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 revenu

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. ------------------------------------------------- ----------------- Lazy Analysis ----------------- ------------------------------------------------- Here is SNOW's latest Q: https://www.sec.gov/ix?doc=/Archives/edgar/data/1640147/000164014721000212/snow-20210731.htm#i829e850d9acf4b30943c6d2f043f914a_22 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/1640147/000164014721000073/snow-20210131.htm 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-q1-2022.html 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.