Total revenue growth of 8% year-over-year
Subscription and SaaS revenue growth of 44%
year-over-year; 24% of total revenue
VMware, Inc. (NYSE: VMW), a leading innovator in enterprise
software, today announced financial results for the third quarter
of fiscal 2021:
- Revenue for the third quarter was $2.86 billion, an increase of
8% from the third quarter of fiscal 2020.
- The combination of subscription and SaaS and license revenue
was $1.32 billion, an increase of 10% from the third quarter of
fiscal 2020.
- Subscription and SaaS revenue for the third quarter was $676
million, an increase of 44% year-over-year, representing 24% of
total revenue.
- GAAP net income for the third quarter was $434 million, or
$1.02 per diluted share, compared to $407 million, or $0.96 per
diluted share, for the third quarter of fiscal 2020. Non-GAAP net
income for the third quarter was $704 million, or $1.66 per diluted
share, up 17% per diluted share compared to $602 million, or $1.42
per diluted share, for the third quarter of fiscal 2020.
- GAAP operating income for the third quarter was $428 million,
an increase of 15% from the third quarter of fiscal 2020. Non-GAAP
operating income for the third quarter was $888 million, an
increase of 17% from the third quarter of fiscal 2020.
- Operating cash flow for the third quarter was $992 million.
Free cash flow for the third quarter was $908 million.
- RPO for Q3 totaled $10.2 billion, up 10% year-over-year.
Excluding the impact in the third quarter of fiscal year 2020 of
unearned revenue assumed in the acquisition of Carbon Black, which
negatively impacted the year-over-year growth rate by 5 percentage
points, total revenue plus sequential change in total unearned
revenue decreased 4% year-over-year.
- Excluding the impact in the third quarter of fiscal year 2020
of unearned revenue assumed in the acquisition of Carbon Black,
which negatively impacted the year-over-year growth rate by 10
percentage points, subscription and SaaS and license revenue plus
sequential change in unearned subscription and SaaS and license
revenue grew 1% year-over-year.
“Q3 was another good quarter for VMware, and we’re pleased with
our results,” commented Pat Gelsinger, CEO, VMware. “As customers
navigate through these unprecedented times, our focus remains on
delivering the digital foundation for an unpredictable world. We
continue to shape the future in areas that are top priority for
every business–from app development to multi-cloud to security and
digital workspaces.”
“Subscription and SaaS revenue increased 44% year-over-year in
Q3 and surpassed license revenue for the first time,” said Zane
Rowe, executive vice president and CFO, VMware. “VMware will
continue to invest in and focus on further expanding our
Subscription and SaaS portfolio, which we believe will drive
company growth, customer satisfaction and shareholder value.”
VMware is raising full-year fiscal 2021 total revenue guidance
to $11.7 billion and increasing GAAP net income per diluted share
to between $4.17 and $4.27 with non-GAAP net income per diluted
share of $7.03.
Business Highlights & Strategic Announcements
- At VMworld 2020, VMware welcomed nearly 200,000 registrants and
introduced a wave of new offerings and partnerships designed to
help customers navigate their own transformation journeys. The news
across VMworld includes:
- VMware unveiled new innovations to deliver intrinsic security
to the world’s digital infrastructure. Specifically, VMware Carbon
Black Cloud Workload delivers advanced protection built into
vSphere for better securing modern workloads to reduce the attack
surface and strengthen security posture.
- VMware outlined VMware Workforce Anywhere solutions to provide
exceptional workforce experiences, end-to-end Zero Trust security
controls and simplified management featuring VMware NSX Secure
Access Service Edge (SASE), Workspace ONE and Carbon Black Endpoint
Security capabilities.
- VMware announced partnerships with Menlo Security and Zscaler
to help large global enterprises simplify the adoption of a
complete SASE architecture and more effectively implement Zero
Trust security.
- VMware acquired SaltStack, a pioneer in building intelligent,
event-driven automation software. SaltStack will enable VMware to
significantly broaden its software configuration management and
infrastructure and network automation capabilities.
- VMware unveiled updates to Tanzu support across VMware Cloud on
AWS, Azure VMware Solution and Oracle Cloud VMware Solution.
- VMware announced Project Monterey—a technology preview focused
on evolving the architecture for the data center, cloud and edge to
address the changing requirements of next-generation applications
including AI, machine learning and 5G applications.
