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Revenue | 12 Months Ended
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Apr. 26, 2019
Revenue From Contract With Customer [Abstract] |
Revenue | 7. Revenue Effective our first quarter of fiscal 2019, we adopted ASC 606 using the full retrospective method and have restated each prior reporting period presented to conform to the new rules. Refer to Note 1 for a detailed discussion of accounting policies related to revenue recognition, including deferred commissions. The most significant impact of the new standard relates to our accounting for arrangements containing software. For our enterprise software license agreements (ELAs), we now recognize the license fee component of such arrangements up front. Under the prior rules, the software license fee was recognized over the term of the enterprise license based on our inability to establish vendor specific objective evidence of fair value for the undelivered software support element of these arrangements. In addition, for other software arrangements, revenue deferred for the undelivered elements that was previously allocated based on the residual method is now allocated based on relative fair value, which generally results in more software arrangement revenue being recognized earlier. The new standard also impacts our estimation of variable consideration for certain arrangements with contract terms such as rights of return, potential penalties and acceptance clauses. The following table presents the impacts of adoption of ASC 606 to select line items of our consolidated balance sheet as of the end of fiscal 2018:
|  | As of April 27, 2018 |
|  | As Previously Reported |  |  | Impact of ASC 606 Adoption |  | As Adjusted |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 1,009 |  |  | $ | 38 |  |  | (1 | ) | $ | 1,047 |
Inventories |  | $ | 126 |  |  | $ | (4 | ) |  |  |  | $ | 122 |
Other current assets |  | $ | 330 |  |  | $ | 62 |  |  | (2 | ) | $ | 392 |
Other non-current assets |  | $ | 420 |  |  | $ | 30 |  |  | (2 | ) | $ | 450 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term deferred revenue and financed unearned services revenue |  | $ | 1,804 |  |  | $ | (92 | ) |  | (3 | ) | $ | 1,712 |
Other long-term liabilities |  | $ | 961 |  |  | $ | 31 |  |  | (4 | ) | $ | 992 |
Long-term deferred revenue and financed unearned services revenue |  | $ | 1,673 |  |  | $ | (22 | ) |  | (3 | ) | $ | 1,651 |
Accumulated deficit |  | $ | (218 | ) |  | $ | 209 |  |  | (5 | ) | $ | (9 | )
| (1) | Netting of accounts receivable and deferred revenue balances for certain customer arrangements has been updated to reflect the impact of adoption
| (2) | Reflects capitalization of commissions and reduction of long-term deferred tax assets
| (3) | Reflects cumulative change in revenue and the impact of adoption to the netting of accounts receivable and deferred revenue balances for certain customer arrangements
| (4) | Reflects increase in long-term deferred tax liabilities
| (5) | Reflects cumulative impact to net income of which $197 million was the cumulative-effect of adoption as of the beginning of fiscal 2017
The following tables present the impacts of adoption of ASC 606 to our consolidated statements of operations for the fiscal 2018 and 2017:
| Year Ended |
| April 27, 2018 |
| As Previously Reported |  |  | Impact of ASC 606 Adoption | As Adjusted |
Revenues: |  |  |  |  |  |  |  |  |  |  |
Product | $ | 3,461 |  |  | $ | 64 |  |  | $ | 3,525 |
Software maintenance |  | 958 |  |  |  | (56 | ) |  |  | 902 |
Hardware maintenance and other services |  | 1,492 |  |  |  | — |  |  |  | 1,492 |
Net revenues |  | 5,911 |  |  |  | 8 |  |  |  | 5,919 |
Cost of revenues: |  |  |  |  |  |  |  |  |  |  |
Cost of product |  | 1,738 |  |  |  | — |  |  |  | 1,738 |
Cost of software maintenance |  | 25 |  |  |  | — |  |  |  | 25 |
Cost of hardware maintenance and other services |  | 449 |  |  |  | (2 | ) |  |  | 447 |
Total cost of revenues |  | 2,212 |  |  |  | (2 | ) |  |  | 2,210 |
Gross profit |  | 3,699 |  |  |  | 10 |  |  |  | 3,709 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  | 1,729 |  |  |  | (23 | ) |  |  | 1,706 |
