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Sept. 5, 2019, 7:05 p.m. EDT

CrowdStrike improves earnings outlook, but stock falls as guidance gets less aggressive

Cybersecurity M&A spree is ‘validation of what we built,’ CrowdStrike CEO says

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By Wallace Witkowski, MarketWatch


Bloomberg News
George Kurtz is co-founder and chief executive of CrowdStrike Holdings Inc.

CrowdStrike Holdings Inc. shares tumbled in the extended session Thursday after the cybersecurity company didn’t provide as aggressive an outlook as it had in the previous quarter and fielded questions on how recently announced acquisitions of competitors by partners will affect its business.

CrowdStrike /zigman2/quotes/212513426/lastsale CRWD +0.26%  shares dropped 9% after hours, following a 1.8% rise in the regular session to close at $86.85. As of the close, shares were 155% above their IPO pricing.

CrowdStrike forecast results that were better than the Street estimated, but not as aggressive a beat as the company estimated in its first earnings report as a public company, when CrowdStrike saw its shares surge nearly 15% the next day.

CrowdStrike expects an adjusted loss of 12 cents to 11 cents a share on revenue of $117.1 million to $119.5 million for the third quarter, while analysts estimated a loss of 13 cents a share on revenue of $111.1 million.

For the year, CrowdStrike also improved its outlook for the year for an adjusted loss of 65 cents to 62 cents a share on revenue of $445.4 million to $451.8 million for the year, while analysts estimate a loss of 71 cents a share on revenue of $435 million for the year.

Back in July, however, CrowdStrike had forecast a second-quarter adjusted loss of 24 cents to 23 cents a share on revenue of $103 million to $104 million, when analysts had been looking for a loss of 31 cents a share on revenue of $96.7 million. Also, for the year, CrowdStrike had forecast in July an adjusted loss of 72 cents to 70 cents on revenue of $430.2 million to $436.4 million for the year, when analysts had previously been looking for a loss of $1.02 a share on revenue of $412.3 million for the year.

On Thursday’s conference call, analysts peppered CrowdStrike Chief Executive George Kurtz with questions on how VMware Inc.’s /zigman2/quotes/209864107/lastsale VMW -7.20%  announced acquisition of cybersecurity company Carbon Black Inc. will affect CrowdStrike’s partnership with SecureWorks and Dell Technologies Inc. /zigman2/quotes/203822527/lastsale DELL -8.91% , which owns a majority stake in VMware.

Kurtz called the relationship with Dell and SecureWorks “business as usual” and noted that Carbon Black was a partner with SecureWorks many years ago.

“So, ultimately we think that the best technology is going to win out, and some of these relationships actually even predate us," Kurtz said. “We’ll let the customers decide which technology is best.”

Regardless of the partnerships, customers ultimately get to decide whether they go with CrowdStrike or Carbon Black for endpoint protection, Kurtz told MarketWatch in an interview.

“As the market consolidates, it’s really validation of what we built and how hard it is to built a true cloud-data platform,” Kurtz said, referring to deals like Broadcom Inc.’s /zigman2/quotes/200646538/lastsale AVGO -5.13%  bid for Symantec Corp.’s enterprise business, and BlackBerry Ltd.’s /zigman2/quotes/202784246/lastsale BB -3.05%  acquisition of Cylance in February.

“People are selling out because they view the future as not as bright as it would be on their own,” Kurtz told MarketWatch.

Consolidation in the cybersecurity industry has been a running prediction for a while and is gaining serious momentum this year.

Late Thursday, CrowdStrike reported a fiscal second-quarter loss of $51.9 million, or 40 cents a share, compared with a loss of $32.9 million, or 75 cents a share, in the year-ago period. The adjusted loss was 18 cents a share. Revenue nearly doubled from a year ago, surging to $108.1 million from $55.7 million in the year-ago quarter.

Analysts surveyed by FactSet had estimated a loss of 23 cents a share on revenue of $103.8 million.

The company also added a record number of net new subscription customers for the quarter, 730, for a total of 3,789 subscription customers as of July 31.

/zigman2/quotes/212513426/lastsale
US : U.S.: Nasdaq
$ 58.79
+0.15 +0.26%
Volume: 3.83M
March 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$12.53 billion
Rev. per Employee
N/A
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/zigman2/quotes/209864107/lastsale
US : U.S.: NYSE
$ 115.74
-8.98 -7.20%
Volume: 2.10M
March 27, 2020 6:30p
P/E Ratio
7.57
Dividend Yield
N/A
Market Cap
$48.35 billion
Rev. per Employee
$413,548
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/zigman2/quotes/203822527/lastsale
US : U.S.: NYSE
$ 38.75
-3.79 -8.91%
Volume: 3.20M
March 27, 2020 6:30p
P/E Ratio
6.42
Dividend Yield
N/A
Market Cap
$28.96 billion
Rev. per Employee
$624,972
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/zigman2/quotes/200646538/lastsale
US : U.S.: Nasdaq
$ 230.69
-12.48 -5.13%
Volume: 3.94M
March 27, 2020 4:00p
P/E Ratio
38.10
Dividend Yield
5.64%
Market Cap
$92.23 billion
Rev. per Employee
$1.42M
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/zigman2/quotes/202784246/lastsale
US : U.S.: NYSE
$ 3.81
-0.12 -3.05%
Volume: 3.83M
March 27, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.10 billion
Rev. per Employee
$268,248
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Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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