Slide 1: Q3 FY23 Earnings Results
Q3 FY23 Earnings Results February 22, 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: Q3 highlights
• Successful in controlling the elements within our control in a challenging IT spending environment • Returned $308M to shareholders in dividends and share repurchases • Introduced significant innovations, including BlueXP a unified control plane for hybrid, Q3 highlights multicloud environments •
Slide 9: Q3 FY23 summary
Q3 FY23 summary Q3 guidance Q3 actual (as of Nov 29, 2022) Revenue $1.525B – $1.675B $1.53B -5.4% y/y ✅ Billings* $1.57B -10.5% y/y Non-GAAP gross margin ~ 67% 66.8% -50 bps y/y ✅ Non-GAAP operating margin 22% – 23% 24.4% -60 bps y/y ✅ Non-GAAP EPS $1.25 – $1.35 $1.37 -4.9% y/y ✅ Non-GAAP FCF margin
Slide 10: FY23 summary
FY23 summary Q1 Q2 Q3 YTD FY23 Revenue $1.59B $1.66B $1.53B $4.78B +9.2% y/y +6.2% y/y -5.4% y/y +3.1% y/y Billings* $1.56B $1.60B $1.57B $4.73B +13.4% y/y +3.3% y/y -10.5% y/y +1.1% y/y Non-GAAP gross margin 66.7% 66.3% 66.8% 66.6% -260 bps y/y -210 bps y/y -50 bps y/y -170 bps y/y Non-GAAP operati
Slide 11: Revenues
Revenues 5% Y/Y $1.7B $1.7B $1.6B $1.6B $1.6B $1.5B $1.5B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Services revenue Product revenue © 2023 NetApp, Inc. All rights reserved.
Slide 12: Billings
Billings $2.0B 11% Y/Y $1.8B $1.6B $1.6B $1.6B $1.6B $1.4B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 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 $1,070M $1,062M $1,010M $1,020M 69.3% 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 Non-GAAP gross margin dollars Non-GAAP gross margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers
Slide 14: Segment revenue and gross margin
Segment revenue and gross margin Hybrid Cloud Public Cloud $1,560M $1,504M $1,521M $150M $1,479M $1,460M $142M $1,379M $1,376M $132M $120M $110M 70.9% 71.3% 70.9% 69.7% 69.2% 68.3% 68.3% 68.7% 68.2% $87M 67.1% 66.6% $79M 66.4% 66.1% 65.4% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q1 FY
Slide 15: All flash array annualized revenue run rate
All flash array annualized revenue run rate $3.2B $3.2B 12% Y/Y $3.1B $3.0B $3.1B $2.8B $2.8B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 All flash annualized array revenue run rate © 2023 NetApp, Inc. All rights reserved. AFA annualized net revenue run rate is determined by products and
Slide 16: Public cloud ARR
Public cloud ARR 29% Y/Y $603M $605M $584M $505M $469M $388M $337M Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 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 customer commitments
Slide 17: Non-GAAP operating expense
Non-GAAP operating expense $721M $702M $709M $674M $696M $683M $648M 46.2% 44.4% 44.1% 42.9% 42.6% 42.3% 42.5% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Non-GAAP operating expense Non-GAAP operating expense as a percent of revenue Refer to appendix for a reconciliation between Non-GAAP
Slide 18: Non-GAAP operating profit
Non-GAAP operating profit $404M $393M $382M $372M $374M $360M $336M 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 Non-GAAP operating profit Non-GAAP operating margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2023 Ne
Slide 19: Non-GAAP earnings per share
Non-GAAP earnings per share 5% Y/Y $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 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 $137M 20.4% 20.9% 16.1% 13.1% 12.3% 13.6% 8.2% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Free cash flow Free cash flow as a percent of revenue Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2023 Net
Slide 21: Deferred revenue
Deferred revenue 6% Y/Y $4.2B $4.2B $4.2B $4.0B $4.1B $3.9B $3.9B Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Deferred revenue balance © 2023 NetApp, Inc. All rights reserved.
Slide 22: Q4 FY23 Guidance
Q4 Guide Revenue $1.475B – $1.625B Non-GAAP gross margin ~ 67% Non-GAAP operating margin 23% – 24% Q4 FY23 Guidance Earnings per share* $1.30 – $1.40 as of Feb 22, 2023 Additional modeling points Public Cloud ARR Approx flat q/q Net interest income $7.5M Non-GAAP tax rate ~ 21% Share count ~ 218M *E
Slide 23: Updated FY23 Guidance
FY23 Guide Revenue Approx. flat y/y Non-GAAP gross margin 66% – 67% Non-GAAP operating margin 23% – 24% Updated FY23 Guidance Earnings per share* $5.30 – $5.50 as of Feb 22, 2023 Additional modeling points Free cash flow ~ $1.1B *Earnings per share is presented on a Non-GAAP basis. Refer to appendix
Slide 24: Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations
Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations © 2023 NetApp, Inc. All rights reserved.
Slide 25: Supplemental revenue and gross margin data
Supplemental revenue and gross margin data RECONCILIATION OF SEGMENTS GROSS PROFIT TO TOTAL GROSS PROFIT ($ in millions) First Nine First Nine Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Months of FY'22 Months of FY'23 Revenues by Segment Product $ 730 $ 814 $ 846 $ 894 $ 786 $ 83
Slide 26: 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 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 Nine First Nine Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Months of FY'22 Months of FY'23 Net revenues $ 1,458 $ 1,566 $ 1,614 $ 1,680 $ 1,592 $ 1,663
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 Nine First Nine Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Months of FY'22 Months of FY'23 NET REVENUES $ 1,458 $ 1,566 $ 1,614
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 Nine First Nine Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Months of FY'22 Months of FY'23 OPERATING EXPENSES $ 750 $ 765 $ 752 $ 796 $ 791 $ 805 $ 82
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 Nine First Nine Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Months of FY'22 Months of FY'23 INCOME FROM OPERATIONS $ 249 $ 294 $ 321 $ 293 $ 25
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 Nine First Nine Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Months of FY'22 Months of FY'23 NET INCOME PER SHARE $ 0.88 $ 0.98 $ 1.10 $ 1.14 $ 0.96 $ 3.41 $ 0.30 $
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 Nine First Nine Q1 FY'22 Q2 FY'22 Q3 FY'22 Q4 FY'22 Q1 FY'23 Q2 FY'23 Q3 FY'23 Mon
Slide 33: Reconciliation of Non-GAAP guidance to GAAP - fourth quarter 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 34: Reconciliation of Non-GAAP guidance to GAAP - fourth quarter 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 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 $5.30 - $5.50 Adjustments: Amortization of intangible assets ($0.31) Stock-based compensation exp
Slide 37: Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2023
Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2023 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP THIRD QUARTER FISCAL 2023 (Unaudited) Third 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 - third quarter fiscal 2023, continued
Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2023, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP THIRD QUARTER FISCAL 2022 (Unaudited) Third Quarter Fiscal 2023 Net Income Per Share - Non-GAAP Guidance $1.25 - $1.35 Adjustments: Amortization of intangible a
Slide 39: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2023 NetApp, Inc. All rights reserved.