NetApp Earnings 2020-07-31

NetApp Earnings 2020-07-31

NTAP 10Q Quarterly Report

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

ntap-10q_20200731.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 July 31, 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 August 26, 2020, there were 222,005,088 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 July 31, 2020 and April 24, 2020	3
	Condensed Consolidated Statements of Operations for the Three Months Ended July 31, 2020 and July 26, 2019	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended July 31, 2020 and July 26, 2019	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended July 31, 2020 and July 26, 2019	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended July 31, 2020 and July 26, 2019	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4	Controls and Procedures	41

PART II — OTHER INFORMATION

Item 1	Legal Proceedings	42
Item 1A	Risk Factors	42
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)

	July 31, 2020			April 24, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	3,633		$	2,658
Short-term investments		140			224
Accounts receivable		604			973
Inventories		136			145
Other current assets		304			274
Total current assets		4,817			4,274
Property and equipment, net		737			727
Goodwill		2,038			1,778
Other intangible assets, net		140			44
Other non-current assets		684			699
Total assets	$	8,416		$	7,522

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	396		$	426
Accrued expenses		616			774
Commercial paper notes		150			522
Short-term deferred revenue and financed unearned services revenue		1,814			1,894
Total current liabilities		2,976			3,616
Long-term debt		2,630			1,146
Other long-term liabilities		720			714
Long-term deferred revenue and financed unearned services revenue		1,806			1,804
Total liabilities		8,132			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 July 31, 2020 and April 24, 2020, respectively		323			284
Retained earnings		—			—
Accumulated other comprehensive loss		(39	)		(42	)
Total stockholders' equity		284			242
Total liabilities and stockholders' equity	$	8,416		$	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
	July 31, 2020			July 26, 2019
Revenues:
Product	$	627		$	644
Software maintenance		301			250
Hardware maintenance and other services		375			342
Net revenues		1,303			1,236
Cost of revenues:
Cost of product		316			312
Cost of software maintenance		15			10
Cost of hardware maintenance and other services		100			98
Total cost of revenues		431			420
Gross profit		872			816
Operating expenses:
Sales and marketing		429			405
Research and development		233			215
General and administrative		61			71
Restructuring charges		5			21
Acquisition-related expense		8			—
Total operating expenses		736			712
Income from operations		136			104
Other income (expense), net		(32	)		15
Income before income taxes		104			119
Provision for income taxes		27			16
Net income	$	77		$	103
Net income per share:
Basic	$	0.35		$	0.43
Diluted	$	0.35		$	0.42
Shares used in net income per share calculations:
Basic		221			239
Diluted		222			243

See accompanying notes to condensed consolidated financial statements.

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

.	Three Months Ended
	July 31, 2020			July 26, 2019
Net income	$	77		$	103
Other comprehensive income:
Foreign currency translation adjustments		9			(1	)
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the period		2			20
Reclassification adjustments for gains included in net income		—			(14	)
Unrealized losses on cash flow hedges:
Unrealized holding losses arising during the period		(9	)		(1	)
Reclassification adjustments for losses included in net income		1			—
Other comprehensive income		3			4
Comprehensive income	$	80		$	107

See accompanying notes to condensed consolidated financial statements.

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Three Months Ended
	July 31, 2020			July 26, 2019
Cash flows from operating activities:
Net income	$	77		$	103
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		49			49
Non-cash operating lease cost		13			13
Stock-based compensation		54			42
Deferred income taxes		—			(7	)
Other items, net		25			(7	)
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable		391			672
Inventories		9			15
Other operating assets		7			59
Accounts payable		(29	)		(195	)
Accrued expenses		(186	)		(277	)
Deferred revenue and financed unearned services revenue		(158	)		(154	)
Long-term taxes payable		6			(3	)
Other operating liabilities		(18	)		—
Net cash provided by operating activities		240			310
Cash flows from investing activities:
Purchases of investments		(2	)		(4	)
Maturities, sales and collections of investments		87			1,031
Purchases of property and equipment		(52	)		(32	)
Proceeds from sale of properties		6			—
Acquisitions of businesses, net of cash acquired		(350	)		(56	)
Other investing activities, net		—			(1	)
Net cash provided by (used in) investing activities		(311	)		938
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock award plans		48			54
Payments for taxes related to net share settlement of stock awards		(33	)		(71	)
Repurchase of common stock		—			(250	)
Repayments of commercial paper notes, original maturities of three months or less, net		(370	)		(219	)
Issuance of debt, net of issuance costs		2,057			—
Repayments and extinguishment of debt		(589	)		—
Dividends paid		(107	)		(115	)
Other financing activities, net		(3	)		(2	)
Net cash provided by (used in) financing activities		1,003			(603	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		43			(3	)
Net increase in cash, cash equivalents and restricted cash		975			642
Cash, cash equivalents and restricted cash:
Beginning of period		2,666			2,331
End of period	$	3,641		$	2,973

See accompanying notes to condensed consolidated financial statements.

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

(Unaudited)

	Three Months Ended July 31, 2020
									Accumulated
	Common Stock and								Other
	Additional Paid-in Capital					Retained			Comprehensive
	Shares		Amount			Earnings			Loss			Total
	(In millions, except per share amounts)
Balances, April 24, 2020		219	$	284		$	—		$	(42	)	$	242
Net income		—		—			77			—			77
Other comprehensive income		—		—			—			3			3
Issuance of common stock under employee stock award plans, net of taxes		3		15			—			—			15
Stock-based compensation		—		54			—			—			54
Cash dividends declared ($0.48 per common share)		—		(30	)		(77	)		—			(107	)
Balances, July 31, 2020		222	$	323		$	—		$	(39	)	$	284

	Three Months Ended July 26, 2019
										Accumulated
	Common Stock and									Other
	Additional Paid-in Capital						Retained			Comprehensive
	Shares			Amount			Earnings			Loss			Total
	(In millions, except per share amounts)
Balances, April 26, 2019		240		$	1,133		$	—		$	(43	)	$	1,090
Cumulative-effect of adoption of ASC 842		—			—			6			—			6
Net income		—			—			103			—			103
Other comprehensive income		—			—			—			4			4
Issuance of common stock under employee stock award plans, net of taxes		3			(17	)		—			—			(17	)
Repurchase of common stock		(4	)		(141	)		(109	)		—			(250	)
Stock-based compensation		—			42			—			—			42
Cash dividends declared ($0.48 per common share)		—			(115	)		—			—			(115	)
Balances, July 26, 2019		239		$	902		$	—		$	(39	)	$

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	2020-07-31	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	2020-08-21	Earnings, Exit Costs, Exhibits
8-K	2020-06-26	Other Events
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-10.1	ntap-ex101_46.htm
EX-31.1	ntap-ex311_6.htm
EX-31.2	ntap-ex312_7.htm
EX-32.1	ntap-ex321_8.htm
EX-32.2	ntap-ex322_9.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company