- NetApp estimates revenue for the fourth quarter of fiscal year 2011 to be approximately $1.380 billion, plus or minus 2%, which equates to approximately 7% to 11% sequential revenue growth and approximately 15% to 20% year over year revenue growth.
- NetApp estimates that fourth quarter fiscal year 2011 GAAP earnings per share will be approximately $0.38 to $0.42 per share. NetApp estimates that the fourth quarter fiscal year 2011 non-GAAP earnings per share will be approximately $0.49 to $0.53 per share.
- NetApp estimates that share count for the fourth quarter of fiscal year 2011 will increase to approximately 414 million shares, including an estimated 18 million shares from the company's outstanding convertible notes(3) and 12 million shares from outstanding warrants. Share count does not include the company's outstanding note hedges that are expected to offset 80% of the dilution from the convertible notes at maturity or conversion, which would equate to an offset of approximately 14 million shares if the conversion or maturity occurred in the third quarter.
In the third quarter of fiscal year 2011, NetApp announced its biggest product launch in the company's history, aimed at enabling customers to address today's evolving business requirements by moving to a flexible and efficient shared IT infrastructure. Additionally, NetApp and its executives received several noteworthy industry honors and the company once again was named one of the best places to work in the country. Key business highlights include the following: NetApp Paves the Way for Customers to Make the Transition to a Shared IT Infrastructure and Capitalize on New Growth Opportunities
- NetApp delivers the foundation for flexible and efficient shared IT infrastructures. With the biggest product launch in its history, NetApp unveiled enhancements to the NetApp Data ONTAP® operating system that enable greater flexibility, efficiency, scalability, and performance. NetApp also introduced the NetApp FAS/V6200 series of high-end storage systems and FAS/V3200 series of midrange storage systems, both built on unified architectures and able to help customers respond to the rapid growth and pace of business. Additional launch components included the OnCommand™ Management Software Suite, a SAS disk shelf, and new solid-state drives.
- NetApp, Cisco, and VMware enable customer transformation to a virtualized, shared IT infrastructure. Highlighting their ongoing collaboration, NetApp, Cisco, and VMware unveiled FlexPod™ for VMware, a unified, pretested, and validated shared infrastructure that can scale easily, be optimized for a variety of mixed application workloads, or be configured for virtual desktop or server infrastructure, secure multi-tenancy, or cloud environments. The three companies are working closely with leading channel partners to help customers take advantage of FlexPod for VMware to transform to a more efficient and flexible data center infrastructure.
- NetApp acquired Akorri Networks, Inc., a privately held company headquartered in Littleton, Massachusetts. Akorri's technology will enable NetApp to provide customers with comprehensive tools to automate and analyze their shared IT infrastructures, efficiently deliver on service levels, and respond to rapidly changing business needs.
- NetApp named one of the Best Places to Work. NetApp was ranked #5 on FORTUNE magazine's "100 Best Companies to Work For" list for 2011, marking its third consecutive year in the top 10 and the fifth consecutive year in the top 15. NetApp also ranked #2 on Crain's New York Business's annual "Best Places to Work in New York City" list for 2010. Both honors are a testament to NetApp's model company approach, strong culture, and talented employees.
- NetApp executives among most influential. Tom Georgens, president and CEO, and Julie Parrish, vice president of Global Partner Sales, were named two of the Top 100 Most Influential Executives in the industry by Everything Channel's CRN magazine. Georgens was included on the 25 Most Innovative Executives list for his leadership and focus on storage technology innovation and unparalleled channel commitment. Parrish was included on the Top 25 Channel Sales Leaders list for her role in increasing NetApp's global sales through its partner ecosystem.
