What Happened:
Shares of cybersecurity company CrowdStrike (NASDAQ:CRWD) fell 13.1% in the after-market session after the company reported first-quarter results that exceeded analysts' expectations for revenue, annual recurring revenue (ARR), free cash flow, and earnings per share. Gross margin also improved. However, there was a notable setback in terms of billings, which serves as a crucial leading indicator for near-term sales growth. Billings fell 12% below expectations. Management provided more color on the billings outlook during the earnings call noting that "given the timing of expenses, billing seasonality, and the midyear ESPP purchase, the second quarter is generally our lowest cash flow generation quarter of the year. This year we expect to see more pronounced seasonality." Additionally, CFO Burt Podbere pointed out that the company continued to observe "increased deal scrutiny and longer than typical sales cycles." Despite these, guidance was impressive. Revenue, operating income and earnings per share guidance for the next quarter and full year were ahead of Consensus, and the company raised the full year revenue and earnings per share outlook. CrowdStrike also Introduced Charlotte AI, a new generative AI security analyst. Overall, it was a strong quarter although a billings miss is never a good sign for a fast-growing SaaS company. Additionally, the markets were either expecting more (there is whisper that net new ARR, which was down year on year, was expected to be better), or the results were already priced in.
What is the market telling us:
CrowdStrike's shares are quite volatile and over the last year have had 27 moves greater than 5%. But moves this big are very rare even for CrowdStrike and that is indicating to us that this news had a significant impact on the market's perception of the business.
CrowdStrike is up 48.8% since the beginning of the year, but at $153.03 per share it is still trading 24.6% below its 52-week high of $202.94 from August 2022. Investors who bought $1,000 worth of CrowdStrike's shares at the IPO in June 2019 would now be looking at an investment worth $2,650.
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