NTAP - Earnings call transcript Q4 2021

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Operator

Good afternoon, ladies and gentlemen. Welcome to the NetApp Q4 and Fiscal Year 2021 Earnings Call. 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 would now like to turn the call over to, Kris Newton, Vice President, Investor Relations.

Kris Newton

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

projections and cloud and future profitability, regarding such we forward-looking will quarter During the guidance future our and prospects, to XXXX; and today’s outlook statements revenue, fiscal as call, year and ability financial to our with for make returns; first our shareholder respect forward-looking expectations our business, market and may gain overall projections. variety our including and a involve any and continue of Actual for of share, risk macroeconomic all scale market uncertainty. obligation growth, which to statements results disclaim continuing file We conditions materially pandemic; reasons, and update differ and our cash the gain environment; impact also XX-K from Condition capital and spending share and of available recovery grow refer our XX-Q and Forms business, to SEC, to Results “Management’s generate market, Financial well storage IT sections. and Operations” Factors” most and recent our the Analysis website, as ability COVID-XX and of with on Discussion as of uneven cloud in greater our the in such “Risk specifically our we the including to Please documents time time the as flow. the and the

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

George Kurian

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

that parts world, a economic public that encouraged it’s want improvements working by and I to the over is but we started, in remotely. a year been take to get many uneven. recovery the we acknowledge I’m minute the of Before have health all been

a in team have know, you India. we As large

challenging Thank year. and COVID team thoughts are this surge a execution dedication, for your focus, as the cases. with they them, NetApp with to throughout you in deal distressing Our entire

to results, We quarter. solid strong delivered quarter growth. results Now the a fourth off of capping of the year

guidance by all am our above high the of were and excited strength I ranges. product our most ARR, flow. Our cash cloud return all-time results an public QX free revenue to of growth, the

broad-based, verticals, recovering performance than Cloud parts and many support and companies of NetApp Asia Our transformation been the to initiatives. certain U.S., and these the as Europe accelerated pandemic and faster digital was initiatives to have look are key by expected.

into scaling and returning services from by Going business we our in and powered to gains FYXX, our differentiated object priorities: share software public highly block clear file, industry-leading had storage cloud two growth our business.

As fiscal I This our globally have revenue strategy and introduction on period. during growth our our grew storage Based in and the ‘XX. business and past continued the X.X and share gained Astra. on all-flash a year-over-year. we extending In proud ONTAP the challenging I with year, am QX, of what in through focused executing achieved support remained advanced am array X% grew growth, confident reflect all-flash and We innovation. We XX% year cloud share product portfolio that hybrid our innovation revenue have I our gains product markets. will we of

ever good our to new including progress Keystone, Keystone with wins, with make Additionally, continue many largest we deal.

reaching before are cloud ever We customers business. more public our with than

new-to-NetApp fiscal customers services QX from count our by and fiscal with of total customer public we ‘XX. cloud cloud grew course added the year Over ‘XX, X,XXX approximately year XXX%

us. their In spend adding customers cloud with are to expanding new existing cloud addition customers,

services $XXX in ‘XX, our ARR fiscal XXX% rate year-over-year. increase dollar-based XXX% revenue an and public the driving million all Our fourth Spot Cloud of Insights, year quarter. the cloud net increased to Volumes, in well to retention Cloud performed quarter, exiting

customer example in how our a cloud our repeatedly, acquire cloud customers As drive us said to helps we have to I’ll solutions. new growth strongly illustrate on-premises use strategy NetApp. and advantages

car Despite migrate to customer a NetApp part NetApp strategy, digital data its having manufacturer decided host transformation previously, to the data to rapidly Azure EMC NetApp cloud. cloud. never As Volumes workloads chose its data used move systems its Cloud from of the and Cloud the Dell a leading file-based centers its to from Sync on-premises to

delivered, in to service data and to cost high-performance requirements delivering addition Volumes savings to of level of environment, region and breadth critical production automatic plans hybrid well a NetApp the a Azure the NetApp depth to provides availability customer cloud. out-of-the public and Cloud secondary In the looking of Storage. store NetApp replication meet to deploy usage data as now the on-premises, the cross its box in cloud use increase Because is applications, value to through tiering a the cloud, high Blob of environment cloud as

importance and As the earlier, digital elevated I initiatives. noted customers’ pandemic of the accelerated cloud transformation and

continue that ongoing, quickly it. and we public a the and bring value the data-centric and to confidently expect existing benefit trend to be Customers to applications, from deploy centers, securely cloud. cloud-led, software to on will data company We data and this appreciate that NetApp as simplify will modernize manage

of and long our recognized new customers. our ONTAP, Cloud drive enable began for cloud years us ago, our been solutions industry-leading have Volumes seven further differentiation, introduction our enterprise the now, technology; expand We Cloud addressable We ONTAP. to with management data cloud journey market, reach

