Snowflake's (SNOW 0.73%) expanding margins and impressive revenue retention make it a stock worth watching. In this clip from "IPO & SPAC Show" on Motley Fool Live, recorded on April 11, Motley Fool contributor Danny Vena discusses the performance and financials of Snowflake, along with what differentiates the data warehousing company from competitors.
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Danny Vena: Now Snowflake, just leave the slide up here, what Snowflake does is they are a data warehouse. One of the things that they do is they allow enterprise customers to draw data from old enterprise systems, pull it into one place where they can actually then use that data to gain insights. Similar to what Palantir (PLTR 3.30%) does, but there's more of a storage capacity as well. Now what differentiates Snowflake from some other companies is it's not technically a software-as-a-service business. SaaS businesses, we know that these companies use this software-as-a-service. What's different about Snowflake is the fact that they are a use-based business. Customers pay on an as-you-go basis for the time and the data that they use. I think one of the biggest things that's working in Snowflake's favor is the digital transformation is ongoing and we are creating new data at a remarkable clip. The ability to not only store that data, warehouse that data, but also draw meaningful insights from that data is important. The software doubled on its first day of trading. Early investors were Berkshire Hathaway (BRK.A -0.10%) (BRK.B -0.36%) and Salesforce (CRM 0.06%). Most recently, and this is key here, this is a year after their IPO, revenue still doubled year-over-year in the most recent quarter, and the company's margins are expanding. Now you look at remaining performance obligation, an important metric that Jason touched on earlier, which is revenue that's contractually obligated but hasn't been booked into revenue yet. That also doubled, which means that sometime over the course of the next year, they're going to book that into revenue, which bodes well for future growth. The company also just said that the most recent quarter was their largest bookings quarter ever. They're still growing customers hand over fist and their most valuable customers are growing at three times the rate, almost four times the rate of their regular customer growth. Revenue retention is remarkable, customers spent 78% more this year than last year. Their free cash flow went up by 10x. This is a company that I find to be pretty fascinating overall. It's been able to keep up the level of growth that they did at the time of their IPO, which is not something that you've seen very much from other companies.