SNOW Q3 2021 Earnings

https://investors.snowflake.com/news/news-details/2020/Snowf…

Snowflake Reports Financial Results for the Third Quarter of Fiscal 2021
12/02/2020
Product revenue of $148.5 million, representing 115% year-over-year growth
Remaining performance obligations of $927.9 million, representing 240% year-over-year growth
3,554 total customers
Net revenue retention rate of 162%
65 customers with trailing 12-month product revenue greater than $1 million
SAN MATEO, Calif.–(BUSINESS WIRE)-- Snowflake (NYSE: SNOW), provider of the Data Cloud, today announced financial results for its third quarter of fiscal 2021, ended October 31, 2020.

Total revenue for the quarter was $159.6 million, representing 119% year-over-year growth. Product revenue was $148.5 million, representing 115% year-over-year growth. Remaining performance obligations were $927.9 million, representing 240% year-over-year growth. Net revenue retention rate was 162% as of October 31, 2020. The company now has 3,554 total customers and 65 customers with trailing 12-month product revenue greater than $1 million. See the section titled “Key Business Metrics” for definitions of product revenue, remaining performance obligations, net revenue retention rate, total customers, and customers with trailing 12-month product revenue greater than $1 million.

Lee

13 Likes

SNOW is down in AF. Any insight into why? Did they provide guidance?

They r guiding for full year revenue growth this year of around 114% mid point compared to 164% growth last year. They also guide product revenue growth 100% in Q4 compared to 115% in Q3. It’s a clear deceleration.

If they make this year around 580m in top line and grow next year at around 90-100%, we r looking at 1.1-1.2b next year revenues. Today’s valuation 80b. I GUESS it’s stretched. Looking forward to reasonable valuation before starting a position.

What’s noticeable is that SNOW stressed that it’s NOT A SAAS COMPANY as its revenue is 93% usage based - look at earnings presentation page 9. This obviously reminds us of Fastly’s business model. What this means is that SAAS predictability brought by subscription is not present here. So, revenues could be lumpy. This is opposite to, for example, Zoom’s model which is subscription based and WHEN we will enter into post-vaccine world most of the subscriptions will stay and produce revenues.

On the other hand, as Saul says data is unlimited and it will be multiplying exponentially in the future. This is a long-term tailwind for Snowflake with its usage-based model.

I also wonder how shall we interpret 930m in RPO (240% growth) considering that it’s usage based model?

Snowflake is on my watching list, but I’m not buying here. In my eyes from capital allocation perspective there are better investments discussed on our board.

Unless I’m missing something here…? :slight_smile:

8 Likes

Snowflake is not SaaS company, they are consumption company, ( both CEO/cfo emphasized this ) the revenue they logged is the amount of credit the customer has used , we should not use regular SaaS evaluation model to evaluate snow’s revenue, they made it very clear in their conference call.
“Remaining performance obligations of $927.9 million, representing 240% year-over-year growth”
this “remaining performance obligation” is the credit customer bought yet used, this amount will not be logged as revenue, they don’t control how much business spend , so its hard to predict next quarter’s revenue, but it is important to watch this number growing sequentially
I listened to the CC, honestly quite impressed the data cloud concept, their powerful weapon resides in the future of data sharing.
PS, I have been studying $PLTR recently, everyone has been saying they are data company, according to them, they are not data company, they are software company, they are building data operation system, I work in the industry, I feel that’s the future for some company with complex operations
I am excited for both company, IMHO, those two are the future of FAANG

15 Likes

“Remaining performance obligations of $927.9 million, representing 240% year-over-year growth”
this “remaining performance obligation” is the credit customer bought yet used, this amount will not be logged as revenue, they don’t control how much business spend , so its hard to predict next quarter’s revenue, but it is important to watch this number growing sequentially

I’m not sure this is a fair characterisation both in terms of what is bought up front as credit nor that it will not be logged as revenue.

