Summary

• Snowflake Inc. (NYSE:SNOW) is a data cloud company that operates a global network where thousands of organizations mobilize data with near-unlimited scale, concurrency, and performance. Snowflake’s platform is the engine that powers and provides access to the Data Cloud, creating a solution for applications, collaboration, cybersecurity, data engineering, data lake, data science, data warehousing, and unistore.
• The platform of the company is used globally by organizations of all sizes across a broad range of industries. As of January 31, 2023, Snowflake had 7,828 total customers, increasing from 5,967 customers as of January 31, 2022.
• The customers of the company typically enter into capacity arrangements with a term of one to four years, or consume the platform under on-demand arrangements in which the company charges for use of the platform monthly in arrears.
• Snowflake Inc. was founded in July 2012 in San Mateo, California by three data warehousing experts: Benoît Dageville, Thierry Cruanes and Marcin Żukowski. Dageville and Cruanes previously worked as data architects at Oracle Corporation; Żukowski was a co-founder of the Dutch start-up Vectorwise. The company's first CEO was Mike Speiser, a venture capitalist at Sutter Hill Ventures.
• Revenue reported by the company in fiscal 2023 is $2,065.66 million, which was $1,219.33 million a year earlier - a growth of 69%.
• Net loss of the company during the three and nine months ended on October 31, 2023 is $214.69 million and $668.08 million, respectively, which was $201.44 million and $590.04 million, respectively, a year earlier.
• The company has reported a net loss of $797.53 million during fiscal 2023 and $679.95 during a year earlier.

Brief Company Overview

Snowflake Inc. (NYSE:SNOW) is a data cloud company that operates a global network where thousands of organizations mobilize data with near-unlimited scale, concurrency, and performance. Snowflake’s platform is the engine that powers and provides access to the Data Cloud, creating a solution for applications, collaboration, cybersecurity, data engineering, data lake, data science, data warehousing, and unistore. Snowflake’s vision is a world with unlimited access to governed data, so every organization can tackle the challenges and opportunities of today and reveal the possibilities of tomorrow.¹ The company was founded in July 2012 in San Mateo, California by three warehousing experts: Benoît Dageville, Thierry Cruanes and Marcin Żukowski. The cloud-native architecture of the company consists of three independently scalable but logically integrated layers across compute, storage, and cloud services. The platform of the company is used globally by organizations of all sizes across a broad range of industries. As of January 31, 2023, Snowflake had 7,828 total customers, increasing from 5,967 customers as of January 31, 2022.

During recent years, the company keeps achieving significant growth. For the fiscal years ended January 31, 2023, 2022, and 2021, revenue of the company was $2.1 billion, $1.2 billion, and $592.0 million, respectively, representing year-over-year growth of 69% and 106%, respectively. Snowflake's net loss was $797.5 million, $679.9 million, and $539.1 million for the fiscal years ended January 31, 2023, 2022, and 2021, respectively.

As of January 31, 2023, we had 5,884 employees operating across 33 countries. Frank Slootman is the current chairman and CEO of Snowflake. As of December, 2023, the company had 328.8 million shares outstanding. As of December, 2023, stock of the company had a 52-week price range of $202.83 to $119.27, price to sales ratio (ttm) is 24.96 times, price to book (mrq) is 13.40 times, profit margin of the company is -33.35%, operating margin is -35.50%, return on assets (ttm) is -9.07%, and return on equity (ttm) is -16.90%.

Recent Developments

• During the nine months ended October 31, 2023, Snowflake acquired all outstanding stock of Neeva Inc. and its equity investee (collectively, Neeva), a privately-held company which provide search technology powered by language models, for $185.4 million in cash.²
• On February 10, 2023, Snowflake acquired i) all outstanding stock of Mountain US Corporation (formerly known as Mobilize.Net Corporation) (Mountain), a privately-held company which provides a premier suite of tools for efficiently migrating databases to the Data Cloud, for $76.3 million in cash, and ii) all outstanding stock of LeapYear Technologies, Inc. (LeapYear), a privately-held company which provides a differential privacy platform, for $62.0 million in cash.³
• On March, 2022, Snowflake acquired all outstanding stock of Streamlit, Inc. (Streamlit), a privately-held company which provides an open-source framework for creating and deploying data applications. The acquisition date fair value of the purchase consideration was $650.8 million, which was comprised of $211.8 million in cash and 1.9 million shares of common stock valued at $438.9 million as of the acquisition date.⁴
• On September, 2022, Snowflake acquired all outstanding stock of Applica Sp. z.o.o. (Applica), a privately-held company which provides an artificial intelligence platform for document understanding, for $174.7 million in cash.⁵

