Slide 1: Q2 FY24 Earnings Results
Q2 FY24 Earnings Results November 28, 2023 © 2023 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: © 2023 NetApp, Inc. All rights reserved. — NETAPP CONFIDENTIAL —
3 © 2023 NetApp, Inc. All rights reserved. — NETAPP CONFIDENTIAL —
Slide 4: NetApp collaborates to build Intelligent Data Infrastructure to deliver 3 key benefits
NetApp collaborates to build Intelligent Data Infrastructure to deliver 3 key benefits © 2023 NetApp, Inc. All rights reserved.
Slide 5: NetApp makes data infrastructure intelligent
NetApp makes data infrastructure intelligent to turn a world of disruptio into opportunities for every custome!
Slide 6: NetApp helps customers confidently rise to every moment
NetApp helps customers confidently rise to every moment © 2023 NetApp, Inc. All rights reserved.
Slide 7: NetApp ESG Highlights
NetApp ESG Highlights ENVIRONMENT SOCIAL GOVERNANCE • Decreased Scope 1 and Scope • Accountability for DEI&B • Enhanced ESG oversight 2 emissions by 31% from our objectives set at the corporate FY20 baseline level • Added cybersecurity and human capital management to the skills • Joined the CDP Supp
Slide 8: Results highlights
Delivered company all-time highs for gross margin, operating margin, and EPS Introduced the ASA C-series for price-sensitive block workloads Results highlights Expanded our addressable market for AI with the addition of the AFF C-series to ONTAP AI Extended our partnership with Google with the intro
Slide 9: Q2 FY24 summary
Q2 FY24 summary Q2 guidance Q2 actual (as of Aug 23, 2023) Revenue $1.455B – $1.605B $1.56B -6.1% y/y Billings* $1.45B -9.2% y/y Non-GAAP gross margin ~ 70% 72.0% +580 bps y/y Non-GAAP operating margin ~ 24% 26.8% +320 bps y/y Non-GAAP EPS $1.35 – $1.45 $1.58 +6.8% y/y Non-GAAP FCF margin 6.0% Capit
Slide 10: FY24 summary
FY24 summary Q1 Q2 1H FY24 Revenue $1.43B $1.56B $2.99B -10.1% y/y -6.1% y/y -8.0% y/y Billings* $1.30B $1.45B $2.75B -16.7% y/y -9.2% y/y -12.9% y/y Non-GAAP gross margin 70.7% 72.0% 71.4% + 400 bps y/y +580 bps y/y +490 bps y/y Non-GAAP operating margin 21.6% 26.8% 24.3% -100 bps y/y +320 bps y/y
Slide 11: Revenues
Revenues 6% Y/Y $1.7B $1.6B $1.6B $1.6B $1.5B $1.4B Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Services revenue Product revenue © 2023 NetApp, Inc. All rights reserved.
Slide 12: Billings
Billings $1.7B 9% Y/Y $1.6B $1.6B $1.6B $1.5B $1.3B Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Billings Billings is a Non-GAAP measure. Refer to appendix for details and a reconciliation between Non-GAAP and GAAP numbers. © 2023 NetApp, Inc. All rights reserved.
Slide 13: Non-GAAP gross margin
Non-GAAP gross margin $1,125M $1,062M $1,102M $1,091M $1,020M $1,012M 72.0% 70.7% 69.0% 66.7% 66.3% 66.8% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Non-GAAP gross margin dollars Non-GAAP gross margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2023 NetApp, Inc. A
Slide 14: Segment revenue and gross margin
Segment revenue and gross margin Hybrid Cloud Public Cloud $1,521M $1,460M $1,430M $1,376M $1,408M $151M $154M $154M $150M $1,278M $142M $132M 72.7% 69.7% 71.1% 68.3% 68.7% 69.4% 66.9% 65.6% 66.2% 66.4% 66.1% 66.6% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY
Slide 15: All flash array annualized revenue run rate
All flash array annualized revenue run rate 1% Y/Y $3.2B $3.1B $3.1B $3.0B $2.8B $2.8B Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 All flash annualized array revenue run rate © 2023 NetApp, Inc. All rights reserved. AFA annualized net revenue run rate is determined by products and services reven
Slide 16: Public cloud ARR
Public cloud ARR 1% Y/Y $605M $620M $619M $609M $584M $603M Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Public cloud ARR © 2023 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 assum
Slide 17: Non-GAAP operating expense
Non-GAAP operating expense $702M $709M $703M $706M $677M $648M 49.1% 45.2% 44.1% 42.6% 42.5% 42.8% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 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 ©
Slide 18: Non-GAAP operating profit
Non-GAAP operating profit $414M $419M $393M $372M $360M $309M 26.8% 26.2% 24.4% 23.6% 22.6% 21.6% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Non-GAAP operating profit Non-GAAP operating margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2023 NetApp, Inc. All right
Slide 19: Non-GAAP earnings per share
Non-GAAP earnings per share 7% Y/Y $1.54 $1.58 $1.48 $1.37 $1.20 $1.15 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Non-GAAP earnings per share Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2023 NetApp, Inc. All rights reserved.
