Snowflake Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note About Forward-Looking Statements” in this Annual Report on Form 10-K. 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 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. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the GAAP-to-non-GAAP reconciliation included in the section titled “Key Business Metrics—Free Cash Flow,” to more fully understand our business. 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 consolidated subsidiaries. A discussion regarding our financial condition and results of operations for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023 is presented below. 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 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed with the SEC on March 29, 2023. Overview We believe that a cloud computing platform that puts data and AI at its core will offer great benefits to organizations by allowing them to realize the value of the data that powers their businesses. By offering rich primitives for data and applications, we believe that we can create 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, 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. 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 insights, apply AI to solve business problems, build data applications, and share data and data products. 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 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. This architecture is built on three major public clouds across 40 regional deployments around the world. These deployments are generally interconnected to deliver the Data Cloud, enabling a consistent, global user experience. 50 Table of Contents 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. 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. Consumption for most customers accelerates from the beginning of their usage to the end of their contract terms and often exceeds their initial capacity commitment amounts. When this occurs, our customers have the option to amend their existing agreement with us to purchase additional capacity or request early renewals. When a customer’s consumption during the contract term does not exceed its capacity commitment amount, it may have the option to roll over any unused capacity to future periods, generally upon the purchase of additional capacity. For these reasons, we believe our deferred revenue is not a meaningful indicator of future revenue that will be recognized in any given time period. Our go-to-market strategy is focused on acquiring new customers and driving increased use of our platform for existing customers. We primarily focus our selling efforts on large organizations and primarily sell our platform through a direct sales force, which targets technical and business leaders who are adopting a cloud strategy and leveraging data to improve their business performance. Our sales force is comprised of sales development, inside sales, and field sales personnel and is segmented by the industry, size, and region of prospective customers. Once our platform has been adopted, we focus on increasing the migration of additional customer workloads to our platform to drive increased consumption, as evidenced by our net revenue retention rate of 131% and 158% as of January 31, 2024 and 2023, respectively. See the section titled “Key Business Metrics” for a definition of net revenue retention rate. Our platform is used globally by organizations of all sizes across a broad range of industries. As of January 31, 2024, we had 9,437 total customers, increasing from 7,744 customers as of January 31, 2023. 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, 2024, our customers included 691 of the Forbes Global 2000, based on the 2023 Forbes Global 2000 list, and those customers contributed approximately 41% of our revenue for the fiscal year ended January 31, 2024. 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. Fiscal Year Our fiscal year ends on January 31. For example, references to fiscal 2024 refer to the fiscal year ended January 31, 2024. Impact of Macroeconomic Conditions Our business and financial condition have been, and may continue to be, impacted by adverse macroeconomic conditions, including inflation, higher interest rates, and fluctuations or volatility in capital markets or foreign currency exchange rates. These conditions have caused, and may continue to cause, customers to rationalize budgets, prioritize cash flow management, including through shortened contract duration, and optimize consumption, including by reducing storage through shorter data retention policies. 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 51 Table of Contents 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. During the fiscal year ended January 31, 2024, we repurchased approximately 4.0 million shares of our outstanding common stock for an aggregate purchase price of $591.7 million, including transaction costs, at a weighted-average price of $147.50 per share. All repurchases were made in open market transactions (including via pre-set trading plans). As of January 31, 2024, $1.4 billion remained available for future repurchases under the stock repurchase program. See Note 11, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. 