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):   May 24, 2017

 
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.)	
 	
495 East Java Drive
Sunnyvale, CA 94089	
(Address of principal executive offices) (Zip Code)	
 	
(408) 822-6000	
(Registrant’s telephone number, including area code)	
 	
Not Applicable	
(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 (see General Instruction A.2. below):
 
[ ] 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))
 
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 May 24, 2017, NetApp, Inc. (“NetApp” or the “Company”) issued a press release reporting financial results for the fourth quarter and year ended April 28, 2017. The press release is furnished herewith as Exhibit 99.1, and is incorporated herein by reference. 
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 May 24, 2017, reporting earnings for the fiscal quarter and year ended April 28, 2017.	

 

 

 

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

 	 	
 	 NETAPP, INC.	
 	 (Registrant)	

 	 	 	
 
May 24, 2017	By:	/s/ Matthew K. Fawcett	
 	 	Matthew K. Fawcett	
 	 	Senior Vice President, General Counsel and Corporate Secretary

 

 

 

Exhibit Index

Exhibit No.	Description	
99.1	Press release, dated May 24, 2017, reporting earnings for the fiscal quarter and year ended April 28, 2017	

 

Exhibit 99.1

NETAPP REPORTS FOURTH QUARTER AND FISCAL YEAR 2017 RESULTS
 
Net Revenues of $1.48 Billion for the Fourth Quarter and $5.52 Billion for Fiscal Year 2017
 
•	Net Revenues for Q4 up 5% quarter-over-quarter and 7% year-over-year.	

•	Q4 All-flash array annualized net revenue run rate of $1.70 billion, up almost 140% year-over-year.	

•	Over an exabyte of flash shipped in fiscal year 2017.	

•	$913 million returned to shareholders in share repurchases and cash dividends in fiscal year 2017.	

•	First quarter fiscal year 2018 dividend to increase by 5% to $0.20 per share.	
 
Sunnyvale, Calif.—May 24, 2017—NetApp (NASDAQ: NTAP) today reported financial results for the fourth quarter and fiscal year 2017, ended April 28, 2017.
 
Fourth Quarter Financial Results
Net revenues for the fourth quarter of fiscal year 2017 were $1.48 billion. GAAP net income for the fourth quarter of fiscal year 2017 was $190 million, or $0.68 per share, 1  compared to GAAP net loss of $8 million, or $0.03 loss per share, 2  for the comparable period of the prior year. Non-GAAP net income for the fourth quarter of fiscal year 2017 was $239 million, or $0.86 per share, 3  compared to non-GAAP net income of $157 million, or $0.55 per share, for the comparable period of the prior year.
 
Fiscal Year 2017 Financial Results
Net revenues for fiscal year 2017 were $5.52 billion. GAAP net income for fiscal year 2017 was $509 million, or $1.81 per share, 1  compared to GAAP net income of $229 million, or $0.77 per share, for the comparable period of the prior year. Non-GAAP net income for fiscal year 2017 was $768 million, or $2.73 per share, 3  compared to non-GAAP net income of $633 million, or $2.13 per share, for the comparable period of the prior year.

Cash, Cash Equivalents and Investments
NetApp ended the fourth quarter of fiscal year 2017 with $4.9 billion in total cash, cash equivalents and investments. During the fourth quarter of fiscal year 2017, the Company generated $365 million in cash from operations and returned $180 million to shareholders through share repurchases and a cash dividend.
 
The Company will increase the first quarter fiscal year 2018 dividend by 5% to $0.20 per share. The quarterly dividend will be paid on July 26, 2017, to shareholders of record as of the close of business on July 7, 2017.
 
“Our continued focus and disciplined execution yielded yet another quarter of solid results. We have regained momentum, returning the company to revenue growth and delivering against all of our fiscal year 2017 commitments,” said George Kurian, chief executive officer. “By innovating to redefine traditional markets and to bring enterprise-grade technology to emerging areas of the market, we are gaining market share, expanding our addressable market, and creating new opportunities for NetApp.”
 
Q1 Fiscal Year 2018 Outlook
The Company provided the following financial guidance for the first quarter of fiscal year 2018:  
•	Net revenues are expected to be in the range of $1.24 billion to $1.39 billion  GAAPNon-GAAP	

•	Earnings per share is expected to be in the range of:$0.30 - $0.38$0.49 - $0.57	
 
Full Fiscal Year 2018 Outlook
The Company provided the following financial guidance for the full fiscal year 2018:
GAAPNon-GAAP
•	Consolidated gross margin is expected to be in the range of:61% - 62% 62% - 63%	

•	Operating margin is expected to be in the range of:14% - 16% 18% - 20%	

•	Effective tax rate is expected to be in the range of:23% - 24% 19% - 20%	

Business Highlights
•	NetApp Expands Impact in Flash, Cloud, and Next-Generation Data Center	

 	-	New NetApp All-Flash Innovations Improve Data Center Economics. New All Flash FAS A700s array delivers breakthrough performance in a compact form factor to modernize IT for demanding enterprise applications, analytic workloads and cloud integration.	

 	-	NetApp Names Anthony Lye to Lead Cloud Business Unit. Cloud champion joins NetApp to accelerate hyperscaler and hybrid cloud progress. Lye, who reports to NetApp CEO George Kurian, drives the strategy and execution necessary to create a profitable cloud business for NetApp and establish the Company as the undisputed leader in managing data in a cloud-integrated world.	

