NetApp, Inc. · NASDAQ:NTAP
NetApp — Q3 FY2022 Earnings Presentation
40 slides from NetApp's earnings presentation, Feb 23, 2022
Slide 1: Q3 FY22 Earnings Results
Q3 FY22 Earnings Results February 23, 2022 © 2022 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, e
Slide 3: We are a global cloud-led, data-centric software company
We are a global cloud-led, data-centric software company that gives organizations everywhere the freedom to put data to work in the applications that elevate their business © 2022 NetApp, Inc. All rights reserved.
Slide 4: Our solutions address crucial workloads in the cloud and on premises
Our solutions address crucial workloads in the cloud and on premises Cloud Compute Cloud Cloud services storage operations controls and analytics Bring the simplicity and flexibility Enterprise Data AI and of cloud to the enterprise data center workloads protection data lakes Bring enterprise data s
Slide 5: Strategic approach with focused execution for growth
Strategic approach with Building on a strong foundation focused execution for growth • Data-centric software specialist Technology and innovation leadership • Trusted by the world’s leading organizations • Unique partnerships with the biggest public clouds Aligned to customer • Differentiated data f
Slide 6: Market leaders across diverse industries rely on NetApp
Market leaders across diverse industries rely on NetApp X of the top 10 companies in their industries use NetApp 10 9 9 5 8 9 Aerospace Automotive Business Construction Consumer Financial and defense services product services 10 10 8 10 10 10 Healthcare Hi-tech Insurance Life science Manufacturers M
Slide 7: Software leadership, trusted relationships, uniquely positioned
Software Trusted Uniquely leadership relationships positioned Cloud-led, data-centric software Partnerships with the world’s Well positioned to capture company building on a rich leading enterprises transitions in large and legacy of software innovation and public clouds growing markets Focused Soft
Slide 8: Results highlights
• Delivered an outstanding quarter with double- digit year-over-year revenue growth • Achieved record high gross margin dollars, operating income, and earnings per share* • All-flash array annualized revenue run-rate reached $3.2 billion, up 23% year-over-year Results highlights • Public Cloud ARR o
Slide 9: Q3 FY22 summary
Q3 FY22 summary Q3 guidance Q3 actual (as of Nov 30, 2021) Billings* $1.76B +9.9% y/y Revenue $1.525B – $1.675B $1.61B +9.8% y/y ✅ Non-GAAP gross margin 67% – 68% 67.3% flat y/y ✅ Non-GAAP operating margin ~23% 25.0% +310 bps y/y ✅ Non-GAAP EPS $1.21 – $1.31 $1.44 +30.9% y/y ✅ Non-GAAP FCF margin 12
Slide 10: FY22 summary
FY22 summary Q1 Q2 Q3 YTD FY22 Billings* $1.38B $1.55B $1.76B $4.69B +20.2% y/y +6.5% y/y +9.9% y/y +11.6% y/y Revenue $1.46B $1.57B $1.61B $4.64B +11.9% y/y +10.6% y/y +9.8% y/y +10.7% y/y Non-GAAP gross margin 69.3% 68.3% 67.3% 68.3% +130 bps y/y +140 bps y/y flat y/y +90 bps y/y Non-GAAP operatin
Slide 11: Billings
Billings 10% Y/Y $1.7B $1.8B $1.6B $1.6B $1.5B $1.4B $1.1B Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Billings Billings is a Non-GAAP measure. Refer to appendix for details and a reconciliation between Non-GAAP and GAAP numbers. © 2022 NetApp, Inc. All rights reserved.
Slide 12: Revenues
Revenues 10% Y/Y $1.6B $1.6B $1.6B $1.5B $1.5B $1.4B $1.3B Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Services revenue Product revenue © 2022 NetApp, Inc. All rights reserved.
