8-K
0001002047false00010020472024-02-292024-02-29

 

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): February 29, 2024

 

 

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.

 


Item 2.02 Results of Operations and Financial Condition.

On February 29, 2024, the Company issued a press release reporting financial results for the third quarter ended January 26, 2024. 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 February 29, 2024, reporting earnings for the third quarter ended January 26, 2024

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 


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:

February 29, 2024

By:

/s/ Elizabeth O'Callahan

 

 

 

Elizabeth O'Callahan
Executive Vice President, Chief Legal Officer and Secretary

 


EX-99.1

 

Exhibit 99.1

NetApp reports third quarter of fiscal year 2024 results

Net revenues of $1.61 billion for the third quarter; 5% growth year-over-year

Record All-flash array annualized revenue run rate1 of $3.4 billion, an increase of 21% year-over-year
Record Q3 GAAP consolidated gross margins of 72%; record non-GAAP consolidated gross margins2 of 73%
Q3 GAAP operating margins of 23%; record non-GAAP operating margins2 of 30%
Q3 GAAP net income per share3 of $1.48; record non-GAAP net income per share2 of $1.94

SAN JOSE, Calif.—February 29, 2024—NetApp (NASDAQ: NTAP), the intelligent data infrastructure company, today reported financial results for the third quarter of fiscal year 2024, which ended on January 26, 2024.

 

“In Q3, our focused execution and continued operational discipline delivered solid revenue growth and again yielded company all-time highs across key profitability metrics,” said George Kurian, chief executive officer. “Our modern approach to unified data storage, spanning all-flash and cloud environments, is clearly resonating with customers. I am confident in our ability to capitalize on this momentum, as we address new market opportunities, extend our leadership position in existing markets, and deliver increasing value for all our stakeholders.”

 

Third quarter of fiscal year 2024 financial results

 

Net revenues: $1.61 billion, compared to $1.53 billion in the third quarter of fiscal year 2023; a year-over-year increase of 5%.
o
Hybrid Cloud segment revenue: $1.46 billion, compared to $1.38 billion in the third quarter of fiscal year 2023.
o
Public Cloud segment revenue: $151 million, compared to $150 million in the third quarter of fiscal year 2023.
Billings2: $1.69 billion, compared to $1.57 billion in the third quarter of fiscal year 2023; a year-over-year increase of 7%.
NetApp Public Cloud annualized revenue run rate (ARR)4: $608 million, compared to $605 million in the third quarter of fiscal year 2023; relatively flat year-over-year.
All-flash array ARR: $3.4 billion, compared to $2.8 billion in the third quarter of fiscal year 2023; a year-over-year increase of 21%.
Net income: GAAP net income of $313 million, compared to $65 million in the third quarter of fiscal year 2023; non-GAAP net income2 of $410 million, compared to $301 million in the third quarter of fiscal year 2023.
Earnings per share: GAAP net income per share of $1.48, compared to $0.30 in the third quarter of fiscal year 2023; non-GAAP net income per share of $1.94, compared to $1.37 in the third quarter of fiscal year 2023.

 


 

Cash, cash equivalents and investments: $2.92 billion at the end of the third quarter of fiscal year 2024.
Cash provided by operations: $484 million, compared to $377 million in the third quarter of fiscal year 2023.
Share repurchase and dividends: Returned $203 million to stockholders through share repurchases and cash dividends.

Fourth quarter of fiscal year 2024 financial outlook

 

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

Net revenues are expected to be in the range of:

$1.585 billion - $1.735 billion

GAAP

Non-GAAP

Earnings per share is expected to be in the range of:

$1.25 - $1.35

 $1.73 - $1.83

Full fiscal year 2024 financial outlook

 

The Company provided an update to their financial guidance for the full fiscal year 2024:

Net revenues are expected to be in the range of:

$6.185 billion - $6.335 billion

GAAP

Non-GAAP

Consolidated gross margins are expected to be in the range of:

70 - 71%

71 - 72%

Operating margins are expected to be:

    ~19%

   ~27%

Earnings per share is expected to be in the range of:

   $4.52 - $4.62

   $6.40 - $6.50

Dividend

 

The next cash dividend of $0.50 per share is to be paid on April 24, 2024, to stockholders of record as of the close of business on April 5, 2024.