 	-	One-Year Anniversary: NetApp SolidFire Redefines Data Center Infrastructure. NetApp celebrated the one-year anniversary of its acquisition of SolidFire, fueling the advance of the next-generation data center that is transforming IT for enterprises and service providers.	

•	Customers Team with NetApp to Drive Transformation and Improve Performance with Their Choice of Hybrid Cloud Deployment	

 	-	NetApp Supports Vital Energi in Transforming Data into Energy Savings Throughout the UK. Sustainable energy company, Vital Energi, deployed a NetApp all-flash array to speed performance and NetApp AltaVault cloud-integrated storage to help the company meet mandatory back up requirements.	

 	-	DARZ Drives DevOps Success with NetApp. German IT services leader fuels customers’ digital transformation by enabling agile software development through its Docker & Container as a Service offering.	

 	-	neteffect Offers Hybrid Cloud Disaster Recovery Solutions with NetApp. NetApp converged infrastructure gives neteffect technologies the flexibility to blend on-premises and cloud services for customers.	

 	-	NetApp Helps Kaufman Hall Transform Businesses with Data-Driven Insight. Kaufman Hall takes critical first step toward a hybrid cloud future by consolidating on FlexPod to speed innovation as well as maximize performance and growth.	

 	-	Contegix Accelerates Private Cloud Deployment and Cuts Service Costs in Half with NetApp SolidFire.  The leading cloud host provider prepares for coming data deluge with high-	

 	 	performing, scalable NetApp SolidFire all-flash storage to meet customers’ demands for scalability and guaranteed performance to accelerate their private cloud deployments.	
 
Webcast and Conference Call Information
NetApp will host a conference call to discuss these results today at 2:30 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 4:30 p.m. Pacific Time today.
 
About NetApp
Leading organizations worldwide count on NetApp for software, systems and services to manage and store data. We help customers capitalize on the value of their data in the hybrid cloud through our Data Fabric strategy, data management expertise, portfolio and ecosystem. To learn more, visit  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 Q1 Fiscal Year 2018 Outlook section and the Full Fiscal Year 2018 Outlook section and statements made about our ability to redefine traditional markets, address emerging markets and gain market share. 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 global political, macroeconomic and market conditions, changes in U.S. government spending, revenue seasonality and matters specific to our business, such as our ability to understand, and effectively respond to changes affecting our market environment, product, technologies and customer requirements, including the impact of the cloud, customer demand for and acceptance of our products and services, our ability to reduce our cost structure, streamline the business and improve efficiency, our ability to effectively integrate the SolidFire acquisition, 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.
###
NetApp and the NetApp logo and the marks listed at http://www.netapp.com/TM are trademarks of NetApp, Inc. Other company and product names may be trademarks of their respective owners.
 
1GAAP net income per share is calculated using the diluted number of shares.
2GAAP net loss per share is calculated using the basic number of shares and excludes common stock equivalents because the impact would be anti-dilutive.
3Non-GAAP net income excludes, when applicable, (a) amortization of intangible assets, (b) stock-based compensation expenses, (c) acquisition-related expenses, (d) restructuring charges, (e) asset impairments, (f) gains/losses on the sale of properties, and (g) 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 below. 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’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.

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 and free cash flow, and historical and projected non-GAAP earnings per diluted share.
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.
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. In addition, in fiscal years 2016 and 2017 these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation. 
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 they are non-cash expenses. 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. 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, cannot be relied upon for future planning and forecasting.
D. 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. 
E. 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.
F. Gains/losses on the sale of properties. These are gains/losses from the sale of our properties. Management believes that these transactions do not reflect the results of our underlying, on-going business and, therefore, cannot be relied upon for future planning or forecasting.
G. 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 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 resulting from the integration of intellectual properties from acquisitions. Management believes that the use of non-GAAP tax provisions provides a more meaningful measure of the Company’s operational performance.
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.

 

 
NETAPP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
 	 	April 28,
2017	 	 	April 29,
2016	 	
 	 	 	 	 	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash, cash equivalents and investments	 	$	4,921	 	 	$	5,303	 	
Accounts receivable	 	 	731	 	 	 	813	 	
Inventories	 	 	163	 	 	 	98	 	
Other current assets	 	 	383	 	 	 	234	 	
Total current assets	 	 	6,198	 	 	 	6,448	 	
 	 	 	 	 	 	 	 	 	
Property and equipment, net	 	 	799	 	 	 	937	 	
Goodwill and purchased intangible assets, net	 	 	1,815	 	 	 	1,856	 	
Other non-current assets	 	 	681	 	 	 	796	 	
Total assets	 	$	9,493	 	 	$	10,037	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable	 	$	347	 	 	$	254	 	
Accrued expenses	 	 	782	 	 	 	765	 	
Commercial paper notes	 	 	500	 	 	 	—	 	
Short-term loan	 	 	—	 	 	 	849	 	
Current portion of long-term debt	 	 	749	 	 	 	—	 	
Short-term deferred revenue and financed unearned services revenue	 	 	1,661	 	 	 	1,794	 	
Total current liabilities	 	 	4,039	 	 	 	3,662	 	
Long-term debt	 	 	744	 	 	 	1,490	 	
Other long-term liabilities	 	 	249	 	 	 	413	 	
Long-term deferred revenue and financed unearned services revenue	 	 	1,681	 	 	 	1,591	 	
Total liabilities	 	 	6,713	 	 	 	7,156	 	
 	 	 	 	 	 	 	 	 	