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. Business Combinations During the three months ended January 31, 2024, we acquired all outstanding stock of Samooha, Inc. (Samooha), a privately-held company which developed data clean room technology that enabled multiple parties to securely collaborate on sensitive data. The acquisition date fair value of the preliminary purchase consideration was $219.0 million, which was primarily comprised of 0.9 million shares of our common stock valued at $174.2 million as of the acquisition date, $38.8 million fair value of our previously held equity interest in Samooha, and $6.0 million in cash and deferred cash consideration. In addition, we issued to certain of Samooha’s employees a total of 0.4 million shares of our common stock in exchange for a portion of their Samooha stock. These shares are subject to vesting agreements pursuant to which the shares will vest over four years, subject to each of these employees’ continued employment with the Company or its affiliates. The $74.8 million fair value of these shares is accounted for as post-combination stock-based compensation over the requisite service period of four years. During the three months ended July 31, 2023, we acquired all outstanding stock of Neeva Inc. and its equity investee (collectively, Neeva), a privately-held company which developed search technology powered by artificial intelligence language models, for $185.4 million in cash. During the three months ended April 30, 2023, we acquired (i) all outstanding stock of Mountain US Corporation (formerly known as Mobilize.Net Corporation) (Mountain), a privately-held company which provided a suite of tools for efficiently migrating databases to the Data Cloud, for $76.3 million in cash, and (ii) all outstanding stock of LeapYear Technologies, Inc. (LeapYear), a privately-held company which provided a differential privacy platform, for $62.0 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 Adoption of our Platform and Expansion of the Data Cloud Our future success depends in large part on the market adoption of our platform, including new product functionality such as Snowpark. While we see growing demand for our platform, particularly from large enterprises, many of these organizations have invested substantial technical, financial, and personnel resources in their legacy database products or big data offerings, despite their inherent limitations. In addition, many customers are attempting to rationalize budgets, prioritize cash flow management, and optimize consumption amidst macroeconomic uncertainty. 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, monetize, and acquire live data sets and data products. The Data Cloud includes access to the Snowflake Marketplace, through which customers can access or acquire third-party data sets, data applications, and other data products. Our future growth is increasingly dependent on our ability to increase consumption of our platform by building and expanding the Data Cloud. 52 Table of Contents Expanding Within our Existing Customer Base Our large base of customers represents a significant opportunity for further consumption of our platform. 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. 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, 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. In addition, new product features allow customers to use our platform to provide compute services without requiring them to store data. 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, macroeconomic conditions, overall changes in our customers’ spending levels, customers’ attempts to optimize their consumption, 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, including data science, artificial intelligence, and machine learning workloads. 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 the productivity of our sales organization, competitive dynamics in our target markets, changes in our customers’ spending and platform consumption in response to market uncertainty, and our ability to build and maintain partner relationships, including with global system integrators, resellers, technology partners, and third-party providers of native applications on the Snowflake Marketplace. While our platform is built for organizations of all sizes, we focus our selling efforts on large enterprise customers, customers with vast amounts of data, and customers requiring industry-specific solutions. We may not achieve anticipated revenue growth if we are unable to hire, develop, integrate, and retain talented and effective sales personnel; if our sales personnel are unable to achieve desired productivity levels in a reasonable period of time and maintain productivity; or if our sales and marketing programs are not effective. Investing in Growth and Scaling our Business We are focused on our long-term revenue potential and believe our market opportunity is large. We will continue to invest significantly in research and development to improve our platform, including in the areas of data science, artificial intelligence, and machine learning. In addition, we are focused on expanding our business both domestically and internationally. As part of these efforts, we are investing in meeting the needs of organizations in geographies and specialized industries that have heightened data requirements, including with respect to data localization, privacy, and security. 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. 53 Table of Contents Key Business Metrics We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key business metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors. The following tables present a summary of key business metrics for the periods presented: Fiscal Year Ended January 31, 2024 2023 2022 Product revenue (in millions) $ 2,666.8 $ 1,938.8 $ 1,140.5 Free cash flow (non-GAAP) (in millions) (1)(2) $ 778.9 $ 496.5 $ 81.2 January 31, 2024 January 31, 2023 January 31, 2022 Net revenue retention rate (3) 131 % 158 % 178 % Customers with trailing 12-month product revenue greater than $1 million (3) 461 331 186 Forbes Global 2000 customers (3) 691 642 540 Remaining performance obligations (in millions) (4) $ 5,174.7 $ 3,660.5 $ 2,646.5 ________________ (1) Free cash flow for the fiscal years ended January 31, 2024, 2023, and 2022 included the effect of $31.3 million, $23.9 million, and $68.6 million, respectively, in the net cash paid on payroll tax-related items on employee stock transactions. 