Preliminary takeaways from SNOW Q3FY22

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The call isn’t complete yet, but I went through presentation deck at: https://s26.q4cdn.com/463892824/files/doc_presentations/2021…

Some numbers:
YoY Annual Revenue Growth: 124%
QoQ for the last 4 quarters:
Q4FY21: $190M 18.75% growth
Q1FY22: $229M 20.5%
Q2FY22: $272M 18.8%
Q3FY22: $334M 22.8%

Note that 93% of revenue is Product revenue, with the other 7% being Professional Services. I expect the latter to be support and consulting. That percentage has been pretty stable.

Last quarter there was some consternation over the RPO trend. That has reversed to the upside, more than doubling the previous two quarters’ growth rates:
Q3FY21: $928M
Q4FY21: $1.33B 43.6% growth
Q1FY22: $1.43B 7.4%
Q2FY22: $1.53B 6.8%
Q3FY22: $1.8B 18%

DNRR increased to 173% (from a crazy high 170% last quarter)!

Product Gross Margin up to 74% from 63% two years ago. They’re getting more efficient as more larger usage customers come into the fold.

Snowflake is 82% Americas. Growth last quarter was even across the board in EMEA and APJ too. So, I think there’s still a lot of potential growth there.

FCF is turning positive this fiscal year, at 8%, from -12% last year.

Two areas of note:

  1. Snowflake’s Net Promoter Score (NPS) is 68, very very good.
  2. The number of Data Marketplace Listings continue to grow at a growing rate:
    Q1FY22: 498 at 31% QoQ growth
    Q2FY22: 656 at 32% QoQ growth
    Q3FY22: 924 at 41% QoQ growth

The Data Marketplace is Snowflake’s Data-sharing capability, where Snowflake customers can sell their data to other Snowflake customers. This means a company using Snowflake for its data analysis can now make extra money from their data. Snowflake controls security and access, and there are processing tools to anonymize and otherwise package up the data being shared.

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I wrote:
Snowflake is 82% Americas. Growth last quarter was even across the board in EMEA and APJ too. So, I think there’s still a lot of potential growth there.

This was just from looking at the graph in the earnings presentation. During the call (https://seekingalpha.com/article/4472931-snowflake-inc-snow-… ), CEO Slootman said:

We continued our international expansion with product revenue from EMEA and Asia-Pacific outstripping the company’s year-on-year growth, up 174% and 219% respectively.

That growth was just hard for me to see on the chart since it is off of a small base. So, international is a growth area and it’s good to see Snowflake making some inroads there.

Slootman also provided some color on the Data Marketplace during the call:
Snowflakes Data Marketplace grew 41% this quarter now with more than 900 data sets from over 200 providers. We also saw more than 130% annual increase in so-called stable edges. Stable edges are ongoing Snowflake data networking relationships between providers and consumers. One of the feature data sets is FactSet’s tick history data feed. It provides asset managers real-time data from over 200 exchanges.

ZoomInfo is another feature dataset. It provides company and contact data with no additional integration or ETL required. The overarching backdrop for Snowflake is the inexorable march towards direct-to-consumer operations and full blown digital transformation.

CFO Scarpelli had these comments on RPO:
Of the $1.8 billion in RPO, we expect approximately 55% to be recognized as revenue in the next 12 months. We remain focused on penetrating the largest enterprises globally as we believe these organizations provide the largest opportunity for account expansion.

Snowflake is getting more contracts longer than a year. Remember, such contracts can be considered a minimum spend since revenue is actually usage based. Companies enter into these commitment contracts with Snowflake since that reducess pricing.

One of the aspects I noted was that product revenue was 93% of total revenue. The rest is for things like support and assistance (and probably others I don’t know). Scarpelli had this to say, which I think is interesting:
Yes, I’ll also add to is we really stress with customers to take training on how best practices around how to use Snowpark, how to optimize your queries, and we go into our largest customers. And I’ll tell you last quarter, one of our top 10 customers, we saw a big decrease in their consumption, more than what we were forecasting. Why? Because our RSAs went in there and helped optimize that customer. But you want to know what, when we do that, that customer then moves more workloads and we’re seeing this quarter already, they’re tracking ahead of our forecast, because they’re using in a more optimized way and the customer sees the value they’re getting out of Snowflake.

That’s a pretty great story.

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Hi Smorg,

This report by Snowflake had me thinking of what you had written here on 8/21/21
Smorgasbord prior to the call:
If “the numbers” show a slow-down, then the numbers are missing the big picture. This kind of sustainable growth deserves a place in my portfolio.

I agreed with you then and held a equal weight position going into Q3. I was looking for something Muji had said that I wrote into my notes on 8/27/21:
Muji prior after Q2:
The overall number of edges grew +32% sequentially, a small acceleration from last Q’s +31%. More and more customers are discovering the data sharing capabilities – critical to my thesis (and Snowflake’s own vision). I want to see these trends continue.

Although I had hoped for a QoQ breakdown in the call; I checked the slide presentations and found no reference there. I did get this quote from the Call.
Slootman, CEO
We also saw more than 130% annual increase in so-called stable edges. Stable edges are ongoing Snowflake data networking relationships between providers and consumers.

If anyone has any additional insight into the growth of Stable Edges for Snowflake I’d appreciate a shoutout.

My favorite quote of the Call was from Slootman on the first question about the analyst believing Snowflake is showing this +100% Rev growth at ‘just the tip of the iceburg that Snowflake is enabling’
Slootman, CEO ( bolding mine)
So, yes, we are in the very early stages, but as you see from the metrics that we report on, there is a very, very steady aggressive growth happening quarter-on-quarter. But we sort of haven’t reached that tipping point yet where sort of the floodgates are open and things are just expanding at a meteoric rate. But we’re anticipating that that will happen at some point. It’s very non-linear in the way the adoptions is going to develop.

I’m 12% long and looking to add.

Jason

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