On CRWD. Taking up the Challenge.
When I commented that in no way could Crowdstrike’s quarter be considered a “fantastic” quarter, as someone had claimed, but perhaps just a somewhat better than expected quarter, I was challenged to look at the whole picture. I haven’t been following the company since I sold out of it , but here goes, I accept the challenge.
1 – Total revenue growth yoy looks like this
**2021 85% 84% 86% 74%**
**2022 70% 70% 63% 63%**
As you can readily see, as of a quarter ago, revenue growth was falling off a cliff at 63%, down from 86% a year ago, and down from 70% the quarter before. This quarter they stopped the bleeding at 63%, but this certainly wasn’t a fantastic quarter, just a quarter that was above the 57% growth that many were anticipating. They’ve seemed to have stabilized.
2 – How about sequential revenue growth?
**2021 17 12 17 12**
**2022 14 12 12 13**
Yes, they were up slightly from the quarter before, but we are talking well within the range of variation, and certainly nothing fantastic.
3 – Subscription revenue growth?
**2021 89% 89% 87% 77%**
**2022 73% 71% 67% 66%**
Well, they dropped a point from the quarter before, but otherwise have seemed to have stabilized. Nothing fantastic.
4 – Subscription gross margin percent was 79%, down from 80% a year ago, but basically stable like everything else.
5 – Operating cash flow margin was down both sequentially and year over year. Probably nothing to worry about but “fantastic”???
**2021 55% 28% 38% 43%**
**2022 49% 32% 42% 37%**
6 – Free cash flow margin, the same as operating. Down a little sequentially and yoy, but probably not worrysome.
**2021 49% 16% 33% 37%**
**2022 39% 22% 33% 29%**
7 – Adjusted net profit margin, a definite improvement, but certainly not knocking it out of the ballpark.
**2021 03% 04% 08% 12%**
**2022 08% 08% 11% 16%**
8 – Subscription customers growth from 2017 to 2022 has looked like this below. 2022 is the 65% at the bottom. Not bad for the size it’s at, but they are looking for smaller customers now according to management, so even that 65% has to be tempered by size of customer.
**176%**
**173%**
**103%**
**116%**
**82%**
**65%**
9 – Oh! I almost forgot ARO percent gain
**2021 88 87 81 75**
**2022 73 70 67 65**
Still falling off, but gradually.
10 – And ARO growth sequentially:
**2021 14 15 15 16**
**2022 13 12 13 14**
Same old thing, not bad, not great.
To summarize, not bad, not great, nothing really outstanding, nothing really terrible. Operating and free cash flow margins dropping, but offset by a small rise in net income margin.
All in all, a company now stabilizing at a much lower level than it had been growing at. Yearly revenue growth rate levels 2018 to 2022 have been 125%, 110%, 93%, 82%, and 66%!!!
What can I say? When I said that someone who called this a “fantastic” quarter had gotten “carried away,” was I wrong? I’m afraid that he was comparing results with his own very conservative expectations, rather than thinking about the actual company results.
Best,
Saul
! The lens for evaluating a best of the breed Cloud Native SaaS Security company that is proving itself and poised to become the dominant player in end point Security needs to be a little special.