CrowdStrike Holdings, Inc.'s (CRWD) Management Presents at UBS Global TMT Virtual Conference (Transcript)

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) UBS Global TMT Virtual Conference December 8, 2020 12:05 PM ET

Company Participants

Burt Podbere - Chief Financial Officer

Conference Call Participants

Fatima Boolani - UBS

Fatima Boolani

All right, I think we're rocking and rolling. Well, to those of you who has joined us good morning, good afternoon to day two of the UBS Global TMT Conference. I am your host for this fireside chat with CrowdStrike, Fatima Boolani, software analyst on the tech team here. I am thrilled to be hosting an in sharing this virtual stage with Burt Podbere, CFO of CrowdStrike. Thanks for joining us for this chat today.

Burt Podbere

It is great to be here Fatima, it's such a pleasure.

Fatima Boolani

Excellent. So I know I've got a lot to talk about and a lot to ask you, so let's jump right in. Burt, look, you are coming fresh off your third quarter results in what has been a remarkably unique year for cloud enterprise software companies that I saw you know one of the more obvious things. So I think it would be beneficial for us to just have a brief overview of the operational and financial highlights that you’re just coming out of closing Q3? And may be contextualizing these observations against the last nine months in which you navigated the company through the pandemic?

Burt Podbere

Sure, great places are. So first speaking and here is the overall backdrop which is the -- we currently are in a very heightened threat environment, that's number one. Number two, we've got for us favorable competitive environment for us we'll hear in more detail little later I'm sure. And the third one is interesting is we've got these strong secular tailwinds that have been in our favor. And what does that mean? Right? it means that, number one is, security is really mission critical, and I don’t care who we are. Right, that's number one.

Number two is, we're in this movement of digital transformation, and for us, when I think about digital transformation, when I think about what's happening, that was happening even pre-COVID, but I think what COVID did, it acted as a catalyst, just sparked a it that was already there. And I think that this -- the digital transformation is an opportunity of this generation. Right?

This is not something that's here today and just going to fizzle out in the next few quarters. This digital transformation is one of those rare events that happens in a community and we're right there. And of course, importantly for us, as a prerequisite for a successful digital transformation you need security transformation and of course, you know, that's where we come in. And as I mentioned in terms of the secular trends there is a very healthy competitive environment for us today that we live in. And that is about us specifically for the quarter, right?

With all that backdrop, we actually had a record quarter and record year-to-date. And some of the numbers that are out there we've got over $900 million in ARR, that's an 81% year-over-year growth rate at our scale. So really excited about that and we've got over 8400 customers, our subscription customers today, that's great for us, but remember if you take some of our legacy competitors any one of them we would have a higher deal over 100,000 maybe between 100,000 to 200,000 customers.

So we think that, yes, we have done well to-day, but there is still tremendous amounts to go. But I think what's key with that 8400 customers that we have is that we're now showing our growing leadership in the marketplace today and I think that's fundamentally key as customers are looking for those folks I think are eyeing, trusted advisors as you will. And that's us and we see that we don’t take that for granted. You've got to earn leadership.

You've got to show strong execution on the tech side, on being customers focused, on making it easy for customers and then once you make it easy for customers to come in and buy. You want to make it easy for them to deploy and then easy for them to manage. Right? And we think we've done a really good job on all that.

And then finally, my final point, which is one of my favorites is, we've shown really, really strong unit economics and that just goes to show that we're a very well liked company. You know we have tremendous growth at scale, but we're also doing it with an eye to efficiency, and I think that's key for us to continue our leadership position.

Fatima Boolani

I think that's a real important point vis-à-vis the operating leverage and the margin expansion path and the model, but let's kind of put in that because I think it is important and I really would like to come back to that. May be it is just staying level in this sort of demand patterns and demand complexion.

So clearly you've experienced very strong demand over the course of the pandemic as some of the secular forces have really intensified widening attack surfaces, accelerating cloud adoption. And so appreciate the analogy of digital transformation really cutting the fire in the belly of the CIOs and CSOs to make some changes. But I'm curious if you would parse out some of the durability of that demand, how would you frame for investors who perceived some of this demand had been pulled forward from 2021 and 2022 and demand that is potentially episodic or time susceptible if you will?

