NTAP - Earnings call transcript Q4 2020

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Operator

Good day, ladies and gentlemen, and welcome to the NetApp Fourth Quarter Fiscal and Year 2020 Conference Call. My name is Liz, and I will be your conference call coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. I will now turn the call over to Kris Newton, Vice President, Corporate Communications and Investor Relations. Ms. proceed, Please

Newton.

Kris Newton

on joining George for is me are for today webcast netapp.com. Thank and us. CFO, CEO, replay available be Kurian; and call website Mike our at live you will With our Berry. being This

COVID-XX the current in and of the and existing available of operations most impact expand execute and to file Fabric time-to-time spending on total to reasons, accounts, our the accounts, make we strategy. year regarding on shareholder financial grow and strategy expand forward-looking strategy, environment, results future ability our our capitalize respect fiscal and statements including our allocation and management’s conditions, flow disclaim also X-K. our such year to first which Please pandemic, market, and new future our quarter as a of our reports and and our condition Actual cloud ability including cash XXXX; any our continuing During business with Form our and we the to of differ Form and documents We will projections and discussion statements refer Data and involve gain macroeconomic financial expectations the website, available our risk acquire evolve generate IT revenue, execution today’s profitability go-to-market may capital and specifically the from share, sections capital our return; XX-K including uncertainty. on forward-looking our of call, organization, for the SEC recent results our all market XXXX, outlook prospects, fiscal for and on with update projections. obligation improve to materially risk guidance analysis factor for variety

presented call estimates now measures to non-GAAP our George. of GAAP Reconciliations the posted all otherwise be are over I’ll turn to During the the non-GAAP unless indicated. financial on will call, website.

George Kurian

joining for Thank everyone. afternoon, Good us you today. Kris. Thanks,

Before to we of to the quarter, we want unprecedented results situation all get are I moment a the take experiencing. into the acknowledge

express who healthy for workers, gratitude those First foremost, so is safe. business, services, the increased them, help been to of us critical institutions keep NetApp beyond with I to I work by want NVIDIA. to that and Core critical and team that customers. can and also the strong and access around to are acknowledge in impacted the powered my my to to those giving and sector a our frontline AI their essential by amount safety whose COVID-XX to researchers has service, to sympathy battleground ONTAP efforts while our partnership public tremendous coordinate first responders to providing be done focused In cities. and an want going team support AI of globe and have infrastructure above stay missions. COVID-XX to NetApp free partner we public We’ve a keep safe, on Scientific, as they for health vital level efforts our

growing of are to and customers team of for their I’m efforts. and other courage the our rapidly weeks few to the We younger desktop telework and by education partners our workforce. in for remote They infrastructure help new alone rapidly solutions been thanks of very best. to our state, many commitment cloud support customers also last our environments helping customers the sincere proud so at fantastic NetApp virtual to continue remote have representative are each to has demonstrated local adopted build all classrooms. And these community. My our to NetApp generation, VDI support education and and the

the to results turn of let’s Now, quarter. the

flow control, our in well, around to progress we tracking started operating globe and what to in into can we and the was focusing visibility lockdown. business. leverage quarter until in By and We the working environment. deals, the The same margin, pace delays we large and off of operational the cash while saw shutdown to challenging companies going initiated at execution. new continue on targets despite business weren’t orders and countries QX, gross of our In improving others make our delivered We strong get some of reduced. slowed time the accelerated significantly address April, some ahead transactions remote digital to demands began

FY XXXX, and accounts in get of of Over can to the win. know plans with we front more more our where industry-leading we I’ve buyers course our outlined portfolio,

districts the dedicate current acquired ahead our resources our the has sales quarter QX, acquisitions. on to and our primary Our uncertainty. we In maintain focused investments to dedicated coverage customer XXX gaps target to of continued adding expand success one of additional market capacity This to reinforced our schedule. sales decision us close despite enabled in headcount reach, new achieved

operating the total a company’s business, not by to As we the in reminder, adding trade-offs by headcount this expenses. funded making

continue markets, and we Additionally, where presence storage Cloud Services have competitive our both Data significant our a sharpen on we and businesses. to advantage, focus clear

Keystone Block Storage tremendous partners companies in consistent our in We’ve clouds We and multi-cloud and and of real both a a endorsement subscription with FY center. strong in our in IT analysts. consume and cloud experience model by data gives delivering have the XXXX. company’s Object customers, made hybrid File, reinvention made systems business solutions easier progress biggest Keystone, our path public business to from Our market industry customer the to and experience.

available clouds. As general one storage all on Cloud I the NetApp noted cloud platform the leading file public number availability achieved we is all providers. last the in quarter, shared Volumes

than customers Google Microsoft, to Azure bring acquisition, of platform for database, workloads, the Technology Azure new new Desktop, online. XX% more a and for storage is NetApp in for that high-performance computing, were VMware with shared Cloud Service. be Files We again and primary of data continues every Virtual region Amazon and center intellectual the NetApp. source named Google Web Azure Windows NetApp SAP, property Azure to Microsoft’s good Year Partner is embedded customer Services Files Our being Infrastructure.

