UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 29, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-27130

NetApp, Inc.

(Exact name of registrant as specified in its charter)

Delaware	77-0307520
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

3060 Olsen Drive,

San Jose, California 95128

(Address of principal executive offices, including zip code)

(408) 822-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.001 Par Value	NTAP	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 24, 2022, there were 217,365,705 shares of the registrant’s common stock, $0.001 par value, outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of July 29, 2022 and April 29, 2022	3
	Condensed Consolidated Statements of Income for the Three Months Ended July 29, 2022 and July 30, 2021	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended July 29, 2022 and July 30, 2021	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended July 29, 2022 and July 30, 2021	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended July 29, 2022 and July 30, 2021	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4	Controls and Procedures	38
PART II — OTHER INFORMATION
Item 1	Legal Proceedings	39
Item 1A	Risk Factors	39
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3	Defaults upon Senior Securities	40
Item 4	Mine Safety Disclosures	40
Item 5	Other Information	40
Item 6	Exhibits	41
SIGNATURE		42

TRADEMARKS

© 2022 NetApp, Inc. All Rights Reserved. No portions of this document may be reproduced without prior written consent of NetApp, Inc. NetApp, the NetApp logo, and the marks listed at http://www.netapp.com/TM are trademarks of NetApp, Inc. Other company and product names may be trademarks of their respective owners.

2

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

NETAPP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)

(Unaudited)

	July 29,  2022			April 29,  2022
ASSETS
Current assets:
Cash and cash equivalents	$	3,288		$	4,112
Short-term investments		151			22
Accounts receivable		865			1,230
Inventories		232			204
Other current assets		386			377
Total current assets		4,922			5,945
Property and equipment, net		622			602
Goodwill		2,767			2,346
Other intangible assets, net		232			142
Other non-current assets		1,001			991
Total assets	$	9,544		$	10,026
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	515		$	607
Accrued expenses		722			925
Current portion of long-term debt		250			250
Short-term deferred revenue and financed unearned services revenue		2,088			2,171
Total current liabilities		3,575			3,953
Long-term debt		2,387			2,386
Other long-term liabilities		843			788
Long-term deferred revenue and financed unearned services revenue		2,082			2,061
Total liabilities		8,887			9,188
Commitments and contingencies (Note 15)
Stockholders' equity:
Common stock and additional paid-in capital, $0.001 par value; 218 and 220 shares issued and outstanding as of July 29, 2022 and April 29, 2022, respectively		705			760
Retained earnings		—			122
Accumulated other comprehensive loss		(48	)		(44	)
Total stockholders' equity		657			838
Total liabilities and stockholders' equity	$	9,544		$	10,026

See accompanying notes to condensed consolidated financial statements.

3

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

	Three Months Ended
	July 29,  2022		July 30, 2021
Net revenues:
Product	$	786	$	730
Services		806		728
Net revenues		1,592		1,458
Cost of revenues:
Cost of product		397		329
Cost of services		149		130
Total cost of revenues		546		459
Gross profit		1,046		999
Operating expenses:
Sales and marketing		458		451
Research and development		240		210
General and administrative		72		66
Restructuring charges		11		22
Acquisition-related expense		10		1
Total operating expenses		791		750
Income from operations		255		249
Other income (expense), net		15		(12	)
Income before income taxes		270		237
Provision for income taxes		56		35
Net income	$	214	$	202
Net income per share:
Basic	$	0.97	$	0.91
Diluted	$	0.96	$	0.88
Shares used in net income per share calculations:
Basic		220		223
Diluted		224		229

See accompanying notes to condensed consolidated financial statements.

4

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended
	July 29,  2022			July 30, 2021
Net income	$	214		$	202
Other comprehensive income (loss):
Foreign currency translation adjustments		(3	)		(4	)
Unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the period		—			(1	)
Unrealized gains (losses) on cash flow hedges:
Unrealized holding gains (losses) arising during the period		—			1
Reclassification adjustments for gains included in net income		(1	)		—
Other comprehensive income (loss)		(4	)		(4	)
Comprehensive income	$	210		$	198

See accompanying notes to condensed consolidated financial statements.

