NetApp(NTAP) - 2025 Q2 - Quarterly Report

Revenue and Profit - Net revenues for the three months ended October 25, 2024, were $1.658 billion, compared to$1.562 billion in the same period last year, representing a 6.1% increase[15] - Net income for the three months ended October 25, 2024, was $299 million, up from$233 million in the same period last year, a 28.3% increase[15] - Gross profit for the three months ended October 25, 2024, was $1.177 billion, compared to$1.110 billion in the same period last year, a 6.0% increase[15] - Comprehensive income for the three months ended October 25, 2024, was $303 million, compared to$226 million in the same period last year, a 34.1% increase[16] - Net income for the three months ended October 25, 2024 was $299 million[21] - Net income for the six months ended October 25, 2024 was$547 million[23] - Net income per share for the three months ended October 25, 2024, was $1.47 (basic) and$1.42 (diluted), compared to $1.12 (basic) and$1.10 (diluted) for the same period in 2023[62] - Net income per share for the six months ended October 25, 2024, was $2.67 (basic) and$2.59 (diluted), compared to $1.82 (basic) and$1.79 (diluted) for the same period in 2023[62] - Net revenues increased by 6% to $1.658 billion in Q2 2024 and by 7$3.199 billion in the first six months of 2024 compared to the same periods in 2023[80] - Net income increased to 18% of net revenues in Q2 2024 and 17% in the first six months of 2024 compared to 15% and 13% in the same periods in 2023[80] Assets and Liabilities - Total assets as of October 25, 2024, were $9.004 billion, down from$9.887 billion as of April 26, 2024, a decrease of 8.9%[13] - Cash and cash equivalents decreased to $1.478 billion as of October 25, 2024, from$1.903 billion as of April 26, 2024, a 22.3% decline[13] - Total current liabilities as of October 25, 2024, were $4.317 billion, up from$4.106 billion as of April 26, 2024, a 5.1% increase[13] - Long-term debt decreased to $1.244 billion as of October 25, 2024, from$1.992 billion as of April 26, 2024, a 37.5% reduction[13] - Total goodwill as of October 25, 2024 was $2.759 billion, with$1.714 billion in Hybrid Cloud and $1.045 billion in Public Cloud[29] - Total purchased intangible assets as of October 25, 2024 were$96 million, down from $124 million as of April 26, 2024[29] - Cash and cash equivalents decreased to$1,478 million as of October 25, 2024, from $1,903 million as of April 26, 2024[31] - Inventories increased to$317 million as of October 25, 2024, up from $186 million as of April 26, 2024[31] - Property and equipment, net, decreased slightly to$593 million as of October 25, 2024, from $604 million as of April 26, 2024[32] - Deferred revenue and financed unearned services revenue totaled$4.1 billion as of October 25, 2024, with $2.045 billion classified as short-term and$2.055 billion as long-term[36] - The aggregate amount of the transaction price allocated to remaining performance obligations was $4.4 billion as of October 25, 2024, with 49$744 million as of October 25, 2024, from $1,349 million as of April 26, 2024[42] - The fair value of cash, cash equivalents, and short-term investments was$2.222 billion as of October 25, 2024, with $2.208 billion classified as Level 1 and$14 million as Level 2[44] - Total cash and cash equivalents as of April 26, 2024, were $1.903 billion, with$730 million in cash and $1.161 billion in money market funds[45] - The fair value of long-term debt as of October 25, 2024, was$1.881 billion, compared to $2.209 billion as of April 26, 2024[45] - Total principal amount of senior notes as of October 25, 2024, was$2.0 billion, with an unamortized discount and issuance costs of $7 million[46] - The company repaid$407 million in 3.30% Senior Notes due September 2024 upon maturity on September 30, 2024[47] - Future principal debt maturities as of October 25, 2024, include $750 million in 2026,$550 million in 2028, and $700 million thereafter[47] - The company has a$1.0 billion revolving unsecured credit facility, with no amounts drawn as of October 25, 2024[49] - The company had $223 million of gross unrecognized tax benefits as of October 25, 2024, with$162 million potentially affecting the provision for income taxes if recognized[61] - Cash, cash equivalents, and short-term investments totaled $2.222 billion as of October 25, 2024, compared to$3.252 billion as of April 26, 2024[103] - $1.9 billion of cash, cash equivalents, and short-term investments were held by foreign subsidiaries as of October 25, 2024, while$0.3 billion was available in the U.S.[103] - Off-balance sheet purchase commitments totaled approximately $0.9 billion at October 25, 2024[111] Expenses and Costs - Research and development expenses for the three months ended October 25, 2024, were$257 million, down from $262 million in the same period last year, a 1.9$446 million, compared to $588 million in the same period last year, a 24.1$25 million of fully amortized intangible assets during the first six months of fiscal 2025[29] - Amortization expense for purchased intangible assets totaled $14 million for the three months ended October 25, 2024, consistent with the same period in 2023[30] - Future amortization expense related to purchased intangible assets is projected to be$96 million from 2025 to 2028[30] - Total lease cost for operating leases was $33 million for the six months ended October 25, 2024, compared to$36 million for the same period in 2023[50] - Future minimum operating lease payments as of October 25, 2024, total $296 million, with$24 million due in the remainder of fiscal year 2025[51] - Total stock-based compensation expense for the six months ended October 25, 2024 was $188 million, compared to$180 million for the same period in 2023[53] - As of October 25, 2024, total unrecognized compensation expense related to equity awards was $764 million, expected to be recognized over a weighted-average remaining service period of 2.2 years[53] - The effective tax rate for the six months ended October 25, 2024 was 17.0$29 million[59] - Operating expenses for Q2 and first six months of fiscal 2025 totaled $819 million (49$1,617 million (51% of net revenues), respectively, reflecting a 2 percentage point decrease compared to fiscal 2024 due to higher net revenues[92] - Sales and marketing expenses increased by 5% to $485 million in Q2 and 3$956 million in the first six months of fiscal 2025, driven by higher sales commissions[92] - Research and development expenses decreased by 2% to $257 million in Q2 but remained flat at$509 million in the first six months of fiscal 2025 compared to the prior year[92] - General and administrative expenses increased by 3% to $77 million in Q2 and 2$152 million in the first six months of fiscal 2025[92] - Restructuring charges increased by 140% to $12 million in Q2 but decreased by 6$29 million in the first six months of fiscal 2025, primarily due to workforce reductions[92][93] - Acquisition-related expenses decreased by 67% to $1 million in Q2 and$2 million in the first six months of fiscal 2025[94] - Interest income increased by 8% to $15 million in Q2 and 19$63 million in the first six months of fiscal 2025 due to higher yields on cash and investments[95] - Cash flows used in financing activities totaled $1.4 billion in the first six months of fiscal 2025, including$700 million for stock repurchases and $400 million for debt repayment[101] - The company anticipates capital expenditures for the remainder of fiscal 2025 to be between$50 million and $100 million[108] - The outstanding payment related to the transition tax is estimated to be approximately$100 million, expected to be paid during fiscal 2026[109] Stock and Dividends - Stock-based compensation for the six months ended October 25, 2024 was $188 million[23] - Repurchase of common stock for the six months ended October 25, 2024 totaled$700 million[23] - Cash dividends declared for the six months ended October 25, 2024 were $213 million ($1.04 per common share)[23] - Other comprehensive income for the six months ended October 25, 2024 was $4 million[23] - The company granted approximately 3 million restricted stock units (RSUs) with a weighted average grant date fair value of$127.61 per share during the six months ended October 25, 2024[52] - The aggregate grant date fair value of PBRSUs granted in the current year was $62 million, recognized over the remaining performance/service periods[53] - The company repurchased 5.8 million shares at an average price of$121.58 per share, totaling $672 million allocated to retained earnings for the six months ended October 25, 2024[54] - The company declared a cash dividend of$0.52 per share, payable on January 22, 2025, with total dividend payments allocated to retained earnings of $83 million for the six months ended October 25, 2024[55] - The remaining authorization for stock repurchases at the end of the period was$802 million, with cumulative repurchases authorized up to $17.1 billion since the program's inception[54] - The company repurchased 5.8 million shares of common stock at an average price of$121.58 per share, totaling $700 million, during the first six months of fiscal 2025[77] - Aggregate cash dividends declared in the first six months of fiscal 2025 were$1.04 per share, totaling $213 million[77] - The company declared a cash dividend of$0.52 per share of common stock, payable on January 22, 2025[110] - The company repurchased a total of 377 million shares of common stock at an average price of $43.25 per share, for an aggregate purchase price of$16.3 billion[110] - The remaining authorized amount for stock repurchases under the program was $0.8 billion as of October 25, 2024[110] Segment Performance - Hybrid Cloud segment revenue for the three months ended October 25, 2024, was$1.49 billion, with a gross profit of $1.07 billion and a gross margin of 71.8$168 million, with a gross profit of $124 million and a gross margin of 73.8$1.658 billion, with a total gross profit of $1.177 billion and a gross margin of 71.0$2.872 billion, with a gross profit of $2.070 billion and a gross margin of 72.5$327 million, with a gross profit of $237 million and a gross margin of 72.5$3.199 billion, with a total gross profit of $2.275 billion and a gross margin of 71.1$15 million in stock-based compensation and $17 million in amortization of intangible assets[64] - Americas revenues increased to$862 million for the three months ended October 25, 2024, up from $789 million in the same period in 2023, representing a 9.3$543 million for the three months ended October 25, 2024, compared to $525 million in the same period in 2023, a 3.4$253 million for the three months ended October 25, 2024, from $248 million in the same period in 2023, a 2.0$1,658 million, up from $1,562 million in the same period in 2023, a 6.1$807 million of the Americas revenues for the three months ended October 25, 2024, up from $729 million in the same period in 2023, a 10.7$768 million in Q2 2024 and by 11% to $1.437 billion in the first six months of 2024 compared to the same periods in 2023[81] - Services revenues increased by 4$890 million in Q2 2024 and by 4% to $1.762 billion in the first six months of 2024 compared to the same periods in 2023[82] - Public Cloud revenues grew by 9$168 million in Q2 2024 and by 6% to $327 million in the first six months of 2024 compared to the same periods in 2023[82] - Cost of product revenues increased by 11$307 million in Q2 2024 and by 6% to $576 million in the first six months of 2024 compared to the same periods in 2023[86] - Hybrid Cloud product gross margins increased by approximately two percentage points in the first six months of 2024 compared to the same period in 2023[87] - Public Cloud gross margins increased by eight percentage points in Q2 2024 and by six percentage points in the first six months of 2024 compared to the same periods in 2023[90] - Professional and other services revenues increased by 10$87 million in Q2 2024 and by 8% to $169 million in the first six months of 2024 compared to the same periods in 2023[82] - Support revenues increased by 2$635 million in Q2 2024 and by 3% to $1.266 billion in the first six months of 2024 compared to the same periods in 2023[82] Cash Flow and Financing - Net cash provided by operating activities for the six months ended October 25, 2024, was$446 million, compared to $588 million in the same period last year, a 24.1$128 million for cash flow hedges as of October 25, 2024[58] - Cash flows used in financing activities totaled $1.4 billion in the first six months of fiscal 2025, including$700 million for stock repurchases and $400 million for debt repayment[101] - Net cash provided by operating activities decreased to$446 million in the first six months of fiscal 2025 from $588 million in the prior year, driven by changes in accounts receivable and deferred revenue[97][99] - The company sold$26 million of receivables during the six months ended October 25, 2024, compared to $27 million in the same period in 2023[69] - The company has a commercial paper program with a maximum aggregate face amount of$1.0 billion, with no commercial paper notes outstanding as of October 25, 2024[107] - The company has a $1.0 billion revolving unsecured credit facility, with no amounts drawn as of October 25, 2024[107] Restructuring and Workforce - The company reduced its global workforce by approximately 2$29 million[59] - Restructuring charges totaled $12 million for the second quarter and$29 million for the first six months of fiscal 2025[78] - Restructuring charges increased by 140% to $12 million in Q2 but decreased