FY23 Total Revenue of $13.35 billion
FY23 Subscription and SaaS Revenue of $4.01
billion, an increase of 25% year-over-year
VMware, Inc. (NYSE: VMW), a leading innovator in enterprise
software, today announced financial results for the fourth quarter
and full fiscal year 2023. The company’s fourth quarter of fiscal
year 2023 was a 14-week fiscal quarter, while the fourth quarter of
fiscal year 2022 was a 13-week fiscal quarter.1
Quarterly Review
- Revenue for the fourth quarter was $3.71 billion, an increase
of 5% from the fourth quarter of fiscal 2022.
- The combination of subscription and SaaS and license revenue
was $2.03 billion, an increase of 7% from the fourth quarter of
fiscal 2022.
- Subscription and SaaS revenue constituted 32% of our total
revenue for the quarter.
- Subscription and SaaS revenue for the fourth quarter was $1.18
billion, an increase of 36% year-over-year. Approximately 10
percentage points of this year-over-year growth was associated with
the extra week in the fourth quarter of fiscal year 2023.
- GAAP net income for the fourth quarter was $494 million, or
$1.15 per diluted share, down 17% per diluted share compared to
$586 million, or $1.39 per diluted share, for the fourth quarter of
fiscal 2022. Non-GAAP net income for the fourth quarter was $915
million, or $2.13 per diluted share, up 5% per diluted share
compared to $855 million, or $2.02 per diluted share, for the
fourth quarter of fiscal 2022.2
- GAAP operating income for the fourth quarter was $658 million,
a decrease of 16% from the fourth quarter of fiscal 2022. Non-GAAP
operating income for the fourth quarter was $1.14 billion, flat as
compared to the fourth quarter of fiscal 2022.
- Operating cash flow for the fourth quarter was $1.63 billion.
Free cash flow for the fourth quarter was $1.51 billion.
- RPO for the fourth quarter totaled $13.56 billion, up 13%
year-over-year.
Annual Review
- Revenue for fiscal year 2023 was $13.35 billion, an increase of
4% from fiscal year 2022.
- The combination of subscription and SaaS and license revenue
was $6.85 billion, an increase of 8% from fiscal year 2022.
- Subscription and SaaS revenue represented 30% of our total
revenue for the fiscal year.
- Subscription and SaaS revenue for fiscal year 2023 was $4.01
billion, an increase of 25% from fiscal year 2022. Approximately 2
percentage points of this year-over-year growth was associated with
the extra week in fiscal year 2023.
- Subscription and SaaS ARR exiting fiscal year 2023 was $4.66
billion, an increase of 30% from fiscal year 2022.
- GAAP net income for fiscal year 2023 was $1.31 billion, or
$3.09 per diluted share, down 28% per diluted share compared to
$1.82 billion, or $4.31 per diluted share, for fiscal year 2022.
Non-GAAP net income for fiscal year 2023 was $2.78 billion, or
$6.53 per diluted share, down 10% per diluted share compared to
$3.06 billion, or $7.25 per diluted share, for fiscal year
2022.2
- GAAP operating income for fiscal year 2023 was $2.02 billion, a
decrease of 15% from fiscal year 2022. Non-GAAP operating income
for fiscal year 2023 was $3.74 billion, a decrease of 5% from
fiscal year 2022.
- Operating cash flow for fiscal year 2023 was $4.30 billion.
Free cash flow for fiscal year 2023 was $3.85 billion.
“We are very pleased with our fiscal year 2023 performance.
These results reflect consistent customer appetite for our
multi-cloud offerings and our ability to help companies with a
cloud smart approach,” commented Raghu Raghuram, CEO, VMware. “We
look forward to the merger with Broadcom, expected to close in
Broadcom’s current fiscal year, as our combined solutions will
enable customers greater choice and flexibility to build, run,
manage, connect and protect their applications at scale.”
