01—Abstract
Summary
Summary of the 10-K filed June 16, 2022. Cited figures are marked; the original filing is the authoritative source.
NetApp, Inc. reported fiscal 2022 (ended April 29, 2022) net revenues of $6.32 billiona, up from $5.74 billion in fiscal 2021, with net income of $937 million, or $4.09 per diluted share, compared with $730 million and $3.23 in fiscal 2021.
Gross profit rose to $4.22 billionb (66.8% gross margin), and income from operations increased to $1.16 billion from $1.03 billion. Growth was driven by higher product revenues, led by all-flash array systems, and services revenues, which increased primarily due to public cloud growth. Public cloud revenues reached $396 million versus $199 million in the prior year.
Sales through indirect channels represented 77% of net revenues. Cash flow and capital return remained substantial. Net cash provided by operating activities was $1.21 billionc, compared with $1.33 billion in fiscal 2021.
The company repurchased about 7 million shares for $600 milliond, paid $446 million in dividends, and ended the year with $4.13 billion in cash, cash equivalents and short-term investments against $2.65 billion of principal senior notes. Management noted that supply chain constraints, particularly in the second half of fiscal 2022, raised component and freight costs and delayed some customer orders, and it expects these pressures to continue to affect gross margins into fiscal 2023. The company reorganized into two reportable segments, Hybrid Cloud and Public Cloud, effective the first quarter of fiscal 2022.
Subsequent to year end, it acquired Instaclustr, Inc. for approximately $500 million, and it declared a quarterly dividend of $0.50 per share. Key risks cited include competition, supply chain disruption, cybersecurity, international operations, and the effects of the COVID-19 pandemic and Russia sanctions.
02—Key points
Key Highlights
- Net revenues increased to $6.32 billion in fiscal 2022 from $5.74 billion in fiscal 2021, with product revenues at $3.28 billion and services revenues at $3.03 billion.
- Public cloud revenues nearly doubled to $396 million from $199 million, and the company now reports two segments, Hybrid Cloud and Public Cloud.
- Net income was $937 million, or $4.09 per diluted share, versus $730 million, or $3.23 per diluted share, in fiscal 2021.
- Gross profit margin was 66.8% on total gross profit of $4.22 billion, and income from operations reached $1.16 billion.
- The company returned capital through $600 million of share repurchases (about 7 million shares) and $446 million of dividends, and $1.25 billion remained under its repurchase authorization.
- Cash, cash equivalents and short-term investments totaled $4.13 billion at year end, against $2.65 billion of senior notes principal.
- Subsequent to year end, NetApp acquired Instaclustr, Inc. for approximately $500 million, and management flagged supply chain constraints and higher component and freight costs as continuing pressures.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, NetApp kept $0.15.
- Revenue$6.32B100.0%
- Cost of revenue−$2.10B33.2%
- Gross profit$4.22B66.8%
- Operating costs−$3.06B48.5%
- Operating income$1.16B18.3%
- Interest, other & tax−$220.0M3.5%
- Net income$937.0M14.8%
Where FY2022 revenue went
$6.32B- Other operating costs: $2.18B, 35% of revenue
- Cost of revenue: $2.10B, 33% of revenue
- Net income: $937.0M, 15% of revenue
- R&D: $881.0M, 14% of revenue
- Interest, other & tax: $220.0M, 3.5% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed June 16, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $6.32B$5.74B | +10.0% |
| Cost of Revenue | $2.10B$1.93B | +8.8% |
| Gross Profit | $4.22B$3.81B | +10.6% |
| R&D Expenses | $881.00M$881.00M | 0.0% |
| Operating Expenses | $3.06B$2.78B | +10.0% |
| Operating Income | $1.16B$1.03B | +12.2% |
| Interest Expense | $73.00M$74.00M | −1.4% |
| Net Income | $937.00M$730.00M | +28.4% |
| EPS (Basic) | $4.20$3.29 | +27.7% |
| EPS (Diluted) | $4.09$3.23 | +26.6% |
| Shares Outstanding (Basic) | 223.00M222.00M | +0.5% |
| Shares Outstanding (Diluted) | 229.00M226.00M | +1.3% |
05—Questions
Frequently Asked Questions
How did NetApp's revenue and profitability change in fiscal 2022?
Net revenues rose 10% to $6.32 billion, driven by higher product and services revenues, with public cloud revenues reaching $396 million. Net income increased to $937 million from $730 million, and diluted EPS rose to $4.09 from $3.23. Income from operations grew to $1.16 billion from $1.03 billion.
What drove growth in product and services revenue?
Product revenues increased to $3.28 billion, primarily from higher sales of all-flash array systems, partly offset by lower NetApp HCI sales. Services revenues rose to $3.03 billion, reflecting higher support revenue from a richer mix of all-flash systems and growth in public cloud revenues.
How much cash did NetApp generate and how did it use it?
Operating cash flow was $1.21 billion. The company used $600 million to repurchase shares, $446 million for dividends, $226 million for capital expenditures, and $380 million, net of cash acquired, for three acquisitions. Cash, cash equivalents and short-term investments decreased by $462 million to $4.13 billion.
What risks did management highlight for fiscal 2023?
Management said inflationary pressure and supply chain constraints raised component and freight costs, which it expects to continue affecting gross margins into fiscal 2023. Supply chain constraints also delayed fulfillment of some customer orders. The filing further cites COVID-19, Russia sanctions, competition, and cybersecurity as significant risks.
What are the company's debt and capital return commitments?
Senior notes principal totaled $2.65 billion, with $250 million classified as current and maturing in December 2022. A $1.0 billion revolving credit facility was undrawn at year end. The board had authorized up to $15.1 billion in share repurchases since 2003, with $1.25 billion remaining, and it declared a $0.50 quarterly dividend payable July 27, 2022.
06—Continue