01—Abstract
Summary
Summary of the 10-K filed June 12, 2015. Cited figures are marked; the original filing is the authoritative source.
NetApp, Inc. reported fiscal 2015 (year ended April 24, 2015) net revenues of $6.12 billiona, down 3% from $6.33 billion in fiscal 2014.
Product revenues fell 7% to $3.65 billionb, while hardware maintenance and other services revenues rose 7% to $1.57 billion, and software maintenance revenues declined 2% to $898.6 million. Net income was $559.9 million, or $1.75 per diluted share, versus $637.5 million and $1.83 in fiscal 2014. Gross profit margin improved to 63% from 62%, but income from operations was roughly flat at 12% of revenue, and the effective tax rate rose to 21.5% from 13.9%, mainly due to income tax audit settlements.
The company ended the year with $5.33 billionc in cash, cash equivalents and short-term investments, against $1.5 billion of Senior Notes outstanding, and operating cash flow of $1.27 billion. During the year NetApp repurchased 29.6 million shares for $1.17 billion and paid $207.4 million in dividends. Its board had $2.5 billion remaining under the repurchase authorization, and the company declared a $0.18 quarterly dividend on May 20, 2015.
Management also announced a May 2015 realignment expected to cut about 500 employees and cost $25 million to $35 milliond, mostly in the first quarter of fiscal 2016. Management highlighted its shift toward hybrid cloud, flash, converged infrastructure and software-defined storage, and noted that indirect channels generated 80% of net revenues.
George Kurian became chief executive officer on June 1, 2015. Key risks disclosed include a storage market that did not grow in calendar 2013 or 2014, a transition from Data ONTAP 7-Mode to clustered Data ONTAP, heavy reliance on distributors Arrow Electronics (23% of revenue) and Avnet (16%), and $4.7 billion of cash held by foreign subsidiaries, whose repatriation could trigger significant tax costs.
02—Key points
Key Highlights
- Net revenues fell 3% to $6.12 billion in fiscal 2015, driven by a 7% decline in product revenues to $3.65 billion.
- Hardware maintenance and other services revenues rose 7% to $1.57 billion, and gross profit margin improved to 63% from 62%.
- Net income declined to $559.9 million ($1.75 diluted EPS) from $637.5 million ($1.83), with the effective tax rate rising to 21.5% from 13.9%.
- Cash, cash equivalents and short-term investments reached $5.33 billion, with $1.27 billion of operating cash flow.
- NetApp repurchased 29.6 million shares for $1.17 billion and paid $207.4 million in dividends; $2.5 billion remained under the repurchase authorization.
- A May 2015 realignment is expected to reduce headcount by about 500 employees, with charges of $25 million to $35 million.
- Indirect channels generated 80% of net revenues, and two distributors, Arrow Electronics and Avnet, accounted for 23% and 16% of revenues.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, NetApp kept $0.09.
- Revenue$6.12B100.0%
- Cost of revenue−$2.29B37.4%
- Gross profit$3.83B62.6%
- Operating costs−$3.12B50.9%
- Operating income$716.0M11.7%
- Interest, other & tax−$156.0M2.5%
- Net income$560.0M9.1%
Where FY2015 revenue went
$6.12B- Cost of revenue: $2.29B, 37% of revenue
- Other operating costs: $2.20B, 36% of revenue
- R&D: $920.0M, 15% of revenue
- Net income: $560.0M, 9.1% of revenue
- Interest, other & tax: $156.0M, 2.5% of revenue
Kept 9.1% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed June 12, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $6.12B$6.33B | −3.2% |
| Cost of Revenue | $2.29B$2.41B | −4.8% |
| Gross Profit | $3.83B$3.92B | −2.2% |
| R&D Expenses | $920.00M$918.00M | +0.2% |
| Operating Expenses | $3.12B$3.19B | −2.1% |
| Operating Income | $716.00M$734.00M | −2.5% |
| Interest Expense | $42.00M$36.00M | +16.7% |
| Net Income | $560.00M$638.00M | −12.2% |
| EPS (Basic) | $1.77$1.87 | −5.3% |
| EPS (Diluted) | $1.75$1.83 | −4.4% |
| Shares Outstanding (Basic) | 316.00M340.00M | −7.1% |
| Shares Outstanding (Diluted) | 321.00M348.00M | −7.8% |
05—Questions
Frequently Asked Questions
How did NetApp's revenue and profitability change in fiscal 2015?
Net revenues were $6.12 billion, down 3% from $6.33 billion, mainly due to a $289.3 million reduction in product revenues, partly offset by a $103.1 million increase in hardware maintenance and other services. Net income fell to $559.9 million from $637.5 million, reflecting lower operating income in dollars and a higher effective tax rate of 21.5%. Gross profit margin rose to 63% from 62%.
How much cash does NetApp have, and how is it being returned to shareholders?
NetApp held $5.33 billion in cash, cash equivalents and short-term investments at April 24, 2015. During fiscal 2015 it repurchased 29.6 million shares for $1.17 billion and paid $207.4 million in dividends. The board had $2.5 billion remaining under its repurchase authorization, and a $0.18 per share quarterly dividend was declared on May 20, 2015.
What restructuring actions did NetApp announce?
On May 19, 2015, NetApp committed to a realignment expected to reduce global headcount by about 500 employees. The company expects aggregate charges of $25 million to $35 million, mostly cash, with most recognized in the first quarter of fiscal 2016.
What are the main risks highlighted in the filing?
The filing cites a storage market that did not grow in calendar 2013 or 2014, the difficulty of transitioning customers from Data ONTAP 7-Mode to clustered Data ONTAP, and reliance on channel partners for 80% of revenue. It also flags concentration among distributors Arrow Electronics (23% of net revenues) and Avnet (16%), and $4.7 billion of cash held by foreign subsidiaries, whose repatriation could trigger significant tax liability.
06—Continue