SOURCE: NetApp, Inc.

NetApp, Inc.

November 18, 2015 16:01 ET

NetApp Reports Second Quarter Fiscal Year 2016 Results

Net Revenues of $1.45 Billion, Up 8% Quarter-Over-Quarter; GAAP EPS of $0.39 and Non-GAAP EPS of $0.61

SUNNYVALE, CA--(Marketwired - Nov 18, 2015) - NetApp (NASDAQ: NTAP)

  • Product revenue of $815 million, up 23% quarter-over-quarter
  • All Flash FAS units grew 246% quarter-over-quarter
  • Flash capacity grew 80% quarter-over-quarter

NetApp (NASDAQ: NTAP) today reported financial results for the second quarter of fiscal year 2016, ended October 30, 2015.

Second Quarter Financial Results
Net revenues for the second quarter of fiscal year 2016 were $1.45 billion. GAAP net income for the second quarter of fiscal year 2016 was $114 million, or $0.39 income per share1, compared to GAAP net income of $160 million, or $0.49 income per share, for the comparable period of the prior year. Non-GAAP net income for the second quarter of fiscal year 2016 was $181 million, or $0.61 income per share,2 compared to non-GAAP net income of $226 million, or $0.70 income per share, for the comparable period of the prior year.

Cash, Cash Equivalents and Investments
NetApp ended the second quarter of fiscal year 2016 with $4.8 billion in total cash, cash equivalents and investments and generated $145 million in cash from operations. During the second quarter of fiscal year 2016, the Company returned $236 million to shareholders through share repurchases and a cash dividend.

The next dividend in the amount of $0.18 per share will be paid on January 20, 2016, to shareholders of record as of the close of business on January 8, 2016.

"Our Q2 results reflect the progress we are making to pivot NetApp for long-term growth in the data powered digital era. We are moving forward with clarity and speed to better address the changing industry and improve our own execution," said George Kurian, CEO. "Customer wins and partner feedback drive my strong conviction that our industry leading portfolio and differentiated Data Fabric strategy will expand our opportunity and drive long-term growth."

Q3 Fiscal Year 2016 Outlook
The Company provided the following financial guidance for the third quarter of fiscal year 2016:

  • Net revenues are expected to be in the range of $1.40 billion to $1.50 billion.
  • GAAP earnings per share is expected to be in the range of $0.47 to $0.52 per share.
  • Non-GAAP earnings per share is expected to be in the range of $0.66 to $0.71 per share.

Business Highlights

  • NetApp Accelerates Customer and Partner Journey in Hybrid Cloud and Flash Environments:
    • Guarantees 3X Performance For All-Flash Workloads. NetApp extended a special offer for buyers of select all-flash systems guaranteeing a 3X increase in enterprise database performance compared to that of traditional, non-flash disk-based systems.3
    • Makes the Hybrid Cloud More Secure. NetApp unveiled NetApp OnCommand® Cloud Manager 2.0 and integration with Amazon Simple Storage Service Standard-Infrequent Access (Amazon S3 Standard-IA).
    • Offers Free Controller Upgrade. Eligible customers who purchase a three-year SupportEdge Premium contract by December 31, 2015 now qualify for a new All-Flash FAS (AFF) controller free of charge as part of the renewal process.4
    • Extends Support Price Protection. NetApp enabled customers to extend their standard three-year warranty and support for up to four more years.
    • Offers New AFF Series Model. The new AFF8080 EX can be set up to address mainstream SAN workloads in as little as 15 minutes.
    • Expands OpenStack Capabilities. As founder of the OpenStack Manila open-source project, NetApp announced production-ready capabilities for enterprises to easily build or enhance a cloud-ready data center capable of handling business-critical and content-management applications.
  • NetApp Insight® Technical Conference Showcases How Data Fabric Increases Customer Success in the Hybrid Cloud:
    • Data Fabric Solution Essentials. NetApp starter kits make it easier for customers to become hybrid cloud ready and quickly see benefits as they evolve their infrastructures.
    • Data Fabric Enablement Services. NetApp experts help customers identify optimal workloads for the cloud and gain the architectural design and deployment insights they need for success.
    • Expansion of Cloud Service Provider Relationships. NetApp is now a Google Cloud Platform Technology Partner, providing tools which integrate to extend reach and functionality.
  • NetApp Celebrates Business and Cultural Milestones:
    • Cisco and NetApp Celebrate Five Years of FlexPod® Customer Success. FlexPod integrated infrastructure solutions deliver unprecedented value to customers with shared revenue of $5.6 billion.
    • NetApp Named #4 World's Best Multinational Workplaces. For the fifth consecutive year, NetApp's unique culture earned the company a top-five position on this prestigious list by Great Place to Work.

