Mature SaaS companies are in good shape. PAYC last week announced an increase to its share buyback. WDAY giving out $80M in the form of a special bonus to support its lower lever employees.
https://www.cnbc.com/2020/03/16/workday-will-pay-some-employ…
The fastest growing companies are not as FCF positive but I think they will be little affected in the long run and they will be able to weather this storm.
Chris
RE:comments by Gaucho Chris
Mature SaaS companies are in good shape.
I noted that you and others expressed some concerns about CRWD which is down 13% today. Its not clear to me why CRWD is perceived by some as differing from the other SaaS companies?
Any insights would be appreciated.
I noted that you and others expressed some concerns about CRWD which is down 13% today. Its not clear to me why CRWD is perceived by some as differing from the other SaaS companies?
Any insights would be appreciated.
draj,
positives:
CRWD had an amazing Q3 2020 (period ending on October 31, 2019) that was reported in November. The growth for the past several years has been amazing. CRWD seems to be able to get new customers much easier.
Crowdstrike’s agents are very easy to install. Implementing/on-boarding new customers is really easy. Not all security companies have this attribute and they will work against those that don’t, especially in this environment.
The number of people who are working from home is surging. There are increased security risks when employees work remotely. The need for security solutions will be large, at least temporally.
CRWD has been CFFO and FCF positive and these margins have been increasing.
CRWD’s solution becomes more valuable and effective the more customers they have in the network. This network effect attracts more customers which futher improves their competitive advantage. It’s a virtuous cycle.
negatives:
The space is competitive and disruption is common and can happen fast.
unknown:
We don’t know how well CRWD will be able to sell its solution to new customers when all they can do is sell remotely (if traveling options for sales is not an option).
Chris
Draj,
CRWD is probably viewed as easily replaceable in a highly competitive market. Hopefully this theory is false and its growth rates hold up, though at this lowered EV/S they have much less to prove.
After these drops my fear is that these SAAS companies can be acquired by the IT behemoths thereby crystallising the losses
Fireblade
@fireblade: many of the smaller SaaS are still founder-led with high insider ownership and they would never sell their company at a discounted price.
After these drops my fear is that these SAAS companies can be acquired by the IT behemoths thereby crystallising the losses
While this would be unfortunate, it is not really a problem because they are not all going to get acquired at the same time. If one gets acquired and the shares pop as a result (buyouts would happen as a nice premium), then you just redeploy the funds into an alternative SaaS company (at a lower relative price than the company that got taken out).
Chris