Slide 1: Q4 FY23 Earnings Results
Q4 FY23 Earnings Results May 31, 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: NetApp is a global, cloud-led, data-centric software company
NetApp is a global, cloud-led, data-centric software company that empowers customers with hybrid multicloud solutions built for a better future Only NetApp delivers value in these four areas with automation and optimization for IT teams to thrive—on premises, in the clouds, and everywhere in between
Slide 4: 30 years of innovation and counting
30 years of innovation and counting— no wonder we’re still leading the pack Proven leader Only storage OS Best protection Revolutionary in all-flash storage natively available and security in CloudOps services on the biggest the industry clouds NetApp helps companies take disruption in stride and tu
Slide 5: All-in on cloud. Grounded in our on-prem roots.
All-in on cloud. Grounded in our on-prem roots. EVOLVED CLOUD A portfolio built with the freedom to do what’s needed today and the flexibility to adapt to tomorrow Unified hybrid multicloud experience On-premises Cloud Data Cloud data storage data storage services Operations State-of-the art storage
Slide 6: NetApp technology helps our customers change the world
NetApp technology helps our customers change the world © 2023 NetApp, Inc. All rights reserved.
Slide 7: NetApp ESG Highlights
NetApp ESG Highlights Environment Social Governance Sustainable Innovations Investing in People Creating Trust • NetApp GHG emissions reduction • MBO goals create expanded • Established ESG office in FY20 and targets: science-aligned reduction in accountability for Diversity, Inclusion & governance
Slide 8: Highlights
• Delivered fiscal year all-time highs for operating margin and EPS* in FY23 • Returned $850M to shareholders, reducing FY23 share count by 4% versus prior year • Introduced significant innovation • AFF C-series family of capacity all-flash arrays Highlights • AFF A150, new entry all-flash array sys
Slide 9: Q4 FY23 summary
Q4 FY23 summary Q4 guidance Q4 actual (as of Feb 22, 2023) Revenue $1.475B – $1.625B $1.58B -5.9% y/y ✅ Billings* $1.67B -17.0% y/y Non-GAAP gross margin ~ 67% 69.0% +330 bps y/y ✅ Non-GAAP operating margin 23% – 24% 26.2% +350 bps y/y ✅ Non-GAAP EPS $1.30 – $1.40 $1.54 +8.4% y/y ✅ Non-GAAP FCF marg
Slide 10: FY23 summary
FY23 summary Q1 Q2 Q3 Q4 FY23 Revenue $1.59B $1.66B $1.53B $1.58B $6.36B +9.2% y/y +6.2% y/y -5.4% y/y -5.9% y/y +0.7% y/y Billings* $1.56B $1.60B $1.57B $1.67B $6.41B +13.4% y/y +3.3% y/y -10.5% y/y -17.0% y/y -4.4% y/y Non-GAAP gross margin 66.7% 66.3% 66.8% 69.0% 67.2% -260 bps y/y -210 bps y/y -
Slide 11: Revenues
Revenues 6% Y/Y $1.7B $1.7B $1.6B $1.6B $1.6B $1.6B $1.5B $1.5B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Services revenue Product revenue © 2023 NetApp, Inc. All rights reserved.
Slide 12: Billings
Billings $2.0B 17% Y/Y $1.8B $1.7B $1.6B $1.6B $1.6B $1.6B $1.4B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 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 $1,087M $1,103M $1,102M $1,091M $1,070M $1,062M $1,010M $1,020M 69.3% 69.0% 68.3% 67.3% 66.7% 66.8% 66.3% 65.7% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Non-GAAP gross margin dollars Non-GAAP gross margin Refer to appendix for a reconciliation between Non
Slide 14: Segment revenue and gross margin
Segment revenue and gross margin Hybrid Cloud Public Cloud $1,560M $1,521M $151M $1,479M $1,504M $1,460M $150M $1,430M $142M $1,379M $1,376M $132M $120M $110M 70.9% 71.3% 70.9% 69.7% 69.2% 69.4% 68.3% 68.3% 68.7% 68.2% $87M 67.1% 66.6% $79M 65.6% 66.4% 66.1% 65.4% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1
Slide 15: All flash array annualized revenue run rate
All flash array annualized revenue run rate 4% Y/Y $3.2B $3.2B $3.1B $3.1B $3.1B $3.0B $2.8B $2.8B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 All flash annualized array revenue run rate © 2023 NetApp, Inc. All rights reserved. AFA annualized net revenue run rate is determined by
Slide 16: Public cloud ARR
Public cloud ARR 23% Y/Y $603M $605M $620M $584M $505M $469M $388M $337M Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 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 custom
Slide 17: Non-GAAP operating expense
Non-GAAP operating expense $721M $702M $709M $674M $696M $683M $677M $648M 46.2% 44.4% 44.1% 42.9% 42.6% 42.9% 42.3% 42.5% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Non-GAAP operating expense Non-GAAP operating expense as a percent of revenue Refer to appendix for a reconciliat
Slide 18: Non-GAAP operating profit
Non-GAAP operating profit $404M $414M $382M $393M $374M $372M $360M $336M 26.2% 25.0% 24.4% 23.9% 23.6% 23.0% 22.7% 22.6% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Non-GAAP operating profit Non-GAAP operating margin Refer to appendix for a reconciliation between Non-GAAP and GA
Slide 19: Non-GAAP earnings per share
Non-GAAP earnings per share 8% Y/Y $1.54 $1.44 $1.48 $1.42 $1.37 $1.28 $1.20 $1.15 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 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 $343M $319M $252M $216M $191M $199M $196M $137M 20.4% 20.9% 16.1% 13.1% 12.3% 13.6% 12.4% 8.2% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Free cash flow Free cash flow as a percent of revenue Refer to appendix for a reconciliation between Non-GAAP and GAA
Slide 21: Deferred revenue
Deferred revenue 2% Y/Y $4.2B $4.2B $4.2B $4.3B $4.0B $4.1B $3.9B $3.9B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Deferred revenue balance © 2023 NetApp, Inc. All rights reserved.