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 $380.8 million and $184.6 million for the fiscal years ended January 31, 2024 and 2023, respectively, 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) net revenue retention rate, (ii) customers with trailing 12-month product revenue greater than $1 million, 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, 2024, our remaining performance obligations were approximately $5.2 billion, of which we expect approximately 50% to be recognized as revenue in the twelve months ending January 31, 2025 based on historical customer consumption patterns. The weighted-average remaining life of our capacity contracts was 2.2 years as of January 31, 2024. 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. Product Revenue Product revenue is a key metric for us because we recognize revenue based on platform consumption, which is inherently variable at our customers’ discretion, and not based on the amount and duration of contract terms. Product revenue is primarily derived from the consumption of compute, storage, and data transfer resources, which are consumed by customers on our platform as a single, integrated offering. Customers have the flexibility to consume more than their contracted capacity during the contract term and may have the ability to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. Our consumption-based business model distinguishes us from subscription-based software companies that generally recognize revenue ratably over the contract term and may not permit rollover. Because customers have flexibility in the timing of their consumption, which can exceed their contracted capacity or extend beyond the original contract term in many cases, the amount of product revenue recognized in a given period is an important indicator of customer satisfaction and the value derived from our platform. While customer use of our platform in any period is not necessarily indicative of future use, we estimate future revenue using predictive models based on customers’ historical usage to plan and determine financial forecasts. Product revenue excludes our professional services and other revenue, which has been less than 10% of revenue for each of the periods presented. 54 Table of Contents Net Revenue Retention Rate We believe the growth in use of our platform by our existing customers is an important measure of the health of our business and our future growth prospects. We monitor our dollar-based net revenue retention rate to measure this growth. To calculate this metric, we first specify a measurement period consisting of the trailing two years from our current period end. Next, we define as our measurement cohort the population of customers under capacity contracts that used our platform at any point in the first month of the first year of the measurement period. The cohorts used to calculate net revenue retention rate include end-customers under a reseller arrangement. We then calculate our net revenue retention rate as the quotient obtained by dividing our product revenue from this cohort in the second year of the measurement period by our product revenue from this cohort in the first year of the measurement period. 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, 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. 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 seen, and may continue to see, impacts on customer consumption patterns due to holidays and certain of our customers increasing their consumption of our platform at a slower pace than expected, which may negatively impact our net revenue retention rate in future periods. 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. 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. 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 2023 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. 55 Table of Contents Free Cash Flow We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by 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. The following table presents a reconciliation of net cash provided by operating activities to free cash flow, the most directly comparable financial measure calculated in accordance with GAAP, for the periods presented (in millions): Fiscal Year Ended January 31, 2024 2023 2022 Net cash provided by operating activities $ 848.1 $ 545.6 $ 110.2 Less: purchases of property and equipment (35.1) (25.1) (16.2) Less: capitalized internal-use software development costs (34.1) (24.0) (12.8) Free cash flow (non-GAAP) (1)(2) $ 778.9 $ 496.5 $ 81.2 ________________ (1) Free cash flow for the fiscal years ended January 31, 2024, 2023, and 2022 included the effect of $31.3 million, $23.9 million, and $68.6 million respectively, in the net cash paid on payroll tax-related items on employee stock transactions. (2) Cash outflows for employee payroll tax items related to the net share settlement of equity awards, which were $380.8 million and $184.6 million for the fiscal years ended January 31, 2024 and 2023, respectively, 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. 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 free cash flow in the first and fourth fiscal quarters of each year. 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. 