- VMware and NVIDIA announced a broad partnership to deliver both
an end-to-end enterprise platform for AI and a new architecture for
data center, cloud and edge that uses NVIDIA® DPUs (data processing
units) to support existing and next-generation applications. This
will help accelerate AI adoption, enabling enterprises to extend
existing infrastructure for AI, manage all applications with a
single set of operations and deploy AI-ready infrastructure where
the data resides, across the data center, cloud and edge.
- The company announced the 5G Telco Cloud Platform, a consistent
cloud-first solution powered by a field-proven, carrier-grade, and
high-performance cloud native infrastructure with intelligent
automation. This new platform includes Tanzu Kubernetes Grid—an
embedded Kubernetes distribution—that will allow Communication
Service Providers to reliably build, manage and run containerized
workloads across private, telco, edge and public clouds.
- VMware announced it has collaborated with Samsung Electronics
Co., Ltd. to further extend its leadership in 5G. Through this
alliance, the companies seek to help communication service
providers meet the requirements of 5G networks and accelerate the
roll-out of 5G by optimizing Samsung’s portfolio of telco offerings
from Core to Edge to RAN for both containerized network functions
and virtualized network functions with VMware Telco Cloud
Platform.
- The company unveiled VMware vSphere 7 Update 1, VMware vSAN 7
Update 1 and VMware Cloud Foundation 4.1 product releases that
streamline customer adoption of Kubernetes, support stateful
applications with new developer-ready capabilities and enhance
scalability and operations with new features. VMware also announced
Tanzu editions—packaging portfolio capabilities to address the most
common scenarios customers encounter in their modernization
efforts.
- In August, the company was positioned as a Leader in “The
Forrester Wave™: Infrastructure Automation Platforms, Q3
2020.”1
- In September, VMware has again been positioned as a Leader in
the Gartner 2020 Magic Quadrant for WAN Edge Infrastructure.2 This
is the third consecutive year VMware has been positioned as a
Leader for VMware SD-WAN in Gartner’s evaluation for WAN Edge
Infrastructure.
The company will host a conference call today at 1:30 p.m. PT/
4:30 p.m. ET to review financial results and business outlook. A
live web broadcast of the event will be available on the VMware
investor relations website at http://ir.vmware.com. Slides will
accompany the web broadcast. The replay of the webcast and slides
will be available on the website for two months. In addition, six
quarters of historical data for unearned revenue will also be made
available at http://ir.vmware.com in conjunction with the
conference call.
1 Forrester, “The Forrester Wave™: Infrastructure Automation
Platforms, Q3 2020,” August 2020
2 Gartner Magic Quadrant for WAN Edge Infrastructure, Jonathan
Forest, Andrew Lerner, Naresh Singh, 23rd September 2020. 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.
About VMware
VMware software powers the world’s complex digital
infrastructure. The company’s cloud, networking and security, and
digital workspace offerings provide a dynamic and efficient digital
foundation to customers globally, aided by an extensive ecosystem
of partners. Headquartered in Palo Alto, California, VMware is
committed to being a force for good, from its breakthrough
innovations to its global impact. For more information, please
visit https://www.vmware.com/company.html.
Additional Information
VMware’s website is located at www.vmware.com, and its investor
relations website is located at http://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 VMware, all of which is made available free of
charge. The additional information includes: materials that VMware
files with the SEC; announcements of investor conferences, speeches
and events at which its executives talk about its products,
services and competitive strategies; webcasts of its quarterly
earnings calls, investor conferences and events (archives of which
are also available for a limited time); additional information on
its financial metrics, including reconciliations of non-GAAP
financial measures to the most directly comparable GAAP measures;
press releases on quarterly earnings, product and service
announcements, legal developments and international news; corporate
governance information; other news, blogs and announcements that
VMware may post from time to time that investors may find useful or
interesting; and opportunities to sign up for email alerts and RSS
feeds to have information pushed in real time.
VMware, VMworld, Carbon Black, Workspace ONE, NSX, SaltStack,
Tanzu, vSphere and VMware vSAN are registered trademarks or
trademarks of VMware, Inc. or its subsidiaries in the United States
and other jurisdictions. All other marks and names mentioned herein
may be trademarks of their respective organizations.
