VMware Reports Fiscal Year 2023 First Quarter Results
VMware reports Q1 fiscal 2023 revenue of $3.09 billion, up 3% year-over-year, with subscription and SaaS revenue reaching $899 million, a 21% increase. The company has entered into a definitive agreement to be acquired by Broadcom for approximately $61 billion. GAAP net income stands at $242 million, down 43% per diluted share from the prior year. VMware has canceled its Q2 2023 conference call and suspended full-year guidance due to the pending acquisition. Operating cash flow was $1.01 billion with a strong RPO of $11.56 billion, reflecting a 5% year-over-year growth.
- Subscription and SaaS revenue growth of 21% year-over-year.
- Total revenue increases by 3% year-over-year.
- Operating cash flow of $1.01 billion demonstrates strong liquidity.
- RPO totals $11.56 billion, up 5% year-over-year.
- GAAP net income fell by 43% per diluted share compared to Q1 fiscal 2022.
- Non-GAAP operating income decreased by 16% year-over-year.
- Cancellation of Q2 2023 conference call and suspension of financial guidance.
Total Revenue growth of
Subscription and SaaS Revenue of
VMware Enters into Definitive Agreement to be Acquired by Broadcom
Quarterly Review
-
Revenue for the first quarter of fiscal 2023 was
, an increase of$3.09 billion 3% from the first quarter of fiscal 2022. -
Continued momentum in the subscription and SaaS business, constituting
29% of total revenue for the quarter. -
While license revenue was impacted by the transition to subscription and SaaS, the combination of subscription and SaaS and license revenue was
, an increase of$1.47 billion 6% from the first quarter of fiscal 2022. -
Subscription and SaaS revenue for the first quarter was
, an increase of$899 million 21% year-over-year. -
When excluding the impact associated with the suspension of business operations in
Russia and foreign currency, total revenue for the first quarter was , representing year-over-year growth of$3.14 billion 5% , and subscription and SaaS revenue was , representing year-over-year growth of$912 million 23% . -
Subscription and SaaS ARR for the first quarter was
, an increase of$3.66 billion 21% year-over-year. -
GAAP net income for the first quarter was
, or$242 million per diluted share, down$0.57 43% per diluted share compared to , or$425 million per diluted share, for the first quarter of fiscal 2022. Non-GAAP net income for the first quarter was$1.01 , or$542 million per diluted share, down$1.28 27% per diluted share compared to , or$744 million per diluted share, for the first quarter of fiscal 2022.1$1.76 -
GAAP operating income for the first quarter was
, a decrease of$408 million 27% from the first quarter of fiscal 2022. Non-GAAP operating income for the first quarter was , a decrease of$771 million 16% from the first quarter of fiscal 2022. -
Operating cash flow for the first quarter was
. Free cash flow for the first quarter was$1.01 billion .$899 million -
RPO for the first quarter totaled
, up$11.56 billion 5% year-over-year.
“We are focused on accelerating growth of our subscription and SaaS portfolio as we provide customers the flexibility and choice they seek,” said
“In the quarter, we saw continued progress with our subscription and SaaS go-to-market motion, which resulted in a higher-than-expected mix versus our license offerings in total revenue,” said
Business Highlights & Strategic Announcements
-
Google Cloud andVMware expanded their partnership to help customers accelerate application modernization and cloud transformation. Customers will now be able to use the VMware Cloud Universal program to take advantage ofGoogle Cloud VMware Engine, gaining greater financial flexibility, choice and the ability to accelerate their cloud migrations and modernize their enterprise applications inGoogle Cloud. -
VMware expanded the VMware Sovereign Cloud initiative with new partners, as well as new cloud-native, developer-centric capabilities that bring more value to all VMware Cloud provider offerings. The VMware Sovereign Cloud initiative helps customers identify and engage with trusted national or regional cloud service providers to meet their unique sovereign cloud requirements. -
Deloitte and
VMware created the Deloitte VMware Distributed Cloud (DVDC) practice to help clients transform their businesses and the industries they serve by more effectively implementing and utilizing distributed cloud architectures. - DISH will trial VMware’s RAN Intelligent Controller (RIC) as the platform on top of which RAN applications will run. The RIC is a new layer of software that makes the RAN a software platform programmable and accessible by developers. Through the RIC, ISVs and developers can build exciting new applications enabling a dynamic new marketplace for new consumer and business applications.
