Net Revenues of $1.59 Billion for the Fourth
Quarter and $6.15 Billion for Fiscal Year 2019
- Net revenues for fiscal year 2019 grew
4% year-over-year
- Product revenue for fiscal year 2019
grew 7% year-over-year
- All-flash array revenue for fiscal year
2019 grew 25% year-over-year
- $2.51 billion returned to shareholders
in share repurchases and cash dividends in fiscal year 2019
- First quarter fiscal year 2020 dividend
to increase by 20% to $0.48 per share
NetApp (NASDAQ: NTAP) today reported financial results for the
fourth quarter and fiscal year 2019, which ended April 26,
2019.
“Despite the modest shortfall relative to our fiscal year 2019
expectations, we made significant progress in the strategic markets
of all-flash, private cloud, and cloud data services. Our Data
Fabric strategy clearly differentiates us from our
competitors,” said George Kurian, chief executive officer.
“Enterprises are choosing NetApp to be a strategic partner in their
digital transformations. Our opportunity is large and growing, and
we are moving quickly to improve our execution.”
Fourth Quarter Fiscal Year 2019 Financial Results*
- Net Revenues: $1.59 billion,
compared to $1.64 billion in the fourth quarter of fiscal 2018
- Net Income: GAAP net income of
$396 million, compared to GAAP net income of $290 million in the
fourth quarter of fiscal 2018; non-GAAP net income1 of $305
million, compared to non-GAAP net income of $307 million in the
fourth quarter of fiscal 2018
- Earnings per Share: GAAP net
income per share2 of $1.59 compared to GAAP net income per share of
$1.06 in the fourth quarter of fiscal 2018; non-GAAP net income per
share of $1.22, compared to non-GAAP net income per share of $1.12
in the fourth quarter of fiscal 2018
- Cash, Cash Equivalents and
Investments: $3.9 billion at the end of fiscal 2019
- Cash from Operations: $399
million, compared to $494 million in the fourth quarter of fiscal
2018
- Share Repurchase and Dividend:
Returned $597 million to shareholders through share repurchases and
cash dividends
Fiscal Year 2019 Financial Results*
- Net Revenues: $6.15 billion,
increased 4% year-over-year from $5.92 billion in fiscal 2018
- Net Income: GAAP net income of
$1.17 billion, compared to GAAP net income of $116 million** in
fiscal 2018; non-GAAP net income of $1.17 billion, compared to
non-GAAP net income of $983 million in fiscal 2018
- Earnings per Share: GAAP net
income per share of $4.51, compared to GAAP net income per share of
$0.42** in fiscal 2018; non-GAAP net income per share of $4.52,
compared to non-GAAP net income per share of $3.56 in fiscal
2018
- Cash from Operations: $1.34
billion, compared to $1.48 billion in fiscal year 2018
- Share Repurchase and Dividend:
Returned $2.51 billion to shareholders through share repurchases
and cash dividends
*In the first quarter of fiscal 2019, NetApp adopted Revenue
from Contracts with Customers (ASC 606) using the full
retrospective method of adoption. Accordingly, NetApp’s condensed
consolidated balance sheet as of April 27, 2018, condensed
consolidated statements of operations and cash flows for all fiscal
2018 periods presented, and all related financial statement metrics
included herein, have been restated to conform to the new
rules.
**On December 22, 2017, the Tax Cuts and Jobs Act was enacted
into law. This tax reform legislation contains several key tax
provisions that affected the company, including a one-time
mandatory transition tax on accumulated foreign earnings and a
reduction of the U.S. corporate income tax rate to 21% effective
January 1, 2018, among others. GAAP net income in fiscal year 2018
was impacted by a resulting one-time charge of approximately $850
million.