Burt Podbere

Yes, so I think in a big picture and as I've mentioned, I think that what's happened to the world with the pandemic kind of was a start to something that was already there. Right? The strength we are seeing today is about digital growth, digital and security transformation and our core leadership as I mentioned. I think for us when we talk to CSOs and CISO's in the old days they would talk about this refresh, right? And then that usually was about this feeds and that's how it now moved away from that, okay we really saw some weakness in our environment this whole deal perimeter is kind of about, there is an acceleration of the evaporation of that old perimeter.

We need to think about different architecture and I think that with this digital transformation and enhanced security transformation that's where we fit in, that's where we think the world is going to. And it is kind of like, you've let the genie out of the bottle, it is not going to go, you are not able to put back in. Right? There is this movement towards how do we do things in a more cost effective way? How do we do things with a different architecture because the old way still had a tremendous amount of breaches? How would we be able to find a vendor who is able to satisfy all those demands that we have on us today seamlessly. And, you know, that's us.

You know, for us when we think about a customer, their ability to keep their, let's call it castle if you will behind this moat, kind of just that's last [indiscernible]. Right? And so, when you move into, we will kind of being able to log in from different places, that perimeter has just expanded in a way that really lends itself to what we're talking about, which is this digital transformation. And so for us I think that there is a tremendous runway right ahead of us.

I don't think this is episodic at all and I think that most people will agree that no, this is probably one of those trends that's going to go for the next decade and beyond. I mean it is kind of one of those things that happens once in a generation, but you feel when you rebuild up we're here, we feel we have the right tech that lends itself to this.

We rebuilt the new cloud. This allows us to be able to get rapidly and be able to offer customers solution quickly. They can be up and running in times of value immediately. So we have all those things that make this all really important. And I think that a lot of this you can see in the data. Look at the numbers for us in terms of customer adoption. Right? Over 60% were former modules. Over 40% were fiber modules and over 20% over six are more of our modules. There are companies out there that, if they had 20% or more on their second module adoption, would be off to the races and waving their checkered flag. For us to have the gen 6, that just goes to show you how the ease of user deployment for us and that's how I see the environment today.

Fatima Boolani

I want to use that as a jumping off point, thinking about right place, right technology, and this notion of right time, and we -- earlier in the year you were very astute in being responsive to customer needs with respect to more flexible licensing, just making the platform easier to access, consume, and deploy. So with that in mind, with some of the Burst Licensing and trial licensing initiatives that you undertook earlier in the year, I'm curious what the uptake in conversion patterns have been there? And may be more importantly, how that has translated into some of the increased module adoption that you just alluded to within the base?

Burt Podbere

Yes, there was so, obviously that was a really troubling time for the world. And for us at that time it was more about helping and partnering with our customers, and potential customers to keep them stable and protected turning this, call it transition duty. Right? Unfortunately, we were in that situation, the world was in that situation where customers were suffering [ph] and we just wanted to be there for them.

It wasn’t really this everlasting period that we would probably be in. It really talks about an emergency buy at that time and I think the key point about that is it is well timed. Right? There were a lot of emergency buys and now we're in this period where it is post that. Right? And I think we've been post that for a while now where customers are now movement through this digital transformation that we just talked about and we're seeing that throughout the buyers.

Yes, some of those programs that we had earlier were certainly helpful and customers really appreciated what we did, but and then that was a new kind like a large thing to come and help people along, but that really was a period in time type of program. We've moved way beyond that at this point.

So, I'm having trouble hearing you.

Fatima Boolani

I was on mute, classic moves. Maybe doubling down on how you think about your market opportunity particularly in, what I would refer to as your traditional endpoint protection realm, you talked a little bit about legacy vendors and the old guard cohort that just has not shown up with the right technology and so just with respect to the estate that’s out there with some of these legacy providers, can you talk about how much runway you have for share gain within that cohort and frankly the type of endpoint estate coverage that still remains from a more traditional endpoint sense?

Burt Podbere

Yes, sure. So, first, you know, with the backdrop, I think that what we just talked about in terms of the threat landscape being what it is today really much broader and much deeper than it ever was, I think that we talked a little bit about the runway, I mean, us having 8,400 customers, I mean it’s great, don’t get me wrong. We’re really proud of having 8,400 customers, but as I said, that’s kind of -- that pales in comparison to some of the legacy vendors right?

