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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 23, 2023

 

 

NetApp, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			0-27130	77-0307520
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
3060 Olsen Drive
San Jose, California				95128
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (408) 822-6000

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 Par Value		NTAP		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02 Results of Operations and Financial Condition.

On August 23, 2023, the Company issued a press release reporting financial results for the first quarter ended July 28, 2023. The press release is furnished herewith as Exhibit 99.1, to this Current Report.

 

NetApp is making reference to non-GAAP financial information in both the press release and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.

 

The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing. The information in this report, including the exhibits hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press release, dated August 23, 2023, reporting earnings for the first quarter ended July 28, 2023
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			NETAPP, INC. (Registrant)
Date:	August 23, 2023	By:	/s/ Elizabeth O'Callahan
			Elizabeth O'Callahan Executive Vice President, Chief Legal Officer and Secretary

 

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Exhibit 99.1

NetApp reports first quarter of fiscal year 2024 results

Net revenues of $1.43 billion for the first quarter

SAN JOSE, Calif.—August 23, 2023—NetApp (NASDAQ: NTAP) today reported financial results for the first quarter of fiscal year 2024, which ended on July 28, 2023.

 

“We delivered a solid start to fiscal year 2024 in what continues to be a challenging macroeconomic environment. We are managing the elements within our control, driving better performance in our storage business, and building a more focused approach to cloud,” said George Kurian, chief executive officer. “In Q1, we introduced substantial innovation that helps our customers build stronger, smarter and more efficient hybrid multicloud infrastructures. I am delighted by the positive reception to our new products, as well as the differentiation and continued growth of our hyperscaler-managed storage services native to the leading public clouds.”

 

First quarter of fiscal year 2024 financial results

 

 

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Second quarter of fiscal year 2024 financial outlook

 

The Company provided the following financial guidance for the second quarter of fiscal year 2024:

 

Net revenues are expected to be in the range of:	$1.455 billion to $1.605 billion
	GAAP	Non-GAAP
Earnings per share is expected to be in the range of:	$0.90 - $1.00	$1.35 - $1.45

Full fiscal year 2024 financial outlook

 

The Company reiterated the following financial guidance for the full fiscal year 2024:

 

Net revenues are expected to be down year-over-year in the low-to-mid single digits on a percentage basis.
	GAAP	Non-GAAP
Consolidated gross margins are expected to be:	~69%	~70%
Operating margins are expected to be:	~18%	~25%
Earnings per share is expected to be in the range of:	$3.75 - $3.95	$5.65 - $5.85

Dividend

 

The next cash dividend of $0.50 per share is to be paid on October 25, 2023, to stockholders of record as of the close of business on October 6, 2023.

First quarter of fiscal year 2024 business highlights 

 

Leading product innovation

 

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Customer and partner momentum

 

Corporate news and events

 

Awards and recognition

 

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Webcast and conference call information

 

NetApp will host a conference call to discuss these results today at 2:00 p.m. Pacific Time. To access the live webcast of this event, go to the NetApp Investor Relations website at investors.netapp.com. In addition, this press release, historical supplemental data tables, and other information related to the call will be posted on the Investor Relations website. An audio replay will be available on the website after 4:00 p.m. Pacific Time today.

“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 in the Second Quarter of Fiscal Year 2024 Financial Outlook section and Full Fiscal Year 2024 Financial Outlook section, our ability to deliver value to our customers, partners and stockholders, better address areas of priority spending through new innovations and a more focused approach to delivering hybrid multicloud infrastructures, and differentiation and continued growth of our hyperscaler-managed storage services. Actual results may differ materially from these statements for a variety of reasons, including, without limitation, our ability to keep pace with the rapid industry, technological and market trends and changes in the markets in which we operate, our ability to execute our evolved cloud strategy and introduce and gain market acceptance for our products and

 

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services, our ability to maintain our customer, partner, supplier and contract manufacturer relationships on favorable terms and conditions, general global political, macroeconomic and market conditions, including inflation, rising interest rates and foreign exchange volatility and the resulting impact on demand for our products, material cybersecurity and other security breaches, the impact of supply chain disruptions on our business operations, financial performance and results of operations, changes in U.S. government spending, revenue seasonality, changes in laws or regulations, including those relating to privacy, data protection and information security, and our ability to manage our gross profit margins. These and other equally important factors are described in reports and documents we file from time to time with the Securities and Exchange Commission, including the factors described under the section titled “Risk Factors” in our most recently submitted 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.