Webcast and Conference Call Information
NetApp will host a conference call to discuss these results today at 2 p.m. Pacific Time. To access the live webcast of this event, visit the NetApp Investor Relations website at investors.netapp.com. In addition, this press release, historical supplemental data tables and other information related to the call will be posted on the Investor Relations website. An audio replay will also be available on the website after 4 p.m. Pacific Time today.

About NetApp
Leading organizations worldwide count on NetApp for software, systems and services to manage and store their data. Customers value our teamwork, expertise and passion for helping them succeed now and into the future. To learn more visit http://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, but are not limited to, all of the statements made under the Q3 Fiscal Year 2016 Outlook section, statements about our future opportunity and growth, our strategy and execution and statements made about the benefits to us and our customers of our products and partnerships, including those statements under the Business Highlights section. 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 economic and market conditions, changes in U.S. government spending, revenue seasonality and matters specific to our business, such as changes in storage consumption models, customer demand for and acceptance of our products and services, execution by our sales organization and our ability to continue to generate healthy operating cash flow. 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, the NetApp logo, FlexPod, NetApp Insight, and OnCommand are trademarks or registered trademarks of NetApp, Inc. in the United States and/or other countries. All other marks are the property of their respective owners.

1Net income per share is calculated using the diluted number of shares.
2Non-GAAP net income excludes, when applicable, the amortization of intangible assets, stock-based compensation, acquisition-related income and expenses, restructuring and other charges, asset impairments, non-cash interest expense associated with our debt, net losses or gains on investments, and our GAAP tax provision, but includes a non-GAAP tax provision 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-reoccurring 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) the impact of a temporary lapse of tax law, such as the federal research credit, if such extensions have routinely been granted based on past legislative history and are expected to be reinstated in the near future. Non-GAAP earnings per share is calculated using the diluted number of shares for all periods presented. A detailed reconciliation of our non-GAAP to GAAP results can be found at http://investors.netapp.com.
3Terms and conditions are available at www.netapp.com/us/media/netapp-3x-performance-guarantee.pdf.
4Additional information is available at https://mysupport.netapp.com/ecm/ecm_get_file/ECMP12520009.

NetApp Usage of Non-GAAP Financials
The Company refers to the non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company's ongoing operational performance. Non-GAAP net income excludes, when applicable, the amortization of intangible assets, stock-based compensation, acquisition-related income and expenses, restructuring and other charges, asset impairments, non-cash interest expense associated with our 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. 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-reoccurring 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) the impact of a temporary lapse of tax law, such as the federal research credit, if such extensions have routinely been granted based on past legislative history and are expected to be reinstated in the near future. Non-GAAP earnings per share is calculated using the diluted number of shares for all periods.

We have excluded these items in order to enhance investors' understanding of our ongoing operations. The use of these non-GAAP financial measures has limitations and they should not solely be used to evaluate our Company without reference to their corresponding GAAP financial measures. As such, we provide 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.

