Total Revenue of $3.28 billion
Subscription and SaaS Revenue of $1.22 billion,
an increase of 35% year-over-year
VMware, Inc. (NYSE: VMW), a leading innovator in enterprise
software, today announced financial results for the first quarter
of fiscal year 2024:
Quarterly Review
- Revenue for the first quarter was $3.28 billion, an increase of
6% from the first quarter of fiscal 2023.
- Subscription and SaaS revenue for the first quarter was $1.22
billion, an increase of 35% year-over-year.
- Subscription and SaaS revenue constituted 37% of total revenue
for the quarter.
- Subscription and SaaS ARR for the first quarter was $4.85
billion, an increase of 32% year-over-year.
- GAAP net income for the first quarter was $224 million, or
$0.52 per diluted share, down 9% per diluted share compared to $242
million, or $0.57 per diluted share, for the first quarter of
fiscal 2023. Non-GAAP net income for the first quarter was $644
million, or $1.49 per diluted share, up 16% per diluted share
compared to $542 million, or $1.28 per diluted share, for the first
quarter of fiscal 2023.1
- GAAP operating income for the first quarter was $309 million, a
decrease of 24% from the first quarter of fiscal 2023. Non-GAAP
operating income for the first quarter was $819 million, up 6%
compared to the first quarter of fiscal 2023.
- Operating cash flow for the first quarter was $1.75 billion.
Free cash flow for the first quarter was $1.65 billion.
- RPO for the first quarter totaled $13.01 billion, up 13%
year-over-year.
“We are pleased with our Q1 results. This past quarter we
demonstrated momentum and engagement with our customers and
partners as we continue to help them transform their businesses and
unlock the full potential of multi-cloud,” said Raghu Raghuram,
CEO, VMware. “We are excited to introduce new product innovations
and host our customers and partners this year at VMware Explore
events across Las Vegas, Singapore, Brazil, Barcelona, and
Japan.”
“Our Q1 performance reflected a good start to fiscal year 2024
and was highlighted by our subscription and SaaS revenue, which
grew 35% year-over-year,” said Zane Rowe, executive vice president
and CFO, VMware. “We continue to invest in our cloud offerings to
drive future recurring revenue growth.”
Business Highlights & Strategic Announcements
- VMware announced in May that Karen Dykstra will take on the
role as CFO and executive vice president, in addition to her
current role as a member of the VMware Board of Directors, and that
current VMware CFO and executive vice president Zane Rowe will be
leaving the company, effective June 9, 2023. Please refer to the
May 25, 2023 announcement entitled, “VMware Names Karen Dykstra as
CFO; Zane Rowe to Depart Company,” available on
news.vmware.com.
- At Mobile World Congress 2023, VMware announced innovations,
enhancements and partnerships to further meet the evolving needs of
Communications Service Providers (CSPs) and enterprises, including:
- VMware Telco Cloud platform will help CSPs accelerate
network modernization and capture 5G and edge opportunities through
innovations that enable RAN and edge transformation, improve telco
efficiency, and enable smarter networking.
- Project Kauai was unveiled to expand VMware Telco Cloud
Platform RAN deployment options to include bare metal
resources.
- Next-generation networking within VMware Telco Cloud
Platform with VMware NSX, delivering telco-grade intelligent
networking and lateral security capabilities.
- Vodafone Qatar selected both VMware Telco Cloud
Platform-5G Edition and VMware Cloud Foundation with Tanzu as the
cornerstone of its modern cloud platform. This approach will enable
it to fully utilize the power of 5G, cloud and modern applications
to bring new services to market.
- Samsung and VMware expanded their collaboration,
resulting in the integration of Samsung’s O-RAN compliant
virtualized RAN solutions and VMware Telco Cloud Platform as part
of the DISH Wireless 5G network buildout.
- NTT DATA and VMware announced an expanded collaboration
to accelerate the path to software-defined, large-scale Open RAN
deployments through combined solutions and services.
- VMware announced VMware Cross-Cloud managed services, a set of
prescriptive offerings with enhanced partner and customer benefits
that will enable highly skilled partners to expand their managed
services practices.
- VMware unveiled the next evolution of the VMware Partner
Connect program, a singular, unified program for all partner types,
helping their customers accelerate the migration of applications to
the right cloud, automate and better secure the software supply
chain, and manage spending on private and public cloud
infrastructures.
- VMware released new VMware Anywhere Workspace platform
enhancements, including major changes to the Workspace ONE
architecture that enable high performance and scalability for
upwards of millions of endpoints, and new innovations in VMware App
Volumes that greatly reduce the management time and infrastructure
cost of virtual app and desktop environments.
