Total Revenue growth of 9% year-over-year
Subscription and SaaS revenue growth of 23% year-over-year
VMware, Inc. (NYSE: VMW), a leading innovator in enterprise
software, today announced financial results for the second quarter
of fiscal year 2022:
- Revenue for the second quarter was $3.14 billion, an increase
of 9% from the second quarter of fiscal 2021.
- The combination of subscription and SaaS and license revenue
was $1.51 billion, an increase of 12% from the second quarter of
fiscal 2021.
- Subscription and SaaS revenue for the second quarter was $776
million, an increase of 23% year-over-year.
- Subscription and SaaS ARR for the second quarter was $3.15
billion, an increase of 26% year-over-year.
- GAAP net income for the second quarter was $411 million, or
$0.97 per diluted share, down 8% per diluted share compared to $447
million, or $1.06 per diluted share, for the second quarter of
fiscal 2021. Non-GAAP net income for the second quarter was $739
million, or $1.75 per diluted share, down 3% per diluted share
compared to $766 million, or $1.81 per diluted share, for the
second quarter of fiscal 2021.
- GAAP operating income for the second quarter was $525 million,
a decrease of 2% from the second quarter of fiscal 2021. Non-GAAP
operating income for the second quarter was $924 million, a
decrease of 3% from the second quarter of fiscal 2021.
- Operating cash flow for the second quarter was $864 million.
Free cash flow for the second quarter was $777 million.
- RPO for the second quarter totaled $11.2 billion, up 8%
year-over-year.
- Company remains on track for planned spin-off from Dell
Technologies Inc. in early November 2021.
“Our customers are evolving their strategies from a ‘cloud
first’ to a ‘cloud smart’ philosophy where they are picking the
right clouds and cloud services for the right workload, and turning
to a multi-cloud environment,” said Raghu Raghuram, VMware CEO. “We
are delivering the multi-cloud platform for all applications,
enabling the digital innovation and enterprise control that our
customers need to accelerate their businesses today and in the
future.”
“We are pleased with our Q2 financial performance with
Subscription and SaaS ARR increasing 26% year-over-year to $3.2
billion,” said Zane Rowe, executive vice president and CFO, VMware.
“Our performance in Q2 reflects strong year-over-year product
bookings growth in major categories, including our multi-cloud and
modern applications businesses along with End-User Computing.”
Business Highlights & Strategic Announcements
- VMware introduced VMware Anywhere Workspace, a solution that
brings together VMware Workspace ONE, VMware SASE and VMware Carbon
Black Cloud, empowering organizations to manage multi-modal
employee experiences, better secure the distributed edge and
automate the workspace.
- VMware is working with Zoom Video Communications, Inc. to
enable a better and more secure collaboration experience for hybrid
work environments. The effort will deliver interoperability between
VMware Anywhere Workspace and the Zoom collaboration platform to
further improve ease of use, application and network performance
and security.
- VMware and Vapor IO announced they are building a Multi-Cloud
Services Grid that integrates the VMware Telco Cloud Platform with
Vapor IO’s Kinetic Grid platform, designed to greatly simplify and
lower the costs of deploying distributed 5G systems and real-time
applications.
- Cohere Technologies and VMware are developing an open radio
access network (O-RAN) solution to help communications service
providers improve network and spectrum efficiencies and deliver new
and differentiated services and experiences for their
customers.
- VMware announced expanded SaaS innovations to VMware Horizon,
the company’s industry-leading virtual desktop infrastructure (VDI)
and Desktop-as-a-Service (DaaS) platform. These new capabilities
will make it easier for IT organizations to manage Horizon
deployments wherever they may be, on-premises or in the cloud.
- VMware received further recognition from leading industry
analysts:
- VMware was positioned as a Leader in “The Forrester Wave™:
Endpoint Security Software As A Service, Q2 2021.”1
- IDC ranked VMware No. 1 in worldwide IT automation and
configuration management (ITACM) 2020 Market Share.2
- IDC ranked VMware No. 1 in software-defined compute for 2020
market share.3
1 Forrester, Chris Sherman, The Forrester Wave™: Endpoint
Security Software As A Service, Q2, 2021, May 13, 2021 2 IDC,
“Worldwide IT Automation and Configuration Management Software
Market Shares, 2020: Moderate Growth Amid Pandemic Disruption,” doc
#US47758721, June 2021 3 IDC, “Worldwide Software-Defined Compute
Software Market Shares, 2020: Growth Shifts to Containers,” doc
#US47298521, June 2021
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.
