01—Abstract
Summary
Summary of the 10-K filed June 10, 2024. Cited figures are marked; the original filing is the authoritative source.
NetApp, Inc. reported fiscal 2024 (year ended April 26, 2024) net revenues of $6,268 milliona, a decrease from $6,362 million in fiscal 2023, driven by lower product revenues partially offset by higher services revenues.
Product revenues fell to $2,849 millionb from $3,049 million, while services revenues rose to $3,419 million from $3,313 million. Gross margin improved to 71% from 66%, largely due to lower component and freight costs in Hybrid Cloud product revenues, and income from operations increased to $1,214 million from $1,018 million. Net income declined to $986 million from $1,274 million, primarily because fiscal 2023 benefited from a $524 million discrete tax benefit tied to an intra-entity IP transfer, while fiscal 2024 recorded a $277 million tax provision.
Management described a weakened demand environment in fiscal 2024, characterized by cloud optimizations and increased budget scrutiny, which resulted in smaller deal sizes, longer selling cycles, and delayed deals. Cash flow from operations was $1,685 millionc, up from $1,107 million. The company returned capital to shareholders through $900 million of share repurchases and $416 million of dividends, and it authorized an additional $1.0 billion repurchase on May 23, 2024.
Cash, cash equivalents and short-term investments totaled $3,252 milliond, against $2,400 million of senior notes principal, with $400 million of that principal classified as current. The filing highlights the Public Cloud segment, which grew to $611 million of revenue from $575 million, and the company's ongoing investment in research and development, which rose to $1,029 million from $956 million. Management expects fiscal 2025 capital expenditures between $150 million and $200 million and notes that macroeconomic uncertainty could reduce customer demand further.
02—Key points
Key Highlights
- Net revenues were $6,268 million in fiscal 2024, down from $6,362 million in fiscal 2023, as product revenues declined to $2,849 million from $3,049 million.
- Gross margin rose to 71% from 66%, and income from operations increased to $1,214 million from $1,018 million.
- Net income fell to $986 million from $1,274 million, mainly because fiscal 2023 included a $524 million discrete tax benefit from an IP transfer.
- Public Cloud revenues grew to $611 million from $575 million, while Hybrid Cloud net revenues were $5,657 million in fiscal 2024.
- Operating cash flow increased to $1,685 million from $1,107 million.
- Shareholder returns in fiscal 2024 included $900 million in share repurchases and $416 million in dividends, and an additional $1.0 billion repurchase authorization was approved on May 23, 2024.
- Management cited a weakened demand environment with smaller deal sizes, longer selling cycles, and delayed deals; $400 million of senior notes are due in September 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2024, NetApp kept $0.16.
- Revenue$6.27B100.0%
- Cost of revenue−$1.83B29.3%
- Gross profit$4.43B70.7%
- Operating costs−$3.22B51.4%
- Operating income$1.21B19.4%
- Interest, other & tax−$228.0M3.6%
- Net income$986.0M15.7%
Where FY2024 revenue went
$6.27B- Other operating costs: $2.19B, 35% of revenue
- Cost of revenue: $1.83B, 29% of revenue
- R&D: $1.03B, 16% of revenue
- Net income: $986.0M, 16% of revenue
- Interest, other & tax: $228.0M, 3.6% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2024filed June 10, 2024Financial Statements
FY2024 against FY2023
| Line item | FY2024FY2023 | Change |
|---|---|---|
| Revenue | $6.27B$6.36B | −1.5% |
| Cost of Revenue | $1.83B$2.15B | −14.8% |
| Gross Profit | $4.43B$4.21B | +5.3% |
| R&D Expenses | $1.03B$956.00M | +7.6% |
| Operating Expenses | $3.22B$3.19B | +0.9% |
| Operating Income | $1.21B$1.02B | +19.3% |
| Interest Expense | $64.00M$67.00M | −4.5% |
| Net Income | $986.00M$1.27B | −22.6% |
| EPS (Basic) | $4.74$5.87 | −19.3% |
| EPS (Diluted) | $4.63$5.79 | −20.0% |
| Shares Outstanding (Basic) | 208.00M217.00M | −4.1% |
| Shares Outstanding (Diluted) | 213.00M220.00M | −3.2% |
05—Questions
Frequently Asked Questions
Why did net income decline in fiscal 2024 even though operating income increased?
Fiscal 2023 net income benefited from a $524 million discrete tax benefit tied to an intra-entity transfer of intellectual property. Fiscal 2024 instead recorded a provision for income taxes of $277 million, compared with a benefit of $208 million in fiscal 2023, so net income fell to $986 million from $1,274 million even though income from operations rose to $1,214 million from $1,018 million.
What drove the improvement in gross margin?
The filing states that gross margin increased five percentage points to 71% in fiscal 2024, due to higher gross margins on product revenues. Hybrid Cloud gross margins improved by approximately ten percentage points, primarily due to lower component and freight costs from supply chain improvements.
How is the company returning cash to shareholders?
In fiscal 2024 NetApp repurchased approximately 12 million shares for $900 million and paid $416 million in dividends at $0.50 per quarter. It declared a $0.52 per share dividend for the first quarter of fiscal 2025, and on May 23, 2024 its Board authorized an additional $1.0 billion of repurchases. As of April 26, 2024, $0.5 billion remained under the program.
What are the main demand risks described by management?
Management stated that in fiscal 2024 it continued to experience a weakened demand environment, characterized by cloud optimizations and increased budget scrutiny, which resulted in smaller deal sizes, longer selling cycles, and the delay of some deals. It noted that if macroeconomic uncertainties persist or worsen in fiscal 2025, customer demand could decline further.
How concentrated are NetApp's sales channels and customers?
Sales through indirect channels represented 76% of net revenues in fiscal 2024. Two distributors, Arrow Electronics, Inc. and TD Synnex Corporation, each accounted for 22% of net revenues in fiscal 2024.
06—Continue