Net revenues of $1.53 billion and billings1 of
$1.57 billion
- $308 million returned to shareholders in share repurchases and
cash dividends in the third quarter
- Introduced significant innovation, including BlueXP™, a
unified control plane for hybrid multicloud environments, and the
latest version of NetApp ONTAP™ with enhanced protection
capabilities to automatically detect and prevent ransomware
attacks
- Announced the availability of new tools for companies to
monitor, manage, and optimize their carbon footprints across their
hybrid, multi-cloud environments
- Published third annual ESG report with goals to achieve 50%
intensity reduction of Scope 3 greenhouse gas (GHG) emissions and a
42% reduction of Scope 1 and 2 GHG emissions by 2030
NetApp (NASDAQ: NTAP) today reported financial results for the
third quarter of fiscal year 2023, which ended on January 27,
2023.
“In Q3, we executed well on the elements under our control in
the face of a weakening IT spending environment and continued cloud
cost optimization,” said George Kurian, chief executive officer.
“We are confident that we remain well positioned to take advantage
of the secular growth trends of data-driven digital and cloud
transformations. Building on that solid foundation, we are
sharpening our execution to accelerate near-term results while
strengthening our position when the spending environment
rebounds.”
Third quarter of fiscal year 2023 financial results
- Net revenues: $1.53 billion, compared to $1.61 billion
in the third quarter of fiscal year 2022; a year-over-year decrease
of 5%, or 2% in constant currency2.
- Hybrid Cloud segment revenue: $1.38 billion, compared to
$1.50 billion in the third quarter of fiscal year 2022.
- Public Cloud segment revenue: $150 million, compared to
$110 million in the third quarter of fiscal year 2022.
- Billings: $1.57 billion, compared to $1.76 billion in
the third quarter of fiscal year 2022; a year-over-year decrease of
11%, or 7% in constant currency.
- NetApp Public Cloud annualized revenue run rate (ARR)3
$605 million, compared to $469 million in the third quarter of
fiscal year 2022; a year-over-year increase of 29%.
- All-flash array ARR4 $2.8 billion, compared to $3.2
billion in the third quarter of fiscal year 2022; a year-over-year
decrease of 12%.
- Net income: GAAP net income of $65 million, compared to
$252 million in the third quarter of fiscal year 2022; non-GAAP net
income5 of $301 million, compared to $330 million in the third
quarter of fiscal year 2022. The year-over-year fluctuations in
GAAP and Non-GAAP net income each include an unfavorable impact of
approximately $30 million from foreign currency exchange rate
changes.
- Earnings per share: GAAP net income per share6 of $0.30,
compared to $1.10 in the third quarter of fiscal year 2022;
non-GAAP net income per share of $1.37, compared to $1.44 in the
third quarter of fiscal year 2022. The year-over-year fluctuations
in GAAP and Non-GAAP net income per share each include an
unfavorable impact of approximately $0.14 from foreign currency
exchange rate changes.
- Cash, cash equivalents and investments: $3.1 billion at
the end of the third quarter of fiscal year 2023.
- Cash provided by operations: $377 million, compared to
$260 million in the third quarter of fiscal year 2022.
- Share repurchase and dividends: Returned $308 million to
shareholders through share repurchases and cash dividends.
Fourth quarter of fiscal year 2023 financial outlook
The Company provided the following financial guidance for the
third quarter of fiscal year 2023:
Net revenues are expected to be in the
range of:
$1.475 billion to $1.625
billion
GAAP
Non-GAAP
Earnings per share is expected to be in
the range of:
$0.92 - $1.02
$1.30 - $1.40
Full fiscal year 2023 financial outlook
The Company provided the following financial guidance for the
full fiscal year 2023:
Net revenues are expected to be flat
year-over-year
GAAP
Non-GAAP
Consolidated gross margins are expected to
be in the range of:
65% - 66%
66% - 67%
Operating margins are expected to be:
15% - 16%
23% - 24%
Earnings per share is expected to be:
$5.48 - $5.68
$5.30 - $5.50
Dividend
The next cash dividend of $0.50 per share is to be paid on April
26, 2023, to shareholders of record as of the close of business on
April 6, 2023.
Third quarter of fiscal year 2023 business highlights
Leading product innovation
- NetApp announced the availability of NetApp BlueXP, a
unified control plane delivering a simple hybrid multicloud
experience for storage and data services across on-premises and
cloud environments.
- NetApp Cloud Volumes ONTAP™ for Google Cloud is now
offered in three different capacity-tiered licensing packages.
- NetApp announced the availability of new ways for companies to
monitor, manage, and optimize their carbon footprints across
their hybrid multicloud environments.
- NetApp announced the latest release of NetApp ONTAP data
management software, delivering enhanced protection capabilities
that can automatically detect and prevent ransomware attacks.
- NetApp announced that it has begun shipping Titanium-rated
power supplies for new controllers and shelves to help
customers improve data center power efficiency.
- Spot by NetApp announced the release of Ocean CD public
beta, a continuous delivery product for Kubernetes
applications.
- Spot by NetApp announced that Spot Elastigroup by NetApp
can now be easily provisioned and managed as an AWS Quick Start
guide, created in collaboration with the AWS Quick Start team.
Customer and partner momentum
- NetApp announced the general availability of Azure NetApp
Files datastores for Azure VMware Solution.
- NetApp announced the support of NVIDIA AI Enterprise for
VMware. This announcement makes NetApp the first enterprise
storage partner to validate storage solutions with NVIDIA AI
Enterprise for VMware environments.
- NetApp and Modzy partnered to deliver a new way of
applying artificial intelligence (AI) and machine learning (ML) to
any type of data, including imagery, audio, text, and tables, for
at-scale AI and data science where trust matters.
- NetApp announced that customers can simplify operations and
increase the performance of Confluent Platform storage by using
NetApp ONTAP as both primary and tiered storage.
- AWS and NetApp announced new features for Amazon FSx for
NetApp ONTAP around performance improvement, ease-of-use
capabilities, and additional integrations.
- Cisco and NetApp announced that they will bring BlueXP
technology and innovations into FlexPod™ XCS, for FlexPod
and FlexPod XCS customers.
- NetApp announced that it has a Cisco Validated Design (CVD)
proving that FlexPod is the best converged infrastructure for
deploying Epic.
- Cisco and NetApp announced that they are bringing a new wave of
NetApp, Cisco, and Intel innovation to the proven hybrid cloud
capabilities of FlexPod XCS.
NetApp awards and recognition
- NetApp was one of nine champions of the 2022 Canalys EMEA
Channel Leadership Matrix.
- NetApp announced that Amazon FSx for NetApp ONTAP now has
FedRAMP Moderate authorization in US East (N. Virginia), US
East (Ohio), US West (N. California), and US West (Oregon), and
FedRAMP High authorization in AWS GovCloud (US)
Regions.
- NetApp was awarded the highest LEED (Leadership in Energy
and Environmental Design) platinum certification for its
international headquarters in Navigation Square, Cork,
Ireland.
- NetApp announced that GigaOm named NetApp a leader and
outperformer in cloud file storage.
- NetApp received the award of Best Enterprise Storage
Vendor for the second year in a row at Data & Storage
ASEAN’s DSA Awards.
- NetApp is recognized as a major player in IDC’s first-ever
MarketScape for DaaS 2022.7
- NetApp was listed on Business Intelligence Group as the
recipient of both the 2022 Stratus Awards as a Top
Organization and the 2022 Excellence in Customer Service
Awards as Organization of the Year.
- NetApp was named to Glassdoor’s Best Places to Work in
2023.
- NetApp is listed in Frost & Sullivan’s 2022 Global
Technology Innovation Leadership Award for AI healthcare
solutions in North America and healthcare cloud globally. NetApp
was named Best Enterprise Flash Storage at the CIO Choice
Awards.
- In its research, “Omdia Universe: Hybrid and Multicloud
Management Solution, 2022–23,” Omdia named NetApp a Market
Leader and gave BlueXP top scores in three subcategories and the
second-highest score in a fourth subcategory.
- NetApp was part of the 20 coolest cloud storage companies of
the CRN Cloud 100 list.
Corporate news
- NetApp outlined its goal to achieve a 50% intensity reduction
of Scope 3 GHG emissions by 2030, and a 42% reduction of Scope 1
and Scope 2 GHG emissions by 2030 through adoption of a
science-aligned target.
- NetApp announced the opening of its new international
headquarters in Cork, Ireland.
Executive leadership announcements
- NetApp hired Piero Gallucci as the vice president and
general manager to lead U.K. and Ireland employees as
they focus on NetApp’s transformation as a hybrid cloud leader in
the market.
- NetApp appointed Gabrielle “Gabie” Boko as the new chief
marketing officer (CMO) with a strong focus on new software as
NetApp transforms into a software-led, cloud-led company.
- NetApp hired David Kim as the chief diversity
officer.
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 2023 Financial
Outlook section and Full Fiscal Year 2023 Financial Outlook
section, statements about our GHG emission reduction goals, and
statements about our ability to sharpen execution, deliver results,
and position the Company to take advantage of secular growth
trends. 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,
general global political, macroeconomic and market conditions,
including inflation, rising interest rates and foreign exchange
volatility and the resulting impact on demand for our products, the
impact of the COVID-19 pandemic, including supply chain
disruptions, on our business operations, financial performance and
results of operations, material cybersecurity and other security
breaches, changes in U.S. government spending, revenue seasonality,
changes in laws or regulations, including those relating to
privacy, data protection and information security, and our ability
to manage our gross profit margins. These and other equally
important factors are described in reports and documents we file
from time to time with the Securities and Exchange Commission,
including the factors described under the section titled “Risk
Factors” in our most recently submitted annual report on Form 10-K
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
1Refer to the NetApp Usage of Non-GAAP Financial Information
section below for an explanation of billings.