“We delivered strong performance to close out our fiscal year
2023, achieving over $13 billion in total revenue and $4 billion in
subscription and SaaS revenue for the year,” said Zane Rowe,
executive vice president and CFO, VMware. “We grew subscription and
SaaS ARR 30% year-over-year, totaling $4.66 billion, an increase of
over $1 billion in ARR for fiscal 2023, reflecting the strength of
our subscription and SaaS portfolio and progress on our business
model transition.”
Business Highlights & Strategic Announcements
- At VMware Explore Europe 2022, the company announced new
technology offerings to enable customers to accelerate their
digital transformation, including:
- Sovereign SaaS innovations that enable partners to
deliver services equivalent to those found in public clouds, while
also better assuring data is protected, compliant and resident
within national territories. Solutions include VMware Tanzu on
sovereign cloud and VMware Aria Operations Compliance pack for
sovereign clouds. Additionally, VMware achieved partner momentum
having doubled the number of VMware Sovereign Cloud providers to 36
partners globally, up from 14 in April 2022.
- VMware SD-WAN solutions that help enterprises more
securely, reliably and optimally deliver applications, data and
services—no matter where they reside—to the site, branch and home,
across any network to any device.
- New Anywhere Workspace platform capabilities for Digital
Employee Experience Management (DEEM), Workspace ONE Freestyle
Orchestrator and VMware Horizon Cloud that help further ease
management burdens for IT teams and improve their productivity with
automation.
- VMware and Equinix expanded their global relationship and
unveiled VMware Cloud on Equinix Metal, a new distributed cloud
service that will deliver a more performant, secure and
cost-effective cloud option to support enterprise
applications.
- VMware and Hewlett Packard Enterprise expanded their
partnership to bring together HPE GreenLake and VMware Cloud to
deliver a fully integrated solution with a simple pay-as-you-go
hybrid cloud consumption model.
- VMware was positioned as a Leader in the IDC MarketScape:
Worldwide Virtual Client Computing 2022-2023 Vendor Assessment
across both strategies and capabilities.3 The report highlighted
VMware’s diverse ecosystem and growing body of certified
engineers.
- VMware was positioned as a Leader in the IDC MarketScape:
European End User Experience Management 2022 Vendor Assessment
across both strategies and capabilities.4 The report highlighted
VMware’s portfolio of technologies and ability to add new virtual
environments during performance issues.
- VMware received recognition for its ongoing leadership in ESG,
demonstrating progress on its 2030 Agenda:
- For the third consecutive year, VMware was recognized by the
2022 Dow Jones Sustainability Indices, ranking in the 99th
percentile for all companies.
- For the sixth consecutive year, VMware was included in the JUST
100, a comprehensive ranking of ESG and stakeholder performance
among America’s largest publicly traded companies. Within the
software industry, VMware ranked number one in the “workers”
category, demonstrating a commitment to fair and livable wages,
worker safety, cultivating a diverse workplace, investing in
workforce training and providing benefits and work-life
balance.
- VMware was named one of the Best Places to Work in IT by
Computerworld for the 9th consecutive year.
1The extra week during the fourth quarter
of fiscal 2023 resulted in incremental ratable and professional
services revenue on a comparable basis. For more information about
impacts of the extra week in fiscal 2023, see the table titled
“Supplemental Reconciliation of GAAP to non-GAAP Data—Estimated
Impact on Revenue Growth Rates Associated with the Extra Week.”
2Our 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.
3IDC MarketScape: Worldwide Virtual Client
Computing 2022-2023 Vendor Assessment (Doc #US49857422, December
2022)
4IDC MarketScape: European End User
Experience Management 2022 Vendor Assessment (Doc #EUR148395522,
December 2022)
About VMware
VMware is a leading provider of multi-cloud services for all
apps, enabling digital innovation with enterprise control. As a
trusted foundation to accelerate innovation, VMware software gives
businesses the flexibility and choice they need to build the
future. Headquartered in Palo Alto, California, VMware is committed
to building a better future through the company’s 2030 Agenda. For
more information, please visit vmware.com/company.