certifications, regional services the continue to are accelerate business. of quarter, partners invest cloud cloud saw revenue as last increased us of recurring growth cloud go-to-market requirements for support the to data million. digital scale through turn service Our Based and to in cloud workload we $XXX and annualized business. companies this asking to to our to activities growing meet broaden We our on month more the volume QX, rapidly remote deployments, working and rapidly expand

existing and continue value to months, of cloud drive usage the deliver to two cloud past to adding are volumes and bring customers and additional We platform. data provider file which cloud new customers, are the we such acquired more Talon, compliance, for businesses a our these helping foundation software and a to cloud workloads; increased amongst backup new cloud cloud as office Cloud offerings We’ve we to born services services, In workloads remote virtual for comprehensive, companies, desktop caching the cloud. modern Jumper, of enterprises. provider branch public the global workplace largest to and startups all in in added and small a a the in from

in talented the to include family. these We’re teams NetApp excited

powered differentiated growth, and Data Cloud our XXXX, focusing to with on FY into while business, software by block enter manage Services and to clear industry-leading business. our efficiently, business storage we returning priorities: share two continue file our the gains highly object in will we As scaling

the usage expand and our exploit services. shift competitive to products of accelerating will transitions to the We cloud and

to the value our We add technology. strengthen continue bringing customer and will flexibility environments for hybrid our continue and customers all providers cloud multi-cloud and the with on-premises make to will data the to on-premises a cloud of data deepening price environment cloud, for by and experience manage which in it partnerships preference easier and services, our to to cloud-like between simplify will connections we

help is educational to do. of more has Cesar XXXX, track management services July the The also marketing, our strategy teams and respond to our fuel customers changing for to data. dedicated strategy, products evolve marketing in And position of business and optimize a on role especially evolve is globally the He structure reliable With on integrated strengthen focus environment go-to-market building vision. record services, Services Fabric now sole customer of support. cloud. leading and transformations, the we these in and data cloud a remote the and landscape collaboration. data our to data with Cloud healthcare systems growth, Entering to FY been that rapidly customer capitalize teams, created our integrated and as architecture, to Data recently drive challenges governmental, we storage sales to scaling business. cloud ever of we transform world’s is separate And as to ability will by the always will digital opportunity changing the journey. and successful integration than has That our of our public legacy sales public operations clouds to join deliver high-performing access, acquisition tackle It partnerships that Cernuda closed operations I and are we helping our an for we will IT biggest our maximizing continue the resilience and services remotely a NetApp to and they We prioritizing and with the innovation. simplifying work by an coverage continue sales data. our cloud and central and before. through diverse storage society noted expanded have customers driving President, the announced reach accelerate their market. infrastructure important enterprise and sales, impressive our leading teams, can earlier, how and capture of modernizing and with so partners depends orchestration Cesar Data and the customers further critical CEOs means to in and services particularly ahead. flexible financial, our gaps have safe We align in to

cannot clear. will of enduring predict we the is to world importance when data While normal, return the

strong that environments. of enables business our to demand We our products execute be crisis. demand the and our are for of resiliency a services as continue The will emerge we from navigating while and to model this us strategy strength confident range

We decisions us of face make prudent reality, will enable will to the focusing to the current priorities in the that continue growth. on return to

We will to ability value maintain strong long-term ensure balance scenarios. and will support of range our our discipline sheet wide a through also create that shareholder operational

that the cloud and lead the our resources services. to focusing solutions highest are data storage returns, on We

We dedicated acquisition dedicated sales resources. position actions focus, that are a current sales confident the ever. from emerge health to with stronger these cloud than expanded NetApp I’m coverage enterprise broadening our reach customer and crisis

We the hope you’ll that we on be and XXth, will plans an more information a us. of Day for outlook. to evolution on able the September where We our NetApp will continued Analyst business host share multi-year join

Mike have of in with already to position making to Berry, impact. Officer. Mike deliver hybrid as start, be new company software value. cloud long-term the and and He is he on we I’m Finally, strengthen welcome. technology shelter introduce excited his and industry happy local services our into deep team. unique our in partner, Despite Chief first day integrated and knowledge shareholder he our leadership key the Financial coincided I’m will a place Mike’s quickly order. the has an Mike, data the

Mike Berry

wonderful Thank you, introduction. George, and thanks for that

level want who to unusual all my my days frontline COVID-XX interesting harm’s culture. very of put impressed accountability things are customer to the also team and direction who collaboration my a the determination way the sincere you one, have workers to crisis reinforced entire across circumstances the product our the high those first and health safe. views I current to very been across great a been commitment the that level of a future. First, quality continue globe. go-to-market by development, tireless XX keep NetApp’s customers couple NetApp, business has the is The have in do strong pandemic has made in but serving and positioned all model, only in of team have this we for with When base, gratitude of with to impacted and loyal the day and for with the it sympathy to NetApp this us extend I organization. themselves pulling the help express initial engine me and at all clear selfless From the been same transparency

joining liquidity us In solid for value. Let giving strategic and NetApp considerable Ron during Board aligned management. to to the the continue with I’m extremely ability start We uncertainty. appreciation it this free forward critical to cash highlight about short-term to billion the best and expressing provide rest of onboarding. we talented decisions me innovation data my This to that balance and entire long-term investments. sheet to $X.X the and my business me deep George George with position team, closed drive opportunity environment, the alongside help as is unusual model. look of in important for and working his by NetApp’s and particularly current are make flow healthy in and cash NetApp’s is times in generation shareholder QX excited

we year-end, debt our confident, credit we have available through had And market, the $XXX access of are million corporate if As we needed. also approximately to facility.

Our strong liquidity during provide to has allowed the extended our to partners programs health us position crisis. credit channel

my as to allocation. wanted how I walk is call I CFO, Given view NetApp’s first this through capital

more XX% In will with at our have remain now last our free roadmap, a generated until nearly allow better goal the will liquidity within NetApp’s offset with March, we capital prudent it key from fact buybacks us on we the Consistent to our strategy we our role that focused to which dilution sense Cloud program, share recovery. allocation year, least repurchases a environment, bolstering our to and repurchase M&A, X% share our history free dividend, disciplined carries out play the current committed magnitude late strategic believe have the yield. plans. which billion paid in Data strong broader of to strategy, and of of position timing for economic equity acquisition we $X business. remain Services cash our Our roughly to XXXX, Longer-term, in the than flow of long particularly a flow fiscal we did pause dividends. cash is In our

these Of uses of balanced growth. all will the reinvesting course, of be future in capital business against for