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.”
Forward-Looking Statements
This press release contains forward-looking statements
including, among other things, statements regarding VMware
innovations, product and solutions developments and previews, and
their expected benefits to customers, including those relating to
VMware Carbon Black Cloud, VMware Workforce Anywhere, Tanzu,
Project Monterey and the 5G Telco Cloud Platform; partnerships with
Menlo Security and Zscaler and collaboration with NVIDIA, and their
expected benefits to customers; the expected benefits of the
acquisition of SaltStack; and VMware FY21 financial guidance
regarding total revenue and GAAP and Non-GAAP net income per
diluted share. 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 our operations, financial condition,
our customers, the business environment and the global and regional
economies; (2) adverse changes in general economic or market
conditions; (3) delays or reductions in consumer, government and
information technology spending; (4) competitive factors, including
but not limited to pricing pressures, industry consolidation, entry
of new competitors into the virtualization software and cloud, end
user and mobile computing, and security industries, as well as new
product and marketing initiatives by VMware’s competitors; (5) the
ability to successfully integrate into VMware acquired companies
and assets and smoothly transition services related to divested
assets from VMware; (6) rapid technological changes in the
virtualization software and cloud, end user, security and mobile
computing industries; (7) VMware’s customers’ ability to transition
to new products, platforms, services, solutions and computing
strategies in such areas as containerization, modern applications,
intrinsic security and networking, cloud, digital workspaces,
virtualization and the software defined data center, and the
uncertainty of their acceptance of emerging technology; (8)
VMware’s ability to enter into, maintain and extend strategically
effective partnerships, collaborations and alliances; (9) the
continued risk of litigation and regulatory actions; (10) VMware’s
ability to protect its proprietary technology; (11) changes to
product and service development timelines; (12) VMware’s
relationship with Dell Technologies and Dell’s ability to control
matters requiring stockholder approval, including the election of
VMware’s board members and matters relating to Dell’s investment in
VMware; (13) the potential impact of Dell’s investigation of
strategic alternatives with respect to its interest in VMware,
including a potential spinoff and related special cash dividend;
(14) VMware’s ability to attract and retain highly qualified
employees; (15) the ability of VMware to utilize our relationship
with Dell to leverage go-to-market and product development
activities; (16) risks associated with cyber-attacks, information
security and data privacy; (17) disruptions resulting from key
management changes; (18) risks associated with international sales
such as fluctuating currency exchange rates and increased trade
barriers; (19) changes in VMware’s financial condition; (20)
geopolitical changes such as Brexit and increased tariffs and trade
barriers that could adversely impact our non-U.S. sales; and (21)
other business effects, including those related to industry,
market, economic, political, regulatory and global health
conditions. These forward-looking statements are made as of the
date of this press release, are based on current expectations and
are subject to uncertainties and changes in condition,
significance, value and effect as well as other risks detailed in
documents filed with the Securities and Exchange Commission,
including VMware’s most recent reports on Form 10-K and Form 10-Q
and current reports on Form 8- K that we may file from time to
time, which could cause actual results to vary from expectations.
VMware assumes no obligation to, and does not currently intend to,
update any such forward-looking statements after the date of this
release.
VMware, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(amounts in millions, except
per share amounts, and shares in thousands)
(unaudited)
Three Months Ended
Nine Months Ended
October 30,
November 1,
October 30,
November 1,
2020
2019
2020
2019
Revenue:
License
$
639
$
728
$
2,019
$
2,147
Subscription and SaaS
676
470
1,880
1,320
Services
1,549
1,458
4,574
4,271
Total revenue
2,864
2,656
8,473
7,738
Operating expenses(1):
Cost of license revenue
44
42
119
116
Cost of subscription and SaaS revenue
142
103
400
294
Cost of services revenue
330
311
969
916
Research and development
714
642
2,058
1,846
Sales and marketing
912
918
2,727
2,674
General and administrative
250
269
773
701
Realignment
44
—
47
—
Operating income
428
371
1,380
1,191
Investment income
1
12
7
40
Interest expense
(52
)
(40
)
(156
)
(108
)
Other income (expense), net
177
17
186
75
Income before income tax
554
360
1,417
1,198
Income tax provision (benefit)
120
(30
)
150
(4,842
)
Net income
434
390
1,267
6,040
Less: Net loss attributable to
non-controlling interests
—
(17
)
—
(50
)
Net income attributable to VMware,
Inc.