Definitive Agreement to be Acquired by Broadcom
VMware has entered into a definitive agreement to be acquired by
Broadcom Inc. (“Broadcom”). The transaction, which is expected to
be completed in Broadcom's fiscal year 2023, is subject to the
receipt of regulatory approvals and other customary closing
conditions. Please refer to the May 26, 2022 announcement entitled,
“Broadcom to Acquire VMware for Approximately $61 Billion in Cash
and Stock,” available on news.vmware.com.
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 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 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; ESG
(environmental, social and 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, Explore, VMware Aria, Tanzu, Workspace ONE, 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 is an operating measure VMware uses to assess the strength
of the Company’s subscription and SaaS offerings. ARR is a
performance metric and should be viewed independently of, and not
as a substitute for or combined with, revenue and unearned revenue.
ARR represents the annualized value of VMware’s 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 and any applicable
termination for convenience clauses are not exercised, except that,
for consumption-based subscription and SaaS offerings, ARR
represents the annualized quarterly revenue based on revenue
recognized for the current reporting period.
Forward-Looking Statements
This press release contains forward-looking statements
including, among other things, statements regarding the expected
benefits to customers, partners and stockholders of VMware’s
strategy, offerings, and partnerships; portfolio; progress in
VMware’s business model transition; and the proposed acquisition of
VMware by Broadcom, related timing of its consummation and benefits
to customers of combined VMware and Broadcom solutions. 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 satisfaction of the
conditions precedent to consummation of the proposed acquisition,
and the ability to consummate the proposed acquisition, on a timely
basis or at all; (2) business disruption following the announcement
of the proposed acquisition, including disruption of current plans
and operations; (3) the effects of the proposed acquisition, the
spin-off of VMware from Dell and changes in VMware’s and Dell’s
commercial relationships and go-to-market strategy on VMware’s
ability to (a) enter into, maintain and extend strategically
effective partnerships, collaborations and alliances, (b) maintain
and establish new relationships with customers, partners and
suppliers, and (c) maintain operating results and VMware’s business
generally; (4) difficulties in retaining and hiring key personnel
and employees, including due to the proposed acquisition; (5) the
ability to implement plans, forecasts and other expectations with
respect to the business after the completion of the proposed
acquisition and realize synergies; (6) the impact of the COVID-19
pandemic on VMware’s operations, financial condition, customers,
the business environment and global and regional economies; (7) the
ability of VMware to transition its business model and adapt its
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 its
subscription and SaaS portfolio; (8) changes to VMware’s and Dell’s
respective financial conditions and strategic directions, including
potential effects of the proposed acquisition of VMware by
Broadcom, that could adversely impact the VMware-Dell commercial
relationship and collaborations; (9) the continued risk of on-going
and new litigation and regulatory actions, including the outcome of
any legal proceedings related to the proposed acquisition; (10)
adverse changes in general economic or market conditions; (11)
delays or reductions in consumer, government and information
technology spending, including due to the announced acquisition;
(12) competitive factors, such as pricing pressures, industry
consolidation, entry of new competitors into the industries in
which VMware competes, as well as new product and marketing
initiatives by VMware’s competitors; (13) rapid technological
changes in the virtualization software, cloud, end user, edge
security and mobile computing and telecom industries; (14) the
uncertainty of VMware’s customers’ acceptance of and ability to
transition to emerging technologies and new offerings and computing
strategies in the industries in which VMware competes; (15)
VMware’s ability to protect its proprietary technology; (16)
changes to product and services development timelines; (17) risks
associated with cyber-attacks, information security and data
privacy; (18) disruptions resulting from key management changes;
(19) risks associated with international sales, such as fluctuating
currency exchange rates and increased trade barriers; (20) changes
in VMware’s financial condition; and (21) other impacts to VMware’s
business, 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 VMware 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.