About VMware
VMware software powers the world’s complex digital
infrastructure. The company’s cloud, app modernization, networking,
security, and digital workspace offerings help customers deliver
any application on any cloud across any device. Headquartered in
Palo Alto, California, VMware is committed to being a force for
good, from its breakthrough technology 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, Anywhere Workspace, Carbon Black and Horizon 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.”
Annual Recurring Revenue (“ARR”)
ARR represents the annualized value of our committed customer
subscription and SaaS contracts as of the end of the reporting
period, assuming any contract that expires during the next 12
months is renewed on its existing terms. For consumption-based
offerings, ARR represents the annualized quarterly revenue based on
revenue recognized for the current reporting period. We use ARR as
one of our operating measures to assess the health and trajectory
of our subscription and SaaS business. ARR should be viewed
independently of revenue and unearned revenue as ARR is a
performance metric and is not intended to be a substitute for, or
combined with, any of these items.
Forward-Looking Statements
This press release contains forward-looking statements
including, among other things, statements regarding the proposed
spin-off from Dell; customer trends; and the expected benefits to
customers of partnerships, products, solutions and service
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 delay
or failure to consummate the spin-off from Dell Technologies; (2)
the impact of the COVID-19 pandemic on our operations, financial
condition, our customers, the business environment and the global
and regional economies; (3) adverse changes in general economic or
market conditions; (4) delays or reductions in consumer, government
and information technology spending; (5) 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, modern
applications and security industries, as well as new product and
marketing initiatives by VMware’s competitors; (6) the ability to
successfully integrate into VMware acquired companies and assets
and smoothly transition services related to divested assets from
VMware; (7) rapid technological changes in the virtualization
software and cloud, end user, security, modern applications and
mobile computing industries; (8) 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; (9)
VMware’s ability to enter into, maintain and extend strategically
effective partnerships, collaborations and alliances; (10) the
continued risk of litigation and regulatory actions; (11) VMware’s
ability to protect its proprietary technology; (12) changes to
product and service development timelines; (13) 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; (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; (21) the ability of VMware to adapt our offerings, business
operations and go-to-market activities to changes in how customers
consume information technology resources, such as through
subscription and SaaS offerings; and (22) 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
Six Months Ended
July 30,
July 31,
July 30,
July 31,
2021
2020
2021
2020
Revenue:
License
$
738
$
719
$
1,384
$
1,379
Subscription and SaaS
776
631
1,516
1,204
Services
1,624
1,525
3,232
3,026
Total revenue
3,138
2,875
6,132
5,609
Operating expenses(1):
Cost of license revenue
37
35
75
74
Cost of subscription and SaaS revenue
170
132
327
258
Cost of services revenue
352
321
689
639
Research and development
775
679
1,483
1,344
Sales and marketing
1,023
897
1,981
1,814
General and administrative
256
277
492
523
Realignment
—
—
1
4
Operating income
525
534
1,084
953
Investment income
1
1
1
7
Interest expense
(49
)
(55
)
(99
)
(104
)
Other income (expense), net
3
15
(19
)
8
Income before income tax
480
495
967
864
Income tax provision
69
48
131
31
Net income
$
411
$
447
$
836
$
833
Net income per weighted-average share,
basic for Classes A and B
$
0.98
$
1.06
$
1.99
$
1.99
Net income per weighted-average share,
diluted for Classes A and B
$
0.97
$
1.06
$
1.98
$
1.97
Weighted-average shares, basic for Classes
A and B
419,355
420,031
419,235
419,208
Weighted-average shares, diluted for
Classes A and B
422,802
423,050
422,419
422,428
(1) Includes stock-based compensation as
follows:
Cost of license revenue
$
—
$
—
$
1
$
1
Cost of subscription and SaaS revenue
5
5
11
9
Cost of services revenue
24
26
49
48
Research and development
150
132
277
257
Sales and marketing
81
88
153
159
General and administrative
33
42
64
91
VMware, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(amounts in millions, except
per share amounts, and shares in thousands)
(unaudited)
July 30,
January 29,
2021
2021
ASSETS
Current assets:
Cash and cash equivalents
$
5,855
$
4,692
Short-term investments
82
23
Accounts receivable, net of allowance of
$4 and $5
1,718
1,929
Due from related parties, net
915
1,438
Other current assets
604
530
Total current assets
9,174
8,612
Property and equipment, net
1,373
1,334
Other assets
2,678
2,697
Deferred tax assets
5,785
5,781
Intangible assets, net
856
993
Goodwill
9,598
9,599
Total assets
$
29,464
$
29,016
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
220
$
131
Accrued expenses and other
2,176
2,382
Unearned revenue
5,879
5,873
Total current liabilities
8,275
8,386
Note payable to Dell
270
270
Long-term debt
4,721
4,717
Unearned revenue
4,459
4,441
Income tax payable
768
805
Operating lease liabilities
912
891
Other liabilities
439
455
Total liabilities
19,844
19,965
Contingencies
Stockholders’ equity:
Class A common stock, par value $0.01;
authorized 2,500,000 shares; issued and outstanding 111,753 and
112,082 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
1,716
1,985
Accumulated other comprehensive loss
(3
)
(5
)
Retained earnings
7,903
7,067
Total stockholders’ equity
9,620
9,051
Total liabilities and stockholders’
equity
$
29,464
$
29,016
VMware, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
Six Months Ended
July 30,
July 31,
July 30,
July 31,
2021
2020
2021
2020
Operating activities:
Net income
$
411
$
447
$
836
$
833
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
275
252
544
496
Stock-based compensation
293
293
555
565
Deferred income taxes, net
17
(98
)
(31
)
(196
)
Unrealized (gain) loss on equity
securities, net
(1
)
—
34
(6
)
(Gain) Loss on disposition of assets,
revaluation and impairment, net
2
1
3
7
Loss on extinguishment of debt
—
8
—
8
Other
2
2
4
(2
)
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable
(189
)
(432
)
206
(79
)
Other current assets and other assets
(229
)
(173
)
(390
)
(345
)
Due to/from related parties, net
(162
)
(130
)
522
560
Accounts payable
5
21
70
11
Accrued expenses and other liabilities
412
455
(218
)
207
Income taxes payable
(110
)
(66
)
(29
)
(51
)
Unearned revenue
138
139
24
86
Net cash provided by operating
activities
864
719
2,130
2,094
Investing activities:
Additions to property and equipment
(87
)
(76
)
(157
)
(163
)
Sales of investments in equity
securities
26
—
34
—
Purchases of strategic investments
(6
)
(6
)
(7
)
(11
)
Proceeds from disposition of assets
1
18
1
21
Business combinations, net of cash
acquired, and purchases of intangible assets
(6
)
(296
)
(15
)
(335
)
Net cash used in investing activities
(72
)
(360
)
(144
)
(488
)
Financing activities:
Proceeds from issuance of common stock
8
36
139
142
Net proceeds from issuance of long-term
debt
—
(5
)
—
1,979
Repayment of current portion of long-term
debt
—
(1,257
)
—
(1,257
)
Repurchase of common stock
(358
)
(130
)
(729
)
(311
)
Shares repurchased for tax withholdings on
vesting of restricted stock
(186
)
(161
)
(242
)
(276
)
Payment to acquire non-controlling
interests
—
(91
)
—
(91
)
Principal payments on finance lease
obligations
(1
)
(1
)
(2
)
(1
)
Net cash provided by (used in) financing
activities
(537
)
(1,609
)
(834
)
185
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
—
1
—
—
Net increase (decrease) in cash, cash
equivalents and restricted cash
255
(1,249
)
1,152
1,791
Cash, cash equivalents and restricted cash
at beginning of the period
5,667
6,071
4,770
3,031
Cash, cash equivalents and restricted cash
at end of the period
$
5,922
$
4,822
$
5,922
$
4,822
Supplemental disclosures of cash flow
information:
Cash paid for interest
$
50
$
17
$
97
$
91
Cash paid for taxes, net
166
206
204
282
Non-cash items:
Changes in capital additions, accrued but
not paid
$
8
$
(1
)
$
11
$
(7
)
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
July 30,
July 31,
2021
2020
Total revenue, as reported
$
3,138
$
2,875
Sequential change in unearned
revenue(1)
138
167
Total revenue plus sequential change in
unearned revenue
$
3,276
$
3,042
Change (%) over prior year, as
reported
8
%
Growth
in License and Subscription and SaaS Revenue Plus Sequential Change
in Unearned License and Subscription and SaaS
Revenue
Three Months Ended
July 30,
July 31,
2021
2020
Total license and subscription and SaaS
revenue, as reported
$
1,514
$
1,350
Sequential change in unearned license and
subscription and SaaS revenue(2)
148
36
Total license and subscription and SaaS
revenue plus sequential change in unearned license and subscription
and SaaS revenue
$
1,662
$
1,386
Change (%) over prior year, as
reported
20
%
(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
July 30,
July 31,
2021
2020
Remaining performance obligations(3)
$
11,201
$
10,335
Change (%) over prior year
8
%
Remaining performance obligations,
current(4)
$
6,249
$
5,625
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.
VMware, Inc.
SUPPLEMENTAL UNEARNED REVENUE
SCHEDULE
(in millions)
(unaudited)
July 30,
April 30,
January 29,
October 30,
July 31,
May 1,
2021
2021
2021
2020
2020
2020
Unearned revenue as reported:
License
$
20
$
16
$
15
$
11
$
11
$
15
Subscription and SaaS
2,208
2,064
1,998
1,596
1,619
1,579
Services
Software maintenance
6,916
6,957
7,092
6,574
6,696
6,611
Professional services
1,194
1,163
1,209
1,054
1,059
1,013
Total unearned revenue
$
10,338
$
10,200
$
10,314
$
9,235
$
9,385
$
9,218
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended
July 30, 2021
(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
$
37
—
—
(10
)
—
—
$
27
Cost of subscription and SaaS revenue
$
170
(5
)
—
(43
)
—
—
$
121
Cost of services revenue
$
352
(24
)
(1
)
—
—
—
$
326
Research and development
$
775
(150
)
(1
)
(2
)
—
—
$
622
Sales and marketing
$
1,023
(81
)
(3
)
(22
)
—
—
$
919
General and administrative
$
256
(33
)
(1
)
—
(23
)
—
$
199
Operating income
$
525
293
6
77
23
—
$
924
Operating margin(2)
16.7
%
9.3
%
0.2
%
2.4
%
0.7
%
—
29.4
%
Other income (expense), net(3)
$
3
—
—
—
1
—
$
4
Income before income tax
$
480
293
6
77
24
—
$
880
Income tax provision
$
69
71
$
141
Tax rate(2)
14.4
%
16.0
%
Net income
$
411
293
6
77
24
(71
)
$
739
Net income per weighted-average share,
diluted for Classes A and B(2)(4)
$
0.97
$
0.69
$
0.02
$
0.18
$
0.06
$
(0.17
)
$
1.75
(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 422,802 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended
July 31, 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
Acquisition,
Disposition
and Other
Items
Tax
Adjustment(1)
Non-GAAP
As Adjusted(2)
Operating expenses:
Cost of license revenue
$
35
—
—
(9
)
—
—
$
25
Cost of subscription and SaaS revenue
$
132
(5
)
—
(48
)
—
—
$
79
Cost of services revenue
$
321
(26
)
—
—
—
—
$
294
Research and development
$
679
(132
)
(1
)
—
(1
)
—
$
545
Sales and marketing
$
897
(88
)
(3
)
(24
)
—
—
$
784
General and administrative
$
277
(42
)
—
—
(37
)
—
$
198
Operating income
$
534
293
4
81
38
—
$
950
Operating margin(2)
18.6
%
10.2
%
0.1
%
2.8
%
1.3
%
—
33.0
%
Other income (expense), net(3)
$
15
—
—
—
1
—
$
16
Income before income tax
$
495
293
4
81
39
—
$
912
Income tax provision
$
48
98
$
146
Tax rate(2)
9.8
%
16.0
%
Net income
$
447
293
4
81
39
(98
)
$
766
Net income per weighted-average share,
diluted for Classes A and B(2)(4)
$
1.06
$
0.69
$
0.01
$
0.19
$
0.09
$
(0.23
)
$
1.81
(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 423,050 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Six Months Ended July
30, 2021
(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
$
75
(1
)
—
(20
)
—
—
—
$
54
Cost of subscription and SaaS revenue
$
327
(11
)
—
(85
)
—
—
—
$
231
Cost of services revenue
$
689
(49
)
(1
)
—
—
—
—
$
639
Research and development
$
1,483
(277
)
(1
)
(4
)
—
—
—
$
1,200
Sales and marketing
$
1,981
(153
)
(4
)
(45
)
—
—
—
$
1,779
General and administrative
$
492
(64
)
(1
)
—
—
(45
)
—
$
383
Realignment
$
1
—
—
—
(1
)
—
—
$
—
Operating income
$
1,084
555
7
154
1
45
—
$
1,846
Operating margin(2)
17.7
%
9.1
%
0.1
%
2.5
%
—
%
0.7
%
—
30.1
%
Other income (expense), net(3)
$
(19
)
—
—
—
—
36
—
$
17
Income before income tax
$
967
555
7
154
1
81
—
