SNOW - 1Q23 Review

Earnings season has begun. As time permits, I intend to summarize the prior quarter’s earnings report for a few of the board’s most popular companies. I invite other board members to pitch in on these summaries as I will not cover all our companies by myself.

Snowflake reported 1Q23 earnings on May 25, 2022. Snow will report 2Q23 earnings on August 24. Following are most of the important financial numbers and highly condensed review of the prepared remarks and what I considered the most important information from the Q&A. As I do these summaries I reread the CC transcripts and press release. I have noticed that I sometimes have small discrepancies in my financial tracking. Please, don’t nitpick these summaries, however, if you think I’ve made a significant error, I would appreciate a correction. Unless otherwise stated, these numbers are non-GAAP.

I do not intend to speculate on the 2Q23 report. I leave it to each board member to do that for themselves. The transcript and press release are available on Snowflake’s investor relations site.

Snowflake IR:
CEO: Frank Slootman
CFO: Michael Scarpelli

Product Revenue: 394.4M representing an 84.4% YOY increase and a 9.7% sequential increase.
Total Revenue: $422.4M representing an 84.4% YOY increase and a 19.1% sequential increase.
Operating Expense: 298.22M representing a 55.1% YOY increase and a 17.2% sequential increase.
S&M Expense: $183.74M representing 43.5% of revenue and a 19.7% sequential increase.
G&A Expense: $41.23M representing 9.8% of revenue and a 1.2% sequential increase.
RPO: $2,610M representing an 78.2% YOY increase and a 1.4% sequential decrease.
Current RPO (calculated): $1,378M representing an 78.2% YOY increase and a 0.1% sequential increase.
Total Gross Profit: $299.9M representing an 91.7% YOY increase and a 10.0% sequential increase.
Product Gross Profit: $296.73M representing an 92.1% YOY increase and a 10.1% sequential increase.
Total Gross Margin: 71.0% - Product Gross Margin 75.2% - NRR 174%
Total Customers: 6,322 - Forbes Global 2000 Customers: 506 - TTM $1M Customers 206
Data Marketplace Listings 1,350 representing an 171.1% YOY increase and a 20.9% sequential increase.
GAAP Net Income: -$165.80M representing -39.3% of revenue and 25.5% sequential increase.
Adjusted FCF: $181.44 representing a 43.0% YOY increase and 77.7% sequential increase.
EPS: -$0.70 representing no change YOY and a 62.8% sequential decrease.

(I won’t repeat the financials already posted.)

  • Snowflake has been investing for years to enable AI/ML workloads.
  • Core idea of Snowflake data cloud is to enable work to come to the data rather than transport the data to the worksite.
  • Global 2000 Customers +16. Snowflake’s focus is on acquiring large customers as opposed not just increasing total customer count. Large customers drive growth faster than average customers.
  • At end of quarter: $0 debt
  • Ever increasing support for “unstructured” data, ex/ .PDF, medical images, more
  • Announced support for healthcare & life sciences vertical in 1Q23 - Improve time to market by 3 yrs for new drugs
  • Number of “stable edges” grew by 122% in 1Q23 yoy
  • Data marketplace listings grew 22% qoq now with more than 1,350 listings from more than 260 providers
  • NRR 174% with 11 new $1M customers, 10 new $5M customers 40 total, 10 $10M customers
  • Growth strategy - add/enhance verticals, international, large customers 1Q23 booked 4 eight figure contracts up from 2 last year
  • Macro environment driving reduction in usage by consumer facing companies. Quarterly fluctuations seen as no long term impact.
  • 2Q23 $435M - 440M representing YOY growth of 71% - 73%
  • Full Year guide $1.885B - 1.9B YOY growth 65% - 67%
  • Prod Rev Growth (mid-point) 66%
  • Non-GAAP Prod Gross Profit 74.5%
  • Non-GAAP Op Inc 1%
  • Non-GAAP Adj FCF 16%
  • Non-GAAP operating margin -2%
  • Expect diluted share count of 358M
  • Expect to add 1500+ employees for FY 2023
  • Long term 2029 target $10B product revenue reflecting 30% YOY growth
  • Long term margin targets 78% gross margin, 20% operating margin 25% adj FCF margin
    (I will only provide important observations rather than quotes)
  • Most of the slowdown in consumption was the result of optimization less from reduction in workloads
  • Expect the headwinds to peak by end of year (did not specify calendar or fiscal)
  • Emphasized that consumption model is not the same as discretionary. Snowflake is embedded in business operations. It’s not a data lake model
  • Snowflake does not experience pricing pressure. Not commodity s/w. Never lost a sale due to price
  • 94% of revenue come from existing customers. New customers take 6 - 9 months to ramp up

I hope this helps you prepare for the upcoming report. Please, don’t add posts unless you think I got something materially wrong or missed something important. Let’s try to avoid board clutter. Thank you.