Slide 20: Non-GAAP free cash flow
Non-GAAP free cash flow $418M $319M $216M $196M 29.2% 20.9% $137M 13.6% 12.4% $97M 8.2% 6.0% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Free cash flow Free cash flow as a percent of revenue Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2023 NetApp, Inc. All rights r
Slide 21: Deferred revenue
Deferred revenue 1% Y/Y $4.2M $4.2M $4.3M $4.2M $4.1M $4.0M Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Deferred revenue balance © 2023 NetApp, Inc. All rights reserved.
Slide 22: Q3 FY24 Guidance
Q3 Guide Revenue $1.51B – $1.67B Non-GAAP gross margin ~ 71% Non-GAAP operating margin ~ 28% Earnings per share* $1.64 – $1.74 Q3 FY24 Guidance as of Nov 28, 2023 * EPS is a Non-GAAP number. Refer to appendix for additional details and a reconciliation between © 2023 NetApp, Inc. All rights reserved
Slide 23: Updated FY24 Guidance
FY24 Guide Revenue Down ~2% y/y Non-GAAP gross margin ~ 71% Non-GAAP operating margin ~26% Earnings per share* $6.05 – $6.25 Updated FY24 Guidance as of Nov 28, 2023 Additional modeling points 2H product gross margin 58% – 60% Net interest income ~ $30M Share count ~ 212M * EPS is a Non-GAAP number.
Slide 24: Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations
Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations © 2023 NetApp, Inc. All rights reserved.
Slide 25: Supplemental revenue and gross margin data
Supplemental revenue and gross margin data RECONCILIATION OF SEGMENTS GROSS PROFIT TO TOTAL GROSS PROFIT ($ in millions) First Six Months First Six Months Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1'FY24 Q2'FY24 of FY'23 of FY'24 Revenues by Segment Product $ 786 $ 837 $ 682 $ 744 $ 590 $ 706 $ 1,623 $ 1
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) First Six Months First Six Months Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1'FY24 Q2'FY24 of FY'23 of FY'24 Net revenues $ 1,592 $ 1,663 $ 1,526 $ 1,581 $ 1,432 $ 1,562 $ 3,255 $ 2,9
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) First Six Months First Six Months Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1'FY24 Q2'FY24 of FY'23 of FY'24 NET REVENUES $ 1,592 $ 1,663 $ 1,526 $ 1,581 $ 1,4
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) First Six Months First Six Months Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1'FY24 Q2'FY24 of FY'23 of FY'24 OPERATING EXPENSES $ 791 $ 805 $ 829 $ 766 $ 818 $ 806 $ 1,596 $ 1,624 A
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) First Six Months First Six Months Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1'FY24 Q2'FY24 of FY'23 of FY'24 INCOME FROM OPERATIONS $ 255 $ 282 $ 172 $ 309 $ 178 $ 304 $ 537
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 First Six Months First Six Months Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1'FY24 Q2'FY24 of FY'23 of FY'24 NET INCOME PER SHARE $ 0.96 $ 3.41 $ 0.30 $ 1.13 $ 0.69 $ 1.10 $ 4.34 $ 1.79 Adjustm
Slide 32: Reconciliation of operating cash flow to free cash flow
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) First Six Months First Six Months Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1'FY24 Q2'FY24 of
Slide 33: Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2024
Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2024 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP THIRD QUARTER FISCAL 2024 (Unaudited) THIRD Quarter Fiscal 2024 Gross Margin - Non-GAAP Guidance ~71% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Gui
Slide 34: Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2024, continued
Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2024, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP THIRD QUARTER FISCAL 2024 (Unaudited) THIRD Quarter Fiscal 2024 Net Income Per Share - Non-GAAP Guidance $1.64 - $1.74 Adjustments: Amortization of intangible a
Slide 35: Reconciliation of Non-GAAP guidance to GAAP – fiscal 2024
Reconciliation of Non-GAAP guidance to GAAP – fiscal 2024 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FISCAL 2024 (Unaudited) Fiscal 2024 Gross Margin - Non-GAAP Guidance ~71% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Guidance ~70% Fiscal 2024 Product Margin - No
Slide 36: Reconciliation of Non-GAAP guidance to GAAP – fiscal 2024, continued
Reconciliation of Non-GAAP guidance to GAAP – fiscal 2024, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FISCAL 2024 (Unaudited) Fiscal 2024 Net Income Per Share - Non-GAAP Guidance $6.05 - $6.25 Adjustments: Amortization of intangible assets ($0.27) Stock-based compensation exp
Slide 37: Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2024
Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2024 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP SECOND QUARTER FISCAL 2024 (Unaudited) Second Quarter Fiscal 2024 Gross Margin - Non-GAAP Guidance ~70% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP
Slide 38: Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2024, continued
Reconciliation of Non-GAAP guidance to GAAP - second quarter fiscal 2024, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP SECOND QUARTER FISCAL 2024 (Unaudited) Second Quarter Fiscal 2024 Net Income Per Share - Non-GAAP Guidance $1.35 - $1.45 Adjustments: Amortization of intangibl
Slide 39: © 2023 NetApp, Inc. All rights reserved.
© 2023 NetApp, Inc. All rights reserved.