$
1,765
Income tax provision
$
131
152
$
282
Tax rate(2)
13.5
%
16.0
%
Net income
$
836
555
7
154
1
81
(152
)
$
1,483
Net income per weighted-average share,
diluted for Classes A and B(2)(4)
$
1.98
$
1.31
$
0.02
$
0.36
$
—
$
0.19
$
(0.36
)
$
3.51
(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 422,419 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Six Months Ended July
31, 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
$
74
(1
)
—
(21
)
—
—
—
$
52
Cost of subscription and SaaS revenue
$
258
(9
)
—
(89
)
—
—
—
$
160
Cost of services revenue
$
639
(48
)
(1
)
(1
)
—
—
—
$
589
Research and development
$
1,344
(257
)
(1
)
(1
)
—
(1
)
—
$
1,085
Sales and marketing
$
1,814
(159
)
(3
)
(49
)
—
(2
)
—
$
1,600
General and administrative
$
523
(91
)
(1
)
—
—
(76
)
—
$
355
Realignment
$
4
—
—
—
(4
)
—
—
$
—
Operating income
$
953
565
6
161
4
79
—
$
1,768
Operating margin(2)
17.0
%
10.1
%
0.1
%
2.9
%
0.1
%
1.4
%
—
31.5
%
Other income (expense), net(3)
$
8
—
—
—
—
(6
)
—
$
3
Income before income tax
$
864
565
6
161
4
73
—
$
1,674
Income tax provision
$
31
237
$
268
Tax rate(2)
3.5
%
16.0
%
Net income
$
833
565
6
161
4
73
(237
)
$
1,406
Net income per weighted-average share,
diluted for Classes A and B(2)(4)
$
1.97
$
1.34
$
0.01
$
0.38
$
0.01
$
0.17
$
(0.56
)
$
3.33
(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 422,428 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
REVENUE BY TYPE
(in millions)
(unaudited)
Three Months Ended
Six Months Ended
July 30,
July 31,
July 30,
July 31,
2021
2020
2021
2020
Revenue:
License
$
738
$
719
$
1,384
$
1,379
Subscription and SaaS
776
631
1,516
1,204
Total license and subscription and
SaaS
1,514
1,350
2,900
2,583
Services:
Software maintenance
1,336
1,270
2,657
2,515
Professional services
288
255
575
511
Total services
1,624
1,525
3,232
3,026
Total revenue
$
3,138
$
2,875
$
6,132
$
5,609
Percentage of revenue:
License
23.5
%
25.0
%
22.6
%
24.6
%
Subscription and SaaS
24.7
%
22.0
%
24.7
%
21.4
%
Total license and subscription and
SaaS
48.2
%
47.0
%
47.3
%
46.0
%
Services:
Software maintenance
42.6
%
44.2
%
43.3
%
44.8
%
Professional services
9.2
%
8.8
%
9.4
%
9.2
%
Total services
51.8
%
53.0
%
52.7
%
54.0
%
Total revenue
100.0
%
100.0
%
100.0
%
100.0
%
VMware, Inc.
REVENUE BY GEOGRAPHY
(in millions)
(unaudited)
Three Months Ended
Six Months Ended
July 30,
July 31,
July 30,
July 31,
2021
2020
2021
2020
Revenue:
United States
$
1,539
$
1,439
$
3,005
$
2,802
International
1,599
1,436
3,127
2,807
Total revenue
$
3,138
$
2,875
$
6,132
$
5,609
Percentage of revenue:
United States
49.1
%
50.0
%
49.0
%
50.0
%
International
50.9
%
50.0
%
51.0
%
50.0
%
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
Six Months Ended
July 30,
July 31,
July 30,
July 31,
2021
2020
2021
2020
GAAP cash flows from operating
activities
$
864
$
719
$
2,130
$
2,094
Capital expenditures
(87
)
(76
)
(157
)
(163
)
Free cash flows
$
777
$
643
$
1,973
$
1,931
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.”
- 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 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/20210826005701/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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