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Snowflake Reports Financial Results for the Third Quarter of Fiscal 2023

  • Product revenue of $522.8 million in the third quarter, representing 67% year-over-year growth

  • Remaining performance obligations of $3.0 billion, representing 66% year-over-year growth

  • 7,292 total customers

  • Net revenue retention rate of 165%

  • 287 customers with trailing 12-month product revenue greater than $1 million

No-Headquarters/BOZEMAN, Mont., November 30, 2022--(BUSINESS WIRE)--Snowflake (NYSE: SNOW), the Data Cloud company, today announced financial results for its third quarter of fiscal 2023, ended October 31, 2022.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20221130005425/en/

Snowflake Q3 FY23 Infographic (Graphic: Snowflake)

Revenue for the quarter was $557.0 million, representing 67% year-over-year growth. Product revenue for the quarter was $522.8 million, representing 67% year-over-year growth. Remaining performance obligations were $3.0 billion, representing 66% year-over-year growth. Net revenue retention rate was 165% as of October 31, 2022. The company now has 7,292 total customers and 287 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.

"During Q3, product revenue grew 67% year-over-year to $523 million. Our non-GAAP product gross margin came in at 75%, and we continue to drive strong growth at scale, coupled with strength in unit economics, operating profit, and free cash flow," said Frank Slootman, Chairman and CEO, Snowflake. "Snowflake’s Data Cloud maximizes the power and promise of data science and artificial intelligence, a high priority in the modern enterprise."

Third Quarter Fiscal 2023 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the third quarter of fiscal 2023:

 

Third Quarter Fiscal 2023

GAAP Results

 

Third Quarter Fiscal 2023

Non-GAAP Results(1)

 

Amount

(millions)

Year/Year Growth

 

 

 

Product revenue

$522.8

67%

 

 

 

 

 

 

 

 

 

 

Amount

(millions)

Margin

 

Amount

(millions)

Margin

Product gross profit

$376.8

72%

 

$393.9

75%

Operating income (loss)

($206.0)

(37%)

 

$43.4

8%

Net cash provided by operating activities

$79.3

 

 

 

 

Free cash flow

 

 

 

$65.0

12%

Adjusted free cash flow

 

 

 

$65.0

12%

 

 

 

 

 

 

(1) We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section titled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP financial measures, and the table titled "GAAP to Non-GAAP Reconciliations" for a reconciliation of GAAP to non-GAAP financial measures.

 

Note: Fiscal year ends January 31. Numbers are rounded for presentation purposes.

Financial Outlook:

Our guidance includes GAAP and non-GAAP financial measures.

The following table summarizes our guidance for the fourth quarter of fiscal 2023:

 

Fourth Quarter Fiscal 2023

GAAP Guidance

 

Fourth Quarter Fiscal 2023

Non-GAAP Guidance(1)

 

Amount

(millions)

Year/Year Growth

 

 

 

Product revenue

$535 - $540

49 - 50%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Margin

Operating income

 

 

 

 

1%

 

 

 

 

 

 

 

 

 

 

Amount

(millions)

 

Weighted-average shares used in computing net income per share attributable to Snowflake Inc. common stockholders - diluted(2)

 

 

 

360

 

 

 

 

 

 

 

(1) We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section titled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP financial measures.

 

(2) We may have a non-GAAP net income attributable to Snowflake Inc. for the fourth quarter of fiscal 2023. As a result, we are presenting the weighted-average shares used in computing net income per share attributable to Snowflake Inc. common stockholders - diluted in the non-GAAP column of the table above, giving effect to all potentially dilutive securities (stock options, restricted stock units, and employee stock purchase rights under our 2020 Employee Stock Purchase Plan). These potentially dilutive securities would be excluded from the weighted-average shares used in computing net loss per share attributable to Snowflake Inc. common stockholders - diluted if we have a non-GAAP net loss attributable to Snowflake Inc.