deepening with We partnerships, our Kubernetes applications, application initial our providers business. installed deliver cloud To for data service advantage in our and the of Service, availability expand automatically then and innovations. workloads. services. and our recognized ‘XX mission-critical, now management robust each ability focusing management address position. that on to Insights the delivering by a engines DevOps infrastructure Ocean the simplified our well cloud. and to and to into Astra Our led taking We leverage that are monitoring was management focus containers, wanted and to management here services, further workloads to of need, primary to production our We leading the storage cloud confidence and the management a workloads in recovery NetApp saw Spot leverage Together, data-rich strength protects, moves, minimizing backup Cloud cloud and services the manages to for public and the identify cloud that their Cloud performance CloudOps monitoring billion inorganic enhanced market which managed with maximize Cloud efforts enterprises public our infrastructure and are development multi-cloud in our of deliver compute go-to-market expand expanding organic our compute $X the These Kubernetes to fiscal and our enhancing the best-in-class support uniqueness suite beyond issues optimization and to goal My our year cloud costs. world, opportunity utilization our They base. of to plan expertise while activities, Cloud further services Spot, especially press public with we the cloud offers credibility deep providers and working we We is cloud automates to cloud. Volumes quickly reach move for resources intend our infrastructure cloud enterprise by to optimization to our to began the certifications disaster the required infrastructure cloud cloud provides native to give and infrastructure of ARR them Volumes, scaling teams, multi-cloud established resource of infrastructure are Insights growth services. application-aware customers, and opportunity. services, in Spot. acquisition Cloud to Insights, fully services constraints. our services of and

Our focused has execution us set year year up ‘XX. well for last fiscal

We where cloud they company are in storage markets, billings are have a revenue scale we gaining are returned key positively to impacting growth, our at and growth. and public services share total

plan In line digital and momentum our and ‘XX, our cloud a ahead Our I year and to about hybrid, confident ability am year cloud world. services top grow multi-cloud supporting their transformation cloud in customers customers accelerate on our continue to journeys. by to our public excited to in underscores deliver fiscal business. the growth hybrid our we value

Before to fiscal that he Brad retire this to year. let expertise a us who year to our the I Brad we want Anderson, maturation ‘XX. to walk results, take Mike turn intends to our through know I been it and over moment financial has leadership in Cloud his of leading Hybrid instrumental end and Group, leverage of the will at continue thank to

that, in engaged it identifying his actively successor are Mike. turn We to ensure transition. smooth over a to I’ll With

Mike Berry

us. everyone, afternoon, thank Good joining you, and Thank for you George.

As a otherwise to I’ll reminder, non-GAAP noted. unless numbers be referring

We focus, continuing delivered entire $X.X was operating up QX on $XXX XX% franchise. of with up by billion accelerating driven flow grew I billion $X.X $X.X As what billion, of free NetApp to an of in revenue unprecedented and flow up proud be public delivered of our an X% while cash we We but aggressively execution, billion, cloud of while cannot year-over-year, incredibly help look invest billings the of the demand year-over-year. Gross came for We increase NetApp. commitment XX% Both QX of margin, cash revenue year, of billings team. back X%. year-over-year, enterprise free quarter. our of in year solidly throughout billion, and the the margin the million were an was of guidance. XX% $X.X was high-end expectations, above high strong, finished all-time of EPS $X.X while ahead all year-over-year,

up was fiscal year-over-year the public points X franchise cloud an started XXX% NetApp, In of sequentially. impact the to impressive highlighted, growth points X $XXX growth the really and of million X profile of ‘XX, delivering of revenue the and George of X XX% billings in scale in our cloud growth. As ARR overall

are the exited performance, with near we cloud overall we year to our cloud corporate margins strong gross addition average. that ARR In the excited

cloud on Company fiscal $X.X revenue, more year-over-year, total impact recurring our When cloud XX% on growing in representing and ‘XX. XX% detail we the totaled performance, support Given total revenue. revenue business anticipate and increased of public combined, billion our sharing software

mix at continued million and million $XXX Recurring XX% higher was the support Gross driven an shift QX a first trend we in Product this growth. Product revenue revenue in leading fiscal indicator of with year-over-year. we time revenue QX, $XXX returned over increased was margin Product and trends expect was total year-over-year, history, revenue Company the towards have of XX.X% was revenue Consistent ended product million throughout ‘XX, XX% the Deferred the and continues by to revenue of guidance. throughout revenue. all-time cloud portfolio. of constituting $X $XXX growth be software also system for year-over-year. all-flash to from all-flash ‘XX. fiscal X% our revenue, continue X% billion year-over-year, seen an future For up to deferred with XX% of high increased dollars in we increase company mix. XX.X% the importantly, high-end benefited of of margin gross recurring

cloud flow to above our represented recurring EPS continues evidenced of other of of profitable by for the representing revenue. us, and in XX% flow cash in in XX% margin $X.X growing was of flow came $X.XX up while XX% revenue. fiscal forecasted flow cash expected free XX% Full-year in of a strong and was higher closed Our tax-rate. from headwind part We expectations, and from investments. the year-over-year $X.XX million, due DSO Cash services gross short-term a support, than with ahead billion billion business Operating metric business with and Cash end days. was was very $XXX as and cash higher guidance, XX $X.X a to ‘XX high $XXX of despite than of free of margin came QX be of collections, operations XX%. million nicely

