This was a strong quarter for CRWD, up 7% AH but I was a bit surprised they only increased FY21 guidance by 5%.
Katz did say their sales meetings have increased with customers and they have a “record” pipeline. So that’s a positive.
I assume they’re just being conservative with guidance, but I was expecting a bit more.
Would love to hear others’ thoughts.
I had expected a re-acceleration in revenue, particularly given that ZS had achieved this and assuming that ZS has a more difficult sales model.
Slightly disappointed although they are talking about conservative assumptions on the conference call.
Historically they’re pretty conservative in their guidance.
They guided $436 in Q1-Q2, Q2-Q3 they increased that to $452 (3.7%), Q3-Q4 they increased that to $468 (3.5%), and Q1 they increased from $733 to $773 (5.5%), if anything they are increasing their guidance on a QoQ % basis more than usual.
I added AH since I think this may be like Datadog, with some pretty significant multiple expansion. Datadog is at a 47 TTM EV/S while Crowdstrike is not even at a 39.5 (33.75 after today’s beat). Forward EV/S is like 25 which is crazy.
I also thought they would beat more. But then again, it was a great quarter.
I was surprised they added “only” $26 million in revenue sequentially, which is lower than the $27 million added last quarter. And guidance only calls for $12.2 million (of course that’s conservative, but still, even if they beat by $15 million they will add $27 million sequentially “only” again ). I would like to see them grow a bit faster in this environment.
On the other hand, their Free Cash Flow is exploding: $87 million this quarter, up from -$16.1 mil last year! 48.9% FCF margin for the quarter and 20.5% on a TTM-basis. Great stuff!
I think the act of raising guidance itself is a very confident and bullish move. Many companies, including those that clearly should stand to benefit or withstand COVID and its aftermath have withdrew guidance altogether. CRWD in my opinion is firmly entrenched in tier 1 of SaaS companies moving forward.
My Highlights:
Q1 EPS 0.02 vs.(0.06)(BEAT)
Revenue $178M vs. 165M est (BEAT); 85% YoY growth
Subscription Revenue 162M, 89% YoY increase
ARR of 686M, 88% growth
FCF + and ongoing path for profitability
Added 830 new customers, and customers using 4+ modules up to 55%
Long CRWD and wishing I had a bigger than 7% of my portfolio stake in CRWD!
Here are my unedited notes from the CRWD earnings call. Not edited yet since I’m now on the ZM call.
CRWD Earnings Call
6/2/2020
George Kurtz, CEO
Burt Podbear, CFO
All non-GAAP
3 overarching themes:
Generated non-Gaap operating income for the 1st time
WFH is a sustainable trend that will benefit CRWD
CRWD continues to win new logos as companies move to cloud native platforms. Market share of the incumbents continues to erode
Added $86M more ARR
Good deal flow among large enterprises and closed the majority of the biggest deals after the 2nd half of the qtr., which is typical.
Dollar based net retention rate (DBNRR) exceeded 120%
Helping customers with payment plans where necessary.
% of all customers with 4 or more went up by 55% and 5 or more by 35%.
Helped onboard new remote workers. Surged the number of endpoint customers and can install via the web, which has increased w/ +250 companies to deploy from home
100% of workforce (up from 70%) are WFH. Hiring like crazy and most people they interview and make offers to are accepting the offers.
Heightened threat environment is higher than they’ve ever experienced.
Customers continue to prioritize cybersecurity spending as mission critical spend.
CRWD is easy to deploy and manage from a remote location, no matter where employees are located.
At end of Q1, 45% of customers have adopted Falcon __________ and Falcon remote for corporations and schools doing remote schooling
75% increase in ARR between the end of this qtr and last qtr.
Semantic is rapidly being abandoned by their customers and CRWD is onboarding the customers who previously worked with Semantic.
6,261 new customers this quarter
Positioned to be the structural winner for endpoint security and ______________.
Given the uncertain macroeconomic, CRWD continues to innovate and spend on R&D.
