NetApp, Inc. (NASDAQ:NTAP) Q1 2020 Earnings Conference Call Transcript

Aug 14, 2019 • 05:30 pm ET

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NetApp, Inc. (NASDAQ:NTAP) Q1 2020 Earnings Conference Call Transcript

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Presentation
Executive
Ronald J. Pasek

range of 66% to 67%, above our previous guidance range of 64% to 65%, due primarily to the mix shift towards higher margin maintenance revenues, as a result of the weakness in product sales.

Operating margin for fiscal 2020 is expected to be in the range of 19% to 22%. Implied in this guidance is our expectation that operating expenses will be flat to slightly down year-over-year in fiscal 2020. As George highlighted, we expect to add 200 headcount to our sales coverage model over the next 12 months. As a result of the current revenue guidance, we expect EPS to be down between 2% and 15% year-over-year without the benefit of buybacks.

Given the relative weakness of our Americas business in Q1 , we now expect our effective tax rate to be approximately 18% to 19% in fiscal 2020. Additionally, we expect to continue to generate meaningful free cash flow in the range of 19% to 21% of revenues.

Now onto Q2 guidance. We expect Q2 net revenues to range between $1.325 billion and $1.475 billion, which at the midpoint implies an 8% decline in revenues year-over-year, including over a point of currency headwind. For Q2, we expect consolidated gross margin to be approximately 66% and operating margin to be between 18% and 19%. We expect earnings per share for the second quarter to range between $0.91 and $0.99 per share.

We are diligently focused on improved execution and addressing the challenges we face. We are committed to returning the Company to growth, as we implement the action plan George outlined. And we remain confident our business model leverage will enable us to deliver long-term shareholder returns.

With that, I'll turn it back to Kris to open the call for Q&A. Kris?

Executive
Kris Newton

We'll now open the call for Q&A. Please be respectful of your peers and limit yourself to one question, so we can get to as many people as possible. Thanks for your cooperation. Operator?