Third quarter of fiscal year 2024 business highlights

 

Leading product innovation

At AWS re:Invent 2023, AWS announced scale-out file systems of Amazon FSx for NetApp ONTAP through its collaboration with NetApp, which offers up to nine times higher storage performance compared to existing file systems.
NetApp introduced new features to NetApp™Astra™ Control and Astra Trident, including support for on-premises Kubernetes and OpenShift clusters, ransomware protection through object storage retention policies, and Red Hat OpenShift Service on AWS support.

 


 

NetApp launched a new container rightsizing feature in the NetApp Cloud Insights observability platform, which helps manage containerized workloads by optimizing resource usage and reducing costs.
Spot by NetApp added Cost Intelligence and Billing Engine to its portfolio of FinOps offerings to enable customers to better see and manage cloud costs.
Spot by NetApp announced support for Spark Connect in Spot Ocean for Apache Spark.

Customer and partner momentum  

NetApp announced the renewal of its collaboration with Microsoft with cloud storage solutions Azure NetApp Files, Cloud Volumes ONTAP, and CloudOps solutions from Spot by NetApp.
NetApp announced NetApp StorageGRID™ for VMware Sovereign Cloud, which enables customers to more cost-effectively store, secure, protect, and preserve unstructured data while meeting global data privacy and residency regulations.
NetApp announced a new bundled virtualization solution for small and medium businesses that uses VMware vSphere 8 virtualization software, Fujitsu PRIMERGY Servers, and NetApp all-flash storage systems with NetApp ONTAP™ integration to vSphere.
Bharti Airtel Limited, a leading telecom service provider in India, selected NetApp Astra for Kubernetes Storage and Data Management on Red Hat OpenShift as the platform for its containerized workloads.

Corporate news and events

NetApp appointed Anders Gustafsson to the Board of Directors.
NetApp celebrated the eighth iteration of the NetApp Innovation Awards: Empowering Businesses Through Data, which spotlights trailblazers who have leveraged data to drive transformations and create ground-breaking solutions.

Executive leadership announcements

NetApp appointed Riccardo Di Blasio as Senior Vice President of North America Sales.
NetApp appointed Ashish Dhawan as Senior Vice President of Global Cloud Sales.

Awards and recognition

NetApp was ranked on Newsweek’s 2024 America’s Most Responsible Companies list ranking #146 out of 600 companies overall and #17 out of 54 companies in the Software & Telecommunications sector.
NetApp was named “2024 Company of the Year in Global Hybrid Cloud Storage Management Industry” by Frost & Sullivan.
Google Cloud NetApp Volumes won CRN’s 2023 Product of the Year Award in the Storage-Defined category.
NetApp won first place in the SPECstorage Solutions 2020_SWBUILD benchmark.
NetApp was included in CEOWORLD Magazine’s Most Influential and Innovative Companies in 2024.
NetApp was listed as one of America’s Greatest Workplaces for Diversity in 2024 by Newsweek.
NetApp placed among CRN’s 20 Coolest Cloud Storage Companies of the 2024 Cloud 100.
NetApp Cloud Volumes ONTAP was named Editor’s Choice for Best Big Data Product: Cloud Data Storage in Datanami’s 2023 Readers’ & Editor’s Choice Awards.

 


 

Spot by NetApp was listed as a Top Cloud Cost ManagementTool by Spiceworks.
NetApp was named a leader and outperformer in GigaOm’s latest Primary Storage for Large Enterprises report.
NetApp was named a leader of scale-out file storage systems by GigaOm.