Slide 13: Non-GAAP gross margin
Non-GAAP gross margin $1,070M $1,087M $1,046M $990M $1,010M $948M $886M 69.3% 68.3% 68.0% 67.3% 67.3% 67.3% 66.9% Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Non-GAAP gross margin dollars Non-GAAP gross margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 202
Slide 14: Segment revenue and gross margin
Segment revenue and gross margin Hybrid Cloud Public Cloud $1,504M $110M $1,489M $1,479M $1,415M 71.2% 70.9% 71.3% 70.9% $1,369M $1,379M $1,272M 69.1% 69.2% $87M 68.2% 68.2% 66.0% 67.0% 67.3% 67.1% 67.1% $79M $66M 58.1% $55M $47M $31M Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q1 FY21 Q
Slide 15: All flash array revenue run rate
All flash array revenue run rate 23% Y/Y $3.2B $3.1B $2.9B $2.8B $2.6B $2.5B $2.3B Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 All flash array revenue run rate © 2022 NetApp, Inc. All rights reserved. AFA annualized net revenue run rate is determined by products and services revenue for
Slide 16: Public cloud ARR
Public cloud ARR 98% Y/Y $469M $388M $337M $301M $237M $216M $178M Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Public cloud ARR © 2022 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 $688M $696M $683M $673M $668M $674M $657M 51.7% 46.4% 46.2% 45.4% 44.2% 44.4% 42.3% Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 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 $374M $358M $336M $322M $291M 25.0% 23.9% 23.0% 23.0% 21.9% $213M 20.6% 16.3% Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Non-GAAP operating profit Non-GAAP operating margin Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 Ne
Slide 19: Non-GAAP earnings per share
Non-GAAP earnings per share 31% Y/Y $1.44 $1.28 $1.17 $1.15 $1.10 $1.05 $0.73 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Non-GAAP earnings per share Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 NetApp, Inc. All rights reserved.
Slide 20: Non-GAAP free cash flow
Non-GAAP free cash flow $521M $341M 33.5% $252M $188M $191M $199M 23.2% 14.4% 16.1% $121M 13.1% 12.3% 8.5% Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Free cash flow Free cash flow as a percent of revenue Refer to appendix for a reconciliation between Non-GAAP and GAAP numbers © 2022 Net
Slide 21: Deferred revenue
Deferred revenue $4.0B $3.9B $4.0B $3.8B $3.9B $3.6B $3.7B 8.2% 7.8% 7.1% 5.9% 5.3% 3.7% 3.1% Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Deferred revenue balance Deferred revenue y/y growth © 2022 NetApp, Inc. All rights reserved.
Slide 22: Q4 FY22 Guidance
Q4 Guide Revenue $1.635B – $1.735B Non-GAAP gross margin ~ 64% Non-GAAP operating margin ~ 22% Q4 FY22 Guidance Earnings per share* $1.21 – $1.31 as of Feb 23, 2022 Additional modeling points Operating expenses* $705M – $715M Other income & expense ~ ($15M) Non-GAAP tax rate ~ 18% *Earnings per shar
Slide 23: Updated FY22 Guidance
FY22 Guide Revenue ~ 10% y/y Non-GAAP gross margin ~ 67% Non-GAAP operating margin 23% – 24% Updated FY22 Guidance Earnings per share* $5.07 – $5.17 as of Feb 23, 2022 Additional modeling points Public Cloud ARR $525M – $545M *Earnings per share and operating expenses are presented on a Non-GAAP bas
Slide 24: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2022 NetApp, Inc. All rights reserved.
Slide 25: Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations
Appendix: Supplementary Tables and Non-GAAP to GAAP Reconciliations & Explanations © 2022 NetApp, Inc. All rights reserved.