I think that what we seen over the last few years are those legacy vendors [indiscernible]. It was really hard for them to redo their entire business. They are a sizable business, so you have the classic innovator’s dilemma. Right? You don’t want to throw all that away and go somewhere else because you've got this business over here that’s meaningful. So it’s really, really, really hard for them to commit that change, whereas us and the way that we’ve built our platform in an way that we’re securing our position through data and having the estate of mode, I think it’s allowed us to kind of have put up the results that we talked about earlier and I think that you just have to look at those numbers and see what’s happening.

CrowdStrike is really making the move in the leadership role in this phase and really coming at it with innovation, data. I think in today’s world, I think of data as oil as back in the 70s and 80s right? Data is that new commodity which everybody is after. The good news is, it’s not just about data, it’s about the use of the data, right? And we figured that out with our Threat Graph and so that’s how I think about the demand for our products continuing.

We’ve got a lot of runway with respect to the legacy vendors’ share. And the good news for investors is that that market is pretty well defined. It is growing at x-percent and you are growing cloud, right? And you’re kind of like, okay well, that’s kind of even undefined to a certain degree. We’ve tried to define it, but for others they’re still trying to find it and it’s just showing this tremendous opportunity that’s still out there for us.

Fatima Boolani

Maybe just to put a finer point on the traditional endpoint security opportunity with physical servers and physical endpoints, I suspect in the competitive day costs that you all have been in there’s some sense of hey, this Fortune 500 client has an estate of a 100,000 endpoints whether that servers, whatever makes the servers and endpoints. I am curious if you can speak to or have a sense of the number of devices that CrowdStrike is deployed in today and what that sort of theoretical maximum could be especially against a backdrop that’s changing with more and more devices coming online and more and more sort of computing devices coming on networks?

Burt Podbere

Yes, no, absolutely it’s a great question and I think that, I think you've hit it on the head with respect to the proliferation of all these different devices, all these different workloads, all these different applications. There is an endless re-drilling [ph]. Right? So, at some point they all need to be protected. Look, we can’t do it all the day, when you think about IoT, there are many different things to go into an IoT. We do solve it with more, but there’s this whole plethora of different IoT areas which we can focus in on and you can pick one. Right? It could be anything from cars or cell towers or whatever it is. Right? And you know for us…

Fatima Boolani

There is internet connected beer kegs now, not that those will join the corporate network.

Burt Podbere

Right, right it’s kind of like, you know that’s why we get so excited and are passionate about what we’re doing today. It’s that we see this never ending cycle of new things coming up that need to be protected and we’re there. We’re there on the, you know the traditional endpoints or workloads that we talked about and I think that has a tremendous amount of runway. And then there is this unknown runway with all the new stuff that’s coming out whether it’s in the cloud, whether it’s about IOT, whatever it is, it’s just tremendous amount of opportunity for us.

Fatima Boolani

So, just using that as a Segue, you’ve been very vocal about how limited the traditional definition of endpoints are and it’s really sort of evolving into this more encompassing definition of a workload right? So, it seems the historical definition of endpoints has been rather incomplete and so you know, the traditional notion and the addressable market for the endpoint is indeed limited and at least in the way you’re seeing the trends develop in the market place. So, how are you helping break the mold here and what are some of the implications for you competitively and from a budgetary access standpoint as you brought in this definition of endpoints?

Burt Podbere

Yes, right, so obviously we are here, obviously it will start a breach and the breach can come in so many different forms. And so what we’re trying to do is when we go into an environment, you know, we’ll take a look at what the customer is trying to protect, how are they working today right? You know, we’ve got folks that take the old brick and mortar type companies, they still have cloud applications and so we still need to protect those.

And so, when we think about going to market specifically against some of the competition, we come in with this notion of value selling which is, basically we come in and we’re trying to help customers consolidate, save money and at the same time have better efficacy with respect to protection. And the good news is, each customer has a different security profile depending on the space you’re in, depending on the applications you have, depending on the tools that are there, but I can tell you, the vast majority of all of these companies have multiple tool sets and managing multiple tool sets that sometimes don’t integrate together or if they do it’s not really seamless.

And so, our role is to come in and show customers how it can be seamless, how we can show you a better way to be able to manage you’re environment at a very attractive price, actually much less than -- up to a few times less in terms of your older environment than what you have today and it all being seamless. You've got one UI where you can flash up different screens on what you’re looking at, even for me who, you know, as a CFO when I go in and when I look at our UI and get excited, because I really quickly understand all the passwords really quickly. And so, if I can do it just imagine what an IT professional would see or a security professional will see.