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 Fourth Quarter of Fiscal Year 2024 Financial Outlook section and the Full Fiscal Year 2024 Financial Outlook section, and statements about our business, economic and market outlook, financial guidance, our overall future prospects, our modern approach to unified data storage, such approach’s resonance with customers, and our ability to address new market opportunities, extend our leadership position in existing markets, and deliver increasing value for our stakeholders. 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 services; our ability to maintain our customer, partner, supplier and contract manufacturer relationships on favorable terms and conditions; global political, macroeconomic and market conditions, including inflation, rising interest rates, monetary policy shifts, recession risks, and foreign exchange volatility and the resulting impact on demand for our products; the impact of new or ongoing geopolitical conflicts and sanctions; adoption or changes to laws, regulations standards or policies affecting our operations, products, services, or the storage industry; 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; changes in overall technology spending by our customers; revenue seasonality; changes in laws or regulations, including those relating to privacy, data protection and information security; the timing of orders and their fulfilment; and our ability to manage our gross profit margins, including managing component costs. 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 sections titled “Risk Factors” in our most

 


 

recently submitted annual report on Form 10-K and quarterly report on Form 10-Q. We disclaim any obligation to update information contained in this press release whether as a result of new information, future events, or otherwise.

###

NetApp, the NetApp logo, 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

 

1All-flash array annualized net revenue run rate is determined by products and services revenue for the current quarter, multiplied by 4.

 

2Refer to NetApp usage of non-GAAP Financial Information section below for explanations of consolidated non-GAAP gross margins, non-GAAP operating margins, non-GAAP net income, non-GAAP net income per share, free cash flow, and billings.

 

3GAAP net income per share and non-GAAP net income per share are calculated using the diluted number of shares.

 

4Public 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.

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 gross margins, non-GAAP operating margins, 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 its non-GAAP measures, 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’s management uses non-GAAP measures in making operating decisions because it believes that the measurements provide meaningful supplemental information regarding NetApp’s ongoing operational performance.

 

NetApp believes that the presentation of non-GAAP gross margins, non-GAAP operating margin, non-GAAP effective tax rate, non-GAAP net income, and non-GAAP earnings per share data, provides investors with supplemental metrics that assist in understanding current results and future prospects, earnings and profitability that are complementary to GAAP metrics. Each of these Non-GAAP metrics is defined as the applicable GAAP metric adjusted to exclude the items defined in A through I below, as applicable, while our Non-GAAP effective tax rate and Non-GAAP net income also reflect a non-GAAP tax provision, as described in item J below, instead of our GAAP tax provision. Non-GAAP net income per share is computed as Non-GAAP net income divided by the diluted number of shares for the applicable period.

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.

 

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.

 

 

 


 

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.

 

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, ongoing 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, ongoing 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 non-recurring costs do not reflect the results of its underlying, ongoing 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.

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, 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. A detailed reconciliation of our non-GAAP to GAAP results can be found herein.

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 the intelligent data infrastructure company combining unified data storage, integrated data services, and CloudOps solutions to turn a world of disruption into opportunity for every customer. NetApp creates silo-free infrastructure, then harnesses observability and AI, to enable the best data management. As the only enterprise-grade storage service natively embedded in the world’s biggest clouds, our data storage delivers seamless flexibility and our data services create a data advantage through superior cyber-resilience, governance, and applications agility. Our CloudOps solutions provide continuous optimization of performance and efficiency through observability and AI. No matter the data type, workload, or environment, transform your data infrastructure to realize your business possibilities with NetApp.

 

Learn more at www.netapp.com or follow us on X, LinkedIn, Facebook, and Instagram.

