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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

)

 

 

—

 

 

 

—