VMware Reports Fiscal Year 2022 Third Quarter Results
VMware reported total revenue of $3.19 billion for Q3 FY2022, an 11% increase year-over-year. Subscription and SaaS revenue reached $820 million, up 21%, while ARR grew 25% to $3.31 billion. GAAP net income declined 8% to $398 million, or $0.94 per diluted share. Non-GAAP net income increased 3% to $725 million, or $1.72 per diluted share. Operating cash flow was strong at $1.09 billion. The company continues to focus on multi-cloud innovation, with advancements announced at VMworld 2021. VMware's commitment to diversity and ESG leadership was recognized by various industry accolades.
- Total revenue of $3.19 billion, a growth of 11% year-over-year.
- Subscription and SaaS revenue increased by 21% to $820 million.
- ARR for Subscription and SaaS reached $3.31 billion, up 25% year-over-year.
- Non-GAAP net income rose 3% to $725 million, or $1.72 per diluted share.
- GAAP net income decreased by 8% to $398 million, or $0.94 per diluted share.
Total Revenue growth of
Subscription and SaaS ARR for the third quarter was
-
Revenue for the third quarter was
, an increase of$3.19 billion 11% from the third quarter of fiscal 2021.
-
The combination of subscription and SaaS and license revenue was
, an increase of$1.53 billion 16% from the third quarter of fiscal 2021.
-
Subscription and SaaS revenue for the third quarter was
, an increase of$820 million 21% year-over-year.
-
Subscription and SaaS ARR for the third quarter was
, an increase of$3.31 billion 25% year-over-year.
-
GAAP net income for the third quarter was
, or$398 million per diluted share, down$0.94 8% per diluted share compared to , or$434 million per diluted share, for the third quarter of fiscal 2021. Non-GAAP net income for the third quarter was$1.02 , or$725 million per diluted share, up$1.72 3% per diluted share compared to , or$704 million per diluted share, for the third quarter of fiscal 2021.$1.66
-
GAAP operating income for the third quarter was
, an increase of$519 million 21% from the third quarter of fiscal 2021. Non-GAAP operating income for the third quarter was , an increase of$935 million 5% from the third quarter of fiscal 2021.
-
Operating cash flow for the third quarter was
. Free cash flow for the third quarter was$1.09 billion .$984 million
-
RPO for the third quarter totaled
, up$11.12 billion 9% year-over-year.
“We are pleased with our continued strong performance in Q3. This quarter, as we unveiled many new offerings at VMworld, we showcased how we are helping customers transform their businesses today and that our innovation engine is thriving,” said
“We continued healthy revenue growth and profitability in Q3, with Subscription and SaaS ARR increasing
Business Highlights & Strategic Announcements
-
At VMworld 2021, the company articulated its strategy to help customers navigate the multi-cloud era with VMware Cross-Cloud services. This family of integrated services will help deliver a faster and smarter path to cloud for digital businesses. Announcements included:
- New advancements in VMware Cloud, the industry’s first and only cloud-agnostic computing infrastructure that enables customers to move their apps to the cloud quickly and efficiently.
-
The VMware Sovereign Cloud initiative, where
VMware is partnering across itsVMware Cloud Provider Partners to deliver cloud services on sovereign digital infrastructure to customers in regulated industries. - Advancements to the VMware Tanzu portfolio, including Tanzu Application Platform, currently in beta, which delivers a superior developer experience for enterprises building and deploying apps and APIs on any Kubernetes.
- The introduction of VMware Edge, a product portfolio that will enable organizations to run, manage and better secure edge-native apps across multiple clouds, anywhere.
-
VMware Cloud on AWS GovCloud (US) achieved
FedRAMP Agency Authority to Operate at the High Impact Level. FedRAMP is a mandatoryU.S. government-wide program that provides a standardized approach and baseline requirements for security assessment, authorization and monitoring of cloud products. -
VMware unveiled enhancements to its Telco Cloud Platform designed to help service providers speed their multi-cloud transformation, as well as several updates to its Radio Access Network (RAN) portfolio of products and introduced VMware RAN Intelligent Controller. - The Company announced a collaboration with eero, an Amazon company, on work-from-home capabilities that will boost remote network connectivity while extending critical security services to devices connecting to an at-home corporate network.
-
In the third quarter,
VMware received recognition from leading industry analyst firms:-
VMware was positioned as a Leader in “The Forrester New Wave™: Zero Trust Network Access, Q3, 2021."1 -
VMware was also once again named a Leader in theAugust 2021 Gartner® Magic Quadrant™ for Unified Endpoint Management Tools,August 2021 .2 -
VMware once again was named a Leader in theSeptember 2021 Gartner® Magic Quadrant™ for WAN Edge Infrastructure,September 2021 .3 -
VMware was once again ranked No. 1 in theSeptember 2021 IDC report, “Worldwide Cloud System and Service Management Software Market Shares, 2020: Growth Continues for Top Vendors.”4
-
-
VMware joined the Valuable 500, as part of its commitment to diversity inclusion. The Valuable 500 is a global business collective that is igniting systemic change and unlocking the business, social and economic value of more than 1 billion people with disabilities around the world. -
VMware received recognition for its ESG leadership by being invited to the Dow Jones Sustainability World Index (DJSI World ) and Dow Jones Sustainability North America Index (DJSI North America )—one of the world’s leading ESG benchmarks—for the second consecutive year.
