NetApp: Fiscal 4Q14 Financial Results

(in $ million)	4Q13	4Q14	FY13	FY14
Revenue	1,717	1,649	6,332	6,325
*Growth*		-4%		*-0%*
Net income (loss)	173.8	197.0	505.3	637.5

NetApp, Inc. reported financial results for the fourth quarter and fiscal year 2014, ended April 25, 2014.

Fourth Quarter Financial Results
Net revenues for the fourth quarter of fiscal year 2014 were $1.649 billion. GAAP net income for the fourth quarter of fiscal year 2014 was $197 million, or $0.59 per share, compared to GAAP net income of $174 million, or $0.47 per share, for the comparable period of the prior year. Non-GAAP net income for the fourth quarter of fiscal year 2014 was $284 million, or $0.84 per share,[2] compared to non-GAAP net income of $253 million, or $0.69 per share, for the comparable period of the prior year.

Fiscal Year 2014 Financial Results
Net revenues for fiscal year 2014 were $6.325 billion. GAAP net income for fiscal year 2014 was $638 million, or $1.83 per share, compared to GAAP net income of $505 million, or $1.37 per share, for the comparable period of the prior year. Non-GAAP net income for fiscal year 2014 was $968 million, or $2.78 per share, compared to non-GAAP net income of $841 million, or $2.28 per share, for the comparable period of the prior year.

Cash, Cash Equivalents, and Investments
NetApp ended fiscal year 2014 with $5.003 billion of total cash, cash equivalents, and investments and generated $1.350 billion in cash from operations. During fiscal year 2014, the company returned $2.084 billion to shareholders through share repurchases and cash dividends.

The company increased the next dividend to $0.165 per share to be paid on July 22, 2014 to shareholders of record as of the close of business on July 10, 2014.

“NetApp saw market share gains and delivered a solid operational performance in fiscal year 2014, highlighted by margin expansion and strong cash generation,” said Tom Georgens, chairman and CEO. “With solutions like clustered Data ONTAP, our broad flash portfolio and differentiated approach to the cloud, customers are solving the challenges of today, with innovative solutions that pave the way for the future.“

Q1 Fiscal Year 2015 Outlook
The company provides the following financial guidance for the first quarter of fiscal year 2015:

Net revenues are expected to be in the range of $1.420 billion to $1.520 billion
GAAP earnings per share is expected to be in the range of $0.32 to $0.37 per share
Non-GAAP earnings per share is expected to be in the range of $0.53 to $0.58 per share

Business Highlights
In its fourth quarter of fiscal year 2014, NetApp continued to help global enterprises achieve success with a broad portfolio of flash-accelerated, cloud-integrated storage and data management solutions. Its enterprise storage systems and software meet customer needs across a range of application workloads.

Highlights include:

Introduces Unified Scale-Out Storage Systems for the Hybrid Cloud Era. The FAS8000 series unified storage systems are NetApp’s most powerful and feature-rich scale-out storage systems with flexibility to simplify complex upgrades as IT needs change.
Introduces FlexArray Virtualization Software. NetApp V-Series becomes a software option that can be licensed on the FAS8000 to virtualize and manage multivendor storage platforms, paving the way for software-defined storage.
Announces the Latest Release of Clustered Data ONTAP. Version 8.2.1, helps organizations scale out operations and manage data consistently, without disruption across both private and public cloud environments.
Teams with SAP to Set Record for World’s Largest Data Warehouse. SAP announced that it teamed with partners, including NetApp, to generate a world record for the largest data warehouse. The NetApp E5460 storage system was chosen for its ability to handle large data volumes, enormous throughput requirements, high performance and availability demands.
Again Honored as a Channel Champion. CRN’s 24th annual Channel Champions awards highlights vendor partners voted to be the best-of-the-best by the solutions providers for 2014. NetApp moved into the No. 2 position on this year’s list in the enterprise network storage category.

Comments

Revenue for FY ended in April
(in $ million)

Revenue

Y/Y growth

2012

6,233

22%

2013

6,332

2014

6,325

-0%

OEM Revenue for FY ended in April
(in $ million)

Year

Revenue

Y/Y growth

2012

889.5

2013

787.2

-12%

2014

584.7

-37%

Revenue of $1.65 billion for the quarter is up 2% Q/Q, but down 4% Y/Y.

Sales to OEMs including IBM declined further than expected and was down 30% from 3FQ14 and 34% from 3FYQ3.

For the fiscal year, revenue was flat compared to one year and two years ago, a confirmation of the flat growth of about all storage giants.

Guidance is not optimistic: between $1.52 billion and $1.42 billion in revenue for next quarter, or down between -8% and -14%. "This sequential decline reflects our typical Q4 to Q1 seasonal revenue dynamics as well as conservatism around OEM business in light of our Q4 results and our future expectations given the business conditions impacting certain OEM customers," said an executive the company.

For the year, NetApp anticipates mid single-digit branded revenue growth ramping over the course of the year and partially offset by declines in OEM sales of up to 40%.

During its most recent quarter, NetApp reduced headcount reduction. 900 employees were already fired in 4FQ13.

Tom Georgens, CEO:
"For the full year fiscal year '14 clustered notes grew 242% from fiscal year '13. The attach rate of Clustered ONTAP increased across all of our product lines with high-end platforms approaching 50% in Q4. Most notably the attach rate of our new FAS8000 product line was over 60%.
"Our strategic partnership at Cisco around FlexPod Solutions delivers on this promise, and we said FlexPod unit shipments grow 71% from Q4 of last year.
"With over 18PB of flash sold last quarter, NetApp is the leader in the flash market with the best position portfolio both in terms of what is available today and what is coming.
"Units shipped of the EF family grew more than 3000% and all-flash FAS units increased 80% from Q4 a year ago.
"E-Series units shipped exclusive of the EF products grew more than 170% from Q4 of last year. Our high end FAS shipments grew 8% year-on-year. Mid range FAS systems shipped were roughly flat, and interest expense we're down 18%."

Nick Noviello, CFO:
"Branded revenue grew 6% sequentially, and as expected was relatively flat on a year-over-year basis. OEM revenue declined further than expected and was down 30% from Q3 and 34% from Q4 last year. Indirect revenues through the channels and OEMs accounted for 83% of Q4 revenue consistent with the last two quarters. Arrow and Avnet contributed 24% and 17% of net revenue respectively."
"For the fiscal year, net revenues of $6.33 billion were flat from fiscal year 2013. Branded revenue was up 4% that was offset by lower OEM revenue, which was down 26%. Including the impact of lower OEM revenue, geographic revenues in EMEA and AsiaPac were up slightly, offset by lower revenue in the Americas, which was due to challenges in U.S. Federal spending."