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Netapp Inc NASDAQ: NTAP-Q

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NetApp Reports Fourth Quarter and Fiscal Year 2021 Results

Business Wire - Wed Jun 2, 3:01PM CDT

NetApp (NASDAQ:NTAP) today reported financial results for the fourth quarter and fiscal year 2021, which ended on April 30, 2021.

"We delivered fourth quarter results above expectations, capping off a solid year of growth. Our momentum underscores our value to customers in a hybrid, multi-cloud world. We are gaining share in key storage markets and our public cloud services are at a scale where they are positively impacting total company billings and revenue growth," said George Kurian, chief executive officer. "Our focused execution last year has set us up well for FY22. I am excited about the year ahead and confident in our ability to grow revenue while delivering operating leverage as we support our customers on their cloud and digital transformation journeys."

Fourth quarter of fiscal year 2021 financial results

Net revenues: $1.56 billion, compared to $1.40 billion in the fourth quarter of fiscal year 2020Net income: GAAP net income of $334 million, compared to $196 million in the fourth quarter of fiscal year 2020; non-GAAP net income(4) of $268 million, compared to $265 million in the fourth quarter of fiscal year 2020Earnings per share: GAAP net income per share(5) of $1.46, compared to $0.88 in the fourth quarter of fiscal year 2020; non-GAAP net income per share of $1.17, compared to $1.19 in the fourth quarter of fiscal year 2020Cash, cash equivalents and investments: $4.60 billion at the end of the fourth quarter of fiscal year 2021Cash provided by operations: $559 million, compared to $383 million in the fourth quarter of fiscal year 2020 Share repurchase and dividends: Returned $181 million to shareholders through share repurchases and cash dividends

Fiscal year 2021 financial results

Net revenues: $5.74 billion, compared to $5.41 billion in fiscal year 2020Net income: GAAP net income of $730 million, compared to $819 million in fiscal year 2020; non-GAAP net income of $917 million, compared to $944 million in fiscal year 2020Earnings per share: GAAP net income per share of $3.23, compared to $3.52 in fiscal year 2020; non-GAAP net income per share of $4.06, compared to $4.05 in fiscal year 2020Cash provided by operations: $1.33 billion compared to $1.06 billion in fiscal year 2020Share repurchase and dividends: Returned $552 million to shareholders through share repurchases and cash dividends

First quarter fiscal year 2022 financial outlook

The Company provided the following financial guidance for the first quarter of fiscal year 2022:

Net revenues are expected to be in the range of:  $1.37 billion to $1.47 billion
------------------------------------------------ ------------------------------
                                    GAAP          Non-GAAP
------------------------------------------------ --------------- ---------------

Full fiscal year 2022 financial outlook

The Company provided the following financial guidance for the full fiscal year 2022:

Net revenues are expected to grow in the range of:                               6% to 7%
--------------------------------------------------------------------- ----------------------------
Public cloud ARR is expected to exit the fiscal year in the range of:  $425 million to $500 million
--------------------------------------------------------------------- ----------------------------
                                                        GAAP         Non-GAAP
--------------------------------------------------------------------- -------------- --------------
Consolidated gross margins are expected to be:                           66% - 67%      67% - 68%
--------------------------------------------------------------------- -------------- --------------
Operating margins are expected to be:                                    16% - 17%      21% - 22%
--------------------------------------------------------------------- -------------- --------------
Effective tax rate is expected to be:                                       20%            19%
--------------------------------------------------------------------- -------------- --------------

Dividend

The Company will increase the first quarter fiscal year 2022 dividend by 4% to $0.50 per share. The quarterly dividend will be paid on July 28, 2021, to shareholders of record as of the close of business on July 9, 2021.

Share repurchase program

The Company authorized an additional $500 million for the repurchase of shares of its common stock under its existing share repurchase program.

Fourth quarter fiscal year 2021 business highlights

Delivering industry-leading products

NetApp announced the general availability of NetApp Astra(TM), a fully managed application-aware data management service built for Kubernetes workloads.NetApp announced Spot Wave by NetApp. In addition, Spot Ocean by NetApp now supports Azure Kubernetes Service. Together, these products provide customers with leading solutions for simple, scalable, and efficient infrastructure for cloud-native applications.NetApp introduced the Data Science Toolkit to simplify the performance of various data science tasks with NetApp storage.NetApp now supports BeeGFS for Kubernetes, providing infrastructure options for AI initiatives that offer customers a new cloud-native era. The Company also introduced NetApp EF-Series integration with nVIDIA DGX A100 systems, NetApp EF600 all-flash arrays, and the BeeGFS parallel file system with state-of-the-art InfiniBand networking.NetApp announced a FlexPod(TM) Cisco Validated Design (CVD), that enables customers and partners to confidently deploy a FlexPod solution with Citrix Virtual Apps and Desktops.

NetApp partnering for innovation

NetApp and NVIDIA announced a new integrated solution based on the field-proven NetApp ONTAP(TM) AI reference architecture.Cisco and NetApp celebrated the 10-year anniversary of FlexPod and announced the next decade of collaboration with the tech preview of NetApp ONTAP integration with Cisco Intersight.Ducati Corse announced that its NetApp sponsorship would continue for a fourth straight year. The sponsorship plays a critical role in helping the Ducati Corse division fully exploit data's potential in the racing world.NetApp and Aston Martin Cognizant Formula One Team announced a partnership, unlocking the very best of cloud by outfitting the team with world-class data and cloud services.

Leadership matters--driving inclusion at NetApp

NetApp announced that Carrie Palin, former senior vice president and chief marketing officer of Splunk, has joined as a member of the Board of Directors.