So, when we think about this proliferation of the devices and whatever customer we’re looking at, all of a sudden we’ve got unique opportunities across the board. And then when you think about how we've built the tech and how easy it is to explain and how easy it is to sell all the things I talked about in terms of breach, you’re in a place that’s very unique compared to some of our competitors. And the competitors are finding it hard to compete against us right?

I mean it’s not -- you know it’s a daunting proposition when you brought a company that has been built with this technology that it’s built on the cloud, it’s built cloud native, it’s got all it’s data, it’s seamless it’s easy to use, it’s simple to manage and we are going on the guest site it is quite challenging right? I don’t care who you are. And then you layer on the innovation, you layer on a company that is so customer focused and that’s just stonewalls into something unique and interesting.

And you know we're in a space that is being started and we think about ourselves as being one of the disrupt or worse. And then the beauty of what we're doing is not only just focused on what you talked about which is just the traditional endpoint or workload, it goes beyond. Right? It goes into the cloud. It goes into the IoT spaces. And so then you can really start to see, wow this company can really so lot of good and has a lot of additional runway.

Fatima Boolani

Burt, just around this concept of workload protection and again just slotting off sort of the traditional definition of endpoint because now you’re in the cloud and you have got a cloud workload, frankly yes the space has picked up momentum, but the reality is, there are several peers of yours in maybe different facets of this security landscape that are talking about this concept of cloud workload protection.

How would you think about those other rivals in this space? And secondarily, necessarily some of the servers that would have physically been spun up in a data center or maybe now the ones migrating and being born in the cloud, so how you manage that competitive dynamic in terms of the space becoming very noisy and sort of gold rush and land grab with a lot of intensity?

And secondarily, some elements of cannibalization? Because if you're spinning up a server in the cloud doesn't necessarily mean, you're going to do the same thing on-premise. How do you think about that?

Burt Podbere

Yes, so the good news for us is that, cloud workload protections, and certainly cloud protection is wide open, right? No one really has been able to go and claim that, I think 1% of cloud applications have been protected today. And so for us, the only real way to service all of that is via platform, like, if you've got point solutions, you're just, you're never going to be able to keep up.

And if you're trying to stitch things together by buying disparate technologies, and are then offering some sort of hodgepodge of different texts, that becomes very problematic. And so for us, we seamlessly fit in with our platform to be able to go and, service our customers in ways that really our competitors cannot. I mean, we've been using some of this tech in our own cloud for years. Right? And so now we're commercializing it and making it, GA for our customers.

And that's where it stems from, right? So it's not like, oh we – it’s like the world sees that, in security, the world sees this opportunity in cloud, and we're going to build it. And, we're going to come up with something, flashier and better, that's hard. And we've already been doing it for years. Right? So now, when the world is coming to us, we're ready, whereas others are still playing catch up, and the legacy guys, they're really not there. And some of the next gen folks, slide where it looks good, really hard to put it into use, and really hard to scale. And so when you put, yes…

Fatima Boolani

Well, I like that you drink your own champagne, so that's good to hear. I know, just along these lines, you've recently given us some very interesting metrics around, some staggering metrics, a billion containers protected per day. And that's a 14x multiple relative to what you saw just months ago, 20% of your server fleet is protected in the public cloud. How do you think about the growth in these metrics, and then most importantly, putting some numbers around sizing in terms of what the dollar based opportunity could look like for you in the workload protection arena?

Burt Podbere

Yes, so we're early days, so we're excited about that. And we see, the TAM, if you just, compare where things are today, and you go out three years, and you listen to, the IDC's of the world, I mean, they talk about what percentage of overall spend should be in the security pot. I mean, it's a pretty big number. Right? We talked about a 10x from where it is today, to where it could be in 2023. And just by using, I would call it, numbers that have been floating around in that 5% to 10% range, and you get to, a very meaningful TAM, in the teens of billions, right.

