CrowdStrike's (CRWD) Q3 Earnings & Revenues Top Estimates

CrowdStrike CRWD reported third-quarter fiscal 2020 non-GAAP earnings of 8 cents per share as against the Zacks Consensus Estimate of break-even profit. Quarterly earnings also marked significant improvement from the year-ago quarter’s loss per share of 7 cents.

Top Line Details

CrowdStrike’s fiscal third-quarter revenues of $232.5 million surged 86% year over year as well as beat the consensus mark of $213.7 million. Subscription revenues jumped a whopping 87% year over year to $213.5 million.

An 85% increase in subscription customers led to this impressive growth. CrowdStrike added 1,186 net new subscription customers during the reported quarter. The company had a total of 8,416 subscription customers as of Oct 31, 2020.

Moreover, CrowdStrike’s subscription customers that adopted four or more cloud modules increased to 61%, those with five or more cloud modules rose to more than 44%, and for six or more cloud modules jumped to 22% as of Oct 31, 2020.

CrowdStrike Holdings Inc. Price, Consensus and EPS Surprise

CrowdStrike Holdings Inc. Price, Consensus and EPS Surprise

CrowdStrike Holdings Inc. price-consensus-eps-surprise-chart | CrowdStrike Holdings Inc. Quote

Revenues from professional services soared 73.7% year over year to $18.9 million.

The company added $116.8 million to its net new average run rate (ARR) year over year, achieving $907.4 million, up a whopping 81% from the year-ago quarter.

Dollar-based net retention rate exceeded 120% in the reported quarter.

Operating Details

CrowdStrike’s non-GAAP gross margin expanded 400 basis points (bps) on a year-over-year basis to 76%. Subscription gross margin advanced 200 bps to 78%. Moreover, professional services gross margin increased to 45% from the year-ago quarter’s 33%.

Non-GAAP research & development (R&D) expenses as a percentage of revenues shrunk 530 bps on a year-over-year basis to 19.7%. In addition, non-GAAP general & administrative (G&A) expense, as a percentage of revenues, contracted 330 bps to 8%.

Further, non-GAAP sales & marketing (S&M) expenses as a percentage of revenues were 39.9%, significantly down from the year-ago quarter’s 49%.

Total non-GAAP operating expenses as a percentage of revenues were 67.6% compared with the prior-year quarter’s 85.3%.

Non-GAAP operating income was $18.9 million against the loss of $16.5 million reported in the year-ago quarter. Non-GAAP operating margin for the quarter was 8%.

Balance Sheet & Cash Flow

As of Oct 31, 2020, cash and cash equivalents were $1.06 billion compared with $1.07 billion as of Jul 31, 2020.

During the fiscal third quarter, the company generated operating and free cash flows of $88.5 million and $76.1 million, respectively.

Guidance

For fourth-quarter fiscal 2021, CrowdStrike anticipates revenues between $245.5 million and $250.5 million. As far as the bottom line is concerned, the company expects to report earnings per share between 8 cents and 9 cents.

For fiscal 2021, management raised its revenue guidance range to $855-$860 million from the $809.1-$826.7 million projected earlier. The company now anticipates non-GAAP earnings per share of 21-22 cents compared with the previous expectations of 2-8 cents.

Zacks Rank & Stocks to Consider

CrowdStrike currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA, Arrow Electronics ARW and Texas Instruments TXN, all carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for NVIDIA, Arrow and Texas is currently pegged at 20.4%, 9.8% and 9.3%, respectively.

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