NetApp’s CEO: Cloud the key to fiscal success, future

netapp, servers & storage, Spot public cloud computing optimization tool , fourth fiscal quarter 2020

NetApp’s cloud business is booming, with growth accelerating and public cloud annual recurring revenue contributing to a strong fourth fiscal quarter and full fiscal year 2021 and leading to improved guidance for fiscal year 2022, the company reported Wednesday.

NetApp CEO George Kurian, during his prepared remarks during the company’s fourth-quarter fiscal conference call, told analysts that NetApp also saw a return to product revenue growth and an all-time-high free cash flow.

NetApp is also reaching more customers than ever with its public cloud business, Kurian said.

“Over the course of fiscal year 2021, we added approximately 1,500 new-to-NetApp customers with public cloud services and grew our total cloud customer count by 137 percent from Q4 fiscal year 2020,” he said. “In addition to adding new cloud customers, existing cloud customers are expanding their spend with us. … Cloud Volumes, Cloud Insights and Spot all performed well in the quarter, driving our public cloud services ARR [annual recurring revenue] to US$301 million exiting fiscal year 2021, an increase of 171 percent year over year.”

NetApp’s public cloud services including its Cloud Volumes fully managed cloud-native data services, its Cloud Insights cloud monitoring tool and its Spot public cloud computing optimization tool are now the primary growth engines of NetApp’s public cloud services business, Kurian said.

“They are well-established for enterprise applications, and we are taking each of them into the cloud-native world, further expanding our market opportunity. … Together, our public cloud services give our customers, and especially their CloudOps and DevOps teams, a robust suite of multi-cloud infrastructure management services,” he said.

Hardware sales reachedUS$360 million, down from US$386 million a year ago, and software sales reached US$480 million, up from last year’s US$407 million.

Focused execution in fiscal 2021 has set NetApp up well for growth in fiscal 2022, Kurian said.

“We plan to accelerate our public cloud services and continue to grow our hybrid cloud business,” he said. “I am excited about the year ahead and confident in our ability to deliver top-line growth by supporting our customers on their cloud and digital transformation journeys.”

NetApp is well set for growth in fiscal 2022, said Mike Berry, the company’s executive vice president and chief financial officer, during his prepared remarks.

NetApp’s combined software revenue, recurring support and cloud revenue totaled US$1.1 billion in the fourth fiscal quarter, up 18 percent year over year and representing 72 percent of total revenue, Berry said.

“”For the first time in company history, we ended Q4 with over US$4 billion in deferred revenue, an increase of 8 percent year over year,” he said. “Deferred revenue continues to be a leading indicator for future recurring revenue growth.”

NetApp during the fiscal year generated over US$1.1 billion in free cash flow, Berry said.

“Consistent with NetApp’s long history of disciplined M&A … 30 percent of free cash generation will go towards our acquisition strategy, which will remain focused on bolstering our strategic cloud services road map,” he said.

For its fourth fiscal quarter 2021, which ended April 30, NetApp reported net revenue of US$1.56 billion, up 11.4 percent over the US$1.40 billion the company reported for its fourth fiscal quarter 2020.

Net income for the quarter on a GAAP basis was reported at US$334 million, or US$1.46 per share, up significantly over last year’s US$196 million, or 99 cents per share.

On a non-GAAP basis, NetApp reported fourth fiscal quarter 2021 net income of US$268 million, or US$1.17 per share, basically flat compared with last year’s US$265 million, or US$1.19 per share.

For the quarter, NetApp beat revenue expectations by US$60 million, GAAP earnings per share by 58 cents and non-GAAP earnings per share by 58 cents, according to Seeking Alpha.

For its full fiscal year 2021, NetApp reported net revenue of US$5.74 billion, up 6.1 percent over 2020’s net revenue of US$5.41 billion.

For the year, GAAP net income was US$730 million, or US$3.23 per share, down from last year’s US$819 million, or US$3.52 per share.

On a non-GAAP basis, the company reported net income of US$917 million, or US$4.06 per share, down from last year’s US$944 million, or US$4.05 per share.

Looking forward, NetApp is expecting net revenue in its first fiscal quarter 2022 to be in the range of US$1.37 billion to US$1.47 billion, which is up compared with the US$1.3 billion NetApp reported for its first fiscal quarter 2021.

The company also expects GAAP earnings in the range of 69 cents to 77 cents per share and non-GAAP earnings in the range of 89 cents to 97 cents per share.

For full fiscal year 2022, NetApp is expecting net revenue to grow in the range of 6 percent to 7 percent, with earnings of US$3.48 to US$3.68 per share on a GAAP basis and US$4.45 to US$4.65 per share on a non-GAAP basis. The company also expects public cloud annual recurring revenue in the year to reach between US$425 million to US$500 million.

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