NetApp, Inc.

Good afternoon, ladies and gentlemen. Welcome to the NetApp second quarter fiscal year 2022 earnings call. At this time, all participants are on 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 Chris Newton, Vice President, Investor Relations.

Thank you for joining us. With me today are our CEO, George Kurian, and CFO, Mike Berry. This call is being webcast live and will be available through replay on our website at NetApp.com. During today's call, we will make forward-looking statements and projections with respect to our financial outlook and future prospects, such as our guidance for third quarter fiscal year 2022, our expectations regarding future revenue, profitability, and shareholder returns, the value we bring to customers, our ability to drive growth in our hybrid cloud segment and scale our public cloud segment, and our ability to manage through the current supply chain environment, all of which involve risk and uncertainty. We disclaim any obligation to update our forward-looking statements and projections. Actual results may differ materially for a variety of reasons, including macroeconomic and market conditions, such as the continuing impact and uneven recovery of the COVID-19 pandemic, including resulting supply chain disruptions, and the IT capital spending environment, as well as our ability to gain share in the storage market, grow our cloud business, and generate greater cash flow. Please also refer to the documents we file from time to time with the SEC and available on our website, specifically our most recent forms 10Q and 10K, including in the Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factor sections. During the call, all financial measures presented will be non-GAAP unless otherwise indicated. Reconciliations of GAAP to non-GAAP estimates are posted on our website. I'll now turn the call over to George.

