Q1 2022 Snowflake Inc. Earnings Call
Data qualities and active dynamic help with thousands of data relationships between snowflake parties. Many of these relationships are with data providers through to snowflake data marketplace and many others are with key business partners.
Data providers like zoom and throw and for square are using the data cloud to unlock more value to their business health care.
Organizations are using data insights to improve quality of patient care and re.
Taylor's like Albertsons are sharing data with consumer packaged goods companies and media companies are accelerating advertising revenue with snowflake data marketplace.
Historically.
Data warehouses refreshed through large batch processes on a periodic basis must because day that was force fed into them from different sources.
Today, the data cloud is near real time with data continuously pulsing through the clouds being analyzed enacted on lights out and at light speed.
There are no limits anymore, and how many analytical processes can run concurrently concurrently against the same data and how frequently they are run and this has changed people's perceptions and what is possible.
The data cloud is the sum of all data networking and relationships that are active at any point in time, we track these relationship through what we call edges.
At the end of the quarter, 15% of our rapidly expanding customer base had data edges and place with external snowflake accounts compared to 10% a year ago.
And the number of edges. This period grew 33% quarter on quarter customer share data for many reasons and there are specific to them and their industries, but they'll seek to enrich their data and gain more effective and analytical insights and do so faster and more cost effectively.
And so flex focus on vertical industries is well underway, we've organized our organization around 6 core verticals. They are financial services health care and life Sciences, retail and consumer packaged goods advertising media and entertainment technology and public sector. This vertical industry focus and.
Densify across our sales marketing and lines this product and service organizations.
As a result, we expect snowflake, becoming visible and large enterprise I T environments is and the line of business themselves.
While the company maintains a geographical backbone and markets around the world. The industry aperture is rapidly coming into focus.
Partners are also stepping up the snowflake, which is a key element of our strategy for Lloyd Cross the $100 million, Mark and Snowflake business, which was the fastest ramp ever from a standing start for and alliance.
We will host the annual Snowflake Summit June 8 through 10 more.
More than 50000 attendees are expected and including 60 plus customers sessions with the likes of Adobe Blackrock capital 1 Goldman Sachs.
<unk> Kraft Heinz Jetblue, Morgan Stanley and NBC, Universal, we invite investors to attempt to get a better understanding of our data cloud strategy and hear the latest news and platform enhancements optimizations data governance and <unk>.
Vertical industry use cases and.
Closing Q1 was a great start to the fiscal year and we.
Were much looking forward for the balance of the year without and I will now turn the call over to Mike. Thank you. Frank We saw continued momentum in Q1 with another quarter of growth.
Execution and start our fiscal year, our Q1 product revenues for $214 million, representing 110% year over year growth remaining performance obligations were $1.4 billion media and telecom technology and financial services customers drove the outperformance and we saw meaningful growth from our <unk>.
Health care customers are strong <unk> results reflect more and multimillion dollar relationships with particular strength and the telecom and technology sectors of the $1.4 billion and an IPO, we expect approximately 54% to be recognized as revenue and the next 12 months.
Growth and our existing customer base continues to propel our results. When we added 393, net new customers and Q1, including 3.7 figure new logos. These.
And customers only accounted for 1% of revenues, we are hyper focused on penetrating the largest enterprises globally. As we believe these organizations provide the largest opportunity for account expansion.
We're already benefiting from our maturing enterprise sales efforts and Q1, the number of customers with greater than $1 million and trailing 12 months product revenue increased to 100 for up from 77 last quarter, when we expand within our largest customers. We typically replace more than 1 solution in many cases, we replace on premise.
And first generation cloud solutions, and we address new workloads Snowflake creates use cases that were previously impossible and this is what fuels, our 168% net revenue retention rate and we remain confident and our net revenue retention will stay above a 160% for the fiscal year.
We continue to invest and our international opportunity and believe there is significant runway ahead of us as Frank mentioned, we are seeing tremendous growth within EMEA and APAC geographies as our sales organization take shape.
We believe we are and the early innings of addressing the largest enterprises abroad.
First quarter was a record hiring quarter for us we onboard at 436 net new employees, we continue to target the highest performing employees prioritizing talent acquisition and product engineering and enterprise sales groups, turning to margins and a non-GAAP basis, our product gross margin was 72%.
Up 600 basis points from last year favorable cloud service agreements growing scales across regions and our enterprise customers' success, all contribute to steady gross margin improvements.
Operating margin was negative 16% benefiting from revenue outperformance.
And free cash flow margin was 10% positively impacted by strong collections from Q4 bookings and operating margin outperformance as a reminder, adjusted free cash flow and excludes the impact of net cash paid or received on both employee and employer payroll tax related items on employee stock option transactions.
This quarter, we saw a $10 million impact from those items, where we continue to focus on long term margin expansion and profitability, we do experienced free cash flow seasonality and fiscal 'twenty..1 Q1, and Q4 were our strongest free cash flow quarters Q2 was our weakest, we expect to experience the seasonality and future.
Periods, we maintained our strong cash position with approximately $5.1 billion and cash cash equivalents and short term and long term investments Snowflake ventures, Leverages is positioned to evaluate strategic opportunities with announced investments and thought spot and data IQ and the quarter.
We continue to provide high growth companies with capital to engage more with the data cloud now, let's turn to our guidance and outlook.
For the second quarter of fiscal 2022, we expect product revenues between 235 and $240 million representing year over year growth between 88% and 92% turning to margins, we expect and a non-GAAP basis negative and 18% operating margin and we expect 290 <unk>.
7 million weighted average shares outstanding for.
For the full year fiscal 2022, we expect product revenues between 1.02 and 1.035 billion.
Representing year over year growth between $84, 87% this.
And this includes an estimated negative $13 million impact from a storage compression improvement. We just introduced that benefits our customers, we regularly introduce product and performance enhancements that lower the cost for our customers to run Snowflake and we believe this will drive more compute within the platform longer term turning.
And to profitability, we expect on a non-GAAP basis, 72% product gross margin negative, 17% operating margin and breakeven adjusted free cash flow and we expect 299 million weighted average shares outstanding.
Our outlook still assumes that we will add more than 200 net new employees during the fiscal year with respect to Covid. Our forecast assumes that we will continue to work remotely for the foreseeable future with an increase to travel.
That goal and lastly, we will host our first virtual Investor day on June 10th and conjunction with Snowflake Summit you can register for the event and investors that Snowflake Dot com with that operator, you can now open up the line for question.
<unk>.
Thank you, ladies and gentlemen, just as a reminder, if you'd like to ask a question. Please press star and then the number 1 and your telephone keypad.
Our first question comes from the line of Brent price Lin with Piper Sandler.
Thanks.
Moving to start with you and a quick follow up for Frank.
Consumption and Q1 here was was very strong purchase volume.
The increase in product revenue and another triple digit product growth quarter, and you look at kind of Q1 consumption trends.
And the seasonality clearly Didnt show up was that surprising any other surprises just as you look at individual.
Customer consumption trends that drove the outperformance in Q1.
Remember our revenue is based on actual customer consumption is not a ratable recognition. So we did have as I mentioned, we did have some outperformance and some specific customers and part of that is tied to certain projects, they're working on and just because a customer consumes a certain amount 1 quarter doesn't mean, they're going to consume that same amount next.
Quarter.
Running those same projects and so.
We are very happy with the the revenue outperformance in Q1 and.
Our guidance reflects where we think we're going to be for the balance of the year.
Got it and then Frank just following up for you here and you think about kind of the data sharing opportunity clearly seems to be catching on like wildfire. So much. So youre starting to see the accretion of even new open source projects that are also tied to data sharing as you talk about the 27 net.
And then $1 billion plus customers do you think data sharing is with now contributing 2 million.
Million dollar plus customers or do you think a bulk of the big spend is still tied to kind of replacement opportunity around data warehousing and <unk> and the data share drivers still still to come.
Well.
The answer is really.
Both customer need to walk before day wrong. So a lot of their initial focus is on workload transitions and.
And so on but everybody has a very very keen view in terms of where they want to be where they are going to be over time and you're exactly right.
Sure and is absolutely essential.
Really enable data sciences and order to create context around data in order to enrich data.
Fully reached a potential I mean, thats taken us some time to to really eventual is this and this whole idea, but as you said it is it is.
<unk> very very aggressively and the marketplace, we have a lot going on.
Article markets, there are very specific to those complex and very specific to the unique circumstances of.
Vertical industry. So we're really excited and we're very well positioned for it or we have really developed our.
Our data cloud and our snowflake data marketplace to the point, where it's completely operational and hope we will see you.
At our Investor day, because not only you want to talk about and we're also going to show you a bunch of stuff and see how far we've come in that area.
Looking forward to it thanks, Frank and Mike for another great quarter and year.
Your next question comes from the line of Keith Weiss with Morgan Stanley.
Excellent. Thank you guys and very nice quarter.
Frank I wanted to continue the discussion on edges.
And the percentage of customers that are kind of adding that Jonathan from 10% to 15% and the.
And the amount and that is up 33% quarter on quarter is that something we should think about as you're going to do.
Directly impact consumption does that have you seen that the more edges that customer have the more data consumption going on within their data warehouse or is this more of a construct about stickiness. Once once you get and Grand development partners you are never going to stop using the snowflake solution. How should we think about the like the financial impact of this growth and edge it.
Well.
You can answer is bolt, obviously, it's going to make things incredibly sticky, but for us to designate something.
As an edge and it has to have a minimal amount of time in terms of durable consumption. So there is there is very much a consumption dimension to these edges that we track and <unk>.
Bonds or otherwise, we don't consider it.
And edge and our world in other words, they have to be durable and stable.
Because a lot of data relationships are transferring day exists for a period of time. They just for a project maybe a trial whatever it is but that's not that's also a metric that we that we follow but we really look for what we would call stable over or durable edges, though they exist over periods of time, they drive consistent consumption. So the answer is.
Absolutely both for your to your question.
Got it and if I could sneak in 1 follow up.
And for Mike that the 27.
Customer and getting to that million dollar plus level this quarter.
Real eye-popping number I think thats more than you did and the first 3 quarters of last year anything in particular getting that motion going faster and and.
And the other side of the equation is that a number we can expect to see on a go forward basis or is that kind of through higher than expectation and a half for the remainder of the year.
And while I'm not going to guide to $1 million customers. Although I will say is theres a number of as there was going into this quarter. We had a number of customers on the cusp of going to a $1 million and we continue to see.
A number and I think it's going to be very strong growth, but what I want to remind people is when we land a customer. It takes many times 6 to 9 months I think it's closer to 9 months before a customer actually starts to consume at their contract right and so a lot of this is the impact of really.
Focusing on larger customers over the last year and a half that we're starting to see that and pay off for what I will say is of that 100 for customers only I think about 25% of those are actually.
<unk> and then the balance is enterprise customers.
So think of that Fortune 500, only about 25% of fortune 500, and the others are across the board and customers and my point. There is even small can be big consumers of snowflake and.
And there's a lot of them as I said that are just on that cuts, but we expect that to continue.
Awesome. Thanks, so much guys.
Your next question comes from the line of Eric glad with Cowen.
Great Congrats on a great quarter for.
Right.
Love to hear about what's causing the breakout and growth and international regions. I know you guys had some leadership changes.
I'm sure you're feeding more head count there. So how much is just kind of your own efforts versus other factors like market awareness of our growing cloud acceptance or anything else you'd call out.
No. It's exactly what you just said I mean, we just needed to properly operationalize ourselves and <unk>.
Geographies.
And as you know it's market by market and we have to have the correct leadership in place.
We have made a lot of leadership changes in these regions that we're very pleased with and.
And we have a great product like Snowflake and <unk>.
<unk> of that.
Is it going to come fast and furiously.
And I'm personally gone and just a bunch of time.
And Europe, given my own background, because we think the opportunity is tremendous so we're excited that we actually see these regions coming online and and.
And contributing.
And then we expect that to continue.
Very happy with the leadership changes, we've made and Asia Pacific as well, we have very high expectations of Japan.
And obviously, a and as that and there's other markets, where we're going to be struggling and up as well.
That's great and maybe 1 for Mike.
And numbers look great across the board that the 1 outlier was the.
A fortune 500, which looked like a kind of a slower net add and Q1 and then you could kind of speak to this number and maybe seasonality or thoughts around.
What to expect going forward.
Wrong. These.
These large accounts are very very long sales cycles, and you are going to see lumpiness and the additions. Obviously Q4 was a strong quarter and as 1 would expect and Thats just landing and the customer that doesn't mean it contributed to revenue.
And as I said most of those.
Fortune 500, we landed in Q4, we've seen and virtually no revenue from them yet today.
And I can't stress that enough.
And given Q4 is the end of the commission year for people and accelerators reps do everything natural to close everything and the end of that commission here, So I fully expect and we.
We will continue to close fortune 500, the balance of the year and it is.
All based upon when the customer is ready to begin that journey.
And that's great okay. Thanks.
Your next question comes from the line of Kash Rangan with Goldman Sachs.
Thank you very much congratulations on the quarter.
2 questions 1 is that we have.
Talked about.
Never ending and replacement of data warehousing and they give us.
And the spend on that I'm passionate about it because we think the things that I think.
And the data warehousing and it's just a small subsegment of the database market, but your comments seem to suggest that.
It's a longer term longer tailed growth opportunity that that very core of the business and 1 from 1 for you Mike I know that.
For your guidance doesn't look like you're.
Assuming a big flow through EBITDA.
And then again, because you do not want to forecast increases and consumption revenues that wider and definitely.
<unk> forecast for the upcoming quarters conservative. Thank you so much.
Yes cash Frank.
Yes, we're actually Super early innings.
And replacing these legacy.
Premise data warehouses and license.
It's actually and actually you see that and some maturity those numbers. So they are actually hanging on to their business and 1 of the reasons thats been.
And we think snowflake has really been the only company that's been successful and and transitioning these legacy systems.
And we've not seen it done successfully by the public cloud companies. So most of that opportunity is still there and its still coming and Thats why I think it is for all intents and purposes and definitely so so much of our business is actually not coming from from.
From those sources.
But our expectation is that it will continue to contribute materially to our business for a very long period of time.
On your question cash on the Beach, we did flow the beat through to the full year guidance plus about $1 million more but we also had the headwind going to the full year as I mentioned, we introduced new storage compression technology that we literally just rolled out and based upon the early feedback of that it's going to take about $13 million and a rare.
Menu.
Away from the company, because the economics of our storage and so much better for our customer with that compression.
And much higher than we were expecting it to be.
So which is a good thing for our customers and longer term, it's going to drive more.
It's going to cause customers to put more data and snowflake, which will ultimately drive more consumption.
Wonderful, Thank you and Frank and second just followed very quickly.
Cloud based the hottest scanners and their own data warehouse and cloud offerings and why is it that snowflake has been able to keep on that day and their partners.
It doesn't get them away from trying to compete in this market and structural barriers and Nevada.
You guys have against the Hyperscale and cloud based day. Thank you so much and that's it.
Well.
And I can go on and on and volatile the reasons are but for the purposes of this call 1 of the things that make snowflake.
Completely different is that our founding team starting with a clean sheet of paper.
And obviously, we're deeply steeped and database technology over very long period of time and they were looking to absolutely not carry any legacy forward that day that they didn't like and to really reinvent architecturally for cloud scale computing, which is very very different from on premise. So it was incredibly deaf.
<unk> very very innovative.
As a result, we're not straddling the on premise and public cloud environments were only and the public cloud.
And it is very important I mean, you look at a lot of the public companies. They have carriers not only architecture, but actual code forward from our price and volume that try to evolve and adapt that.
And the thing that we always say is look.
It's hard to catch up when you're not sitting on a good architecture, and you're only going to get farther and farther behind architecture matters. It matters a whole lot and this is really the strength of snowflake is rooted in its core architecture is something we should never lose sight of.
Your next question comes from the line of Kirk Mccarren with.
Evercore ISI.
Yeah, Thanks, very much and congrats on the quarter. Frank I was wondering if you can maybe just expand a little bit on your comments on the verticals. It seems to me when we start thinking about the data sharing opportunity landing some of those key beachhead clients and each vertical is going to be really important to sort of build out.
Beyond that and I guess, along those lines I was just kind of curious where you think you are and each of those 6 verticals that theres. A couple that are maybe ahead of the game I'm, sorry, and building out sort of thrill market knowledge, having salespeople and understand the intricacies and each of those verticals versus maybe the ones that you still need to do some work on price.
And that's kind of a broad ranging question and again definitely come and see us.
And at summit, because we're going to showcase a lot of customers and these vertical saw you didn't hear directly from them in terms of what they're doing and how they're doing it but our largest vertical and this doesn't actually surprised some people is actually and media and streaming content and advertising and it's actually not that much of a surprise.
And because they are.
Digital to consumer business and no other way for for companies like Hulu, and Disney and Comcast and NBC Universal to run their businesses and they are very sophisticated very advanced.
And obviously because of the dominance and advertising <unk>.
The likes of Amazon Facebook and Google This is very very important.
To them how to develop their businesses and snowflake is really a key enabler.
For that for many reasons and.
So that's just 1 example of a business that is extremely active with snowflake at this point because of the strategic challenges that are going on.
Over their second largest vertical is actually financial that might not be large financial institutions that may not be much of a surprise because they tend to be for.
For most software companies and healthcare life Sciences, and retail, obviously and consumer packaged goods is very very big.
For us for similar reasons, because digital transformation is so large and that part of the world of course, the whole advertising side and very big thing over there as well.
Public sector software companies is a very large component of our business because many many software companies out there and you'll see a lot of that at our summit event, our re platforming on top of a snowflake snowflake, becoming a core part.
And if their stock so theres a lot of moving parts and a we're really excited about progress.
We have made.
As a company that we no longer sell exclusively on architectural distinction.
And we're really crossed over into the customers' business and really enable and der challenges their outcomes and.
And it makes us a much higher value added partner than we historically have been when we were just focused on.
Shifting and lifting workloads from from on premise to the cloud.
And that's really helpful and Mike if I could squeeze and really quick 1 and can you think assumption model.
Polymers.
And we think about it in terms of seasonality from just consumption over the summer.
The year is we've seen bookings trends obviously.
<unk> come down a little bit and say the third quarter is there anything and if you consider in terms of your full year guidance on that front.
First of all it's factored into that but there is no.
You see more seasonality on weekends, obviously, because there's not as many employees and the office spend a lot of our workloads still run on weekends too. So it sounds like and dropped to zero. So clearly around holidays, you do see some but it's not a profound in terms of people taking vacation and December that youll see a big drop off consumption and we really haven't seen.
And that.
Thank you al Congrats.
Your next question comes from the line of.
And <unk> with UBS.
Great. Thank you and maybe 2 for for Mike, Mike any noticeable change and the revenue mix between snowflake on AWS versus Snowflake on Azure and then I've got a quick follow up.
I will still say at AWS is still our biggest but.
Azure from new bookings as we get into the large enterprise and that continues to increase as a percent but still.
As for our biggest from new book.
Okay makes sense and then Mike just as a follow up intra.
Interesting on the storage compression change and the Delta in terms of the revenues and I'm just wondering whether thats.
Symbolic of any change in pricing strategy, and maybe you Frank and the team has a greater willingness now to tap these types of cost savings on to customers to drive future growth or was this change a little bit more 1 time ish as opposed to a.
A real high level pricing strategy changed thank you.
Well I'll be transparent I learned a lot and this process. So this is something the company has historically done about every 2 years.
