NetApp, Inc. reports 75.9% Net Income decline in 2018 while 7.8% Revenue growth
05/23/2018 • About NetApp, Inc. (
$NTAP) • By InTwits
NetApp, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- NetApp, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 3.5%. Average EBITDA Margin for the same period was 16.7%
- NetApp, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.0%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $50m in FY2018, $72m in FY2017, $34m in FY2016, $30m in FY2015, $45m in FY2014
- In the last 5 years the company invested considerably less than D&A: $876m vs. $1,344m. In FY2018 this situation was still the same: CAPEX was 145 while D&A was 198
- The company has highly profitable business model: ROIC is 28.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 7.8%. Revenue growth showed acceleration in FY18Q4 - it increased 13.1% YoY. During FY2014-FY2018 Revenue growth bottomed in FY2016 at -9.4% and was accelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 15.7 pp from 20.9% to 36.5% in 2018. During the last 5 years EBITDA Margin bottomed in FY2016 at 11.3% and was growing since that time.
Gross Margin increased slightly on 1.4 pp from 61.3% to 62.7% in FY2018. SG&A as a % of Revenue decreased slightly on 1.4 pp from 35.0% to 33.6% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2016 at 37.8% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 0.83 pp from 3.6% to 2.7% in FY2018.
Net Income margin decreased on 6.8 pp from 8.8% to 2.0% in FY2018. The efficient tax rate was 90.3% in FY2018 while the average for the last five years was 44.1%.
Investments (CAPEX, working capital and M&A)
In FY2018 NetApp, Inc. had CAPEX/Revenue of 2.4%. CAPEX/Revenue showed almost no change from FY2015 to FY2018. Average CAPEX/Revenue for the last three years was 2.8%.
Accounts receivable as a % of Revenue increased on 4.4 pp from 13.3% to 17.7% in FY2018. Inventories as a % of Revenue decreased slightly on 0.91 pp from 3.0% to 2.1% in FY2018. Accounts payable as a % of Revenue jumped on 11.2 pp from 16.3% to 27.6% in FY2018.
NetApp, Inc. has spent
$75m on M&A in FY2018 which accounts for 1.3% of revenue.
Return on investment
The company operates at good ROIC (28.1%) while ROE is low (4.6%). ROIC surged on 14.0 pp from 14.0% to 28.1% in FY2018. ROE dropped on 12.4 pp from 17.0% to 4.6% in FY2018.
Leverage (Debt)
Debt level is -0.7x Net Debt / EBITDA and 1.4x Debt / EBITDA. Debt decreased on 3.4% while cash surged on 20.3%.
NetApp, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 18.7x. NetApp, Inc. has no short term refinancing risk: cash is higher than short term debt (763.9%).
Average interest expence paid by the company was 3.2% in FY2018.
Valuation and dividends
NetApp, Inc.'s trades at EV/EBITDA 12.7x and P/E 157.0x.
The company paid 184.5% of Net Income as dividends in FY2018. Dividends grew on average at 1.2% per annum in the last 5 years).
Management team
NetApp, Inc.'s CEO is George Kurian. George Kurian is a founder and has 3 years tenure with the company. NetApp, Inc.'s CFO is Ronald J Pasek "Ron". Ronald J Pasek "Ron" has 3 years tenure at the company.
Insider ownership is 0.25%. Insider ownership didn't change in 2018.
At the end of financial year the company had 10,300 employees. The number of employees increased slightly on 2.0%. Average revenue per employee in FY2018 was
$574,660 and it increased on 5.7%.