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NetApp, the NetApp logo, and the marks listed at http://www.netapp.com/TM are trademarks of NetApp, Inc. All other marks are the property of their respective owners.

Footnotes

 

1Refer to the NetApp Usage of Non-GAAP Financial Information section below for explanations of free cash flow and billings.

 

2Public Cloud annualized revenue run rate (ARR) is calculated as the annualized value of all Public Cloud customer commitments with the assumption that any commitment expiring during the next 12 months will be renewed with its existing terms.

 

3All-flash array annualized net revenue run rate is determined by products and services revenue for the current quarter, multiplied by 4.

 

4Non-GAAP net income excludes, when applicable, (a) amortization of intangible assets, (b) stock-based compensation expenses, (c) litigation settlements, (d) acquisition-related expenses, (e) restructuring charges, (f) asset impairments, (g) gains/losses on the sale or derecognition of assets, (h) gains/losses on the sale of investments in equity securities, (i) debt extinguishment costs, and (j) our GAAP tax provision, but includes a non-GAAP tax provision based upon our projected annual non-GAAP effective tax rate for the first three quarters of the fiscal year and an actual non-GAAP tax provision for the fourth quarter of the fiscal year. NetApp makes additional adjustments to the non-GAAP tax provision for certain tax matters as described

 

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below. A detailed reconciliation of our non-GAAP to GAAP results can be found at http://investors.netapp.com. NetApp’s management uses these non-GAAP measures in making operating decisions because it believes that the measurements provide meaningful supplemental information regarding NetApp’s ongoing operational performance.

 

5GAAP net income per share and non-GAAP net income per share are calculated using the diluted number of shares.

NetApp usage of non-GAAP financial information

 

To supplement NetApp’s condensed consolidated financial statement information presented in accordance with generally accepted accounting principles in the United States (GAAP), NetApp provides investors with certain non-GAAP measures, including, but not limited to, historical non-GAAP operating results, non-GAAP net income, non-GAAP effective tax rate, free cash flow, billings, and historical and projected non-GAAP earnings per diluted share. NetApp also presents the hardware and software components of our GAAP product revenues. Because our revenue recognition policy under GAAP defines a configured storage system, inclusive of the operating system software essential to its functionality, as a single performance obligation, hardware and software components of our product revenues are considered non-GAAP measures. The hardware and software components of our product revenues are derived from an estimated fair value allocation of the transaction price of our contracts with customers, down to the level of the product hardware and software components. This allocation is primarily based on the contractual prices at which NetApp has historically billed customers for such respective components.

 

NetApp believes that the presentation of non-GAAP net income, non-GAAP effective tax rates, and non-GAAP earnings per share data, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations.

 

NetApp believes that the presentation of free cash flow, which it defines as the net cash provided by operating activities less cash used to acquire property and equipment, to be a liquidity measure that provides useful information to management and investors because it reflects cash that can be used to, among other things, invest in its business, make strategic acquisitions, repurchase common stock, and pay dividends on its common stock. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.

 

 

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NetApp believes that the presentation of the software and hardware components of our product revenues is meaningful to investors and management as it illustrates the significance of the Company’s software and provides improved visibility into the value created by our software innovation and R&D investment.

 

NetApp approximates billings by adding net revenues as reported on our Condensed Consolidated Statements of Operations for the period to the change in total deferred revenue and financed unearned services revenue as reported on our Condensed Consolidated Statements of Cash Flows for the same period. Billings is a performance measure that NetApp believes provides useful information to management and investors because it approximates the amounts under purchase orders received by us during a given period that have been billed.