Big focus on new compression technology for storage and.
And the impact of it.
Bigger than we would've thought and we only do that and once we actually.
<unk> got real live examples from customers and our philosophy has always been to pass that onto customers, but there's other and performance improvements as well for instance, we are working on new chip technology that will dramatically increase performance and improve performance. So we do expect that to have an impact and that's more of next year.
Youll see that and we have always done that and continue to improve the.
The performance of our product that goes directly to the benefit of our customers.
Got it makes sense, okay. Thanks for that feedback.
Your next question comes from the line of Gregg Moskowitz with Mizuho.
Alright, congratulations and thanks for taking the questions I had a follow up on secure data sharing so as that ramps naturally your consumption is going to rise by a lot, but so too will the complexity of all the data thats being shared and all kinds of intricate ways and so I'm wondering do you have any concerns about maintaining a high level of security and governance on.
The platform as that unfolds.
Frank the answer is no not really because.
Data sharing is completely integral.
2 our architecture and other words, we're deploying.
And the exact same security model that we've deployed for for internal as we do for external security. So.
And as I said earlier architecture matters and this wont, Colorado and this is beautifully designed for doing exactly what it what it does.
It is not a bolt on and there's not a heck.
Incredibly well implemented itself for the answer would be no to your question.
Alright Thats helpful. Thanks, Frank and then a quick follow up for Mike. So you mentioned that EMEA bookings grew over 200% Asia Pac over 300 does this reflect acceleration can you say, what the growth looked like and our fiscal 'twenty 1.
What I will say is both EMEA and APAC exceeded their plan and they had very strong quarters, we saw.
And $1 million plus it was actually a multimillion dollar deal we did in EMEA with a big pharmaceutical company.
And we landed a nice very nice job.
Customer in Japan.
Japan, as well and saw a very strong across the board I would say performance and EMEA and APAC.
Alright, that's great thanks very much.
And our next question comes from the line of Raimo Lynn Zhao from.
Barclays.
Hey, Thanks for squeezing me in and congrats from me as well and quickly.
Quick question and ask you shrank after you and.
And to the replacement cycle and you've kind of pointed out here for the the 1 that actually does it properly where are you. What are you seeing I think around the partner capacity to help get here you mentioned to Lloyd already obviously is kind of 1 big 1 but.
I assume just getting all the care data is actually quite to be chopped with kind of a lot of extra work and book where are you. How happy are you with the channel there and then I had 1 follow up for Mike.
Lower.
Happy and in places and I highlighted our relationship with Deloitte.
Our lead partner they went from a <unk>.
Standing start low.
But over a year ago to $100 million and business, which is an absolutely roofing.
Trajectory that they're on.
Just show share that demand for these migrations.
Whether it's kept Jim and I are infosys, and obviously accenture and.
And so on but they are all scrambling to certify to staff to provision.
Our professional services organization is actually by far the best at this and that's obviously a logical consequence for the fact, there's always do.
So we're really using our own abilities to help leverage them into the business and.
And it's not easy because the ramp associate for for everybody and we got to make sure that we do an absolutely terrific job for our customers. Because these migrations are not easy and theyre not cheap there's.
And there is risk involved and so on and that's that's really the friction in the marketplace. So essentially very welcome.
The system integrators are leaning in as hard as they are but the enablement.
And for them to become really effective large growth businesses.
And sort of the day to day challenge that we have but I view it as all good work that we do.
Yes, Okay makes sense and then Mike.
The storage compression et cetera, like does that impact gross margins might be a stupid question, but like 72% is the highest and now everyone is wondering like how and why haven't.
How do we manage to get so quickly there and is there a kind of more upside next year with compression et cetera.
It is a totally unrelated.
Well for what I will say is the it does improve margins and the way. It improves margin is because storage becomes more efficient storage is a smaller component of the overall mix of the revenue and compute is real and value of our software that drives more margin.
And I will say, we did roll this out in April and you do see some of that coming into and impact on last quarter.
But.
We did say at our IPO. If you remember we thought we could get to the mid seventies and might feel very good that we'll get to the mid seventy's is going to take some time and stay tuned for our Investor day, and we'll talk more about that later I would say the biggest improvement we've seen to date in the gross margin has really been the renegotiation of our <unk>.
Contracts with their cloud vendors and the discipline and our sales organization around discounting and coupled with the fact as we move into larger enterprises, we're selling more business critical and enterprise, which attract a higher contribution margin.
Okay. Thank you.
Okay.
Your next question comes from the line of Brian <unk> with Jefferies.
Mike just on quota carrying reps this year, if youre not giving a number can you just give a sense of how are you going to keep the same trajectory of growth you added last year or try and get more productivity out of the red Seattle, just any color around the quota quota carrying side would be helpful. Thanks, well, we don't disclose quota carrying rep.
And what I will say is we're going to add about 200 net employees for the full year and we do expect that will add about the same level into our sales organization. This year as we did last year.
So same number of absolute rats for it.
<unk>.
Great. Thank you Mike.
Our next question comes from the line and DJ Hynes with Canaccord Genuity.
Hey, Thanks, Frank I wanted to ask about Snowflake ventures.
Called out thoughts by day, IQ I know day to robots and the portfolio, So obviously analytics and and.
And all AI are logical targets just curious like warehouse are you seeing interesting stuff happening in the ecosystem as it pertains that driving volume to snowflake.
Yes areas.
Our governance.
And he and governance.
Becoming such a huge aspect.
Data operations in and.
And large institutions and you want to say governance, and it really relates to security as well as privacy compliance.
Compliance.
So we actually acquired.
Company lost share.
<unk> and <unk>.
And that is and I will actually flow into our platform and opening up the ability to anonymize Pi data and things of that sort of super Super important that customers can really for you.
Safe on our platform that when they allow data on our platform.
And this fully fully govern them and it's been a big issue, but it's literally growing and important quarter on quarter and a lot of the large customers are really organizing themselves too.
And to maintain that kind of a posture.
There's sort of there's areas and data cataloging and theres a whole ecosystem.
Round, our platform and what we like about investing is not just the upside and <unk>.
For us from the investments, but we get to.
Book closer relationship with these customers on the basis of the investments.
Much more seamless integration is better customer experiences and that's what we'd like to do I mean, we're very much and we're very much and ecosystem oriented company.
Company, rather than we had 1 flavor and that's what you're going to use.
We want to make sure that the whole ecosystem. It feels like a like a very good experience to our customers. So we look for opportunities, we see a lot and low.
Happy with the number of investments.
And that we've done and we're looking at new stuff continually.
Yes, yes.
Some good ones and the portfolio already.
Mike a follow up to you.
So raimo asked about gross margins as it pertains to kind of the storage compression technology I was going to ask.
And if I think about the trajectory it kind of you guys expand into doing more with unstructured data I think there are heavy demands on storage theyre like how should we think about the trajectory of gross margins as we get to that.
Mid Seventy's target I mean is that is it fair and I can take a dip and the interim or what's what's the right way to think about that.
I don't see it dip happening and our product gross margins at all but there is a limit to where you can get to and.
And when we're going through our IPO people were asking question and I did say I don't see us getting into the <unk>.
I can see is a path for the mid seventies, we may 1 day and be able to get into the high seventy's, but given the storage component and we are passing through the cost associated with the public clouds or and there it's pretty hard to get beyond that.
Yeah makes sense, okay. Thanks, nice numbers guys.
Your next question comes from the line of Brad Reback with Stifel.
Great. Thanks, very much Mike I think last quarter, you talked about investment and fed ramp can you maybe give us an update where you stand and do you think.
The federal vertical.
Tributary and fiscal 'twenty.
So there is that ramp high we're working on ISR is going to be out mid this year fed ramp high end of the year and.
And obviously, if we didn't see a big opportunity because there is a big cost associated with doing that we wouldn't be doing it and.
We have a very good pipeline within the public sector.
And we're very focused on it.
As of today, it's not a big driver of revenue. So that's a lot of upside there.
Great. Thanks very much.
Your next question comes from the line of Tyler Radke with Citi.
Hey, Thanks very much for taking my question, maybe just start with Frank.
I think earlier from a call you talked about how kind of the legacy data.
Data warehouse migration.
It's been a really important go to market and understand I'm curious give.
And we're focused on the day to cloud.
Changing at all in from the initial use case and leading with.
And perhaps given the success, you're seeing with data sharing and data marketplace, you find it easier to perhaps land and new customer with given that it's more greenfield and loss of that large scale legacy database migration.
The thing that happens is when people move. These these legacy workloads to the cloud and you're running a platform like snowflake and all of a sudden and you're finding out that no.
Workloads can run orders of magnitude faster in other words not why go after 3 weeks you know populated might warehouse and now populating the dashboards and reports that people are almost there.
And he moved on but by the time they get data.
And you accelerate that timeframe, we often talk about this whole concept and the time value of data. If you get data even most of our customers are and I don't know 24 hour cycle, but that's now moving up where people are seeing data and.
In hours and minutes and we're very aggressively working.
2 event architectures, where you got to sort of mirror near real time.
And the computer science real time and in a visceral sense, it's near real time. So you are now looking at data very differently than you did before or do you have to wait for days and weeks for it to see it now it's showing a very quickly that completely changes people's perspective, what they can do it right and that's that is what is so different.
So different and they've enabled by the public cloud.
Coupled with.
Snowflake architecture that is whats driving the consumption of high net revenue retention rates because people are discovering completely new use cases and things that can do that were never a consideration and in previous times. It was very important.
Hold static batch oriented way of thinking we havent data warehouses.
Really different now.
Thanks, and then.
Follow up for for Mike.
And the current.
And you don't really have a current RPI does obviously.
And to model, but.
In terms of your comment on the percentage of our expected.
And then.
Last 12 months I just wanted to from time to seem like that the growth from that number.
Picked up.
And quite a bit from from the last few quarters.
So number 1 just wanted to confirm that.
The growth rate on that number.
Number 2 and just understand kind of the factors and.
Net.
And I think.
Bookings performance here and.
And Q1.
Well it was a strong Q1 and bookings performance and we estimate that 54% of and our Apio roll off into revenue over the next 12 months and it was 54% 50.
And 55% last quarter.
And.
And there has to say about that but we see it.
We see it rolling after revenue.
Thank you.
Our last question comes from the line of Canal Zac with William Blair.
Hi, everyone and congrats on the gross should start for the year and thanks for taking my question.
I have a follow up on the targeted 1200 head count increase this year can you update us on the execution to date and should we expect that to be front end loaded and maybe could you provide the split between first half and second half for you.
Well as I said and the remarks, we onboard at 436 net employees in the first half of the year and so 1200, it's definitely front and loaded we always try to add a lot of people into our sales and marketing organization and the first month of.
For the year to take get the benefit of our sales kickoff.
But.
And definitely we're going to continue to add.
And the first half as them and it's going to be more skewed to that.
That's helpful and.
<unk> delivered incredible RPM growth over the past.
It's been over 200 per cent I guess for the past few years now.
Can you provide and update on contract duration and how that's changing is that.
Something being pushed by your sales team or is that just a function of.
More penetration at the enterprise level.
Yes.
Well last year was the first year, we really incentivize your sales force to sell multi year contracts and what I would say is now it's getting more into the normal sale.
Sales motion of our salespeople, it's more natural for them to be going in and asking customers to sign a 3 year contract historically.
And we used to sell 1 year contracts only.
And so we still do have renewals and customer.
And are still some customers on renewals and only wanted to do a 1 year renewal because thats, what <unk> always done and there are some customers, especially ones, where they are new customers that we want to do a 1 year contract because they want to get to know us more generally those newer customers. We're finding on renewals are doing the multi year renewals with us as they are they're seeing everything they can do on staff.
And so.
And thats fully reflected and our appeal.
Okay. It makes sense all right. Thank you and congrats again.
And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
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