$
434
$
407
$
1,267
$
6,090
Net income per weighted-average share
attributable to VMware, Inc. common stockholders, basic for Classes
A and B
$
1.03
$
0.98
$
3.02
$
14.60
Net income per weighted-average share
attributable to VMware, Inc. common stockholders, diluted for
Classes A and B
$
1.02
$
0.96
$
3.00
$
14.32
Weighted-average shares, basic for Classes
A and B
420,857
416,387
419,758
417,002
Weighted-average shares, diluted for
Classes A and B
423,400
423,035
423,093
425,366
__________
(1) Includes stock-based compensation as
follows:
Cost of license revenue
$
—
$
—
$
1
$
1
Cost of subscription and SaaS revenue
4
3
13
10
Cost of services revenue
25
20
74
58
Research and development
140
118
397
328
Sales and marketing
85
76
243
204
General and administrative
50
39
141
104
VMware, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(amounts in millions, except
per share amounts, and shares in thousands)
(unaudited)
October 30,
January 31,
2020
2020
ASSETS
Current assets:
Cash and cash equivalents
$
3,898
$
2,915
Accounts receivable, net of allowance for
doubtful accounts of $6 and $7
1,789
1,883
Due from related parties, net
672
1,457
Other current assets
473
436
Total current assets
6,832
6,691
Property and equipment, net
1,311
1,280
Other assets
2,698
2,266
Deferred tax assets
5,865
5,556
Intangible assets, net
1,059
1,172
Goodwill
9,559
9,329
Total assets
$
27,324
$
26,294
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
190
$
208
Accrued expenses and other
2,232
2,151
Current portion of long-term debt and
other borrowings
—
2,747
Unearned revenue
5,205
5,218
Total current liabilities
7,627
10,324
Note payable to Dell
270
270
Long-term debt
4,715
2,731
Unearned revenue
4,030
4,050
Income tax payable
790
817
Operating lease liabilities
904
746
Other liabilities
512
347
Total liabilities
18,848
19,285
Contingencies
Stockholders’ equity:
Class A common stock, par value $0.01;
authorized 2,500,000 shares; issued and outstanding 113,300 and
110,484 shares
1
1
Class B convertible common stock, par
value $0.01; authorized 1,000,000 shares; issued and outstanding
307,222 shares
3
3
Additional paid-in capital
2,201
2,000
Accumulated other comprehensive loss
(5
)
(4
)
Retained earnings
6,276
5,009
Total stockholders’ equity
8,476
7,009
Total liabilities and stockholders’
equity
$
27,324
$
26,294
VMware, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
October 30,
November 1,
October 30,
November 1,
2020
2019
2020
2019
Operating activities:
Net income
$
434
$
390
$
1,267
$
6,040
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
261
219
757
626
Stock-based compensation
304
256
869
705
Deferred income taxes, net
20
(183
)
(177
)
(5,138
)
Unrealized (gain) loss on equity
securities, net
(190
)
(10
)
(197
)
(30
)
(Gain) loss on disposition of assets,
revaluation and impairment, net
15
1
22
(4
)
Loss on extinguishment of debt
—
—
8
—
Other
2
1
—
4
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable
181
48
102
164
Other current assets and other assets
(277
)
(91
)
(622
)
(444
)
Due to/from related parties, net
225
2
785
299
Accounts payable
(15
)
7
(4
)
14
Accrued expenses and other liabilities
186
(92
)
393
(82
)
Income taxes payable
(2
)
27
(53
)
15
Unearned revenue
(152
)
176
(65
)
618
Net cash provided by operating
activities
992
751
3,085
2,787
Investing activities:
Additions to property and equipment
(84
)
(52
)
(247
)
(215
)
Purchases of strategic investments
(5
)
(9
)
(16
)
(18
)
Proceeds from disposition of assets
—
—
21
22
Business combinations, net of cash
acquired, and purchases of intangible assets
(56
)
(2,052
)
(390
)
(2,437
)
Net cash paid on disposition of a
business
—
—
—
(4
)
Net cash used in investing activities
(145
)
(2,113
)
(632
)
(2,652
)
Financing activities:
Proceeds from issuance of common stock
122
141
264
294
Net proceeds from issuance of long-term
debt
—
—
1,979
—
Borrowings under term loan, net of
issuance costs
—
1,993
—
1,993
Repayment of term loan
(1,500
)
(1,400
)
(1,500
)
(1,400
)
Repayment of current portion of long-term
debt
—
—
(1,257
)
—
Repurchase of common stock
(255
)
(242
)
(566
)
(1,279
)
Shares repurchased for tax withholdings on
vesting of restricted stock
(44
)
(41
)
(319
)
(393
)
Payment to acquire non-controlling
