NetApp, Inc. (NASDAQ:NTAP) Q2 2020 Earnings Conference Call - Final Transcript

Nov 13, 2019 • 05:30 pm ET

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NetApp, Inc. (NASDAQ:NTAP) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Ron Pasek

We are maintaining our expectations for free cash flow to be in the range of 19% to 21% of revenues in fiscal 2020.

During Q2 we repurchased 9.8 million shares at an average price of $51.19 for a total of $500 million. Weighted average diluted shares outstanding were 236 million down 28 million shares year-on-year, representing an 11% decrease. During the quarter we paid out $111 million in cash dividends. In total, we returned $611 million to shareholders in the quarter. For fiscal Q3 cash dividend will be $0.48 per share.

Now on to guidance. We expect revenues for fiscal 2020 to be down approximately 8% year-over-year. We continue to expect ELAs to represent approximately 2% of total revenue. For fiscal 2020, we now expect gross margin to be in the range of 67% to 68% above our previous guidance of 66% to 67%, due primarily to the improvement in product margins. Operating margin for fiscal 2020 is expected to be in the range of 21% to 22%. Implied in this guidance is our expectation that operating expenses will be down slightly year-over-year in fiscal 2020 due to lower variable compensation. As a result of the updated revenue and margin guidance, we expect EPS to be down between 5% and 8% year-over-year without the benefit of buybacks.

Now onto Q3 guidance. We expect Q3 net revenues to range between $1.39 billion and $1.54 billion, which at the midpoint, implies a 6% decline in revenues year-over-year, including a 0.5 point of currency headwinds. For Q3, we expect consolidated gross margin to be approximately 67% and operating margin to be approximately 22%. We expect earnings per share for the quarter to range between $1.14 and a $1.22 per share. We are diligently focused on improved execution and addressing the challenges we face. We are committed to returning the company to growth, and we remain confident our business model leverage will enable us to deliver long-term shareholder returns.

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

Executive
Kris Newton

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