NetApp (NASDAQ:NTAP) today reported financial results for the first
quarter fiscal year 2018, ended July 28, 2017.
First Quarter Financial Results
Net revenues for the first quarter of fiscal year 2018 were
$1.33 billion, compared to net revenues of $1.29 billion for the
comparable period of the prior year. GAAP net income for the first
quarter of fiscal year 2018 was $136 million, or $0.49 per share,1
compared to GAAP net income of $64 million, or $0.23 per share, for
the comparable period of the prior year. Non-GAAP net income for
the first quarter of fiscal year 2018 was $173 million, or $0.62
per share,2 compared to non-GAAP net income of $129 million, or
$0.46 per share, for the comparable period of the prior year.
Cash, Cash Equivalents and Investments
NetApp ended the first quarter of fiscal year 2018 with $5.3
billion in total cash, cash equivalents and investments. During the
first quarter of fiscal year 2018, the Company generated $250
million in cash from operations and returned $204 million to
shareholders through share repurchases and a cash dividend.
The Company announced the next cash dividend of $0.20 per share.
The quarterly dividend will be paid on October 25, 2017, to
shareholders of record as of the close of business on October 6,
2017.
“We delivered strong Q1 results across the board and continued
to introduce substantial innovation. We are strengthening our
leadership position by enhancing our all flash array and converged
infrastructure offerings, and augmenting our Data Fabric strategy,”
said George Kurian, chief executive officer. “Customers and
industry leaders are excited by our strategic direction and are
choosing NetApp as their partner for data-driven digital
transformations. We are building on a strong foundation and are,
without question, the best positioned and the best executing
company in the industry.”
Q2 Fiscal Year 2018 OutlookThe Company provided
the following financial guidance for the second quarter of fiscal
year 2018:
|
• Net revenues are expected to be in the range of $1.31
billion to $1.46 billion |
|
|
GAAP |
Non-GAAP |
•
Earnings per share is expected to be in the range of: |
$0.47 - $0.55 |
$0.64 - $0.72 |
|
|
|
Business HighlightsNetApp Expands
Service Provider Programs and Alliances, Leads a New IT Category,
and Delivers New Innovations
- Expanded Fueled by NetApp Program helps
service providers gain access to new consulting and incubator
programs, as well as new efficiency guarantees and increased
training.
- NetApp recognized as a Leader in Gartner Magic Quadrant
for Solid-State Arrays.
- New FlexPod™ SF converged infrastructure
solution offers ideal infrastructure for the data-intensive
scale-out workloads that are critical to digital
transformation.
- NetApp positioned to capture digital transformation
opportunity with leadership in new IDC category of hybrid
cloud data services.
- NetApp expands collaboration with Microsoft
Azure in hybrid cloud data services to deliver
enterprise-grade visibility and insights, data access and control,
as well as data protection and security for customers moving to
Microsoft Azure.
- NetApp has provided early access to the innovations of
NetApp™ HCI, planned to be generally available in
the second half of calendar 2017, to a number of technology
partners that are integrating with the solution.
- ONTAP™ select
software-defined storage is optimized for new use cases,
including a new remote office/branch office solution and enterprise
NAS services in more diverse storage environments.
- OnCommand™ Insight
(OCI) adds new functions to ease hybrid cloud migration
and optimize hybrid cloud resources with accurate workload
placement and resizing.
- ONTAP enhancements include the new FabricPool
feature for automatic and transparent tiering of inactive data to
the cloud; expanded inline deduplication across multiple pools of
storage to increase storage efficiency; and new performance
controls, including quality of service minimum and intelligent data
placement.
- With NextCredit, NetApp introduces the
industry’s most flexible future credit program, allowing customers
to upgrade or build out their Data Fabric with new technologies and
capabilities as they become available.
- StorageGRID™ Webscale next-generation object
storage software simplifies OpenStack storage deployments and
supports Docker container deployment on bare-metal servers.
- NetApp SnapCenter™ 3.0 enables customers to
restore and recover SAP HANA multitenant database
containers.
Webcast and Conference Call InformationNetApp
will host a conference call to discuss these results today at 2:30
p.m. Pacific Time. To access the live webcast of this event, visit
the NetApp Investor Relations website at investors.netapp.com. In
addition, this press release, historical supplemental data tables,
and other information related to the call will be posted on the
Investor Relations website. An audio replay will also be available
on the website after 4:30 p.m. Pacific Time today.
