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Earnings Highlights and Review: NetApp's Revenue Grew 7%; Adjusted EPS Surged 56%

Research Desk Line-up: Brocade Communications Systems Post Earnings Coverage

LONDON, UK / ACCESSWIRE / June 13, 2017 / Pro-Trader Daily publishes post-earnings coverage on NetApp, Inc. (NASDAQ: NTAP) following the Company's posting of its fourth quarter and fiscal 2017 earnings results on May 24, 2017. The data storage Company surpassed top- and bottom-line expectations. Additionally, the Company announced a 5% hike in dividend. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:

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Get more of our free earnings reports coverage from other constituents of the Data Storage Devices industry. Pro-TD has currently selected Brocade Communications Systems, Inc. (NASDAQ: BRCD) for due-diligence and potential coverage as the Company reported on May 25, 2017, its financial results for Q2 FY17. Register for a free membership today, and be among the early birds that get access to our report on Brocade Communications Systems when we publish it.

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Earnings Reviewed

NetApp's net revenues for the fourth quarter of fiscal year 2017 ended on April 28, 2017, were $1.48 billion, up 7% compared to revenue of $1.38 billion in Q4 FY16. The Company's net revenue was at the high-end of its guidance and also ahead of analysts' expectations of $1.38 billion. NetApp's net revenues for FY17 were $5.52 billion compared to net revenue of $5.55 billion in FY16.

For Q4 FY17, NetApp's gross margin improved to 62.5% compared to gross margin of 61.5% in Q3 FY17 and above the Company's guidance range. The Company's operating expenses of $619 million increased 7% sequentially, reflecting higher variable compensation due to the higher than expected revenue growth. For the reported quarter, NetApp's all-flash array annualized net revenue run rate of $1.70 billion, surging approximately 140% on a y-o-y basis

NetApp's GAAP net income for Q4 FY17 was $190 million, or $0.68 per share, compared to GAAP net loss of $8 million, or $0.03 loss per share, for Q4 FY16. The Company's non-GAAP net income for the reported quarter was $239 million, or $0.86 per share, compared to non-GAAP net income of $157 million, or $0.55 per share, for the corresponding year ago same period. NetApp's earnings surpassed Wall Street's expectations of $0.82 per share.

For FY17, NetApp's GAAP net income totaled $509 million, or $1.81 per share, compared to GAAP net income of $229 million, or $0.77 per share, for FY16. The Company's non-GAAP net income for the fiscal year was $768 million, or $2.73 per share, compared to non-GAAP net income of $633 million, or $2.13 per share, for the year ago corresponding period.

Segment Results

During Q4 FY17, NetApp's Product revenue of $852 million grew over 12% on a y-o-y basis, driven by flash and the continued strength of the Company's strategic solutions. Product gross margin of 48.9% increased approximately 3.2% sequentially and 2.1% on a y-o-y basis, reflecting improved sales discipline, fewer promotions, and lower reserves.

NetApp's software maintenance revenue grew to $242 million compared to revenue of $234 million in Q4 FY16, while hardware maintenance and other services revenues declined marginally to $387 million compared to $389 million in the prior year's same quarter. Software maintenance gross margin of 97.5%, grew 0.4% sequentially, and increased just over 1.3% on a y-o-y basis. Hardware maintenance and other services gross margin of 70.3% fell 1.3% sequentially, while it grew 2.4% on y-o-y basis.

Balance Sheet

During Q4 FY17, NetApp's cash conversion cycle improved 13 days y-o-y, reflecting 24 days of combined improvement in Days Sales Outstanding and Days Payable Outstanding from the Company's transformation initiatives, partially offset by a 10-day increase in Days of Inventory Outstanding. The Company's deferred and financed unearned services revenue declined 1% on a y-o-y basis due to lower ASPs and to a lesser extent, execution issues within renewals. Free cash flow grew 5% y-o-y to $327 million.

NetApp ended Q4 FY17 with $4.9 billion in total cash, cash equivalents, and investments. During the reported quarter, the Company generated $365 million in cash from operations and repurchased $129 million of NetApp's shares and paid $51 million in cash dividends during the quarter. The Company has completed over $1.7 billion of a $2.5 billion repurchase program it announced in February 2015.

NetApp announced that it will increase Q1 FY18 dividend by 5% to $0.20 per share. The quarterly dividend will be paid on July 26, 2017, to shareholders of record as of the close of business on July 07, 2017.

Outlook

For Q1 FY18, NetApp is forecasting revenue in the range of $1.24 billion to $1.39 billion. At the midpoint, this implies y-o-y revenue growth of approximately 2%. The Company expects gross margins of approximately 62% to 63% and is targeting operating margins of 13.5% to 14.5% in the upcoming quarter. NetApp is projecting EPS to be between $0.49 and $0.57. This implies a 15% growth y-o-y at the midpoint.

For FY18, NetApp is forecasting a gross margin range of 62% to 63% and expect operating margin in the range of 18% to 20%. Additionally, the Company expects to continue generating meaningful free cash flow in the range of 17% to 19% of revenues.

Stock Performance

At the closing bell, on Monday, June 12, 2017, NetApp's stock slipped 1.67%, ending the trading session at $38.86. A total volume of 4.25 million shares were traded at the end of the day, which was higher than the 3-month average volume of 2.93 million shares. In the last six months and previous twelve months, shares of the Company have soared 7.05% and 58.68%, respectively. Moreover, the stock rallied 10.18% since the start of the year. Shares of the Company have a PE ratio of 21.42 and have a dividend yield of 2.06%. The stock currently has a market cap of $10.33 billion.

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