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Cloud data platform Snowflake, who launched it's IPO last September reported fiscal 4th quarter earnings Wednesday. $SNOW sold off after it's full-year guidance did not exceed analysts’ estimates, a miss in a hugely overvalued technology sector. SNOW also announced an end to its dual-share class structure.

SnowFlake IPO

When the Snowflake (SNOW) debuted on September 16, 2020 it became the largest software IPO in history.

Snowflake Inc. NYSE: SNOW Reported Earnings After Close Wednesday

($0.70) Missed ($0.17) EPS Forecast and $190.50 million Beat $178.5 million Revenue Forecast

Earnings

Snowflake announced it;s first earnings report since going public, it's fiscal fourth quarter earnings of a loss of 70 cents per share. Wall Street had forecast a loss of just 17 cents per share. A net loss of $199 million, up from a loss of $83 million one year ago.

Snowflake revenue was $190.5 million vs. $178.5 million as expected by analysts, according to Refinitiv. SNOW's revenue increased by 117% on an annualized basis in the fiscal fourth quarter, which ended Jan. 31. In the prior quarter revenue had grown 119%.  Product revenue in the quarter was $178.3 million, above the $167 million estimate. For the full year, Snowflake’s product revenue jumped 120%, to $553.8 million and on a stronger gross margin.

Snowflake platform

 

Snowflake Inc. NYSE: SNOW

Market Reaction $239.73 -  $9.27 (- 3.72%) on Week. Close March 5 2021

Snowflake daily 3 6 2021

Highlights

“We have implemented operations that will help us show more profitability,” finance chief Mike Scarpelli said during a conference call with analysts. “We’re continuing to invest heavily in the business.”

  • Snowflake reported a 240% surge in remaining performance obligations (RPO) to $927.9 mln
  • SNOW also saw 115% growth in product revenue to $148.5 mln just ahead of $147.5 mln expectation.
  • SNOW considers product revenue, which excludes professional services (>10% of total revenue), to be the most relevant demand metric it offers as the company does not utilize a SAAS business model.
  • Product gross margin improved by five percentage points on a yr/yr basis to 70%. During the earnings conference call, CEO Frank Slootman credited improving unit economics, operating efficiency, and strong top-line growth for the lift in margins.

SNOW uses a consumption-based model in which product revenue is directly linked to a customer's platform usage. SNOW's customers purchase credits to use the platform. Consequently, there is no limit to how much a customer can spend during a given period. Of course this is dependant on the demand for data, in the WFA economy data is king.

Snowflake conumption mode

There are few companies of this size that are generating triple-digit revenue growth which why SNOW has benefited more than most in this NASDAQ stock market ramp. Investors point to the company being still in the early stages of its growth curve.

Guidance 

On the strength of tailwinds from the SNOW platform consolidating data from disparate sources into a single access point, perfectly aligns SNOW to capitalize on powerful secular trends like the digitization of businesses the company is forecasting Q4 product revenue to grow by 97-103% yr/yr to $162-$167 mln.

For FY21, the company sees product revenue of $538-$543 mln, exceeding analysts' estimates of $530 million. Heading into its debut quarterly report, SNOW was facing nearly insurmountable expectations.

"With the onslaught of digital transformation, data operations become the beating heart of the modern enterprise. Customers realize that to survive and thrive they need to step up their data again, given what is now possible with technology. The Snowflake Data Cloud enables breakthrough data strategies. Capacity limitations are a thing of the past. There virtually no constraints anymore on the number of workloads that can execute at the same time against the same data. Frank Slootman — Chairman and Chief Executive Officer"

Getting Rid of Dual-Class Share Structure

The company also said in a regulatory filing that as of Monday it had gotten rid of its dual-class structure, in which Class A shares got one vote per share and Class B shares got 10 votes per share. The structure had been in place since September, when Snowflake stock debuted on the New York Stock Exchange. All Class B shares will be converted into Class A shares.

Dual-class structures have become common in tech companies, including Google, Facebook and Snap, as a way to let founders and early investors maintain control, and block takeovers from activist investors.

 

Snowflake IPO History

Snowflake raised its estimated IPO price by around 30% in a new S-1 filing Monday. Last week, Snowflake revealed in a filing that Berkshire Hathaway and Salesforce each agreed to buy $250 million of stock at the IPO price in a concurrent private placement. This saw the stock open at . This was almost triple of expectations just a week ago before the announcement of the private sales and a hesitant market post Covid.

SNOW Opens .....

SNOW First Day

SNOW First Day Trading

Berkshire Hathaway and Salesforce agreeing to buy shares in concurrent private sales.

Berkshire Hathaway also agreed to buy 4.04 million shares in a secondary transaction from former CEO Bob Muglia. At the midpoint of the new estimated price range of $110, Berkshire Hathaway’s total stake in Snowflake after the IPO would be valued at $674.4 million, compared with the roughly $550 million it would have been worth at the midpoint of the previous range.

Popular initial public offerings this year.

Inari Medical has risen 297% since its May IPO, BigCommerce has gained 252% since its August IPO, and Schrodinger is up 212% since its February IPO. The Renaissance IPO ETF, is up nearly 60% this year.

The IPO market ground to a halt in April, so much of what you’re seeing now is some pent-up demand for IPOs with the explosion of stocks higher since the depth of despair in the Covid market swoon. Demand is pumped by y fiscal and monetary stimulus, 

About SnowFlake

Snowflake gives businesses new ways to store and access data in the cloud, rather than relying on databases tied to hardware. The company is growing fast, reporting that revenue in the first half of 2020 more than doubled to $242 million from $104 million a year earlier.

However Snowflake faces a complicated relationship with Amazon Web Services as it relies on AWS to host a significant portion of its business, while also competing against the Amazon Redshift cloud data warehouse offering.

Source: Snowflake

From The TradersCommunity News Desk

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