First Quarter Fiscal Year 2020 Financial Outlook
The Company provided the following financial guidance for the
first quarter of fiscal year 2020:
• Net revenues are expected to be in the
range of:
$1.315 billion to $1.465 billion
GAAP
Non-GAAP
• Earnings per share is expected to be in
the range of:
$0.56-$0.64
$0.78-$0.86
Full Fiscal Year 2020 Financial Outlook
The Company provided the following financial guidance for the
full fiscal year 2020:
• Net revenues are expected to grow at the
low-end of mid-single-digit range
GAAP
Non-GAAP
• Consolidated gross margins are expected
to be:
63%-64%
64%-65%
• Operating margins are expected to be in
the range of:
20%-21%
23%-24%
• Effective tax rate is expected to be
approximately 19.5% on both a GAAP and Non-GAAP basis
Dividend
The Company will increase the first quarter fiscal year 2020
dividend by 20% to $0.48 per share. The quarterly dividend will be
paid on July 24, 2019, to shareholders of record as of the close of
business on July 5, 2019.
Fourth Quarter Fiscal Year 2019 Business Highlights
New Products Enable Digital Transformation
- NetApp announced a variety of new and
updated offerings that give customers more flexibility across
hybrid multicloud environments for a range of use cases, including
FlexPod™ AI platform; FlexPod for MEDITECH software;
NetApp™ Service Level Manager; and the
FlexCache™.
- OnCommand™ Workflow Automation
5.0 makes it easier for customers to automate, monitor, and
maintain storage workflows. Changes in the web UI deliver a
consistent user experience across OnCommand System Manager, Unified
Manager, and Workflow Automation, resulting in improved simplicity
and efficiency.
Industry-Leading Strategic Partnerships
- Intel Optane DC Persistent
Memory and NetApp Memory Accelerated
Data extended their partnership to help customers realize
the promise of solutions that offer shorter time to results with
their data.
- NetApp partnered
with H2O.ai and integrated NetApp Cloud
Volumes Service, a cloud-native file storage
service. H2O Driverless AI provides a platform for
customers to collaborate, scale, and deploy AI solutions more
quickly.
- Texas-based Soccour Solutions
received HCI Champion Partner status after it
embraced NetApp HCI as part of its customer offerings.
Industry Recognition
- NetApp was named 2018 Google
Cloud Technology Partner of the Year for Infrastructure at
the Google Cloud Next 2019 Partner Summit.
- NetApp was awarded Brand of the
Year by Think Global Awards, which recognizes
achievements in promoting an awareness of thinking globally for
individuals, communities, startups, small to medium-sized
businesses, global brands, and large-scale international
organizations.
Webcast and Conference Call Information
NetApp will host a conference call to discuss these results
today at 2:00 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 4:00 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 First Quarter Fiscal Year 2020 Financial
Outlook and Full Fiscal Year 2020 Financial Outlook sections,
statements about our large and growing opportunity and our ability
to improve our 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 reports on 10-Q and 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)
April 26,2019
April 27,2018
ASSETS Current assets: Cash, cash equivalents
and investments $ 3,899 $ 5,391 Accounts receivable 1,216 1,047
Inventories 131 122 Other current assets 364 392
Total current assets 5,610 6,952 Property and equipment, net
759 756 Goodwill and purchased intangible assets, net 1,782 1,833
Other non-current assets 590 450 Total assets $ 8,741
$ 9,991
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $ 542 $ 609 Accrued expenses
851 825 Commercial paper notes 249 385 Current portion of long-term
debt 400 — Short-term deferred revenue and financed unearned
services revenue 1,825 1,712 Total current
liabilities 3,867 3,531 Long-term debt 1,144 1,541 Other long-term
liabilities 797 992 Long-term deferred revenue and financed
unearned services revenue 1,843 1,651 Total
liabilities 7,651 7,715 Stockholders' equity
1,090 2,276 Total liabilities and stockholders'
equity $ 8,741 $ 9,991
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended Year Ended April 26,
2019 April 27, 2018 April 26, 2019
April 27, 2018 Revenues: Product $ 1,000 $ 1,027 $
3,755 $ 3,525 Software maintenance 242 234 946 902 Hardware
maintenance and other services 350 383 1,445
1,492 Net revenues 1,592 1,644 6,146
5,919 Cost of revenues: Cost of product 457 496 1,752
1,738 Cost of software maintenance 10 6 35 25 Cost of hardware
maintenance and other services 99 113 414
447 Total cost of revenues 566 615
2,201 2,210 Gross profit 1,026 1,029
3,945 3,709 Operating expenses: Sales and marketing
439 443 1,657 1,706 Research and development 205 203 827 783
General and administrative 69 71 278 280 Restructuring charges 16 —
35 — Gain on sale or derecognition of assets (73 ) —
(73 ) (218 ) Total operating expenses 656
717 2,724 2,551 Income from operations
370 312 1,221 1,158 Other income, net 14 16
47 41 Income before income taxes 384 328 1,268
1,199 Provision (benefit) for income taxes (12 )
38 99 1,083 Net income $ 396 $ 290 $
1,169 $ 116 Net income per share: Basic $ 1.62 $ 1.09 $ 4.60
$ 0.43 Diluted $ 1.59 $ 1.06 $ 4.51 $ 0.42 Shares
used in net income per share calculations: Basic 245
265 254 268 Diluted 249 273
259 276 Cash dividends declared per share $
0.40 $ 0.20 $ 1.60 $ 0.80
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Year Ended April 26, 2019
April 27, 2018 April 26, 2019 April
27, 2018 Cash flows from operating activities: Net
income $ 396 $ 290 $ 1,169 $ 116
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 48 48 197 198 Stock-based
compensation 37 36 158 161 Deferred income taxes 18 25 (3 ) 270
Gain on sale or derecognition of assets (73 ) — (73 ) (218 ) Other
items, net (6 ) (19 ) 2 (27 )
Changes in assets and liabilities, net of
acquisitions of businesses:
Accounts receivable (350 ) (279 ) (185 ) (289 ) Inventories (31 )
(32 ) (9 ) 36 Accounts payable 44 147 (57 ) 262 Accrued expenses
127 104 42 162
Deferred revenue and financed unearned
services revenue
326 238 343 139 Long-term taxes payable (104 ) (9 ) (164 ) 714
Changes in other operating assets and
liabilities, net
(33 ) (55 ) (79 ) (46 ) Net cash
provided by operating activities 399 494 1,341
1,478
Cash flows from investing activities:
Redemptions (purchases) of investments, net 215 168 876 (10 )
Purchases of property and equipment (35 ) (48 ) (173 ) (145 )
Proceeds from sale of properties — — — 210 Acquisitions of
businesses, net of cash acquired — — (3 ) (75 ) Other investing
activities, net 3 — 4 (1 ) Net cash
provided by (used in) investing activities 183 120
704 (21 )
Cash flows from financing
activities: Proceeds from issuance of common stock under
employee stock award plans 3 16 121 173
Payments for taxes related to net share
settlement of stock awards
(4 ) (8 ) (96 ) (75 ) Repurchase of common stock (500 ) (344 )
(2,111 ) (794 ) Proceeds from (repayments of) commercial paper
notes, net 85 (247 ) (136 ) (115 ) Issuance of long-term debt, net
— — — 795 Repayment of long-term debt — — — (750 ) Dividends paid
(97 ) (53 ) (403 ) (214 ) Other financing activities, net (1
) — (6 ) (6 ) Net cash used in financing
activities (514 ) (636 ) (2,631 ) (986
)
Effect of exchange rate changes on cash, cash
equivalents and restricted cash (13 ) (11 ) (30 ) 26
Net increase (decrease) in cash, cash equivalents and restricted
cash 55 (33 ) (616 ) 497
Cash, cash equivalents and
restricted cash: Beginning of period 2,276 2,980
2,947 2,450 End of period $ 2,331 $ 2,947 $ 2,331 $
2,947
SELECTED CONDENSED CONSOLIDATED BALANCE
SHEET LINE ITEMS
(In millions)
(Unaudited)
As of April 27, 2018
As PreviouslyReported
Impact of ASC606
Adoption
As Adjusted ASSETS Accounts receivable $ 1,009 $ 38 $
1,047 Inventories 126 (4 ) 122 Other current assets 330 62 392
Other non-current assets 420 30 450
LIABILITIES AND
STOCKHOLDERS' EQUITY Short-term deferred revenue and financed
unearned services revenue $ 1,804 $ (92 ) $ 1,712 Other long-term
liabilities 961 31 992 Long-term deferred revenue and financed
unearned services revenue 1,673 (22 ) 1,651 Total stockholders'
equity 2,067 209 2,276
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In
millions, except per share amounts) (Unaudited)
Three Months
Ended Year Ended April 27, 2018 April 27,
2018
AsPreviouslyReported
Impact ofASC
606Adoption
AsAdjusted
AsPreviouslyReported
Impact ofASC
606Adoption
AsAdjusted
Revenues: Product $ 1,011 $ 16 $ 1,027 $ 3,461 $ 64 $ 3,525
Software maintenance 247 (13 ) 234 958 (56 ) 902 Hardware
maintenance and other services 383 — 383
1,492 — 1,492 Net revenues 1,641
3 1,644 5,911 8 5,919 Cost of
revenues: Cost of product 500 (4 ) 496 1,738 — 1,738 Cost of
software maintenance 6 — 6 25 — 25 Cost of hardware maintenance and
other services 113 — 113 449 (2
) 447 Total cost of revenues 619 (4 )
615 2,212 (2 ) 2,210 Gross profit 1,022
7 1,029 3,699 10 3,709
Operating expenses: Sales and marketing 461 (18
)
443 1,729 (23 ) 1,706 Research and development 203 — 203 783 — 783
General and administrative 71 — 71 280 — 280 Gain on sale or
derecognition of assets — — — (218 )
— (218 ) Total operating expenses 735
(18 ) 717 2,574 (23 ) 2,551
Income from operations 287 25 312 1,125 33 1,158 Other
income, net 16 — 16 41 —
41 Income before income taxes 303 25 328 1,166 33 1,199
Provision for income taxes 32 6 38
1,090 (7 ) 1,083 Net income $ 271 $ 19
$ 290 $ 76 $ 40 $ 116 Net income per share: Basic $ 1.02 $
0.07 $ 1.09 $ 0.28 $ 0.15 $ 0.43 Diluted $ 0.99 $ 0.07 $
1.06 $ 0.28 $ 0.14 $ 0.42 Shares used in net income per
share calculations: Basic 265 265 265
268 268 268 Diluted 273 273
273 276 276 276
NETAPP, INC. SUPPLEMENTAL DATA (In millions except
net income per share, percentages, DSO, DIO, DPO, CCC and Inventory
Turns) (Unaudited) Q4
FY'19 Q3 FY'19 Q4 FY'18
FY 2019 FY2018
Revenues Product
$ 1,000 $ 967 $ 1,027
$ 3,755 $ 3,525 Strategic
$ 774 $ 674 $
747
$ 2,709 $ 2,468 Mature
$ 226 $ 293
$ 280
$ 1,046 $ 1,057 Software Maintenance
$
242 $ 239 $ 234
$ 946 $ 902 Hardware
Maintenance and Other Services
$ 350 $ 357 $ 383
$ 1,445 $ 1,492 Hardware Maintenance Support
Contracts
$ 284 $ 292 $ 310
$ 1,182 $
1,214 Professional and Other Services
$ 66 $ 65 $ 73
$ 263 $ 278
Net Revenues $ 1,592
$ 1,563 $ 1,644
$ 6,146 $ 5,919
Geographic Mix
% of
Q4FY'19Revenue
% of Q3FY'19Revenue
% of Q4FY'18Revenue
% of
FY2019Revenue
% of FY2018Revenue
Americas
57 % 52 % 54 %
56 % 54 %
Americas Commercial
45 % 41 % 42 %
44 %
41 % U.S. Public Sector
11 % 11 % 12 %
12
% 13 % EMEA
29 % 33 % 33 %
30 %
32 % Asia Pacific
14 % 14 % 13 %
14 %
14 %
Pathways Mix
% of
Q4FY'19Revenue
% of Q3FY'19Revenue
% of Q4FY'18Revenue
% of
FY2019Revenue
% of FY2018Revenue
Direct
24 % 19 % 21 %
24 % 21 %
Indirect
76 % 81 % 79 %
76 % 79 %
Non-GAAP Gross Margins Q4 FY'19 Q3
FY'19 Q4 FY'18
FY 2019 FY2018 Non-GAAP Gross Margin
65.2 % 63.7 % 63.3 %
65.0 % 63.5 %
Product
55.3 % 52.6 % 52.7 %
54.4 %
51.8 % Software Maintenance
95.9 % 95.8 % 97.4 %
96.3 % 97.2 % Hardware Maintenance and Other Services
72.3 % 72.3 % 71.0 %
72.0 % 70.7 %
Non-GAAP Income from Operations, Income before
Income Taxes & Effective Tax Rate Q4 FY'19 Q3 FY'19
Q4 FY'18
FY 2019 FY2018 Non-GAAP Income from Operations
$ 358 $ 367 $ 360
$ 1,387 $ 1,159 % of
Net Revenues
22.5 % 23.5 % 21.9 %
22.6
% 19.6 % Non-GAAP Income before Income Taxes
$
372 $ 375 $ 376
$ 1,434 $ 1,200 Non-GAAP
Effective Tax Rate
18.1 % 18.7 % 18.4 %
18.4
% 18.1 %
Non-GAAP Net Income Q4 FY'19 Q3 FY'19 Q4 FY'18
FY
2019 FY2018 Non-GAAP Net Income
$ 305 $ 305 $ 307
$ 1,171 $ 983 Non-GAAP Weighted Average Common Shares
Outstanding, Diluted
249 255 273
259 276 Non-GAAP
Income per Share, Diluted
$ 1.22 $ 1.20 $ 1.12
$ 4.52 $ 3.56
Select Balance Sheet
Items Q4 FY'19 Q3 FY'19 Q4 FY'18 Deferred Revenue and
Financed Unearned Services Revenue
$ 3,668 $ 3,357 $
3,363 DSO (days)
70 51 58 DIO (days)
21 16 18 DPO
(days)
87 78 90 CCC (days)
3 (11 ) (14 ) Inventory
Turns
17 23 20 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 Q4 FY'19 Q3 FY'19 Q4 FY'18
FY 2019 FY2018
Net Cash Provided by Operating Activities
$ 399 $ 451
$ 494
$ 1,341 $ 1,478 Purchases of Property and
Equipment
$ 35 $ 31 $ 48
$ 173 $ 145
Free Cash Flow
$ 364 $ 420 $ 446
$
1,168 $ 1,333 Free Cash Flow as a % of Net Revenues
22.9 % 26.9 % 27.1 %
19.0 % 22.5 %
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)
