Strictly Business: CrowdStrike Pre-Earnings Thoughts
Some things I'll be watching.
CRWD – CrowdStrike’s March 7 report is an important one. After a surprisingly weak Q3, management has lowered expectations for Q4. It has also shuffled the executive deck in an attempt to better position for its next phase of growth. Working conservatively off Q3’s record-low beat, I’m estimating ~$640M in revenue with a ~$685M Q1 guide.
In secondary expectations:
A strong enough FY24 revenue guide to imply some stabilization in growth. Initial guides have been a wildcard this season. In this case, CRWD will be setting a rough floor for where its slide might settle. I’m hopeful we see a number north of 25%.
Net new ARR (Annual Recurring Revenue) of $180M or better. Last quarter management forecasted a 10% sequential decline from Q3’s $198M. Any dip larger than 10% would be a major concern given the importance CRWD has attached to this metric.
Remaining Performance Obligation above $3B.
A rebound in net new customer growth. Last quarter’s 1,460 was the smallest in eight quarters. Management referenced delayed deals as a factor while pointing to RPO as evidence of pipeline stability. I’d like to feel we are exiting the year on firmer footing in this area.
Continued strength in customers using 5+, 6+, and 7+ modules, which would imply current customers still see value in expanding usage.
In Q4 CRWD traditionally updates its standard “120%+” net retention rate comment with specific figures for the year. I’d like to see the final trend along with management’s initial thoughts on where NRR might go during the upcoming year.
Another strong showing in cash flow and profit margin. If I’m going to accept lower growth, this is a must. I’m eyeing 30%+ for cash flows and 15%+ for profits.
Comfort in management’s forward plan. Q3 clearly changed the landscape. If nothing else, CEO George Kurtz has aggressively restructured management to adjust. I’m curious to hear how he sees things playing out with the changes.