CONSOLIDATED STATEMENTS OF
INCOME
(amounts in millions, except
per share amounts, and shares in thousands)
(unaudited)
Three Months Ended
Twelve Months Ended
February 3,
January 28,
February 3,
January 28,
2023
2022
2023
2022
Revenue:
License
$
845
$
1,035
$
2,835
$
3,128
Subscription and SaaS
1,183
868
4,012
3,205
Services
1,686
1,628
6,503
6,518
Total revenue
3,714
3,531
13,350
12,851
Operating expenses(1):
Cost of license revenue
42
41
154
152
Cost of subscription and SaaS revenue
204
188
788
690
Cost of services revenue
412
378
1,540
1,429
Research and development
908
806
3,317
3,057
Sales and marketing
1,173
1,075
4,391
4,067
General and administrative
315
260
1,130
1,068
Realignment
2
—
8
1
Operating income
658
783
2,022
2,387
Investment income
38
—
65
2
Interest expense
(83
)
(80
)
(304
)
(252
)
Other income (expense), net
53
(41
)
9
(52
)
Income before income tax
666
662
1,792
2,085
Income tax provision
172
76
478
265
Net income
$
494
$
586
$
1,314
$
1,820
Net income per weighted-average share,
basic
$
1.16
$
1.39
$
3.11
$
4.34
Net income per weighted-average share,
diluted
$
1.15
$
1.39
$
3.09
$
4.31
Weighted-average shares, basic
425,814
420,089
423,150
419,504
Weighted-average shares, diluted
429,809
422,976
425,860
422,394
__________
(1) Includes stock-based compensation as
follows:
Cost of license revenue
$
—
$
—
$
1
$
1
Cost of subscription and SaaS revenue
7
5
25
21
Cost of services revenue
27
22
106
92
Research and development
174
126
616
528
Sales and marketing
99
75
376
302
General and administrative
42
34
166
131
VMware, Inc.
CONSOLIDATED BALANCE
SHEETS
(amounts in millions, except
per share amounts, and shares in thousands)
(unaudited)
February 3,
January 28,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
5,100
$
3,614
Short-term investments
—
19
Accounts receivable, net of allowance of
$9 and $10
2,510
2,297
Due from related parties
2,078
1,438
Other current assets
543
598
Total current assets
10,231
7,966
Property and equipment, net
1,623
1,461
Deferred tax assets
6,157
5,906
Intangible assets, net
478
714
Goodwill
9,598
9,598
Due from related parties
208
199
Other assets
2,942
2,832
Total assets
$
31,237
$
28,676
LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$
267
$
234
Accrued expenses and other
2,568
2,336
Customer deposits
1,087
470
Current portion of long-term debt
1,000
—
Unearned revenue
7,079
6,479
Due to related parties
390
132
Total current liabilities
12,391
9,651
Long-term debt
9,440
12,671
Unearned revenue
5,664
4,743
Income tax payable
287
242
Operating lease liabilities
845
927
Due to related parties
648
909
Other liabilities
428
409
Total liabilities
29,703
29,552
Contingencies
Stockholders’ equity (deficit):
Class A common stock, par value $0.01;
authorized 2,500,000 shares; issued and outstanding 426,741 and
418,808 shares
4
4
Additional paid-in capital
1,095
—
Accumulated other comprehensive loss
(4
)
(5
)
Retained earnings (accumulated
deficit)
439
(875
)
Total stockholders’ equity (deficit)
1,534
(876
)
Total liabilities and stockholders’ equity
(deficit)
$
31,237
$
28,676
VMware, Inc.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
Twelve Months Ended
February 3,
January 28,
February 3,
January 28,
2023
2022
2023
2022
Operating activities:
Net income
$
494
$
586
$
1,314
$
1,820
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
328
284
1,234
1,110
Stock-based compensation
349
262
1,290
1,075
Deferred income taxes, net
