Thanks for the thoughts above Saul, Ant, Waver and bnh.
Points well made on seasonality. I’ve now had time to review the results in more detail and came away very impressed. Before highlighting what stood out to me, just quickly on those two point above, looking at the qoq change vs the same Q last year:
Net new sales: I calculated the average number of new customers landed per S&M customer, and this is down slightly (but not materially) vs Q1 2021, from 0.30 to 0.27. So they did land slightly less customers per S&M employee - slightly lower productivity. They also did have a slightly slower qoq customer growth this Q of 9% vs 14% in Q1 2021.
RPO: This went from $1,333m to $1,432m - so up 7% qoq vs 10% in Q1 of last year so again a small slowdown. The CFO explained RPO dynamics as follows in the Q&A:
”Well, last year was the first year we really incentivized our sales force to sell multiyear contracts. And what I would say is now it’s getting more into the normal sales motion of our salespeople. It’s more natural for them to be going in and asking customers to sign a 3-year contract. Historically, we used to sell 1-year contracts only. “
So the slowdown is not as big as it would seem at first glance - it’s seasonal, and the RPO dynamics were well explained. Still, both qoq percentages were down a little vs the same Q of last year. But then again that’s to be expected as the company scales.
So probably a red herring, yes.
Here are some things that stood out for me from the results:
And >160 expected for the remainder of the year; same as guide last Q. This is of course fantastic; it’s also great that the guide is still for >160%.
Cash on hand: $5.1bn
And FCF positive at $23.4m and guiding for no cash burn in the rest of the year. So they have $5bn to spend and don’t need any of it to build the current business, so it will all be for M&A which hopefully will further accelerate growth in future.
Product GM% trending up:
This came in at 72%, the highest ever, from 66% a year ago Q1. And in the Q&A they re-iterated the guide to mid-70’s.
CFO: “I don’t see a dip happening in our product gross margins at all, but there is a limit to where you can get to. And when we’re going through our IPO, people were asking questions. I did say I don’t see us getting into the 80s. I can see a path to the mid-70s. We may, one day, be able to get into the high 70s.”
Operating margin improvement:
Starting in Q3 2020 to now: -93%, -73%, -66%, -44%, -30%, -24%, -16%.
So in a year they went from -66% to -16% - 50%pts improvement in a year.
Sales force verticalisation:
Sales org has been focused on 6 verticals, and is starting to bear fruit, but will really start to show results in the Q’s ahead, I think.
Data sharing opportunity:
“catching on like wildfire” - Analyst’s words: edges going from 10% to 15% and the number of edges up 33% quarter-on-quarter.
$1m+ customer adoption:
27 customers getting to $1 million-plus level this quarter - more than the total added first three quarters all of last year.
CFO: "As I said, most of those Fortune 500, we landed in Q4. We’ve seen virtually no revenue from them yet today.
Both EMEA and APAC exceeded their plan; EMEA bookings grew over 200%, Asia Pac over 300%.
Growth in Europe now contributes 13% of revenue vs 10% a year ago, so growth is extremely high.
CEO: “So I’m personally going to invest a bunch of time in Europe, given my own background, because I think the opportunity is tremendous. So we’re excited that we actually see these regions coming online and contributing and we expect that to continue.”
So they are stepping on the gas for Europe specifically which bodes very well.
CFO: “Our relationship with Deloitte, who is our lead partner, they went from a standing start a little bit over a year ago to $100 million of business, which is an absolutely ripping trajectory that they’re on. It just shows here that demand for these migrations is enormous.”
So all in all a great set of results. I’m keeping my position as is.
(Long SNOW 14%)