The following table summarizes our guidance for the full-year fiscal 2023:

 

Full-Year Fiscal 2023

GAAP Guidance

 

Full-Year Fiscal 2023

Non-GAAP Guidance(1)

 

Amount

(millions)

Year/Year Growth

 

 

 

Product revenue

$1,919 - $1,924

68 - 69%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Margin

Product gross profit

 

 

 

 

75%

Operating income

 

 

 

 

3%

Adjusted free cash flow

 

 

 

 

21%

 

 

 

 

 

 

 

 

 

 

Amount

(millions)

 

Weighted-average shares used in computing net income per share attributable to Snowflake Inc. common stockholders - diluted(2)

 

 

 

359

 

 

 

 

 

 

 

(1) We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section titled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP financial measures.

 

(2) We may have a non-GAAP net income attributable to Snowflake Inc. for full-year fiscal 2023. As a result, we are presenting the weighted-average shares used in computing net income per share attributable to Snowflake Inc. common stockholders - diluted in the non-GAAP column of the table above, giving effect to all potentially dilutive securities (stock options, restricted stock units, and employee stock purchase rights under our 2020 Employee Stock Purchase Plan). These potentially dilutive securities would be excluded from the weighted-average shares used in computing net loss per share attributable to Snowflake Inc. common stockholders - diluted if we have a non-GAAP net loss attributable to Snowflake Inc.

A reconciliation of non-GAAP guidance measures to corresponding GAAP guidance measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. Stock-based compensation-related charges, including employer payroll tax-related items on employee stock transactions, are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. We have provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for our historical non-GAAP financial results included in this release. Our fiscal year ends January 31, and numbers are rounded for presentation purposes.

Conference Call Details

We will host a conference call today, beginning at 3 p.m. Mountain Time on November 30, 2022. Investors and participants may attend the call by dialing (844) 200-6205 (Access code: 255864), or if outside the United States, by dialing +1 (929) 526-1599 (Access code: 255864).

The call will also be webcast live on the Snowflake Investor Relations website.

An audio replay of the conference call and webcast will be available two hours after its completion and will be accessible for 30 days on the Snowflake Investor Relations website.

Investor Presentation Details

An investor presentation providing additional information and analysis can be found at https://investors.snowflake.com.

Statement Regarding Use of Non‑GAAP Financial Measures

We report the following non-GAAP financial measures, which have not been prepared in accordance with generally accepted accounting principles in the United States (GAAP), in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

  • Product gross profit, Operating income (loss), Net income (loss), Net income (loss) attributable to Snowflake Inc., and Net income (loss) per share attributable to Snowflake Inc. common stockholders - basic and diluted. Our non-GAAP product gross profit, operating income (loss), net income (loss), and net income (loss) attributable to Snowflake Inc. measures exclude the effect of (i) stock-based compensation-related charges, including employer payroll tax-related items on employee stock transactions, (ii) amortization of acquired intangibles, (iii) expenses associated with acquisitions and strategic investments, (iv) adjustments attributable to noncontrolling interest, and (v) the related income tax effect of these adjustments as well as the non-recurring income tax expense or benefit associated with acquisitions. Our non-GAAP net income (loss) per share attributable to Snowflake Inc. common stockholders - basic is calculated by dividing non-GAAP net income (loss) attributable to Snowflake Inc. by the weighted-average number of diluted shares of common stock outstanding during the period. Our non-GAAP net income (loss) per share attributable to Snowflake Inc. common stockholders - diluted is calculated by dividing net non-GAAP net income (loss) attributable to Snowflake Inc. by the weighted-average number of diluted shares outstanding, giving effect to all potentially dilutive common stock equivalents (stock options, restricted stock units, and employee stock purchase rights under our 2020 Employee Stock Purchase Plan). Amounts attributable to noncontrolling interest were not material for all periods presented. We believe the presentation of operating results that exclude these non-cash or non-recurring items provides useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.

  • Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities reduced by purchases of property and equipment and capitalized internal-use software development costs. Cash outflows for employee payroll tax items related to the net share settlement of equity awards are included in cash flow for financing activities and, as a result, do not have an effect on the calculation of free cash flow. Free cash flow margin is calculated as free cash flow as a percentage of revenue. We believe these measures provide useful supplemental information to investors because they are indicators of the strength and performance of our core business operations.

  • Adjusted free cash flow. Adjusted free cash flow is defined as free cash flow plus (minus) net cash paid (received) on employer and employee payroll tax-related items on employee stock transactions. Employee payroll tax-related items on employee stock transactions are generally pass-through transactions that are expected to have a net zero impact on free cash flow over time, but that may impact free cash flow in any given fiscal quarter due to differences between the time that we receive funds from our employees and the time we remit those funds to applicable tax authorities. We believe that excluding the effects of these payroll tax-related items will enhance stockholders' ability to evaluate our free cash flow performance, including on a quarter-over-quarter basis. Adjusted free cash flow margin is calculated as adjusted free cash flow as a percentage of revenue. We believe these measures provide useful supplemental information to investors because they are indicators of the strength and performance of our core business operations.

We use these non-GAAP financial measures internally for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP to non-GAAP results.

Key Business Metrics

We monitor our key business metrics, including (i) free cash flow starting with the fiscal quarter ended January 31, 2022, and (ii) the other metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. See the section titled "Statement Regarding Use of Non-GAAP Financial Measures" for the definition of free cash flow. The calculation of our key business metrics may differ from other similarly titled metrics used by other companies, securities analysts, or investors.

  • Product Revenue. Product revenue is a key metric for us because we recognize revenue based on platform consumption, which is inherently variable at our customers’ discretion, and not based on the amount and duration of contract terms. Product revenue is primarily derived from the consumption of compute, storage, and data transfer resources, which are consumed by customers on our platform as a single, integrated offering. Customers have the flexibility to consume more than their contracted capacity during the contract term and may have the ability to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. Our consumption-based business model distinguishes us from subscription-based software companies that generally recognize revenue ratably over the contract term and may not permit rollover. Because customers have flexibility in the timing of their consumption, which can exceed their contracted capacity or extend beyond the original contract term in many cases, the amount of product revenue recognized in a given period is an important indicator of customer satisfaction and the value derived from our platform. Product revenue excludes our professional services and other revenue.

  • Remaining Performance Obligations. Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including (i) deferred revenue and (ii) non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. RPO excludes performance obligations from on-demand arrangements and certain time and materials contracts that are billed in arrears. Portions of RPO that are not yet invoiced and are denominated in foreign currencies are revalued into U.S. dollars each period based on the applicable period-end exchange rates. RPO is not necessarily indicative of future product revenue growth because it does not account for the timing of customers’ consumption or their consumption of more than their contracted capacity. Moreover, RPO is influenced by a number of factors, including the timing of renewals, the timing of purchases of additional capacity, average contract terms, seasonality, changes in foreign currency exchange rates, and the extent to which customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

  • Total Customers. We count the total number of customers at the end of each period. For purposes of determining our customer count, we treat each customer account, including accounts for end-customers under a reseller arrangement, that has at least one corresponding capacity contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers. For purposes of determining our customer count, we do not include customers that consume our platform only under on-demand arrangements. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments.

  • Net Revenue Retention Rate. To calculate net revenue retention rate, we first specify a measurement period consisting of the trailing two years from our current period end. Next, we define as our measurement cohort the population of customers under capacity contracts that used our platform at any point in the first month of the first year of the measurement period. Starting with the fiscal quarter ended October 31, 2021, the cohorts used to calculate net revenue retention rate include end-customers under a reseller arrangement. We then calculate our net revenue retention rate as the quotient obtained by dividing our product revenue from this cohort in the second year of the measurement period by our product revenue from this cohort in the first year of the measurement period. Any customer in the cohort that did not use our platform in the second year remains in the calculation and contributes zero product revenue in the second year. Our net revenue retention rate is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our net revenue retention rate for historical periods reflecting these adjustments. Since we will continue to attribute the historical product revenue to the consolidated contract, consolidation of capacity contracts within a customer’s organization typically will not impact our net revenue retention rate unless one of those customers was not a customer at any point in the first month of the first year of the measurement period.

