- NetApp Cloud Data Services annualized recurring revenue of
approximately $61 million, an increase of 189% year-over-year
- Consolidated GAAP gross margin of 66.0%, non-GAAP gross margin
of 67.2%
- $365 million returned to shareholders, representing 131% of
free cash flow
NetApp (NASDAQ: NTAP) today reported financial results for the
first quarter of fiscal year 2020, which ended on July 26,
2019.
“I am clearly disappointed with our Q1 top line results but
remain confident in our strategy and the fundamentals of our
business model. The gross margin and cost structure improvements
we’ve made provide support for our free cash flow generation and
enable us to navigate the ongoing macroeconomic headwinds while
making the strategic moves that position us well to return to
growth,” said George Kurian, chief executive officer. “We
consistently receive positive feedback from our customers and
partners on the value of our Data Fabric strategy and the strong
performance of our best teams demonstrates our ability to
capitalize on this strength.”
First Quarter of Fiscal Year 2020 Financial Results
- Net Revenues: $1.24 billion, compared to $1.47 billion*
in the first quarter of fiscal 2019
- Net Income: GAAP net income of $103 million, compared to
GAAP net income of $283 million in the first quarter of fiscal
2019; non-GAAP net income1 of $157 million, compared to non-GAAP
net income of $281 million in the first quarter of fiscal 2019
- Earnings per Share: GAAP net income per share2 of $0.42
compared to GAAP net income per share of $1.05 in the first quarter
of fiscal 2019; non-GAAP net income per share of $0.65, compared to
non-GAAP net income per share of $1.04 in the first quarter of
fiscal 2019
- Cash, Cash Equivalents and Investments: $3.5 billion at
the end of the first quarter of fiscal 2020
- Cash from Operations: $310 million, compared to $326
million in the first quarter of fiscal 2019
- Share Repurchase and Dividend: Returned $365 million to
shareholders through share repurchases and cash dividends
*Net revenues in the first quarter of fiscal year 2019
included $90 million from enterprise software license agreements
which did not repeat in the first quarter of fiscal year 2020.
Second Quarter of Fiscal Year 2020 Financial Outlook
The Company provided the following financial guidance for the
second quarter of fiscal year 2020:
- Net revenues are expected to be in the range of:
$1.325 billion to $1.475
billion
GAAP
Non-GAAP
- Earnings per share is expected to be in the range of:
$0.86 - $0.94
$0.91 - $0.99
Full Fiscal Year 2020 Financial Outlook
The Company updated the following financial guidance for the
full fiscal year 2020:
- Net revenues are expected to decline 5% - 10%
year-over-year
GAAP
Non-GAAP
- Consolidated gross margins are expected to be:
65% - 66%
66% - 67%
- Operating margins are expected to be in the range of:
16% - 19%
19% - 22%
- Effective tax rate is expected to be:
19% - 20%
18% - 19%
Dividend
The next cash dividend of $0.48 per share will be paid on
October 23, 2019, to shareholders of record as of the close of
business on October 4, 2019.
First Quarter of Fiscal Year 2020 Business Highlights
Spearheading Innovation
- NetApp presented a bold vision for a hybrid multicloud world,
with a range of new and updated offerings: NetApp™ Kubernetes
Service on NetApp HCI, Cloud Volumes on NetApp HCI, a
beta release of Cloud Volumes Service for Google Cloud
Platform, Cloud Volumes ONTAP™ for Google Cloud
Platform, Fabric Orchestrator, new pay-per-use offerings
for Cloud Consumption for NetApp HCI and Cloud Volumes
Service On-Premises, NetApp Cloud Insights as a
“freemium” offering, and NetApp Professional Services for the
Data Fabric.
- NetApp released the NetApp AFF C190 system, a simple,
smart, and secure all-flash storage solution that enables channel
partners to expand their market share by helping smaller
organizations modernize their IT infrastructure.
- The NetApp Cloud Tiering service is generally available
now on AWS and Azure. With this service, customers can leverage the
benefits of cloud economics while making space available on
high-performance NetApp AFF and FAS solid-state drive
systems.
