Crowdstrike & GitLab Q1 Earnings

Bottom line up front (BLUF): Crowdstrike posted great results and I’m expecting the same from GitLab when they report after the market closes today. I have no intention of trimming either position.

Disclosure: I am long Crowdstrike (CRWD) and GitLab (GTLB). Here’s a look at the $10k to $1 million portfolio positions. Follow me on Commonstock (link) if you’re looking for an awesome investment community and research without the bots and trolls of Twitter.

Crowdstrike (CRWD) Q1 2023 Results Review

BLUF: Crowdstrike earnings were strong and the thesis is still intact. I’d look at any sell-off as an opportunity for investors to build a position if they want to make it larger.

Shares are down 18% YTD
NTM P/S down from 39 in July to 17 today
Fwd P/S based on FY 23 rev of $2.15B = 17
Fwd P/S based on FY 24 rev: $2.98B = 12.6

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Q1 FY 23 Results

Revenue: $487.8M, beat management’s guidance by $25 million, beat analyst expectations by $23M
Non-GAAP EPS: $0.31, beat analyst expectations by $0.08

Annual Recurring Revenue (ARR) increased 61% year-over-year to $1.92 billion, of which $190.5 million was net new ARR added in the quarter

Subscription Gross Margin: GAAP subscription gross margin was approximately 77% in both the first quarter of fiscal 2023 and 2022. Non-GAAP subscription gross margin was approximately 79% in both the first quarter of fiscal 2023 and 2022.

Income/Loss from Operations: GAAP loss from operations was $23.9 million, compared to $31.3 million in the first quarter of fiscal 2022. Non-GAAP income from operations was $83.0 million, compared to $29.8 million in the first quarter of fiscal 2022.

Cash Flow: Net cash generated from operations was $215.0 million, compared to $147.5 million in the first quarter of fiscal 2022. Free cash flow was $157.5 million, compared to $117.3 million in the first quarter of fiscal 2022.

Cash and Cash Equivalents was $2.15 billion as of April 30, 2022.

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Business Highlights

Added 1,620 net new subscription customers in the quarter for a total of 17,945 subscription customers as of April 30, 2022, representing 57% growth year-over-year.

Subscription customers that have adopted four or more modules, five or more modules and six or more modules increased to 71%, 59%, and 35%, respectively. Customers with seven or more modules reached 19% as of April 30, 2022.

Expanded its strategic partnership with Cloudflare with technology integrations to strengthen the Zero Trust posture of joint customers.

Financial Outlook

Q2 2023 Revenue: $515M
Non-GAAP EPS: $0.28
FY 2023 Revenue: $2.198B, increased $50M from managements previous guide of $2.148B. *Implies continued momentum ($50M increase vs $25M beat this quarter)*
Non-GAAP EPS: $1.20

Management Commentary

George R. Kurtz CrowdStrike Holdings, Inc. – Co-Founder, CEO, President & Director

I will start today's call by summarizing 3 key points. First, fiscal 2023 is off to a fantastic start. We believe our Q1 results exemplify that we have a winning formula that includes scale, growth, profitability and free cash flow.

Second, we saw strength across the platform, including a record quarter for modules deployed in the public cloud and over 100% year-over-year ending ARR growth for our emerging product group, which includes our Discover, Spotlight, Identity Protection and Log Management modules.

And third, we are seeing more and more customers standardize on the Falcon platform. The number of customers adopting 6 or more and 7 or more modules both grew more than 100% year-over-year. We believe this underscores our wide competitive moat and our opportunity to drive long-term sustainable growth in both our core and expansion markets.

On demand

The demand environment we see is more robust today than this time last year as cybersecurity is not discretionary. Additionally, the competitive environment has remained favorable to CrowdStrike. Our growing leadership in the market is reflected in IDC's most recent report where CrowdStrike leapfrogged to the #1 position amongst all vendors in the 2021 market share for worldwide corporate endpoint security and once again took the top spot in modern endpoint security.

Moving to the market dynamics and threat environment, we continue to see powerful tailwinds fueling our market, and we do not currently see any indication that these trends will abate anytime soon. These tailwinds include a rapidly expanding attack surface and digital supply chain as organizations embrace digital transformation and move more workloads to the cloud, the cybersecurity skills gap in a heightened threat environment.

Number of modules new customers start with

Yes. So our bigger customers, those over $1 million, as we talked about on the webinar in April, we -- each of those customers has about 7 on average, just over 7 modules. In terms of landing new, we talked about in FY '22, it's 4.7. And that's up from 4.3 from the year before.

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GitLab Q1 2023 Earnings Preview

BLUF: Next-twelve-months price to sales (NTM P/S) has come down from 30 in January, 2022 to 15.62 on 6/3/22 with analysts expecting revenue growth of 53%, 39%, and 35% in FY 23 - FY 25.

Judging by the results of other cloud/software companies I expect GTLB results and guidance to be strong. I have no idea how the stock will react after earnings even if they beat and raise.

For Q1 2023, analysts are expecting revenue of $78 million, gross margin of 87%, non-GAAP EPS of -$0.26, and free cash flow of -$24 million.

For FY 2023, analysts are expecting revenue of $387 million, gross margin of 87%, non-GAAP EPS of -$0.96, and free cash flow of -$86 million

These are the numbers analysts will be paying attention to as well as any indication as to when management expects to be profitable on a non-GAAP basis.

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