QX. Given meet in to ability as reiterate supply confidence technology we end-demand broader chain, our to want recent in developments into our the head I

and lead-times ‘XX. excellent to have closely team have supply and they remain been with at levels partner backlog throughout an We customer our normal chain ecosystem working ensure fiscal

into to Towards inventory shortages. investing help mitigate supply of commitments goal, we will risk this dollars incremental longer-term be and

Given low cost balance and about our good this strong capital, sheet feel we of investment.

fiscal ‘XX, our all-flash ‘XX, fiscal the support billings to in cloud in continued cloud-connected In momentum X% and given expected expect recurring portfolio. revenues year-over-year, X% we guidance. strength share gains services. expect to we and revenue continued to contracts with outpace Now In to grow

continue We public diversified also will grow and cloud services invest to our in portfolio.

to innovation. driven enhanced our strongest Similar to fiscal QX QX driven activities, expect of raising net the new are with This now public product we cloud compensation seasonal cloud million, semi-annual experienced in million fiscal ‘XX, and ARR the fiscal and $XXX deeper ‘XX partnerships anticipate We low-end by our go-to-market guide and cadence be for continued we is our by ‘XX $XXX to cloud ARR. exit plans. pattern to seasonal quarters sales public

sales initiatives, growth expense confidence fiscal increased margin cloud billion. driven being operating have we XX% we be in expect our cloud flat continued Implied range continue with in this our activities, operating $X.X in noted, cloud balanced in invest expenses our in XX%, The delivering investments ARR be base as for by to is to investment George ability fiscal generating and ‘XX, while expanding billion In As $X in public improving expectation roughly gross operating continued to in team. increase our revenue sales targeted hybrid to at strong our guidance and that strong in year-over-year and our between in $X.XX our ‘XX. portfolio, margin as year-over-year anticipate products. will customer success is we leverage. resources including investment are to XX% margins XX%, We cloud demand eclipse between

P&L, to the and tax-rate be approximately our we expense effective million expect interest $XX to $XX be million XX%. down to Moving

a result tax bit below we committed year-over-year operating the a interest representing higher ‘XX mid-point. delivering EPS, at in growth, of of as get to to are income XX% we $X.XX fiscal rate, the expense the delevering line, While and $X.XX

cloud in million. $X.X a cash in $XXX again over flow free business our cloud in as flow fiscal fund the to into year-over-year services ‘XX, We the growth billion continues to free hybrid to step-up $XXX our Factored is generation generate franchise. CapEx million to expect cash in

margins we our cloud billion in move with become to in allow public to cloud to investment, accretive strategic The areas. gross $X.X particular cash on as in through over key capital ‘XX. we additional Even driving continue corporate free Our will for capacity fiscal us on global build allocation commitments, our Generating to also average capital. are cloud out to our partners, the will expect dividend first deliver while remain call added hard investing us Azure, this our offerings.

role dividend today, allocation to play capital continue our saw strategy. raised a per in Share share. we you As $X.XX key quarterly also will to repurchases our

expect this goal Board approved authorization. in equity In an to dilution our buyback offset buybacks we ‘XX, Towards $XXX additional million from our plans. fiscal

disciplined fiscal purposes, free our modeling roadmap. on remain strategic to history count of million which flat we cloud shares, towards For remaining go expect of M&A, NetApp’s generation Consistent long our cash XXX ‘XX. with at services bolstering share will the acquisition exiting strategy, will focused XX% remain

QX Now on guidance. to

at $X.XX implies revenues and revenues midpoint, in We a billion X% to QX expect net range year-over-year. increase between which, $X.XX billion the

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

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

what the to huge team, many for this work during in customers to ways. importantly, $XX a Assumed for of closing, to in our was entire base QX partners, means million. unwavering out guidance million a to NetApp expense want I is it $XX as In thank our and shout year interest investors year. support what so And redefining their a most past employee challenging

ever hand to capitalize We ahead. I’ll confident opportunity than call Q&A. the open Kris to ability back are industry on to in the transitions and more the call our for market Kris? now

Kris Newton

Mike. Thanks,

Let’s people question open so get keep Operator? to Please we possible. the one call just many as for as Q&A. can to

Operator

Evercore. with Our Instructions] Amit first [Operator question from Daryanani you. comes Thank

Amit Daryanani

could of the million of had drove my bit taking And just cloud understand versus upside the number more that to how is I to for to $XX guess, important it the is to think then, up to go nice million And as achieve million Azure -- if Thanks think, this the full the business. out already by $XXX in the $XXX ticking talk question. the beyond guide data love a, really, end, was on what is million, quarter $XXX Congrats little would services strength. provided fiscal in I about really there? you targets I the hoping when year on year sort I you you year? a And you low million. next out? $XXX the you confidence driving for I million laid business into scale What $XX

George Kurian

the question. you Thank for

We which multiple working and for good throughout have programs their Volumes for really compute Cloud overall, customers strong our strongly. We the extremely parts of for digital had all their QXs monitoring; Spot of performed the years. been saw and expansion transformation on Insights storage; number innovation quarter. portfolio, in of the customers really Cloud all number management, customers. and in of against growth new-to-NetApp strong saw cloud spending We strong

for that trajectory us a smooth the well next think quarter. sets And through year. So, it up was I

our I we strongly had acquisitions can think, see our dollar-based million this $XX CloudJumper. rate, year, at if that of you and organic look grew year inorganic business being Talon of net Spot, from retention about you this and

that year’s also So, the continue back next of organic acceleration portfolio inorganic portfolio. growth when strength of you our out, our continued we and expect rate to

a portfolio really differentiated services. of and have good We

the deep range customer who the we do of people many projects are partnerships with hyperscalers. have We And expanding things the doing we business-critical on and are growing our of public base us. clouds are with

indicated, cloud details confidence. with it. on you about So, as excited we year, as I’m Mike you tell through really go our more every We’ll the giving more business,

Operator

Thank you.

comes from Goldman next Sachs. Rod question Our with Hall

Rod Hall

And calculations guide. EPS clearly, on headroom of there? growth And you just idea clarification George, and for the year the that then, through. what coming going I’m thing, on Because the to a maybe I’m really of the if us curious just could do the and done is do give Obviously, what is you’ve lot some what if there. clarification The on I ceiling the question think is. you old full the question can. ARR there’s well --

giving. lower you guys than range are number getting We’re the a

the we using like $X.XX. sure all So, if you’re I’m talking inputs get not about, something

would maybe not guide different I’m sure, than why is. ending So, at add you if your up, that all a be we place up

know, be don’t or Mike helpful. if I So, that clarify would you Thanks. that, could

George Kurian

Thanks, portfolio us. of to be listen, the terms Rod. With in in good portfolio, the heavy regard I shape think innovation lift to getting the behind really cloud is

innovations I the the engines, lineups bringing well out three of are I have, think, innovation really strong those we cloud-native through summer. as as course and we said, across

it’s to cloud are we course things take of that to in doing, last revenue-generating with the indicated we’re success customers. expanding terms of the and the the we’re further things good and We Microsoft business, to regard quarter, the We’re all to as market. facing expand investments, it doing in making accelerate With right? going of their accelerate route teams the seen portfolio. number range sellers We’ve to really what’s of

of use we more differentiated the these also the And capabilities We’re working with we’re our hyperscalers expand the customer range our confident business other we with target to our service building range teams. the success feel public cloud value-creating train and even that highly ways take are market we And deploying achieve I products applications, them. we the to application. that of business portfolios, in customer $X cases have on billion ARR run to mission-critical, indicated. the that customer are and

part So, I where to you do good the are Mike, want the feel at other about we year. really, really the question? of take

Mike Berry

George. Hey, Thanks, Rod. Sure.

be count. the want of want to is could not there’s as with hey, in OIE just to that to that well, calculation I so. sure the it could net -- you make interest. gross team. lot interest sensitivity, It We go the and the through obviously, sure So, a And we make separately

little different So, that below it’s bit income a in it’s model. our operating probably

that walk to separately. through you happy We’re

Rod Hall

OI&E you that that is? Then for the could number Mike, plug can just say people what call, in. just maybe

Mike Berry

Yes.

we for XX So, XX the interest. to said

more in we is that in did OIE my that’s the interest as interest, that’s obviously, the we on that what the jumps that yes, have -- just There’s around -- number know, bit. OIE script. quite number. And in For there you a than

Operator

Rakers from comes Wells Aaron question with next Fargo. Our

Aaron Rakers

remarks of congratulations general. kind pricing controller story a just little the wanted flash this around I and of environment. your the And bit. taking a There’s know touched prepared SSDs how the in SSDs in moving of progressing. question. lot confident in out you on and for discussion I quarter, Thanks go But, Yes. the to component back to and is clearly upward there kind constraints, some on on

Just Thank maybe any reacting have to and help pricing kind you component us dynamic? you’re of that the confidence in appreciate inflationary you. supply how

Mike Berry

Mike. Aaron, for Hey Sure. it’s question. Thanks the

and really confidence certainly margin performance have they’ve chain we challenges fiscal have we contemplated well when can suppliers. our this with guidance gross providing all So, that in the Supply QX And chain our continue year supply closely the working we long, performed year. ‘XX. for coming teams,

know, company. you software cloud As world we’re a

And the continue of to to work services product we higher-margin software-rich we margin. configurations. from benefit to lot do Our the margins, expect continue on a hard

-- talked to deployed today, today cost, a about, those we expect through margins we total it things the the that circumstances unforeseen half. good second we There’s be as the And potentially bit And, of go well the about when it. that when based in consumption well first system as guidance. we increase benefits may as you’ll as we As sit our in cloud little you But take our half here the component a see of we Software-as-a-Service. tailwind you in and a as headwind year, as of bit then, that talk on we know improve feel a have always into come change, prices about continue should to into play. the total our little and more of

George Kurian

the portfolio, our range to technology all have support a gigs with customers from terabytes. XXX regard we our to of we can that XX said, configurations way With as Mike

a environment good in said, listen, our the to meet With operated operating components really demand them. Mike and support as gross to flexibility the have needs capability given through a And software customer and margins, done job. so, to we qualify to of right plenty we’ve system the year tough regard and

we balancing us year. management end-user think through as I see to that margin go continue demand with remain the prudent, you’ll

Operator

with question from Research. Nik Longbow Todorov next comes Our

Nik Todorov

give congrats appreciate revenue and George, maybe me click wondering on results. Yes. year full growth. as do we you well to market double CDS around share the talk from if comes Thank or the breakdown X% or X% of product software? from that you. versus I assumptions guide. Maybe any some I’m outlook, much or you more how Can between great gains drivers there? if color just the can can of Thanks, the the on the

George Kurian

we in as year, overall see health through Listen, and improvement demand Okay. go the environment. we continuing the a public

from have projects We benefiting the cloud digital through and transformation been course of the year.

parts likely We of half course our the don’t any spending. on see the a so more Europe in something major have countries, unique the government come are strategic snapback U.S. line fiscal in second year. the in year, in seen in not Western strongly of of or -- that more through trends fiscal especially of projects way we like us see long-term customers. or more to We significant We from on our some and line see the first spending and part enterprise the that Europe U.S. more year, fiscal coming benefiting

have services portfolio. every grow see we’ll strength differentiated, of and product our that to is and revenue We portfolio our cloud continue product faster the revenue confidence than

a in the now have cloud base bigger customers business. much We of

certifications last a broader have application year. we We that of much range entered

the really ahead. And so, feel about really, good year we

Operator

from comes with Matt question Our next Credit Suisse. Cabral

Matt Cabral

XX that or added I the past, you’ve wondering give quota-bearing it an over can Yes. was think XXX so. Thank I update you. ramp on if months of heads you was the the

‘XX, to in in full next productivity? about And relative as they and their for thinking beyond? year into investments are how ramps you’re sales fiscal capacity the we’re just where Just fiscal heading

George Kurian

over I typical happens quarters. four course ramp think, as productivity sales the said, of we the

in productive. They’re part the are fully fiscal NetApp -- started XXX ‘XX reps We that adding are of we teams. year

You we it their us said from the a be American recovery has strong over those the saw we benefits we and and which was Mike before, additions, well be of performance prudent we for business, add the regard our continued what where With teams, up said what and sets really some XX think next teams. have months. continue will particularly strong, of Americas to about additions to the as in to course

tell success we past and see in strong. our so in more will our added we’ll about that. of teams We do We quarter. And headcount cloud where you environments being the some customer and course teams demand this

you You that growth us the color? cloud to to the add if But, of any continuing want other should anticipate portfolio. Mike, do support to

Mike Berry

George. Thanks, Yes.

would and talked last this just a as then all as terms additions customer the cloud well quarter know, the I underline upsell, renewals. around cloud, of super into team that business So, we in about cross-sell quarter areas in important success is, you and specific which

to continue you’ve the And do we this So, there. results quarter. in make of the ARR investments results I think seen some

Operator

with Next question Morgan comes from Katy Huberty Stanley.

Katy Huberty

And cost business cloud efficiencies? you. can revenue dilutive, the we due any to ramping should clarify model Public cloud for the way follow-up to that is margins profitability that, the better you. year Thank full or scale, XXXX expect model? you faster as capture performance. alongside Thank tuned Is purely the neutral to accretive to be a then, just Mike, revenue whether or in you have to

Mike Berry

question, the for Thanks Katy. Sure.

first. one the do me last Let

said, cloud total So, to the to margins through we year, accretive expected be average. we as the we go Company

and get year also cloud than had certainly ending our expected. matters. the And have would Certainly, bigger I seen margins as scale we So, year. the a we revenue then, scale -- we through increase yes, originally much in give that to also though, process. but of being stuff it those use all not a as only relates they for the the to this people of team, goes and kudos efficient really support businesses how lot hardware, terms in to

the in ARR driver followed the team next So, by that by is certainly, terms growth it’s key of good all But a job above. margins. in the of really managing

George Kurian

offerings as software-only drive Katy, business. described Insights, Cloud I the avenues continue the of hardware Mike We think mentioned we of several There’s growing Spot, in Cloud a the offerings have portfolio gross have our margins in we business. our cloud software. versions cloud to many to utilization. -- all Volumes are

of terms that new management ONTAP efficiency. brought out operating data be of to our versions systems have in efficient continue We and storage more

our we so, feel gross cloud continuing path improve the that about in And Mike to to margins good direction articulated. very

Operator

next Mohan America. Our comes of Wamsi from question with Bank

Wamsi Mohan

were QX Cloud be You to higher. be maybe much generated? in where how some relative QX, would though year, through at level deals, year Thank sequentially you at color you. wondering, should NAV noted going even that those -- on seasonality of we organic these typically And the is the give QX? accurate look are last think seasonality the some us partner into can it of any to higher ARR generated least at net growth some cloud a it course I versus -- was

Mike Berry

Yes.

the I on saw this the would accelerated organic And -- quarter, quarter-over-quarter. you by Wamsi, what net I to in number. dollar-based you point the as way. it Mike, the actually retention So, is growth,

NetApp hyperscalers that want core sales driven and the take seasonality you I you’ve is in in from would And and the So, two a you to as the our doing call business business hey, do just a There obviously, the see lot is, divide say business look can for please, years. the by models that guys last teams, -- take when assume, addition, Don’t sure increase account. the well. that your of in are seasonal What you in And a break just that QX you by out organic that, I the talked seasonality of hyperscalers. year, -- with And doing very, X. lot is organic the QX absolutely into very in business or seen that the is at next ARR you underline is business. is that make contributions the we which please if take offerings don’t business. is about, pickup it, as George organic those versus

Operator

Fox comes Steven question next from Our Fox with Advisors.

Steven Fox

George, you I year. a market talked mix the just I to It that improving wondering, was listened everything go better you when as about said, you sounds through share. like

transformation say the of take I year Thanks. year, And market, I the that there I when imply expecting had into the engagements even look the You comparisons. you or at deceleration to during into quarter as anything digital when thinking you’re sort this tougher some at is the accelerating Am some would else go look full I about it guidance, you of up then, conservatism quarter. on when the and markets? seems right, account throughout

Mike Berry

next Listen, the growth. in X% we’ve X% I year, year when think guidance of guided we to revenue full at look terms for

I from us think what you the in that real confidence is see business.

The kind second expectation a a compare or is half deceleration ability the the as this realization half our year this in back on through having of a compare grow isn’t year just It’s So, of on it COVID, half spending share. stronger a came second year to the terms half of line basis is second of an a to of a stronger of than compared year. that cloud right? gain this us enterprise first

Operator

with from question comes Suva Jim next Citigroup. The

Jim Suva

billion case. $X sit know But of about because organic based be it’s want but and kind congratulations today, question outlook, great could wanted is, results revenues for look used My M&A think reported of and again, you organic also a and just just that George, mentioned And cash XX% as kind of for you. versus Mike the assume clarify the the you M&A. organic? Thank versus clarification, clarify how But to of outlook. mentioned as all then, were you rate. that’s much clarify can you acquisition? I this out. flow on I I run the related upon I to I forward-looking quarter, Is And

Mike Berry

Hey Jim, it’s Mike.

It -- X.X very to the less much small. contribution really And was very that of quarter, little. percentage one of in first at at of in terms the organic all the the an much growth. was related It than from On revenue, was impact it earlier not was of not the that year, acquisitions is it in mind all. cloud keep in but point

George Kurian

think, in billion I very good feel us when we look to have that portfolio number year $X today Hey, at the Jim, business, our capabilities getting fiscal about ‘XX. that we we ARR

to We’re not versus out inorganic. organic break going

year full Talon. of acquisitions, Spot, I of core think, a we our we’ve feel integration CloudJumper and that achieved

So, that the this are place year. core we for feel in bets

in to look capabilities we strong fill to market. that to at differentiated We inorganic out position really strong have have. portfolio, that So, about we continue We our the a acquisitions feel the we will start cloud think right?

I’ll the our of right? you three We more course we sit through growing business, while the We business. business. the And on our are it expand -- things, will tell of just through cloud course about as growing cloud business the core

net a acquiring customers. of are new We lot

our accelerating are We our organic business inorganic acquisitions. growth and

to so, through will gross as year, be the go margins, next feel average, margins. accretive corporate we really, Cloud I near as And really said, good our gross about are company business and Mike overall.

work I very, our doing and in cloud team the the good about cloud with just it. we’re on going double has feel So, opportunity that And down our the been providers. to very

Jim Suva

Congratulations.

Kris Newton

Thanks, Jim.

question? Next

Operator

question Cross comes Cross Research. Next Shannon with from

Shannon Cross

to inventory, you do cash to longer when that question billion to what a the see the you’re understand $X.X on period a for have will as going model Thank from pressure on be excess more and much. Thank this drag XXXX guided inventory longer a higher CapEx or about and in able to to terms that term expect basis, I of you we that closely had don’t think we’ll maybe have start should cash I increased growth is you you. CapEx. over buy very fiscal of flow. a mirrors you time? flow But, earnings,

Mike Berry

Hey Shannon, it’s Mike.

flow, So, to the do thanks for cash on question happy that.

of a things. couple So,

that XXX% cash over operating look of really last operating non-GAAP like you If in the four NetApp years, the It’s income. the have operating flow mirrored results -- number.

mirror expect that flow operating we see income over cash operating income cash operating growth. So, we’ll mere flow operating we’ll do time see

operating you I’m Now there’s to flow. take and going to little I’ll free do to bumper a -- bit, cash it’s then on and going

the growth flow earnings, install of year, are the because be script. flow working hardware the for to One look would -- some we is we really year high fiscal cash operating just than From cloud as CapEx business. capital put bit there. support Next a continuing centers in of certainly we’ve A that next to data in perspective, in pieces free cash of at watermark. little we the instance, expect impact and see the couple to more the ‘XX, the of ‘XX, hopefully a and of expenses some

obviously well. about that there we super and about, As big help. we have extent, have I as our of next will in year. projects, feel number, lesser a San can there’s That’s Wichita facilities talked two next We And the bit million forward in below we George $XX that as in that’s some more that software options related to a comfortable of why we’re software that the the $XXX in going new to but have little year Jose. related CapEx CapEx number about discussed facilities CapEx, defined, excited a building site million Also to our script.

you But So to working around through I takes. want operating I to yes, near bumping those time, to with every expect pretty cash walk and some over largely just flow operating due year capital. much do puts income

Operator

The question with Baruah Capital. Loop comes next from Ananda

Ananda Baruah

-- of that know guess, -- on sort that Hey, the those sales guys. XXX incremental, regard were strong the taking with to so I Yes. the I portfolio. collectively the And meaningfully the -- on mean, contribute? there initiatives results. I guess, for go-forward the just Thanks just any is and new anything there Mike, force. Congrats not back, question. sort across I incremental can add of is George going Is

and to customer how not repositioning side, perspective? thinking you go-to were on the I’m Thanks. also totality, but the new And from on that’s it. regards So, in really solution cloud just a with customer side the

George Kurian

teams. I sales where think, about we add careful continue we’ll to be

I we think, the of locations of opportunity, the constantly rebalance where terms in to both the composition sales we of headcount. force the areas put and

I’ve the coming X recovery months X in more we will expect pronounced where different the of recovery geographies. public year, and Europe be the this indicates, before, the as I lagging at data is after as the maybe rest think, economies to the place I developing months be rates different thereafter, X said And to think X that. the Americas to

So, cloud, the been accordance demand. adding, how we’ll With with end prioritize any user have we see in step-wise. additions we

teams important we’re centers. I with this think cloud and be is to that to our sales year one data frontline focused systems balanced of on the get our customers’ things in selling

stepwise the business not we’re very going those And feel like, listen, investment. comes. in our approach I fairly to a addition feel have disciplined so, and we’ve short do taken in it order. investments about the payoffs the we And for as good We’ll

Ananda Baruah

optimized adds at -- current fully the they or the are George, this adds point? And are so far,

George Kurian

fully part sales said, NetApp think on I the as heads, of XXX the fully team. we’ve productive, they are

of anticipate in to we same -- they are the time cloud headcount those as some We productive, quarter, last get traditional sales adding headcount. some of will the range to some our add year. more Alongside productivity in some but course ramps this business, the we added take are

operating leverage coming see this opportunities. is think, to investing I our from you coming reflects in what expense, additional that outpaces guidance see where leading revenue That we from the to the to approach year our our model. disciplined the in year growth business

Operator

comes Hosseini next Mehdi Our FIG. from with question

Mehdi Hosseini

the late. joined I call

two-year a I buying storage? out you So, to are your a I low. inventories question. there repeating are I see at going and how And be strategy key I’m your quick I components, have apologize aggressive if what’s especially noticed the And to want follow-up.

Mike Berry

it’s Mike. Sure. Mehdi, Hey

QX. at had So, good we of very end inventory yes, the turns

and we’ve enough a key We’ve of in started the our mentioned we is related make -- As we to continue done and One that. different couple already the programs. I that script, some continue double expect have storage of to down components to to we to always products do sure And will will we that. resources. on

to will there so if the we’re safety and add We world, some respond to hopefully, also that. issues that able throughout stocks, are

that will year. it, extend -- will also orders we we’ve the addition, longer, have I’ll through In call purchase

the make to So, everything QX, I sure would we you should make XX investment. to again, that have expect, always have to enough we’re inventory. in turns lower And that’s think can XX back we doing that go meet see customer that goal given we we sure probably to and those requirements, number. of capital, we cost good very product a our could

the for thanks Yes, go likely ‘XX. So, the down turns of should QX and those question. the increase inventories and see through you rest fiscal inventory in

Mehdi Hosseini

follow-up. quick a just And Great.

cost the higher of margin? is But services that is cloud becoming that margins is component gross accretive. Your capping

George Kurian

think see relatively this to going costs, the the in component to with aggregate we Mike as in said, the to takes I that is component next mix. cost look for the puts of with be flat year year regard we Listen, some as full terms out year, and

in trade-off gross regard more that heavily the think in regions with the to with customer continue footprint, of cloud to that make business. certain to to between expand reflecting the regions business consumption expand other And walk. to our we the growth while the getting margins, and investments seeing is investing balance installed balance it’s of we ARR I really continue utilized

