Slide 1: Forward-looking statement
Forward-looking statement This presentation and the statements made on behalf of NetApp during this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act regarding our strategy, products and services, shareholder returns and our future
Slide 2: Delivering shareholder value
Delivering shareholder value Mike Berry Executive Vice President and Chief Financial Officer 2 © 2024 NetApp, Inc. All rights reserved.
Slide 3: Agenda: Resilient performance in an uncertain environment
Resilient performance in an uncertain environment Agenda 3 © 2024 NetApp, Inc. All rights reserved.
Slide 4: Revenue and EPS trends
Revenue and EPS1 trends Driving profitability coming out of the pandemic and through an uncertain macro environment Consistent revenue in an uncertain Strong EPS1 growth driven by macro environment ($ Billions) disciplined management +14% +2% CAGR CAGR $6.46 $6.32 $6.36 $6.27 $5.91 $6.15 $5.74 $5.59
Slide 5: We delivered strong financial results in FY24
We delivered strong financial results in FY24 Record margins, cash flows, and earnings per share, with strong shareholder returns Record highs Gross Operating Operating EPS1 Capital returned to Margin1 Margin1 Cash Flow shareholders2 72% 27% $1.7B $6.46 $1.3B Higher margin 3rd consecutive OCF in lin
Slide 6: Look back to March 2022
Look back to March 2022 Material changes to the economic environment slowed spending and drove cloud optimization Metric FY25 model FY25 guide Comments • Difficult macro through FY24 Revenue $7.9B-8.4B $6.45B-6.65B • Expected to return to growth in FY25 Gross • All-flash and Public Cloud drive expan
Slide 7: Agenda: Strong business model
Strong business model Agenda 7 © 2024 NetApp, Inc. All rights reserved.
Slide 8: Platform enhances revenue potential and provides strong operating leverage
Platform enhances revenue potential and provides strong operating leverage Financial Advantages to NetApp Platform Benefits Greater revenue opportunity • Broad set of price and performance options Single operating system • Easier transition to flash • Data management capabilities Unified and block o
Slide 9: Sustainable revenue growth
Sustainable revenue growth Growth driven by expanding market opportunity, new products, and go-to-market focus Public Cloud revenue $0.6 • Growth driven by 1st party and marketplace $0.2 cloud storage • Future growth expected to be organic $2.6 $2.9 Support and Services revenue $ Billions • Growth d
Slide 10: Services revenue
Services revenue Recurring revenue base of ~ $3B plus sticky consumption revenue expected to represent ~55% of total revenue in FY25* $3.5 Consumption $2.8 • More than 80% of Public Cloud revenue is consumption-based • Strong net revenue retention rate for Public $ Billions Cloud storage services Re
Slide 11: Support revenue creates a base of stable and predictable growth
Support revenue creates a base of stable and predictable growth Consistent support revenue growth through choppy product revenue Support Revenue Product Revenue Support revenue • 2% CAGR FY17 – FY24 • Represents ~44% of Hybrid Cloud revenue in FY24 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 11 © 2024 N
Slide 12: Revenue metrics
Revenue metrics Metric FY21 FY22 FY23 FY24 Our expectations All flash % of Hybrid Continue to increase 46% 52% 52% 58% Cloud revenue as percent of total Stable support Support DBNRR1 105% 105% 103% 103% retention First party and Continue to increase marketplace % of 31% 33% 37% 48% as percent of tot
Slide 13: The quality of our revenue has a direct impact on gross margins and EPS
The quality of our revenue has a direct impact on gross margins and EPS Product mix has significantly increased the quality of revenue Gross 67% 71-72% margin1 Hybrid & HDD Products • Lower than average product gross margin1 >85% Public Cloud of total • Approaching 75 - 80% target gross margin1 reve
Slide 14: Gross profit growth
Gross profit1 growth Gross profit driven by mix shift to higher margin products and services $4.7 Public Cloud $3.9 • Path to target range within NetApp control • Improved use of cloud resources and lower depreciation expense drive increase $ Billions Hybrid Cloud • Support gross profit expansion dr
Slide 15: Net Income and cash flow
Net Income1 and cash flow Driving continued dollar growth; strong correlation to cash flow $1.4 Net Income1 • Continued growth in operating profit $0.9 • Target operating margins1 greater than 30% • Operating cash flow expected to correlate $ Billions with net income over time (will vary by period d
Slide 16: Earnings per Share
Earnings per Share1 Driving continued growth Shares2 226M 210M EPS +14% • Target EPS growth ahead of revenue growth CAGR • Driven by revenue growth, higher margins, operating discipline Shares $6.90 • Target reduction in share count of at least 1-2% per year $4.06 • Weighted average cost of shares p
Slide 17: Agenda: Maintaining financial strength and discipline
Agenda Maintaining financial strength and discipline 17 © 2024 NetApp, Inc. All rights reserved.