5

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Three Months Ended
	July 29,  2022			July 30, 2021
Cash flows from operating activities:
Net income	$	214		$	202
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		58			46
Non-cash operating lease cost		14			13
Stock-based compensation		67			53
Deferred income taxes		(15	)		(15	)
Other items, net		(66	)		4
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable		364			287
Inventories		(28	)		6
Other operating assets		1			29
Accounts payable		(90	)		(51	)
Accrued expenses		(208	)		(242	)
Deferred revenue and financed unearned services revenue		(32	)		(82	)
Long-term taxes payable		1			(8	)
Other operating liabilities		1			—
Net cash provided by operating activities		281			242
Cash flows from investing activities:
Purchases of investments		(133	)		(5	)
Maturities, sales and collections of investments		2			16
Purchases of property and equipment		(65	)		(51	)
Acquisitions of businesses, net of cash acquired		(491	)		(14	)
Other investing activities, net		59			—
Net cash used in investing activities		(628	)		(54	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock    award plans		54			53
Payments for taxes related to net share settlement of stock awards		(52	)		(57	)
Repurchase of common stock		(350	)		(100	)
Dividends paid		(110	)		(112	)
Other financing activities, net		(1	)		(2	)
Net cash used in financing activities		(459	)		(218	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(18	)		(5	)
Net change in cash, cash equivalents and restricted cash		(824	)		(35	)
Cash, cash equivalents and restricted cash:
Beginning of period		4,119			4,535
End of period	$	3,295		$	4,500

See accompanying notes to condensed consolidated financial statements.

6

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except per share amounts)

(Unaudited)

	Three Months Ended July 29, 2022
										Accumulated
	Common Stock and									Other
	Additional Paid-in Capital						Retained			Comprehensive
	Shares			Amount			Earnings			Loss			Total
Balances, April 29, 2022		220		$	760		$	122		$	(44	)	$	838
Net income		—			—			214			—			214
Other comprehensive loss		—			—			—			(4	)		(4	)
Issuance of common stock under employee     stock award plans, net of taxes		3			2			—			—			2
Repurchase of common stock		(5	)		(18	)		(332	)		—			(350	)
Stock-based compensation		—			67			—			—			67
Cash dividends declared ($0.50 per     common share)		—			(106	)		(4	)		—			(110	)
Balances, July 29, 2022		218		$	705		$	—		$	(48	)	$	657

	Three Months Ended July 30, 2021
										Accumulated
	Common Stock and									Other
	Additional Paid-in Capital						Retained			Comprehensive
	Shares			Amount			Earnings			Loss			Total
Balances, April 30, 2021		222		$	504		$	211		$	(30	)	$	685
Net income		—			—			202			—			202
Other comprehensive loss		—			—			—			(4	)		(4	)
Issuance of common stock under employee     stock award plans, net of taxes		3			(4	)		—			—			(4	)
Repurchase of common stock		(1	)		(3	)		(97	)		—			(100	)
Stock-based compensation		—			53			—			—			53
Cash dividends declared ($0.50 per     common share)		—			—			(112	)		—			(112	)
Balances, July 30, 2021		224		$	550		$	204		$	(34	)	$	720

See accompanying notes to condensed consolidated financial statements.

7

NETAPP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Significant Accounting Policies

NetApp, Inc. (we, us, or the Company) is a global cloud-led, data-centric software company that provides organizations the ability to manage and share their data across on-premises, private and public clouds. We provide a full range of enterprise-class software, systems and services solutions that customers use to modernize their infrastructures, build next generation data centers and harness the power of hybrid clouds.

Basis of Presentation and Preparation

Our fiscal year is reported on a 52- or 53-week year ending on the last Friday in April. An additional week is included in the first fiscal quarter approximately every six years to realign fiscal months with calendar months. Fiscal years 2023 and 2022, ending on April 28, 2023, and April 29, 2022, respectively, are each 52-week years, with 13 weeks in each quarter.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company, and reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, comprehensive income, cash flows and stockholders’ equity for the interim periods presented. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, these statements do not include all information and footnotes required by GAAP for annual consolidated financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the fiscal year ended April 29, 2022 contained in our Annual Report on Form 10-K. The results of operations for the three months ended July 29, 2022 are not necessarily indicative of the operating results to be expected for the full fiscal year or future operating periods.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; inventory valuation; valuation of goodwill and intangibles; restructuring reserves; employee benefit accruals; stock-based compensation; loss contingencies; investment impairments; income taxes and fair value measurements. Actual results could differ materially from those estimates. Management’s estimates include, as applicable, the anticipated impacts of the COVID-19 pandemic.

2. Recent Accounting Pronouncements

Although there are new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements had or will have a material impact on our consolidated financial position, operating results, cash flows or disclosures.

3. Business Combinations

Fiscal 2023 Acquisition

Instaclustr Inc. Acquisition

On May 20, 2022, we acquired all the outstanding shares of privately-held Instaclustr Inc., (Instaclustr) for approximately $498 million. Instaclustr is a leading platform provider of fully managed open-source database, pipeline and workflow applications delivered as-a-service.

The preliminary acquisition-date values of the assets acquired and liabilities assumed are as follows (in millions):

	Amount
Cash	$	4
Intangible assets		107
Goodwill		421
Other assets		15
Total assets acquired		547
Liabilities assumed		(49	)
Total purchase price	$	498

8

The components of the intangible assets acquired were as follows (in millions, except useful life):

	Amount		Estimated useful life (years)
Developed technology	$	55