SOURCE: NetApp, Inc.

NetApp, Inc.

February 17, 2016 16:01 ET

NetApp Reports Third Quarter Fiscal Year 2016 Results

Net Revenues of $1.39 Billion; GAAP EPS of $0.52 and Non-GAAP EPS of $0.70

SUNNYVALE, CA--(Marketwired - Feb 17, 2016) - NetApp (NASDAQ: NTAP)

  • Announced acquisition of SolidFire™
  • NetApp™ clustered Data ONTAP™ node shipments increased 69% year over year
  • Free cash flow of $314 million dollars; 23% of net revenues
  • Initiated transformation program to reduce cost structure of the company

NetApp (NASDAQ: NTAP) today reported financial results for the third quarter of fiscal year 2016, ended January 29, 2016.

Third Quarter Financial Results
Net revenues for the third quarter of fiscal year 2016 were $1.39 billion. GAAP net income for the third quarter of fiscal year 2016 was $153 million, or $0.52 income per share1, compared to GAAP net income of $177 million, or $0.56 income per share, for the comparable period of the prior year. Non-GAAP net income for the third quarter of fiscal year 2016 was $206 million, or $0.70 income per share,2 compared to non-GAAP net income of $238 million, or $0.75 income per share, for the comparable period of the prior year.

Cash, Cash Equivalents and Investments
NetApp ended the third quarter of fiscal year 2016 with $5.0 billion in total cash, cash equivalents and investments and generated $355 million in cash from operations. During the third quarter of fiscal year 2016, the Company returned $137 million to shareholders through share repurchases and a cash dividend.

The next dividend in the amount of $0.18 per common share will be paid on April 27, 2016, to shareholders of record as of the close of business on April 8, 2016.

"NetApp's third quarter results demonstrate good progress in advancing our strategy and strong operational execution despite the challenging macroeconomic environment," said George Kurian, CEO. "To position NetApp for long-term success, we launched a transformation program designed to streamline the business and reduce our cost structure, while at the same time, maintaining our ability to invest in strategic opportunities. We are confident that we have the right strategy to further pivot the company toward the growth areas of the market and deliver long-term value."

Q4 Fiscal Year 2016 Outlook
The Company provided the following financial guidance for the fourth quarter of fiscal year 2016:

  • Net revenues are expected to be in the range of $1.35 billion to $1.50 billion.
  • GAAP earnings per share is expected to be in the range of $0.12 to $0.21 per share.
  • Non-GAAP earnings per share is expected to be in the range of $0.55 to $0.60 per share.

Business Highlights

  • NetApp Is the Clear Technology Leader in the All-Flash-Array Market
    • Accelerates customer adoption of all-flash data centers with SolidFire. With the acquisition of SolidFire, NetApp now has all-flash offerings that address each of the three largest all-flash-array market segments. SolidFire combines the performance and economics of all-flash storage with a webscale architecture that radically simplifies data center operations and enables rapid deployments of new applications. SolidFire products will be incorporated into the strategy for the Data Fabric enabled by NetApp, delivering seamless management across flash, disk and cloud resources.
    • NetApp flash storage improves student and faculty experience. With NetApp solutions, Western Oregon University (WOU) speeds educational, operational and financial decisions, while enhancing online collaboration benefits.
    • Performance of flash at the price of disk. NetApp's new software efficiency technology and higher capacity drives within the NetApp All Flash FAS array series make it now possible for customers to reduce capacity requirements by as much as 30:1.
  • The Data Fabric Vision Is Extended with New Solutions, Services and Partnerships
    NetApp provides customers with the enterprise data protection that they need to confidently embrace the hybrid cloud. With NetApp SnapCenter™, StorageGRID™ Webscale, NetApp Private Storage, NetApp MetroCluster ™ and NetApp SnapMirror™ disaster recovery solutions; as well as Commvault IntelliSnap, NetApp customers can now build a new generation of hybrid cloud services designed to move, manage, and protect data.

