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
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%.
- Hybrid Cloud segment revenue: $1.46 billion, compared to
$1.38 billion in the third quarter of fiscal year 2023.
- 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
Editors’ Choice for Best Big Data Product: Cloud
Data Storage in Datanami’s 2023 Readers’ & Editors’ Choice
Awards.
- Spot by NetApp was listed as a Top Cloud Cost
Management Tool 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
RESTRUCTURING CHARGES
$
13
$
5
$
87
Adjustments:
Restructuring charges
(13
)
(5
)
(87
)
NON-GAAP RESTRUCTURING CHARGES
$
—
$
—
$
—
ACQUISITION-RELATED EXPENSE
$
3
$
3
$
3
Adjustments:
Acquisition-related expense
(3
)
(3
)
(3
)
NON-GAAP ACQUISITION-RELATED
EXPENSE
$
—
$
—
$
—
OPERATING EXPENSES
$
785
$
806
$
829
Adjustments:
Amortization of intangible assets
(5
)
(6
)
(6
)
Stock-based compensation
(82
)
(86
)
(85
)
Restructuring charges
(13
)
(5
)
(87
)
Acquisition-related expense
(3
)
(3
)
(3
)
NON-GAAP OPERATING EXPENSES
$
682
$
706
$
648
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
INCOME FROM OPERATIONS
$
366
$
304
$
172
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
NON-GAAP INCOME FROM OPERATIONS
$
485
$
419
$
372
OTHER INCOME, NET
$
16
$
11
$
5
Adjustments:
Litigation settlements
—
(5
)
—
NON-GAAP OTHER INCOME, NET
$
16
$
6
$
5
INCOME BEFORE INCOME TAXES
$
382
$
315
$
177
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
)
—
NON-GAAP INCOME BEFORE INCOME
TAXES
$
501
$
425
$
377
PROVISION FOR INCOME TAXES
$
69
$
82
$
112
Adjustments:
Income tax effects
22
9
33
Resolution of income tax matters
—
—
(69
)
NON-GAAP PROVISION FOR INCOME
TAXES
$
91
$
91
$
76
NET INCOME PER SHARE
$
1.48
$
1.10
$
0.30
Adjustments:
Amortization of intangible assets
0.07
0.07
0.08
Stock-based compensation
0.42
0.44
0.42
Restructuring charges
0.06
0.02
0.40
Acquisition-related expense
0.01
0.01
0.01
Litigation settlements
—
(0.02
)
—
Income tax effects
(0.10
)
(0.04
)
(0.15
)
Resolution of income tax matters
—
—
0.32
NON-GAAP NET INCOME PER SHARE
$
1.94
$
1.58
$
1.37
RECONCILIATION OF NON-GAAP TO
GAAP
GROSS MARGIN
($ in millions)
Q3'FY24
Q2'FY24
Q3'FY23
Gross margin-GAAP
71.7
%
71.1
%
65.6
%
Cost of revenues adjustments
1.0
%
1.0
%
1.2
%
Gross margin-Non-GAAP
72.7
%
72.0
%
66.8
%
GAAP cost of revenues
$
455
$
452
$
525
Cost of revenues adjustments:
Amortization of intangible assets
(9
)
(8
)
(11
)
Stock-based compensation
(7
)
(7
)
(8
)
Non-GAAP cost of revenues
$
439
$
437
$
506
Net revenues
$
1,606
$
1,562
$
1,526
RECONCILIATION OF NON-GAAP TO
GAAP
PRODUCT GROSS MARGIN
($ in millions)
Q3'FY24
Q2'FY24
Q3'FY23
Product gross margin-GAAP
62.2
%
60.9
%
46.2
%
Cost of product revenues adjustments
0.3
%
0.1
%
0.3
%
Product gross margin-Non-GAAP
62.5
%
61.0
%
46.5
%
GAAP cost of product revenues
$
282
$
276
$
367
Cost of product revenues adjustments:
Stock-based compensation
(2
)
(1
)
(2
)
Non-GAAP cost of product revenues
$
280
$
275
$
365
Product revenues
$
747
$
706
$
682
RECONCILIATION OF NON-GAAP TO
GAAP
SERVICES GROSS MARGIN
($ in millions)
Q3'FY24
Q2'FY24
Q3'FY23
Services gross margin-GAAP
79.9
%
79.4
%
81.3
%
Cost of services revenues adjustments
1.6
%
1.6
%
2.0
%
Services gross margin-Non-GAAP
81.5
%
81.1
%
83.3
%
GAAP cost of services revenues
$
173
$
176
$
158
Cost of services revenues adjustments:
Amortization of intangible assets
(9
)
(8
)
(11
)
Stock-based compensation
(5
)
(6
)
(6
)
Non-GAAP cost of services revenues
$
159
$
162
$
141
Services revenues
$
859
$
856
$
844
RECONCILIATION OF NON-GAAP TO
GAAP
OPERATING MARGIN
($ in millions)
Q3'FY24
Q2'FY24
Q3'FY23
Operating margin-GAAP
22.8
%
19.5
%
11.3
%
Adjustments:
7.4
%
7.4
%
13.1
%
Operating margin-Non-GAAP
30.2
%
26.8
%
24.4
%
GAAP income from operations
$
366
$
304
$
172
Income from operations 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
Non-GAAP income from operations
$
485
$
419
$
372
Net revenues
$
1,606
$
1,562
$
1,526
RECONCILIATION OF NON-GAAP TO
GAAP
EFFECTIVE TAX RATE
Q3'FY24
Q2'FY24
Q3'FY23
GAAP effective tax rate
18.1
%
26.0
%
63.3
%
Adjustments:
Income tax effects
0.1
%
(4.6
)%
(4.1
)%
Resolution of income tax matters
—
%
—
%
(39.0
)%
Non-GAAP effective tax rate
18.2
%
21.4
%
20.2
%
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW
(NON-GAAP)
(In millions)
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
RECONCILIATION OF NET
REVENUES
TO BILLINGS (NON-GAAP)
(In millions)
Q3'FY24
Q2'FY24
Q3'FY23
Net revenues
$
1,606
$
1,562
$
1,526
Change in deferred revenue and financed
unearned services revenue*
81
(108
)
46
Billings
$
1,687
$
1,454
$
1,572
* As reported on our Condensed
Consolidated Statements of Cash Flows
NETAPP, INC.
RECONCILIATION OF NON-GAAP
GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER
SHARE
FOURTH QUARTER FISCAL
2024
Fourth Quarter
Fiscal 2024
Non-GAAP Guidance - Net Income Per
Share
$1.73-$1.83
Adjustments of Specific Items to Net
Income
Per Share for the Fourth Quarter Fiscal
2024:
Amortization of intangible assets
($0.07)
Stock-based compensation expense
($0.44)
Income tax effects
$0.03
Total Adjustments
($0.48)
GAAP Guidance - Net Income Per Share
$1.25-$1.35
Some items may not add or recalculate due
to rounding.
NETAPP, INC.
RECONCILIATION OF NON-GAAP
GUIDANCE TO GAAP
Fiscal 2024
Fiscal 2024
Gross Margin - Non-GAAP Guidance
71% - 72%
Adjustment:
Cost of revenues adjustments
(1)%
Gross Margin - GAAP Guidance
70% - 71%
Fiscal 2024
Operating Margin - Non-GAAP Guidance
~27%
Adjustments:
Amortization of intangible assets
(1)%
Stock-based compensation expense
(6)%
Restructuring charges
(1)%
Operating Margin - GAAP Guidance
~19%
Some items may not add or recalculate due
to rounding.
NETAPP, INC.
RECONCILIATION OF NON-GAAP
GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER
SHARE
Fiscal 2024
Fiscal 2024
Non-GAAP Guidance - Net Income Per
Share
$6.40-$6.50
Adjustments of Specific Items to Net
Income
Per Share for Fiscal 2024:
Amortization of intangible assets
($0.27)
Stock-based compensation expense
($1.70)
Restructuring charges
($0.21)
Acquisition-related expenses
($0.04)
Litigation settlements
$0.02
Income tax effects
$0.32
Total Adjustments
($1.88)
GAAP Guidance - Net Income Per Share
$4.52-$4.62
Some items may not add or recalculate due
to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240229528778/en/
(Press) Kenya Hayes 1 703 589 7595 kenya.hayes@netapp.com
(Investors) Kris Newton 1 408 822 3312
kris.newton@netapp.com
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