 

NetApp’s management uses these non-GAAP measures in making operating decisions because it believes the measurements provide meaningful supplemental information regarding NetApp’s ongoing operational performance. These non-GAAP financial measures are used to: (1) measure company performance against historical results, (2) facilitate comparisons to our competitors’ operating results and (3) allow greater transparency with respect to information used by management in financial and operational decision making.

NetApp excludes the following items from its non-GAAP measures when applicable:

 

A. Amortization of intangible assets. NetApp records amortization of intangible assets that were acquired in connection with its business combinations. The amortization of intangible assets varies depending on the level of acquisition activity. Management finds it useful to exclude these charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods and in measuring operational performance.

 

B. Stock-based compensation expenses. NetApp excludes stock-based compensation expenses from its non-GAAP measures primarily because the amount can fluctuate based on variables unrelated to the performance of the underlying business. While management views stock-based compensation as a key element of our employee retention and long-term incentives, we do not view it as an expense to be used in evaluating operational performance in any given period.

 

C. Litigation settlements. NetApp may periodically incur charges or benefits related to litigation settlements. NetApp excludes these charges and benefits, when significant, because it does not believe they are reflective of ongoing business and operating results.

 

D. Acquisition-related expenses. NetApp excludes acquisition-related expenses, including (a) due diligence, legal and other one-time integration charges and (b) write down of assets acquired that NetApp does not intend to use in its ongoing business, from its non-GAAP measures, primarily because they are not related to our ongoing business or cost base and, therefore, are less useful for future planning and forecasting.

 

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E. Restructuring charges. These charges consist of restructuring charges that are incurred based on the particular facts and circumstances of restructuring decisions, including employment and contractual settlement terms, and other related charges, and can vary in size and frequency. We therefore exclude them in our assessment of operational performance.

 

F. Asset impairments. These are non-cash charges to write down assets when there is an indication that the asset has become impaired. Management finds it useful to exclude these non-cash charges due to the unpredictability of these events in its assessment of operational performance.

 

G. Gains/losses on the sale or derecognition of assets. These are gains/losses from the sale of our properties and other transactions in which we transfer control of assets to a third party. Management believes that these transactions do not reflect the results of our underlying, on-going business and, therefore, are less useful for future planning and forecasting.

 

H. Gains/losses on the sale of investments in equity securities. These are gains/losses from the sale of our investment in certain equity securities. Typically, such investments are sold as a result of a change in control of the underlying businesses. Management believes that these transactions do not reflect the results of our underlying, on-going business and, therefore, are less useful for future planning and forecasting.

 

I. Debt extinguishment costs. NetApp excludes certain non-recurring expenses incurred as a result of the early extinguishment of debt. Management believes such nonrecurring costs do not reflect the results of its underlying, on-going business and, therefore, are less useful for future planning and forecasting.

 

J. Income tax adjustments. NetApp’s non-GAAP tax provision is based upon a projected annual non-GAAP effective tax rate for the first three quarters of the fiscal year and an actual non-GAAP tax provision for the fourth quarter of the fiscal year. The non-GAAP tax provision also excludes, when applicable, (a) tax charges or benefits in the current period that relate to one or more prior fiscal periods that are a result of events such as changes in tax legislation, authoritative guidance, income tax audit settlements, statute lapses and/or court decisions, (b) tax charges or benefits that are attributable to unusual or non-recurring book and/or tax accounting method changes, (c) tax charges that are a result of a non-routine foreign cash repatriation, (d) tax charges or benefits that are a result of infrequent restructuring of the Company’s tax structure, (e) tax charges or benefits that are a result of a change in valuation allowance, and (f) tax charges or benefits resulting from the integration of intellectual property from acquisitions. Management believes that the use of non-GAAP tax provisions provides a more meaningful measure of the Company’s operational performance.

 

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These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. NetApp believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. NetApp management compensates for these limitations by analyzing current and projected results on a GAAP basis as well as a non-GAAP basis. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures.

Constant Currency

 

In periods in which the impacts of foreign currency exchange rate changes are significant, NetApp presents certain constant currency growth rates or quantifies the impact of foreign currency exchange rate changes on year-over-year fluctuations, including for net revenues, billings, and earnings. This constant currency information assumes the same foreign currency exchange rates that were in effect for the comparable prior-year period were used in translation of the current period results.

