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VMware Reports Fiscal Year 2024 Second Quarter Results
Total Revenue of $3.41 billion Subscription and SaaS Revenue of $1.26 billion, an increase of 34% year-over-year PALO ALTO, Calif.–(BUSINESS WIRE)– VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the second quarter of fiscal year 2024: Quarterly Review Revenue for the second quarter was $3.41 billion, an increase of 2% from the …
Thu, 31 Aug 2023 00:00:00
Total Revenue of
Subscription and SaaS Revenue of
Quarterly Review
-
Revenue for the second quarter was
$3.41 billion , an increase of 2% from the second quarter of fiscal 2023. -
Subscription and SaaS revenue for the second quarter was
$1.26 billion , an increase of 34% year-over-year. - Subscription and SaaS revenue constituted 37% of total revenue for the quarter.
-
Subscription and SaaS ARR exiting the second quarter was
$5.31 billion , an increase of 36% year-over-year. -
GAAP net income for the second quarter was
$477 million , or$1.10 per diluted share, up 34% per diluted share compared to$347 million , or$0.82 per diluted share, for the second quarter of fiscal 2023. Non-GAAP net income for the second quarter was$792 million , or$1.83 per diluted share, up 11% per diluted share compared to$697 million , or$1.64 per diluted share, for the second quarter of fiscal 2023.1 -
GAAP operating income for the second quarter was
$547 million , a decrease of 3% from the second quarter of fiscal 2023. Non-GAAP operating income for the second quarter was$977 million , up 1% compared to the second quarter of fiscal 2023. -
Operating cash flow for the second quarter was
$444 million . Free cash flow for the second quarter was$350 million . -
RPO for the second quarter totaled
$12.88 billion , up 6% year-over-year.2
“We delivered solid Q2 results. Our customers continue to invest in our Multi-Cloud offerings as they modernize their infrastructure to run enterprise, cloud-native, and new AI workloads,” said
“We are pleased with our Q2 performance, which reflects the continued strength of our Subscription and SaaS portfolio and execution of our business model transition,” said
Business Highlights & Strategic Announcements
-
Last week at VMware Explore 2023 Las Vegas, the company introduced several new offerings, including:
- The next evolution of VMware Cloud, empowering customers to invest in digital transformation and growth while helping them innovate faster, increase operational efficiency, improve threat defenses, and recover from ransomware attacks faster.
- An expanded Tanzu portfolio to help customers develop, operate, and optimize apps on any cloud with an enhanced Tanzu Application Platform, new Tanzu Intelligence Services with artificial intelligence (AI)/machine learning (ML) capabilities for deeper insights, and updates to Tanzu Hub.
- The new VMware Edge Cloud Orchestrator (formerly VMware SASE Orchestrator) which will provide unified management for VMware SASE and Edge Compute Stack—an industry-first offering to bridge the gap between edge networking and edge compute.
- New Digital Experience (DEX) Insights based on greatly expanded data and ML algorithms that enhance DEX remediation capabilities. These updates broaden access to data, help strengthen VMware Insights, and allow for remediation of more issues.
-
Also at VMware Explore Las Vegas,
VMware unveiled its perspective on generative AI in the enterprise with the introduction of Private AI, which serves as an architectural approach that balances the business gains from AI with the practical privacy and compliance needs of an organization.-
VMware Private AI Foundation with NVIDIA is a new integrated offering that will enable enterprises to customize models and run generative AI applications, including intelligent chatbots, assistants, search, and summarization. The fully integrated solution will feature generative AI software and accelerated computing from NVIDIA, built onVMware Cloud Foundation optimized for AI.
-
-
VMware releasedVMware Cloud Foundation 5.0. This major release delivered increased scalability, security and several key enhancements that address requirements for cloud scale infrastructure as a service (IaaS), simplified deployment of on-premises clouds, and enhanced protection against cyberattacks. -
VMware Cloud on AWS continued to expand globally, with new regions opening in
Melbourne, Australia andZurich, Switzerland . This brings the total number of global regions for VMware Cloud on AWS to 25. -
VMware joined forces with AMD, Samsung, and members of the RISC-V Keystone community to simplify the development and operations of confidential computing applications, which have the potential to secure workloads no matter where they run including in Multi-Cloud and edge settings. The companies will collaborate on and contribute to the open-source Certifier Framework for Confidential Computing project. -
VMware received recognition from analyst firm Omdia3 citing that VMware’s take on SASE builds on two key strengths: its broad set of technologies and products and its strong presence in SD-WAN. -
VMware released its 2023 Environmental, Social and Governance (ESG) report, sharing its Smart Impact strategy and progress made over the last year toward the company’s 2030 Agenda.VMware also received recognition for its ongoing ESG and diversity, equity, and inclusion (DEI) leadership including:- Awarded 100% score on the Disability Equality Index® and recognized as a DEI Best Place to Work for Disability Inclusion.
