01—Abstract
Summary
Summary of the 10-Q filed August 28, 2024. Cited figures are marked; the original filing is the authoritative source.
NetApp, Inc. reported net revenues of $1,541 milliona for the first quarter of fiscal 2025 (three months ended July 26, 2024), up from $1,432 million a year earlier.
Income from operations was $282 millionb versus $178 million, and net income was $248 million, or $1.17 per diluted share, compared with $149 million, or $0.69 per diluted share, in the prior-year quarter. Product revenues rose to $669 million from $590 million, and services revenues rose to $872 million from $842 million. The filing attributes the product increase mainly to higher sales of C-Series all-flash array systems, and the services increase to higher support contract value, growth in professional services, and higher public cloud demand.
Cash flow and capital return were the main drains on liquidity. Net cash from operating activities was $341 millionc, down from $453 million, largely due to a $221 million decline in accrued expenses tied to fiscal 2024 incentive and commission payouts. The company repurchased about 3 million shares for $400 million and paid $107 million in dividends.
Cash, cash equivalents and short-term investments fell to $3,017 milliond from $3,252 million. Senior notes of $750 million due June 2025 and $400 million due September 2024 were reclassified to current liabilities, which pushed the company to a net working capital deficit of $191 million. The company also recorded a restructuring plan this quarter that reduces the global workforce by approximately 2%, with $17 million of charges.
Remaining performance obligations totaled $4.5 billion, with about 50% expected to be recognized within 12 months. Management states that the company has no material changes to its risk factors or critical accounting policies since its fiscal 2024 Form 10-K.
02—Key points
Key Highlights
- Net revenues grew to $1,541 million from $1,432 million, with product revenues up to $669 million from $590 million.
- Net income rose to $248 million ($1.17 diluted EPS) from $149 million ($0.69 diluted EPS) as gross profit increased to $1,098 million from $996 million.
- Operating cash flow declined to $341 million from $453 million, mainly from a $221 million decrease in accrued expenses.
- The company repurchased 3 million shares for $400 million and paid $107 million in dividends, declaring $0.52 per share.
- Cash, cash equivalents and short-term investments decreased to $3,017 million, and a net working capital deficit of $191 million resulted from reclassifying $750 million of senior notes to current liabilities.
- A restructuring plan to reduce the global workforce by about 2% produced $17 million in charges in the quarter.
- Remaining performance obligations were $4.5 billion, with about 50% expected to be recognized in the next 12 months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, NetApp kept $0.16.
- Revenue$1.54B100.0%
- Cost of revenue−$443.0M28.7%
- Gross profit$1.10B71.3%
- Operating costs−$816.0M53.0%
- Operating income$282.0M18.3%
- Interest, other & tax−$34.0M2.2%
- Net income$248.0M16.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed August 28, 2024Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $1.54B$1.43B | +7.6% |
| Cost of Revenue | $443.00M$436.00M | +1.6% |
| Gross Profit | $1.10B$996.00M | +10.2% |
| R&D Expenses | $252.00M$247.00M | +2.0% |
| Operating Expenses | $816.00M$818.00M | −0.2% |
| Operating Income | $282.00M$178.00M | +58.4% |
| Net Income | $248.00M$149.00M | +66.4% |
| EPS (Basic) | $1.20$0.70 | +71.4% |
| EPS (Diluted) | $1.17$0.69 | +69.6% |
| Shares Outstanding (Basic) | 206.00M212.00M | −2.8% |
| Shares Outstanding (Diluted) | 212.00M216.00M | −1.9% |
05—Questions
Frequently Asked Questions
Why did operating cash flow decline year over year?
Net cash provided by operating activities was $341 million compared with $453 million. The filing attributes the decrease mainly to a $221 million decline in accrued expenses, primarily from employee compensation payouts for fiscal 2024 incentive and commission plans. Accounts receivable also declined by $335 million due to lower billings and more favorable invoicing linearity.
How is NetApp returning capital to shareholders?
During the quarter, NetApp repurchased about 3 million shares at an average price of $120.46 for $400 million and paid $107 million in dividends. It declared a cash dividend of $0.52 per share on August 22, 2024, payable October 23, 2024. As of July 26, 2024, the remaining authorization under the repurchase program was $1.1 billion.
What drove the working capital deficit and how is debt maturing?
The net working capital deficit was $191 million, a reduction of $982 million from April 26, 2024, primarily because of lower cash and the reclassification of $750 million of senior notes from long-term to current liabilities. Current portion of long-term debt was $1,149 million. The filing lists a $400 million 3.30% note due September 2024 and a $750 million 1.875% note due June 2025. A $1.0 billion revolving credit facility matures January 22, 2026, and no amounts were drawn on it.
What is the outlook for capital expenditures and tax payments?
NetApp anticipates capital expenditures of between $100 million and $150 million for the remainder of fiscal 2025. Outstanding transition tax payments under the Tax Cuts and Jobs Act are estimated at approximately $215 million, with $115 million expected in fiscal 2025 and $100 million in fiscal 2026.
What did the restructuring plan involve?
In the first quarter of fiscal 2025, management approved a plan to redirect resources to the highest-return activities and reduce costs. It reduced the global workforce by about 2%, with charges consisting primarily of employee severance-related costs totaling $17 million. The activities are expected to be substantially complete by the end of the second quarter of fiscal 2025.
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