interests
—
—
(91
)
—
Contribution from Dell
—
27
—
27
Principal payments on finance lease
obligations
(1
)
—
(3
)
(1
)
Net cash provided by (used in) financing
activities
(1,678
)
478
(1,493
)
(759
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(831
)
(884
)
960
(624
)
Cash, cash equivalents and restricted cash
at beginning of the period
4,822
3,856
3,031
3,596
Cash, cash equivalents and restricted cash
at end of the period
$
3,991
$
2,972
$
3,991
$
2,972
Supplemental disclosures of cash flow
information:
Cash paid for interest
$
51
$
67
$
142
$
131
Cash paid for taxes, net
111
95
393
283
Non-cash items:
Changes in capital additions, accrued but
not paid
$
(11
)
$
10
$
(18
)
$
5
Changes in tax withholdings on vesting of
restricted stock, accrued but not paid
(6
)
53
(4
)
49
VMware, Inc.
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
October 30,
November 1,
2020
2019
Total revenue, as reported
$
2,864
$
2,656
Sequential change in unearned
revenue(1)
(150
)
329
Total revenue plus sequential change in
unearned revenue
$
2,714
$
2,985
Change (%) over prior year, as
reported
(9
)%
Assumed Carbon Black unearned
revenue(3)
$
—
$
(151
)
Total revenue plus sequential change in
unearned revenue, excluding impact of Carbon Black
$
2,714
$
2,834
Change (%) over prior year, excluding
impact of Carbon Black
(4
)%
Growth
in License and Subscription and SaaS Revenue Plus Sequential Change
in Unearned License and Subscription and SaaS
Revenue
Three Months Ended
October 30,
November 1,
2020
2019
Total license and subscription and SaaS
revenue, as reported
$
1,315
$
1,198
Sequential change in unearned license and
subscription and SaaS revenue(2)
(23
)
223
Total license and subscription and SaaS
revenue plus sequential change in unearned license and subscription
and SaaS revenue
$
1,292
$
1,421
Change (%) over prior year, as
reported
(9
)%
Assumed Carbon Black unearned subscription
and SaaS revenue(3)
$
—
$
(145
)
Total license and subscription and SaaS
revenue plus sequential change in unearned license and subscription
and SaaS revenue, excluding impact of Carbon Black
$
1,292
$
1,276
Change (%) over prior year, excluding
impact of Carbon Black
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.
(3) Amount represents unearned revenue
assumed in the acquisition of Carbon Black.
VMware, Inc.
SUPPLEMENTAL UNEARNED REVENUE
SCHEDULE
(in millions)
(unaudited)
October 30,
July 31,
May 1,
January 31,
November 1,
August 2,
2020
2020
2020
2020
2019
2019
Unearned revenue as reported:
License
$
11
$
11
$
15
$
19
$
19
$
19
Subscription and SaaS
1,596
1,619
1,579
1,534
1,199
976
Services
Software maintenance
6,574
6,696
6,611
6,700
6,106
6,042
Professional services
1,054
1,059
1,013
1,015
893
851
Total unearned revenue
$
9,235
$
9,385
$
9,218
$
9,268
$
8,217
$
7,888
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended
October 30, 2020
(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 Adjustment(1)
Non-GAAP As
Adjusted(2)
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.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Nine Months Ended
October 30, 2020
(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 Adjustment(1)
Non-GAAP As
Adjusted(2)
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.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended
November 1, 2019
(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 Adjustment(1)
Non-GAAP As
Adjusted(2)
Operating expenses:
Cost of license revenue
$
42
—
—
(21
)
—
—
$
21
Cost of subscription and SaaS revenue
$
103
(3
)
—
(26
)
—
—
$
73
Cost of services revenue
$
311
(20
)
—
(1
)
—
—
$
289
Research and development
$
642
(118
)
—
—
—
—
$
524
Sales and marketing
$
918
(76
)
(1
)
(26
)
—
—
$
816
General and administrative
$
269
(39
)
—
—
(55
)
—
$
175
Operating income
$
371
256
1
74
55
—
$
758
Operating margin(2)
14.0
%
9.6
%
—
%
2.8
%
2.1
%
—
28.5
%
Other income (expense), net(3)
$
17
—
—
—
(10
)
—
$
7
Income before income tax
$
360
256
1
74
45
—
$
737
Income tax provision (benefit)
$
(30
)
147
$
118
Tax rate(2)
N/M
16.0
%
Net income
$
390
256
1
74
45
(147
)
$
619
Less: Net income (loss) attributable to
non-controlling interests
$
(17
)
26
—
9
2
(3
)
$
17
Net income attributable to VMware,
Inc.
