With shares down 62.2% YTD, Snowflake (SNOW), an enterprise SaaS firm, revealed in its latest quarterly filing it’s considering topping off employee equity awards or offering other incentives to attract and retain employees:

“...we may issue additional equity awards or provide our employees with increased cash compensation, which could negatively impact our results of operations.”

Snowflake is the third leading technology firm to consider increasing the cash component of employee compensation. In April, we reported Shopify’s (SHOP) new employee compensation plan that allows workers to choose between equity and cash. In May, Workday (WDAY) followed by announcing it would begin paying certain bonuses in cash rather than equity as it had previously.

In an Exclusive Report for DuDil+ subscribers, we warned that if tech firms are forced to follow Shopify’s and increase the cash component of equity compensation, tech firm operating cash flows would plunge and the entire sector will be revalued significantly lower even after the recent sell-off.

In 2021, stock based compensation (SBC) was 49.6% of Snowflake’s revenue. The company reported operating cash flow of $110.1 million, in part, because it added back $605 million in SBC expense. If Snowflake were to have paid employees in cash rather than equity, 2021 operating cash flow would have been ($494.9 million). If Snowflake had replaced just a quarter of SBC with cash, 2021 operating cash flow would have been ($41 million), or 72.8% lower.