UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
(Address of principal executive offices, including zip code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Emerging growth company |
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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 23, 2024, there were
TABLE OF CONTENTS
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Item 1 |
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3 |
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7 |
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Item 2 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3 |
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35 |
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Item 4 |
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36 |
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Item 1 |
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37 |
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Item 1A |
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37 |
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Item 2 |
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37 |
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Item 3 |
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37 |
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Item 4 |
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37 |
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Item 5 |
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Item 6 |
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TRADEMARKS
© 2024 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.
2
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
NETAPP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
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July 26, |
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April 26, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable |
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Inventories |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Purchased intangible assets, net |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of long-term debt |
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Short-term deferred revenue and financed unearned services revenue |
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Total current liabilities |
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Long-term debt |
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Other long-term liabilities |
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Long-term deferred revenue and financed unearned services revenue |
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Total liabilities |
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Stockholders' equity: |
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Common stock and additional paid-in capital, $ |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
3
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
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Three Months Ended |
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July 26, |
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July 28, |
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Net revenues: |
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Product |
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$ |
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$ |
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Services |
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Net revenues |
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Cost of revenues: |
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Cost of product |
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Cost of services |
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Total cost of revenues |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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Research and development |
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General and administrative |
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Restructuring charges |
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Acquisition-related expense |
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Total operating expenses |
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Income from operations |
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Other income, net |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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Net income per share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Shares used in net income per share calculations: |
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Basic |
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Diluted |
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See accompanying notes to condensed consolidated financial statements.
4
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
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Three Months Ended |
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July 26, |
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July 28, |
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Net income |
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$ |
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$ |
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Other comprehensive income: |
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Foreign currency translation adjustments |
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Unrealized gains (losses) on cash flow hedges: |
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Unrealized holding gains (losses) arising during the period |
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Reclassification adjustments for losses (gains) included in net income |
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Other comprehensive income |
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Comprehensive income |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
5
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
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Three Months Ended |
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July 26, |
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July 28, |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Non-cash operating lease cost |
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Stock-based compensation |
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Deferred income taxes |
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( |
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( |
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Other items, net |
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( |
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Changes in assets and liabilities, net of acquisitions of businesses: |
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Accounts receivable |
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Inventories |
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( |
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Other operating assets |
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Accounts payable |
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( |
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( |
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Accrued expenses |
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( |
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( |
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Deferred revenue and financed unearned services revenue |
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( |
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( |
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Long-term taxes payable |
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Other operating liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchases of investments |
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( |
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Maturities, sales and collections of investments |
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Purchases of property and equipment |
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( |
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( |
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Other investing activities, net |
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( |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from issuance of common stock under employee stock award plans |
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Payments for taxes related to net share settlement of stock awards |
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( |
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( |
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Repurchase of common stock |
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( |
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( |
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Dividends paid |
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( |
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( |
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Other financing activities, net |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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Net change in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash: |
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Beginning of period |
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End of period |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
6
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per share amounts)
(Unaudited)
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Three Months Ended July 26, 2024 |
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Accumulated |
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Common Stock and |
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Other |
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Additional Paid-in Capital |
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Retained |
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Comprehensive |
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Shares |
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Amount |
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Earnings |
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Loss |
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Total |
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Balances, April 26, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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Issuance of common stock under employee stock award plans, net of taxes |
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( |
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— |
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— |
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( |
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Repurchase of common stock |
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( |
) |
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( |
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( |
) |
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— |
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( |
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Excise tax on net stock repurchases |
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— |
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( |
) |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Cash dividends declared ($ |
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— |
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( |
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( |
) |
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— |
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( |
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Balances, July 26, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Three Months Ended July 28, 2023 |
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Accumulated |
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Common Stock and |
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Other |
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Additional Paid-in Capital |
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Retained |
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Comprehensive |
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Shares |
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Amount |
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Earnings |
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Loss |
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Total |
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Balances, April 28, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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Issuance of common stock under employee stock award plans, net of taxes |
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( |
) |
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— |
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— |
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( |
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Repurchase of common stock |
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( |
) |
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( |
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( |
) |
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— |
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( |
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Excise tax on net stock repurchases |
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— |
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( |
) |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Cash dividends declared ($ |
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— |
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( |
) |
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( |
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— |
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( |
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Balances, July 28, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying notes to condensed consolidated financial statements.