-
VMware was recognized for its continued Environmental, Social and Governance (ESG) leadership and sustainability initiatives with inclusion on Barron’s list of the 100 Most Sustainable Companies in 2022 and on the Clean 200 list for the third consecutive year. -
VMware was named by Forbes to its list of America’s Best Employers for Diversity in 2022 for the fourth consecutive year.VMware ranked number two on the overall list—and was the top ranked technology company—among the 500 employers Forbes ranked most dedicated to diversity, equity and inclusion. -
VMware was recognized by Newsweek in its first annual ranking of America’s Most Trustworthy Companies.VMware was ranked fourth in the software and telecommunications category.
Entry into Definitive Agreement to be Acquired by Broadcom
VMware’s results are provided in conjunction with today’s announcement that
Due to the Company’s pending acquisition by Broadcom, the Company is canceling its
1 Our annual estimated tax rate is based upon, among other things, current tax law regarding the impacts of Internal Revenue Code Section 174 (“Section 174”) research and development expense capitalization, which became effective beginning VMware’s fiscal 2023. Although the
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 and partners of VMware’s strategy and offerings, as well as the announced proposed acquisition of
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||
(unaudited) |
||||||||
|
|
|
||||||
|
Three Months Ended |
|||||||
|
|
|
||||||
|
2022 |
2021 |
||||||
Revenue: |
|
|
||||||
License |
$ |
572 |
|
$ |
646 |
|
||
Subscription and SaaS |
|
899 |
|
|
741 |
|
||
Services |
|
1,617 |
|
|
1,607 |
|
||
Total revenue |
|
3,088 |
|
|
2,994 |
|
||
Operating expenses(1): |
|
|
||||||
Cost of license revenue |
|
35 |
|
|
37 |
|
||
Cost of subscription and SaaS revenue |
|
192 |
|
|
157 |
|
||
Cost of services revenue |
|
375 |
|
|
337 |
|
||
Research and development |
|
774 |
|
|
708 |
|
||
Sales and marketing |
|
1,053 |
|
|
959 |
|
||
General and administrative |
|
251 |
|
|
236 |
|
||
Realignment |
|
— |
|
|
1 |
|
||
Operating income |
|
408 |
|
|
559 |
|
||
Investment income |
|
1 |
|
|
— |
|
||
Interest expense |
|
(71 |
) |
|
(50 |
) |
||
Other income (expense), net |
|
(10 |
) |
|
(23 |
) |
||
Income before income tax |
|
328 |
|
|
486 |
|
||
Income tax provision |
|
86 |
|
|
61 |
|
||
Net income |
$ |
242 |
|
$ |
425 |
|
||
Net income per weighted-average share, basic |
$ |
0.58 |
|
$ |
1.01 |
|
||
Net income per weighted-average share, diluted |
$ |
0.57 |
|
$ |
1.01 |
|
||
Weighted-average shares, basic |
|
420,586 |
|
|
419,116 |
|
||
Weighted-average shares, diluted |
|
422,987 |
|
|
422,038 |
|
||
__________ |
|
|
||||||
(1) Includes stock-based compensation as follows: |
|
|
||||||
Cost of subscription and SaaS revenue |
$ |
5 |
|
$ |
5 |
|
||
Cost of services revenue |
|
23 |
|
|
25 |
|
||
Research and development |
|
132 |
|
|
127 |
|
||
Sales and marketing |
|
83 |
|
|
75 |
|
||
General and administrative |
|
40 |
|
|
31 |
|
||
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||
(unaudited) |
||||||||
|
|
|
||||||
|
|
|
||||||
|
2022 |
2022 |
||||||
ASSETS |
|
|
||||||
Current assets: |
|
|
||||||
Cash and cash equivalents |
$ |
3,719 |
|
$ |
3,614 |
|
||
Short-term investments |
|
— |
|
|
19 |
|
||
Accounts receivable, net of allowance of |
|
1,620 |
|
|
2,297 |
|
||
Due from related parties |
|
638 |
|
|
1,438 |
