SNOW Q1 Results

I meant Q1 of two years ago, my apologies.

To add to my comment, RPO was rounded to 1.4 billion but it actually is 1.43 billion, as they state 206% growth compared to Q1 of last year (468 million)

Guidance is weaker then expected:

GUIDANCE:
Q2 2022 revenue $235-240mn vs est. $251mn
FY 2022 revenue $1.02-1.035B vs est. $1.09B

https://twitter.com/skaushi/status/1397646309822111744

Yes the slowdown in topline growth is concerning.

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Zerohedge,

You are comparing total revenue est to Product revenue guidance. They’re not the same thing

Bnh

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RPO growth slowed. It was $1.3bn last Q vs $1.4bn now, so an increase of $100m vs $372m last Q. Or 8% QoQ vs 10%, 47%, 35%, 40% for Q1-Q4 of last year. Again - going from 40% QoQ last Q to 8% this Q is a bit disappointing.

I am listening to the call where they stated last year was the first year they incentivized sales reps to sign multi-year contracts instead of 1 yr contracts. That made the outstanding growth in RPO last year look higher than it actually was. So yes RPO will look like it is slowing but it should normalize this year.

Bnh

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RPO growth slowed. It was $1.3bn last Q vs $1.4bn now, so an increase of $100m vs $372m last Q. Or 8% QoQ vs 10%, 47%, 35%, 40% for Q1-Q4 of last year.

You are looking at something seasonal.

The year before last, RPO grew 8% this quarter and then 60% the next.
Last year (as you yourself pointed out), RPO grew by 10% this quarter and by 47% the next.

And it was up 206% this quarter yoy. How can you complain about that?

I suspect that for all of these issues that you point out, customer companies like to sign up starting at the end of the calendar year or fiscal year, so they sign up during SNOW’s 4th quarter. I suspect that the RPO and number of customer sign-ups will turn out to be false issues (red herrings). Sorry.

Best,

Saul

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I am working for a top financial company and we have a lot of databases in our production.

What Saul said is true:
We signed up Snowflake in 2020Q4 due to annual budget cycle, and deployed Snowflake and migrated our legacy database(s) into Snowflake in 2021Q1.

(1) Snowflake is very easy to use
We have a lot of training sessions for Snowflake which I never go through. But after we deployed it into production, I just open it and start to use it, based on their very user friendly interfaces. We have hadoop, Oracle, Sybase, DB2, Vertica etc… I did not hear too much complains from dev team migrating our legacy DBs into Snowflakes. And it is very faster than our legacy DBs.

(2) Usage will be lagged
We finished deployment and migration in February, and still running our data both on Snowflake and legacy DBs parallelly. So Q2 billing will be low and it will take sometimes, like 2-3 quarters for billing to start going up. Because we have to get ourselves familiar with Snowflake and start to run our R&D jobs on it, and then start to migrate our jobs on Snowflake. Data migration and running jobs are different. For example, data migration will be charged by storage but the real money will be made by charging our daily routine job execution on huge Big Data volume. As the board pointed out: enterprise customers growth is a leading indicator, and the revenue growth will follow.

(3) Very smart fee charging structure
We can config our usage, speed, etc by different cost layer. Now we started with on lower end, and I am pretty sure the bills will go up significantly in 3-4 quarters.

Best

– Waver
Long SNOW

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Just a couple of Q&A responses that address these 2 points of potential concern from WSM that are additional to all points raised in this thread

  1. Slowing Customer Growth…
    Well, these large accounts are very, very long sales cycles, and you are going to see lumpiness in the additions. Obviously, Q4 was a strong quarter. And as one would expect, that’s just landing a customer. That doesn’t mean it contributed to revenue. As I said, most of those Fortune 500, we landed in Q4. We’ve seen virtually no revenue from them yet today. I can’t stress that enough. And given Q4 is the end of a commission year for people and accelerators, reps do everything natural to close everything in the end of that commission year. So I fully expect we’ll continue to close Fortune 500 the balance of the year. And it’s all based upon when the customer is ready to begin that journey.

  2. Slowing RPO growth/Revenue Guidance…
    On your question, Kash, on the beat, we did flow the beat through to the full year guidance, plus about $1 million more, but we also had the headwind going to the full year. As I mentioned, we introduced new storage compression technology that we literally just rolled out. And based upon the early feedback of that, it’s going to take about $13 million of our revenue away from the company because the economics of our storage is so much better for our customer, with that compression being much higher than we were expecting it to be. Switch is a good thing for our customers. And longer term, it’s going to drive more – it’s going to cause customers to put more data in Snowflake, which will ultimately drive more consumption.

