Snowflake eliminates dual-class share structure, hits estimates on guidance

Snowflake eliminates dual-class share structure, hits estimates on guidance

Frank Slootman, CEO, Snowflake

Source: CNBC

Snowflake stock fell as much as 7% then rebounded in extended trading on Wednesday after the data analytics software company gave full-year guidance that met but did not exceed analysts’ estimates, and announced an end to its dual-share class structure, which could allow newer investors more control over the company’s direction.

The stock had already dropped about 9% during regular trading Wednesday, amid a broad sell-off in tech stocks.

Here’s how the company did:

  • Earnings: Loss of 70 cents per share
  • Revenue: $190.5 million, vs. $178.5 million as expected by analysts, according to Refinitiv.

The company’s revenue increased by 117% on an annualized basis in the fiscal fourth quarter, which ended Jan. 31, according to a statement. In the prior quarter had grown 119%. The company’s net loss widened to about $199 million from $83 million in the year-ago quarter.

“We have implemented operations that will help us show more profitability,” finance chief Mike Scarpelli said during a conference call with analysts. “We’re continuing to invest heavily in the business.”

The company also said in a regulatory filing that as of Monday it had gotten rid of its dual-class structure, in which Class A shares got one vote per share and Class B shares got 10 votes per share. The structure had been in place since September, when Snowflake stock debuted on the New York Stock Exchange. Now, all Class B shares will be converted into Class A shares.

Dual-class structures have become common in tech companies, including Google, Facebook and Snap, as a way to let founders and early investors maintain control, and block takeovers from activist investors.

With respect to guidance, Snowflake said it expects $195 million to $200 million in product revenue in the fiscal first quarter, which would be up 92% to 96% year over year. Analysts polled by FactSet were looking for $196.3 million in product revenue. Almost 94% of Snowflake’s revenue came from product revenue in the fiscal fourth quarter.

For the full 2022 fiscal year, the company sees $1.00 billion to $1.02 billion in product revenue, representing 81% to 84% growth, a decline from 116% product revenue growth in the fiscal fourth quarter. Analysts polled by FactSet had expected $1.01 billion in product revenue.

Excluding the after-hours move, Snowflake stock has fallen 11% since the start of 2021, while the S&P 500 index is up 2% over the same period.

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