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 Q4 Fiscal Year 2016 Outlook section, statements made about our strategy, reducing our cost structure, our ability to invest in strategic opportunities, our future growth, and our ability to deliver long-term value, 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, our ability to effectively integrate the SolidFire acquisition, our ability to successfully execute our transformation program, reduce our costs and pivot to the growth areas of the market 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 and the NetApp logo are trademarks of NetApp, Inc. 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.

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)
         
    January 29, 2016   April 24, 2015
             
ASSETS            
             
Current assets:            
  Cash, cash equivalents and investments   $ 5,023   $ 5,326
  Accounts receivable     585     779
  Inventories     102     146
  Other current assets     354     522
    Total current assets     6,064     6,773
             
Property and equipment, net     873     1,030
Goodwill and purchased intangible assets, net     1,064     1,117
Other non-current assets     784     481
      Total assets   $ 8,785   $ 9,401
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 175   $ 284
  Accrued expenses     617     701
  Short-term deferred revenue and financed unearned services revenue     1,684     1,724
    Total current liabilities     2,476     2,709
             
Long-term debt     1,490     1,487
Other long-term liabilities     268     318
Long-term deferred revenue and financed unearned services revenue     1,442     1,473
    Total liabilities     5,676     5,987
             
Stockholders' equity     3,109     3,414
      Total liabilities and stockholders' equity   $ 8,785   $ 9,401
                   
                   
   
   
NETAPP, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In millions, except per share amounts)  
(Unaudited)  
                       
    Three Months Ended     Nine Months Ended  
    January 29, 2016     January 23, 2015     January 29, 2016   January 23, 2015  
Revenues:                              
  Product   $ 750     $ 929     $ 2,229   $ 2,741  
  Software maintenance     234       226       715     672  
  Hardware maintenance and other services     402       396       1,222     1,170  
    Net revenues     1,386       1,551       4,166     4,583  
Cost of revenues:                              
  Cost of product     381       420       1,134     1,216  
  Cost of software maintenance     9       9       28     26  
  Cost of hardware maintenance and other services     141       145       449     443  
    Total cost of revenues     531       574       1,611     1,685  
      Gross profit     855       977       2,555     2,898  
Operating expenses:                              
  Sales and marketing     418       475       1,358     1,443  
  Research and development     200       230       660     687  
  General and administrative     70       70       223     213  
  Restructuring and other charges     -       -       28     -  
  Acquisition-related expense     2       -       2     -  
    Total operating expenses     690       775       2,271     2,343  
Income from operations     165       202       284     555  
Other income (expense), net     (2 )     (2 )     1     (6 )
Income before income taxes     163       200       285     549  
Provision for income taxes     10       23       48     124  
Net income   $ 153     $ 177     $ 237   $ 425  
Net income per share:                              
  Basic   $ 0.52     $ 0.57     $ 0.80   $ 1.34  
  Diluted   $ 0.52     $ 0.56     $ 0.79   $ 1.31  
Shares used in net income per share calculations:                              
  Basic     293       312       297     318  
  Diluted     296       317       300     323  
Cash dividends declared per share   $ 0.180     $ 0.165     $ 0.540   $ 0.495  
                               
                               
   
   
NETAPP, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In millions)  
(Unaudited)  
                         
    Three Months Ended     Nine Months Ended  
    January 29, 2016     January 23, 2015     January 29, 2016     January 23, 2015  
                                 