Ant

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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:

NRR: 168%

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.

International growth:

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.

Partner acceleration:

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.

-WSM
(Long SNOW 14%)

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Snowflake user here – I’d like to highlight a couple of things noted by either other users of snowflake, or in the earnings q&a.

Snowflake charges on use, not on storage (or at least the primary part of their revenue is use). It will take time for new and large customers to figure out just how easy it is to use snowflake. Once these large users catch on, snowflake revenues will REALLY ramp up.

Second, the new compression technology that snow rolled out will make it cheaper for them to hold data, and easier for users to use it (again, snowflake revenues ramp up).

Long snow

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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.

WSM

Interesting observations regarding growth comparison. I saw 110% Y/Y growth for revenue and 206% RPO growth and I did not register a slowdown…

One observation. In comparing actuals with 4Q guidance ( assuming I have the right nos.) they beat their revenue estimate by 8.35% and their Y/Y growth estimate by 17% (110% vs 88-92% guided) I am guessing they will continue to beat by similar percentages going forward.

Also they are projecting that 54% of current RPO will be recognized as income this year. That is about 75% of FY projected revenue . Add to this Slootman’s remarks on the ramp up time for new million dollar accounts (and other accounts) and the number of existing accounts nearing this figure it wouldn’t surprise me if the beat gets a bit larger.

we shall see.

cheers

draj

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And for all the people worried about Snowflake’s results, they are now up $3.30 when I just looked, bearing out my impression that there was nothing really wrong, while for comparison, Okta is down $26.00 because something really does seem to be wrong.

Saul

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“Cash on hand: $5.1bn”

Snowflake has not $5.1bn cash on hand.

According to the press statement they reported:

Cash $644 mio
Short term investments $3,285 mio

The operative cash flow was positive, but FCF was still negative according to cash flow statement (different to their No-GAAP FCF).

According to Cash Flow statement cash decreased $174 mio during the last quarter from $835 mio to $660 mio.

Should we expect a capital raise?

Indeed, okta cfo quit just one qty on the job, that is really wrong.

Cash & Equivalents + “Quasi cash” is $5.1b:

Cash & Equivalents $645m
Short-term investments $3,286m
Long-term investments $1,178m
TOTAL $5,109m

So, for all intents and purposes, they do have $5.1b of a war chest for running the business and growing via acquisitions.

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My take always from the Conference Call that I don’t believe have been raised here yet are:

104 customers with trailing 12-month product revenue greater than $1 million, +35%QoQ
What was more telling to me was that…
25% of customers with >$1million annual revenue are Fortune 500 companies. That means 75% are smaller.
Does this mean G2000 companies are all going to grow their TTM spend greater than $1million? It means that some have. I believe that in order to keep up with those that have others must.

Snowflakes largest vertical is Streaming media and Digital Advertising.
I liked Pinterest for the flood of ad spend I’m expecting the second half of this year. What percent of ad spend paid to Pinterest is going to Snowflake?

When asked about Snowflake achieving Fed Ramp High this year and if Snowflake Security is that good. The answer was yes. Is that Hubris? I’m asking.

Regarding digital transformation and the benefits of the Snowflake Archecture for storage: Last quarter Snowflake said time to migration onto their platform was six months. This Conference Call their now saying 9 months. This is putting their current revenue growth figures as a longer lagging indicator.

Deloitte assisted the digital transformation onto the Snowflake Platform of zero companies a year ago. Deloitte brought Snowflake $100million in revenue over the course of this last year for this reason.

But Snowflake doesn’t improve their margins by charging for storage. So improved compression technology isn’t going hurt here. They increase their margins by the usage of compute. Durable ongoing usage is increased by the number of edges utilized. Snowflake announced that Edges increasing 33% QoQ. This means that each company has developed , on average, 33% greater integration into the Snowflake ecosystem. The insights each company gains are dependent on the other companies within the Snowflake ecosystem. Not only does this increase the stickiness of the platform but greater integration increases usage by way of improving insights. Last quarter Slootman announced an Innovation transformation taking place on Snowflake. I believe he was referring to the improvement in the level of insights attainable with the increase in the number of these edges and thus the growing integration of greater numbers of Enterprises into the Snowflake platform.

I sold 20% prior to earnings to add to Zoom info. I’m thinking that may have been short sighted?

Still Long 11% SNOW

Best,

Jason

4 Likes

104 customers with trailing 12-month product revenue greater than $1 million, +35%QoQ
What was more telling to me was that…
25% of customers with >$1million annual revenue are Fortune 500 companies. That means 75% are smaller.
Does this mean G2000 companies are all going to grow their TTM spend greater than $1million? It means that some have. I believe that in order to keep up with those that have others must.

Will O

What caught my attention was two points. The first was the acceleration in the rate of addition of
customers with TTM of $1M

It was +35% in Q1, and +18% in Q4 . There were 65 such customers in the prior quarter so the increase in Q3 must have been just above 9% Q/Q . 12 months earlier they had “only” 31 such clients.

The second point was Slootman’s comment that there were a number of small companies whose spend was approaching $1 M. So c acceleration may continue in this fashion.

I also noted his comments on the future potential inherent in the addition of “edges”. Edges are contacts with data stored by other Snowflake customers. The more “edges” a company has the greater the opportunities for expansion in usage involving other outside but relevant data sets. IMHO this offers enormous growth possibility. I also like the emphasis on storage compression offering more data available at speed with no additional cost…

“One question during the Q&A was “why was Snowflake so successful”…The answer was that Snowflake was using a “completely new approach” to the core architecture for data storage,retrieval and usage.As a consequence SNOW workloads run “orders of magnitude” faster than any legacy system and therefore users are getting data back in” “hours and minutes” instead of days or longer. It boggles the mind.

All this notwithstanding SNOW is working to get responses to database queries back to the user in real time. Imagine that. That will be an even more powerful usage driver in the future.

All in all , to my simple way of looking at things SNOW is likely to beat its growth projection this year and probably for a bit longer. Perhaps they will even justify current EV/S of 69 (more or less) Time will tell.

cheers

draj

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Already so much great discussion here of Snowflake’s quarter - was really debating if I should post this here. Can also read it here on my new blog: https://exponentialdave.com/2021/05/30/hypergrowth-continues…

Years ago, I used to wish that Amazon would spin off AWS, or Microsoft would spin off Azure, allowing me to invest in their cloud services without also having to invest in all the other low margin things Microsoft and Amazon do. But last year, something better came along. That something is Snowflake, a leader and pioneer of the “data cloud”. Snowflake hit a big milestone in this quarter of processing more than 1 billion queries in a single day!

I’m going to oversimplify Snowflake’s business for non-technical people into three major areas: storage of data, compute (ability to do stuff to/with the data), and data sharing. Data sharing is capable both within an organization and between different organizations.

We have very little to complain about in Snowflake’s recently posted quarter as Snowflake grew product revenues 110% year over year to $214 million. Margins jumped to 72%, up from 66% in the comparable quarter last year. Management indicated in the long term, this number could trend upward into the mid 70’s. The net revenue retention rate was 168%, meaning that, if a customer spent $100 last year on the Snowflake platform, this year they are spending $168.

Additionally, the company now has 117% more million dollar customers than the comparable quarter last year, clocking in at 104. And there are many companies on the cusp of the $1mm dollar mark who could very well join the cohort in coming quarters. Net new customer adds (of any dollar amount) was 393 in Q1. These customers only accounted for 1% of revenues, which is a reminder that Snowflake’s time to fully ramp on to the platform is many months long (roughly 6-9 months). Of these customer wins, several were very notable, including Datadog and Walgreens Boots Alliance.

The company’s balance sheet is healthy, with approximately $5.1 billion in cash, cash equivalents and short-term and long-term investments.

A key part in the Snowflake investment thesis is not just its ability to store and process data, but also to make data sharing easier than ever before. The company outlined that “At the end of the quarter, 15% of our rapidly expanding customer base had data edges (data networking relationships) in place with external Snowflake accounts compared to 10% a year ago. And the number of edges in this period grew 33% quarter-on-quarter.” The more edges get made and used, the more useful (and sticky) Snowflake’s platform becomes. The ease and sheer amount of data sharing further enables the value of the data to grow exponentially.

Regarding guidance, the company is guiding revenues between $235 million and $240 million, representing year-over-year growth between 88% and 92%. This equates to 12% sequential growth from Q1 2021 to Q2 2021, which is exactly the same sequential growth they guided for Q1 2021, only to come in 8 percent higher at 20%. I am no fortune teller, but I think it’s very realistic to expect the same thing to happen again. So even though they are forecasting 92% high end growth, it will probably be more like 105% YoY growth on $260mm of revenue.