Stockholders' equity	 	 	2,780	 	 	 	2,881	 	
Total liabilities and stockholders' equity	 	$	9,493	 	 	$	10,037	 	

 

 
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)

 	 	Three Months Ended	 	 	Year Ended	 	
 	 	April 28,
2017	 	 	April 29,
2016	 	 	April 28,
2017	 	 	April 29,
2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product	 	$	852	 	 	$	757	 	 	$	3,006	 	 	$	2,986	 	
Software maintenance	 	 	242	 	 	 	234	 	 	 	965	 	 	 	949	 	
Hardware maintenance and other services	 	 	387	 	 	 	389	 	 	 	1,548	 	 	 	1,611	 	
Net revenues	 	 	1,481	 	 	 	1,380	 	 	 	5,519	 	 	 	5,546	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of product	 	 	444	 	 	 	424	 	 	 	1,614	 	 	 	1,558	 	
Cost of software maintenance	 	 	6	 	 	 	9	 	 	 	28	 	 	 	37	 	
Cost of hardware maintenance and other services	 	 	118	 	 	 	129	 	 	 	487	 	 	 	578	 	
Total cost of revenues	 	 	568	 	 	 	562	 	 	 	2,129	 	 	 	2,173	 	
Gross profit	 	 	913	 	 	 	818	 	 	 	3,390	 	 	 	3,373	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales and marketing	 	 	405	 	 	 	434	 	 	 	1,633	 	 	 	1,792	 	
Research and development	 	 	191	 	 	 	201	 	 	 	779	 	 	 	861	 	
General and administrative	 	 	70	 	 	 	84	 	 	 	271	 	 	 	307	 	
Restructuring charges	 	 	—	 	 	 	80	 	 	 	52	 	 	 	108	 	
Acquisition-related expense	 	 	—	 	 	 	6	 	 	 	—	 	 	 	8	 	
Gain on sale of properties	 	 	—	 	 	 	(51	)	 	 	(10	)	 	 	(51	)	
Total operating expenses	 	 	666	 	 	 	754	 	 	 	2,725	 	 	 	3,025	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations	 	 	247	 	 	 	64	 	 	 	665	 	 	 	348	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense), net	 	 	1	 	 	 	(4	)	 	 	—	 	 	 	(3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income taxes	 	 	248	 	 	 	60	 	 	 	665	 	 	 	345	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Provision for income taxes	 	 	58	 	 	 	68	 	 	 	156	 	 	 	116	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	190	 	 	$	(8	)	 	$	509	 	 	$	229	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.70	 	 	$	(0.03	)	 	$	1.85	 	 	$	0.78	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	0.68	 	 	$	(0.03	)	 	$	1.81	 	 	$	0.77	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares used in net income (loss) per share calculations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	270	 	 	 	284	 	 	 	275	 	 	 	294	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	 	278	 	 	 	284	 	 	 	281	 	 	 	297	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash dividends declared per share	 	$	0.190	 	 	$	0.180	 	 	$	0.760	 	 	$	0.720	 	

 

 
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 	 	Three Months Ended	 	 	Year Ended	 	
 	 	April 28,
2017	 	 	April 29,
2016	 	 	April 28,
2017	 	 	April 29,
2016	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	190	 	 	$	(8	)	 	$	509	 	 	$	229	 	
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	53	 	 	 	77	 	 	 	226	 	 	 	279	 	
Stock-based compensation	 	 	46	 	 	 	61	 	 	 	195	 	 	 	260	 	
Gain on sale of properties	 	 	—	 	 	 	(51	)	 	 	(10	)	 	 	(51	)	
Other items, net	 	 	19	 	 	 	31	 	 	 	84	 	 	 	(43	)	
Changes in assets and liabilities, net of acquisitions of
   businesses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(127	)	 	 	(206	)	 	 	81	 	 	 	(16	)	
Inventories	 	 	(38	)	 	 	5	 	 	 	(65	)	 	 	49	 	
Accounts payable	 	 	81	 	 	 	60	 	 	 	94	 	 	 	(53	)	
Accrued expenses	 	 	35	 	 	 	108	 	 	 	(86	)	 	 	30	 	
Deferred revenue and financed unearned services
  revenue	 	 	111	 	 	 	238	 	 	 	(37	)	 	 	186	 	
Changes in other operating assets and liabilities, net	 	 	(5	)	 	 	30	 	 	 	(5	)	 	 	104	 	
Net cash provided by operating activities	 	 	365	 	 	 	345	 	 	 	986	 	 	 	974	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Redemptions (purchases) of investments, net	 	 	(45	)	 	 	103	 	 	 	(43	)	 	 	982	 	
Purchases of property and equipment	 	 	(38	)	 	 	(35	)	 	 	(175	)	 	 	(160	)	
Proceeds from sale of properties	 	 	—	 	 	 	102	 	 	 	—	 	 	 	102	 	
Acquisitions of businesses, net of cash acquired	 	 	(8	)	 	 	(842	)	 	 	(8	)	 	 	(842	)	
Other investing activities, net	 	 	4	 	 	 	4	 	 	 	6	 	 	 	3	 	
Net cash provided by (used in) investing activities	 	 	(87	)	 	 	(668	)	 	 	(220	)	 	 	85	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of common stock under employee stock award
  plans	 	 	22	 	 	 	—	 	 	 	92	 	 	 	70	 	
Repurchase of common stock	 	 	(129	)	 	 	(262	)	 	 	(705	)	 	 	(960	)	
Changes in commercial paper notes, net	 	 	107	 	 	 	—	 	 	 	499	 	 	 	—	 	
Proceeds from sale-leaseback financing transactions	 	 	—	 	 	 	148	 	 	 	—	 	 	 	148	 	
Proceeds from short-term loan	 	 	—	 	 	 	870	 	 	 	—	 	 	 	870	 	
Repayment of short-term loan	 	 	—	 	 	 	(20	)	 	 	(850	)	 	 	(20	)	
Dividends paid	 	 	(51	)	 	 	(51	)	 	 	(208	)	 	 	(210	)	
Other financing activities, net	 	 	—	 	 	 	(4	)	 	 	(7	)	 	 	(7	)	
Net cash provided by (used in) financing activities	 	 	(51	)	 	 	681	 	 	 	(1,179	)	 	 	(109	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	4	 	 	 	15	 	 	 	(11	)	 	 	(4	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	 	231	 	 	 	373	 	 	 	(424	)	 	 	946	 	
Cash and cash equivalents:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of period	 	 	2,213	 	 	 	2,495	 	 	 	2,868	 	 	 	1,922	 	
End of period	 	$	2,444	 	 	$	2,868	 	 	$	2,444	 	 	$	2,868	 	

