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Here's How Snowflake Is Performing Since It Went Public

By Jon Quast and Danny Vena – Dec 16, 2021 at 8:05AM

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The biggest software IPO stock isn't disappointing investors with its quarterly financials.

On its first day of trading following its initial public offering (IPO), Snowflake (SNOW 3.56%) reached a valuation of almost $70 billion, making it the biggest software IPO of all time. It's safe to say, therefore, that investors had high expectations about this company.

In this video clip from Motley Fool Backstage Pass, recorded on Dec. 6, Fool contributor Danny Vena updates viewers on Snowflake's business is performing, to see if it's living up to lofty expectations. And as you'll see, it is.

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Danny Vena: We're going to take a quick look here at the company that I wanted to address out of the two here. I'm going to be talking about Snowflake and it's interesting because if you look at how Snowflake has done compared to how C3.ai has done, at least from a stock price perspective, it's a pretty interesting divergence. I'm going to go ahead and share my screen here and get to our presentation about Snowflake.

One of the things that we'll talk about Snowflake, it offers a cloud-based platform that helps users store and access their data from just any amount whatsoever. What's interesting is that Snowflake became the biggest software IPO ever, it raised about $4 billion dollars, valued the company at about $70 billion at the time. They got a $250 million concurrent private placement investment from Buffett and Berkshire Hathaway and they also bought more than four million shares from Snowflake's former CEO, Bob Muglia in a private transaction.

But this is the numbers that we saw on Snowflake's recent quarterly report. Their third quarter revenue was up 110% year over year compared to, what did you say 40 something percent, Jason, for C3.ai?

Jason Hall: Yeah, 41%.

Vena: Okay. Remaining performance obligation for Snowflake was up 94% and it wasn't all from one customer.

Revenue retention, I wanted to highlight this because this is something Jason said earlier. Revenue retention is you have a cohort of existing customers from the prior year and those same customers this year are spending 73% more with you than they did in the prior year period so that is a ridiculously high revenue retention rate in my estimation of things. I think C3.ai did well with their 41% revenue retention but Snowflake's was up 73%.

Their loss per share was actually $0.51 where you go while you're not happy that they're losing money but that was improved from a loss of a $1.01 so they cut their loss in half over the course of about a year.

Then I also wanted to point out cash flow because when you have a high growth company that's spending heavily on their infrastructure, that's spending heavily to bring in new customers, you want to look at what their cash flow is if they're still losing money. The company is still losing money but they had positive free cash flow of $9.5 million in the third quarter compared to basically a loss of free cash or negative free cash of about $38 million in the prior year quarter. Then they're operating cash flow in the third quarter was $15.5 million positive compared to a negative last year of about $20 million. By all of the metrics that Jason pointed out with C3.ai and they were all seemingly very good growth metrics, Snowflake essentially blew them all away.

Danny Vena owns Snowflake Inc. Jason Hall owns C3.ai, Inc. and Snowflake Inc. Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns and recommends Berkshire Hathaway (B shares), C3.ai, Inc., and Snowflake Inc. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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