1 Forrester, The Forrester New Wave™: Zero Trust Network Access, Q3, 2021,
2 Gartner, Magic Quadrant for Unified Endpoint Management Tools,
3 Gartner, Magic Quadrant for WAN Edge Infrastructure,
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Gartner and Magic Quadrant are registered trademarks and service marks of Gartner, Inc. and/or its affiliates and are used herein with permission. All rights reserved.
4 IDC, Worldwide Cloud System and Service Management Software Market Shares, 2021: Growth Continues for Top Vendors, #US48074121,
The company will host a conference call today at
About
Additional Information
VMware’s website is located at vmware.com, and its investor relations website is located at ir.vmware.com. VMware’s goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”
Annual Recurring Revenue (“ARR”)
ARR is an operating measure
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding the expected benefits to customers of VMware’s strategy, collaborations, partnerships and offerings. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (1) the impact of the COVID-19 pandemic on VMware’s operations, financial condition, VMware’s customers, the business environment and global and regional economies; (2) the ability of
|
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Revenue: |
|
|
|
|
|
|
|
|
||||||||
License |
|
$ |
710 |
|
|
$ |
639 |
|
|
$ |
2,093 |
|
|
$ |
2,019 |
|
Subscription and SaaS |
|
820 |
|
|
676 |
|
|
2,336 |
|
|
1,880 |
|
||||
Services |
|
1,658 |
|
|
1,549 |
|
|
4,891 |
|
|
4,574 |
|
||||
Total revenue |
|
3,188 |
|
|
2,864 |
|
|
9,320 |
|
|
8,473 |
|
||||
Operating expenses(1): |
|
|
|
|
|
|
|
|
||||||||
Cost of license revenue |
|
37 |
|
|
44 |
|
|
111 |
|
|
119 |
|
||||
Cost of subscription and SaaS revenue |
|
175 |
|
|
142 |
|
|
502 |
|
|
400 |
|
||||
Cost of services revenue |
|
362 |
|
|
330 |
|
|
1,051 |
|
|
969 |
|
||||
Research and development |
|
768 |
|
|
714 |
|
|
2,251 |
|
|
2,058 |
|
||||
Sales and marketing |
|
1,011 |
|
|
912 |
|
|
2,993 |
|
|
2,727 |
|
||||
General and administrative |
|
316 |
|
|
250 |
|
|
808 |
|
|
773 |
|
||||
Realignment |
|
— |
|
|
44 |
|
|
1 |
|
|
47 |
|
||||
Operating income |
|
519 |
|
|
428 |
|
|
1,603 |
|
|
1,380 |
|
||||
Investment income |
|
— |
|
|
1 |
|
|
1 |
|
|
7 |
|
||||
Interest expense |
|
(74 |
) |
|
(52 |
) |
|
(173 |
) |
|
(156 |
) |
||||
Other income (expense), net |
|
12 |
|
|
177 |
|
|
(7 |
) |
|
186 |
|
||||
Income before income tax |
|
457 |
|
|
554 |
|
|
1,424 |
|
|
1,417 |
|
||||
Income tax provision |
|
59 |
|
|
120 |
|
|
190 |
|
|
150 |
|
||||
Net income |
|
$ |
398 |
|
|
$ |
434 |
|
|
$ |
1,234 |
|
|
$ |
1,267 |
|
Net income per weighted-average share, basic for Classes A and B |
|
$ |
0.95 |
|
|
$ |
1.03 |
|
|
$ |
2.94 |
|
|
$ |
3.02 |
|
Net income per weighted-average share, diluted for Classes A and B |
|
$ |
0.94 |
|
|
$ |
1.02 |
|
|
$ |
2.92 |
|
|
$ |
3.00 |
|
Weighted-average shares, basic for Classes A and B |
|
419,456 |
|
|
420,857 |
|
|
419,309 |
|
|
419,758 |
|
||||
Weighted-average shares, diluted for Classes A and B |
|
421,763 |
|
|
423,400 |
|
|
422,201 |
|
|
423,093 |
|
||||
__________ |
|
|
|
|
|
|
|
|
||||||||
(1) Includes stock-based compensation as follows: |
|
|
|
|
|
|
|
|
||||||||
Cost of license revenue |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
1 |
|
Cost of subscription and SaaS revenue |
|
5 |
|
|
4 |
|
|
16 |
|
|
13 |
|
||||
Cost of services revenue |
|
21 |
|
|
25 |
|
|
70 |
|
|
74 |
|
||||
Research and development |
|
125 |
|
|
140 |
|
|
402 |
|
|
397 |
|
||||
Sales and marketing |
|
74 |
|
|
85 |
|
|
227 |
|
|
243 |
|
||||
General and administrative |
|
33 |
|
|
50 |
|
|
97 |
|
|
141 |
|
|
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(amounts in millions, except per share amounts, and shares in thousands) |
|||||||
(unaudited) |
|||||||
|
|
|
|
||||
|
|
|
|
||||
|
2021 |
|
2021 |
||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
12,500 |
|
|
$ |
4,692 |
|
Short-term investments |
33 |
|
|
23 |
|
||
Accounts receivable, net of allowance of |
1,675 |
|
|
1,929 |
|
||
Due from related parties, net |
660 |
|
|
1,438 |
|
||
Other current assets |
577 |
|
|
530 |
|
||
Total current assets |
15,445 |
|
|
8,612 |
|
||
Property and equipment, net |
1,411 |