Recent Financing Activities

• During the nine months ended October 31, 2023, Snowflake repurchased approximately 4.0 million shares of the outstanding common stock for an aggregate purchase price of approximately $591.7 million, including transaction costs, at a weighted-average price of $147.50 per share.
• During the fiscal year ended January 31, 2023, the company received a proceed of $80.8 million from the issuance of equity securities under equity incentive plans.

Financial Performance Highlights

Q3 Highlights

Product revenue increased $175.7 million and $545.3 million for the three and nine months ended October 31, 2023, compared to the three and nine months ended October 31, 2022, respectively, primarily due to increased consumption of our platform by existing customers, as evidenced by our net revenue retention rate of 135% as of October 31, 2023. The increase in product revenue was also driven by an increase in capacity consumption prices of approximately 3% for each of the three and nine months ended October 31, 2023, compared to the same periods in the prior year, primarily due to increased consumption of higher-priced editions of Snowflake's platform and better discipline over discounting.

The company had 436 customers with product revenue of greater than $1 million for the trailing 12 months ended October 31, 2023, an increase from 287 customers as of October 31, 2022. Such customers represented approximately 64% and 61% of the product revenue for the trailing 12 months ended October 31, 2023 and 2022, respectively. Professional services and other revenue increased $9.8 million for the nine months ended October 31, 2023, compared to the same period in the prior year.

Cost of product revenue increased $34.1 million and $119.5 million for the three and nine months ended October 31, 2023, compared to the three and nine months ended October 31, 2022, respectively. The increase was primarily due to an increase of $15.5 million and $61.9 million in third-party cloud infrastructure expenses as a result of increased customer consumption for the three and nine months ended October 31, 2023, respectively, compared to the same periods in the prior year. Product gross margin of the company was 74% for each of the three and nine months ended October 31, 2023, compared to 72% for each of the three and nine months ended October 31, 2022. Cost of professional services and other revenue increased $4.2 million and $25.4 million for the three and nine months ended October 31, 2023, compared to the three and nine months ended October 31, 2022, respectively.

Research and development expenses increased $120.7 million and $377.5 million for the three and nine months ended October 31, 2023, compared to the three and nine months ended October 31, 2022, respectively. General and administrative expenses increased $22.6 million for the nine months ended October 31, 2023, compared to the nine months ended October 31, 2022, primarily due to an increase of $13.3 million in personnel-related costs and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business.

Interest income increased $31.6 million and $108.6 million for the three and nine months ended October 31, 2023, compared to the three and nine months ended October 31, 2022, respectively, primarily due to higher yields on our investments in available-for-sale marketable debt securities as a result of increased interest rates.

Net loss of the company during the three and nine months ended on October 31, 2023 is $214.69 million and $668.08 million, respectively, which was $201.44 million and $590.04 million, respectively, a year earlier.

Annual Performance Highlights

Fiscal year of the company ends on January 31; FY23 refers to the financial year ended January 31, 2023. Revenue reported by the company in fiscal 2023 is $2,065.66 million, which was $1,219.33 million a year earlier - a growth of 69%. The increase in revenue is primarily due to increased consumption of our platform by existing customers, as evidenced by the net revenue retention rate of 158% as of January 31, 2023. Cost of product revenue increased $199.7 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $156.9 million in third-party cloud infrastructure expenses as a result of increased customer consumption. Personnel-related costs and allocated overhead costs also increased $28.7 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year.

