Capital Markets / Investor Relations in Two Minutes or Less
What Snowflake’s $SNOW C4Q23 Teaches Public Company Executives
Software-as-a-Service (SaaS) companies benefit from attractive growth profiles and significant recurring revenue foundations from which to operate.
A SaaS-plotion represents the phenomenon of when that growth profile faces an unexpected negative adjustment.
A SaaS company is having an in-line or better year, the company reaches the fourth quarter, provides upcoming year guidance below the Street, and boom, the stock is down 20%+!
The scenario occurs because most SaaS companies fail to manage the FY+1 or out year period throughout the current quarter and year, setting investors up for poor financial expectations management.
What Happened at $SNOW?
The company reported an inline C4Q23, but provided FY25 financial guidance below Street consensus.
C1Q25 Revenue guidance was 8% below the Street consensus midpoint.
FY25 revenue guidance was 11% below the Street consensus midpoint.
On top of the weak guidance, an abrupt management change occurred at the CEO position.
Putting these negative data points together results in an extremely negative stock valuation reset.
What Is a SaaS-Plotion?
A SaaS-plotion represents a SaaS company that is having an inline or better year.
The team is managing financial expectations for each quarter and current year well.
The company comes to the fourth quarter and must give guidance on next year.
The guidance provided is well below Street expectations and the stock is down 20%+.
All due to poor financial expectations management regarding FY+1.
Key Learnings for Public Executives:
1. Financial Expectations Management Revolves Around Three Variables: Current quarter, current year, and Fiscal Year + 1 or out year.
2. Successful Earnings = Avoiding Extreme Negative Surprises
3. Everyone Forgets to Manage the FY+1!!!
Remember, a strong Investor Relations Officer managing expectations is a better strategy than a 37-page earnings slide deck and the Street analysts controlling your financial expectations.
Controlling Financial Expectations = Controlling Valuation!
A management team avoids or provides poor financial expectations management at their own peril!
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