$
407
230
1
65
43
(144
)
$
602
Net income per weighted-average share
attributable to VMware, Inc. common stockholders, diluted for
Classes A and B(2)(4)
$
0.96
$
0.54
$
—
$
0.15
$
0.10
$
(0.34
)
$
1.42
__________
N/M - Tax rate calculated on a GAAP basis
is not considered meaningful.
(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 423,035 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Nine Months Ended
November 1, 2019
(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 Adjustment(1)
Non-GAAP As
Adjusted(2)
Operating expenses:
Cost of license revenue
$
116
(1
)
—
(62
)
—
—
$
53
Cost of subscription and SaaS revenue
$
294
(10
)
—
(78
)
—
—
$
205
Cost of services revenue
$
916
(58
)
—
(2
)
—
—
$
854
Research and development
$
1,846
(328
)
(1
)
(1
)
—
—
$
1,516
Sales and marketing
$
2,674
(204
)
(6
)
(71
)
—
—
$
2,394
General and administrative
$
701
(104
)
—
—
(89
)
—
$
508
Operating income
$
1,191
705
7
214
89
—
$
2,208
Operating margin(2)
15.4
%
9.1
%
0.1
%
2.8
%
1.2
%
—
28.5
%
Other income (expense), net(3)
$
75
—
—
—
(33
)
—
$
41
Income before income tax
$
1,198
705
7
214
56
—
$
2,181
Income tax provision (benefit)
$
(4,842
)
(4)
5,191
$
349
Tax rate(2)
N/M
(4)
16.0
%
Net income
$
6,040
705
7
214
56
(5,191
)
$
1,832
Less: Net income (loss) attributable to
non-controlling interests
$
(50
)
73
—
27
2
(9
)
$
43
Net income attributable to VMware,
Inc.
$
6,090
632
7
187
54
(5,182
)
$
1,789
Net income per weighted-average share
attributable to VMware, Inc. common stockholders, diluted for
Classes A and B(2)(5)
$
14.32
$
1.48
$
0.02
$
0.44
$
0.13
$
(12.18
)
$
4.21
__________
N/M - Tax rate calculated on a GAAP basis
is not considered meaningful.
(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) During the second quarter of fiscal
2020, we completed an intra-group transfer of certain of our
intellectual property rights to our Irish subsidiary, where our
international business is headquartered. A discrete tax benefit of
$4.9 billion was recorded as a deferred tax asset. Due to the
impact of the discrete tax benefit of $4.9 billion, the tax rate
calculated on a GAAP basis is not considered meaningful.
(5) Calculated based upon 425,366 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
REVENUE BY TYPE
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
October 30,
November 1,
October 30,
November 1,
2020
2019
2020
2019
Revenue:
License
$
639
$
728
$
2,019
$
2,147
Subscription and SaaS
676
470
1,880
1,320
Total license and subscription and
SaaS
1,315
1,198
3,899
3,467
Services:
Software maintenance
1,282
1,200
3,797
3,519
Professional services
267
258
777
752
Total services
1,549
1,458
4,574
4,271
Total revenue
$
2,864
$
2,656
$
8,473
$
7,738
Percentage of revenue:
License
22.3
%
27.4
%
23.8
%
27.7
%
Subscription and SaaS
23.6
%
17.7
%
22.2
%
17.1
%
Total license and subscription and
SaaS
45.9
%
45.1
%
46.0
%
44.8
%
Services:
Software maintenance
44.8
%
45.2
%
44.8
%
45.5
%
Professional services
9.3
%
9.7
%
9.2
%
9.7
%
Total services
54.1
%
54.9
%
54.0
%
55.2
%
Total revenue
100.0
%
100.0
%
100.0
%
100.0
%
VMware, Inc.