|
|
1,334 |
|
||
Other assets |
2,645 |
|
|
2,697 |
|
||
Deferred tax assets |
5,830 |
|
|
5,781 |
|
||
Intangible assets, net |
781 |
|
|
993 |
|
||
|
9,598 |
|
|
9,599 |
|
||
Total assets |
$ |
35,710 |
|
|
$ |
29,016 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
229 |
|
|
$ |
131 |
|
Accrued expenses and other |
2,273 |
|
|
2,382 |
|
||
Current portion of long-term debt |
1,498 |
|
|
— |
|
||
Unearned revenue |
5,808 |
|
|
5,873 |
|
||
Total current liabilities |
9,808 |
|
|
8,386 |
|
||
Note payable to |
— |
|
|
270 |
|
||
Long-term debt |
9,170 |
|
|
4,717 |
|
||
Unearned revenue |
4,425 |
|
|
4,441 |
|
||
Income tax payable |
781 |
|
|
805 |
|
||
Operating lease liabilities |
885 |
|
|
891 |
|
||
Other liabilities |
416 |
|
|
455 |
|
||
Total liabilities |
25,485 |
|
|
19,965 |
|
||
Contingencies |
|
|
|
||||
Stockholders’ equity: |
|
|
|
||||
Class A common stock, par value |
1 |
|
|
1 |
|
||
Class B convertible common stock, par value |
3 |
|
|
3 |
|
||
Additional paid-in capital |
1,923 |
|
|
1,985 |
|
||
Accumulated other comprehensive loss |
(3 |
) |
|
(5 |
) |
||
Retained earnings |
8,301 |
|
|
7,067 |
|
||
Total stockholders’ equity |
10,225 |
|
|
9,051 |
|
||
Total liabilities and stockholders’ equity |
$ |
35,710 |
|
|
$ |
29,016 |
|
|
|||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||||||||||
(in millions) |
|||||||||||||||
(unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Operating activities: |
|
|
|
|
|
|
|
||||||||
Net income |
$ |
398 |
|
|
$ |
434 |
|
|
$ |
1,234 |
|
|
$ |
1,267 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
281 |
|
|
261 |
|
|
825 |
|
|
757 |
|
||||
Stock-based compensation |
258 |
|
|
304 |
|
|
813 |
|
|
869 |
|
||||
Deferred income taxes, net |
(61 |
) |
|
20 |
|
|
(92 |
) |
|
(177 |
) |
||||
Unrealized (gain) loss on equity securities, net |
(10 |
) |
|
(190 |
) |
|
25 |
|
|
(197 |
) |
||||
(Gain) Loss on disposition of assets, revaluation and impairment, net |
1 |
|
|
15 |
|
|
4 |
|
|
22 |
|
||||
Loss on extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
8 |
|
||||
Other |
3 |
|
|
2 |
|
|
6 |
|
|
— |
|
||||
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
||||||||
Accounts receivable |
41 |
|
|
181 |
|
|
247 |
|
|
102 |
|
||||
Other current assets and other assets |
(77 |
) |
|
(277 |
) |
|
(467 |
) |
|
(622 |
) |
||||
Due to/from related parties, net |
255 |
|
|
225 |
|
|
777 |
|
|
785 |
|
||||
Accounts payable |
17 |
|
|
(15 |
) |
|
87 |
|
|
(4 |
) |
||||
Accrued expenses and other liabilities |
37 |
|
|
186 |
|
|
(181 |
) |
|
393 |
|
||||
Income taxes payable |
53 |
|
|
(2 |
) |
|
24 |
|
|
(53 |
) |
||||
Unearned revenue |
(106 |
) |
|
(152 |
) |
|
(82 |
) |
|
(65 |
) |
||||
Net cash provided by operating activities |
1,090 |
|
|
992 |
|
|
3,220 |
|
|
3,085 |
|
||||
Investing activities: |
|
|
|
|
|
|
|
||||||||
Additions to property and equipment |
(106 |
) |
|
(84 |
) |
|
(263 |
) |
|
(247 |
) |
||||
Sales of investments in equity securities |
34 |
|
|
— |
|
|
68 |
|
|
— |
|
||||
Purchases of strategic investments |
(1 |
) |
|
(5 |
) |
|
(7 |
) |
|
(16 |
) |
||||
Proceeds from disposition of assets |
4 |
|
|
— |
|
|
5 |
|
|
21 |
|
||||
Business combinations, net of cash acquired, and purchases of intangible assets |
— |
|
|
(56 |
) |
|
(15 |
) |
|
(390 |
) |
||||
Net cash used in investing activities |
(69 |
) |
|
(145 |
) |
|
(212 |
) |
|
(632 |
) |
||||
Financing activities: |
|
|
|
|
|
|
|
||||||||
Proceeds from issuance of common stock |
128 |
|
|
122 |
|
|
267 |
|
|
264 |
|
||||
Net proceeds from issuance of long-term debt |
5,944 |
|
|
— |
|
|
5,944 |
|
|
1,979 |
|
||||
Repayment of term loan |
— |
|
|
(1,500 |
) |
|
— |
|
|
(1,500 |
) |
||||
Repayment of current portion of long-term debt |
— |
|
|
— |
|
|
— |
|
|
(1,257 |
) |
||||
Repayment of note payable to |
(270 |
) |
|
— |
|
|
(270 |
) |
|
— |
|
||||
Repurchase of common stock |
(143 |
) |
|
(255 |
) |
|
(872 |
) |
|
(566 |
) |
||||
Shares repurchased for tax withholdings on vesting of restricted stock |
(48 |
) |
|
(44 |
) |
|
(291 |
) |
|
(319 |
) |
||||
Payment to acquire non-controlling interests |
— |
|
|
— |
|
|
— |
|
|
(91 |
) |
||||
Principal payments on finance lease obligations |
(1 |
) |
|
(1 |
) |
|
(3 |
) |
|
(3 |
) |
||||