- NetApp announced a new update to its growing data management
software series, NetApp ONTAP 9.6. The Company also
announced the new midrange, end-to-end-NVMe NetApp AFF A320
all-flash storage system and an expanded portfolio of services to
help businesses maximize the value of their data and drive
efficiency.
Expanding Partnerships
- NetApp completed support for Cloud Volumes across public clouds
and hybrid environments with Cloud Volumes ONTAP for Google
Cloud Platform and with the general availability of Azure
NetApp Files.
- NetApp announced NetApp HCI for Private Cloud with Red
Hat at the Red Hat Summit, offering a modern,
open-source-based, true cloud solution that works in conjunction
with the Red Hat OpenStack Platform.
Earning Prestigious Awards
- NetApp continues to grow its reputation as a data authority,
receiving the AIconics award for Corporate Innovation in
AI and earning the AI Breakthrough award for the Best
AI Solution for Big Data.
Webcast and Conference Call Information
NetApp 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, go to 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 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 1995
This 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 Second Quarter of Fiscal Year 2020
Financial Outlook and the Full Fiscal Year 2020 Financial Outlook
sections, statements about our free cash flow generation, our
ability to navigate the ongoing macroeconomic headwinds, and our
ability to capitalize on our Data Fabric strategy. 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.
Footnotes
1Non-GAAP net income excludes, when applicable, (a) amortization
of intangible assets, (b) stock-based compensation expenses, (c)
litigation settlements, (d) acquisition-related expenses, (e)
restructuring charges, (f) asset impairments, (g) gains/losses on
the sale or derecognition of assets, and (h) 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. 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.
2GAAP net income per share and non-GAAP net income per share are
calculated using the diluted number of shares.
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. Litigation settlements. NetApp may periodically incur charges
or benefits related to litigation settlements. NetApp excludes
these charges and benefits, when significant, because it does not
believe they are reflective of ongoing business and operating
results.
D. 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.
E. 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.
F. 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.
G. Gains/losses on the sale or derecognition of assets. These
are gains/losses from the sale of our properties and other
transactions in which we transfer control of assets to a third
party. 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.
H. 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 26,
April 26,
2019
2019
ASSETS
Current assets:
Cash, cash equivalents and investments
$
3,532
$
3,899
Accounts receivable
542
1,216
Inventories
116
131
Other current assets
326
364
Total current assets
4,516
5,610
Property and equipment, net
754
759
Goodwill and purchased intangible assets,
net
1,832
1,782
Other non-current assets
709
590
Total assets
$
7,811
$
8,741
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
348
$
542
Accrued expenses
633
851
Commercial paper notes
30
249
Current portion of long-term debt
400
400
Short-term deferred revenue and financed
unearned services revenue
1,764
1,825
Total current liabilities
3,175
3,867
Long-term debt
1,145
1,144
Other long-term liabilities
882
797
Long-term deferred revenue and financed
unearned services revenue
1,746
1,843
Total liabilities
6,948
7,651
Stockholders' equity
863
1,090
Total liabilities and stockholders'
equity
$
7,811
$
8,741
NETAPP, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended
July 26, 2019
July 27, 2018
Revenues:
Product
$
644
$
875
Software maintenance
250
229
Hardware maintenance and other
services
342
370
Net revenues
1,236
1,474
Cost of revenues:
Cost of product
312
398
Cost of software maintenance
10
7
Cost of hardware maintenance and other
services
98
106
Total cost of revenues
420
511
Gross profit
816
963
Operating expenses:
Sales and marketing
405
409
Research and development
215
208
General and administrative
71
73
Restructuring charges
21
19
Total operating expenses
712
709
Income from operations
104
254
Other income, net
15
18
Income before income taxes
119
272
Provision (benefit) for income taxes
16
(11
)
Net income
$
103
$
283
Net income per share:
Basic
$
0.43
$
1.08
Diluted
$
0.42
$
1.05
Shares used in net income per share
calculations:
Basic
239
262
Diluted
243
269
Cash dividends declared per share
$
0.48
$
0.40
NETAPP, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended
July 26, 2019
July 27, 2018
Cash flows from operating
activities:
Net income
$
103
$
283
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
49
49
Stock-based compensation
42
40
Deferred income taxes
(7
)
(26
)
Other items, net
6
8
Changes in assets and liabilities, net of
acquisitions of businesses:
Accounts receivable
672
423
Inventories
15
25
Accounts payable
(195
)
(177
)
Accrued expenses
(277
)
(221
)
Deferred revenue and financed unearned
services
revenue
(154
)
(87
)
Long-term taxes payable
(3
)
5
Changes in other operating assets and
liabilities, net
59
4
Net cash provided by operating
activities
310
326
Cash flows from investing
activities:
Redemptions of investments, net
1,027
248
Purchases of property and equipment
(32
)
(64
)
Acquisitions of businesses, net of cash
acquired
(56
)
—
Other investing activities, net
(1
)
2
Net cash provided by investing
activities
938
186
Cash flows from financing
activities:
Proceeds from issuance of common stock
under employee
stock award plans
54
63
Payments for taxes related to net share
settlement of stock
awards
(71
)
(84
)
Repurchase of common stock
(250
)
(500
)
Repayments of commercial paper notes,
net
(219
)
(185
)
Dividends paid
(115
)
(105
)
Other financing activities, net
(2
)
(1
)
Net cash used in financing activities
(603
)
(812
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(3
)
(14
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
642
(314
)
Cash, cash equivalents and restricted
cash:
Beginning of period
2,331
2,947
End of period
$
2,973
$
2,633
NETAPP, INC.
SUPPLEMENTAL DATA
(In millions except net income
per share, percentages, DSO, DIO, DPO, CCC and Inventory
Turns)
(Unaudited)
Q1 FY'20
Q4' FY19
Q1 FY'19
Revenues
Product
$
644
$
1,000
$
875
Strategic*
$
337
$
623
$
475
Mature*
$
307
$
377
$
400
Software Maintenance
$
250
$
242
$
229
Hardware Maintenance and Other
Services
$
342
$
350
$
370
Hardware Maintenance Support Contracts
$
284
$
284
$
303
Professional and Other Services
$
58
$
66
$
67
Net Revenues
$
1,236
$
1,592
$
1,474
* In Q1 FY’20 we made changes to the
products and solutions contained in each of the Strategic and
Mature product groupings. Mature now includes OEM and all products
related to disk and hybrid arrays. Strategic now includes add-on
software, private cloud solutions, and all products related to
All-Flash Arrays. Revenues for previous quarters have been recast
in accordance with the revised product grouping methodology for
comparability.