 


 

 

NETAPP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

 

 

January 26,
 2024

 

 

April 28,
  2023

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash, cash equivalents and investments

 

$

2,917

 

 

$

3,070

 

Accounts receivable

 

 

787

 

 

 

987

 

Inventories

 

 

131

 

 

 

167

 

Other current assets

 

 

492

 

 

 

456

 

Total current assets

 

 

4,327

 

 

 

4,680

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

607

 

 

 

650

 

Goodwill and purchased intangible assets, net

 

 

2,897

 

 

 

2,940

 

Other non-current assets

 

 

1,538

 

 

 

1,548

 

Total assets

 

$

9,369

 

 

$

9,818

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

396

 

 

$

392

 

Accrued expenses

 

 

876

 

 

 

857

 

Current portion of long-term debt

 

 

400

 

 

 

 

Short-term deferred revenue and financed unearned services revenue

 

 

2,093

 

 

 

2,218

 

Total current liabilities

 

 

3,765

 

 

 

3,467

 

Long-term debt

 

 

1,991

 

 

 

2,389

 

Other long-term liabilities

 

 

585

 

 

 

708

 

Long-term deferred revenue and financed unearned services revenue

 

 

2,034

 

 

 

2,095

 

Total liabilities

 

 

8,375

 

 

 

8,659

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

994

 

 

 

1,159

 

Total liabilities and stockholders' equity

 

$

9,369

 

 

$

9,818

 

 

 


 

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 26,
 2024

 

 

January 27,
2023

 

 

January 26,
 2024

 

 

January 27,
2023

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

747

 

 

$

682

 

 

$

2,043

 

 

$

2,305

 

Services

 

 

859

 

 

 

844

 

 

 

2,557

 

 

 

2,476

 

Net revenues

 

 

1,606

 

 

 

1,526

 

 

 

4,600

 

 

 

4,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product

 

 

282

 

 

 

367

 

 

 

823

 

 

 

1,182

 

Cost of services

 

 

173

 

 

 

158

 

 

 

520

 

 

 

465

 

Total cost of revenues

 

 

455

 

 

 

525

 

 

 

1,343

 

 

 

1,647

 

Gross profit

 

 

1,151

 

 

 

1,001

 

 

 

3,257

 

 

 

3,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

439

 

 

 

450

 

 

 

1,368

 

 

 

1,387

 

Research and development

 

 

249

 

 

 

230

 

 

 

758

 

 

 

713

 

General and administrative

 

 

81

 

 

 

59

 

 

 

230

 

 

 

198

 

Restructuring charges

 

 

13

 

 

 

87

 

 

 

44

 

 

 

109

 

Acquisition-related expense

 

 

3

 

 

 

3

 

 

 

9

 

 

 

18

 

Total operating expenses

 

 

785

 

 

 

829

 

 

 

2,409

 

 

 

2,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

366

 

 

 

172

 

 

 

848

 

 

 

709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

16

 

 

 

5

 

 

 

35

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

382

 

 

 

177

 

 

 

883

 

 

 

752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

69

 

 

 

112

 

 

 

188

 

 

 

(277

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

313

 

 

$

65

 

 

$

695

 

 

$

1,029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.52

 

 

$

0.30

 

 

$

3.33

 

 

$

4.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

1.48

 

 

$

0.30

 

 

$

3.26

 

 

$

4.66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in net income per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

206

 

 

 

216

 

 

 

209

 

 

 

218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

211

 

 

 

219

 

 

 

213

 

 

 

221

 

 

 


 

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 26,
 2024

 

 

January 27,
2023

 

 

January 26,
 2024

 

 

January 27,
2023

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

313

 

 

$

65

 

 

$

695

 

 

$

1,029

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

63

 

 

 

65

 

 

 

191

 

 

 

182

 

Non-cash operating lease cost

 

 

11

 

 

 

13

 

 

 

34

 

 

 

40

 

Stock-based compensation

 

 

89

 

 

 

93

 

 

 

269

 

 

 

238

 

Deferred income taxes

 

 

11

 

 

 

(7

)

 

 

(2

)

 

 

(577

)

Other items, net

 

 

31

 

 

 

58

 

 

 

4

 

 

 

(69

)

Changes in assets and liabilities, net of acquisitions of businesses:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

10

 

 

 

112

 

 

 

195

 

 

 

425

 

Inventories

 

 

(9

)

 

 

69

 

 

 

37

 

 

 

29

 

Accounts payable

 