56 Table of Contents Components of Results of Operations Revenue We deliver our platform over the internet as a service. Customers choose to consume our platform under either capacity arrangements, in which they commit to a certain amount of consumption at specified prices, or under on-demand arrangements, in which we charge for use of our platform monthly in arrears. Under capacity arrangements, from which a majority of our revenue is derived, we typically bill our customers annually in advance of their consumption. However, in future periods, we expect to see an increase in capacity contracts providing for quarterly upfront billings and monthly in arrears billings as our customers increasingly want to align consumption and timing of payments. Revenue from on-demand arrangements typically relates to customers with lower usage levels or overage consumption beyond a customer’s contracted usage amount or following the expiration of a customer’s contract. Revenue from on-demand arrangements represented approximately 3%, 2%, and 3% of our revenue for the fiscal years ended January 31, 2024, 2023, and 2022, respectively. We recognize revenue as customers consume compute, storage, and data transfer resources under either of these arrangements. In limited instances, customers pay an annual deployment fee to gain access to a dedicated instance of a virtual private deployment. We recognize the deployment fee ratably over the contract term. 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. The weighted-average term of capacity contracts entered into during the fiscal year ended January 31, 2024 is approximately 2.6 years. To the extent our customers enter into such contracts and either consume our platform in excess of their capacity commitments or continue to use our platform after expiration of the contract term, they are charged for their incremental consumption. In many cases, our customer contracts permit customers to roll over any unused capacity to a subsequent order, generally upon the purchase of additional capacity. 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 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. 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 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. Because customers have flexibility in their consumption, and we generally recognize revenue on consumption and not ratably over the term of the contract, we do not have the visibility into the timing of revenue recognition from any particular customer contract that typical subscription-based software companies may have. 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, including in response to adverse macroeconomic conditions, which may cause fluctuations in our revenue and results of operations. 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. 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, information technology (IT) and general recruiting related expenses and other expenses, such as software and subscription services. 57 Table of Contents Cost of Revenue Cost of revenue consists of cost of product revenue and cost of professional services and other revenue. Cost of revenue also includes allocated overhead costs. Cost of product revenue. Cost of product revenue consists primarily of (i) third-party cloud infrastructure expenses incurred in connection with our customers’ use of our platform and the deployment and maintenance of our platform on public clouds, including different regional deployments, and (ii) personnel-related costs associated with customer support and maintaining service availability and security of our platform, including salaries, benefits, bonuses, and stock-based compensation. We periodically receive credits from third-party cloud providers that are recorded as a reduction to the third-party cloud infrastructure expenses. Cost of product revenue also includes amortization of capitalized internal-use software development costs, amortization of acquired intangible assets, and expenses associated with software and subscription services dedicated for use by our customer support team and our engineering team responsible for maintaining our platform. Cost of professional services and other revenue. Cost of professional services and other revenue consists primarily of personnel-related costs associated with our professional services and training departments, including salaries, benefits, bonuses, and stock-based compensation, amortization of an acquired intangible asset, and costs of contracted third-party partners and software tools. We intend to continue to invest additional resources in our platform infrastructure and our customer support and professional services organizations to support the growth of our business. Some of these investments, including certain support costs and costs of expanding our business internationally, are incurred in advance of generating revenue, and either the failure to generate anticipated revenue or fluctuations in the timing of revenue could affect our gross margin from period to period. Operating Expenses Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include allocated overhead costs. Sales and Marketing Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing staff, including salaries, benefits, bonuses, and stock-based compensation. Sales and marketing expenses also include sales commissions and draws paid to our sales force and certain referral fees paid to third parties, including amortization of deferred commissions. A portion of the sales commissions paid to the sales force is earned based on the level of the customers’ consumption of our platform, and a portion of the commissions paid to the sales force is earned upon the origination of the customer contracts. Sales commissions tied to customers’ consumption are expensed in the same period as they are earned. 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. As our go-to-market motion evolves, more sales personnel will be compensated based on the level of the customers’ consumption of our platform. As a result, we will defer less sales commissions, and we expect that our expenses associated with sales commissions tied to customers’ consumption will increase during the fiscal year ending January 31, 2025. Sales and marketing expenses also include advertising costs and other expenses associated with our sales, marketing and business development programs, including our user conferences such as Data Cloud Summit and Data Cloud World Tour, 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 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, although the percentage may fluctuate from period to period depending on the timing and the extent of these expenses. 