About NetApp
NetApp is the data authority for hybrid cloud. We provide a full
range of hybrid cloud data services that simplify management of
applications and data across cloud and on-premises environments to
accelerate digital transformation. Together with our partners, we
empower global organizations to unleash the full potential of their
data to expand customer touchpoints, foster greater innovation and
optimize their operations. For more information, visit
www.netapp.com. #DataDriven
“Safe Harbor” Statement Under U.S. Private Securities
Litigation Reform Act of 1995This press release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include,
but are not limited to, all of the statements made under the Q2
Fiscal Year 2018 Outlook section, statements about strengthening
our leadership position, enhancing our product offerings, and
augmenting our Data Fabric strategy, as well as statements about
our ability to capitalize on our position and continue execution.
All of these forward-looking statements involve risk and
uncertainty. Actual results may differ materially from these
statements for a variety of reasons, including, without limitation,
general global political, macroeconomic and market conditions,
changes in U.S. government spending, revenue seasonality and
matters specific to our business, such as our ability to expand our
total available market and grow our portfolio of products, customer
demand for and acceptance of our products and services, our ability
to successfully execute new business models, our ability to
successfully execute on our Data Fabric strategy to generate
profitable growth and stockholder return and our ability to manage
our gross profit margins. These and other equally important factors
are described in reports and documents we file from time to time
with the Securities and Exchange Commission, including the factors
described under the section titled “Risk Factors” in our most
recently submitted Annual Report on Form 10-K. We disclaim any
obligation to update information contained in this press release
whether as a result of new information, future events, or
otherwise.
NetApp and the NetApp logo and the marks listed at
http://www.netapp.com/TM are trademarks of NetApp, Inc. Other
company and product names may be trademarks of their respective
owners.
1GAAP earnings per share is calculated using the diluted number
of shares.2Non-GAAP net income excludes, when applicable,
(a) amortization of intangible assets, (b) stock-based
compensation expenses, (c) acquisition-related expenses, (d)
restructuring charges, (e) asset impairments, (f) gains/losses on
the sale of properties, and (g) our GAAP tax provision, but
includes a non-GAAP tax provision based upon our projected annual
non-GAAP effective tax rate for the first three quarters of the
fiscal year and an actual non-GAAP tax provision for the fourth
quarter of the fiscal year. NetApp makes additional adjustments to
the non-GAAP tax provision for certain tax matters as described
below. Non-GAAP earnings per share is calculated using the diluted
number of shares for all periods presented. A detailed
reconciliation of our non-GAAP to GAAP results can be found at
http://investors.netapp.com. NetApp’s management uses these
non-GAAP measures in making operating decisions because it believes
the measurements provide meaningful supplemental information
regarding NetApp’s ongoing operational performance.
NetApp Usage of Non-GAAP Financial Information
To supplement NetApp’s condensed consolidated financial
statement information presented in accordance with generally
accepted accounting principles in the United States (GAAP), NetApp
provides investors with certain non-GAAP measures, including, but
not limited to, historical non-GAAP operating results, non-GAAP net
income, non-GAAP effective tax rate and free cash flow, and
historical and projected non-GAAP earnings per diluted share.
NetApp believes that the presentation of non-GAAP net income,
non-GAAP effective tax rates, and non-GAAP earnings per share data
when shown in conjunction with the corresponding GAAP measures,
provides useful information to investors and management regarding
financial and business trends relating to its financial condition
and results of operations. NetApp believes that the presentation of
free cash flow, which it defines as the net cash provided by
operating activities less cash used to acquire property and
equipment, to be a liquidity measure that provides useful
information to management and investors because it reflects cash
that can be used to, among other things, invest in its business,
make strategic acquisitions, repurchase common stock, and pay
dividends on its common stock. As free cash flow is not a measure
of liquidity calculated in accordance with GAAP, free cash flow
should be considered in addition to, but not as a substitute for,
the analysis provided in the statement of cash flows.
NetApp’s management uses these non-GAAP measures in making
operating decisions because it believes the measurements provide
meaningful supplemental information regarding NetApp’s ongoing
operational performance. These non-GAAP financial measures are used
to: (1) measure company performance against historical results, (2)
facilitate comparisons to our competitors’ operating results and
(3) allow greater transparency with respect to information used by
management in financial and operational decision making.
NetApp excludes the following items from its non-GAAP measures
when applicable:
A. Amortization of intangible assets. NetApp records
amortization of intangible assets that were acquired in connection
with its business combinations. The amortization of intangible
assets varies depending on the level of acquisition activity.