Cash flows from operating activities:                                
Net income   $ 153     $ 177     $ 237     $ 425  
Adjustments to reconcile net income to net cash provided by operating activities:                                
  Depreciation and amortization     66       80       202       235  
  Stock-based compensation     63       66       199       196  
  Excess tax benefit from stock-based compensation     (1 )     (5 )     (5 )     (54 )
  Other, net     (21 )     (20 )     (69 )     30  
Changes in assets and liabilities, net of acquisitions of businesses:                                
  Accounts receivable     1       (35 )     190       187  
  Inventories     23       (10 )     44       5  
  Accounts payable     (53 )     (14 )     (113 )     (46 )
  Accrued expenses     10       (26 )     (78 )     (162 )
  Deferred revenue and financed unearned services revenue     85       79       (52 )     34  
  Changes in other operating assets and liabilities, net     29       (17 )     74       22  
    Net cash provided by operating activities     355       275       629       872  
Cash flows from investing activities:                                
  Redemptions (purchases) of investments, net     91       (320 )     879       41  
  Purchases of property and equipment     (41 )     (29 )     (125 )     (138 )
  Acquisitions of businesses     -       (85 )     -       (85 )
  Other investing activities, net     (1 )     4       (1 )     3  
    Net cash provided by (used in) investing activities     49       (430 )     753       (179 )
Cash flows from financing activities:                                
  Issuance of common stock     45       75       70       146  
  Repurchase of common stock     (85 )     (200 )     (698 )     (919 )
  Excess tax benefit from stock-based compensation     1       5       5       54  
  Issuance of long-term debt, net     -       -       -       495  
  Dividends paid     (52 )     (52 )     (159 )     (157 )
  Other financing activities, net     (5 )     (4 )     (8 )     (8 )
    Net cash used in financing activities     (96 )     (176 )     (790 )     (389 )
                                 
Effect of exchange rate changes on cash and cash equivalents     (11 )     (34 )     (19 )     (55 )
                                 
Net increase (decrease) in cash and cash equivalents     297       (365 )     573       249  
Cash and cash equivalents:                                
  Beginning of period     2,198       2,905       1,922       2,291  
  End of period   $ 2,495     $ 2,540     $ 2,495     $ 2,540  
                                   
                                   
   
   
NETAPP, INC.  
SUPPLEMENTAL DATA  
(In millions except net income per share, percentages, DSO and Inventory Turns)  
(Unaudited)  
                   
                   
    Q3 FY'16     Q2 FY'16     Q3 FY'15  
  Revenues                        
Product   $ 750     $ 815     $ 929  
Software Maintenance   $ 234     $ 233     $ 226  
Hardware Maintenance & Other Services:   $ 402     $ 397     $ 396  
  Hardware Maintenance Support Contracts   $ 326     $ 326     $ 316  
  Professional and Other Services   $ 76     $ 71     $ 80  
    Net Revenues   $ 1,386     $ 1,445     $ 1,551  
                         
                         
  Geographic Mix                        
    % of Q3 FY'16 Revenue     % of Q2 FY'16 Revenue     % of Q3 FY'15 Revenue  
Americas     54 %     57 %     54 %
  Americas Commercial     44 %     42 %     44 %
  U.S. Public Sector     10 %     14 %     10 %
EMEA     33 %     30 %     33 %
Asia Pacific     13 %     14 %     13 %
                         
                         
  Pathways Mix  
    % of Q3 FY'16 Revenue     % of Q2 FY'16 Revenue     % of Q3 FY'15 Revenue  
Direct     22 %     23 %     21 %
Indirect     78 %     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                        
    Q3 FY'16     Q2 FY'16     Q3 FY'15  
Non-GAAP Gross Margin     63.1 %     62.5 %     64.6 %
  Product     51.1 %     51.8 %     57.0 %
  Software Maintenance     96.2 %     96.1 %     95.9 %
  Hardware Maintenance & Other Services     66.2 %     64.7 %     64.5 %
                         
                         
  Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate                        
    Q3 FY'16     Q2 FY'16     Q3 FY'15  
Non-GAAP Income from Operations   $ 244     $ 219     $ 288  
  % of Net Revenues     17.6 %     15.2 %     18.5 %
Non-GAAP Income before Income Taxes   $ 242     $ 218     $ 285  
Non-GAAP Effective Tax Rate     14.9 %     17.0 %     16.5 %
                         