(37
)
12
(218
)
(80
)
(Gain) loss on equity securities and
disposition of assets, net
4
5
(6
)
33
Loss on extinguishment of debt
—
21
2
21
Other
1
4
5
10
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable
(602
)
(626
)
(218
)
(379
)
Other current assets and other assets
(281
)
(385
)
(792
)
(852
)
Due from related parties
(1,274
)
(683
)
(647
)
95
Accounts payable
(10
)
11
38
98
Accrued expenses, customer deposits and
other liabilities
1,026
668
499
487
Income taxes payable
75
5
283
28
Unearned revenue
1,526
990
1,520
908
Due to related parties
33
(17
)
(4
)
(17
)
Net cash provided by operating
activities
1,632
1,137
4,300
4,357
Investing activities:
Additions to property and equipment
(123
)
(123
)
(450
)
(386
)
Sales of investments in equity
securities
—
9
20
77
Purchases of strategic investments
—
(5
)
(11
)
(11
)
Proceeds from disposition of assets
—
9
91
14
Business combinations, net of cash
acquired, and purchases of intangible assets
(12
)
(7
)
(17
)
(23
)
Net cash used in investing activities
(135
)
(117
)
(367
)
(329
)
Financing activities:
Proceeds from issuance of common stock
2
3
250
270
Proceeds from issuance of senior notes,
net of issuance costs
—
—
—
5,944
Borrowings under term loan, net of
issuance costs
—
3,998
—
3,998
Repayment of term loan
(250
)
(500
)
(2,250
)
(500
)
Repayment of current portion of senior
notes
—
(1,519
)
—
(1,519
)
Repayment of note payable to Dell
—
—
—
(270
)
Repurchase of common stock
—
(297
)
(89
)
(1,169
)
Shares repurchased for tax withholdings on
vesting of restricted stock
(122
)
(95
)
(375
)
(385
)
Payment for Special Dividend
—
(11,499
)
—
(11,499
)
Principal payments on finance lease
obligations
(1
)
(1
)
(5
)
(5
)
Net cash used in financing activities
(371
)
(9,910
)
(2,469
)
(5,135
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
1,126
(8,890
)
1,464
(1,107
)
Cash, cash equivalents and restricted cash
at beginning of the period
4,001
12,553
3,663
4,770
Cash, cash equivalents and restricted cash
at end of the period
$
5,127
$
3,663
$
5,127
$
3,663
Supplemental disclosures of cash flow
information:
Cash paid for interest
$
66
$
54
$
292
$
200
Cash paid for taxes, net
105
55
383
331
Non-cash items:
Changes in capital additions, accrued but
not paid
$
(24
)
$
(5
)
$
(1
)
$
4
Changes in tax withholdings on vesting of
restricted stock, accrued but not paid
12
(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
February 3,
January 28,
2023
2022
Total revenue, as reported
$
3,714
$
3,531
Sequential change in unearned
revenue(1)
1,526
989
Total revenue plus sequential change in
unearned revenue
$
5,240
$
4,520
Change (%) over prior year, as
reported
16
%
Growth
in License and Subscription and SaaS Revenue Plus Sequential Change
in Unearned License and Subscription and SaaS
Revenue
Three Months Ended
February 3,
January 28,
2023
2022
Total license and subscription and SaaS
revenue, as reported
$
2,028
$
1,903
Sequential change in unearned license and
subscription and SaaS revenue(2)
1,197
433
Total license and subscription and SaaS
revenue plus sequential change in unearned license and subscription
and SaaS revenue
$
3,225
$
2,336
Change (%) over prior year, as
reported
38
%
__________
(1) Consists of the change in total
unearned revenue from the preceding quarter. Total unearned revenue
consists of current and non-current unearned revenue amounts
presented in the condensed consolidated balance sheets.
