy new cloud modules, and we expect to continue investing in those efforts to further enhance our technology platform and product functionality. In addition to our ongoing investment in research and development, we may also pursue acquisitions of businesses, technologies, and assets that complement and expand the functionality of our Falcon platform, add to our technology or security expertise, or bolster our leadership position by gaining access to new customers or markets. Furthermore, we expect our general and administrative expenses to increase in dollar amount for the foreseeable future given the additional expenses for accounting, compliance, and investor relations as we ~~become~~grow as a public company.

Key Metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.

~~Subscription Customers~~

We define a subscription customer as a separate legal entity that has entered into a distinct subscription agreement for access to Falcon platform for which the term has not ended or with which we are negotiating a renewal contract. We do not consider our channel partners as customers, and we treat managed service security providers, who may purchase our products on behalf of multiple companies, as a single customer. While initially we focused our sales and marketing efforts on large enterprises, in recent years we have also increased our sales and marketing to small and medium sized businesses.

~~The following table sets forth the number of our subscription customers as of the dates presented:~~

As of April 30,


2019

2018

(in thousands)

Subscription customers

3,059

1,491

Year-over-year growth

105
%
178
%

Annual Recurring Revenue (“ARR”)

ARR is calculated as the annualized value of our 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 we are negotiating a renewal with a customer after the expiration of the subscription, we continue to include that revenue in ARR if we 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 following table sets forth our ARR as of the dates ~~presented:~~

presented (dollars in thousands):
As of April 30,
2023 2022
Annual recurring revenue $ 2,733,931 $ 1,921,831
Year-over-year growth 42 % 61 %

ARR grew to $2.7 billion as of April 30, 2023, of which $174.2 million was net new ARR added for the three months ended April 30, 2023. ARR grew to $1.9 billion as of April 30, 2022, of which $190.5 million was net new ARR added for the three months ended April 30, 2022.

As of April 30,


2019

2018

(in thousands)

Annual recurring revenue

$
364,648

$
170,392

Year-over-year growth

114
%

138
%

Dollar-Based Net Retention Rate

Our dollar-based net retention rate compares our ARR from a set of subscription customers against the same metric for those subscription customers from the prior year. Our dollar-based net retention rate reflects customer renewals, expansion, contraction, and churn, and excludes revenue from our incident response and proactive services. We calculate our 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. We 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. We then divide the Current Period ARR by the Prior Period ARR to arrive at our dollar-based net retention rate.

~~Since January 2016, our~~

Our dollar-based net retention rate ~~has consistently exceeded 100%, which is primarily attributable to an expansion~~was above 120% as of ~~endpoints within, and cross-selling additional cloud modules to, our existing subscription customers.~~April 30, 2023. Our dollar-based net retention rate can fluctuate from period to period due to large customer contracts in a

given period, which may reduce our dollar-based net retention rate in subsequent periods if the customer makes a larger upfront purchase and does not continue to increase purchases.

Our dollar-based net retention rate has varied from quarter to quarter due to a number of factors and we expect that trend to continue. In addition, we have seen strong success with our strategy to land bigger deals with more modules, and we are also seeing an acceleration in our acquisition of new customers. While we view these two trends as positive developments, they have a natural trade off on our ability to expand business with existing customers in the near term.

Components of Our Results of Operations

Revenue

Subscription Revenue. Subscription revenue primarily consists of subscription fees for our Falcon platform and additional cloud modules that are supported by our 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. We recognize subscription revenue ratably over the term of the agreement, which is generally one to three years. Because the majority of our subscription customers are ~~generally~~ billed upfront, we have recorded significant deferred revenue. Consequently, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to subscriptions that we entered into during previous periods. ~~We typically invoice~~The majority of our customers are invoiced annually ~~in advance, and to a lesser extent quarterly in advance, monthly~~ in advance or multi-year in advance.

Professional Services Revenue. Professional services revenue includes incident response and proactive services, forensic and malware analysis, and attribution analysis. Professional services are generally sold separately from subscriptions to our Falcon platform, although customers frequently enter into a separate arrangement to purchase subscriptions to our Falcon platform at the conclusion of a professional services arrangement. Professional services are available through hourly rate and fixed fee contracts, one-time and ongoing engagements, and retainer-based agreements. For time and materials and retainer-based arrangements, revenue is recognized as services are performed. ~~For fixed~~Fixed fee contracts ~~we recognize revenue by applying the proportional performance method.~~

account for an immaterial portion of our revenue.

Cost of Revenue

Subscription Cost of Revenue. Subscription cost of revenue consists primarily of costs related to hosting our cloud-based Falcon platform in data centers, amortization of our capitalized internal-use software, employee-related costs such as salaries and bonuses, stock-based compensation expense, benefits costs associated with our operations and support personnel, software license fees, property and equipment depreciation, amortization of acquired intangibles, and an allocated portion of facilities and administrative costs.

As new customers subscribe to our platform and existing subscription customers increase the number of endpoints on our Falcon platform, our cost of revenue will increase due to greater cloud hosting costs related to powering new cloud modules and the incremental costs for storing additional data collected for such cloud modules and employee-related costs. We intend to continue to invest additional resources in our cloud platform and our customer support organizations as we grow our business. The level and timing of investment in these areas could affect our cost of revenue in the future.

Professional Services Cost of Revenue. Professional services cost of revenue consists primarily of employee-related costs, such as salaries and bonuses, stock-based compensation expense, technology, property and equipment depreciation, and an allocated portion of facilities and administrative costs.

Gross Profit and Gross Margin

Gross profit and gross margin have been and will continue to be affected by various factors, including the timing of our acquisition of new subscription customers, renewals from existing subscription customers, sales of additional modules to existing subscription customers, the data center and bandwidth costs associated with operating our cloud platform, the extent to which we expand our customer support and cloud operations organizations, and the extent to which we can increase the efficiency of our technology, infrastructure, and data centers through technological improvements. We expect our gross profit to increase in dollar amount and our gross margin to increase modestly over the long term, although our gross margin could fluctuate from period to period depending on the interplay of these factors. Demand for our incident response services is driven by the number of breaches experienced by non-customers.

Also, we view our professional services solutions in the context of our larger business and as a significant lead generator for new subscriptions. Because of these factors, our services revenue and gross margin may fluctuate over time.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development and general administrative expenses. For each of these categories of expense, employee-related expenses are the most significant component, which include salaries, employee ~~benefit costs,~~ bonuses, sales commissions, ~~travel~~ and ~~entertainment related expenses, and stock-based compensation expense.~~employer payroll tax. Operating expenses also include an allocated portion of overhead costs for facilities ~~IT,~~ and ~~depreciation expense.~~

IT.

Sales and Marketing. Sales and marketing expenses primarily consist of employee-related expenses such as salaries, commissions, and bonuses. Sales and marketing expenses also include stock-based ~~compensation,~~compensation; expenses related to our ~~Fal.con~~Fal.Con customer conference and other marketing ~~events and~~events; an allocated portion of facilities and administrative ~~expenses,~~expenses; amortization of acquired intangibles, and cloud hosting and related services costs related to proof of value efforts. Incremental expenses to obtain a subscription contract, such as sales commissions, are capitalized and amortized over the term of the subscription. Prior to February 1, 2019, we amortized sales commissions on a straight-line basis to salesSales and marketing ~~expense over the term of the subscription. On February 1, 2019, we adopted ASC 606, and began amortizing~~expenses also include sales commissions and any other incremental ~~expenses to obtain a subscription and upsells to existing customers that are paid~~payments made upon the initial acquisition of a subscription or upsells to ~~sales~~existing customers, which are capitalized and ~~marketing expense~~amortized over the estimated customer ~~life,~~life. We also capitalize and ~~amortizing~~amortize any such expenses paid for the renewal of a subscription ~~to sales and marketing expense~~ over the term of the renewal.

We expect sales and marketing expenses to increase in dollar amount as we continue to make significant investments in our sales and marketing organization to drive additional revenue, further penetrate the market, and expand our global customer base.

However, we anticipate sales and marketing expenses to decrease as a percentage of our total revenue over time, although our sales and marketing expenses may fluctuate as a percentage of our total revenue from period to period depending on the timing of these expenses.

Research and Development. Research and development expenses primarily consist of employee-related expenses such as salaries and ~~bonuses,~~bonuses; stock-based ~~compensation,~~compensation; consulting expenses related to the design, development, testing, and enhancements of our subscription ~~services,~~services; and an allocated portion of facilities and administrative expenses. Our cloud platform is software-driven, and our research and development teams employ software engineers in the design, and the related development, testing, certification, and support of these solutions.

We expect research and development expenses to increase in dollar amount as we continue to increase investments in our technology architecture and software platform. However, we anticipate research and development expenses to decrease as a percentage of our total revenue over time, although our research and development expenses may fluctuate as a percentage of our total revenue from ~~period-to-period~~period to period depending on the timing of these expenses.

General and Administrative. General and administrative expenses consist of employee-related expenses such as salaries and ~~bonuses,~~bonuses; stock-based ~~compensation,~~compensation; and related expenses for our executive, finance, human resources, and legal organizations. In addition, general and administrative expenses include outside legal, accounting, and other professional ~~fees,~~fees; and an allocated portion of facilities and administrative expenses.

We expect ~~to incur additional expenses as a result of operating as a public company. As a result, we expect our~~ general and administrative expenses to increase in dollar ~~amount.~~amount over time. However, we anticipate general and administrative expenses to decrease as a percentage of our total revenue over ~~time.~~

~~Since September 2018 we granted RSUs that include~~time although our general and administrative expenses may fluctuate as a ~~service-based vesting condition and a performance-based vesting condition. The service-based vesting condition is generally satisfied based on one~~percentage of ~~three vesting schedules: (i) vesting of one-fourth of the RSUs~~our total revenue from period-to-period depending on the ~~first “Company vest date” (defined as March 20, June 20, September 20, or December 20)~~timing of these expenses.

Interest Expense. Interest expense consists primarily of amortization of debt issuance costs, contractual interest expense for our Senior Notes issued in January 2021, and amortization of debt issuance costs on or following the one-year anniversary of the vesting commencement date with the remainder of the RSUs vesting in twelve equal quarterly installments thereafter, subject to continued service, (ii) vesting in sixteen equal quarterly installments beginning on December 20, 2018, subject to continued service, or (iii) vesting in eight equal quarterly installments beginning on December 20, 2022, subject to continued service. The performance-based vesting condition is satisfied on the earlier of (i) a change in control, in which the consideration paid to holders of shares is either cash, publicly traded securities, or a combination thereof, or (ii) the first Company vest date to occur

our secured revolving credit facility.

following the expiration of the lock-up period upon an IPO, subject to continued service through such change in control or lock-up expiration, as applicable. None of the RSUs vest unless the performance-based vesting condition is satisfied. The performance-based vesting condition was not deemed probable of occurring as of April 30, 2019, and thus no stock-based compensation relating to these RSUs was recognized. In the quarter in which the performance-based vesting condition becomes probable, we will begin recording stock-based compensation expense using the accelerated attribution method based on the grant date fair value of the RSUs and will recognize all deferred expense related to RSUs as of that date in our condensed consolidated statement of operations. As of April 30, 2019, the total amount of stock-based compensation expense deferred related to this performance-based vesting condition was approximately $13.0 million. Upon the completion of the IPO on June 14, 2019, the performance-based vesting condition was met.Interest Income.

~~Other Income (Expense), Net~~

~~Other~~Interest income ~~(expense), net~~ consists primarily of income earned on our cash and cash equivalents ~~expense related to the fair value~~and short-term investments.

Other Income, Net. Other income, net, consists primarily of ~~warrants for our redeemable convertible preferred stock, interest expense~~gain and losses on ~~our bank facility,~~strategic investments and foreign currency transaction gains and losses.

Provision for Income ~~Taxes~~

Taxes. Provision for income taxes consists ~~primarily~~ of state income taxes in the United States, foreign income taxes, and withholding taxes related to customer payments in certain foreign jurisdictions in which we conduct ~~business, as well as state income taxes in the United States. We have not recorded any U.S. federal income tax expense.~~business. We maintain a full valuation allowance on our U.S. federal and state and U.K. deferred tax assets, aswhich we have ~~concluded that it is~~determined are not realizable on a more likely than not ~~that those deferred assets will not be utilized.~~

basis.

Net Income Attributable to Non-controlling Interest. Net income attributable to non-controlling interest consists of the Falcon Funds’ non-controlling interest share of mark-to-market gains and losses and interest income from our strategic investments.

Results of Operations

The following tables set forth our condensed consolidated statements of operations ~~in dollar amounts and as a percentage of total revenue~~ for each period ~~presented:~~

~~Three Months Ended April 30, 2019 and 2018~~

~~The following table summarizes our results of operations for the three months ended April 30, 2019 as compared to the three months ended April 30, 2018:~~

presented (in thousands, except percentages):

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Revenue

Subscription

$
85,990

$
39,758

$
46,232

116
%
Professional services

10,087

7,531

2,556

34
%
Total revenue

96,077

47,289

48,788

103
%

Cost of revenue

Subscription

23,691

15,171

8,520

56
%
Professional services

5,582

4,223

1,359

32
%
Total cost of revenue (1)

29,273

19,394

9,879

51
%

Gross profit

66,804

27,895

38,909

139
%

Operating expenses

Sales and marketing (1)

56,843

36,617

20,226

55
%
Research and development (1)

23,875

17,615

6,260

36
%
General and administrative (1)

11,861

6,777

5,084

75
%
Total operating expenses

92,579

61,009

31,570

52
%

Loss from operations

(25,775)

(33,114)

7,339

(22)
%
Interest expense

(1)

(192)

191

(99)
%
Other expense, net

394

(190)

584

(307)
%

Loss before provision for income taxes

(25,382)

(33,496)

8,114

(24)
%

Provision for income taxes

(595)

(121)

(474)

392
%

Net loss

$
(25,977)

$
(33,617)

$
7,640

(23)
%

~~Includes stock-based compensation expense as follows:~~

Three Months Ended April 30,


2019

2018

(in thousands)

Cost of revenue

$
368

$
109
Sales and marketing

1,518

773
Research and development

681

448
General and administrative

1,185

389
Total stock-based compensation expense

$
3,752

$
1,719


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Revenue
Subscription	$	651,175	$	459,822	$	191,353	42	%
Professional services	41,405		28,012		13,393		48	%
Total revenue	692,580		487,834		204,746		42	%
Cost of revenue
Subscription	142,100		107,942		34,158		32	%
Professional services	27,130		18,890		8,240		44	%
Total cost of revenue	169,230		126,832		42,398		33	%
Gross profit	523,350		361,002		162,348		45	%
Operating expenses
Sales and marketing	281,107		193,532		87,575		45	%
Research and development	179,065		123,399		55,666		45	%
General and administrative	82,634		67,954		14,680		22	%
Total operating expenses	542,806		384,885		157,921		41	%
Loss from operations	(19,456)		(23,883)		4,427		(19)	%
Interest expense	(6,387)		(6,298)		(89)		1	%
Interest income	30,521		1,507		29,014		1,925	%
Other income, net	230		1,705		(1,475)		(87)	%
Income (loss) before provision for income taxes	4,908		(26,969)		31,877		(118)	%
Provision for income taxes	4,409		3,440		969		28	%
Net income (loss)	499		(30,409)		30,908		(102)	%
Net income attributable to non-controlling interest	8		1,114		(1,106)		(99)	%
Net income (loss) attributable to CrowdStrike	$	491	$	(31,523)	$	32,014	(102)	%

The following table presents the components of our condensed consolidated statements of operations as a percentage of total revenue for the ~~three months ended~~periods presented:
Three Months Ended April 30,
2023 2022
%
Revenue
Subscription 94 % 94 %
Professional services 6 % 6 %
Total revenue 100 % 100 %
Cost of revenue
Subscription 21 % 22 %
Professional services 4 % 4 %
Total cost of revenue 24 % 26 %
Gross profit 76 % 74 %
Operating expenses
Sales and marketing 41 % 40 %
Research and development 26 % 25 %
General and administrative 12 % 14 %
Total operating expenses 78 % 79 %
Loss from operations (3) % (5) %
Interest expense (1) % (1) %
Interest income 4 % — %
Other income, net — % — %
Income (loss) before provision for income taxes 1 % (6) %
Provision for income taxes 1 % 1 %
Net income (loss) — % (6) %
Net income attributable to non-controlling interest — % — %
Net income (loss) attributable to CrowdStrike — % (6) %

Comparison of the Three Months Ended April 30, ~~2019 as compared to the three months ended April 30, 2018:~~

2023 and 2022

Revenue

Three Months Ended April 30,

Three Months Ended April 30,


2019

2018

2019

2018

(in thousands)

%

%

Revenue

Subscription

85,990

$
39,758

90
%
84
%
Professional services

10,087

7,531

10
%
16
%
Total revenue

96,077

47,289

100
%
100
%

Cost of revenue

Subscription

23,691

15,171

25
%
32
%
Professional services

5,582

4,223

6
%
9
%
Total cost of revenue

29,273

19,394

30
%
41
%

Gross profit

66,804

27,895

70
%
59
%

Operating expenses

Sales and marketing

56,843

36,617

59
%
77
%
Research and development

23,875

17,615

25
%
37
%
General and administrative

11,861

6,777

12
%
14
%
Total operating expenses

92,579

61,009

96
%
129
%

Loss from operations

(25,775)

(33,114)

(27)
%
(70)
%
Interest expense

(1)

(192)

0
%
0
%
Other expense, net

394

(190)

0
%
0
%

Loss before provision for income taxes

(25,382)

(33,496)

(26)
%
(71)
%

Provision for income taxes

(595)

(121)

(1)
%
0
%

Net loss

$
(25,977)

(33,617)

(27)
%
(71)
%

~~Revenue~~

The following ~~is a breakdown of~~shows total revenue from subscriptions and professional services for the three months endedApril 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

2022 (in thousands, except percentages):

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Subscription

$
85,990

$
39,758

$
46,232

116
%
Professional services

10,087

7,531

2,556

34
%
Total revenue

$
96,077

$
47,289

$
48,788

103
%


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Subscription	$	651,175	$	459,822	$	191,353	42	%
Professional services	41,405		28,012		13,393		48	%
Total revenue	$	692,580	$	487,834	$	204,746	42	%

Total revenue increased ~~from $47.3~~by $204.7 million, or 42%, for the three months ended April 30, ~~2018,~~2023 compared to ~~$96.1~~the three months ended April 30, 2022. Subscription revenue accounted for 94% of our total revenue for each of the three months ended April 30, 2023 and April 30, 2022. Professional services revenue accounted for 6% of our total revenue for each of the three months ended April 30, 2023 and April 30, 2022.

Subscription revenue increased by $191.4 million, or 42%, for the three months ended April 30, ~~2019. Subscription~~2023 compared to the three months ended April 30, 2022, primarily driven by a combination of the addition of new customers and the sale of additional endpoints and modules to existing customers.

Professional services revenue ~~accounted for 84% of our total revenue~~increased by $13.4 million, or 48%, for the three months ended April 30, ~~2018, and 90% for~~2023, compared to the three months ended April 30, ~~2019. Professional services revenue accounted for 16% of our total revenue for the three months ended April 30, 2018, and 10% for the three months ended April 30, 2019.~~

The growth in subscription revenue from $39.8 million for the three months ended April 30, 2018 to $86.0 million for the three months ended April 30, 2019, a 116% increase, was primarily attributable to the addition of new subscription customers, as we increased our customer base by 105% from 1,491 subscription customers as of April 30, 2018 to 3,059 subscription customers as of April 30, 2019. Subscription revenue from new customers, subscription revenue from the renewal of existing customers, and subscription revenue from the sale of additional endpoints and additional modules to existing customers accounted for 62%, 22%, and 16% of total subscription revenue for the three months ended April 30, 2018, respectively. Subscription revenue from new customers, subscription revenue from the renewal of existing customers, and subscription revenue from the sale of additional endpoints and additional modules to existing customers accounted for 43%, 31%, and 26% of total subscription revenue for the three months ended April 30, 2019, respectively.

~~Professional services revenue grew from $7.5 million for the three months ended April 30, 2018, to $10.1 million for the three months ended April 30, 2019, a 34% increase, and~~2022, which was primarily attributable to an increase in the number of professional service hours performed.

Cost of Revenue, Gross Profit, and Gross Margin

The following ~~is a breakdown of~~shows cost of revenue related to subscriptions and professional services for the three months ended April 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Subscription

$
23,691

$
15,171

$
8,520

56
%
Professional services

5,582

4,223

1,359

32
%
Total cost of revenue

$
29,273

$
19,394

$
9,879

51
%

2022 (in thousands, except percentages):


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Subscription	$	142,100	$	107,942	$	34,158	32	%
Professional services	27,130		18,890		8,240		44	%
Total cost of revenue	$	169,230	$	126,832	$	42,398	33	%

Total cost of revenue increased ~~from $19.4~~by $42.4 million, or 33%, for the three months ended April 30, ~~2018~~2023 compared to ~~$29.3~~the three months ended April 30, 2022. Subscription cost of revenue increased by $34.2 million, or 32%, for the three months ended April 30, ~~2019. Subscription cost of revenue increased from $15.2 million for~~2023, compared to the three months ended April 30, ~~2018, to $23.7 million for the three months ended April 30, 2019, a 56% increase.~~2022. The increase in subscription cost of revenue was primarily due to an increase in employee-related expenses of ~~$3.3~~$11.7 million driven by a ~~170%~~41% increase in average headcount, ~~which included significant hiring of technical support employees,~~ an increase in cloud hosting and related services cost of ~~$2.3~~$7.5 million driven by increased customer activity, an increase in depreciation of data center equipment of ~~$0.8~~$4.3 million, an increase in amortization of internal-use software of $3.2 million, an increase in allocated overhead costs of ~~$0.7~~$2.7 million, ~~an increase in amortization of internal use software of $0.3 million, an increase in software license fees of $0.2 million, and~~ an increase in stock-based compensation expense of ~~$0.2~~$2.4 million, and an increase in term-based software licenses of $1.7 million.

Professional services cost of revenue increased ~~from $4.2~~by $8.2 million, or 44%, for the three months ended April 30, ~~2018,~~2023, compared to ~~$5.6 million for~~ the three months ended April 30, ~~2019, a 32% increase.~~2022. The increase in professional services cost of revenue was primarily due to an increase in employee-related expenses of ~~$1.2~~$5.3 million driven by an increase in average headcount of ~~32%~~44%, an increase in stock-based compensation expense of $1.6 million, an increase in allocated overhead costs of $0.8 million, and an increase in ~~cloud hosting and related services~~employee health insurance costs of ~~$0.2~~$0.3 million.

The following ~~is a breakdown of~~shows gross profit and gross margin for subscriptions and professional services for the three months ended April 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Subscription gross profit

$
62,299

$
24,587

$
37,712

153
%
Professional services gross profit

4,505

3,308

1,197

36
%
Total gross profit

$
66,804

$
27,895

$
38,909

139
%

2022 (in thousands, except percentages):


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Subscription gross profit	$	509,075	$	351,880	$	157,195	45	%
Professional services gross profit	14,275		9,122		5,153		56	%
Total gross profit	$	523,350	$	361,002	$	162,348	45	%


	Three Months Ended April 30,				Change %
	2023		2022
Subscription gross margin	78	%	77	%	1	%
Professional services gross margin	34	%	33	%	1	%
Total gross margin	76	%	74	%	2	%

Three Months Ended April 30,

Change


2019

2018

%

Subscription gross margin

72
%
62
%
10
%
Professional services gross margin

45
%
44
%
1
%
Total gross margin

70
%
59
%
11
%

Subscription gross margin increased ~~from 62%~~by 1% for the three months ended April 30, ~~2018,~~2023, compared to ~~72%~~the three months ended April 30, 2022. The increase in subscription gross margin was primarily due to an increase in cloud hosting efficiency during the three months ended April 30, 2023, compared to the three months ended April 30, 2022.

Professional services gross margin increased by 1% for the three months ended April 30, ~~2019. This~~2023 compared to the three months ended April 30, 2022. The increase was a result of moving more of our operations to colocation data centers from third-party cloud service providers and renegotiating the terms of a third-party cloud service provider contract. This increase in professional services gross margin was ~~also~~primarily due to ~~incentivizing our sales team to drive higher margin subscriptions~~increased utilization and ~~efforts to optimize our channel partner programs.~~

decreased subcontractor costs during the three months ended April 30, 2023.

