Earnings Call Transcript
Snowflake Inc. (SNOW)
Earnings Call Transcript - SNOW Q1 2023
Operator, Operator
Good evening, and thank you for attending today's Snowflake Q1 Fiscal 2023 Conference Call. My name is Daniel, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Jimmy Sexton. Jimmy, please proceed.
Jimmy Sexton, Moderator
Good afternoon and thank you for joining us on Snowflake's Q1 fiscal 2023 earnings call. With me in Bozeman, Montana, are Frank Slootman, our Chairman and Chief Executive Officer; Mike Scarpelli, our Chief Financial Officer; and Christian Kleinerman, our Senior Vice President of Product, who will join us for the Q&A session. During today's call, we will review our financial results for the first quarter of fiscal 2023 and discuss our guidance for the second quarter and full year fiscal 2023. During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, products and features, long-term growth and overall future prospects. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after market close today and in our SEC filings, including our most recently filed Form 10-K for the fiscal year ended January 31, 2022, and the Form 10-Q for the quarter ended April 2022 that we will file with the SEC. We caution you to not place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in our expectations. We'd also like to point out that on today's call, we will report both GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. To see the reconciliations of these non-GAAP financial measures, please refer to our earnings press release distributed earlier today and our investor presentation, which are posted at investors.snowflake.com. A replay of today's call will also be posted on the website. With that, I would now like to turn the call over to Frank.
Frank Slootman, CEO
Thanks, Jimmy, and good afternoon, everybody. Product revenue grew 84% year-on-year to $394 million. Remaining performance obligations grew 82% year-on-year to $2.6 billion. And in the quarter, we added 16 Global 2000 customers. We closed the quarter with a record $181 million of non-GAAP adjusted free cash flow, pairing high growth with improving unit economics and operational efficiency. Historically, enterprises have struggled to report yesterday's news in a timely manner. Data have to be transformed and transported to systems that produce the reports and dashboards that make sense out of transactional and operational data. There wasn't enough time or money in the day to ingest ever-larger volumes of data and perform long-running processes to make the data consumable and analytics-ready. The public cloud infrastructure, coupled with cloud-native data platforms like Snowflake, broke the back of these laboring systems with tremendous scale, performance, and economics. While these have been incredible advances, they are only scratching the surface of what is possible. Goals are evolving due to full-scale mobilization of data in the service of the enterprise mission. Data can do a lot more than authority reports of what happened historically. We sometimes refer to our innovation of traditional data warehousing workloads as the end of the beginning because so much more is possible. Data science can discover and describe data relationships and, therefore, also predict them and optimize courses of action. To enable machine learning and data science workloads, Snowflake has been investing for years now in the tooling for these workload types. This includes a wide variety of data programmability options as well as the Snowpark language runtime capabilities in support of Java, Scala, and Python. More generally, the Snowflake strategic focus is to enable every single workload type that needs to access governed data. The core idea behind the Snowflake Data Cloud is to enable work to come to the data and stop bringing data to the work. Prior to the data cloud, data was copied, transferred, and replicated to be used wherever it was needed. That has led to rivers of data moving 24/7, causing operational complexity, cost, and governance risks. The Snowflake Data Cloud holds the promise to bring that undesirable legacy to an end. Data stays put on the data cloud, and our workload enablement ensures that customers can have their needs met in terms of data engineering, data warehousing, data lake, data science, data analytics, and data application development. We recently announced several product development milestones. Our acquisition of Streamlit closed. With Streamlit, we are enabling developers to build apps using their favorite tools and with simplified data access and governance. We're making great progress on our integration plans. Support for unstructured data is now generally available. Examples include securely sharing PDF documents in the Snowflake Data Marketplace and storing medical images to extract data from them. We also entered a public preview for programming of unstructured data from Snowpark. Snowflake Data Marketplace monetization is now in public preview. This allows companies to easily publish a variety of data sets that then become available for purchase by other Snowflake users. Our summit conference in June will feature our most significant product announcements in four years. We look forward to discussing more innovations with you then. Use cases are often industry-specific applications of Snowflake. In the quarter, we announced the introduction of our healthcare and life sciences data cloud and the retail data cloud. The healthcare and life sciences data cloud helps customers deliver improved patient outcomes and accelerate clinical research and time to market. One of our pharmaceutical customers estimates that using Snowflake will improve their time to market for a new drug by three years. The retail data cloud empowers retailers, manufacturers, and consumer packaged goods vendors to access new data and seamlessly collaborate across the retail industry. Customers such as 84.51 and Albertsons are leveraging Snowflake to optimize operations for businesses across the sector. We also enable new use cases through partner enablement. We recently announced new partnerships with Dell Technologies and Pure Storage. With Dell, joint customers will be able to use on-premise data stored on Dell object storage with the Snowflake data cloud while keeping their data local or seamlessly copying it to public clouds. With Pure Storage, joint customers will be able to work with data stored locally on Pure Storage FlashBlade. As we enable more workload types and use cases, the opportunity for data sharing grows. In Q1, the number of stable edges grew 122% year-on-year. 20% of our growing customer base has at least one stable edge, up from 15% a year ago. Snowflake's Data Marketplace listings grew 22% quarter-over-quarter, now with more than 1,350 data listings from over 260 providers. Our Snowflake Data Marketplace fuels our rich application development ecosystem and Powered by Snowflake program. Today, there are over 425 Powered by Snowflake partners, representing 48% quarter-over-quarter growth. Over the past three years, we have achieved high growth while greatly improving unit economics, operating efficiency, and cash flow. The company has a fortified balance sheet with over $5 billion in cash, cash equivalents, and investments and zero debt. We have the ability to continue to grow at scale, generate cash, and invest accordingly. We will continue to do so. Snowflake is not a 'growth at all costs' company, and we only invest with defined expectations in terms of returns and business impact. Research and development investments must lead to innovation and differentiation. Sales and marketing investments must lead to productive growth, and G&A investment is focused on system and process efficiency. Our strategic focus on continued growth informs all of our investments, coupled with improving free cash flow generation. With that, I will now turn the call over to Mike.
Mike Scarpelli, CFO
Thank you, Frank. In the first quarter, product revenues reached $394 million, marking an 84% increase year-over-year, while remaining performance obligations increased by 82% year-over-year to total $2.6 billion. Of this amount, we anticipate that roughly 53% will be recognized as revenue within the next year, representing a 79% increase year-over-year. Our net revenue retention stands at 174%, highlighted by 11 new customers contributing $1 million each and showcasing robust growth among our largest clients. During this quarter, 10 customers exceeded the $5 million threshold over the past 12 months, bringing our total to 45 customers with at least $1 million and 10 customers exceeding $10 million. Consistent with the previous quarter, five of our top 10 customers experienced faster product revenue growth year-over-year compared to the company overall. We are committed to a vertical strategy to bolster enterprise growth, with product revenue in the healthcare and life sciences sector growing over 100% year-on-year, and in financial services, just under 100%. This growth is largely driven by our shift towards larger market segments. As we expand globally, we are prioritizing the Forbes Global 2000 and other major organizations. In this quarter, we welcomed 16 new Global 2000 customers, up from 12% in the same quarter of the previous year. This focus on enterprise also leads to larger contracts, as we secured four eight-figure deals this quarter, compared to two in the same quarter last year. I'd like to delve into the dynamics of our revenue and bookings from this quarter. The first quarter's product revenue highlights robust growth at scale. We are pleased with our customers' adoption and expansion of the platform. Our business model provides organizations with the flexibility to adjust their Snowflake usage according to their needs. Customers rely on Snowflake for their operations, aligning consumption with their current business demands. Last year, some customers had consumption levels significantly exceeding expectations due to rapid business growth. Currently, certain customers are encountering a more challenging operating environment and are consuming less than we expected due to economic shifts affecting them, particularly among consumer-focused cloud companies. Although these customers continue to grow, macroeconomic factors are influencing their consumption patterns, which may vary from quarter to quarter. This variability does not diminish our long-term prospects. The overall demand for Snowflake remains strong, as evidenced by the contractual commitments and long-term plans customers have for utilizing the data cloud throughout their organizations. Regarding bookings, as I mentioned in our previous earnings call, we recorded exceptional bookings in the fourth quarter of fiscal year 2022, outperforming our internal forecast by around $300 million in that period. This strong performance has made quarter-to-quarter comparisons more challenging, resulting in a sequential decline in remaining performance obligations in the first quarter. The fourth quarter's success prompted us to increase our booking expenditures for the fiscal year 2023, and we still met our internal targets in the first quarter. Remember, revenue serves as a primary indicator of our growth, while bookings and remaining performance obligations follow customer purchases as they acquire more capacity. Now, focusing on margins on a non-GAAP basis, our product gross margin was 75%. Efficiency in our public cloud data centers and success with enterprise customers contributed to steady gross margin improvements. Our operating margin was at 0%, benefiting from hiring efficiency. Our adjusted free cash flow margin was 43%, positively influenced by strong collections from record bookings in the fourth quarter. We concluded the quarter with approximately $5 billion in cash and investments, which positions us strongly. I want to reiterate what Frank pointed out earlier: Snowflake does not prioritize growth at any cost. Since we joined, our investment evaluations have been based on expected returns. This approach has strengthened our financial position. We will continue to grow while demonstrating leverage annually. Now, let's discuss our guidance. For the second quarter, we project product revenues between $435 million and $440 million, reflecting a year-over-year growth of 71% to 73%. Regarding margins, we foresee a negative 2% operating margin on a non-GAAP basis and an expectation of 358 million diluted weighted average shares outstanding. Please remember that we will be hosting our summit conference in person in June, with related expenses primarily incurred in each second quarter going forward. For the full fiscal year 2023, we expect product revenues between $1.885 billion and $1.9 billion, which translates to a 65% to 67% year-over-year growth. In terms of profitability for the fiscal year 2023, we anticipate a non-GAAP product gross margin of 74.5%, a 1% operating margin, and a 16% adjusted free cash flow margin, with 358 million diluted weighted average shares outstanding. We are increasing our workforce to support our growth strategies, and the first quarter was our best hiring quarter yet. For the broader year, our plan is to add over 1,500 net new employees. Our long-term opportunities have never been more promising. Our strategy around enabling various workloads and data types is unfolding effectively, with an expanding market opportunity. Conversations with customers indicate that the Data Cloud is integral to their success. Given the growth we've experienced in the past year and the opportunity ahead, we are confident in our ability to execute at scale. Ahead of our Investor Day, I’d like to update our fiscal year 2029 targets. We are reaffirming our product revenue target of $10 billion, anticipating a growth rate of 30% year-over-year. We are also raising our margin targets and now expect approximately 78% product gross margin, a 20% operating margin, and a 25% adjusted free cash flow margin on a non-GAAP basis. We look forward to providing more details during our Investor Day on June 14 in Las Vegas, coinciding with the Snowflake Summit. If you wish to attend, please email ir@snowflake.com. Now, operator, you may open the line for questions.
Operator, Operator
Certainly. First question comes from Karl Keirstead of UBS. Please proceed.
Karl Keirstead, Analyst
Thank you very much. I would like to ask you, Mike, since you mentioned that some customers might be affected by macroeconomic factors, particularly consumer-facing cloud companies, which may have impacted you a bit in the April quarter. As we look at the full year product revenue guidance of $1.9 billion, could you share the assumptions you are incorporating in that guidance for the second through fourth quarters? Are you anticipating that the trends observed in the April quarter will continue or possibly worsen? I think that would be valuable insight. Thank you.
Mike Scarpelli, CFO
Well, specifically, for some of our large customers where we saw a decline, we've taken that on their forecast, but we have others that are offsetting partially some of that. What I will say is in April, we did see weakness in our total revenue by customer week-over-week. But to be honest, the last two weeks of March and May have been very strong. But just given everything in the macro headwinds we're hearing, we're going to be a little bit more cautious going into the full year.
Operator, Operator
Thank you. Next question comes from Alex Zukin of Wolfe Research. Please proceed.
Alex Zukin, Analyst
Hey, guys. Thanks for taking the question. So maybe just to kind of piggyback on Karl's question, Mike, can you talk about specifically what kind of consumption trends actually took a step back? And you mentioned even for some of the impacted companies, those numbers started to step back up in May. Again, kind of the confidence interval of how you see even within those companies, consumption patterns trending around the Data Cloud that give you conviction around the guidance.
Mike Scarpelli, CFO
Well, I know all the customers that are going to be going into production that are the new ones because we've been working on these. That gives me the confidence. And I literally look at the revenue on a daily basis for all of our customers, and that's how we base our forecast. And as I said, the last two to three weeks have been very strong and week-over-week growth in revenue that gives us the conviction even with lowering on an individual basis, some of our larger customers that are still growing, just not at the pace we saw them grow last year.
Alex Zukin, Analyst
Got it. And is it possible to quantify or size that impact?
Mike Scarpelli, CFO
It is possible, but I told you what I'm going to tell you.
Operator, Operator
Thank you. The next question comes from Keith Weiss with Morgan Stanley. Please proceed.
Keith Weiss, Analyst
Thank you for taking my question. I have two inquiries. First, last quarter we discussed a significant price performance enhancement you are implementing for your customers and its expected outcomes, such as reduced revenues but also encouraging more workloads to migrate to your platform. Has this initiative achieved the results you anticipated so far? Have you observed the behaviors you were aiming for? Second, building on Karl's question, when customer consumption falls below expectations, does that usually result from clients cutting back on existing workloads, or is it primarily due to a slowdown in the deployment of new workloads? Can you provide some insight into what primarily influences those consumption patterns?
Mike Scarpelli, CFO
Yes. Regarding your first question, as we mentioned last quarter, there is typically a delay between our performance improvements and the introduction of new workloads that generate additional revenue in Snowflake. However, everything is proceeding as expected with the rollout. Specifically about Graviton 2, the warehouse scheduling was implemented last quarter, and we are beginning to see its advantages for our customers. The feedback we have received from customers has also been very positive. For your second question, I will let Christian address that.
Christian Kleinerman, SVP of Product
There are two reasons for the lower consumption. One is the natural correlation with data and business activity. When some businesses anticipate a slowdown, they generate less data, which affects our pipelines and aggregation. The other reason is an increased focus on optimizing the use of Snowflake. I wouldn’t describe this as a reduction in workloads; rather, it's about better management of resources.
Mike Scarpelli, CFO
Many of our customers who have experienced rapid growth have not focused on costs as much, which is why we have adjusted our forecast. Some of these customers have publicly acknowledged their need to cut costs, and those are the customers being cautious and leading to lower consumption forecasts from them. Additionally, we are working with these customers to help them optimize their usage.
Alex Zukin, Analyst
Got it. That’s super helpful. Thank you, guys.
Operator, Operator
Thank you. The next question comes from Mark Murphy of JPMorgan. Please proceed.
Mark Murphy, Analyst
Yes. Thank you very much. So you had commented on slower consumption from consumer cloud. We're probably associating that with Facebook, Netflix, Peloton, Snap types of public companies that have missed. Is it reasonable to assume some softness from enterprise software companies, maybe the cash-burning, venture-backed ones that are also slowing their investments and trying to get to cash flow breakeven? And then it's kind of the same question for retailers. Just in the wake of Amazon, Walmart, Target, we have the three biggest retailers that have missed their own numbers. And I'm just wondering if there's any recalibration there?
Mike Scarpelli, CFO
Well, I'm not going to name the customers, but none of them were the ones you mentioned. And there definitely is a focus on top of mind for many CFOs to find out where they can cut costs. And that's the beauty of a consumption model is you only expense what you use, and that's what our customers like as well, too. And so I feel good about the forecast that we just laid out, taking into consideration the macro environment and literally looking at our customer's continued usage of Snowflake, and I don't see that changing in aggregate. Yes, I'm sure there's going to be some customers that are going to underperform. But likewise, there's going to be many customers that overperform. And long-term, none of these customers are moving off of Snowflake and most have plans to do more with Snowflake.
Operator, Operator
Thank you. Next question comes from Gregg Moskowitz of Mizuho. Please proceed.
Gregg Moskowitz, Analyst
Thank you, and good afternoon everyone. The net new customer count seems to be slowing down a bit and is lower compared to the previous year. I understand it's more about quality than quantity. Mike mentioned 11 new seven-figure customers. Could you provide more insight on that and share your expectations for net new customers as you assess your pipeline?
Mike Scarpelli, CFO
I can't disclose the specific target we aim to add. However, as I mentioned earlier, our primary focus is on the largest enterprises globally. Not every customer holds the same value; we aim to engage with those that can generate over $1 million. Thus, it's not solely about the total number of customers, but rather the quality of each individual customer, which is our main priority.
Operator, Operator
Thank you. The next question comes from Kash Rangan of Goldman Sachs. Please proceed.
Kash Rangan, Analyst
Thank you very much. Thank you so much, Frank and Mike. Did the full effect of the warehouse optimizer credit and the AMB upfront shift, did you get the full headwind effect in this quarter? Just curious about that…
Mike Scarpelli, CFO
No.
Kash Rangan, Analyst
...or is there any more left to play out? Okay, okay. Got it.
Mike Scarpelli, CFO
No, the Graviton2 was rolled out over a period of time. The warehouse scheduling service was already done and we have a full impact of that.
Kash Rangan, Analyst
Got it. So, which quarter should we expect a maximum headwind and then the weighting of that headwind?
Mike Scarpelli, CFO
It's by the end of the year.
Kash Rangan, Analyst
Okay, got it. Also, Mike, you mentioned that you observed activity returning in the first couple of weeks of May. Was that the same group of customers that experienced the decline in consumption, or was it more of an overall effect?
Mike Scarpelli, CFO
More of an aggregate effect.
Kash Rangan, Analyst
Got it. And finally, are you rethinking how you structure contracts to have more subscription and more predictable element given that the macroeconomic environment is?
Mike Scarpelli, CFO
No.
Kash Rangan, Analyst
And why would that not be the case?
Mike Scarpelli, CFO
Well, the problem is when you are in a consumption model, the more you use it, the more our costs are. And the only way to extract the value to cover the cost is by doing a consumption model.
Frank Slootman, CEO
People have contracts.
Mike Scarpelli, CFO
And it's also much more customer-friendly.
Operator, Operator
Thank you. Next question comes from Kirk Materne of Evercore. Please proceed.
Kirk Materne, Analyst
Hi. Thanks very much. Frank, you obviously, you've both been through some economic cycles before. I was just wondering if you could talk a little bit about just, sort of, the importance of Snowflake and data as we go through a potential economic cycle and the discretionary nature of it or the lack of being discretionary. I think people are thinking the consumer model also means it's discretionary. And I’d imagine you have a very different take on that in terms of how customers are using your technology. So I was just wondering if you could give us some perspective on the longer term importance of what you guys are doing for your customers and why that gives you confidence in the fiscal 2029 guide? Thanks.
Frank Slootman, CEO
It's a valid question, and I've noticed some discussions on this topic online too. However, it requires a more nuanced perspective, as it's not a simple issue. Our workloads are deeply integrated into essential business processes, which is why, for the past two years in our calls, we've highlighted the challenges of moving workloads to Snowflake. These workloads are integral to operations and aren't going anywhere; they aren't optional or something individuals decide on a whim. There are, of course, workloads on the data lake side that are more discretionary, where data scientists might explore a large set of files to derive insights. However, this isn’t the focus of our business. When customers use Snowflake, they have serious intentions for that data. The areas of data platforms that are discretionary, allowing for avoidance of certain processes, are not our main concern. In our case, as I mentioned, these workloads are embedded in core business operations, making it impractical to simply pause them during uncertain times.
Kirk Materne, Analyst
Thank you.
Operator, Operator
Thank you. The next question comes from Raimo Lenschow of Barclays. Please proceed.
Raimo Lenschow, Analyst
Thank you. I have a quick question. As mentioned by a couple of others on the call, Mike and Frank, you've experienced this situation before. Considering your readiness or adaptation to the current circumstances, could you discuss the strategies you have for potentially investing more in industries that appear more stable, and how that might influence your spending priorities across different sales segments or verticals? Is there anything you can do in this regard? Additionally, I'm sure you've conducted the analysis on your exposure to more consumer-facing sectors. Is there anything you can share about that, or is this something you may cover during the Analyst Day? Thank you.
Mike Scarpelli, CFO
Yes. Regarding your question about costs in our business, we are still experiencing impressive growth at scale. We will continue to invest in our business, making efficient investments as we have consistently done for the last two-and-a-half years, and this approach will remain intact moving forward. There are significant opportunities ahead of us, and we are heavily investing in both research and development and our go-to-market strategy. We will maintain this focus while ensuring efficiency and leverage in our model. We are also prioritizing free cash flow and currently have over $5 billion available. We plan to be opportunistic with our investments, focusing on long-term success rather than short-term results amidst current macroeconomic uncertainties, as we look to position ourselves for the next 10 to 20 years.
Raimo Lenschow, Analyst
Yes. And Mike, I came more from the revenue side, in terms of, like more of the still is focus like for example, as you're building out vertical clouds now, can you focus more on financials because that might be like safer or over the next...
Mike Scarpelli, CFO
We are concentrating on all those cloud opportunities, and where we identify potential, we will allocate more resources. We are seeing particularly strong growth in healthcare. Even though some retail clients are facing challenges, they are seeking better data. In difficult times, people are more inclined to access data to better understand their business, which will lead to increased usage of Snowflake. Financial services has always been one of our largest sectors and will continue to be a major focus for us.
Operator, Operator
Thank you. Next question comes from Brad Zelnick of Deutsche Bank. Please proceed.
Brad Zelnick, Analyst
Thank you very much. Instead of trying to find another way to discuss the macroeconomic impacts, I want to take a moment to acknowledge the impressive growth you’re achieving. This is significant and shouldn’t be overlooked. However, regarding pricing and the competitive landscape, I see you maintaining strong pricing discipline with a clear focus on ROI. Do you think pricing might be a barrier to adoption? Do you have any insights into whether your competitors are experiencing similar trends? Additionally, is there any indication that win rates are changing or that customers are diversifying their spending towards alternative options to save on costs? Any insights you can provide on these matters would be appreciated. Thank you.
Frank Slootman, CEO
Yes. Our business is not commoditized, which addresses your question. There are certainly individuals in our industry attempting to commoditize it, but our customers are engaged in challenging and impressive tasks. The value they derive from credit is already highly optimized and competitive. This is a matter of physics and economics, and there isn’t much room to maneuver regarding our pricing. Therefore, pursuing that route is not very productive. The focus should be on developing impact and insights, which is where we are concentrating our efforts. We haven’t experienced any pressure in this regard. We do keep our pricing discipline, ensuring that customers do not feel they are subsidizing our operations. We are committed to this discipline. We offer top-tier solutions, delivering value and impact. We have tailored our business to align with our customers’ missions and outcomes, rather than just debating minor price differences for compute credit. These discussions are not relevant when a hospital's priority is to save lives or enhance the quality of life. That is the essence of what our customers are trying to achieve with Snowflake, and those are the conversations we are having. Our clients are not pushing us to reduce prices; that is simply not the situation unfolding in the market.
Mike Scarpelli, CFO
I'm not aware of any significant customer opportunity we've pursued where we lost it due to pricing, not a single one.
Christian Kleinerman, SVP of Product
I'll add one more thing that we also look at the ratio of price performance and the performance and enhancements platform that we deliver, improve not only the factor, decisions and insights for customers but also the economics of the platform. And from that front, customers see the value.
Frank Slootman, CEO
Yes. I mean, we can use many examples. We have a lot of pharma customers. And their mission in life is to accelerate time to market of life-saving pharmaceuticals. That's what they're trying to do. Snowflake helps with that. That's what's on their mind. That's what preoccupies them, how do we do this, right? So this whole commoditization thing, I think is a dog that just won't hunt very well.
Mike Scarpelli, CFO
Yeah. I think what we're seeing is this growth across both existing customers, smaller customers growing faster and that dynamic continues, as well as new customer additions.
Operator, Operator
Thank you. Next question comes from Kamil Mielczarek of William Blair. Please proceed.
Kamil Mielczarek, Analyst
Hi, thanks for taking my question. Your sales and marketing headcount grew 55% year-over-year, the fastest rate in over two years, and net new adds almost doubled. Given the macro-related noise from some customers, why is now the right time to accelerate that growth? And when factoring in the time needed for new reps to ramp and the time needed to load data from new customers onto the platform, when should we expect this accelerated headcount growth to show up in the financial model?
Mike Scarpelli, CFO
Well, it's reflected in our long-term target of getting to $10 billion by fiscal year 2029. And Q1 is always our biggest hiring quarter in sales and marketing, as we've said before, because we onboard people at the beginning of a new comp year, but also for our sales kickoff. And it tends to be very heavy more in the SDRs that we try to onboard in big groups at once. And typically, depending on the nature of the rep, whether you're on the corporate team or you're on the enterprise or majors, it's anywhere from a six-month ramp to nine months to a year. And the people we're hiring now will have more of an impact on revenue next year has somewhat of an impact on bookings towards the end of the year, but this is what we were planning on doing all along. And as I said, we're going to continue to invest in our go-to-market function because of the opportunity we have in front of us. And we've shown that we can do it efficiently and continue to show leverage.
Kamil Mielczarek, Analyst
That's helpful. Thank you. And if I could just quickly follow-up. Frank, in your prepared remarks, you mentioned all the great progress you've made to enable application developers. You acquired Streamlit. You're adding Python. You launched Powered by Snowflake. Have you seen any changes in the pace of app development in recent quarters? And are there key milestones that we should watch out for maybe around the rollout of specific features and integration that could make app development a more dependable flywheel for Snowflake? Thank you.
Frank Slootman, CEO
I mentioned in the prepared remarks that we now have a significant number of Powered by Snowflake partners, with growth of about 48% quarter-on-quarter. There's a lot of excitement on the application software development side. Later this year in November, we will hold a separate conference called Build specifically for application developers. Focusing on this area, where our programmers are engaged, is a major priority for Snowflake. Our entire strategy centers on enabling workloads. When customers are unable to perform desired tasks on Snowflake, they extract data and process it elsewhere, leading us away from our business model and causing misalignment. Our goal is to ensure that work comes to the data. Regardless of whether you are a data engineer or a programmer, our efforts are dedicated to maximizing investment in allowing these workloads to operate efficiently, enhancing usability, economics, and performance. Success in these areas directly supports the core business model of consuming Snowflake. Everything we do, announce, and present is aligned with this focus and strategy.
Mike Scarpelli, CFO
Yeah. And that will add, too, we're extremely excited about Streamlit. And what's amazing about that is that the Streamlit acquisition we announced last quarter, we've already seen a 25% increase in the number of developers using Streamlit today. And we think once that's reintegrated into Snowflake, that will be meaningful for the app development in Snowflake.
Operator, Operator
Thank you. The next question comes from Ittai Kidron of Oppenheimer. Please proceed.
Ittai Kidron, Analyst
Thanks. Frank, I had a question for you regarding your prepared remarks. You talked about the unstructured data opportunity. It's in preview now. Any more color you can give on timing when will this be GA? And how big is the universe of customers trying this out? How do you think the impact it can have on your performance out of the gate?
Frank Slootman, CEO
I'm going to just flip this one over to Christian, if you don't mind.
Christian Kleinerman, SVP of Product
Yes. The core capability is generally available. What you'll see us announcing both at our summit user conference in a couple of weeks and throughout the year, additional capabilities on how to extract additional value from unstructured types. But all of the benefits of Snowflake around data governance and replication and data sharing, that's available for – actually in use already.
Operator, Operator
Thank you. Next question comes from Brent Bracelin of Piper Sandler. Please proceed.
Brent Bracelin, Analyst
Thank you. I guess, Mike, on the consumption side, I look back at the pandemic. That was the most recent business cycle where we saw a pretty meaningful slowdown. Your business actually did slow sequentially for about two quarters and then reaccelerated. I guess if you just were to go back in time and look at some of the customers most impacted, travel, hospitality as their businesses were impacted, did they recover two quarters later as well, because they start to use new use cases beyond just a slowdown in their business? Just trying to think back what you saw in the past relative to a slowdown in the pandemic and then that reacceleration. Just wondering what you saw then and kind of comparing maybe a little bit to what you're seeing now. Thanks.
Mike Scarpelli, CFO
I don't have data on those specific industries at the moment. What I can say is that the slowdown we experienced came from some of our highest growth customers, which is specific to their businesses, particularly in April. This led us to adjust the forecasts for some of our largest customers, around $10 million, for the full year. Currently, several of our top 10 customers are exceeding our forecasts, while a few are falling short, but that's typical for us each quarter.
