NetApp Reports Second Quarter Fiscal Year 2016 Results

Net Revenues of $1.45 Billion, Up 8% Quarter-over-Quarter; GAAP EPS of $0.39 and Non-GAAP EPS of $0.61

• Product revenue of $815 million, up 23% quarter-over-quarter
• All Flash FAS units grew 246% quarter-over-quarter
• Flash capacity grew 80% quarter-over-quarter

Sunnyvale, Calif.—November 18, 2015—NetApp (NASDAQ: NTAP) today reported financial results for the second quarter of fiscal year 2016, ended October 30, 2015.

Second Quarter Financial Results
Net revenues for the second quarter of fiscal year 2016 were $1.45 billion. GAAP net income for the second quarter of fiscal year 2016 was $114 million, or $0.39 income per share ^[1], compared to GAAP net income of $160 million, or $0.49 income per share, for the comparable period of the prior year. Non-GAAP net income for the second quarter of fiscal year 2016 was $181 million, or $0.61 income per share,^[2]compared to non-GAAP net income of $226 million, or $0.70 income per share, for the comparable period of the prior year.

Cash, Cash Equivalents and InvestmentsNetApp ended the second quarter of fiscal year 2016 with $4.8 billion in total cash, cash equivalents and investments and generated $145 million in cash from operations. During the second quarter of fiscal year 2016, the Company returned $236 million to shareholders through share repurchases and a cash dividend.

The next dividend in the amount of $0.18 per share will be paid on January 20, 2016, to shareholders of record as of the close of business on January 8, 2016.

“Our Q2 results reflect the progress we are making to pivot NetApp for long-term growth in the data powered digital era. We are moving forward with clarity and speed to better address the changing industry and improve our own execution,” said George Kurian, CEO. “Customer wins and partner feedback drive my strong conviction that our industry leading portfolio and differentiated Data Fabric strategy will expand our opportunity and drive long-term growth.”

Q3 Fiscal Year 2016 Outlook
The Company provided the following financial guidance for the third quarter of fiscal year 2016:

• Net revenues are expected to be in the range of $1.40 billion to $1.50 billion.
• GAAP earnings per share is expected to be in the range of $0.47 to $0.52 per share.
• Non-GAAP earnings per share is expected to be in the range of $0.66 to $0.71 per share.

Business Highlights

• NetApp Accelerates Customer and Partner Journey in Hybrid Cloud and Flash Environments:
  • Guarantees 3X Performance For All-Flash Workloads.NetApp extended a special offer for buyers of select all-flash systems guaranteeing a 3X increase in enterprise database performance compared to that of traditional, non-flash disk-based systems.^[3]
  • Makes the Hybrid Cloud More Secure.NetApp unveiled NetApp OnCommand® Cloud Manager 2.0 and integration with Amazon Simple Storage Service Standard-Infrequent Access (Amazon S3 Standard-IA).
  • Offers Free Controller Upgrade.Eligible customers who purchase a three-year SupportEdge Premium contract by December 31, 2015 now qualify for a new All-Flash FAS (AFF) controller free of charge as part of the renewal process.^[4]
  • Extends Support Price Protection.NetApp enabled customers to extend their standard three-year warranty and support for up to four more years.
  • Offers New AFF Series Model.The new AFF8080 EX can be set up to address mainstream SAN workloads in as little as 15 minutes.
  • Expands OpenStack Capabilities.As founder of the OpenStack Manila open-source project, NetApp announced production-ready capabilities for enterprises to easily build or enhance a cloud-ready data center capable of handling business-critical and content-management applications.
• NetApp Insight® Technical Conference Showcases How Data Fabric Increases Customer Success in the Hybrid Cloud:
  • Data Fabric Solution Essentials.NetApp starter kits make it easier for customers to become hybrid cloud ready and quickly see benefits as they evolve their infrastructures.
  • Data Fabric Enablement Services.NetApp experts help customers identify optimal workloads for the cloud and gain the architectural design and deployment insights they need for success.
  • Expansion of Cloud Service Provider Relationships.NetApp is now a Google Cloud Platform Technology Partner, providing tools which integrate to extend reach and functionality.
• NetApp Celebrates Business and Cultural Milestones:
  • Cisco and NetApp Celebrate Five Years of FlexPod® Customer Success.FlexPod integrated infrastructure solutions deliver unprecedented value to customers with shared revenue of $5.6 billion.
  • NetApp Named #4 World’s Best Multinational Workplaces.For the fifth consecutive year, NetApp’s unique culture earned the company a top-five position on this prestigious list by Great Place to Work.

Webcast and Conference Call Information
NetApp will host a conference call to discuss these results today at 2 p.m. Pacific Time. To access the live webcast of this event, visit 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 also be available on the website after 4 p.m. Pacific Time today.

About NetApp
Leading organizations worldwide count on NetApp for software, systems and services to manage and store their data. Customers value our teamwork, expertise and passion for helping them succeed now and into the future. To learn more visit www.netapp.com.

[1]Net income per share is calculated using the diluted number of shares.

^[2]Non-GAAP net income excludes, when applicable, the amortization of intangible assets, stock-based compensation, acquisition-related income and expenses, restructuring and other charges, asset impairments, non-cash interest expense associated with our debt, net losses or gains on investments, and our GAAP tax provision, but includes a non-GAAP tax provision 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 and/or court decisions, (b) tax charges or benefits that are attributable to unusual or non-reoccurring 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) the impact of a temporary lapse of tax law, such as the federal research credit, if such extensions have routinely been granted based on past legislative history and are expected to be reinstated in the near future. Non-GAAP earnings per share is calculated using the diluted number of shares for all periods presented. A detailed reconciliation of our non-GAAP to GAAP results can be found atinvestors.netapp.com.

^[3]Terms and conditions are available atwww.netapp.com/us/media/netapp-3x-performance-guarantee.pdf.

^[4]Additional information is available atmysupport.netapp.com/ecm/ecm_get_file/ECMP12520009.