REVENUE BY GEOGRAPHY
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
October 30,
November 1,
October 30,
November 1,
2020
2019
2020
2019
Revenue:
United States
$
1,466
$
1,323
$
4,268
$
3,835
International
1,398
1,333
4,205
3,903
Total revenue
$
2,864
$
2,656
$
8,473
$
7,738
Percentage of revenue:
United States
51.2
%
49.8
%
50.4
%
49.6
%
International
48.8
%
50.2
%
49.6
%
50.4
%
Total revenue
100.0
%
100.0
%
100.0
%
100.0
%
VMware, Inc.
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
October 30,
November 1,
October 30,
November 1,
2020
2019
2020
2019
GAAP cash flows from operating
activities
$
992
$
751
$
3,085
$
2,787
Capital expenditures
(84
)
(52
)
(247
)
(215
)
Free cash flows
$
908
$
699
$
2,838
$
2,572
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
FISCAL 2021 NET INCOME PER
DILUTED SHARE GUIDANCE
(in millions)
(unaudited)
Full Year
Fiscal 2021
(Projected)
Current Guidance
GAAP Net income per diluted
share
$4.17-$4.27(1)
Projected
Stock-based compensation
2.75
Estimated
Employer Payroll Tax on Employee Stock
Transactions
0.02
Estimated
Intangible Amortization
0.78
Estimated
Acquisition, Disposition and Other Related
Items(2)
—
Estimated
Tax adjustment(3)
(0.76)
Estimated
Non-GAAP Net income per diluted
share
$7.03
Projected
__________
(1) Values of items excluded from GAAP net
income per diluted share are estimates. While the aggregate of
estimates may not foot, in total we expect GAAP net income per
share to be $2.76 to $2.86 less than non-GAAP net income per
share.
(2) Current guidance includes gains or
losses on investments in equity securities, whether realized or
unrealized, during the nine months ended October 30, 2020,
including the unrealized gain of $189 million on an investment in a
company that completed its initial public offering during the third
quarter of fiscal 2021.
(3) 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.
About Non-GAAP Financial Measures
To provide investors and others with additional information
regarding VMware’s results, VMware has disclosed in this earnings
release the following non-GAAP financial measures: non-GAAP
operating income, non-GAAP operating margin, non-GAAP net income,
non-GAAP net income per diluted share and free cash flow. VMware
has provided a reconciliation of each non-GAAP financial measure
used in this earnings release to the most directly comparable GAAP
financial measure. These non-GAAP financial measures, other than
free cash flow, differ from GAAP in that they exclude stock-based
compensation, employer payroll taxes on employee stock
transactions, amortization of acquired intangible assets,
realignment charges, acquisition, disposition and other items, and
discrete items that impacted our GAAP tax rate, each as discussed
below. Our non-GAAP financial measures also reflect the application
of our non-GAAP tax rate. Free cash flow differs from GAAP cash
flow from operating activities with respect to the treatment of
capital expenditures.
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 of VMware. – 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.”
- 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 VMware did not pay out a portion of
its compensation in the form of stock-based compensation and
related employer payroll taxes, the cash salary expense included in
operating expenses would be higher, which would affect VMware’s
cash position. VMware compensates for these limitations by
reconciling the non-GAAP financial measures to the most comparable
GAAP financial measures. These non-GAAP financial measures should
be considered in addition to, not as a substitute for or in
isolation from, measures prepared in accordance with GAAP and
should not be considered measures of VMware’s liquidity. Further,
these non-GAAP measures may differ from the non-GAAP information
used by other companies, including peer companies, and therefore
comparability may be limited.
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/20201124005941/en/
Paul Ziots VMware Investor Relations pziots@vmware.com
650-427-3267
Michael Thacker VMware Global PR mthacker@vmware.com
650-427-4454
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Vmware (NYSE:VMW)
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From Apr 2023 to Apr 2024