10-QPeriod: Q1 FY2023

Snowflake Inc. Quarterly Report for Q1 Ended Apr 30, 2022

Filed June 3, 2022For Securities:SNOW

Summary

Snowflake Inc. reported strong revenue growth in the first quarter of fiscal year 2023, with total revenue increasing by 85% year-over-year to $422.4 million. This growth was primarily driven by a 84% increase in product revenue, largely attributed to higher consumption by existing customers as indicated by a robust net revenue retention rate of 174%. The company also demonstrated improving gross margins, with product gross margin reaching 72%, up from 66% in the prior year period, attributed to increased sales of higher-priced platform editions and greater scale. Despite the strong revenue performance, Snowflake continued to operate at a net loss of $165.8 million, though this represents an improvement from the $203.2 million net loss in the same period last year. Strategic acquisitions also played a role, with the company completing the acquisition of Streamlit, Inc. for approximately $650.8 million in March 2022. This acquisition is expected to bolster Snowflake's capabilities in data application development. The company ended the quarter with a healthy cash and investments balance of $5.0 billion, and positive net cash provided by operating activities of $184.6 million, indicating solid financial footing and operational cash generation. Investors should monitor the company's continued revenue growth, path to profitability, and integration of strategic acquisitions.

Financial Highlights

51 data points
Beta

Revenue

$422.37M

65.0% Gross Margin

Net Income

-$165.79M

-39.3% Net Margin

EPS (Diluted)

$-0.53

Total Assets

$7.02B

Cash & Equivalents

$1.06B

Free Cash Flow

$177.20M

Financial Statements
Beta
Revenue$422.37M
Cost of Revenue$147.93M
Gross Profit$274.44M
R&D Expenses$150.80M
Operating Expenses$463.21M
Operating Income-$188.77M
Net Income-$165.79M
EPS (Basic)$-0.53
EPS (Diluted)$-0.53
Shares Outstanding (Basic)314.36M
Shares Outstanding (Diluted)314.36M

Key Highlights

  • 1Revenue grew 85% year-over-year to $422.4 million in Q1 FY2023.
  • 2Product revenue increased by 84% to $394.4 million, driven by strong consumption from existing customers.
  • 3Net revenue retention rate remained high at 174% as of April 30, 2022.
  • 4Product gross margin improved to 72% from 66% year-over-year.
  • 5Net loss narrowed to $165.8 million from $203.2 million in the prior year.
  • 6Completed the acquisition of Streamlit, Inc. for $650.8 million in March 2022.
  • 7Ended the quarter with $5.0 billion in cash, cash equivalents, and investments.

Frequently Asked Questions

Snowflake's primary source of revenue is product revenue, which is generated from fees charged to customers based on their consumption of compute, storage, and data transfer resources on the company's platform. Revenue is generally recognized on a consumption basis, meaning it is recognized as customers use the platform's resources, rather than ratably over the term of a contract. This consumption-based model provides flexibility for customers but also means Snowflake has less visibility into the precise timing of revenue recognition compared to traditional subscription models.

The acquisition of Streamlit, Inc. in March 2022 for approximately $650.8 million was accounted for as a business combination. The purchase consideration included cash and Snowflake's Class A common stock. The acquisition resulted in significant goodwill ($494.2 million) and the recognition of intangible assets, such as a developer community intangible asset ($150 million). The results of Streamlit from the acquisition date were included in Snowflake's financial statements, though they were not material for the reported period. The acquisition also led to increased stock-based compensation expense over the next three years related to founder shares.

Snowflake ended the quarter with a strong liquidity position, holding $5.0 billion in cash, cash equivalents, and investments. The company generated positive net cash provided by operating activities of $184.6 million for the three months ended April 30, 2022, a significant increase from $21.9 million in the prior year. Management believes its current cash and investments are sufficient to support working capital and capital expenditure requirements for at least the next 12 months, and expects continued positive cash flow from operations.

Snowflake's product gross margin improved to 72% from 66% year-over-year primarily due to an increased percentage of revenue derived from customers consuming higher-priced editions of their platform, higher volume-based discounts on purchases of third-party cloud infrastructure, and increased operational efficiencies gained through scale across their cloud infrastructure regions.