7
NETAPP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and Significant Accounting Policies
NetApp, Inc. (we, us, NetApp, or the Company) makes data infrastructure intelligent by combining unified data storage, integrated data services, and CloudOps solutions. NetApp creates silo-free infrastructure, harnessing observability and artificial intelligence to enable seamless data management. We provide a full range of enterprise-class software, systems and services that customers use to transform their data infrastructures across data types, workloads, and environments to realize business possibilities.
Basis of Presentation and Preparation
Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2025 and 2024, ending on April 25, 2025 and April 26, 2024, respectively, are each 52-week years, with 13 weeks in each quarter.
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company, and reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, comprehensive income, cash flows and stockholders’ equity for the interim periods presented. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, these statements do not include all information and footnotes required by GAAP for annual consolidated financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the fiscal year ended April 26, 2024 contained in our Annual Report on Form 10-K. The results of operations for the three months ended July 26, 2024 are not necessarily indicative of the operating results to be expected for the full fiscal year or future operating periods.
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation; valuation of goodwill and intangibles; restructuring reserves; employee benefit accruals; stock-based compensation; loss contingencies; investment impairments; income taxes and fair value measurements. Actual results could differ materially from those estimates, the anticipated effects of which have been incorporated, as applicable, into management's estimates as of July 26, 2024.
2. Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the effect of this pronouncement on our income tax disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. We will adopt the new requirements for our annual periods starting in fiscal 2025 (and interim periods thereafter). We are currently evaluating the effect of this pronouncement, which we expect to result in enhanced financial statement disclosures only.
3. Goodwill and Purchased Intangible Assets, Net
Goodwill by reportable segment as of July 26, 2024 is as follows (in millions):
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Amount |
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Hybrid Cloud |
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$ |
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Public Cloud |
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Total goodwill |
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$ |
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8
Purchased intangible assets, net are summarized below (in millions):
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July 26, |
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April 26, |
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Gross |
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Accumulated |
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Net |
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Gross |
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Accumulated |
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Net |
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Assets |
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Amortization |
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Assets |
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Assets |
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Amortization |
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Assets |
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Developed technology |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
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$ |
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Customer contracts/relationships |
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( |
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( |
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Other purchased intangibles |
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( |
) |
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( |
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Total purchased intangible assets |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
( |
) |
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$ |
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During the first three months of fiscal 2025, we retired approximately $
Amortization expense for purchased intangible assets is summarized below (in millions):
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Three Months Ended |
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Statements of |
|||||
|
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July 26, |
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July 28, |
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Income |
||
Developed technology |
|
$ |
|
|
$ |
|
|
Cost of revenues |
||
Customer contracts/relationships |
|
|
|
|
|
|
|
Operating expenses |
||
Other purchased intangibles |
|
|
|
|
|
|
|
Operating expenses |
||
Total |
|
$ |
|
|
$ |
|
|
|
||
As of July 26, 2024, future amortization expense related to purchased intangible assets is as follows (in millions):
Fiscal Year |
|
Amount |
|
|
2025 (remainder) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total |
|
$ |
|
|
4. Supplemental Financial Information
Cash and cash equivalents (in millions):
The following table presents cash and cash equivalents as reported in our condensed consolidated balance sheets, as well as the sum of cash, cash equivalents and restricted cash as reported on our condensed consolidated statements of cash flows:
