On December 1st, Snowflake reported Q3’22 earnings that exceeded expectations. Many important metrics showed acceleration, including revenue and RPO growth, and customers with trailing twelve month revenue of $1 million or more. Snowflake also continued to show operational leverage as Adjusted Operating Margin was -2.5% compared to -30% a year ago. Next quarter they guided for 1% (1st positive quarter).
With total Q3’22 revenue of $334M, Snowflake now has an Enterprise Value to Next Twelve Months revenue (EV/NTM) of about 53x and suddenly the valuation isn’t looking so “expensive” relative to it’s SaaS peers (though Snowflake isn’t really an SaaS model as 93% of revenue is consumption based).
Q3’22 Highlights:
Total Revenue: 334M +23% QoQ, +109% YoY (acceleration)
Product Revenue: 312.5M +22.5% QoQ, +110% YoY (acceleration)
Product Gross Margin: 70% (75% adjusted)
Operating Cash Flow: 15.5M
Free Cash Flow: 9.5M (21.5M adjusted)
RPO: 1804M +18% QoQ, +94% YoY (acceleration)
NRR: 173%; previous 4 quarters: (170%, 168%, 168%, 162%)
Total Customers: 5416 +426 seq, +8.5% QoQ, +52% YoY
Customers with TTM >$1 million: 148 +32 seq, +28% QoQ (acceleration)
Q4’22 Guidance was also strong:
Product Revenue: 350M +96% YoY
Adj Product Gross Margin: 74%
Adj FCF Margin: 8%
FY’22 Product Revenue: 1131M +104% YoY
Frank Slootman (CEO of Snowflake) said on the conference call:
So, yes, we are in the very early stages, but as you see from the metrics that we report on, there is a very, very steady aggressive growth happening quarter-on-quarter. But we sort of haven't reached that tipping point yet where sort of the floodgates are open and things are just expanding at a meteoric rate. But we're anticipating that that will happen at some point. It's very non-linear in the way the adoptions is going to develop.
Prior to earnings, I had re-initiated a position in SNOW equal to 5.5% of my portfolio. As of 12/3, SNOW is 12.7% of my portfolio.
Sincerely,
HugoStocklitz