NetApp Earnings 2020-10-30

NetApp Earnings 2020-10-30

NTAP 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

ntap-10q_20201030.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 30, 2020

☐	TRANSITION QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-27130

NetApp, Inc.

(Exact name of registrant as specified in its charter)

Delaware		77-0307520
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1395 Crossman Avenue,

Sunnyvale, California 94089

(Address of principal executive offices, including zip code)

(408) 822-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)		Name of exchange on which registered
Common Stock, $0.001 Par Value	NTAP		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of December 1, 2020, there were 223,384,837 shares of the registrant’s common stock, $0.001 par value, outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of October 30, 2020 and April 24, 2020	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended October 30, 2020 and October 25, 2019	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended October 30, 2020 and October 25, 2019	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended October 30, 2020 and October 25, 2019	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended October 30, 2020 and October 25, 2019	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4	Controls and Procedures	43

PART II — OTHER INFORMATION

Item 1	Legal Proceedings	44
Item 1A	Risk Factors	44
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3	Defaults upon Senior Securities	56
Item 4	Mine Safety Disclosures	56
Item 5	Other Information	56
Item 6	Exhibits	57
SIGNATURE		58

TRADEMARKS

^© 2020 NetApp, Inc. All Rights Reserved. No portions of this document may be reproduced without prior written consent of NetApp, Inc. NetApp, the NetApp logo, and the marks listed at http://www.netapp.com/TM are trademarks of NetApp, Inc. Other company and product names may be trademarks of their respective owners.

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

NETAPP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)

(Unaudited)

	October 30, 2020			April 24, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	3,529		$	2,658
Short-term investments		117			224
Accounts receivable		796			973
Inventories		116			145
Other current assets		263			274
Total current assets		4,821			4,274
Property and equipment, net		737			727
Goodwill		2,039			1,778
Other intangible assets, net		125			44
Other non-current assets		698			699
Total assets	$	8,420		$	7,522

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	367		$	426
Accrued expenses		738			774
Commercial paper notes		—			522
Short-term deferred revenue and financed unearned services revenue		1,815			1,894
Total current liabilities		2,920			3,616
Long-term debt		2,631			1,146
Other long-term liabilities		663			714
Long-term deferred revenue and financed unearned services revenue		1,836			1,804
Total liabilities		8,050			7,280

Commitments and contingencies (Note 16)

Stockholders' equity:
Common stock and additional paid-in capital, $0.001 par value; 222 and 219 shares issued and outstanding as of October 30, 2020 and April 24, 2020, respectively		372			284
Retained earnings		30			—
Accumulated other comprehensive loss		(32	)		(42	)
Total stockholders' equity		370			242
Total liabilities and stockholders' equity	$	8,420		$	7,522

See accompanying notes to condensed consolidated financial statements.

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	October 30, 2020			October 25, 2019			October 30, 2020			October 25, 2019
Revenues:
Product	$	749		$	771		$	1,376		$	1,415
Software maintenance		303			254			604			504
Hardware maintenance and other services		364			346			739			688
Net revenues		1,416			1,371			2,719			2,607
Cost of revenues:
Cost of product		360			341			676			653
Cost of software maintenance		24			11			39			21
Cost of hardware maintenance and other services		99			94			199			192
Total cost of revenues		483			446			914			866
Gross profit		933			925			1,805			1,741
Operating expenses:
Sales and marketing		432			389			861			794
Research and development		212			209			445			424
General and administrative		67			69			128			140
Restructuring charges		37			—			42			21
Acquisition-related expense		3			—			11			—
Gain on sale or derecognition of assets		—			(38	)		—			(38	)
Total operating expenses		751			629			1,487			1,341
Income from operations		182			296			318			400
Other income (expense), net		(7	)		3			(39	)		18
Income before income taxes		175			299			279			418
Provision for income taxes		38			56			65			72
Net income	$	137		$	243		$	214		$	346
Net income per share:
Basic	$	0.62		$	1.03		$	0.96		$	1.46
Diluted	$	0.61		$	1.03		$	0.96		$	1.44
Shares used in net income per share calculations:
Basic		222			235			222			237
Diluted		224			236			223			240

See accompanying notes to condensed consolidated financial statements.

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended						Six Months Ended
	October 30, 2020			October 25, 2019			October 30, 2020			October 25, 2019
Net income	$	137		$	243		$	214		$	346
Other comprehensive income:
Foreign currency translation adjustments		—			(1	)		9			(2	)
Defined benefit obligations:
Reclassification adjustments related to defined benefit obligations		—			(1	)		—			(1	)
Income tax effect		—			1			—			1
Unrealized gains on available-for-sale securities:
Unrealized holding gains (losses) arising during the period		(1	)		2			1			22
Reclassification adjustments for gains included in net income		—			—			—			(14	)
Unrealized losses on cash flow hedges:
Unrealized holding gains (losses) arising during the period		1			2			(8	)		1
Reclassification adjustments for losses included in net income		7			—			8			—
Other comprehensive income		7			3			10			7
Comprehensive income	$	144		$	246		$	224		$	353

See accompanying notes to condensed consolidated financial statements.