58 Table of Contents Research and Development Research and development expenses consist primarily of personnel-related expenses associated with our research and development staff, including salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include contractor or professional services fees, third-party cloud infrastructure expenses incurred in developing our platform, amortization of acquired intangible assets, and software and subscription services dedicated for use by our research and development organization. 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, 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. General and Administrative 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, unallocated lease costs associated with unused office facilities to accommodate planned headcount growth, and other corporate expenses. 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 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 Other income (expense), net consists primarily of (i) net realized and unrealized gains (losses) on our strategic investments in equity securities, and (ii) the effect of exchange rates on our foreign currency-denominated asset and liability balances. Provision for (Benefit from) Income Taxes Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and U.S. federal and state jurisdictions in which we conduct business. We maintain a full valuation allowance against our U.S. and U.K. 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. 59 Table of Contents Results of Operations The following table sets forth our consolidated statements of operations data for the periods indicated (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Revenue $ 2,806,489 $ 2,065,659 $ 1,219,327 Cost of revenue (1) 898,558 717,540 458,433 Gross profit 1,907,931 1,348,119 760,894 Operating expenses (1) : Sales and marketing 1,391,747 1,106,507 743,965 Research and development 1,287,949 788,058 466,932 General and administrative 323,008 295,821 265,033 Total operating expenses 3,002,704 2,190,386 1,475,930 Operating loss (1,094,773) (842,267) (715,036) Interest income 200,663 73,839 9,129 Other income (expense), net 44,887 (47,565) 28,947 Loss before income taxes (849,223) (815,993) (676,960) Provision for (benefit from) income taxes (11,233) (18,467) 2,988 Net loss (837,990) (797,526) (679,948) Less: net loss attributable to noncontrolling interest (1,893) (821) — Net loss attributable to Snowflake Inc. $ (836,097) $ (796,705) $ (679,948) ________________ (1) Includes stock-based compensation as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Cost of revenue $ 123,363 $ 106,302 $ 87,336 Sales and marketing 299,657 246,811 185,970 Research and development 644,928 407,524 232,867 General and administrative 100,067 100,896 98,922 Total stock-based compensation $ 1,168,015 $ 861,533 $ 605,095 The increase in stock-based compensation for the fiscal year ended January 31, 2024, compared to the fiscal year ended January 31, 2023, was primarily attributable to additional equity awards granted to new and existing 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). As of January 31, 2024, total compensation cost related to unvested awards not yet recognized was $3.0 billion, which will be recognized over a weighted-average period of 2.9 years. See Note 11, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. 60 Table of Contents The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated: Fiscal Year Ended January 31, 2024 2023 2022 Revenue 100 % 100 % 100 % Cost of revenue (1) 32 35 38 Gross profit 68 65 62 Operating expenses (1) : Sales and marketing 50 54 61 Research and development 46 38 38 General and administrative 11 14 22 Total operating expenses 107 106 121 Operating loss (39) (41) (59) Interest income 7 3 1 Other income (expense), net 2 (2) 2 Loss before income taxes (30) (40) (56) Provision for (benefit from) income taxes — (1) — Net loss (30) (39) (56) Less: net loss attributable to noncontrolling interest — — — Net loss attributable to Snowflake Inc. (30%) (39%) (56%) ________________ (1) Stock-based compensation included in the table above as a percentage of revenue as follows: Fiscal Year Ended January 31, 2024 2023 2022 Cost of revenue 4 % 5 % 7 % Sales and marketing 11 12 15 Research and development 23 20 19 General and administrative 4 5 9 Total stock-based compensation 42 % 42 % 50 % Comparison of the Fiscal Years Ended January 31, 2024 and 2023 Revenue Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) Revenue: Product $ 2,666,849 $ 1,938,783 38% Professional services and other 139,640 126,876 10% Total $ 2,806,489 $ 2,065,659 36% Percentage of revenue: Product 95% 94% Professional services and other 5% 6% Total 100% 100% 61 Table of Contents Product revenue increased $728.1 million for the fiscal year ended January 31, 2024, 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 131% as of January 31, 2024. The increase in product revenue was also driven by an increase in capacity consumption prices of approximately 3% for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to increased consumption of higher-priced editions of our platform and better discipline over discounting. We had 461 customers with product revenue of greater than $1 million for the trailing 12 months ended January 31, 2024, an increase from 331 customers as of January 31, 2023. Such customers represented approximately 65% and 63% of our product revenue for the trailing 12 months ended January 31, 2024 and 2023, respectively. Within these customers, we had 83 and 26 customers with product revenue of greater than $5 million and $10 million, respectively, for the trailing 12 months ended January 31, 2024. The substantial majority of our revenue was derived from existing customers under capacity arrangements, which represented approximately 97% and 96% of our revenue for the fiscal years ended January 31, 2024 and 2023, respectively. The remainder was derived from new customers under capacity arrangements and on-demand arrangements. 