NETAPP, INC. Management's Discussion and Analysis of Financial Condition and Resultsof Operations. (form 10-Q)

Published: 2021-12-02 16:11:10 ET NTAP

COVID-19

Stock Repurchase and Dividend Activity

Restructuring Event

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Results of Operations

The following table sets forth certain condensed consolidated statements of income data as a percentage of net revenues for the periods indicated:

Percentages may not add due to rounding

Discussion and Analysis of Results of Operations

Net Revenues (in millions, except percentages):

Product Revenues (in millions, except percentages):

Services Revenues (in millions, except percentages):

Public Cloud

Public Cloud revenues are derived from the sale of public cloud offerings primarily delivered as-a-service, which include storage services, cloud automation and optimization services, and cloud infrastructure monitoring services.

Our cost of revenues consists of:

Cost of Product Revenues (in millions, except percentages):

Unallocated

Cost of Services Revenues (in millions, except percentages):

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Public Cloud

Sales and Marketing, Research and Development and General and Administrative Expenses

Compensation costs represent the largest component of operating expenses. Included in compensation costs are salaries, benefits, other compensation-related costs, stock-based compensation expense and employee incentive compensation plan costs.

Total compensation costs included in operating expenses increased by $38 million, or 9%, in the second quarter of fiscal 2022 compared to the corresponding period of the prior year, reflecting an increase of all components of compensation costs.

Sales and Marketing (in millions, except percentages):

Sales and marketing expenses $ 465 $ 432

The increase in commissions expense for the second quarter and first six months of fiscal 2022 is primarily due to higher performance against sales goals.

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Research and Development (in millions, except percentages):

Research and development expenses $ 216 $ 212

General and Administrative (in millions, except percentages):

General and administrative expenses $ 76 $ 67

Restructuring Charges (in millions, except percentages):

In the second quarter and first six months of fiscal 2022, we recognized $7 million and $29 million, respectively, in restructuring costs, consisting primarily of lease termination fees, office relocation costs, and employee severance-related costs.

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Acquisition-related Expense (in millions, except percentages):

In the first six months of fiscal 2022, we incurred $2 million of acquisition-related costs, primarily legal and consulting fees.

Other Expense, Net (in millions, except percentages)

The components of other expense, net were as follows:

Provision for Income Taxes (in millions, except percentages):

Liquidity, Capital Resources and Cash Requirements

2021

Cash, cash equivalents and short-term investments $ 4,548 $ 4,596 Principal amount of debt

The following is a summary of our cash flow activities:

746

Cash Flows from Operating Activities

Significant changes in assets and liabilities in the first six months of fiscal 2022 included the following:

Cash Flows from Investing Activities

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Cash Flows from Financing Activities

Our principal sources of liquidity as of October 29, 2021 consisted of cash and cash equivalents, short-term investments, cash we expect to generate from operations, and our commercial paper program and related credit facility.

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Senior Notes

The following table summarizes the principal amount of our Senior Notes as of October 29, 2021 (in millions):

Commercial Paper Program and Credit Facility

Capital Expenditure Requirements

Dividends and Stock Repurchase Program

On November 22, 2021, we declared a cash dividend of $0.50 per share of common stock, payable on January 26, 2022 to holders of record as of the close of business on January 7, 2022.

Purchase Commitments

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Financing Guarantees

Legal Contingencies

Critical Accounting Policies and Estimates

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