About NetApp

NetApp is a global, cloud-led, data-centric software company that empowers organizations to lead with data in the age of accelerated digital transformation. The company provides systems, software, and cloud services that enable them to run their applications optimally from data center to cloud, whether they are developing in the cloud, moving to the cloud, or creating their own cloudlike experiences on premises. With solutions that perform across diverse environments, NetApp helps organizations build their own data fabric and securely deliver the right data, services, and applications to the right people—anytime, anywhere. Learn more at www.netapp.com or follow us on Twitter, LinkedIn, Facebook, and Instagram.

 

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NETAPP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

		July 28,  2023				April 28,   2023
ASSETS
Current assets:
Cash, cash equivalents and investments		$	2,975			$	3,070
Accounts receivable			653				987
Inventories			131				167
Other current assets			401				456
Total current assets			4,160				4,680
Property and equipment, net			641				650
Goodwill and purchased intangible assets, net			2,925				2,940
Other non-current assets			1,544				1,548
Total assets		$	9,270			$	9,818
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	344			$	392
Accrued expenses			778				857
Short-term deferred revenue and financed unearned services revenue			2,127				2,218
Total current liabilities			3,249				3,467
Long-term debt			2,390				2,389
Other long-term liabilities			703				708
Long-term deferred revenue and financed unearned services revenue			2,055				2,095
Total liabilities			8,397				8,659
Stockholders' equity			873				1,159
Total liabilities and stockholders' equity		$	9,270			$	9,818

 

 

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NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

		Three Months Ended
		July 28,  2023				July 29, 2022
Net revenues:
Product		$	590			$	786
Services			842				806
Net revenues			1,432				1,592
Cost of revenues:
Cost of product			265				397
Cost of services			171				149
Total cost of revenues			436				546
Gross profit			996				1,046
Operating expenses:
Sales and marketing			468				458
Research and development			247				240
General and administrative			74				72
Restructuring charges			26				11
Acquisition-related expense			3				10
Total operating expenses			818				791
Income from operations			178				255
Other income, net			8				15
Income before income taxes			186				270
Provision for income taxes			37				56
Net income		$	149			$	214
Net income per share:
Basic		$	0.70			$	0.97
Diluted		$	0.69			$	0.96
Shares used in net income per share calculations:
Basic			212				220
Diluted			216				224

 

 

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NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

		Three Months Ended
		July 28,  2023				July 29, 2022
Cash flows from operating activities:
Net income		$	149			$	214
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			64				58
Non-cash operating lease cost			11				14
Stock-based compensation			87				67
Deferred income taxes			(6	)			(15	)
Other items, net			(2	)			(66	)
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable			332				364
Inventories			37				(28	)
Accounts payable			(56	)			(90	)
Accrued expenses			(89	)			(208	)
Deferred revenue and financed unearned services   revenue			(133	)			(32	)
Long-term taxes payable			1				1
Changes in other operating assets and liabilities, net			58				2
Net cash provided by operating activities			453				281
Cash flows from investing activities:
Purchases of investments, net			(192	)			(131	)
Purchases of property and equipment			(35	)			(65	)
Acquisitions of businesses, net of cash acquired			—				(491	)
Other investing activities, net			(1	)			59
Net cash used in investing activities			(228	)			(628	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee   stock award plans			52				54
Payments for taxes related to net share settlement of stock   awards			(65	)			(52	)
Repurchase of common stock			(400	)			(350	)
Dividends paid			(106	)			(110	)
Other financing activities, net			(2	)			(1	)
Net cash used in financing activities			(521	)			(459	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			—				(18	)
Net change in cash, cash equivalents and restricted cash			(296	)			(824	)
Cash, cash equivalents and restricted cash:
Beginning of period			2,322				4,119
End of period		$	2,026			$	3,295

 

 

 

 