Slide 22: FY24 Guidance
FY24 Guide Down mid to low Revenue single digits % y/y Non-GAAP gross margin ~ 70% Non-GAAP operating margin ~ 25% FY24 Guidance Earnings per share* $5.65 – $5.85 as of May 31, 2023 Additional modeling points Public Cloud revenue Up mid-teens % y/y Tax rate 21% – 22% Share count Down at least 2% y/y
Slide 23: Q1 FY24 Guidance
Q1 Guide Revenue $1.325B – $1.475B Non-GAAP gross margin ~ 70% Non-GAAP operating margin ~ 20% Q1 FY24 Guidance Earnings per share* $1.00 – $1.10 as of May 31, 2023 *Earnings per share is presented on a Non-GAAP basis. Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers. © 2023
Slide 24: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2023 NetApp, Inc. All rights reserved.
Slide 25: Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations
Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations © 2023 NetApp, Inc. All rights reserved.
Slide 26: Supplemental revenue and gross margin data
Supplemental revenue and gross margin data RECONCILIATION OF SEGMENTS GROSS PROFIT TO TOTAL GROSS PROFIT ($ in millions) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 FY'22 FY'23 Revenues by Segment Product $ 730 $ 814 $ 846 $ 894 $ 786 $ 837 $ 682 $ 744 $ 3,284 $ 3,049 Sup
Slide 27: Dollar-based net revenue retention rate for public cloud services
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 28: 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 Q2 FY'23 Q3 FY'23 Q4 FY'23 FY'22 FY'23 Net revenues $ 1,458 $ 1,566 $ 1,614 $ 1,680 $ 1,592 $ 1,663 $ 1,526 $ 1,581 $ 6,318 $ 6,362 C
Slide 29: 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 Q2 FY'23 Q3 FY'23 Q4 FY'23 FY'22 FY'23 NET REVENUES $ 1,458 $ 1,566 $ 1,614 $ 1,680 $ 1,592 $ 1,663 $ 1,526 $
Slide 30: 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 Q2 FY'23 Q3 FY'23 Q4 FY'23 FY'22 FY'23 OPERATING EXPENSES $ 750 $ 765 $ 752 $ 796 $ 791 $ 805 $ 829 $ 766 $ 3,063 $ 3,191 Adjustmen
Slide 31: 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 Q2 FY'23 Q3 FY'23 Q4 FY'23 FY'22 FY'23 INCOME FROM OPERATIONS $ 249 $ 294 $ 321 $ 293 $ 255 $ 282 $ 172 $ 309 $ 1,157 $ 1,0
Slide 32: 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 Q2 FY'23 Q3 FY'23 Q4 FY'23 FY'22 FY'23 NET INCOME PER SHARE $ 0.88 $ 0.98 $ 1.10 $ 1.14 $ 0.96 $ 3.41 $ 0.30 $ 1.13 $ 4.09 $ 5.79 Adjustments:
Slide 33: 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) Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 FY'22 FY'23 Net
Slide 34: Reconciliation of Non-GAAP guidance to GAAP – Q1 fiscal 2024
Reconciliation of Non-GAAP guidance to GAAP – first quarter fiscal 2024 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FIRST QUARTER FISCAL 2024 (Unaudited) First Quarter Fiscal 2024 Gross Margin - Non-GAAP Guidance ~70% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Gui
Slide 35: Reconciliation of Non-GAAP guidance to GAAP - Q1 fiscal 2024, continued
Reconciliation of Non-GAAP guidance to GAAP - first quarter fiscal 2024, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FIRST QUARTER FISCAL 2024 (Unaudited) First Quarter Fiscal 2024 Net Income Per Share - Non-GAAP Guidance $1.00 - $1.10 Adjustments: Amortization of intangible a
Slide 36: 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 ~70% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Guidance ~69% Fiscal 2024 Product Margin - No
Slide 37: 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 $5.65 - $5.85 Adjustments: Amortization of intangible assets ($0.27) Stock-based compensation exp
Slide 38: Reconciliation of Non-GAAP guidance to GAAP - Q4 fiscal 2023
Reconciliation of Non-GAAP guidance to GAAP - fourth quarter fiscal 2023 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FOURTH QUARTER FISCAL 2023 (Unaudited) Fourth Quarter Fiscal 2023 Gross Margin - Non-GAAP Guidance ~67% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP
Slide 39: Reconciliation of Non-GAAP guidance to GAAP - Q4 fiscal 2023, continued
Reconciliation of Non-GAAP guidance to GAAP - fourth quarter fiscal 2023, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FOURTH QUARTER FISCAL 2023 (Unaudited) Fourth Quarter Fiscal 2023 Net Income Per Share - Non-GAAP Guidance $1.30 - $1.40 Adjustments: Amortization of intangibl
Slide 40: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2023 NetApp, Inc. All rights reserved.