Naughty and Nice ER Review: SNOW

As I read through the Snow report I came to the following conclusion: There would be, forthwith, a great deal of the ‘Picking of the Nits’; and, at that moment, I had no idea which side might win. The entire debate that would follow would be similar, and reminds me a great deal of, Pickle Ball - not so much about skill but rather more like a fun time between folks whose knees, reflexes and stamina might be a little short of tennis. If you understand what I am trying to say here. Nonetheless, if I had to pick a theme for the review of SNOW is would be this:

Chi Non Fa, Non Falla - which, translates to something like this: He Who Makes No Mistakes, Makes Nothing. It’s one of those old Italian sayings that they probably stole from the Greeks. I am by family linage Italian with family tree spread throughout Sicily; which, probably makes my heritage part mafia at some point. Hard to tell as the Sicilians have been killing each other for various reasons for centuries. That said, if I were to actually be mafia I would, without hesitation, ask Ears to be family Consigliere. Guy might be too honest for such a role. A man can be too honest you know…If you don’t believe me take this example:

You tell your All-Too-Lovely that you would like to take her to a really nice restaurant for a romantic dinner. So - off she goes to get ready. A couple of hours later she comes back ready to go and asks you, as women will in their rather less than oblique way how she looks. You say Muy Bonita or in Italian you might say - “Sei Incredibilmente Bella”, which means exactly what you think it means. Now as many Americans know very little Italian you might simply say - you look fine sweetheart. But you do see the difference don’t you? Remember - this is a romantic date with your All-Too-Lovely so what sounds more romantic: You look fine honey - or - Sei Incredibilmente Bella?

Timely Tip: For non Italians: To effect the Sei Incredibilmente Bella just right - you have to use your hands in an expressive way. Here is a primer for you non-Italian cretins:

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&…

Back to your All-Too-Lovely:

She then turns around and asks you this: Does this dress make my butt look big? Now…let’s say your lovely wife has perhaps, over the years, packed on a little padding. I mean she is by no means developed into a Dainty Heifer - just…you know a added a little padding. And you love her dearly and the last thing in the world you would do is say anything that might hurt her feelings…right? Now…a completely honest man - and a really stupid one, might say…Why yes sweetheart that dress makes your butt looks like the full moon coming up over the Himalayas. But…a smart man might tell one of those little white lies: why no…not at all. And besides, after many years of marriage all of us carry some of our more noticeable flaws a little more honorably. Do you see what I am getting at here?

Just trying to help.

Snowflake - Cloud-Based Platform for Data Stuff. All sorts of Data stuff

https://www.snowflake.com/

SNOW reported Q1 2022 yesterday.

A Few Data Points:

Current Price: $126.80
Range: 112.10 - 405
About 68% Below its High
Market Cap: $40B - give or take
EV/S: 33.92
YTD Momentum: -62%

The Report: Q1 FY2023

  • Revenue for the quarter was $422.4 million, representing 85% year-over-year growth: ATTA BOY!

Note: This revenue total represents slowing growth; however, the law of large numbers effect had to come into play sometime and 85% Rev Grow is fantastic any way you want to slice it. Having said that - the slow down in Sequential Revenue Growth demands an: OH POOP!

  • Remaining performance obligations were $2.6 billion, representing 82% year-over-year growth: ATTA BOY!

Note: There was a noticeable sequential slow down in the growth of RPO in the QTR attributed to record bookings in Q4 FY2022. Still 82% Y/Y growth is nothing to sneeze at; regardless, there must be accurate accountability: OH POOP!

  • Net Revenue Retention rate was 174% as of April 30, 2022: ATTA BOY!

I mean really - who else does this?

  • And in the quarter, we added 16 Global 2000 customers: ATTA BOY!

Some picking-of-nits surrounds the new customer adds and it has been pointed out as “Slowing Customer Growth”. Not ready to declare a trend here at all and thus no penalty is assigned

  • We closed the quarter with a record $181 million of non-GAAP adjusted free cash flow, pairing high growth with improving unit economics and operational efficiency: ATTA BOY!

  • Our Snowflake Data Marketplace fuels our rich application development ecosystem and Powered by Snowflake program. Today, there are over 425 Powered by Snowflake partners, representing 48% quarter-over-quarter growth: ATTA BOY!

  • Now turning to margins on a non-GAAP basis. Our product gross margin was 75%. Scale in our public cloud data centers and enterprise customer success contribute to steady gross margin improvement. Our operating margin was 0%, benefiting from hiring linearity. Our adjusted free cash flow margin was 43%, positively impacted by strong collections from record Q4 bookings: ATTA BOY!

  • We ended the quarter in a strong cash position, with approximately $5 billion in cash, cash equivalents and short and long-term investments. I would like to reiterate what Frank mentioned earlier. Snowflake is not a ‘growth at all cost’ company. And since we joined, it never has been. We evaluate investments based on yield. This has put us in a very strong position. We will continue to grow and are committed to showing leverage year-on-year: ATTA BOY!

  • Now let’s turn to our guidance. For the second quarter, we expect product revenues between $435 million and $440 million, representing year-over-year growth between 71% and 73%. ATTA BOY!

This level of Revenue Growth is, in and of itself,. fine; however The problem I see here is Sequential Revenue Growth is slowing a bit more than I like. This is then an: OH POOP!

  • We expect on a non-GAAP basis, negative 2% operating margin, and we expect 358 million diluted weighted average shares outstanding. As a reminder, we will be hosting our summit conference in-person in June. The associated expenses will largely be incurred in every Q2 moving forward. For the full year fiscal 2023, we expect product revenues between $1.885 billion and $1.9 billion, representing year-over-year growth between 65% and 67%.

ATTA BOY for confirming annual Revenue.

OH POOP for SBC.

  • Turning to profitability for the full year fiscal 2023, we expect on a non-GAAP basis, 74.5% product gross margin, 1% operating margin and 16% adjusted free cash flow margin, and we expect 358 million diluted weighted average shares outstanding: ATTA BOY!

  • We are adding headcount to support our growth initiatives. Q1 was a record hiring quarter. For the full year, we still plan on adding more than 1,500 net new employees. Our long-term opportunity is stronger today than it has ever been: ATTA BOY!

  • In advance of our Investor Day, I would like to update our fiscal year 2029 targets. For fiscal year 2029, we are reiterating our target for product revenue of $10 billion, growing 30% year-over-year. We are increasing our margin targets and now expect on a non-GAAP basis approximately 78% product gross margin, 20% operating margin and 25% adjusted free cash flow margin: ATTA BOY!

SNOW ER SCORE: ATTA BOYS 13/OH POOPS 4

LIST and RANKING Assgments: NICE #4

Note: I added about 20% to SNOW yesterday during AH when the company was down a little over 14%. It was a knee jerk reaction on my part and a very stupid thing to do before I had read the CC Transcript. It worked out today - but who knows about tomorrow in this market. Which gets me back to adding shares blindly yesterday could have been a huge mistake - but, as the Italians say:

Chi Non FA, NON FALA!

All the Best,

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That, mio amico, was a post,

Sei Incredibilmente Bella!

Best,
Pintail.

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