There was a lot of false and erroneous misinformation about Crowdstrike metrics recently posted on the board, by people who should have known better, so I thought I’d put all the corrections and correct information in one place, and give you a little summary.
I should start out by clarifying that Crowd isn’t one of my superfavorite positions, and is currently my 8th largest out of nine positions, but still, some of those misleading posts got a lot of recs and I’m worried that some innocents on the board may have absorbed some really incorrect stuff.
First – Two people asserted that Crowd had three times as many shares as they had a year ago, so they were diluting like mad.
Response – They were not familiar with the company and didn’t realize that it had just IPOed a few months ago. Share counts before and after an IPO have little relation to each other as there are all different kinds of shares which change from before to after: convertible, preferred, Class A, Class B. This is usually true for all IPO’s. I wouldn’t try to figure it out until there are comparable numbers, but if you are curious see Bear’s nice attempt to explain it here: https://discussion.fool.com/denny-you-were-confused-because-12x-… but the kind of shares they had a year before the IPO have little relationship to the kind they have now. It’s the many, if not almost all companies that have an IPO
Second – It was suggested that the reduced number of shares hides that they are losing more and more money each year
Response – That’s simply incorrect, wrong! It is true that Adjusted Net Income or Adjusted Net Profit Margin would be much easier to follow. Adj net loss was $23.1 million, improved from $30.4 million the year before.
That gives a net profit margin of minus 21.4% (23.1 million divided by 108.1 million revenue), improved from minus 54.6% the year before (30.4 divided by 55.7 revenue). That’s a fairly awesome rate of improvement.
Third – It was asserted that cash flow was negative $78 million dollars and 72% of revenue.
Response – No one knows where those figures came from. This is what the 10-Q says:
**Operating Cash Flow (negative) $6.2 million**
**Less Purchases of Property and Equipment $21.6 million**
**Less Capitalized internal use software $1.3 million**
**Which gives Free Cash Flow (negative) $29.2 million**
That gives an operating cash flow margin of negative 6%, based on revenue of $108.1 million, not negative 72%.
Some other metrics from the last quarter:
Total Revenue was up 94%
Subscription Revenue was up 98%
Annual Recurring Revenue was up 104%
Subscription Gross Margin was 74%, up from 70% the year before
Subscription Customers have grown more than 100% each of the last three years, compounded.
Best,
Saul