And so when you think about that, you're kind of like, and that's only in the next, three years type of thing, and you think about where we're going beyond that, and there are all kinds of, there's all kinds of data, to talk about that, I mean, we're in a really good spot to go and capture, all right, or part of that, all of the available talent we can go after. And so when we think about how we built the platform, and all the different factors that we have, whether it's in security, or whether it's IT or whatever it is, we've really positioned ourselves well, to go to a customer and say, hey we know what we do well, and we cover so much of your security estate and IT estate, use us as a pillar. And it makes a lot of sense for a lot of companies.

And certainly when, we think about their cloud and what they're, what's happened today in the world, they get excited, because there's nobody else who can really offer that, and in a way that we do, and that's a huge differentiator. And when we think about how all the work that we've done over the last decade, to make this thing, flighted in a certain way to be able to deploy it quickly and being able to give the visibility that customers want, that just didn't happen last year. Right? That happened a decade ago, when, George Kurtz, our founder, he saw that opportunity. And he said, look, we're going to be patient, back in 2011 Cloud was not invoked, I can assure you of that.

And now you're seeing obviously it is, and we were flighting all this work a decade ago and getting it all ready. And that's why we really do think we've been at the beginning of, we're at the beginning of the journey. Right? And that's why we think we have a long way to go with respect to where we can go and capture a bigger part of this ever growing market.

Fatima Boolani

So I can appreciate that maybe there's a little bit of elbow grease involved because cloud is still so new for so many organizations and how to even protect cloud assets, but what I to drill in on is the fact that the Falcon platform has also featured product expansion and enhancement on maybe some of the more known and well understood security disciplines like vulnerability management, like IT asset management and hygiene.

So maybe on sort of the earmarked line items of spend that you don't have to spend as much time convincing organizations to allocate dollars to, how should investors think about your opportunity and ability to unlock incremental spend in those may be more well defined and traditionally in well known areas like VM and asset management?

Burt Podbere

Yes, that's a great question. So right, it goes back to the premise set, we collect data once and use it many times, right, so we'll start there. And once we've established that, which we believe we have, then you can start, unlocking, additional kind of use cases, vulnerability being one, this is where our founder grew up, he grew up in that space, there is a company called Foundstone, understands that space, basically defined that space back in the day.

And then obviously, he went on to McAfee, where he was the global CTO, all those fundamental blocks came and prepared him for this, for CrowdStrike. And so, when he set out and when he, put together the strategy and the plan, all those things came together. And so, vulnerability management was near and dear to his heart. He said, there's a, we're already collecting the data, we'll be able to kind of do more, same with the IT hygiene, we already collect the data, we're already seeing things that others don't, including rogue systems and what have you. So CIOs get excited about the application and the performance that we are able to provide.

And then when you really break it down, when you think about where the world's going in terms of the platform and how they could use us, there are three spots, right? There's endpoint workload protection, which we're clearly in there and we've already talked about some of the other applications, the adjacencies. Number two is identity. Right? So identity is one of those spots where we took our first meaningful step. We purchased a company called Preamp [ph] which is in the Zero trust space.

And then the third one, I think, is data protection. Right? So this is the next or the next-gen of what I call DLP, Data Loss Prevention. And, that's based I think is as right as any virus was 10 years ago, right? It's, all the real policies that are in place, all the band aids put together to kind of make that thing work, it really happened, right? And so we use some of our technology internally to have a form of DLP, or data protection. We just -- it's not been commercialized yet and we see an opportunity there, whether it's us coming out with a new module, or we buy one, or we put it in the store, we see that as an opportunity.

So when you put those three things together, you're kind of meaningful in this space and it's a big space. And as we gain traction and gain share, we see those three areas as again, additional opportunity for us.

Fatima Boolani

I want to shift to go-to-market, blocking and tackling on the sales and sales management side. So as we think about your pipeline, we've discussed a number of opportunities you have for new customer acquisition, the runway you have there. We've talked about the entire Falcon platform that's still relatively under penetrated, you've got a family of 16, and only a quarter of your customers have six. Right? So there's expansion vector, and then you certainly have the renewal vector because of the subscription business. So taking these three pieces, how does this manifest in your pipeline? And, frankly, how it underpins the way you forecast and guide and communicate your outlook?

Burt Podbere

Yes, it's a great question. So when you think about our pipeline, so I'll first start with saying, on our last earnings call we mentioned that we have our strongest pipeline company history. That goes to all the things we've really been talking about everything that kind of, that fits together. So, we've seen, certainly an increase in demand and this overall desire to replace current, vendors in an environment. We've talked about the strong secular tailwinds that are with us, whether it be that security is mission critical or the fact that digital transformation is here, so all of those things have contributed to the fact that we've got this record pipeline.