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 $12.8 million for the fiscal year ended January 31, 2024, 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 Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) Cost of revenue: Product $ 701,200 $ 547,547 28% Professional services and other 197,358 169,993 16% Total cost of revenue $ 898,558 $ 717,540 25% Gross profit (loss): Product $ 1,965,649 $ 1,391,236 41% Professional services and other (57,718) (43,117) 34% Total gross profit $ 1,907,931 $ 1,348,119 42% Gross margin: Product 74% 72% Professional services and other (41%) (34%) Total gross margin 68% 65% Headcount (at period end) Product 414 373 Professional services and other 525 488 Total headcount 939 861 Cost of product revenue increased $153.7 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to an increase of $78.2 million in third-party cloud infrastructure expenses as a result of increased customer consumption of our platform. Personnel-related costs and allocated overhead costs also increased $33.3 million for the fiscal year ended January 31, 2024, 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 new and existing employees. The remaining increase in cost of product revenue was primarily driven by an increase of $34.5 million in amortization of acquired developed technology intangible assets and capitalized internal-use software development costs. 62 Table of Contents Our product gross margin was 74% for the fiscal year ended January 31, 2024, compared to 72% for the prior fiscal year, primarily due to (i) higher volume-based discounts for our purchases of third-party cloud infrastructure, and (ii) increased cost efficiency as a result of cloud infrastructure processor improvements. While we expect our product gross margin to slightly improve for the fiscal year ending January 31, 2025, 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 public cloud marketplaces, (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 $27.4 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to an increase of $26.0 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 equity awards granted to existing and new employees. The overall increase in cost of professional services and other revenue was also driven by increased amortization of an acquired developed technology intangible asset as a result of the Mountain business combination completed in February 2023, partially offset by a decrease in costs associated with contracted third-party partners. Professional services and other gross margin declined for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to overall increased costs from scaling our professional services organization, including increased headcount and amortization of an acquired developed technology intangible asset as a result of the Mountain business combination. However, we do not believe the year-over-year changes in professional services and other gross margins are meaningful given that our professional services and other revenue represents a small percentage of our revenue. Sales and Marketing Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) Sales and marketing $ 1,391,747 $ 1,106,507 26% Percentage of revenue 50 % 54 % Headcount (at period end) 3,008 2,738 Sales and marketing expenses increased $285.2 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to an increase of $206.2 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 $52.8 million increase in stock-based compensation for the fiscal year ended January 31, 2024, 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 that is recognized using an accelerated attribution method. See Note 11, “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 $46.1 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to increases in customers’ consumption of our platform. In addition, advertising costs and other expenses associated with our sales, marketing and business development programs increased $19.2 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year. The remaining increase in sales and marketing expenses for the fiscal year ended January 31, 2024 was primarily attributable to a $12.4 million increase in travel-related expenses. 63 Table of Contents Research and Development Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) Research and development $ 1,287,949 $ 788,058 63% Percentage of revenue 46 % 38 % Headcount (at period end) 2,002 1,378 Research and development expenses increased $499.9 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to an increase of $423.3 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 a $237.4 million increase in stock-based compensation, primarily related to additional equity awards granted to new and existing employees, partially offset by a decrease in stock-based compensation related to RSUs granted prior to our IPO that is recognized using an accelerated attribution method. See Note 11, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. Third-party cloud infrastructure expenses incurred in developing our platform also increased $42.4 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year. The remaining increase in research and development expenses for the fiscal year ended January 31, 2024 was primarily driven by (i) impairment charges of $7.1 million, recognized during the fiscal year ended January 31, 2024, related to our capitalized internal-use software development costs previously included in construction in progress that were no longer probable of being completed, and, to a lesser extent, (ii) increased costs associated with software and subscription services dedicated for use by our research and development organization, and (iii) increased amortization of developed technology intangible assets acquired from business combinations. General and Administrative Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) General and administrative $ 323,008 $ 295,821 9% Percentage of revenue 11 % 14 % Headcount (at period end) 1,055 907 General and administrative expenses increased $27.2 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to an increase of $20.0 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. Costs associated with outside services also increased $5.6 million due to increased legal fees, accounting and other professional service fees related to the normal course of operations. Interest Income Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) Interest income $ 200,663 $ 73,839 172% Interest income increased $126.8 million for the fiscal year ended January 31, 2024, 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. 64 Table of Contents Other Income (Expense), Net Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) Net unrealized gains (losses) on strategic investments in non-marketable equity securities: Upward adjustments $ — $ 4,125 NM Impairments (3,101) (38,036) (92%) Net unrealized gains (losses) on strategic investments in marketable equity securities 15,197 (12,524) (221%) Realized gains on strategic investments in non-marketable equity securities 34,713 — NM Other (1,922) (1,130) 70% Other income (expense), net $ 44,887 $ (47,565) (194%) NM - Not meaningful. Other income (expense), net increased $92.5 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to (i) a decrease in impairments recorded on our strategic investments in non-marketable equity securities, (ii) a remeasurement gain recognized on a previously held equity interest as a result of a business combination completed during the fiscal year ended January 31, 2024, and (iii) changes in net unrealized gains or losses on our strategic investments in marketable equity securities. See Note 5, “Fair Value Measurements,” and Note 7, “Business Combinations,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. Benefit from Income Taxes Fiscal Year Ended January 31, 2024 2023 % Change (dollars in thousands) Loss before income taxes $ (849,223) $ (815,993) 4% Benefit from income taxes (11,233) (18,467) (39%) Effective tax rate 1.3% 2.3% Our benefit from income taxes decreased $7.2 million for the fiscal year ended January 31, 2024, compared to the prior fiscal year, primarily due to a $7.7 million decrease in partial releases of valuation allowances as a result of the business combinations completed during the periods. We maintain a full valuation allowance on our U.S. and U.K. deferred tax assets, and the significant components of our recorded tax expense are current cash taxes in various jurisdictions. The cash tax expenses are impacted by each jurisdiction’s individual tax rates, laws on the timing of recognition of income and deductions, and availability of net operating losses and tax credits. Our effective tax rate might fluctuate significantly and could be adversely affected to the extent earnings are lower than forecasted in countries that have lower statutory rates and higher than forecasted in countries that have higher statutory rates Liquidity and Capital Resources As of January 31, 2024, our principal sources of liquidity were cash, cash equivalents, and short-term and long-term investments totaling $4.8 billion. Our investments primarily consist of U.S. government and agency securities, corporate notes and bonds, money market funds, commercial paper, certificates of deposit, and time deposits. As of January 31, 2024, our RPO was $5.2 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, but that are not recorded on the balance sheet. 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. 65 Table of Contents 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. 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. Our primary uses of cash include personnel-related expenses, third-party cloud infrastructure expenses, sales and marketing expenses, overhead costs, acquisitions and strategic investments we may make from time to time, and repurchases of our common stock under our authorized stock repurchase program. As of January 31, 2024, our material cash requirements from known contractual obligations and commitments related 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. For more information regarding our contractual obligations and commitments as of January 31, 2024, 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 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. During the fiscal year ended January 31, 2024, we repurchased 4.0 million shares of our outstanding common stock for an aggregate purchase price of $591.7 million, including transaction costs, at a weighted-average price of $147.50 per share. All repurchases were made in open market transactions (including via pre-set trading plans). As of January 31, 2024, $1.4 billion remained available for future repurchases under the stock repurchase program. See Note 11, “Equity,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details. 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 repurchases of our common stock under our authorized stock repurchase program, 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, our existing commitments to our third-party cloud providers, expenses associated with our international expansion, the introduction of platform enhancements, the continuing market adoption of our platform, and the volume and timing of our stock repurchases. We may continue to enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may, as a result of those arrangements or the general expansion of our business, be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. 