-
Ranked in the top 5% on
USA Today’s inaugural America’s Climate Leaders List, which ranks companies based on their emissions reductions year-over-year. - Recognized by Newsweek as one of America’s Greatest Workplaces, receiving a 5/5 workplace score.
1 Our annual effective tax rate is based upon, among other things, current tax law, including Internal Revenue Code Section 174 relating to research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. If in the future this provision is deferred, modified or repealed, our effective tax rate may fluctuate significantly in the quarter in which such change in law becomes effective. |
2 Remaining performance obligations do not include customer prepayments received for contracts that include certain cancellation rights, such as termination for convenience clauses, which are included in customer deposits on the condensed consolidated balance sheets and were |
3 On the Radar: |
About
Definitive Agreement to be Acquired by Broadcom
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 momentum of, customer investment in and expected benefits to customers, partners and stockholders of VMware’s strategy, offerings, collaborations and partnerships; and the proposed acquisition of
|
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Revenue: |
|
|
|
|
|
|
|
|
||||||||
License |
|
$ |
619 |
|
|
$ |
796 |
|
|
$ |
1,136 |
|
|
$ |
1,369 |
|
Subscription and SaaS |
|
|
1,259 |
|
|
|
943 |
|
|
|
2,476 |
|
|
|
1,842 |
|
Services |
|
|
1,530 |
|
|
|
1,597 |
|
|
|
3,073 |
|
|
|
3,213 |
|
Total revenue |
|
|
3,408 |
|
|
|
3,336 |
|
|
|
6,685 |
|
|
|
6,424 |
|
Operating expenses(1): |
|
|
|
|
|
|
|
|
||||||||
Cost of license revenue |
|
|
37 |
|
|
|
39 |
|
|
|
76 |
|
|
|
74 |
|
Cost of subscription and SaaS revenue |
|
|
203 |
|
|
|
196 |
|
|
|
411 |
|
|
|
387 |
|
Cost of services revenue |
|
|
399 |
|
|
|
369 |
|
|
|
796 |
|
|
|
744 |
|
Research and development |
|
|
835 |
|
|
|
803 |
|
|
|
1,682 |
|
|
|
1,577 |
|
Sales and marketing |
|
|
1,100 |
|
|
|
1,080 |
|
|
|
2,205 |
|
|
|
2,134 |
|
General and administrative |
|
|
287 |
|
|
|
276 |
|
|
|
660 |
|
|
|
527 |
|
Realignment |
|
|
— |
|
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
Operating income |
|
|
547 |
|
|
|
566 |
|
|
|
855 |
|
|
|
974 |
|
Investment income |
|
|
74 |
|
|
|
7 |
|
|
|
138 |
|
|
|
8 |
|
Interest expense |
|
|
(79 |
) |
|
|
(74 |
) |
|
|
(159 |
) |
|
|
(145 |
) |
Other income (expense), net |
|
|
19 |
|
|
|
(20 |
) |
|
|
26 |
|
|
|
(30 |
) |
Income before income tax |
|
|
561 |
|
|
|
479 |
|
|
|
860 |
|
|
|
807 |
|
Income tax provision |
|
|
84 |
|
|
|
132 |
|
|
|
159 |
|
|
|
218 |
|
Net income |
|
$ |
477 |
|
|
$ |
347 |
|
|
$ |
701 |
|
|
$ |
589 |
|
Net income per weighted-average share, basic |
|
$ |
1.11 |
|
|
$ |
0.82 |
|
|
$ |
1.63 |
|
|
$ |
1.40 |
|
Net income per weighted-average share, diluted |
|
$ |
1.10 |
|
|
$ |
0.82 |
|
|
$ |
1.62 |
|
|
$ |
1.39 |
|
Weighted-average shares, basic |
|
|
430,395 |
|
|
|
422,002 |
|
|
|
429,290 |
|
|
|
421,294 |
|
Weighted-average shares, diluted |
|
|
434,090 |
|
|
|
424,125 |
|
|
|
432,839 |
|
|
|
423,561 |
|
__________ |
|
|
|
|
|
|
|
|
||||||||
(1) Includes stock-based compensation as follows: |
|
|
|
|
|
|
|
|
||||||||
Cost of license revenue |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
1 |
|
Cost of subscription and SaaS revenue |
|
|
6 |
|
|
|
6 |
|
|
|
13 |
|
|
|
11 |
|
Cost of services revenue |
|
|
23 |
|
|
|
25 |
|
|
|
45 |
|
|
|
48 |
|
Research and development |
|
|
146 |
|
|
|
146 |
|
|
|
293 |
|
|
|
278 |
|
Sales and marketing |
|
|
88 |
|
|
|
93 |
|
|
|
166 |
|
|
|
174 |
|
General and administrative |
|
|
47 |
|
|
|
41 |
|
|
|
81 |
|
|
|
81 |
|
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||
(unaudited) |
||||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
|
2023 |
|
2023 |
||||
ASSETS |
|
|
|
|||||
Current assets: |
|
|
|
|||||
Cash and cash equivalents |
$ |
6,801 |
|
|
$ |
5,100 |
|
|
Accounts receivable, net of allowance of |
|
2,432 |
|
|
|
2,510 |
|
|
Due from related parties |
|
1,267 |
|
|
|
2,078 |
|
|
Other current assets |
|
519 |
|
|
|
543 |
|
|
Total current assets |
|
11,019 |
|
|
|
10,231 |
|
|
Property and equipment, net |
|
1,644 |
|
|
|
1,623 |
|
|
Deferred tax assets |
|
6,402 |
|
|
|
6,157 |
|
|
Intangible assets, net |
|
368 |
|
|
|
478 |
|
|
|
|
9,598 |
|
|
|
9,598 |
|
|
Due from related parties |
|
267 |
|
|
|
208 |
|
|
Other assets |
|
2,901 |
|
|
|
2,942 |
|
|
Total assets |
$ |
32,199 |
|
|
$ |
31,237 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|||||
Current liabilities: |
|
|
|
|||||
Accounts payable |
$ |
217 |
|
|
$ |
267 |
|
|
Accrued expenses and other |
|
2,358 |
|
|
|
2,568 |
|
|
Customer deposits |
|
2,017 |
|
|
|
1,087 |
|
|
Current portion of long-term debt |
|
1,000 |
|
|
|
1,000 |
|
|
Unearned revenue |
|
6,739 |
|
|
|
7,079 |
|
|
Due to related parties |
|
404 |
|
|
|
390 |
|
|
Total current liabilities |
|
12,735 |
|
|
|
12,391 |
|
|
Long-term debt |
|
9,449 |
|
|
|
9,440 |
|
|
Unearned revenue |
|
5,351 |
|
|
|
5,664 |
|
|
Income tax payable |
|
381 |
|
|
|
287 |
|
|
Operating lease liabilities |
|
785 |
|
|
|
845 |
|
|
Due to related parties |
|
504 |
|
|
|
648 |
|
|
Other liabilities |
|
447 |
|
|
|
428 |
|
|
Total liabilities |
|
29,652 |
|
|
|
29,703 |
|
|
Contingencies |
|
|
|
|||||
Stockholders’ equity: |
|
|
|
|||||
Class A common stock, par value |
|
4 |
|
|
|
4 |
|
|
Additional paid-in capital |
|
1,409 |
|
|
|
1,095 |
|
|
Accumulated other comprehensive loss |
|
(6 |
) |
|
|
(4 |
) |
|
Retained earnings |
|
1,140 |
|
|
|
439 |
|
|
Total stockholders’ equity |
|
2,547 |
|
|
|
1,534 |
|
|
Total liabilities and stockholders’ equity |
$ |
32,199 |
|
|
$ |
31,237 |
|
|
|
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||||||||
(in millions) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Operating activities: |
|
|
|
|
|
|
|
|||||||||
Net income |
$ |
477 |
|
|
$ |
347 |
|
|
$ |
701 |
|
|
$ |
589 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|||||||||
Depreciation and amortization |
|
336 |
|
|
|
302 |
|
|
|
666 |
|
|
|
590 |
|
|
Stock-based compensation |
|
310 |
|
|
|
311 |
|
|
|
599 |
|
|
|
593 |
|
|
Deferred income taxes, net |
|
(150 |
) |
|
|
(37 |
) |
|
|
(237 |
) |
|
|
(80 |
) |
|
(Gain) loss on equity securities and disposition of assets, net |
|
3 |
|
|
|
(3 |
) |
|
|
4 |
|
|
|
(12 |
) |
|
Other |
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
3 |
|
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|||||||||
Accounts receivable |
|
(600 |
) |
|
|
(453 |
) |
|
|
72 |
|
|
|
222 |
|
|
Other current assets and other assets |
|
(188 |
) |
|
|
(175 |
) |
|
|
(291 |
) |
|
|
(418 |
) |
|
Due from related parties |
|
(667 |
) |
|
|
(621 |
) |
|
|
752 |
|
|
|
180 |
|
|
Accounts payable |
|
(9 |
) |
|
|
(3 |
) |
|
|
(49 |
) |
|
|
(31 |
) |
|
Accrued expenses, customer deposits and other liabilities |
|
1,234 |
|
|
|
345 |
|
|
|
717 |
|
|
|
(319 |
) |
|
Income taxes payable |
|
(69 |
) |
|
|
41 |
|
|
|
37 |
|
|
|
114 |
|
|
Unearned revenue |
|
(114 |
) |
|
|
366 |
|
|
|
(653 |
) |
|
|
9 |
|
|
Due to related parties |
|
(119 |
) |
|
|
(23 |
) |
|
|
(130 |
) |
|
|
(38 |
) |
|
Net cash provided by operating activities |
|
444 |
|
|
|
397 |
|
|
|
2,194 |
|
|
|
1,402 |
|
|
Investing activities: |
|
|
|
|
|
|
|
|||||||||
Additions to property and equipment |
|
(94 |
) |
|
|
(113 |
) |
|
|
(199 |
) |
|
|
(219 |
) |
|
Sales of investments in equity securities |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
|
Purchases of strategic investments |
|
(3 |
) |
|
|
— |
|
|
|
(3 |
) |
|
|
(8 |
) |
|
Proceeds from disposition of assets |
|
10 |
|
|
|
84 |
|
|
|
10 |
|
|
|
90 |
|
|
Business combinations, net of cash acquired, and purchases of intangible assets |
|
— |
|
|
|
(1 |
) |
|
|
(8 |
) |
|
|
(4 |
) |
|
Net cash used in investing activities |
|
(87 |
) |
|
|
(30 |
) |
|
|
(200 |
) |
|
|
(121 |
) |
|
Financing activities: |
|
|
|
|
|
|
|
|||||||||
Proceeds from issuance of common stock |
|
4 |
|
|
|
5 |
|
|
|
5 |
|
|
|
124 |
|
|
Repayment of term loan |
|
— |
|
|
|
(750 |
) |
|
|
— |
|
|
|
(1,500 |
) |
|
Repurchase of common stock |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(89 |
) |
|
Shares repurchased for tax withholdings on vesting of restricted stock |
|
(112 |
) |