 
 
NETAPP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
         
    October 30, 2015   April 24, 2015
             
ASSETS            
             
Current assets:            
  Cash, cash equivalents and investments   $ 4,814   $ 5,326
  Accounts receivable     587     779
  Inventories     125     146
  Other current assets     555     522
    Total current assets     6,081     6,773
             
Property and equipment, net     1,004     1,030
Goodwill and purchased intangible assets, net     1,078     1,117
Other non-current assets     472     481
      Total assets   $ 8,635   $ 9,401
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 226   $ 284
  Accrued expenses     618     701
  Short-term deferred revenue and financed unearned services revenue     1,609     1,724
    Total current liabilities     2,453     2,709
             
Long-term debt     1,489     1,487
Other long-term liabilities     269     318
Long-term deferred revenue and financed unearned services revenue     1,437     1,473
    Total liabilities     5,648     5,987
             
Stockholders' equity     2,987     3,414
      Total liabilities and stockholders' equity   $ 8,635   $ 9,401
                 
                 
   
   
NETAPP, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In millions, except per share amounts)  
(Unaudited)  
                       
    Three Months Ended     Six Months Ended  
    October 30, 2015     October 24, 2014     October 30, 2015   October 24, 2014  
                               
Revenues:                              
  Product   $ 815     $ 929     $ 1,479   $ 1,812  
  Software maintenance     233       225       481     446  
  Hardware maintenance and other services     397       389       820     774  
    Net revenues     1,445       1,543       2,780     3,032  
                               
Cost of revenues:                              
  Cost of product     408       402       753     796  
  Cost of software maintenance     9       9       19     17  
  Cost of hardware maintenance and other services     144       149       308     298  
    Total cost of revenues     561       560       1,080     1,111  
      Gross profit     884       983       1,700     1,921  
                               
Operating expenses:                              
  Sales and marketing     448       488       940     968  
  Research and development     216       229       460     457  
  General and administrative     74       73       153     143  
  Restructuring and other charges     1       -       28     -  
    Total operating expenses     739       790       1,581     1,568  
                               
Income from operations     145       193       119     353  
                               
Other income (expense), net     (1 )     (4 )     3     (4 )
                               
Income before income taxes     144       189       122     349  
                               
Provision for income taxes     30       29       38     101  
                               
Net income   $ 114     $ 160     $ 84   $ 248  
                               
Net income per share:                              
  Basic   $ 0.39     $ 0.50     $ 0.28   $ 0.77  
                               
  Diluted   $ 0.39     $ 0.49     $ 0.28   $ 0.76  
                               
Shares used in net income per share calculations:                              
  Basic     294       318       299     321  
                               
  Diluted     296       323       302     326  
                               
Cash dividends declared per share   $ 0.180     $ 0.165     $ 0.360   $ 0.330  
                               
                               
   
   
NETAPP, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In millions)  
(Unaudited)  
                         
    Three Months Ended     Six Months Ended  
    October 30, 2015     October 24, 2014     October 30, 2015     October 24, 2014  
                                 
Cash flows from operating activities:                                
Net income   $ 114     $ 160     $ 84     $ 248  
Adjustments to reconcile net income to net cash provided by operating activities:                                
  Depreciation and amortization     67       77       136       155  
  Stock-based compensation     59       68       136       130  
  Excess tax benefit from stock-based compensation     (2 )     (6 )     (4 )     (49 )
  Other, net     12       4       (22 )     50  
Changes in assets and liabilities:                                
  Accounts receivable     (172 )     (49 )     189       222  
  Inventories     68       (3 )     21       15  
  Accounts payable     (27 )     30       (60 )     (32 )
  Accrued expenses     31       91       (88 )     (136 )
  Deferred revenue and financed unearned services revenue     (16 )     (19 )     (137 )     (45 )
  Changes in other operating assets and liabilities, net     11       28       19       39  
    Net cash provided by operating activities     145       381       274       597  
Cash flows from investing activities:                                
  Redemptions of investments, net     10       170       788       361  
  Purchases of property and equipment     (46 )     (51 )     (84 )     (109 )
  Other investing activities, net     (2 )     (1 )     -       (1 )
    Net cash provided by (used in) investing activities     (38 )     118       704       251  
Cash flows from financing activities:                                
  Issuance of common stock     6       43       25       71  
  Repurchase of common stock     (183 )     (600 )     (613 )     (719 )
  Excess tax benefit from stock-based compensation     2       6       4       49  
  Issuance of long-term debt, net     -       -       -       495  
  Dividends paid     (53 )     (52 )     (107 )     (105 )
  Other financing activities, net     (2 )     (2 )     (3 )     (4 )
    Net cash used in financing activities     (230 )     (605 )     (694 )     (213 )
                                 
Effect of exchange rate changes on cash and cash equivalents     (3 )     (21 )     (8 )     (21 )
                                 
Net increase (decrease) in cash and cash equivalents     (126 )     (127 )     276       614  
Cash and cash equivalents:                                
  Beginning of period     2,324       3,032       1,922       2,291  
  End of period   $ 2,198     $ 2,905     $ 2,198     $ 2,905  
                                   
                                   
   
   
NETAPP, INC.  
SUPPLEMENTAL DATA  
(In millions except net income per share, percentages, DSO and Inventory Turns)  
(Unaudited)  
                   
                   
    Q2 FY'16     Q1 FY'16     Q2 FY'15  
  Revenues                        
Product   $ 815     $ 664     $ 929  
Software Maintenance   $ 233     $ 248     $ 225  
Hardware Maintenance & Other Services:   $ 397     $ 423     $ 389  
  Hardware Maintenance Support Contracts   $ 326     $ 346     $ 311  
  Professional and Other Services   $ 71     $ 77     $ 78  
    Net Revenues   $ 1,445     $ 1,335     $ 1,543  
                         
                         
  Geographic Mix                        
    % of Q2 FY'16 Revenue     % of Q1 FY'16 Revenue     % of Q2 FY'15 Revenue  
Americas     57 %     56 %     59 %
  Americas Commercial     42 %     44 %     42 %
  U.S. Public Sector     14 %     12 %     17 %
EMEA     30 %     31 %     28 %
Asia Pacific     14 %     13 %     13 %
                         
                         
  Pathways Mix  
    % of Q2 FY'16 Revenue     % of Q1 FY'16 Revenue     % of Q2 FY'15 Revenue  
Direct     23 %     22 %     21 %
Indirect     77 %     77 %     79 %
                         
  Direct revenues are those sold through our direct sales force and, effective Q1 FY'16, include those sold to service providers. Indirect revenues include those sold through value-added resellers, system integrators, OEMs and distributors. Indirect revenue reflects order fulfillment and is not reflective of who is responsible for the customer relationship.  
                         
  Non-GAAP Gross Margins                        
    Q2 FY'16     Q1 FY'16     Q2 FY'15  
Non-GAAP Gross Margin     62.5 %     63.6 %     65.0 %
  Product     51.8 %     51.2 %     58.4 %
  Software Maintenance     96.1 %     96.2 %     96.2 %
  Hardware Maintenance & Other Services     64.7 %     64.1 %     62.7 %
                         
                         
  Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate                        
    Q2 FY'16     Q1 FY'16     Q2 FY'15  
Non-GAAP Income from Operations   $ 219     $ 103     $ 275  
  % of Net Revenues     15.2 %     7.7 %     17.8 %
Non-GAAP Income before Income Taxes   $ 218     $ 107     $ 271  
Non-GAAP Effective Tax Rate     17.0 %     17.0 %     16.5 %
                         
                         
  Non-GAAP Net Income                        
    Q2 FY'16     Q1 FY'16     Q2 FY'15  
Non-GAAP Net Income   $ 181     $ 89     $ 226  
Non-GAAP Weighted Average Common Shares Outstanding, Diluted     296       308       323  
Non-GAAP Net Income per Share, Diluted   $ 0.61     $ 0.29     $ 0.70  
                         
                         
  Select Balance Sheet Items                        
    Q2 FY'16     Q1 FY'16     Q2 FY'15  
Deferred Revenue and Financed Unearned Services Revenue   $ 3,046     $ 3,066     $ 3,047  
DSO (days)     37       30       37  
Inventory Turns     17       10       20  
                         
  Days sales outstanding (DSO) is defined as accounts receivable divided by net revenues, multiplied by the number of days in the quarter. Inventory turns is defined as annualized non-GAAP cost of revenues divided by net inventories.  
                         
                         
  Select Cash Flow Statement Items                        
    Q2 FY'16     Q1 FY'16     Q2 FY'15  
Net Cash Provided by Operating Activities   $ 145     $ 129     $ 381  
Purchases of Property and Equipment   $ 46     $ 38     $ 51  
Free Cash Flow   $ 99     $ 91     $ 330  
Free Cash Flow as % of Net Revenues     6.9 %     6.8 %     21.4 %
                         
  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)  
                   
    Q2'FY16     Q1'FY16     Q2'FY15  
                         
NET INCOME (LOSS)   $ 114     $ (30 )   $ 160  
Adjustments:                        
  Amortization of intangible assets     14       14       14  
  Stock-based compensation     59       77       68  
  Asset impairment     -       11       -  
  Restructuring and other charges     1       27       -  
  Income tax effect of non-GAAP adjustments     (17 )     (23 )     (16 )
  Settlement of income tax audit     10       13       -  
NON-GAAP NET INCOME   $ 181     $ 89     $ 226  
                         
COST OF REVENUES   $ 561     $ 519     $ 560  
Adjustments:                        
  Amortization of intangible assets     (14 )     (14 )     (14 )
  Stock-based compensation     (5 )     (8 )     (5 )
  Asset impairment     -       (11 )     -  
NON-GAAP COST OF REVENUES   $ 542     $ 486     $ 540  
                         
COST OF PRODUCT REVENUES   $ 408     $ 345     $ 402  
Adjustments:                        
  Amortization of intangible assets     (14 )     (14 )     (14 )
  Stock-based compensation     (1 )     (2 )     (2 )
  Asset impairment     -       (5 )     -  
NON-GAAP COST OF PRODUCT REVENUES   $ 393     $ 324     $ 387  
                         
COST OF HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES   $ 144     $ 164     $ 149  
Adjustments:                        
  Stock-based compensation     (4 )     (6 )     (3 )
  Asset impairment     -       (6 )     -  
NON-GAAP COST OF HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES   $ 140     $ 152     $ 145  
                         
GROSS PROFIT   $ 884     $ 816     $ 983  
Adjustments:                        
  Amortization of intangible assets     14       14       14  
  Stock-based compensation     5       8       5  
  Asset impairment     -       11       -  
NON-GAAP GROSS PROFIT   $ 903     $ 849     $ 1,002  
                         
SALES AND MARKETING EXPENSES   $ 448     $ 492     $ 488  
Adjustment:                        
  Stock-based compensation     (26 )     (31 )     (30 )
NON-GAAP SALES AND MARKETING EXPENSES   $ 422     $ 461     $ 457  
                         
RESEARCH AND DEVELOPMENT EXPENSES   $ 216     $ 244     $ 229  
Adjustment:                        
  Stock-based compensation     (18 )     (26 )     (22 )
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES   $ 198     $ 218     $ 208  
                         
GENERAL AND ADMINISTRATIVE EXPENSES   $ 74     $ 79     $ 73  
Adjustment:                        
  Stock-based compensation     (10 )     (12 )     (11 )
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES   $ 64     $ 67     $ 62  
                         
