My notes from the SNOW Q3 FY 23 Analyst Q/A
Frank Slootman, CEO
Michael Scarpelli, CFO
Q As you think about next year, how do you think about what you think about new customers?
A Most of the revenue is driven by existing customers, however, they’re focused on landing the highest quality clients such as those in the global 2000.
Q Are you starting to see that the network effects are helping your verticals, and can certain verticals grow in because they’re locked in.
A See this in financial services in the data sharing that’s driving this. Each industry has its unique dynamics that drive this. They’re all a little bit different. There’s a lot of data gravity that benefits SNOW dramatically, and reduces friction, especially in verticals such as financial services.
Q 47% growth in FY24. Draw the bridge for us.
A Q4 has a lot of holidays with customers traveling, etc. They think Snowpark Python will be a FY24 dynamic.
Q Stripping out the largest 10 customers, what are the underlying trends?
A They continue to see strength in financial services and advertising and weakness in APJ because FX is impacting them and in the SMB customers w/ 500 or less employees.
Q Guidance in next quarter, what are you assuming for next year. Walk us through puts and takes in guidance trajectory.
A Considering more of the same, and all they can do is forecast based on what they see today.
Q When do some of the optimization patterns start to take over?
A Technology has underperformed and freezing hiring and CFO is not factoring in any growth from these companies this quarter.
Q Q4 revenue guidance was below consensus. Did it tilt one way vs. the other.
A They saw a slowdown in October. November is starting to tick back up again given the macro backdrop they have.
Q Slowing consumption and weaker macro environment would be focused on certain verticals. Is this still the same?
A It hasn’t changed that much and there are certain verticals such as technology that are not performing very well. Financial services are very strong as is advertising/media, which is driven by clean room technology. SMB slowdown in consumption, is not changing.
Q Where are you focusing future investments? Hiring?
A Very much focused on hiring and sales force going into existing markets rather than expanding into new markets geographically or vertical wise. 6 month typical lag time from land to generating interest.
A AWSM and Microsoft have been healthy and Google has been more of the same.
Q What do you think will be the average G2K spend in the future?
A There’s no reason why a typical G2K cannot spend $10M on Snowflake. This is a marathon, not a spring. Capital 1 is their largest customer, and it has taken them 5 years to ramp to this size.
Q Legacy migration
A Selling into large companies takes 6-9 months to ramp to where they generate meaningful revenue.
Q Data ingestion
A Past they bleeding edge customer, now it’s FOMO, fear of missing out, we cannot be left behind. In other words, their customers want to lean in and are clearly identifying what is holding them back from getting there.
Q RPO in 4Q
A From a current RPO perspective, they typically see more holidays and travel amongst their customers during Q4.
Q Higher free cash flow and longer target looks pretty good, what are the larger upside drivers for this?
A Part of it is what they guided to. Slowing their hiring down next year, so there’s an opportunity to put more $ in their pocket. (not exact words).
Q Given current Macro environment, can you talk about how the larger customers will grow.
A Spending more time with customers to make sure customers are using SNOW the most efficiently. Training and product enhancements.
Q What is revenue exposure from your SMB customers?
A It’s less than 10%.
Q On a short term basis, how do you plan on mainitaining sales?
A Ramp up time just takes (2-6 months) a longer time. Their spend on hardware improvements is really hitting them this quarter.
Q Expanding number of use cases. Do you have insight re: customer’s appetites into expanding into data science and how quickly in the next year or 2 this will happen.
A Seeing pretty high interest, and the willingness to expand the use cases seems unaffected.