NetApp Inc at Nasdaq Investor Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Hamza Fodderwala - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>Yeah. And I was told that this might be your last sell side or conference fireside as you are retiring from NetApp. And I noticed, you joined NetApp during the depth of the pandemic in March 2020. And obviously the stock has more than tripled since then. So maybe I just want to start off kind of just what are you most proud of the last, almost, I guess, four years since you've been -- over four years since you've been at NetApp. Michael Berry - NetApp Inc - Chief Financial Officer, Executive Vice President, Interim Chief Accounting Officer Okay. So that wasn't on the questions. I don't know, but it's a great one. So it's interesting. So my first day at NetApp was actually the day the world shut down, when George called me and said, don't come to California because everyone's working from home. It's been a great ride, it's going to be a better one even going forward. So we did announce that I'll retire in May. If this is the last one or not, we'll see. It depends on how they do with the CFO search, but he's got plenty of time to go figure that out. What I'm most proud of is the progress that the NetApp team has made building a different NetApp. And I say that because when I got there, and I think there's a lot of view still that NetApp is a hardware company. NetApp's not a hardware company. It's a software company that monetizes its software through hardware. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 11:00AM, NTAP.OQ - NetApp Inc at Nasdaq Investor Conference And the team has done so great not only expanding the market reach, but introducing new products. We are the only company in storage that has a first party service with one, never mind all three of the hyperscalers. And during that time, we the 12,000 employees have taken NetApp from $4 a share in earnings per share to over $7. And it's been a great ride. I know it's going to be a better ride going forward. And I'm most proud of the team, especially the team I get to work with every day.

Question: Hamza Fodderwala - Morgan Stanley - Analyst : That's really interesting. And you talked last quarter about I think over 100 AI and data lake modernization wins across various geographies and industries. Maybe could you give us a little bit more color what those deals look like you talked about, some of them are larger deals, some of them are smaller deals. But it is fundamentally around this whole preparing your organization for AI. Is that largely what it is?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Yeah, certainly it's a big priority for every organization around, getting ready for GenAI and setting up their data governance frameworks. I wanted to shift a little bit to the financial side. So last quarter, overall revenue grew 6%, the product revenue grew 9%. You recently set out targets to grow mid to upper single digit revenue growth at your analyst day. When you think about the drivers of that growth because it's obviously very durable growth, if not, even an acceleration relative to what you're doing today, what is driving that growth? How does AI fit into that. And maybe beyond AI, what are some of the drivers?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Got it. And you know, one of the things you mentioned early on about GenAI -- excuse me about NetApp really being more of a software company. Can you talk a little bit about the pricing and the delivery model of these of these services? I mean, there's one angle where the hardware is ultimately the beachhead for the software. So what are the software attach rates look like on some of the newer hardware that you're selling? And then also is there a shift to perhaps physical to virtual appliances in general in this market?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : And one of the things that really stood out to me was the improvement that you made in your growth and your operating margins, particularly driven by the improvement on the public cloud gross margin side. Can you talk a little bit about that? And then what are some of the puts and takes around gross margins going forward as you drive more software business, but also I think your product gross margins probably are going to face some headwinds as well? Just talk a little bit about that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 11:00AM, NTAP.OQ - NetApp Inc at Nasdaq Investor Conference

Question: Hamza Fodderwala - Morgan Stanley - Analyst : That's great. Maybe a couple of questions, and then I'd love to open up to the audience as well. Can you talk a little bit about sort of the spending environment in data storage just more broadly. It does seem like we're gearing up for a pretty solid refresh cycle heading into '25 in a lot of areas, but storage specifically? But you know, what are you seeing there already? What does the pipeline look like? What are customers telling you around that front?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Yeah, and that refresh cycle opportunity I imagine would also open up those larger deal conversations as customers pursue their data modernization efforts. Are those sort of come hand in hand, would you expect that to pick up as more customers refresh some of their assets from recent years?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Any questions from the audience before I continue? Okay, I'll keep going then. So I think you had some new product releases. I think you've done a fantastic job with the release of your C series product. Can you lay out what portion of the market this helps you address, and you know why you've been able to outgrow your peers with that product?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Got it. And then so the A series and the refresh kind of ties in with the C series. There's been some concern as around whether we could see the same sort of tailwind, especially as you lap sort of more difficult comparisons. Just curious how you guys get confidence on the durability of growth around that.

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Got it. I wanted to dig in a little bit on the public cloud business. Can you maybe walk through a little bit the evolution of the public cloud business? I think there's been some changes that you've made. Curious how the business has been performing since those changes? And where do you still see the greatest opportunity with public cloud?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Super interesting point. You've also had a -- you talked about how a lot of your product is deployed within the hyperscaler and their data centers. You've had strong partnerships there, you've had a strong partnership with NVIDIA. How is that momentum been building, especially as you address these newer markets within GenAI and others?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Got it. One or two more questions, and I'd love to open up to the audience again. The US public sector segment, it's been a bright spot for NetApp, despite I'd say some mixed results from others in recent quarters. Just curious when you think about the federal business going forward, given the uncertainty around the new administration, the budget resolution, what are you seeing there? What gives you confidence that's going to continue to be a durable tailwind for you guys? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 11:00AM, NTAP.OQ - NetApp Inc at Nasdaq Investor Conference

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Great. I just want to open up one more time for the audience. Is there any questions? I must be doing a good job.

Question: Hamza Fodderwala - Morgan Stanley - Analyst : NetApp has had a great history of returning cash to shareholders. Just curious how you think about balancing capital return versus M&A opportunities that you might see down the line?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Yeah. Definitely you have a lot of drivers for that double digit EPS growth. And those are targets that you laid out on your recent analyst day. Just curious as you think about chasing some of these new markets, these new opportunities, which there's certainly a lot of, how do you balance that with the desire for continued efficiency as some as these double edged EPS targets apply?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Well, Mike, congrats on a great run on NetApp. Congrats on a great run over the decades, running multiple great organizations. We wish you the best for retirement and your next journey ahead. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 11:00AM, NTAP.OQ - NetApp Inc at Nasdaq Investor Conference