Product gross margin of the company was 72% for the fiscal year ended January 31, 2023, compared to 70% for the prior fiscal year, primarily due to i) increased cost efficiency as a result of cloud infrastructure processor improvements, ii) an increased percentage of revenue from consumption of higher-priced editions of the platform, iii) increased scale across the cloud infrastructure regions, and iv) higher volume-based discounts for the purchases of third-party cloud infrastructure. In addition, the year-over-year increase in the product gross margin was driven by a decrease in stock-based compensation as a percentage of product revenue.

Cost of professional services and other revenue increased $59.4 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $48.3 million in personnel-related costs and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in the company's business, and increased stock-based compensation primarily related to additional equity awards granted to existing and new employees.

Sales and marketing expenses increased $362.5 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $232.5 million in personnel-related costs (excluding commission expenses) and allocated overhead costs, as a result of increased headcount, stock-based compensation, and overall costs to support the growth in business. Research and development expenses increased $321.1 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $279.9 million in personnel-related costs and allocated overhead costs, as a result of increased stock-based compensation, headcount, and overall costs to support the growth in business. General and administrative expenses increased $30.8 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $14.0 million in outside services mainly as a result of increased legal fees related to acquisitions.

The company has reported a net loss of $797.53 million during fiscal 2023 and $679.95 during a year earlier.

Total current assets of the company at the end of fiscal 2023 is $4,984.69 million, which was $4,598.64 million a year earlier; total assets reported is $7,722.32 million, and $6,649.69 million, respectively; total liabilities of the company is $2,253.71 million and $1,600.65 million, respectively.

During the fiscal 2023, net cash provided by operating activities of the company is $545.64 million, net cash used in investing activities is $597.88 million, and net cash used in financing activities is $92.62 million. Total cash and cash equivalents, and restricted cash at the end of fiscal 2023 is $956.73 million, which was $1,102.53 million a year earlier.

Business Overview

The business of Snowflake Inc. is designed to solve the decades-old problem of data silos and data governance. Leveraging the elasticity and performance of the public cloud, our platform enables customers to unify and query data to support a wide variety of use cases. It also provides frictionless and governed data access so users can securely share data inside and outside of their organizations, generally without copying or moving the underlying data. As a result, customers can blend existing data with new data for broader context, augment data science efforts, and create new monetization streams. Delivered as a service, Snowflake's platform requires near-zero maintenance, enabling customers to focus on deriving value from their data rather than managing infrastructure.

The customers of the company typically enter into capacity arrangements with a term of one to four years, or consume the platform under on-demand arrangements in which the company charges for use of the platform monthly in arrears. Consumption for most customers accelerates from the beginning of their usage to the end of their contract terms and often exceeds their initial capacity commitment amounts. When this occurs, the customers have the option to amend their existing agreement with the company to purchase additional capacity or request early renewals. When a customer’s consumption during the contract term does not exceed its capacity commitment amount, it may have the option to roll over any unused capacity to future periods, generally upon the purchase of additional capacity.

The business of the company consists of three integrated layers: compute, storage, and cloud services.

Compute layer: The compute layer provides dedicated resources to enable users to simultaneously access common data sets for many use cases with minimal latency.

Storage layer: The storage layer ingests massive amounts and varieties of structured, semi-structured, and unstructured data to create a unified data record.

Cloud services layer: The cloud services layer intelligently optimizes each use case’s performance requirements with no administration. This architecture is built on three major public clouds across 38 regional deployments around the world. These deployments are generally interconnected to deliver the Data Cloud, enabling a consistent, global user experience.

The platform of Snowflake Inc. unifies data and supports a growing variety of workloads, including data warehousing, data lakes, and Unistore, as well as collaboration, data engineering, cybersecurity, data science and machine learning, and application development. Customers can leverage the platform for any one of these workloads, but when taken together, it provides an integrated, end-to-end solution that delivers greater insights, faster data transformations, improved data sharing, and accelerated application development. Delivered as a service, the platform is deployed across multiple public clouds and regions, is easy to use, and requires near-zero maintenance.

The platform was built from the ground up to take advantage of the cloud, and is built on an innovative multi-cluster, shared data architecture. It consists of three independently scalable layers deployed and generally connected globally across public clouds and regions:

Centralized storage: The storage layer is based on scalable cloud storage and can manage structured, semi-structured, and unstructured data. It can be grown independently of compute resources, allowing for maximum scalability and elasticity, and ensures a single, persistent copy of the data. The stored data is automatically partitioned, and metadata is extracted during loading to enable efficient processing.
Multi-cluster compute: The compute layer is designed to capitalize on the instant elasticity and performance of the public cloud. Compute clusters can be spun up and down easily within seconds, enabling our platform to retrieve the optimal data required from the storage layer to answer queries and transform data with optimized price-performance. This functionality allows a multitude of users and use cases to operate on a single copy of the data.
Cloud services: The cloud services layer acts as the brain of the platform ensuring the different components work in unison to deliver a consistent user-friendly customer experience. It performs a variety of tasks, including security operations, system monitoring, query optimization, and metadata and state tracking throughout the platform.

This architecture is built on three major public clouds across 38 regional deployments around the world. These deployments are generally interconnected through a Snowgrid technology to deliver the Data Cloud, enabling a global and consistent user experience.

Research and development is one of the core capabilities of the company. As of January 31, 2023, we had 1,378 employees in our research and development organization. Snowflake has developed innovative technology across their platform, including managed service, storage, query capabilities, compute model, data sharing, global infrastructure, and integrated security.

Other Business Information

Historically, the company received a higher volume of orders from new and existing customers in the fourth fiscal quarter of each year. As of January 31, 2023, the company held 486 issued U.S. patents and had 311 U.S. patent applications pending.

Company History

Snowflake Inc. was founded in July 2012 in San Mateo, California by three data warehousing experts: Benoît Dageville, Thierry Cruanes and Marcin Żukowski. Dageville and Cruanes previously worked as data architects at Oracle Corporation; Żukowski was a co-founder of the Dutch start-up Vectorwise. The company's first CEO was Mike Speiser, a venture capitalist at Sutter Hill Ventures.

In June 2014, the company appointed former Microsoft executive Bob Muglia as CEO. In October 2014, it raised $26 million and came out of stealth mode, being used by 80 organizations. In June 2015, the company raised an additional $45 million and launched its first product, its cloud data warehouse, to the public. It raised another $100 million in April 2017. In January 2018, the company announced a $263 million financing round at a $1.5 billion valuation, making it a unicorn. In October 2018, it raised another $450 million in a round led by Sequoia Capital, raising its valuation to $3.5 billion.

In May 2019, Frank Slootman, the retired former CEO of ServiceNow, joined Snowflake as its CEO and Michael Scarpelli, the former CFO of ServiceNow joined the company as CFO. In June 2019, the company launched Snowflake Data Exchange. In September 2019, it was ranked first on LinkedIn's 2019 U.S. list of Top Startups.

On February 7, 2020, the company raised another $479 million. At that time, it had 3,400 active customers. On September 16, 2020, Snowflake became a public company via an initial public offering (IPO) raising $3.4 billion, one of the largest software IPOs and the largest to double on its first day of trading.

On May 26, 2021, the company announced that it would become headquarterless, with a principal executive office located in Bozeman, Montana.

On March 2, 2022, the company acquired Streamlit for $800 million. Then on October 17, 2022, the company announced an investment in advanced TV advertising firm OpenAP.

Snowflake announced it would acquire privacy-focused search startup Neeva in May 2023.

On October 23, 2023, Snowflake acquired a start-up named Ponder to expand its Python capabilities for enterprises.

References

1. ^ https://investors.snowflake.com/overview/default.aspx
2. ^ https://techcrunch.com/2023/05/24/snowflake-acquires-neeva-to-bring-intelligent-search-to-its-cloud-data-management-solution/
3. ^ https://www.marketscreener.com/quote/stock/SNOWFLAKE-INC-112440376/news/Snowflake-Inc-completed-the-acquisition-of-LeapYear-Technologies-Inc-for-62-million-43423732/
4. ^ https://www.snowflake.com/blog/snowflake-to-acquire-streamlit/
5. ^ https://www.marketscreener.com/quote/stock/SNOWFLAKE-INC-112440376/news/Snowflake-Inc-completed-the-acquisition-of-Applica-Sp-z-o-o-42494418/