Snowflake’s IPO: The Details You Need To Know

Cloud data platform provider Snowflake filed an S-1 document with the U.S. Securities and Exchange Commission this week, providing information about the company’s financial performance, ownership and go-to-market plans in advance of its much-anticipated IPO. Here’s a deep dive into the details.

Ready To Go Public

This week, cloud data platform developer Snowflake, one of the most successful Silicon Valley startups in recent years, filed an S-1 document with the U.S. Securities and Exchange Commission detailing plans for its highly anticipated initial public offering.

Snowflake, founded in 2012 and based in San Mateo, Calif., developed a cloud-based data warehouse system to compete with on-premises data warehouse products from companies like IBM, Oracle and Teradata. More recently, Snowflake expanded its potential market by positioning its technology as a cloud data platform for a range of applications.

Snowflake has raised a staggering $1.4 billion in venture financing, including a $450 million round in October 2018 and a $479 million round in February of this year, putting the company’s valuation at $12.4 billion.

The S-1, more than 180 pages long, offers a look at the company’s product and market strategy, management, operations, finances and more.

Here are the key points to know about the Snowflake IPO.

Trading Up

Snowflake shares of Class A Common Stock will trade on the New York Stock Exchange under the symbol “SNOW.”

The S-1 does not disclose the expected initial share price of Snowflake stock or say what proceeds the company expects to earn from the IPO.

Major underwriters are Goldman Sachs & Co., Morgan Stanley, J.P. Morgan Securities, Allen & Company and Citigroup, with about 18 other underwriting participants including Credit Suisse, Barclays, Deutsche Securities, Capital One Securities and Oppenheimer & Co.

Key Statistics

For all of fiscal 2020 (ended Jan. 31) Snowflake recorded revenue of $264.7 million, up 174 percent from $96.7 million in fiscal 2019.

For the first six months (ended July 31, 2020) of fiscal 2021 Snowflake reported revenue of $242.0 million, up 133 percent from $104.0 million in the first half of fiscal 2020.

As of July 31, 2020, Snowflake had 2,392 customers with Capital One the company’s single biggest customer.

As of July 31, 2020, Snowflake had 2,037 employees in 19 countries.

Taking Ownership

The S-1 disclosed the “beneficial owners” of Snowflake – the company’s current stakeholders. Sutter Hill Ventures is the biggest owner with a 20.3 percent stake followed by Altimeter Partners Fund (14.8 percent), ICONIQ Strategic Partners (13.8 percent), Redpoint Ventures (9.0 percent) and Sequoia Capital Growth Fund (8.4 percent).

Current CEO Frank Slootman (pictured) has a 5.9 percent stake while former CEO Robert Muglia, who left the company in April 2019, owns 3.3 percent.

Potential Market Opportunity

Snowflake believes the addressable market opportunity for the Snowflake Cloud Data Platform is $81 billion, as of Jan. 31, 2020.

The company cites market researcher IDC, which puts the markets for “analytics data management and integration platforms” and “business intelligence and analytics tools,” – both of which Snowflake says it addresses – at a combined $56 billion by the end of this year and $84 billion by the end of 2023.

Snowflake also believes there is a “substantial and largely untapped” opportunity in data sharing services, which the company said “has not been defined or quantified” by market researchers.

IPO In The Time Of COVID-19

The S-1 devotes some 26 pages to potential risk factors, warning prospective shareholders of everything that could go wrong and turn Snowflake shares into a bad investment. The warnings, much of them legal boilerplate, include the highly competitive nature of the cloud services industry, the possibility of defects in the company’s technology or service disruptions, problems with the public cloud providers on which the Snowflake service runs, and potential fallout of a security breach.

But, in a sign of the times, the potential risks section says the COVID-19 pandemic “could have an adverse effect on our business, operations and the markets and communities in which we, our partners and customers operate.”

The potential impacts of the pandemic include the economic slowdown that hurts existing customers and prospects, critical vendors and suppliers that could go out of business, canceled in-person marketing events and customer conferences, incurred expenses such as facilities planning and food services when employees return to work post-pandemic, and potential legal liability for safe workplace claims.

The Customer Base

The company recruited its first customers in 2014.

As of Jan. 31, 2020 (the end of the company’s fiscal 2020) Snowflake had 2,392 customers compared to 948 one year before.

Capital One, the company’s single biggest customer, represented 11 percent of Snowflake’s fiscal 2020 revenue.

Other big-name customers include Experian in financial services, McKesson and Strava in healthcare and wellness, Accordant Media and Nielsen in advertising and media, Sony in manufacturing, Office Depot in retail, and Akamai and Adobe in technology.