 

 
NETAPP, INC.	 	
SUPPLEMENTAL DATA	 	
(In millions except net income per share, percentages, DSO, DIO, DPO, CCC and Inventory Turns)	 	
(Unaudited)	 	

 	 	Q4 FY'17	 	 	Q3 FY'17	 	 	Q4 FY'16	 	 	FY 2017	 	 	FY 2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product (1)	 	$	852	 	 	$	784	 	 	$	757	 	 	$	3,006	 	 	$	2,986	 	
Strategic	 	$	596	 	 	$	512	 	 	$	481	 	 	$	1,971	 	 	$	1,682	 	
Mature	 	$	256	 	 	$	272	 	 	$	276	 	 	$	1,035	 	 	$	1,304	 	
Software Maintenance	 	$	242	 	 	$	240	 	 	$	234	 	 	$	965	 	 	$	949	 	
Hardware Maintenance and Other Services:	 	$	387	 	 	$	380	 	 	$	389	 	 	$	1,548	 	 	$	1,611	 	
Hardware Maintenance Support Contracts	 	$	313	 	 	$	313	 	 	$	318	 	 	$	1,265	 	 	$	1,316	 	
Professional and Other Services	 	$	74	 	 	$	67	 	 	$	71	 	 	$	283	 	 	$	295	 	
Net Revenues	 	$	1,481	 	 	$	1,404	 	 	$	1,380	 	 	$	5,519	 	 	$	5,546	 	

Geographic Mix	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	% of Q4
FY'17
Revenue	 	 	% of Q3
FY'17
Revenue	 	 	% of Q4
FY'16
Revenue	 	 	% of
FY 2017
Revenue	 	 	% of
FY 2016
Revenue	 	
Americas	 	 	54	%	 	 	55	%	 	 	54	%	 	 	56	%	 	 	55	%	
Americas Commercial	 	 	42	%	 	 	44	%	 	 	43	%	 	 	43	%	 	 	43	%	
U.S. Public Sector	 	 	12	%	 	 	10	%	 	 	12	%	 	 	13	%	 	 	12	%	
EMEA	 	 	32	%	 	 	33	%	 	 	33	%	 	 	31	%	 	 	32	%	
Asia Pacific	 	 	14	%	 	 	13	%	 	 	13	%	 	 	13	%	 	 	13	%	

Pathways Mix	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	% of Q4
FY'17
Revenue	 	 	% of Q3
FY'17
Revenue	 	 	% of Q4
FY'16
Revenue	 	 	% of
FY 2017
Revenue	 	 	% of
FY 2016
Revenue	 	
Direct	 	 	22	%	 	 	21	%	 	 	26	%	 	 	22	%	 	 	23	%	
Indirect	 	 	78	%	 	 	79	%	 	 	74	%	 	 	78	%	 	 	77	%	

Non-GAAP Gross Margins	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4 FY'17	 	 	Q3 FY'17	 	 	Q4 FY'16	 	 	FY 2017	 	 	FY 2016	 	
Non-GAAP Gross Margin	 	 	62.5	%	 	 	61.5	%	 	 	61.1	%	 	 	62.3	%	 	 	62.5	%	
Product	 	 	48.9	%	 	 	45.7	%	 	 	46.8	%	 	 	47.4	%	 	 	50.2	%	
Software Maintenance	 	 	97.5	%	 	 	97.1	%	 	 	96.2	%	 	 	97.1	%	 	 	96.1	%	
Hardware Maintenance and Other Services	 	 	70.3	%	 	 	71.6	%	 	 	67.9	%	 	 	69.4	%	 	 	65.7	%	

Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4 FY'17	 	 	Q3 FY'17	 	 	Q4 FY'16	 	 	FY 2017	 	 	FY 2016	 	
Non-GAAP Income from Operations	 	$	306	 	 	$	284	 	 	$	185	 	 	$	950	 	 	$	751	 	
% of Net Revenues	 	 	20.7	%	 	 	20.2	%	 	 	13.4	%	 	 	17.2	%	 	 	13.5	%	
Non-GAAP Income before Income Taxes	 	$	307	 	 	$	284	 	 	$	181	 	 	$	950	 	 	$	748	 	
Non-GAAP Effective Tax Rate	 	 	22.1	%	 	 	18.6	%	 	 	13.1	%	 	 	19.2	%	 	 	15.4	%	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 
Non-GAAP Net Income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4 FY'17	 	 	Q3 FY'17	 	 	Q4 FY'16	 	 	FY 2017	 	 	FY 2016	 	
Non-GAAP Net Income	 	$	239	 	 	$	231	 	 	$	157	 	 	$	768	 	 	$	633	 	
Non-GAAP Weighted Average Common Shares Outstanding, Diluted	 	 	278	 	 	 	281	 	 	 	287	 	 	 	281	 	 	 	297	 	
Non-GAAP Income per Share, Diluted	 	$	0.86	 	 	$	0.82	 	 	$	0.55	 	 	$	2.73	 	 	$	2.13	 	

Select Balance Sheet Items	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4 FY'17	 	 	Q3 FY'17	 	 	Q4 FY'16	 	 	 	 	 	 	 	 	 	
Deferred Revenue and Financed Unearned Services Revenue	 	$	3,342	 	 	$	3,234	 	 	$	3,385	 	 	 	 	 	 	 	 	 	
DSO (days)	 	 	45	 	 	 	39	 	 	 	54	 	 	 	 	 	 	 	 	 	
DIO (days)	 	 	26	 	 	 	21	 	 	 	16	 	 	 	 	 	 	 	 	 	
DPO (days)	 	 	56	 	 	 	42	 	 	 	41	 	 	 	 	 	 	 	 	 	
CCC (days)	 	 	15	 	 	 	17	 	 	 	28	 	 	 	 	 	 	 	 	 	
Inventory Turns	 	 	14	 	 	 	18	 	 	 	23	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Days sales outstanding (DSO) is defined as accounts receivable divided by net revenues, multiplied by the number of days in the quarter.	 	
Days inventory outstanding (DIO) is defined as net inventories divided by cost of 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.	 	
Cash conversion cycle (CCC) is defined as DSO plus DIO minus DPO.	 	 	 	 	 	 	 	 	 	
Inventory turns is defined as annualized cost of revenues divided by net inventories.	 	 	 	 	 	 	 	 	 	

Select Cash Flow Statement Items	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4 FY'17	 	 	Q3 FY'17	 	 	Q4 FY'16	 	 	FY 2017	 	 	FY 2016	 	
Net Cash Provided by Operating Activities	 	$	365	 	 	$	235	 	 	$	345	 	 	$	986	 	 	$	974	 	
Purchases of Property and Equipment	 	$	38	 	 	$	45	 	 	$	35	 	 	$	175	 	 	$	160	 	
Free Cash Flow	 	$	327	 	 	$	190	 	 	$	310	 	 	$	811	 	 	$	814	 	
Free Cash Flow as a % of Net Revenues	 	 	22.1	%	 	 	13.5	%	 	 	22.5	%	 	 	14.7	%	 	 	14.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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.	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(1) Sales of certain products which should have been reported as strategic products were improperly reported as mature product revenues. All FY 2016 periods presented have been recast to reflect the appropriate classification.	 	

 

 
NETAPP, INC.	 	
RECONCILIATION OF NON-GAAP TO GAAP	 	
INCOME STATEMENT INFORMATION	 	
(In millions, except net income (loss) per share amounts)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME (LOSS)	 	$	190	 	 	$	146	 	 	$	(8	)	 	$	509	 	 	$	229	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	13	 	 	 	13	 	 	 	25	 	 	 	48	 	 	 	67	 	
Stock-based compensation	 	 	46	 	 	 	46	 	 	 	61	 	 	 	195	 	 	 	260	 	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11	 	
Restructuring charges	 	 	—	 	 	 	52	 	 	 	80	 	 	 	52	 	 	 	108	 	
Acquisition-related expense	 	 	—	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	8	 	
Gain on sale of properties	 	 	—	 	 	 	(10	)	 	 	(51	)	 	 	(10	)	 	 	(51	)	
Income tax effect of non-GAAP adjustments	 	 	(10	)	 	 	(16	)	 	 	(20	)	 	 	(26	)	 	 	(86	)	
Income tax expenses from integration of intellectual
  properties from acquisition	 	 	—	 	 	 	—	 	 	 	64	 	 	 	—	 	 	 	64	 	
Settlement of income tax audit	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	23	 	
NON-GAAP NET INCOME	 	$	239	 	 	$	231	 	 	$	157	 	 	$	768	 	 	$	633	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
COST OF REVENUES	 	$	568	 	 	$	553	 	 	$	562	 	 	$	2,129	 	 	$	2,173	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	(8	)	 	 	(8	)	 	 	(20	)	 	 	(29	)	 	 	(61	)	
Stock-based compensation	 	 	(4	)	 	 	(4	)	 	 	(5	)	 	 	(17	)	 	 	(24	)	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(11	)	
NON-GAAP COST OF REVENUES	 	$	556	 	 	$	541	 	 	$	537	 	 	$	2,083	 	 	$	2,077	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
COST OF PRODUCT REVENUES	 	$	444	 	 	$	435	 	 	$	424	 	 	$	1,614	 	 	$	1,558	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	(8	)	 	 	(8	)	 	 	(20	)	 	 	(29	)	 	 	(61	)	
Stock-based compensation	 	 	(1	)	 	 	(1	)	 	 	(1	)	 	 	(4	)	 	 	(5	)	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5	)	
NON-GAAP COST OF PRODUCT REVENUES	 	$	435	 	 	$	426	 	 	$	403	 	 	$	1,581	 	 	$	1,487	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
COST OF HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES	 	$	118	 	 	$	111	 	 	$	129	 	 	$	487	 	 	$	578	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	(3	)	 	 	(3	)	 	 	(4	)	 	 	(13	)	 	 	(19	)	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(6	)	
NON-GAAP COST OF HARDWARE MAINTENANCE AND OTHER SERVICES REVENUES	 	$	115	 	 	$	108	 	 	$	125	 	 	$	474	 	 	$	553	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GROSS PROFIT	 	$	913	 	 	$	851	 	 	$	818	 	 	$	3,390	 	 	$	3,373	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	8	 	 	 	8	 	 	 	20	 	 	 	29	 	 	 	61	 	
Stock-based compensation	 	 	4	 	 	 	4	 	 	 	5	 	 	 	17	 	 	 	24	 	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11	 	
NON-GAAP GROSS PROFIT	 	$	925	 	 	$	863	 	 	$	843	 	 	$	3,436	 	 	$	3,469	 	

 

 
NETAPP, INC.	 	
RECONCILIATION OF NON-GAAP TO GAAP	 	
INCOME STATEMENT INFORMATION	 	
(In millions, except net income (loss) per share amounts)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SALES AND MARKETING EXPENSES	 	$	405	 	 	$	381	 	 	$	434	 	 	$	1,633	 	 	$	1,792	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	(5	)	 	 	(5	)	 	 	(5	)	 	 	(19	)	 	 	(6	)	
Stock-based compensation	 	 	(20	)	 	 	(20	)	 	 	(26	)	 	 	(84	)	 	 	(110	)	
NON-GAAP SALES AND MARKETING EXPENSES	 	$	380	 	 	$	356	 	 	$	403	 	 	$	1,530	 	 	$	1,676	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
RESEARCH AND DEVELOPMENT EXPENSES	 	$	191	 	 	$	181	 	 	$	201	 	 	$	779	 	 	$	861	 	
Adjustment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	(13	)	 	 	(14	)	 	 	(20	)	 	 	(59	)	 	 	(84	)	
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES	 	$	178	 	 	$	167	 	 	$	181	 	 	$	720	 	 	$	777	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GENERAL AND ADMINISTRATIVE EXPENSES	 	$	70	 	 	$	64	 	 	$	84	 	 	$	271	 	 	$	307	 	
Adjustment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	(9	)	 	 	(8	)	 	 	(10	)	 	 	(35	)	 	 	(42	)	
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES	 	$	61	 	 	$	56	 	 	$	74	 	 	$	236	 	 	$	265	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
RESTRUCTURING CHARGES	 	$	—	 	 	$	52	 	 	$	80	 	 	$	52	 	 	$	108	 	
Adjustment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring charges	 	 	—	 	 	 	(52	)	 	 	(80	)	 	 	(52	)	 	 	(108	)	
NON-GAAP RESTRUCTURING CHARGES	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ACQUISITION-RELATED EXPENSE	 	$	—	 	 	$	—	 	 	$	6	 	 	$	—	 	 	$	8	 	
Adjustment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition-related expense	 	 	—	 	 	 	—	 	 	 	(6	)	 	 	—	 	 	 	(8	)	
NON-GAAP ACQUISITION-RELATED EXPENSE	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAIN ON SALE OF PROPERTIES	 	$	—	 	 	$	(10	)	 	$	(51	)	 	$	(10	)	 	$	(51	)	
Adjustment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gain on sale of properties	 	 	—	 	 	 	10	 	 	 	51	 	 	 	10	 	 	 	51	 	
NON-GAAP GAIN ON SALE OF PROPERTIES	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	$	666	 	 	$	668	 	 	$	754	 	 	$	2,725	 	 	$	3,025	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	(5	)	 	 	(5	)	 	 	(5	)	 	 	(19	)	 	 	(6	)	
Stock-based compensation	 	 	(42	)	 	 	(42	)	 	 	(56	)	 	 	(178	)	 	 	(236	)	
Restructuring charges	 	 	—	 	 	 	(52	)	 	 	(80	)	 	 	(52	)	 	 	(108	)	
Acquisition-related expense	 	 	—	 	 	 	—	 	 	 	(6	)	 	 	—	 	 	 	(8	)	
Gain on sale of properties	 	 	—	 	 	 	10	 	 	 	51	 	 	 	10	 	 	 	51	 	
NON-GAAP OPERATING EXPENSES	 	$	619	 	 	$	579	 	 	$	658	 	 	$	2,486	 	 	$	2,718	 	

 
NETAPP, INC.	 	
RECONCILIATION OF NON-GAAP TO GAAP	 	
INCOME STATEMENT INFORMATION	 	
(In millions, except net income (loss) per share amounts)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME FROM OPERATIONS	 	$	247	 	 	$	183	 	 	$	64	 	 	$	665	 	 	$	348	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	13	 	 	 	13	 	 	 	25	 	 	 	48	 	 	 	67	 	
Stock-based compensation	 	 	46	 	 	 	46	 	 	 	61	 	 	 	195	 	 	 	260	 	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11	 	
Restructuring charges	 	 	—	 	 	 	52	 	 	 	80	 	 	 	52	 	 	 	108	 	
Acquisition-related expense	 	 	—	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	8	 	
Gain on sale of properties	 	 	—	 	 	 	(10	)	 	 	(51	)	 	 	(10	)	 	 	(51	)	
NON-GAAP INCOME FROM OPERATIONS	 	$	306	 	 	$	284	 	 	$	185	 	 	$	950	 	 	$	751	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME BEFORE INCOME TAXES	 	$	248	 	 	$	183	 	 	$	60	 	 	$	665	 	 	$	345	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	13	 	 	 	13	 	 	 	25	 	 	 	48	 	 	 	67	 	
Stock-based compensation	 	 	46	 	 	 	46	 	 	 	61	 	 	 	195	 	 	 	260	 	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11	 	
Restructuring charges	 	 	—	 	 	 	52	 	 	 	80	 	 	 	52	 	 	 	108	 	
Acquisition-related expense	 	 	—	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	8	 	
Gain on sale of properties	 	 	—	 	 	 	(10	)	 	 	(51	)	 	 	(10	)	 	 	(51	)	
NON-GAAP INCOME BEFORE INCOME TAXES	 	$	307	 	 	$	284	 	 	$	181	 	 	$	950	 	 	$	748	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PROVISION FOR INCOME TAXES	 	$	58	 	 	$	37	 	 	$	68	 	 	$	156	 	 	$	116	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax effect of non-GAAP adjustments	 	 	10	 	 	 	16	 	 	 	20	 	 	 	26	 	 	 	86	 	
Income tax expenses from integration of intellectual
  properties from acquisition	 	 	—	 	 	 	—	 	 	 	(64	)	 	 	—	 	 	 	(64	)	
Settlement of income tax audit	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(23	)	
NON-GAAP PROVISION FOR INCOME TAXES	 	$	68	 	 	$	53	 	 	$	24	 	 	$	182	 	 	$	115	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME (LOSS) PER SHARE	 	$	0.68	 	 	$	0.52	 	 	$	(0.03	)	 	$	1.81	 	 	$	0.77	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	0.05	 	 	 	0.05	 	 	 	0.09	 	 	 	0.17	 	 	 	0.23	 	
Stock-based compensation	 	 	0.17	 	 	 	0.16	 	 	 	0.21	 	 	 	0.69	 	 	 	0.88	 	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.04	 	
Restructuring charges	 	 	—	 	 	 	0.19	 	 	 	0.28	 	 	 	0.19	 	 	 	0.36	 	
Acquisition-related expense	 	 	—	 	 	 	—	 	 	 	0.02	 	 	 	—	 	 	 	0.03	 	
Gain on sale of properties	 	 	—	 	 	 	(0.04	)	 	 	(0.18	)	 	 	(0.04	)	 	 	(0.17	)	
Income tax effect of non-GAAP adjustments	 	 	(0.04	)	 	 	(0.06	)	 	 	(0.07	)	 	 	(0.09	)	 	 	(0.29	)	
Income tax expenses from integration of intellectual
  properties from acquisition	 	 	—	 	 	 	—	 	 	 	0.23	 	 	 	—	 	 	 	0.22	 	
Settlement of income tax audit	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.08	 	
NON-GAAP NET INCOME PER SHARE	 	$	0.86	 	 	$	0.82	 	 	$	0.55	 	 	$	2.73	 	 	$	2.13	 	

 

 
RECONCILIATION OF NON-GAAP TO GAAP	 	
GROSS MARGIN	 	
($ in millions)	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross margin-GAAP	 	 	61.6	%	 	 	60.6	%	 	 	59.3	%	 	 	61.4	%	 	 	60.8	%	
Cost of revenues adjustments	 	 	0.8	%	 	 	0.9	%	 	 	1.8	%	 	 	0.8	%	 	 	1.7	%	
Gross margin-Non-GAAP	 	 	62.5	%	 	 	61.5	%	 	 	61.1	%	 	 	62.3	%	 	 	62.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP cost of revenues	 	$	568	 	 	$	553	 	 	$	562	 	 	$	2,129	 	 	$	2,173	 	
Cost of revenues adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	(8	)	 	 	(8	)	 	 	(20	)	 	 	(29	)	 	 	(61	)	
Stock-based compensation	 	 	(4	)	 	 	(4	)	 	 	(5	)	 	 	(17	)	 	 	(24	)	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(11	)	
Non-GAAP cost of revenues	 	$	556	 	 	$	541	 	 	$	537	 	 	$	2,083	 	 	$	2,077	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net revenues	 	$	1,481	 	 	$	1,404	 	 	$	1,380	 	 	$	5,519	 	 	$	5,546	 	

RECONCILIATION OF NON-GAAP TO GAAP	 	
PRODUCT GROSS MARGIN	 	
($ in millions)	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product gross margin-GAAP	 	 	47.9	%	 	 	44.5	%	 	 	44.0	%	 	 	46.3	%	 	 	47.8	%	
Cost of product revenues adjustments	 	 	1.1	%	 	 	1.1	%	 	 	2.8	%	 	 	1.1	%	 	 	2.4	%	
Product gross margin-Non-GAAP	 	 	48.9	%	 	 	45.7	%	 	 	46.8	%	 	 	47.4	%	 	 	50.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP cost of product revenues	 	$	444	 	 	$	435	 	 	$	424	 	 	$	1,614	 	 	$	1,558	 	
Cost of product revenues adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of intangible assets	 	 	(8	)	 	 	(8	)	 	 	(20	)	 	 	(29	)	 	 	(61	)	
Stock-based compensation	 	 	(1	)	 	 	(1	)	 	 	(1	)	 	 	(4	)	 	 	(5	)	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5	)	
Non-GAAP cost of product revenues	 	$	435	 	 	$	426	 	 	$	403	 	 	$	1,581	 	 	$	1,487	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product revenues	 	$	852	 	 	$	784	 	 	$	757	 	 	$	3,006	 	 	$	2,986	 	