 

(11

)

 

 

(145

)

 

 

3

 

 

 

(173

)

Accrued expenses

 

 

(64

)

 

 

(9

)

 

 

(16

)

 

 

(117

)

Deferred revenue and financed unearned services
  revenue

 

 

81

 

 

 

46

 

 

 

(160

)

 

 

(47

)

Long-term taxes payable

 

 

3

 

 

 

2

 

 

 

(107

)

 

 

(82

)

Changes in other operating assets and liabilities, net

 

 

(44

)

 

 

15

 

 

 

(71

)

 

 

(6

)

Net cash provided by operating activities

 

 

484

 

 

 

377

 

 

 

1,072

 

 

 

872

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of investments, net

 

 

(401

)

 

 

(132

)

 

 

(329

)

 

 

(474

)

Purchases of property and equipment

 

 

(36

)

 

 

(58

)

 

 

(109

)

 

 

(200

)

Acquisitions of businesses, net of cash acquired

 

 

 

 

 

 

 

 

 

 

 

(491

)

Other investing activities, net

 

 

 

 

 

1

 

 

 

 

 

 

60

 

Net cash used in investing activities

 

 

(437

)

 

 

(189

)

 

 

(438

)

 

 

(1,105

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock under employee
  stock award plans

 

 

48

 

 

 

54

 

 

 

100

 

 

 

108

 

Payments for taxes related to net share settlement of stock
  awards

 

 

(23

)

 

 

(11

)

 

 

(108

)

 

 

(74

)

Repurchase of common stock

 

 

(100

)

 

 

(200

)

 

 

(800

)

 

 

(700

)

Repayments and extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(250

)

Dividends paid

 

 

(103

)

 

 

(108

)

 

 

(312

)

 

 

(326

)

Other financing activities, net

 

 

 

 

 

 

 

 

 

 

 

(2

)

Net cash used in financing activities

 

 

(178

)

 

 

(265

)

 

 

(1,120

)

 

 

(1,244

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

16

 

 

 

47

 

 

 

(10

)

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

 

 

(115

)

 

 

(30

)

 

 

(496

)

 

 

(1,473

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

1,941

 

 

 

2,676

 

 

 

2,322

 

 

 

4,119

 

End of period

 

$

1,826

 

 

$

2,646

 

 

$

1,826

 

 

$

2,646

 

 

 

 

 


 

NETAPP, INC.

 

SUPPLEMENTAL DATA

 

(In millions except net income per share, percentages, DSO, DPO and Inventory Turns)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues by Segment

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Product

 

$

747

 

 

$

706

 

 

$

682

 

Support

 

 

631

 

 

 

623

 

 

 

616

 

Professional and Other Services

 

 

77

 

 

 

79

 

 

 

78

 

Hybrid Cloud Segment Net Revenues

 

 

1,455

 

 

 

1,408

 

 

 

1,376

 

Public Cloud Segment Net Revenues

 

 

151

 

 

 

154

 

 

 

150

 

Net Revenues

 

$

1,606

 

 

$

1,562

 

 

$

1,526

 

 

 

 

 

 

 

 

 

 

 

Gross Profit by Segment

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Product

 

$

467

 

 

$

431

 

 

$

317

 

Support

 

 

582

 

 

 

573

 

 

 

572

 

Professional and Other Services

 

 

19

 

 

 

19

 

 

 

28

 

Hybrid Cloud Segment Gross Profit

 

 

1,068

 

 

 

1,023

 

 

 

917

 

Public Cloud Segment Gross Profit

 

 

99

 

 

 

102

 

 

 

103

 

Total Segments Gross Profit

 

 

1,167

 

 

 

1,125

 

 

 

1,020

 

 

 

 

 

 

 

 

 

 

 

Amortization of Intangible Assets

 

 

(9

)

 

 

(8

)

 

 

(11

)

Stock-based Compensation

 

 

(7

)

 

 

(7

)

 

 

(8

)

Unallocated Cost of Revenues

 