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended
	October 30, 2020			October 25, 2019
Cash flows from operating activities:
Net income	$	214		$	346
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		105			99
Non-cash operating lease cost		26			26
Stock-based compensation		103			82
Deferred income taxes		—			(23	)
Gain on sale or derecognition of assets		—			(38	)
Other items, net		28			(13	)
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable		197			435
Inventories		29			20
Other operating assets		8			41
Accounts payable		(59	)		(157	)
Accrued expenses		(69	)		(315	)
Deferred revenue and financed unearned services revenue		(118	)		(197	)
Long-term taxes payable		(46	)		(49	)
Other operating liabilities		(17	)		—
Net cash provided by operating activities		401			257
Cash flows from investing activities:
Purchases of investments		(3	)		(9	)
Maturities, sales and collections of investments		110			1,155
Purchases of property and equipment		(92	)		(68	)
Proceeds from sale of properties		6			96
Acquisitions of businesses, net of cash acquired		(350	)		(56	)
Other investing activities, net		8			(2	)
Net cash provided by (used in) investing activities		(321	)		1,116
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock award plans		49			55
Payments for taxes related to net share settlement of stock awards		(34	)		(74	)
Repurchase of common stock		—			(750	)
Proceeds from (repayments of) commercial paper notes, original maturities of three months or less, net		(420	)		249
Issuance of debt, net of issuance costs		2,057			—
Repayments and extinguishment of debt		(689	)		(400	)
Dividends paid		(214	)		(226	)
Other financing activities, net		(3	)		(2	)
Net cash provided by (used in) financing activities

Price	53.81	EPS	4
Shares	240	P/E	13
MCap	12,914	P/FCF	20
Net Debt	-1,842	EBIT	1,284
TEV	11,072	TEV/EBIT	9
TTM 2019-10-25, in MM, except price, ratios

10-Q	2020-10-30	Filed 2020-12-03
10-Q	2020-07-31	Filed 2020-08-28
10-K	2020-04-24	Filed 2020-06-15
10-Q	2020-01-24	Filed 2020-02-18
10-Q	2019-10-25	Filed 2019-11-18
10-Q	2019-07-26	Filed 2019-08-19
10-K	2019-04-26	Filed 2019-06-18
10-Q	2019-01-25	Filed 2019-02-19
10-Q	2018-10-26	Filed 2018-11-19
10-Q	2018-07-27	Filed 2018-08-21
10-K	2018-04-27	Filed 2018-06-19
10-Q	2018-01-26	Filed 2018-02-22
10-Q	2017-10-27	Filed 2017-11-29
10-Q	2017-07-28	Filed 2017-08-29
10-K	2017-04-28	Filed 2017-06-20
10-Q	2017-01-27	Filed 2017-02-28
10-Q	2016-10-28	Filed 2016-12-02
10-Q	2016-07-29	Filed 2016-09-02
10-K	2016-04-29	Filed 2016-06-22
10-Q	2016-01-29	Filed 2016-03-07
10-Q	2015-10-30	Filed 2015-12-02
10-Q	2015-07-31	Filed 2015-09-08
10-K	2015-04-24	Filed 2015-06-12
10-Q	2015-01-23	Filed 2015-02-25
10-Q	2014-10-24	Filed 2014-11-25
10-Q	2014-07-25	Filed 2014-08-28
10-K	2014-04-25	Filed 2014-06-17
10-Q	2014-01-24	Filed 2014-02-26
10-Q	2013-10-25	Filed 2013-11-26
10-K	2013-04-26	Filed 2013-06-17
10-Q	2013-01-25	Filed 2013-02-28
10-Q	2012-10-26	Filed 2012-11-30
10-Q	2012-07-27	Filed 2012-08-30
10-K	2012-04-27	Filed 2012-06-19
10-Q	2012-01-27	Filed 2012-03-05
10-Q	2011-10-28	Filed 2011-12-05
10-Q	2011-07-29	Filed 2011-09-01
10-K	2011-04-29	Filed 2011-06-23
10-Q	2011-01-28	Filed 2011-03-04
10-Q	2010-10-29	Filed 2010-12-06
10-Q	2010-07-30	Filed 2010-08-27
10-K	2010-04-30	Filed 2010-06-18
10-Q	2010-01-29	Filed 2010-03-01

8-K	2020-09-18
8-K	2020-09-10
8-K	2020-08-21
8-K	2020-06-26
8-K	2020-06-17
8-K	2020-06-01
8-K	2020-05-27
8-K	2020-05-12
8-K	2020-03-30
8-K	2020-03-02
8-K	2020-02-08
8-K	2020-01-31
8-K	2019-11-13
8-K	2019-09-12
8-K	2019-08-08
8-K	2019-08-01
8-K	2019-05-16
8-K	2019-02-13
8-K	2018-11-14
8-K	2018-09-13
8-K	2018-08-15
8-K	2018-05-17
8-K	2018-04-27
8-K	2018-04-03
8-K	2018-02-14
8-K	2018-02-07

EX-31.1	ntap-ex311_10.htm
EX-31.2	ntap-ex312_9.htm
EX-32.1	ntap-ex321_8.htm
EX-32.2	ntap-ex322_6.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company