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 28, 2023

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 23, 2023, there were 208,791,155 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 28, 2023 and April 28, 2023	3
	Condensed Consolidated Statements of Income for the Three Months Ended July 28, 2023 and July 29, 2022	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended July 28, 2023 and July 29, 2022	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended July 28, 2023 and July 29, 2022	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended July 28, 2023 and July 29, 2022	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4	Controls and Procedures	36
PART II — OTHER INFORMATION
Item 1	Legal Proceedings	37
Item 1A	Risk Factors	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3	Defaults upon Senior Securities	37
Item 4	Mine Safety Disclosures	37
Item 5	Other Information	37
Item 6	Exhibits	38
SIGNATURE		39

TRADEMARKS

© 2023 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 28,  2023			April 28,   2023
ASSETS
Current assets:
Cash and cash equivalents	$	2,020		$	2,316
Short-term investments		955			754
Accounts receivable		653			987
Inventories		131			167
Other current assets		401			456
Total current assets		4,160			4,680
Property and equipment, net		641			650
Goodwill		2,759			2,759
Other intangible assets, net		166			181
Other non-current assets		1,544			1,548
Total assets	$	9,270		$	9,818
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	344		$	392
Accrued expenses		778			857
Short-term deferred revenue and financed unearned services revenue		2,127			2,218
Total current liabilities		3,249			3,467
Long-term debt		2,390			2,389
Other long-term liabilities		703			708
Long-term deferred revenue and financed unearned services revenue		2,055			2,095
Total liabilities		8,397			8,659
Commitments and contingencies (Note 15)
Stockholders' equity:
Common stock and additional paid-in capital, $0.001 par value; 209 and 212 shares issued and outstanding as of July 28, 2023 and April 28, 2023, respectively		921			945
Retained earnings		—			265
Accumulated other comprehensive loss		(48	)		(51	)
Total stockholders' equity		873			1,159
Total liabilities and stockholders' equity	$	9,270		$	9,818

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 28,  2023		July 29, 2022
Net revenues:
Product	$	590	$	786
Services		842		806
Net revenues		1,432		1,592
Cost of revenues:
Cost of product		265		397
Cost of services		171		149
Total cost of revenues		436		546
Gross profit		996		1,046
Operating expenses:
Sales and marketing		468		458
Research and development		247		240
General and administrative		74		72
Restructuring charges		26		11
Acquisition-related expense		3		10
Total operating expenses		818		791
Income from operations		178		255
Other income, net		8		15
Income before income taxes		186		270
Provision for income taxes		37		56
Net income	$	149	$	214
Net income per share:
Basic	$	0.70	$	0.97
Diluted	$	0.69	$	0.96
Shares used in net income per share calculations:
Basic		212		220
Diluted		216		224

See accompanying notes to condensed consolidated financial statements.

4

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended
	July 28,  2023			July 29, 2022
Net income	$	149		$	214
Other comprehensive income (loss):
Foreign currency translation adjustments		2			(3	)
Unrealized gains on cash flow hedges:
Unrealized holding gains arising during the period		2			—
Reclassification adjustments for gains included in net income		(1	)		(1	)
Other comprehensive income (loss)		3			(4	)
Comprehensive income	$	152		$	210

See accompanying notes to condensed consolidated financial statements.

5

NETAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Three Months Ended
	July 28,  2023			July 29, 2022
Cash flows from operating activities:
Net income	$	149		$	214
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		64			58
Non-cash operating lease cost		11			14
Stock-based compensation		87			67
Deferred income taxes		(6	)		(15	)
Other items, net		(2	)		(66	)
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable		332			364
Inventories		37			(28	)
Other operating assets		57			1
Accounts payable		(56	)		(90	)
Accrued expenses		(89	)		(208	)
Deferred revenue and financed unearned services revenue		(133	)		(32	)
Long-term taxes payable		1			1
Other operating liabilities		1			1
Net cash provided by operating activities		453			281
Cash flows from investing activities:
Purchases of investments		(571	)		(133	)
Maturities, sales and collections of investments		379			2
Purchases of property and equipment		(35	)		(65	)
Acquisitions of businesses, net of cash acquired		—			(491	)
Other investing activities, net		(1	)		59
Net cash used in investing activities		(228	)		(628	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock    award plans		52			54
Payments for taxes related to net share settlement of stock awards		(65	)		(52	)
Repurchase of common stock		(400	)		(350	)
Dividends paid		(106	)		(110	)
Other financing activities, net		(2	)		(1	)
Net cash used in financing activities		(521	)		(459	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		—			(18	)
Net change in cash, cash equivalents and restricted cash		(296	)		(824	)
Cash, cash equivalents and restricted cash:
Beginning of period		2,322			4,119
End of period	$	2,026		$	3,295

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 28, 2023
										Accumulated
	Common Stock and									Other
	Additional Paid-in Capital						Retained			Comprehensive
	Shares			Amount			Earnings			Loss			Total
Balances, April 28, 2023		212		$	945		$	265		$	(51	)	$	1,159
Net income		—			—			149			—			149
Other comprehensive loss		—			—			—			3			3
Issuance of common stock under employee     stock award plans, net of taxes		2			(13	)		—			—			(13	)
Repurchase of common stock		(5	)		(24	)		(376	)		—			(400	)
Excise tax on net stock repurchases		—			(2	)		—			—			(2	)
Stock-based compensation		—			83			—			—			83
Cash dividends declared ($0.50 per     common share)		—			(68	)		(38	)		—			(106	)
Balances, July 28, 2023		209		$	921		$	—		$	(48	)	$	873

	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

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, NetApp, 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 2024 and 2023, ending on April 26, 2024 and April 28, 2023, 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 28, 2023 contained in our Annual Report on Form 10-K. The results of operations for the three months ended July 28, 2023 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, the anticipated effects of which have been incorporated, as applicable, into management's estimates as of July 28, 2023.

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 Combination

Fiscal 2023 Acquisition

Instaclustr Acquisition

On May 20, 2022, we acquired all the outstanding shares of privately-held Instaclustr US Holding, 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 acquisition-date values of the assets acquired and liabilities assumed are as follows (in millions):

	Amount
Cash	$	4
Intangible assets		107
Goodwill		413
Other assets		19
Total assets acquired		543
Liabilities assumed		(45	)
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		5
Customer contracts/relationships		50		5
Trade name		2		3
Total intangible assets	$	107

The acquired net assets and assumed debt of Instaclustr were recorded at their estimated values. We determined the estimated values with the assistance of valuations and appraisals performed by third party specialists and estimates made by management. We expect to realize revenue synergies and anticipate opportunities for growth through the ability to leverage additional future products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated value of their identifiable net assets acquired, and as a result, we have recorded goodwill in connection with the acquisition. The goodwill is not deductible for income tax purposes.

The results of operations related to the acquisition of Instaclustr have been included in our condensed consolidated statements of income from the acquisition date. Pro forma results of operations have not been presented because the impact from the acquisition was not material to our consolidated results of operations.

4. Goodwill and Purchased Intangible Assets, Net

Goodwill by reportable segment as of July 28, 2023 is as follows (in millions):

	Amount
Hybrid Cloud	$	1,714
Public Cloud		1,045
Total goodwill	$	2,759

Purchased intangible assets, net are summarized below (in millions):