Operating Expenses

Sales and Marketing

The following ~~is a breakdown of~~shows sales and marketing expenses for the three months ended April 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

2022 (in thousands, except percentages):


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Sales and marketing expenses	$	281,107	$	193,532	$	87,575	45	%

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Sales and marketing expenses

$
56,843

$
36,617

$
20,226

55
%

Sales and marketing expenses increased ~~from $36.6~~by $87.6 million, or 45%, for the three months ended April 30, ~~2018,~~2023 compared to ~~$56.8 million for~~ the three months ended April 30, ~~2019, a 55% increase.~~2022. The increase in sales and marketing expenses was primarily due to an increase in employee-related expenses of ~~$9.2~~$39.8 million driven by an increase in sales and marketing average headcount of ~~62%~~34%, an increase in marketing programs of ~~$5.5~~$15.8 million, an increase in ~~travel-related costs~~stock-based compensation of ~~$1.6~~$9.0 million, an increase in company events expenses of $6.2 million, an increase in allocated overhead costs of ~~$1.5~~$4.3 million, an increase in ~~stock-based compensation~~tax and licenses of ~~$0.7~~$2.3 million, an increase in employer pension of $2.2 million, an increase in travel expenses of $2.1 million, and an increase in employee health insurance costs of ~~$0.5~~$2.0 million. ~~As a result of adopting ASC 606 effective February 1, 2019, our commissions expense for the three months ended April 30, 2019 was $4.2 million lower than it would have been under ASC 605.~~

Research and Development

The following ~~is a breakdown of~~shows research and development expenses for the three months ended April 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Research and development expenses

$
23,875

$
17,615

$
6,260

36
%

2022 (in thousands, except percentages):


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Research and development expenses	$	179,065	$	123,399	$	55,666	45	%

Research and development expenses increased ~~from $17.6~~by $55.7 million, or 45%, for the three months ended April 30, ~~2018,~~2023 compared to ~~$23.9 million for~~ the three months ended April 30, ~~2019, a 36% increase.~~2022. This increase was primarily due to an increase in employee-related expenses of ~~$4.3~~$33.2 million driven by an increase in research and development average headcount of ~~43%. In addition, there was~~46%, an increase in stock-based compensation of $10.3 million, an increase in cloud hosting and related costs of ~~$1.1~~$6.5 million, ~~and~~ an increase in allocated overhead costs of ~~$0.8~~$5.0 million, an increase in employee health insurance costs of $1.7 million, an increase in employer pension of $1.8 million, and an increase in depreciation of data center equipment of $1.0 million, partially offset by an increase in software capitalization of $5.6 million.

General and Administrative

The following ~~is a breakdown of~~shows general and administrative expenses for the three months ended April 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

General and administrative expenses

$
11,861

$
6,777

$
5,084

75
%

2022 (in thousands, except percentages):


	Three Months Ended April 30,				Change $		Change %
	2023		2022

General and administrative expenses	$	82,634	$	67,954	$	14,680	22	%

General and administrative expenses increased ~~from $6.8~~by $14.7 million, or 22%, for the three months ended April 30, ~~2018,~~2023 compared to ~~$11.9 million for~~ the three months ended April 30, ~~2019, a 75% increase.~~2022. The increase in general and administrative expenses was primarily due to an increase in stock-based compensation expense of $5.0 million, an increase in employee-related expenses of ~~$2.8~~$4.5 million driven by an increase in general and administrative average headcount of ~~63%. In addition, there was~~35%, an increase in legal ~~and accounting fees~~expense of ~~$1.1~~$2.9 million, an increase in ~~software license fees of $1.1 million, an increase in stock-based compensation expense of $0.8 million, an increase in facilities~~allocated overhead costs of ~~$0.7~~$0.9 million, and an increase in ~~depreciation and amortization expenses~~other labor expense of ~~$0.7 million, offset by an increase in overhead costs allocated to other functional areas~~$0.8 million.

Table of ~~$3.2 million.~~

Interest Expense, Interest Income, and Other ~~Expense,~~Income, Net

The following ~~is a breakdown of~~shows interest expense, interest income, and other ~~expense,~~income, net for the three months ended April 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Interest expense

$
1

$
192

$
(191)

(99)
%
Other expense (income), net

$
(394)

$
190

$
(584)

(307)
%

2022 (in thousands, except percentages):


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Interest expense	$	(6,387)	$	(6,298)	$	(89)	1	%
Interest income	$	30,521	$	1,507	$	29,014	1,925	%
Other income, net	$	230	$	1,705	$	(1,475)	(87)	%

Interest expense consists primarily of amortization of debt issuance costs, contractual interest expense, and accretion of debt discount for our Senior Notes issued in January 2021.

The ~~decrease~~increase in interest ~~expense of $0.2 million was driven primarily by a decrease in the amounts borrowed during~~income for the three months ended April 30, ~~2019~~2023 compared to the three months ended April 30, ~~2018. Other (income) expense,~~2022 was driven by increases in market interest rates.

The decrease in other income, net ~~was an expense of $0.2 million~~ for the three months ended April 30, ~~2018~~2023 compared to ~~income of $0.4 million for~~ the three months ended April 30, ~~2019. This $0.6 million change~~2022 was ~~driven~~ primarily ~~by an increase in interest income of $1.1 million, an increase in other income~~ due to ~~the write-off~~a decrease in net positive mark-to-market adjustments of ~~contingent consideration~~our strategic investments of ~~$0.5 million, and an increase in other income due to the unrealized gains on currency revaluation of $0.3~~$2.2 million, partially offset by ana net increase ~~in expense related to the fair value~~ of ~~the redeemable convertible preferred stock warrants of $1.2 million.~~

$0.7 million from foreign currency transaction gains.

Provision for Income Taxes

The following ~~is a breakdown of~~shows the provision for income taxes for the three months ended April 30, ~~2019~~2023 as compared to the three months ended April 30, ~~2018:~~

Three Months Ended April 30,

Change

Change


2019

2018

$

%

(in thousands)

Provision for income taxes

$
595

$
121

$
474

392
%

2022 (in thousands, except percentage):


	Three Months Ended April 30,				Change $		Change %
	2023		2022

Provision for income taxes	$	4,409	$	3,440	$	969	28	%

The increase in ~~the~~ provision for income taxes of ~~$0.5~~$1.0 million ~~was driven primarily by an increase in international income tax expense due to increased activity in several countries~~ during the three months ended April 30, ~~2019~~2023 compared to the three months ended April 30, ~~2108.~~

2022 was primarily attributable to withholding taxes related to customer payments in certain foreign jurisdictions in which the Company conducts business.

~~Non-GAAP Financial Measures~~

In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In particular, free cash flow is not a substitute for cash used in operating activities. Additionally, the utility of free cash flow as a measure of our financial performance and liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

We believe that these non-GAAP financial measures as presented in the below table, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook.

~~Non-GAAP Subscription Gross Profit and Non-GAAP Subscription Gross Margin~~

We define non-GAAP subscription gross profit and non-GAAP subscription gross margin as GAAP subscription gross profit and GAAP subscription gross margin, respectively, excluding stock-based compensation expense and amortization of acquired intangible assets. We believe non-GAAP subscription gross profit and non-GAAP subscription gross margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these measures eliminate the effects of certain variables unrelated to our overall operating performance.

The following table presents a reconciliation of our non-GAAP subscription gross profit to our GAAP subscription gross profit and of our non-GAAP subscription gross margin to our GAAP subscription gross margin as of the periods presented:

Three Months Ended April 30,


2019

2018

(in thousands)

Subscription revenue

$
85,990

$
39,758

Subscription gross profit

$
62,299

$
24,587

Add: Stock-based compensation expense

270

63

Add: Amortization of acquired intangible assets

104

96

Non-GAAP subscription gross profit

$
62,673

$
24,746

Subscription gross margin

72
%

62
%

Non-GAAP subscription gross margin

73
%

62
%

~~Non-GAAP Loss from Operations and Non-GAAP Operating Margin~~

We define non-GAAP loss from operations and non-GAAP operating margin as GAAP loss from operations and GAAP operating margin, respectively, excluding stock-based compensation expense, amortization of acquired intangible assets, and acquisition-related expenses. We believe non-GAAP loss from operations and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables unrelated to our overall operating performance.

The following table presents a reconciliation of our non-GAAP loss from operations to our GAAP loss from operations and our non-GAAP operating margin to our GAAP operating margin as of the periods presented:

Three Months Ended April 30,


2019

2018

(in thousands)

Total revenue

$
96,077

$
47,289

Loss from operations

$
(25,775)

$
(33,114)

Add: Stock-based compensation expense

3,752

1,719

Add: Amortization of acquired intangible assets

146

166

Non-GAAP loss from operations

$
(21,877)

$
(31,229)

Operating margin

(27)
%

(70)
%

Non-GAAP operating margin

(23)
%

(66)
%

~~Free Cash Flow and Free Cash Flow Margin~~

Free cash flow is a non-GAAP financial measure that we define as net cash used in operating activities less purchases of property and equipment, capitalized internal-use software, acquisition of intangible assets, and cash used for business combinations. Free cash flow margin is calculated as free cash flow divided by total revenue. We monitor free cash flow as one measure of our overall business performance, which enables us to analyze our future performance without the effects of non-cash items and allow us to better understand the cash needs of our business. While we believe that free cash flow is useful in evaluating our business, free cash flow is a non-GAAP financial measure that has limitations as an analytical tool, and free cash flow should not be considered as an alternative to, or substitute for, net cash used in operating activities in accordance with GAAP. The utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for any given period. In addition, other companies, including companies in our industry, may calculate free cash flow differently or not at all, which reduces the usefulness of free cash flow as a tool for comparison.

~~The following table presents a reconciliation of free cash flow and free cash flow margin to net cash used in operating activities:~~

Three Months Ended April 30,


2019

2018


(in thousands)

Total revenue

$
96,077

$
47,289

Net cash provided by (used in) operating activities

1,415

(6,393)

Less: Purchases of property and equipment

(15,541)

(8,649)

Less: Capitalized internal-use software

(1,984)

(1,707)

Free cash flow

$
(16,110)

$
(16,749)

Net cash provided by (used in) investing activities

$
4,138

$
(7,756)

Net cash provided by (used in) financing activities

$
(882)

$
449

Net cash provided by (used in) operating activities as a percentage of revenue

1
%

(13)
%
Less: Purchases of property and equipment as a percentage of revenue

(16)
%

(18)
%
Less: Capitalized internal-use software as a percentage of revenue

(2)
%

(4)
%
Free cash flow margin

(17)
%

(35)
%

Liquidity and Capital Resources

~~In June 2019, upon completion~~

Our primary sources of ~~our IPO, we received net proceeds of $659.1 million, after deducting underwriters’ discounts and commissions and estimated offering expenses of $44.7 million. As~~liquidity as of April 30, ~~2019, we had $4.0 million of deferred offering costs classified as other assets~~2023, consisted of: (i) $2.8 billion in ~~our condensed consolidated balance sheet which were reclassified to stockholders’ equity as a further reduction of the net proceeds received from the IPO.~~

Prior to our IPO, we financed our operations principally through private placements of our equity securities, payments received from customers using our Falcon platform and professional services, and borrowings under our credit facility. As of April 30, 2019, we had cash equivalents, consisting of money market funds, corporate debt securities, and US Treasuries, of $87.9 million, and marketable securities, consisting of corporate debt securities and U.S. treasury securities, of $82.1 million. Our cash and cash equivalents, ~~primarily~~which mainly consists of cash on hand and highly liquid investments in time deposits and money market funds, (ii) $100.0 million in short-term investments, which consist of ~~highly liquid investments. Since~~time deposits, (iii) cash we expect to generate from operations, and (iv) available capacity under our ~~inception,~~$750.0 million senior secured revolving credit facility (the “A&R Credit Agreement”). We expect that the combination of our existing cash and cash equivalents, short-term investments, cash flows from operations, and the A&R Credit Agreement will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

Our short-term and long-term liquidity requirements primarily arise from: (i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) interest and principal payments related to our outstanding indebtedness, (iv) research and development and capital expenditure needs, and (v) license and service arrangements integral to our business operations. Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

We have historically generated operating losses, as reflected in our accumulated deficit of ~~$521.7 million~~$1.1 billion as of April 30, ~~2019, and negative cash flows from operations.~~2023. We expect to continue to incur operating losses ~~and generate negative cash flows from operations~~ for the foreseeable future due to the investments we intend to continue to make, particularly in sales and marketing and research and ~~development, and due to additional general and administrative costs we expect to incur as a public company.~~development. As a result, we may require additional capital resources in the future to execute strategic initiatives to grow our business.

We typically invoice our subscription customers annually in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our condensed consolidated balance sheets as deferred revenue. Deferred revenue primarily consists of billed fees for our subscriptions, prior to satisfying the criteria for revenue recognition, which are subsequently recognized as revenue in accordance with our revenue recognition policy. As of April 30, ~~2019,~~2023, we had deferred revenue of ~~$313.4 million,~~$2.4 billion, of which ~~$242.5 million~~$1.8 billion 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.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities. We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions, or foreign currency forward contracts.

Cash Flows

The following table summarizes our cash flows for the periods ~~presented:~~

Three Months Ended April 30,


2019

2018

(in thousands)

Net cash provided by (used in) operating activities

$
1,415

$
(6,393)
Net cash provided by (used in) investing activities

4,138

(7,756)
Net cash provided by (used in) financing activities

(882)

449

presented (in thousands):


	Three Months Ended April 30,
	2023		2022

Net cash provided by operating activities	$	300,892	$	214,957
Net cash provided by (used in) investing activities	66,031		(60,950)
Net cash provided by financing activities	7,908		4,568

Operating Activities

Net cash provided by operating activities during the three months ended April 30, ~~2019~~2023 was ~~$1.4~~$300.9 million, which resulted from a net ~~loss~~income of ~~$26.0~~$0.5 million, adjusted for non-cash charges of ~~$16.1~~$220.4 million and net cash inflow of ~~$11.3~~$80.0 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of ~~$7.3~~$130.9 million in stock-based compensation expense, $55.3 million of amortization of deferred contract acquisition costs, ~~$4.9~~$26.4 million of depreciation and amortization, $3.8 million in stock-based compensation expense, and $1.2 million due to the change in the fair value of our redeemable convertible preferred stock warrant liability. The net cash inflow from changes in operating assets and liabilities was primarily due to a $24.8 million increase in deferred revenue and a $5.4 million decrease in accounts receivable, partially offset by a $8.5 million increase in deferred contract acquisition costs, a $6.6 million decrease in accrued payroll and benefits, and a $4.0 million increase in prepaid expenses and other assets.

Net cash used in operating activities during the three months ended April 30, 2018 was $6.4 million, which resulted from a net loss of $33.6 million, adjusted for non-cash charges of $10.6 million and net cash inflow of $16.6 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $5.6$4.2 million of amortization of ~~deferred contract acquisition costs, $3.0~~intangibles assets, $3.1 million of ~~depreciation~~non-cash operating lease costs, and ~~amortization, and $1.8~~$0.8 million ~~in stock-based compensation~~of non-cash interest expense. The net cash inflow from changes in operating assets and liabilities was primarily due to a ~~$20.7~~$165.1 million decrease in accounts receivable, net, and a ~~$9.4~~$48.7 million increase in deferred revenue, partially offset by a ~~decrease in accrued expenses and other current liabilities of $7.3 million, a $5.0~~$49.5 million increase in deferred contract acquisition costs, a $36.6 million decrease in accrued expenses and other liabilities, an $18.6 million decrease in accounts payable, a ~~$4.3~~$17.3 million decrease in accrued payroll and ~~benefits.~~

benefits, an $8.6 million increase in prepaid expenses and other assets, and a $3.2 million decrease in operating lease liabilities.

Investing Activities

Net cash provided by investing activities ~~during the three months ended April 30, 2019~~ of $4.1 million was primarily due to maturities of marketable securities of $69.0 million, partially offset by purchases of marketable securities of $51.8 million and purchases of property and equipment of $15.5 million

Net cash used in investing activities during the three months ended April 30, 2018 of $7.8 million was primarily due to purchases of property and equipment of $8.6 million and capitalized internal-use software of $1.7 million, partially offset by maturities of marketable securities of $2.6 million.

~~Financing Activities~~

~~Net cash used in financing activities of $0.9~~$66.0 million during the three months ended April 30, ~~2019~~2023 was primarily due to ~~$2.4~~proceeds from the sale of investments of $150.0 million, ~~of payments of deferred offering costs~~ partially offset by ~~proceeds from the issuance~~purchases of ~~common stock upon exercise~~property and equipment of ~~stock options~~$62.3 million, purchases of ~~$1.5~~strategic investments of $10.5 million, and capitalized internal-use software and website development costs of $10.9 million.

Financing Activities

Net cash provided by financing activities of ~~$0.4~~$7.9 million during the three months ended April 30, ~~2018~~2023 was primarily due to $5.3 million of capital contributions from non-controlling interests and proceeds from the ~~issuance of common stock upon~~ exercise of stock options of ~~$0.8 million partially offset~~$2.7 million.

Supplemental Guarantor Financial Information

Our Senior Notes are guaranteed on a senior, unsecured basis by ~~payments~~CrowdStrike, Inc., a wholly owned subsidiary of ~~indemnity holdback~~CrowdStrike Holdings, Inc. (the “subsidiary guarantor,” and together with CrowdStrike Holdings, Inc., the “Obligor Group”). The guarantee is full and unconditional and is subject to certain conditions for release. See Note 4, “Debt”, in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of ~~$0.5 million.~~

this Quarterly Report on Form 10-Q, for a brief description of the Senior Notes.

~~Debt~~We conduct our operations almost entirely through our subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service the notes will depend on the earnings of our subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities will have a direct claim only against the Obligor Group.

Summarized financial information is presented below for the Obligor Group on a combined basis after elimination of intercompany transactions and balances within the Obligor Group and equity in the earnings from and investments in any non-guarantor subsidiary. The revenue amounts presented in the summarized financial information include all of our condensed consolidated revenue, and there is no intercompany revenue from the non-guarantor subsidiaries. This summarized financial information has been prepared and presented pursuant to Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S. GAAP.


Statement of Operations	Three Months Ended April 30, 2023

	(in thousands)
Revenue	$	692,580
Cost of revenue	179,441
Operating expenses	550,408
Loss from operations	(37,269)
Net loss	(14,987)
Net loss attributable to CrowdStrike	(14,987)


Balance Sheet	April 30, 2023		January 31, 2023

	(in thousands)
Current assets (excluding intercompany receivables from non-Guarantors)	$	3,595,334	$	3,541,670
Intercompany receivables from non-Guarantors	7,757		5,817
Noncurrent assets	1,434,308		1,443,684
Current liabilities	2,017,664		2,027,443
Noncurrent liabilities (excluding intercompany payable to non-Guarantors)	1,402,132		1,417,627
Intercompany payable to non-Guarantors	249,660		289,242

Strategic Investments

In July 2019, we agreed to commit up to $10.0 million to a newly formed entity, CrowdStrike Falcon Fund LLC (the “Original Falcon Fund”) in exchange for 50% of the sharing percentage of any distribution by the Original Falcon Fund. In December 2021, we agreed to commit an additional $50.0 million to a newly formed entity, CrowdStrike Falcon Fund II LLC (“Falcon Fund II”) in exchange for 50% of the sharing percentage of any distribution by Falcon Fund II. Further, entities associated with Accel also agreed to commit up to $10.0 million and $50.0 million, respectively, to the Original Falcon Fund and Falcon Fund II (collectively, the “Falcon Funds”), and collectively own the remaining 50% of the sharing percentage of the Falcon Funds. Both Falcon Funds are in the business of purchasing, selling and investing in minority equity and convertible debt securities of privately-held companies that develop applications that have potential for substantial contribution to us and our platform. We are the manager of the Falcon Funds and control their investment decisions and day-to-day operations and accordingly have consolidated each of the Falcon Funds. Each Falcon Fund has a duration of ten years and may be extended for three additional years. At dissolution, the Falcon Funds will be liquidated and the remaining assets will be distributed to the investors based on their respective sharing percentage.

Contractual Obligations

and Commitments

Contractual Obligations

During the three months ended April 30, 2023, there were no significant changes to our debt obligations related to the Senior Notes or our contractual obligations under our non-cancelable real estate arrangements, as presented in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

We have non-cancelable data center commitments totaling $265.0 million as of April 30, 2023, of which $194.9 million has a remaining term in excess of 12 months. We also have non-cancelable purchase commitments with various parties to purchase products and services entered in the normal course of business totaling $94.5 million as of April 30, 2023, of which $81.9 million has a remaining term in excess of 12 months. We expect to fund these obligations with cash flows from operations and cash on our balance sheet.

The contractual commitment amounts above are associated with agreements that are enforceable and legally binding. Obligations under contracts, including purchase orders, that we can cancel without a significant penalty are excluded.

Other Obligations

In ~~April 2019,~~October 2021, we entered into a ~~Credit Agreement~~new private pricing addendum with Silicon Valley Bank and other lenders, to provide a revolving line of credit of up to $150.0 million, including a letter of credit sub-facility in the aggregate amount of $10.0 million, and a swingline sub-facility in the aggregate amount of $10.0 million. We also have the option to request an incremental facility of up to an additional $75.0 million from one or more of the lenders under the Credit Agreement. The amount we may borrow under the Credit Agreement may not exceed the lesser of $150.0 million or our ordinary course recurring subscription revenue for the most recent month, as determined under the Credit Agreement, multiplied by a number that is (i) 6, for the first year after entry into the Credit Agreement; (ii) 5, for the second year after entry into the Credit Agreement; and (iii) 4, thereafter.Amazon Web Services (“AWS”), which provides us with cloud computing infrastructure. Under the ~~terms~~new pricing addendum, we committed to purchase a minimum of the Credit Agreement, revolving loans may be either Eurodollar Loans or ABR Loans. Outstanding Eurodollar Loans incur interest at the Eurodollar Rate, which is defined in the Credit Agreement as LIBOR (or any successor thereto), plus a margin between 2.75% and 3.25%, depending on usage. Outstanding ABR Loans incur interest at the highest$600.0 million of (a) the Prime Rate, as published by the Wall Street Journal, (b) the federal funds rate in effect for such day plus 0.50%, and (c) the Eurodollar Rate plus 1.00%, in each case plus a margin between 1.75% and 2.25%, depending on usage. The applicable margin for Eurodollar Loans and ABR Loans will be reduced by 0.25% upon the completion of an initial public offering of at least $100.0 million in gross proceeds. We are charged a commitment fee of 0.2% to 0.3% per year for committed but unused amounts. The Credit Agreement will terminate on April 19, 2022.

The Credit Agreement is collateralized by substantially all of our current and future property, rights, and assets, including, but not limited to, cash, goods, equipment, contractual rights, financial assets, and intangible assets of the Company and our subsidiaries. The Credit Agreement contains covenants limiting our ability to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock, and make investments, in each case subject to certain exceptions. The Credit Agreement also contains financial covenants requiring us to maintain the year-over-year growth rate of its ordinary course recurring subscription revenue above specified rates and to maintain minimum liquidity at specified levels. We were in compliance with all covenants ascloud services from AWS through September 2026. As of April 30, ~~2019. The Credit Agreement contains events~~2023, we have utilized $366.9 million of ~~default that include, among others, non-payment of principal, interest, or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults~~this commitment. We expect to ~~certain other indebtedness, bankruptcy and insolvency events, and material judgments.~~

~~No amounts were outstanding under the Credit Agreement as~~meet our remaining commitment with AWS.