- NetApp positioned in Leaders quadrant. Gartner, Inc. placed NetApp in the Leaders quadrant for midrange and high-end modular disk arrays. Gartner asserted that vendors in the Leaders quadrant "have the highest scores in their ability to execute and completeness of vision."(4)
The NetApp third quarter fiscal year 2011 results conference call will be broadcast live on the Internet at http://investors.netapp.com on Wednesday, February 16, 2011, at 2:00 p.m. Pacific time. This press release and any other information related to the call will also be posted on the Web site at that location. An audio replay Webcast will also be available after 4:00 p.m. Pacific time on our Web site. NetApp uses a hybrid format for disclosing key financial information associated with our quarterly results. Concurrent with the press release, NetApp posts a separate document with financial commentary and statistics. This supplemental commentary is available prior to the conference call in order to provide the investment community with additional time to analyze our results. The supplemental commentary will be posted to our Web site at investors.netapp.com and will not be read during the earnings call. About NetApp
NetApp creates innovative storage and data management solutions that deliver outstanding cost efficiency and accelerate business breakthroughs. Discover our passion for helping companies around the world go further, faster at www.netapp.com. "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 all of the statements under the Outlook section relating to our forecasted operating results, share count, and metrics for the fourth quarter of fiscal year 2011; expectations regarding our recent new product introductions and acquisitions, and our partnerships and strategic alliances; and the benefits that we expect our customers to realize from using our products and from our strategic alliances and partnerships. These forward-looking statements involve risks and uncertainties, and actual results could vary. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, customer demand for our products and services including our recent new product introductions; our ability to increase revenue and manage our operating costs; our reliance on a limited number of suppliers; our ability to accurately forecast demand for our products; increased competition risks associated with the anticipated growth in networked storage market; general economic and market conditions; our ability to deliver new product architectures and enterprise service offerings; our ability to design products and services that compete effectively from a price and performance perspective; and other important factors as described in NetApp reports and documents filed from time to time with the Securities and Exchange Commission (SEC), including the factors described under the sections captioned "Risk Factors" in our most recently submitted Annual and Quarterly Reports on Forms 10-K and 10-Q, respectively. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise. NetApp, the NetApp logo, Go further, faster, Data ONTAP, FlexPod, and OnCommand are trademarks or registered trademarks of NetApp, Inc. in the United States and/or other countries. All other brands or products are trademarks or registered trademarks of their respective holders and should be treated as such. (1) GAAP earnings per share is calculated using the diluted number of shares for all periods presented.
(2) Non-GAAP net income excludes the amortization of intangible assets, stock-based compensation expenses, acquisition related income and expenses, restructuring and other charges, asset impairments, non-cash interest expense associated with our convertible debt, net losses or gains on investments, and 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. Non-GAAP earnings per share is calculated using the diluted number of shares for all periods presented.
(3) 80% hedged on maturity or conversion of the convertible notes.
(4) "Magic Quadrant for Midrange and High-End Modular Disk Arrays" by Roger Cox, Stan Zaffos, Pushan Rinnen, and Jimmie Chang, November 2010.
NetApp Usage of Non-GAAP Financials
The Company refers to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding the Company's ongoing operational performance. Non-GAAP net income excludes the amortization of intangible assets, stock-based compensation expenses, acquisition related income and expenses, restructuring and other charges, asset impairments, non-cash interest expense associated with our convertible debt, net losses or gains on investments, and 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. We have excluded these items in order to enhance investors' understanding of our ongoing operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures. 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. In addition, these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation. We have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting at this time.
NETAPP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
January 28, 2011 April 30, 2010
---------------- ----------------
ASSETS
Current assets:
Cash, cash equivalents and investments $ 4,755.7 $ 3,724.0
Accounts receivable, net 541.5 471.5
Inventories 97.2 112.9
Other current assets 204.3 228.7
---------------- ----------------
Total current assets 5,598.7 4,537.1