|
||
Other current assets |
|
666 |
|
|
598 |
|
||
Total current assets |
|
6,643 |
|
|
7,966 |
|
||
Property and equipment, net |
|
1,492 |
|
|
1,461 |
|
||
Deferred tax assets |
|
5,948 |
|
|
5,906 |
|
||
Intangible assets, net |
|
651 |
|
|
714 |
|
||
|
|
9,598 |
|
|
9,598 |
|
||
Due from related parties |
|
197 |
|
|
199 |
|
||
Other assets |
|
2,905 |
|
|
2,832 |
|
||
Total assets |
$ |
27,434 |
|
$ |
28,676 |
|
||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
||||||
Current liabilities: |
|
|
||||||
Accounts payable |
$ |
204 |
|
$ |
234 |
|
||
Accrued expenses and other |
|
2,276 |
|
|
2,806 |
|
||
Unearned revenue |
|
6,296 |
|
|
6,479 |
|
||
Due to related parties |
|
116 |
|
|
132 |
|
||
Total current liabilities |
|
8,892 |
|
|
9,651 |
|
||
Long-term debt |
|
11,926 |
|
|
12,671 |
|
||
Unearned revenue |
|
4,570 |
|
|
4,743 |
|
||
Income tax payable |
|
241 |
|
|
242 |
|
||
Operating lease liabilities |
|
927 |
|
|
927 |
|
||
Due to related parties |
|
911 |
|
|
909 |
|
||
Other liabilities |
|
378 |
|
|
409 |
|
||
Total liabilities |
|
27,845 |
|
|
29,552 |
|
||
Contingencies |
|
|
||||||
Stockholders’ deficit: |
|
|
||||||
Class A common stock, par value |
|
4 |
|
|
4 |
|
||
Additional paid-in capital |
|
227 |
|
|
— |
|
||
Accumulated other comprehensive loss |
|
(9 |
) |
|
(5 |
) |
||
Accumulated deficit |
|
(633 |
) |
|
(875 |
) |
||
Total stockholders’ deficit |
|
(411 |
) |
|
(876 |
) |
||
Total liabilities and stockholders’ deficit |
$ |
27,434 |
|
$ |
28,676 |
|
||
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(in millions) |
||||||||
(unaudited) |
||||||||
|
|
|
||||||
|
Three Months Ended |
|||||||
|
|
|
||||||
|
2022 |
2021 |
||||||
Operating activities: |
|
|
||||||
Net income |
$ |
242 |
|
$ |
425 |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
||||||
Depreciation and amortization |
|
288 |
|
|
269 |
|
||
Stock-based compensation |
|
283 |
|
|
263 |
|
||
Deferred income taxes, net |
|
(43 |
) |
|
(48 |
) |
||
(Gain) loss on equity securities and disposition of assets, net |
|
(9 |
) |
|
36 |
|
||
Other |
|
3 |
|
|
1 |
|
||
Changes in assets and liabilities, net of acquisitions: |
|
|
||||||
Accounts receivable |
|
675 |
|
|
395 |
|
||
Other current assets and other assets |
|
(244 |
) |
|
(161 |
) |
||
Due from related parties |
|
801 |
|
|
685 |
|
||
Accounts payable |
|
(28 |
) |
|
65 |
|
||
Accrued expenses and other liabilities |
|
(665 |
) |
|
(630 |
) |
||
Income taxes payable |
|
74 |
|
|
80 |
|
||
Unearned revenue |
|
(357 |
) |
|
(114 |
) |
||
Due to related parties |
|
(15 |
) |
|
— |
|
||
Net cash provided by operating activities |
|
1,005 |
|
|
1,266 |
|
||
Investing activities: |
|
|
||||||
Additions to property and equipment |
|
(106 |
) |
|
(70 |
) |
||
Sales of investments in equity securities |
|
20 |
|
|
8 |
|
||
Purchases of strategic investments |
|
(8 |
) |
|
— |
|
||
Proceeds from disposition of assets |
|
6 |
|
|
— |
|
||
Business combinations, net of cash acquired, and purchases of intangible assets |
|
(3 |
) |
|
(10 |
) |
||
Net cash used in investing activities |
|
(91 |
) |
|
(72 |
) |
||
Financing activities: |
|
|
||||||
Proceeds from issuance of common stock |
|
119 |
|
|
131 |
|
||
Repayment of term loan |
|
(750 |
) |
|
— |
|
||
Repurchase of common stock |
|
(89 |
) |
|
(371 |
) |
||
Shares repurchased for tax withholdings on vesting of restricted stock |
|
(94 |
) |
|
(56 |
) |
||
Principal payments on finance lease obligations |
