It has set a goal of reaching $ 10 billion in annual product revenue by fiscal 2029, the cloud data software company said today in its first meeting with analysts since its initial public offering last year. The company had $ 554 million in product revenue. for fiscal year January 2021.
In a presentation that kicked off the virtual meeting, Mike Scarpelli, Snowflake’s chief financial officer, said the company now measures its total addressable market at $ 90 billion, up from $ 81 billion used during the IPO tour.
Investors don’t seem impressed by the long-term goal. Snowflake shares were down 4% in after-hours trading on Thursday.
In his talk, Scarpelli explained how the company hopes to reach the revenue goal of $ 10 billion. He says Snowflake envisions the business being driven by a growing number of customers generating more than $ 1 million each in annual revenue. Scarpelli says the model anticipates more than 1,400 customers of that size by fiscal 2029, up from 77 last year.
Snowflake anticipates that average annual revenue for those large customers will grow to $ 5.5 million, from $ 3.4 million in the last year. Scarpelli says the company expects revenue from those large clients to account for 77% of revenue at the end of the forecast period, up from 47% last year.
Scarpelli added that Snowflake believes it will continue to increase product revenue at a rate of 30% at the end of the period. Snowflake expects non-GAAP product gross margin to be 75% for fiscal 2029, up from 69% recently. He says that by the end of the target period, the company expects to have operating margins of 10% and free cash flow margins of 15% or more.
Snowflake went public in September at $ 120 a share, opened to trade at $ 245 and touched $ 429 at one point last year. The stock then reversed its course, dropping as low as $ 184.71 a month ago, before a recent surge pushed the price above its first day of opening, into the $ 250 range. It’s losing some of those gains on Thursday night.
The stock continues to be the subject of a vigorous tug of war between bulls who love the company’s rapid growth and bears who find valuation extreme, even after the recent slide.
For its fiscal first quarter, which ended April 30, Snowflake had an operating loss of $ 35.8 million, but posted revenue of $ 228.9 million, up 110% from a year ago and ahead of the consensus forecast. of Wall Street of $ 213 million. Product revenue, the company’s preferred performance measure, was $ 213.8 million, or an increase of 110%.
Remaining performance obligations, an indicator of future growth, amounted to $ 1.4 billion, up 206%. The net retention rate, which tracks trends in contract renewals minus customer losses, was 168%.
The stock has recovered about 10% since the earnings announcement on May 26.
In an interview with Barron Following the earnings news, CFO Scarpelli said the company continues to report unprecedented growth, while increasing its gross margin on product sales to more than 72% in the quarter, from a low 60 a few years ago. He said the company had positive cash flow for the second consecutive quarter. Snowflake expects to break even in terms of free cash flow annually for the first time this year.
When asked about the company’s long-term growth expectations, Scarpelli had foreshadowed that he would address the issue at the analyst meeting. There is “a huge market opportunity … we are in the right place and time with digital transformation … everyone is moving data from the premises to the cloud,” he said.
In a research note anticipating the meeting, Mizuho analyst Gregg Moskowitz made a case for his bullish stance on stocks.
“Although Snowflake is trading at a substantial premium, we believe the shares have significant upside potential and are likely to perform better as the company continues to grow at high rates,” he said, repeating his Buy rating and price target of $ 300. “We continue to believe that Snowflake’s cloud-based platform is substantially ahead of the competition at this time and that its technology competencies are very difficult to replicate at scale.”
In a note reviewing the recent earnings report, Evercore ISI Kirk Materne said he believes the analyst day and user conference “should help illustrate the great opportunity the company still has, especially as it relates to the ecosystem. data exchange “. While he noted that the stock could remain stuck in neutral for a while as it “continues to grow in valuation,” Materne remains a long-term bull. You rate the stock on Outperform and have a target of $ 311 for price.