Slide 26: Supplemental revenue and gross margin data
Supplemental revenue and gross margin data RECONCILIATION OF SEGMENTS GROSS PROFIT TO TOTAL GROSS PROFIT ($ in millions) First Nine First Nine Q1 FY'21 Q2 FY'21 Q3 FY'21 Q4 FY'21 Q1 FY'22 Q2 FY'22 Q3 FY'22 Months of FY'21 Months of FY'22 Revenues by Segment Product $ 627 $ 749 $ 775 $ 840 $ 730 $ 81
Slide 27: Dollar-based net revenue retention rate for cloud services (Non-GAAP)
Dollar-based net revenue retention rate for cloud services (Non-GAAP) Dollar-based net revenue retention rate (DBNRR) for cloud services is a Non-GAAP metric calculated by dividing the approximate total revenue from our cloud customer base at the end of a period (“Cloud Current Period revenue”) by t
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) First Nine First Nine Q1 FY'21 Q2 FY'21 Q3 FY'21 Q4 FY'21 Q1 FY'22 Q2 FY'22 Q3 FY'22 Months of FY'21 Months of FY'22 Net revenues $ 1,303 $ 1,416 $ 1,470 $ 1,555 $ 1,458 $ 1,566
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) First Nine First Nine Q1 FY'21 Q2 FY'21 Q3 FY'21 Q4 FY'21 Q1 FY'22 Q2 FY'22 Q3 FY'22 Months of FY'21 Months of FY'22 NET REVENUES $ 1,303 $ 1,416 $ 1,470
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) First Nine First Nine Q1 FY'21 Q2 FY'21 Q3 FY'21 Q4 FY'21 Q1 FY'22 Q2 FY'22 Q3 FY'22 Months of FY'21 Months of FY'22 OPERATING EXPENSES $ 736 $ 751 $ 717 $ 580 $ 750 $ 765 $ 75
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) First Nine First Nine Q1 FY'21 Q2 FY'21 Q3 FY'21 Q4 FY'21 Q1 FY'22 Q2 FY'22 Q3 FY'22 Months of FY'21 Months of FY'22 INCOME FROM OPERATIONS $ 136 $ 182 $ 258 $ 455 $ 24
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 First Nine First Nine Q1 FY'21 Q2 FY'21 Q3 FY'21 Q4 FY'21 Q1 FY'22 Q2 FY'22 Q3 FY'22 Months of FY'21 Months of FY'22 NET INCOME PER SHARE $ 0.35 $ 0.61 $ 0.80 $ 1.46 $ 0.88 $ 0.98 $ 1.10 $
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) First Nine First Nine Q1 FY'21 Q2 FY'21 Q3 FY'21 Q4 FY'21 Q1 FY'22 Q2 FY'22 Q3 FY'22 Mon
Slide 34: Reconciliation of Non-GAAP guidance to GAAP - fourth quarter fiscal 2022
Reconciliation of Non-GAAP guidance to GAAP - fourth quarter fiscal 2022 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FOURTH QUARTER FISCAL 2022 (Unaudited) Fourth Quarter Fiscal 2022 Gross Margin - Non-GAAP Guidance ~64% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP
Slide 35: Reconciliation of Non-GAAP guidance to GAAP - fourth quarter fiscal 2022, continued
Reconciliation of Non-GAAP guidance to GAAP - fourth quarter fiscal 2022, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FOURTH QUARTER FISCAL 2022 (Unaudited) Fourth Quarter Fiscal 2022 Net Income Per Share - Non-GAAP Guidance $1.21 - $1.31 Adjustments: Amortization of intangibl
Slide 36: Reconciliation of Non-GAAP guidance to GAAP – fiscal 2022
Reconciliation of Non-GAAP guidance to GAAP – fiscal 2022 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FISCAL 2022 (Unaudited) Fiscal 2022 Gross Margin - Non-GAAP Guidance ~67% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAAP Guidance ~66% Fiscal 2022 Operating Margin -
Slide 37: Reconciliation of Non-GAAP guidance to GAAP – fiscal 2022, continued
Reconciliation of Non-GAAP guidance to GAAP – fiscal 2022, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP FISCAL 2022 (Unaudited) Fiscal 2022 Net Income Per Share - Non-GAAP Guidance $5.07 - $5.17 Adjustments: Amortization of intangible assets ($0.20) Stock-based compensation exp
Slide 38: Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2022
Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2022 NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP THIRD QUARTER FISCAL 2022 (Unaudited) Third Quarter Fiscal 2022 Gross Margin - Non-GAAP Guidance 67% - 68% Adjustment: Cost of revenues adjustments (1)% Gross Margin - GAA
Slide 39: Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2022, continued
Reconciliation of Non-GAAP guidance to GAAP - third quarter fiscal 2022, continued NETAPP, INC. RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP THIRD QUARTER FISCAL 2022 (Unaudited) Third Quarter Fiscal 2022 Net Income Per Share - Non-GAAP Guidance $1.21 - $1.31 Adjustments: Amortization of intangible a
Slide 40: NetApp unlocks the best of cloud
NetApp unlocks the best of cloud © 2022 NetApp, Inc. All rights reserved.