I think, for us, when we look at both, renewals and new logos, when we go after new, we call it net new ARR, can come from anywhere. Right? So we think about net new on our renewal base, right, so we've got a base of folks that have set up modules, and they spend a certain amount of with us and we've already seen the trend on module adoption that we talk about. And then you look and so, we think that we have a tremendous runway, we're still early in the day, so both of those vectors are important to us and we pay the same to our sales reps for net new ARR.

We pay, if they bring in a new logo, we pay the same as a net new expansion with an existing customer. And, so long as we continue to bring out, new modules, and as long as we're, creating value for our customers, and showing how they're going to be able to save less and get more, I mean, that's what driving that pipeline. And for us, I think, when I look at where we are today, in terms of being able to go after new adjacencies, it's kind of like, AB was in the 90s, right?

I mean, there's this whole breadth of opportunity for customers to be better in terms of their protection against breaches, and using us as a pillar is one of those ways, and that's why we've seen the pipeline, expand the way has?

Fatima Boolani

May be to round out the thoughts around the go-to-market engine in the pipeline, just as notion of verticalization in your sales organization, where are you? Is this a top priority? What are some of the maybe most or highest ROI opportunities for you to even consider verticalizing some sort of emotion within your sales org?

Burt Podbere

Yes, I mean, not surprisingly, we've got different lanes of sales folks for different sizes of customers. We have enterprise, so we've the field reps that are going after the large enterprise customers. Then we've got, at mid market and SMB, a lot of it in the SMB and mid market, you're seeing a lot of great traction from our trial to pay, right, you can come in, look at it, and we have folks that kind of see that movement and can come in and, offer help where needed, or, ultimately, having customers buy.

And then even on the enterprise side, when you think about the trial pay, you can have somebody in a large world kind of test it out, look at it, love it, and then escalate it and the next thing you know, it's an enterprise there. So we're that, traditionally, we do service the swim lanes, but we have been able to kind of carve out certain areas, in terms of, you call them vectors, we call them industries where we think that there's an opportunity in healthcare for example. Right?

If we think about, that is a couple of reps who really understand that market and because we're large enough, now we can have, specific focus in on that, more state loan. Right? On the public side right, we have folks have grown up in that space, and can add value and understand how state and local purchase. Right? And so we are big enough to kind of take our big toe and put it in the water to really maximize the efficiency and opportunity that we have, within, a certain vector, so that's exciting for us. Right?

And, the good news is, we're there. The market is there, we're there and we're able to leverage those unit economics that we've talked about earlier to go out and get it. Right? So now that we know, we've been very focused on efficiency in the sales and marketing works. Now we can zoom in, in new areas and new territories, and it might be less efficient at first, but then can catapult to be efficiently wrong. So that's how I think about that.

Fatima Boolani

Burt, that's a good segue into the next area that I want to talk to you about in the last five minutes, just sort of rounding out the unit economics, discussion and conversation so just margin leverage in the business. The leverage that you've demonstrated year-to-date, while continuing to grow OpEx, in spite of growing OpEx 40% to 50% has been pretty impressive. So, other than revenue outperformance what specifically is driving the leverage in the business? And maybe if you can spell out for us the incremental investment priorities that are on your punch list for 2021.

Burt Podbere

Yes, great way to put it altogether at the end. I think we are clearly excited about the opportunities in the marketplace, let's just frame it that way. We think that, we have a larger opportunity than most because of all the coverage we have. And I think number one, when you think about the operating numbers, whether it's we kstart with sales and marketing, I think that, it's not only the magic number that we look at, its CAC and rule 40, folks can do their own work on where we are on some of those.

And they're all kind of where we want them to be. Actually, they're all telling us the same thing, you need to invest. Right? And, yes, we've had, great top line growth at scale, but it those metrics are telling us, put your pedal to the metal and keep going and we are. And some of those areas that we think about in terms of, investment, we talked about one, which could be going zooming in on a certain sector and adding headcount into the -- just in those focused areas.