Slide 18: Demonstrated commitment to returning value to shareholders
Demonstrated commitment to returning value to shareholders Over $4 billion in free cash flow (FCF)1 returned to shareholders over the last four years $1.3 Expect operating cash flow to $1.3 track with net income1 $1.0 Returned 92% of FCF1 FY21 – FY24 $ Billions Targeting ~100% of FCF1 returns $0.6 t
Slide 19: Strong cash flow generation allows for balanced capital structure
Strong cash flow generation allows for balanced capital structure Balanced debt and equity capital structure allows us to lower our cost of capital Cash Staggered debt maturities $3.3B as of April 26, 2024 (in millions) balance1 $750 $700 Net cash $0.9B as of April 26, 2024 $550 balance2 $400 Minimu
Slide 20: Agenda: Revenue growth with strong operating leverage
Agenda Revenue growth with strong operating leverage 20 © 2024 NetApp, Inc. All rights reserved.
Slide 21: Revenue levers
Revenue levers Multiple tailwinds to support sustained revenue growth Expect on-going 10k RPM HDD replacement cycle, product refreshes, block and AI All-Flash to drive continued growth above market Currently underpenetrated with opportunity for market disruption and Block significant share gains Exp
Slide 22: Three-year financial model
Three-year financial model Targeting rule of 40 long-term Mid-to-upper Operating Double-digit Free cash flow single digit margin2 EPS2 growth margin2 revenue > 30% 20%+ growth1 on average on average FY27 FY25-FY27 FY25-FY27 FY25-FY27 Above market Operating dollar Leverage through In line with net gr
Slide 23: Key takeaways
Key takeaways Platform Strong business Disciplined Shareholder advantages of model drives management friendly capital will drive returns accelerate cost, operating speed and leverage continued EPS growth functionality profit growth 23 © 2024 NetApp, Inc. All rights reserved.
Slide 24: Appendix: Non-GAAP to GAAP Reconciliations & Explanations
Appendix: Non-GAAP to GAAP Reconciliations & Explanations © 2024 NetApp, Inc. All rights reserved.
Slide 25: Reconciliation of Non-GAAP to GAAP earnings per share
Reconciliation of Non-GAAP to GAAP earnings per share NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP EARNINGS PER SHARE FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025E* NET INCOME PER SHARE $ 1.71 $ 0.42 $ 4.51 $ 3.52 $ 3.23 $ 4.09 $ 5.79 $ 4.63 $ 5.06 Adjustments: Amortization of i
Slide 26: Reconciliation of Non-GAAP to GAAP gross margin
Reconciliation of Non-GAAP to GAAP gross margin NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP GROSS MARGIN ($ in millions) FY2021 FY2024 Gross margin-GAAP 66% 71% Cost of revenues adjustments 1% 1% Gross margin-Non-GAAP 67% 72% GAAP cost of revenues $ 1,929 $ 1,835 Cost of revenues adjustments: Am
Slide 27: Reconciliation of Non-GAAP to GAAP operating margin
Reconciliation of Non-GAAP to GAAP operating margin NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP OPERATING MARGIN ($ in millions) FY2024 Operating margin-GAAP 19% Adjustments: 8% Operating margin-Non-GAAP 27% GAAP income from operations $ 1,214 Income from operations adjustments: Amortization of
Slide 28: Dollar-Based Net Retention Rate Definition
Dollar-Based Net Retention Rate Definition Support Dollar-Based Net Retention Rate (DBNRR) - To calculate Support DBNRR, we start with approximate support revenue for the current fiscal year from all customers that generated support revenue in prior fiscal years (“existing support customers”). We th
Slide 29: Reconciliation of Non-GAAP to GAAP net income