|
|
July 26, |
|
|
April 26, |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
Inventories (in millions):
|
|
July 26, |
|
|
April 26, |
|
||
Purchased components |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
9
Property and equipment, net (in millions):
|
|
July 26, |
|
|
April 26, |
|
||
Land |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Computer, production, engineering and other equipment |
|
|
|
|
|
|
||
Computer software |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Construction-in-progress |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Other non-current assets (in millions):
|
|
July 26, |
|
|
April 26, |
|
||
Deferred tax assets |
|
$ |
|
|
$ |
|
||
Operating lease right-of-use (ROU) assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Other non-current assets |
|
$ |
|
|
$ |
|
||
Other non-current assets as of both July 26, 2024 and April 26, 2024 include $
Accrued expenses (in millions):
|
|
July 26, |
|
|
April 26, |
|
||
Accrued compensation and benefits |
|
$ |
|
|
$ |
|
||
Product warranty liabilities |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Accrued expenses |
|
$ |
|
|
$ |
|
||
Other long-term liabilities (in millions):
|
|
July 26, |
|
|
April 26, |
|
||
Liability for uncertain tax positions |
|
$ |
|
|
$ |
|
||
Income taxes payable |
|
|
|
|
|
|
||
Product warranty liabilities |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Other long-term liabilities |
|
$ |
|
|
$ |
|
||
Deferred revenue and financed unearned services revenue
The following table summarizes the components of our deferred revenue and financed unearned services revenue balance as reported in our condensed consolidated balance sheets (in millions):
10
|
|
July 26, |
|
|
April 26, |
|
||
Deferred product revenue |
|
$ |
|
|
$ |
|
||
Deferred services revenue |
|
|
|
|
|
|
||
Financed unearned services revenue |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Reported as: |
|
|
|
|
|
|
||
Short-term |
|
$ |
|
|
$ |
|
||
Long-term |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Deferred product revenue represents unrecognized revenue related to undelivered product commitments and other product deliveries that have not met all revenue recognition criteria. Deferred services revenue represents customer payments made in advance for services, which include software and hardware support contracts, certain public cloud services and other services. Financed unearned services revenue represents undelivered services for which cash has been received under certain third-party financing arrangements. See Note 14 – Commitments and Contingencies for additional information related to these arrangements.
During the three months ended July 26, 2024 and July 28, 2023, we recognized revenue of $
Remaining performance obligations
As of July 26, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied was $
Deferred commissions
|
|
July 26, |
|
|
April 26, |
|
||
Other current assets |
|
$ |
|
|
$ |
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total deferred commissions |
|
$ |
|
|
$ |
|
||
Other income, net (in millions):
|
|
Three Months Ended |
|
|||||
|
|
July 26, |
|
|
July 28, |
|
||
Interest income |
|
$ |
|
|
$ |
|
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
( |
) |
|
|
( |
) |
Total other income, net |
|
$ |
|
|
$ |
|
||
Statements of cash flows additional information (in millions):
Supplemental cash flow information related to our operating leases is included in Note 7 ─ Leases. Non-cash investing activities and other supplemental cash flow information are presented below:
11
|
|
Three Months Ended |
|
|||||
|
|
July 26, |
|
|
July 28, |
|
||
Non-cash Investing Activities: |
|
|
|
|
|
|
||
Capital expenditures incurred but not paid |
|
$ |
|
|
$ |
|
||
Supplemental Cash Flow Information: |
|
|
|
|
|
|
||
Income taxes paid, net of refunds |
|
$ |
|
|
$ |
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
5. Financial Instruments and Fair Value Measurements
The accounting guidance for fair value measurements provides a framework for measuring fair value on either a recurring or nonrecurring basis, whereby the inputs used in valuation techniques are assigned a hierarchical level. The following are the three levels of inputs to measure fair value:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs that reflect quoted prices for identical assets or liabilities in less active markets; quoted prices for similar assets or liabilities in active markets; benchmark yields, reported trades, broker/dealer quotes, inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs that reflect our own assumptions incorporated in valuation techniques used to measure fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our own or the counterparty’s non-performance risk is considered in measuring the fair values of liabilities and assets, respectively.
Investments
The following is a summary of our investments at their cost or amortized cost as of July 26, 2024 and April 26, 2024 (in millions):
|
|
July 26, |
|
|
April 26, |
|
||
U.S. Treasury and government debt securities |
|
$ |
|
|
$ |
|
||
Money market funds |
|
|
|
|
|
|
||
Certificates of deposit |
|
|
|
|
|
|
||
Mutual funds |
|
|
|
|
|
|
||
Total debt and equity securities |
|
$ |
|
|
$ |
|
||
The fair value of our investments approximates their cost or amortized cost for both periods presented. Investments in mutual funds relate to the non-qualified deferred compensation plan offered to certain employees.
12
As of July 26, 2024, all our debt investments are due to mature in one year or less.
Fair Value of Financial Instruments
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis (in millions):
|
|
July 26, 2024 |
|
|||||||||
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|||
Cash |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Money market funds |
|
|
|
|
|
|
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|||
U.S. Treasury and government debt securities |
|
|
|
|
|
|
|
|
|
|||
Total cash and cash equivalents |
|
|
|
|
|
|
|
|
||||