Net cash provided by (used in) financing activities |
5,610 |
|
|
(1,678 |
) |
|
4,775 |
|
|
(1,493 |
) |
||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
6,631 |
|
|
(831 |
) |
|
7,783 |
|
|
960 |
|
||||
Cash, cash equivalents and restricted cash at beginning of the period |
5,922 |
|
|
4,822 |
|
|
4,770 |
|
|
3,031 |
|
||||
Cash, cash equivalents and restricted cash at end of the period |
$ |
12,553 |
|
|
$ |
3,991 |
|
|
$ |
12,553 |
|
|
$ |
3,991 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
||||||||
Cash paid for interest |
$ |
49 |
|
|
$ |
51 |
|
|
$ |
146 |
|
|
$ |
142 |
|
Cash paid for taxes, net |
73 |
|
|
111 |
|
|
276 |
|
|
393 |
|
||||
Non-cash items: |
|
|
|
|
|
|
|
||||||||
Changes in capital additions, accrued but not paid |
$ |
(2 |
) |
|
$ |
(11 |
) |
|
$ |
9 |
|
|
$ |
(18 |
) |
|
|||||||
GROWTH IN REVENUE PLUS SEQUENTIAL CHANGE IN UNEARNED REVENUE |
|||||||
(in millions) |
|||||||
(unaudited) |
|||||||
|
|||||||
|
|||||||
Growth in Total Revenue Plus Sequential Change in Unearned Revenue |
|||||||
|
|
|
|
||||
|
Three Months Ended |
||||||
|
|
|
|
||||
|
2021 |
|
2020 |
||||
Total revenue, as reported |
$ |
3,188 |
|
|
$ |
2,864 |
|
Sequential change in unearned revenue(1) |
(105 |
) |
|
(150 |
) |
||
Total revenue plus sequential change in unearned revenue |
$ |
3,083 |
|
|
$ |
2,714 |
|
Change (%) over prior year, as reported |
14 |
% |
|
|
|||
|
|
|
|
||||
Growth in License and Subscription and SaaS Revenue Plus Sequential Change in Unearned License and Subscription and SaaS Revenue |
|||||||
|
|
|
|
||||
|
Three Months Ended |
||||||
|
|
|
|
||||
|
2021 |
|
2020 |
||||
Total license and subscription and SaaS revenue, as reported |
$ |
1,530 |
|
|
$ |
1,315 |
|
Sequential change in unearned license and subscription and SaaS revenue(2) |
27 |
|
|
(23 |
) |
||
Total license and subscription and SaaS revenue plus sequential change in unearned license and subscription and SaaS revenue |
$ |
1,557 |
|
|
$ |
1,292 |
|
Change (%) over prior year, as reported |
21 |
% |
|
|
__________ | ||
(1)
|
|
Consists of the change in total unearned revenue from the preceding quarter. Total unearned revenue consists of current and non-current unearned revenue amounts presented in the consolidated balance sheets. |
(2) |
|
Consists of the change in unearned license and subscription and SaaS revenue from the preceding quarter. |
REMAINING PERFORMANCE OBLIGATIONS |
|||||||
(in millions) |
|||||||
(unaudited) |
|||||||
|
|||||||
|
|||||||
Growth in Remaining Performance Obligations |
|||||||
|
|
|
|
||||
|
|
|
|
||||
|
2021 |
|
2020 |
||||
Remaining performance obligations(3) |
$ |
11,123 |
|
|
$ |
10,173 |
|
Change (%) over prior year |
9 |
% |
|
|
|||
|
|
|
|
||||
Remaining performance obligations, current(4) |
$ |
6,232 |
|
|
$ |
5,631 |
|
Change (%) over prior year |
11 |
% |
|
|
__________ | |||||
(3)
|
|
Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period. |
|||
(4) |
|
Current remaining performance obligations represent the amount expected to be recognized as revenue over the next twelve months. |
|
|||||||||||||||||||||||
SUPPLEMENTAL UNEARNED REVENUE SCHEDULE |
|||||||||||||||||||||||
(in millions) |
|||||||||||||||||||||||
(unaudited) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2021 |
|
2021 |
|
2021 |
|
2021 |
|
2020 |
|
2020 |
||||||||||||
Unearned revenue as reported: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
License |
$ |
17 |
|
|
$ |
20 |
|
|
$ |
16 |
|
|
$ |
15 |
|
|
$ |
11 |
|
|
$ |
11 |
|
Subscription and SaaS |
2,238 |
|
|
2,208 |
|
|
2,064 |
|
|
1,998 |
|
|
1,596 |
|
|
1,619 |
|
||||||
Services |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Software maintenance |
6,773 |
|
|
6,916 |
|
|
6,957 |
|
|
7,092 |
|
|
6,574 |
|
|
6,696 |
|
||||||
Professional services |
1,205 |
|
|
1,194 |
|
|
1,163 |
|
|
1,209 |
|
|
1,054 |
|
|
1,059 |
|
||||||
Total unearned revenue |
$ |
10,233 |
|
|
$ |
10,338 |
|
|
$ |
10,200 |
|
|
$ |
10,314 |
|
|
$ |
9,235 |
|
|
$ |
9,385 |
|
|
|||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA |
|||||||||||||||||||||||||||
For the Three Months Ended |
|||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
|||||||||||||||||||||||||||
(unaudited) |
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
GAAP |
|