Geographic Mix
% of Q1 FY'20 Revenue
% of Q4 FY'19 Revenue
% of Q1 FY'19 Revenue
Americas
51
%
57
%
57
%
Americas Commercial
38
%
45
%
46
%
U.S. Public Sector
13
%
11
%
11
%
EMEA
33
%
29
%
29
%
Asia Pacific
16
%
14
%
14
%
Pathways Mix
% of Q1 FY'20 Revenue
% of Q4 FY'19 Revenue
% of Q1 FY'19 Revenue
Direct
19
%
24
%
29
%
Indirect
81
%
76
%
71
%
Non-GAAP Gross Margins
Q1 FY'20
Q4' FY19
Q1 FY'19
Non-GAAP Gross Margin
67.2
%
65.2
%
66.2
%
Product
53.4
%
55.3
%
55.7
%
Software Maintenance
96.0
%
95.9
%
96.9
%
Hardware Maintenance and Other
Services
71.9
%
72.3
%
72.2
%
Non-GAAP Income from Operations, Income
before Income Taxes & Effective Tax Rate
Q1 FY'20
Q4' FY19
Q1 FY'19
Non-GAAP Income from Operations
$
178
$
358
$
326
% of Net Revenues
14.4
%
22.5
%
22.1
%
Non-GAAP Income before Income Taxes
$
193
$
372
$
344
Non-GAAP Effective Tax Rate
18.7
%
18.1
%
18.3
%
Non-GAAP Net Income
Q1 FY'20
Q4' FY19
Q1 FY'19
Non-GAAP Net Income
$
157
$
305
$
281
Non-GAAP Weighted Average Common Shares
Outstanding, Diluted
243
249
269
Non-GAAP Income per Share, Diluted
$
0.65
$
1.22
$
1.04
Select Balance Sheet Items
Q1 FY'20
Q4' FY19
Q1 FY'19
Deferred Revenue and Financed Unearned
Services Revenue
$
3,510
$
3,668
$
3,260
DSO (days)
40
70
38
DIO (days)
25
21
17
DPO (days)
75
87
76
CCC (days)
(10
)
3
(20
)
Inventory Turns
14
17
21
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'20
Q4' FY19
Q1 FY'19
Net Cash Provided by Operating
Activities
$
310
$
399
$
326
Purchases of Property and Equipment
$
32
$
35
$
64
Free Cash Flow
$
278
$
364
$
262
Free Cash Flow as a % of Net Revenues
22.5
%
22.9
%
17.8
%
Free cash flow is a non-GAAP measure and
is defined as net cash provided by operating activities less
purchases of property and equipment.
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'FY20
Q4'FY19
Q1'FY19
NET INCOME
$
103
$
396
$
283
Adjustments:
Amortization of intangible assets
11
8
13
Stock-based compensation
42
37
40
Restructuring charges
21
16
19
Gain on sale or derecognition of
assets
—
(73
)
—
Income tax effects
(20
)
(31
)
(40
)
Resolution of income tax examinations
—
(48
)
—
Income tax benefit of ASC 606 adoption
—
—
(34
)
NON-GAAP NET INCOME
$
157
$
305
$
281
COST OF REVENUES
$
420
$
566
$
511
Adjustments:
Amortization of intangible assets
(11
)
(8
)
(9
)
Stock-based compensation
(3
)
(4
)
(4
)
NON-GAAP COST OF REVENUES
$
406
$
554
$
498
COST OF PRODUCT REVENUES
$
312
$
457
$
398
Adjustments:
Amortization of intangible assets
(11
)
(8
)
(9
)
Stock-based compensation
(1
)
(2
)
(1
)
NON-GAAP COST OF PRODUCT
REVENUES
$
300
$
447
$
388
COST OF HARDWARE MAINTENANCE AND OTHER
SERVICES REVENUES
$
98
$
99
$
106
Adjustment:
Stock-based compensation
(2
)
(2
)
(3
)
NON-GAAP COST OF HARDWARE MAINTENANCE
AND OTHER SERVICES REVENUES
$
96
$
97
$
103
GROSS PROFIT
$
816
$
1,026
$
963
Adjustments:
Amortization of intangible assets
11
8
9
Stock-based compensation
3
4
4
NON-GAAP GROSS PROFIT
$
830
$
1,038
$
976
NETAPP, INC.
RECONCILIATION OF NON-GAAP TO
GAAP
INCOME STATEMENT
INFORMATION
(In millions, except net
income per share amounts)
Q1'FY20
Q4'FY19
Q1'FY19
SALES AND MARKETING EXPENSES
$
405
$
439
$
409
Adjustments:
Amortization of intangible assets
—
—
(4
)
Stock-based compensation
(18
)
(15
)
(17
)
NON-GAAP SALES AND MARKETING
EXPENSES
$
387
$
424
$
388
RESEARCH AND DEVELOPMENT
EXPENSES
$
215
$
205
$
208
Adjustment:
Stock-based compensation
(15
)
(11
)
(12
)
NON-GAAP RESEARCH AND DEVELOPMENT
EXPENSES
$
200
$
194
$
196
GENERAL AND ADMINISTRATIVE
EXPENSES
$
71
$
69
$
73
Adjustment:
Stock-based compensation
(6
)
(7
)
(7
)
NON-GAAP GENERAL AND ADMINISTRATIVE
EXPENSES
$
65
$
62
$
66
RESTRUCTURING CHARGES
$
21
$
16
$
19
Adjustment:
Restructuring charges
(21
)
(16
)
(19
)
NON-GAAP RESTRUCTURING CHARGES
$
—
$
—
$
—
GAIN ON SALE OR DERECOGNITION OF
ASSETS
$
—
$
(73
)
$
—
Adjustment:
Gain on sale or derecognition of
assets
—
73
—
NON-GAAP GAIN ON SALE OR DERECOGNITION
OF ASSETS
$
—
$
—
$
—
OPERATING EXPENSES
$
712
$
656
$
709
Adjustments:
Amortization of intangible assets
—
—
(4
)
Stock-based compensation
(39
)
(33
)
(36
)
Restructuring charges
(21
)
(16
)
(19
)
Gain on sale or derecognition of
assets
—
73
—
NON-GAAP OPERATING EXPENSES
$
652
$
680
$
650
NETAPP, INC.
RECONCILIATION OF NON-GAAP TO
GAAP
INCOME STATEMENT
INFORMATION
(In millions, except net
income per share amounts)
Q1'FY20
Q4'FY19
Q1'FY19
INCOME FROM OPERATIONS
$
104
$
370
$
254
Adjustments:
Amortization of intangible assets
11
8
13
Stock-based compensation
42
37
40
Restructuring charges
21
16
19
Gain on sale or derecognition of
assets
—
(73
)
—
NON-GAAP INCOME FROM OPERATIONS
$
178
$
358
$
326
INCOME BEFORE INCOME TAXES
$
119
$
384
$
272
Adjustments:
Amortization of intangible assets
11
8
13
Stock-based compensation
42
37
40
Restructuring charges
21
16
19
Gain on sale or derecognition of
assets
—
(73
)
—
NON-GAAP INCOME BEFORE INCOME
TAXES
$
193
$
372
$
344
PROVISION (BENEFIT) FOR INCOME
TAXES
$
16
$
(12
)
$
(11
)
Adjustments:
Income tax effects
20
31
40
Resolution of income tax examinations
—
48
—
Income tax benefit of ASC 606 adoption
—
—
34
NON-GAAP PROVISION FOR INCOME
TAXES
$
36
$
67
$
63
NET INCOME PER SHARE
$
0.42
$
1.59
$
1.05
Adjustments:
Amortization of intangible assets
0.05
0.03
0.05
Stock-based compensation
0.17
0.15
0.15
Restructuring charges
0.09
0.06
0.07
Gain on sale or derecognition of
assets
—
(0.29
)
—
Income tax effects
(0.08
)
(0.12
)
(0.15
)
Resolution of income tax examinations
—
(0.19
)
—
Income tax benefit of ASC 606 adoption
—
—
(0.13
)
NON-GAAP NET INCOME PER SHARE
$
0.65
$
1.22
$
1.04
RECONCILIATION OF NON-GAAP TO
GAAP
GROSS MARGIN
($ in millions)
Q1'FY20
Q4'FY19
Q1'FY19
Gross margin-GAAP
66.0
%
64.4
%
65.3
%
Cost of revenues adjustments
1.1
%
0.8
%
0.9
%
Gross margin-Non-GAAP
67.2
%
65.2
%
66.2
%
GAAP cost of revenues
$
420
$
566
$
511
Cost of revenues adjustments:
Amortization of intangible assets
(11
)
(8
)
(9
)
Stock-based compensation
(3
)
(4
)
(4
)
Non-GAAP cost of revenues
$
406
$
554
$
498
Net revenues
$
1,236
$
1,592
$
1,474
RECONCILIATION OF NON-GAAP TO
GAAP
PRODUCT GROSS MARGIN
($ in millions)
Q1'FY20
Q4'FY19
Q1'FY19
Product gross margin-GAAP
51.6
%
54.3
%
54.5
%
Cost of product revenues adjustments
1.9
%
1.0
%
1.1
%
Product gross margin-Non-GAAP
53.4
%
55.3
%
55.7
%
GAAP cost of product revenues
$
312
$
457
$
398
Cost of product revenues adjustments:
Amortization of intangible assets
(11
)
(8
)
(9
)
Stock-based compensation
(1
)
(2
)
(1
)
Non-GAAP cost of product revenues
$
300
$
447
$
388
Product revenues
$
644
$
1,000
$
875
RECONCILIATION OF NON-GAAP TO
GAAP
HARDWARE MAINTENANCE AND OTHER
SERVICES GROSS MARGIN
($ in millions)
Q1'FY20
Q4'FY19
Q1'FY19
Hardware maintenance and other services
gross margin-GAAP
71.3
%
71.7
%
71.4
%
Cost of hardware maintenance and other
services revenues adjustment
0.6
%
0.6
%
0.8
%
Hardware maintenance and other services
gross margin-Non-GAAP
71.9
%
72.3
%
72.2
%
GAAP cost of hardware maintenance and
other services revenues
$
98
$
99
$
106
Cost of hardware maintenance and other
services revenues adjustment:
Stock-based compensation
(2
)
(2
)
(3
)
Non-GAAP cost of hardware maintenance and
other services revenues
$
96
$
97
$
103
Hardware maintenance and other services
revenues
$
342
$
350
$
370
RECONCILIATION OF NON-GAAP TO
GAAP
EFFECTIVE TAX RATE
Q1'FY20
Q4'FY19
Q1'FY19
GAAP effective tax rate
13.4
%
(3.1
)%
(4.0
)%
Adjustments:
Income tax effects
5.3
%
8.3
%
9.8
%
Resolution of income tax examinations
—
%
12.9
%
—
%
Income tax benefit of ASC 606 adoption
—
%
—
%
12.5
%
Non-GAAP effective tax rate
18.7
%
18.1
%
18.3
%
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW
(NON-GAAP)
(In millions)
Q1'FY20
Q4'FY19
Q1'FY19
Net cash provided by operating
activities
$
310
$
399
$
326
Purchases of property and equipment
(32
)
(35
)
(64
)
Free cash flow
$
278
$
364
$
262
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
2020
Second Quarter
Fiscal 2020
Non-GAAP Guidance - Net Income Per
Share
$0.91 - $0.99
Adjustments of Specific Items to Net
Income
Per Share for the Second Quarter Fiscal
2020:
Amortization of intangible assets
(0.05
)
Stock-based compensation expense
(0.17
)
Gain on sale or derecognition of
assets
0.17
Total Adjustments
(0.05
)
GAAP Guidance - Net Income Per Share
$0.86 - $0.94
NETAPP, INC.
RECONCILIATION OF NON-GAAP
GUIDANCE TO GAAP
FISCAL 2020
(Unaudited)
GROSS MARGIN
Gross Margin - Non-GAAP Guidance
66% - 67%
Adjustment:
Cost of revenues adjustments
(1)%
Gross Margin - GAAP Guidance
65% - 66%
OPERATING MARGIN
Operating Margin - Non-GAAP Guidance
19% - 22%
Adjustments:
Amortization of intangible assets
(1)%
Stock-based compensation expense
(3)%
Gain on sale or derecognition of
assets
1%
Operating Margin - GAAP Guidance
16% - 19%
EFFECTIVE TAX RATE
Effective Tax Rate - Non-GAAP Guidance
18% - 19%
Adjustment:
Income tax effects
1%
Effective Tax Rate - GAAP Guidance
19% - 20%
Some items may not add or recalculate due
to rounding
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190814005614/en/
Press Contact: Amelia Vierra NetApp 1 408 822 6403
amelia.vierra@netapp.com Investor Contact: Lance Berger
NetApp 1 408 822 6628 lance.berger@netapp.com
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