Financial and operational results
FY ended 04/27/2018
NetApp, Inc. ($NTAP) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 6,325 | 6,123 | 5,546 | 5,491 | 5,919 | 7.8% |
| Gross Profit | 3,919 | 3,833 | 3,373 | 3,364 | 3,709 | 10.3% |
| SG&A | 2,179 | 2,197 | 2,099 | 1,922 | 1,986 | 3.3% |
| EBITDA | 1,068 | 1,023 | 627 | 847 | 1,356 | 60.1% |
| EBIT | 734 | 716 | 348 | 621 | 1,158 | 86.5% |
| Interest expence | 36 | 42 | 49 | 52 | 62 | 19.2% |
| Tax | 103 | 153 | 116 | 140 | 1,083 | 673.6% |
| Net Income | 638 | 560 | 229 | 481 | 116 | -75.9% |
| Stock Based Compensation | 221 | 204 | 255 | 195 | 161 | -17.4% |
Balance Sheet
|
|---|
| Cash | 2,291 | 1,922 | 2,868 | 2,444 | 2,941 | 20.3% |
| Accounts Receivable | 856 | 779 | 813 | 731 | 1,047 | 43.2% |
| Inventory | 122 | 147 | 98 | 163 | 122 | -25.2% |
| Accounts Payable | 247 | 283 | 254 | 347 | 609 | 75.5% |
| Short Term Debt | 0 | 0 | 849 | 1,249 | 385 | -69.2% |
| Long Term Debt | 990 | 1,488 | 1,490 | 744 | 1,541 | 107.1% |
Cash flow
|
|---|
| Capex | 221 | 175 | 160 | 175 | 145 | -17.1% |
| Dividends | 202 | 208 | 210 | 208 | 214 | 2.9% |
| Acquisitions | | 85 | 842 | 8 | 75 | 837.5% |
Ratios
|
|---|
| Revenue growth | -0.1% | -3.2% | -9.4% | -1.0% | 7.8% | |
| EBITDA growth | 12.2% | -4.2% | -38.7% | 35.1% | 60.1% | |
|
|---|
| Gross Margin | 62.0% | 62.6% | 60.8% | 61.3% | 62.7% | 1.4% |
| EBITDA Margin | 16.9% | 16.7% | 11.3% | 15.4% | 22.9% | 7.5% |
| EBIT Margin | 11.6% | 11.7% | 6.3% | 11.3% | 19.6% | 8.3% |
| SG&A, % of revenue | 34.5% | 35.9% | 37.8% | 35.0% | 33.6% | -1.4% |
| SBC, % of revenue | 3.5% | 3.3% | 4.6% | 3.6% | 2.7% | -0.8% |
| Net Income Margin | 10.1% | 9.1% | 4.1% | 8.8% | 2.0% | -6.8% |
| CAPEX, % of revenue | 3.5% | 2.9% | 2.9% | 3.2% | 2.4% | -0.7% |
|
|---|
| ROIC | 12.5% | 14.8% | 7.3% | 14.0% | 28.1% | 14.0% |
| ROE | 15.0% | 15.6% | 7.3% | 17.0% | 4.6% | -12.4% |
| Net Debt/EBITDA | -1.2x | -0.4x | -0.8x | -0.5x | -0.7x | -0.2x |
| Interest expence / Average debt | 3.6% | 3.4% | 2.6% | 2.4% | 3.2% | 0.8% |
People
|
|---|
| Insider ownership | 0.3% | 0.3% | 0.3% | 0.3% | 0.3% | 0.0% |
| Employees | 12,490 | 12,810 | 12,030 | 10,100 | 10,300 | 2.0% |
| Revenue/Employee, th. $ | 506 | 478 | 461 | 544 | 575 | 5.7% |
NetApp, Inc. ($NTAP) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,321 | 1,415 | 1,539 | 1,644 | | 2.1% | 5.6% | 9.6% | 13.1% |
| EBITDA | 191 | 267 | 538 | 360 | | 24.8% | 34.2% | 125.1% | 40.6% |
| Net Income | 131 | 174 | -479 | 290 | | 104.7% | 59.6% | -428.1% | 79.0% |
Balance Sheet
|
|---|
| Cash | 2,951 | 3,535 | 2,974 | 2,941 | | 28.6% | 67.3% | 34.4% | 20.3% |
| Short Term Debt | 1,643 | 1,468 | 632 | 385 | | | | -44.6% | -69.2% |
| Long Term Debt | 745 | 1,540 | 1,540 | 1,541 | | -50.0% | 3.2% | 107.0% | 107.1% |
Ratios
|
|---|
| Gross Margin | 62.4% | 63.6% | 62.1% | 62.6% | | 0.8% | 1.7% | 1.5% | 1.5% |
| EBITDA Margin | 14.5% | 18.9% | 35.0% | 21.9% | | 2.6% | 4.0% | 17.9% | 4.3% |
| Net Income Margin | 9.9% | 12.3% | -31.1% | 17.6% | | 5.0% | 4.2% | -41.5% | 6.5% |
Peers in Technology Hardware, Storage &