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 First Quarter of Fiscal Year 2022 Financial Outlook section and the Full Fiscal Year 2022 Financial Outlook section and statements about our ability to gain share, scale our cloud business, grow revenue and deliver operating leverage. 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 (including the impact of the COVID-19 pandemic thereon), changes in U.S. government spending, revenue seasonality and matters specific to our business, such as the impact of the COVID-19 pandemic on the company's business operations, financial performance and results of operations, our ability to expand our total available market and grow our portfolio of products, customer demand for and acceptance of our products and services, our ability to successfully execute new business models, our ability to successfully execute on our data fabric strategy to generate profitable growth and stockholder return 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

(1)Public cloud services annualized revenue run rate (ARR) is calculated as the annualized value of all public cloud services customer commitments as of the last day of the quarter, with the assumption that any commitment expiring during the next 12 months will be renewed with its existing terms.

(2)All Flash Array annualized net revenue run rate is determined by products and services revenue for the current quarter, multiplied by 4.

(3)Refer to the NetApp Usage of Non-GAAP Financial Information section below for an explanation of billings and free cash flow.

(4)Non-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, (j) COVID-19 charges and (k) 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 the measurements provide meaningful supplemental information regarding NetApp's ongoing operational performance.

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

NetApp usage of non-GAAP financial information

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

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

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

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 represents 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 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. 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, cannot be relied upon 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, cannot be relied upon for future planning or 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, cannot be relied upon for future planning or 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, cannot be relied upon for future planning or forecasting.

J. COVID-19 charges. NetApp has excluded certain non-recurring expenses incurred as a direct result of the COVID-19 pandemic. Management believes such nonrecurring costs do not reflect the results of its underlying, on-going business and, therefore, cannot be relied upon for future planning or forecasting.

K. 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.

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)
                                                                      April 30,                                     April 24,                 
                                                                                                              2021                                                                                2020
                                                                                           ----------------------------------------                                            ----------------------------------------
                                                                  
ASSETS                                                                               
                                                                  
Current assets:                                                                      
                                                                        $                                   4,596     $                                   2,882  
   Cash, cash equivalents and investments
                                                                                           945                        973  
   Accounts receivable
                                                                                           114                        145  
   Inventories
                                                                                           346                        274  
   Other current assets
                                                                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                         6,001                      4,274  
      Total current assets
                                                                  
Property and equipment, net                                                                525                        727  
Goodwill and purchased intangible assets, net                                            2,140                      1,822  
Other non-current assets                                                                   694                        699  
                                                                                           -------------------- --------------------                                           -------------------- --------------------
                                                                        $                                   9,360     $                                   7,522  
            Total assets
                                                                                           ==================== ====================                                           ==================== ====================
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY                                                 
                                                                  
Current liabilities:                                                                 
                                                                        $                                     420     $                                     426  
   Accounts payable
                                                                                           970                        774  
   Accrued expenses
                                                                                --                        522  
   Commercial paper notes
                                                                                         2,062                      1,894  
   Short-term deferred revenue and financed unearned services revenue
                                                                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                         3,452                      3,616  
      Total current liabilities
Long-term debt                                                                           2,632                      1,146  
Other long-term liabilities                                                                650                        714  
Long-term deferred revenue and financed unearned services revenue                        1,941                      1,804  
                                                                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                         8,675                      7,280  
         Total liabilities
                                                                                           -------------------- --------------------                                           -------------------- --------------------
                                                                  
Stockholders' equity                                                                       685                        242  
                                                                                           -------------------- --------------------                                           -------------------- --------------------
NETAPP, INC.
                                                                                                                                                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                                                                              (In millions, except per share amounts)
                                                                                                                                                                                            (Unaudited)
                                                                                       Three Months Ended                                                                                                                    Year Ended                                                           
                                                                       ------------------------------------------------------------------------------------------------------------------------                                                ------------------------------------------------------------------------------------------------------------------------
                                               April 30, 2021                                April 24, 2020                                April 30, 2021                                April 24, 2020               
                                                                       ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
                                                              
Revenues:                                                                        
                                                    $                                     840     $                                     793     $                                   2,991     $                                   2,995  
   Product
                                                                       343                        267                      1,281                      1,034  
   Software support
                                                                       372                        341                      1,472                      1,383  
   Hardware support and other services
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                     1,555                      1,401                      5,744                      5,412  
      Net revenues
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                              
Cost of revenues:                                                                
                                                                       387                        355                      1,432                      1,368  
   Cost of product
                                                                        28                         15                         95                         48  
   Cost of software support
                                                                       105                         90                        402                        373  
   Cost of hardware support and other services
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                       520                        460                      1,929                      1,789  
      Total cost of revenues
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                     1,035                        941                      3,815                      3,623  
         Gross profit
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                              
Operating expenses:                                                              
                                                                       447                        389                      1,744                      1,585  
   Sales and marketing
                                                                       221                        212                        881                        847  
   Research and development
                                                                        66                         63                        257                        263  
   General and administrative
                                                            --             --                         42                         21  
   Restructuring charges
                                                                         2             --                         16             --  
   Acquisition-related expense
                                                                      (156 )                              --                       (156 )                                         (38 )
   Gain on sale or derecognition of assets
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                       580                        664                      2,784                      2,678  
      Total operating expenses
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                              
Income from operations                                                 455                        277                      1,031                        945  
                                                              
Other expense, net                                                     (19 )                                         (27 )                                         (69 )                                          (1 )
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                              
Income before income taxes                                             436                        250                        962                        944  
                                                              