As of April 30, ~~2019.~~

~~Contractual Obligations and Commitments~~

~~The following table summarizes~~2023, our ~~contractual obligations~~unrecognized tax benefits included $4.4 million which were classified as long-term liabilities due to the inherent uncertainty with respect to the timing of ~~April 30, 2019 and the years in which these obligations are due:~~

Fiscal Year Ending April 30,


Total

2020

2021

2022

2023

2024

Thereafter

(in thousands)

Operating leases (1)

$
24,165

$
4,300

$
5,469

$
5,229

$
4,365

$
3,090

$
1,712
Data center commitments (2)

207,386

35,716

67,819

86,536

8,445

7,330

1,540
Other purchase obligations (3)

14,964

9,977

4,340

647

—

—

—
Total

$
246,515

$
49,993

$
77,628

$
92,412

$
12,810

$
10,420

$
3,252

~~(1)~~

~~Relates to our facilities worldwide.~~

~~(2)~~

~~Relates to non-cancelable commitments to data center vendors.~~

~~(3)~~

~~Relates to non-cancelable purchase commitments with various parties to purchase products and services entered into in the normal course of business.~~

future cash outflows associated with our unrecognized tax benefits.

Indemnification

~~Indemnification~~

Our subscription agreements contain standard indemnification obligations. Pursuant to these agreements, we will indemnify, defend, and hold the other party harmless with respect to a claim, suit, or proceeding brought against the other party by a third party alleging that our intellectual property infringes upon the intellectual property of the third party, or results from a breach of our representations and warranties or covenants, or that results from any acts of negligence or willful misconduct. The term of these indemnification agreements is generally perpetual ~~any time~~ after the execution of the agreement. Typically, these indemnification provisions do not provide for a maximum potential amount of future payments we could be required to make. However, in the past we have not been obligated to make significant payments for these obligations and no liabilities have been recorded for these obligations on our condensed consolidated balance ~~sheet~~sheets as of April 30, ~~2019~~2023 or January 31, ~~2019.~~

2023.

We also agreed to indemnify our ~~officers~~directors and ~~directors~~certain executive officers for certain events or occurrences, subject to certain limits, while the officer is or was serving at our request in such capacity. The maximum amount of potential future indemnification is unlimited. However, our director and officer liability insurance policy ~~limits~~mitigates our ~~exposure and enables us to recover a portion of any future amounts paid.~~exposure. Historically, we have not been obligated to make any payments for these obligations and no liabilities have been recorded for these obligations on our condensed consolidated balance ~~sheet~~sheets as of April 30, ~~2019~~2023 or January 31, ~~2019.~~

2023.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements were prepared in accordance with U.S GAAP. The preparation of the condensed consolidated financial statements requires our management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates and judgments on our historical experience, knowledge of factors affecting our business and our belief as to what could occur in the future considering available information and assumptions that are believed to be reasonable under the circumstances.

The accounting estimates we use in the preparation of our condensed consolidated financial statements will change as new events occur, more experience is acquired, additional information is obtained and our operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in our reported results of operations and, if material, the effects of changes in estimates are disclosed in the notes to our condensed consolidated financial statements. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.

There have been no significant changes in our critical accounting policies and estimates during the three months ended April 30, 2023, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended January 31, 2023, filed with the SEC on March 9, 2023.

Backlog

We enter into both single and multi-year subscription contracts for our solutions. We generally invoice ~~the entire amount~~our customers at contract signing prior to commencement of subscription period. Until such time as these amounts are invoiced, they are not recorded in deferred revenue or elsewhere in our condensed consolidated financial statements, and are considered by us to be backlog. As of April 30, ~~2019,~~2023, we had backlog of approximately ~~$70.4~~$912.0 million. ~~Of the backlog of $70.4 million as of April 30, 2019, approximately $30.9 million is not reasonably expected to be billed in the next twelve months.~~ We expect backlog will change from period to period for several reasons, including the timing and duration of customer agreements, varying billing cycles of subscription agreements, and the timing and duration of customer renewals. Because revenue for any period is a function of revenue recognized from deferred revenue under contracts in existence at the beginning of the period, as well as contract renewals and new customer contracts during the period, backlog at the beginning of any period is not necessarily indicative of future revenue performance. We do not utilize backlog as a key management metric internally.

~~Off-Balance Sheet Arrangements~~

~~Critical Accounting Policies and Estimates~~

~~Our management’s discussion and analysis~~

Seasonality

Given the annual budget approval process of ~~financial condition and results~~many of ~~operations~~our customers, we see seasonal patterns in our business. Net new ARR generation is ~~based upon our financial statements and notes to our financial statements, which were prepared~~typically greater in ~~accordance with GAAP. The preparation~~the second half of the ~~financial statements requires our management to make estimates and assumptions that affect the amounts reported~~year, particularly in the ~~financial statements and accompanying notes. Our management evaluates our estimates on an ongoing basis, including those related~~fourth quarter, as compared to the ~~allowance for doubtful accounts,~~first half of the ~~carrying value of long-lived assets,~~year. In addition, we also experience seasonality in our operating margin, typically with a lower margin in the useful lives of long-lived assets, the fair value of financial instruments, the recognition and disclosure of contingent liabilities, the provision for income taxes and related deferred taxes, stock-based compensation, the fair valuefirst half of our ~~common stock,~~fiscal year due to a step up in costs for payroll taxes, new hires, and annual sales and marketing events. This also impacts the ~~fair value~~timing of operating cash flow.

Employees

As of April 30, 2023, we had 7,321 full-time employees. We also engage temporary employees and consultants as needed to support our operations. None of our ~~redeemable convertible preferred stock warrants. We base our estimates and judgments on our historical experience, knowledge of factors affecting our business and our belief as to what could occur~~employees in the ~~future considering available information and assumptions that~~United States are ~~believed~~represented by a labor union or subject to ~~be reasonable under the circumstances.~~

~~The accounting estimates~~a collective bargaining agreement. In certain countries in which we use in the preparation of our financial statements will change as new events occur, more experience is acquired, additional information is obtained and our operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in our reported results of operations and, if material, the effects of changes in estimates are disclosed in the notes to our financial statements. By their nature, these estimates and judgmentsoperate, we are subject to ~~an inherent degree of uncertainty and actual results could differ materially from the amounts reported based on these estimates.~~

~~Our significant accounting policies are more fully described in Note 2 of~~local labor law requirements which may automatically make our condensed consolidated financial statements. Our critical accounting policies and our more significant judgments and estimates used in the preparation of our financial statements are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our prospectus dated June 11, 2019 filed with the SEC pursuantemployees subject to Rule 424(b) under the Securities Act of 1933, as amended, and there have been no significant changes to these policies for the three months ended April 30, 2019, except in regard to our adoption of ASU 606, ~~Revenue from Contracts with Customers~~ ~~which is discussed below.~~

~~Revenue Recognition~~

We adopted Accounting Standards Codification ("ASC") Topic 606, Revenue From Contracts With Customers ("ASC 606") on February 1, 2019, using the modified retrospective transition method. Under this method, results for reporting periods beginning on February 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under Topic 605.

We recorded a cumulative effect adjustment to opening accumulated deficit of $23.4 million, net of tax, as of the date of adoption. The change resulted from a $23.7 million reduction in commissions expense offset by a $0.3 million reduction in revenue.

The adoption of Topic 606 had no impact on net cash provided by or used in operating, investing, or financing activities in our consolidated statements of cash flows for the three months ended April 30, 2019. As a result of adopting ASC 606 effective February 1, 2019, our commissions expense for the three months ended April 30, 2019 was $4.2 million lower than it would have been under ASC 605.

~~Under ASC 606, we report our revenues in two categories: (i) subscriptions and (ii) professional services.~~

~~Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.~~

~~We determine revenue recognition through the following steps:~~

●

~~Identification of the contract, or contracts, with a customer~~

We consider the terms and conditions of contracts with customers and our customary business practices in identifying contracts under ASC 606. We determine we have a contract with a customer when the contract is approved, each party’s rights regarding the services to be transferred can be identified, payment terms for the services can be identified, it has been determined that the customer has the ability and intent to pay, and the contract has commercial substance. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.

●

~~Identification of the performance obligations in the contract~~

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, meaning that the customer can benefit from the service either on its own or together with other resources that are readily available from us or from third parties, and are distinct in the context of the contract, meaning that the transfer of the services is separately

~~identifiable from other promises in the contract. Our performance obligations in our contracts with customers consist of (i) subscription and support services and (ii) professional services.~~

●

~~Determination of the transaction price~~

The transaction price is determined based on the consideration to which we are expected to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of our contracts contains a significant financing component.

●

~~Allocation of the transaction price to the performance obligations in the contract~~

●

~~Recognition of revenue when, or as, we satisfy a performance obligation~~

Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised service to the customer. Revenue is recognized when control of the services is transferred to the customer, in an amount that reflects the consideration expected to be received in exchange for those services. We generate all our revenue from contracts with customers.

~~Subscription Revenue~~

Our Falcon Platform technology solutions are SaaS offerings designed to continuously monitor, share, and mitigate risks from determined attackers. Customers do not have the right to take possession of the cloud-based software platform. Fees are based on several factors, including the solutions subscribed for by the customer and the number of endpoints purchased by the customer. The subscription fees are typically payable within 30 to 60 days after the execution of the arrangement, and thereafter upon renewal or subsequent installment. We initially record the subscription fees as deferred revenue and recognize revenue on a straight-line basis over the term of the agreement.

~~Professional Services Revenue~~

We offer several types of professional services including incident response and forensic services, surge forensic and malware analysis, and attribution analysis, which are focused on responding to imminent and direct threats, assessing vulnerabilities, and recommending solutions. The professional services are available through hourly rate and fixed fee contracts, one-time and ongoing engagements, and retainer-basedindustry-wide collective bargaining agreements. ~~Revenue for time and materials arrangements is recognized as services are performed and revenue for fixed fees is recognized on a proportional performance basis as the services are performed.~~

~~Contracts with Multiple Performance Obligations~~

Some contracts with customers contain multiple promised services consisting of subscription and professional services that are distinct and accounted for separately. The transaction price is allocated to the separate performance obligations on a relative SSP basis. The SSP is the price at which we would sell promised subscription or professional services separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation. We determine SSP based on our overall pricing objectives, taking into consideration the type of subscription or professional service and the number of endpoints.

~~Variable Consideration~~

If subscriptions do not meet certain service level commitments, our customers are entitled to receive service credits, and in certain cases, refunds, each representing a form of variable consideration. We have ~~historically~~ not experienced any ~~significant incidents affecting the defined levels of reliability~~work stoppages, and performance as required by its subscription contracts. Accordingly, any estimated refunds related to these agreements in the condensed consolidated financial statements is not material during the periods presented.

~~We provide rebates and other credits within~~we consider our ~~contracts~~relations with ~~certain resellers, which are estimated based on the most likely amounts expected~~our employees to be ~~earned or claimed on the related sales transaction. Overall, the transaction price~~good.

Corporate Information

Our principal executive offices are located at 206 E. 9th Street, Suite 1400, Austin, Texas 78701 and our telephone number is reduced to reflect our estimate of the amount of consideration to which it is entitled based on the terms of the contract. Estimated rebates and other credits were not material during the periods presented.

~~JOBS Act Accounting Election~~

(888) 512-8906. We are ~~an emerging growth~~a holding company ~~as defined in the JOBS Act. Under the JOBS Act, emerging growth companies~~and all of our business operations are conducted through our subsidiaries, including CrowdStrike, Inc. Our website address is www.crowdstrike.com. Information contained on, or that can ~~delay adopting new or revised accounting standards issued after the enactment~~be accessed through, our website does not constitute part of ~~the JOBS Act until those standards apply to private companies. We have elected to use~~ this ~~extended transition period under the JOBS Act.~~

Quarterly Report on Form 10-Q.

Recently Issued Accounting Pronouncements

See Note ~~2 to~~1, “Description of Business and Significant Accounting Policies”, of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for more information about the impact of certain recent accounting pronouncements on our condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risks during the three months ended April 30, 2023 compared to our disclosures in Part II, Item ~~3. Quantitative and Qualitative Disclosures About Market Risk~~

~~We have operations in the United States and internationally, and we are exposed to market risk in the ordinary course of business.~~

~~Inflation Rate Risk~~

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

~~Interest Rate Risk~~

Our cash and cash equivalents primarily consist of cash on hand and highly liquid investments in corporate debt securities and money market funds, including overnight investments. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value7A of our investments. As of April 30, 2019, we had cash and cash equivalents of $93.0 million and marketable securities of $82.1 million. The carrying amount of our cash equivalents reasonably approximates fair value due toAnnual Report on Form 10-K for the short maturities of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs, and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. However, due to the short-term nature of our investment portfolio, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We

fiscal year ended January 31, 2023.

~~therefore do not expect our results of operations or cash flows to be materially affected by a sudden change in market interest rates.~~

~~Foreign Currency Risk~~

To date, all of our sales contracts have been denominated in U.S. dollars. A portion of our operating expenses are incurred outside the United States, denominated in foreign currencies and subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound, Australian Dollar, and Euro. The functional currency of our foreign subsidiaries is that country’s local currency. Monetary assets and liabilities of the foreign subsidiaries are re-measured into U.S. dollars at the exchange rates in effect at the reporting date, non-monetary assets and liabilities are re-measured at historical rates, and revenue and expenses are re-measured at average exchange rates in effect during each reporting period. Foreign currency transaction gains and losses are recorded to Other income (expense), net. As the impact of foreign currency exchange rates has not been material to our historical results of operations, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.

~~Item~~

ITEM 4. ~~Controls and Procedures~~

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a–15(e) and Rule 15d–15(e) under the Exchange Act that are designed to ~~ensure~~provide reasonable assurance that information required to be disclosed by ~~a company~~us in the reports that ~~it files~~we file or ~~submits~~submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ~~ensure~~provide reasonable assurance that information required to be disclosed by ~~a company~~us in the reports that ~~it files~~we file or ~~submits~~submit under the Exchange Act is accumulated and communicated to our management, including our ~~principal executive~~Chief Executive Officer and ~~principal financial officers,~~Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and ~~our~~ Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of April 30, ~~2019.~~2023. Based on ~~the~~such evaluation of our disclosure controls and procedures as of April 30, ~~2019,~~2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting ~~(as defined~~identified in ~~Rules 13a-15(f)~~connection with the evaluation required by Rule 13a-15(d) and ~~15d-15(f) under~~Rule 15d-15(d) of the Exchange ~~Act)~~Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Inherent limitations in all control systems include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

~~Item~~

ITEM 1. ~~Legal Proceedings~~

LEGAL PROCEEDINGS

We are currently ~~involved in proceedings before the Trademark Trial~~a party to, and Appeal Board, or TTAB,at the U.S. Patent and Trademark Office, or USPTO, regarding our U.S. trademark registrations for “CrowdStrike Falcon” and our U.S. application to register our “Falcon OverWatch” trademark. On November 23, 2016, Fair Isaac Corporation, or FICO, filed a Petition for Cancellation of our “CrowdStrike Falcon” trademark registrations and a Notice of Opposition against our “Falcon OverWatch” trademark application before the TTAB. On January 3, 2017, we filed answers to both the cancellation and opposition proceedings, and the proceedings thereafter were consolidated. On November 21, 2018, we filed a Petition for Partial Cancellation or Amendment of one of FICO’s “Falcon” trademark registrations, and on December 10, 2018, the parties filed a joint request to consolidate the proceedings and adjust the schedule. On January 16, 2019, FICO moved to dismiss our petition, and the TTAB thereafter suspended all proceedings pending its ruling on the motions. On July 2, 2019, the TTAB issued an order granting the request to consolidate the proceedings, and granting the motion to dismiss with leave to file an amended petition by July 22, 2019. The order also set a schedule with trial proceedings to close no earlier than 2021. We are vigorously defending the case, but given the early stage, we are unable to predict the likelihood of success of Fair Isaac's claims. If we do not ultimately prevail in these proceedings and in any subsequent appeal or civil action, we could ultimately be required to change the names of our solutions, which may ~~entail significant expense and adversely affect our brand recognition.~~

~~From~~from time to time ~~we may~~in the future be involved in, various litigation matters and subject to ~~legal proceedings arising~~claims that arise in the ordinary course of ~~business. In addition, from time to time,~~business, including claims asserted by third parties ~~may assert intellectual property infringement claims against us~~ in the form of letters and other ~~forms~~communications. For information regarding legal proceedings and other claims in which we are involved, see Note 8, “Commitments and Contingencies” in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of ~~communication. We~~this Quarterly Report on Form 10-Q.

For any claims for which we believe a liability is both probable and reasonably estimable, we record a liability in the period for which it makes this determination. There is no pending or threatened legal proceeding to which we are ~~not currently~~ a party ~~to any litigation the outcome of which, if determined adversely to us, would individually or~~that, in ~~the aggregate be reasonably expected~~our opinion, is likely to have a material adverse effect on our business and our condensed consolidated financial statements; however, the results of ~~operations, prospects, cash flows,~~litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on our business because of defense and settlement costs, diversion of management resources, and other factors. In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect our condensed consolidated financial ~~position, or brand.~~

statements.

~~Item~~

ITEM 1A. ~~Risk Factors~~

RISK FACTORS

A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider the risks and uncertainties described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations."” The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations, financial condition and growth prospects. In such an event, the market price of our Class A common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Business and Industry

We have experienced rapid growth in recent periods, and if we do not manage our future growth, our business and results of operations will be adversely affected.

We have experienced rapid revenue growth in recent periods and we expect to continue to invest broadly across our organization to support our growth. For example, our headcount grew from ~~324~~3,394 employees as of January 31, ~~2016,~~2021, to ~~550 employees as of January 31, 2017, to 910 employees as of January 31, 2018, to 1,455 employees as of January 31, 2019 and to 1,683~~7,321 employees as of April 30, ~~2019.~~2023. Although we have experienced rapid growth historically, we may not sustain our current growth rates ~~nor can we assure you that~~and our investments to support our growth ~~will~~may not be successful. The growth and expansion of our business will require us to invest significant financial and operational resources and the continuous dedication of our management team. We have encountered and will continue to encounter risks and difficulties frequently experienced by rapidly growing companies in evolving industries, including market acceptance of our Falcon platform, adding new customers, intense competition, and our ability to manage our costs and operating expenses. Our future success will depend in part on our ability to manage our growth effectively, which will require us to, among other things:

●

~~effectively attract, integrate, and retain a large number of new employees, particularly members of our sales and marketing and research and development teams;~~

●

~~further improve our Falcon platform, including our cloud modules, and IT infrastructure, including expanding and optimizing our data centers, to support our business needs;~~

●

enhance our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of channel partners and customers; and

●

~~improve our financial, management, and compliance systems and controls.~~

•effectively attract, integrate, and retain a large number of new employees, particularly members of our sales and marketing and research and development teams;

•further improve our Falcon platform, including our cloud modules, and IT infrastructure, including expanding and optimizing our data centers, to support our business needs;

•enhance our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of channel partners and customers; and

•improve our financial, management, and compliance systems and controls.

If we fail to achieve these objectives effectively, our ability to manage our expected growth, ensure uninterrupted operation of our Falcon platform and key business systems, and comply with the rules and regulations applicable to our business could be impaired. Additionally, the quality of our platform and services could suffer and we may not be able to adequately address competitive challenges. Any of the foregoing could adversely affect our business, results of operations, and financial condition.

We have a history of losses, and while we have achieved profitability in a period, we may not be able to achieve or sustain profitability in the future.

We have incurred net losses ~~in all periods~~each year since our inception, and we may not achieve or maintain profitability in the future. We experienced net losses of ~~$91.3~~$183.2 million, ~~$135.5~~$234.8 million, ~~$140.1~~and $92.6 million for fiscal ~~2017,~~2023, fiscal ~~2018,~~2022, and fiscal ~~2019,~~2021, respectively. As of April 30, ~~2019,~~2023, we had an accumulated deficit of ~~$521.7 million.~~$1.1 billion. While we have experienced significant growth in revenue in recent periods, and achieved profitability in a quarterly period, we cannot ~~predict~~assure you when or whether we will reach ~~or maintain~~sustained profitability. We also expect our operating expenses to increase in the future as we continue to invest for our future growth, which will negatively affect our results of operations if our total revenue does not increase. We cannot assure you that these investments will result in substantial increases in our total revenue or improvements in our results of operations. ~~In addition~~We also have incurred and expect to ~~the anticipated costs to grow our business, we also expect~~continue to incur significant additional legal, accounting, and other expenses as a ~~newly~~ public company. Any failure to increase our revenue as we invest in our business or to manage our costs could prevent us from achieving or maintaining profitability or positive cash flow.

~~Our limited operating history makes it difficult to evaluate our current business and future prospects, and may increase the risk of your investment.~~

We were founded in November 2011 and launched our first endpoint security solution in 2013. Our limited operating history makes it difficult to evaluate our current business, future prospects, and other trends, including our ability to plan for and model future growth. We have encountered and will continue to encounter risks, uncertainties, and

difficulties frequently experienced by rapidly growing companies in evolving industries, including our ability to achieve broad market acceptance of cloud-based, SaaS-delivered endpoint security solutions and our Falcon platform, attract additional customers, grow partnerships, compete effectively, build and maintain effective compliance programs, and manage increasing expenses as we continue to invest in our business. If we do not address these risks, uncertainties, and difficulties successfully, our business, and results of operations will be harmed. Further, we have limited historical financial data, and we operate in a rapidly evolving market. As a result, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.

If organizations do not adopt cloud-based SaaS-delivered endpoint security solutions, our ability to grow our business and results of operations may be adversely affected.

We believe our future success will depend in large part on the growth, if any, in the market for cloud-based SaaS-delivered endpoint security solutions. The use of SaaS solutions to manage and automate security and IT operations is at an early stage and rapidly evolving. As such, it is difficult to predict its potential growth, if any, customer adoption and retention rates, customer demand for our solutions, customer consolidation on our platform, or the success of existing competitive products. Any expansion in our market depends on a number of factors, including the cost, performance, and perceived value associated with our solutions and those of our competitors. If our solutions do not achieve widespread adoption or there is a reduction in demand for our solutions due to a lack of customer acceptance, technological challenges, competing products, privacy concerns, decreases in corporate spending, weakening economic conditions or otherwise, it could result in early terminations, reduced customer retention rates, or decreased revenue, any of which would adversely affect our business, results of operations, and financial results. We do not know whether the trend in adoption of cloud-based SaaS-delivered endpoint security solutions we have experienced in the past will continue in the future. Furthermore, if we or other SaaS security providers experience security incidents, loss or disclosure of customer data, disruptions in delivery, or other problems, the market for SaaS solutions as a whole, including our security solutions, ~~will~~could be negatively affected. You should consider our business and prospects in light of the risks and difficulties we encounter in this new and evolving market.

If we are unable to successfully enhance our existing products and services and introduce new products and services in response to rapid technological changes and market developments as well as evolving security threats, our competitive position and prospects will be harmed.

Our ability to increase revenue from existing customers and attract new customers will depend in significant part on our ability to anticipate and respond effectively to rapid technological changes and market developments as well as evolving security threats. The success of our Falcon platform depends on our ability to take such changes into account and invest effectively in our research and development organization to increase the reliability, availability and scalability of our existing solutions and introduce new solutions. If we fail to effectively anticipate, identify or respond to such changes in a timely manner, or at all, our business could be harmed. Even if we adequately fund our research and development efforts there is no guarantee that we will realize a return on such efforts.

Success in delivering enhancements and new solutions depends on several factors, including the timely completion, introduction and market acceptance of the enhancement or new solution, the risk that such enhancement or new solution may have quality or other defects or deficiencies, especially in the early stages of introduction, as well as our ability to seamlessly integrate all of our product and service offerings and develop adequate sales capabilities in new markets. Failure in this regard may erode our competitive position, significantly impair our revenue growth, and negatively impact our operating results.

If we are unable to attract new customers, our future results of operations could be harmed.