Thanks, Chris, and welcome everyone to our Q2 fiscal year 22 earnings call. We delivered another strong quarter with results all at the high end or above our guidance. Building on the momentum of last year and the previous quarter, Revenue grew 11% year-over-year with public cloud segment revenue growth of 85% and hybrid cloud segment revenue growth of 8%. Product revenue grew 9% year-over-year, the third consecutive quarter of year-over-year growth. Gross margin, operating margin, and earnings per share are all at record highs for the first half of the fiscal year. Our performance reflects continued broad-based customer demand created by the sizable and long-term trends of cloud and data-driven digital transformation, where NetApp is playing an increasingly important role in helping customers achieve their business and hybrid cloud transformation goals. NetApp is uniquely positioned to solve organizations' most significant challenges, in both modern and traditional applications, on-premises, and in hybrid multi-cloud environments. As I've said many times, our public cloud services not only allow us to participate in the rapidly growing cloud market, but they also make us a more strategic data center partner to our enterprise customers, driving share gains in our hybrid cloud business. We are seeing this play out in the strong results from both our public cloud and hybrid cloud segments. In Q2, we had a number of announcements that further solidify our leadership position as we continue to drive growth in our hybrid cloud segment while scaling our public cloud segment. Public cloud revenue grew 85% year over year, driven by Azure NetApp Files, Cloud Insights, and Spot by NetApp. Public Cloud ARR grew to 388 million, an increase of 80% year-over-year, and public cloud dollar-based net revenue retention rate remains healthy at 179%. During Q2, we advanced our cloud agenda significantly, and we remain confident in our ability to achieve our goal of reaching $1 billion ARR in fiscal year 25 with a gross margin profile that is accretive to the corporate average. In Q2, Amazon Web Services, AWS, announced the general availability of Amazon FSX for NetApp ONTAP, a native, fully managed AWS storage service powered by ONTAP. This new first-party product is fully integrated into the AWS console, and it's sold, supported, run, and built by AWS, making it easy and cost-effective for customers to take advantage of NetApp's suite of enterprise-grade data services while running in an AWS native experience. As we saw with Azure NetApp Files, it will take time for FSx for NetApp ONTAP to ramp, But we are extraordinarily pleased with the early indicators and the number of customers piloting this service. Additionally, Google Cloud announced that NetApp will provide storage infrastructure for its Google Distributed Cloud hosted, where data resides in customer-owned data centers and co-location facilities. Google is previewing the integration of Google Cloud VMware Engine with NetApp Cloud Volume Service, a fully managed service that helps organizations meet their needs for storage and disaster recovery. We also expanded availability of Cloud Volume Service in the Google Cloud. Much like any other Google Cloud native service, Cloud Volume Service can be provisioned and consumed against existing Google Cloud agreements making it easier for customers to expand their cloud engagements with both Google and NetApp. Finally, Microsoft announced that whitelisting has been removed from Azure NetApp Files. Azure NetApp Files has been generally available since May 2019, with customers around the world relying on it to run their most demanding enterprise workloads in the Azure cloud. Now customers can instantaneously leverage Azure NetApp files to accelerate the deployment of mission-critical applications to Azure. Additionally, we expanded the backup restore service and cross-region replication capabilities for Azure NetApp files. We now have fully integrated services with all the major public cloud providers. to give organizations the benefits of our storage and data management expertise and experience, no matter which cloud they choose. We have deepened each partnership and co-engineered services directly with the cloud providers, enabling their customers to buy directly from them. This level of integration streamlines purchasing, billing, operations and support, and eliminates the complexity of additional contracts, product installations, or patching. Importantly for NetApp, these partnerships create a new and massive go-to-market growth engine as three of the largest and most innovative companies in the world are reselling our technology. Each of these announcements represent years of hard work, partnership, and continuous innovation. bringing ONTAP to the cloud at cloud speed and represent the opportunity for continued expansion. We're now the first and only storage environment that's natively integrated into each of the major public cloud providers. We also made significant enhancements to the Spark portfolio. We introduced Spark Security, a new product designed to keep cloud infrastructure secure. Delivering continuous automated AI-based security, Spot Security analyzes, detects, and prioritizes threats to surface the most critical vulnerabilities and provides actionable compliance, remediation, and prevention. We also release Intelligent Traffic Flow, a new functionality to Spot Elastic Group, which further enhances our customers' ability to optimize their applications by intelligently managing and controlling incoming network traffic for optimal instance utilization and high performance. Additionally, we announced SpotPC, a fully managed, secured, and continuously optimized desktop service built together with Microsoft to provide a complete solution for Windows 365 and Azure Virtual Desktop. At the beginning of Q3, We close the acquisition of CloudChecker, whose industry-leading cloud billing analytics and cloud configuration management monitoring and assessment solutions will augment the full suite of spot services. In addition to being a solid technology acquisition, CloudChecker will enhance our partner strategy for cloud, and we will leverage the CloudChecker platform to build and extend distributor and partner businesses in both the private and public sectors. Also in Q2, we held our annual flagship customer event, Insight, with more than 10,000 attendees, and we introduced NetApp TV to stay engaged with customers throughout the year. At Insight, we announced enhancements to our hybrid cloud portfolio with the latest version of ONTAP, that delivers even better performance for SAN and modern workloads like AI and analytics, expanded capabilities for object storage, increasingly automated storage system management, and autonomous ransomware protection based on machine learning. The strength of our storage offerings was recognized by Gartner, which named NetApp once again as a leader in the 2021 magic quadrant for primary storage. Gartner called out our robust product and cloud service portfolio, as well as Keystone Flex subscription, our comprehensive and flexible storage as a service offering. We were also recognized among this year's top vendor solutions evaluated in the 2021 Gartner critical capabilities for primary storage across all use cases. Growth in our hybrid cloud segment was driven by strength in object storage for the rapidly growing unstructured data and analytics use cases and our all-flash-array portfolio. In Q2, our all-flash-array business reached a record high annualized run rate of $3.1 billion, an increase of 22% year-on-year. All-flash-arrays now compose 30% of our install-based systems, we see substantial headroom to continue to help existing and new customers modernize their storage environments. Based on our continued strong revenue growth, I am confident that we, once again, gain share in the enterprise storage and all flash array markets. Like everyone in our industry, we are faced with a challenging supply environment. While the situation is dynamic and continues to evolve, We are doing everything we can to mitigate the supply chain headwinds. We believe that we can continue to manage through them and address the substantial customer demand. As Mike will explain, we have factored the ongoing supply chain uncertainty into our guidance for Q3 and the full year. I am pleased with how we have navigated these challenges and want to thank our suppliers for their support and the NetApp team for their hard work in this environment. In summary, our Q2 results reflect healthy momentum, a clear vision, and exceptional execution across our business. As we close the first half of fiscal year 22, I'm proud of our team and what we have accomplished. We continue to bring industry leading capabilities to market, further enhancing our differentiated position in cloud and software. As our customers accelerate their digital transformation and their adoption of hybrid cloud and hybrid work strategies, we believe we are well positioned to capture the sizable opportunity ahead. Before I turn the call over to Mike, I want to invite you all to join us for our Investor Day on March 22, 2022. Please mark your calendars and stay tuned for more information. I'll now turn it over to Mike.