  • Customers with Trailing 12-Month Product Revenue Greater than $1 Million. To calculate the number of customers with trailing 12-month product revenue greater than $1 million, we count the number of customers under capacity arrangements that contributed more than $1 million in product revenue in the trailing 12 months. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our customer count for historical periods reflecting these adjustments.

Use of Forward‑Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding our performance, including but not limited to statements in the section titled "Financial Outlook." The forward-looking statements contained in this release and the accompanying oral presentation are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results or outcomes to be materially different from any future results or outcomes expressed or implied by the forward-looking statements. These risks, uncertainties, assumptions, and other factors include, but are not limited to, those related to our business and financial performance, general market and business conditions, downturns, or uncertainty, including fluctuations or volatility in capital markets or foreign currency exchange rates, the effects of the recent and developing armed conflict in Ukraine on our business, results of operations, and financial condition, our ability to attract and retain customers, our ability to develop new products and services and enhance existing products and services, our ability to respond rapidly to emerging technology trends, our ability to execute on our business strategy, including our strategy related to the Data Cloud, our ability to increase and predict customer consumption of our platform, our ability to compete effectively, and our ability to manage growth.

Further information on these and additional risks, uncertainties, and other factors that could cause actual outcomes and results to differ materially from those included in or contemplated by the forward-looking statements contained in this release are included under the caption "Risk Factors" and elsewhere in our Form 10-Q for the fiscal quarter ended July 31, 2022 and other filings and reports we make with the Securities and Exchange Commission from time to time, including our Form 10-Q that will be filed for the fiscal quarter ended October 31, 2022.

Moreover, we operate in a very competitive and rapidly changing environment, and new risks may emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results or outcomes to differ materially from those contained in any forward-looking statements we may make. Forward-looking statements speak only as of the date the statements are made and are based on information available to us at the time those statements are made and/or management's good faith belief as of that time with respect to future events. Except as required by law, we undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.

About Snowflake

Snowflake enables every organization to mobilize their data with Snowflake’s Data Cloud. Customers use the Data Cloud to unite siloed data, discover and securely share data, and execute diverse analytic workloads. Wherever data or users live, Snowflake delivers a single data experience that spans multiple clouds and geographies. Thousands of customers across many industries, including 543 of the 2022 Forbes Global 2000 (G2K) as of October 31, 2022, use Snowflake Data Cloud to power their businesses. Learn more at snowflake.com.

Source: Snowflake Inc.

 

Snowflake Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended October 31,

 

Nine Months Ended October 31,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

Revenue

$

557,028

 

 

$

334,441

 

 

$

1,476,647

 

 

$

835,553

 

Cost of revenue

 

190,721

 

 

 

120,786

 

 

 

511,883

 

 

 

324,253

 

Gross profit

 

366,307

 

 

 

213,655

 

 

 

964,764

 

 

 

511,300

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

284,477

 

 

 

190,971

 

 

 

803,034

 

 

 

540,678

 

Research and development

 

211,387

 

 

 

115,900

 

 

 

545,933

 

 

 

343,783

 

General and administrative

 

76,462

 

 

 

64,055

 

 

 

218,314

 

 

 

189,846

 

Total operating expenses

 

572,326

 

 

 

370,926

 

 

 

1,567,281

 

 

 

1,074,307

 

Operating loss

 

(206,019

)

 

 

(157,271

)

 

 

(602,517

)

 

 

(563,007

)

Interest income

 

21,857

 

 

 

1,985

 

 

 

38,308

 

 

 

6,787

 

Other income (expense), net

 

(13,271

)

 

 

1,609

 

 

 

(44,672

)

 

 

9,867

 

Loss before income taxes

 

(197,433

)

 

 

(153,677

)

 

 

(608,881

)

 

 

(546,353

)

Provision for (benefit from) income taxes

 

4,009

 

 

 

1,179

 

 

 

(18,839

)

 

 

1,442

 

Net loss

 

(201,442

)

 

 

(154,856

)

 

 

(590,042

)

 

 

(547,795

)

Less: net loss attributable to noncontrolling interest

 

(506

)

 

 

 

 

 

(506

)

 

 

 

Net loss attributable to Snowflake Inc.

$

(200,936

)

 

$

(154,856

)

 

$

(589,536

)

 

$

(547,795

)

Net loss per share attributable to Snowflake Inc. common stockholders - basic and diluted

$

(0.63

)

 

$

(0.51

)

 

$

(1.86

)

 

$

(1.84

)

Weighted-average shares used in computing net loss per share attributable to Snowflake Inc. common stockholders - basic and diluted

 

320,135

 

 

 

303,007

 

 

 

317,653

 

 

 

297,436

 

 

Snowflake Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

October 31, 2022

 

January 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

819,003

 

$

1,085,729

Short-term investments

 

3,123,879

 

 

2,766,364

Accounts receivable, net

 

394,063

 

 

545,629

Deferred commissions, current

 

61,738

 

 

51,398

Prepaid expenses and other current assets

 

160,221

 

 

149,523

Total current assets

 

4,558,904

 

 

4,598,643

Long-term investments

 

943,081

 

 

1,256,207

Property and equipment, net

 

145,974

 

 

105,079

Operating lease right-of-use assets

 

234,678

 

 

190,356

Goodwill

 

649,092

 

 

8,449

Intangible assets, net

 

196,165

 

 

37,141

Deferred commissions, non-current

 

133,939

 

 

124,517

Other assets

 

293,855

 

 

329,306

Total assets

$

7,155,688

 

$

6,649,698

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

24,757

 

$

13,441

Accrued expenses and other current liabilities

 

225,321

 

 

200,664

Operating lease liabilities, current

 

29,263

 

 

25,101

Deferred revenue, current

 

1,199,701

 

 

1,157,887

Total current liabilities

 

1,479,042

 

 

1,397,093

Operating lease liabilities, non-current

 

225,013

 

 

181,196

Deferred revenue, non-current

 

7,333

 

 

11,180

Other liabilities

 

21,029

 

 

11,184

Snowflake Inc. stockholders’ equity

 

5,410,777

 

 

5,049,045

Noncontrolling interest

 

12,494

 

 

Total liabilities and stockholders’ equity

$

7,155,688

 

$

6,649,698

 

Snowflake Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended October 31,

 

Nine Months Ended October 31,

 

2022

 

2021

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$

(201,442

)

 

$

(154,856

)

 

$

(590,042

)

 

$

(547,795

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

17,696

 

 

 

5,518

 

 

 

43,809

 

 

 

15,586

 

Non-cash operating lease costs

 

12,340

 

 

 

8,855

 

 

 

33,579

 

 

 

25,895

 

Amortization of deferred commissions

 

14,554

 

 

 

9,667

 

 

 

41,525

 

 

 

26,824

 

Stock-based compensation, net of amounts capitalized

 

229,163

 

 

 

144,387

 

 

 

610,837

 

 

 

459,392

 

Net amortization (accretion) of premiums (discounts) on investments

 

(545

)

 

 

11,587

 

 

 

12,331

 

 

 

36,938

 

Net unrealized losses (gains) on strategic investments in equity securities

 

13,064

 

 

 

(455

)

 

 

45,096

 

 

 

(8,515

)

Deferred income tax

 

1,387

 

 

 

 

 

 

(25,277

)

 

 

 

Other

 

(1,396

)

 

 

...