 

 
RECONCILIATION OF NON-GAAP TO GAAP	 	
HARDWARE MAINTENANCE AND OTHER SERVICES GROSS MARGIN	 	
($ in millions)	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Hardware maintenance and other services gross margin-GAAP	 	 	69.5	%	 	 	70.8	%	 	 	66.8	%	 	 	68.5	%	 	 	64.1	%	
Cost of hardware maintenance and other services revenues adjustments	 	 	0.8	%	 	 	0.8	%	 	 	1.0	%	 	 	0.8	%	 	 	1.6	%	
Hardware maintenance and other services gross margin-Non-GAAP	 	 	70.3	%	 	 	71.6	%	 	 	67.9	%	 	 	69.4	%	 	 	65.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP cost of hardware maintenance and other services revenues	 	$	118	 	 	$	111	 	 	$	129	 	 	$	487	 	 	$	578	 	
Cost of hardware maintenance and other services revenues adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	(3	)	 	 	(3	)	 	 	(4	)	 	 	(13	)	 	 	(19	)	
Asset impairment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(6	)	
Non-GAAP cost of hardware maintenance and other services revenues	 	$	115	 	 	$	108	 	 	$	125	 	 	$	474	 	 	$	553	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Hardware maintenance and other services revenues	 	$	387	 	 	$	380	 	 	$	389	 	 	$	1,548	 	 	$	1,611	 	

RECONCILIATION OF NON-GAAP TO GAAP	 	
EFFECTIVE TAX RATE	 	
 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP effective tax rate	 	 	23.4	%	 	 	20.2	%	 	 	113.3	%	 	 	23.5	%	 	 	33.6	%	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax effect of non-GAAP adjustments	 	 	(1.3	)%	 	 	(1.6	)%	 	 	(64.9	)%	 	 	(4.3	)%	 	 	(6.6	)%	
Income tax expenses from integration of intellectual
  properties from acquisition	 	 	—	%	 	 	—	%	 	 	(35.4	)%	 	 	—	%	 	 	(8.6	)%	
Settlement of income tax audit	 	 	—	%	 	 	—	%	 	 	—	%	 	 	—	%	 	 	(3.1	)%	
Non-GAAP effective tax rate	 	 	22.1	%	 	 	18.6	%	 	 	13.1	%	 	 	19.2	%	 	 	15.4	%	

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES	 	
TO FREE CASH FLOW (NON-GAAP)	 	
(In millions)	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Q4'FY17	 	 	Q3'FY17	 	 	Q4'FY16	 	 	FY2017	 	 	FY2016	 	
Net cash provided by operating activities	 	$	365	 	 	$	235	 	 	$	345	 	 	$	986	 	 	$	974	 	
Purchases of property and equipment	 	 	(38	)	 	 	(45	)	 	 	(35	)	 	 	(175	)	 	 	(160	)	
Free cash flow	 	$	327	 	 	$	190	 	 	$	310	 	 	$	811	 	 	$	814	 	
 
Some items may not add or recalculate due to rounding.

 

 
NETAPP, INC.	 	
RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP	 	
EXPRESSED AS EARNINGS PER SHARE	 	
FIRST QUARTER FISCAL 2018	 	
 	 	 	 	 	
 	 	First Quarter	 	
 	 	Fiscal 2018	 	
 	 	 	 	 	
Non-GAAP Guidance - Net Income Per Share	 	$0.49 - $0.57	 	
 	 	 	 	 	
Adjustments of Specific Items to Net Income	 	 	 	 	
Per Share for the First Quarter Fiscal 2018:	 	 	 	 	
Amortization of intangible assets	 	 	(0.05	)	
Stock-based compensation expense	 	 	(0.17	)	
Income tax effect of non-GAAP adjustments	 	 	0.03	 	
Total Adjustments	 	 	(0.19	)	
 	 	 	 	 	
GAAP Guidance - Net Income Per Share	 	$0.30 - $0.38	 	

 

 
NETAPP, INC.	
RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP	
FISCAL 2018	
(Unaudited)	

 	 	GROSS MARGIN	
 	 	 	
Gross Margin - Non-GAAP Guidance	 	62% - 63%	
Adjustment:	 	 	
Cost of revenues adjustments	 	(1)%	
Gross Margin - GAAP Guidance	 	61% - 62%	

 	 	OPERATING MARGIN	
 	 	 	
Operating Margin - Non-GAAP Guidance	 	18% - 20%	
Adjustments:	 	 	
Amortization of intangible assets	 	(1)%	
Stock-based compensation expense	 	(3)%	
Operating Margin - GAAP Guidance	 	14% - 16%	

 	 	 	
 	 	EFFECTIVE TAX RATE	
 	 	 	
Effective Tax Rate - Non-GAAP Guidance	 	19% - 20%	
Adjustment:	 	 	
Tax effect of non-GAAP adjustments	 	4%	
Effective Tax Rate - GAAP Guidance	 	23% - 24%	
 
Some items may not add or recalculate due to rounding.

 

 

Press Contact:
Judy Radlinsky
NetApp
1 408 822 6527
judy.radlinsky@netapp.com
 
Investor Contact:
Kris Newton
NetApp
1 408 822 3312
kris.newton@netapp.com