Management finds it useful to exclude these charges to assess the
appropriate level of various operating expenses to assist in
budgeting, planning and forecasting future periods and in measuring
operational performance.B. Stock-based compensation expenses.
NetApp excludes stock-based compensation expenses from its non-GAAP
measures primarily because they are non-cash expenses. While
management views stock-based compensation as a key element of our
employee retention and long-term incentives, we do not view it
as an expense to be used in evaluating operational performance in
any given period. C. Acquisition-related expenses. NetApp excludes
acquisition-related expenses, including (a) due diligence, legal
and other one-time integration charges and (b) write down of assets
acquired that NetApp does not intend to use in its ongoing
business, from its non-GAAP measures, primarily because they are
not related to our ongoing business or cost base and, therefore,
cannot be relied upon for future planning and forecasting.D.
Restructuring charges. These charges consist of restructuring
charges that are incurred based on the particular facts and
circumstances of restructuring decisions, including employment and
contractual settlement terms, and other related charges, and can
vary in size and frequency. We therefore exclude them in our
assessment of operational performance. E. Asset impairments.
These are non-cash charges to write down assets when there is an
indication that the asset has become impaired. Management finds it
useful to exclude these non-cash charges due to the
unpredictability of these events in its assessment of operational
performance.F. Gains/losses on the sale of properties. These are
gains/losses from the sale of our properties. Management believes
that these transactions do not reflect the results of our
underlying, on-going business and, therefore, cannot be relied upon
for future planning or forecasting.G. Income tax adjustments.
NetApp’s non-GAAP tax provision is based upon a projected annual
non-GAAP effective tax rate for the first three quarters of the
fiscal year and an actual non-GAAP tax provision for the fourth
quarter of the fiscal year. The non-GAAP tax provision also
excludes, when applicable, (a) tax charges or benefits in the
current period that relate to one or more prior fiscal periods that
are a result of events such as changes in tax legislation,
authoritative guidance, income tax audit settlements and/or court
decisions, (b) tax charges or benefits that are attributable to
unusual or non-recurring book and/or tax accounting method changes,
(c) tax charges that are a result of a non-routine foreign cash
repatriation, (d) tax charges or benefits that are a result of
infrequent restructuring of the Company’s tax structure, (e) tax
charges or benefits that are a result of a change in valuation
allowance, and (f) tax charges resulting from the integration of
intellectual properties from acquisitions. Management believes that
the use of non-GAAP tax provisions provides a more meaningful
measure of the Company’s operational performance.
These non-GAAP measures are not in accordance with, or an
alternative for, measures prepared in accordance with GAAP, and may
be different from non-GAAP measures used by other companies. In
addition, these non-GAAP measures are not based on any
comprehensive set of accounting rules or principles. NetApp
believes that non-GAAP measures have limitations in that they do
not reflect all of the amounts associated with the Company’s
results of operations as determined in accordance with GAAP and
that these measures should only be used to evaluate the Company’s
results of operations in conjunction with the corresponding GAAP
measures. NetApp management compensates for these limitations by
analyzing current and projected results on a GAAP basis as well as
a non-GAAP basis. The presentation of non-GAAP financial
information is not meant to be considered in isolation or as a
substitute for the directly comparable financial measures prepared
in accordance with generally accepted accounting principles in the
United States. The non-GAAP financial measures are meant to
supplement, and be viewed in conjunction with, GAAP financial
measures.
NETAPP, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (In
millions)(Unaudited) |
|
|
|
July 28,2017 |
|
|
April 28,2017 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash,
cash equivalents and investments |
|
$ |
5,321 |
|
|
$ |
4,921 |
|
Accounts
receivable |
|
|
518 |
|
|
|
731 |
|
Inventories |
|
|
143 |
|
|
|
163 |
|
Other
current assets |
|
|
316 |
|
|
|
383 |
|
Total
current assets |
|
|
6,298 |
|
|
|
6,198 |
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
|
799 |
|
|
|
799 |
|
Goodwill and purchased
intangible assets, net |
|
|
1,825 |
|
|
|
1,815 |
|
Other non-current
assets |
|
|
677 |
|
|
|
681 |
|
Total assets |
|
$ |
9,599 |
|
|
$ |
9,493 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
289 |
|
|
$ |
347 |
|
Accrued
expenses |
|
|
653 |
|
|
|
782 |
|
Commercial paper notes |
|
|
894 |
|
|
|
500 |
|
Current
portion of long-term debt |
|
|
749 |
|
|
|
749 |
|
Short-term deferred revenue and financed unearned services
revenue |
|
|
1,702 |
|
|
|
1,744 |
|
Total
current liabilities |
|
|
4,287 |
|
|
|
4,122 |
|
Long-term debt |
|
|
745 |
|
|
|
744 |
|
Other long-term
liabilities |
|
|
250 |
|
|
|
249 |
|
Long-term deferred
revenue and financed unearned services revenue |
|
|
1,549 |
|
|
|
1,598 |
|
Total liabilities |
|
|
6,831 |
|
|
|
6,713 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity |
|
|
2,768 |
|
|
|
2,780 |
|
Total liabilities and stockholders' equity |
|
$ |
9,599 |
|
|
$ |
9,493 |
|
NETAPP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In
millions, except per share amounts)
(Unaudited) |
|
|
|
Three Months Ended |
|
|
|
July 28,2017 |
|
|
July 29,2016 |
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
Product |
|
$ |
723 |
|
|
$ |
660 |
|
Software
maintenance |
|
|
234 |
|
|
|
241 |
|
Hardware
maintenance and other services |
|
|
368 |
|
|
|
393 |
|
Net
revenues |
|
|
1,325 |
|
|
|
1,294 |
|
|
|
|
|
|
|
|
|
|
Cost of revenues: |
|
|
|
|
|
|
|
|
Cost of
product |
|
|
371 |
|
|
|
359 |
|
Cost of
software maintenance |
|
|
7 |
|
|
|
8 |
|
Cost of
hardware maintenance and other services |
|
|
113 |
|
|
|
130 |
|
Total
cost of revenues |
|
|
491 |
|
|
|
497 |
|
Gross profit |
|
|
834 |
|
|
|
797 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
425 |
|
|
|
429 |
|
Research
and development |
|
|
193 |
|
|
|
207 |
|
General
and administrative |
|
|
68 |
|
|
|
68 |
|
Total
operating expenses |
|
|
686 |
|
|
|
704 |
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
|
148 |
|
|
|
93 |
|
|
|
|
|
|
|
|
|
|
Other income (expense),
net |
|
|
5 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
153 |
|
|
|
92 |
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
17 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
136 |
|
|
$ |
64 |
|
|
|
|
|
|
|
|
|
|
Net income per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.50 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.49 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
Shares used in net
income per share calculations: |
|
|
|
|
|
|
|
|
Basic |
|
|
270 |
|
|
|
279 |
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
278 |
|
|
|
282 |
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
per share |
|
$ |
0.200 |
|
|
$ |
0.190 |
|
NETAPP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In
millions) (Unaudited) |
|
|
|
Three Months Ended |
|
|
|
July 28,2017 |
|
|
July 29,2016 |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
136 |
|
|
$ |
64 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
51 |
|
|
|
60 |
|
Stock-based compensation |
|
|
48 |
|
|
|
52 |
|
Other
items, net |
|
|
7 |
|
|
|
12 |
|
Changes
in assets and liabilities, net of acquisition of
business: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
218 |
|
|
|
311 |
|
Inventories |
|
|
20 |
|
|
|
17 |
|
Accounts
payable |
|
|
(58 |
) |
|
|
(30 |
) |
Accrued
expenses |
|
|
(135 |
) |
|
|