I as margins solutions to in and the products also gross other of drive to Cloud software with Insights being portfolio avenues some continue in mentioned, software-only. cloud. The several mix Spot growing our think have versions we I and Cloud Volumes like is

to efficiency system continue the we ONTAP software. drive is second in operating The software, in

company to job there to gross margins as this And be expect accelerate through cloud margins. year. So, done avenues are lots of continue fiscal to to it year. good we has a Team next gross accretive we go

Operator

Our next Bank. with Ho Sidney question comes Deutsche from

Sidney Ho

target In margin more the to the you margin. question on get back a to past, gross product talked gross one Maybe mid-XXs. about

heavy You this the gross like should to side software to change think already that. Should term, costs continue both grow? may improve XX next few expect near or quarter. not want quarters, and we have in room this we And it the to an mix about still to but towards the are have over margin at products, impact higher just given and Thanks. software confirm margins the hardware component sounds I shift

Mike Berry

Sidney, Hey it’s Yes. Mike.

as by bit XX% much we quarter, flat. as our product. relatively fiscal component QX talked little versus costs that QX, in product with to over in in sit matters in full consistent services at margins. mind our margins Keep we we Also will about QX move a that’s be but relatively as well. gross mix bigger in revenue a this gross year, Again, exited component mind today, here guided on have there’s a point, that keep well, in We It of how QX. the numbers, lot ‘XX in

bump in that you get margin. also So

the in that saw well. as last You couple of QXs

costs numbers. sit matter quarter, based but we’ve the here that’s a Again largely QX. don’t in exiting relatively how the the today, today. we’re we with see as lot movement we of that does gross we on consistent So, margin Mix component see in stayed

Operator

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

Nehal Chokshi

Thank I And you. about the also, is always in in and extra quarter a impressive with And But, congrats great the more. PCS of you for the thank profitability quite terms guidance. which margin great the visibility on actually providing gross scale. comment, want

So, can right my operating comment on of XX operating maybe about the at you now? And/or question where here division? is, profitability the PCS PCS what of is on income the Rule

Mike Berry

So, I question. want I understand to the sure make

not You’re gross talking about margins.

Nehal? operating margins, You’re talking about

Nehal Chokshi

Correct, of correct. And then, you context of maybe the if XX? put Rule want to that into

Mike Berry

Yes.

talking more. gross you point, this We you margins. always about at as our about good feel want said, So,

that business going in things. down operating margins of not and gets to to into a allocations that We’re go lot

going we’re And we spend business So, where on gross Do the focus OpEx? money? margin. to at to we’re do. we we certainly going the do Yes, is look what

Rule of have again, terms of that. XX, income. in do won’t down operating We the go So, the to we

gross margin at it discussion. keep the We will

Nehal Chokshi

prevent or on happen? would of future, much you In break there’s expect able that to do out, be this -- expect you just that kind too to to the cross-selling the do going that breakout

Mike Berry

talk about we’re QX call, ‘XX. the is, would to going I going what after say What in hey, tune and in disclose we’ll

Operator

Ackerman Karl from with comes question Cowen. last Our

Karl Ackerman

you. Thank Yes.

a array most of peers. latest $X.X rate year-over-year near all-flash are Your and revenues billion record growth your run exceeded

some parameters, maybe fiscal installed Thank all-flash your your at those could array so, base and around growth, into for I ‘XX provide of you. expectations mix the least how expectations? qualitatively, you hoping And was plays

George Kurian

about Listen, I really business. flash feel good our

We and executing the are focused, differentiated market. in

midrange growth part of which strong industry, our our evident, sweet of market, is think, of the spot the clearly storage position competitors. I the is in is rates it and affecting the the

CAGR, going next this the the We and grow market forward. outpace continue year. for we that Day said the that at confidence expect over have we the several and to coming What will array will X.X% we share all-flash about Analyst that was quarters, that do at last every to see taken few years, we

the us storage revenue industry our to outpace picture that overall. growth storage expects expect the around X%, of We grow and the will industry

So, confidence more we feel gives really even us out our ONTAP X.X differentiation. good. coming in And

Kris Newton

thank Karl. question. Well, That’s final our All you, right.

I’ll George So, remarks. it to hand for some over closing

George Kurian

Kris. Thanks, year by top delivered public expect significant reiterate are business we a and on to well-positioned operating to continued is closing, end initiatives. flow, year. line, the and great billings growth confident hybrid to all year strong in growth. us. capitalize cloud where team. the cash while our you special to And scale in meaningfully want we ‘XX, to fiscal the into ‘XX. our industry leverage revenue In is speaking the I opportunities we free again excited generate forward ability next as quarter. grow I we I support am thank fiscal a with product transitions to deliver joining move a and will Thank at contributing for growth. cloud revenue deliver market to And In business our we our and And ahead. innovations look a you to you it that investing NetApp

Operator

Thank This participating. concludes call. today’s for you conference

disconnect. You now may

NetApp (NTAP) 3 Jun 212021 Q4 Earnings call transcript