NetApp (NTAP) has reported a 4.39 percent fall in profit for the quarter ended Oct. 28, 2016. The company has earned $109 million, or $0.38 a share in the quarter, compared with $114 million, or $0.39 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $169 million, or $0.60 a share compared with $181 million or $0.61 a share, a year ago.
Revenue during the quarter dropped 7.27 percent to $1,340 million from $1,445 million in the previous year period. Gross margin for the quarter expanded 69 basis points over the previous year period to 61.87 percent. Total expenses were 89.40 percent of quarterly revenues, down from 89.97 percent for the same period last year. This has led to an improvement of 56 basis points in operating margin to 10.60 percent.
Operating income for the quarter was $142 million, compared with $145 million in the previous year period.
However, the adjusted operating income for the quarter stood at $204 million compared to $219 million in the prior year period. At the same time, adjusted operating margin improved 7 basis points in the quarter to 15.22 percent from 15.16 percent in the last year period.
"Our second quarter results are evidence of our ability to maintain a high level of execution while streamlining the business and pivoting to the growth areas of the market," said George Kurian, chief executive officer. "Our market-leading innovations in flash, next-generation data centers and hybrid cloud, coupled with a sharp focus on operational discipline, position NetApp to lead in the digital era."
For the third-quarter, NetApp forecasts revenue to be in the range of $1,325 million to $1,475 million. The company expects diluted earnings per share to be in the range of $0.41 to $0.46. On an adjusted basis, the company expects diluted earnings per share to be in the range of $0.72 to $0.77.
Operating cash flow improves significantly
NetApp has generated cash of $386 million from operating activities during the first half, up 40.88 percent or $112 million, when compared with the last year period.
Cash flow from investing activities was $97 million for the first half, down 86.22 percent or $607 million, when compared with the last year period.
The company has spent $1,225 million cash to carry out financing activities during the first six months as against cash outgo of $694 million in the last year period.
Working capital drops significantly
NetApp has witnessed a decline in the working capital over the last year. It stood at $2,692 million as at Oct. 28, 2016, down 25.80 percent or $936 million from $3,628 million on Oct. 30, 2015. Current ratio was at 2.06 as on Oct. 28, 2016, down from 2.48 on Oct. 30, 2015.
Cash conversion cycle (CCC) has decreased to 3 days for the quarter from 19 days for the last year period. Days sales outstanding went up to 33 days for the quarter compared with 32 days for the same period last year.
Days inventory outstanding has decreased to 9 days for the quarter compared with 26 days for the previous year period. At the same time, days payable outstanding went up to 45 days for the quarter from 39 for the same period last year.
Debt remains almost stable
Total debt of NetApp remained almost stable for the quarter at $1,492 million, when compared with the last year period. Long-term debt of Netapp remained almost stable for the quarter at $1,492 million, when compared with the last year period. Total debt was 17.03 percent of total assets as on Oct. 28, 2016, compared with 17.24 percent on Oct. 30, 2015. Debt to equity ratio was at 0.53 as on Oct. 28, 2016, up from 0.50 as on Oct. 30, 2015.
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