2Refer to the Constant Currency section below for an explanation
of constant currency growth rates and the impact of foreign
currency exchange rate changes on year-over-year fluctuations in
earnings.
3Public 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.
4All-flash array annualized net revenue run rate is determined
by products and services revenue for the current quarter,
multiplied by 4.
5Non-GAAP net income excludes, when applicable, (a) amortization
of intangible assets, (b) stock-based compensation expenses, (c)
litigation settlements, (d) acquisition-related expenses, (e)
restructuring charges, (f) asset impairments, (g) gains/losses on
the sale or derecognition of assets, (h) gains/losses on the sale
of investments in equity securities, (i) debt extinguishment costs,
and (j) our GAAP tax provision, but includes a non-GAAP tax
provision based upon our projected annual non-GAAP effective tax
rate for the first three quarters of the fiscal year and an actual
non-GAAP tax provision for the fourth quarter of the fiscal year.
NetApp makes additional adjustments to the non-GAAP tax provision
for certain tax matters as described below. A detailed
reconciliation of our non-GAAP to GAAP results can be found at
http://investors.netapp.com. NetApp’s management uses these
non-GAAP measures in making operating decisions because it believes
that the measurements provide meaningful supplemental information
regarding NetApp’s ongoing operational performance.
6GAAP net income per share and non-GAAP net income per share are
calculated using the diluted number of shares.
7IDC MarketScape: “Worldwide Desktop as a Service 2022–2023
Vendor Assessment,” Shannon Kalvar.
NetApp usage of non-GAAP financial information
To supplement NetApp’s condensed consolidated financial
statement information presented in accordance with generally
accepted accounting principles in the United States (GAAP), NetApp
provides investors with certain non-GAAP measures, including, but
not limited to, historical non-GAAP operating results, non-GAAP net
income, non-GAAP effective tax rate, free cash flow, billings, and
historical and projected non-GAAP earnings per diluted share.
NetApp also presents the hardware and software components of our
GAAP product revenues. Because our revenue recognition policy under
GAAP defines a configured storage system, inclusive of the
operating system software essential to its functionality, as a
single performance obligation, hardware and software components of
our product revenues are considered non-GAAP measures. The hardware
and software components of our product revenues are derived from an
estimated fair value allocation of the transaction price of our
contracts with customers, down to the level of the product hardware
and software components. This allocation is primarily based on the
contractual prices at which NetApp has historically billed
customers for such respective components.
NetApp believes that the presentation of non-GAAP net income,
non-GAAP effective tax rates, and non-GAAP earnings per share data,
when shown in conjunction with the corresponding GAAP measures,
provides useful information to investors and management regarding
financial and business trends relating to its financial condition
and results of operations.
NetApp believes that the presentation of free cash flow, which
it defines as the net cash provided by operating activities less
cash used to acquire property and equipment, to be a liquidity
measure that provides useful information to management and
investors because it reflects cash that can be used to, among other
things, invest in its business, make strategic acquisitions,
repurchase common stock, and pay dividends on its common stock. As
free cash flow is not a measure of liquidity calculated in
accordance with GAAP, free cash flow should be considered in
addition to, but not as a substitute for, the analysis provided in
the statement of cash flows.
NetApp believes that the presentation of the software and
hardware components of our product revenues is meaningful to
investors and management as it illustrates the significance of the
Company’s software and provides improved visibility into the value
created by our software innovation and R&D investment.
NetApp approximates billings by adding net revenues as reported
on our Condensed Consolidated Statements of Operations for the
period to the change in total deferred revenue and financed
unearned services revenue as reported on our Condensed Consolidated
Statements of Cash Flows for the same period. Billings is a
performance measure that NetApp believes provides useful
information to management and investors because it approximates the
amounts under purchase orders received by us during a given period
that have been billed.
NetApp’s management uses these non-GAAP measures in making
operating decisions because it believes the measurements provide
meaningful supplemental information regarding NetApp’s ongoing
operational performance. These non-GAAP financial measures are used
to: (1) measure company performance against historical results, (2)
facilitate comparisons to our competitors’ operating results and
(3) allow greater transparency with respect to information used by
management in financial and operational decision making.
NetApp excludes the following items from its non-GAAP measures
when applicable:
A. Amortization of intangible assets. NetApp records
amortization of intangible assets that were acquired in connection
with its business combinations. The amortization of intangible
assets varies depending on the level of acquisition activity.
Management finds it useful to exclude these charges to assess the
appropriate level of various operating expenses to assist in
budgeting, planning and forecasting future periods and in measuring
operational performance.
B. Stock-based compensation expenses. NetApp excludes
stock-based compensation expenses from its non-GAAP measures
primarily because the amount can fluctuate based on variables
unrelated to the performance of the underlying business. While
management views stock-based compensation as a key element of our
employee retention and long-term incentives, we do not view it as
an expense to be used in evaluating operational performance in any
given period.
C. Litigation settlements. NetApp may periodically incur charges
or benefits related to litigation settlements. NetApp excludes
these charges and benefits, when significant, because it does not
believe they are reflective of ongoing business and operating
results.
D. Acquisition-related expenses. NetApp excludes
acquisition-related expenses, including (a) due diligence, legal
and other one-time integration charges and (b) write down of assets
acquired that NetApp does not intend to use in its ongoing
business, from its non-GAAP measures, primarily because they are
not related to our ongoing business or cost base and, therefore,
are less useful for future planning and forecasting.
E. Restructuring charges. These charges consist of restructuring
charges that are incurred based on the particular facts and
circumstances of restructuring decisions, including employment and
contractual settlement terms, and other related charges, and can
vary in size and frequency. We therefore exclude them in our
assessment of operational performance.
F. Asset impairments. These are non-cash charges to write down
assets when there is an indication that the asset has become
impaired. Management finds it useful to exclude these non-cash
charges due to the unpredictability of these events in its
assessment of operational performance.
G. Gains/losses on the sale or derecognition of assets. These
are gains/losses from the sale of our properties and other
transactions in which we transfer control of assets to a third
party. Management believes that these transactions do not reflect
the results of our underlying, on-going business and, therefore,
are less useful for future planning and forecasting.
H. Gains/losses on the sale of investments in equity securities.
These are gains/losses from the sale of our investment in certain
equity securities. Typically, such investments are sold as a result
of a change in control of the underlying businesses. Management
believes that these transactions do not reflect the results of our
underlying, on-going business and, therefore, are less useful for
future planning and forecasting.
I. Debt extinguishment costs. NetApp excludes certain
non-recurring expenses incurred as a result of the early
extinguishment of debt. Management believes such nonrecurring costs
do not reflect the results of its underlying, on-going business
and, therefore, are less useful for future planning and
forecasting.
J. Income tax adjustments. NetApp’s non-GAAP tax provision is
based upon a projected annual non-GAAP effective tax rate for the
first three quarters of the fiscal year and an actual non-GAAP tax
provision for the fourth quarter of the fiscal year. The non-GAAP
tax provision also excludes, when applicable, (a) tax charges or
benefits in the current period that relate to one or more prior
fiscal periods that are a result of events such as changes in tax
legislation, authoritative guidance, income tax audit settlements,
statute lapses and/or court decisions, (b) tax charges or benefits
that are attributable to unusual or non-recurring book and/or tax
accounting method changes, (c) tax charges that are a result of a
non-routine foreign cash repatriation, (d) tax charges or benefits
that are a result of infrequent restructuring of the Company’s tax
structure, (e) tax charges or benefits that are a result of a
change in valuation allowance, and (f) tax charges 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.
These non-GAAP measures are not in accordance with, or an
alternative for, measures prepared in accordance with GAAP, and may
be different from non-GAAP measures used by other companies. In
addition, these non-GAAP measures are not based on any
comprehensive set of accounting rules or principles. NetApp
believes that non-GAAP measures have limitations in that they do
not reflect all of the amounts associated with the Company’s
results of operations as determined in accordance with GAAP and
that these measures should only be used to evaluate the Company’s
results of operations in conjunction with the corresponding GAAP
measures. NetApp management compensates for these limitations by
analyzing current and projected results on a GAAP basis as well as
a non-GAAP basis. The presentation of non-GAAP financial
information is not meant to be considered in isolation or as a
substitute for the directly comparable financial measures prepared
in accordance with generally accepted accounting principles in the
United States. The non-GAAP financial measures are meant to
supplement, and be viewed in conjunction with, GAAP financial
measures.
Constant Currency
NetApp presents certain constant currency growth rates or
quantifies the impact of foreign currency exchange rate changes on
year-over-year fluctuations, including for net revenues, billings,
and earnings. This constant currency information assumes the same
foreign currency exchange rates that were in effect for the
comparable prior-year period were used in translation of the
current period results.
About NetApp
NetApp is a global, cloud-led, data-centric software company
that empowers organizations to lead with data in the age of
accelerated digital transformation. The company provides systems,
software, and cloud services that enable them to run their
applications optimally from data center to cloud, whether they are
developing in the cloud, moving to the cloud, or creating their own
cloudlike experiences on premises. With solutions that perform
across diverse environments, NetApp helps organizations build their
own data fabric and securely deliver the right data, services, and
applications to the right people—anytime, anywhere. Learn more at
www.netapp.com or follow us on Twitter, LinkedIn, Facebook, and
Instagram.
NETAPP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
(Unaudited)
January 27, 2023
April 29, 2022
ASSETS
Current assets:
Cash, cash equivalents and investments
$
3,141
$
4,134
Accounts receivable
821
1,230
Inventories
175
204
Other current assets
403
377
Total current assets
4,540
5,945
Property and equipment, net
667
602
Goodwill and purchased intangible assets,
net
2,965
2,488
Other non-current assets
1,538
991
Total assets
$
9,710
$
10,026
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
432
$
607
Accrued expenses
835
925
Current portion of long-term debt
—
250
Short-term deferred revenue and financed
unearned services revenue
2,126
2,171
Total current liabilities
3,393
3,953
Long-term debt
2,388
2,386
Other long-term liabilities
737
788
Long-term deferred revenue and financed
unearned services revenue
2,090
2,061
Total liabilities
8,608
9,188
Stockholders' equity
1,102
838
Total liabilities and stockholders'
equity
$
9,710
$
10,026
NETAPP, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
January 27, 2023
January 28, 2022
January 27, 2023
January 28, 2022
Net revenues:
Product
$
682
$
846
$
2,305
$
2,390
Services
844
768
2,476
2,248
Net revenues
1,526
1,614
4,781
4,638
Cost of revenues:
Cost of product
367
407
1,182
1,108
Cost of services
158
134
465
399
Total cost of revenues
525
541
1,647
1,507
Gross profit
1,001
1,073
3,134
3,131
Operating expenses:
Sales and marketing
450
461
1,387
1,377
Research and development
230
220
713
646
General and administrative
59
65
198
207
Restructuring charges
87
—
109
29
Acquisition-related expense
3
6
18
8
Total operating expenses
829
752
2,425
2,267
Income from operations
172
321
709
864
Other income (expense), net
5
(15
)
43
(41
)
Income before income taxes
177
306
752
823
Provision (benefit) for income taxes
112
54
(277
)
145
Net income
$
65
$
252
$
1,029
$
678
Net income per share:
Basic
$
0.30
$
1.13
$
4.72
$
3.04
Diluted
$
0.30
$
1.10
$
4.66
$
2.96
Shares used in net income per share
calculations:
Basic
216
223
218
223
Diluted
219
229
221
229
NETAPP, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
Nine Months Ended
January 27, 2023
January 28, 2022
January 27, 2023
January 28, 2022
Cash flows from operating
activities:
Net income
$
65
$
252
$
1,029
$
678
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
65
51
182
143
Non-cash operating lease cost
13
12
40
40
Stock-based compensation
93
64
238
179
Deferred income taxes
(7
)
(34
)
(577
)
(66
)
Other items, net
58
(23
)
(69
)
(35
)
Changes in assets and liabilities, net of
acquisitions of businesses:
Accounts receivable
112
(155
)
425
137
Inventories
69
(12
)
29
(53
)
Accounts payable
(145
)
(1
)
(173
)
10
Accrued expenses
(9
)
(1
)
(117
)
(207
)
Deferred revenue and financed unearned
services revenue
46
143
(47
)
46
Long-term taxes payable
2
(1
)
(82
)
(66
)
Changes in other operating assets and
liabilities, net
15
(35
)
(6
)
(6
)
Net cash provided by operating
activities
377
260
872
800
Cash flows from investing
activities:
(Purchases) redemptions of investments,
net
(132
)
10
(474
)
36
Purchases of property and equipment
(58
)
(61
)
(200
)
(158
)
Acquisitions of businesses, net of cash
acquired
—
(345
)
(491
)
(359
)
Other investing activities, net
1
—
60
—
Net cash used in investing activities
(189
)
(396
)
(1,105
)
(481
)
Cash flows from financing
activities:
Proceeds from issuance of common stock
under employee stock award plans
54
52
108
105
Payments for taxes related to net share
settlement of stock awards
(11
)
(6
)
(74
)
(69
)
Repurchase of common stock
(200
)
(125
)
(700
)
(350
)
Repayments and extinguishment of debt
—
—
(250
)
—
Dividends paid
(108
)
(111
)
(326
)
(335
)
Other financing activities, net
—
—
(2
)
(2
)
Net cash used in financing activities
(265
)
(190
)
(1,244
)
(651
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
47
(13
)
4
(26
)
Net change in cash, cash equivalents
and restricted cash
(30
)
(339
)
(1,473
)
(358
)
Cash, cash equivalents and restricted
cash:
Beginning of period
2,676
4,516
4,119
4,535
End of period
$
2,646
$
4,177
$
2,646
$
4,177
NETAPP, INC.
SUPPLEMENTAL DATA
(In millions except net income
per share, percentages, DSO, DPO and Inventory Turns)
(Unaudited)
Revenues by Segment
Q3'FY23
Q2'FY23
Q3'FY22
Product
$
682
$
837
$
846
Support
616
607
586
Professional and Other Services
78
77
72
Hybrid Cloud Segment Net
Revenues
1,376
1,521
1,504
Public Cloud Segment Net
Revenues
150
142
110
Net Revenues
$
1,526
$
1,663
$
1,614
Gross Profit by Segment
Q3'FY23
Q2'FY23
Q3'FY22
Product
$
317
$
420
$
442
Support
572
562
541
Professional and Other Services
28
23
26
Hybrid Cloud Segment Gross
Profit
917
1,005
1,009
Public Cloud Segment Gross
Profit
103
97
78
Total Segments Gross Profit
1,020
1,102
1,087
Amortization of Intangible Assets
(11
)
(10
)
(9
)
Stock-based Compensation
(8
)
(5
)
(5
)
Unallocated Cost of Revenues
(19
)
(15
)
(14
)
Gross Profit
$
1,001
$
1,087
$
1,073
Gross Margin by Segment
Q3'FY23
Q2'FY23
Q3'FY22
Product
46.5
%
50.2
%
52.2
%
Support
92.9
%
92.6
%
92.3
%
Professional and Other Services
35.9
%
29.9
%
36.1
%
Hybrid Cloud Segment Gross
Margin
66.6
%
66.1
%
67.1
%
Public Cloud Segment Gross
Margin
68.7
%
68.3
%
70.9
%
Product Revenues
Q3'FY23
Q2'FY23
Q3'FY22
Total
$
682
$
837
$
846
Software*
$
390
$
495
$
507
Hardware*
$
292
$
342
$
339
Software and recurring support and
public cloud revenue
Q3'FY23
Q2'FY23
Q3'FY22
Product - Software
$
390
$
495
$
507
Support
616
607
586
Public Cloud
150
142
110
Software and recurring support and
public cloud revenue*
$
1,156
$
1,244
$
1,203
Software and recurring support and public
cloud revenue as a percentage of net revenues
76
%
75
%
75
%
* 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'23
% of Q2 FY'23
% of Q3 FY'22
Revenue
Revenue
Revenue
Americas
54
%
54
%
56
%
Americas Commercial
44
%
40
%
47
%
U.S. Public Sector
10
%
14
%
9
%
EMEA
32
%
32
%
32
%
Asia Pacific
14
%
14
%
12
%
Pathways Mix
% of Q3 FY'23
% of Q2 FY'23
% of Q3 FY'22
Revenue
Revenue
Revenue
Direct
22
%
23
%
21
%
Indirect
78
%
77
%
79
%
Non-GAAP Income from Operations, Income
before Income Taxes & Effective Tax Rate
Q3'FY23
Q2'FY23
Q3'FY22
Non-GAAP Income from Operations
$
372
$
393
$
404
% of Net Revenues
24.4
%
23.6
%
25.0
%
Non-GAAP Income before Income Taxes
$
377
$
416
$
389
Non-GAAP Effective Tax Rate
20.2
%
21.6
%
15.2
%
Non-GAAP Net Income
Q3'FY23
Q2'FY23
Q3'FY22
Non-GAAP Net Income
$
301
$
326
$
330
Non-GAAP Weighted Average Common Shares
Outstanding, Diluted
219
220
229
Non-GAAP Net Income per Share, Diluted
$
1.37
$
1.48
$
1.44
Select Balance Sheet Items
Q3'FY23
Q2'FY23
Q3'FY22
Deferred Revenue and Financed Unearned
Services Revenue
$
4,216
$
4,051
$
3,969
DSO (days)
49
50
45
DPO (days)
75
92
73
Inventory Turns
12
9
13
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'FY23
Q2'FY23
Q3'FY22
Net Cash Provided by Operating
Activities
$
377
$
214
$
260
Purchases of Property and Equipment
$
58
$
77
$
61
Free Cash Flow
$
319
$
137
$
199
Free Cash Flow as % of Net Revenues
20.9
%
8.2
%
12.3
%
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'FY23
Q2'FY23
Q3'FY22
NET INCOME
$
65
$
750
$
252
Adjustments:
Amortization of intangible assets
17
17
13
Stock-based compensation
93
78
64
Restructuring charges
87
11
—
Acquisition-related expense
3
5
6
Income tax effects
(33
)
(11
)
(5
)
Resolution of income tax matters
69
—
—
Income tax benefit from intra-entity
intellectual property transfer
—
(524
)
—
NON-GAAP NET INCOME
$
301
$
326
$
330
COST OF REVENUES
$
525
$
576
$
541
Adjustments:
Amortization of intangible assets
(11
)
(10
)
(9
)
Stock-based compensation
(8
)
(5
)
(5
)
NON-GAAP COST OF REVENUES
$
506
$
561
$
527
COST OF PRODUCT REVENUES
$
367
$
418
$
407
Adjustments:
Amortization of intangible assets
—
—
(2
)
Stock-based compensation
(2
)
(1
)
(1
)
NON-GAAP COST OF PRODUCT
REVENUES
$
365
$
417
$
404
COST OF SERVICES REVENUES
$
158
$
158
$
134
Adjustments:
Amortization of intangible assets
(11
)
(10
)
(7
)
Stock-based compensation
(6
)
(4
)
(4
)
NON-GAAP COST OF SERVICES
REVENUES
$
141
$
144
$
123
GROSS PROFIT
$
1,001
$
1,087
$
1,073
Adjustments:
Amortization of intangible assets
11
10
9
Stock-based compensation
8
5
5
NON-GAAP GROSS PROFIT
$
1,020
$
1,102
$
1,087
NETAPP, INC.
RECONCILIATION OF NON-GAAP TO
GAAP
INCOME STATEMENT
INFORMATION
(In millions, except net
income per share amounts)
Q3'FY23
Q2'FY23
Q3'FY22
SALES AND MARKETING EXPENSES
$
450
$
479
$
461
Adjustments:
Amortization of intangible assets
(6
)
(7
)
(4
)
Stock-based compensation
(40
)
(35
)
(30
)
NON-GAAP SALES AND MARKETING
EXPENSES
$
404
$
437
$
427
RESEARCH AND DEVELOPMENT
EXPENSES
$
230
$
243
$
220
Adjustments:
Stock-based compensation
(32
)
(26
)
(19
)
NON-GAAP RESEARCH AND DEVELOPMENT
EXPENSES
$
198
$
217
$
201
GENERAL AND ADMINISTRATIVE
EXPENSES
$
59
$
67
$
65
Adjustments:
Stock-based compensation
(13
)
(12
)
(10
)
NON-GAAP GENERAL AND ADMINISTRATIVE
EXPENSES
$
46
$
55
$
55
RESTRUCTURING CHARGES
$
87
$
11
$
—
Adjustments:
Restructuring charges
(87
)
(11
)
—
NON-GAAP RESTRUCTURING CHARGES
$
—
$
—
$
—
ACQUISITION-RELATED EXPENSE
$
3
$
5
$
6
Adjustments:
Acquisition-related expense
(3
)
(5
)
(6
)
NON-GAAP ACQUISITION-RELATED
EXPENSE
$
—
$
—
$
—
OPERATING EXPENSES
$
829
$
805
$
752
Adjustments:
Amortization of intangible assets
(6
)
(7
)
(4
)
Stock-based compensation
(85
)
(73
)
(59
)
Restructuring charges
(87
)
(11
)
—
Acquisition-related expense
(3
)
(5
)
(6
)
NON-GAAP OPERATING EXPENSES
$
648
$
709
$
683
NETAPP, INC.
RECONCILIATION OF NON-GAAP TO
GAAP
INCOME STATEMENT
INFORMATION
(In millions, except net
income per share amounts)
Q3'FY23
Q2'FY23
Q3'FY22
INCOME FROM OPERATIONS
$
172
$
282
$
321
Adjustments:
Amortization of intangible assets
17
17
13
Stock-based compensation
93
78
64
Restructuring charges
87
11
—
Acquisition-related expense
3
5
6
NON-GAAP INCOME FROM OPERATIONS
$
372
$
393
$
404
INCOME BEFORE INCOME TAXES
$
177
$
305
$
306
Adjustments:
Amortization of intangible assets
17
17
13
Stock-based compensation
93
78
64
Restructuring charges
87
11
—
Acquisition-related expense
3
5
6
NON-GAAP INCOME BEFORE INCOME
TAXES
$
377
$
416
$
389
PROVISION (BENEFIT) FOR INCOME
TAXES
$
112
$
(445
)
$
54
Adjustments:
Income tax effects
33
11
5
Resolution of income tax matters
(69
)
—
—
Income tax benefit from intra-entity
intellectual property transfer
—
524
—
NON-GAAP PROVISION FOR INCOME
TAXES
$
76
$
90
$
59
NET INCOME PER SHARE
$
0.30
$
3.41
$
1.10
Adjustments:
Amortization of intangible assets
0.08
0.08
0.06
Stock-based compensation
0.42
0.35
0.28
Restructuring charges
0.40
0.05
—
Acquisition-related expense
0.01
0.02
0.03
Income tax effects
(0.15
)
(0.05
)
(0.02
)
Resolution of income tax matters
0.32
—
—
Income tax benefit from intra-entity
intellectual property transfer
—
(2.38
)
—
NON-GAAP NET INCOME PER SHARE
$
1.37
$
1.48
$
1.44
RECONCILIATION OF NON-GAAP TO
GAAP
GROSS MARGIN
($ in millions)
Q3'FY23
Q2'FY23
Q3'FY22
Gross margin-GAAP
65.6
%
65.4
%
66.5
%
Cost of revenues adjustments
1.2
%
0.9
%
0.9
%
Gross margin-Non-GAAP
66.8
%
66.3
%
67.3
%
GAAP cost of revenues
$
525
$
576
$
541
Cost of revenues adjustments:
Amortization of intangible assets
(11
)
(10
)
(9
)
Stock-based compensation
(8
)
(5
)
(5
)
Non-GAAP cost of revenues
$
506
$
561
$
527
Net revenues
$
1,526
$
1,663
$
1,614
RECONCILIATION OF NON-GAAP TO
GAAP
PRODUCT GROSS MARGIN
($ in millions)
Q3'FY23
Q2'FY23
Q3'FY22
Product gross margin-GAAP
46.2
%
50.1
%
51.9
%
Cost of product revenues adjustments
0.3
%
0.1
%
0.4
%
Product gross margin-Non-GAAP
46.5
%
50.2
%
52.2
%
GAAP cost of product revenues
$
367
$
418
$
407
Cost of product revenues adjustments:
Amortization of intangible assets
—
—
(2
)
Stock-based compensation
(2
)
(1
)
(1
)
Non-GAAP cost of product revenues
$
365
$
417
$
404
Product revenues
$
682
$
837
$
846
RECONCILIATION OF NON-GAAP TO
GAAP
SERVICES GROSS MARGIN
($ in millions)
Q3'FY23
Q2'FY23
Q3'FY22
Services gross margin-GAAP
81.3
%
80.9
%
82.6
%
Cost of services revenues adjustments
2.0
%
1.7
%
1.4
%
Services gross margin-Non-GAAP
83.3
%
82.6
%
84.0
%
GAAP cost of services revenues
$
158
$
158
$
134
Cost of services revenues adjustments:
Amortization of intangible assets
(11
)
(10
)
(7
)
Stock-based compensation
(6
)
(4
)
(4
)
Non-GAAP cost of services revenues
$
141
$
144
$
123
Services revenues
$
844
$
826
$
768
RECONCILIATION OF NON-GAAP TO
GAAP
EFFECTIVE TAX RATE
Q3'FY23
Q2'FY23
Q3'FY22
GAAP effective tax rate
63.3
%
(145.9
)%
17.6
%
Adjustments:
Income tax effects
(4.1
)%
41.6
%
(2.5
)%
Resolution of income tax matters
(39.0
)%
—
%
—
%
Income tax benefit from intra-entity
intellectual property transfer
—
%
126.0
%
—
%
Non-GAAP effective tax rate
20.2
%
21.6
%
15.2
%
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW
(NON-GAAP)
(In millions)
Q3'FY23
Q2'FY23
Q3'FY22
Net cash provided by operating
activities
$
377
$
214
$
260
Purchases of property and equipment
(58
)
(77
)
(61
)
Free cash flow
$
319
$
137
$
199
RECONCILIATION OF NET
REVENUES
TO BILLINGS (NON-GAAP)
(In millions)
Q3'FY23
Q2'FY23
Q3'FY22
Net revenues
$
1,526
$
1,663
$
1,614
Change in deferred revenue and financed
unearned services revenue*
46
(61
)
143
Billings
$
1,572
$
1,602
$
1,757
* 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
2023
Fourth Quarter
Fiscal 2023
Non-GAAP Guidance - Net Income Per
Share
$1.30-$1.40
Adjustments of Specific Items to Net
Income
Per Share for the Fourth Quarter Fiscal
2023:
Amortization of intangible assets
($0.08)
Stock-based compensation expense
($0.35)
Income tax effects
$0.05
Total Adjustments
($0.38)
GAAP Guidance - Net Income Per Share
$0.92-$1.02
Some items may not add or recalculate due
to rounding.
NETAPP, INC.
RECONCILIATION OF NON-GAAP
GUIDANCE TO GAAP
FISCAL 2023
Fiscal 2023
Gross Margin - Non-GAAP Guidance
66% - 67%
Adjustment:
Cost of revenues adjustments
(1)%
Gross Margin - GAAP Guidance
65% - 66%
Fiscal 2023
Operating Margin - Non-GAAP Guidance
23% - 24%
Adjustments:
Amortization of intangible assets
(1)%
Stock-based compensation expense
(5)%
Restructuring charges
(2)%
Operating Margin - GAAP Guidance
15% - 16%
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 2023
Fiscal 2023
Non-GAAP Guidance - Net Income Per
Share
$5.30 - $5.50
Adjustments of Specific Items to Net
Income
Per Share for Fiscal 2023:
Amortization of intangible assets
($0.31)
Stock-based compensation expense
($1.43)
Restructuring charges
($0.49)
Acquisition-related expenses
($0.08)
Gain on sale of equity investment
$0.15
Resolution of income tax matters
($0.31)
Income tax benefit from intra-entity
intellectual property transfer
$2.38
Income tax effects
$0.27
Total Adjustments
$0.18
GAAP Guidance - Net Income Per Share
$5.48 - $5.68
Some items may not add or recalculate due
to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230222005411/en/
(Press) Chris Drago 1 831 900 8889 chris.drago@netapp.com
(Investors) Kris Newton 1 408 822 3312
kris.newton@netapp.com
NetApp (NASDAQ:NTAP)
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