88% ARR growth
65% YoY growth, well over expectations.
Revenue grew 85% YOY
$3.77 of ARR for every $1 spent
73% of revenue from US
70% to 75% non-GAAP margin since last qtr.
Shifted s&M from in-person to digital. Saw a $1.5M reduction due to sales persons not traveling and expect this to be a $5M annual savings.
23% increase in non-gaap margin
Free cash flow was $87M
Guidance
185.9 to _____, for a 72-76% increase in revenue
Guidance Fiscal yr 2021:
Raising guidance to de-risk guidance for the yr
Not guiding to ending ARR, have added ARR expectations to the full year.
Modifying Q1 as low point for 2021 ARR.
Continuing to hire aggressively, and travel will increase in Q3.
Expect to see slightly negative cash flow negative for next qtr.
2021 Guidance
$761 to $772 GAAP revenue
$18.1 to $9.1 M loss
Anticipate a hybrid of WFH vs. what was previously. This is part of digital transformation being accelerated to work outside their office, meaning more work for CRWD in the long-term, because we do not anticipate going back to the way things were previously.
Deeper and bigger partners is the preferred go to market strategy vs. getting wider. AWS has been a fantastic partner who has removed a lot of the friction experienced previously.
Falcon for containers and AWS: ARR is up 75% over last year. Who is being displaced? Not many, since this is a greenfield opportunity. Big difference between what CRWD does and competition, because there is zero friction since CRWD can navigate outside the containers.
CRWD remained +120% for dollar based net retention. Going forward, they anticipate maintaining this as more and more customers purchase more modules. Today, CRWD is still going after the large lands, and sales persons are paid the same for new logo vs. expanding existing customers.
Tipping point at the current time. CRWD being deployed in areas that include discover module outside of security.
Gross margins upper and lower limits… New modules mean more gross margin for CRWD. In the future, they see even more opportunities to expand margins.
Lots of growth is coming from new endpoints, with so many new laptops being sold. Workload protection (cloud, on-prem, etc.) is really what CRWD is focused on, and it’s a much broader market than endpoint protection. (perhaps part of why CRWD is so much more of a large grower vs. OKTA). CRWD has an advantage due to the digital transformation because of their cloud architecture vs. legacy systems.
Very focused on cash. CAPX –trying to manage to spend 8% as a % of revenue, which they typically spend more on CAPX later in the year.
Best FCF numbers they’ve ever had.
WFH –are flexible w/ their licensing arrangement with their customers. 1 opportunity of several, and seeing more people asking for CRWD services on their personal home computers.
CRWD spends a lot of time working on Kubernetes, very differentiated product that goes into the run time of Kubernetes. Lot of future opportunities to streamline this. It’s so easy to deploy.
Competitive displacement: Symantics and NextGen players. Why? What are their deficiencies?
Ransomware is a big driver of why displacing symantics. On Next Gen players, they don’t have an on-prem platform. Being able to aggregate data and add additional modules is something that just can’t be done with Next Gen players with who CRWD competes.
Traction w/ 3rd party players: Opened up the platform and now have 11 high-quality, vetted partners who produce results. More agents are more painful. Adding apps around white listing, and none of their competitors don’t have similar products.
Vendor consolidation is accelerating.
11 modules now, and always working on more modules based on feedback from customers.
Spotlight product. Module adoption was up this quarter since everyone is working from home, and compliance requirements still insist on being able to see across your system.
How to think about the upside and what’s driving such exceptional performance by CRWD? Customers have suffered breaches and they’re looking for a system that just works. Incumbants losing market share, Cloud adoption, digital transformation and WFH are all drivers for CRWD. It’s simple and easy to use and the mobile tool has great traction.
Do you expect to see churn? Yes, they are expecting more contraction and churn. They have increased their assumptions and it’s reflected in their guidance.
When economy fully opens, will you travel as much or do you see more WFH? They’ve been able to get to their customers via WFH very, very effectively.
sjo