Part of Snowflake’s business comes from storing data, and the company implemented a compression algorithm that’s so good, it’s going to reduce the company’s revenues by roughly $13 million over the course of fiscal 2022. This might sound like a bad thing to investors, but there is much more money to be made from Snowflake’s compute business. Making storage cheaper will ultimately drive more money into Snowflake’s compute business in the long run. Snowflake indicated they update their compression algorithms roughly every two years, so we can expect this to be something Snowflake does more than once.

An interesting question that came up on the call from an analyst was what advantages does Snowflake have over the hyperscalers (Amazon, Microsoft, Google) that have their own cloud based data warehouse? CEO Frank Slootman’s answer was, to put it simply, better architecture. Snowflake was not architected to straddle the on premise and public cloud environments – it was only made for the public cloud.

Another key aspect driving customers towards Snowflake is governance, a combination of compliance and cybersecurity requirements. Snowflake highlighted its acquisition of a company called CryptoNumerics and its ability to anonymize personal information. This is hyper critical for sharing data and ensuring that personal information is dealt with properly and safely.

No quarter, not even Snowflake’s, is ever perfect. If we temporarily forget about all the new million dollar customers this quarter and turn our attention to net customer adds or fortune 500 customer adds, these numbers came in at a lower rate than previous quarters from a sequential (QoQ) perspective. But company leadership was quick to assert that there will be lumpiness and seasonality in tracking this statistic. Sales reps are much more likely to close new customers, especially big ones such as those in the fortune 500, towards the end of the year, not in Q1.

Another weak point was sequential growth in Remaining Performance Obligation, which clocked in at 7.4%. This appears to be due to seasonality. Last time QoQ (quarter over quarter) growth was about this slow was in the corresponding quarter in 2020.

In summary, Snowflake posted a business as usual quarter. For a company like Snowflake, business as usual is terrific. Based on current guidance and company fundamentals, I am very bullish on Snowflake and will continue to hold for the long term.

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I enjoyed your post and agree, EP!
Something to consider…
https://seekingalpha.com/article/4432000-palantir-stock-vs-s…
Best Always!
paul

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Thank you ExponentialDave for your great post on Snowflake!

I’ve encountered an interesting personal experience with Snowflake which I believe might be of interest to the members of this board [https://jmarquesdatabeyond.medium.com/what-makes-snowflake-s…

"My Personal Experience with Snowflake

Since I first used Snowflake back in 2016, I have been an enthusiastic advocate for its qualities.

Back then, I was implementing a greenfield data platform for a travel company, and when asked to try this new database we hadn’t heard of before, we were highly suspicious of it. It was a time when NoSQL databases were promising an easy world for everyone, and here it was, yet another “tool” claiming to take all the hassle away, no tuning needed, linear scaling…. too good to be true, but still we decided to give it a chance and do a side by side comparison with our preferred tool, AWS Redshift.

For the test, we used the hardest job we had: “shredding” hundreds of millions of click-stream data XML… after a lot of testing, we found that for the same price point, Snowflake won by a nice margin. After some more tests with typical query patterns, we saw that Snowflake was just a better tool for the job, and we went with it.

After little more than one year into the project, I was absolutely sold… let me share an anecdotal story:

I had just found a bug in the shredding process that deemed all our shredded data incomplete. Here I was, 11am on a Friday and my last day before a two week break, how lucky of me… Shredding hundreds of millions of these chunky (some of them 1MB+) XMLs would take forever! Unless…

I call the Client and explain the situation: I needed to start a very big cluster to get this over the finish line in time… And so I did, and the whole thing was done in less than a hour. I went on holidays at 6PM that day, with the work done and worry-free.

The best part? Because it scales linearly, waiting hours for it to run on a small cluster would have cost the same as doing it quickly in a large cluster. This was probably the big turning point for me: I now loved Snowflake.

Conclusions

Snowflake is just a great productivity enabler. It transforms all the expensive waiting around into productive work time: Data Engineers and Analysts are much more expensive than licensing, and this is before we even consider time-to-market. Cherry on top, no more “database administrators” needed, there is really nothing for them here…
I have worked with more than one client handling multi-billion records a day, and I know it can be done with other technologies. But this is the only technology that makes me breathe a sight of relief…"

Lemat

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