constraints the fourth Block $X.X currency point results, Cloud to business. business, and key to powered margins, X be and that result and our than decreased quarter. industry-leading including in like our Despite free numbers through challenges logistical the that going strategic by we minor referring our billion focus headwind. demand of and otherwise leverage I rest of In areas, highlighting noted. our nearly of considerably healthy unless non-GAAP the weakness, a QX cash flow and Services, Object QX, Data worth revenue better net XXXX File, year-over-year, operating delivered XX% It is as two Before both supply performed I you fiscal would Storage gross substantial of COVID-XX, the Software remind strong will

of $XXX million down revenue all-flash year-over-year. X% was Our

only year. We Cloud $XXX runway than all-flash. very data impressive and growing continue product believe QX Cloud of less more that our year-over-year XX% an to are $XXX ELA ARR, there is in million customer a X,XXX, of QX sequentially. of systems million healthy revenue count doubling decreased now than services services delivered for XX% was all-flash data in adoption, approximately as XXX% XX% last Total $XX exceeds million. from year-over-year. revenue installed

out quarters. not ELA business, breaking be ELAs that small in such will revenue portion Given our of represents a we future

has effort be over extremely predict. year, reduce and not we and more In the a to including guidance more to know, be last going ELAs difficult you magnitude of forward. predictable timing an conservative proven ELAs will forecast, the have As and confusion,

maintenance revenue two revenue of million, of revenue. comprise Software up year-over-year. maintenance and was nearly net hardware roughly total $XXX lines These XX% X% recurring

shortfall deferred play streams, We in the quoting we a around operating with I from done our million team recurring of margin of for X% a was an Product X.X forward, variable X was rigorous motion was our was been which the over year-over-year. from profitable $XXX X flow $X.XX, Gross of in approximately software more The growth. driven margin incredibly points us, mix. year-over-year. up up have mainly XX% impressed by on year-over-year continued and more incredibly in point with point renewals, by The to big sales driven combination hardware be Operating decreased continues much X increase Cash model. XX.X%, simplified an high-margin an largely EPS was down all-flash than ended representing revenue. gross $XXX of renewals a improvement will other implementing was revenue increase in year-over-year. of revenue, maintenance business X% Going margin QX gross QX margin increase XX.X%, and of by the in billion has where QX focus and system. a driven $X.X expenses free lot lower with services an role year-over-year. margin of with associated nearly year-over-year, $XXX up X% of support XX%, was work The point last of was million, product leverage revenue. and year-over-year. operations compensation year. cash was flow expansion more XX.X%, million,

million for million. of $XXX repurchased an During QX, a of $XX.XX, price we shares X.X total at average

had our As average buyback end shares $XXX diluted billion decrease. $XXX representing of down of the shares million on an QX, million remaining we original million, $X XX% outstanding XX year-on-year, authorization. were Weighted

the we dividends. During $XXX million cash out paid in quarter,

will in of QX. maintain dividend our per We cash $X.XX share

$XXX revenues. in and We repurchases the in shareholders. to last billion XX% million $X.XX, of to Turning fiscal EPS including to to points three lower-than-anticipated currency XXXX, of $X.X XX.X% And the margin generated completed in versus XXXX. of XX% dividends year-over-year. decreased our Net points $X.X was year. years, over XX% We XXXX decreased fiscal nearly cash Operating which X.X returned due year-over-year, million revenues point three billion share X we revenues. billion fiscal free of margin full-year $X.X represented nearly decreased fiscal of $XXX a of flow headwind. compared XXXX, in have of results. up XX.X%, Gross net

guidance. onto Now

by know, As you significantly demand been all visibility impacted COVID-XX. has

the result, not time. guiding we this full-year a are As at

as a it ability guidance our are boundaries that fiscal reassess think near-term. QX. was to to the important we after we in to did backdrop, provide demand scenarios will provide With seeing the XXXX We

revenues the expect a implies range X.X points billion, We decline net at between X% in $X.XX midpoint, QX of billion and headwind. which year-over-year, including currency to $X.XX revenues

to range We gross margin expect XX%. margin operating approximately consolidated XX% and between and XX% to be

for QX share. this per XX% operating be our our expect range to $XXX between guidance, $X.XX anticipate expenses rate Assumed in and to million $XXX of per approximately share non-GAAP and earnings tax to million. $X.XX We QX

expenses revenues As other our and to each offset the a incremental adds year, which have million reminder, to our $XX go-forward largely total and and has operating at on week extra revenue million recurring comment income impact to quick the this QX expenses $XX operating quarter. an approximately both minimal The thus for EPS. structure. A expense level

As our envelope. go-to-market of incremental over resources in changes adding sales our primary significant George dollars to XXX At to And the downturn. time, we highlighted, we not base any expense quarters. our have we did by last magnitude three into to we the expense engine without invested adding this visibility this better make structural duration until and current the have decided operating

closely We three to over monitor situation, next two fluid which very continue quarters. the the will remain to likely

XXXX, did two As strategic year. goals for key we want fiscal look forward highlight the to to I

cloud on-prem a all-flash continues singular portfolio architecture under platform. software connected bridges Our a cloud to that environments offer customers public and ONTAP unique

industry, ONTAP Services fiscal Cloud the a is Volumes Google year grow coming year, the was growth in to XXXX share the AWS, determine Service economic Cloud In both the business. continue and recovery our and XXXX rate also invest launching will Data largely for will foundational Cloud. the gains Cloud storage Volumes across in Azure the shape we overall reestablish and Fiscal in While of to our market. storage goal for

great two TAM. acquired breadth our Talon to confident cloud platform cloud the in Services in adding market unique only million $XXX nicely best data for thought confidence the of the position. target are opportunity. to feedback data our expectations and of and cloud services of the Jumper, be assets to Partner million. But services expanding XXXX reaffirmed customer we We the reset and Cloud has remain also to fiscal ARR We around ramp, $XXX our Cloud in so size prudent, we Data ARR overall removing

for to Day for our serve in guidance aided growth We new add shareholders. to franchise, trackable as at September. our unique year this XXXX NetApp services continues Services crisis. be to cloud and the support. customers up joining Data employees Cloud new for Services In as a time with value data investors I Cloud to will business dedicated our special by and I clearly business Fiscal value for clear driving during closing, metrics continued a Data a significant long-term our our you their a of a provide It goal thank stepping real which force. partners, see want will the is And NetApp. evolve sales global to for Analyst thank will be critical opportunity