|
(1 |
) |
|
(1 |
) |
||
Net cash used in financing activities |
|
(815 |
) |
|
(297 |
) |
||
Net increase in cash, cash equivalents and restricted cash |
|
99 |
|
|
897 |
|
||
Cash, cash equivalents and restricted cash at beginning of the period |
|
3,663 |
|
|
4,770 |
|
||
Cash, cash equivalents and restricted cash at end of the period |
$ |
3,762 |
|
$ |
5,667 |
|
||
Supplemental disclosures of cash flow information: |
|
|
||||||
Cash paid for interest |
$ |
80 |
|
$ |
46 |
|
||
Cash paid for taxes, net |
|
69 |
|
|
38 |
|
||
Non-cash items: |
|
|
||||||
Changes in capital additions, accrued but not paid |
$ |
(7 |
) |
$ |
3 |
|
||
|
||||||||
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 |
|||||||
|
|
|
|
|||||
|
2022 |
|
2021 |
|||||
Total revenue, as reported |
$ |
3,088 |
|
|
$ |
2,994 |
|
|
Sequential change in unearned revenue(1) |
|
(356 |
) |
|
|
(114 |
) |
|
Total revenue plus sequential change in unearned revenue |
$ |
2,732 |
|
|
$ |
2,880 |
|
|
Change (%) over prior year, as reported |
|
(5 |
) % |
|
|
|||
|
|
|
|
|||||
Growth in License and Subscription and SaaS Revenue Plus Sequential Change in Unearned License and Subscription and SaaS Revenue |
||||||||
|
|
|
|
|||||
|
Three Months Ended |
|||||||
|
|
|
|
|||||
|
2022 |
|
2021 |
|||||
Total license and subscription and SaaS revenue, as reported |
$ |
1,471 |
|
|
$ |
1,387 |
|
|
Sequential change in unearned license and subscription and SaaS revenue(2) |
|
3 |
|
|
|
67 |
|
|
Total license and subscription and SaaS revenue plus sequential change in unearned license and subscription and SaaS revenue |
$ |
1,474 |
|
|
$ |
1,454 |
|
|
Change (%) over prior year, as reported |
|
1 |
% |
|
|
|||
__________ |
|
|
|
|||||
(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 condensed 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 |
|||||||
|
|
|
|
||||
|
|
|
|
||||
|
2022 |
|
2021 |
||||
Remaining performance obligations(3) |
$ |
11,556 |
|
|
$ |
11,032 |
|
Change (%) over prior year |
|
5 |
% |
|
|
||
|
|
|
|
||||
Remaining performance obligations, current(4) |
$ |
6,563 |
|
|
$ |
6,164 |
|
Change (%) over prior year |
|
6 |
% |
|
|
||
__________ |
|
|
|
||||
(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) |
||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
||||||||||||
|
2022 |
2022 |
2021 |
2021 |
2021 |
2021 |
||||||||||||
Unearned revenue as reported: |
|
|
|
|
|
|
||||||||||||
License |
$ |
20 |
$ |
19 |
$ |
17 |
$ |
20 |
$ |
16 |
$ |
15 |
||||||
Subscription and SaaS |
|
2,671 |
|
2,669 |
|
2,238 |
|
2,208 |
|
2,064 |
|
1,998 |
||||||
Services |
|
|
|
|
|
|
||||||||||||
Software maintenance |
|
6,877 |
|
7,208 |
|
6,773 |
|
6,916 |
|
6,957 |
|
7,092 |
||||||
Professional services |
|
1,298 |
|
1,326 |
|
1,205 |
|
1,194 |
|
1,163 |
|
1,209 |
||||||
Total unearned revenue |
$ |
10,866 |
$ |
11,222 |
$ |
10,233 |
$ |
10,338 |
$ |
10,200 |
$ |
10,314 |
|
||||||||||||||||||||||||||||
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
|
Employer
|
Intangible
|
Acquisition,
|
Tax
|
Non-GAAP
|
|||||||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|||||||||||||||||||||
Cost of license revenue |
$ |
35 |
|
|
— |
|
|
— |
|
|
(10 |
) |
|
— |
|
|
— |
|
$ |
24 |
|
|||||||
Cost of subscription and SaaS revenue |
$ |
192 |
|
|
(5 |
) |
|
— |
|
|
(37 |
) |
|
— |
|
|
— |
|
$ |
150 |
|
|||||||
Cost of services revenue |
$ |
375 |
|
|
(23 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
