ASSESSMENT SNOWFLAKE (IPO)

The company delivered sky-high revenues growth last fiscal year of 173% and 121% in
the most recent quarter with a record-breaking net retention rate of 158%- which is
the highest of any public cloud company at time of listing

These industry-leading. Umbers are due to the company disrupting the data
warehousing market with a superior cloud data platform.

Snowflake has strong financials for a tech IPO, yet it’s important to remember the
product has been available for only six years and tech growth is typically stronger in
the early days. The company delivered 173% growth in the fiscal year ending January
31, growing $96.7 million to $264.7 million with gross profit margins of 56.2%.

These gross margins are below what cloud companies are capable of yet improved in
the most recent period. Revenues grew 133% year-over-year in the first six months of
fiscal 2021 ending in July, growing from $104 million to $242 million with improving
gross profit margins of 61.5%

In the most recent quarter, the company reported growth of 121%. Here, we already
see the effects of age within a short time period as Snowflake settles from 173%
growth to 133% and now to 121% growth. This is not a negative by any means but
keep in perspective it’s age when comparing Snowflake to any high-growth cloud SaaS
peers

The bottom line has been varied depending on what period you look at. The losses
doubled from fiscal year 2019 with net losses of $178 million increasing to net losses of
$348.5 million in fiscal year 2020.

More recently in the first six months of fiscal 2021, the net losses were flat period-
over-period at $177.2 million compared to losses of $171.3 million. This cloud be an
encouraging sign or it could be Snowflake tightening the belt temporarily for the public
offering before returning to the original pace of worsening losses.

Adjusted EPS was negative $1.63 in the fiscal year ending in January compared to
negative adjusted EPS of $0.72 in the first half of fiscal 2021.

Net retention rate for Snowflake is a record 158%- the highest of any company when
going public. However, it’s important to remember that net retention rate lowers over
time as customers because harder to retain long term

You can see evidence of how net retention is affected by number years as the
company had a rate of 223% in the first half of 2019 compared to 158% period-over-
period. Annually, the company lost 11 percentage points in net retention rate from
180% to 169%.
Regardless, Snowflake has impressive numbers. Perhaps the most impressive key
metric is the growth in the percentage of customers with product revenue greater
than $1 million. This has grown considerably from 14% in fiscal year 2019 to 41% in
fiscal year 2020. There is evidence high-end accounts are continuing to grow with the
first six months of 2020 at 56% compared to 22% in the year-ago period.

The new CEO, Frank Slootman, clearly knows how to make a company attractive to
investors. Not only did the company quickly tighten its belt in regard to net losses, the
company also doubled customers from 1,547 to 3,117 over the past twelve months.
This includes 7 of the Fortune 10 and 146 of the Fortune 500

Cash used in operating activities decreased from $110 million to $45.3 million in the
first six months of the fiscal 2021. The company has cash and investments of $591
millions and no debt.