To expand our customer base, we need to convince potential customers to allocate a portion of their discretionary budgets to purchase our Falcon platform. Our sales efforts often involve educating our prospective customers about the uses and benefits of our Falcon platform. Enterprises and governments that use legacy security products, such as signature-based or malware-based products, firewalls, intrusion prevention systems, and antivirus, for their IT security may be hesitant to purchase our Falcon platform if they believe that these products are more cost effective, provide substantially the same functionality as our Falcon platform or provide a level of IT security that is sufficient to meet their needs. We may have difficulty convincing prospective customers of the value of adopting our solution. Even if we are successful in convincing prospective customers that a cloud native platform like ours is critical to protect against cyberattacks, they may not decide to purchase our Falcon platform for a variety of reasons, some of which are out of our control. For example, any ~~future~~ deterioration in general economic conditions, including as a result of the geopolitical environment, the outbreak of diseases such as COVID-19, volatility in the banking and financial services sector, or inflation (as well as government policies such as raising interest rates in response to inflation), have in the past and may in the future cause our current and prospective customers to delay or cut their overall security and IT operations spending, and such delays or cuts may fall disproportionately on cloud-based security solutions like ours. Economic weakness, customer financial difficulties, and constrained spending on security and IT operations may result in decreased revenue, reduced sales, an increase in multi-phase subscription start dates, shorter terms for customer subscriptions, lengthened sales cycles, increased churn, lower demand for our products, and adversely affect our results of operations and financial conditions. Furthermore, we may need to exercise more flexibility in customer payment terms as customers navigate a more challenging economic environment. Additionally, if the incidence of cyberattacks were to decline, or ~~enterprises~~be perceived to decline, or ~~governments perceive~~if organizations adopt endpoints that ~~the general level of cyberattacks has declined,~~use operating systems we do not adequately support, our ability to attract new customers and expand sales of our solutions to existing customers could be adversely affected. If organizations do not continue to adopt our Falcon platform, our sales will not grow as quickly as anticipated, or at all, and our business, results of operations, and financial condition would be harmed.

If our customers do not renew their subscriptions for our products and add additional cloud modules to their subscriptions, our future results of operations could be harmed.

In order for us to maintain or improve our results of operations, it is important that our customers renew their subscriptions for our Falcon platform when existing contract terms expire, and that we expand our commercial

relationships with our existing customers by selling additional cloud modules and by deploying to more endpoints in their environments. Our customers have no obligation to renew their subscription for our Falcon platform after the expiration of their contractual subscription period, which is generally one year, and in the normal course of business, some customers have elected not to renew. In addition, ~~our~~ customers that previously signed multi-year subscription contracts may renew for shorter contract subscription lengths, orand customers may cease using certain cloud ~~modules.~~modules altogether. Even if customers choose to renew their subscription of certain cloud modules, they may decline to purchase additional cloud modules or choose not to consolidate onto our Falcon platform. Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our services, our pricing, customer security and networking issues and requirements, our customers’ spending levels, decreases in the number of endpoints to which our customers deploy our solutions, mergers and acquisitions involving our customers, industry developments, competition and general economic and geopolitical conditions. If our efforts to maintain and expand our relationships with our existing customers are not successful, our business, results of operations, and financial condition may materially suffer.

Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.

Our revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for our Falcon platform. Customers often view the subscription to our Falcon platform as a significant strategic decision and, as a result, frequently require considerable time to evaluate, test and qualify our Falcon platform prior to entering into or expanding a relationship with us. Large enterprises and government entities in particular often undertake a significant evaluation process that further lengthens and adds uncertainty to our sales cycle. In addition, uncertain economic conditions may lead to additional scrutiny of budgets by current and prospective customers, which has resulted in, for example, longer sales cycles for products and services, and may result in shifting demand for IT products and services, and slower adoption of new technologies.

Our direct sales team develops relationships with our customers, and works with our channel partners on account penetration, account coordination, sales and overall market development. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce a sale. Security solution purchases are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. As a result, it is difficult to predict whether and when a sale will be completed. The failure of our efforts to secure sales after investing resources in a lengthy sales process could adversely affect our business and results of operations.

We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition, and results of operations.

The market for security and IT operations solutions is intensely competitive, fragmented, and characterized by rapid changes in technology, customer requirements, industry standards, increasingly sophisticated attackers, and by frequent introductions of new or improved products to combat security threats. We expect to continue to face intense competition from current competitors, as well as from new entrants into the market. If we are unable to anticipate or react to these challenges, our competitive position could weaken, and we could experience a decline in revenue or reduced revenue growth, and loss of market share that would adversely affect our business, financial condition, and results of operations. Our ability to compete effectively depends upon numerous factors, many of which are beyond our control, including, but not limited to:

●

~~product capabilities, including performance and reliability, of our Falcon platform, including our cloud modules, services, and features compared to those of our competitors;~~

●

~~our ability, and the ability of our competitors, to improve existing products, services, and features, or to develop new ones to address evolving customer needs;~~

●

~~our ability to attract, retain, and motivate talented employees;~~

●

~~our ability to establish and maintain relationships with channel partners;~~

●

~~the strength of our sales and marketing efforts; and~~

●

~~acquisitions or consolidation within our industry, which may result in more formidable competitors.~~

•product capabilities, including performance and reliability, of our Falcon platform, including our cloud modules, services, and features compared to those of our competitors;

•our ability, and the ability of our competitors, to improve existing products, services, and features, or to develop new ones to address evolving customer needs;

•our ability to attract, retain, and motivate talented employees;

•our ability to establish and maintain relationships with channel partners;

•the strength of our sales and marketing efforts; and

•acquisitions or consolidation within our industry, which may result in more formidable competitors.

Our competitors include the following by general category:

●

~~legacy antivirus product providers, such as McAfee, Inc. and Symantec Corporation, who offer a broad range of approaches and solutions with traditional antivirus and signature-based protection;~~

●

~~alternative endpoint security providers, such as Blackberry Cylance and Carbon Black, Inc., who offer point products based on malware-only or application whitelisting techniques; and~~

●

~~network security vendors, such as Palo Alto Networks, Inc. and FireEye, Inc., who are supplementing their core perimeter-based offerings with endpoint security solutions.~~

•legacy antivirus product providers who offer a broad range of approaches and solutions including traditional signature-based anti-virus protection;

•alternative endpoint security providers who generally offer a mix of on-premise and cloud-hosted products that rely heavily on malware-only or application whitelisting techniques;

•network security vendors who are supplementing their core perimeter-based offerings with endpoint security solutions; and

•professional service providers who offer cybersecurity response services.

Many of ~~these~~our competitors have greater financial, technical, marketing, sales, and other resources, greater name recognition, longer operating histories, and a larger base of customers than we do. They may be able to devote greater resources to the development, promotion, and sale of services than we can, and they may offer lower pricing than we do. Further, they may have greater resources for research and development of new technologies, the provision of customer support, and the pursuit of ~~acquisitions, or they may have other financial, technical, or other resource advantages.~~acquisitions. Our

larger competitors have substantially broader and more diverse product and services offerings as well as routes to market, which ~~may allow~~allows them to leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our platform, including our cloud modules. Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering or acquisitions by our competitors or continuing market consolidation. Some of our ~~current or potential~~ competitors have recently made ~~or could make~~ acquisitions of businesses or ~~establish~~have established cooperative relationships that may allow them to offer more directly competitive and comprehensive solutions than were previously offered and adapt more quickly to new technologies and customer needs. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer orders, reduced revenue and gross margins, increased net losses and loss of market share. Further, ~~many~~ competitors that specialize in providing protection from a single type of security threat may be able to deliver these targeted security products to the market quicker than we can or convince organizations that these limited products meet their needs. Even if there is significant demand for cloud-based security solutions like ours, if our competitors include functionality that is, or is perceived to be, equivalent to or better than ours in legacy products that are already generally accepted as necessary components of an organization’s IT security architecture, we may have difficulty increasing the market penetration of our platform. Furthermore, even if the functionality offered by other security and IT operations providers is ~~different and~~ more limited than the functionality of our platform, organizations may elect to accept such limited functionality in lieu of adding products from additional vendors like us. If we are unable to compete successfully, or if competing successfully requires us to take aggressive pricing or other actions, our business, financial condition, and results of operations would be adversely affected.

Competitive pricing pressure may reduce our gross profits and adversely affect our financial results.

If we are unable to maintain our pricing due to competitive pressures or other factors, our margins will be reduced and our gross profits, business, results of operations, and financial condition would be adversely affected. The subscription prices for our Falcon platform, cloud modules, and professional services may decline for a variety of reasons, including competitive pricing pressures, discounts, anticipation of the introduction of new solutions by our competitors, or promotional programs offered by us or our competitors. ~~Competition continues to increase in the~~The cybersecurity market ~~segments in which we operate,~~remains very competitive, and ~~we expect~~ competition tomay further increase in the future. ~~Larger competitors with more diverse product and service offerings~~Competitors may reduce the price of products or subscriptions that compete with ours or may bundle them with other products and subscriptions.

If our solutions fail or are perceived to fail to detect or prevent incidents or have or are perceived to have defects, errors, or vulnerabilities, our brand and reputation would be harmed, which would adversely affect our business and results of operations.

Real or perceived defects, errors or vulnerabilities in our Falcon platform and cloud modules, the failure of our platform to detect or prevent incidents, including advanced and newly developed attacks, misconfiguration of our solutions, or the failure of customers to take action on attacks identified by our platform could harm our reputation and adversely affect our business, financial position and results of operations. Because our cloud native security platform is complex, it may contain defects or errors that are not detected until after deployment. We cannot assure you that our products will detect all cyberattacks, especially in light of the rapidly changing security threat landscape that our solution seeks to address. Due to a variety of both internal and external factors, including, without limitation, defects or misconfigurations of our solutions, our solutions could be or become

vulnerable to security incidents (both from intentional attacks and accidental causes) that cause them to fail to secure endpoints and detect and block attacks. In addition, because the techniques used by computer hackers to access or sabotage networks and endpoints change frequently and generally are not recognized until launched against a target, there is a risk that an advanced attack could emerge that our cloud native security platform is unable to detect or prevent until after some of our customers are affected. Additionally, our Falcon platform may falsely indicate a cyberattack or threat that does not actually exist, which may lessen customers’ trust in our solutions.

Moreover, as our cloud native security platform is adopted by an increasing number of enterprises and governments, ~~it is possible that the~~ individuals and organizations behind advanced cyberattacks ~~will begin to focus on finding ways~~may intensify their efforts to defeat our security platform. If this happens, our systems and subscription customers could be specifically targeted by attackers and could result in vulnerabilities in our platform or undermine the market acceptance

of our Falcon platform and could adversely affect our reputation as a provider of security solutions. Because we host customer data on our cloud platform, which in some cases may contain personally-identifiable information or potentially confidential information, a security compromise, or an accidental or intentional misconfiguration or malfunction of our platform could result in personally-identifiable information and other customer data being accessible such as to attackers or to other customers. Further, if a high profile security breach occurs with respect to another next-generation or cloud-based security system, our customers and potential customers may lose trust in cloud solutions generally, and cloud-based security solutions such as ours in particular.

Organizations are increasingly subject to a wide variety of attacks on their networks, systems, and endpoints. No security solution, including our Falcon platform, can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security incident. If any of our customers experiences a successful cyberattack while using our solutions or services, such customer could be disappointed with our Falcon platform, regardless of whether our solutions or services blocked the theft of any of such customer’s data, or ~~were implicated in failing to block such attack.~~if the attack would have otherwise been mitigated or prevented if the customer had fully deployed aspects of our Falcon platform. Similarly, if our solutions detect attacks against a customer but the customer does not address the vulnerability, customers and the public may erroneously believe that our solutions were not effective. Security breaches against customers that use our solutions may result in customers and the public believing that our solutions failed. Our Falcon platform may fail to detect or prevent malware, viruses, worms or similar threats for any number of reasons, including our failure to enhance and expand our Falcon platform to reflect the increasing sophistication of malware, viruses and other threats. Real or perceived security breaches of our customers’ networks could cause disruption or damage to their networks or other negative consequences and could result in negative publicity to us, damage to our reputation, and other customer relations issues, and may adversely affect our revenue and results of operations.

As a cybersecurity provider, we have been, and expect to continue to be, a target of cyberattacks. If our or our service providers' internal networks, systems, or data are or are perceived to have been compromised, our reputation may be damaged and our financial results may be negatively affected.

As a provider of security solutions, ~~our Falcon platform has~~we have in the past been, and may in the future be, specifically targeted by bad actors for attacks intended to circumvent our security capabilities or to exploit our Falcon platform as an entry point into customers’ endpoints, networks, or systems. In particular, because we have been involved in the identification of organized cybercriminals and nation-state actors, we have been the subject of intense efforts by sophisticated cyber adversaries who seek to compromise our systems. Such efforts may also intensify if geopolitical tensions increase. We are also susceptible to inadvertent compromises of our systems and data, including those arising from process, coding, or human errors. We also utilize third-party service providers to, among other things, host, transmit, or otherwise process electronic data in connection with our business activities, including our supply chain, operations, and communications. Our third-party service providers and other vendors have faced and may continue to face cyberattacks, compromises, interruptions in service, or other security incidents from a variety of sources. A successful attack or other incident that ~~compromises our or our customers’ data or~~ results in an interruption of service or that compromises our or our service providers’ internal networks, systems, or data could have a significant negative effect on our operations, reputation, financial resources, and the value of our intellectual property. We cannot assure you that any of our efforts to manage this risk, including adoption of a comprehensive incident response plan and process for detecting, mitigating, and investigating security incidents that we regularly test through table-top exercises, testing of our security protocols through additional techniques, such as penetration testing, debriefing after security incidents, to improve our security and responses, and regular briefing of our directors and officers on our cybersecurity risks, preparedness, and management, will be effective in protecting us from such attacks.

It is virtually impossible for us to entirely eliminate the risk of such attacks, compromises, interruptions in service, or other security incidents affecting our internal systems or ~~data.~~data, or that of our third-party service providers and vendors. Organizations are subject to a wide variety of attacks on their supply chain, networks, systems, and endpoints, and techniques used to sabotage or to obtain unauthorized access to networks in which data is stored or through which data is transmitted change frequently. Furthermore, employee error or malicious activity could compromise our systems. As a result, we may be unable to

anticipate these techniques or implement adequate measures to prevent an intrusion into our networks, which could result in unauthorized access to customer data, intellectual property including access to our source code, and information about vulnerabilities in our product, which in turn, could reduce the effectiveness of our solutions, or lead to cyberattacks or other intrusions of our customers’ networks, litigation, governmental audits and investigations and significant legal fees, any or all of which could damage our relationships with our existing customers and could have a negative effect on our ability to attract and retain new customers. We have expended, and anticipate continuing to expend, significant ~~amounts and~~ resources in an effort to prevent security breaches and other security incidents impacting our systems and data. Since our business is focused on providing reliable security services to our customers, we believe that an actual or perceived security incident affecting our internal systems

or data or data of our customers would be especially detrimental to our reputation, customer confidence in our solution, and our business.

In addition, while we maintain insurance policies that may cover certain liabilities in connection with a cybersecurity incident, we cannot be certain that our insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, results of ~~operation~~operations and reputation.

We rely on third-party data centers, such as Amazon Web Services, and our own colocation data centers to host and operate our Falcon platform, and any disruption of or interference with our use of these facilities may negatively affect our ability to maintain the performance and reliability of our Falcon platform which could cause our business to suffer.

Our customers depend on the continuous availability of our Falcon platform. We currently host our Falcon platform and serve our customers using a mix of third-party data centers, primarily Amazon Web Services, Inc., or AWS, and our data centers, hosted in colocation facilities. Consequently, we may be subject to service disruptions as well as failures to provide adequate support for reasons that are outside of our direct control. We have experienced, and expect that in the future we may experience interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.

The following factors, many of which are beyond our control, can affect the delivery, availability, and the performance of our Falcon platform:

●

•the development and maintenance of the infrastructure of the internet;

•the performance and availability of third-party providers of cloud infrastructure services, such as AWS, with the necessary speed, data capacity and security for providing reliable internet access and services;

•decisions by the owners and operators of the data centers where our cloud infrastructure is deployed to terminate our contracts, discontinue services to us, shut down operations or facilities, increase prices, change service levels, limit bandwidth, declare bankruptcy or prioritize the traffic of other parties;

•physical or electronic break-ins, acts of war or terrorism, human error or interference (including by disgruntled employees, former employees or contractors) and other catastrophic events;

•cyberattacks, including denial of service attacks, targeted at us, our data centers, or the infrastructure of the internet;

•failure by us to maintain and update our cloud infrastructure to meet our data capacity requirements;

•errors, defects or performance problems in our software, including third-party software incorporated in our software;

•improper deployment or configuration of our solutions;

•the failure of our redundancy systems, in the event of a service disruption at one of our data centers, to provide failover to other data centers in our data center network; and

•

●

the performance and availability of third-party providers of cloud infrastructure services, such as AWS, with the necessary speed, data capacity and security for providing reliable internet access and services;

●

decisions by the owners and operators of the data centers where our cloud infrastructure is deployed to terminate our contracts, discontinue services to us, shut down operations or facilities, increase prices, change service levels, limit bandwidth, declare bankruptcy or prioritize the traffic of other parties;

●

~~physical or electronic break-ins, acts of war or terrorism, human error or interference (including by disgruntled employees, former employees or contractors) and other catastrophic events;~~

●

~~cyberattacks, including denial of service attacks, targeted at us, our data centers, or the infrastructure of the internet;~~

●

~~failure by us to maintain and update our cloud infrastructure to meet our data capacity requirements;~~

●

~~errors, defects or performance problems in our software, including third-party software incorporated in our software;~~

●

~~improper deployment or configuration of our solutions;~~

●

~~the failure of our redundancy systems, in the event of a service disruption at one of our data centers, to provide failover to other data centers in our data center network; and~~

●

the failure of our disaster recovery and business continuity arrangements.

The adverse effects of any service interruptions on our reputation, results of operations, and financial condition may be disproportionately heightened due to the nature of our business and the fact that our customers have a low tolerance for interruptions of any duration. Interruptions or failures in our service delivery could result in a cyberattack or other security threat to one of our customers during such periods of interruption or failure. Additionally, interruptions or failures in our service could cause customers to terminate their subscriptions with us, adversely affect our renewal rates, and harm our ability to attract new customers. Our business would also be harmed if our customers believe that a cloud-based SaaS-delivered endpoint security solution is unreliable. While we do not consider them to have been material, we have experienced, and may in the future experience, service interruptions and other performance problems due to a variety of factors. The occurrence of any of these factors, or if we are unable to rapidly and cost-effectively fix such errors or other problems that may be identified, could damage our reputation, negatively affect our relationship with our customers or otherwise harm our business, results of operations and financial condition.

We rely on our key technical, sales and management personnel to grow our business, and the loss of one or more key employees could harm our business.

Our future success is substantially dependent on our ability to attract, retain, and motivate the members of our management team and other key employees throughout our organization. In particular, we are highly dependent on the services of George Kurtz, our President and Chief Executive Officer, who is critical to our future vision and strategic direction. We rely on our leadership team in the areas of operations, security, research and development, marketing, sales, support and general and administrative functions. Although we have entered into employment agreements with our key personnel, our employees, including our executive officers, work for us on an “at-will” basis, which means they may terminate their employment with us at any time. Leadership transitions can be inherently difficult to manage. In particular, they can cause operational and administrative inefficiencies, and could impact relationships with key customers and vendors. If Mr. Kurtz, or one or more of our key employees, or members of our management team resigns or otherwise ceases to provide us with their service, our business could be harmed.

If we are unable to attract and retain qualified personnel, our business could be harmed.

There is also significant competition for personnel with the skills and technical knowledge that we require across our technology, cyber, sales, professional services, and administrative support functions. Competition for these personnel is intense, especially for experienced sales professionals and for engineers experienced in designing and developing cloud applications and security software. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. For example, in recent years, recruiting, hiring and retaining employees with expertise in the cybersecurity industry has become increasingly difficult as the demand for cybersecurity professionals has increased as a result of the recent cybersecurity attacks on global corporations and governments. Additionally, our incident response and proactive services team is small and comprised of personnel with highly technical skills and experience, who are in high demand, and who would be difficult to replace. More generally, the technology industry is subject to substantial and continuous competition for engineers with high levels of experience in designing, developing and managing software and Internet-related services. Many of the companies with which we compete for experienced personnel have greater resources than we have. Our competitors also may be successful in recruiting and hiring members of our management team or other key employees, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. We have in the past, and may in the future, be subject to allegations that employees we hire have been improperly solicited, or that they have divulged proprietary or other confidential information or that their former employers own such employees’ inventions or other work product, or that they have been hired in violation of non-compete provisions or non-solicitation provisions.

In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. Volatility or lack of performance in our stock price may also affect our ability to attract and retain our key employees. Also, many of our employees have become, or will soon become, vested in a substantial amount of equity awards, which may give them a substantial amount of personal wealth. This may make it more difficult for us to retain and motivate these employees, and this wealth could affect their decision about whether or not they continue to work for us. Any failure to successfully attract, integrate or retain qualified personnel to fulfill our current or future needs could adversely affect our business, results of operations and financial condition.

If we do not effectively expand and train our direct sales force, we may be unable to add new customers or increase sales to our existing customers, and our business will be adversely affected.

We depend on our direct sales force to obtain new customers and increase sales with existing customers. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel, particularly in international markets. We have expanded our sales organization significantly in recent

periods and expect to continue to add additional sales capabilities in the near term. There is significant competition for sales personnel with the skills and technical knowledge that we require. New hires require significant training and may take significant time before they achieve full productivity, and this delay is accentuated by our long sales cycles. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. In addition, a large percentage of our sales force is new to our company and selling our solutions, and therefore this team may be less effective than our more seasoned sales personnel. Furthermore, hiring sales personnel in new countries, or expanding our existing presence, requires upfront and ongoing expenditures that we may not recover if the sales personnel fail to achieve full productivity. We cannot predict whether, or to what extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. If we are unable to hire and train a sufficient number of effective sales personnel, or the sales personnel we hire are not successful in obtaining new customers or increasing sales to our existing customer base, our business and results of operations will be adversely affected.

Because we recognize revenue from subscriptions to our platform over the term of the subscription, downturns or upturns in new business will not be immediately reflected in our results of operations.

We generally recognize revenue from customers ratably over the terms of their subscription, which is generally one year. As a result, a substantial portion of the revenue we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, any increase or decline in new sales or renewals in any one period will not be immediately reflected in our revenue for that period. Any such change, however, would affect our revenue in future periods. Accordingly, the effect of downturns or upturns in new sales and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods. We may also be unable to timely reduce our cost structure in line with a significant deterioration in sales or renewals that would adversely affect our results of operations and financial condition.

Our results of operations may fluctuate significantly, which could make our future results difficult to predict and could cause our results of operations to fall below expectations.

Our results of operations may vary significantly from period to period, which could adversely affect our business, financial condition and results of operations. Our results of operations have varied significantly from period to period, and we expect that our results of operations will continue to vary as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including:

●

~~our ability to attract new and retain existing customers;~~

•our ability to attract new and retain existing customers;

•the budgeting cycles, seasonal buying patterns, and purchasing practices of customers;

•economic difficulties confronting our customers, which may impact the number of modules or endpoint deployments they are willing or able to purchase;

•the timing and length of our sales cycles;

•changes in customer or channel partner requirements or market needs;

•changes in the growth rate of the cloud-based SaaS-delivered endpoint security solutions market;

•the timing and success of new product and service introductions by us or our competitors or any other competitive developments, including consolidation among our customers or competitors;

•the level of awareness of cybersecurity threats, particularly advanced cyberattacks, and the market adoption of our Falcon platform;

•our ability to successfully expand our business domestically and internationally;

•decisions by organizations to purchase security solutions from larger, more established security vendors or from their primary IT equipment vendors;

•changes in our pricing policies or those of our competitors;

●

~~the budgeting cycles, seasonal buying patterns, and purchasing practices of customers;~~

●

~~the timing and length of our sales cycles;~~

●

~~changes in customer or channel partner requirements or market needs;~~

●

~~changes in the growth rate of the cloud-based SaaS-delivered endpoint security solutions market;~~

●

~~the timing and success of new product and service introductions by us or our competitors or any other competitive developments, including consolidation among our customers or competitors;~~

●

~~the level of awareness of cybersecurity threats, particularly advanced cyberattacks, and the market adoption of our Falcon platform;~~

●

~~our ability to successfully expand our business domestically and internationally;~~

●

~~decisions by organizations to purchase security solutions from larger, more established security vendors or from their primary IT equipment vendors;~~

●

~~changes in our pricing policies or those of our competitors;~~

●

~~any disruption in our relationship with channel partners;~~

●

~~insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solutions;~~

●

~~significant security breaches of, technical difficulties with or interruptions to, the use of our Falcon platform;~~

●

~~extraordinary expenses such as litigation or other dispute-related settlement payments or outcomes;~~

●

~~general economic conditions, both domestic and in our foreign markets;~~

●

~~future accounting pronouncements or changes in our accounting policies or practices;~~

●

~~the amount and timing of operating costs and capital expenditures related to the expansion of our business; and~~

●

~~increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates.~~

•any disruption in our relationship with channel partners;

•insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solutions;

•significant security breaches of, technical difficulties with or interruptions to, the use of our Falcon platform;

•extraordinary expenses such as litigation or other dispute-related settlement payments or outcomes;

•future accounting pronouncements or changes in our accounting policies or practices;

•negative media coverage or publicity;

•political events;

•the amount and timing of operating costs (including new hires) and capital expenditures related to the expansion of our business;

•increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates; and

•significant natural disasters and other catastrophic events, including the occurrence of a contagious disease or illness, such as COVID-19.