(2) Consists of the change in unearned
license and subscription and SaaS revenue from the preceding
quarter.
REMAINING PERFORMANCE
OBLIGATIONS
(in millions)
(unaudited)
Growth
in Remaining Performance Obligations
February 3,
January 28,
2023
2022
Remaining performance obligations(3)
$
13,559
$
11,996
Change (%) over prior year
13
%
Remaining performance obligations,
current(4)
$
7,322
$
6,793
Change (%) over prior year
8
%
__________
(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 RECONCILIATION OF
GAAP TO NON-GAAP DATA
ESTIMATED IMPACT ON REVENUE
GROWTH RATES ASSOCIATED WITH THE EXTRA WEEK(1)
(unaudited)
For the Three Months
Ended
February 3, 2023
Change year-over-
year, as reported
(%)
Estimated impact
of extra week in
fiscal 2023(1)
(% pts.)
Change year-over-
year, adjusted for
the extra week in
fiscal 2023
(%)
Revenue:
License
(18
)
—
(18
)
Subscription and SaaS
36
10
26
Services
4
8
(4
)
Total revenue
5
6
(1
)
For the Twelve Months
Ended
February 3, 2023
Change year-over-
year, as reported
(%)
Estimated impact
of extra week in
fiscal 2023(1)
(% pts.)
Change year-over-
year, adjusted for
the extra week in
fiscal 2023
(%)
Revenue:
License
(9
)
—
(9
)
Subscription and SaaS
25
2
23
Services
—
2
(2
)
Total revenue
4
2
2
__________
(1) VMware's fiscal year is the 52 or 53
weeks ending on the Friday nearest to January 31 of each year.
Fiscal 2023 was a 53-week fiscal year, in which the first three
quarters each had 13 weeks while the fourth quarter had 14 weeks.
Fiscal 2022 was a 52-week fiscal year, in which all four quarters
had 13 weeks.
VMware, Inc.
SUPPLEMENTAL UNEARNED REVENUE
SCHEDULE
(in millions)
(unaudited)
February 3,
October 28,
July 29,
April 29,
January 28,
October 29,
2023
2022
2022
2022
2022
2021
Unearned revenue as reported:
License
$
21
$
28
$
20
$
20
$
19
$
17
Subscription and SaaS
4,401
3,197
2,952
2,671
2,669
2,238
Services
Software maintenance
6,805
6,636
6,903
6,877
7,208
6,773
Professional services
1,516
1,356
1,356
1,298
1,326
1,205
Total unearned revenue
$
12,743
$
11,217
$
11,231
$
10,866
$
11,222
$
10,233
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended
February 3, 2023
(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(3)
Operating expenses:
Cost of license revenue
$
42
—
—
(9
)
—
—
—
$
32
Cost of subscription and SaaS revenue
$
204
(7
)
—
(36
)
—
—
—
$
160
Cost of services revenue
$
412
(27
)
—
—
—
(9
)
—
$
376
Research and development
$
908
(174
)
—
(3
)
—
(1
)
—
$
730
Sales and marketing
$
1,173
(99
)
(3
)
(15
)
—
(8
)
—
$
1,050
General and administrative
$
315
(42
)
—
—
—
(49
)
—
$
224
Realignment
$
2
—
—
—
(2
)
—
—
$
—
Operating income
$
658
349
3
63
2
67
—
$
1,142
Operating margin(3)
17.7
%
9.4
%
0.1
%
1.7
%
—
%
1.8
%
—
30.7
%
Other income (expense), net(4)
$
53
—
—
—
—
2
—
$
54
Income before income tax
$
666
349
3
63
2
69
—
$
1,151
Income tax provision
$
172
64
$
236
Tax rate(2)(3)
25.9
%
20.5
%
Net income
$
494
349
3
63
2
69
(64
)
$
915
Net income per weighted-average share,
diluted(3)(5)
$
1.15
$
0.81
$
0.01
$
0.15
$
—
$
0.16
$
(0.15
)
$
2.13
__________
(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 429,809 diluted
weighted-average shares of common stock.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended
January 28, 2022
(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
$
41
—
—
(9
)
—
—
$
32
Cost of subscription and SaaS revenue
$
188
(5
)
—
(43
)
—
—
$
140
Cost of services revenue
$
378
(22
)
—
—
—
—
$
355
Research and development
$
806
(126
)
—
(2
)
—
—
$
678
Sales and marketing
$
1,075
(75
)
(3
)
(20
)
—
—
$
979
General and administrative
$
260
(34
)
—
—
(16
)
—
$
210
Operating income
$
783
262
3
74
16
—
$
1,137
Operating margin(2)
22.2
%
7.4
%
0.1
%
2.1
%
0.4
%
—
32.2
%
Other income (expense), net(3)
$
(41
)
—
—
—
3
—
$
(39
)
Income before income tax
$
662
262
3
74
19
—
$
1,018
Income tax provision
$
76
87
$
163
Tax rate(2)
11.4
%
16.0
%
Net income
$
586
262
3
74
19
(87
)
$
855
Net income per weighted-average share,
diluted for Classes A and B(2)(4)
$
1.39
$
0.62
$
0.01
$
0.17
$
0.04
$
(0.21
)
$
2.02
__________
(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 422,976 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Twelve Months Ended
February 3, 2023
(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(3)
Operating expenses:
Cost of license revenue
$
154
(1
)
—
(37
)
—
—
—
$
116
Cost of subscription and SaaS revenue
$
788
(25
)
—
(146
)
—
(1
)
—
$
616
Cost of services revenue
$
1,540
(106
)
(1
)
—
—
(17
)
—
$
1,416
Research and development
$
3,317
(616
)
(1
)
(10
)
—
(1
)
—
$
2,689
Sales and marketing
$
4,391
(376
)
(7
)
(61
)
—
(15
)
—
$
3,932
General and administrative
$
1,130
(166
)
(1
)
—
—
(117
)
—
$
845
Realignment
$
8
—
—
—
(8
)
—
—
$
—
Operating income
$
2,022
1,290
10
254
8
151
—
$
3,736
Operating margin(3)
15.1
%
9.7
%
0.1
%
1.9
%
0.1
%
1.1
%
—
28.0
%
Other income (expense), net(4)
$
9
—
—
—
—
(9
)
—
$
—
Income before income tax
$
1,792
1,290
10
254
8
142
—
$
3,497
Income tax provision
$
478
239
$
717
Tax rate(2)(3)
26.7
%
20.5
%
Net income
$
1,314
1,290
10
254
8
142
(239
)
$
2,780
Net income per weighted-average share,
diluted(3)(5)
$
3.09
$
3.03
$
0.02
$
0.60
$
0.02
$
0.33
$
(0.56
)
$
6.53
__________
(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 425,860 diluted
weighted-average shares of common stock.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Twelve Months Ended
January 28, 2022
(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
$
152
(1
)
—
(39
)
—
—
—
$
112
Cost of subscription and SaaS revenue
$
690
(21
)
—
(171
)
—
—
—
$
498
Cost of services revenue
$
1,429
(92
)
(1
)
—
—
—
—
$
1,334
Research and development
$
3,057
(528
)
(2
)
(8
)
—
—
—
$
2,519
Sales and marketing
$
4,067
(302
)
(7
)
(85
)
—
—
—
$
3,676
General and administrative
$
1,068
(131
)
(1
)
—
—
(142
)
—
$
794
Realignment
$
1
—
—
—
(1
)
—
—
$
—
Operating income
$
2,387
1,075
11
303
1
142
—
$
3,918
Operating margin(2)
18.6
%
8.4
%
0.1
%
2.4
%
—
%
1.1
%
—
30.5
%
Other income (expense), net(3)
$
(52
)
—
—
—
—
31
—
$
(21
)
Income before income tax
$
2,085
1,075
11
303
1
173
—
$
3,647
Income tax provision
$
265
318
$
583
Tax rate(2)
12.7
%
16.0
%
Net income
$
1,820
1,075
11
303
1
173
(318
)
$
3,064
Net income per weighted-average share,
diluted for Classes A and B(2)(4)
$
4.31
$
2.54
$
0.03
$
0.72
$
—
$
0.41
$
(0.75
)
$
7.25
__________
(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 422,394 diluted
weighted-average shares for Classes A and B.