(198 |
) |
Deferred
revenue and financed unearned services revenue |
|
|
(107 |
) |
|
|
(83 |
) |
Changes
in other operating assets and liabilities, net |
|
|
70 |
|
|
|
23 |
|
Net cash provided by operating activities |
|
|
250 |
|
|
|
228 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Redemptions of investments, net |
|
|
112 |
|
|
|
313 |
|
Purchases
of property and equipment |
|
|
(36 |
) |
|
|
(36 |
) |
Acquisition of business, net of cash acquired |
|
|
(24 |
) |
|
|
— |
|
Other
investing activities, net |
|
|
5 |
|
|
|
(1 |
) |
Net cash provided by investing activities |
|
|
57 |
|
|
|
276 |
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock under employee stock award
plans |
|
|
48 |
|
|
|
42 |
|
Payments
for taxes related to net share settlement of stock
awards |
|
|
(57 |
) |
|
|
(33 |
) |
Repurchase of common stock |
|
|
(150 |
) |
|
|
(175 |
) |
Proceeds
from issuance of commercial paper notes, net |
|
|
394 |
|
|
|
— |
|
Repayment
of short-term loan |
|
|
— |
|
|
|
(850 |
) |
Dividends
paid |
|
|
(54 |
) |
|
|
(53 |
) |
Other
financing activities, net |
|
|
— |
|
|
|
(2 |
) |
Net cash provided by (used in) financing activities |
|
|
181 |
|
|
|
(1,071 |
) |
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash and cash equivalents |
|
|
19 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents |
|
|
507 |
|
|
|
(574 |
) |
Cash and cash
equivalents: |
|
|
|
|
|
|
|
|
Beginning
of period |
|
|
2,444 |
|
|
|
2,868 |
|
End of
period |
|
$ |
2,951 |
|
|
$ |
2,294 |
|
NETAPP, INC. |
|
SUPPLEMENTAL DATA |
|
(In millions except net income per share,
percentages, DSO, DIO, DPO, CCC and Inventory Turns) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 FY'18 |
|
|
Q4 FY'17 |
|
|
Q1 FY'17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Product (1) |
|
$ |
723 |
|
|
$ |
852 |
|
|
$ |
660 |
|
Strategic |
|
$ |
500 |
|
|
$ |
596 |
|
|
$ |
411 |
|
Mature |
|
$ |
223 |
|
|
$ |
256 |
|
|
$ |
249 |
|
Software
Maintenance |
|
$ |
234 |
|
|
$ |
242 |
|
|
$ |
241 |
|
Hardware Maintenance
and Other Services |
|
$ |
368 |
|
|
$ |
387 |
|
|
$ |
393 |
|
Hardware
Maintenance Support Contracts |
|
$ |
298 |
|
|
$ |
313 |
|
|
$ |
323 |
|
Professional and Other Services |
|
$ |
70 |
|
|
$ |
74 |
|
|
$ |
70 |
|
Net Revenues |
|
$ |
1,325 |
|
|
$ |
1,481 |
|
|
$ |
1,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Mix |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
Q1FY'18Revenue |
|
|
% of Q4FY'17Revenue |
|
|
% of Q1FY'17Revenue |
|
Americas |
|
|
55 |
% |
|
|
54 |
% |
|
|
57 |
% |
Americas
Commercial |
|
|
42 |
% |
|
|
42 |
% |
|
|
44 |
% |
U.S.
Public Sector |
|
|
13 |
% |
|
|
12 |
% |
|
|
13 |
% |
EMEA |
|
|
30 |
% |
|
|
32 |
% |
|
|
30 |
% |
Asia Pacific |
|
|
15 |
% |
|
|
14 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pathways Mix |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
Q1FY'18Revenue |
|
|
% of Q4FY'17Revenue |
|
|
% of Q1FY'17Revenue |
|
Direct |
|
|
20 |
% |
|
|
22 |
% |
|
|
23 |
% |
Indirect |
|
|
80 |
% |
|
|
78 |
% |
|
|
77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross Margins |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 FY'18 |
|
|
Q4 FY'17 |
|
|
Q1 FY'17 |
|
Non-GAAP Gross
Margin |
|
|
63.8 |
% |
|
|
62.5 |
% |
|
|
62.4 |
% |
Product |
|
|
49.9 |
% |
|
|
48.9 |
% |
|
|
46.7 |
% |
Software
Maintenance |
|
|
97.0 |
% |
|
|
97.5 |
% |
|
|
96.7 |
% |
Hardware
Maintenance and Other Services |
|
|
70.1 |
% |
|
|
70.3 |
% |
|
|
67.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Income from Operations, Income before Income Taxes
& Effective Tax Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 FY'18 |
|
|
Q4 FY'17 |
|
|
Q1 FY'17 |
|
Non-GAAP Income from
Operations |
|
$ |
209 |
|
|
$ |
306 |
|
|
$ |
156 |
|
% of Net
Revenues |
|
|
15.8 |
% |
|
|
20.7 |
% |
|
|
12.1 |
% |
Non-GAAP Income before
Income Taxes |
|
$ |
214 |
|
|
$ |
307 |
|
|
$ |
155 |
|
Non-GAAP Effective Tax
Rate |
|
|
19.4 |
% |
|
|
22.1 |
% |
|
|
16.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 FY'18 |
|
|
Q4 FY'17 |
|
|
Q1 FY'17 |
|
Non-GAAP Net
Income |
|
$ |
173 |
|
|
$ |
239 |
|
|
$ |
129 |
|
Non-GAAP Weighted
Average Common Shares Outstanding, Diluted |
|
|
278 |
|
|
|
278 |
|
|
|
282 |
|
Non-GAAP Income per
Share, Diluted |
|
$ |
0.62 |
|
|
$ |
0.86 |
|
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Select Balance Sheet Items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 FY'18 |
|
|
Q4 FY'17 |
|
|
Q1 FY'17 |
|
Deferred Revenue and
Financed Unearned Services Revenue |
|
$ |
3,251 |
|
|
$ |
3,342 |
|
|
$ |
3,300 |
|
DSO (days) |
|
|
36 |
|
|
|
45 |
|
|
|
35 |
|
DIO (days) |
|
|
27 |
|
|
|
26 |
|
|
|
15 |
|
DPO (days) |
|
|
54 |
|
|
|
56 |
|
|
|
44 |
|
CCC (days) |
|
|
9 |
|
|
|
15 |
|
|
|
6 |
|
Inventory Turns |
|
|
14 |
|
|
|
14 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Days sales outstanding (DSO) is defined as accounts receivable
divided by net revenues, multiplied by the number of days in the
quarter. |
|
Days inventory outstanding (DIO) is defined as net inventories
divided by cost of revenues, multiplied by the number of days in
the quarter. |
|
Days payables outstanding (DPO) is defined as accounts payable
divided by cost of revenues, multiplied by the number of days in
the quarter. |
|
Cash conversion cycle (CCC) is defined as DSO plus DIO minus
DPO. |
|
Inventory turns is defined as annualized cost of revenues
divided by net inventories. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Select Cash Flow Statement Items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 FY'18 |
|
|
Q4 FY'17 |
|
|
Q1 FY'17 |
|
Net Cash Provided by
Operating Activities |
|
$ |
250 |
|
|
$ |
365 |
|
|
$ |
228 |
|
Purchases of Property
and Equipment |
|
$ |
36 |
|
|
$ |
38 |
|
|
$ |
36 |
|
Free Cash Flow |
|
$ |
214 |
|
|
$ |
327 |
|
|
$ |
192 |
|
Free Cash Flow as a %
of Net Revenues |
|
|
16.2 |
% |
|
|
22.1 |
% |
|
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow is a non-GAAP measure and is defined as net
cash provided by operating activities less purchases of property
and equipment. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Sales of certain products which should have been reported
as strategic products were improperly reported as mature product
revenues in Q1 FY'17. That period has been recast to reflect the
appropriate classification. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Some items may not add or recalculate due to rounding. |
|
NETAPP, INC. |
|
RECONCILIATION OF NON-GAAP TO
GAAP |
|
INCOME STATEMENT INFORMATION |
|
(In millions, except net income per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME |
|
$ |
136 |
|
|
$ |
190 |
|
|
$ |
64 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
13 |
|
|
|
13 |
|
|
|
11 |
|
Stock-based compensation |
|
|
48 |
|
|
|
46 |
|
|
|
52 |
|
Income
tax effect of non-GAAP adjustments |
|
|
(24 |
) |
|
|
(10 |
) |
|
|
2 |
|
NON-GAAP NET
INCOME |
|
$ |
173 |
|
|
$ |
239 |
|
|
$ |
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF
REVENUES |
|
$ |
491 |
|
|
$ |
568 |
|
|
$ |
497 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
(8 |
) |
|
|
(8 |
) |
|
|
(6 |
) |
Stock-based compensation |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
NON-GAAP COST
OF REVENUES |
|
$ |
479 |
|
|
$ |
556 |
|
|
$ |
486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF PRODUCT
REVENUES |
|
$ |
371 |
|
|
$ |
444 |
|
|
$ |
359 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
(8 |
) |
|
|
(8 |
) |
|
|
(6 |
) |
Stock-based compensation |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
NON-GAAP COST
OF PRODUCT REVENUES |
|
$ |
362 |
|
|
$ |
435 |
|
|
$ |
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF
HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES |
|
$ |
113 |
|
|
$ |
118 |
|
|
$ |
130 |
|
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
NON-GAAP COST
OF HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES |
|
$ |
110 |
|
|
$ |
115 |
|
|
$ |
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
$ |
834 |
|
|
$ |
913 |
|
|
$ |
797 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
8 |
|
|
|
8 |
|
|
|
6 |
|
Stock-based compensation |
|
|
4 |
|
|
|
4 |
|
|
|
5 |
|
NON-GAAP GROSS
PROFIT |
|
$ |
846 |
|
|
$ |
925 |
|
|
$ |
808 |
|
NETAPP, INC. |
|
RECONCILIATION OF NON-GAAP TO
GAAP |
|
INCOME STATEMENT INFORMATION |
|
(In millions, except net income per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES AND
MARKETING EXPENSES |
|
$ |
425 |
|
|
$ |
405 |
|
|
$ |
429 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
Stock-based compensation |
|
|
(21 |
) |
|
|
(20 |
) |
|
|
(23 |
) |
NON-GAAP SALES
AND MARKETING EXPENSES |
|
$ |
399 |
|
|
$ |
380 |
|
|
$ |
401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESEARCH AND
DEVELOPMENT EXPENSES |
|
$ |
193 |
|
|
$ |
191 |
|
|
$ |
207 |
|
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(15 |
) |
|
|
(13 |
) |
|
|
(15 |
) |
NON-GAAP
RESEARCH AND DEVELOPMENT EXPENSES |
|
$ |
178 |
|
|
$ |
178 |
|
|
$ |
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL AND
ADMINISTRATIVE EXPENSES |
|
$ |
68 |
|
|
$ |
70 |
|
|
$ |
68 |
|
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(8 |
) |
|
|
(9 |
) |
|
|
(9 |
) |
NON-GAAP
GENERAL AND ADMINISTRATIVE EXPENSES |
|
$ |
60 |
|
|
$ |
61 |
|
|
$ |
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
$ |
686 |
|
|
$ |
666 |
|
|
$ |
704 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
Stock-based compensation |
|
|
(44 |
) |
|
|
(42 |
) |
|
|
(47 |
) |
NON-GAAP
OPERATING EXPENSES |
|
$ |
637 |
|
|
$ |
619 |
|
|
$ |
652 |
|
NETAPP, INC. |
|
RECONCILIATION OF NON-GAAP TO
GAAP |
|
INCOME STATEMENT INFORMATION |
|
(In millions, except net income per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM
OPERATIONS |
|
$ |
148 |
|
|
$ |
247 |
|
|
$ |
93 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
13 |
|
|
|
13 |
|
|
|
11 |
|
Stock-based compensation |
|
|
48 |
|
|
|
46 |
|
|
|
52 |
|
NON-GAAP INCOME
FROM OPERATIONS |
|
$ |
209 |
|
|
$ |
306 |
|
|
$ |
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE
INCOME TAXES |
|
$ |
153 |
|
|
$ |
248 |
|
|
$ |
92 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
13 |
|
|
|
13 |
|
|
|
11 |
|
Stock-based compensation |
|
|
48 |
|
|
|
46 |
|
|
|
52 |
|
NON-GAAP INCOME
BEFORE INCOME TAXES |
|
$ |
214 |
|
|
$ |
307 |
|
|
$ |
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR
INCOME TAXES |
|
$ |
17 |
|
|
$ |
58 |
|
|
$ |
28 |
|
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax effect of non-GAAP adjustments |
|
|
24 |
|
|
|
10 |
|
|
|
(2 |
) |
NON-GAAP
PROVISION FOR INCOME TAXES |
|
$ |
41 |
|
|
$ |
68 |
|
|
$ |
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER
SHARE |
|
$ |
0.49 |
|
|
$ |
0.68 |
|
|
$ |
0.23 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
0.05 |
|
|
|
0.05 |
|
|
|
0.04 |
|
Stock-based compensation |
|
|
0.17 |
|
|
|
0.17 |
|
|
|
0.18 |
|
Income
tax effect of non-GAAP adjustments |
|
|
(0.09 |
) |
|
|
(0.04 |
) |
|
|
0.01 |
|
NON-GAAP NET
INCOME PER SHARE |
|
$ |
0.62 |
|
|
$ |
0.86 |
|
|
$ |
0.46 |
|
RECONCILIATION OF NON-GAAP TO
GAAP |
|
GROSS MARGIN |
|
($ in millions) |
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin-GAAP |
|
|
62.9 |
% |
|
|
61.6 |
% |
|
|
61.6 |
% |
Cost of
revenues adjustments |
|
|
0.9 |
% |
|
|
0.8 |
% |
|
|
0.9 |
% |
Gross
margin-Non-GAAP |
|
|
63.8 |
% |
|
|
62.5 |
% |
|
|
62.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP cost of
revenues |
|
$ |
491 |
|
|
$ |
568 |
|
|
$ |
497 |
|
Cost of revenues
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
(8 |
) |
|
|
(8 |
) |
|
|
(6 |
) |
Stock-based compensation |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
Non-GAAP cost of
revenues |
|
$ |
479 |
|
|
$ |
556 |
|
|
$ |
486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
1,325 |
|
|
$ |
1,481 |
|
|
$ |
1,294 |
|
RECONCILIATION OF NON-GAAP TO
GAAP |
|
PRODUCT GROSS MARGIN |
|
($ in millions) |
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product gross
margin-GAAP |
|
|
48.7 |
% |
|
|
47.9 |
% |
|
|
45.6 |
% |
Cost of
product revenues adjustments |
|
|
1.2 |
% |
|
|
1.1 |
% |
|
|
1.1 |
% |
Product gross
margin-Non-GAAP |
|
|
49.9 |
% |
|
|
48.9 |
% |
|
|
46.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP cost of product
revenues |
|
$ |
371 |
|
|
$ |
444 |
|
|
$ |
359 |
|
Cost of product
revenues adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
(8 |
) |
|
|
(8 |
) |
|
|
(6 |
) |
Stock-based compensation |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Non-GAAP cost of
product revenues |
|
$ |
362 |
|
|
$ |
435 |
|
|
$ |
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues |
|
$ |
723 |
|
|
$ |
852 |
|
|
$ |
660 |
|
RECONCILIATION OF NON-GAAP TO
GAAP |
|
HARDWARE MAINTENANCE AND OTHER SERVICES GROSS
MARGIN |
|
($ in millions) |
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
maintenance and other services gross margin-GAAP |
|
|
69.3 |
% |
|
|
69.5 |
% |
|
|
66.9 |
% |
Cost of
hardware maintenance and other services revenues adjustment |
|
|
0.8 |
% |
|
|
0.8 |
% |
|
|
1.0 |
% |
Hardware
maintenance and other services gross margin-Non-GAAP |
|
|
70.1 |
% |
|
|
70.3 |
% |
|
|
67.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP cost of hardware
maintenance and other services revenues |
|
$ |
113 |
|
|
$ |
118 |
|
|
$ |
130 |
|
Cost of hardware
maintenance and other services revenues adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
Non-GAAP cost of
hardware maintenance and other services revenues |
|
$ |
110 |
|
|
$ |
115 |
|
|
$ |
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware maintenance
and other services revenues |
|
$ |
368 |
|
|
$ |
387 |
|
|
$ |
393 |
|
RECONCILIATION OF NON-GAAP TO
GAAP |
|
EFFECTIVE TAX RATE |
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP effective
tax rate |
|
|
11.1 |
% |
|
|
23.4 |
% |
|
|
30.4 |
% |
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
Tax
effect of non-GAAP adjustments |
|
|
8.3 |
% |
|
|
(1.3 |
)% |
|
|
(13.8 |
)% |
Non-GAAP
effective tax rate |
|
|
19.4 |
% |
|
|
22.1 |
% |
|
|
16.6 |
% |
RECONCILIATION OF NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
TO FREE CASH FLOW (NON-GAAP) |
|
(In millions) |
|
|
|
|
|
|
|
Q1'FY18 |
|
|
Q4'FY17 |
|
|
Q1'FY17 |
|
Net cash provided by
operating activities |
|
$ |
250 |
|
|
$ |
365 |
|
|
$ |
228 |
|
Purchases of property
and equipment |
|
|
(36 |
) |
|
|
(38 |
) |
|
|
(36 |
) |
Free cash
flow |
|
$ |
214 |
|
|
$ |
327 |
|
|
$ |
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Some items
may not add or recalculate due to rounding. |
|
|
|
NETAPP, INC. |
|
RECONCILIATION OF NON-GAAP GUIDANCE TO
GAAP |
|
EXPRESSED AS EARNINGS PER SHARE |
|
SECOND QUARTER FISCAL 2018 |
|
|
|
|
|
|
|
|
Second Quarter |
|
|
|
Fiscal 2018 |
|
|
|
|
|
|
Non-GAAP Guidance - Net
Income Per Share |
|
$0.64 - $0.72 |
|
|
|
|
|
|
Adjustments of Specific
Items to Net Income |
|
|
|
|
Per Share
for the Second Quarter Fiscal 2018: |
|
|
|
|
Amortization of intangible assets |
|
|
(0.05 |
) |
Stock-based compensation expense |
|
|
(0.14 |
) |
Income
tax effect of non-GAAP adjustments |
|
|
0.02 |
|
Total Adjustments |
|
|
(0.17 |
) |
|
|
|
|
|
GAAP Guidance - Net
Income Per Share |
|
$0.47 - $0.55 |
|
Press Contact:
Madge Miller
NetApp
1 408 419 5263
madge.miller@netapp.com
Investor Contact:
Kris Newton
NetApp
1 408 822 3312
kris.newton@netapp.com
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