01—Abstract
Summary
Summary of the 10-K filed June 14, 2023. Cited figures are marked; the original filing is the authoritative source.
NetApp, Inc. (NASDAQ: NTAP) reported net revenues of $6,362 milliona for fiscal 2023 (ended April 28, 2023), up from $6,318 million in fiscal 2022, with net income rising to $1,274 million from $937 million and diluted net income per share of $5.79 versus $4.09.
The increase in net income was aided by a discrete tax benefit of $524 millionb from an intra-entity transfer of intellectual property, which produced a benefit from income taxes of $208 million for the year. Income from operations declined to $1,018 million from $1,157 million, and the company cited softening customer demand, lower product revenues (down 7% to $3,049 million), and higher restructuring charges of $120 million, which followed workforce reductions of approximately 8% in the fourth quarter. Services revenues grew 9% to $3,313 million, driven by public cloud revenues of $575 million (up 45%) and support revenues.
Cash, cash equivalents and short-term investments fell to $3,070 millionc from $4,134 million, primarily because of $850 million in share repurchases, $432 million in dividends, and $491 million for the Instaclustr acquisition. Senior notes principal stood at $2,400 million, and the company declared an additional $1.0 billion stock repurchase authorization on May 26, 2023, with $402 million remaining under the existing program as of year-end.
Management stated that global economic uncertainty had a material adverse effect on demand in fiscal 2023 and that it may observe further reductions in customer demand in fiscal 2024. The company expects capital expenditures of $175 million to $225 milliond for fiscal 2024 and has outstanding transition tax payments of approximately $303 million scheduled through fiscal 2026.
02—Key points
Key Highlights
- Net revenues were $6,362 million, up slightly from $6,318 million, with services revenues up 9% to $3,313 million and product revenues down 7% to $3,049 million.
- Net income increased to $1,274 million, or $5.79 per diluted share, versus $937 million, or $4.09 per diluted share, in fiscal 2022, helped by a $524 million discrete tax benefit from an intellectual property transfer.
- Income from operations decreased to $1,018 million from $1,157 million, with restructuring charges rising to $120 million from $33 million.
- Public cloud revenues increased 45% to $575 million, and the Instaclustr acquisition for approximately $498 million was completed on May 20, 2022.
- Cash, cash equivalents and short-term investments declined to $3,070 million from $4,134 million, after $850 million in share repurchases and $432 million in dividends.
- Management reported that global economic uncertainty had a material adverse impact on product demand in fiscal 2023 and could continue to affect demand in fiscal 2024.
- Quarterly cash dividends of $0.50 per share were maintained, and a further $1.0 billion share repurchase authorization was approved on May 26, 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, NetApp kept $0.20.
- Revenue$6.36B100.0%
- Cost of revenue−$2.15B33.8%
- Gross profit$4.21B66.2%
- Operating costs−$3.19B50.2%
- Operating income$1.02B16.0%
- Interest, other & tax$256.0M4.0%
- Net income$1.27B20.0%
Where FY2023 revenue went
$6.36B- Other operating costs: $2.23B, 35% of revenue
- Cost of revenue: $2.15B, 34% of revenue
- Operating income: $1.02B, 16% of revenue
- R&D: $956.0M, 15% of revenue
Kept 16% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed June 14, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $6.36B$6.32B | +0.7% |
| Cost of Revenue | $2.15B$2.10B | +2.6% |
| Gross Profit | $4.21B$4.22B | −0.3% |
| R&D Expenses | $956.00M$881.00M | +8.5% |
| Operating Expenses | $3.19B$3.06B | +4.2% |
| Operating Income | $1.02B$1.16B | −12.0% |
| Interest Expense | $67.00M$73.00M | −8.2% |
| Net Income | $1.27B$937.00M | +36.0% |
| EPS (Basic) | $5.87$4.20 | +39.8% |
| EPS (Diluted) | $5.79$4.09 | +41.6% |
| Shares Outstanding (Basic) | 217.00M223.00M | −2.7% |
| Shares Outstanding (Diluted) | 220.00M229.00M | −3.9% |
05—Questions
Frequently Asked Questions
How did NetApp's profitability change in fiscal 2023?
Net income rose to $1,274 million from $937 million, and diluted net income per share rose to $5.79 from $4.09. However, income from operations fell to $1,018 million from $1,157 million. The higher net income was largely attributable to a $524 million discrete tax benefit from an intra-entity transfer of intellectual property, which produced a benefit from income taxes of $208 million.
What drove the change in NetApp's revenue mix?
Total net revenues rose slightly to $6,362 million from $6,318 million. Services revenues increased 9% to $3,313 million, led by public cloud revenues of $575 million, up 45%. Product revenues decreased 7% to $3,049 million, primarily due to lower sales of all-flash array systems as a result of softening customer demand.
How much cash did NetApp return to shareholders and how much cash does it have?
In fiscal 2023, NetApp repurchased approximately 13 million shares for $850 million and paid $432 million in dividends. Cash, cash equivalents and short-term investments totaled $3,070 million at April 28, 2023, down from $4,134 million a year earlier. As of that date, $402 million remained under the stock repurchase program, and an additional $1.0 billion was authorized on May 26, 2023.
What debt obligations does NetApp have?
NetApp had $2,400 million in aggregate principal amount of Senior Notes outstanding as of April 28, 2023, maturing in 2024, 2025, 2027 and 2030. It also has a $1.0 billion revolving unsecured credit facility maturing January 22, 2026, under which no amounts were drawn. The company stated it was in compliance with all associated covenants.
What risks did management highlight for fiscal 2024?
Management noted that continuing global economic uncertainty, political conditions and fiscal challenges may lead to adverse macroeconomic conditions, and that a further reduction in customer demand could affect operating results if these uncertainties persist or worsen. Supply chain constraints in the first half of fiscal 2023 increased component and freight costs, and the company is implementing new business information systems in fiscal 2024.
06—Continue