Reconciliation of Non-GAAP to GAAP net income NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP NET INCOME ($ in millions) FY2021 FY2022 FY2023 FY2024 Total** FY2025E* NET INCOME $ 730 $ 937 $ 1,274 $ 986 $ 3,927 $ 1,096 Adjustments: Amortization of intangible assets 49 46 68 57 220 54 Stock-based com
Slide 30: Reconciliation of Non-GAAP guidance to GAAP – fiscal 2025
Reconciliation of Non-GAAP guidance to GAAP – fiscal 2025 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP Fiscal 2025 Fiscal 2025 Gross Margin - Non-GAAP Guidance 71% - 72% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Guidance 70% - 71% Fiscal 2025 Operating Margin - No
Slide 31: Reconciliation of Non-GAAP to GAAP gross profit
Reconciliation of Non-GAAP to GAAP gross profit NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP GROSS PROFIT ($ in millions) FY2021 FY2025E* GROSS PROFIT $ 3,815 $ 4,615 Adjustments: Amortization of intangible assets 41 32 Stock-based compensation 14 31 NON-GAAP GROSS PROFIT $ 3,870 $ 4,678 * "E" in
Slide 32: Reconciliation of Non-GAAP to GAAP income from operations
Reconciliation of Non-GAAP to GAAP income from operations NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP INCOME FROM OPERATIONS ($ in millions) FY2021 FY2025E* INCOME FROM OPERATIONS $ 1,031 $ 1,364 Adjustments: Amortization of intangible assets 49 55 Stock-based compensation 197 393 Litigation set
Slide 33: Reconciliation of net cash provided by operating activities 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 OPERATING ACTIVITIES TO FREE CASH FLOW (NON-GAAP) ($ in millions) FY2021 FY2022 FY2023 FY2024 Total** Dividends* $ 427 $ 446 $ 432 $ 416 $ 1,721 Repurchases* 125
Slide 34: Reconciliation of Non-GAAP net cash
Reconciliation of Non-GAAP net cash NETAPP, INC. RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS TO NET CASH (NON-GAAP) (In millions) April 26, 2024 Cash, cash equivalents and investments $ 3,252 Current portion of long-term debt (400) Long-term debt (1,992) Net Cash* $ 860 *Net
Slide 35: Reconciliation of Non-GAAP to GAAP – operating margin FY2027E
Reconciliation of Non-GAAP to GAAP – operating margin FY2027E* NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP OPERATING MARGIN FISCAL 2027E* Fiscal 2027E* Operating Margin - Non-GAAP > 30% Adjustments: Stock-based compensation expense ~ 5% Operating Margin - GAAP > 25% * "E" indicates expected figu
Slide 36: Reconciliation of Non-GAAP to GAAP – earnings per share FY2025E–FY2027E
Reconciliation of Non-GAAP to GAAP – earnings per share FY2025E –FY2027E NETAPP, INC. RECONCILIATION OF NON-GAAP TO GAAP EARNINGS PER SHARE GROWTH Management expects double digit percent annual EPS growth on average from FY'25 to FY'27. This expectation is consistent for EPS on both a GAAP and Non-G
Slide 37: Reconciliation of Non-GAAP to GAAP – free cash flows FY2025E–FY2027E
Reconciliation of Non-GAAP to GAAP – free cash flows FY2025E – FY2027E RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES AS % OF REVENUE TO FREE CASH FLOW MARGIN (NON-GAAP) Fiscal 2025E* Fiscal 2026E* Fiscal 2027E* Net cash provided by operating activities as % of net revenues ≥23% ≥23% ≥2
Slide 38: Reconciliation of FY2025 Expectations presented on March 22, 2022
Reconciliation of Non-GAAP to GAAP FY2025 Expectations presented on March 22, 2022, for Investor Day GAAP reconciliations for the FY25 Non-GAAP expectations were provided in our previous Investor Day presentation dated March 22, 2022. Refer to our previous presentation located on our website. 38 © 2
Slide 39: NetApp Investor Day
NETAPP INVESTOR DAY June 11, 2024 © 2024 NetApp, Inc. All rights reserved.