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NETAPP, INC.
SUPPLEMENTAL DATA
(In millions except net income per share, percentages, DSO, DPO and Inventory Turns)
(Unaudited)
Revenues by Segment
		Q1'FY24				Q4'FY23				Q1'FY23
Product		$	590			$	744			$	786
Support			611				598				598
Professional and Other Services			77				88				76
Hybrid Cloud Segment Net Revenues			1,278				1,430				1,460
Public Cloud Segment Net Revenues			154				151				132
Net Revenues		$	1,432			$	1,581			$	1,592
Gross Profit by Segment
		Q1'FY24				Q4'FY23				Q1'FY23
Product		$	326			$	410			$	391
Support			564				549				555
Professional and Other Services			19				33				24
Hybrid Cloud Segment Gross Profit			909				992				970
Public Cloud Segment Gross Profit			103				99				92
Total Segments Gross Profit			1,012				1,091				1,062
Amortization of Intangible Assets			(9	)			(10	)			(11	)
Stock-based Compensation			(7	)			(6	)			(5	)
Unallocated Cost of Revenues			(16	)			(16	)			(16	)
Gross Profit		$	996			$	1,075			$	1,046
Gross Margin by Segment
		Q1'FY24				Q4'FY23				Q1'FY23
Product			55.3	%			55.1	%			49.7	%
Support			92.3	%			91.8	%			92.8	%
Professional and Other Services			24.7	%			37.5	%			31.6	%
Hybrid Cloud Segment Gross Margin			71.1	%			69.4	%			66.4	%
Public Cloud Segment Gross Margin			66.9	%			65.6	%			69.7	%
Product Revenues
		Q1'FY24				Q4'FY23				Q1'FY23
Total		$	590			$	744			$	786
Software*		$	342			$	437			$	476
Hardware*		$	248			$	307			$	310
Software and recurring support and public cloud revenue
		Q1'FY24				Q4'FY23				Q1'FY23
Product - Software		$	342			$	437			$	476
Support			611				598				598
Public Cloud			154				151				132
Software and recurring support and public cloud revenue*		$	1,107			$	1,186			$	1,206
Software and recurring support and public cloud revenue as a percentage of net revenues			77	%			75	%			76	%
* Our revenue recognition policy under GAAP defines a configured storage system, inclusive of the operating system software essential to its functionality, as a single performance obligation. We have provided a breakdown of our GAAP product revenues into the software and hardware components, which are considered non-GAAP measures, to display the significance of software included in total product revenues. Software and recurring support and public cloud revenue is a non-GAAP measure because it includes the software component of our product revenues, but not the hardware component.

 

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Geographic Mix**
		% of Q1 FY'24				% of Q4 FY'23				% of Q1 FY'23
		Revenue				Revenue				Revenue
Americas			53	%			49	%			52	%
Americas Commercial			41	%			39	%			41	%
U.S. Public Sector			12	%			10	%			11	%
EMEA			31	%			36	%			32	%
Asia Pacific			16	%			15	%			16	%
** Effective in Q1 FY'24, management began evaluating revenues by geographic region based on the location to which products and services are delivered, rather than based on the location from which the customer relationship is managed. Prior period percentages have been conformed to the current period presentation.
Pathways Mix
		% of Q1 FY'24				% of Q4 FY'23				% of Q1 FY'23
		Revenue				Revenue				Revenue
Direct			24	%			22	%			21	%
Indirect			76	%			78	%			79	%
Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate
		Q1'FY24				Q4'FY23				Q1'FY23
Non-GAAP Income from Operations		$	309			$	414			$	360
% of Net Revenues			21.6	%			26.2	%			22.6	%
Non-GAAP Income before Income Taxes		$	317			$	419			$	343
Non-GAAP Effective Tax Rate			21.5	%			20.3	%			21.6	%
Non-GAAP Net Income
		Q1'FY24				Q4'FY23				Q1'FY23
Non-GAAP Net Income		$	249			$	334			$	269
Non-GAAP Weighted Average Common Shares Outstanding, Diluted			216				217				224
Non-GAAP Net Income per Share, Diluted		$	1.15			$	1.54			$	1.20
Select Balance Sheet Items
		Q1'FY24				Q4'FY23				Q1'FY23
Deferred Revenue and Financed Unearned Services Revenue		$	4,182			$	4,313			$	4,170
DSO (days)			41				57				49
DPO (days)			72				70				86
Inventory Turns			13				12				9
Days sales outstanding (DSO) is defined as accounts receivable divided by net revenues, multiplied by the number of days in the quarter.
Days payables outstanding (DPO) is defined as accounts payable divided by cost of revenues, multiplied by the number of days in the quarter.
Inventory turns is defined as annualized cost of revenues divided by net inventories.
Select Cash Flow Statement Items
		Q1'FY24				Q4'FY23				Q1'FY23
Net Cash Provided by Operating Activities		$	453			$	235			$	281
Purchases of Property and Equipment		$	35			$	39			$	65
Free Cash Flow		$	418			$	196			$	216
Free Cash Flow as % of Net Revenues			29.2	%			12.4	%			13.6	%
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.

