NetApp Inc. (NASDAQ: NTAP) reported better-than-expected earnings for the first quarter of 2020 while revenues came in line with estimates. Shares gained over 5% in aftermarket hours on Wednesday.

Total revenue dropped to $1.24 billion from $1.47 billion in the same period last year, but were in line with expectations. Last year’s results included $90 million from enterprise software license agreements which did not repeat in the current quarter.   

NetApp beat earnings estimates for Q1 2020 while revenues matched expectations

On a GAAP basis, net income was $103 million, or $0.42 per share, compared to $283 million, or $1.05 per share, last year. Adjusted net income was $157 million, or $0.65 per share. The consensus forecast was for EPS of $0.61.

During the quarter, NetApp made changes to the products and solutions in the Strategic and Mature product groups. Mature now includes OEM and all products related to disk and hybrid arrays. Strategic now includes add-on software, private cloud solutions, and all products related to All-Flash Arrays.

Total product revenues fell 26% year-over-year, driven by a 29% drop in Strategic revenue and a 23% decrease in Mature revenue. Looking at geographic mix, Americas made up 51% of total revenue in the quarter versus 57% in the same period last year. EMEA comprised 33% versus 29% last year while Asia-Pacific comprised 16% versus 14%.

In terms of pathways mix, direct revenues formed 19% of total revenue while indirect revenues comprised 81%. This compares to 29% and 71%, respectively, last year.    

For the second quarter of 2020, NetApp expects revenues to be $1.32 billion to $1.47 billion. GAAP EPS is expected to be $0.86-0.94 while adjusted EPS is expected to be $0.91-0.99.

For the full year of 2019, net revenues are expected to decline 5-10% year-over-year. Consolidated gross margins are expected to be 65-66% on a GAAP basis and 66-67% on a non-GAAP basis. Operating margins are expected to come between 16-19% on a GAAP basis and 19-22% on a non-GAAP basis.

NetApp declared a dividend of $0.48 per share, payable on October 23, 2019, to shareholders of record as of October 4, 2019.

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