Research and development |  | 783 |  |  |  | — |  |  |  | 783 |
General and administrative |  | 280 |  |  |  | — |  |  |  | 280 |
Gain on sale or derecognition of assets |  | (218 | ) |  |  | — |  |  |  | (218 | )
Total operating expenses |  | 2,574 |  |  |  | (23 | ) |  |  | 2,551 |
Income from operations |  | 1,125 |  |  |  | 33 |  |  |  | 1,158 |
Other income, net |  | 41 |  |  |  | — |  |  |  | 41 |
Income before income taxes |  | 1,166 |  |  |  | 33 |  |  |  | 1,199 |
Provision for income taxes |  | 1,090 |  |  |  | (7 | ) |  |  | 1,083 |
Net income | $ | 76 |  |  | $ | 40 |  |  | $ | 116 |
Net income per share: |  |  |  |  |  |  |  |  |  |  |
Basic | $ | 0.28 |  |  | $ | 0.15 |  |  | $ | 0.43 |
Diluted | $ | 0.28 |  |  | $ | 0.14 |  |  | $ | 0.42 |
Shares used in net income per share calculations: |  |  |  |  |  |  |  |  |  |  |
Basic |  | 268 |  |  |  | 268 |  |  |  | 268 |
Diluted |  | 276 |  |  |  | 276 |  |  |  | 276 |
|  | Year Ended |
|  | April 28, 2017 |
|  | As Previously Reported |  |  | Impact of ASC 606 Adoption | As Adjusted |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Product |  | $ | 3,006 |  |  | $ | 54 |  |  | $ | 3,060 |
Software maintenance |  |  | 965 |  |  |  | (60 | ) |  |  | 905 |
Hardware maintenance and other services |  |  | 1,548 |  |  |  | (22 | ) |  |  | 1,526 |
Net revenues |  |  | 5,519 |  |  |  | (28 | ) |  |  | 5,491 |
Cost of revenues: |  |  |  |  |  |  |  |  |  |  |  |
Cost of product |  |  | 1,614 |  |  |  | (2 | ) |  |  | 1,612 |
Cost of software maintenance |  |  | 28 |  |  |  | — |  |  |  | 28 |
Cost of hardware maintenance and other services |  |  | 487 |  |  |  | — |  |  |  | 487 |
Total cost of revenues |  |  | 2,129 |  |  |  | (2 | ) |  |  | 2,127 |
Gross profit |  |  | 3,390 |  |  |  | (26 | ) |  |  | 3,364 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  | 1,633 |  |  |  | 18 |  |  |  | 1,651 |
Research and development |  |  | 779 |  |  |  | — |  |  |  | 779 |
General and administrative |  |  | 271 |  |  |  | — |  |  |  | 271 |
Restructuring charges |  |  | 52 |  |  |  | — |  |  |  | 52 |
Gain on sale of properties |  |  | (10 | ) |  |  | — |  |  |  | (10 | )
Total operating expenses |  |  | 2,725 |  |  |  | 18 |  |  |  | 2,743 |
Income from operations |  |  | 665 |  |  |  | (44 | ) |  |  | 621 |
Other income (expense), net |  |  | — |  |  |  | — |  |  |  | — |
Income before income taxes |  |  | 665 |  |  |  | (44 | ) |  |  | 621 |
Provision for income taxes |  |  | 156 |  |  |  | (16 | ) |  |  | 140 |
Net income |  | $ | 509 |  |  | $ | (28 | ) |  | $ | 481 |
Net income per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 1.85 |  |  | $ | (0.10 | ) |  | $ | 1.75 |
Diluted |  | $ | 1.81 |  |  | $ | (0.10 | ) |  | $ | 1.71 |
Shares used in net income per share calculations: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 275 |  |  |  | 275 |  |  |  | 275 |
Diluted |  |  | 281 |  |  |  | 281 |  |  |  | 281 |
The adoption of ASC 606 had no impact to cash provided by or used in operating, investing or financing activities as presented on our consolidated statements of cash flows. Disaggregation of revenue To provide visibility into our transition from older products to our newer, higher growth products and clarity into the dynamics of our product revenue, we have historically grouped our products by “Strategic” and “Mature” solutions. Strategic solutions include Clustered ONTAP, branded E-Series, SolidFire, converged and hyper-converged infrastructure, ELAs and other optional add-on software products. Mature solutions include 7-mode ONTAP, add-on hardware and related operating system (OS) software and original equipment manufacturers (OEM) products. Both our Mature and Strategic product lines include a mix of disk, hybrid and all flash storage media. Additionally, we provide a variety of services including software maintenance, hardware maintenance and other services including professional services, global support solutions, and customer education and training. The following table depicts the disaggregation of revenue by our products and services (in millions):
| Year Ended |
| April 26, 2019 |  |  | April 27, 2018 |  |  | April 28, 2017 |
Product revenues | $ | 3,755 |  |  | $ | 3,525 |  |  | $ | 3,060 |
Strategic |  | 2,709 |  |  |  | 2,468 |  |  |  | 2,000 |
Mature |  | 1,046 |  |  |  | 1,057 |  |  |  | 1,060 |
Software maintenance revenues |  | 946 |  |  | 902 |  |  | 905 |
Hardware maintenance and other services revenues |  | 1,445 |  |  |  | 1,492 |  |  |  | 1,526 |
Hardware maintenance support contracts |  | 1,182 |  |  |  | 1,214 |  |  |  | 1,258 |
Professional and other services |  | 263 |  |  |  | 278 |  |  |  | 268 |
Net revenues | $ | 6,146 |  |  | $ | 5,919 |  |  | $ | 5,491 |
Revenues by geographic region are presented in Note 16 – Segment, Geographic, and Significant Customer Information. Deferred revenue and financed unearned services revenue (in millions): The following table summarizes the components of our deferred revenue and financed unearned services balance as reported in our consolidated balance sheets (in millions):
|  | April 26, 2019 |  |  | April 27, 2018 |
Deferred product revenue |  | $ | 84 |  |  | $ | 107 |
Deferred services revenue |  |  | 3,502 |  |  |  | 3,134 |
Financed unearned services revenue |  |  | 82 |  |  |  | 122 |
Total |  | $ | 3,668 |  |  | $ | 3,363 |
Reported as: |  |  |  |  |  |  |  |
Short-term |  | $ | 1,825 |  |  | $ | 1,712 |
Long-term |  |  | 1,843 |  |  |  | 1,651 |
Total |  | $ | 3,668 |  |  | $ | 3,363 |
Deferred product revenue represents unrecognized revenue related to undelivered product commitments and other product deliveries that have not met all revenue recognition criteria. Deferred services revenue represents customer payments made in advance for services, which include software and hardware maintenance contracts and other services. Financed unearned services revenue represents undelivered services for which cash has been received under certain third-party financing arrangements. See Note 18 – Commitments and Contingencies for additional information related to these arrangements. The following tables summarize the activity related to deferred revenue and financed unearned services revenue (in millions):
|  | Year Ended |
|  | April 26, 2019 |  |  | April 27, 2018 |
Balance at beginning of period |  | $ | 3,363 |  |  | $ | 3,213 |
Additions |  |  | 2,763 |  |  |  | 2,566 |
Revenue recognized during the period |  |  | (2,458 | ) |  |  | (2,416 | )
Balance at end of period |  | $ | 3,668 |  |  | $ | 3,363 |
During the years ended April 26, 2019 and April 27, 2018, we recognized $1,722 million and $1,806 million, respectively, that was included in the deferred revenue and financed unearned services revenue balance at the beginning of the respective periods. As of April 26, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied was $3,668 million, which is equivalent to our deferred revenue and unearned services revenue balance. Because customer orders are typically placed on an as-needed basis, and cancellable without penalty prior to shipment, orders in backlog may not be a meaningful indicator of future revenue and have not been included in this amount. We expect to recognize as revenue approximately 50% of our deferred revenue and financed unearned services revenue balance in the next 12 months, approximately 25% in the next 13 to 24 months, and the remainder thereafter. Deferred commissions As a result of our adoption of ASC 606, we capitalize sales commissions that are incremental direct costs of obtaining customer contracts for which revenue is not immediately recognized. We then amortize capitalized commissions based on the transfer of goods or services to which they relate. The following tables summarize the activity related to deferred commissions and their balances as reported in our consolidated balance sheets (in millions):
| Year Ended |
| April 26, 2019 |  |  | April 27, 2018 |
Balance at beginning of period | $ | 137 |  |  | $ | 113 |
Additions |  | 112 |  |  |  | 92 |
Expense recognized during the period |  | (77 | ) |  |  | (68 | )
Balance at end of period | $ | 172 |  |  | $ | 137 |
| April 26, 2019 |  |  | April 27, 2018 |
Other current assets | $ | 75 |  |  | $ | 66 |
Other non-current assets |  | 97 |  |  |  | 71 |
Total deferred commissions | $ | 172 |  |  | $ | 137 |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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