$ |
352 |
|
|||||||
Research and development |
$ |
774 |
|
|
(132 |
) |
|
— |
|
|
(2 |
) |
|
— |
|
|
— |
|
$ |
639 |
|
|||||||
Sales and marketing |
$ |
1,053 |
|
|
(83 |
) |
|
(2 |
) |
|
(17 |
) |
|
— |
|
|
— |
|
$ |
954 |
|
|||||||
General and administrative |
$ |
251 |
|
|
(40 |
) |
|
— |
|
|
— |
|
|
(13 |
) |
|
— |
|
$ |
198 |
|
|||||||
Operating income |
$ |
408 |
|
|
283 |
|
|
2 |
|
|
66 |
|
|
13 |
|
|
— |
|
$ |
771 |
|
|||||||
Operating margin(2) |
|
13.2 |
% |
|
9.2 |
% |
|
0.1 |
% |
|
2.1 |
% |
|
0.4 |
% |
|
— |
|
|
25.0 |
% |
|||||||
Other income (expense), net(3) |
$ |
(10 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(9 |
) |
|
— |
|
$ |
(19 |
) |
|||||||
Income before income tax |
$ |
328 |
|
|
283 |
|
|
2 |
|
|
66 |
|
|
4 |
|
|
— |
|
$ |
682 |
|
|||||||
Income tax provision |
$ |
86 |
|
|
|
|
|
|
54 |
|
$ |
140 |
|
|||||||||||||||
Tax rate(2) |
|
26.1 |
% |
|
|
|
|
|
|
20.5 |
% |
|||||||||||||||||
Net income |
$ |
242 |
|
|
283 |
|
|
2 |
|
|
66 |
|
|
4 |
|
|
(54 |
) |
$ |
542 |
|
|||||||
Net income per weighted-average share, diluted(2)(4) |
$ |
0.57 |
|
$ |
0.67 |
|
$ |
— |
|
$ |
0.16 |
|
$ |
0.01 |
|
$ |
(0.13 |
) |
$ |
1.28 |
|
|||||||
__________ |
|
|
|
|
|
|
|
|||||||||||||||||||||
(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 422,987 diluted weighted-average shares of common stock. |
|
|||||||||||||||||||||||
SUPPLEMENTAL 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 |
|
Tax Adjustment (1) |
|
Non-GAAP
|
|
Estimated Tax
|
|
Non-GAAP As
Excluding Section
|
||||||||||||||
Income before income tax |
$ |
328 |
|
|
|
|
$ |
682 |
|
|
|
|
|
|
$ |
|
682 |
|
|||||
Income tax provision |
$ |
86 |
|
|
$ |
54 |
|
$ |
140 |
|
|
$ |
(27 |
) |
- |
(34 |
) |
|
$ |
113 |
- |
106 |
|
Tax rate (4) |
|
26.1 |
% |
|
|
|
|
20.5 |
% |
|
|
|
|
|
|
16.5 |
- |
15.5 |
% |
||||
Net income |
$ |
242 |
|
|
|
|
$ |
542 |
|
|
|
|
|
|
$ |
569 |
- |
576 |
|
||||
Net income per weighted-average share, diluted (4)(5) |
$ |
0.57 |
|
|
|
|
$ |
1.28 |
|
|
|
|
|
|
$ |
1.35 |
- |
1.36 |
|
||||
__________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(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) Our annual estimated tax rate is based upon, among other things, current tax law regarding the impacts of Internal Revenue Code Section 174 (“Section 174”) research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. Although the |
|||||||||||||||||||||||
(3) Represents the estimated non-GAAP results excluding the impact of Section 174 capitalization under the tax law in effect as of |
|||||||||||||||||||||||
(4) Totals may not sum, due to rounding. Tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. |
|||||||||||||||||||||||
(5) Calculated based upon 422,987 diluted weighted-average shares of common stock. |
|
||||||||||||||||||||||||||||||||
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
|
Employer
|
Intangible
|
Realignment
|
Acquisition,
|
Tax
|
Non-GAAP
|
||||||||||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Cost of license revenue |
$ |
37 |
|
|
— |
|
|
— |
|
|
(11 |
) |
|
— |
|
|
— |
|
|
— |
|
$ |
26 |
|
||||||||
Cost of subscription and SaaS revenue |
$ |
157 |
|
|
(5 |
) |
|
— |
|
|
(42 |
) |
|
— |
|
|
— |
|
|
— |
|
$ |
109 |
|
||||||||
Cost of services revenue |
$ |
337 |
|
|
(25 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
$ |
312 |
|
||||||||
Research and development |
$ |
708 |
|
|
(127 |
) |
|
— |
|
|
(2 |
) |
|
— |
|
|
— |
