NetApp, Inc. (NASDAQ:NTAP) Q1 2020 Earnings Conference Call Transcript

Aug 14, 2019 • 05:30 pm ET

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NetApp, Inc. (NASDAQ:NTAP) Q1 2020 Earnings Conference Call Transcript

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Q & A
Operator
Operator

(Operator Instructions) Our first question comes from the line of Sanjay Roja Hachey. Your line is open.

Analyst
Nehal Choksi

Thank you. You probably covered this in the script, but your guidance does call for a significant improvement of the year-over-year revenue growth profile. And I appreciate all the detail on what you're doing to address the shortfall. Is it true to say that these things that you're doing, you expect to actually result in that improvement this quickly?

Executive
George Kurian

If you look at our Q2 seasonality, there are sort of two or three elements that come into play. The first is, Q2 is typically a strong quarter for our US public sector business. The second is, cloud data services and our private cloud business should continue to perform in a normal seasonal acceleration model. And then the third is that, we have factored in and probably -- probability weighted a little impact from ELAs in Q2. As you might note from the call script, we did not see any ELAs in Q1.

Analyst
Nehal Choksi

Understood. Okay. And then the deferred revenue continues to trend up year-over-year, despite the significant year-over-year product revenue decline, below even the July 2015 and July 2016 levels, is it safe to say that this is a reflection of an increasing attach of software and services per dollar of installed base?

Executive
George Kurian

So it's a function of several things. That's one. It's also a function of, we're doing a little better job on renewals and point of sale that -- point of sale rate for services held steady. So it's a focus area has been for a while, we told you that and we're doing a little better in it.

Analyst
Nehal Choksi

Great , thank you.

Executive
Kris Newton

Thanks, Nehal. Next question.

Operator
Operator

Our next question comes from Rod Hall of Goldman Sachs. Your question please.

Analyst
Rod Hall

Yeah, thanks for the question, guys. I wanted to start off, I guess with the AFA weakness you called out George and see is. And it looks like, I mean, if we back that out the hybrid trajectory with okay. I mean things seem more stable there. So I wonder if you could just drill into that in a little bit more detail. What you see going on there is the factor of this macro weakness or are you seeing people backing off of AFA investment but keeping up with hybrid. And then I wanted to just double check, it is a housekeeping measure the -- you are guiding with ELAs in the guide this quarter. I just want to check that, because I thought previously you guys had decided not to guide ELAs anymore. So thanks.

Executive
Ronald J. Pasek

Ron. So it's it's factored in with a probability. So there are some in there and we factored it down a little bit, just in case. So, and there was some in there last year, so that's a fair compare. But we didn't put it in at the full value.

Executive
George Kurian

With regard to the mix of AFAs and hybrid, if you recall last year, we