Furthermore, our business and revenues are impacted by global economic and geopolitical conditions. Volatile financial markets, bank failures, inflation, rising interest rates, supply chain challenges, political turmoil and other disruptions to global and regional economies and markets continue to add uncertainty to macroeconomic conditions. Any continued or further uncertainty, weakness or deterioration in economic conditions or the geopolitical environment could harm our business and results of operations. In addition, we experience seasonal fluctuations in our financial results as we typically receive a higher percentage of our annual orders from new customers, as well as renewal orders from existing customers, in ~~our fourth~~the second half of the fiscal ~~quarter~~year as compared to ~~other quarters~~the first half of the year due to the annual budget approval process of many of our customers. In addition, we also experience seasonality in our operating margin, typically with a lower margin in the first half of our fiscal year. Any of the above factors, individually or in the aggregate, may result in significant fluctuations in our financial and other results of operations from period to period. As a result of this variability, our historical results of operations should not be relied upon as an indication of future performance. Moreover, this variability and unpredictability could result in our failure to meet our operating plan or the expectations of investors or analysts for any period. If we fail to meet such expectations for these or other reasons, our stock price could fall substantially, and we could face costly lawsuits, including securities class action suits.

~~Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.~~

Our revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for our Falcon platform, particularly with respect to large organizations and government entities. Customers often view the subscription to our Falcon platform as a significant strategic decision and, as a result, frequently require considerable time to evaluate, test and qualify our Falcon platform prior to entering into or expanding a relationship with us. Large enterprises and government entities in particular often undertake a significant evaluation process that further lengthens our sales cycle.

~~We rely on our key technical, sales and management personnel to grow our business, and the loss of one or more key employees could harm our business.~~

Our future success is substantially dependent on our ability to attract, retain, and motivate the members of our management team and other key employees throughout our organization. In particular, we are highly dependent on the services of George Kurtz, our Chief Executive Officer, who is critical to our future vision and strategic direction. We rely on our leadership team in the areas of operations, security, research and development, marketing, sales, support and general and administrative functions. Although we have entered into employment agreements with our key personnel, our employees, including our executive officers, work for us on an “at-will” basis, which means they may terminate their employment with us at any time. If Mr. Kurtz, or one or more of our key employees, or members of our management team resigns or otherwise ceases to provide us with their service, our business could be harmed.

~~If we are unable to attract and retain qualified personnel, our business could be harmed.~~

There is also significant competition for personnel with the skills and technical knowledge that we require across our technology, cyber, sales, professional services, and administrative support functions. Competition for these personnel in the San Francisco Bay Area, where our headquarters are located, and in other locations where we maintain offices, is intense, especially for experienced sales professionals and for engineers experienced in designing and developing cloud applications and security software. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. For example, in recent years, recruiting, hiring and retaining employees with expertise in the cybersecurity industry has become increasingly difficult as the demand for cybersecurity professionals has increased as a result of the recent cybersecurity attacks on global corporations and governments. Additionally, our incident response and proactive services team is small and comprised of personnel with highly technical skills and experience, who are in high demand, and who would be difficult to replace. Many of the companies with which we compete for experienced personnel have greater resources than we have. Our competitors also may be successful in recruiting and hiring members of our management team or other key employees, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. We have in the past, and may in the future, be subject to allegations that employees we hire have been improperly solicited, or that they have divulged proprietary or other confidential information or that their former employers own such employees’ inventions or other work product, or that they have been hired in violation of non-compete provisions or non-solicitation provisions.

not they continue to work for us. Any failure to successfully attract, integrate or retain qualified personnel to fulfill our current or future needs could adversely affect our business, results of operations and financial condition.

If we are not able to maintain and enhance our CrowdStrike and Falcon brand and our reputation as a provider of high-efficacy security solutions, our business and results of operations may be adversely affected.

We believe that maintaining and enhancing our CrowdStrike and Falcon brand and our reputation as a provider of high-efficacy security solutions is critical to our relationship with our existing customers, channel partners, and technology alliance partners and our ability to attract new customers and partners. The successful promotion of our CrowdStrike and Falcon brand will depend on a number of factors, including our marketing efforts, our ability to continue to develop additional cloud modules and features for our Falcon platform, our ability to successfully differentiate our Falcon platform from competitive cloud-based or legacy security solutions and, ultimately, our ability to detect and stop breaches. Although we believe it is important for our growth, our brand promotion activities may not be successful or yield increased revenue.

In addition, independent industry or financial analysts and research firms often test our solutions and provide reviews of our Falcon platform, as well as the products of our competitors, and perception of our Falcon platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of our competitors’ products, our brand may be adversely affected. Our solutions may fail to detect or prevent threats in any particular test for a number of reasons that may or may not be related to the efficacy of our solutions in real world environments. To the extent potential customers, industry analysts or testing firms believe that the occurrence of a failure to detect or prevent any particular threat is a flaw or indicates that our solutions or services do not provide significant value, we may lose customers, and our reputation, financial condition and business would be harmed. Additionally, the performance of our channel partners and technology alliance partners may affect our brand and reputation if customers do not have a positive experience with these partners. In addition, we have in the past worked, and continue to work, with high profile private and public customers as well as

assist in analyzing and remediating high profile ~~cyberattacks.~~cyberattacks, which sometimes involve nation-state actors. Our work with such customers ~~and cyberattacks may expose~~has exposed us to ~~negative~~ publicity and media coverage. Changing political environments in the United States and abroad may amplify the media and political scrutiny we face. Negative publicity about us, including about our management, the efficacy and reliability of our Falcon platform, our products offerings, our professional services, and the customers we work with, even if inaccurate, could adversely affect our reputation and brand.

If we are unable to maintain successful relationships with our channel partners and technology alliance partners, or if our channel partners or technology alliance partners fail to perform, our ability to market, sell and distribute our Falcon platform will be limited, and our business, financial position and results of operations will be harmed.

In addition to our direct sales force, we rely on our channel partners to sell and support our Falcon platform. AThe vast majority of sales of our Falcon platform flow through our channel partners, and we expect this to continue for the foreseeable future. Additionally, we have entered, and intend to continue to enter, into technology alliance partnerships with third parties to support our future growth plans. The loss of a substantial number of our channel partners or technology alliance partners, or the failure to recruit additional partners, could adversely affect our results of operations. Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our channel partners and in training our channel partners to independently sell and deploy our Falcon platform. If we fail to effectively manage our existing sales channels, or if our channel partners are unsuccessful in fulfilling the orders for our solutions, or if we are unable to enter into arrangements with, and retain a sufficient number of, high quality channel partners in each of the regions in which we sell solutions and keep them motivated to sell our products, our ability to sell our products and results of operations will be harmed.

Our international operations and plans for future international expansion expose us to significant risks, and failure to manage those risks could adversely impact our business.

We derived approximately 28%, 28%, 30% and 31% of our total revenue from our international customers for fiscal 2021, fiscal 2022, fiscal 2023 and the three months ended April 30, 2023, respectively. We are continuing to adapt to and develop strategies to address international markets and our growth strategy includes expansion into target geographies, but there is no guarantee that such efforts will be successful. We expect that our international activities will continue to grow in the future, as we continue to pursue opportunities in international markets. These international operations will require significant management attention and financial resources and are subject to substantial risks, including:

•greater difficulty in negotiating contracts with standard terms, enforcing contracts and managing collections, and longer collection periods;

•higher costs of doing business internationally, including costs incurred in establishing and maintaining office space and equipment for our international operations;

•management communication and integration problems resulting from cultural and geographic dispersion;

•risks associated with trade restrictions and foreign legal requirements, including any importation, certification, and localization of our Falcon platform that may be required in foreign countries;

•greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;

•compliance with anti-bribery laws, including, without limitation, compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. Travel Act and the U.K Bribery Act 2010, or Bribery Act, violations of which could lead to significant fines, penalties, and collateral consequences for our company;

•heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;

•the uncertainty of protection for intellectual property rights in some countries;

•general economic and political conditions in these foreign markets;

•foreign exchange controls or tax regulations that might prevent us from repatriating cash earned outside the United States;

•political and economic instability in some countries;

•double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate;

•unexpected costs for the localization of our services, including translation into foreign languages and adaptation for local practices and regulatory requirements (including, but not limited to data localization requirements);

•requirements to comply with foreign privacy, data protection, and information security laws and regulations and the risks and costs of noncompliance;

•greater difficulty in identifying, attracting and retaining local qualified personnel, and the costs and expenses associated with such activities;

•greater difficulty identifying qualified channel partners and maintaining successful relationships with such partners;

•differing employment practices and labor relations issues; and

•difficulties in managing and staffing international offices and increased travel, infrastructure, and legal compliance costs associated with multiple international locations.

Additionally, nearly all of our sales contracts are currently denominated in U.S. dollars. However, a strengthening of the U.S. dollar could increase the cost of our solutions to our international customers, which could adversely affect our business and results of operations. In addition, an increasing portion of our operating expenses is incurred outside the United States; is denominated in foreign currencies, such as the Australian Dollar, British Pound, Canadian Dollar, Euro, Indian Rupee, and Japanese Yen; and is subject to fluctuations due to changes in foreign currency exchange rates. If we become more exposed to currency fluctuations and are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected.

As we continue to develop and grow our business globally, our success will depend in large part on our ability to anticipate and effectively manage these risks. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. Our failure to successfully manage our international operations and the associated risks could limit the future growth of our business.

Our business depends, in part, on sales to government organizations, and significant changes in the contracting or fiscal policies of such government organizations could have an adverse effect on our business and results of operations.

Our future growth depends, in part, on increasing sales to government organizations. Demand from government organizations is often unpredictable, subject to budgetary uncertainty and typically involves long sales cycles. We have made significant investment to address the government sector, but we cannot assure you that these investments will be

successful, or that we will be able to maintain or grow our revenue from the government sector. ~~Although we anticipate that they may increase in the future, sales to~~ U.S. federal, state and local ~~governmental agencies have not accounted for, and may never account for, a significant portion of our revenue. U.S. federal, state and local~~government sales as well as foreign government sales are subject to a number of challenges and risks that may adversely impact our business.

Sales to such government entities include, but are not limited to, the following risks:

●

selling to governmental agencies can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale;

●

government certification requirements applicable to our products may change and, in doing so, restrict our ability to sell into the U.S. federal government sector until we have attained the revised certification. For example, although we are currently certified under the Federal Risk and Authorization Management Program, or FedRAMP, such certification is costly to maintain and if we lost our certification in the future it would restrict our ability to sell to government customers;

●

government demand and payment for our Falcon platform may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our Falcon platform;

●

governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our Falcon platform, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit were to uncover improper or illegal activities; and

●

governments may require certain products to be manufactured, hosted, or accessed solely in their country or in other relatively high-cost manufacturing locations, and we may not manufacture all products in locations that meet these requirements, affecting our ability to sell these products to governmental agencies.

•selling to governmental agencies can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale;

•we may be required to obtain personnel security clearances and facility clearances to perform on classified contracts for government agencies, and there is no guarantee that we will be able to obtain or maintain such clearances;

•government certification, software supply chain, or source code transparency requirements applicable to us or our products are constantly evolving and, in doing so, restrict our ability to sell to certain government customers until we have attained the new or revised certification or meet other applicable requirements, which we are not

guaranteed to do. For example, although we are currently certified under the U.S. Federal Risk and Authorization Management Program, or FedRAMP, such certification is costly to maintain and if we lose our certification it would restrict our ability to sell to government customers;

•government product requirements are often technically complex and assessors may require us to make costly changes to our products to meet such requirements without any assurance that such changes will generate a sale;

•government demand and payment for our Falcon platform may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays in the government appropriations or procurement processes adversely affecting public sector demand for our Falcon platform, including as a result of abrupt events such as war, incidents of terrorism, natural disasters, and public health concerns or epidemics;

•government attitudes towards us as a company, our platform or the capabilities that we offer as a viable software solution may change, and reduce interest in our products and services as acceptable solutions;

•changes in the political environment, including before or after a change to the leadership within the government administration, can create uncertainty or changes in policy or priorities and reduce available funding for our products and services;

•third parties may compete intensely with us on pending, new or existing contracts with government products, which can also lead to appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government;

•even if we are awarded a sale, the terms of such contracts may be unusually burdensome;

•governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our Falcon platform, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit were to uncover improper or illegal activities; and

•governments may require certain products to be manufactured, hosted, or accessed solely in their country or in other relatively high-cost manufacturing locations, and we may not manufacture all products in locations that meet these requirements, affecting our ability to sell these products to governmental agencies.

The occurrence of any of the foregoing risks could cause governments and governmental agencies to delay or refrain from purchasing our solutions in the future or otherwise have an adverse effect on our business and results of operations.

We may not timely and cost-effectively scale and adapt our existing technology to meet our customers’ performance and other requirements.

Our future growth is dependent upon our ability to continue to meet the needs of new customers and the expanding needs of our existing customers as their use of our solutions grow. As our customers gain more experience with our solutions, the number of endpoints and events, the amount of data transferred, processed and stored by us, the number of locations where our platform and services are being accessed, have in the past, and may in the future, expand rapidly. In order to meet the performance and other requirements of our customers, we intend to continue to make significant investments to increase capacity and to develop and implement new technologies in our service and cloud infrastructure operations. These technologies, which include databases, applications and server optimizations, network and hosting strategies, and automation, are often advanced, complex, new and untested. We may not be successful in developing or implementing these technologies. In addition, it takes a significant amount of time to plan, develop and test improvements to our technologies and infrastructure, and we may not be able to accurately forecast demand or predict the results we will realize from such improvements. To the extent that we do not effectively scale our operations to meet the needs of our growing customer base and to maintain performance as our customers

expand their use of our solutions, we may not be able to grow as quickly as we anticipate, our customers may reduce or cancel use of our solutions and we may be unable to compete as effectively and our business and results of operations may be harmed.

Additionally, we have and will continue to make substantial investments to support growth at our data centers and improve the profitability of our cloud platform. For example, because of the importance of AWS’ services to our business and AWS’ position in the cloud-based server industry, any renegotiation or renewal of our agreement with AWS may be on terms that are significantly less favorable to us than our current agreement. If our cloud-based server

costs were to increase, our business, results of operations and financial condition may be adversely affected. Although we expect that we could receive similar services from other third parties, if any of our arrangements with AWS are terminated, we could experience interruptions on our Falcon platform and in our ability to make our solutions available to customers, as well as delays and additional expenses in arranging alternative cloud infrastructure services. Ongoing improvements to cloud infrastructure may be more expensive than we anticipate, and may not yield the expected savings in operating costs or the expected performance benefits. In addition, we may be required to re-invest any cost savings achieved from prior cloud infrastructure improvements in future infrastructure projects to maintain the levels of service required by our customers. We may not be able to maintain or achieve cost savings from our investments, which could harm our financial results.

Our ability to maintain customer satisfaction depends in part on the quality of our customer support.

Once our Falcon platform is deployed within our customers’ networks, our customers depend on our customer support services to resolve any issues relating to the implementation and maintenance of our Falcon platform. If we do not provide effective ongoing support, customer renewals and our ability to sell additional modules as part of our Falcon platform to existing customers could be adversely affected and our reputation with potential customers could be damaged. Many larger organizations have more complex networks and require higher levels of support than smaller customers and we offer premium services for these customers. Failure to maintain high-quality customer support could have a material adverse effect on our business, results of operations, and financial condition.

We may need to raise additional capital to expand our operations and invest in new solutions, which capital may not be available on terms acceptable to us, or at all, and which could reduce our ability to compete and could harm our business.

We expect that our existing cash, cash equivalents and short-term investments will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. Retaining or expanding our current levels of personnel and products offerings may require additional funds to respond to business challenges, including the need to develop new products and enhancements to our Falcon platform, improve our operating infrastructure, or acquire complementary businesses and technologies. Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our ability to compete and could harm our business. Accordingly, we may need to engage in additional equity or debt financings to secure additional funds. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the market price of our Class A common stock could decline. If we engage in additional debt financing, the holders of such debt would have priority over the holders of our Class A common stock, and we may be required to accept terms that further restrict our operations or our ability to incur additional indebtedness or to take other actions that would otherwise be in the interests of the debt holders. Any of the above could harm our business, results of operations, and financial condition.

If we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success and our business may be harmed.

We believe that our corporate culture has been a contributor to our success, which we believe fosters innovation, teamwork, passion and focus on building and marketing our Falcon platform. As we grow, we may find it difficult to maintain our corporate culture. Any failure to preserve our culture could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively and execute on our business strategy. Additionally, our productivity and the quality of our solutions may be adversely affected if we do not integrate and train our new employees quickly and effectively. If we experience any of these effects in connection with future growth, it could impair our ability to attract new customers, retain existing customers and expand their use of our Falcon platform, all of which would adversely affect our business, financial condition and results of operations.

Public health crises, such as the COVID-19 pandemic could adversely affect our business, operating results and future revenue.

We are subject to public health crises, such as the COVID-19 pandemic, which has impacted and continues to impact worldwide economic activity and financial markets. We have previously taken and may in the future take precautionary measures

intended to mitigate the spread of the COVID-19 virus and minimize the risk to our employees, customers, partners, and the communities in which we operate to respond to developments relating to the pandemic, including developments relating to infection rates, disease variants, vaccination progress and efficacy, and evolving public health guidance. These measures could, for example, negatively affect our customer success efforts, delay and lengthen our sales cycles, impact our sales and marketing efforts, slow our international expansion efforts, increase cybersecurity risks, and create operational or other challenges, any of which could harm our business and results of operations.

In addition, public health crises may disrupt the operations of our customers and partners for an indefinite period of time. Some of our customers have been negatively impacted by the COVID-19 pandemic, which could result in delays in accounts receivable collection, or result in decreased technology spending which could negatively affect our revenues. More generally, the COVID-19 pandemic adversely affected economies and financial markets globally. Uncertainty caused by public health crises could lead to prolonged economic downturns, which could result in a larger customer churn than we can anticipate and reduce demand for our products and services, in which case our revenues could be significantly impacted. The lasting impact of the public health crises, including the COVID-19 pandemic, may also exacerbate other risks discussed in this “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q.

We rely on a limited number of suppliers for certain components of the equipment we use to operate our cloud platform. Supply chain disruptions could delay our ability to expand or increase the capacity of our global data center network, replace defective equipment in our existing data centers and impact our operating costs.

We rely on a limited number of suppliers for several components of the equipment we use to operate our cloud platform and provide services to our customers. We generally purchase these components on a purchase order basis, and do not have long-term contracts guaranteeing supply. Our reliance on these suppliers exposes us to risks, including reduced control over production costs and constraints based on the then current availability, terms and pricing of these components. If we experience disruption or delay from our suppliers, we may not be able to obtain supplies or components from alternative suppliers on a timely basis or on terms that are favorable to us, if at all. The technology industry has recently experienced widespread component shortages and delivery delays, including as a result of geopolitical tensions, the COVID-19 pandemic and natural disasters. While we have taken steps to mitigate our supply chain risk, supply chain disruptions and delays could nevertheless adversely impact our operations by, among other things, causing us to delay opening new data centers, delay increasing capacity or replacing defective equipment at existing data centers, and experience increased operating costs.

Risks Related to Intellectual Property, Legal, and Regulatory Matters

The success of our business depends in part on our ability to protect and enforce our intellectual property rights.

We believe our intellectual property is an essential asset of our business, and our success and ability to compete depend in part upon protection of our intellectual property rights. We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality procedures and contractual provisions, to establish and protect our intellectual property rights in the United States and abroad, all of which provide only limited protection. The efforts we have taken to protect our intellectual property may not be sufficient or effective, and our trademarks, copyrights and patents may be held invalid or unenforceable. Moreover, we cannot assure you that any patents will be issued with respect to our currently pending patent applications in a manner that gives us adequate defensive protection or competitive advantages, or that any patents issued to us will not be challenged, invalidated or circumvented. We have filed for patents in the United States and in certain non-U.S. jurisdictions, but such protections may not be available in all countries in which we operate or in which we seek to enforce our intellectual property rights, or may be difficult to enforce in practice. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against certain third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Moreover, we may need to expend additional resources to defend our intellectual property rights in these countries, and our inability to do so could impair our business or adversely affect our international expansion. Our currently issued patents and any patents that may be issued in the future with respect to pending or future patent applications may not provide sufficiently broad protection or they may not prove to be enforceable in actions against alleged infringers.

We may not be effective in policing unauthorized use of our intellectual property, and even if we do detect violations, litigation or technical changes to our products may be necessary to enforce our intellectual property rights. Protecting against the unauthorized use of our intellectual property rights, technology and other proprietary rights is expensive and difficult, particularly outside of the United States. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert management’s attention, which could harm our business and results of operations. Further, attempts to enforce our rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against

us, or result in a holding that invalidates or narrows the scope of our rights, in whole or in part. The inability to adequately protect and enforce our intellectual property and other proprietary rights could seriously harm our business, results of operations and financial condition. Even if we are able to secure our intellectual property rights, we cannot assure you that such rights will provide us with competitive advantages or distinguish our services from those of our competitors or that our competitors will not independently develop similar technology, duplicate any of our technology, or design around our patents.

Claims by others that we infringe their proprietary technology or other intellectual property rights could result in significant costs and substantially harm our business, financial condition, results of operations, and prospects.

Claims by others that we infringe their proprietary technology or other intellectual property rights could harm our business. A number of companies in our industry hold a large number of patents and also protect their copyright, trade secret and other intellectual property rights, and companies in the networking and security industry frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. For example, in March 2022, Webroot, Inc. and Open Text, Inc. filed a lawsuit against us alleging that certain of our products infringe on patents held by them. As we face increasing competition and grow, the possibility of intellectual property rights claims against us also grows. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that such personnel have divulged proprietary or other confidential information to us. From time to time, third parties have in the past and may in the future

assert claims of infringement of intellectual property rights against us. For example, we are currently involved in proceedings before the Trademark Trial and Appeal Board at the U.S. Patent and Trademark Office regarding our U.S. trademark registrations for CrowdStrike Falcon and our U.S. application to register our Falcon OverWatch trademark. Fair Isaac Corporation, or FICO, petitioned to cancel our trademark registrations and opposed our application. If the appeal board were to find against us, it would cancel our trademark registrations for CrowdStrike Falcon and reject our application to register Falcon OverWatch. If FICO were to file an infringement action in court and if we do not prevail in that action, we could ultimately be required to change the names of our solutions, which would force us to incur significant marketing expense in establishing an alternative brand to our existing Falcon brand. We cannot assure you that we will be successful in these rebranding efforts.

Third parties may in the future also assert claims against our customers or channel partners, whom our standard license and other agreements obligate us to indemnify against claims that our solutions infringe the intellectual property rights of third parties. As the number of products and competitors in the security and IT operations market increases and overlaps occur, claims of infringement, misappropriation, and other violations of intellectual property rights may increase. While we intend to increase the size of our patent portfolio, many of our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. In addition, future litigation may involve non-practicing entities, companies or other patent owners who have no relevant product offerings or revenue and against whom our own patents may therefore provide little or no deterrence or protection. Any claim of intellectual property infringement by a third party, even a claim without merit, could cause us to incur substantial costs defending against such claim, could distract our management from our business and could require us to cease use of such intellectual property.