 

(16

)

 

 

(15

)

 

 

(19

)

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

1,151

 

 

$

1,110

 

 

$

1,001

 

 

 

 

 

 

 

 

 

 

 

Gross Margin by Segment

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Product

 

 

62.5

%

 

 

61.0

%

 

 

46.5

%

Support

 

 

92.2

%

 

 

92.0

%

 

 

92.9

%

Professional and Other Services

 

 

24.7

%

 

 

24.1

%

 

 

35.9

%

Hybrid Cloud Segment Gross Margin

 

 

73.4

%

 

 

72.7

%

 

 

66.6

%

Public Cloud Segment Gross Margin

 

 

65.6

%

 

 

66.2

%

 

 

68.7

%

 

 

 

 

 

 

 

 

 

 

    Product Revenues

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Total

 

$

747

 

 

$

706

 

 

$

682

 

Software*

 

$

412

 

 

$

398

 

 

$

390

 

Hardware*

 

$

335

 

 

$

308

 

 

$

292

 

 

 

 

 

 

 

 

 

 

 

Software and recurring support and public cloud revenue

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Product - Software

 

$

412

 

 

$

398

 

 

$

390

 

Support

 

 

631

 

 

 

623

 

 

 

616

 

Public Cloud

 

 

151

 

 

 

154

 

 

 

150

 

Software and recurring support and public cloud revenue*

 

$

1,194

 

 

$

1,175

 

 

$

1,156

 

 

 

 

 

 

 

 

 

 

 

Software and recurring support and public cloud revenue as a percentage of net revenues

 

 

74

%

 

 

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.

 

 


 

 

 

 

 

 

 

 

 

 

 

Geographic Mix**

 

 

 

 

 

 

 

 

 

 

 

% of Q3 FY'24

 

 

% of Q2 FY'24

 

 

% of Q3 FY'23

 

 

 

Revenue

 

 

Revenue

 

 

Revenue

 

Americas

 

 

50

%

 

 

50

%

 

 

52

%

     Americas Commercial

 

 

41

%

 

 

37

%

 

 

42

%

     U.S. Public Sector

 

 

9

%

 

 

13

%

 

 

10

%

EMEA

 

 

35

%

 

 

34

%

 

 

33

%

Asia Pacific

 

 

15

%

 

 

16

%

 

 

15

%

 

 

 

 

 

 

 

 

 

 

** 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 year percentages have been conformed to the current year presentation.

 

 

 

 

 

 

 

 

 

 

 

Pathways Mix

 

 

 

 

 

 

 

 

 

 

 

% of Q3 FY'24

 

 

% of Q2 FY'24

 

 

% of Q3 FY'23

 

 

 

Revenue

 

 

Revenue

 

 

Revenue

 

Direct

 

 

26

%

 

 

23

%

 

 

22

%

Indirect

 

 

74

%

 

 

77

%

 

 

78

%

 

 

 

 

 

 

 

 

 

 

Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Non-GAAP Income from Operations

 

$

485

 

 

$

419

 

 

$

372

 

     % of Net Revenues

 

 

30.2

%

 

 

26.8

%

 

 

24.4

%

Non-GAAP Income before Income Taxes

 

$

501

 

 

$

425

 

 

$

377

 

Non-GAAP Effective Tax Rate

 

 

18.2

%

 

 

21.4

%

 

 

20.2

%

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Income

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Non-GAAP Net Income

 

$

410

 

 

$

334

 

 

$

301

 

Non-GAAP Weighted Average Common Shares Outstanding, Diluted

 

 

211

 

 

 

211

 

 

 

219

 

Non-GAAP Net Income per Share, Diluted

 

$

1.94

 

 

$

1.58

 

 

$

1.37

 

 

 

 

 

 

 

 

 

 

 

Select Balance Sheet Items

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Deferred Revenue and Financed Unearned Services Revenue

 

$

4,127

 

 

$

4,002

 

 

$

4,216

 

DSO (days)

 

 