Property and equipment, net 862.2 804.4
Goodwill and other intangible assets, net 772.4 706.1
Long-term investments and restricted cash 69.2 72.8
Other non-current assets 460.9 374.0
---------------- ----------------
Total Assets $ 7,763.4 $ 6,494.4
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 183.6 $ 184.6
Accrued compensation and other current
liabilities 581.9 591.3
Short-term deferred revenue 1,176.9 1,135.1
---------------- ----------------
Total current liabilities 1,942.4 1,911.0
Long-term debt and other obligations 1,341.2 1,273.4
Long-term deferred revenue 966.4 779.5
---------------- ----------------
Total liabilities 4,250.0 3,963.9
---------------- ----------------
Stockholders' equity 3,513.4 2,530.5
---------------- ----------------
Total liabilities and stockholders'
equity $ 7,763.4 $ 6,494.4
================ ================
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except net income per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------- --------------------
January January January January
28, 2011 29, 2010 28, 2011 29, 2010
--------- --------- --------- ---------
Revenues:
Product $ 818.6 $ 619.0 $ 2,319.4 $ 1,622.3
Software entitlements and
maintenance 183.8 170.9 536.4 506.0
Service 265.7 221.8 757.5 631.3
--------- --------- --------- ---------
Net revenues 1,268.1 1,011.7 3,613.3 2,759.6
--------- --------- --------- ---------
Cost of revenues:
Cost of product 329.3 253.9 933.1 665.6
Cost of software entitlements
and maintenance 4.0 3.0 10.9 9.1
Cost of service 111.0 113.3 320.0 314.2
--------- --------- --------- ---------
Total cost of revenues 444.3 370.2 1,264.0 988.9
--------- --------- --------- ---------
Gross profit 823.8 641.5 2,349.3 1,770.7
--------- --------- --------- ---------
Operating expenses:
Sales and marketing 397.4 324.8 1,134.4 927.0
Research and development 166.0 129.3 472.1 392.0
General and administrative 61.9 58.1 182.3 174.6
Restructuring and other
charges (0.7) - (0.6) 2.7
Acquisition related (income)
expense, net 0.6 - 0.9 (41.1)
--------- --------- --------- ---------
Total operating expenses 625.2 512.2 1,789.1 1,455.2
--------- --------- --------- ---------
Income from operations 198.6 129.3 560.2 315.5
Other income (expenses), net
Interest income 10.3 7.5 29.6 23.0
Interest expense (19.0) (18.2) (56.2) (55.3)
Other income (expenses), net 0.4 (0.7) 1.2 (0.2)
--------- --------- --------- ---------
Total other expenses, net (8.3) (11.4) (25.4) (32.5)
--------- --------- --------- ---------
Income before income taxes 190.3 117.9 534.8 283.0
Provision for income taxes 17.8 10.0 55.9 27.8
--------- --------- --------- ---------
Net income $ 172.5 $ 107.9 $ 478.9 $ 255.2
========= ========= ========= =========
Net income per share:
Basic $ 0.47 $ 0.32 $ 1.33 $ 0.76
========= ========= ========= =========
Diluted $ 0.42 $ 0.30 $ 1.23 $ 0.73
========= ========= ========= =========
Shares used in net income per
share calculations:
Basic 364.8 341.4 358.8 337.5
========= ========= ========= =========
Diluted 406.2 360.3 390.7 349.4
========= ========= ========= =========
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ ------------------
January January January January
28, 2011 29, 2010 28, 2011 29, 2010
-------- -------- -------- --------
Cash Flows from Operating
Activities:
Net income $ 172.5 $ 107.9 $ 478.9 $ 255.2
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 41.0 40.8 123.3 126.0
Stock-based compensation 45.0 36.7 127.0 122.1
Accretion of discount and issue
costs on notes 13.3 12.5 39.2 37.8
Unrealized losses on derivative
activities 5.7 - 12.4 -
Tax benefit from stock-based
compensation 16.5 (17.1) 57.4 (2.7)
Excess tax benefit from
stock-based compensation (12.6) 0.4 (45.3) (1.0)
Other, net (8.8) (1.7) (26.6) (5.8)
Changes in assets and liabilities:
Accounts receivable (95.0) (139.6) (67.7) (7.9)
Inventories (12.5) (11.2) 15.7 (10.9)
Accounts payable 16.3 16.5 (2.3) (0.4)
Accrued compensation and other
current liabilities 49.7 80.9 (46.4) (59.2)
Deferred revenue 140.9 74.3 222.5 60.1
Changes in other operating
assets and liabilities, net (8.5) (5.6) 17.4 (12.9)
-------- -------- -------- --------
Net cash provided by
operating activities 363.5 194.8 905.5 500.4
-------- -------- -------- --------
Cash Flows from Investing
Activities:
Purchases and redemptions of
investments, net (240.7) 11.0 (835.5) (91.4)
Purchases of property and
equipment (66.3) (49.7) (149.8) (97.2)
Acquisition of business, net of
cash acquired - - (74.9) -
Other investing activities, net 0.8 0.6 0.8 4.1
-------- -------- -------- --------
Net cash used in investing
activities (306.2) (38.1) (1,059.4) (184.5)
-------- -------- -------- --------
Cash Flows from Financing
Activities:
Issuance of common stock 75.9 96.6 312.0 156.7
Excess tax benefit from
stock-based compensation 12.6 (0.4) 45.3 1.0
Other financing activities 2.4 - 0.4 -
-------- -------- -------- --------
Net cash provided by
financing activities 90.9 96.2 357.7 157.7
-------- -------- -------- --------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 0.1 (5.9) 10.6 8.0
Net Increase (Decrease) in Cash and
Cash Equivalents 148.3 247.0 214.4 481.6
Cash and Cash Equivalents:
Beginning of period 1,771.1 1,728.8 1,705.0 1,494.2
-------- -------- -------- --------
End of period $1,919.4 $1,975.8 $1,919.4 $1,975.8
======== ======== ======== ========
NETAPP, INC.
RECONCILIATION OF NON-GAAP AND GAAP
IN THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except net income per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ ------------------
January January January January
28, 2011 29, 2010 28, 2011 29, 2010
-------- -------- -------- --------
SUMMARY RECONCILIATION OF NET
INCOME
NET INCOME $ 172.5 $ 107.9 $ 478.9 $ 255.2
Adjustments:
Amortization of intangible assets 3.5 4.9 13.4 15.6
Stock-based compensation expenses 44.8 36.6 127.0 122.0
Restructuring and other charges (0.7) - (0.6) 2.7
Acquisition related (income)
expense, net 0.6 - 0.9 (41.1)
Non-cash interest expense 13.2 12.5 39.2 37.8
Gain on investments - (0.7) (2.5) (3.5)
Income tax effect of non-GAAP
adjustments (23.3) (17.4) (60.1) (38.8)
-------- -------- -------- --------
NON-GAAP NET INCOME $ 210.6 $ 143.8 $ 596.2 $ 349.9
======== ======== ======== ========
NET INCOME PER SHARE $ 0.425 $ 0.299 $ 1.226 $ 0.730
Adjustments:
Amortization of intangible assets 0.009 0.013 0.034 0.045
Stock-based compensation expenses 0.110 0.102 0.325 0.349
Restructuring and other charges - - - 0.008
Acquisition related (income)
expense, net 0.001 - 0.002 (0.118)
Non-cash interest expense 0.033 0.035 0.100 0.108
Gain on investments - (0.002) (0.006) (0.010)
Income tax effect of non-GAAP
adjustments (0.057) (0.048) (0.154) (0.111)
-------- -------- -------- --------
NON-GAAP NET INCOME PER SHARE $ 0.521 $ 0.399 $ 1.527 $ 1.001
======== ======== ======== ========
NETAPP, INC.
SUPPLEMENTAL INFORMATION
(In millions)
(Unaudited)
Three Months Ended January 28, 2011
----------------------------------------
Amortization
of Stock-based Restructuring
Intangible Compensation and Other
Assets Expenses Charges
------------ ------------ -------------
Cost of product revenues $ 2.5 $ 0.9 $ -
Cost of service revenues - 3.6 -
Sales and marketing expense 1.0 21.2 -
Research and development
expense - 11.3 -
General and administrative
expense - 7.8 -
Restructuring and other charges - - (0.7)
Acquisition related (income)
expense, net - - -
Interest expense - - -
------------ ------------ -------------
Effect on income before income
taxes $ 3.5 $ 44.8 $ (0.7)
Three Months Ended January 28, 2011
------------------------------------------
Acquisition
related
(income) Non-Cash
expense, Interest Gain on
net Expense Investments Total
----------- -------- ----------- -------
Cost of product revenues $ - $ - $ - $ 3.4
Cost of service revenues - - - 3.6
Sales and marketing expense - - - 22.2
Research and development
expense - - - 11.3
General and administrative
expense - - - 7.8
Restructuring and other charges - - - (0.7)
Acquisition related (income)
expense, net 0.6 - - 0.6
Interest expense - 13.2 - 13.2
----------- -------- ----------- -------
Effect on income before income
taxes $ 0.6 $ 13.2 $ - $ 61.4
Nine Months Ended January 28, 2011
----------------------------------------
Amortization
of Stock-based Restructuring
Intangible Compensation and Other
Assets Expenses Charges
------------ ------------ -------------
Cost of product revenues $ 10.2 $ 2.6 $ -
Cost of service revenues - 10.7 -
Sales and marketing expense 3.2 59.2 -
Research and development
expense - 31.6 -
General and administrative
expense - 22.9 -
Restructuring and other charges - - (0.6)
Acquisition related (income)
expense, net - - -
Interest expense - - -
Other income (expenses), net - - -
------------ ------------ -------------
Effect on income before income
taxes $ 13.4 $ 127.0 $ (0.6)
Nine Months Ended January 28, 2011
------------------------------------------
Acquisition
related
(income) Non-Cash
expense, Interest Gain on
net Expense Investments Total
----------- -------- ----------- -------
Cost of product revenues $ - $ - $ - $ 12.8
Cost of service revenues - - - 10.7
Sales and marketing expense - - - 62.4
Research and development
expense - - - 31.6
General and administrative
expense - - - 22.9
Restructuring and other charges - - - (0.6)
Acquisition related (income)
expense, net 0.9 - - 0.9
Interest expense - 39.2 - 39.2
Other income (expenses), net - - (2.5) (2.5)
----------- -------- ----------- -------
Effect on income before income
taxes $ 0.9 $ 39.2 $ (2.5) $ 177.4
Three Months Ended January 29, 2010
----------------------------------------
Amortization
of Stock-based Restructuring
Intangible Compensation and Other
Assets Expenses Charges
------------ ------------ -------------
Cost of product revenues $ 4.1 $ 1.0 $ -
Cost of service revenues - 3.3 -
Sales and marketing expense 0.8 17.2 -
Research and development
expense - 8.9 -
General and administrative
expense - 6.2 -
Restructuring and other charges - - -
Interest expense - - -
Other income (expenses), net - - -
------------ ------------ -------------
Effect on income before income
taxes $ 4.9 $ 36.6 $ -
Three Months Ended January 29, 2010
------------------------------------------
Acquisition
related
(income) Non-Cash
expense, Interest Gain on
net Expense Investments Total
----------- -------- ----------- -------
Cost of product revenues $ - $ - $ - $ 5.1
Cost of service revenues - - - 3.3
Sales and marketing expense - - - 18.0
Research and development
expense - - - 8.9
General and administrative
expense - - - 6.2
Restructuring and other charges - - - -
Interest expense - 12.5 - 12.5
Other income (expenses), net - - (0.7) (0.7)
----------- -------- ----------- -------
Effect on income before income
taxes $ - $ 12.5 $ (0.7) $ 53.3
Nine Months Ended January 29, 2010
----------------------------------------
Amortization
of Stock-based Restructuring
Intangible Compensation and Other
Assets Expenses Charges
------------ ------------ -------------
Cost of product revenues $ 13.1 $ 2.7 $ -
Cost of service revenues - 10.7 -
Sales and marketing expense 2.5 56.9 -
Research and development
expense - 29.5 -
General and administrative
expense - 22.2 -
Restructuring and other charges - - 2.7
Acquisition related (income)
expense, net - - -
Interest expense - - -
Other income (expenses), net - - -
------------ ------------ -------------
Effect on income before income
taxes $ 15.6 $ 122.0 $ 2.7
Nine Months Ended January 29, 2010
------------------------------------------
Acquisition
related
(income) Non-Cash
expense, Interest Gain on
net Expense Investments Total
----------- -------- ----------- -------
Cost of product revenues $ - $ - $ - $ 15.8
Cost of service revenues - - - 10.7
Sales and marketing expense - - - 59.4
Research and development
expense - - - 29.5
General and administrative
expense - - - 22.2
Restructuring and other charges - - - 2.7
Acquisition related (income)
expense, net (41.1) - - (41.1)
Interest expense - 37.8 - 37.8
Other income (expenses), net - - (3.5) (3.5)
----------- -------- ----------- -------
Effect on income before income
taxes $ (41.1) $ 37.8 $ (3.5) $ 133.5
NETAPP, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
FOURTH QUARTER 2011
(Unaudited)
Fourth Quarter
2011
----------------
Non-GAAP Guidance $ 0.49 - $ 0.53
Adjustments of Specific Items to
Net Income Per Share for the Fourth
Quarter 2011:
Stock based compensation expense (0.11)
Amortization of intangible assets (0.01)
Non cash interest expense (0.03)
Income tax effect 0.04
----------------
Total Adjustments (0.11)
GAAP Guidance - Net Income Per Share $ 0.38 - $ 0.42
Contact Information: Press Contact: Ryan Lowry NetApp (408) 822-7544 ryanl@netapp.com Investor Contacts: Shauna O'Boyle NetApp (408) 822-7655 oboyle@netapp.com