Provision for income taxes                                             102                         54                        232                        125  
                                                                       -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                              
Net income                                          $                                     334     $                                     196     $                                     730     $                                     819  
                                                                       ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                              
Net income per share:                                                            
                                                    $                                    1.50     $                                    0.89     $                                    3.29     $                                    3.56  
   Basic
                                                                       ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                              
                                                    $                                    1.46     $                                    0.88     $                                    3.23     $                                    3.52  
   Diluted
                                                                       ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                              
Shares used in net income per share calculations:                                
                                                                       222                        220                        222                        230  
   Basic
                                                                       ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
NETAPP, INC.
                                                                                                                                                                                                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                                                                                                                       (In millions)
                                                                                                                                                                                                                        (Unaudited)
                                                                                                                                               Three Months Ended                                                                                                                    Year Ended                                                           
                                                                                                                               ------------------------------------------------------------------------------------------------------------------------                                                ------------------------------------------------------------------------------------------------------------------------
                                                                                                       April 30, 2021                                April 24, 2020                                April 30, 2021                                April 24, 2020               
                                                                                                                               ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Cash flows from operating activities:                                                                                                    
                                                                                                            $                                     334     $                                     196     $                                     730     $                                     819  
   Net income
                                                                                                                                         
   Adjustments to reconcile net income to net cash provided by operating activities:
                                                                                                                                48                         47                        207                        193  
      Depreciation and amortization
                                                                                                                                14                         12                         52                         51  
      Non-cash operating lease cost
                                                                                                                                48                         35                        197                        153  
      Stock-based compensation
                                                                                                                                (5 )                                           6                         (6 )                                         (17 )
      Deferred income taxes
                                                                                                                              (156 )                              --                       (156 )                                         (38 )
      Gain on sale or derecognition of assets
                                                                                                                               (11 )                                          17                         24                          1  
      Other items, net
                                                                                                                                         
   Changes in assets and liabilities, net of acquisitions of businesses:
                                                                                                                              (146 )                                        (156 )                                          62                        238  
      Accounts receivable
                                                                                                                                (8 )                                         (32 )                                          31                        (14 )
      Inventories
                                                                                                                                81                         41                        (11 )                                        (117 )
      Accounts payable
                                                                                                                               195                         96                        134                       (177 )
      Accrued expenses
                                                                                                                               183                        147                        193                         54  
      Deferred revenue and financed unearned services revenue
                                                                                                                                (6 )                                         (30 )                                         (57 )                                        (163 )
      Long-term taxes payable
                                                                                                                               (12 )                                           4                        (67 )                                          77  
      Changes in other operating assets and liabilities, net
                                                                                                                               -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                                                               559                        383                      1,333                      1,060  
         Net cash provided by operating activities
                                                                                                                               -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Cash flows from investing activities:                                                                                                    
                                                                                                                                20                         82                        160                      1,370  
   Redemptions of investments, net
                                                                                                                               (38 )                                         (24 )                                        (162 )                                        (124 )
   Purchases of property and equipment
                                                                                                                               365             --                        371                         96  
   Proceeds from sale of properties
                                                                                                                    --                        (17 )                                        (350 )                                         (73 )
   Acquisitions of businesses, net of cash acquired
                                                                                                                                (6 )                                           1                          2             --  
   Other investing activities, net
                                                                                                                               -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                                                               341                         42                         21                      1,269  
      Net cash provided by investing activities
                                                                                                                               -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Cash flows from financing activities:                                                                                                    
                                                                                                                                 6             --                         98                        102  
   Proceeds from issuance of common stock under employee stock award plans
                                                                                                                                (4 )                                          (2 )                                         (42 )                                         (79 )
   Payments for taxes related to net share settlement of stock awards
                                                                                                                               (75 )                                        (161 )                                        (125 )                                      (1,411 )
   Repurchase of common stock
                                                                                                                    --                       (261 )                                        (420 )                                         172  
   (Repayments of) proceeds from commercial paper notes, original maturities of three months or less, net
                                                                                                                    --                        101                      2,057                        111  
   Issuances of debt, net of issuance costs
                                                                                                                    --                        (10 )                                        (689 )                                        (410 )
   Repayments and extinguishment of debt
                                                                                                                              (106 )                                        (105 )                                        (427 )                                        (439 )
   Dividends paid
                                                                                                                                (1 )                                          (2 )                                          (8 )                                          (6 )
   Other financing activities, net
                                                                                                                               -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                                                              (180 )                                        (440 )                                         444                     (1,960 )
      Net cash (used in) provided by financing activities
                                                                                                                               -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                                                      
Effect of exchange rate changes on cash, cash equivalents and restricted cash                                                    1                        (30 )                                          71                        (34 )
                                                                                                                      
Net increase (decrease) in cash, cash equivalents and restricted cash                                                          721                        (45 )                                       1,869                        335  
Cash, cash equivalents and restricted cash:                                                                                              
                                                                                                                             3,814                      2,711                      2,666                      2,331  
   Beginning of period
                                                                                                                               -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NETAPP, INC.                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                     SUPPLEMENTAL DATA                                                                                                                                                                                                                                           
                                                                                                                                                                                                       (In millions except net income per share, percentages, DSO, DPO and Inventory Turns)                                                                                                                                                                                                         
                                                                                                                                                                                                                                     (Unaudited)                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                       
                                                                                                        
                                                                                     Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
                                                                                                                           
      Revenues
Product                                                                               $                                     840     $                                     775     $                                     793     $                                   2,991     $                                   2,995  
                                                                                      $                                     360     $                                     347     $                                     386     $                                   1,355     $                                   1,541  
   Hardware
                                                                                      $                                     480     $                                     428     $                                     407     $                                   1,636     $                                   1,454  
   Software
Software Support                                                                      $                                     343     $                                     334     $                                     267     $                                   1,281     $                                   1,034  
Hardware Support & Other Services                                                     $                                     372     $                                     361     $                                     341     $                                   1,472     $                                   1,383  
                                                                                      $                                     299     $                                     293     $                                     279     $                                   1,195     $                                   1,142  
   Hardware Support Contracts
                                                                                      $                                      73     $                                      68     $                                      62     $                                     277     $                                     241  
   Professional and Other Services
                                                                                                         -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                      $                                   1,555     $                                   1,470     $                                   1,401     $                                   5,744     $                                   5,412  
      Net Revenues
                                                                                                        
                                                                                                                           
      Product Revenues
Total                                                                                 $                                     840     $                                     775     $                                     793     $                                   2,991     $                                   2,995  
                                                                                      $                                     480     $                                     428     $                                     407     $                                   1,636     $                                   1,454  
   Software*
                                                                                      $                                     360     $                                     347     $                                     386     $                                   1,355     $                                   1,541  
   Hardware*
* 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 to display the significance of software included in total product revenues.                                                                                                                     
                                                                                                        
                                                                                                        
                                                                                     Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
                                                                                                                           
   Software and recurring support and cloud revenue
Product - Software                                                                    $                                     480     $                                     428     $                                     407     $                                   1,636     $                                   1,454  
Software Support                                                                      $                                     343     $                                     334     $                                     267     $                                   1,281     $                                   1,034  
Hardware Support Contracts                                                            $                                     299     $                                     293     $                                     279     $                                   1,195     $                                   1,142  
                                                                                                         -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
                                                                                      $                                   1,121     $                                   1,055     $                                     953     $                                   4,111     $                                   3,630  
   Software and recurring support and cloud revenue*
                                                                                                        
                                                                                                          72 %                                          72 %                                          68 %                                          72 %                                          67 %
   Software and recurring support and cloud revenue as a percentage of net revenues
                                                                                                        
Cloud revenue is included in software support revenues                                                                                                                                                                                                                                      
*Software and recurring support and 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 Q4 FY'21 Revenue                         % of Q3 FY'21 Revenue                         % of Q4 FY'20 Revenue                          % of FY 2021 Revenue                          % of FY 2020 Revenue  
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Americas                                                                                                  53 %                                          53 %                                          54 %                                          54 %                                          53 %
                                                                                                          44 %                                          43 %                                          43 %                                          43 %                                          41 %
   Americas Commercial
                                                                                                           9 %                                          10 %                                          11 %                                          11 %                                          12 %
   U.S. Public Sector
EMEA                                                                                                      32 %                                          32 %                                          32 %                                          31 %                                          32 %
Asia Pacific                                                                                              15 %                                          15 %                                          14 %                                          15 %                                          15 %
                                                                                                        
                                                                                                        
                                                                                                                           
   Pathways Mix
                                                                                       % of Q4 FY'21 Revenue                         % of Q3 FY'21 Revenue                         % of Q4 FY'20 Revenue                          % of FY 2021 Revenue                          % of FY 2020 Revenue  
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Direct                                                                                                    23 %                                          24 %                                          23 %                                          23 %                                          21 %
Indirect                                                                                                  77 %                                          76 %                                          77 %                                          77 %                                          79 %
                                                                                                        
                                                                                                        
                                                                                                                           
   Non-GAAP Gross Margins
                                                                                     Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Non-GAAP Gross Margin                                                                                   67.3 %                                        67.3 %                                        68.0 %                                        67.4 %                                        67.9 %
                                                                                                        54.3 %                                        53.4 %                                        56.4 %                                        53.1 %                                        55.7 %
   Product
                                                                                                        93.3 %                                        93.1 %                                        94.4 %                                        93.8 %                                        95.4 %
   Software Support
                                                                                                        72.6 %                                        73.4 %                                        74.5 %                                        73.4 %                                        73.8 %
   Hardware Support & Other Services
                                                                                                        
                                                                                                        
                                                                                                                           
   Non-GAAP Income from Operations, Income before Income Taxes & Effective Tax Rate
                                                                                                        
                                                                                     Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Non-GAAP Income from Operations                                                       $                                     358     $                                     322     $                                     324     $                                   1,184     $                                   1,123  
                                                                                                        23.0 %                                        21.9 %                                        23.1 %                                        20.6 %                                        20.8 %
   % of Net Revenues
Non-GAAP Income before Income Taxes                                                   $                                     339     $                                     311     $                                     307     $                                   1,123     $                                   1,132  
Non-GAAP Effective Tax Rate                                                                             20.9 %                                        19.6 %                                        13.7 %                                        18.3 %                                        16.6 %
                                                                                                        
                                                                                                        
                                                                                                                           
   Non-GAAP Net Income
                                                                                     Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Non-GAAP Net Income                                                                   $                                     268     $                                     250     $                                     265     $                                     917     $                                     944  
Non-GAAP Weighted Average Common Shares Outstanding, Diluted                                             229                        227                        222                        226                        233  
Non-GAAP Net Income per Share, Diluted                                                $                                    1.17     $                                    1.10     $                                    1.19     $                                    4.06     $                                    4.05  
                                                                                                        
                                                                                                        
                                                                                                                           
   Select Balance Sheet Items
                                                                                     Q4'FY21                                       Q3'FY21                                       Q4'FY20                                  
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Deferred Revenue and Financed Unearned Services Revenue                               $                                   4,003     $                                   3,828     $                                   3,698                  
DSO (days)                                                                                                55                         49                         63                  
DPO (days)                                                                                                74                         62                         84                  
Inventory Turns                                                                                           18                         19                         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
                                                                                     Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                                         ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Net Cash Provided by Operating Activities                                             $                                     559     $                                     373     $                                     383     $                                   1,333     $                                   1,060  
Purchases of Property and Equipment                                                   $                                      38     $                                      32     $                                      24     $                                     162     $                                     124  
Free Cash Flow                                                                        $                                     521     $                                     341     $                                     359     $                                   1,171     $                                     936  
Free Cash Flow as % of Net Revenues                                                                     33.5 %                                        23.2 %                                        25.6 %                                        20.4 %                                        17.3 %
NETAPP, INC.                                                                                                                                                                                                                                  
                                                                                                                                                                                                                     RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                                       
                                                                                                                                                                                                                        INCOME STATEMENT INFORMATION                                                                                                                                                                                                                          
                                                                                                                                                                                                             (In millions, except net income per share amounts)                                                                                                                                                                                                               
                                                                                  
                                                               Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                   ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
NET INCOME                                                      $                                     334     $                                     182     $                                     196     $                                     730     $                                     819  
Adjustments:                                                                                         
                                                                                     9                         15                          9                         49                         39  
   Amortization of intangible assets
                                                                                    48                         46                         35                        197                        153  
   Stock-based compensation
                                                                        --             --                         10             --                         10  
   Asset impairment
                                                                        --             --             --                          5             --  
   Litigation settlements
                                                                        --             --                          3             --                          3  
   COVID-19 charges
                                                                        --             --             --                         42                         21  
   Restructuring charges
                                                                                     2                          3             --                         16             --  
   Acquisition-related expense
                                                                                  (156 )                              --             --                       (156 )                                         (38 )
   Gain on sale or derecognition of assets
                                                                        --             --             --                         (6 )                              --  
   Gain on sale of equity investment
                                                                        --             --             --                         14             --  
   Debt extinguishment costs
                                                                                    18                        (13 )                                          12                        (20 )                                         (13 )
   Income tax effects
                                                                                    13                         17             --                         46             --  
   Income tax expenses from integration of acquired companies
                                                                        --             --             --             --                        (50 )
   Resolution of income tax matters
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP NET INCOME                                             $                                     268     $                                     250     $                                     265     $                                     917     $                                     944  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
COST OF REVENUES                                                $                                     520     $                                     495     $                                     460     $                                   1,929     $                                   1,789  
Adjustments:                                                                                         
                                                                                    (7 )                                         (12 )                                          (9 )                                         (41 )                                         (39 )
   Amortization of intangible assets
                                                                                    (4 )                                          (3 )                                          (3 )                                         (14 )                                         (13 )
   Stock-based compensation
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP COST OF REVENUES                                       $                                     509     $                                     480     $                                     448     $                                   1,874     $                                   1,737  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
COST OF PRODUCT REVENUES                                        $                                     387     $                                     369     $                                     355     $                                   1,432     $                                   1,368  
Adjustments:                                                                                         
                                                                                    (2 )                                          (7 )                                          (9 )                                         (26 )                                         (39 )
   Amortization of intangible assets
                                                                                    (1 )                                          (1 )                              --                         (4 )                                          (3 )
   Stock-based compensation
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP COST OF PRODUCT REVENUES                               $                                     384     $                                     361     $                                     346     $                                   1,402     $                                   1,326  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
COST OF SOFTWARE SUPPORT REVENUES                               $                                      28     $                                      28     $                                      15     $                                      95     $                                      48  
Adjustment:                                                                                          
                                                                                    (5 )                                          (5 )                              --                        (15 )                              --  
   Amortization of intangible assets
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP COST OF SOFTWARE SUPPORT REVENUES                      $                                      23     $                                      23     $                                      15     $                                      80     $                                      48  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
COST OF HARDWARE SUPPORT AND OTHER SERVICES REVENUES            $                                     105     $                                      98     $                                      90     $                                     402     $                                     373  
Adjustment:                                                                                          
                                                                                    (3 )                                          (2 )                                          (3 )                                         (10 )                                         (10 )
   Stock-based compensation
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP COST OF HARDWARE SUPPORT AND OTHER SERVICES REVENUES   $                                     102     $                                      96     $                                      87     $                                     392     $                                     363  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
GROSS PROFIT                                                    $                                   1,035     $                                     975     $                                     941     $                                   3,815     $                                   3,623  
Adjustments:                                                                                         
                                                                                     7                         12                          9                         41                         39  
   Amortization of intangible assets
                                                                                     4                          3                          3                         14                         13  
   Stock-based compensation
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NETAPP, INC.                                                                                                                                                                                                                           
                                                                                                                                                                                                               RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                                
                                                                                                                                                                                                                  INCOME STATEMENT INFORMATION                                                                                                                                                                                                                   
                                                                                                                                                                                                       (In millions, except net income per share amounts)                                                                                                                                                                                                        
                                                                     
                                                  Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                      ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
SALES AND MARKETING EXPENSES                       $                                     447     $                                     436     $                                     389     $                                   1,744     $                                   1,585  
Adjustments:                                                                            
                                                                       (2 )                                          (3 )                              --                         (8 )                              --  
   Amortization of intangible assets
                                                                      (22 )                                         (21 )                                         (16 )                                         (92 )                                         (66 )
   Stock-based compensation
                                                           --             --                         (3 )                              --                         (3 )
   COVID-19 charges
                                                                      -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP SALES AND MARKETING EXPENSES              $                                     423     $                                     412     $                                     370     $                                   1,644     $                                   1,516  
                                                                      ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                     
RESEARCH AND DEVELOPMENT EXPENSES                  $                                     221     $                                     215     $                                     212     $                                     881     $                                     847  
Adjustment:                                                                             
                                                                      (15 )                                         (15 )                                         (12 )                                         (64 )                                         (53 )
   Stock-based compensation
                                                                      -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES         $                                     206     $                                     200     $                                     200     $                                     817     $                                     794  
                                                                      ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                     
GENERAL AND ADMINISTRATIVE EXPENSES                $                                      66     $                                      63     $                                      63     $                                     257     $                                     263  
Adjustments:                                                                            
                                                                       (7 )                                          (7 )                                          (4 )                                         (27 )                                         (21 )
   Stock-based compensation
                                                           --             --             --                         (5 )                              --  
   Litigation settlements
                                                                      -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES       $                                      59     $                                      56     $                                      59     $                                     225     $                                     242  
                                                                      ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                     
RESTRUCTURING CHARGES                              $                          --     $                          --     $                          --     $                                      42     $                                      21  
Adjustment:                                                                             
                                                           --             --             --                        (42 )                                         (21 )
   Restructuring charges
                                                                      -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP RESTRUCTURING CHARGES                     $                          --     $                          --     $                          --     $                          --     $                          --  
                                                                      ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                     
GAIN ON SALE OR DERECOGNITION OF ASSETS            $                                    (156 )                      $                          --     $                          --     $                                    (156 )                      $                                     (38 )
Adjustment:                                                                             
                                                                      156             --             --                        156                         38  
   Gain on sale or derecognition of assets
                                                                      -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                      -------------------- -------------------- --------------------
NON-GAAP GAIN ON SALE OR DERECOGNITION OF ASSETS   $                          --     $                          --     $                          --     $                          --     $                          --  
                                                                      ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                      ==================== ==================== ====================
                                                                     
ACQUISITION-RELATED EXPENSE                        $                                       2     $                                       3     $                          --     $                                      16     $                          --  
Adjustment:                                                                             
                                                                       (2 )                                          (3 )                              --                        (16 )                              --  
   Acquisition-related expense
                                                                      -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP ACQUISITION-RELATED EXPENSE               $                          --     $                          --     $                          --     $                          --     $                          --  
                                                                      ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                     
OPERATING EXPENSES                                 $                                     580     $                                     717     $                                     664     $                                   2,784     $                                   2,678  
Adjustments:                                                                            
                                                                       (2 )                                          (3 )                              --                         (8 )                              --  
   Amortization of intangible assets
                                                                      (44 )                                         (43 )                                         (32 )                                        (183 )                                        (140 )
   Stock-based compensation
                                                           --             --             --                         (5 )                              --  
   Litigation settlements
                                                           --             --                         (3 )                              --                         (3 )
   COVID-19 charges
                                                           --             --             --                        (42 )                                         (21 )
   Restructuring charges
                                                                       (2 )                                          (3 )                              --                        (16 )                              --  
   Acquisition-related expense
                                                                      156             --             --                        156                         38  
   Gain on sale or derecognition of assets
                                                                      -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP OPERATING EXPENSES                        $                                     688     $                                     668     $                                     629     $                                   2,686     $                                   2,552  
                                                                      ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
NETAPP, INC.                                                                                                                                                                                                                                  
                                                                                                                                                                                                                     RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                                       
                                                                                                                                                                                                                        INCOME STATEMENT INFORMATION                                                                                                                                                                                                                          
                                                                                                                                                                                                             (In millions, except net income per share amounts)                                                                                                                                                                                                               
                                                                                  
                                                               Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                   ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
INCOME FROM OPERATIONS                                          $                                     455     $                                     258     $                                     277     $                                   1,031     $                                     945  
Adjustments:                                                                                         
                                                                                     9                         15                          9                         49                         39  
   Amortization of intangible assets
                                                                                    48                         46                         35                        197                        153  
   Stock-based compensation
                                                                        --             --             --                          5             --  
   Litigation settlements
                                                                        --             --                          3             --                          3  
   COVID-19 charges
                                                                        --             --             --                         42                         21  
   Restructuring charges
                                                                                     2                          3             --                         16             --  
   Acquisition-related expense
                                                                                  (156 )                              --             --                       (156 )                                         (38 )
   Gain on sale or derecognition of assets
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP INCOME FROM OPERATIONS                                 $                                     358     $                                     322     $                                     324     $                                   1,184     $                                   1,123  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
OTHER INCOME (EXPENSE), NET                                     $                                     (19 )                      $                                     (11 )                      $                                     (27 )                      $                                     (69 )                      $                                      (1 )
Adjustments:                                                                                         
                                                                        --             --                         10             --                         10  
   Asset impairment
                                                                        --             --             --                         14             --  
   Debt extinguishment costs
                                                                        --             --             --                         (6 )                              --  
   Gain on sale of equity investment
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP OTHER INCOME (EXPENSE), NET                            $                                     (19 )                      $                                     (11 )                      $                                     (17 )                      $                                     (61 )                      $                                       9  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
INCOME BEFORE INCOME TAXES                                      $                                     436     $                                     247     $                                     250     $                                     962     $                                     944  
Adjustments:                                                                                         
                                                                                     9                         15                          9                         49                         39  
   Amortization of intangible assets
                                                                                    48                         46                         35                        197                        153  
   Stock-based compensation
                                                                        --             --                         10             --                         10  
   Asset impairment
                                                                        --             --             --                          5             --  
   Litigation settlements
                                                                        --             --                          3             --                          3  
   COVID-19 charges
                                                                        --             --             --                         42                         21  
   Restructuring charges
                                                                                     2                          3             --                         16             --  
   Acquisition-related expense
                                                                                  (156 )                              --             --                       (156 )                                         (38 )
   Gain on sale or derecognition of assets
                                                                        --             --             --                         14             --  
   Debt extinguishment costs
                                                                        --             --             --                         (6 )                              --  
   Gain on sale of equity investment
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP INCOME BEFORE INCOME TAXES                             $                                     339     $                                     311     $                                     307     $                                   1,123     $                                   1,132  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
PROVISION FOR INCOME TAXES                                      $                                     102     $                                      65     $                                      54     $                                     232     $                                     125  
Adjustments:                                                                                         
                                                                                   (18 )                                          13                        (12 )                                          20                         13  
   Income tax effects
                                                                                   (13 )                                         (17 )                              --                        (46 )                              --  
   Income tax expenses from integration of acquired companies
                                                                        --             --             --             --                         50  
   Resolution of income tax matters
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP PROVISION FOR INCOME TAXES                             $                                      71     $                                      61     $                                      42     $                                     206     $                                     188  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
                                                                                  
NET INCOME PER SHARE                                            $                                    1.46     $                                    0.80     $                                    0.88     $                                    3.23     $                                    3.52  
Adjustments:                                                                                         
                                                                                  0.04                       0.07                       0.04                       0.22                       0.17  
   Amortization of intangible assets
                                                                                  0.21                       0.20                       0.16                       0.87                       0.66  
   Stock-based compensation
                                                                        --             --                       0.05             --                       0.04  
   Asset impairment
                                                                        --             --             --                       0.02             --  
   Litigation settlements
                                                                        --             --                       0.01             --                       0.01  
   COVID-19 charges
                                                                        --             --             --                       0.19                       0.09  
   Restructuring charges
                                                                                  0.01                       0.01             --                       0.07             --  
   Acquisition-related expense
                                                                                 (0.68 )                              --             --                      (0.69 )                                       (0.16 )
   Gain on sale or derecognition of assets
                                                                                           --                                --             --                       0.06             --  
   Debt extinguishment costs
                                                                        --             --                                --                      (0.03 )                              --  
   Gain on sale of equity investment
                                                                                  0.08                      (0.06 )                                        0.05                      (0.09 )                                       (0.06 )
   Income tax effects
                                                                                  0.06                       0.07             --                       0.20             --  
   Income tax expenses from integration of acquired companies
                                                                        --             --             --             --                      (0.21 )
   Resolution of income tax matters
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
NON-GAAP NET INCOME PER SHARE                                   $                                    1.17     $                                    1.10     $                                    1.19     $                                    4.06     $                                    4.05  
                                                                                   ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================                                           ==================== ====================
RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                          
                                                                                                                                                                                                                    GROSS MARGIN                                                                                                                                                                                                                     
                                                                                                                                                                                                                   ($ in millions)                                                                                                                                                                                                                   
                                                                                                                                                                                                                                    
                                      Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                          ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Gross margin-GAAP                                        66.6 %                                        66.3 %                                        67.2 %                                        66.4 %                                        66.9 %
                                                          0.7 %                                         1.0 %                                         0.9 %                                         1.0 %                                         1.0 %
   Cost of revenues adjustments
                                                          -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Gross margin-Non-GAAP                                    67.3 %                                        67.3 %                                        68.0 %                                        67.4 %                                        67.9 %
                                                         
GAAP cost of revenues                  $                                     520     $                                     495     $                                     460     $                                   1,929     $                                   1,789  
Cost of revenues adjustments:                                               
                                                           (7 )                                         (12 )                                          (9 )                                         (41 )                                         (39 )
   Amortization of intangible assets
                                                           (4 )                                          (3 )                                          (3 )                                         (14 )                                         (13 )
   Stock-based compensation
                                                          -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Non-GAAP cost of revenues              $                                     509     $                                     480     $                                     448     $                                   1,874     $                                   1,737  
                                                          -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                            
                                                                                                                                                                                                                 PRODUCT GROSS MARGIN                                                                                                                                                                                                                   
                                                                                                                                                                                                                    ($ in millions)                                                                                                                                                                                                                     
                                                                                                                                                                                                                                       
                                         Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                             ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Product gross margin-GAAP                                   53.9 %                                        52.4 %                                        55.2 %                                        52.1 %                                        54.3 %
                                                             0.4 %                                         1.0 %                                         1.1 %                                         1.0 %                                         1.4 %
   Cost of product revenues adjustments
                                                             -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Product gross margin-Non-GAAP                               54.3 %                                        53.4 %                                        56.4 %                                        53.1 %                                        55.7 %
                                                            
GAAP cost of product revenues             $                                     387     $                                     369     $                                     355     $                                   1,432     $                                   1,368  
Cost of product revenues adjustments:                                          
                                                              (2 )                                          (7 )                                          (9 )                                         (26 )                                         (39 )
   Amortization of intangible assets
                                                              (1 )                                          (1 )                              --                         (4 )                                          (3 )
   Stock-based compensation
                                                             -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Non-GAAP cost of product revenues         $                                     384     $                                     361     $                                     346     $                                   1,402     $                                   1,326  
                                                             -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                                
                                                                                                                                                                                                                 SOFTWARE SUPPORT GROSS MARGIN                                                                                                                                                                                                                  
                                                                                                                                                                                                                        ($ in millions)                                                                                                                                                                                                                         
                                                                                                                                                                                                                                               
                                                 Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                     ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Software support gross margin-GAAP                                  91.8 %                                        91.6 %                                        94.4 %                                        92.6 %                                        95.4 %
                                                                     1.5 %                                         1.5 %                              -- %                                         1.2 %                              -- %
   Cost of software support revenues adjustment
                                                                     -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Software support gross margin-Non-GAAP                              93.3 %                                        93.1 %                                        94.4 %                                        93.8 %                                        95.4 %
                                                                    
GAAP cost of software support revenues            $                                      28     $                                      28     $                                      15     $                                      95     $                                      48  
Cost of software support revenues adjustment:                                          
                                                                      (5 )                                          (5 )                              --                        (15 )                              --  
   Amortization of intangible assets
                                                                     -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Non-GAAP cost of software support revenues        $                                      23     $                                      23     $                                      15     $                                      80     $                                      48  
                                                                     -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                                         
                                                                                                                                                                                                                 HARDWARE SUPPORT AND OTHER SERVICES GROSS MARGIN                                                                                                                                                                                                                  
                                                                                                                                                                                                                                  ($ in millions)                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                    Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                        ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Hardware support and other services gross margin-GAAP                                  71.8 %                                        72.9 %                                        73.6 %                                        72.7 %                                        73.0 %
                                                                                        0.8 %                                         0.6 %                                         0.9 %                                         0.7 %                                         0.7 %
   Cost of hardware support and other services revenues adjustment
                                                                                        -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Hardware support and other services gross margin-Non-GAAP                              72.6 %                                        73.4 %                                        74.5 %                                        73.4 %                                        73.8 %
                                                                                       
GAAP cost of hardware support and other services revenues            $                                     105     $                                      98     $                                      90     $                                     402     $                                     373  
Cost of hardware support and other services revenues adjustment:                                          
                                                                                         (3 )                                          (2 )                                          (3 )                                         (10 )                                         (10 )
   Stock-based compensation
                                                                                        -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Non-GAAP cost of hardware support and other services revenues        $                                     102     $                                      96     $                                      87     $                                     392     $                                     363  
                                                                                        -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
RECONCILIATION OF NON-GAAP TO GAAP                                                                                                                                                                                                                       
                                                                                                                                                                                                                             EFFECTIVE TAX RATE                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                   
                                                               Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                   ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
GAAP effective tax rate                                                           23.4 %                                        26.3 %                                        21.6 %                                        24.1 %                                        13.2 %
Adjustments:                                                                                         
                                                                                   0.5 %                                         0.2 %                                        (7.9 )%                                       (1.0 )%                                       (1.1 )%
   Income tax effects
                                                                                  (3.0 )%                                       (6.9 )%                             -- %                                        (4.8 )%                             -- %
   Income tax expenses from integration of acquired companies
                                                                        -- %                              -- %                              -- %                              -- %                                         4.4 %
   Resolution of income tax matters
                                                                                   -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                                                                                                                                                            
                                                                                                                                                                                                                           TO FREE CASH FLOW (NON-GAAP)                                                                                                                                                                                                                            
                                                                                                                                                                                                                                   (In millions)                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                  
                                                                    Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                        ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Net cash provided by operating activities                            $                                     559     $                                     373     $                                     383     $                                   1,333     $                                   1,060  
Purchases of property and equipment                                                     (38 )                                         (32 )                                         (24 )                                        (162 )                                        (124 )
                                                                                        -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Free cash flow                                                       $                                     521     $                                     341     $                                     359     $                                   1,171     $                                     936  
                                                                                       
                                                                                       
                                                                                                                                                                                                                          RECONCILIATION OF NET REVENUES                                                                                                                                                                                                                           
                                                                                                                                                                                                                              TO BILLINGS (NON-GAAP)                                                                                                                                                                                                                               
                                                                                                                                                                                                                                   (In millions)                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                  
                                                                    Q4'FY21                                       Q3'FY21                                       Q4'FY20                                       FY2021                                        FY2020                   
                                                                                        ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------                                            ----------------------------------------
Net revenues                                                         $                                   1,555     $                                   1,470     $                                   1,401     $                                   5,744     $                                   5,412  
Change in deferred revenue and financed unearned services revenue*                      183                        128                        147                        193                         54  
                                                                                        -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------                                           -------------------- --------------------
Billings                                                             $                                   1,738     $                                   1,598     $                                   1,548     $                                   5,937     $                                   5,466
NETAPP, INC.
                        RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP
                              EXPRESSED AS EARNINGS PER SHARE
                                 FIRST QUARTER FISCAL 2022
                                
                                   First Quarter
                                    Fiscal 2022
                                                                     --------------------
                                
Non-GAAP Guidance - Net Income Per Share              $0.89 - $0.97
                                
Adjustments of Specific Items to Net Income        
                                                   
   Per Share for the First Quarter Fiscal 2022:
                                                         ($0.04)
      Amortization of intangible assets
                                                         ($0.20)
      Stock-based compensation expense
                                                          $0.04
      Income tax effects
                                                                     --------------------
Total Adjustments                                        ($0.20)
                                
GAAP Guidance - Net Income Per Share                  $0.69 - $0.77
NETAPP, INC.                                               
                              RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP                               
                                              FISCAL 2022                                               
                                              (Unaudited)                                               
                            
                                      GROSS MARGIN                
                                                             ----------------------------------------
                            
Gross Margin - Non-GAAP Guidance                           67% - 68%                 
                                               
   Adjustment:
                                                             (1)%                    
      Cost of revenues adjustments
Gross Margin - GAAP Guidance                               66% - 67%                 
                            
                                    OPERATING MARGIN              
                                                             ----------------------------------------
                            
Operating Margin - Non-GAAP Guidance                       21% - 22%                 
                                               
   Adjustments:
                                                             (1)%                    
      Amortization of intangible assets
                                                             (4)%                    
      Stock-based compensation expense
                                                             ----------------------------------------
Operating Margin - GAAP Guidance                           16% - 17%                 
                            
                                   EFFECTIVE TAX RATE             
                                                             ----------------------------------------
                            
Effective Tax Rate - Non-GAAP Guidance                         19%                   
                                               
   Adjustment:
                                                              1%                     
      Income tax effects
                                                             ----------------------------------------
Effective Tax Rate - GAAP Guidance                             20%
NETAPP, INC.
                      RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP
                            EXPRESSED AS EARNINGS PER SHARE
                                      FISCAL 2022
                            
                            
                                Fiscal 2022
                                                                 --------------------
                            
Non-GAAP Guidance - Net Income Per Share          $4.45 - $4.65
                            
Adjustments of Specific Items to Net Income    
                                               
   Per Share for Fiscal 2022:
                                                     ($0.16)
      Amortization of intangible assets
                                                     ($0.98)
      Stock-based compensation expense
                                                      $0.17
      Income tax effects
                                                                 --------------------
Total Adjustments                                    ($0.97)
                            
GAAP Guidance - Net Income Per Share              $3.48 - $3.68

View source version on businesswire.com: https://www.businesswire.com/news/home/20210602005997/en/

SOURCE: NetApp, Inc.

(Press)
Chris Drago
1 831 900 8889
chris.drago@netapp.com

(Investors)
Lance Berger
1 408 822 6628
lance.berger@netapp.com
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COMTEX_387744344/1006/2021-06-02T16:01:01

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