A worry re CRWD

I own a lot of CRWD and am bullish on the name despite mild disappointment with the way the market has reacted so far to the latest earnings report. That said, I came across the following article, which gave me pause. Not the part about it being “expensive,” but the part I have excerpted below. I hope someone on this board can set my mind at ease about the following, but if not, well, I’d rather know sooner than later about a potential problem.


The Balance Sheet

It’s not like the balance sheet is weak, it is not. Still there are some interesting numbers that made me look twice. Cash and cash equivalents are down 12% over three months, which primarily accounts for the $254 million contraction in current assets. Total assets are up some $149M, but that was driven by the “goodwill” entry which is not a tangible asset. Goodwill has increased $83 million three months prior to $374 million reported at the end of this period. Current liabilities, as well as long-term liabilities are both up, but still dwarfed by the asset side of the balance sheet. Long-term debt is actually lower. I would love to know how they chose $374 million as a value for something not quantifiable, and why. They did not need it to balance the books and that would be what one might be afraid of. There must be something I just don’t see. The Current Ratio is reflective of a healthy situation.


It’s my understanding that all of these numbers the author questions are due to the recent Humio acquisition. That was a $352 million cash purchase, and you can see its effects on the cash flow statement. Any sort of tech company acquisition is going to have the majority portion of its acquisition cost written up as goodwill, since very little in the way of tangible assets exist on the balance sheet of a tech company (it’s all IP and employee talent).

Since the article didn’t mention the Humio acquisition, my guess is that the author is not aware of it, which means the author doesn’t know CrowdStrike very well.

press release on acquisition: