Slide 1: Q1 FY23 Earnings Results
Q1 FY23 Earnings Results August 24, 2022 © 2022 NetApp, Inc. All rights reserved.
Slide 2: Safe harbor
Safe harbor This presentation contains forward-looking statements and projections about our strategy, products and services, shareholder returns, and our future results, performance or achievements, financial and otherwise. These statements and projections reflect management's current expectations,
Slide 3: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud We help customers build their data fabric so they can thrive during times of disruption by getting the most out of their data, whether on premises, in a hybrid environment, or entirely in the cloud. 3 © 2022 NetApp, Inc. All rights reserved.
Slide 4: In the post-COVID business world, work and IT architectures are hybrid
In the post-COVID business world, work and IT architectures are hybrid… Physical is being replaced or complemented by digital Physical: predictable, slow Digital: resilient, agile 4 © 2022 NetApp, Inc. All rights reserved.
Slide 5: The new rules of digital – and hybrid – business
The new rules of digital – and hybrid – business… Speed and flexibility matter enormously: businesses will pay more for these capabilities Speed is the Flexibility is the Cloud is the platform Hybrid multi-cloud new scale greatest strength and data is the is the de facto currency for digital IT arch
Slide 6: Our solutions address crucial workloads in the cloud and on premises
Our solutions address crucial workloads in the cloud and on premises Cloud Compute Cloud Cloud services storage operations controls and analytics Bring the simplicity and flexibility Enterprise Data AI and of cloud to the enterprise data center workloads protection data lakes Bring enterprise data s
Slide 7: Strategic approach with focused execution for growth
Strategic approach with Building on a strong foundation focused execution for growth • Data-centric software specialist Technology and innovation leadership • Trusted by the world’s leading organizations • Unique partnerships with the biggest public clouds Aligned to customer • Differentiated data f
Slide 8: Results highlights
• Strong start to FY23 with company Q1 all-time high billings, revenue, gross profit dollars, operating income and EPS • Recurring support and Public Cloud revenue achieved a new high at 46% of total revenue • Public Cloud ARR of $584M grew 73% year on year • Delivered substantial innovation in our
Slide 9: Q1 FY23 summary
Q1 FY23 summary Q1 guidance Q1 actual (as of June 1, 2022) Revenue $1.475B – $1.625B $1.59B +9.2% y/y ✅ Billings* $1.56B +13.4% y/y Non-GAAP gross margin ~ 67% 66.7% -260 bps y/y ✅ Non-GAAP operating margin ~ 21% 22.6% -40 bps y/y ✅ Non-GAAP EPS $1.05 – $1.15 $1.20 +4.3% y/y ✅ Non-GAAP FCF margin 13
Slide 10: Revenues
Revenues $1.7B 9% Y/Y $1.6B $1.6B $1.6B $1.5B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Services revenue Product revenue © 2022 NetApp, Inc. All rights reserved.
Slide 11: Billings
Billings $2.0B $1.8B 13% Y/Y $1.6B $1.6B $1.4B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Billings Billings is a Non-GAAP measure. Refer to appendix for details and a reconciliation between Non-GAAP and GAAP numbers. © 2022 NetApp, Inc. All rights reserved.
Slide 12: Non-GAAP gross margin
Non-GAAP gross margin $1,087M $1,103M $1,070M $1,062M $1,010M 69.3% 68.3% 67.3% 66.7% 65.7% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Non-GAAP gross margin dollars Non-GAAP gross margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 NetApp, Inc. All rights reserved.
Slide 13: Segment revenue and gross margin
Segment revenue and gross margin Hybrid Cloud Public Cloud $1,560M $132M $1,479M $1,504M $1,460M $120M $1,379M $110M 70.9% 71.3% 70.9% $87M 69.7% 69.2% $79M 68.2% 68.3% 67.1% 66.4% 65.4% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Segment revenue Segment gross mar
Slide 14: All flash array annualized revenue run rate
All flash array annualized revenue run rate $3.2B $3.2B 7% Y/Y $3.1B $3.0B $2.8B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 All flash array annualized revenue run rate © 2022 NetApp, Inc. All rights reserved. AFA annualized net revenue run rate is determined by products and services revenue for the cur
Slide 15: Public cloud ARR
Public cloud ARR 73% Y/Y $584M $505M $469M $388M $337M Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Public cloud ARR © 2022 NetApp, Inc. All rights reserved. Public cloud annualized revenue run-rate is calculated as the annualized value of all Public Cloud customer commitments with the assumption that an
Slide 16: Non-GAAP operating expense
Non-GAAP operating expense $721M $702M $674M $696M $683M 46.2% 44.4% 44.1% 42.9% 42.3% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Non-GAAP operating expense Non-GAAP operating expense as a percent of revenue Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 NetApp, Inc. Al
Slide 17: Non-GAAP operating profit
Non-GAAP operating profit $404M $382M $374M $360M $336M 25.0% 23.9% 23.0% 22.7% 22.6% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Non-GAAP operating profit Non-GAAP operating margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 NetApp, Inc. All rights reserved.
Slide 18: Non-GAAP earnings per share
Non-GAAP earnings per share $1.44 $1.42 4% Y/Y $1.28 $1.20 $1.15 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Non-GAAP earnings per share Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 NetApp, Inc. All rights reserved.
Slide 19: Non-GAAP free cash flow
Non-GAAP free cash flow $343M $252M $216M $191M $199M 20.4% 16.1% 13.1% 13.6% 12.3% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Free cash flow Free cash flow as a percent of revenue Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 NetApp, Inc. All rights reserved.
Slide 20: Deferred revenue
Deferred revenue $4.2B $4.2B $3.9B $4.0B $3.9B 7.8% 6.8% 5.9% 5.7% 3.7% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Deferred revenue balance Deferred revenue y/y growth © 2022 NetApp, Inc. All rights reserved.
Slide 21: Q2 FY23 guidance
Q2 Guide Revenue $1.595B – $1.745B Non-GAAP gross margin 66% – 67% Q2 FY23 guidance Non-GAAP operating margin ~ 23% as of Aug 24, 2022 Earnings per share* $1.28 – $1.38 Additional modeling points Net interest expense ~ $5M Non-GAAP tax rate 21% – 22% Share count ~ 223M *Earnings per share is present
Slide 22: Reaffirmed FY23 guidance
FY23 Guide Revenue + 6% – 8% y/y Non-GAAP gross margin 66% – 67% Non-GAAP operating margin 23% – 24% Reaffirmed FY23 guidance Earnings per share* $5.40 – $5.60 as of Aug 24, 2022 Additional modeling points Public Cloud ARR $780M – $820M Net interest expense ~ $30M Non-GAAP tax rate 21% – 22% Operati
Slide 23: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2022 NetApp, Inc. All rights reserved.
Slide 24: Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations
Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations © 2022 NetApp, Inc. All rights reserved.
Slide 25: Supplemental revenue and gross margin data
Supplemental revenue and gross margin data RECONCILIATION OF SEGMENTS GROSS PROFIT TO TOTAL GROSS PROFIT ($ in millions) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Revenues by Segment Product $ 730 $ 814 $ 846 $ 894 $ 786 Support 578 590 586 590 598 Professional and Other Services 71 75 72 76 76 H
Slide 26: Dollar-based net revenue retention rate for public cloud services (Non-GAAP)
Dollar-based net revenue retention rate for public cloud services (Non-GAAP) Dollar-based net revenue retention rate (DBNRR) for public cloud services is a Non-GAAP metric calculated by dividing the approximate total revenue from our public cloud customer base at the end of a period (“Cloud Current
Slide 27: Reconciliation of net revenues to billings (Non-GAAP)
Reconciliation of net revenues to billings (Non-GAAP) RECONCILIATION OF NET REVENUES TO BILLINGS (NON-GAAP) (In millions) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Net revenues $ 1,458 $ 1,566 $ 1,614 $ 1,680 $ 1,592 Change in deferred revenue and financed unearned services revenue* (82) (15) 143
Slide 28: Reconciliation of Non-GAAP to GAAP gross profit and gross margin
Reconciliation of Non-GAAP to GAAP gross profit and gross margin RECONCILIATION OF NON-GAAP TO GAAP GROSS PROFIT AND GROSS MARGIN ($ in millions) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 NET REVENUES $ 1,458 $ 1,566 $ 1,614 $ 1,680 $ 1,592 GROSS PROFIT $ 999 $ 1,059 $ 1,073 $ 1,089 $ 1,046 Adjus
Slide 29: Reconciliation of Non-GAAP to GAAP operating expenses
Reconciliation of Non-GAAP to GAAP operating expenses RECONCILIATION OF NON-GAAP TO GAAP OPERATING EXPENSES ($ in millions) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 OPERATING EXPENSES $ 750 $ 765 $ 752 $ 796 $ 791 Adjustments: Amortization of intangible assets (2) (3) (4) (4) (6) Stock-based com
Slide 30: Reconciliation of Non-GAAP to GAAP income from operations
Reconciliation of Non-GAAP to GAAP income from operations RECONCILIATION OF NON-GAAP TO GAAP INCOME FROM OPERATIONS ($ in millions) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 INCOME FROM OPERATIONS $ 249 $ 294 $ 321 $ 293 $ 255 Adjustments: Amortization of intangible assets 9 10 13 14 17 Stock-bas
Slide 31: Reconciliation of Non-GAAP to GAAP net income per share
Reconciliation of Non-GAAP to GAAP net income per share RECONCILIATION OF NON-GAAP TO GAAP NET INCOME PER SHARE Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 NET INCOME PER SHARE $ 0.88 $ 0.98 $ 1.10 $ 1.14 $ 0.96 Adjustments: Amortization of intangible assets 0.04 0.04 0.06 0.06 0.08 Stock-based com
Slide 32: Reconciliation of operating cash flow to free cash flow (Non-GAAP)
Reconciliation of net cash provided by (used in) operating activities to free cash flow (Non-GAAP) RECONCILIATION OF NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES TO FREE CASH FLOW (NON-GAAP) (In millions) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Net cash provided by (used in) operating ac
Slide 33: Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2023
Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2023 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP SECOND QUARTER FISCAL 2023 (Unaudited) Second Quarter Fiscal 2023 Gross Margin - Non-GAAP Guidance 66% - 67% Adjustment: Cost of revenues adjustments (1)% Gross Margin -
Slide 34: Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2023, continued
Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2023, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP SECOND QUARTER FISCAL 2022 (Unaudited) Second Quarter Fiscal 2023 Net Income Per Share - Non-GAAP Guidance $1.28 - $1.38 Adjustments: Amortization of intangibl
Slide 35: Reconciliation of Non-GAAP guidance to GAAP – fiscal 2023
Reconciliation of Non-GAAP guidance to GAAP – fiscal 2023 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FISCAL 2023 (Unaudited) Fiscal 2023 Gross Margin - Non-GAAP Guidance 66% - 67% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Guidance 65% - 66% Fiscal 2023 Operating
Slide 36: Reconciliation of Non-GAAP guidance to GAAP – fiscal 2023, continued
Reconciliation of Non-GAAP guidance to GAAP – fiscal 2023, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FISCAL 2023 (Unaudited) Fiscal 2023 Net Income Per Share - Non-GAAP Guidance $5.40 - $5.60 Adjustments: Amortization of intangible assets ($0.31) Stock-based compensation exp
Slide 37: Reconciliation of Non-GAAP guidance to GAAP - first quarter fiscal 2023
Reconciliation of Non-GAAP guidance to GAAP - first quarter fiscal 2023 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FIRST QUARTER FISCAL 2023 (Unaudited) First Quarter Fiscal 2023 Gross Margin - Non-GAAP Guidance ~67% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Gui
Slide 38: Reconciliation of Non-GAAP guidance to GAAP - first quarter fiscal 2023, continued
Reconciliation of Non-GAAP guidance to GAAP - first quarter fiscal 2023, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FIRST QUARTER FISCAL 2023 (Unaudited) First Quarter Fiscal 2023 Net Income Per Share - Non-GAAP Guidance $1.05 - $1.15 Adjustments: Amortization of intangible a
Slide 39: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2022 NetApp, Inc. All rights reserved.