NetApp, Inc.

and welcome to the NetApp fourth quarter and fiscal year 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Chris Newton, Vice President of Investor Relations. Please go ahead.

Hi, everyone. Thanks 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 for replay on our website at NetApp.com. During today's call, we will make a number of forward-looking statements and projections with respect to our financial outlook and future prospects, including, without limitation, our guidance for the first quarter and fiscal year 2024, our expectations regarding future revenue, profitability, and shareholder returns, and other growth initiatives and strategies. These statements are subject to various risks and uncertainties, which may cause our actual results to differ materially. For more information, please refer to the documents we file from time to time with the SEC and on our website, including our most recent Form 10-K and Form 10-Q. We disclaim any obligation to update our forward-looking statements and projections. During the call, all financial measures presented will be non-GAAP unless otherwise indicated. Reconciliations of GAAP to non-GAAP estimates are available on our website. I'll now turn the call over to George.

Thanks, Chris. Welcome, everyone, to our fourth quarter FY23 call. Our Q4 results reflect solid execution in the face of ongoing macroeconomic challenges. We delivered revenue above the midpoint of our guidance with disciplined operational management yielding all-time high quarterly operating margin and EPS above expectations. For FY23, we delivered record high annual operating margin and EPS despite the slow demand environment and relatively flat revenue from fiscal year 22. Even as customers are tightening their budgets in response to the macro, they are not stopping investments in applications and technologies that drive business productivity and growth. Digital transformation projects involving business analytics, AI, data security, and application modernization, both on premises and in the cloud, remain top priorities for IT organizations. This drives our confidence in the health of our market and future growth opportunity, despite the temporary macro headwind. We are participating in the areas of priority spending with a modern approach to hybrid multi-cloud infrastructure and data management by providing customers with the ability to leverage data across their entire estate With simplicity, security, and sustainability, we increase our relevance and value, and we continue to introduce new innovations to deliver greater customer value, further strengthening our position. On our last call, I outlined our three areas of focus to sharpen our execution to better deliver results, while at the same time, positioning ourselves for long-term success. As a reminder, the focus areas are remain prudent stewards of the business, tightly managing the elements within our control, reinvigorate efforts across the company in support of our storage systems business, and build a more focused approach to our public cloud business. As you can see from our Q4 and FY23 results, we have demonstrated success in managing the elements within our control and staying flexible to adapt to the ever-changing environment. We remain committed to maintaining operational discipline as we move through FY24, adjusting as appropriate to drive operating margin expansion and EPS growth while also continuing to invest for the long term. Turning to our storage systems business, Q4 hybrid cloud segment revenue of $1.4 billion was down 8% year-over-year and up 4% sequentially. Our all-flash array business decreased 4% from Q4 a year ago to an annualized revenue run rate of $3.1 billion. Similar to Q3, headwinds from large enterprises weighed on our product and AFA revenue. As you've seen, We are reinvigorating our storage portfolio, innovating to deliver greater customer value, reach new customers, and better address areas of priority spending and market growth. ONTAP AI and FlexPod AI are proven and tested reference architectures to help speed and simplify AI deployment. These solutions are designed around our all-flash arrays, which are uniquely suited to meet the performance, multi-protocol, and data mobility demands of AI workloads. In Q4, we demonstrated industry-leading performance in the GPU direct benchmark, proof of our ability to enable customers to use the full power of GPU technology for AI. Our affinity to AI use cases doesn't stop at performance. ONTAP includes native data management tools that streamline workflows for data science teams and integrate multi-platform, multi-site, and multi-cloud data pipelines. With new performance and data management features planned in upcoming ONTAP releases, we expect to raise the bar again, not just for performance, but for total workflow solutions that help companies realized the benefits of AI faster and with better results. The new AFF C-Series, our comprehensive portfolio of QLC-based all-flash arrays, began shipping late in Q4. We are very pleased with the initial customer response. In addition to lots of porting activity, we closed a good number of deals in the fourth quarter. One of our early C-Series wins, was a $15 million deal at a large financial institution for business-critical workloads in its cloud-ready, service-level defined environment. We beat the competition with a solution that was significantly denser and more energy efficient. Following this highly successful launch, we introduced the NetApp ASA A-Series early in Q1. The ASA is a new line of SAN-specific flash storage systems that deliver high levels of performance, scalability, data availability, efficiency, and cloud connectivity with up to 50% lower power consumption and associated carbon emissions than competitive offerings. The ASA complements our unified storage offerings to address block-only use cases while avoiding the operational and data silos of competitors' products. We are also innovating to improve the customer experience. In Q4, we introduced NetApp Advanced, a portfolio program bringing predictability and adaptability, including the storage lifecycle program for non-disruptive storage upgrades. At the start of Q1, we announced ONTAP One, a simple way to buy and consume all the native software capabilities of ONTAP. We are enhancing the value of these built-in capabilities with our ransomware recovery guarantee, which leverages ONTAP's unique combination of key built-in security and ransomware protection features to detect, stop, and recover from ransomware attacks in real time. In addition to delivering significant innovation, We've also rebalanced our go-to-market efforts, including focusing our broad sales organization on selling flash through compensation plans and reinstituting a specialist sales team for cloud. We believe these actions will allow the team to better address the large storage spam. Entering FY24, I'm confident that these actions will enable us to drive product revenue growth and regained share in the all-class array market. We are seeing early positive signs, but the full benefit of these changes will take time to develop and should be a driver for product revenue growth in the second half. While we are sharpening our attack on the storage market, we are not taking our eye off the public cloud opportunity. Public cloud ARR of $620 million was up 23% year over year, and ahead of our expectations, driven by strength in public cloud storage services. Our public cloud business in Q4 was back and loaded, resulting in softer revenue and lower DBNRR than our ARR results would indicate. Public cloud revenue for Q4 was $151 million, and DBNRR was 114%. Our public cloud services are highly differentiated with a multi-year advantage over our traditional competitors, and they create customer preference for NetApp. The number of total cloud customers, customers using multiple of our public cloud services, and customers with greater than $500,000 of revenue in the quarter all continue to grow nicely. While like our cloud partners, we see continued cloud optimization, some of the customers whose optimization created significant headwinds for us in FY23 have kicked off new projects that we expect to scale over the next 18 months. We believe that our first party storage services, branded and sold by our cloud partners, represent our biggest opportunity. We have aligned our sales specialist resources to our cloud partners' customer segmentation and go-to-market structure to tighten our alignment to and improve our execution against this opportunity. Over the course of FY24, we will scale our customer success team to further improve customer retention and expansion and develop a more focused cloud channel model. Cloud operations remains an important market for us and we have dedicated go-to-market resources to address this opportunity. We have not wavered in our conviction that public cloud services has the potential to be a multi-billion dollar ARR business for us. While the shift to cloud is experiencing an industry-wide slowdown, the long-term trend in favor of cloud is unchanged. In conclusion, while FY23 was not the year we expected at its outset, Our discipline management enabled us to overcome a number of headwinds to deliver all-time high operating margin and EPS. The fundamentals of our business model are sound, and our confidence in our strategy and the health of long-term opportunity is unchanged. We are entering fiscal year 24 with substantially more innovation and a new, more focused operating model to attack the areas of priority spending, In this uncertain environment, we will remain agile and continue to be disciplined stewards of the business. We believe our actions will drive margin expansion and earnings growth while yielding top line growth in the back half of the year. Thank you to the NetApp team for their dedication and focus. I am pleased with our progress, but we recognize our work is not done. We look forward to building on this momentum and driving long-term value for our shareholders. I'll now turn the call over to Mike.