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. The following table shows a summary of our cash flows for the periods presented (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Net cash provided by operating activities $ 848,122 $ 545,639 $ 110,179 Net cash provided by (used in) investing activities $ 832,258 $ (597,885) $ (20,800) Net cash provided by (used in) financing activities $ (854,103) $ (92,624) $ 178,198 66 Table of Contents 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) depreciation and amortization of property and equipment and amortization of acquired intangible assets, (iii) amortization of deferred commissions, (iv) net amortization (accretion) of premiums (discounts) on investments, (v) amortization of operating lease right-of-use assets, (vi) net unrealized gains or losses on strategic investments in equity securities, 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, 2024, net cash provided by operating activities was $848.1 million, primarily consisting of our net loss of $838.0 million, adjusted for non-cash charges of $1.3 billion, and net cash inflows of $390.7 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, 2024 were (i) a $528.0 million increase in deferred revenue due to invoicing for prepaid capacity agreements outpacing revenue recognition, (ii) a $171.0 million increase in accrued expenses and other liabilities primarily due to increased headcount, growth in our business and the timing of accruals and payments, and (iii) a $59.8 million decrease in prepaid expenses and other assets primarily driven by a decrease in prepaid third-party cloud infrastructure expenses, partially offset by (a) a $212.1 million increase in accounts receivable primarily due to growth in our business, (b) a $134.8 million increase in deferred commissions earned upon the origination of customer contracts, and (c) a $40.5 million decrease in operating lease liabilities due to payments related to our operating lease obligations. 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. Net cash provided by operating activities increased $302.5 million for the fiscal year ended January 31, 2024, compared to the fiscal year ended January 31, 2023, primarily due to an increase of $751.1 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. We expect to continue to generate positive net cash flows from operating activities for the fiscal year ending January 31, 2025. Investing Activities Net cash provided by investing activities for the fiscal year ended January 31, 2024 was $832.3 million, primarily driven by proceeds of $1.2 billion from net sales, maturities and redemptions of investments, partially offset by an aggregate of $275.7 million in cash paid for the Neeva, Mountain, LeapYear and other business combinations, net of cash, cash equivalents, and restricted cash acquired, and, to a lesser extent, purchases of property and equipment to support our office facilities, capitalized internal-use software development costs, and purchases of intangible assets. Net cash used in investing activities for the fiscal year ended January 31, 2023 was $597.9 million, primarily as a result of an aggregate of $362.6 million in cash paid for Streamlit, Applica and other business combinations, net of cash and cash equivalents acquired, $185.4 million in net purchases of investments, and, to a lesser extent, purchases of property and equipment to support our office facilities and capitalized internal-use software development costs. Financing Activities Net cash used in financing activities for the fiscal year ended January 31, 2024 was $854.1 million, primarily as a result of $591.7 million in repurchases of our common stock under our authorized stock repurchase program and $380.8 million in taxes paid related to net share settlement of equity awards, partially offset by proceeds of $118.4 million from the issuance of equity securities under our equity incentive plans. 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 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. 67 Table of Contents Critical Accounting Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. By their nature, these estimates and assumptions are subject to an inherent degree of uncertainty and actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. 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 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. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price (SSP) basis. We consider our evaluation of SSP to be a critical accounting estimate. An observable SSP is established based on the price at which a service is sold separately. If an SSP is not observable through past transactions, we estimate it by maximizing the use of observable inputs, including the overall pricing strategy, market data, internally approved pricing guidelines related to the performance obligations, and other observable inputs. As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of our offerings, and/or changes in customer segmentation may result in a lack of consistency, making it difficult to establish and/or maintain SSP. Changes in SSP could result in different and unanticipated allocations of revenue in contracts with multiple performance obligations. These factors, among others, may adversely impact the amount of revenue and gross margin we report in a given period. 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. Recent Accounting Pronouncements 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 a discussion of recent accounting pronouncements. 68 Table of Contents