45

 

 

 

46

 

 

 

49

 

DPO (days)

 

 

79

 

 

 

83

 

 

 

75

 

Inventory Turns

 

 

14

 

 

 

15

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

Net Cash Provided by Operating Activities

 

$

484

 

 

$

135

 

 

$

377

 

Purchases of Property and Equipment

 

$

36

 

 

$

38

 

 

$

58

 

Free Cash Flow

 

$

448

 

 

$

97

 

 

$

319

 

Free Cash Flow as % of Net Revenues

 

 

27.9

%

 

 

6.2

%

 

 

20.9

%

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'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

NET INCOME

 

$

313

 

 

$

233

 

 

$

65

 

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

14

 

 

 

14

 

 

 

17

 

Stock-based compensation

 

 

89

 

 

 

93

 

 

 

93

 

Restructuring charges

 

 

13

 

 

 

5

 

 

 

87

 

Acquisition-related expense

 

 

3

 

 

 

3

 

 

 

3

 

Litigation settlements

 

 

 

 

 

(5

)

 

 

 

Income tax effects

 

 

(22

)

 

 

(9

)

 

 

(33

)

Resolution of income tax matters

 

 

 

 

 

 

 

 

69

 

NON-GAAP NET INCOME

 

$

410

 

 

$

334

 

 

$

301

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUES

 

$

455

 

 

$

452

 

 

$

525

 

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

(9

)

 

 

(8

)

 

 

(11

)

Stock-based compensation

 

 

(7

)

 

 

(7

)

 

 

(8

)

NON-GAAP COST OF REVENUES

 

$

439

 

 

$

437

 

 

$

506

 

 

 

 

 

 

 

 

 

 

 

COST OF PRODUCT REVENUES

 

$

282

 

 

$

276

 

 

$

367

 

Adjustments:

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

(2

)

 

 

(1

)

 

 

(2

)

NON-GAAP COST OF PRODUCT REVENUES

 

$

280

 

 

$

275

 

 

$

365

 

 

 

 

 

 

 

 

 

 

 

COST OF SERVICES REVENUES

 

$

173

 

 

$

176

 

 

$

158

 

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

(9

)

 

 

(8

)

 

 

(11

)

Stock-based compensation

 

 

(5

)

 

 

(6

)

 

 

(6

)

NON-GAAP COST OF SERVICES REVENUES

 

$

159

 

 

$

162

 

 

$

141

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

$

1,151

 

 

$

1,110

 

 

$

1,001

 

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

9

 

 

 

8

 

 

 

11

 

Stock-based compensation

 

 

7

 

 

 

7

 

 

 

8

 

NON-GAAP GROSS PROFIT

 

$

1,167

 

 

$

1,125

 

 

$

1,020

 

 

 

 

 

 

 


 

NETAPP, INC.

 

RECONCILIATION OF NON-GAAP TO GAAP

 

INCOME STATEMENT INFORMATION

 

(In millions, except net income per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3'FY24

 

 

Q2'FY24

 

 

Q3'FY23

 

SALES AND MARKETING EXPENSES

 

$

439

 

 

$

461

 

 

$

450

 

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

(5

)

 

 

(6

)

 

 

(6

)

Stock-based compensation

 

 

(36

)

 

 

(37

)

 

 

(40

)

NON-GAAP SALES AND MARKETING EXPENSES

 

$

398

 

 

$

418

 

 

$

404

 

 

 

 

 

 

 

 

 

 

 

RESEARCH AND DEVELOPMENT EXPENSES

 

$

249

 

 

$

262

 

 

$

230

 

Adjustments:

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

(32

)

 

 

(35

)

 

 

(32

)

NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES

 

$

217

 

 

$

227

 

 

$

198

 

 

 

 

 

 

 

 

 

 

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

$

81

 

 

$

75

 

 

$

59

 

Adjustments:

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

(14

)

 

 

(14

)

 

 

(13

)

NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES

 

$

67

 

 

$

61

 

 

$

46