Additionally, our insurance may not cover intellectual property rights infringement claims that may be made. In the event that we fail to successfully defend ourselves against an infringement claim, a successful claimant could secure a judgment or otherwise require payment of legal fees, settlement payments, ongoing royalties or other costs or damages; or we may agree to a settlement that prevents us from offering certain services or features; or we may be required to obtain a license, which may not be available on reasonable terms, or at all, to use the relevant technology. If we are prevented from using certain technology or intellectual property, we may be required to develop alternative, non-infringing technology, which could require significant time, ~~during which~~effort and expense and may ultimately not be successful. Additionally, we ~~could~~may be unable to continue to offer our affected services or features ~~effort and expense and may ultimately not be successful.~~

while developing such technology.

Although third parties may offer a license to their technology or other intellectual property, the terms of any offered license may not be acceptable, and the failure to obtain a license or the costs associated with any license could cause our business, financial condition and results of operations to be adversely affected. In addition, some licenses may be nonexclusive, and therefore our competitors may have access to the same technology licensed to us. If a third party does not offer us a license to its technology or other intellectual property on reasonable terms, or at all, we could be enjoined from continued use of such intellectual property. As a result, we may be required to develop alternative, non-infringing technology, which could require significant time, ~~during which~~effort and expense and may ultimately not be successful. Additionally, we ~~could~~may be unable to continue to offer our affected products, subscriptions or services, ~~effort, and expense and may ultimately not be successful.~~while developing such technology. Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that prevents us from distributing certain products, providing certain subscriptions or performing certain ~~services~~services. Any such judgment or ~~that requires~~settlement could also require us to pay substantial damages, royalties or other fees. Any of these events could harm our business, financial condition and results of operations.

We license technology from third parties, and our inability to maintain those licenses could harm our business.

We currently incorporate, and will in the future incorporate, technology that we license from third parties, including software, into our solutions. We cannot be certain that our licensors do not or will not infringe on the intellectual property rights of third parties or that our licensors have or will have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell our Falcon platform. Some of our agreements with our licensors may be terminated by them for convenience, or otherwise provide for a limited term. If we are unable to continue to license technology because of intellectual property infringement claims brought by third parties against our licensors or against us, or if we are unable to continue our license

agreements or enter into new licenses on commercially reasonable terms, our ability to develop and sell solutions and services containing or dependent on that technology would be limited, and our business could be harmed. Additionally, if we are unable to license technology from third parties, we may be forced

to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner or at all, and may require us to use alternative technology of lower quality or performance standards. This could limit or delay our ability to offer new or competitive solutions and increase our costs. As a result, our margins, market share, and results of operations could be significantly harmed.

~~If we~~

We are ~~not able~~required to ~~satisfy~~comply with stringent, complex and evolving laws, rules, regulations and standards in many jurisdictions, as well as contractual obligations, relating to data ~~protection, security,~~ privacy and ~~other government-~~security. Any actual or perceived failure to comply with these requirements could have a material adverse effect on our business.

We are required to comply with stringent, complex and ~~industry-specific requirements or regulations, our business, results of operations, and financial condition could be harmed.~~

~~Personal privacy, data protection, information security, telecommunications~~evolving laws, rules, regulations and standards in many jurisdictions, as well as contractual obligations, relating to data privacy and security. Ensuring that our collection, use, transfer, storage and other ~~laws applicable to specific categories~~processing of personal information ~~are significant issues in~~complies with such requirements can increase operating costs, impact the development of new products or services, and reduce operational efficiency.

In the United States, ~~Europe~~there are numerous federal, state and inlocal data privacy and security laws, rules, and regulations governing the collection, sharing, use, retention, disclosure, security, transfer, storage and other ~~jurisdictions where~~processing of personal information, including federal and state data privacy and security laws, data breach notification laws, and data disposal laws. For example, at the federal level, we ~~offer our solutions. The data that we collect, analyze, and store is~~are subject to, ~~a variety of~~among other laws and regulations, ~~including regulation by various government agencies. The U.S. federal government,~~the rules and ~~various state and foreign governments, have adopted or proposed limitations on~~regulations promulgated under the ~~collection, distribution, use, and storage~~authority of ~~certain categories of information, such as personally identifiable information of individuals, health information, and other sector-specific types of data, including~~ the Federal Trade Commission (which has the authority to regulate and enforce against unfair or deceptive acts or practices in or affecting commerce, including acts and practices with respect to data privacy and security), as well as the Electronic Communication Privacy Act, the Computer Fraud and Abuse Act, ~~HIPAA,~~the Health Insurance Portability and Accountability Act, and the Gramm Leach Bliley Act. ~~Laws and regulations outside the~~The United States Congress also has considered, is currently considering, and ~~particularly in Europe, often are more restrictive than those~~may in the ~~United States. Such~~future consider, various proposals for comprehensive federal data privacy and security legislation, to which we may become subject if passed. If we are found to have violated applicable laws or regulations, we also may be subject to penalties, fines, damages, injunctions or other outcomes that may adversely affect our operations and financial results.

At the state level, we are subject to laws and regulations ~~may require companies~~such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”). The CCPA broadly defines personal information and gives California residents expanded privacy rights and protections, such as affording them the right to ~~implement~~access and request deletion of their information and to opt out of certain sharing and sales of personal information. The CCPA also prohibits covered businesses from discriminating against California residents for exercising any of their CCPA rights. The CCPA provides for severe civil penalties and statutory damages for violations and a private right of action for certain data breaches that result in the loss of unencrypted personal information. This private right of action is expected to increase the likelihood of, and risks associated with, data breach litigation. Numerous other states have also enacted, or are in the process of enacting or considering, comprehensive state-level data privacy and security ~~policies, permit customers~~laws, rules, and regulations that share similarities with the CCPA. At least four such laws, in Virginia, Colorado, Connecticut, and Utah, have taken effect, or are scheduled to ~~access, correct, and delete~~take effect, in 2023. Moreover, laws in all 50 U.S. states require businesses to provide notice under certain circumstances to consumers whose personal information ~~stored~~has been disclosed as a result of a data breach. These state statutes, and other similar state or ~~maintained by such companies, inform individuals of security breaches~~federal laws that affect their personal information, and, in some cases, obtain individuals’ consent to use personally identifiable information for certain purposes. In addition, some foreign governments require that any information of certain categories, such as financial or personally identifiable information collected in a country not be disseminated outside of that country. We also may find it necessary or desirable to join industry or other self-regulatory bodies or other information security or data protection-related organizations that require compliance with their rules pertaining to information security and data protection. We also may be ~~bound by additional, more stringent contractual obligations relating to our collection, use and disclosure of personal, financial, and other data.~~

We also expect that there will continue to be new proposed laws, regulations, and industry standards concerning privacy, data protection, information security, specific categories of data, electronic, and telecommunications servicesenacted in the ~~United States, the European Union~~future, may require us to modify our data processing practices and ~~other jurisdictions~~policies, incur substantial compliance-related costs and expenses, and otherwise suffer adverse impacts on our business.

Internationally, virtually every jurisdiction in which we operate ~~or may operate,~~has established its own data privacy and security legal framework with which we ~~cannot yet determine the impact such future laws, regulations, standards, or perception of their requirements may have on our business.~~must comply. For example, we are required to comply with the European ~~Commission recently adopted the European~~Union (“EU”) General Data Protection Regulation ~~or GDPR, that became fully effective in May 2018,~~(“GDPR”), which imposes stringent obligations regarding the collection, control, use, sharing, disclosure and ~~applies~~other processing of personal data. Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the ~~processing (which includes the collection and use)~~U.K. General Data Protection Regulation (“U.K. GDPR”), a version of ~~certain personal data. As compared to previously-effective data protection law in the European Union,~~ the GDPR ~~imposes additional obligations and risk upon our business and increases substantially~~as implemented into the ~~penalties to which we could be subject in~~laws of the event of any non-compliance. Administrative fines under the GDPR can amount up to 20 million Euros or four percent of our worldwide annual revenue for the prior fiscal year, whichever is higher. We have incurred substantial expense in complying with the obligations imposed byUnited Kingdom (“U.K.”). While the GDPR and weU.K. GDPR remain substantially similar for the time being, the U.K. government has announced that it would seek to chart its own path on data protection and reform its relevant laws, including in ways that may differ from the GDPR. While these developments increase uncertainty with regard to data protection regulation in the U.K., even in their current, substantially similar form, the GDPR and U.K. GDPR can expose businesses to divergent parallel regimes that may be ~~required~~subject to ~~do so in the future,~~ potentially ~~making significant changes in our business operations, which may adversely affect our revenue~~different interpretations and ~~our business overall. Additionally, because there have been very few GDPR~~enforcement actions ~~enforced against companies, we are unable to predict how they will be applied to us or our customers. Despite our efforts to attempt~~for certain violations and related uncertainty. Failure to comply with the GDPR ~~a regulator may determine that we have not done so and subject us to~~or the U.K. GDPR can result in significant fines and ~~public censure, which could harm our company. Among~~ other ~~requirements,~~liability, including, under the GDPR, ~~regulates transfers~~fines of ~~personal~~up to EUR 20 million (or GBP 17.5 million under the U.K. GDPR) or four percent (4%) of annual global revenue, whichever is greater. The cost of compliance, and the potential for fines and penalties for non-compliance, with GDPR and U.K. GDPR may have a significant adverse effect on our business and operations.

Legal developments in the European Economic Area (“EEA”), including recent rulings from the Court of Justice of the European Union (“CJEU”) and from various EU member state data ~~subject to the GDPR to third countries that~~protection authorities, have ~~not been found to provide adequate protection to such personal data, including the United States. We have undertaken certain efforts to conform~~created complexity and uncertainty regarding processing and transfers of personal data from the ~~European Economic Area, or~~ EEA to the United States and other ~~jurisdictions based~~so-called third countries outside the EEA, including in the context of website cookies. Similar complexities and uncertainties also apply to transfers from the U.K. to third countries. While we have taken steps to mitigate the impact on ~~our understanding~~us, such as implementing the European Commission’s standard contractual clauses (“SCCs”), the efficacy and longevity of ~~current regulatory~~these mechanisms remains uncertain. Moreover, in 2021, the European Commission adopted new SCCs, which impose on companies additional obligations relating to personal data transfers out of the EEA, including the obligation to update internal privacy practices, conduct transfer impact assessments and, as required, implement additional security measures. The new SCCs may increase the ~~guidance~~legal risks and liabilities under EU laws associated with cross-border data transfers, and result in material increased compliance and operational costs. While the European Commission announced in March 2022 that an agreement in principle had been reached between EU and U.S. authorities regarding a new transatlantic data privacy framework, no formal agreement has been finalized, and any such agreement, if formalized, is likely to face challenge at the CJEU. Moreover, although the U.K. currently has an adequacy decision from the European Commission, such that SCCs are not required for the transfer of ~~data protection authorities. Despite this, we may be unsuccessful in establishing or maintaining conforming means of transferring such~~personal data from the EEA to the U.K., that decision will sunset in ~~particular as a result of continued legal~~June 2025 unless extended and ~~legislative activity within~~it may be revoked in the future by the European ~~Union~~Commission if the U.K. data protection regime is reformed in ways that ~~has challenged or called into question~~deviate substantially from the ~~legal basis~~GDPR. Adding further complexity for ~~existing means~~international data flows, in March 2022, the U.K. adopted its own International Data Transfer Agreement (“IDTA”) for transfers of personal data ~~transfers to countries that have not been found to provide adequate protection for personal data.~~

~~The implementation~~out of the ~~GDPR~~U.K. to so-called third countries, as well as an international data transfer addendum (U.K. Addendum) that can be used with the SCCs for the same purpose. The EU has ~~led~~also proposed legislation that would regulate non-personal data and establish new cybersecurity standards, and other ~~jurisdictions~~countries, including the U.K., may similarly do so in the future. If we are otherwise unable to ~~either amend,~~transfer data, including personal data, between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or ~~propose legislation~~segregation of our relevant systems and operations, and could adversely affect our financial results. While we have implemented new controls and procedures designed to ~~amend their existing data privacy and cybersecurity laws to resemble all or a portion of~~comply with the requirements of the GDPR, ~~(e.g., for purposes~~U.K. GDPR and the data privacy and security laws of ~~having an adequate level of data protection to facilitate data transfers from the EU) or enact new laws to do~~

~~the same. Accordingly, the challenges we face in the EU will likely also apply to~~ other jurisdictions ~~outside the EU~~in which we operate, such procedures and controls may not be effective in ensuring compliance or preventing unauthorized transfers of personal data.

Moreover, while we strive to publish and prominently display privacy policies that ~~adopt~~are accurate, comprehensive, and compliant with applicable laws, ~~similar in construction~~rules regulations and industry standards, we cannot ensure that our privacy policies and other statements regarding our practices will be sufficient to ~~the GDPR~~protect us from claims, proceedings, liability or ~~regulatory frameworks~~adverse publicity relating to data privacy and security. Although we endeavor to comply with our privacy policies, we may at times fail to do so or be alleged to have failed to do so. If our public statements about our use, collection, disclosure and other processing of ~~equivalent complexity. For example,~~personal information, whether made through our privacy policies, information provided on ~~June 28, 2018, California adopted the California Consumer Privacy Act of 2018,~~our website, press statements or ~~CCPA. The CCPA has been characterized as the first “GDPR-like” privacy statute~~otherwise, are alleged to be ~~enacted in the United States because it contains a number~~deceptive, unfair or misrepresentative of ~~provisions similar to certain provisions of the GDPR. Because of this, we may need to engage in data mapping to identify any consumer information that~~our actual practices, we may be ~~collecting from our customers through our Falcon platform. In addition, we will need~~subject to ~~ensure that our policies permit our customers to recognize the rights granted to consumers~~potential government or legal investigation or action, including by the ~~CCPA. All of this will need to be done before~~Federal Trade Commission or applicable state attorneys general.

Our compliance efforts are further complicated by the ~~effective date of the CCPA on January 1, 2020.~~

~~Evolving~~fact that data privacy and changing definitions of personal data and personal information within the European Union, the United States, and elsewhere, especially relating to classification of IP addresses, machine identification, location data and other information, may limit or inhibit our ability to operate or expand our business, including limiting technology alliance partnerships that may involve the sharing of data. Even the perception of privacy concerns, whether or not valid, may harm our reputation, inhibit adoption of our products by current and future customers, or adversely impact our ability to attract and retain workforce talent. In addition, changes insecurity laws, ~~or regulations that adversely affect the use of the internet, including laws impacting net neutrality, could impact our business. We expect that existing laws,~~rules, regulations and standards around the world are rapidly evolving, may be ~~interpreted in new manners in the future. Future laws, regulations, standards~~subject to uncertain or inconsistent interpretations and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could require us to modify our solutions, restrict our business operations, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.

Beyond broader data processing regulations affecting our business, the cybersecurity industry may face direct regulation. In 2018, Singapore introduced what is believed to be the world’s first cybersecurity licensing requirement, mandating that providers of specific types of incident response services receive a government license before providing such services. License requirements such as these may impose upon CrowdStrike significant organizational costs and high barriers of entry into new markets.

Although we work to comply with applicable laws and regulations, certain applicable industry standards with which we represent compliance, and our contractual obligations and other legal obligations, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another,enforcement, and may conflict with one another. In addition, they may conflict with other requirements or legal obligations that apply to our business or the security features and services that our customers expect from our solutions. As such, we cannot assure ongoing compliance with all such laws, regulations, standards and obligations.among various jurisdictions. Any failure or perceived failure by us ~~or our employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties~~ to comply with ~~applicable laws and regulations,~~our privacy policies, or applicable ~~industry standards that we represent compliance with or that may be asserted to apply to us, or to comply with employee, customer, partner, and other~~ data privacy and ~~data~~ security ~~requirements pursuant~~laws, rules, regulations, standards, certifications or contractual obligations, or any compromise of security that results in unauthorized access to, ~~contract and our stated notices~~ or ~~policies, could~~unauthorized loss, destruction, use, modification, acquisition, disclosure, release or transfer of personal information, may result in ~~enforcement~~requirements to modify or cease certain operations or practices, the expenditure of substantial costs, time and other resources, proceedings or actions against us, ~~including~~legal liability, governmental investigations, enforcement actions, claims, fines, ~~imprisonment~~judgments, awards, penalties, sanctions and costly litigation (including class actions). Any of ~~company officials and public censure, claims for damages by customers and other affected individuals, damage to~~the foregoing could harm our reputation, distract our management and ~~loss~~technical personnel, increase our costs of ~~goodwill (both~~doing business, adversely affect the demand for our products and services, and ultimately result in ~~relation to existing customers and prospective customers),~~the imposition of liability, any of which could have a material adverse effect on our ~~operations,~~business, financial performance and business. Any inability of us or our employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, standards and obligations, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our businesscondition and results of operations.

Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers ~~in the public sector~~ or negatively impact our ability to contract with customers, including those in the public sector.

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing data protection, data privacy and data ~~protection~~security laws and regulations, employment and labor laws, workplace safety, product safety, environmental laws, consumer protection laws, anti-bribery laws, import and export controls, federal securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in the United States. Increased scrutiny of technologies like artificial intelligence may also become subject to regulation under new laws or new applications of existing laws. Noncompliance by us, our

employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties with applicable regulations or requirements could subject us to:

●

~~investigations, enforcement actions and sanctions;~~

●

~~mandatory changes to our Falcon platform;~~

●

~~disgorgement of profits, fines and damages;~~

●

~~civil and criminal penalties or injunctions;~~

●

~~claims for damages by our customers or channel partners;~~

●

~~termination of contracts;~~

●

~~loss of intellectual property rights; and~~

●

~~temporary or permanent debarment from sales to government organizations.~~

•investigations, enforcement actions and sanctions;

•mandatory changes to our Falcon platform;

•disgorgement of profits, fines and damages;

•civil and criminal penalties or injunctions;

•claims for damages by our customers or channel partners;

•termination of contracts;

•loss of intellectual property rights;

•loss of our license to do business in the jurisdictions in which we operate; and

•temporary or permanent debarment from sales to government organizations.

If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, results of operations and financial condition.

We endeavor to properly classify employees as exempt versus non-exempt under applicable law. Although there are no pending or threatened material claims or investigations against us asserting that some employees are improperly classified as exempt, the possibility exists that some of our current or former employees could have been incorrectly classified as exempt employees.

These laws and regulations impose added costs on our business, and failure by us, our employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties to comply with these or other applicable regulations and requirements could lead to claims for damages, penalties, termination of contracts, loss of exclusive rights in our intellectual property and temporary suspension or permanent debarment from government contracting. Any such damages, penalties, disruptions or limitations in our ability to do business with customers, including those in the public sector, could result in reduced sales of our products, substantial product inventory write-offs, reputational damage, penalties, and other sanctions, any of which could harm our business, reputation, and results of operations.

We are subject to laws and regulations, including governmental export and import controls, sanctions, and anti-corruption laws, that could impair our ability to compete in our markets and subject us to liability if we are not in full compliance with applicable laws.

We are subject to laws and regulations, including governmental export controls, that could subject us to liability or impair our ability to compete in our markets. Our products are subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration Regulations, and we and our employees, representatives, contractors, agents, intermediaries, and other third parties are also subject to various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. We incorporate standard encryption algorithms into our products, which, along with the underlying technology, may be exported outside of the U.S. only with the required export authorizations, including by license, license exception or other appropriate government authorizations, which may require the filing of an encryption registration and classification request. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain cloud-based solutions to countries, governments, and persons targeted by U.S. sanctions.

We also collect information about cyber threats from open sources, intermediaries, and third parties, ~~that~~which we use and make available to our customers in our threat industry publications. ~~While~~Although we

take precautions and have implemented certain procedures to facilitate compliance with applicable laws and regulations in connection with the collection of this information, we cannot assure you that these procedures have been effective or that we, or third parties, many of whom we do not control, have complied with all laws or regulations in this regard. Failure by our employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties to comply with applicable laws and regulations in the collection of this information also could have negative consequences to us, including reputational harm, government investigations and penalties.

~~Although we take precautions~~ to prevent our information collection practices and services from being provided in violation of ~~such~~applicable laws and regulations, our information collection practices and services may have been in the past, and could in the future be, provided in violation of such ~~laws. If~~laws and regulations. In addition, we cannot assure you that third parties, many of whom we do not control, have complied with all such laws or regulations. Failure by our employees, representatives, contractors, ~~channel partners,~~ agents, intermediaries, or other third parties ~~fail~~ to comply with ~~these~~such laws and regulations wein the collection of this information could ~~be subject to civil or criminal penalties, including the possible loss of export privileges and fines. We may also be~~ adversely ~~affected~~affect us, through reputational harm, loss of access to certain markets, ~~or otherwise. Obtaining the necessary authorizations, including any required license, for a particular transaction may be time-consuming, is not guaranteed~~government investigations, and ~~may result in the delay or loss~~civil and criminal penalties.

Table of ~~sales opportunities.~~

Various countries regulate the import of certain encryption technology, including through import permit and license requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries. Obtaining the necessary authorizations, including any required license, for a particular transaction may be time consuming, is not guaranteed and may result in the delay or loss of sales opportunities. Changes in our products or changes in export and import regulations may create delays in the introduction of our products into international markets, prevent our customers with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. Any promulgation of new regulations or change in export or import regulations, economic sanctions or related legislation, ~~shift in~~ the enforcement or scope of existing regulations, or ~~change in~~ the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential ~~customers with international operations.~~customers. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, results of operations, and financial condition.

We are also subject to the ~~U.S. Foreign Corrupt Practices Act of 1977, or~~ FCPA, the ~~UK Bribery Act 2010, or~~ Bribery Act, and other anti-corruption, sanctions, anti-bribery, anti-money laundering and similar laws in the United States and other countries in which we conduct activities. Anti-corruption and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees, agents, intermediaries, and other third parties from promising, authorizing, making or offering improper payments or other benefits to government officials and others in the private sector. We leverage third parties, including intermediaries, agents, and channel partners, to conduct our business in the U.S. and abroad, to sell subscriptions to our Falcon platform and to collect information about cyber threats. We and these third-parties may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, agents, intermediaries, and other third parties, even if we do not ~~explicitly~~ authorize such activities. While we have policies and procedures to address compliance with the FCPA, the Bribery Act and other anti-corruption, sanctions, anti-bribery, anti-money laundering and similar laws, we cannot assure you that they will be effective, or that all of our employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties have taken, or will not take actions, in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase. Noncompliance with these laws could subject us to investigations, severe criminal or civil sanctions, settlements, prosecution, loss of export privileges, suspension or debarment from U.S. government contracts, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, whistleblower complaints, adverse media coverage and other consequences. Any investigations, actions or sanctions could harm our reputation, business, results of operations and financial condition.

Some of our technology incorporates “open source” software, which could negatively affect our ability to sell our Falcon platform and subject us to possible litigation.

Our products and subscriptions contain third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products and subscriptions. The use and distribution of open source software may entail greater risks than the use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the ~~code.~~code and they can change the license terms on which they offer the open source software. Many of the risks associated with use of open source software cannot be eliminated and could negatively affect our business. In addition, the wide availability of source code used in our solutions could expose us to security vulnerabilities.

Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use. If we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public, including authorizing further modification and redistribution, or otherwise be limited in the licensing of our services, each of which could provide an advantage to our competitors or other entrants to the market, create security vulnerabilities in our solutions, require us to re-engineer all or a portion of our Falcon platform, and could reduce or eliminate the value of our services. This would allow our competitors to create similar products with lower development effort and time and ultimately could result in a loss of sales for us.

