Snow my Thoughts

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The bad:

Revenue slowed down from 101.49% to 84.51% So growth YoY in now out of the 100 percent range
Sequentially Revenue growth was at 10 percent slowing down.

Earnings per share was still negative and Operating margins was at -44.69 percent. Still not seeing expenses improve.

Customer growth coming down Sequentially and YoY. But still grew 39.50 percent YoY.

1 million dollar customers coming down but still grew 98 percent YoY

The good:

Revenue growth is still very high

The had FCF of $172.4 million this quarter

FcF YoY was $240.6 million

FcF per share was up to $.77 per share

They now have a FcF yield of 17.03

Their magic number is still one of the highest if not the highest at 101.54 consistently above 100

$ 5 billion cash no debt on books

NRRR at 174% very good

Cash per share at $4.49 going up every quarter making their P/S at 26.83 the lowest it has ever been (Price now $120.47 / $4.49 = 26.83)

Sales now at 1.4 billion YoY

Conclusion:

This is a very solid company. Growth is coming down but that is to be expected I just hope they can stay above 50 percent growth for 5 years. That would make this an amazing investment. It’s NRRR is really good at 174 and it has an excellent Magic number. So as their growth is coming down their FcF margin is shooting up. This should keep it above 100 if they can keep executing. I wasn’t happy because of the growth drop but when I realized that they were growing FcF faster and the Magic Number was Basically the same it was a real bright spot to the report.


Magic Number

               Q321     Q421     Q122     Q222     Q322     Q422     Q123 
Rev Gr %       118.63   117.20   110.37   104.44   109.52   101.49   84.51
FcF margin %   -28.87   -14.48   -8.70    -3.47    1.73     6.66     17.03
Magic Number   89.76    102.72   101.67   100.97   111.25   108.15   101.54

A magic number above 40 is considered great yet Snow has kept it above 100 for 6 quarters now.

Andy

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2

Andy wrote:


Magic Number

               Q321     Q421     Q122     Q222     Q322     Q422     Q123 
Rev Gr %       118.63   117.20   110.37   104.44   109.52   101.49   84.51
FcF margin %   -28.87   -14.48   -8.70    -3.47    1.73     6.66     17.03
Magic Number   89.76    102.72   101.67   100.97   111.25   108.15   101.54

Hey Andy,

You labeled it Magic Number, but it seems you are calcing the Rule of 40 there (YoY revenue growth + LTM FCF margin). But as you show, Snowflake is best in class there.

What is known as Magic Number is different. It’s a shorthand way to measure sales efficiency, taking new growth (this Q revenue - last Q revenue), annualizing it, and dividing by the last quarter’s S&M spend. Here is a blog explaining it.
https://userpilot.com/blog/saas-magic-number/

Magic Number over 1 is considered excellent. But I’m not sure if a “one Q back” looking metric like this is that useful a calc for companies massively ramping up new S&M hires (making a big part of today’s S&M spend not contribute to rev for several Qs, given how Snowflake has stated it 6-12 mo to fully ramp up new sales staff depending on the role). This effect would lower today’s Magic Number sales efficiency for tomorrow’s add’l revenue gains.

Easier number for me to grok is the trend over S&M margin, which is moving the right way over the past year.

Q1 GAAP:
S&M 72.9% → 57.7%
R&D 47.9% → 35.7%

Q1 NonGAAP:
S&M 49.2% → 43.5%
R&D 21.0% → 17.3%

This is reflected in how GAAP Opex is now growing significantly slower now as operational efficiencies kick in DESPITE THE MASSIVE INCR IN HIRING (+567 new hires this Q!). As the top line begins to wane, operational costs have gone from growing +107% last year (for +110.4% revenue growth) to only +37.4% this year (for +84.5% revenue growth).

  • muji
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3

Your right Muji, thanks for the correction. I had my terms messed up.

Andy