   
NETAPP, INC.  
RECONCILIATION OF NON-GAAP TO GAAP  
INCOME STATEMENT INFORMATION  
(In millions, except net income per share amounts)  
                   
    Q2'FY16     Q1'FY16     Q2'FY15  
                         
RESTRUCTURING AND OTHER CHARGES   $ 1     $ 27     $ -  
Adjustment:                        
  Restructuring and other charges     (1 )     (27 )     -  
NON-GAAP RESTRUCTURING AND OTHER CHARGES   $ -     $ -     $ -  
                         
OPERATING EXPENSES   $ 739     $ 842     $ 790  
Adjustments:                        
  Stock-based compensation     (54 )     (69 )     (63 )
  Restructuring and other charges     (1 )     (27 )     -  
NON-GAAP OPERATING EXPENSES   $ 684     $ 746     $ 728  
                         
INCOME (LOSS) FROM OPERATIONS   $ 145     $ (26 )   $ 193  
Adjustments:                        
  Amortization of intangible assets     14       14       14  
  Stock-based compensation     59       77       68  
  Asset impairment     -       11       -  
  Restructuring and other charges     1       27       -  
NON-GAAP INCOME FROM OPERATIONS   $ 219     $ 103     $ 275  
                         
INCOME (LOSS) BEFORE INCOME TAXES   $ 144     $ (22 )   $ 189  
Adjustments:                        
  Amortization of intangible assets     14       14       14  
  Stock-based compensation     59       77       68  
  Asset impairment     -       11       -  
  Restructuring and other charges     1       27       -  
NON-GAAP INCOME BEFORE INCOME TAXES   $ 218     $ 107     $ 271  
                         
PROVISION FOR INCOME TAXES   $ 30     $ 8     $ 29  
Adjustments:                        
  Income tax effect of non-GAAP adjustments     17       23       16  
  Settlement of income tax audit     (10 )     (13 )     -  
NON-GAAP PROVISION FOR INCOME TAXES   $ 37     $ 18     $ 45  
                         
NET INCOME (LOSS) PER SHARE   $ 0.39     $ (0.10 )   $ 0.49  
Adjustments:                        
  Amortization of intangible assets     0.05       0.05       0.04  
  Stock-based compensation     0.20       0.25       0.21  
  Asset impairment     -       0.04       -  
  Restructuring and other charges     -       0.09       -  
  Income tax effect of non-GAAP adjustments     (0.06 )     (0.08 )     (0.05 )
  Settlement of income tax audit     0.03       0.04       -  
NON-GAAP NET INCOME PER SHARE   $ 0.61     $ 0.29     $ 0.70  
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
GROSS MARGIN  
($ in millions)  
       
    Q2'FY16     Q1'FY16     Q2'FY15  
                         
Gross margin-GAAP     61.2 %     61.1 %     63.7 %
  Cost of revenues adjustments     1.3 %     2.5 %     1.3 %
Gross margin-Non-GAAP     62.5 %     63.6 %     65.0 %
                         
GAAP cost of revenues   $ 561     $ 519     $ 560  
Cost of revenues adjustments:                        
  Amortization of intangible assets     (14 )     (14 )     (14 )
  Stock-based compensation     (5 )     (8 )     (5 )
  Asset impairment     -       (11 )     -  
Non-GAAP cost of revenues   $ 542     $ 486     $ 540  
                         
Net revenues   $ 1,445     $ 1,335     $ 1,543  
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
PRODUCT GROSS MARGIN  
($ in millions)  
       
    Q2'FY16     Q1'FY16     Q2'FY15  
                         
Product gross margin-GAAP     49.9 %     48.0 %     56.8 %
  Cost of product revenues adjustments     1.8 %     3.2 %     1.6 %
Product gross margin-Non-GAAP     51.8 %     51.2 %     58.4 %
                         