 

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NETAPP, INC.
RECONCILIATION OF NON-GAAP TO GAAP
INCOME STATEMENT INFORMATION
(In millions, except net income per share amounts)
		Q1'FY24				Q4'FY23				Q1'FY23
NET INCOME		$	149			$	245			$	214
Adjustments:
Amortization of intangible assets			15				17				17
Stock-based compensation			87				74				67
Restructuring charges			26				11				11
Acquisition-related expense			3				3				10
Gain on sale of equity investment			—				—				(32	)
Income tax effects			(31	)			11				(18	)
Income tax (benefits) expenses from integration of acquired companies			—				(27	)			—
NON-GAAP NET INCOME		$	249			$	334			$	269
COST OF REVENUES		$	436			$	506			$	546
Adjustments:
Amortization of intangible assets			(9	)			(10	)			(11	)
Stock-based compensation			(7	)			(6	)			(5	)
NON-GAAP COST OF REVENUES		$	420			$	490			$	530
COST OF PRODUCT REVENUES		$	265			$	335			$	397
Adjustments:
Amortization of intangible assets			—				—				(1	)
Stock-based compensation			(1	)			(1	)			(1	)
NON-GAAP COST OF PRODUCT REVENUES		$	264			$	334			$	395
COST OF SERVICES REVENUES		$	171			$	171			$	149
Adjustments:
Amortization of intangible assets			(9	)			(10	)			(10	)
Stock-based compensation			(6	)			(5	)			(4	)
NON-GAAP COST OF SERVICES REVENUES		$	156			$	156			$	135
GROSS PROFIT		$	996			$	1,075			$	1,046
Adjustments:
Amortization of intangible assets			9				10				11
Stock-based compensation			7				6				5
NON-GAAP GROSS PROFIT		$	1,012			$	1,091			$	1,062

 

 

 

 

 

 

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NETAPP, INC.
RECONCILIATION OF NON-GAAP TO GAAP
INCOME STATEMENT INFORMATION
(In millions, except net income per share amounts)
		Q1'FY24				Q4'FY23				Q1'FY23
SALES AND MARKETING EXPENSES		$	468			$	442			$	458
Adjustments:
Amortization of intangible assets			(6	)			(7	)			(6	)
Stock-based compensation			(36	)			(32	)			(28	)
NON-GAAP SALES AND MARKETING EXPENSES		$	426			$	403			$	424
RESEARCH AND DEVELOPMENT EXPENSES		$	247			$	243			$	240
Adjustments:
Stock-based compensation			(32	)			(29	)			(24	)
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES		$	215			$	214			$	216
GENERAL AND ADMINISTRATIVE EXPENSES		$	74			$	67			$	72
Adjustments:
Stock-based compensation			(12	)			(7	)			(10	)
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES		$	62			$	60			$	62
RESTRUCTURING CHARGES		$	26			$	11			$	11
Adjustments:
Restructuring charges			(26	)			(11	)			(11	)
NON-GAAP RESTRUCTURING CHARGES		$	—			$	—			$	—
ACQUISITION-RELATED EXPENSE		$	3			$	3			$	10
Adjustments:
Acquisition-related expense			(3	)			(3	)			(10	)
NON-GAAP ACQUISITION-RELATED EXPENSE		$	—			$	—			$	—
OPERATING EXPENSES		$	818			$	766			$	791
Adjustments:
Amortization of intangible assets			(6	)			(7	)			(6	)
Stock-based compensation			(80	)			(68	)			(62	)
Restructuring charges			(26	)			(11	)			(11	)
Acquisition-related expense			(3	)			(3	)			(10	)
NON-GAAP OPERATING EXPENSES		$	703			$	677			$	702