Cloud Platform Providers Are Also Competitors

Snowflake runs its services on the Amazon Web Services, Microsoft Azure and Google Cloud Platform public clouds, making Snowflake a customer of all three. The S-1, in fact, says Snowflake expects to pay $1.2 billion for those infrastructure services – much of it to AWS – between now and July 2025.

But Snowflake also competes with cloud data management services offered by those very same companies, including going head-to-head against their cloud data warehouse services: AWS Redshift, Google Big Query and Microsoft Synapse.

Partners

Earlier this year, Snowflake launched the Snowflake Partner Network, the company’s first partner program, under the direction of Colleen Kapase, the company’s vice president of worldwide partner and alliances who joined Snowflake from VMware in mid-2019.

The S-1 document says Snowflake’s growth strategies include investing in and growing its partner network, which includes solution providers and systems integrators who accelerate the adoption of Snowflake, as well as technology partners who provide their own products – such as data loading and business intelligence tools – that work in conjunction with the Snowflake platform.

“Collectively, these partners help us source leads and provide training and implementation of our platform,” the S-1 said. “We continue to invest in formal alliances with the leading consulting, data management and implementation service providers to help our customers migrate their legacy database solutions to the cloud. Over time, we expect our partner network to drive more customers and consumption to our platform.”

Executive Compensation

CEO Frank Slootman, hired in April 2019, earned $287,990 in salary for the portion of fiscal 2020 (ended Jan. 31, 2020) that he worked. His annual base salary was $375,000 for the year.

Slootman’s stock option awards were $59,874,582 for the fiscal year ended Jan. 31, 2020. (According to a footnote, that was the aggregate grant-date fair value of the stock options granted and does not reflect the dollar amount he actually received).

Slootman also received $307,886 in “non-equity incentive plan compensation” – a performance bonus.

Former CEO Robert Muglia, who unexpectedly resigned and left the company in April 2019, earned $72,885 in salary for the first quarter of fiscal 2020 (from an annual base salary of $300,000), stock awards valued at $16,652,753, and $315,772 in “other compensation” for a total of $17,041,410.

Revenue For The Last Eight Quarters Has Risen Steadily…

The S-1 provides reams of financial data and consolidated financial statements about Snowflake’s performance, including quarterly revenue for the last eight quarters:

FY2019 Q3 (ended Oct. 31, 2018): $28.7 million

FY2019 Q4 (ended Jan. 31, 2019): $36.7 million

FY2020 Q1 (ended April 30, 2019): $43.7 million

FY2020 Q2 (ended July 31, 2019): $60.3 million

FY2020 Q3 (ended Oct. 31, 2019): $73.0 million

FY2020 Q4 (ended Jan. 31, 2020): $87.7 million

FY2021 Q1 (ended April 30, 2020): $108.8 million

FY2021 Q2 (ended July 31, 2020): $133.1 million

…As Have Gross Profits…

The S-1 includes the company’s quarterly gross profit for the last eight quarters:

FY2019 Q3 (ended Oct. 31, 2018): $14.9 million

FY2019 Q4 (ended Jan. 31, 2019): $16.3 million

FY2020 Q1 (ended April 30, 2019): $19.7 million

FY2020 Q2 (ended July 31, 2019): $31.8 million

FY2020 Q3 (ended Oct. 31, 2019): $43.5 million

FY2020 Q4 (ended Jan. 31, 2020): $53.2 million

FY2021 Q1 (ended April 30, 2020): $66.3 million

FY2021 Q2 (ended July 31, 2020): $82.7 million

…While The Company Has Reported A Net Loss For The Last Eight Quarters

The S-1 includes the company’s quarterly net losses for the last eight quarters:

FY2019 Q3 (ended Oct. 31, 2018): $37.3 million

FY2019 Q4 (ended Jan. 31, 2019): $67.9 million

FY2020 Q1 (ended April 30, 2019): $83.8 million

FY2020 Q2 (ended July 31, 2019): $93.4 million

FY2020 Q3 (ended Oct. 31, 2019): $88.1 million

FY2020 Q4 (ended Jan. 31, 2020): $83.3 million

FY2021 Q1 (ended April 30, 2020): $93.6 million

FY2021 Q2 (ended July 31, 2020): $77.6 million

The Balance Sheet

As of July 31, 2020, Snowflake listed total assets of $1.44 billion, including $138.9 million in cash and cash equivalents, $452.0 million in short-term investments, $295.9 million in long-term investments and $151.2 million in net accounts receivable.

As of July 31, 2020, Snowflake listed total liabilities of $673.6 million, including $373.6 million in current deferred revenue and $79.2 million in accrued expenses and other current liabilities.