NTAP - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen. Welcome to the NetApp Second Quarter Fiscal Year 2022 Earnings Call. [Operator Instructions] I will now like to turn the call over to Kris Newton, Vice President, Investor Relations.

Kris Newton

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

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

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

George Kurian

segment year-over-year, Building on welcome or earnings of results the with We guidance. Kris the above previous revenue earnings the of and another first at third of with growth all XX% revenue the high-end year. at share margin, Public our of for and record 'XX QX margin, year quarter, last call. are Cloud year grew fiscal to Hybrid fiscal quarter and segment strong highs our year-over-year XX% all half Thanks, of and growth X%. growth. operating grew everyone delivered X% per revenue quarter, momentum Product Gross year-over-year, consecutive Cloud the revenue the

long-term where reflects their hybrid helping in digital customers continued playing and role is customer and organizations’ cloud and trends in challenges uniquely demand important applications, goals. multi-cloud data-driven the hybrid, increasingly performance and Our business significant both achieve cloud NetApp most in created traditional environments. transformation transformation, to broad-based and by sizeable modern on-premises, is of an solve positioned NetApp

us cloud said not data partner in growing to rapidly but allow I’ve our us Hybrid the to services they Cloud customers, only market, enterprise many Public business. our share more Cloud gains also strategic center driving in our make As times, participate a

a the We Cloud our and continue NetApp of rate number as retention grew Cloud to leadership QX, Files, while Cloud position growth of results XX% ARR million, by Hybrid Public Cloud In dollar-based both XX% seeing segment, revenue segment. net Cloud remains Spot Public increase XXX%. out at healthy had scaling Cloud driven grew by Public Public Cloud that year-over-year, Hybrid Public play our year-over-year, Insights, our and our segments. in revenue Azure NetApp. we drive Cloud this $XXX are in and solidify announcements an further strong to from we

managed AWS, average. to in a During accretive In that reaching margin fully ONTAP, our the 'XX, new Services, advantage achieve into in $X making general to the profile fully product NetApp first announced sold, QX, it party we for data AWS availability we is to for confident our in This ARR cost of advanced billion of integrated ONTAP. while console NetApp’s by and Web Amazon gross with the native effective customers easy enterprise FSx cloud significantly, is powered remain experience. and year service corporate supported, and of ability suite fiscal agenda a storage take native, AWS, running run of QX, by goal an Amazon our billed AWS services AWS and is grade

for ramp, saw the early we we Files, take but extraordinarily it NetApp this and with As service. FSx to are indicators number will pleased time Azure with customers piloting NetApp for ONTAP of

Hosted, infrastructure recovery. VMware provide Engine for Additionally, storage helps service Cloud announced their and resides Volumes Google of facilities. with NetApp a is Cloud for previewing in storage centers and integration Cloud Distributed its Cloud data managed NetApp co-location that fully disaster Google that Service, where Google meet needs organizations Google will the data customer-owned

availability Cloud with Volumes of expanded Google against Google like consumed to engagements NetApp. and be Cloud Volumes customers Google both Cloud cloud making their native Cloud service, agreements also existing can We Service it the for Cloud. other and any Google expand Service easier provisioned in Much

their NetApp cloud. in Azure announced has demanding world generally Files enterprise on Microsoft around since has been Azure most the whitelisting been Finally, available that relying May customers XXXX the Files. removed from workloads Azure it to with NetApp run

Files to to Now of enterprise mission-critical accelerate Azure. the applications instantaneously leverage NetApp can customers Azure deployment

the replication they expanded now the cloud providers organizations we management for region give integrated which expertise benefits the all service and of with Files. to fully and and no have backup/restore cross NetApp major storage capabilities data experience Azure public services cloud our choose. We Additionally, matter

of the services co-engineered buy integration streamlines and from support of their to level complexity partnership This product cloud contracts, and purchasing, patching. providers, billing, and eliminates additional operations each or the deepened directly them. directly enabling customers with installations, have We

partnership, new work, and the hard massive expansion. speed of three Importantly bringing are of our continuous most for for reselling in opportunity NetApp, and companies innovation engine, these to the at represent these innovative continued as partnerships cloud years largest technology. create a go-to-market cloud the ONTAP and represent and growth world announcements Each of the

providers. are storage the that first natively We and cloud is major each now environment of into integrated public only the

We significant infrastructure the made Security threats most introduced Security, Delivering Spot designed and and the portfolio. new product to also prevention. keep remediation, analyzes, to a Spot surface secure. security, enhancements vulnerabilities detects, critical We AI-based provides continuous, prioritizes cloud and automated to compliance, Spot actionable

traffic also by flow, their Spot incoming enhances optimal new further a and ability to intelligent controlling intelligently We utilization released traffic which optimize performance. and functionality Elastigroup, our high network to instance applications customers’ for managing

Virtual fully beginning closed of and assessments together complete suite and cloud the a will full analytics of billing the Additionally, we CloudCheckr, At QX, a built managed, announced Spot whose secured, and solutions Microsoft Spot solution Desktop. to acquisition the continuously configuration we of management, with monitoring, provide Windows desktop XXX augment Azure services. service PC, optimized cloud and industry-leading for

$X.X and QX, our At cloud, portfolio In better of ransomware to storage storage, annual the capabilities and of system of are latest on will increase The service headroom to and growing strong year-on-year. faced array in analytics, our also supply QX, more and out was continued Flex expanded we and the and introduced array customers as markets. modernize with flagship leverage growth, strength we portfolio. we ONTAP increasingly the new by recognized and strategy for strength revenue XX% Keystone base Insight, named comprehensive than we year. we storage in Capabilities challenging again with cloud in our with substantial announced data vendor autonomous our service our in Gartner stay recognized distributor the addition throughout was private a sectors. Growth protection to by SAN extend reached All-flash evaluated as we build our a again for in offering. arrays for and on held and as flexible All-flash acquisition, All-flash In for and segment automated gained share even Also technology all will CloudCheckr help among like compose machine and that XXXX We year’s and Storage analytics customer NetAppTV solutions the our being our run delivers of across XX% systems. management, I’m hybrid storage enhance now rate the product XXXX in driven high modern our for enhancements Object Critical version learning. their an leader Gartner, and once storage a XX,XXX Based top cases, partner once customers confident engaged annualized the Cloud for object All-flash Insight, cloud a Primary portfolio event, in CloudCheckr see use Quadrant our storage robust with installed industry, to our cases. billion, environments. Magic Like were to existing environment. based this both performance public everyone our of attendees subscription, called NetApp record AI that Hybrid Storage which use and Gartner workloads We a array the solid platform businesses offerings Storage. rapidly in partner continue enterprise to business unstructured well as Primary

to evolve, While the everything customer to doing we manage can that believe address we supply continues chain and are through is mitigate substantial the we dynamic We them can headwinds. demand. and to situation continue the

clear our the suppliers for pleased QX ongoing our momentum, supply we results how with hard will a summary, for across have this full these and their Mike our work business. into am vision, reflect factored our As have and NetApp in support thank their challenges the explain, exceptional want we and execution QX for In I team and the chain to healthy year. uncertainty navigated guidance environment.

of team As we and fiscal our we close the what of I'm half 'XX, have year proud accomplished. first

to our cloud software. capabilities industry-leading further enhancing position bring in and to continue We market, differentiated

their our digital and accelerate we and work are transformation strategies, we to hybrid the their ahead. opportunity well-positioned adoption As sizeable of believe hybrid customers cloud capture

your to want for you Mike, information. I’ll XX, I invite the XXXX. stay for to tuned to all us turn more now and our join call mark Day I Before turn Mike. Investor March Please on over to calendars it over

Mike Berry

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

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

$X our for healthy as the we demand number ARR, number outstanding increasing are pipeline addition had guidance our a the year. by and QX, quarter march business Before EPS or fiscal margins; Cloud our year our revenue, guidance; of Cloud X, for and details, results we Public as another towards half of in discussion. the the it be billion ARR grow show for strong I valuable quarter, operating was high-end business Number would QX with go and X, you key to we continues themes number our the X, leverage significant today’s operating the through think financial our above profitability model at walk driven through the full target; outperformance and to another we CloudCheckr, X, second

QX up QX NetApp and Now of gross up at details. delivered the to revenue, In we team entire business. the Outstanding X% billings by billion, $X.XX fiscal billion, yielded strong margin, across leverage operating Revenue $X.XX year-over-year. year-over-year. came in XX% the execution

and results by increased the was Cloud fiscal Our momentum the million operating increased All-flash million Gross recurring million the seen demand last we in year-over-year. and we’ve across were revenue Cloud, solid continued all Public healthy revenue XX% Cloud the driven trends product and year-over-year, $XXX of Product support increased revenue over third 'XX. $XXX year-over-year. delivered Within Hybrid year, QX guidance. towards X% throughout Cloud continue of software with billion year-over-year. X% Total both EPS Hybrid quarter portfolio. expect came segments. growth of QX driven Total above mix this $X.XX shift high-end Consistent up our X% our to $XXX the consecutive by for Hybrid margin segment product of of margin, revenue revenue

platform deferred Cloud scale growth. ended of revenue, Cloud As and combined, and software up delivering NetApp XX% the marks quarter Public support up was George Azure revenue history points Insights. QX revenue, ARR representing $X.X the XX% in margin with growing strong was deferred profile for XX% value rate, systems. Cloud Cloud Public platform. When XX% XX% Public million, Cloud highlighted, of year-over-year. Cloud million recognized product Cloud in was total growth. continues revenue Public Spot XX% year-over-year. recurring leading overall at the QX. company’s which XXth our XX%, of We product portfolio the $X of margin growth, Hybrid software-rich Total was All-flash XX of both shift the is XX% growth our Public and which billion XX% Cloud first up continued Total growth year-over-year in total of includes QX revenue and revenue from XX% in indicator in to Cloud an time year-over-year. billion constituting was best year-over-year also XX% $X.X XX% revenue year-over-year, of revenue, revenue sequentially, our in eclipsed totaled gross exited revenue. positively and Within revenue, impact recurring QX the the was $XX Public $XXX revenue continued and quarter year-over-year, our the margin X segment, from 'XX. of up Recurring gross Files, run for X% and billion up support reflecting increase and million, towards QX The $XXX increased of by consecutive benefited the in mix NetApp, gross and All-flash support software product driven Hybrid

very Public margin to gross margin gross profitable, XX% was corporate recurring with Cloud the average. business Our overall of be accretive XX%. continues of support to

free margin $XXX Public introduced goal operating continue a year-over-year EPS an to high. $X.XX with to of acquisition, new and Public free also trend XX%, XX%, long-term to our flow Checkr recently operations all-time QX an solutions. from We and business on margin in the quarterly of an highlighting are our Cloud for was Cash company highlighted for and was strong increasing record both of Cloud our days, XX% a be impressive offerings Cloud expect built million. is $XXX tremendous company. software-only million Year-to-date also flow throughout healthy and million up percentage gross long-term model, of operating represented ONTAP up XX% as DSO XX was towards closed was linearity collections quarter. product process margins in We leverage with goal. will the of QX FSx year-over-year. cash flow XX% $XXX the the our cash AWS, the new and support software-only

to and and short-term repurchased of we returned flow. XX% total We in we free with cash million $XXX billion $XXX shareholders, in million cash $XXX QX, $X.X During out million stock In dividends. in paid cash QX closed investments. representing

all have know, you As the supply headwinds recently. chain intensified dynamic

demand with continues supply work team much chain excellent with Our partner procurement our customer as meeting goal as closely the of to and possible. ecosystem,

our margins in invest product half QX the full expect to chain technology the inventory revenue longer-term 'XX our and this Towards in into year-over-year, 'XX. of anticipate our with year said, revenues dollars chain into addition the for X% and headwinds, ongoing chain our CloudCheckr, and the actions them, we do overall healthy execution goal, fiscal industry updated That we our We to grow supply With are facing of continue will now our incremental a year, XX% revenue commitments. supply we half of second impact QX, fiscal environment. even strong pipeline and raising fiscal the second to challenging and factored supply guidance. to demand guidance. to product challenges These mitigate gross been the have

Public growing We cloud activities, product go-to-market driven deeper also enhanced and partnerships confidence Cloud innovation. continued and have in by broader our opportunity, expanding

are $XXX with we range $XXX a raising organic Public on million of new ARR, million. result, the a our As to guidance Cloud

the is closed guidance CloudCheckr the you fiscal $XXX additional the Public new Cloud million total, acquisition XX% in 'XX $XXX We anticipate CloudCheckr year. As at to Cloud to contribute ARR million to midpoint, increase early in which $XX a for exiting our know, an Public QX. million, ARR we year-over-year. exit In $XX million implies

forecast we be fiscal XX%. total approximately For gross margin ‘XX, continue to to

will in now year. freight approximately We to temporarily product and However, and the QX pressure be for expedite supply chain margins margins the anticipate current product full XX% higher charges, challenges with QX.

guidance margin to are reaffirming our XX% of XX%. operating We full-year

investment including We million and sales forecasting investments between to Cloud expenses revenue generating driven in and and range $X.XXX portfolio, our $X.XXX by billion, operating in Cloud are customer activities, expanding teams. Public success our both

Our $XX quarter CloudCheckr. new per includes guidance million OpEx also from

expenses. revenue faster than As we last Day to growing discussed at our we committed operating remain Investor September,

are EPS $XX and growth, in free be income EPS other this at at Implied We between and million $X.XX $X.XX, representing cash expectation business tax-rate will range We XX% that now expense fiscal fund guidance. raising our continues negative We our platform. than is $X.X expect a guidance year-over-year committed the mid-point. to ’XX remain Hybrid remain delivering to fiscal Cloud Public flow will effective in and Cloud 'XX, growth the as to XX%. more in our our billion our in

on QX to Now guidance.

We the We increase consolidated at expect $X.XXX a margin and implies X% QX range year-over-year. between to XX%. and and to which, net between billion $X.XXX anticipate be margin gross XX% XX% to operating range approximately billion revenues midpoint,

million QX to operating includes guidance of million, expenses CloudCheckr. are Assumed $XXX $XXX in this which

expect We and $X.XX share $X.XX for to range between per earnings share. QX per

Assumed be be for our the team approximately guidance XX%. and our The our is in a not of core tax-rate focused closing, stayed NetApp control. will I other thank negative priorities QX In the want entire income external our were out and their half expense expectation on to million will by $XX distracted that fiscal events of first outstanding execution team in and year. the our

to as excited we on maintaining Hybrid Cloud on an that scale are platform, business. the while to momentum Public a continue truly unwavering build Cloud We differentiated focus

hand host to long-term the George our shareholders, we the value further drivers Kris for Day partners. to we Q&A. open Kris? where will Investor call for mentioned, it As and customers discuss the back an I'll plan now to spring, in

Kris Newton

Thanks Mike.

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

Operator

Ader of William question you. Blair. Instructions] Our line first comes Thank [Operator from with the Jason

Your open. is line

Jason Ader

of lot guess whole NetApp Files figure it's their ONTAP, guess is, our think business announced and elements is hard most are question us cloud I we How well, NetApp going you about different help terms to to curious for the be of Spot years I think CloudCheckr. let's business. services important, obviously, out from I the our you thinking a we I over to is FSx your as particular business, the how FSx now. guys. mean, going be time? George Hey, thanks. just about perspective there Azure X for call Yes, would services my within ARR magnitude? X important to I’m service should how I’m from will which particular be just about in And cloud the it, about that think that

George Kurian

quarter pieces Insights, past is Cloud services; important in all, performance I and optimization of three cloud. Volumes, our all our think, cloud compute the which we which Cloud cloud which storage first is storage and Spot this strong saw dynamic from monitoring, has portfolio; portfolio, of of

of them All have strong and really we're quarters pleased. really

it's that file of that days. terms are storage cloud I FSx for In if But we Amazon that the market. pleased. at Services suggests look an just first File player Listen, public the service a say the very Amazon And ONTAP, will early the dominant market, you cloud extraordinarily data having Enterprise ONTAP in opportunity. Web enormous needed party is storage in is

We're innovation have We play we for out work the Azure us. several is early will over the of, really that with are that But doing the Just we a files NetApp pleased to see quarters, right? really Microsoft long, product stellar kind a now business. and results. enablement scale like the next

Jason Ader

Thanks.

Operator

Thank you.

with comes Morgan from Katy the Our next question Huberty of Stanley. line

Your open. line is

Katy Huberty

fiscal Mike, the any should 'XX shortfall profit back impact in impact Yes, think revenue contributing growth? in sized to what you product we the half? the supply And of revenue to the chain just constraints. of thank But is you.

Mike Berry

the for Katy. question, Thanks Sure.

for cloud. the put situation. really the Coming we're year calling fiscal hey, growth So for QX, a as growth, how QX feel supply tougher up. guidance And chain We across a shaping in the little raised even the about revenue context off good both it we've really we and in bit, product strong full let's year. the with did

of much in what As fiscal numbers. way to very how second of really we're what make work it But We of want 'XX. we the we as partners does 'XX, hey, able all to fully our chain in, implication our break in have through into can. we've diligently Candidly, guidance was we're the it terms the that prepared And our see we'll it not with work that two fiscal baked fiscal supply as sure to the supply we relates our said fulfill into out, customers, how its At baked have does remarks, going this our level? year. rest to we'll goes, half of guidance, as chain? to team, to don't continue

Katy Huberty

Thank you.

George Kurian

if the I a trends think you growing really you product slower second broadly the our at services the and that in mix. well. progression expectation quickly, is my than should think with services revenue growing team managed the has bit first see of cloud environment half continued guidance, that speaking, And little half I and our business look overall

Katy Huberty

Thank you.

Operator

Thank you.

comes with of Sachs. Goldman question from next Hall Our the line Rod

Your open. is line

Rod Hall

me. for taking are applications. do earlier, about, strategically, where this as curious, these going just the most give opportunities where specific where of a was take into you're Yes, us opportunity strategically? I A in sell if in into hyper Can great. we've seen business, lie, bigger? you directly you of storage. little you back to cost cloud But I'm Thanks know to some question hardware of service I is? a services if sales hardware three to of kind amortizing some to question. you're see is these wanted an of George, thing asked the industry I for I into direct also services, maybe And be dig And way kind things what you couple I for where instances. a these But that bit. One for emerging some sort the application wonder scalars opportunity the the of think hardware are service, low Thanks. of part some questions flash the as the know, think in wonder

George Kurian

customers, our broad regard with look a the at to think providers, with cloud we approach I together serve to range of Listen, opportunities.

Cloud. in I think they exist Public don't the solely

to data a us can so, hybrid deliver Google the commentary infrastructure distributed on we build you that could range platform with see, my cloud management see example, remarks, with them. and the you'll for that scalars broaden and innovation management multi cloud truly services with opportunities continue hyper around in working think so the we the, of prepared platform I a

I be for to public going cloud, substantial continued the within there growth. think opportunities are

towards I $X targets we really, as we think had ARR I said, laid billion good that out. the progress really feel the about

will share conference, biggest Cloud And to the providers specific our spot opportunity. We Cloud just alone a is file analysts more world. rapidly me let Storage about alongside long-term the our updates in plans storage the a of but sweet very let right, at three we is massive are that at say, opportunity. cloud growing multibillion the positioned

priority. more onto them. and of Second, compute also deploy and massively us important gives services, platform only another to that go Spot more Cloud CloudCheckr cloud collapsing of as two plus service cloud elements monitor a workloads but cost we types Insights, And management infrastructure management important Service, Infrastructure a see of after And these set cases. and those not is customers platform use differentiated monitoring customer our

So really, really, progress. I feel really about our cloud good

Rod Hall

Great, thank you.

Operator

you. Thank

Our next of comes from the question Cowen. Karl with Ackerman line

open. is Your line

Karl Ackerman

in relying integrate how Yes, and as was your thank question, margins the gross into shifting grow hoping toward high actually insights rather force? your Should target operating happen partners, go-to-market earlier, you margins, the could given address maybe appears cloud expect discuss this could XXs. billion business than that in and as $X the And cloud that simply you corporate on plan to a spa line be Or cloud to can Thanks. drive cloud business the you. I you we your sales portfolio. to own achieve average? you CloudCheckr with

George Kurian

by CloudCheckr, to think allows to platform cloud and available, what efficient regard on do deploying most their is optimize storage cloud to spend customers computing Listen, spot environments, the I with dynamically right.

prioritize subsequently, So to the they and spend first about CloudCheckr we technology. able What should them using the best is move customers integrated Spot. build then do Spot an of which allows be environments can XX% that their and entire optimized to to of those addressed with quickly, customers the savings. now analyze most first And Spot for they gives environment get so also to

perspective. a an to billing use we're from their of it has and strong CloudCheckr footprint downstream platform a brings public customers. about So integrated excited From in managed perspective, who service a route analytics what sector, in it as and technology for providers all market

to total be we fast margin to in opportunity. continuing doing opportunity see the revenue so invest fell to gross going We into would the bottom a capture margins, we don't so line. I XX% high you of the first growth year, are reach And just to a it to cloud we at today, expands that more marketplace. this operating highly cloud But break tell growing the are while margins. the margin of the drive model you, look And operating than regard to company. of are that. leveraged operating company, With our we our if half profile operating the for total

continued and So portfolio. cloud services margin I'm ahead our and increase rich excited Mike, about possibilities you software the anything have in else? in

Mike Berry

We because both across add One things you is a of cloud Karl, goes a couple to synergies a George. would of said. thanks, it to business. I lot as R&D, ONTAP in ways as couple do just Yes, benefit those. George the in there's relates know, what

So it, that will out. help, the we it call as margin, you don't operating though break even

helps. other to market about The talked channel certainly the and hyperscalers yes, is the sales we've thing route

our have efficient, team. well. especially up team They that as sales get We also success customer and more as more own we build will

average the look $X our those ARR. have that And as we've we as very about, a corporate operating target, that today. look billion about at certainly you near $X talked billion of So comps at margins are

Karl Ackerman

Thank you.

Operator

you. Thank

of the line from is Fox question next Fox Steven with Our Advisors.

is line Your open.

Steven Fox

afternoon. good Hi,

for Can see that initial Thanks. success you would George, cloud that? the to maybe you that fully have with portfolio all you, How us you full talked do upon for leverage having from sort think builds integrated question how now more you how service services where And roadmap one success? you then start Just of about a providers. give itself? and cloud you later

George Kurian

drive ways cloud Yes, certainly, we we three have success that business. in the

expansion. workload and certification technology is first The

primary the work VMware of is Cloud that as as the more using that the new as to environments well cloud now cloud with to Google, as to customers want use we best I and NetApp to to in Cloud, the VMware cloud Volumes store, to that customers more able An more has can certified a cited technology. primary served enormous VMware expand critical which on deploy recently right. NetApp So be being and data workloads now our VMware, qualify example providers benefits to be mission and the

additional expansions, and is the that's go-to-market engines. certifications for second So Workload enablement the regions, and one.

us grow And customer steadily get in net Azure very service. based know a to scale XXX%. of we and very rate the a we're early working are finally, seen files and our that. But and then over successfully and business days You've on recipe behind Google It's NetApp Amazon retention time. the that. healthy Dollar our is to period upselling wants customer cross-selling and base.

that services. expand we a time, of portfolio then come shows get down. sell that our them and uses to one should services, over of So they it a more But once dramatically, customer

on to We're get we lots the our really, super And ways hard worked cloud going here excited. grow really we're and to to of capitalize So business ahead. opportunity.

Steven Fox

helpful. that. very Thanks That's for

Operator

you. Thank

question next Raymond from of the with Simon Our James. Leopold line comes

Your open. line is

Simon Leopold

your question. strong NetApp? In declines storage I encroaching seems seeing aspects of trends and the there the least you're the performance? that if that unpack be declining, mid taking sub business, we're if some market. segments from competitors steep for on in for flash very high-end the are the trending one All-flash high-end. Thank growth range And at is little to how wondering Thanks a see you imply maybe you and you. your particular, of which to bit maybe more would seeing I'm traditional want at are see suffering, could

George Kurian

absolutely. Yes,

the think forward, systems to expect I range trend time, spot mid the some free environments seeing out. price consolidate large a different said play with completely memory have And a of sweet clustering, offer you [indiscernible] we that going build long be to And that days performance for a from range our are with customers. transparent. software, that enormously cannibalize workloads. And the standpoint range clustering high-end will you're of business to mid for competitors. our we over The free systems of of can the continue

an we'll Hybrid going within part business, continue All-flash that how will in customers will see -- have trend regard a long-term continue have so time. over the data and arrays With the important And position our to on data of arrays center. growing these center. to to Flash

So base. of flash the installed XX% in all a example, for installed is today base, about our

XX% come play time. to grow We that expect more as flash technologies to number to about over

subscribe that not archival, disk no theory certain do will value are I think, however, enduring retention, and for that images, hard have backup value, built workloads, drives for to the of capacity they media things oriented that. longer have they we workloads like sets

focused market. in storage going execute our our you. good So object We're environment. our against business about we businesses All-flash feel for and the the to position to enterprise priorities stay continue Thank and array storage

Operator

Thank you.

Research. Longbow of the line Nik from next with question Todorov Our comes

line open. Your is

Nik Todorov

Yes, Thanks on and great quarter. congrats another

Cloud side. Hybrid the on that demand seeing It me accelerating you're there. to question sounds Another

the So on from half normal model of you Also, the Thanks. any could perspective? challenges, is, much second you visibility I your a in what have half. and forward. chain kind backlog that strong given supply you seeing is of seeing impact are And point? do do think the pipeline you how talked very think at question this about second have

Mike Berry

the Hey, Nik, we Mike. demand Yes, it's good for the question. feel environment. Thanks very about

a ins at we -- Again, pipeline really Poland's is relates is talked is good now into any and we we overall chain. better look the baked as on second the we there's at feel environment. outs. As half. demand no want what sure half, make going as really have result of really a about it haven't to the as much And point would And this note, push seen the view there. call there's either, and backlog, basis we've we do been certainly purchasing about, lot There significant I what's guidance supply a look always pull shift at also to quarterly behavior of second a unusual a into I

We there haven't either. seen anything unusual

pipeline as that forward of continues go And going the half like good really customers. second behavior our looks about So into buying hopefully we into year. the next in what feel

Nik Todorov

Sounds great. luck. guys. Good Thanks,

Operator

Thank you.

Jim of Suva line the from comes with question next Our Citigroup.

open. Your line is

Jim Suva

bit normalcy that contrast away, now back and Thank Thank pandemic seeing, you. may what of of just or pre the like you more is I'm to the little All-flash Can the saw compare George you is society you're of lead that think be customers. you. and Mike, trends contrast, and more good might post be a longer now hopefully kind discussions in because hopefully. or you're for you it with is getting purchasing compare of to versus of pre-pandemic post, versus having chain, a here supply cloud times push

George Kurian

perspective been for the roadmap But how always digital hybrid into customers. work IT, architectures our technology part have and continuing see long-term focus and transformation, trends has they That on certainly We COVID. our of evolve. with come architectures hybrid sharper of business been long-term have those

workloads, cloud-based for be environments to workloads, or hybrid. future ability of we in to will on the environments those remains and as for We think going work teachers continue classrooms, based able especially to desktops, have and for of seen certain the acceleration conduct schools forward, like use the you're virtual cloud

I've there flash have economics part will earlier are enterprise a we've used like what think in going the to for, understand and the hard flash the that is and storage big flash mentioned believed sort drives. to people the the consolidate used going your grows. flash call early for. to ability I environment always being that now is That Within center, on center the what will data of draft simplify be HDDs of customer environments, And to understand stabilizing are workloads of data stay to continue growing said, be and and as

a see like And as more and that, mentioned, so regard we unusual. steady With things didn't we Mike anything see and pattern lead times to, there. transactions

variety well video to starting conferences, conferencing meet as have as a customers some using We digital now able to meet been of through mechanisms, mechanisms, customers in person.

continue And going time, of least. forward for so we expect at period a that to

Jim Suva

congratulations your much, so you and and to Thank teams. you

George Kurian

you. Thank

Operator

you. Thank

question the Barclays. next Long of with comes Our Tim line from

is Your line open.

Tim Long

think about a was tackle chain strategy some what and you the and little inflation that the facing how are Thank bit peer your obviously on commodity pricing the is a where you be challenges a other going few next and of you you. Could there you're given, be talk NetApp And of quarters somewhat environment will hoping you. see side. companies kind And bit through here? that a I sometimes flowing market prices the little competitors moving you view the differentiation talk supply in just in about -- do any these could Thank model to of how some will doing? pricing factor. over

Mike Berry

Tim. Hey, It's Mike.

for the So, thanks yes, so question.

of a the seen pricing not have We environment. in much change

we've it's still relatively marquee to somebody keep everyone's before, while event. does But to an grab rational something about be going certainly As talked that's one. a customer unusual [ph] a or

As we've won't competitors. for any looked forward, speak look our I of

everybody's all costs. think the with business dealing up component board, costs across freight gone I We're their looking hey, that. in have at saying, especially

talk expect about that you to increases. will do doing So hear I continue folks price

NetApp from at this depends think Again, we've a looked we're long on I how lot in that. a this perspective, of situation.

increase. price a implemented have We

our expect our would start want an for we speak again, expect to So year. I competitors. them. later in continue impact But see across to that I to do have that to don't fiscal to

how shortage this approach depends well I market long the think on short how as last, our supply chain a well. lot of as and they component this manufacturers,

Tim Long

Okay. Thank you.

George Kurian

Thank you.

Operator

you. Thank

comes Ho from the Deutsche Sidney Bank. Our of question with line next

open. Your line is

Sidney Ho

have Thanks free I my for flow. the question question. cash on a taking

about So lower free it what maybe would average imply XX%. the That's second definitely year on the full of XX% fiscal happened based It's your since half year X about of flow, below the year cash the year? XXXX. full guidance, of color

is highlight that cash second my First of a generation? in And anything flow change may factor you Thanks. constrained would math so you expect supply particularly, do cash if of flow this all, right, being terms seasonality?

Mike Berry

All capital right. for the awesome, question. thanks Hey,

already would million. talk your point, guide off, or let's we've generated for it, So free top. start do let's imply your cash operating flow billion. X.XXX call it $X.X for about greater, the so $XXX yes, billion operating that cash at cash let's and To first, did We

We So what you QX, in forward some had a a record collections pull saw QX us great low into quarter QX. in was for collections that did DSLs.

Still you least to lower really cash getting 'XX, the look $X.X seasonality half as at of to number. the second second it as a we in So bit called should operating you be at QX. that, see half, the billion expect of little because the that strong

to your that inventory. question invest baked about As we chain, on continue an in we'll supply in have assumption

in our well you about with You QX from XX inventory for saw We folks was last QX, talked in that that XX went couple that as the turns quarters. to of planned.

have we that baked into assumption. So our

kind Going into from forward, I in return. seasonal And to think expect it see just continue that a good future. the you should the wouldn't to averages expect perspective. QX I very a of very, was Again, collections

for question. So again, that answers your that Hopefully question. thanks

Sidney Ho

Thank you.

Operator

you. Thank

comes the Northland question next of Our Nehal Capital. from with Chokshi line

open. Your is line

Nehal Chokshi

strong Cloud Public on That's thanks and congrats Yes, services. see. great to

the feel you materially the On the you pipeline -- billings? And say year-over-year giving decelerate why good what do a Can the that? basis. behind talk pretty were dynamics on overall business, buildings to did you then given about

George Kurian

Sure.

and So hello. thanks, Nehal

XX%. in bit in XX% right as by about QX that around a quarter as a XX% about In of talked Keep grew on that QX, we so mind to on around grew well. about basis, dynamics on as little deferred billings going based the number X%. FX -- a as to growth, by is jump So each billings revenue, year-to-date well

in deferred calculate we in net quarter-over-quarter impact and in change of the FX excluding So quarter then the billings as deferred. revenue

of little a seasonality bit a So there's move little to that's going to numbers that. bit, the

the we on at Billings take the our the look forward, based matters jump overall the well grow trailing bit at as months. of revenue billings billings, XX as number. little or -- you and would or continue components to a above So a I seasonality. to number expect And see looking encourage year-to-date will mix would again, around

Nehal Chokshi

Thank Great. you. it. Got

George Kurian

Thank you.

Operator

Thank you.

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

line Your open. is

Wamsi Mohan

trajectory. through to to pipeline? pricing QX? issues also And like maybe On takes Are mentioned on Yes, this drives to else Or guide QX you QX? QX, better better For Mike, seasonality for there you increased well. be that is and a resolved something as a component QX the QX you puts express from and expecting thank your you. little can QX differently QX,

So QX to QX, maybe you bridge be could helpful. that'd

George Kurian

is might know, semi-annual you year, run plan. our the a we QX finish as fiscal of

And QX, so, strong we QX. had and a strong we'll have a

seasonality in the reflects through buying that So customer as driven our planning, well compensation year. by our the as business,

I'll margins, cover Mike think regard have I to that. with

we are do is What terms In tell our have excellent margin profile, the seen partners chain costs before, largely and we are expect elements would not just up our I on that and with for of the situation. are year-on-year that year-on-year largely the There a as that some basis. execution flat are costs you, the year-on-year supply of component year through have we component said of are teams . the year-on-year, others resolution components supply full the down flat near-term and but

reflected through now, the premium and Mike I our take expedite that some that is I freight which time to the have think will is start the costs pricing we let what November, that systems. at see left characterize. will at really and are of a flow implemented in and we

Mike Berry

hey, you, to to And see to from services add on if just One growth. George. to that Wamsi, continue add specific hopefully mind. of you're quarter-on-quarter to Cloud is, question, Support, professional that, the will going that go QX services grow, this you keep QX, a Thank to couple revenue Great. things in

quarter. look work to QX through things make of a way time we little can then can And that point, As the doing at the only but increase, supply we in versus a bit seasonally always as to QX. in other work as its to take chain, price much of we and lot George's in high it'll engineering our QX certainly sure We're system. in want deliver not

our guide QX. and QX for up our into those So together guidance, what add implied those. all in That's added

Wamsi Mohan

Thank you.

George Kurian

Thank you.

Operator

you. Thank

the Our next Daryanani line with question Evercore. comes of from Amit

open. Your is line

Amit Daryanani

Thank do Azure for AWS early the NetApp the you've now, you fully business. perfect. proactively especially you time? while billion partnership back, that you then number that when integrated this you pilots to this thanks and narrative? on incremental NetApp? up that the and how in did -- questions Just envision us, or stages, guess Yes, given AWS at around bring I wondering with in was about how right And think Azure? would is services you really of a George, about against with cloud what you partnership, Or the the of terms roadmap $X envision you fact somewhat think $X my workload question. Did stack is AWS how the just that I is when console, in would anything selling the the that this all roadmap? AWS is billion I taking

George Kurian

think with scale enormous the different And They of different all, IT market. have work impact on have first with trillion dollar I honored and and ways approaches them. both strengths. Listen, enormous are the base and we different AWS base. and are corporations the of Azure to reach into customer customer to These

Amazon we're with so Microsoft. work excited and to And

I market, overall right. scale reflects think opportunity set the the in their

market So and massive Amazon has market presence share.

are file large of a I market. think very in the part the they space, files

the storage into So scale a have them with market. us file play that the enormous fact we gives

done from business. we've partnership the standpoint, few over a execution what are And know we listen, think, to lot learned I an that in we've Microsoft. last it scale takes years. a We with

regard multiple some we cocky scale had part services But always we're of quickly. we enough assume innovation had think that to that scale we and are more believed But that we hyperscalars. we you that our honored roadmap have the with bag. with in I should were working say and be AWS. that partnership to the as don't billion and learned how lessons to With go-to-market. those plants, we the continue We of to can would $X taking with co-engineering into listen, other that we also

get of to mix timing I think, good all we Date, about tell you $X feel to where about as that in right, I about where the really and I good roadmap we very, are feel We'll but more the and Analysts our very when billion. said, a I we are.

Operator

Thank you.

line Capital. from Baruah comes Loop question of Ananda next the with Our

Your open. line is

Ananda Baruah

the the you Appreciate components, chain, Yes, trade to interplay guys How XXX model. about question. op how XX%. about basis Hey, points that at guess, off? towards investing margins or to in for I already good of guys. mid a the you I guys Thanks. business be think interplay, the growth, expand? to continue origin, M&A supply taking guys or like cetera, go and place XX% do you Mike, actually off and investing margins nice maybe seemingly Now in think we're up, the do are really on the think continue the absorbing XXX afternoon, sort the margins which kind so, of it. expense, trade has the as Thanks George in et between of XX%. If last

George Kurian

great great, a So question.

talked last So than is business is the in operating to lower to invest the couple investing for as of our goal we've years continue revenue to drive cognizant margins. drive a about at fully expense growth. to Being a rate COGS in and

so if pick $XXX an And million number, guide, million, take incredible operating midpoint the saw you $XXX You $XXX the of million favorite number. up your OpEx your really is or leverage this year. almost a far on year-over-year, revenue

we're So good scale business. the drive while in to investing continuing really

that development. so we're going sales as return. cloud that what product and forward, but do focused very to we only to continue on on much well not will does That's focused We need incremental as where invest, why

invest expect So should to going continue forward. you to us see

OpEx, M&A. lot cash nice balance of flow. outside we've a have at still And of our continue of to Plus, it we're XX% Now balance fund on flexibility very the free to acquisitions. in will we and before, talked least cash be about allocating we a active sheet

to should to M&A you as drive growth, us well active yes, OpEx be So, market. expect in the as increase continue see to

Ananda Baruah

in expanding goes like it bigger the revenue keep to So accelerating margins up cash M&A, and flow opportunity free … growth, sounds get like

George Kurian

doesn't we're fun? that That's focused on. what exactly like sound And

Ananda Baruah

guys. Thanks,

George Kurian

Thank you.

Operator

you. Thank

of question line Chatterjee final the comes Samik Our from with JPMorgan.

open. Your line is

Samik Chatterjee

guess up pricing question. for my earlier. on question taking I the thanks was my Hi, just following discussion

time. You take would taken flow some a through mentioned the bit you've pricing of and

as they away? to think time sticky eases trying of kind next price to those can we how as I'm And supply for be? year about to Or those flow competed Thank should they you. chain price how of we benefit stickiness how increases the just fiscal Are they much into the can like increases? have they Just take P&L? be think the

George Kurian

Yes, great, great questions.

rest I'll a to expect So in it as you takes flight, much you QX. next year, see of that a while of at work look cones in There's year, this a lot the and take really benefit it shouldn't of effect. fiscal for into to

So we expect to to in start some that QX. see of

covering a of overall for lot are roll there's doing? What I what component environment? we lot right What's think earlier happens our costs things. to in doing very with customers, we it of think think well. depends 'XX, freight? to say, costs sticks. be while the our for ensure disciplined our and are around as pricing competitors want able into As X we us we a we are hey, Certainly to And your question care pricing. amount that on that are on we I taking The the things

So as did impact of on it. on you clear on the we'll year that. focused be I talk to But you. next to want to be the very just 'XX. We'll impact of guide we Thank

Mike Berry

Thank you.

George Kurian

key ARR, year. position We solid the our healthy Thank bring ahead. in we half cloud deep a our year market for to a We full Object and and Public markets to to revenue, Day well and Investor in while in as again increased have Cloud for of model operating unique delivered the innovation CloudCheckr in Public the I speaking next guidance with us fiscal scaling and you. of gaining addition first we look the and Storage, by All-flash our with significant of share forward business driven The grow Cloud opportunity rapidly our our margins. demand our revenues and quarter second great half again, all business. and QX, leverage the pipeline March. partnerships, We're outperformance at EPS you execute upcoming

Operator

for you Thank call. conference today's concludes your this participation. gentlemen, and Ladies

disconnect. now may You

NetApp (NTAP) 1 Dec 212022 Q2 Earnings call transcript