|
|
(111 |
) |
|
|
(300 |
) |
|
|
(205 |
) |
|
Principal payments on finance lease obligations |
|
(1 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
|
Net cash used in financing activities |
|
(109 |
) |
|
|
(857 |
) |
|
|
(298 |
) |
|
|
(1,672 |
) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
248 |
|
|
|
(490 |
) |
|
|
1,696 |
|
|
|
(391 |
) |
|
Cash, cash equivalents and restricted cash at beginning of the period |
|
6,575 |
|
|
|
3,762 |
|
|
|
5,127 |
|
|
|
3,663 |
|
|
Cash, cash equivalents and restricted cash at end of the period |
$ |
6,823 |
|
|
$ |
3,272 |
|
|
$ |
6,823 |
|
|
$ |
3,272 |
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|||||||||
Cash paid for interest |
$ |
68 |
|
|
$ |
59 |
|
|
$ |
154 |
|
|
$ |
140 |
|
|
Cash paid for taxes, net |
|
353 |
|
|
|
114 |
|
|
|
416 |
|
|
|
184 |
|
|
Non-cash items: |
|
|
|
|
|
|
|
|||||||||
Changes in capital additions, accrued but not paid |
$ |
(3 |
) |
|
$ |
16 |
|
|
$ |
(12 |
) |
|
$ |
9 |
|
|
|
||||||||
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 |
||||||
|
|
|
|
|
||||
|
|
2023 |
|
2022 |
||||
Total revenue, as reported |
$ |
3,408 |
|
|
$ |
3,336 |
|
|
Sequential change in unearned revenue(1) |
|
(115 |
) |
|
|
365 |
|
|
Total revenue plus sequential change in unearned revenue |
$ |
3,293 |
|
|
$ |
3,701 |
|
|
Change (%) over prior year, as reported |
|
(11 |
)% |
|
|
|||
|
|
|
|
|||||
Growth in Subscription and SaaS Revenue Plus Sequential Change in Unearned Subscription and SaaS Revenue |
||||||||
|
|
|
|
|
||||
|
|
Three Months Ended |
||||||
|
|
|
|
|
||||
|
|
2023 |
|
2022 |
||||
Subscription and SaaS revenue, as reported |
$ |
1,259 |
|
|
$ |
943 |
|
|
Sequential change in unearned subscription and SaaS revenue(2) |
|
102 |
|
|
|
281 |
|
|
Subscription and SaaS revenue plus sequential change in unearned subscription and SaaS revenue |
$ |
1,361 |
|
|
$ |
1,224 |
|
|
Change (%) over prior year, as reported |
|
11 |
% |
|
|
__________ | |||||
(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 subscription and SaaS revenue from the preceding quarter. |
REMAINING PERFORMANCE OBLIGATIONS |
||||||||
(in millions) |
||||||||
(unaudited) |
||||||||
|
||||||||
Growth in Remaining Performance Obligations |
||||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
|
2023 |
|
2022 |
||||
Remaining performance obligations(3) |
$ |
12,875 |
|
|
$ |
12,103 |
|
|
Change (%) over prior year |
|
6 |
% |
|
|
|||
|
|
|
|
|||||
Remaining performance obligations, current(4) |
$ |
7,019 |
|
|
$ |
6,767 |
|
|
Change (%) over prior year |
|
4 |
% |
|
|
__________ | |||||
(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) |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
2023 |
|
2023 |
|
2023 |
|
2022 |
|
2022 |
|
2022 |
||||||||||||
Unearned revenue as reported: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
License |
$ |
11 |
|
|
$ |
17 |
|
|
$ |
21 |
|
|
$ |
28 |
|
|
$ |
20 |
|
|
$ |
20 |
|
|
Subscription and SaaS |
|
4,488 |
|
|
|
4,386 |
|
|
|
4,401 |
|
|
|
3,197 |
|
|
|
2,952 |
|
|
|
2,671 |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Software maintenance |
|
6,095 |
|
|
|
6,348 |
|
|
|
6,805 |
|
|
|
6,636 |
|
|
|
6,903 |
|
|
|
6,877 |
|
|
Professional services |
|
1,496 |
|
|
|
1,454 |
|
|
|
1,516 |
|
|
|
1,356 |
|
|
|
1,356 |
|
|
|
1,298 |
|
|
Total unearned revenue |
$ |
12,090 |
|
|
$ |
12,205 |
|
|
$ |
12,743 |
|
|
$ |
11,217 |
|
|
$ |
11,231 |
|
|
$ |
10,866 |
|
|
RECONCILIATION OF GAAP TO NON-GAAP DATA |
||||||||||||||||||||||||||||
For the Three Months Ended |
||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||||||||||||||||||||||
(unaudited) |
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
GAAP |
|
Stock-Based Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Acquisition, Disposition and Other Items |
|
Tax |
|
Non-GAAP |
||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|||||||||||||||||||||
Cost of license revenue |
$ |
37 |
|
|
— |
|
|
— |
|
|
(9 |
) |
|
— |
|
|
— |
|
$ |
28 |
|
|||||||
Cost of subscription and SaaS revenue |
$ |
203 |
|
|
(6 |
) |
|
— |
|
|
(33 |
) |
|
(1 |
) |
|
— |
|
$ |
163 |
|
|||||||
Cost of services revenue |
$ |
399 |
