Revenue forecasting is a challenge, so we prefer conservative guidance

Snowflake CEO Frank Slotman told CNBC’s Jim Kramer on Wednesday that the company prefers to provide conservative guidance, saying the way it identifies revenue creates significant uncertainty when making forecasts.

Slotman’s comments on “crazy money” The interview came after the data analytics company announced results for the fourth quarter and fiscal year 2022. Its stock was crushed in extended trading, dropped 30% at one point before recovering which somewhat dropped by almost 22%.

Investors are dealing with the company’s slowest revenue growth since at least 2019, as well as its guidance for fiscal year 2023. Snowflake said it expects product revenue to increase by 65% ​​to 67%. in the financial year, analysts forecast close to 66 % growth, according to FactSet. This may represent a significant slowdown from previous years.

“We use a data-driven approach, which you would expect from a data management company,” Slotman said. “We don’t put a wet finger in the air and say, ‘Well, we think it’s going to happen.’

In fiscal year 2022, Snowflake’s product revenue – which makes up the majority of its total sales – rose nearly 106%, according to its earnings presentation on Wednesday.

Slootman noted that Snowflake exceeded the 2022 financial products revenue forecast Submitted on March 3, 2021. In that quarterly report, Snowflake predicts product revenue growth of 82% annually.

Frank Slotman, CEO of Snowflake, on the day of his 2020 IPO. He is known for being a demanding leader, and straight shooter. He recently told CNBC, “I often attend board meetings with other companies, and the CEO will make a list of 10 priorities … well, that’s the same as no priority.”

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Slotman said Snowflake books its revenue using a “consumption model,” rather than the standard subscription model common in the software industry. Slotman said investors can take the time to understand how this affects its results and its ability to predict many parts of the future.

“We report revenue about what people actually consume in the quarter. We have tons and tons of customers that we don’t have any history with, and we have to expect exactly what they will do and how they will grow, ”he said.

Cloud-based Snowflake software allows customers to search and analyze large amounts of data, with the ability to measure capacity as they need it. Snowflake had a total of 5,944 customers at the end of fiscal year 2022, up 44% from the previous year.

“In the consumption model, it is different from a [software-as-a-service] A model where things are under contract, and they have a completely different rhythm. Over time, people will get it. “They’re big with it, and they’ll get used to it, I hope,” said Slotman, a veteran in the tech industry who previously helped ServiceNow.

He helped bring Snowflake to the public in September 2020, at that time the largest software IPO ever.

Snowflake shares have dropped nearly 22% since the beginning of the year, not including the move after Wednesday hours. The struggles of stocks come as Wall Street shifts its focus to more defensive market segments and away from unprofitable, growth -focused companies like Snowflake.

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