As an back Kris provide Day planning great Analyst for I’ll a George host our to include to of initiatives and Q&A. hand our noted, we financial to will overview long-term September, to strategic model. are it call now update an in Kris? the which open

Kris Newton

Mike. we the Please as for call many as respectful so yourself question, Thanks, possible. limit one to be just now Operator? to people peers of get Q&A. open can We’ll and your

Operator

[Operator from Sachs. Instructions] comes first Goldman question with Hall Rod Our

open. line is Your now

Bala Reddy

on Hi, thank that weeks And give have and four you a on geographies, for is color us trends taking for been you in seeing Rod. how trends on This in Bala got demand color the month? Could follow-up. different I this questions. across order past maybe some the you’re Reddy my

George Kurian

think order followed the the if somewhat across you across I of trends world. geographies, look the the COVID impact

was in COVID, business surrounding by first impacted I Pacific think our China. areas Asia the particularly

to felt broaden I globe. things different we the several saw think until Through we going on. part impact we And the of in prepared remarks, course business of come across our of the that we’ve COVID seen quarter, the the that said were as back on we target started online.

work was chain our ready deploy some supply team. before or impact. transactions, either Others transactions pulled deferred could forward customers the place and by chain Some Thanks in took performance shelter strong. supply good transactions, so they clearly, really downsized done full that to be our

meet geography within market that course the of that is vertical we From wanted a business. the said, part of single we or range to industry cover so most so requirements. and no industries, of able perspective, I broad of their a customers material has a And our orders as there were

and traditional and at retail were from through quarter, oil financial I were of look oil through quarter. think results Automotive, healthcare And the the strong that dependent gas and were the when the performers. of the challenged weaker meaning we the retail, quarter. similarly, economies services course course

Bala Reddy

Thanks, weeks George. Maybe on have the been this four in in trends the past some color how month?

George Kurian

I in think, of as I first said, they couple visibility the of weeks in of trajectory the quarter. were of – into we than couple had order months, four the last less the periods the months

that, I in a quarter do is think, there’s the at around are into our and to look are – about cautious being you itself. where guidance we time material add from we guidance to a today, cautious commentary we as want change trying anything? a providing why the be which Mike,

Mike Berry

Thank it. that’s No, you.

Kris Newton

you. Thank

Next question?

Operator

with Leopold Raymond comes Simon question from James. next Our

is now open. line Your

Simon Leopold

guess, the bridge for that mix gross see gross and good gross margin. wanted what’s volume mix. question. guidance, On-premises, or to increasing you I me. help aspect aspect. there’s the and Thank help should a would I taking maybe But margin maybe you They the see could have believe I in that’s we’d margin, fundamentally, if services shift throwing cost maybe the

is? offset the what wondering I’m So

Mike Berry

Simon, Yes, Mike Berry. it’s

year-over-year look So relates to exactly see. do because I seasonality if year-over-year to margin. as gross that’s you would that it what always you you of encourage look

look a the benefit we year-over-year. you you higher in at get into as not that’s QX XX%-plus when year-over-year influence you have as XXth-week, significant then numbers. so again, increase, of as will little from look applicable year-over-year to drives get – total, just you sequentially up services mix a have it So the the slight to gross and relates seasonality the total take But that margin the account. if And, at

Simon Leopold

Great. follow-up. as then just And a

mention of a I NetApp financing some did IT some financing your for than on vocal peers. the large of have perception available You for has less been customers And partners.

Thank elaborate you if on not channel wondering to you how your may could help adjusting Just be just partners? customers program maybe your financing and you.

George Kurian

range leading broad of customers’ flexibility of and We cloud time to of several cash on of and the the have a all concerns. the preservation not but services, course, customers data meet that also models saw for advantage available we data from portfolio kinds business range, needs are OpEx the provision. which to They had, take cloud services public capabilities platforms only cloud rapid

program monthly which work have model. which offering We service we is of our typically enterprise offerings, have data that a clearly, basis leasing with as introduced centers. part as a some wins saw we And models subscription in healthy called then Keystone, for we well strong pipeline. a And parties around are through happy partners for work managed further. with Mike payment on a traditional And third have we I’m comment customers. to business,

Mike Berry

Yes.

to end as users, walked some with George I as just partners they their channel of our through, financial flexibility our terms also extended and our two what giving us assignment. well parts think there’s as helps deal

Simon Leopold

Great. Thank taking you for questions. the

Kris Newton

you, Thank right. Simon. All

question? Next

Operator

with from Our Long Tim next Barclays. comes question

Your line is now open.

Tim Long

to data hoping services talk Thank you. I the was a little bit. about cloud

do acceleration quarter. the numbers like some in Your look

obviously why pulling the and get like could around, longer-term targets the GA you’ve little big quarter. bit the of cloud some as the color just the players of is we kind to has the about It if slower? maybe the hit in you a been move curious guidance, accelerating Just does highlighted most at seem uptake the

sell customers just bit just that why the of been difficult sales harder a So that maybe curve? the force? give give color think If affected just a you Thank more what’s to can us to you slope on or for has as color you. of some little us

George Kurian

about the even than we year we ago. bullish today did more First offerings feel of a all, for demand our

net base are over that year, customers coming more there number and substantial mentioned, think a added new I Mike of customers of last NetApp. have doubled than customer lot we our a to the as

a have, are completely mentioned, working – been And together to as we still getting behind where through We a to availability. terms frictionless to with general we in the still year be for get of we Microsoft, have services we model example. sales needed

there’s really done. good work So being

the We’ve regard where expanding our of a year in we but data are guide. let last centers use being quarter. behind that’s the even more I’ll would We be comment to cases. felt about consistent been we we and got Mike the deployed, number with are commentary

Mike Berry

so we growth QX, feel as really growth. in the George good Nice mentioned, sequential business. Tim, about Yes.