GAAP cost of product revenues   $ 408     $ 345     $ 402  
Cost of product revenues adjustments:                        
  Amortization of intangible assets     (14 )     (14 )     (14 )
  Stock-based compensation     (1 )     (2 )     (2 )
  Asset impairment     -       (5 )     -  
Non-GAAP cost of product revenues   $ 393     $ 324     $ 387  
                         
Product revenues   $ 815     $ 664     $ 929  
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
HARDWARE MAINTENANCE AND OTHER SERVICES GROSS MARGIN  
($ in millions)  
       
    Q2'FY16     Q1'FY16     Q2'FY15  
                         
Hardware maintenance and other services gross margin-GAAP     63.7 %     61.2 %     61.6 %
  Cost of hardware maintenance and other services revenues adjustments     1.0 %     2.8 %     1.2 %
Hardware maintenance and other services gross margin-Non-GAAP     64.7 %     64.1 %     62.7 %
                         
GAAP cost of hardware maintenance and other services revenues   $ 144     $ 164     $ 149  
Cost of hardware maintenance and other services revenues adjustments:                        
  Stock-based compensation     (4 )     (6 )     (3 )
  Asset impairment     -       (6 )     -  
Non-GAAP cost of hardware maintenance and other services revenues   $ 140     $ 152     $ 145  
                         
Hardware maintenance and other services revenues   $ 397     $ 423     $ 389  
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
EFFECTIVE TAX RATE  
       
    Q2'FY16     Q1'FY16     Q2'FY15  
                         
GAAP effective tax rate     20.8 %     (36.4 %)     15.4 %
Adjustments:                        
  Tax effect of non-GAAP adjustments     0.8 %     65.5 %     1.1 %
  Settlement of income tax audit     (4.6 %)     (12.1 %)     - %
Non-GAAP effective tax rate     17.0 %     17.0 %     16.5 %
                         
                         
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES  
TO FREE CASH FLOW (NON-GAAP)  
(In millions)  
       
    Q2'FY16     Q1'FY16     Q2'FY15  
Net cash provided by operating activities   $ 145     $ 129     $ 381  
Purchases of property and equipment     (46 )     (38 )     (51 )
Free cash flow   $ 99     $ 91     $ 330  
                         
                         
INVENTORY TURNS AND RECONCILIATION OF NON-GAAP TO GAAP  
COST OF REVENUES USED IN INVENTORY TURNS  
(In millions, except annualized inventory turns)  
       
    Q2'FY16     Q1'FY16     Q2'FY15  
Annualized inventory turns-GAAP     18       11       21  
  Cost of revenues adjustments     (1 )     (1 )     (1 )
Annualized inventory turns-Non-GAAP     17       10       20  
                         
GAAP cost of revenues   $ 561     $ 519     $ 560  
Cost of revenues adjustments:                        
  Amortization of intangible assets     (14 )     (14 )     (14 )
  Stock-based compensation     (5 )     (8 )     (5 )
  Asset impairment     -       (11 )     -  
Non-GAAP cost of revenues   $ 542     $ 486     $ 540  
                         
Inventory   $ 125     $ 193     $ 108  
                         
  Some items may not add or recalculate due to rounding.                        
                           
                           
 
 
NETAPP, INC.
RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
THIRD QUARTER FISCAL 2016
     
     
    Third Quarter
    Fiscal 2016
     
Non-GAAP Guidance - Net Income Per Share   $0.66 - $0.71
     
Adjustments of Specific Items to Net Income
 Per Share for the Third Quarter Fiscal 2016:
   
 
   Amortization of intangible assets   (0.05)
   Stock-based compensation expense   (0.19)
   Income tax effect of non-GAAP adjustments   0.05
Total Adjustments   (0.19)
     
GAAP Guidance - Net Income Per Share   $0.47 - $0.52

Contact Information

  • Press Contact:
    Meghan Fintland
    NetApp
    1 408 822 1389
    Email Contact

    Investor Contact:
    Kris Newton
    NetApp
    1 408 822 3312
    Email Contact