                         
  Non-GAAP Net Income                        
    Q3 FY'16     Q2 FY'16     Q3 FY'15  
Non-GAAP Net Income   $ 206     $ 181     $ 238  
Non-GAAP Weighted Average Common Shares Outstanding, Diluted     296       296       317  
Non-GAAP Net Income per Share, Diluted   $ 0.70     $ 0.61     $ 0.75  
                         
                         
  Select Balance Sheet Items                        
    Q3 FY'16     Q2 FY'16     Q3 FY'15  
Deferred Revenue and Financed Unearned Services Revenue   $ 3,126     $ 3,046     $ 3,110  
DSO (days)     38       37       39  
Inventory Turns     20       17       19  
                         
  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                        
    Q3 FY'16     Q2 FY'16     Q3 FY'15  
Net Cash Provided by Operating Activities   $ 355     $ 145     $ 275  
Purchases of Property and Equipment   $ 41     $ 46     $ 29  
Free Cash Flow   $ 314     $ 99     $ 246  
Free Cash Flow as % of Net Revenues     22.7 %     6.9 %     15.9 %
                         
  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)  
                   
    Q3'FY16     Q2'FY16     Q3'FY15  
                         
NET INCOME   $ 153     $ 114     $ 177  
Adjustments:                        
  Amortization of intangible assets     14       14       19  
  Stock-based compensation     63       59       66  
  Restructuring and other charges     -       1       -  
  Acquisition-related expense     2       -       -  
  Income tax effect of non-GAAP adjustments     (26 )     (17 )     (24 )
  Settlement of income tax audit     -       10       -  
NON-GAAP NET INCOME   $ 206     $ 181     $ 238  
                         
COST OF REVENUES   $ 531     $ 561     $ 574  
Adjustments:                        
  Amortization of intangible assets     (13 )     (14 )     (18 )
  Stock-based compensation     (6 )     (5 )     (6 )
NON-GAAP COST OF REVENUES   $ 512     $ 542     $ 550  
                         
COST OF PRODUCT REVENUES   $ 381     $ 408     $ 420  
Adjustments:                        
  Amortization of intangible assets     (13 )     (14 )     (18 )
  Stock-based compensation     (1 )     (1 )     (2 )
NON-GAAP COST OF PRODUCT REVENUES   $ 367     $ 393     $ 400  
                         
COST OF HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES   $ 141     $ 144     $ 145  
Adjustment:                        
  Stock-based compensation     (5 )     (4 )     (4 )
NON-GAAP COST OF HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES   $ 136     $ 140     $ 140  
                         
GROSS PROFIT   $ 855     $ 884     $ 977  
Adjustments:                        
  Amortization of intangible assets     13       14       18  
  Stock-based compensation     6       5       6  
NON-GAAP GROSS PROFIT   $ 874     $ 903     $ 1,002  
                         
SALES AND MARKETING EXPENSES   $ 418     $ 448     $ 475  
Adjustments:                        
  Amortization of intangible assets     (1 )     -       (1 )
  Stock-based compensation     (27 )     (26 )     (30 )
NON-GAAP SALES AND MARKETING EXPENSES   $ 390     $ 422     $ 445  
                         
RESEARCH AND DEVELOPMENT EXPENSES   $ 200     $ 216     $ 230  
Adjustment:                        
  Stock-based compensation     (20 )     (18 )     (21 )
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES   $ 180     $ 198     $ 208  
                         
GENERAL AND ADMINISTRATIVE EXPENSES   $ 70     $ 74     $ 70  
Adjustment:                        
  Stock-based compensation     (10 )     (10 )     (9 )
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES   $ 60     $ 64     $ 61  
                         
                         
                         
NETAPP, INC.  
RECONCILIATION OF NON-GAAP TO GAAP  
INCOME STATEMENT INFORMATION  
(In millions, except net income per share amounts)  
                   
    Q3'FY16     Q2'FY16     Q3'FY15  
                         
RESTRUCTURING AND OTHER CHARGES   $ -     $ 1     $ -  
Adjustment:                        
  Restructuring and other charges     -       (1 )     -  
NON-GAAP RESTRUCTURING AND OTHER CHARGES   $ -     $ -     $ -  
                         
ACQUISITION-RELATED EXPENSE   $ 2     $ -     $ -  
Adjustment:                        
  Acquisition-related expense     (2 )     -       -  
NON-GAAP ACQUISITION-RELATED EXPENSE   $ -     $ -     $ -  
                         
OPERATING EXPENSES   $ 690     $ 739     $ 775  
Adjustments:                        
  Amortization of intangible assets     (1 )     -       (1 )
  Stock-based compensation     (57 )     (54 )     (60 )
  Restructuring and other charges     -       (1 )     -  
  Acquisition-related expense     (2 )     -       -  
NON-GAAP OPERATING EXPENSES   $ 630     $ 684     $ 714  
                         
INCOME FROM OPERATIONS   $ 165     $ 145     $ 202  
Adjustments:                        
  Amortization of intangible assets     14       14       19  
  Stock-based compensation     63       59       66  
  Restructuring and other charges     -       1       -  
  Acquisition-related expense     2       -       -  
NON-GAAP INCOME FROM OPERATIONS   $ 244     $ 219     $ 288  
                         
INCOME BEFORE INCOME TAXES   $ 163     $ 144     $ 200  
Adjustments:                        
  Amortization of intangible assets     14       14       19  
  Stock-based compensation     63       59       66  
  Restructuring and other charges     -       1       -  
  Acquisition-related expense     2       -       -  
NON-GAAP INCOME BEFORE INCOME TAXES   $ 242     $ 218     $ 285  
                         
PROVISION FOR INCOME TAXES   $ 10     $ 30     $ 23  
Adjustments:                        
  Income tax effect of non-GAAP adjustments     26       17       24  
  Settlement of income tax audit     -       (10 )     -  
NON-GAAP PROVISION FOR INCOME TAXES   $ 36     $ 37     $ 47  
                         
NET INCOME PER SHARE   $ 0.52     $ 0.39     $ 0.56  
Adjustments:                        
  Amortization of intangible assets     0.05       0.05       0.06  
  Stock-based compensation     0.21       0.20       0.21  
  Restructuring and other charges     -       -       -  
  Acquisition-related expense     0.01       -       -  
  Income tax effect of non-GAAP adjustments     (0.09 )     (0.06 )     (0.07 )
  Settlement of income tax audit     -       0.03       -  
NON-GAAP NET INCOME PER SHARE   $ 0.70     $ 0.61     $ 0.75  
                         
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
GROSS MARGIN  
($ in millions)  
       
    Q3'FY16     Q2'FY16     Q3'FY15  
                         
Gross margin-GAAP     61.7 %     61.2 %     63.0 %
  Cost of revenues adjustments     1.4 %     1.3 %     1.6 %
Gross margin-Non-GAAP     63.1 %     62.5 %     64.6 %
                         
GAAP cost of revenues   $ 531     $ 561     $ 574  
Cost of revenues adjustments:                        
  Amortization of intangible assets     (13 )     (14 )     (18 )
  Stock-based compensation     (6 )     (5 )     (6 )
Non-GAAP cost of revenues   $ 512     $ 542     $ 550  
                         
Net revenues   $ 1,386     $ 1,445     $ 1,551  
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
PRODUCT GROSS MARGIN  
($ in millions)  
       
    Q3'FY16     Q2'FY16     Q3'FY15  
                         
Product gross margin-GAAP     49.2 %     49.9 %     54.9 %
  Cost of product revenues adjustments     1.9 %     1.8 %     2.1 %
Product gross margin-Non-GAAP     51.1 %     51.8 %     57.0 %
                         
GAAP cost of product revenues   $ 381     $ 408     $ 420  
Cost of product revenues adjustments:                        
  Amortization of intangible assets     (13 )     (14 )     (18 )
  Stock-based compensation     (1 )     (1 )     (2 )
Non-GAAP cost of product revenues   $ 367     $ 393     $ 400  
                         
Product revenues   $ 750     $ 815     $ 929  
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
HARDWARE MAINTENANCE AND OTHER SERVICES GROSS MARGIN  
($ in millions)  
       
    Q3'FY16     Q2'FY16     Q3'FY15  
                         
Hardware maintenance and other services gross margin-GAAP     64.9 %     63.7 %     63.3 %
  Cost of hardware maintenance and other services revenues adjustment     1.2 %     1.0 %     1.2 %
Hardware maintenance and other services gross margin-Non-GAAP     66.2 %     64.7 %     64.5 %
                         
GAAP cost of hardware maintenance and other services revenues   $ 141     $ 144     $ 145  
Cost of hardware maintenance and other services revenues adjustment:                        
  Stock-based compensation     (5 )     (4 )     (4 )
Non-GAAP cost of hardware maintenance and other services revenues   $ 136     $ 140     $ 140  
                         
Hardware maintenance and other services revenues   $ 402     $ 397     $ 396  
                         
                         
RECONCILIATION OF NON-GAAP TO GAAP  
EFFECTIVE TAX RATE  
       
    Q3'FY16     Q2'FY16     Q3'FY15  
                         
GAAP effective tax rate     6.1 %     20.8 %     11.6 %
Adjustments:                        
  Tax effect of non-GAAP adjustments     8.8 %     0.8 %     4.9 %
  Settlement of income tax audit     - %     (4.6 %)     - %
Non-GAAP effective tax rate     14.9 %     17.0 %     16.5 %
                         
                         
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES  
TO FREE CASH FLOW (NON-GAAP)  
(In millions)  
       
    Q3'FY16     Q2'FY16     Q3'FY15  
Net cash provided by operating activities   $ 355     $ 145     $ 275  
Purchases of property and equipment     (41 )     (46 )     (29 )
Free cash flow   $ 314     $ 99     $ 246  
                         
                         
INVENTORY TURNS AND RECONCILIATION OF NON-GAAP TO GAAP  
COST OF REVENUES USED IN INVENTORY TURNS  
(In millions, except annualized inventory turns)  
       
    Q3'FY16     Q2'FY16     Q3'FY15  
Annualized inventory turns-GAAP     21       18       19  
  Cost of revenues adjustments     (1 )     (1 )     (1 )
Annualized inventory turns-Non-GAAP     20       17       19  
                         
GAAP cost of revenues   $ 531     $ 561     $ 574  
Cost of revenues adjustments:                        
  Amortization of intangible assets     (13 )     (14 )     (18 )
  Stock-based compensation     (6 )     (5 )     (6 )
Non-GAAP cost of revenues   $ 512     $ 542     $ 550  
                         
Inventory   $ 102     $ 125     $ 118  
                         
  Some items may not add or recalculate due to rounding.                        
                           
                           
 
 
NETAPP, INC.
RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
FOURTH QUARTER FISCAL 2016
     
     
    Fourth Quarter
    Fiscal 2016
     
Non-GAAP Guidance - Net Income Per Share   $0.55 - $0.60
     
Adjustments of Specific Items to Net Income Per Share for the Fourth Quarter Fiscal 2016:    
  Amortization of intangible assets   (0.08)
  Stock-based compensation expense   (0.21)
  Restructuring and other charges   (0.24) - (0.20)
  Acquisition-related expense   (0.01)
  Income tax effect of non-GAAP adjustments   0.11
Total Adjustments   (0.43) - (0.39)
     
GAAP Guidance - Net Income Per Share   $0.12 - $0.21
     
     

Contact Information

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

    Investor Contact:
    Kris Newton
    NetApp
    1 408 822 3312
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