– not So level. it doesn’t reflect us confidence our

address As were the Hence, in behind do he and a little done. now mentioned, I want able guide of the rest we September. at update to like was once we’re kind all in business. it model to we of the that, not be And long-term would where didn’t the bit as as to original well

we relates get why together, virtually to address in of hopefully in that’s will “Hey, we So that or the all September. it business when we said, person as

Tim Long

I’ll just thanks. it keep the one. at Okay,

Kris Newton

you, right. All Thank Tim.

question? Next

Operator

Sheerin Our next with Matt Stifel. question comes from

line Your is open. now

Matt Sheerin

of Yes, adopting services thank terms platform. hardware data customer you. fact those on-premise that fairly cloud the different a and of you? adopting in and I guess, following you opportunity customers up cross-selling Or customers services chunk new that the saw from big on a there that a is Is base?

George Kurian

have those set NetApp. who of anything There’s clearly never from a bought customers

cross-sell data customers. they the meaning, the is natives, those an of of digital truly vast center. are for customers don’t and there, have enterprise up-sell those of concept majority the Some And

customers of enterprise We have today cloud data a and workloads very terms meaning, wallet, of centers. we can expand slice the have total narrow of there. also their Many in

center?” primary obviously, us a if “Hey, you I’ll to couldn’t deploy to in discussions us public example. you’re There’s data not going companies in on cloud, have the data in give their vendor opportunities you the range an us we now vendor, so shared why large They a second them with data platform center, us are able enterprise public but broader who cloud. of several be use the giving And the primary are are their our global as center. in your enterprise a

least, centers at more COVID as our we’ll expanded, see we see belief. enterprise the footprints, being So abates of crisis that’s share – more and data being confident

Matt Sheerin

me. it That’s you. Thank Okay. for

Kris Newton

Matt. All right. Thanks,

Next question?

Operator

Next with Stanley. question Morgan Huberty comes from Katy

line is open. Your now

Katy Huberty

advantaged an by unprecedented disruption balance the strong of but we’re in macro you. Thank you obviously period a George, sheet. at level, are

your make opportunity do as past your you of in M&A and out or stronger? get larger some more you that there’s than to this thoughts come to love So the for whether to would press have investments perhaps period advantage an

George Kurian

Katy. Thanks,

mentioned, we in the margins, rich when we as at of have, margin contribution software you terms to a overall strong think profile I gross the of business, reflecting profile look business. really our our

free I to to if which mentioned support see continue to cash the Mike we see is forward. the of will where are The we think, to impairment we flow, as the capital dividend level going moment. we in our terms current reevaluate have at at don’t going structural some place that allocation,

to stay dividend. we’re with the So continue going to

mentioned. $X.X portfolio, like going landscape. We and into have We’ve hit a the pause have continue the on so opportunities billion, almost strategic years, And going see overall selective, of the a relevance pause buybacks are we until over we we’re and of you better to visibility done to couple but buybacks. expand last lot the to that we to our be

I and as much continue to that going cloud would roadmap, all software cases. the of strategic we’re to about So these it’s go-forward tied to think services. more we tell you balance

doing consolidations leaning for scale. We’re towards not horizontal

I for think a not primary be focus that, that would us.

Katy Huberty

Thank you.

Kris Newton

Katy. Thanks,

Next question?

Operator

Our from Steven Advisors. comes with next Fox Fox question

is now line open. Your

Steven Fox

unnaturally wondering Thanks. the you’re George, talk incentives you afternoon. Hi, many going backdrop sort pulling was how I good you’re providing How revenues? the you to against industries sort approach maybe so deploying of some capital about having demand? make uncertain sure that correctly with of could do of vendor forward just if of without you’re

George Kurian

I engaged on that customer think in. good are we have discussions the handle a we

one customers. operating without account executives put raising expense mentioned, level of to the company was demand facing primary invested areas in overall generation, of that I the the we As

have good these customers. close we with a dialogue So

centers, For advantage They that They world’s of and to the be want and take able many technology cash, our uniquely are instantly provisionable. market a their think we deploy data in in because to services selective. at biggest also the are and to ways, the to our cases, that model. amounts services of the to those don’t subscription without cloud right? we’re transition time to That positioned say over hyperscale with data trying customers other our subscription having allow cloud. of have going of reach use are journey scale portfolio. I to this would offer, start entire point we to in we lead think on I regard business be that large are

have selective customers to qualifying, in I and have to. are we think we we’ll portfolio which about need subscription offerings that our it, but we provide

Steven Fox

That’s Thank very helpful. you very much.

Kris Newton

Thanks, Steve.

Next question?

Operator

Our Iwanyc Oppenheimer. with next question comes George from

now is line Your open.

George Iwanyc

addition, XXX you how the how sense us in have taking Thank give can America? ramping of they’re comments George, on the the productivity a been trends your my additions, expanding maybe and question. you for North sales on

George Kurian

going said, which tell of end headcount, we quarter. QX primary the of as would current bring on the of we from QX XXX were demand of through XXXX, generation is FY FY I the XXXX starting beginning that, you to

We that plan. objective a bit have little ahead accomplished of

I four we the as We they quarters full we are to three get sales typically, feel up good of process enabling they’re before, in about would so doing to productivity have said those and headcount. take to tell work you far. the

of would we’ve strongest we the they that storage good portfolio, is second-half focus cloud them our this object on our new in on think also year. said and our on and the in and some results customer clearly places seen all-flash have arrays that I which acquisition,

started are underlying good So as and these some deploy we focus have to the we in starting resources, trends to business. see

George Iwanyc

you. Thank

Kris Newton

George. Thanks,

question? Next

Operator

Our next Lake question comes from Eric Martinuzzi Street. with

now is open. line Your

Eric Martinuzzi

public Yes. I on focus to wanted sector.