Frank Slootman, CEO
Yes. The only thing I would add is that I remember from the pandemic how it triggered many new use cases in response to people being confused about where demand was and where it wasn't. Supply chains were disrupted, with products being sent to the wrong locations, leading to a renewed effort to truly understand the situation. This resulted in a demand acceleration that helped offset some of the weaknesses in sectors like travel and hospitality. I believe this will happen again now, as such disruptions typically prompt a stronger focus on analytics.
Brent Bracelin, Analyst
Great. And just a quick follow-up on the new workload area. I spoke to a Snowflake customer in the consumer retail space last week who mentioned building a data app store on top of Snowflake. It seems that may be related to Streamlit. How popular is the idea of creating an app store on top of Snowflake as you consider it a new workload lever for the business?
Christian Kleinerman, SVP of Product
Yes. The general capability we have for data sharing and function sharing, which underpins our marketplace, has also been utilized by several third parties as the enabling technology for data distribution and commercialization. I'm not aware of the specifics, but I believe that's what you might be referring to.
Brent Bracelin, Analyst
Helpful. Thank you.
Operator, Operator
Thank you. The next question comes from Derrick Wood of Cowen. Please proceed.
Derrick Wood, Analyst
Hey, guys. First question. I think you made some tweaks to go-to-market teams in Q1 as you evolve more towards a verticalized strategy. Can you remind us what changes you may have made and whether there was any kind of impact to productivity in Q1, or how did you feel about that sales productivity for new bookings in the quarter?
Mike Scarpelli, CFO
Hi, Derrick, as I mentioned, we hit our internal Q1 bookings plan for growth. Productivity is where we needed to be. And the change we made is we went to an industry vertical focus from a geography focus with the majors, and there were a number of accounts that moved under new sales leadership. But by and large, the reps themselves did not change. And that's something we have been talking about for almost a year. We were going to roll it out starting this commission plan year.
Derrick Wood, Analyst
Great. Mike, you increased the long-term free cash flow margin target from 15% to 25%. That's a significant change. Can you explain the main adjustments in your assumptions?
Mike Scarpelli, CFO
I think we were probably too conservative last year. As a reminder, we achieved a free cash flow of 43% in the recent quarter, which is somewhat unusual, but I am very optimistic about exceeding 16% for the full year. As I mentioned, we will continue to leverage our performance each year, and collecting cash from our customers is not a problem.
Derrick Wood, Analyst
Got it. Thank you.
Operator, Operator
Thank you. Next question comes from Tyler Radke of Citi. Please proceed.
Tyler Radke, Analyst
Thanks for taking the question. Could you just talk about what you saw in EMEA and internationally, if there was any slowdowns with some of the macro noise out there in the quarter? And then I just wanted to clarify in terms of your outlook, did you make assumptions in terms of lower consumption rates going forward beyond just those large customers you referenced, or was it only specific to those customers? Thank you.
Mike Scarpelli, CFO
We lowered it for specific customers, and we still continue to see, as I've mentioned in the last two and a half weeks, we've seen quite high growth on a daily basis for revenue week-over-week. So customers are increasing their consumption and in line with what we're forecasting. Yes, I do see some weakness in Europe, but I'm not going to necessarily blame it on the macro. I think it's probably an execution on our part as well, too. Frank has been spending a lot of time in Europe recently, and we'll continue as well as Chris Degnan over there. APJ is very strong for us. We're seeing really good growth there. Mind you, it's small. I would say North America enterprise was very strong last quarter, as well as our commercial business was strong in North America.
Operator, Operator
Thank you. The next question comes from Brad Reback of Stifel. Please proceed.
Brad Reback, Analyst
Great. Thanks very much. Mike, earlier in the call, you had talked about having good line of sight on new customers coming onto the platform. I know it usually takes well over a year for a new customer to hit their stride. How should we think about the go-forward growth rates of net new customers versus historically over the last few years? And what have you sort of modeled in? Thanks.
Mike Scarpelli, CFO
Well, the biggest impact is going to be existing customers in the current year driving revenue. When we start a year, roughly 94% of our revenue comes from existing customers. The customers we're landing now have a bigger impact going out. And when I say the visibility, when we are signing up new customers, we know it takes them six to nine months to really ramp on our platform because it takes time to do the migration. And that's what I'm saying, those customers that we signed up in Q3 and Q4 are starting to come on in Q2.
Brad Reback, Analyst
Great. Thanks very much.
Operator, Operator
Thank you. Next question comes from Phil Winslow of Credit Suisse. Please proceed.
Phil Winslow, Analyst
Hi. Thanks guys for taking my question. Last quarter, there was a lot of focus on the impact of the Graviton chips on consumption. But I wanted to double-click on the workload schedule, it’s something that we've been talking to customers about being an area of enhancement they've been looking for. What are you seeing in terms of just to go up the negative impact that you discussed right now? Is it similar to what you expect, any different? But also what are customers saying, call it, on the flip side of this, what types of new workloads could be brought on the Snowflake? What does this open up that maybe wasn't necessarily going to move to Snowflake without enhanced workload scheduling? Thanks.
Mike Scarpelli, CFO
The impact of the warehouse scheduling service has aligned with our expectations. We had rolled it out prior to the end of January, and it influenced the quarter as anticipated. In terms of new workloads, I'll allow Christian to address that.
Christian Kleinerman, SVP of Product
Yes, we've heard from many of our customers that they see the concurrency improvement, the lower latency, and many of them have expressed intent of bringing additional workloads on to Snowflake. Oftentimes, those processes take time. So we cannot say that the migrations have happened, but the intention to leverage these new capabilities is something we hear frequently about.
Mike Scarpelli, CFO
There's been nothing but positive impact from our customers on these performance improvements.
Operator, Operator
Thank you. Next question comes from Gray Powell of BTIG. Please proceed.
Gray Powell, Analyst
Okay. Thanks for taking the question. So, yes, I mean, I know we've kind of hit on this before, but I do think that everybody understands that there's risk just across all of software if we go into a recession. But Snowflake is generating a lot of free cash flow. You're sitting on $5 billion in cash. So let's just say the economy gets worse and everyone starts seeing slowing growth. Where would you look to invest in order to come out a bigger and stronger company once the world stabilizes, or said differently, where do you see opportunities in this downturn?
Frank Slootman, CEO
This is Frank. I believe Mike has attempted to address this question several times today, but we recognize opportunities everywhere at this moment. We consistently monitor which customers, verticals, use cases, and workloads are performing well and which are not. This enables us to strategically adjust our direct investments where we anticipate the most significant returns and impacts. There’s no need for us to adopt a defensive stance because our current investments continue to generate results. We've indicated that if we were to slow our growth trajectory, it would not make sense given how successful it has been for us. Our opportunities remain extensive. For instance, we still have verticals where we have not penetrated deeply, such as the public sector, especially the federal government. While there are certain areas within the federal space where we are performing well and where we are investing, it’s important to note that such investments require a long-term commitment rather than a quick shift. Eventually, conditions may change. We can’t react impulsively every time there’s a bit of unease in the market. As long as we can maintain growth with the solid economics we are achieving—specifically regarding unit economics, operational efficiency, and cash flow—there’s no reason not to continue our current path. We’re not retreating; we intend to pursue our strategy. If circumstances were to arise where our investments ceased to yield results, we would of course make adjustments, but that is not the current situation. Our customers are still actively engaging and investing rather than pulling back or severely cutting expenses associated with the platform. Therefore, I think we might be overreacting regarding the current state of the real economy.
Mike Scarpelli, CFO
Yes. I'll add to that. I believe that in the next six months, if the current situation persists, there could be intriguing opportunities in mergers and acquisitions, not necessarily involving large deals, but I think some private companies will see valuation adjustments that could lead to interesting possibilities. This suggests that there may be areas in our roadmap where it could be advantageous to acquire a team with valuable technology, focusing more on securing good teams and technology at a more attractive valuation rather than on revenue.
Operator, Operator
Thank you. Next question comes from DJ Hynes of Canaccord. Please proceed.
DJ Hynes, Analyst
Hey, thanks guys. Mike, just one for you. So, if you see more consumption rollover, which I think notionally kind of lowers your expansion opportunities at renewal, how does that impact your thinking around retention of sales staff? I know just given the comp model, driving expansions like foundational to how these guys get paid. Is that something you worry about at all or how would you manage through it?
Mike Scarpelli, CFO
Yes. So just to be clear, we still are seeing our customers consume their contracted amount well within their contract period. Actually, one of our largest customers who signed a three-year $100 million deal, we've already invoiced them for their third year when we're still in the second year. And I don't see that changing for our customers because most of our customers have historically, and I still see that happening, consuming within their contract period. I just don't see that changing right now.
Operator, Operator
Thank you. The next question comes from Steve Koenig of SMBC. Please proceed.
Steve Koenig, Analyst
Thanks gentlemen for squeezing me in. I'll just ask one question for Mike. And by the way, it's a pleasure to be covering you guys now. So Mike, the acceleration in NRR and revenue per customer across fiscal 2022 was really remarkable. Can you talk a little bit about what drove this? And just qualitatively, how should we think about the puts and takes on the trends in those metrics going forward, either short-term lumpiness or longer term? Thanks very much.
Mike Scarpelli, CFO
Net revenue retention is primarily influenced by our largest customers who are growing rapidly, as well as new customers who are increasing their usage. This focus has been central to our strategy over the past two years. It’s not just about the number of customers, but the quality of those customers. Many of our large clients are now in a two-year cohort and are increasing their use of Snowflake. While I foresee net revenue retention eventually declining from its current high rate, I expect it to decrease gradually over time, remaining above 130% for the foreseeable future.
Steve Koenig, Analyst
Got it. Great. Well, thank you very much.
Operator, Operator
That will conclude the time of questions. Thank you for your participation. You may now disconnect your lines.