- VMware Aria Automation was ranked as a leader in The Forrester
Wave™ Infrastructure Automation. According to Forrester’s
evaluation, “VMware gives customers an easy path to automatically
move between on-premises and cloud licenses.”2 The evaluation also
noted VMware’s massive partner ecosystem and array of supporting
products and services.
- VMware received recognition for its ongoing Environmental,
Social and Governance (ESG) leadership, demonstrating progress on
its 2030 Agenda:
- For the second consecutive year, VMware was recognized by
Newsweek as one of America’s Most Trustworthy Companies, ranking
second in the Software and Telecommunications industry.
- VMware was also recognized by Newsweek as one of America’s
Greatest Workplaces for Diversity, receiving 5/5 diversity
score.
- Forbes recognized VMware for its commitment to Diversity,
Equity and Inclusion (DEI) and included VMware on its list of
America’s Best Employers for Diversity.
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 Forrester Research, Inc., The Forrester
Wave™: Infrastructure Automation, Q1 2023, March 21, 2023
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, NSX, Tanzu, VMware Anywhere Workspace,
Workspace ONE, and Aria 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 rights 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, collaborations and partnerships; upcoming
VMware Explore events; investments in cloud products and those
investments driving recurring revenue; VMware’s CFO transition and
related timing; 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 pending acquisition, and the ability to consummate the pending
acquisition, on a timely basis or at all; (2) business disruption
following the announcement of the pending acquisition, including
disruption of current plans and operations; (3) the effects of the
pending 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 pending
acquisition; (5) the ability to implement plans, forecasts and
other expectations with respect to the business after the
completion of the pending 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 pending
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 pending 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.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(amounts in millions, except
per share amounts, and shares in thousands)
(unaudited)
Three Months Ended
May 5,
April 29,
2023
2022
Revenue:
License
$
517
$
572
Subscription and SaaS
1,217
899
Services
1,543
1,617
Total revenue
3,277
3,088
Operating expenses(1):
Cost of license revenue
39
35
Cost of subscription and SaaS revenue
208
192
Cost of services revenue
397
375
Research and development
847
774
Sales and marketing
1,104
1,053
General and administrative
373
251
Operating income
309
408
Investment income
64
1
Interest expense
(80
)
(71
)
Other income (expense), net
6
(10
)
Income before income tax
299
328
Income tax provision
75
86
Net income
$
224
$
242
Net income per weighted-average share, basic
$
0.52
$
0.58
Net income per weighted-average share, diluted
$
0.52
$
0.57
Weighted-average shares, basic
428,185
420,586
Weighted-average shares, diluted
431,583
422,987
__________
(1)
Includes stock-based compensation as
follows:
Cost of subscription and SaaS revenue
$
6
$
5
Cost of services revenue
22
23
Research and development
146
132
Sales and marketing
82
83
General and administrative
34
40
VMware, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(amounts in millions, except
per share amounts, and shares in thousands)
(unaudited)
May 5,
February 3,
2023
2023
ASSETS
Current assets:
Cash and cash equivalents
$
6,548
$
5,100
Accounts receivable, net of allowance of
$9 and $9
1,833
2,510
Due from related parties
661
2,078
Other current assets
556
543
Total current assets
9,598
10,231
Property and equipment, net
1,636
1,623
Deferred tax assets
6,247
6,157
Intangible assets, net
427
478
Goodwill
9,598
9,598
Due from related parties
206
208
Other assets
2,862
2,942
Total assets
$
30,574
$
31,237
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
225
$
267
Accrued expenses and other
2,108
2,568
Customer deposits
1,155
1,087
Current portion of long-term debt
1,000
1,000
Unearned revenue
6,806
7,079
Due to related parties
379
390
Total current liabilities
11,673
12,391
Long-term debt
9,445
9,440
Unearned revenue
5,399
5,664
Income tax payable
295
287
Operating lease liabilities
819
845
Due to related parties
648
648
Other liabilities
428
428
Total liabilities
28,707
29,703
Contingencies
Stockholders’ equity:
Class A common stock, par value $0.01;
authorized 2,500,000 shares; issued and outstanding 429,707 and
426,741 shares
4
4
Additional paid-in capital
1,204
1,095