|
|
(23 |
) |
|
— |
|
|
— |
|
|
(9 |
) |
|
— |
|
$ |
366 |
|
|||||||
Research and development |
$ |
835 |
|
|
(146 |
) |
|
(1 |
) |
|
(2 |
) |
|
(1 |
) |
|
— |
|
$ |
685 |
|
|||||||
Sales and marketing |
$ |
1,100 |
|
|
(88 |
) |
|
(3 |
) |
|
(14 |
) |
|
(10 |
) |
|
— |
|
$ |
986 |
|
|||||||
General and administrative |
$ |
287 |
|
|
(47 |
) |
|
— |
|
|
— |
|
|
(36 |
) |
|
— |
|
$ |
203 |
|
|||||||
Operating income |
$ |
547 |
|
|
310 |
|
|
4 |
|
|
58 |
|
|
57 |
|
|
— |
|
$ |
977 |
|
|||||||
Operating margin(3) |
|
16.0 |
% |
|
9.1 |
% |
|
0.1 |
% |
|
1.7 |
% |
|
1.7 |
% |
|
— |
|
|
28.7 |
% |
|||||||
Other income (expense), net(4) |
$ |
19 |
|
|
— |
|
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
$ |
25 |
|
|||||||
Income before income tax |
$ |
561 |
|
|
310 |
|
|
4 |
|
|
58 |
|
|
63 |
|
|
— |
|
$ |
997 |
|
|||||||
Income tax provision |
$ |
84 |
|
|
|
|
|
|
120 |
|
$ |
205 |
|
|||||||||||||||
Tax rate(2)(3) |
|
15.0 |
% |
|
|
|
|
|
|
20.5 |
% |
|||||||||||||||||
Net income |
$ |
477 |
|
|
310 |
|
|
4 |
|
|
58 |
|
|
63 |
|
|
(120 |
) |
$ |
792 |
|
|||||||
Net income per weighted-average share, diluted(3)(5) |
$ |
1.10 |
|
$ |
0.71 |
|
$ |
0.01 |
|
$ |
0.13 |
|
$ |
0.15 |
|
$ |
(0.28 |
) |
$ |
1.83 |
|
__________ | |||||||||||||||
(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 effective tax rate is based upon, among other things, current tax law, including Internal Revenue Code Section 174 relating to research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. If in the future this provision is deferred, modified or repealed, our effective tax rate may fluctuate significantly in the quarter in which such change in law becomes effective. |
||||||||||||||
(3) |
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. |
||||||||||||||
(4) |
Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. |
||||||||||||||
(5) |
Calculated based upon 434,090 diluted weighted-average shares of common stock. |
||||||||||||||
|
||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA |
||||||||||||||||||||||||||||||||
For the Six Months Ended |
||||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||||||||||||||||||||||||||
(unaudited) |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
GAAP |
|
Stock-Based Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Acquisition, Disposition and Other Items |
|
Certain Litigation and Other Contingencies |
|
Tax |
|
Non-GAAP |
||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Cost of license revenue |
$ |
76 |
|
|
(1 |
) |
|
— |
|
|
(18 |
) |
|
— |
|
|
— |
|
|
— |
|
$ |
58 |
|
||||||||
Cost of subscription and SaaS revenue |
$ |
411 |
|
|
(13 |
) |
|
— |
|
|
(66 |
) |
|
(1 |
) |
|
— |
|
|
— |
|
$ |
331 |
|
||||||||
Cost of services revenue |
$ |
796 |
|
|
(45 |
) |
|
(1 |
) |
|
— |
|
|
(19 |
) |
|
— |
|
|
— |
|
$ |
732 |
|
||||||||
Research and development |
$ |
1,682 |
|
|
(293 |
) |
|
(1 |
) |
|
(5 |
) |
|
(1 |
) |
|
— |
|
|
— |
|
$ |
1,381 |
|
||||||||
Sales and marketing |
$ |
2,205 |
|
|
(166 |
) |
|
(5 |
) |
|
(29 |
) |
|
(21 |
) |
|
— |
|
|
— |
|
$ |
1,982 |
|
||||||||
General and administrative |
$ |
660 |
|
|
(81 |
) |
|
(1 |
) |
|
— |
|
|
(89 |
) |
|
(85 |
) |
|
— |
|
$ |
405 |
|
||||||||
Operating income |
$ |
855 |
|
|
599 |
|
|
8 |
|
|
118 |
|
|
131 |
|
|
85 |
|
|
— |
|
$ |
1,796 |
|
||||||||
Operating margin(3) |
|
12.8 |
% |
|
9.0 |
% |
|
0.1 |
% |
|
1.8 |
% |
|
2.0 |
% |
|
1.3 |
% |
|
— |
|
|
26.9 |
% |
||||||||
Other income (expense), net(4) |
$ |
26 |
|
|
— |
|
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
|
— |
|
$ |
32 |
|
||||||||
Income before income tax |
$ |
860 |
|
|
599 |
|
|
8 |
|
|
118 |
|
|
137 |
|
|
85 |
|
|
— |
|
$ |
1,807 |
|
||||||||
Income tax provision |
$ |
159 |
|
|
|
|
|
|
|
211 |
|
$ |
371 |
|
||||||||||||||||||
Tax rate(2)(3) |
|
18.5 |
% |
|
|
|
|
|
|
|
20.5 |
% |
||||||||||||||||||||
Net income |
$ |
701 |
|
|
599 |
|
|
8 |
|
|
118 |
|
|
137 |
|
|
85 |
|
|
(211 |
) |
$ |
1,436 |
|
||||||||
Net income per weighted-average share, diluted(3)(5) |
$ |
1.62 |
|
$ |
1.38 |
|
$ |
0.02 |
|
$ |
0.27 |
|
$ |
0.32 |
|
$ |
0.20 |
|
$ |
(0.49 |
) |
$ |
3.32 |
|
__________ | |||||||||||||||||
(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 effective tax rate is based upon, among other things, current tax law, including the impacts of Internal Revenue Code Section 174 relating to research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. If in the future this provision is deferred, modified or repealed, our effective tax rate may fluctuate significantly in the quarter in which such change in law becomes effective. |
||||||||||||||||
(3) |
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. |
||||||||||||||||
(4) |
Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. |
||||||||||||||||
(5) |
Calculated based upon 432,839 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 Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Realignment Charges |
|
Acquisition, Disposition and Other Items |
|
Tax |
|
Non-GAAP |
||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Cost of license revenue |
$ |
39 |
|
|
|
— |
|
|
|
— |
|
|
|
(9 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
30 |
|
|
Cost of subscription and SaaS revenue |
$ |
196 |
|
|
|
(6 |
) |
|
|
— |
|
|
|
(36 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
154 |
|
|
Cost of services revenue |
$ |
369 |
|
|
|
(25 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
343 |
|
|
Research and development |
$ |
803 |
|
|
|
(146 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
654 |
|
|
Sales and marketing |
$ |
1,080 |
|
|
|
(93 |
) |
|
|
(3 |
) |
|
|
(15 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
971 |
|
|
General and administrative |
$ |
276 |
|
|
|
(41 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
|
$ |
219 |
|
|
Realignment |
$ |
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
Operating income |
$ |
566 |
|
|
|
311 |
|
|
|
4 |
|
|
|
63 |
|
|
|
7 |
|
|
|
15 |
|
|
|
— |
|
|
$ |
965 |
|
|
Operating margin(2) |
|
17.0 |
% |
|
|
9.3 |
% |
|
|
0.1 |
% |
|
|
1.9 |
% |
|
|
0.2 |
% |
|
|
0.4 |
% |
|
|
— |
|
|
|
28.9 |
% |
|
Other income (expense), net(3) |
$ |
(20 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
$ |
(21 |
) |
|
Income before income tax |
$ |
479 |
|
|
|
311 |
|
|
|
4 |
|
|
|
63 |
|
|
|
7 |
|
|
|
12 |
|
|
|
— |
|
|
$ |
877 |
|
|
Income tax provision |
$ |
132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
47 |
|
|
$ |
180 |
|
|||||||||||
Tax rate(2) |
|
27.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.5 |
% |
|||||||||||||
Net income |
$ |
347 |
|
|
|
311 |
|
|
|
4 |
|
|
|
63 |
|
|
|
7 |
|
|
|
12 |
|
|
|
(47 |
) |
|
$ |
697 |
|
|
Net income per weighted-average share, diluted(2)(4) |
$ |
0.82 |
|
|
$ |
0.73 |
|
|
$ |
0.01 |
|
|
$ |
0.15 |
|
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
(0.11 |
) |
|
$ |
1.64 |
|
__________ | |||||||||||||||||
(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 424,125 diluted weighted-average shares of common stock. |
||||||||||||||||
|
||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA |
||||||||||||||||||||||||||||||||
For the Six Months Ended |
||||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) |
||||||||||||||||||||||||||||||||
(unaudited) |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
GAAP |
|
Stock-Based Compensation |
|
Employer Payroll Taxes on Employee Stock Transactions |
|
Intangible Amortization |
|
Realignment Charges |
|
Acquisition, Disposition and Other Items |
|
Tax |
|
Non-GAAP |
||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Cost of license revenue |
$ |
74 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(19 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
54 |
|
|
Cost of subscription and SaaS revenue |
$ |
387 |
|
|
|
(11 |
) |
|
|
— |
|
|
|
(73 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
303 |
|
|
Cost of services revenue |
$ |
744 |
|
|
|
(48 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
695 |
|
|
Research and development |
$ |
1,577 |
|
|
|
(278 |
) |
|
|
(1 |
) |
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,293 |
|
|
Sales and marketing |
$ |
2,134 |
|
|
|
(174 |
) |
|
|
(3 |
) |
|
|
(32 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,925 |
|
|
General and administrative |
$ |
527 |
|
|
|
(81 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(28 |
) |
|
|
— |
|
|
$ |
417 |
|
|
Realignment |
$ |
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
Operating income |
$ |
974 |
|
|
|
593 |
|
|
|
6 |
|
|
|
129 |
|
|
|
7 |
|
|
|
28 |
|
|
|
— |
|
|
$ |
1,737 |
|
|
Operating margin(2) |
|
15.2 |
% |
|
|
9.2 |
% |
|
|
0.1 |
% |
|
|
2.0 |
% |
|
|
0.1 |
% |
|
|
0.4 |
% |
|
|
— |
|
|
|
27.0 |
% |
|
Other income (expense), net(3) |
$ |
(30 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
|
$ |
(41 |
) |
|
Income before income tax |
$ |
807 |
|
|
|
593 |
|
|
|
6 |
|
|
|
129 |
|
|
|
7 |
|
|
|
16 |
|
|
|
— |
|
|
$ |
1,559 |
|
|
Income tax provision |
$ |
218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
101 |
|
|
$ |
320 |
|
|||||||||||
Tax rate(2) |
|
27.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.5 |
% |
|||||||||||||
Net income |
$ |
589 |
|
|
|
593 |
|
|
|
6 |
|
|
|
129 |
|
|
|
7 |
|
|
|
16 |
|
|
|
(101 |
) |
|
$ |
1,239 |
|
|
Net income per weighted-average share, diluted(2)(4) |
$ |
1.39 |
|
|
$ |
1.40 |
|
|
$ |
0.01 |
|
|
$ |
0.30 |
|
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
$ |
(0.24 |
) |
|
$ |
2.93 |
|
__________ | |||||||||||||||||
(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 423,561 diluted weighted-average shares for Classes A and B. |
||||||||||||||||
|
||||||||||||||||
REVENUE BY TYPE |
||||||||||||||||
(in millions) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Revenue: |
|
|
|
|
|
|
|
|
||||||||
License |
|
$ |
619 |
|
|
$ |
796 |
|
|
$ |
1,136 |
|
|
$ |
1,369 |
|
Subscription and SaaS |
|
|
1,259 |
|
|
|
943 |
|
|
|
2,476 |
|
|
|
1,842 |
|
Services: |
|
|
|
|
|
|
|
|
||||||||
Software maintenance |
|
|
1,222 |
|
|
|
1,299 |
|
|
|
2,456 |
|
|
|
2,609 |
|
Professional services |
|
|
308 |
|
|
|
298 |
|
|
|
617 |
|
|
|
604 |
|
Total services |
|
|
1,530 |
|
|
|
1,597 |
|
|
|
3,073 |
|
|
|
3,213 |
|
Total revenue |
|
$ |
3,408 |
|
|
$ |
3,336 |
|
|
$ |
6,685 |
|
|
$ |
6,424 |
|
Percentage of revenue: |
|
|
|
|
|
|
|
|
||||||||
License |
|
|
18.2 |
% |
|
|
23.9 |
% |
|
|
17.0 |
% |
|
|
21.3 |
% |
Subscription and SaaS |
|
|
36.9 |
% |
|
|
28.2 |
% |
|
|
37.0 |
% |
|
|
28.7 |
% |
Services: |
|
|
|
|
|
|
|
|
||||||||
Software maintenance |
|
|
35.8 |
% |
|
|
38.9 |
% |
|
|
36.7 |
% |
|
|
40.6 |
% |
Professional services |
|
|
9.1 |
% |
|
|
9.0 |
% |
|
|
9.3 |
% |
|
|
9.4 |
% |
Total services |
|
|
44.9 |
% |
|
|
47.9 |
% |
|
|
46.0 |
% |
|
|
50.0 |
% |
Total revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
||||||||||||||||
REVENUE BY GEOGRAPHY |
||||||||||||||||
(in millions) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Revenue: |
|
|
|
|
|
|
|
|||||||||
|
$ |
1,621 |
|
|
$ |
1,648 |
|
|
$ |
3,176 |
|
|
$ |
3,166 |
|
|
International |
|
1,787 |
|
|
|
1,688 |
|
|
|
3,509 |
|
|
|
3,258 |
|
|
Total revenue |
$ |
3,408 |
|
|
$ |
3,336 |
|
|
$ |
6,685 |
|
|
$ |
6,424 |
|
|
Percentage of revenue: |
|
|
|
|
|
|
|
|||||||||
|
|
47.6 |
% |
|
|
49.4 |
% |
|
|
47.5 |
% |
|
|
49.3 |
% |
|
International |
|
52.4 |
% |
|
|
50.6 |
% |
|
|
52.5 |
% |
|
|
50.7 |
% |
|
Total revenue |
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
||||||||||||||||
RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||||||
TO FREE CASH FLOWS |
||||||||||||||||
(A NON-GAAP FINANCIAL MEASURE) |
||||||||||||||||
(in millions) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
GAAP cash flows from operating activities |
$ |
444 |
|
|
$ |
397 |
|
|
$ |
2,194 |
|
|
$ |
1,402 |
|
|
Capital expenditures |
|
(94 |
) |
|
|
(113 |
) |
|
|
(199 |
) |
|
|
(219 |
) |
|
Free cash flows |
$ |
350 |
|
|
$ |
284 |
|
|
$ |
1,995 |
|
|
$ |
1,183 |
|
About Non-GAAP Financial Measures
To provide investors and others with additional information regarding VMware’s results,
VMware’s management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware’s financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware’s business, as they exclude charges and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flow provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.
Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware’s operating performance due to the following factors:
-
Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, the expense for the fair value of the stock-based instruments
VMware utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of VMware’s core business. - Employer payroll taxes on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and other factors that are beyond VMware’s control and do not correlate to the operation of the business.
-
Amortization of acquired intangible assets. A portion of the purchase price of VMware’s acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However,
VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore,VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods. - Realignment charges. Realignment charges include workforce reductions, asset impairments, losses on asset disposals and costs to exit facilities. VMware’s management believes it is useful to exclude these items, when significant, as they are not reflective of VMware’s core business and operating results.
-
Acquisition, disposition and other items. As
VMware does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction,VMware believes it is useful to exclude acquisition, disposition and other items when looking for a consistent basis for comparison across accounting periods. These items include:- Direct costs of acquisitions and dispositions, such as transaction and advisory fees.
- Costs associated with integrating acquired businesses.
-
Accruals for the portion of merger consideration payable in installments that may be paid in cash or
VMware stock, at the option ofVMware . - Gains or losses on investments in equity securities, whether realized or unrealized.
- Charges recognized for non-recoverable strategic investments or gains recognized on the disposition of strategic investments.
- Gains or losses on sale or disposal of distinct lines of business or product offerings, or transactions with features similar to discontinued operations, including recoveries or charges recognized to adjust the fair value of assets that qualify as “held for sale.”
-
Certain costs incurred related to
VMware’s pending acquisition by Broadcom Inc. (“Broadcom”), such as legal and advisory fees incurred to effect the acquisition and retention compensation incurred to preserve our business organization through the consummation of the merger. The acquisition is expected to be consummated onOctober 30, 2023 and is subject to the receipt of regulatory approvals and other customary closing conditions.
-
Certain litigation and other contingencies.
VMware , from time to time, may incur charges or benefits that are outside of the ordinary course of VMware’s business related to litigation and other contingencies.VMware believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of VMware’s business and because of the singular nature of the claims underlying such matters. -
Tax adjustment. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to VMware’s annual estimated tax rate on non-GAAP income. This rate is based on VMware’s estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating VMware’s non-GAAP income as well as significant tax adjustments. VMware’s estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that
VMware management believes materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to VMware’s estimated annual tax rates as described above, the estimated tax rate on non-GAAP income may differ from the GAAP tax rate and from VMware’s actual tax liabilities.
Additionally, VMware’s management believes that the non-GAAP financial measure of free cash flow is meaningful to investors because management reviews cash flow generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.
The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware’s operations. Specifically, in the case of stock-based compensation, if
Management encourages investors and others to review VMware’s financial information in its entirety and not rely on a single financial measure.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230830315470/en/
VMware Investor Relations
ir@vmware.com
VMware Global PR
druyak@vmware.com
Source: