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Item 7. Management’s Discussion and Analysis

2023-03-29 compared with 2022-03-30 · 205 added, 128 removed, 336 unchanged (50% of the section changed)

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You should review the disclosure under the heading “Risk Factors” in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

In addition to our results determined in accordance with GAAP, free cash flow, a non-GAAP financial measure, is included in the section titled “Key Business Metrics.” This non-GAAP financial measure is not meant to be considered in isolation or as a substitute for, or superior to, comparable GAAP financial measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

In addition to our results determined in accordance with U.S.

generally accepted accounting principles (GAAP), free cash flow, a non-GAAP financial measure, is included in the section titled “Key Business Metrics.” This non-GAAP financial measure is not meant to be considered in isolation or as a substitute for, or superior to, comparable GAAP financial measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Our presentation of this non-GAAP financial measure may not be comparable to similar measures used by other companies.

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Unless the context otherwise requires, all references in this report to “Snowflake,” the “Company,” “we,” “our,” “us,” or similar terms refer to Snowflake Inc.

and its subsidiaries.

and its consolidated subsidiaries.

A discussion regarding our financial condition and results of operations for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022 is presented below.

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We believe in a data connected world where organizations have seamless access to explore, share, and unlock the value of data.

To realize this vision, we deliver the Data Cloud, a network where Snowflake customers, partners, data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in secure, governed, and compliant ways.

Our platform is the innovative technology that powers the Data Cloud, enabling customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data.

To realize this vision, we deliver the Data Cloud, a network where Snowflake customers, partners, developers, data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in secure, governed, and compliant ways.

We provide our platform through a customer-centric, consumption-based business model, only charging customers for the resources they use.

Our cloud-native architecture consists of three independently scalable but logically integrated layers across storage, compute, and cloud services.

The storage layer ingests massive amounts and varieties of structured, semi-structured, and unstructured data to create a unified data record.

Our cloud-native architecture consists of three independently scalable but logically integrated layers across compute, storage, and cloud services.

The compute layer provides dedicated resources to enable users to simultaneously access common data sets for many use cases with minimal latency.

The storage layer ingests massive amounts and varieties of structured, semi-structured, and unstructured data to create a unified data record.

The cloud services layer intelligently optimizes each use case’s performance requirements with no administration.

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These deployments are generally interconnected to deliver the Data Cloud, enabling a consistent, global user experience.

We generate the substantial majority of our revenue from fees charged to our customers based on the storage, compute, and data transfer resources consumed on our platform as a single, integrated offering.

For storage resources, consumption fees are based on the average terabytes per month of all of the customer’s data stored in our platform.

We generate the substantial majority of our revenue from fees charged to our customers based on the compute, storage, and data transfer resources consumed on our platform as a single, integrated offering.

For compute resources, consumption fees are based on the type of compute resource used and the duration of use or, for some features, the volume of data processed.

For storage resources, consumption fees are based on the average terabytes per month of all of the customer’s data stored in our platform.

For data transfer resources, consumption fees are based on terabytes of data transferred, the public cloud provider used, and the region to and from which the transfer is executed.

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Our customers typically enter into capacity arrangements with a term of one to four years, or consume our platform under on-demand arrangements in which we charge for use of our platform monthly in arrears.

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As of January 31, 2023, we had 7,828 total customers, increasing from 5,967 customers as of January 31, 2022.

Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments.

Our platform has been adopted by many of the world’s largest organizations that view Snowflake as a key strategic partner in their cloud and data transformation initiatives.

As of January 31, 2022, our customers included 241 of the Fortune 500, based on the 2021 Fortune 500 list, and 488 of the Global 2000, based on the 2021 Forbes Global 2000 list, and those customers contributed approximately 26% and 40% of our revenue, respectively, for the fiscal year ended January 31, 2022.

Each of our Fortune 500 and Global 2000 customer counts is subject to adjustments for annual updates to the Fortune 500 list by Fortune and to the Global 2000 list by Forbes, respectively, as well as acquisitions, consolidations, spin-offs, and other market activity with respect to such customers.

Initial Public Offering, Private Placements, and Elimination of Dual-Class Common Stock Structure

In September 2020, we completed our IPO and certain concurrent private placements that closed immediately subsequent to the closing of the IPO.

On March 1, 2021, all shares of our then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock pursuant to the terms of our amended and restated certificate of incorporation.

No additional shares of Class B common stock will be issued following such conversion.

See Note 11, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

As of January 31, 2023, our customers included 573 of the Forbes Global 2000, based on the 2022 Forbes Global 2000 list, and those customers contributed approximately 41% of our revenue for the fiscal year ended January 31, 2023.

Our Forbes Global 2000 customer count is subject to adjustments for annual updates to the Global 2000 list by Forbes, as well as acquisitions, consolidations, spin-offs, and other market activity with respect to such customers, and we present our Forbes Global 2000 customer count for historical periods reflecting these adjustments.

Our fiscal year ends on January 31.

For example, references to fiscal 2023 refer to the fiscal year ended January 31, 2023.

Impact of Macroeconomic Conditions

Our business and financial condition have been, and may continue to be, impacted by adverse macroeconomic conditions, including higher inflation, higher interest rates, and fluctuations or volatility in capital markets or foreign currency exchange rates, which are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management (including through shortened contract duration).

We are continuing to monitor the actual and potential effects of general macroeconomic conditions across our business.

For additional details, see the section titled “Risk Factors.”

Stock Repurchase Program

In February 2023, our board of directors authorized a stock repurchase program of up to $2.0 billion of our outstanding common stock.

Repurchases may be effected, from time to time, either on the open market (including via pre-set trading plans), in privately negotiated transactions, or through other transactions in accordance with applicable securities laws.

The program is funded using our working capital and will expire in March 2025.

The timing and amount of any repurchases will be determined by management based on an evaluation of market conditions and other factors.

The program does not obligate us to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at our discretion.

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Business Combinations

On March 31, 2022, we acquired all outstanding stock of Streamlit, Inc.

(Streamlit), a privately-held company which provides an open-source framework for creating and deploying data applications.

The acquisition date fair value of the purchase consideration was $650.8 million, which was comprised of $211.8 million in cash and 1.9 million shares of our common stock valued at $438.9 million as of the acquisition date.

In addition, we issued to Streamlit’s three founders a total of 0.4 million shares of our common stock in exchange for a portion of their Streamlit stock.

These shares are subject to vesting agreements pursuant to which the shares will vest over three years, subject to each founder’s continued employment with us.

The $93.7 million fair value of these shares are accounted for as post-combination stock-based compensation over the requisite service period of three years.

On September 23, 2022, we acquired all outstanding stock of Applica Sp.

(Applica), a privately-held company which provides an artificial intelligence platform for document understanding, for $174.7 million in cash.

The results of operations of these business combinations have been included in our consolidated financial statements from the respective dates of acquisition.

See Note 7, “Business Combinations,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details regarding these business combinations.

Key Factors Affecting Our Performance

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While this makes it difficult to predict customer adoption rates and future demand, we believe that the benefits of our platform put us in a strong position to capture the significant market opportunity ahead.

Our platform powers the Data Cloud, a network of data providers, data consumers, and data application developers that enables our customers to securely share, connect, collaborate, monetize, and acquire live data sets.

Our platform powers the Data Cloud, a network of data providers, data consumers, and data application developers that enables our customers to securely share, monetize, and acquire live data sets and data products.

The Data Cloud includes access to Snowflake Marketplace, through which customers can access or acquire third-party data sets and other data products.

Our future growth will be increasingly dependent on our ability to increase consumption of our platform by building and expanding the Data Cloud.

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Our large base of customers represents a significant opportunity for further consumption of our platform.

While we have seen a rapid increase in the number of customers that have contributed more than $1 million in product revenue in the trailing 12 months, we believe that there is a substantial opportunity to continue growing these customers further, as well as continuing to expand the usage of our platform within our other existing customers.

We plan to continue investing to encourage increased consumption and adoption of new use cases among our existing customers.

While we have seen an increase in the number of customers that have contributed more than $1 million in product revenue in the trailing 12 months, we believe that there is a substantial opportunity to continue growing these customers further, as well as continuing to expand the usage of our platform within our other existing customers.

We plan to continue investing to encourage increased consumption and adoption of new use cases among our existing customers, particularly large enterprises.

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Once deployed, our customers often expand their use of our platform more broadly within the enterprise and across their ecosystem of customers and partners as they migrate more data to the public cloud, identify new use cases, and realize the benefits of our platform and the Data Cloud.

However, because we generally recognize product revenue on consumption and not ratably over the term of the contract, we do not have visibility into the timing of revenue recognition from any particular customer.

In any given period, there is a risk that customer consumption of our platform will be slower than we expect, which may cause fluctuations in our revenue and results of operations.

In any given period, there is a risk that customer consumption of our platform will be slower than we expect, including in response to adverse macroeconomic conditions, which may cause fluctuations in our revenue and results of operations.

New software releases or hardware improvements, like better storage compression and cloud infrastructure processor improvements, may make our platform more efficient, enabling customers to consume fewer compute, storage, and data transfer resources to accomplish the same workloads.

To the extent these improvements do not result in an offsetting increase in new workloads, we may experience lower revenue.

Our ability to increase usage of our platform by, and sell additional contracted capacity to, existing customers, and, in particular, large enterprise customers, will depend on a number of factors, including our customers’ satisfaction with our platform, competition, pricing, overall changes in our customers’ spending levels, the effectiveness of our and our partners’ efforts to help our customers realize the benefits of our platform, and the extent to which customers migrate new workloads to our platform over time.

In addition, we have recently seen, and may continue to see, our newer customers increase their consumption of our platform at a slower pace than our more tenured customers.

Our ability to increase usage of our platform by, and sell additional contracted capacity to, existing customers, and, in particular, large enterprise customers, will depend on a number of factors, including our customers’ satisfaction with our platform, competition, pricing, economic conditions, overall changes in our customers’ spending levels, the effectiveness of our and our partners’ efforts to help our customers realize the benefits of our platform, and the extent to which customers migrate new workloads to our platform over time.

Acquiring New Customers

We believe there is a substantial opportunity to further grow our customer base by continuing to make significant investments in sales and marketing and brand awareness.

Our ability to attract new customers will depend on a number of factors, including our success in recruiting and scaling our sales and marketing organization, competitive dynamics in our target markets, and our ability to build and maintain partner relationships, including with global system integrators, resellers, and technology partners.

We intend to expand our direct sales force, with a focus on specific industries and increasing sales to large organizations.

Our ability to attract new customers will depend on a number of factors, including our success in recruiting and scaling our sales and marketing organization, competitive dynamics in our target markets, changes in our customers’ spending in response to market uncertainty, and our ability to build and maintain partner relationships, including with global system integrators, resellers, and technology partners.

We intend to continue expanding our direct sales force, with a focus on specific industries and increasing sales to large organizations.

While our platform is built for organizations of all sizes, we focus our selling efforts on large enterprise customers and customers with vast amounts of data, and providing industry-specific solutions.

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We are focused on our long-term revenue potential.

We believe that our market opportunity is large, and we will continue to invest significantly in scaling across all organizational functions in order to grow our operations both domestically and internationally.

We have a history of introducing successful new features and capabilities on our platform, and we intend to continue to invest heavily to grow our business to take advantage of our expansive market opportunity rather than optimize for profitability or cash flow in the near future.

We believe that our market opportunity is large, and we will continue to invest significantly in scaling across all organizational functions, with a focus on research and development, and sales and marketing, in order to grow our operations both domestically and internationally.

We have a history of introducing successful new features and capabilities on our platform, and we intend to continue to invest heavily to grow our business to take advantage of our expansive market opportunity while also focusing on profitability and cash flow.

Key Business Metrics

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$ 496.5 $ 81.2 $ (85.7)

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January 31, 2023 January 31, 2022 January 31, 2021

Customers with trailing 12-month product revenue greater than $1 million (3)

Net revenue retention rate (3)

158 % 177 % 168 %

Forbes Global 2000 customers (3)

Remaining performance obligations (in millions) (4)

$ 3,660.5 $ 2,646.5 $ 1,332.8

Total customers 5,944 4,139 2,392

Net revenue retention rate 178 % 168 % 169 %

Customers with trailing 12-month product revenue greater than $1 million 184 77 41

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See the section titled “Free Cash Flow” for a reconciliation of free cash flow to the most directly comparable financial measure calculated in accordance with GAAP.

(2) Cash outflows for employee payroll tax items related to the net share settlement of equity awards, which were $184.6 million for the fiscal year ended January 31, 2023, are included in cash flow for financing activities and, as a result, do not have an effect on the calculation of free cash flow.

No equity awards were net settled prior to the fiscal year ended January 31, 2023.

(3) Historical numbers for (i) customers with trailing 12-month product revenue greater than $1 million, (ii) net revenue retention rate, and (iii) Forbes Global 2000 customers reflect any adjustments for acquisitions, consolidations, spin-offs, and other market activity.

In addition, our Forbes Global 2000 customer count reflects adjustments for annual updates to the Forbes Global 2000 list by Forbes.

(4) As of January 31, 2023, our remaining performance obligations were approximately $3.7 billion, of which we expect approximately 55% to be recognized as revenue in the twelve months ending January 31, 2024 based on historical customer consumption patterns.

The weighted-average remaining life of our capacity contracts was 2.0 years as of January 31, 2023.

However, the amount and timing of revenue recognition are generally driven by customers' consumption, which is inherently variable at our customers’ discretion and can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

However, the amount and timing of revenue recognition are generally dependent upon customers' future consumption, which is inherently variable at our customers’ discretion and can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

In addition, our historical customer consumption patterns are not necessarily indicative of future results.

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Product revenue excludes our professional services and other revenue, which has been less than 10% of revenue for each of the periods presented.

Remaining Performance Obligations

Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including (i) deferred revenue, and (ii) non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods.

RPO excludes performance obligations from on-demand arrangements and certain time and materials contracts that are billed in arrears.

Portions of RPO that are not yet invoiced and are denominated in foreign currencies are revalued into USD each period based on the applicable period-end exchange rates.

RPO is not necessarily indicative of future product revenue growth because it does not account for the timing of customers’ consumption or their consumption of more than their contracted capacity.

Moreover, RPO is influenced by a number of factors, including the timing of renewals, the timing of purchases of additional capacity, average contract terms, seasonality, and the extent to which customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

Due to these factors, it is important to review RPO in conjunction with product revenue and other financial metrics disclosed elsewhere herein.

Total Customers

We count the total number of customers at the end of each period.

Customers with Trailing 12-Month Product Revenue Greater than $1 Million

Large customer relationships lead to scale and operating leverage in our business model.

Compared with smaller customers, large customers present a greater opportunity for us to sell additional capacity because they have larger budgets, a wider range of potential use cases, and greater potential for migrating new workloads to our platform over time.

As a measure of our ability to scale with our customers and attract large enterprises to our platform, we count the number of customers under capacity arrangements that contributed more than $1 million in product revenue in the trailing 12 months.

For purposes of determining our customer count, we treat each customer account, including accounts for end-customers under a reseller arrangement, that has at least one corresponding capacity contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers.

For purposes of determining our customer count, we do not include customers that consume our platform only under on-demand arrangements.

Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

We believe that the number of customers is an important indicator of the growth of our business and future revenue trends.

We do not include customers that consume our platform only under on-demand arrangements for purposes of determining our customer count.

Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our customer count for historical periods reflecting these adjustments.

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Net Revenue Retention Rate

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Any customer in the cohort that did not use our platform in the second year remains in the calculation and contributes zero product revenue in the second year.

Our net revenue retention rate is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

Our net revenue retention rate is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our net revenue retention rate for historical periods reflecting these adjustments.

Since we will continue to attribute the historical product revenue to the consolidated contract, consolidation of capacity contracts within a customer’s organization typically will not impact our net revenue retention rate unless one of those customers was not a customer at any point in the first month of the first year of the measurement period.

Although our net revenue retention rate has increased over the periods presented above, we expect our net revenue retention rate to decrease over the long-term as customers that have consumed our platform for an extended period of time become a larger portion of both our overall customer base and our product revenue that we use to calculate net revenue retention rate, and as their consumption growth primarily relates to existing use cases rather than new use cases.

Customers with Trailing 12-Month Product Revenue Greater than $1 Million

Large customer relationships lead to scale and operating leverage in our business model.

Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

We expect our net revenue retention rate to decrease over the long-term as customers that have consumed our platform for an extended period of time become a larger portion of both our overall customer base and our product revenue that we use to calculate net revenue retention rate, and as their consumption growth primarily relates to existing use cases rather than new use cases.

In addition, we have recently seen, and may continue to see, our newer customers increase their consumption of our platform at a slower pace than our more tenured customers, which may negatively impact our net revenue retention rate in future periods.

Forbes Global 2000 Customers

We believe that the number of Forbes Global 2000 customers is an important indicator of the growth of our business and future revenue trends as we focus our selling efforts on large enterprise customers and customers with vast amounts of data.

Our Forbes Global 2000 customer count is a subset of our customer count based on the 2022 Forbes Global 2000 list.

Our Forbes Global 2000 customer count is subject to adjustments for annual updates to the list by Forbes, as well as acquisitions, consolidations, spin-offs, and other market activity with respect to such customers, and we present our Forbes Global 2000 customer count for historical periods reflecting these adjustments.

Remaining Performance Obligations

Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including (i) deferred revenue and (ii) non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods.

RPO excludes performance obligations from on-demand arrangements and certain time and materials contracts that are billed in arrears.

Portions of RPO that are not yet invoiced and are denominated in foreign currencies are revalued into U.S.

dollars each period based on the applicable period-end exchange rates.

RPO is not necessarily indicative of future product revenue growth because it does not account for the timing of customers’ consumption or their consumption of more than their contracted capacity.

Moreover, RPO is influenced by a number of factors, including the timing and size of renewals, the timing and size of purchases of additional capacity, average contract terms, seasonality, changes in foreign currency exchange rates, and the extent to which customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

Due to these factors, it is important to review RPO in conjunction with product revenue and other financial metrics disclosed elsewhere herein.

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Free Cash Flow

We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by (used in) operating activities reduced by purchases of property and equipment and capitalized internal-use software development costs.

Cash outflows for employee payroll tax items related to the net share settlement of equity awards are included in cash flow for financing activities and, as a result, do not have an effect on the calculation of free cash flow.

We believe information regarding free cash flow provides useful supplemental information to investors because it is an indicator of the strength and performance of our core business operations.

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(1) Free cash flow for the fiscal years ended January 31, 2023, 2022, and 2021 included the effect of $23.9 million, $68.6 million, and $14.1 million, respectively, in the net cash paid on payroll tax-related items on employee stock transactions.

No equity awards were net settled prior to the fiscal year ended January 31, 2023.

Historically, we have received a higher volume of orders from new and existing customers in the fourth fiscal quarter of each year.

As a result, we have historically seen higher collections and consequently higher free cash flow in the first and fourth fiscal quarters of each year.

Impact of COVID-19

The ongoing COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020.

The full extent to which the COVID-19 pandemic, including any new variants, may continue to directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted.

Although our results of operations, cash flows, and financial condition were not materially adversely impacted in the fiscal year ended January 31, 2022, we have experienced, and may continue to experience, an adverse impact on certain parts of our business as a result of governmental restrictions and other measures to mitigate the spread of COVID-19, including a lengthening of the sales cycle for some prospective customers and delays in the delivery of professional services and trainings to our customers.

We have also experienced, and may continue to experience, a modest positive impact on other aspects of our business, including a continued decrease in certain operating expenses due to the virtualization or cancellation of customer, partner, and employee events.

While these modest impacts had a short-term benefit to our results of operations for the fiscal year ended January 31, 2022, we do not yet have visibility into the full impact this will have on our business.

We cannot predict how long we will continue to experience these impacts as regulations and other measures are expected to change over time, and the availability, efficacy, and acceptance of vaccines or other preventative measures remains unclear.

However, if our customers or partners experience downturns or uncertainty in their own business operations or revenue resulting from the spread or resurgence of COVID-19, they may decrease or delay their spending, request pricing discounts, or seek renegotiations of their contracts, any of which may result in decreased revenue and cash receipts for us in future periods.

In addition, we may experience customer losses, including due to bankruptcy or our customers ceasing operations, which may result in an inability to collect accounts receivable from these customers.

In addition, in response to the spread of COVID-19, we required virtually all of our employees to work remotely to minimize the risk of the virus to our employees and the communities in which we operate, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners.

Although we have recently opened most of our offices for voluntary use and we expect many of our employees to return to physical offices in the future, the nature and extent of that return is uncertain.

As our offices reopen, we expect to incur incremental expenses as we resume onsite services and related in-office costs.

Given the uncertainty regarding the length, severity, and ability to combat the COVID-19 pandemic, we cannot reasonably estimate the long-term impact on our future results of operations, cash flows, or financial condition.

For additional details, see the section titled “Risk Factors.”

As a result, we have historically seen higher free cash flow in the first and fourth fiscal quarters of each year.

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Components of Results of Operations

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Revenue from on-demand arrangements typically relates to initial consumption as part of customer onboarding and, to a lesser extent, overage consumption beyond a customer’s contracted usage amount or following the expiration of a customer’s contract.

Revenue from on-demand arrangements represented 3%, 4%, and 4% of the Company’s revenue for the fiscal years ended January 31, 2022, 2021, and 2020, respectively.

Revenue from on-demand arrangements represented approximately 2%, 3%, and 4% of our revenue for the fiscal years ended January 31, 2023, 2022, and 2021, respectively.

We recognize revenue as customers consume compute, storage, and data transfer resources under either of these arrangements.

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We recognize the deployment fee ratably over the contract term.

Such deployment revenue represented approximately 1% of our revenue for all periods presented.

Such deployment revenue represented less than 1% of our revenue for all periods presented.

Our customer contracts for capacity typically have a term of one to four years.

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For those customers who do not have a capacity arrangement, our on-demand arrangements generally have a monthly stated contract term and can be terminated at any time by either the customer or us.

We do not make any one of these resources available for consumption without the others.

Instead, each of compute, storage, and data transfer work together to drive consumption on our platform.

For storage resources, consumption for a given customer is based on the average terabytes per month of all of such customer’s data stored in our platform.

For compute resources, consumption is based on the type of compute resource used and the duration of use or, for some features, the volume of data processed.

For storage resources, consumption for a given customer is based on the average terabytes per month of all of such customer’s data stored in our platform.

For data transfer resources, consumption is based on terabytes of data transferred, the public cloud provider used, and the region to and from which the transfer is executed.

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As our customer base grows, we expect our ability to forecast customer consumption in the aggregate to improve.

However, in any given period, there is a risk that customers will consume our platform more slowly than we expect, which may cause fluctuations in our revenue and results of operations.

However, in any given period, there is a risk that customers will consume our platform more slowly than we expect, including in response to adverse macroeconomic conditions, which may cause fluctuations in our revenue and results of operations.

For example, we have recently seen, and may continue to see, our newer customers increase their consumption of our platform at a slower pace than our more tenured customers.

In addition, new software releases or hardware improvements, like better storage compression and cloud infrastructure processor improvements, may make our platform more efficient, enabling customers to consume fewer compute, storage, and data transfer resources to accomplish the same workloads.

To the extent these improvements do not result in an offsetting increase in new workloads, we may experience lower revenue.

Our revenue also includes professional services and other revenue, which consists primarily of consulting, on-site technical solution services, and training related to our platform.

Our revenue also includes professional services and other revenue, which consists primarily of consulting, technical solution services, and training related to our platform.

Our professional services revenue is recognized over time based on input measures, including time and materials costs incurred relative to total costs, with consideration given to output measures, such as contract deliverables, when applicable.

Other revenue consists primarily of fees from customer training delivered on-site or through publicly available classes.

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Allocation of Overhead Costs

Overhead costs that are not substantially dedicated for use by a specific functional group are allocated based on headcount.

Such costs include costs associated with office facilities, depreciation of property and equipment, and information technology (IT) related personnel and other expenses, such as software and subscription services.

Such costs include costs associated with office facilities, depreciation of property and equipment, information technology (IT) and general recruiting related expenses and other expenses, such as software and subscription services.

Cost of Revenue

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Sales commissions and referral fees earned upon the origination of the new customer or customer expansion contracts are deferred and then amortized over a period of benefit that we determined to be five years.

Prior to the fiscal year ended January 31, 2021, we primarily amortized sales commissions over a period of benefit that we determined to be five years as they were earned on new customer or expansion of existing customer contracts.

Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs, including Summit, our user conference, offset by proceeds from such conferences and programs.

In addition, sales and marketing expenses are comprised of travel-related expenses, software and subscription services dedicated for use by our sales and marketing organizations, and outside services contracted for sales and marketing purposes.

Sales and marketing expenses also include advertising costs and other expenses associated with our sales, marketing and business development programs, including Summit, our annual user conference, offset by proceeds from such conferences and programs.

In addition, sales and marketing expenses are comprised of travel-related expenses, software and subscription services dedicated for use by our sales and marketing organizations, amortization of an acquired developer community intangible asset, and outside services contracted for sales and marketing purposes.

We expect that our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense for the foreseeable future as we grow our business.

However, we expect that our sales and marketing expenses will decrease as a percentage of our revenue over time.

However, we expect that our sales and marketing expenses will decrease as a percentage of our revenue over time, although the percentage may fluctuate from period to period depending on the timing and the extent of these expenses.

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Research and Development

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We expect that our research and development expenses will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform.

However, we expect that our research and development expenses will decrease as a percentage of our revenue over time.

However, we expect that our research and development expenses will decrease as a percentage of our revenue over time, although the percentage may fluctuate from period to period depending on the timing and the extent of these expenses.

In addition, research and development expenses that qualify as internal-use software development costs are capitalized, the amount of which may fluctuate significantly from period to period.

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General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources, facilities, and administrative personnel, including salaries, benefits, bonuses, and stock-based compensation.

General and administrative expenses also include external legal, accounting, and other professional services fees, software and subscription services dedicated for use by our general and administrative functions, insurance and other corporate expenses.

As a result of our IPO, we have incurred and expect to continue to incur additional expenses to operate as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services.

We expect that our general and administrative expenses will increase in absolute dollars as our business grows but will decrease as a percentage of our revenue over time.

We expect that our general and administrative expenses will increase in absolute dollars as our business grows but will decrease as a percentage of our revenue over time, although the percentage may fluctuate from period to period depending on the timing and the extent of these expenses.

Interest Income

Interest income consists primarily of interest income earned on our cash equivalents and short-term and long-term investments, including amortization of premiums and accretion of discounts related to our available-for-sale marketable securities, net of associated fees.

Interest income consists primarily of interest income earned on our cash and cash equivalents and short-term and long-term investments, including amortization of premiums and accretion of discounts related to our available-for-sale marketable debt securities, net of associated fees.

Other Income (Expense), Net

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Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and U.S.

state jurisdictions in which we conduct business.

federal and state jurisdictions in which we conduct business.

We maintain a full valuation allowance against our U.S.

deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized.

Net Income (Loss) Attributable to Noncontrolling Interest

Our consolidated financial statements include the accounts of Snowflake Inc., our wholly-owned subsidiaries, and a majority-owned subsidiary in which we have a controlling financial interest.

Net income (loss) attributable to noncontrolling interest represents the net income (loss) of our majority-owned subsidiary attributed to noncontrolling interest using the hypothetical liquidation at book value method.

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

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Results of Operations

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Loss before income taxes (815,993) (676,960) (537,040)

Provision for income taxes 2,988 2,062 993

Provision for (benefit from) income taxes (18,467) 2,988 2,062

Net loss (797,526) (679,948) (539,102)

net loss attributable to noncontrolling interest (821) — —

Net loss attributable to Snowflake Inc.

$ (796,705) $ (679,948) $ (539,102)

________________

(1) Includes stock-based compensation as follows (in thousands):

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Total stock-based compensation $ 861,533 $ 605,095 $ 301,441

The increase in stock-based compensation for the fiscal year ended January 31, 2022, compared to the fiscal year ended January 31, 2021, was primarily due to additional RSUs granted to current and new employees and an increased weighted-average grant-date fair value of RSUs granted after our IPO.

As of January 31, 2022, total compensation cost related to unvested stock-based awards not yet recognized was $1.4 billion, which will be recognized over a weighted-average period of 3.0 years.

The increase in stock-based compensation for the fiscal year ended January 31, 2023, compared to the fiscal year ended January 31, 2022, was primarily attributable to additional equity awards granted to existing and new employees, partially offset by a decrease in stock-based compensation associated with restricted stock unit awards (RSUs) granted prior to our Initial Public Offering (IPO).

RSUs granted prior to our IPO have both a service-based and a performance-based vesting condition and, as a result of the performance-based vesting condition being satisfied in connection with our IPO, we recognized stock-based compensation associated with such RSUs using an accelerated attribution method.

As of January 31, 2023, total compensation cost related to unvested equity awards not yet recognized was $2.4 billion, which will be recognized over a weighted-average period of 2.9 years.

See Note 12, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

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The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:

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Loss before income taxes (40) (56) (91)

Provision for income taxes — — —

Provision for (benefit from) income taxes (1) — —

Net loss (39%) (56%) (91%)

net loss attributable to noncontrolling interest — — —

Net loss attributable to Snowflake Inc.

(39%) (56%) (91%)

________________

(1) Stock-based compensation included in the table above as a percentage of revenue as follows:

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Product revenue increased $798.3 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to increased consumption of our platform by existing customers, as evidenced by our net revenue retention rate of 158% as of January 31, 2023.

The increase in product revenue was also driven by an increase in capacity sales prices of approximately 4% for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to increased sales of higher-priced editions of our platform.

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We had 330 customers with product revenue of greater than $1 million for the trailing 12 months ended January 31, 2023, an increase from 184 customers as of January 31, 2022.

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The remainder was driven by on-demand arrangements.

As described in the section titled “Impact of COVID-19,” we have experienced impacts from the ongoing COVID-19 pandemic, including the elongation of sales cycles, that may impact new customer acquisition, the timing of future revenue recognition, and our future growth rates.

We continue to carefully monitor the impact of COVID-19 on product revenue, customer acquisitions, and net revenue retention rates.

Professional services and other revenue increased $40.6 million for the fiscal year ended January 31, 2022.

compared to the prior fiscal year, as we expanded our professional services organization to help our customers further realize the benefits of our platform.

The preceding historical metrics reflect any adjustments for acquisitions, consolidations, spin-offs, and other market activity.

For purposes of determining revenue derived from (i) customers with trailing 12-month product revenue greater than $1 million, (ii) new customers, and (iii) existing customers, we treat each customer account, including accounts for end-customers under a reseller arrangement, that has at least one corresponding capacity contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers.

Professional services and other revenue increased $48.0 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, as we continued to expand our professional services organization to help our customers further realize the benefits of our platform.

Cost of Revenue, Gross Profit (Loss), and Gross Margin

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Cost of product revenue increased $199.7 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $156.9 million in third-party cloud infrastructure expenses as a result of increased customer consumption.

Personnel-related costs and allocated overhead costs also increased $49.7 million for the fiscal year ended January 31, 2022, compared to the prior fiscal year, as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation related to additional RSUs granted after our IPO.

Our product gross margin was 70% for the fiscal year ended January 31, 2022, compared to 65% for the prior fiscal year, primarily due to (i) higher volume-based discounts for our purchases of third-party cloud infrastructure, (ii) an increased percentage of revenue from consumption of computing resources due to better storage compression, (iii) an increased percentage of revenue from consumption of higher-priced editions of our platform, and (iv) increased scale across our cloud infrastructure regions, partially offset by the increase in stock-based compensation.

Personnel-related costs and allocated overhead costs also increased $28.7 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to existing and new employees.

The remaining increase in cost of product revenue was primarily driven by an increase of $7.6 million in amortization of internal-use software development costs and acquired developed technology intangible assets.

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Our product gross margin was 72% for the fiscal year ended January 31, 2023, compared to 70% for the prior fiscal year, primarily due to (i) increased cost efficiency as a result of cloud infrastructure processor improvements, (ii) an increased percentage of revenue from consumption of higher-priced editions of our platform, (iii) increased scale across our cloud infrastructure regions, and (iv) higher volume-based discounts for our purchases of third-party cloud infrastructure.

In addition, the year-over-year increase in our product gross margin was driven by a decrease in stock-based compensation as a percentage of product revenue.

While we expect our product gross margin to remain relatively flat for the fiscal year ending January 31, 2024, a number of factors could hinder any improvement in our product gross margin, including (i) fluctuations in the mix and timing of customers' consumption, which is inherently variable at our customers' discretion, (ii) whether or not a customer contracts with us through our marketplace listings, (iii) our discounting practices, including as a result of changes to the competitive environment, and (iv) the extent of our investments in our operations, including performance improvements that may make our platform or the underlying cloud infrastructure more efficient.

Cost of professional services and other revenue increased $61.9 million for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to an increase of $59.3 million in personnel-related costs and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional RSUs granted after our IPO.

Professional services and other gross margins declined significantly for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to the increase in stock-based compensation.

Cost of professional services and other revenue increased $59.4 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $48.3 million in personnel-related costs and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to existing and new employees.

Costs associated with contracted third-party partners, primarily related to customer implementations and migrations from legacy solutions, also increased $9.6 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, as a result of growth in our business.

Professional services and other gross margin improved for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to decreased stock-based compensation as a percentage of professional services and other revenue.

We do not believe the year-over-year changes in professional services and other gross margins are meaningful given that we are continuing to scale our professional services organization and our professional services and other revenue represents a small percentage of our revenue.

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Headcount (at period end) 2,738 1,891

Sales and marketing expenses increased $264.6 million for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to an increase of $208.7 million in personnel-related costs (excluding commission expenses) and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional RSUs granted after our IPO.

Expenses associated with sales commissions and draws paid to our sales force and certain referral fees paid to third parties, including amortization of deferred commissions, increased $34.3 million for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to increases in customers’ consumption of our platform and in bookings.

The remaining increase in sales and marketing expenses was driven by an increase of $16.6 million in advertising costs and other expenses associated with our marketing programs and an increase of $6.0 million in software and subscription services for the fiscal year ended January 31, 2022 compared to the prior fiscal year.

Sales and marketing expenses increased $362.5 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $232.5 million in personnel-related costs (excluding commission expenses) and allocated overhead costs, as a result of increased headcount, stock-based compensation, and overall costs to support the growth in our business.

The increase in personnel-related costs included a $60.8 million increase in stock-based compensation for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily related to additional equity awards granted to existing and new employees, partially offset by a decrease in stock-based compensation related to RSUs granted prior to our IPO.

See Note 12, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

Expenses associated with sales commissions and draws paid to our sales force and certain referral fees paid to third parties, including amortization of deferred commissions, increased $33.1 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to increases in customers’ consumption of our platform and in the annualized contract value of our customer contracts.

Advertising costs and other expenses associated with our sales, marketing and business development programs also increased $39.4 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily driven by increased expenses related to in-person sales and marketing events and user conferences, including Summit, our annual user conference which was held virtually in the prior year due to the COVID-19 pandemic, net of associated proceeds.

As a result of our in-person sales and marketing events and user conferences as well as the easing of COVID-19 travel restrictions, travel-related expenses also increased $17.4 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year.

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In addition, sales and marketing expenses for the fiscal year ended January 31, 2023 included $25.2 million of amortization of an acquired developer community intangible asset as a result of the Streamlit business combination completed in March 2022.

Research and Development

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Headcount (at period end) 1,378 788

Research and development expenses increased $229.0 million for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to an increase of $202.9 million in personnel-related costs and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional RSUs granted after our IPO, partially offset by increased capitalized internal-use software development costs.

Research and development expenses increased $321.1 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $279.9 million in personnel-related costs and allocated overhead costs, as a result of increased stock-based compensation, headcount, and overall costs to support the growth in our business.

The increase in personnel-related costs included $174.7 million increase in stock-based compensation, primarily related to additional equity awards granted to existing and new employees and the post-combination stock-based compensation related to the Streamlit business combination, partially offset by a decrease in stock-based compensation related to RSUs granted prior to our IPO.

See Note 12, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

The remaining increase in research and development expenses was primarily driven by an increase of $22.8 million in third-party cloud infrastructure expenses incurred in developing our platform.

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Headcount (at period end) 907 722

General and administrative expenses increased $88.9 million for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to an increase of $75.0 million in personnel-related costs and allocated overhead costs as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional RSUs granted after our IPO.

The remaining increase in general and administrative expenses was attributable to increased insurance expenses and other corporate expenses to support the normal course of operating as a public company and our continued growth.

General and administrative expenses increased $30.8 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to an increase of $14.0 million in outside services mainly as a result of increased legal fees related to acquisitions.

Unallocated lease costs, which are associated with unused office facilities to accommodate planned headcount growth, also increased $4.9 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year.

The remaining increase in general and administrative expenses was primarily attributable to increased insurance expenses and increased other corporate expenses to support the normal course of operations and our continued growth.

Interest Income

Fiscal Year Ended January 31,

2023 2022 % Change

(dollars in thousands)

Interest income $ 73,839 $ 9,129 709%

Interest income increased $64.7 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to higher yields on our investments in available-for-sale marketable debt securities as a result of increased interest rates.

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Other Income (Expense), Net

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(dollars in thousands)

Net unrealized gains on strategic investments in equity securities $ 27,621 $ — NM

Net unrealized gains (losses) on strategic investments in non-marketable equity securities:

Upward adjustments $ 4,125 $ 32,975 (87%)

Impairments (38,036) — NM

Net unrealized losses on strategic investments in marketable equity securities (12,524) (5,354) 134%

Other (1,130) 1,326 (185%)

Other income (expense), net $ 28,947 $ (610) NM

Other income (expense), net $ (47,565) $ 28,947 (264%)

NM - Not meaningful.

Other income (expense), net increased $29.6 million for the fiscal year ended January 31, 2022, compared to the prior fiscal year, primarily due to net unrealized gains on our strategic investments in equity securities recorded during the fiscal year ended January 31, 2022.

Provision for Income Taxes

Other income (expense), net decreased $76.5 million for the fiscal year ended January 31, 2023, compared to the prior fiscal year, primarily due to (i) impairments recorded on our strategic investments in non-marketable equity securities, (ii) a decrease in upward adjustments recorded on our strategic investments in non-marketable equity securities, and (iii) increased net unrealized losses recorded on our strategic investments in marketable equity securities.

See Note 5, “Fair Value Measurements,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

Provision for (Benefit from) Income Taxes

Fiscal Year Ended January 31,

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Loss before income taxes $ (815,993) $ (676,960) 21%

Provision for income taxes 2,988 2,062 45 %

Provision for (benefit from) income taxes (18,467) 2,988 (718%)

Effective tax rate 2.3% (0.4%)

Our benefit from income taxes was $18.5 million for the fiscal year ended January 31, 2023, compared to our provision for income taxes of $3.0 million for the fiscal year ended January 31, 2022, primarily due to the partial release of a valuation allowance of $26.9 million as a result of the Streamlit business combination.

We maintain a full valuation allowance on our U.S.

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Liquidity and Capital Resources

Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers as further detailed below.

Our IPO resulted in aggregate net proceeds of $3.7 billion, after underwriting discounts of $121.7 million.

We also received aggregate proceeds of $500.0 million related to certain concurrent private placements, and did not pay any underwriting discounts or commissions with respect to the shares that were sold in these private placements.

As of January 31, 2023, our principal sources of liquidity were cash, cash equivalents, and short-term and long-term investments totaling $5.1 billion.

Our investments primarily consist of corporate notes and bonds, commercial paper, money market funds, U.S.

government and agency securities, and certificates of deposit.

Our investments primarily consist of corporate notes and bonds, commercial paper, U.S.

government and agency securities, certificates of deposit, and money market funds.

As of January 31, 2023, our RPO was $3.7 billion.

Our RPO represents the amount of contracted future revenue that has not yet been recognized, including (i) deferred revenue and (ii) non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods, which are not recorded on the balance sheet.

Portions of RPO that are not yet invoiced and are denominated in foreign currencies are revalued into USD each period based on the applicable period-end exchange rates.

Our primary uses of cash include personnel-related expenses, sales and marketing expenses, third-party cloud infrastructure expenses, overhead costs and capital expenditures.

Portions of RPO that are not yet invoiced and are denominated in foreign currencies are revalued into U.S.

dollars each period based on the applicable period-end exchange rates.

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Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers.

Our IPO resulted in aggregate net proceeds of $3.7 billion, after underwriting discounts of $121.7 million.

Our primary uses of cash include personnel-related expenses, third-party cloud infrastructure expenses, sales and marketing expenses, overhead costs, and acquisitions and strategic investments we may make from time to time.

As of January 31, 2023, our material cash requirements from known contractual obligations and commitments relate primarily to (i) third-party cloud infrastructure agreements, (ii) operating leases for office facilities, and (iii) subscription arrangements used to facilitate our operations at the enterprise level.

These agreements are enforceable and legally binding and specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

In January 2023, we amended one of our third-party cloud infrastructure agreements effective February 1, 2023.

Under the amended agreement, we have committed to spend an aggregate of at least $2.5 billion from fiscal 2024 to fiscal 2028 on cloud infrastructure services ($350.0 million in fiscal 2024, $450.0 million in fiscal 2025, $500.0 million in fiscal 2026, $550.0 million in fiscal 2027, and $650.0 million in fiscal 2028).

We are required to pay the difference if we fail to meet the minimum purchase commitment during any fiscal year, and such payment can be applied to qualifying expenditures for cloud infrastructure services during the term of the amended agreement.

For more information regarding our contractual obligations and commitments as of January 31, 2023, see Note 10, “Commitments and Contingencies,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Our long-term purchase commitments may be satisfied earlier than the payment periods presented as we continue to grow and scale our business.

In the three months ending April 30, 2022, we began funding withholding taxes in certain jurisdictions due on the vesting of employee RSUs by net share settlement, rather than our previous approach of selling shares of our common stock to cover taxes upon vesting of such awards.

In future periods, this change in withholding method is expected to reduce (i) net cash provided by financing activities and (ii) our shares outstanding used to calculate net income (loss) per share.

The amount of withholding taxes related to net share settlement of employee RSUs is approximately $54 million for the three months ending April 30, 2022.

In March 2022, we entered into an agreement to acquire all outstanding capital stock of Streamlit, Inc., a privately-held company which provides a framework built to simplify and accelerate the creation of data applications, for approximately $800 million (Deal Consideration), net of acquired cash and cash equivalents and subject to customary purchase price adjustments.

Upon completion of the acquisition, which is subject to customary closing conditions and expected to occur in the three months ending April 30, 2022, the Deal Consideration will be paid in a combination of cash and unregistered shares of our common stock.

We believe that our existing cash, cash equivalents, and short-term and long-term investments will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months.

For the period beyond the next 12 months, we believe we will be able to meet our working capital and capital expenditure needs from our existing cash, cash equivalents, and short-term and long-term investments and cash flows from our operating activities.

On February 10, 2023, we acquired (i) all outstanding stock of Mountain US Corporation (f/k/a Mobilize.net Corporation), a privately-held company which provides a premier suite of tools for efficiently migrating databases to the Data Cloud, for approximately $67 million in cash, net of cash and cash equivalents acquired, and (ii) all outstanding stock of LeapYear Technologies, Inc., a privately-held company which provides a differential privacy platform, for approximately $59 million in cash, net of cash and restricted cash acquired.

In February 2023, our board of directors authorized a stock repurchase program of up to $2.0 billion of our outstanding common stock.

The program is funded using our working capital and will expire in March 2025.

The timing and amount of any repurchases will be determined by management based on an evaluation of market conditions and other factors.

The program does not obligate us to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at our discretion.

We believe that our existing cash, cash equivalents, and short-term and long-term investments, as well as cash flows expected to be generated by our operations, will be sufficient to support our working capital and capital expenditure requirements, acquisitions and strategic investments we may make from time to time, and authorized stock repurchases, for the next 12 months and beyond.

Our future capital requirements will depend on many factors, including our revenue growth rate, expenditures related to our headcount growth, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the price at which we are able to purchase public cloud capacity, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform.

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If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition.

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The following table shows a summary of our cash flows for the periods presented (in thousands):

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Net cash provided by (used in) operating activities $ 545,639 $ 110,179 $ (45,417)

Net cash provided by (used in) investing activities $ (20,800) $ (4,036,645) $ 138,495

Net cash provided by financing activities $ 178,198 $ 4,775,290 $ 57,469

Net cash used in investing activities $ (597,885) $ (20,800) $ (4,036,645)

Net cash provided by (used in) financing activities $ (92,624) $ 178,198 $ 4,775,290

Operating Activities

Net cash provided by operating activities mainly consists of our net loss adjusted for certain non-cash items, primarily consisting of (i) stock-based compensation, net of amounts capitalized, (ii) net amortization (accretion) of premiums (discounts) on investments, (iii) amortization of deferred commissions, (iv) amortization of operating lease right-of-use assets, (v) net unrealized gains on strategic investments in equity securities, and (vi) depreciation of property and equipment and amortization of acquired intangible assets, and changes in operating assets and liabilities during each period.

Net cash provided by operating activities mainly consists of our net loss adjusted for certain non-cash items, primarily consisting of (i) stock-based compensation, net of amounts capitalized, (ii) depreciation and amortization of property and equipment and amortization of acquired intangible assets, (iii) amortization of deferred commissions, (iv) net unrealized gains or losses on strategic investments in equity securities, (v) amortization of operating lease right-of-use assets, (vi) net amortization (accretion) of premiums (discounts) on investments, and (vii) deferred income tax benefit or expense, and changes in operating assets and liabilities during each period.

For the fiscal year ended January 31, 2023, net cash provided by operating activities was $545.6 million, primarily consisting of our net loss of $797.5 million, adjusted for non-cash charges of $1.1 billion, and net cash inflows of $289.5 million provided by changes in our operating assets and liabilities, net of the effects of business combinations.

The main drivers of the changes in operating assets and liabilities during the fiscal year ended January 31, 2023 were (i) a $514.3 million increase in deferred revenue due to invoicing for prepaid capacity agreements outpacing revenue recognition, and (ii) a $74.5 million increase in accrued expenses and other liabilities primarily due to increased headcount and growth in our business, partially offset by (a) a $167.0 million increase in accounts receivable primarily due to growth in our business, (b) a $95.1 million increase in deferred commissions earned upon the origination of customer contracts, and (c) a $42.3 million decrease in operating lease liabilities due to payments related to our operating lease obligations.

For the fiscal year ended January 31, 2022, net cash provided by operating activities was $110.2 million, primarily consisting of our net loss of $679.9 million, adjusted for non-cash charges of $721.7 million, and net cash inflows of $68.4 million provided by changes in our operating assets and liabilities.

The main drivers of the changes in operating assets and liabilities during the fiscal year ended January 31, 2022 were (i) a $526.2 million increase in deferred revenue due to invoicing for prepaid capacity agreements outpacing revenue recognition, and (ii) a $79.8 million increase in accrued expenses and other liabilities primarily due to increased headcount and growth in our business, partially offset by (a) a $251.7 million increase in accounts receivable primarily due to growth in our business, (b) a $159.2 million increase in prepaid expenses and other assets primarily driven by increased prepaid third-party cloud infrastructure expenses, (c) a $95.9 million increase in deferred commissions earned on bookings, and (d) a $38.2 million decrease in operating lease liabilities due to payments related to our operating lease obligations.

For the fiscal year ended January 31, 2021, net cash used in operating activities was $45.4 million, primarily consisting of our net loss of $539.1 million, adjusted for non-cash charges of $386.8 million, and net cash inflows of $106.9 million provided by changes in our operating assets and liabilities, net of the effect of a business combination.

Net cash provided by operating activities was $110.2 million for the fiscal year ended January 31, 2022, compared to the net cash used in operating activities of $45.4 million for the fiscal year ended January 31, 2021, primarily due to an increase of $724.4 million in cash collected from customers resulting from increased sales.

Net cash provided by operating activities increased $435.5 million for the fiscal year ended January 31, 2023, compared to the fiscal year ended January 31, 2022, primarily due to an increase of $954.1 million in cash collected from customers resulting from increased sales.

This was partially offset by increased expenditures due to an increase in headcount and growth in our business.

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Investing Activities

Net cash used in investing activities for the fiscal year ended January 31, 2023 was $597.9 million, primarily as a result of (i) an aggregate of $362.6 million in cash paid for Streamlit, Applica and other business combinations, net of cash and cash equivalents acquired, (ii) $185.4 million in net purchases of investments, (iii) $25.1 million in purchases of property and equipment, and (iv) $24.0 million in capitalized internal-use software development costs.

Net cash used in investing activities for the fiscal year ended January 31, 2022 was $20.8 million, primarily as a result of purchases of investments, purchases of intangible assets, purchases of property and equipment to support our office facilities, and capitalized internal-use software development costs, partially offset by proceeds from the sales, maturities, and redemptions of investments.

Net cash used in investing activities for the fiscal year ended January 31, 2021 was $4.0 billion, primarily as a result of net purchases of investments, and to a lesser extent, purchases of property and equipment to support existing and additional office facilities, purchases of intangible assets, cash paid for a business combination, and capitalized internal-use software development costs.

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Financing Activities

Net cash used in financing activities for the fiscal year ended January 31, 2023 was $92.6 million, primarily as a result of taxes paid related to net share settlement of employee equity awards of $184.6 million, partially offset by proceeds of $80.8 million from the issuance of equity securities under our equity incentive plans, and capital contributions of $13.0 million from noncontrolling interest holders.

During the fiscal year ended January 31, 2023, we began funding withholding taxes due upon the vesting of employee RSUs in certain jurisdictions by net share settlement, rather than our previous approach of selling shares of our common stock to cover taxes upon vesting of such awards.

Net cash provided by financing activities for the fiscal year ended January 31, 2022 was $178.2 million, primarily as a result of proceeds from the issuance of equity securities under our equity incentive plans.

Net cash provided by financing activities for the fiscal year ended January 31, 2021 was $4.8 billion, primarily as a result of $4.2 billion of aggregate net proceeds from our IPO and the concurrent private placements completed in September 2020, net of underwriting discounts, as well as $532.1 million in proceeds from the issuance of equity securities.

Critical Accounting Estimates

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The significant accounting policies and methods used in the preparation of our consolidated financial statements are discussed in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We believe that the accounting policy and estimate described below involves a substantial degree of judgment and complexity and therefore is the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

We believe that the accounting policies and estimates associated with revenue recognition and business combinations involve a substantial degree of judgment and complexity and therefore are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

Many of our contracts with customers include multiple performance obligations.

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These factors, among others, may adversely impact the amount of revenue and gross margin we report in a given period.

Recently Issued Accounting Pronouncements

Business Combinations

When we acquire a business, we allocate the purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated respective fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Critical estimates used in valuing certain intangible assets include, but are not limited to, time and resources required to recreate the assets acquired.

These estimates are based on information obtained from the management of the acquired companies, our assessment of the information, and historical experience.

Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

The amounts and estimated useful lives assigned to intangible assets acquired in business combinations impact the amount and timing of future amortization expense.

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Recent Accounting Pronouncements

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis