NetApp (NASDAQ: NTAP), today reported selected preliminary
results for its first quarter of fiscal year 2020 ended July 26,
2019 and revised previously-issued guidance for full fiscal year
2020. The company expects to provide final first quarter of fiscal
2020 results and guidance for the second quarter of fiscal year
2020 on August 14, 2019.
Selected Preliminary First Quarter of Fiscal Year 2020
Results
Preliminarily, first quarter of fiscal year 2020 net revenues
are expected to be between $1.220 and $1.230 billion, which is a
decline of approximately 17% from the first quarter of fiscal year
2019. As a reminder, net revenues in the first quarter of fiscal
year 2019 included $90 million from enterprise software license
agreements (ELAs) which did not repeat in the first quarter of
fiscal year 2020. Adjusting for ELAs, preliminary first quarter of
fiscal year 2020 net revenues would have been down approximately
12% year-over-year. GAAP net income per share1 is expected to be in
the range of $0.30 to $0.35 and non-GAAP net income per share2 is
expected to be in the range of $0.55 to $0.60, each computed based
on an expected diluted 243 million shares. These preliminary
results are below the company's previously stated guidance for the
first quarter of fiscal year 2020 issued on May 22, 2019, which
included a range of $1.315 to $1.465 billion for net revenues, a
range of $0.56 to $0.64 for GAAP net income per share, and a range
of $0.78 to $0.86 for non-GAAP net income per share. Our final
results for the first quarter of fiscal year 2020 may ultimately
differ somewhat from these preliminary results.
Revised Full Fiscal Year 2020 Outlook
Our revised expectation for full fiscal year 2020 is that net
revenues will be down between 5% and 10% year-over-year, below the
company’s previously stated full fiscal year 2020 guidance issued
on May 22, 2019, which reflected an expectation that net revenues
for fiscal year 2020 would grow year-over-year at the low-end of
the mid-single-digit range. Given our revised expectations for full
fiscal year 2020 net revenues, investors should not rely on our
previous full fiscal year 2020 guidance issued on May 22, 2019.
“While we are disappointed that our preliminary results for the
first quarter are lower than we had previously anticipated, we
remain confident in our long-term strategy and the health of our
business model,” said George Kurian, chief executive officer. “Our
customer conversations indicate that our hybrid multicloud
portfolio of solutions is the right one. We believe we can return
to growth over time by prudently reallocating investments to expand
sales coverage and accelerate our participation in the growing
Private Cloud and Cloud Data Services markets.”
Webcast and Conference Call Information
NetApp will host a conference call 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 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, statements
about our preliminary first quarter of fiscal year 2020 results,
all of the statements made under the Revised Full Fiscal Year 2020
Outlook section, and statements about our long-term strategy and
business model and our ability to return to growth by reallocating
investments. 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 macroeconomic and market conditions, changes in U.S.
government spending, the capital spending environment and matters
specific to our business, such as our ability to expand our total
available market, acquire new accounts, expand existing accounts,
our ability to successfully execute on our Data Fabric strategy and
consistently execute 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 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
1GAAP net income per share and non-GAAP net income per share are
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)
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.
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.
RECONCILIATION OF NON-GAAP TO
GAAP
PRELIMINARY EARNINGS PER
SHARE
FIRST QUARTER FISCAL
2020
First Quarter
Fiscal 2020
Non-GAAP Guidance - Net Income Per
Share
$0.55 - $0.60
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
(0.17
)
Restructuring charges
(0.09
)
Income tax effects
0.05
Total Adjustments
(0.25
)
GAAP Guidance - Net Income Per Share
$0.30 - $0.35
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190801005995/en/
(Press) Amelia Vierra 1 408 822 6403
amelia.vierra@netapp.com
(Investors) Lance Berger 1 408 822 6628
lance.berger@netapp.com
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