~~Table~~•causing delays in the deployment of ~~Contents~~our Falcon platform or service offerings to our customers;

The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in ways that could impose unanticipated conditions or restrictions on our ability to commercialize products and subscriptions incorporating such software. Moreover, we cannot assure you that our processes for controlling our use of open source software in our products and subscriptions will be effective. From time to time, we may face claims from third parties asserting ownership of, or demanding release of, the open source software or derivative works that we developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation. Litigation could be costly for us to defend, have a negative effect on our results of operations and financial condition or require us to devote additional research and development resources to change our solutions. Responding to any infringement or noncompliance claim by an open source vendor, regardless of its validity, discovering certain open source software code in our Falcon platform, or a finding that we have breached the terms of an open source software license, could harm our business, results of operations and financial condition, by, among other things:

●

~~resulting in time-consuming and costly litigation;~~

●

~~diverting management’s time and attention from developing our business;~~

●

~~requiring us to pay monetary damages or enter into royalty and licensing agreements that we would not normally find acceptable;~~

●

~~causing delays in the deployment of our Falcon platform or service offerings to our customers;~~

●

~~requiring us to stop offering certain services or features of our Falcon platform;~~

●

~~requiring us to redesign certain components of our Falcon platform using alternative non-infringing or non-open source technology, which could require significant effort and expense;~~

●

~~requiring us to disclose our software source code and the detailed program commands for our software; and~~

●

~~requiring us to satisfy indemnification obligations to our customers.~~

•resulting in time-consuming and costly litigation;

•diverting management’s time and attention from developing our business;

•requiring us to pay monetary damages or enter into royalty and licensing agreements that we would not normally find acceptable;

•requiring us to stop offering certain services or features of our Falcon platform;

•requiring us to redesign certain components of our Falcon platform using alternative non-infringing or non-open source technology, which could require significant effort and expense;

•requiring us to disclose our software source code and the detailed program commands for our software; and

•requiring us to satisfy indemnification obligations to our customers.

We provide service level commitments under some of our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service and our business could suffer.

Certain of our customer agreements contain service level commitments, which contain specifications regarding the availability and performance of our Falcon platform. Any failure of or disruption to our infrastructure could impact the performance of our Falcon platform and the availability of services to customers. If we are unable to meet our stated service level commitments or if we suffer extended periods of poor performance or unavailability of our Falcon platform, we may be contractually obligated to provide affected customers with service credits for future subscriptions, and, in certain cases, refunds. To date, there has not been a material failure to meet our service level commitments, and we do not currently have any material liabilities accrued on our balance ~~sheet~~sheets for such commitments. Our revenue, other results of operations and financial condition could be harmed if we suffer performance issues or downtime that exceeds the service level commitments under our agreements with our customers.

We are currently, and may in the future become, involved in litigation that may adversely affect us.

We are regularly subject to claims, suits, and government investigations and other proceedings including patent, product liability, class action, whistleblower, personal injury, property damage, labor and employment (including allegations of wage and hour violations), commercial disputes, compliance with laws and regulatory requirements and other matters, and we may become subject to additional types of claims, suits, investigations and proceedings as our business develops. For example, we, along with certain other cybersecurity providers, currently are subject to a civil investigation regarding participation in cybersecurity testing standard-setting and allegations that this standard-setting facilitated a concerted refusal to deal with cybersecurity testing organizations that did not adhere to those standards. While we believe that we have acted in compliance in all material respects with applicable antitrust laws, such investigation, as well as any otherSuch claims, suits, and government investigations and proceedings ~~that may be asserted against us in the future~~ are inherently uncertain and their results cannot be predicted with certainty. Regardless of the outcome, any of these types of legal proceedings can have an adverse impact on us because of legal costs and diversion of management attention and resources, and could cause us to incur significant expenses or liability, adversely affect our brand recognition, and/or require us to change our business practices. The expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect our results of operations. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that could adversely affect our business, condensed consolidated financial position, results of operations, or cash flows in a particular period. These proceedings could also result in reputational harm, sanctions, consent decrees, or orders requiring a change in our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle

disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, financial condition, results of operations, and prospects. Any of these consequences could adversely affect our business and results of operations.

~~Our ability to maintain customer satisfaction depends in part on the quality of our customer support.~~

Once our Falcon platform is deployed within our customers’ networks, our customers depend on our customer support services to resolve any issues relating to the implementation and maintenance of our Falcon platform. If we do not provide effective ongoing support, our ability to sell additional modules as part of our Falcon platform to existing customers would be adversely affected and our reputation with potential customers could be damaged. Many larger organizations have more complex networks and require higher levels of support than smaller customers and we offer premium services for these customers. Failure to maintain high-quality customer support could have a material adverse effect on our business, results of operations, and financial condition.

We expect that our existing cash and cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. Retaining or

expanding our current levels of personnel and products offerings may require additional funds to respond to business challenges, including the need to develop new products and enhancements to our Falcon platform, improve our operating infrastructure, or acquire complementary businesses and technologies. Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our ability to compete and could harm our business. Accordingly, we may need to engage in additional equity or debt financings to secure additional funds. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the market price of our Class A common stock could decline. If we engage in debt financing, the holders of debt would have priority over the holders of our Class A common stock, and we may be required to accept terms that restrict our operations or our ability to incur additional indebtedness or to take other actions that would otherwise be in the interests of the debt holders. Any of the above could harm our business, results of operations, and financial condition.

Our business is subject to the risks of warranty claims, product returns, product liability, and product defects from real or perceived defects in our solutions or their misuse by our customers or third parties and indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.

We may be subject to liability claims for damages related to errors or defects in our solutions. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products may harm our business and results of operations. Although we generally have limitation of liability provisions in our terms and conditions of sale, these provisions do not cover our indemnification obligations as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indemnification” and they may not fully or effectively protect us from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the United States or other countries. The sale and support of our products also entails the risk of product liability claims.

Additionally, our agreements with customers and other third parties typically include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims regarding intellectual property infringement, breach of agreement, including confidentiality, privacy and security obligations, violation of applicable laws, damages caused by failures of our solutions or to property or persons, or other liabilities relating to or arising from our products and services, or other acts or omissions. These contractual provisions often survive termination or expiration of the applicable agreement. We have not to date received any indemnification claims from third parties. However, as we continue to grow, the possibility of these claims against us will increase.

If our customers or other third parties we do business with make intellectual property rights or other indemnification claims against us, we will incur significant legal expenses and may have to pay damages, license fees, and/or stop using technology found to be in violation of the third party’s rights. We may also have to seek a license for the technology. Such license may not be available on reasonable terms, if at all, and may significantly increase our operating expenses or may require us to restrict our business activities and limit our ability to deliver certain solutions or features. We may also be required to develop alternative non-infringing technology, which could require significant effort and expense and/or cause us to alter our products and services, which could harm our business. Large indemnity obligations, whether for intellectual property or other claims, could harm our business, results of operations, and financial condition.

Additionally, our Falcon platform may be used by our customers and other third parties who obtain access to our solutions for purposes other than for which our platform was intended. For example, our Falcon platform might be misused by a customer to monitor its employee’s activities in a manner that violates the employee’s privacy rights under applicable law.

During the course of performing certain solution-related services and our professional services, our teams may have significant access to our customers’ networks. We cannot be sure that ~~a disgruntled~~an employee may not take advantage of such access which may make our customers vulnerable to malicious activity by such employee. Any such misuse of our Falcon platform could result in negative press coverage and negatively affect our reputation, which could result in harm to our business, reputation, and results of operations.

We maintain insurance to protect against certain claims associated with the use of our products, but our insurance coverage may not adequately cover any claim asserted against us. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert management’s time and other resources, and harm our business and reputation. We offer our Falcon Complete customers a limited warranty, subject to certain ~~conditions, with~~conditions. While we maintain insurance relating to our ~~Falcon Complete cloud module and our potential liability under this~~ warranty, ~~is provided by~~we cannot be certain that our insurance ~~carrier~~coverage will be adequate to ~~us.~~cover such claims, that such insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any claim. Any failure or refusal of our insurance providers to provide the expected insurance benefits to us after we have paid the warranty claims would cause us to incur significant expense or cause us to cease offering this warranty which could damage our reputation, cause us to lose customers, expose us to liability claims by our customers, negatively impact our sales and marketing efforts, and have an adverse effect on our business, financial condition and results of operations.

Risks Related to Ownership of Our ~~credit agreement contains restrictive covenants~~Class A Common Stock

The market price of our Class A common stock may be volatile regardless of our operating performance, and you could lose all or part of your investment.

We cannot predict the prices at which our Class A common stock will trade. The market price of our Class A common stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our Class A common stock. Factors that could cause fluctuations in the market price of our Class A common stock include the following:

•actual or anticipated changes or fluctuations in our results of operations;

•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;

•industry or financial analyst or investor reaction to our press releases, other public announcements and filings with the SEC;

•rumors and market speculation involving us or other companies in our industry;

•price and volume fluctuations in the overall stock market from time to time;

•changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

•failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

•litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

•developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights;

•announced or completed acquisitions of businesses or technologies by us or our competitors;

•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

•any major changes in our management or our board of directors, particularly with respect to Mr. Kurtz;

•effects of public health crises, pandemics and epidemics, such as COVID-19;

•general economic conditions and slow or negative growth of our markets; and

•other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our Class A common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market prices of a particular company’s securities, securities class action litigation has often been instituted against that company. Securities

litigation, if instituted against us, could result in substantial costs and divert our management’s attention and resources from our business. This could have an adverse effect on our business, results of operations and financial condition.

Sales of substantial amounts of our Class A common stock in the public markets, or the perception that they might occur, could reduce the price that our Class A common stock might otherwise attain and may dilute your voting power and your ownership interest in us.

Sales of a substantial number of shares of our Class A common stock in the public market, including shares of Class A stock that have been converted from shares of Class B common stock, and particularly sales by our directors, executive officers and significant stockholders, or the perception that these sales could occur, could adversely affect the market price of our Class A common stock. As of May 15, 2023, we had 224,132,410 shares of Class A common stock outstanding and 12,975,938 shares of Class B common stock outstanding.

In addition, certain holders of our Class B common stock are entitled to rights with respect to registration of these shares under the Securities Act pursuant to our amended and restated registration rights agreement. If these holders of our Class B common stock, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our Class A common stock.

We may also issue our shares of Class A common stock or securities convertible into shares of our Class A common stock from time to time in connection with a financing, acquisition, investments or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the market price of our Class A common stock to decline.

If industry or financial analysts do not publish research or reports about our business, or if they issue inaccurate or unfavorable research regarding our Class A common stock, our stock price and trading volume could decline.

The trading market for our Class A common stock will be influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. If any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding our stock price, our stock price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our Class A common stock or publish unfavorable research about us. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our stock price or trading volume to decline.

The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock (or options or other securities convertible into or exercisable for our capital stock) prior to the completion of our initial public offering, including our executive officers, employees, directors, principal stockholders, and their affiliates, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval.

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share. The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock (or options or other securities convertible into or exercisable for our capital stock) prior to our initial public offering, including our executive officers, employees, directors, principal stockholders, and their affiliates, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change in control transaction. Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.

As of April 30, 2023, our executive officers, directors, one of our current stockholders and its respective affiliates held, in aggregate, 37% of the voting power of our outstanding capital stock. As a result, these stockholders, acting together, have control over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control or other liquidity event of our company, could deprive our stockholders of an opportunity to receive a premium for their shares of common stock as part of a sale or other liquidity event and might ultimately affect the market price of our common stock.

Further, our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” does not apply to Accel, or its respective affiliates, in a manner that would prohibit them from investing in competing businesses or doing business with our partners or customers.

We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Additionally, our ability to ~~borrow more money, to make distributions to our stockholders, and to engage in certain other activities, as well as financial covenants that may limit our operating flexibility.~~

~~Our existing credit agreement contains a number of covenants that limit~~pay dividends is limited by restrictions on our ability ~~and our subsidiaries’ ability~~ to ~~among other things, transfer or dispose of assets,~~ pay dividends or make distributions incur additional indebtedness, create liens, make investments, loans and acquisitions, engage in transactions with affiliates, merge or consolidate with other companies, or sell substantially all of our assets. Our credit agreement is guaranteed by us and certain of our subsidiaries and secured by substantially all ofunder the ~~assets of the borrower subsidiary, us, and the guarantor subsidiaries. The~~ terms of our credit ~~agreement~~facility. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may ~~restrict~~never occur, as the only way to realize any future gains on their investments.

Certain provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove members of our board of directors or current management, and ~~future operations~~may adversely affect the market price of our Class A common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include:

•our dual class common stock structure, which provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock;

•a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;

•the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

•the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders, which prohibition will take effect on the first date on which the number of outstanding shares of our Class B common stock represents less than 10% of the aggregate number of outstanding shares of our Class A common stock and our Class B common stock, taken together as a single class;

•the requirement that a special meeting of stockholders may be called only by the chairperson of our board of directors, chief executive officer or by the board of directors acting pursuant to a resolution adopted by a majority of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

•certain amendments to our amended and restated certificate of incorporation require the approval of two-thirds of the then-outstanding voting power of our capital stock; and

•advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware, and to the extent enforceable, the federal district courts of the United States, will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for:

•any derivative action or proceeding brought on our behalf;

•any action asserting a breach of fiduciary duty;

•any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws;

•any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; and

•any action asserting a claim against us that is governed by the internal-affairs doctrine.

However, this exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. In addition, our amended and restated bylaws provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision.

These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

Risks Related to our Indebtedness

Our indebtedness could adversely affect our financial condition.

As of April 30, 2023, we had $750.0 million principal amount of indebtedness outstanding (excluding intercompany indebtedness), and there is additional availability under our revolving facility of up to $750.0 million (excluding issued but undrawn letters of credit). Our indebtedness could have important consequences, including:

•limiting our ability to ~~finance~~obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

•requiring a portion of our ~~future operations or~~cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, ~~needs or~~capital expenditures, acquisitions and other general corporate purposes;

•increasing our vulnerability to ~~execute preferred business strategies. In addition, complying with these covenants may make it more difficult for~~adverse changes in general economic, industry and competitive conditions; and

•exposing us to ~~successfully execute~~the risk of increased interest rates as certain of our ~~business strategy and compete against companies who~~borrowings, including borrowings under our revolving facility, are ~~not subject to such restrictions. Additionally, our credit agreement includes financial covenants that require us to maintain minimum growth~~at variable rates of interest; and increasing our ~~recurring subscription revenue, and to maintain minimum liquidity at specified levels.~~ cost of borrowing.

We may not be able to generate sufficient cash ~~flow or sales~~ to ~~meet~~service all of our indebtedness, including the ~~financial covenants or pay the principal or interest under the credit facility.~~

~~If we are unable~~notes, and may be forced to ~~comply with our payment requirements, our lender may accelerate~~take other actions to satisfy our obligations under our ~~credit agreement~~indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations, including the Senior Notes, depends on our financial condition and ~~foreclose upon~~results of operations, which in turn are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the ~~collateral, or~~principal, premium, if any, and interest on our indebtedness, including the notes.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the Senior Notes. Our ability to restructure or ~~seek~~refinance our debt will depend on, among other things, the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments and the indenture that governs the Senior Notes may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

Further, our credit agreement contains provisions that restrict our ability to dispose of assets and use the proceeds from any such disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

If we cannot make scheduled payments on our indebtedness, we will be in default and holders of our Senior Notes could declare all outstanding principal and interest to be due and payable, the lenders under our revolving facility could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. If we breach the covenants under our debt instruments, we would be in default under such instruments. The holders of such indebtedness could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.

Our revolving facility and the indenture that governs our Senior Notes contain terms which restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

Our revolving facility and the indenture that governs our Senior Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, among other things, restrictions on our ability to:

•incur additional indebtedness and guarantee indebtedness;

•prepay, redeem or repurchase certain indebtedness;

•sell or otherwise dispose of assets;

•incur liens;

•enter into transactions with affiliates;

•alter the businesses we conduct;

•enter into agreements restricting our subsidiaries’ ability to pay dividends; and

•consolidate, merge with, or sell all or substantially all of our assets to, another person.

The covenants in the indenture and supplemental indenture that govern the Senior Notes are subject to exceptions and qualifications.

In addition, the restrictive covenants in the credit agreement governing our revolving facility require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may not be able to meet them. These restrictive covenants could adversely affect our ability to:

•finance our operations;

•make needed capital expenditures;

•make strategic acquisitions or investments or enter into joint ventures;

•withstand a future downturn in our business, the industry or the economy in general;

•engage in business activities, including future opportunities, that may be in our best interest; and

•plan for or react to market conditions or otherwise execute our business strategies.

These restrictions may affect our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations.

As a result of these restrictions, we will be limited as to how we conduct our business and we may be unable to raise additional debt or equity ~~capital, which would dilute our stockholders’ interests. If~~financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.

Our failure to comply with the restrictive covenants described above and/or the terms of any ~~covenant it~~future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our business, financial condition and results of operations could be adversely affected.

Our revolving facility and the indenture that governs our Senior Notes contain cross-default provisions that could result in the acceleration of all of our indebtedness.

A breach of the covenants under our revolving facility or the indenture that governs our Senior Notes could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement governing our revolving facility would permit the lenders under our revolving facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay amounts due and payable under our revolving facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our ~~lender could make the entire debt immediately due and payable. If this occurs,~~guarantors may not have sufficient assets to repay that indebtedness. Additionally, we ~~might~~may not be able to ~~repay our debt or~~ borrow ~~sufficient funds~~money from other lenders to enable us to refinance ~~it. Even if new financing is available, it may not be on terms that are acceptable to us.~~

~~The requirements of being a public company may strain~~ our ~~resources, divert managements’ attention, and if~~indebtedness.

General Risk Factors

If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

~~As a new public company, we recently became~~

We are subject to the reporting requirements of ~~the Securities Exchange Act of 1934, as amended, or~~ the Exchange Act, the Sarbanes-Oxley Act of 2002 ~~or the~~ (“Sarbanes-Oxley ~~Act, and~~Act”), the rules and regulations of ~~Nasdaq. We expect~~Nasdaq, and other securities rules and regulations that ~~the~~impose various requirements ofon public companies. Our management and other personnel devote substantial time and resources to comply with these rules and ~~regulations~~regulations. Such compliance has increased, and will continue to increase our legal, accounting and financial compliance costs; make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure information required to be disclosed by us in our condensed consolidated financial statements and in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

Our current controls and any new controls we develop may become inadequate because of changes in conditions in our business. ~~Further, weaknesses~~Additionally, to the extent we acquire other businesses, the acquired company may not have a sufficiently robust system of internal controls and we may uncover new deficiencies. Weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our results of operations, may result in a restatement of our condensed consolidated financial statements for prior periods, cause us to fail to

Table of ~~periodic management evaluations and annual~~Contents

meet our reporting obligations, and could ~~adversely affect the results~~result in an adverse opinion regarding our internal control

over financial reporting from our independent registered public accounting firm, ~~attestation reports regarding the effectiveness of our internal control over financial reporting that we are required~~and lead to include in the periodic reports we are required to file with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our Class A common stock.. As a result of becoming a public company, our management if required, pursuant to investigations or sanctions by regulatory authorities.

Section 404 of the Sarbanes-Oxley Act requires our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial ~~reporting commencing with~~reporting. We are also required to have our ~~second Annual Report~~independent registered public accounting firm attest to, and issue an opinion on, ~~Form 10-K. In order~~the effectiveness of our internal control over financial reporting. If we are unable to ~~improve~~assert that our ~~disclosure controls and procedures and~~ internal control over financial reporting ~~to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm~~is effective, or if, when required, our ~~business, financial condition, and results of operations.~~

~~Our~~ independent registered public accounting firm is ~~not required~~unable to ~~formally attest to~~express an opinion on the effectiveness of our internal control over financial reporting, ~~until after~~ we ~~are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse~~could lose investor confidence in the ~~event it is not satisfied with~~accuracy and completeness of our financial reports, which would cause the ~~level at which~~price of our ~~controls are documented, designed or operating.~~ Class A common stock to decline.

Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and results of operations and could cause a decline in the price of our stock.

Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our business, financial condition, and results of ~~operations and financial condition.~~

operations.

As part of our business strategy, we have in the past and ~~are likely~~expect to continue to make investments in and/or acquire complementary companies, services or ~~technologies, such as our acquisition of Payload Security, UG.~~technologies. Our ability as an organization to acquire and integrate other companies, services or technologies in a successful manner in the future is not guaranteed. We may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on favorable terms, if at all. If we do complete acquisitions, we may not ultimately strengthen our competitive position or ability to achieve our business objectives, and any acquisitions we complete could be viewed negatively by our end-customers or investors. In addition, ifour due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or other accounting practices or issues with employees or customers. If we are unsuccessful at integrating such acquisitions, or the technologies associated with such acquisitions, into our company, the revenue and results of operations of the combined company could be adversely affected. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, ~~including~~causing unanticipated write-offs or accounting charges. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could adversely affect our financial condition and the market price of our Class A common stock. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

Additional risks we may face in connection with acquisitions include:

●

~~diversion of management time and focus from operating our business to addressing acquisition integration challenges;~~

●

~~coordination of research and development and sales and marketing functions;~~

●

~~integration of product and service offerings;~~

●

~~retention of key employees from the acquired company;~~

●

~~changes in relationships with strategic partners as a result of product acquisitions or strategic positioning resulting from the acquisition;~~

•diversion of management time and focus from operating our business to addressing acquisition integration challenges;

•coordination of research and development and sales and marketing functions;

•integration of administrative systems, employee, product and service offerings;

•retention of key employees from the acquired company;

•changes in relationships with strategic partners as a result of product acquisitions or strategic positioning resulting from the acquisition;

•the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies;

•additional legal, regulatory or compliance requirements;

•financial reporting, revenue recognition or other financial or control deficiencies of the acquired company that we do not adequately address and that cause our reported results to be incorrect;

●

~~cultural challenges associated with integrating employees from the acquired company into our organization;~~

●

~~integration of the acquired company’s accounting, management information, human resources and other administrative systems;~~

●

~~the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies;~~

●

~~financial reporting, revenue recognition or other financial or control deficiencies of the acquired company that we don’t adequately address and that cause our reported results to be incorrect;~~

●

liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

●

~~unanticipated write-offs or charges; and~~

●

~~litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.~~

•liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and

•litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.

Our failure to address these risks or other problems encountered in connection with acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally.

~~If we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success and our business may be harmed.~~

~~Our international operations and plans for future international expansion expose us to significant risks, and failure to manage those risks could adversely impact our business.~~

We derived approximately 13%, 16%, 23%, and 25% of our total revenue from our international customers for fiscal 2017, fiscal 2018, fiscal 2019, and the three months ended April 30, 2019, respectively. We are continuing to adapt to and develop strategies to address international markets and our growth strategy includes expansion into target geographies, but there is no guarantee that such efforts will be successful. We expect that our international activities will continue to grow in the future, as we continue to pursue opportunities in international markets. These international operations will require significant management attention and financial resources and are subject to substantial risks, including:

●

~~greater difficulty in negotiating contracts with standard terms, enforcing contracts and managing collections, and longer collection periods;~~

●

~~higher costs of doing business internationally, including costs incurred in establishing and maintaining office space and equipment for our international operations;~~

●

~~management communication and integration problems resulting from cultural and geographic dispersion;~~

●

~~risks associated with trade restrictions and foreign legal requirements, including any importation, certification, and localization of our Falcon platform that may be required in foreign countries;~~

●

~~greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;~~

●

compliance with anti-bribery laws, including, without limitation, compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. Travel Act and the UK Bribery Act 2010, violations of which could lead to significant fines, penalties, and collateral consequences for our company;

●

heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;

●

~~the uncertainty of protection for intellectual property rights in some countries;~~

●

~~general economic and political conditions in these foreign markets;~~

●

~~foreign exchange controls or tax regulations that might prevent us from repatriating cash earned outside the United States;~~

●

~~political and economic instability in some countries;~~

●

~~double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate;~~

●

~~unexpected costs for the localization of our services, including translation into foreign languages and adaptation for local practices and regulatory requirements;~~

●

~~requirements to comply with foreign privacy, data protection, and information security laws and regulations and the risks and costs of noncompliance;~~

●

~~greater difficulty in identifying, attracting and retaining local qualified personnel, and the costs and expenses associated with such activities;~~

●

~~greater difficulty identifying qualified channel partners and maintaining successful relationships with such partners;~~

●

~~differing employment practices and labor relations issues; and~~

●

~~difficulties in managing and staffing international offices and increased travel, infrastructure, and legal compliance costs associated with multiple international locations.~~

Additionally, all of our sales contracts are currently denominated in U.S. dollars. However, a strengthening of the U.S. dollar could increase the cost of our solutions to our international customers, which could adversely affect our business and results of operations. In addition, an increasing portion of our operating expenses is incurred outside the United States, is denominated in foreign currencies, such as the British Pound, Indian Rupee, and Euro, and is subject to fluctuations due to changes in foreign currency exchange rates. If we become more exposed to currency fluctuations and are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected.