Stock-Based Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Acquisition, Disposition and Other Items |
|
Tax
|
|
Non-GAAP
|
||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cost of license revenue |
$ |
37 |
|
|
— |
|
|
— |
|
|
(10 |
) |
|
— |
|
|
— |
|
|
$ |
27 |
|
|||||
Cost of subscription and SaaS revenue |
$ |
175 |
|
|
(5 |
) |
|
— |
|
|
(43 |
) |
|
— |
|
|
— |
|
|
$ |
127 |
|
|||||
Cost of services revenue |
$ |
362 |
|
|
(21 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
$ |
341 |
|
|||||
Research and development |
$ |
768 |
|
|
(125 |
) |
|
— |
|
|
(2 |
) |
|
— |
|
|
— |
|
|
$ |
641 |
|
|||||
Sales and marketing |
$ |
1,011 |
|
|
(74 |
) |
|
(1 |
) |
|
(20 |
) |
|
— |
|
|
— |
|
|
$ |
915 |
|
|||||
General and administrative |
$ |
316 |
|
|
(33 |
) |
|
— |
|
|
— |
|
|
(82 |
) |
|
— |
|
|
$ |
202 |
|
|||||
Operating income |
$ |
519 |
|
|
258 |
|
|
1 |
|
|
75 |
|
|
82 |
|
|
— |
|
|
$ |
935 |
|
|||||
Operating margin(2) |
16.3 |
% |
|
8.1 |
% |
|
— |
% |
|
2.4 |
% |
|
2.6 |
% |
|
— |
|
|
29.3 |
% |
|||||||
Other income (expense), net(3) |
$ |
12 |
|
|
— |
|
|
— |
|
|
— |
|
|
(10 |
) |
|
— |
|
|
$ |
2 |
|
|||||
Income before income tax |
$ |
457 |
|
|
258 |
|
|
1 |
|
|
75 |
|
|
72 |
|
|
— |
|
|
$ |
863 |
|
|||||
Income tax provision |
$ |
59 |
|
|
|
|
|
|
|
|
|
|
79 |
|
|
$ |
138 |
|
|||||||||
Tax rate(2) |
12.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
16.0 |
% |
||||||||||||
Net income |
$ |
398 |
|
|
258 |
|
|
1 |
|
|
75 |
|
|
72 |
|
|
(79 |
) |
|
$ |
725 |
|
|||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) |
$ |
0.94 |
|
|
$ |
0.61 |
|
|
$ |
— |
|
|
$ |
0.18 |
|
|
$ |
0.17 |
|
|
$ |
(0.19 |
) |
|
$ |
1.72 |
|
__________ | |||||||||||||||
(1) |
|
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. |
|||||||||||||
(2) |
|
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. |
|||||||||||||
(3) |
|
Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. |
|||||||||||||
(4) |
|
Calculated based upon 421,763 diluted weighted-average shares for Classes A and B. |
|
|||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA |
|||||||||||||||||||||||||||||||
For the Three Months Ended |
|||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
|||||||||||||||||||||||||||||||
(unaudited) |
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
GAAP |
|
Stock-Based Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Realignment Charges |
|
Acquisition, Disposition and Other Items |
|
Tax
|
|
Non-GAAP
|
||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cost of license revenue |
$ |
44 |
|
|
— |
|
|
— |
|
|
(11 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
33 |
|
||||||
Cost of subscription and SaaS revenue |
$ |
142 |
|
|
(4 |
) |
|
— |
|
|
(48 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
90 |
|
||||||
Cost of services revenue |
$ |
330 |
|
|
(25 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
$ |
305 |
|
||||||
Research and development |
$ |
714 |
|
|
(140 |
) |
|
— |
|
|
(1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
573 |
|
||||||
Sales and marketing |
$ |
912 |
|
|
(85 |
) |
|
(1 |
) |
|
(23 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
803 |
|
||||||
General and administrative |
$ |
250 |
|
|
(50 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(28 |
) |
|
— |
|
|
$ |
172 |
|
||||||
Realignment |
$ |
44 |
|
|
— |
|
|
— |
|
|
— |
|
|
(44 |
) |
|
— |
|
|
— |
|
|
$ |
— |
|
||||||
Operating income |
$ |
428 |
|
|
304 |
|
|
1 |
|
|
83 |
|
|
44 |
|
|
28 |
|
|
— |
|
|
$ |
888 |
|
||||||
Operating margin(2) |
14.9 |
% |
|
10.6 |
% |
|
— |
% |
|
2.9 |
% |
|
1.5 |
% |
|
1.0 |
% |
|
— |
|
|
31.0 |
% |
||||||||
Other income (expense), net(3) |
$ |
177 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(175 |
) |
|
— |
|
|
$ |
1 |
|
||||||
Income before income tax |
$ |
554 |
|
|
304 |
|
|
1 |
|
|
83 |
|
|
44 |
|
|
(147 |
) |
|
— |
|
|
$ |
838 |
|
||||||
Income tax provision |
$ |
120 |
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
$ |
134 |
|
|||||||||||
Tax rate(2) |
21.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
16.0 |
% |
||||||||||||||
Net income |
$ |
434 |
|
|
304 |
|
|
1 |
|
|
83 |
|
|
44 |
|
|
(147 |
) |
|
(14 |
) |
|
$ |
704 |
|
||||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) |
$ |
1.02 |
|
|
$ |
0.72 |
|
|