Q4'FY19 Q3'FY19 Q4'FY18
FY2019 FY2018 NET INCOME $ 396 $ 249 $
290 $ 1,169 $ 116 Adjustments: Amortization of intangible assets 8
13 12 46 53 Stock-based compensation 37 43 36 158 161 Litigation
settlements — — — — 5 Restructuring charges 16 — — 35 — Gain on
sale or derecognition of assets (73 ) — — (73 ) (218 ) Income tax
effects (31 ) — (31 ) (82 ) 10 Resolution of income tax
examinations (48 ) — — (48 ) — Income tax benefit of ASC 606
adoption — — — (34 ) — Tax reform — — —
— 856
NON-GAAP NET INCOME $ 305 $ 305 $ 307 $ 1,171 $
983
COST OF REVENUES $ 566 $ 581 $ 615 $ 2,201 $
2,210 Adjustments: Amortization of intangible assets (8 ) (10 ) (9
) (36 ) (36 ) Stock-based compensation (4 ) (4 )
(3 ) (14 ) (13 )
NON-GAAP COST OF
REVENUES $ 554 $ 567 $ 603 $ 2,151 $ 2,161
COST OF
PRODUCT REVENUES $ 457 $ 469 $ 496 $ 1,752 $ 1,738 Adjustments:
Amortization of intangible assets (8 ) (10 ) (9 ) (36 ) (36 )
Stock-based compensation (2 ) (1 ) (1 )
(4 ) (3 )
NON-GAAP COST OF PRODUCT REVENUES $ 447 $
458 $ 486 $ 1,712 $ 1,699
COST OF HARDWARE MAINTENANCE
AND OTHER SERVICES REVENUES $ 99 $ 102 $ 113 $ 414 $ 447
Adjustment: Stock-based compensation (2 ) (3 )
(2 ) (10 ) (10 )
NON-GAAP COST OF HARDWARE
MAINTENANCE AND OTHER SERVICES REVENUES $ 97 $ 99 $ 111 $ 404 $
437
GROSS PROFIT $ 1,026 $ 982 $ 1,029 $ 3,945 $
3,709 Adjustments: Amortization of intangible assets 8 10 9 36 36
Stock-based compensation 4 4 3 14
13
NON-GAAP GROSS PROFIT $ 1,038 $ 996 $ 1,041 $
3,995 $ 3,758
NETAPP, INC. RECONCILIATION
OF NON-GAAP TO GAAP INCOME STATEMENT INFORMATION (In
millions, except net income per share amounts)
Q4'FY19 Q3'FY19 Q4'FY18
FY2019 FY2018 SALES AND MARKETING
EXPENSES $ 439 $ 401 $ 443 $ 1,657 $ 1,706 Adjustments:
Amortization of intangible assets — (3
)
(3 ) (10 ) (17 ) Stock-based compensation (15 ) (19 )
(15 ) (67 ) (68 )
NON-GAAP SALES AND
MARKETING EXPENSES $ 424 $ 379 $ 425 $ 1,580 $ 1,621
RESEARCH AND DEVELOPMENT EXPENSES $ 205 $ 203 $ 203 $ 827 $
783 Adjustment: Stock-based compensation (11 ) (13 )
(11 ) (48 ) (49 )
NON-GAAP RESEARCH AND
DEVELOPMENT EXPENSES $ 194 $ 190 $ 192 $ 779 $ 734
GENERAL AND ADMINISTRATIVE EXPENSES $ 69 $ 67 $ 71 $ 278 $
280 Adjustments: Stock-based compensation (7 ) (7 ) (7 ) (29 ) (31
) Litigation settlements — — — —
(5 )
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 62 $ 60
$ 64 $ 249 $ 244
RESTRUCTURING CHARGES $ 16 $
— $ — $ 35 $ — Adjustment: Restructuring charges (16 )
— — (35 ) —
NON-GAAP RESTRUCTURING
CHARGES $ — $ — $ — $ — $ —
GAIN ON SALE OR
DERECOGNITION OF ASSETS $ (73 ) $ — $ — $ (73 ) $ (218 )
Adjustment: Gain on sale or derecognition of assets 73
— — 73 218
NON-GAAP GAIN ON SALE OR
DERECOGNITION OF ASSETS $ — $ — $ — $ — $ —
OPERATING
EXPENSES $ 656 $ 671 $ 717 $ 2,724 $ 2,551 Adjustments:
Amortization of intangible assets — (3 ) (3 ) (10 ) (17 )
Stock-based compensation (33 ) (39 ) (33 ) (144 ) (148 ) Litigation
settlements — — — — (5 ) Restructuring charges (16 ) — — (35 ) —
Gain on sale or derecognition of assets 73 — —
73 218
NON-GAAP OPERATING EXPENSES $ 680 $ 629
$ 681 $ 2,608 $ 2,599
NETAPP, INC.
RECONCILIATION OF NON-GAAP TO GAAP INCOME STATEMENT
INFORMATION (In millions, except net income per share
amounts)
Q4'FY19 Q3'FY19 Q4'FY18 FY2019
FY2018 INCOME FROM OPERATIONS $ 370 $ 311 $
312 $ 1,221 $ 1,158 Adjustments: Amortization of intangible assets
8 13 12 46 53
Stock-based compensation
37 43 36 158 161 Litigation settlements — — — — 5 Restructuring
charges 16 — — 35 — Gain on sale or derecognition of assets
(73 ) — — (73 ) (218 )
NON-GAAP
INCOME FROM OPERATIONS $ 358 $ 367 $ 360 $ 1,387 $ 1,159
INCOME BEFORE INCOME TAXES $ 384 $ 319 $ 328 $ 1,268 $ 1,199
Adjustments: Amortization of intangible assets 8 13 12 46 53
Stock-based compensation 37 43 36 158 161 Litigation settlements —
— — — 5 Restructuring charges 16 — — 35 — Gain on sale or
derecognition of assets (73 ) — — (73 )
(218 )
NON-GAAP INCOME BEFORE INCOME TAXES $ 372 $
375 $ 376 $ 1,434 $ 1,200
PROVISION (BENEFIT) FOR INCOME
TAXES $ (12 ) $ 70 $ 38 $ 99 $ 1,083 Adjustments: Income tax
effects 31 — 31 82 (10 ) Resolution of income tax examinations 48 —
— 48 — Income tax benefit of ASC 606 adoption — — — 34 — Tax reform
— — — — (856 )
NON-GAAP
PROVISION FOR INCOME TAXES $ 67 $ 70 $ 69 $ 263 $ 217
NET INCOME PER SHARE $ 1.59 $ 0.98 $ 1.06 $ 4.51 $ 0.42
Adjustments: Amortization of intangible assets 0.03 0.05 0.04 0.18
0.19 Stock-based compensation 0.15 0.17 0.13 0.61 0.58 Litigation
settlements — — — — 0.02 Restructuring charges 0.06 — — 0.14 — Gain
on sale or derecognition of assets (0.29 ) — — (0.28 ) (0.79 )
Income tax effects (0.12 ) — (0.11 ) (0.32 ) 0.04 Resolution of
income tax examinations (0.19 ) — — (0.19 ) — Income tax benefit of
ASC 606 adoption — — — (0.13 ) — Tax reform — —
— — 3.10
NON-GAAP NET INCOME PER SHARE
$ 1.22 $ 1.20 $ 1.12 $ 4.52 $ 3.56
RECONCILIATION
OF NON-GAAP TO GAAP GROSS MARGIN ($ in millions)
Q4'FY19 Q3'FY19
Q4'FY18 FY2019 FY2018 Gross
margin-GAAP 64.4 % 62.8 % 62.6 % 64.2 % 62.7 % Cost of revenues
adjustments 0.8 % 0.9 % 0.7 % 0.8 %
0.8 %
Gross margin-Non-GAAP 65.2 % 63.7 % 63.3 % 65.0
% 63.5 % GAAP cost of revenues $ 566 $ 581 $ 615 $ 2,201 $
2,210 Cost of revenues adjustments: Amortization of intangible
assets (8 ) (10 ) (9 ) (36 ) (36 ) Stock-based compensation
(4 ) (4 ) (3 ) (14 ) (13 ) Non-GAAP
cost of revenues $ 554 $ 567 $ 603 $ 2,151 $ 2,161 Net
revenues $ 1,592 $ 1,563 $ 1,644 $ 6,146 $ 5,919
RECONCILIATION OF NON-GAAP TO GAAP PRODUCT GROSS
MARGIN ($ in millions)
Q4'FY19 Q3'FY19 Q4'FY18
FY2019 FY2018 Product gross margin-GAAP
54.3 % 51.5 % 51.7 % 53.3 % 50.7 % Cost of product revenues
adjustments 1.0 % 1.1 % 1.0 % 1.1 %
1.1 %
Product gross margin-Non-GAAP 55.3 % 52.6 %
52.7 % 54.4 % 51.8 % GAAP cost of product revenues $ 457 $
469 $ 496 $ 1,752 $ 1,738 Cost of product revenues adjustments:
Amortization of intangible assets (8 ) (10 ) (9 ) (36 ) (36 )
Stock-based compensation (2 ) (1 ) (1 )
(4 ) (3 ) Non-GAAP cost of product revenues $ 447 $ 458 $
486 $ 1,712 $ 1,699 Product revenues $ 1,000 $ 967 $ 1,027 $
3,755 $ 3,525
RECONCILIATION OF NON-GAAP TO
GAAP HARDWARE MAINTENANCE AND OTHER SERVICES GROSS
MARGIN ($ in millions)
Q4'FY19 Q3'FY19 Q4'FY18
FY2019 FY2018 Hardware maintenance and
other services gross margin-GAAP 71.7 % 71.4 % 70.5 % 71.3 %
70.0 %
Cost of hardware maintenance and other
services revenues adjustment
0.6 % 0.8 % 0.5 % 0.7 % 0.7 %
Hardware maintenance and other services gross
margin-Non-GAAP 72.3 % 72.3 % 71.0 % 72.0 % 70.7 % GAAP
cost of hardware maintenance and other services revenues $ 99 $ 102
$ 113 $ 414 $ 447 Cost of hardware maintenance and other services
revenues adjustment: Stock-based compensation (2 ) (3
) (2 ) (10 ) (10 ) Non-GAAP cost of hardware
maintenance and other services revenues $ 97 $ 99 $ 111 $ 404 $ 437
Hardware maintenance and other services revenues $ 350 $ 357
$ 383 $ 1,445 $ 1,492
RECONCILIATION OF NON-GAAP
TO GAAP EFFECTIVE TAX RATE
Q4'FY19 Q3'FY19 Q4'FY18
FY2019 FY2018 GAAP effective
tax rate (3.1 )% 21.9 % 11.6 % 7.8 % 90.3 % Adjustments: Income
tax effects 8.3 % (3.2 )% 6.8 % 4.9 % (0.8 )% Resolution of income
tax examinations 12.9 % — % — % 3.3 % — % Income tax benefit of ASC
606 adoption — % — % — % 2.4 % — % Tax reform — % — %
— % — % (71.4 )%
Non-GAAP effective tax
rate 18.1 % 18.7 % 18.4 % 18.4 % 18.1 %
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW (NON-GAAP) (In millions)
Q4'FY19 Q3'FY19
Q4'FY18 FY2019 FY2018 Net cash provided by
operating activities $ 399 $ 451 $ 494 $ 1,341 $ 1,478 Purchases of
property and equipment (35 ) (31 ) (48 )
(173 ) (145 )
Free cash flow $ 364 $ 420 $ 446
$ 1,168 $ 1,333
Some items may not add or recalculate due
to rounding.
NETAPP, INC. RECONCILIATION OF NON-GAAP
GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE
FIRST QUARTER FISCAL 2020 First Quarter
Fiscal 2020 Non-GAAP Guidance - Net Income Per Share
$0.78 - $0.86 Adjustments of Specific Items to Net Income
Per Share for the First Quarter Fiscal 2020: Amortization of
intangible assets (0.04 ) Stock-based compensation expense (0.16 )
Restructuring charges (0.07 ) Income tax effects 0.05 Total
Adjustments (0.22 ) GAAP Guidance - Net Income Per Share
$0.56 - $0.64
NETAPP, INC. RECONCILIATION
OF NON-GAAP GUIDANCE TO GAAP FISCAL 2020
(Unaudited) GROSS MARGIN Gross
Margin - Non-GAAP Guidance 64% - 65% Adjustment: Cost of revenues
adjustments (1)% Gross Margin - GAAP Guidance 63% - 64%
OPERATING MARGIN Operating Margin - Non-GAAP
Guidance 23% - 24% Adjustments: Amortization of intangible assets
(1)% Stock-based compensation expense (3)% Gain on sale of
properties 1% Operating Margin - GAAP Guidance 20% - 21%
Some items may not add or recalculate due to rounding
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190522005718/en/
Press Contact:Madge MillerNetApp1 408 419
5263madge.miller@netapp.com
Investor Contact:Lance BergerNetApp1 408 822
6628lance.berger@netapp.com
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