|
|
— |
|
$ |
578 |
|
||||||||
Sales and marketing |
$ |
959 |
|
|
(75 |
) |
|
(1 |
) |
|
(22 |
) |
|
— |
|
|
— |
|
|
— |
|
$ |
863 |
|
||||||||
General and administrative |
$ |
236 |
|
|
(31 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(22 |
) |
|
— |
|
$ |
183 |
|
||||||||
Realignment |
$ |
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
— |
|
$ |
— |
|
||||||||
Operating income |
$ |
559 |
|
|
263 |
|
|
1 |
|
|
77 |
|
|
1 |
|
|
22 |
|
|
— |
|
$ |
923 |
|
||||||||
Operating margin(2) |
|
18.7 |
% |
|
8.8 |
% |
|
— |
% |
|
2.6 |
% |
|
— |
% |
|
0.7 |
% |
|
— |
|
|
30.8 |
% |
||||||||
Other income (expense), net(3) |
$ |
(23 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
36 |
|
|
— |
|
$ |
12 |
|
||||||||
Income before income tax |
$ |
486 |
|
|
263 |
|
|
1 |
|
|
77 |
|
|
1 |
|
|
58 |
|
|
— |
|
$ |
885 |
|
||||||||
Income tax provision |
$ |
61 |
|
|
|
|
|
|
|
80 |
|
$ |
141 |
|
||||||||||||||||||
Tax rate(2) |
|
12.6 |
% |
|
|
|
|
|
|
|
16.0 |
% |
||||||||||||||||||||
Net income |
$ |
425 |
|
|
263 |
|
|
1 |
|
|
77 |
|
|
1 |
|
|
58 |
|
|
(80 |
) |
$ |
744 |
|
||||||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) |
$ |
1.01 |
|
$ |
0.62 |
|
$ |
— |
|
$ |
0.18 |
|
$ |
— |
|
$ |
0.14 |
|
$ |
(0.19 |
) |
$ |
1.76 |
|
||||||||
__________ |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
(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 422,038 diluted weighted-average shares for Classes A and B. |
|
||||||||
REVENUE BY TYPE |
||||||||
(in millions) |
||||||||
(unaudited) |
||||||||
|
|
|
||||||
|
|
|
||||||
|
Three Months Ended |
|||||||
|
|
|
||||||
|
2022 |
2021 |
||||||
Revenue: |
|
|
||||||
License |
$ |
572 |
|
$ |
646 |
|
||
Subscription and SaaS |
|
899 |
|
|
741 |
|
||
Total license and subscription and SaaS |
|
1,471 |
|
|
1,387 |
|
||
Services: |
|
|
||||||
Software maintenance |
|
1,310 |
|
|
1,321 |
|
||
Professional services |
|
307 |
|
|
286 |
|
||
Total services |
|
1,617 |
|
|
1,607 |
|
||
Total revenue |
$ |
3,088 |
|
$ |
2,994 |
|
||
Percentage of revenue: |
|
|
||||||
License |
|
18.5 |
% |
|
21.6 |
% |
||
Subscription and SaaS |
|
29.1 |
% |
|
24.7 |
% |
||
Total license and subscription and SaaS |
|
47.6 |
% |
|
46.3 |
% |
||
Services: |
|
|
||||||
Software maintenance |
|
42.4 |
% |
|
44.1 |
% |
||
Professional services |
|
10.0 |
% |
|
9.6 |
% |
||
Total services |
|
52.4 |
% |
|
53.7 |
% |
||
Total revenue |
|
100.0 |
% |
|
100.0 |
% |
|
||||||||
REVENUE BY GEOGRAPHY |
||||||||
(in millions) |
||||||||
(unaudited) |
||||||||
|
|
|
||||||
|
|
|
||||||
|
Three Months Ended |
|||||||
|
|
|
||||||
|
2022 |
2021 |
||||||
Revenue: |
|
|
||||||
|
$ |
1,518 |
|
$ |
1,466 |
|
||
International |
|
1,570 |
|
|
1,528 |
|
||
Total revenue |
$ |
3,088 |
|
$ |
2,994 |
|
||
Percentage of revenue: |
|
|
||||||
|
|
49.1 |
% |
|
49.0 |
% |
||
International |
|
50.9 |
% |
|
51.0 |
% |
||
Total revenue |
|
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 |
|||||||
|
|
|
||||||
|
2022 |
2021 |
||||||
GAAP cash flows from operating activities |
$ |
1,005 |
|
$ |
1,266 |
|
||
Capital expenditures |
|
(106 |
) |
|
(70 |
) |
||
Free cash flows |
$ |
899 |
|
$ |
1,196 |
|
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
– 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
-
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/20220525006086/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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