$ |
— |
|
|
$ |
0.20 |
|
|
$ |
0.10 |
|
|
$ |
(0.35 |
) |
|
$ |
(0.03 |
) |
|
$ |
1.66 |
|
__________ | |||||||||||||||||
(1) |
|
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. |
|||||||||||||||
(2) |
|
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. |
|||||||||||||||
(3) |
|
Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. |
|||||||||||||||
(4) |
|
Calculated based upon 423,400 diluted weighted-average shares for Classes A and B. |
|
|||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA |
|||||||||||||||||||||||||||||||
For the Nine Months Ended |
|||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
|||||||||||||||||||||||||||||||
(unaudited) |
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
GAAP |
|
Stock-Based Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Realignment Charges |
|
Acquisition, Disposition and Other Items |
|
Tax
|
|
Non-GAAP
|
||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cost of license revenue |
$ |
111 |
|
|
(1 |
) |
|
— |
|
|
(30 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
80 |
|
||||||
Cost of subscription and SaaS revenue |
$ |
502 |
|
|
(16 |
) |
|
— |
|
|
(128 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
358 |
|
||||||
Cost of services revenue |
$ |
1,051 |
|
|
(70 |
) |
|
(1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
$ |
979 |
|
||||||
Research and development |
$ |
2,251 |
|
|
(402 |
) |
|
(1 |
) |
|
(5 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
1,842 |
|
||||||
Sales and marketing |
$ |
2,993 |
|
|
(227 |
) |
|
(5 |
) |
|
(66 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
2,696 |
|
||||||
General and administrative |
$ |
808 |
|
|
(97 |
) |
|
(1 |
) |
|
— |
|
|
— |
|
|
(126 |
) |
|
— |
|
|
$ |
584 |
|
||||||
Realignment |
$ |
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
— |
|
|
$ |
— |
|
||||||
Operating income |
$ |
1,603 |
|
|
813 |
|
|
8 |
|
|
229 |
|
|
1 |
|
|
126 |
|
|
— |
|
|
$ |
2,781 |
|
||||||
Operating margin(2) |
17.2 |
% |
|
8.7 |
% |
|
0.1 |
% |
|
2.5 |
% |
|
— |
% |
|
1.4 |
% |
|
— |
|
|
29.8 |
% |
||||||||
Other income (expense), net(3) |
$ |
(7 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
28 |
|
|
— |
|
|
$ |
20 |
|
||||||
Income before income tax |
$ |
1,424 |
|
|
813 |
|
|
8 |
|
|
229 |
|
|
1 |
|
|
154 |
|
|
— |
|
|
$ |
2,629 |
|
||||||
Income tax provision |
$ |
190 |
|
|
|
|
|
|
|
|
|
|
|
|
231 |
|
|
$ |
421 |
|
|||||||||||
Tax rate(2) |
13.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
16.0 |
% |
||||||||||||||
Net income |
$ |
1,234 |
|
|
813 |
|
|
8 |
|
|
229 |
|
|
1 |
|
|
154 |
|
|
(231 |
) |
|
$ |
2,208 |
|
||||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) |
$ |
2.92 |
|
|
$ |
1.93 |
|
|
$ |
0.02 |
|
|
$ |
0.54 |
|
|
$ |
— |
|
|
$ |
0.36 |
|
|
$ |
(0.55 |
) |
|
$ |
5.23 |
|
__________ |
|||
(1) |
|
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. |
|
(2) |
|
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. |
|
(3) |
|
Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. |
|
(4) |
|
Calculated based upon 422,201 diluted weighted-average shares for Classes A and B. |
|
|||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA |
|||||||||||||||||||||||||||||||
For the Nine Months Ended |
|||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
|||||||||||||||||||||||||||||||
(unaudited) |
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
GAAP |
|
Stock-Based Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Realignment Charges |
|
Acquisition, Disposition and Other Items |
|
Tax
|
|
Non-GAAP
|
||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cost of license revenue |
$ |
119 |
|
|
(1 |
) |
|
— |
|
|
(33 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
85 |
|
||||||
Cost of subscription and SaaS revenue |
$ |
400 |
|
|
(13 |
) |
|
— |
|
|
(138 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
249 |
|
||||||
Cost of services revenue |
$ |
969 |
|
|
(74 |
) |
|
(1 |
) |
|
(1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
$ |
894 |
|
||||||
Research and development |
$ |
2,058 |
|
|
(397 |
) |
|
(1 |
) |
|
(1 |
) |
|
— |
|
|
(2 |
) |
|
— |
|
|
$ |
1,658 |
|
||||||
Sales and marketing |
$ |
2,727 |
|
|
(243 |
) |
|
(4 |
) |
|
(71 |
) |
|
— |
|
|
(2 |
) |
|
— |
|
|
$ |
2,404 |
|
||||||
General and administrative |
$ |
773 |
|
|
(141 |
) |
|
(1 |
) |
|
— |
|
|
— |
|
|
(104 |
) |
|
— |
|
|
$ |
527 |
|
||||||
Realignment |
$ |
47 |
|
|
— |
|
|
— |
|
|
— |
|
|
(47 |
) |
|
— |
|
|
— |
|
|
$ |
— |
|
||||||
Operating income |
$ |
1,380 |
|
|
869 |
|
|
7 |
|
|
244 |
|
|
47 |
|
|
108 |
|
|
— |
|
|
$ |
2,656 |
|
||||||
Operating margin(2) |
16.3 |
% |
|
10.3 |
% |
|
0.1 |
% |
|
2.9 |
% |
|
0.6 |
% |
|
1.3 |
% |
|
— |
|
|
31.3 |
% |
||||||||
Other income (expense), net(3) |
$ |
186 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(182 |
) |
|
— |
|
|
$ |
5 |
|
||||||
Income before income tax |
$ |
1,417 |
|
|
869 |
|
|
7 |
|
|
244 |
|
|
47 |
|
|
(74 |
) |
|
— |
|
|
$ |
2,512 |
|
||||||
Income tax provision |
$ |
150 |
|
|
|
|
|
|
|
|
|
|
|
|
252 |
|
|
$ |
402 |
|
|||||||||||
Tax rate(2) |
10.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
16.0 |
% |
||||||||||||||
Net income |
$ |
1,267 |
|
|
869 |
|
|
7 |
|
|
244 |
|
|
47 |
|
|
(74 |
) |
|
(252 |
) |
|
$ |
2,110 |
|
||||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) |
$ |
3.00 |
|
|
$ |
2.05 |
|
|
$ |
0.02 |
|
|
$ |
0.58 |
|
|
$ |
0.11 |
|
|
$ |
(0.17 |
) |
|
$ |
(0.59 |
) |
|
$ |
4.99 |
|
__________ |
|||||||||||||||||
(1) |
|
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. |
|||||||||||||||
(2) |
|
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. |
|||||||||||||||
(3) |
|
Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. |
|||||||||||||||
(4) |
|
Calculated based upon 423,093 diluted weighted-average shares for Classes A and B. |
|
||||||||||||||||
REVENUE BY TYPE |
||||||||||||||||
(in millions) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Revenue: |
|
|
|
|
|
|
|
|
||||||||
License |
|
$ |
710 |
|
|
$ |
639 |
|
|
$ |
2,093 |
|
|
$ |
2,019 |
|
Subscription and SaaS |
|
820 |
|
|
676 |
|
|
2,336 |
|
|
1,880 |
|
||||
Total license and subscription and SaaS |
|
1,530 |
|
|
1,315 |
|
|
4,429 |
|
|
3,899 |
|
||||
Services: |
|
|
|
|
|
|
|
|
||||||||
Software maintenance |
|
1,354 |
|
|
1,282 |
|
|
4,011 |
|
|
3,797 |
|
||||
Professional services |
|
304 |
|
|
267 |
|
|
880 |
|
|
777 |
|
||||
Total services |
|
1,658 |
|
|
1,549 |
|
|
4,891 |
|
|
4,574 |
|
||||
Total revenue |
|
$ |
3,188 |
|
|
$ |
2,864 |
|
|
$ |
9,320 |
|
|
$ |
8,473 |
|
Percentage of revenue: |
|
|
|
|
|
|
|
|
||||||||
License |
|
22.3 |
% |
|
22.3 |
% |
|
22.5 |
% |
|
23.8 |
% |
||||
Subscription and SaaS |
|
25.7 |
% |
|
23.6 |
% |
|
25.0 |
% |
|
22.2 |
% |
||||
Total license and subscription and SaaS |
|
48.0 |
% |
|
45.9 |
% |
|
47.5 |
% |
|
46.0 |
% |
||||
Services: |
|
|
|
|
|
|
|
|
||||||||
Software maintenance |
|
42.5 |
% |
|
44.8 |
% |
|
43.0 |
% |
|
44.8 |
% |
||||
Professional services |
|
9.5 |
% |
|
9.3 |
% |
|
9.5 |
% |
|
9.2 |
% |
||||
Total services |
|
52.0 |
% |
|
54.1 |
% |
|
52.5 |
% |
|
54.0 |
% |
||||
Total revenue |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
|||||||||||||||
REVENUE BY GEOGRAPHY |
|||||||||||||||
(in millions) |
|||||||||||||||
(unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Revenue: |
|
|
|
|
|
|
|
||||||||
|
$ |
1,582 |
|
|
$ |
1,466 |
|
|
$ |
4,587 |
|
|
$ |
4,268 |
|
International |
1,606 |
|
|
1,398 |
|
|
4,733 |
|
|
4,205 |
|
||||
Total revenue |
$ |
3,188 |
|
|
$ |
2,864 |
|
|
$ |
9,320 |
|
|
$ |
8,473 |
|
Percentage of revenue: |
|
|
|
|
|
|
|
||||||||
|
49.6 |
% |
|
51.2 |
% |
|
49.2 |
% |
|
50.4 |
% |
||||
International |
50.4 |
% |
|
48.8 |
% |
|
50.8 |
% |
|
49.6 |
% |
||||
Total revenue |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
|||||||||||||||
RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES |
|||||||||||||||
TO FREE CASH FLOWS |
|||||||||||||||
(A NON-GAAP FINANCIAL MEASURE) |
|||||||||||||||
(in millions) |
|||||||||||||||
(unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
GAAP cash flows from operating activities |
$ |
1,090 |
|
|
$ |
992 |
|
|
$ |
3,220 |
|
|
$ |
3,085 |
|
Capital expenditures |
(106 |
) |
|
(84 |
) |
|
(263 |
) |
|
(247 |
) |
||||
Free cash flows |
$ |
984 |
|
|
$ |
908 |
|
|
$ |
2,957 |
|
|
$ |
2,838 |
|
About Non-GAAP Financial Measures
To provide investors and others with additional information regarding VMware’s results,