 

 

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NETAPP, INC.
RECONCILIATION OF NON-GAAP TO GAAP
INCOME STATEMENT INFORMATION
(In millions, except net income per share amounts)
		Q1'FY24				Q4'FY23				Q1'FY23
INCOME FROM OPERATIONS		$	178			$	309			$	255
Adjustments:
Amortization of intangible assets			15				17				17
Stock-based compensation			87				74				67
Restructuring charges			26				11				11
Acquisition-related expense			3				3				10
NON-GAAP INCOME FROM OPERATIONS		$	309			$	414			$	360
OTHER INCOME, NET		$	8			$	5			$	15
Adjustments:
Gain on sale of equity investment			—				—				(32	)
NON-GAAP OTHER INCOME (EXPENSE), NET		$	8			$	5			$	(17	)
INCOME BEFORE INCOME TAXES		$	186			$	314			$	270
Adjustments:
Amortization of intangible assets			15				17				17
Stock-based compensation			87				74				67
Restructuring charges			26				11				11
Acquisition-related expense			3				3				10
Gain on sale of equity investment			—				—				(32	)
NON-GAAP INCOME BEFORE INCOME TAXES		$	317			$	419			$	343
PROVISION FOR INCOME TAXES		$	37			$	69			$	56
Adjustments:
Income tax effects			31				(11	)			18
Income tax benefits (expenses) from integration of acquired companies			—				27				—
NON-GAAP PROVISION FOR INCOME TAXES		$	68			$	85			$	74
NET INCOME PER SHARE		$	0.69			$	1.13			$	0.96
Adjustments:
Amortization of intangible assets			0.07				0.08				0.08
Stock-based compensation			0.40				0.34				0.30
Restructuring charges			0.12				0.05				0.05
Acquisition-related expense			0.01				0.01				0.04
Gain on sale of equity investment			—				—				(0.14	)
Income tax effects			(0.14	)			0.05				(0.08	)
Income tax (benefits) expenses from integration of acquired companies			—				(0.12	)			—
NON-GAAP NET INCOME PER SHARE		$	1.15			$	1.54			$	1.20

 

 

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RECONCILIATION OF NON-GAAP TO GAAP
GROSS MARGIN
($ in millions)
		Q1'FY24				Q4'FY23				Q1'FY23
Gross margin-GAAP			69.6	%			68.0	%			65.7	%
Cost of revenues adjustments			1.1	%			1.0	%			1.0	%
Gross margin-Non-GAAP			70.7	%			69.0	%			66.7	%
GAAP cost of revenues		$	436			$	506			$	546
Cost of revenues adjustments:
Amortization of intangible assets			(9	)			(10	)			(11	)
Stock-based compensation			(7	)			(6	)			(5	)
Non-GAAP cost of revenues		$	420			$	490			$	530
Net revenues		$	1,432			$	1,581			$	1,592

 

RECONCILIATION OF NON-GAAP TO GAAP
PRODUCT GROSS MARGIN
($ in millions)
		Q1'FY24				Q4'FY23				Q1'FY23
Product gross margin-GAAP			55.1	%			55.0	%			49.5	%
Cost of product revenues adjustments			0.2	%			0.1	%			0.3	%
Product gross margin-Non-GAAP			55.3	%			55.1	%			49.7	%
GAAP cost of product revenues		$	265			$	335			$	397
Cost of product revenues adjustments:
Amortization of intangible assets			—				—				(1	)
Stock-based compensation			(1	)			(1	)			(1	)
Non-GAAP cost of product revenues		$	264			$	334			$	395
Product revenues		$	590			$	744			$	786

