NetApp, Inc.

Good day and welcome to the NetApp 4th Quarter Fiscal Year 2024 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, 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 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 2025, 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. Thank you, Chris.

Welcome, everyone. We concluded FY24 on a high note. demonstrating robust performance in the fourth quarter and building positive momentum as we step into FY25. Our revenue for both Q4 and FY24 exceeded the midpoint of our guidance, reflecting the strong growth of our expanded All Flash portfolio. Throughout FY24, we maintained a high level of operational discipline leading to company records for annual gross margin, operating margin, earnings per share, operating cash flow, and free cash flow. At the start of FY24, we implemented a plan to enhance the performance of our storage business and build a more focused approach to the public cloud business while managing the elements within our control in an uncertain macro environment. This plan has yielded tangible results, and our value proposition is resonating strongly in the marketplace. Customers are increasingly turning to NetApp to help them build intelligent data infrastructures and leverage the power of public and hybrid clouds for rapidly growing data-intensive workloads like AI, cloud-native, open-source, and enterprise applications, while ensuring their data remains secure and protected from ransomware attacks. NetApp uniquely delivers a comprehensive and integrated portfolio of unified data storage solutions based on one operating system, ONTAP, supporting any application, any data type, and spanning on-premises and multiple cloud environments. We deliver unparalleled simplicity of data management and infrastructure and application deployment with consistent automation, all unified by common API and a single control plane. In a world of limited IT resources, rapid data growth, and escalating cybersecurity threats, we empower customers with the flexibility to rapidly deploy new applications, unify their data for AI, simplify cloud integration, and strengthen data protection. Now to the results of the quarter. We delivered robust year-over-year performance in our hybrid cloud segment with revenue growth of 6% and product revenue growth of 8%. Strong customer demand for our broad portfolio of modern all-flash arrays, particularly The C-series capacity flash and ASA block optimized flash was again ahead of our expectations. This demand propelled our all-flash array annualized revenue run rate to an all-time high at $3.6 billion, up 17% year-over-year. Early in Q1 of FY25, we unveiled our new all-flash A-series unified data storage products, offering customers enhanced performance and effective density at a lower cost than the previous A-series generation. These products set a new standard for enterprise storage, enabling customers to turbocharge workloads ranging from traditional enterprise applications to Gen AI. The new AFF A-series, coupled with our highly successful C-series, and TAM expanding ASA products position us to further increase our share in the all-flash market. Keystone, our storage as a service offering, was also a highlight of the quarter. Keystone provides cloud-like management for hybrid cloud resources in a single subscription with flexible multi-year contracts that align storage costs with business needs enabling rapid response to changing capacity and performance requirements. We consistently hear from customers that our integrated service level assurance with performance, availability, ransomware recovery, and sustainability guarantees is our differentiator. This has enabled us to accelerate growth by displacing competitors' storage as a service subscriptions, winning new Keystone subscriptions and expanding existing ones. FY24 total contract value sales of Keystone more than doubled from the prior year to almost $150 million. We expect this momentum to continue and that FY25 will be another significant growth year for Keystone. A leading semiconductor manufacturer, selected Keystone as the vehicle to consolidate its storage needs. Initially aiming to select one vendor for block and another for file, we established ourselves as a single global standard for both environments, displacing the incumbent for block storage. This multi-year, eight-figure deal allows the customer to reduce the complexity and improve the availability of their storage environment. AI is a top priority for organizations as they seek to accelerate innovation, revolutionize operations, drive competitive advantage, and deliver superior solutions to their customers. Data management is essential for enterprise AI. Customers choose NetApp to support them at every phase of the AI lifecycle due to our high-performance all-flash storage, complemented by comprehensive data management capabilities that support requirements from data preparation, model training and tuning, retrieval augmented generation, or RAG, and inferencing, as well as requirements for responsible AI, including model and data versioning data governance, and privacy. We continue to strengthen our position in enterprise AI, focusing on making it easier for customers to derive value from their AI investments. In Q4, we introduced NetApp AI Pod with C-Series capacity flag system, delivering a new level of cost and performance, RAC space utilization, and sustainability. In conjunction with Cisco, we updated FlexPod AI reference architectures to support the NVIDIA AI enterprise software platform, giving customers an end-to-end blueprint to efficiently design, deploy, and operate AI infrastructure. We were one of the first partners to complete the storage validation for NVIDIA OBX systems, and at the start of Q1, we were the first to announce a full-stack OBX system. The NetApp AI pod with Lenovo Think System servers for NVIDIA OBX is optimized for Gen AI and designed to support RAG. We announced much of this innovation at NVIDIA GTC, where we were honored to be recognized during the keynote for our role in storing a significant portion of enterprises' unstructured data which is the fuel for Gen AI. Through our partnership with NVIDIA, we give customers the ability to talk directly to the large amount of existing data stored on NetApp on-premises and in the cloud, demonstrating the value of our install base and the critical role we play in AI. We are the AI infrastructure of choice for one of the world's leading oil and gas companies, The company is developing its own large language model using a high-performance AI cluster with NetApp all-flash storage. They are now also building an AI center of excellence to support various departmental AI initiatives and have again selected NetApp storage for this part of their AI infrastructure, leveraging CCDs to optimize price and performance. They are rapidly ramping up their AI infrastructure building new models, and onboarding AI resources. They awarded us the deal over their AI server vendor because of our ability to remove roadblocks in their AI workflows and accelerate the time to value from their AI investments. Public cloud segment revenue was $152 million, up 1% year over year. First party and hyperscaler marketplace storage services remain our priority and are growing rapidly, increasing more than 30% year-over-year and driving cloud storage services to two-thirds of total public cloud ARR. These offerings are highly differentiated and closely aligned with customers' purchase preferences. In Q4, we had a good number of takeouts of competitors on-premises infrastructure with cloud storage services based on NetApp ONTAP technology, which helped drive our best quarter for cloud storage services with each of our hyperscaler partners. We are well ahead of the competition in cloud storage services, and we are innovating to further extend our leadership position. In Q4, we further increased the performance of Amazon FSX for NetApp ONTAP, addressing an even broader set of performance-intensive workloads. We also introduced a new service level for Google Cloud NetApp volumes, giving customers more granular control to match the capacity and performance needs of their cloud workloads. We were proud to receive Google Cloud's Technology Partner of the Year for infrastructure storage for the second consecutive year. Reflecting on FY24, I want to thank the NetApp team for their work to strengthen our position. We have a stronger, more complete all-flash portfolio, are addressing a wider set of cloud storage workloads, and have a robust go-to-market plan, better positioning us to win across the board and in new markets like AI. Without question, Our modern approach to unified data storage, spanning data types, price points, and hybrid multi-cloud environments is resonating in the market, giving us solid momentum as we enter the new fiscal year. Looking ahead to FY25, we are cautiously optimistic on the macro environment. The backdrop is better now than it was at the start of FY24. We will remain laser-focused on our top priorities while continuing to raise the bar on execution and maintaining our operational discipline. NetApp is leading the evolution of the storage industry, helping our customers make their data infrastructure intelligent for the age of AI. I am confident that this leadership, coupled with the strong momentum we built through FY24, positions us for continued growth and share gains. I encourage you to attend or tune into our June 11th Investor Day to learn more about our long-term strategy. Visit our investor relations website for more information. I'll now turn the call over to Mike.