Important to keep in mind sales expense often buys multi-year cashflows.
In this case, directly comparing the expense of building a customer base to the revenue from the existing customer base over the same period can lead you to wrong conclusions about the viability of the business.
I would focus instead on the cost of customer acquisition, versus the PV of the average customer's gross cash flows.
Let's model SNOW's revenue as: The sum of prior year's revenue (existing contracts) plus new revenue cause by the prior year's sales efforts.
On page 42 of the K: We see that each year's gross income is consistently larger than the prior year's sales and marketing expense.
----------------- Example -----------------
In 2020, if we say that all 164mm of new revenue is due to the 125mm of sales expense in 2019, and contracts average 2 years, then we have ~320mm of revenue on 125mm of expense.
By this math in 2021 and forward, it looks like we can expect ~840mm of new revenue from the 293mm of sales expense in 2020, and in 2022 we might expect 1,100mm of total revenue.
In this case, directly comparing the expense of building a customer base to the revenue from the existing customer base over the same period can lead you to wrong conclusions about the viability of the business.
I would focus instead on the cost of customer acquisition, versus the PV of the average customer's gross cash flows.
------------------------------------------------- ----------------- Lazy Analysis ----------------- -------------------------------------------------
Here is SNOW's latest Q: https://www.sec.gov/ix?doc=/Archives/edgar/data/1640147/0001...
If you look on page 32 we see that the weighted average life of large customer contracts is 1.8 years, and that net revenue retention rate is 169%!
So customers sign up for multiple years, and renew with big purchases.
Turning to the K for some annual figures: https://www.sec.gov/ix?doc=/Archives/edgar/data/1640147/0001...
----------------- Assumptions -----------------
Let's model SNOW's revenue as: The sum of prior year's revenue (existing contracts) plus new revenue cause by the prior year's sales efforts.
On page 42 of the K: We see that each year's gross income is consistently larger than the prior year's sales and marketing expense.
----------------- Example -----------------
In 2020, if we say that all 164mm of new revenue is due to the 125mm of sales expense in 2019, and contracts average 2 years, then we have ~320mm of revenue on 125mm of expense.
By this math in 2021 and forward, it looks like we can expect ~840mm of new revenue from the 293mm of sales expense in 2020, and in 2022 we might expect 1,100mm of total revenue.
----------------- Projections -----------------
In reality, SNOW has projected $1,020 in revenue for 2022. - https://www.cnbc.com/2021/05/26/snowflake-snow-earnings-q1-2...
Note my number is a little high as I did not know what portion of 2019's contracts expired in 2019, so assumed none.