 

RECONCILIATION OF NON-GAAP TO GAAP
SERVICES GROSS MARGIN
($ in millions)
		Q1'FY24				Q4'FY23				Q1'FY23
Services gross margin-GAAP			79.7	%			79.6	%			81.5	%
Cost of services revenues adjustments			1.8	%			1.8	%			1.7	%
Services gross margin-Non-GAAP			81.5	%			81.4	%			83.3	%
GAAP cost of services revenues		$	171			$	171			$	149
Cost of services revenues adjustments:
Amortization of intangible assets			(9	)			(10	)			(10	)
Stock-based compensation			(6	)			(5	)			(4	)
Non-GAAP cost of services revenues		$	156			$	156			$	135
Services revenues		$	842			$	837			$	806

 

 

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RECONCILIATION OF NON-GAAP TO GAAP
EFFECTIVE TAX RATE
		Q1'FY24				Q4'FY23				Q1'FY23
GAAP effective tax rate			19.9	%			22.0	%			20.7	%
Adjustments:
Income tax effects			1.6	%			(10.3	)%			0.8	%
Income tax benefits from integration of acquired companies			—	%			8.6	%			—	%
Non-GAAP effective tax rate			21.5	%			20.3	%			21.6	%

 

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW (NON-GAAP)
(In millions)
		Q1'FY24				Q4'FY23				Q1'FY23
Net cash provided by operating activities		$	453			$	235			$	281
Purchases of property and equipment			(35	)			(39	)			(65	)
Free cash flow		$	418			$	196			$	216
RECONCILIATION OF NET REVENUES
TO BILLINGS (NON-GAAP)
(In millions)
		Q1'FY24				Q4'FY23				Q1'FY23
Net revenues		$	1,432			$	1,581			$	1,592
Change in deferred revenue and financed unearned services revenue*			(133	)			93				(32	)
Billings		$	1,299			$	1,674			$	1,560
* As reported on our Condensed Consolidated Statements of Cash Flows

 

 

 

 

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NETAPP, INC.
RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
SECOND QUARTER FISCAL 2024
		Second Quarter
		Fiscal 2024
Non-GAAP Guidance - Net Income Per Share		$1.35-$1.45
Adjustments of Specific Items to Net Income
Per Share for the Second Quarter Fiscal 2024:
Amortization of intangible assets		($0.07)
Stock-based compensation expense		($0.44)
Income tax effects		$0.06
Total Adjustments		($0.45)
GAAP Guidance - Net Income Per Share		$0.90-$1.00

 

Some items may not add or recalculate due to rounding.

 

 

 

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NETAPP, INC.
RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP
Fiscal 2024
		Fiscal 2024
Gross Margin - Non-GAAP Guidance		~70%
Adjustment:
Cost of revenues adjustments		(1)%
Gross Margin - GAAP Guidance		~69%
		Fiscal 2024
Operating Margin - Non-GAAP Guidance		~25%
Adjustments:
Amortization of intangible assets		(1)%
Stock-based compensation expense		(6)%
Operating Margin - GAAP Guidance		~18%

Some items may not add or recalculate due to rounding.

 

 

NETAPP, INC.
RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
Fiscal 2024
		Fiscal 2024
Non-GAAP Guidance - Net Income Per Share		$5.65-$5.85
Adjustments of Specific Items to Net Income
Per Share for Fiscal 2024:
Amortization of intangible assets		($0.27)
Stock-based compensation expense		($1.78)
Restructuring charges		($0.12)
Acquisition-related expenses		($0.01)
Income tax effects		$0.28
Total Adjustments		($1.90)
GAAP Guidance - Net Income Per Share		$3.75-$3.95

Some items may not add or recalculate due to rounding.

 

Contacts:

 

(Press)

Kenya Hayes

1 703 589 7595

kenya.hayes@netapp.com

 

(Investors)

Kris Newton

1 408 822 3312

kris.newton@netapp.com

 

 

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