VMware’s management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware’s financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware’s business, as they exclude charges and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flow provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.
Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware’s operating performance due to the following factors:
-
Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, the expense for the fair value of the stock-based instruments
VMware utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of VMware’s core business.
- Employer payroll taxes on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and other factors that are beyond VMware’s control and do not correlate to the operation of the business.
-
Amortization of acquired intangible assets. A portion of the purchase price of VMware’s acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However,
VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore,VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.
- Realignment charges. Realignment charges include workforce reductions, asset impairments, losses on asset disposals and costs to exit facilities. VMware’s management believes it is useful to exclude these items, when significant, as they are not reflective of VMware’s core business and operating results.
-
Acquisition, disposition and other items. As
VMware does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction,VMware believes it is useful to exclude acquisition, disposition and other items when looking for a consistent basis for comparison across accounting periods. These items include:- Direct costs of acquisitions and dispositions, such as transaction and advisory fees.
- Costs associated with integrating acquired businesses.
-
Accruals for the portion of merger consideration payable in installments that may be paid in cash or
VMware stock, at the option ofVMware . - Gains or losses on investments in equity securities, whether realized or unrealized.
- Charges recognized for non-recoverable strategic investments or gains recognized on the disposition of strategic investments.
- Gains or losses on sale or disposal of distinct lines of business or product offerings, or transactions with features similar to discontinued operations, including recoveries or charges recognized to adjust the fair value of assets that qualify as “held for sale.”
-
Certain costs incurred related to
VMware's spin-off from its former parent company,Dell Technologies Inc. , completed onNovember 1, 2021 , such as legal and advisory fees.
-
Certain litigation and other contingencies.
VMware , from time to time, may incur charges or benefits that are outside of the ordinary course of VMware’s business related to litigation and other contingencies.VMware believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of VMware’s business and because of the singular nature of the claims underlying such matters.
-
Tax adjustment. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to VMware’s annual estimated tax rate on non-GAAP income. This rate is based on VMware’s estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating VMware’s non-GAAP income as well as significant tax adjustments. VMware’s estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that
VMware management believes materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to VMware’s estimated annual tax rates as described above, the estimated tax rate on non-GAAP income may differ from the GAAP tax rate and from VMware’s actual tax liabilities.
Additionally, VMware’s management believes that the non-GAAP financial measure of free cash flow is meaningful to investors because management reviews cash flow generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.
The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware’s operations. Specifically, in the case of stock-based compensation, if
Management encourages investors and others to review VMware’s financial information in its entirety and not rely on a single financial measure.
View source version on businesswire.com: https://www.businesswire.com/news/home/20211123006126/en/
VMware Investor Relations
pziots@vmware.com
650-427-3267
VMware Global PR
mthacker@vmware.com
650-427-4454
Source:
FAQ
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