snowflake‘s ( SNOW -0.77% ) growing margins and impressive revenue retention make it a stock worth watching. In this clip from “IPO & SPAC Show” on Motley Fool Live, recorded on 11.4Motley Fool contributor Danny Vena discusses Snowflake’s performance and finances, and what sets the data warehousing company apart from its competitors.
Danny Vein: Now Snowflake, just leave the slide up here, what Snowflake does is they’re a data warehouse. One of the things they do is they allow enterprise customers to pull data from legacy enterprise systems and bring it together in one place where they can then actually use that data to generate insights. Similar what Palantir (PLTR -3.00% ) does, but there’s also more storage capacity. Now, what sets Snowflake apart from some other companies is that it’s not technically a software-as-a-service business. As SaaS companies, we know that these companies use this software-as-a-service. What’s different about Snowflake is that it’s a usage-based company. Customers pay based on usage for the time and data they use. I think one of the biggest benefits for Snowflake is the ongoing digital transformation, and we’re creating new data at a remarkable pace. The ability to not only store and store this data, but also to draw meaningful insights from this data is important. The software doubled on the first day of trading. Early investors were Berkshire Hathaway (BRK.A -2.01% ) (BRK.B -2.34% ) and Foreclosure (CRM -3.27% ). More recently, and that’s key here, a year after its IPO, revenue has still doubled year over year in its most recent quarter, and the company’s margins are expanding. Now look at the remaining performance obligation, an important metric Jason mentioned earlier, which is revenue that’s contracted but not yet recognized as revenue. That’s also doubled, which means they’ll be booking that into revenue at some point over the next year, which bodes well for future growth. The company also only said that last quarter was its busiest quarter of bookings ever. They’re still growing customers hand over fist, and their most valuable customers are growing three times faster, almost four times faster than their regular customers’ growth. Revenue retention is remarkable, with customers spending 78% more this year than last year. Her free cash flow grew 10x. It’s a company that I find overall quite fascinating. It’s been able to sustain growth levels at the time of the IPO, something you haven’t often seen at other companies.
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