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 October 28, 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 November 29, 2022, there were 215,573,357 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 October 28, 2022 and April 29, 2022	3
	Condensed Consolidated Statements of Income for the Three and Six Months Ended October 28, 2022 and October 29, 2021	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended October 28, 2022 and October 29, 2021	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended October 28, 2022 and October 29, 2021	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended October 28, 2022 and October 29, 2021	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4	Controls and Procedures	42
PART II — OTHER INFORMATION
Item 1	Legal Proceedings	43
Item 1A	Risk Factors	43
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3	Defaults upon Senior Securities	44
Item 4	Mine Safety Disclosures	44
Item 5	Other Information	44
Item 6	Exhibits	45
SIGNATURE		46

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)

	October 28,  2022			April 29,  2022
ASSETS
Current assets:
Cash and cash equivalents	$	2,669		$	4,112
Short-term investments		364			22
Accounts receivable		910			1,230
Inventories		244			204
Other current assets		416			377
Total current assets		4,603			5,945
Property and equipment, net		661			602
Goodwill		2,767			2,346
Other intangible assets, net		215			142
Other non-current assets		1,534			991
Total assets	$	9,780		$	10,026
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	584		$	607
Accrued expenses		819			925
Current portion of long-term debt		—			250
Short-term deferred revenue and financed unearned services revenue		1,992			2,171
Total current liabilities		3,395			3,953
Long-term debt		2,387			2,386
Other long-term liabilities		737			788
Long-term deferred revenue and financed unearned services revenue		2,059			2,061
Total liabilities		8,578			9,188
Commitments and contingencies (Note 15)
Stockholders' equity:
Common stock and additional paid-in capital, $0.001 par value; 217 and 220 shares issued and outstanding as of October 28, 2022 and April 29, 2022, respectively		765			760
Retained earnings		499			122
Accumulated other comprehensive loss		(62	)		(44	)
Total stockholders' equity		1,202			838
Total liabilities and stockholders' equity	$	9,780		$	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						Six Months Ended
	October 28,  2022			October 29, 2021			October 28,  2022			October 29, 2021
Net revenues:
Product	$	837		$	814		$	1,623		$	1,544
Services		826			752			1,632			1,480
Net revenues		1,663			1,566			3,255			3,024
Cost of revenues:
Cost of product		418			372			815			701
Cost of services		158			135			307			265
Total cost of revenues		576			507			1,122			966
Gross profit		1,087			1,059			2,133			2,058
Operating expenses:
Sales and marketing		479			465			937			916
Research and development		243			216			483			426
General and administrative		67			76			139			142
Restructuring charges		11			7			22			29
Acquisition-related expense		5			1			15			2
Total operating expenses		805			765			1,596			1,515
Income from operations		282			294			537			543
Other income (expense), net		23			(14	)		38			(26	)
Income before income taxes		305			280			575			517
(Benefit) provision for income taxes		(445	)		56			(389	)		91
Net income	$	750		$	224		$	964		$	426
Net income per share:
Basic	$	3.46		$	1.00		$	4.40		$	1.91
Diluted	$	3.41		$	0.98		$	4.34		$	1.86
Shares used in net income per share calculations:
Basic		217			223			219			223
Diluted		220			229			222			229

See accompanying notes to condensed consolidated financial statements.

4

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended						Six Months Ended
	October 28,  2022			October 29, 2021			October 28,  2022			October 29, 2021
Net income	$	750		$	224		$	964		$	426
Other comprehensive loss:
Foreign currency translation adjustments		(15	)		(4	)		(18	)		(8	)
Unrealized losses on available-for-sale securities:
Unrealized holding losses arising during the period		—			—			—			(1	)
Unrealized gains on cash flow hedges:
Unrealized holding gains arising during the period		4			1			4			2
Reclassification adjustments for gains included in net income		(3	)		(1	)		(4	)		(1	)
Other comprehensive loss		(14	)		(4	)		(18	)		(8	)
Comprehensive income	$	736		$	220		$	946		$	418

See accompanying notes to condensed consolidated financial statements.

5

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended
	October 28,  2022			October 29, 2021
Cash flows from operating activities:
Net income	$	964		$	426
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		117			92
Non-cash operating lease cost		27			28
Stock-based compensation		145			115
Deferred income taxes		(570	)		(32	)
Other items, net		(127	)		(12	)
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable		313			292
Inventories		(40	)		(41	)
Other operating assets		(24	)		34
Accounts payable		(28	)		11
Accrued expenses		(108	)		(206	)
Deferred revenue and financed unearned services revenue		(93	)		(97	)
Long-term taxes payable		(84	)		(65	)
Other operating liabilities		3			(5	)
Net cash provided by operating activities		495			540
Cash flows from investing activities:
Purchases of investments		(420	)		(6	)
Maturities, sales and collections of investments		78			32
Purchases of property and equipment		(142	)		(97	)
Acquisitions of businesses, net of cash acquired		(491	)		(14	)
Other investing activities, net		59			—
Net cash used in investing activities		(916	)		(85	)
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		(63	)		(63	)
Repurchase of common stock		(500	)		(225	)
Repayments and extinguishment of debt		(250	)		—
Dividends paid		(218	)		(224	)
Other financing activities, net		(2	)		(2	)
Net cash used in financing activities		(979	)		(461	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(43	)		(13	)
Net change in cash, cash equivalents and restricted cash		(1,443	)		(19	)
Cash, cash equivalents and restricted cash:
Beginning of period		4,119			4,535
End of period	$	2,676		$	4,516

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 October 28, 2022
										Accumulated
	Common Stock and									Other
	Additional Paid-in Capital						Retained			Comprehensive
	Shares			Amount			Earnings			Loss			Total
Balances, July 29, 2022		218		$	705		$	—		$	(48	)	$	657
Net income		—			—			750			—			750
Other comprehensive loss		—			—			—			(14	)		(14	)
Issuance of common stock under employee     stock award plans, net of taxes		1			(11	)		—			—			(11	)
Repurchase of common stock		(2	)		(7	)		(143	)		—			(150	)
Stock-based compensation		—			78			—			—