VMware, Inc.
REVENUE BY TYPE
(in millions)
(unaudited)
Three Months Ended
Twelve Months Ended
February 3,
January 28,
February 3,
January 28,
2023
2022
2023
2022
Revenue:
License
$
845
$
1,035
$
2,835
$
3,128
Subscription and SaaS
1,183
868
4,012
3,205
Total license and subscription and
SaaS
2,028
1,903
6,847
6,333
Services:
Software maintenance
1,374
1,346
5,281
5,356
Professional services
312
282
1,222
1,162
Total services
1,686
1,628
6,503
6,518
Total revenue
$
3,714
$
3,531
$
13,350
$
12,851
Percentage of revenue:
License
22.7
%
29.3
%
21.2
%
24.3
%
Subscription and SaaS
31.9
%
24.6
%
30.1
%
25.0
%
Total license and subscription and
SaaS
54.6
%
53.9
%
51.3
%
49.3
%
Services:
Software maintenance
37.0
%
38.1
%
39.6
%
41.7
%
Professional services
8.4
%
8.0
%
9.1
%
9.0
%
Total services
45.4
%
46.1
%
48.7
%
50.7
%
Total revenue
100.0
%
100.0
%
100.0
%
100.0
%
VMware, Inc.
REVENUE BY GEOGRAPHY
(in millions)
(unaudited)
Three Months Ended
Twelve Months Ended
February 3,
January 28,
February 3,
January 28,
2023
2022
2023
2022
Revenue:
United States
$
1,748
$
1,645
$
6,528
$
6,232
International
1,966
1,886
6,822
6,619
Total revenue
$
3,714
$
3,531
$
13,350
$
12,851
Percentage of revenue:
United States
47.1
%
46.6
%
48.9
%
48.5
%
International
52.9
%
53.4
%
51.1
%
51.5
%
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
Twelve Months Ended
February 3,
January 28,
February 3,
January 28,
2023
2022
2023
2022
GAAP cash flows from operating
activities
$
1,632
$
1,137
$
4,300
$
4,357
Capital expenditures
(123
)
(123
)
(450
)
(386
)
Free cash flows
$
1,509
$
1,014
$
3,850
$
3,971
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, free cash flow and non-GAAP
estimated revenue growth rates as adjusted for the extra week in
fiscal 2023. VMware has provided a reconciliation of each non-GAAP
financial measure used in this earnings release to the most
directly comparable GAAP financial measure. Other than free cash
flow and non-GAAP estimated revenue growth rates, these non-GAAP
financial measures 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 costs incurred related to VMware's spin-off from its
former parent company, Dell Technologies Inc., completed on
November 1, 2021, such as legal and advisory fees.
- 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 occur in
Broadcom's fiscal year 2023 and is subject to the receipt of
regulatory approvals and other customary closing conditions.
- 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.
VMware’s management also believes that the non-GAAP estimated
revenue growth rate as adjusted for the extra week during the
fourth quarter of fiscal 2023 is meaningful to investors, given
that the extra week resulted in incremental ratable and
professional services revenue on a comparable basis.
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/20230301006224/en/
Julie Gonzalez VMware Investor Relations ir@vmware.com
Doreen Ruyak VMware Global PR druyak@vmware.com
Vmware (NYSE:VMW)
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