cycles. tentative issues. public what the interested I’m healthcare, sector secondly, and clarify clarification pipeline? includes And you elective And healthcare that? maybe sure procedures ed, seeing revenue government impacting then pretty SLED, within then their to then budgeting budgets I’m to particularly question. are regards in First, higher just just a with but in with a

public you if for moment a would me? for focus on Just the sector

George Kurian

of solutions and that we healthcare lots the Certainly, imaging, look are ONTAP it categorized for like a whole all we were are our because strength sector, of in operating really with of unique enables of system healthcare think, lot there of are Not of doing I be our public at workflow pieces customer a technologies wins around is our NVIDIA of that are to – type not there for State right? that business, if successful. but as there that sector. business Hospitals had digital University imaging, I AI overall, the in the public Hospitals, advancements University

customer the for we’ve The second up them. support to our is, with also base, healthcare regard stepped

and I there to they they sustain think are think of work I sort work, has. don’t work sort saw. was highly budgetary of stressed of their just that any patient level the the are was of we of capacity they’re doing issue the patient-facing of really It the levels sort that amount so workforce

a and we model. really business, saw a think I customer we of education education, movement of that’s around state both education. world With broad regard healthcare. sector, our have about federal, local, government to book several public to that wins the rapid and the working, again, Within remote remote part covering of

And a so choppy. cloud our I It’s certainly solutions that move. it’s cloud, across benefited tell is public both visibility private It’s little modern choppy, from – solutions workplace you right? our board. and would the that

try the not had bring our close a in being of couple together teams that of we I able public to to because within business, to close transaction. logistics deals think sector the quarter, of just the did

Eric Martinuzzi

of guidance far that’s And that? then, three in all the captured as guidance, as the across

George Kurian

correct. That’s

Eric Martinuzzi

it. you. Thank Got

Kris Newton

Thanks, Eric.

Next?

Operator

comes question next Our Citigroup. Suva from Jim with

now is open. line Your

Jim Suva

had of and in such or mentioned efforts? the to harder I’m which coronavirus but which little very like into wondering all that. now keep in some and a I’m new this congratulations, impressive, force on to you the doors it and quite you same hers is which is nobody the and hims companies plan, Are wins. market knocking sales harder anticipated, does in and plan share – makes thinking George, it much. to Or design does still out new Thank persons there have environment, they the able ramping, your new cracking you regain place. start about new make get COVID-XX a shares? good. ahead I it just you’re

we really ahead wondering of seems out, all plan now? how Just it sort because about this you’re like

George Kurian

So, Meaning, a any are customer trying the that can we old into the day. see changes. use the America, lean we with a remote the now anywhere I to as customers, any and That in given globe. to right? as conversations disrupt, these you bring day that to the right? they about into single think NetApp teams bring in of Asia, opportunity in Europe can discussion CEO lean that all North a – of wasn’t tools an the can on in best possible coronavirus working sales you the think of to course the our One is of world, things if the with

we they the said, we place of that some a was I about key which good performance. QX, headcount. of progress had targeting our our As Even feel good acquired districts, were in

business had think We to us have to that you on from place that And as results. focused cloud continue our been a the ramp good I success and as expect should else with several right? have see do it. are return So demonstrated look we’ll something over past a if we that on to don’t disciplined the operators, we certainly years, investment, we

And evolving accordingly. the adjust so market the Mike on nature you should to we’ll of focused I and stay expect and

Jim Suva

details the It’s explanation. you, you for Thank Thank and appreciated. greatly

George Kurian

Jim. Thanks,

Kris Newton

Jim. you, Thank

Next question?

Operator

from Credit comes Suisse. with question next Matt Our Cabral

Your line is now open.

Matthew Cabral

Thank you very much.

seen demand environment, changes softer you’ve of or terms I’m if March? if middle the other of pricing any about wondering talk the behavior you competitive since Given can in

George Kurian

of No, gross of discipline that as sales the well of profile I differentiation strong think products. reflective our the our both force, the our margin of business is as

good we think technology I an extraordinarily have portfolio.

the in range services. not uniquely data the have cloud differentiated said, third, I and As position we the not have we full object is leadership second, leadership five business, which technologies, Storage block position, in the

have always product that, focus several to us. market over So, be we demonstrated is now, continue of yes, But competitive. I an area quarters gross for the margins think as

a to staying the going and around force to We and keep sales saw and you have at a that time end? stay take to through want we’re Mike, the disciplined incented quarter, around quarter discounting, disciplined you it that.

Mike Berry

more. nothing No,

Kris Newton

right. All Matt. Thanks,

question? Next

Operator

Miscioscia Our Lou with Daiwa. next comes question from

Your line open. now is

Louis Miscioscia

Okay, thank you.

see get your your thoughts some and will the either long you you As and would do that given just for in Any make work been anything that you. estate then run, would be actually And here interesting permanent? more be people you structure cost your something long-term helpful? at you’ve real actually here. able or change of to some this of Thank home how have don’t look But else? with you COVID-XX, to any changes to from guidance

George Kurian

with I think, have could I than saw our team we team. the – from I’m the we I the more all, NetApp January thank proud first started of when crisis COVID Across result in as from team first quarter. what to been teams board, our working never I deal past to planning have want engineering everything part work our And have saw the the able from our to being for and operate pretty been of a supply deliverables without incredible most chain we disruption. done, to support in the China. on impact that home has this seamless

opportunity focus is there. I else, think medium. continuing on digital customers that everybody are through we think we to new the that are place right, And ability engage the to a in we I like see it but just to

little bit regard tell. I with to model, a think to the long-term it’s early

returning workforce cautious certainly are our we the think to I about office.

I of wise think going our employees. the with the it we’re priority being safety step to do

a like. working choice. normal percentage in with our what employees other looks settles we’ll that locations And their flexible time it of the it a we at hybrid see factor large of as that will be And over new or home so into model

serve customers. going certainly do that factor what employees can over time our best into we We’re to to in and

Mike Berry

it’s making with George’s on just about add, safe it’s point, that, Mike. now. I would dealing And sure to all it are Lou, employees our and

look does I But think forward, that. quarters, very to the areas of or out figure need lot real months companies marketing will What this mean able several lot then those team? a next, call of tell goes over companies for to and early it, asking how it events. be us it the be you travel, too As estate, sales into, look a it’s way be have for that to questions. be to We

Louis Miscioscia

the Okay. And good luck with job. new

Mike Berry

Thank you.

Kris Newton

Thanks, Lou.

Next question?

Operator

question next SIG. Mehdi Our with Hosseini from comes

Your line now open. is

Mehdi Hosseini

think thanks follow-up? year-over-year I Yes, question. array. behind hopefully and a a should Do with for all-flash four sooner in follow-ups. we the taking worst and growth us year-over-year decline And a have quarters you see of Two consecutive George, is my later? rebound than

George Kurian

of volatility healthier It’s all-flash part array business tell sales difficult business, you focus driven has enterprise have guidance, to to array as of But our numbers That underneath all-flash much overall for and have the will driven we our give I we is specific which given the yet. predominant better doesn’t show coverage. all-flash than the trends the the number number much are me COVID. you that perform SaaS overall the what as array all-flash shows. started

So there we’re going encouraged is getting and our as by installed base that. position exploiting And it perspective, to So all-flash XX%. an From base on we’re installed focused, I right? a is it said, we’ve think small back stay percentage, still to at growth.

So we got a long go. way to

on gain And levels disposal that are share. all the going to to using focused so stay we’re

Mehdi Hosseini

work I of demand. It from in is virtualization to have is follow-up. me Sure. in going going that seems certain to Great. context, of VDI a us. home to secular be aspect permanent that with And And for detail. Thanks be a

emphasis And hear You’ve for all-flash do recently expect VDI, There maybe doing for should cloud and that of I made you How us? here. services. specific acquisition I want Thank on sector? you? can think data an has how lot you. you I more a been it grow that this array, to in and about But to think you’re something quantify

George Kurian

Yes.

that, created done cloud And out that a all going of to hyperscalers, us the add is, cloud added and we Jumper built governance data cloud The we QX called desktop doing Talon now gives strong organically backup services. as compliance modern QX of combines workplace we global desktop an a transition year We’ve Talon solution are Cloud Windows provider we virtual what efficient offering acquired protection services. and the much particularly desktop and of and solution in have combination several and to which Azure Cloud the And customers are is consolidation service infrastructure a file new we that solution building we’ve to of the is consistently said see into what by virtual on market. on we in in cloud. what which data were more as fiscal the to XXXX. volumes, portfolio, extremely infrastructure the called broad services our fundamental and desktop, it’s get suited then data platform. Jumper, cloud our of volumes part offering enable acquired top virtual a We As desktop is, that a virtual services major – going to into services to infrastructures we’re Microsoft

Cloud that you and that NetApp. accelerate tell are we you’ll we worked many wins. NetApp, business so more quarters, saw Jumper before about but significant integrated some with partner should and had And we’re do the see a customer that, coming been really to into together further. now our deals of cloud and We in they excited longstanding had them think us that

Mehdi Hosseini

you. Thank Great.

Kris Newton

Thanks, Mehdi.

question? Next

Operator

next Our Northland with Capital Nehal comes from Chokshi Markets. question

is line now Your open.

Nehal Chokshi

congrats given you, good a the is conditions. I quarter, and Thank on a what think

where to goes the bullish, of On the probably part in high-end year-over-year. recent of guidance from around appears that revenue most rather negative flattish XX% quarter the

underpins what profile? seeing that rather strong you year-over-year that So are this growth in uptick

Mike Berry

Yes.

Nehal, this Mike. is – So this

from revenue, week to of a in XX get lot. mix We in things XX that, that. So couple revenue the numbers. on in do Keep the extra that’s mind matters that a

where then This the our recurring So into if comes from revenue QX, product account. take revenue the well. in strength And as perspective year-over-year, seasonal that in is you a lower. look of because is

on So that, that helps range. us that also

then guidance to recurring got mix, driven range, we by call of benefit it, strength how from really revenue really the the that’s the of that, So high-end and XXth-week. the the

Nehal Chokshi

Okay.

So is that deterioration low-end macro? the the on a guidance, does then there embed the in the of follow-on

Mike Berry

George continuation latter saw the in QX. what I talked So of about, of it, we our a have it’s call really part,

March it So and QX. continues into saw assumes later April in what we that

Nehal Chokshi

Thank Okay. you.

Kris Newton

Thanks, Nehal.

Next question?

Operator

next from Nik Our comes with question Longbow Research. Todorov

is line now open. Your

Nikolay Todorov

afternoon, Good guys. Thanks.

customers incentives talk services CDS all? distinct cloud sort buyers on-prem on-prem? you the cycle at have for is departments. the the sales NetApp customers same Can if about within and cross-selling CDS think how systems different, data I services, if customer, two what on-prem and do to to cloud consumption that, that you data adopted related also And of their On have increase of to

George Kurian

of acquired Microsoft. CDS some think, customers first of don’t through all, I the are

a really and those that so incentives are an – provided deploy incentive to to workloads Cloud, with I’ll on are them incentives. to a cross-selling the by give to of kind than rather confidence it discussion an of specific on-prem really customers provided more example. those customer And you a regard relationship Microsoft environment, think I Azure is right? commercial

SAP environment as on on platform certified it, starting the or many both as like intelligence analytics are Google may entire We may clouds. of use or well Azure a customers those They are And Cloud. run Cloud portion They example, for to that. to – cloud run not something on with run SAP their the SAP use those provider business NetApp.

awareness we confidence And us on technology to of in go using a you’re on-premise? relationship tell and we you the Why so use and and So for and your benefits. benefit of specific more get like Azure, you and a customer processing on environment incentives. the SAP get listen, NetApp wouldn’t transaction it’s them

Nikolay Todorov

Okay.

Just if I can think, more, one it’s I sneak important.

You talked on with frictionless please to a little Can Microsoft. elaborate about bit sales you model, especially moving a that?

George Kurian

customers. that Today, of workloads that production the we are we the serve, we given environments importance these support have, in

with We call we whitelisting Microsoft. requirements have a, what

that’s Microsoft sure there’s call – go website with NetApp So manual customers step has the where customer has customer essentially, that the live. ready creates to then and provisioning make to register a that to a

happens. to as provision work done, that that when we’re And forward still that we we are on we that looking automatically so both requirement, working working can but teams closely NetApp requirement. to to be remove Volumes. Microsoft have the think I workloads business, scaled with actively remove Cloud are There’s to that to

Nikolay Todorov

Good Thanks. it. guys. Got luck,

Kris Newton

Thank you, Nik.

Next question?

Operator

from Cross Research. Cross question Our next with comes Shannon

line is open. now Your

Shannon Cross

cloud, just internal topic it’s you not about exactly the got just taking of to you’ve now sales going you’re on versus get handle Thank the are doing I’m what in or Thank few the if I’m I focus, coming going much. follow-up. curious, question. how my then what But given on have expanding it? too a be to quarters, taking you partnerships expanding very be a trying to for just of stay acquisition to is And the you��re more and how versus cloud thinking much you. I’m really much development? thinking

George Kurian

disciplined uses cash. We’ve always of been pretty about the

continue going that. We’re to to do

as cultural lot We where to we to selective. spend do time. time financial make of benefits our I a strategic that sure think and as we acquisitions, fit, well are over very both shareholders

continue acquisitions. So disciplined to going to we’re stay on

the today cloud regard vast is with portfolio integrated our think the of of itself, data – of service. it the I the big we’ve every not that to amount cloud. development. only public unlike that, system, we the have enabled has center in feel best industry, revenue anyone it and and cloud taken We big data management cloud through their done. three And that the storage selling three taken two into majority world’s the work major operating actually as world’s organic biggest made are else it And been of own

pretty place then moves organic, scale, we a it. be of is to set disciplined following that about are A in selective inorganic. capabilities capabilities that, of add are foundation chess we’ll Now starting those number and large to to and

Shannon Cross

then And curious landscape. about helpful. I was was That the competitive you. Thank Okay.

new do quarters? about kind Thank expect And what’s a at there want how you to obviously the thinking share, now? and a a competitor will changer, Your I’m base. fairly are their least, in out gain be launched for they of of environment you right they big coming you. curious game believe what mid-range platform sort competitive that installed

George Kurian

delayed It’s always still very much it competitive. a is platform, and incomplete. To particular this long

us. see opportunity as for it complete we so And

they’ve that tuned. going it, Stay Now announced we’re after them.

Shannon Cross

you. Thank

Kris Newton

Shannon. Thank you,

question? Next

Operator

with from question Ananda Loop last Baruah Capital. comes Our

Your line now open. is

Ananda Baruah

customer of Thanks moving the just taking are taken Yes, how me. between around sort question. Would guys love George. if does for initiative? that? your I you Hi, and I different that how George, context approaching place, initiatives sales about thinking expansion of was just was afternoon. apologize your force you impact, calls a asked. one for Hi, Mike. of Thanks. are couple kind this this already How And and what’s enterprise guys any

George Kurian

transitions COVID-XX clearly in We market. see accelerating of set a the

system market one from like cycle. the XX-K and There are going database that replacement that, transformation transformation right? technology digital are a You those that And, And I highly cannot is product transitions there right? of major series transition. customers. migrations operating transitions on. opportunity successful data-driven, of are that our infrastructure, There’s that transitions There of us. data the in without think most creates follow course, of is transformation digital for digital be competitive is modern important the

attack to in going transitions. We’re those

that can. offerings, we’d attack as So pretty getting we and laser-focused be be those transitions focused. teams productive on on Analyst you provide at product And in seen And we’ll an Day. stay to next strongest ads results focus QX we’ve our we’re earnings customer our to going net and new QX the working our update and continue and to from as we’re call good to market and

Ananda Baruah

And that’s helpful, George. And how about net new sales people add?

George Kurian

without generation in the comments, we to by mentioned We new demand are QX. increase my operating I net expenses on as XXX track, headcount completed

we’ve schedule, And results. you. of we’re productive. are the early commitments we’ve QX, them made starting within on cohorts quarter show to So and one The met ahead to ourselves focused to getting

about we so are. we where feel And good

So questions. thank for you your

Ananda Baruah

very Thanks much.

Kris Newton

it All remarks. George you, to Ananda. for right. some over Thank I’ll closing turn

George Kurian

In stronger the to emerge before, come while the expect face we moves you that than make to us discipline healthcare of current the from crisis, have NetApp. will continue to strategic maintaining position operational

with find file continue of our we us and and cloud clear dedicated and system cloud will in greater exploit with acquired services enable front for from forward in I ever. To our this block done we our all are we Thank and business healthy. industry-leading together significant compelling you you. by work at in hope have want Day see that team the powered a market and you our we progress NetApp’s and expanding past emerge of with the to amazing thank our QX, few our resources. data investors, I out months. further you, hope partners, path storage this competitive stronger stay to crisis. reach our software industry-leading leading working closing, crisis have dedicated And resilience, presence. our by this advantages focus, Our than a portfolio object safe success in will I acquisition cloud coverage, to creativity buyers sales believe our more customers, and that together together dedicated customer to Getting and sales that Analyst We our districts. see In enterprise position, September.

Operator

concludes conference this you for participating. today’s gentlemen, call. and Ladies Thank

disconnect. You may now

NetApp (NTAP) 27 May 202020 Q4 Earnings call transcript