Below we provide NetApp, Inc. benchmarking against other companies in Technology Hardware, Storage & industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crossroads Systems Inc ($CRSS) | | -90.6% | -35.5% | -89.5% | 39,959.5% |
| Immersion Corporation ($IMMR) | | 19.8% | -9.9% | -38.7% | 217.0% |
| Veritec Inc ($VRTC) | | -42.2% | -28.0% | -52.2% | 53.1% |
| Boxlight Corporation ($BOXL) | | -88.5% | 503.2% | 26.4% | 47.0% |
| Pure Storage, Inc. ($PSTG) | | 308.2% | 152.4% | 67.9% | 38.6% |
| |
|---|
| Median (30 companies) | -16.9% | -3.3% | -4.3% | 2.1% | 4.3% |
|---|
| NetApp, Inc. ($NTAP) | | -3.2% | -9.4% | -1.0% | 7.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Immersion Corporation ($IMMR) | 99.1% | 99.3% | 99.7% | 99.4% | 99.8% |
| Pure Storage, Inc. ($PSTG) | 43.5% | 55.5% | 61.9% | 65.9% | 65.5% |
| Avid Technology, Inc. ($AVID) | 61.4% | 60.9% | 65.0% | 57.8% | 57.9% |
| Datasea Inc ($DTSS) | | | | 39.3% | 54.4% |
| Socket Mobile, Inc. ($SCKT) | 43.6% | 48.6% | 50.2% | 53.5% | 51.4% |
| |
|---|
| Median (29 companies) | 35.6% | 35.0% | 38.5% | 38.9% | 38.3% |
|---|
| NetApp, Inc. ($NTAP) | 62.0% | 62.6% | 60.8% | 61.3% | 62.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Immersion Corporation ($IMMR) | 12.3% | 9.0% | -25.1% | -127.0% | 48.6% |
| Apple Inc. ($AAPL) | 33.1% | 35.3% | 32.7% | 31.2% | 30.8% |
| Western Digital Corporation ($WDC) | 20.1% | 18.7% | 12.5% | 21.4% | 27.5% |
| Seagate Technology PLC ($STX) | 19.3% | 21.1% | 11.3% | 16.7% | 20.0% |
| Hewlett Packard Enterprise Company ($HPE) | 11.8% | 10.5% | 25.4% | 12.7% | 14.4% |
| |
|---|
| Median (29 companies) | 7.1% | 6.2% | 3.8% | 3.5% | 7.9% |
|---|
| NetApp, Inc. ($NTAP) | 16.9% | 16.7% | 11.3% | 15.4% | 22.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 6.6% | 6.4% | 10.8% | 10.9% | 9.6% |
| Pure Storage, Inc. ($PSTG) | 28.7% | 24.2% | 8.9% | 10.4% | 6.3% |
| 3D Systems Corporation ($DDD) | 3.5% | 3.4% | 2.6% | 4.8% | 5.9% |
| Apple Inc. ($AAPL) | 5.2% | 4.8% | 5.9% | 5.4% | 5.0% |
| Western Digital Corporation ($WDC) | 4.2% | 4.2% | 4.5% | 3.0% | 4.0% |
| |
|---|
| Median (29 companies) | 2.6% | 3.0% | 1.7% | 1.8% | 2.2% |
|---|
| NetApp, Inc. ($NTAP) | 3.5% | 2.9% | 2.9% | 3.2% | 2.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Avid Technology, Inc. ($AVID) | | | | | 252.4% |
| Ionix Technology Inc ($IINX) | | | | 23.9% | 204.5% |
| Immersion Corporation ($IMMR) | 7.6% | 5.8% | -21.5% | -138.9% | 96.8% |
| HP Inc. ($HPQ) | 8.0% | 8.7% | 15.8% | 60.8% | 72.9% |
| Apple Inc. ($AAPL) | 40.0% | 41.8% | 27.0% | 23.8% | 28.0% |
| |
|---|
| Median (37 companies) | 5.9% | 5.0% | -2.6% | 0.2% | 2.2% |
|---|
| NetApp, Inc. ($NTAP) | 12.5% | 14.8% | 7.3% | 14.0% | 28.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CPI Card Group Inc. ($PMTS) | 3.4x | 3.5x | 5.8x | | 12.4x |
| NCR Corporation ($NCR) | 4.9x | 6.6x | 2.7x | 2.3x | 5.2x |
| Avid Technology, Inc. ($AVID) | -0.7x | 3.1x | 1.7x | 5.6x | 4.8x |
| Xerox Corporation ($XRX) | 3.5x | 3.5x | 3.1x | 3.0x | 3.0x |
| Electronics for Imaging, Inc. ($EFII) | -0.2x | 1.4x | 1.3x | 1.6x | 1.7x |
| |
|---|
| Median (19 companies) | -0.2x | 0.6x | 0.4x | 0.5x | 1.1x |
|---|
| NetApp, Inc. ($NTAP) | -1.2x | -0.4x | -0.8x | -0.5x | -0.7x |
