01—Abstract
Summary
Summary of the 10-K filed June 21, 2021. Cited figures are marked; the original filing is the authoritative source.
NetApp, Inc. (NASDAQ: NTAP) reported fiscal 2021 net revenues of $5.74 billiona, up 6% from $5.41 billion in fiscal 2020, primarily driven by higher hardware and software support revenues, while product revenues were roughly flat at $2.99 billion.
Gross profit margin was 66%, down from 67% the prior year, and income from operations rose to $1.03 billionb, or 18% of net revenues, helped by a $156 million gain on the sale of Sunnyvale headquarters properties. Net income declined to $730 million from $819 million, and diluted EPS fell to $3.23 from $3.52. The company describes itself as a global cloud-led, data-centric software company and highlights growth in Public Cloud Services, which are included in software support revenues.
Cash flow and balance sheet activity were significant during the year. Net cash provided by operating activities was $1.33 billionc, and cash, cash equivalents and short-term investments rose to $4.60 billion, supported by $2.0 billion of net proceeds from Senior Notes issued in June 2020. Total Senior Notes principal stood at $2.65 billion as of April 30, 2021.
The company acquired Spot, Inc. for $340 milliond and Cloud Jumper Corporation for $34 million, repurchased $125 million of common stock, and paid $427 million in dividends. Management declared a $0.50 quarterly dividend for the first quarter of fiscal 2022.
The filing also flags continuing risks, including a long-term decline in the networked storage hardware market, reliance on indirect channel partners (77% of fiscal 2021 net revenues), concentration with distributors Arrow Electronics (24%) and Tech Data (20%), COVID-19 uncertainty, supply chain constraints, and cybersecurity exposure. Management also notes that a securities class action was dismissed in February 2021 and is under appeal.
02—Key points
Key Highlights
- Net revenues rose 6% to $5.74 billion in fiscal 2021, led by software support revenues of $1.28 billion, up 24%.
- Product revenues were flat at $2.99 billion, with the software component reaching $1.64 billion, or 55% of product revenues, versus 49% a year earlier.
- Gross profit margin was 66%, down from 67%, while income from operations grew to $1.03 billion from $945 million.
- Net income fell to $730 million from $819 million, and diluted EPS declined to $3.23 from $3.52.
- Operating cash flow increased to $1.33 billion, and cash, cash equivalents and short-term investments reached $4.60 billion at year-end.
- Sale of Sunnyvale headquarters properties generated $365 million in cash proceeds and a net gain of $156 million.
- Board authorized $13.6 billion in total repurchases under the program, with $0.3 billion remaining, and an additional $500 million was authorized on May 28, 2021.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, NetApp kept $0.13.
- Revenue$5.74B100.0%
- Cost of revenue−$1.93B33.6%
- Gross profit$3.81B66.4%
- Operating costs−$2.78B48.5%
- Operating income$1.03B17.9%
- Interest, other & tax−$301.0M5.2%
- Net income$730.0M12.7%
Where FY2021 revenue went
$5.74B- Cost of revenue: $1.93B, 34% of revenue
- Other operating costs: $1.90B, 33% of revenue
- R&D: $881.0M, 15% of revenue
- Net income: $730.0M, 13% of revenue
- Interest, other & tax: $301.0M, 5.2% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed June 21, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $5.74B$5.41B | +6.1% |
| Cost of Revenue | $1.93B$1.79B | +7.8% |
| Gross Profit | $3.81B$3.62B | +5.3% |
| R&D Expenses | $881.00M$847.00M | +4.0% |
| Operating Expenses | $2.78B$2.68B | +4.0% |
| Operating Income | $1.03B$945.00M | +9.1% |
| Interest Expense | $74.00M$55.00M | +34.5% |
| Net Income | $730.00M$819.00M | −10.9% |
| EPS (Basic) | $3.29$3.56 | −7.6% |
| EPS (Diluted) | $3.23$3.52 | −8.2% |
| Shares Outstanding (Basic) | 222.00M230.00M | −3.5% |
| Shares Outstanding (Diluted) | 226.00M233.00M | −3.0% |
05—Questions
Frequently Asked Questions
How did NetApp's revenue and profitability trend in fiscal 2021?
Net revenues increased 6% to $5.74 billion, mainly due to higher hardware and software support revenues, while product revenues were relatively flat. Gross profit margin decreased to 66% from 67%, but income from operations increased to $1.03 billion from $945 million, partly due to the gain on sale of properties. Net income decreased to $730 million from $819 million.
What drove the growth in software support revenues?
Software support revenues increased 24% to $1.28 billion, reflecting higher Public Cloud Services revenue and a larger aggregate contract value of the installed base. The filing also notes that the additional week in the first quarter contributed approximately $20 million of additional revenues.
How is NetApp's debt position and liquidity?
As of April 30, 2021, Senior Notes principal totaled $2.65 billion, maturing across 2022 through 2030. The company issued $2.0 billion of net proceeds from new notes in June 2020 and extinguished $513 million of notes due June 2021. No commercial paper was outstanding, and the $1.0 billion revolving credit facility was undrawn. Cash, cash equivalents and short-term investments totaled $4.60 billion.
What are the main risks highlighted in the filing?
Key risks include a decline in the traditional networked storage hardware market over the last three calendar years, dependence on indirect channel partners that represent 77% of net revenues, and concentration with distributors Arrow Electronics (24%) and Tech Data (20%). The filing also cites COVID-19 uncertainty, supply chain disruptions, reliance on limited suppliers, and cybersecurity threats.
What capital returns did NetApp provide to shareholders?
NetApp paid $427 million in dividends, equal to $1.92 per share for fiscal 2021, and repurchased about 2 million shares for $125 million, with the program suspended for the first half of the year due to COVID-19. In the first quarter of fiscal 2022, the company declared a $0.50 per share dividend payable July 28, 2021.
06—Continue