Gross margin of 62.6% in fiscal 3Q18
As seen in the table below, NetApp (NTAP) reported non-GAAP[1. generally accepted accounting principles] gross margins of 62.6% in fiscal 3Q18. Its Product segment’s gross margin rose 4.5 basis points YoY (year-over-year), driven by reduced promotions, one-time items, and currency fluctuations.
Its operating expenses rose 11.0% YoY to $644.0 million in 3Q18, driven by higher variable compensation expenses and currency.
During the company’s 3Q18 earnings call, NetApp’s CFO, Ronald Pasek, stated, “Excluding these items, OpEx would have been flat year-over-year, reflecting our continued strong discipline. As a percentage of net revenue, operating expense of 42% were roughly flat compared to the same period last year. Operating margin of 20.4% was flat year-over-year as well.”
Bottom line expected to outpace top-line growth
One of NetApp’s top strategic priorities is a focus on execution and improving its operational efficiency. NetApp’s revenues are expected to rise 7.9% YoY in fiscal 4Q18, 6.4% YoY in fiscal 1Q19, 6.3% YoY in fiscal 2018, and 4.1% YoY in fiscal 2020.
NetApp’s non-GAAP earnings per share (or EPS) are estimated to rise 16.3% in fiscal 4Q18, 21.0% in fiscal 2018, 26.0% in fiscal 2018, and 10.0% in fiscal 2019, indicating a reduction in costs.