This is what prepared remarks and Q&A clarifications referring to RPO help characterise this metric as:-

Prepared Remarks:-

We also focus on the remaining performance obligations or RPO. RPO represents all the contracted revenue not yet recognized including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. Unlike most SaaS businesses, billings is not a meaningful metric for us because it is less correlated to product revenue due to the variability of consumption…

…Now let’s turn to our results in guidance. For Q3 product revenues were $148 million, representing 115% year-over-year growth. Our remaining performance obligation was $928 million representing 240% year-over-year growth with a weighted average life per multi-year contracts of 2.5 years. This strong performance is driven by our customer base realizing the value of our platform for their existing use cases, while also embracing the Snowflake Data Cloud vision.

As I mentioned earlier, our business model allows our customers to consume their entire contract before the end of the term, which is what we often see. We also continue to see customers willing to make more multi-year commitments with us, which is a direct result of the value our customers can create with us as we continue to scale.

Q&A

Brent Bracelin

And then Mike, just as we think about the RPO momentum this quarter, I mean, much stronger than I think we had kind of thought it would be. And I know you had the benefit of a very large contract last quarter, so what drove the acceleration and kind of new bookings this quarter and that upside in RPO?

Michael Scarpelli

As we’re moving more into large enterprises, large enterprises really want to do multi-year deals. They are not interested in having to go to procurement every year and so we saw a number of large enterprises commit to multi-year deals with us and we think that is going to be a trend that will continue. And I will say it wasn’t until this year that our sales force really started pushing more three-year deals and we’re going to continue to do that going forward in the future.

Tyler Radke

Thank you very much and congratulations on the first quarter here. I wanted to ask you a little bit about the guidance for Q4. Obviously, you saw really strong RPO growth in Q3 and I’m curious if there were any factors that had perhaps a short-term negative impact on the Q4 revenue guidance? I know oftentimes when we sign these big deals, customers through volume based discounts get effectively a lower consumption credit rate. So I’m wondering I guess it’s almost the RPO strength that you saw this quarter and the large commitments that were signed, if that had any type of negative impact on your expected growth rate for revenue in Q4?

Michael Scarpelli

No, you have to remember a lot of that RPO are new deals that we were booking. And as I said before, it takes, customers to pay, we have a lot of big on-prem migrations that are going on and until those ramp up and it could take six months plus, you don’t really see any revenue from that and so most - a lot of that won’t flow through until next fiscal year.

Regards
Ant

16 Likes

They’re not a SaaS company but they are much more SaaSsy than some other consumption based companies (such as FSLY). They charge on data consumption. In the world of data, RARELY does the amount of data go down. So while yes, they are consumption based, its a lot more stable than FSLY’s consumption based model is.

1 Like

“I’m not sure this is a fair characterisation both in terms of what is bought up front as credit nor that it will not be logged as revenue.”
I may over simplified but that’s the concept. here is the complete message from CFO related to their consumption based mode
"We are not a SaaS model. We are a consumption model. Our business model is a key differentiator for us and is designed to drive customer success. Our customers purchase credits and when those credits are consumed, we recognize the revenue. Unlike a ratable model, we only recognize revenue, if the customer uses our platform.

For this reason, there is no shelfware in our revenue. For many customers, it takes several months up until they are up and running at full capacity and this model gives them the flexibility to purchase the amount they plan on using without wasting credits or exceeding their original contract if they consume more than planned.

For these reasons, we do not focus on the same metrics that the SaaS business would. We focus on product revenue and remaining performance obligation. Product revenue, which excludes professional services and other revenue is the most transparent disclosure we offer. It gives full insight into how our customers are actually using our product in the period reported. If a customer purchases credits and does not consume, their revenue will be zero dollars.

We also focus on the remaining performance obligations or RPO. RPO represents all the contracted revenue not yet recognized including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. Unlike most SaaS businesses, billings is not a meaningful metric for us because it is less correlated to product revenue due to the variability of consumption."

6 Likes