~~The requirements of being a public company may strain our resources and divert management’s attention.~~

As a public company, we are subject to the reporting and corporate governance requirements of the Exchange Act, the listing requirements of the Nasdaq Global Select Market and other securities rules and regulations, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly and increase demand on our systems and resources, the effects of which will be magnified after we are no longer an “emerging growth company” as defined in the JOBS Act. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal control over financial reporting. In order to improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition, and results of operations.

~~U.S. federal income tax reform could adversely affect us.~~

In December 2017, the United States adopted new tax law legislation commonly referred to as the Tax Cuts and Jobs Act of 2017, or the Tax Act, which significantly reforms the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. The Tax Act, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and the use of net operating losses generated in tax years beginning after December 31, 2017, allows for the expensing of certain capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. Further changes to U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits, as well as changes to U.S. tax laws that may be enacted in the future, could impact the tax treatment of our foreign earnings. Due to expansion of our international business activities, any changes in the U.S. taxation of such activities may increase our worldwide effective tax rate and adversely affect our financial condition and results of operations. The enactment of legislation implementing changes in the U.S. taxation of international business activities or the adoption of other tax reform policies could adversely impact our financial position and results of operations.

~~The Tax Act did not have a material impact on our financial statements for fiscal 2019, other than disclosures in our year-end financial statements.~~

~~Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.~~

As of January 31, 2019, we had aggregate U.S. federal and state net operating loss carryforwards of $376.0 million and $287.8 million, respectively, which may be available to offset future taxable income for income tax purposes. If not utilized, the federal net operating loss carryforwards will begin to expire in 2031, and the state net operating loss carryforwards will begin to expire in 2021. As of January 31, 2019, we had federal and California research and development credit carryforwards of $7.4 million and $3.7 million, respectively. The federal research and development credit carryforwards begin to expire in 2031, and the California carryforwards are carried forward indefinitely. Realization of these net operating loss and research and development credit carryforwards depends on future income, and there is a risk that our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our results of operations.

ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

We do not collect sales and use, value added or similar taxes in all jurisdictions in which we have sales because we have been advised that such taxes are not applicable to our services in certain jurisdictions. Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, to us or our customers for the past amounts, and we may be required to collect such taxes in the future. If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, which may adversely affect our results of operations.

Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our results of operations.

We are expanding our international operations and staff to support our business in international markets. We generally conduct our international operations through wholly-owned subsidiaries and are or may be required to report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

We are subject to federal, state, and local income, sales, and other taxes in the United States and income, withholding, transaction, and other taxes in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination ismay be uncertain. In addition, our tax obligations and effective tax rates could be adversely affected, among other things, by (i) changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including ~~those~~increases in corporate tax rates and greater taxation of international income and changes relating to income tax nexus, by(ii) recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by(iii) changes in foreign currency exchange rates, or by(iv) changes in the valuation of our deferred tax assets and liabilities. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes, sales taxes and value added taxes against us. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have an adverse effect on our results of operations or cash flows in the period or periods for which a determination is made.

In addition, the Organization for Economic Cooperation and Development (“OECD”) has published proposals covering a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules, tax treaties and taxation of the digital economy. A significant majority of countries in the OECD’s Inclusive Framework have agreed in principle to a proposed solution to address the tax challenges arising from the digitalization of the economy, including joining a two-pillar plan to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate. The first pillar is focused on the allocation of taxing rights between countries for in-scope multinational enterprises that sell goods and services into countries with little or no local physical presence and is intended to apply to multinational enterprises with global revenue above 20 billion euro and certain other criteria. The second pillar is focused on developing a global minimum tax rate of at least 15 percent applicable to in-scope multinational enterprises and is intended to apply to multinational enterprises with annual consolidated group revenue in excess of 750 million euro. While substantial work remains to be completed by the OECD and national governments on the implementation of these proposals, future tax reform resulting from these developments may result in changes to long-standing tax principles, which could adversely affect our effective tax rate or result in higher cash tax liabilities. The OECD’s proposed solution envisages new international tax rules and the removal of all Digital Services Taxes (“DST”). Notwithstanding this, some countries, in the European Union and beyond, continue to operate a DST regime to capture tax revenue on digital services more immediately. Such laws may increase our tax obligations in those countries or change the manner in which we operate our business.

Our ~~reported financial results~~ability to use our net operating loss carryforwards and certain other tax attributes may be ~~affected~~limited.

As of January 31, 2023, we had aggregate U.S. federal and California net operating loss carryforwards of $1.6 billion and $248.2 million, respectively, which may be available to offset future taxable income for income tax purposes. If not utilized, the federal and California net operating loss carryforwards will begin to expire in fiscal 2031. As of January 31, 2023, we had net operating loss carryforwards for other states of $1.0 billion that will begin to expire in fiscal 2024. As of January 31, 2023, we had federal and California research and development credit carryforwards of $87.4 million and $18.8 million, respectively. The federal research and development credit carryforwards will begin to expire in 2035, and the California carryforwards are carried forward indefinitely. As of January 31, 2023, we had aggregate United Kingdom net operating loss carryforwards of $80.9 million, which are carried forward indefinitely. Realization of these net operating loss and research and development credit carryforwards depends on future income, and there is a risk that our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our results of operations.

In addition, under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in ownership by “5 percent shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryovers and other pre-change tax attributes, such as research and development credits, to offset its post-change income or taxes may be limited. We may experience ownership changes in ~~accounting principles generally accepted~~the future as a result of shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

Taxing authorities may successfully assert that we should have collected or in the ~~United States,~~future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

We do not collect sales and use, value added or similar taxes in all jurisdictions in which we have sales because we have been advised that such ~~as the adoption of ASC 606,~~taxes are not applicable to our services in certain jurisdictions. Sales and ~~difficulties~~use, value added, and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in ~~implementing these changes could cause us to fail to meet our financial reporting obligations,~~which we do not collect such taxes may assert that such taxes are applicable, which could result in ~~regulatory discipline~~tax assessments, penalties and ~~harm investors’ confidence in us.~~

~~Accounting principles generally accepted~~interest, to us or our customers for the past amounts, and we may be required to collect such taxes in the United States, or U.S. GAAP, are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

In particular, in May 2014, the FASB issued ASC 606, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As an ‘‘emerging growth company,’’future. If we are ~~allowed under the JOBS Act to delay adoption~~unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, which may adversely affect our results of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We elected to take advantage of this extended transition period under the JOBS Act, which resulted in ASC 606 becoming effective for us beginning on February 1, 2019. We have adopted using the modified retrospective transition method. Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

operations.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our condensed consolidated financial statements include those related to revenue recognition; allowance for ~~doubtful accounts;~~credit losses; valuation of common stock and redeemable convertible preferred stock warrants; carrying value and useful lives of long-lived assets; loss contingencies; and the provision for income taxes and related deferred taxes. Additionally, as a result of the global COVID-19 pandemic, many of management’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of industry or financial analysts and investors, resulting in a decline in the market price of our Class A common stock.

Additionally, we regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards and changes in their interpretation, we might be required to change our accounting policies, alter our operational policies and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or we may be required to restate our published financial statements. Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial position and profit, or cause an adverse deviation from our revenue and operating profit target, which may negatively impact our financial results.

We are subject to risks associated with our equity investments, including partial or complete loss of invested capital, and significant changes in the fair value of this portfolio could adversely impact our financial results.

Through our Falcon Funds, we invest in early to late stage private companies, and we may not realize a return on our equity investments. Many such companies generate net losses and the market for their products, services, or technologies may be slow to develop or never materialize. These companies are often dependent on the availability of later rounds of financing from banks or investors on favorable terms to continue their operations. The financial success of our investment in any company is typically dependent on a liquidity event, such as a public offering, acquisition, or other favorable market event reflecting appreciation to the cost of our initial investment. The capital markets for public offerings and acquisitions are dynamic and the likelihood of liquidity events for the companies in which we have invested could deteriorate, which could result in a loss of all or a substantial part of our investment in these companies. In addition, our ability to realize gains on investments may be impacted by our contractual obligations to hold securities for a set period of time. For example, to the extent a company we have invested in undergoes an initial public offering, we may be subject to a lock-up agreement that restricts our ability to sell our securities for a period of time after the public offering or otherwise impedes our ability to mitigate market volatility in such securities.

Further, valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data. In addition, we may experience additional volatility to our statements of operations due to changes in market prices of our marketable equity investments, the valuation and timing of observable price changes or impairments of our non-marketable equity investments, and changes in the proportionate share of earnings and losses or impairment of our equity investments accounted for under the equity method. This volatility could be material to our results in any given quarter and may cause our stock price to decline.

Our business is subject to the risks of catastrophic events, including, but not limited to, natural events such as earthquakes, fire, floods, and ~~other natural catastrophic events, and to interruption by~~the outbreak of diseases, as well as man-made problems such as power disruptions, computer viruses, data security breaches, terrorism and bank or ~~terrorism.~~

financial institution failures.

Our ~~corporate headquarters~~principal executive offices are located in Austin, Texas, and we also maintain other office locations around the ~~San Francisco Bay Area, a region known for~~world, including in California and India, that are prone to natural disasters including severe weather and seismic activity. A significant natural disaster, such as an earthquake, a fire, a flood, or significant power outage and other catastrophic events, including the occurrence of a contagious disease or illness, such as COVID-19, could have a material adverse impact on our business, results of operations, and financial condition. Natural disasters and other catastrophic events such as COVID-19, could affect our personnel, recovery of our assets, data centers, supply chain, manufacturing vendors, or logistics providers’ ability to provide materials and perform services such as manufacturing products or assisting with shipments on a timely basis. In addition, climate change could result in an increase in the frequency or severity of natural disasters. ~~In the event that~~If our or our service providers’ information technology systems or manufacturing or logistics abilities are hindered by any of the events discussed above, shipments could be delayed, resulting in missed financial targets, such as revenue and shipment targets, for a particular quarter. In addition, computer malware, viruses and computer hacking, fraudulent use attempts, and phishing attacks have become more prevalent in our industry, and our internal systems may be victimized by such attacks. Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a catastrophic event, such as a natural disaster, or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, and our insurance may not cover such events or may be insufficient to compensate us

for the potentially significant losses we may incur. Acts of terrorism and other ~~geo-political~~geopolitical unrest could also cause disruptions in our business or the business of our supply chain, manufacturers, logistics providers, partners, or customers or the economy as a whole. Any disruption in the business of our supply chain, manufacturers, logistics providers, partners or end-customers ~~that impacts sales at the end of a fiscal quarter~~ could have a significant adverse impact on our financial results. Moreover, the failure of a bank, or other adverse conditions impacting financial institutions at which we maintain balances, could adversely impact our business, results of operations, and financial performance. For example, in March 2023, the Federal Deposit Insurance Corporation (the “FDIC”) was named receiver for Silicon Valley Bank, one of the lenders under our credit agreement. While our cash management strategy is to maintain diversity in deposit accounts across financial institutions,balances in these accounts regularly exceed FDIC insurance limits and the federal government may not guarantee all deposits if any such financial institutions were to fail. All of the aforementioned risks may be further increased if the disaster recovery plans for us and our suppliers prove to be inadequate. To the extent that any of the above should result in delays or cancellations of customer orders, or the delay in the manufacture, deployment or shipment of our products, our business, financial condition and results of operations would be adversely affected.

~~Risks Related to Ownership of Our Class A Common Stock~~

~~The market price of our Class A common stock may be volatile, and you could lose all or part of your investment.~~

We cannot predict the prices at which our Class A common stock will trade. The market price of our Class A common stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. In addition, the limited public float of our Class A common stock tends to increase the volatility of the trading price of our Class A common stock. These fluctuations could cause you to lose all or part of your investment in our Class A common stock. Factors that could cause fluctuations in the market price of our Class A common stock include the following:

●

~~actual or anticipated changes or fluctuations in our results of operations;~~

●

~~the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;~~

●

~~announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;~~

●

~~industry or financial analyst or investor reaction to our press releases, other public announcements and filings with the SEC;~~

●

~~rumors and market speculation involving us or other companies in our industry;~~

●

~~price and volume fluctuations in the overall stock market from time to time;~~

●

~~changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;~~

●

~~the expiration of market stand-off or contractual lock-up agreements and sales of shares of our Class A common stock by us or our stockholders;~~

●

failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

●

~~actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;~~

●

~~litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;~~

●

~~developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights;~~

●

~~announced or completed acquisitions of businesses or technologies by us or our competitors;~~

●

~~new laws or regulations or new interpretations of existing laws or regulations applicable to our business;~~

●

~~any major changes in our management or our board of directors, particularly with respect to Mr. Kurtz;~~

●

~~general economic conditions and slow or negative growth of our markets; and~~

●

~~other events or factors, including those resulting from war, incidents of terrorism or responses to these events.~~

Sales of a substantial number of shares of our Class A common stock in the public market, including shares of Class A stock that have been converted from shares of Class B common stock, and particularly sales by our directors, executive officers and significant stockholders, or the perception that these sales could occur, could adversely affect the market price of our Class A common stock and may make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate. As of June 30, 2019, we had 20,700,000 shares of Class A common stock outstanding and 184,298,485 shares of Class B common stock outstanding.

All of the shares of Class A common stock sold in our initial public offering are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act.

Subject to certain exceptions, we, all of our directors and executive officers and record holders of substantially all of our securities outstanding immediately prior to our initial public offering, are subject to market stand-off agreements or have agreed not to offer, sell or agree to sell, directly or indirectly, any shares of capital stock without the permission of Goldman Sachs & Co. LLC on behalf of the underwriters, for a period of 180 days from June 11, 2019, which is the date of the final prospectus used in connection with our initial public offering. Such period may be shortened in certain circumstances to as few as 120 days from the date of the final prospectus; however, we currently anticipate that the lock-up will not expire until 180 days from June 11, 2019. When the lock-up period expires, we and our securityholders subject to a lock-up agreement or market stand-off agreement will be able to sell our shares in the public market. In addition, Goldman Sachs & Co. LLC may, in its sole discretion, release all or some portion of the shares subject to lock-up agreements prior to the expiration of the lock-up period. Sales of a substantial number of such shares upon expiration of the lock-up and market stand-off agreements, or the perception that such sales may occur, or early release of these agreements, could cause our market price to fall or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.

In addition, holders of an aggregate of up to 163,916,832 shares of our Class B common stock are entitled to rights with respect to registration of these shares under the Securities Act pursuant to our amended and restated registration rights agreement, or RRA. If these holders of our Class B common stock, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our Class A common stock. We

~~have also registered the offer and sale of all shares of Class A common stock that we may issue under our equity compensation plans.~~

An aggregate of approximately 6.1 million shares of our Class B common stock that are beneficially owned by George Kurtz, our President and Chief Executive Officer and a member of our board of directors, and Burt Podbere, our Chief Financial Officer, are pledged to secure obligations of Mr. Kurtz and Mr. Podbere under certain loan agreements. In the case of nonpayment at maturity or another event of default (including but not limited to the borrower’s inability to satisfy a margin call, which may be instituted by the lender following certain declines in our stock price), the lender or any transferee (in the event that the lender had assigned or otherwise transferred its rights under the pledge to a non-affiliate) may exercise its rights under the applicable loan agreement to foreclose on and sell shares pledged to cover the amount due under the loan, provided that no sales of the pledged shares may be made to third parties by the lender until 180 days after June 11, 2019, which is the date of the final prospectus used in connection with our initial public offering, or 120 days after June 11, 2019 by any transferee unaffiliated with the lender. Any transfers or sales of such pledged shares may cause the price of our Class A common stock to decline.

The trading market for our Class A common stock will be influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. As a new public company, we may be slow to attract research coverage and the analysts who publish information about our Class A common stock will have had relatively little experience with our company, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates. In the event we obtain industry or financial analyst coverage, if any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding our stock price, our stock price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our Class A common stock or publish unfavorable research about us. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our stock price or trading volume to decline.

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share. The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock (or options or other securities convertible into or exercisable for our capital stock) prior to the initial public offering, including our executive officers, employees, directors, principal stockholders, and their affiliates, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change in control transaction. Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.

Upon the closing of our initial public offering, our executive officers, directors, each of our stockholders that owned more than five percent of our outstanding capital stock, and their respective affiliates held, in aggregate, 75% of the voting power of our outstanding capital stock. Furthermore, three of our current stockholders and their affiliates held, in aggregate, 62% of the voting power of our outstanding capital stock. As a result, these stockholders, acting together, have control over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. Corporate action might be taken even if other stockholders, including those who purchased shares in our initial public offering, oppose them. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control or other liquidity event of our company, could deprive our stockholders of an opportunity to receive a premium for their shares of common stock as part of a sale or other liquidity event and might ultimately affect the market price of our common stock.

Further, our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” does not apply to Accel and Warburg Pincus, or their respective affiliates, in a manner that would prohibit them from investing in competing businesses or doing business with our partners or customers.

~~Shares of our common stock are subordinate to our debts and other liabilities, resulting in a greater risk of loss for stockholders.~~

Shares of our common stock are subordinate in right of payment to all of our current and future debt. We cannot assure that there would be any remaining funds after the payment of all of our debts for any distribution to our common stockholders.

~~We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.~~

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Additionally, our ability to pay dividends is limited by restrictions on our ability to pay dividends or make distributions under the terms of our credit facility. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the first fiscal year following the fifth anniversary of our initial public offering; (ii) the first fiscal year after our annual gross revenue is $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) date on which we qualify as a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act, which would occur at the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700.0 million as of the end of the second quarter of that fiscal year, and after which we have been a reporting company for at least 12 months. Further, pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our results of operations and financial statements

may not be comparable to the results of operations and financial statements of other companies who have adopted the new or revised accounting standards. We cannot predict if investors will find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, our stock price may be more volatile.

~~The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans, or otherwise will dilute all other stockholders.~~

Our amended and restated certificate of incorporation authorizes us to issue up to 2,000,000,000 shares of Class A common stock, up to 300,000,000 shares of Class B common stock, and up to 100,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue shares of Class A common stock or securities convertible into shares of our Class A common stock from time to time in connection with a financing, acquisition, investment, our stock incentive plans or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the market price of our Class A common stock to decline.

Certain provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove members of our board of directors or current management, and may adversely affect the market price of our Class A common stock.

●

our dual class common stock structure, which provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock;

●

~~a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;~~

●

the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

●

the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

●

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders, which prohibition will take effect on the first date on which the number of outstanding shares of our Class B common stock represents less than 10% of the aggregate number of outstanding shares of our Class A common stock and our Class B common stock, taken together as a single class;

●

the requirement that a special meeting of stockholders may be called only by the chairperson of our board of directors, chief executive officer or by the board of directors acting pursuant to a resolution adopted by a majority of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

●

~~certain amendments to our amended and restated certificate of incorporation require the approval of two-thirds of the then-outstanding voting power of our capital stock; and~~

●

advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

~~These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.~~

~~Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for:~~

●

~~any derivative action or proceeding brought on our behalf;~~

●

~~any action asserting a breach of fiduciary duty;~~

●

~~any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws;~~

●

~~any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; and~~

●

~~any action asserting a claim against us that is governed by the internal-affairs doctrine.~~

~~Item~~

ITEM 2. ~~Unregistered Shares~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to purchases by the Company of ~~Equity Securities and Use of Proceeds~~

~~Unregistered Sales of Equity Securities~~

~~From February 1, 2019 to July 19, 2019, we granted to our directors, officers, employees, consultants, and other service providers under our 2011 Plan:~~

●

~~options to purchase an aggregate of 879,758 shares of our Class B common stock at an exercise price of $14.65 per share, and~~

●

~~an aggregate of 853,188 RSUs to be settled in shares of our Class B common stock.~~

We believe these transactions were exempt from registration under the Securities Act of 1933 in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit

plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof. All recipients had adequate access, through their relationships with us, to information about CrowdStrike.

~~Use of Proceeds from Public Offering of Common Stock~~

~~On June 14, 2019, we closed our initial public offering, in which we sold 20,700,000~~ shares of ~~our~~ Class A ~~common stock at a price to~~Common Stock during the ~~public of $34.00 per share, including shares sold~~three months ended April 30, 2023:


Period	(a) Total number of shares (or units) purchased (1)	(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
February 1, 2023 to February 28, 2023	—	$	—	—	—
March 1, 2023 to March 31, 2023	—	$	—	—	—
April 1, 2023 to April 30, 2023	7	$	122.62	—	—

(1)We repurchased, in connection with the full exercise of the underwriters’ option to purchase additional shares. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 001-38933), which was declared effective by the SEC on June 11, 2019. The managing underwriter of our IPO was Goldman Sachs & Co. LLC. Following the sale of theopen market transactions, seven shares in connection with the closing of the IPO, the offering terminated. The aggregate offering price of the offering was $703.8 million, before deducting underwriters’ discounts and commissions of $38.7 million and before deducting an estimated $6.0 million of offering expenses payable by us. None of such expenses were paid by us to our directors, officers, or persons owning ten percent or moreadministration of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy. We estimate that we received net proceeds of $659.1 million from our initial public offering. There has been no material change in the planned use of proceeds from our IPO as described in the final prospectus used in connection with our initial public offering. Pending the uses described, we intend to invest the net proceeds in short-term interest-bearing investment-grade securities, certificates of deposit or government securities, pursuant to the investment policy approved by our board of directors.

ESPP.

~~Item~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

~~Item~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~Item~~

ITEM 5. OTHER INFORMATION

Not applicable.

~~Item~~

ITEM 6. ~~Exhibits~~

EXHIBITS

We have filed the exhibits listed on the accompanying Exhibit Index, which is incorporated herein by reference.

Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect.

Index to Exhibits

Incorporated by Reference
Exhibit
Number

Exhibit Description
Form
File No.
Exhibit
Filing
Date
Filed
Herewith
3.1

Amended and Restated Certificate of Incorporation.
8-K
001-38933
3.1
June 14, 2019

3.2

Amended and Restated Bylaws.
8-K
001-38933
3.2
June 14, 2019

10.1

Form of Indemnification Agreement between the Company and each of its directors and executive officers.
S-1
333-231461
10.1
May 14, 2019

10.2

2019 Equity Incentive Plan and related form agreement.
S-1/A
333-231461
10.2
May 29, 2019

10.3

2019 Employee Stock Purchase Plan and related form agreements.
S-1/A
333-231461
10.3
May 29, 2019

10.4

Outside Director Compensation Plan.
S-1/A
333-231461
10.5
May 29, 2019

31.1

Certification of the Principal Executive Officer pursuant to Exchange Act Rules 13a14(a) and 15d14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X
31.2

Certification of the Principal Financial Officer pursuant to Exchange Act Rules 13a14(a) and 15d14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X
32.1*

Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X
101.INS

XBRL Instance Document

X
101.SCH

XBRL Taxonomy Extension Schema Document

X
101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X
101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X
101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X
101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

X

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

3.1

8-K

001-38933

3.1

June 14, 2019

3.2

Amended and Restated Bylaws of the Registrant, as currently in effect.

8-K

001-38933

3.2

March 03, 2023

10.1

CrowdStrike Holdings, Inc. Corporate Incentive Plan

22.1

List of Subsidiary Guarantors

S-3ASR

333-252007

22.1

January 11, 2021

31.1

Certification of the Principal Executive Officer pursuant to Exchange Act Rules 13a14(a) and 15d14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Principal Financial Officer pursuant to Exchange Act Rules 13a14(a) and 15d14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline Instance XBRL document

_______________________________________

*

*						The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” ~~for~~or purposes of Section 18 of the Securities Exchange Act of 1934, as amended, ~~except~~and are not to be incorporated by reference into any of CrowdStrike Holdings, Inc.’s filings under the ~~extent that the registrant specifically incorporates it by reference.~~ Securities Act of 1933, as amended, irrespective of any general incorporation language contained in such filing.