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
/EINPresswire.com/ -- SUNNYVALE, CA -- (Marketwired) -- 02/17/16 -- 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 share(1), 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.
(1)Net income per share is calculated using the diluted number of shares.
(2)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 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 January January January
29, 2016 23, 2015 29, 2016 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 January January January
29, 2016 23, 2015 29, 2016 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 % of Q2 % of Q3
FY'16 FY'16 FY'15
Revenue Revenue 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 % of Q2 % of Q3
FY'16 FY'16 FY'15
Revenue Revenue 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
Press Contact:
Meghan Fintland
NetApp
1 408 822 1389
Email Contact
Investor Contact:
Kris Newton
NetApp
1 408 822 3312
Email Contact
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