Slide 1: Q1 FY24 Earnings Results
Q1 FY24 Earnings Results August 23, 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— no wonder we’re still leading the pack
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: Results highlights
• Solid start to FY24 with strong customer acceptance of new products • Announced the ASA A-series family of SAN- specific flash storage systems • Made ONTAP One available on all AFF A-series, AFF C-series, ASA A-series, and FAS systems • Introduced Ransomware Recovery Guarantee, a Results highlight
Slide 9: Q1 FY24 summary
Q1 FY24 summary Q1 guidance Q1 actual (as of May 31, 2023) Revenue $1.325B – $1.475B $1.43B -10.1% y/y ✅ Billings* $1.30B -16.7% y/y Non-GAAP gross margin ~ 70% 70.7% + 400 bps y/y ✅ Non-GAAP operating margin ~ 20% 21.6% -100 bps y/y ✅ Non-GAAP EPS $1.00 – $1.10 $1.15 -4.2% y/y ✅ Non-GAAP FCF margin
Slide 10: Revenues
Revenues $1.7B 10% Y/Y $1.6B $1.6B $1.5B $1.4B Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Services revenue Product revenue © 2023 NetApp, Inc. All rights reserved.
Slide 11: Billings
Billings $1.6B $1.6B $1.6B $1.7B 17% Y/Y $1.3B Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 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 12: Non-GAAP gross margin
Non-GAAP gross margin $1,062M $1,102M $1,091M $1,020M $1,012M 70.7% 69.0% 66.7% 66.8% 66.3% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 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. All rights reserved.
Slide 13: Segment revenue and gross margin
Segment revenue and gross margin Hybrid Cloud Public Cloud $1,521M $1,460M $1,430M $151M $154M $1,376M $150M $1,278M $142M $132M 71.1% 69.4% 69.7% 68.3% 68.7% 66.4% 66.6% 66.9% 66.1% 65.6% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Segment revenue Segment gross m
Slide 14: All flash array annualized revenue run rate
All flash array annualized revenue run rate 7% Y/Y $3.1B $3.1B $3.0B $2.8B $2.8B Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 All flash array annualized revenue run rate © 2023 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 6% Y/Y $605M $620M $619M $584M $603M Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 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 assumption that any
Slide 16: Non-GAAP operating expense
Non-GAAP operating expense $702M $709M $703M $677M $648M 49.1% 44.1% 42.6% 42.5% 42.8% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 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 © 2023 NetApp, Inc. Al
Slide 17: Non-GAAP operating profit
Non-GAAP operating profit $414M $393M $372M $360M $309M 26.2% 24.4% 23.6% 22.6% 21.6% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 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 rights reserved.
Slide 18: Non-GAAP earnings per share
Non-GAAP earnings per share $1.48 $1.37 $1.54 4% Y/Y $1.20 $1.15 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 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 19: Non-GAAP free cash flow
Non-GAAP free cash flow $418M $319M 29.2% $216M 20.9% $196M 13.6% $137M 12.4% 8.2% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 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 reserved.
Slide 20: Deferred revenue
Deferred revenue 0% Y/Y $4.2M $4.2M $4.3M $4.2M $4.1M Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Deferred revenue balance © 2023 NetApp, Inc. All rights reserved.
Slide 21: Q2 FY24 guidance
Q2 Guide Revenue $1.455B – $1.605B Non-GAAP gross margin ~ 70% Q2 FY24 guidance Non-GAAP operating margin ~ 24% as of Aug 23, 2023 Earnings per share* $1.35 – $1.45 Additional modeling points *Earnings per share is presented on a Non-GAAP basis. Refer to appendix for a reconciliation between Non-GAA
Slide 22: Reaffirmed FY24 guidance
FY24 Guide Down mid to low Revenue single digits % y/y Non-GAAP gross margin ~ 70% Non-GAAP operating margin ~ 25% Reaffirmed FY24 guidance Earnings per share* $5.65 – $5.85 as of Aug 23, 2023 Additional modeling points Tax rate 21% – 22% Share count Down at least 2% y/y *Earnings per share is prese
Slide 23: Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations
Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations © 2023 NetApp, Inc. All rights reserved.
Slide 24: Supplemental revenue and gross margin data
Supplemental revenue and gross margin data RECONCILIATION OF SEGMENTS GROSS PROFIT TO TOTAL GROSS PROFIT ($ in millions) Q1 FY'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1 FY'24 Revenues by Segment Product $ 786 $ 837 $ 682 $ 744 $ 590 Support 598 607 616 598 611 Professional and Other Services 76 77 78 88 77 H
Slide 25: 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 26: 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'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1 FY'24 Net revenues $ 1,592 $ 1,663 $ 1,526 $ 1,581 $ 1,432 Change in deferred revenue and financed unearned services revenue* (32) (61) 46
Slide 27: 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'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1 FY'24 NET REVENUES $ 1,592 $ 1,663 $ 1,526 $ 1,581 $ 1,432 GROSS PROFIT $ 1,046 $ 1,087 $ 1,001 $ 1,075 $ 996 Adjus
Slide 28: 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'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1 FY'24 OPERATING EXPENSES $ 791 $ 805 $ 829 $ 766 $ 818 Adjustments: Amortization of intangible assets (6) (7) (6) (7) (6) Stock-based com
Slide 29: 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'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1 FY'24 INCOME FROM OPERATIONS $ 255 $ 282 $ 172 $ 309 $ 178 Adjustments: Amortization of intangible assets 17 17 17 17 15 Stock-ba
Slide 30: 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'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1 FY'24 NET INCOME PER SHARE $ 0.96 $ 3.41 $ 0.30 $ 1.13 $ 0.69 Adjustments: Amortization of intangible assets 0.08 0.08 0.08 0.08 0.07 Stock-based com
Slide 31: 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'23 Q2 FY'23 Q3 FY'23 Q4 FY'23 Q1 FY'24 Net cash provided by (used in) operating ac
Slide 32: 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 33: 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 34: 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 35: 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 36: Reconciliation of Non-GAAP guidance to GAAP - first quarter 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 37: Reconciliation of Non-GAAP guidance to GAAP - first quarter 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 38: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2023 NetApp, Inc. All rights reserved.