The other one is, certainly emerging markets, right? we see an opportunity to become more global. And sometimes when you go into emerging markets, the efficiency is not there to begin with, and then you would gain efficiency, as you build out those markets, so we want to continue to do that. And I think what the answer to investors really is, we are going to continue to aggressively invest in a business. We've got that opportunity to do that today. We see, not only opportunities to invest in those areas, but R&D, that's another big one, where we think we have an opportunity to aggressively invest, even greater in terms of the percentages in terms of where we think we're going to and S&M and G&A.

We think R&D is the area where we can, I'm not going to use the word double down, because it's not a true double, but you get the idea. Right? We're really aggressively invest in the R&D opportunity, because it's there, it's there for us to build on the platform, create more adjacencies, create more value to our customers. And because we've got a platform, we get the leverage in that area, too. Right? So we've already built out that fundamental, that foundational layer where you can build on top of, and so there's going to be leverage in R&D as well.

And then finally, I'm sure your investors are interested in the gross margins that we've been able to post over the years. You remember the days when they were in the 30% range before?

Fatima Boolani

I sure do.

Burt Podbere

Yes and – yes I could speak an hour on that one alone. But, we're really happy about where we've come from, obviously, module expansion, this is a big one where every new module on top of the first is virtually pure margin, so now we've got 16. So you can see how we're getting leveraging gross margin in that, as well. As on the operation side, we have a great partner in AWS, we built the business on AWS, we did see opportunities to create our own private cloud, and still continue to leverage AWS where needed and our own private cloud where needed, and that clearly is how and then optimizing both right on how to continue to, invest in both, in both AWS and invest in our in our own private, data center.

So I mean, those things also helped. And they're a bunch of other things that helped along the way. But those are the big ones. And that's provided, where we are today, in terms of our gross margins, really proud of as a CFO, really, really proud of the partnerships I have with my with my colleagues in engineering and data Ops, and it's been a great partnership, is that we actually invite those folks into our monthly closing meetings, which is unique, I think, right to get their perspective on, what additional efficiencies, where can we spend more and get more, what does that investment thesis looks like?

And, I don't know if some of you investors are golfers, but the golf analogy I like is use is, going from a score of 110 to 100, well, okay, you can get there, but going from a score to 70 to 69, that is really heard and so that's where we're at. . That is really hard. And so that's where we're at, right, with our gross margins where we are today, how do you get that next level? Well, that's, we've already grabbed, a lot of low hanging fruit. Now, we got to really work hard to continue to show expansion, and we can see, expansion opportunities, and even where we are today.

Fatima Boolani

And just the last question for me around sales and marketing, clearly a unique year because you haven't had sales folks jump on a plane to go see clients. So there's an element of maybe depressed levels of travel and expense that are maybe, transiently benefiting you this year. I'm curious, from a loose timeframe perspective, when you're even planning for some of that to come back.

And secondarily, we've been doing this long enough remotely, do you see if and do you believe there are any structural changes that are actually going to stick in the way you go-to-market such that, you could actually even exercise greater efficiency from your sales and marketing investments?

Burt Podbere

Great question then so, yes, we have seen some, a level of [indiscernible] [00:04:57] decrease spend on travel, in the mid, single, millions to figure for per quarter type thing. But, I think that whenever we come out of this, whenever that is, hopefully it's next year, and hopefully it's mid next year fingers crossed. The way that we are looking at travel and meeting with customers is going to be very different than the way it was. Right?

And we're going to be very judicious, because we've seen the success without it to a certain extent, we do recognize that you can't continue just the way it is because there's going to be, customers that want to see face-to-face some of the vendors. So we know, we're going to have to do some of that, but we're going to be putting, I’m a CFO and there are many CFOs like me out there, who see this as an opportunity to bring in greater discipline on the travel within the company, not just in sales and marketing, but across the board.

And so I'm no different, I see this as an opportunity to change the way we think about travel. And we will use it, but we will obviously use it more judiciously, and it'll be highest and best use of our travel dollars. I'm not saying it wasn't before, but I think that there's opportunities to do better.

Fatima Boolani

Fair enough. Well, we'll cap it there. Time flies when you're having fun. I really appreciate the feedback and the details and it's always a good conversation. So I wanted to thank you again for your time Burt. Thank you so much.

Burt Podbere

Always a pleasure, thank you.

Fatima Boolani

Take care.

Burt Podbere

You too, be safe.

Question-and-Answer Session

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