Accumulated other comprehensive loss
(4
)
(4
)
Retained earnings
663
439
Total stockholders’ equity
1,867
1,534
Total liabilities and stockholders’
equity
$
30,574
$
31,237
VMware, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
May 5,
April 29,
2023
2022
Operating activities:
Net income
$
224
$
242
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
331
288
Stock-based compensation
290
283
Deferred income taxes, net
(87
)
(43
)
(Gain) loss on equity securities and
disposition of assets, net
1
(9
)
Other
5
3
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable
672
675
Other current assets and other assets
(106
)
(244
)
Due from related parties
1,419
801
Accounts payable
(40
)
(28
)
Accrued expenses, customer deposits and
other liabilities
(517
)
(665
)
Income taxes payable
106
74
Unearned revenue
(538
)
(357
)
Due to related parties
(10
)
(15
)
Net cash provided by operating
activities
1,750
1,005
Investing activities:
Additions to property and equipment
(105
)
(106
)
Sales of investments in equity
securities
—
20
Purchases of strategic investments
—
(8
)
Proceeds from disposition of assets
—
6
Business combinations, net of cash
acquired, and purchases of intangible assets
(8
)
(3
)
Net cash used in investing activities
(113
)
(91
)
Financing activities:
Proceeds from issuance of common stock
2
119
Repayment of term loan
—
(750
)
Repurchase of common stock
—
(89
)
Shares repurchased for tax withholdings on
vesting of restricted stock
(190
)
(94
)
Principal payments on finance lease
obligations
(1
)
(1
)
Net cash used in financing activities
(189
)
(815
)
Net increase in cash, cash equivalents and
restricted cash
1,448
99
Cash, cash equivalents and restricted cash
at beginning of the period
5,127
3,663
Cash, cash equivalents and restricted cash
at end of the period
$
6,575
$
3,762
Supplemental disclosures of cash flow
information:
Cash paid for interest
$
86
$
80
Cash paid for taxes, net
63
69
Non-cash items:
Changes in capital additions, accrued but
not paid
$
(9
)
$
(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
May 5,
April 29,
2023
2022
Total revenue, as reported
$
3,277
$
3,088
Sequential change in unearned revenue(1)
(538
)
(356
)
Total revenue plus sequential change in unearned revenue
$
2,739
$
2,732
Change (%) over prior year, as reported
—
%
Growth
in Subscription and SaaS Revenue Plus Sequential Change in Unearned
Subscription and SaaS Revenue
Three Months Ended
May 5,
April 29,
2023
2022
Subscription and SaaS revenue, as reported
$
1,217
$
899
Sequential change in unearned subscription and SaaS revenue(2)
(15
)
2
Subscription and SaaS revenue plus sequential change in unearned
subscription and SaaS revenue
$
1,202
$
901
Change (%) over prior year, as reported
33
%
__________
(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
May 5,
April 29,
2023
2022
Remaining performance obligations(3)
$
13,012
$
11,556
Change (%) over prior year
13
%
Remaining performance obligations, current(4)
$
7,068
$
6,563
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 UNEARNED REVENUE
SCHEDULE
(in millions)
(unaudited)
May 5,
February 3,
October 28,
July 29,
April 29,
January 28,
2023
2023
2022
2022
2022
2022
Unearned revenue as reported:
License
$
17
$
21
$
28
$
20
$
20
$
19
Subscription and SaaS
4,386
4,401
3,197
2,952
2,671
2,669
Services
Software maintenance
6,348
6,805
6,636
6,903
6,877
7,208
Professional services
1,454
1,516
1,356
1,356
1,298
1,326
Total unearned revenue
$
12,205
$
12,743
$
11,217
$
11,231
$
10,866
$
11,222
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended May
5, 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
Acquisition,
Disposition
and Other
Items
Certain
Litigation and
Other
Contingencies
Tax
Adjustment(1)
Non-GAAP
As Adjusted(3)
Operating expenses:
Cost of license revenue
$
39
—
—
(9
)
—
—
—
$
30
Cost of subscription and SaaS revenue
$
208
(6
)
—
(33
)
—
—
—
$
168
Cost of services revenue
$
397
(22
)
(1
)
—
(9
)
—
—
$
365
Research and development
$
847
(146
)
(1
)
(3
)
(1
)
—
—
$
697
Sales and marketing
$
1,104
(82
)
(2
)
(14
)
(10
)
—
—
$
996
General and administrative
$
373
(34
)
—
—
(53
)
(85
)
—
$
202
Operating income
$
309
290
4
59
73
85
—
$
819
Operating margin(3)
9.4
%
8.8
%
0.1
%
1.8
%
2.2
%
2.6
%
—
25.0
%
Other income (expense), net(4)
$
6
—
—
—
1
—
—
$
7
Income before income tax
$
299
290
4
59
74
85
—
$
810
Income tax provision
$
75
91
$
166
Tax rate(2)(3)
25.0
%
20.5
%
Net income
$
224
290
4
59
74
85
(91
)
$
644
Net income per weighted-average share, diluted(3)(5)
$
0.52
$
0.67
$
0.01
$
0.14
$
0.17
$
0.20
$
(0.21
)
$
1.49
__________
(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 431,583 diluted
weighted-average shares of common stock.
VMware, Inc.
RECONCILIATION OF GAAP TO
NON-GAAP DATA
For the Three Months Ended
April 29, 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
$
35
—
—
(10
)
—
—
$
24
Cost of subscription and SaaS revenue
$
192
(5
)
—
(37
)
—
—
$
150
Cost of services revenue
$
375
(23
)
—
—
—
—
$
352
Research and development
$
774
(132
)
—
(2
)
—
—
$
639
Sales and marketing
$
1,053
(83
)
(2
)
(17
)
—
—
$
954
General and administrative
$
251
(40
)
—
—
(13
)
—
$
198
Operating income
$
408
283
2
66
13
—
$
771
Operating margin(2)
13.2
%
9.2
%
0.1
%
2.1
%
0.4
%
—
25.0
%
Other income (expense), net(3)
$
(10
)
—
—
—
(9
)
—
$
(19
)
Income before income tax
$
328
283
2
66
4
—
$
682
Income tax provision
$
86
54
$
140
Tax rate(2)
26.1
%
20.5
%
Net income
$
242
283
2
66
4
(54
)
$
542
Net income per weighted-average share, diluted(2)(4)
$
0.57
$
0.67
$
—
$
0.16
$
0.01
$
(0.13
)
$
1.28
__________
(1)
Non-GAAP financial information for the
quarter is adjusted for a tax rate equal to our annual estimated
tax rate on non-GAAP income. This rate is based on our estimated
annual GAAP income tax rate forecast, adjusted to account for items
excluded from GAAP income in calculating the non-GAAP financial
measures presented above as well as significant tax adjustments.
Our estimated tax rate on non-GAAP income is determined annually
and may be adjusted during the year to take into account events or
trends that we believe materially impact the estimated annual rate
including, but not limited to, significant changes resulting from
tax legislation, material changes in the geographic mix of revenue
and expenses, changes to our corporate structure and other
significant events. Due to the differences in the tax treatment of
items excluded from non-GAAP earnings, as well as the methodology
applied to our estimated annual tax rates as described above, our
estimated tax rate on non-GAAP income may differ from our GAAP tax
rate and from our actual tax liabilities.
(2)
Totals may not sum, due to rounding.
Operating margin, tax rate and net income per weighted average
share information are calculated based upon the respective
underlying, non-rounded data.
(3)
Non-GAAP adjustment to other income
(expense), net includes gains or losses on investments in equity
securities, whether realized or unrealized.
(4)
Calculated based upon 422,987 diluted
weighted-average shares of common stock.
VMware, Inc.
REVENUE BY TYPE
(in millions)
(unaudited)
Three Months Ended
May 5,
April 29,
2023
2022
Revenue:
License
$
517
$
572
Subscription and SaaS
1,217
899
Services:
Software maintenance
1,234
1,310
Professional services
309
307
Total services
1,543
1,617
Total revenue
$
3,277
$
3,088
Percentage of revenue:
License
15.8
%
18.5
%
Subscription and SaaS
37.1
%
29.1
%
Services:
Software maintenance
37.7
%
42.4
%
Professional services
9.4
%
10.0
%
Total services
47.1
%
52.4
%
Total revenue
100.0
%
100.0
%
VMware, Inc.
REVENUE BY GEOGRAPHY
(in millions)
(unaudited)
Three Months Ended
May 5,
April 29,
2023
2022
Revenue:
United States
$
1,555
$
1,518
International
1,722
1,570
Total revenue
$
3,277
$
3,088
Percentage of revenue:
United States
47.4
%
49.1
%
International
52.6
%
50.9
%
Total revenue
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
May 5,
April 29,
2023
2022
GAAP cash flows from operating
activities
$
1,750
$
1,005
Capital expenditures
(105
)
(106
)
Free cash flows
$
1,645
$
899
About Non-GAAP Financial Measures
To provide investors and others with additional information
regarding VMware’s results, VMware has disclosed in this earnings
release the following non-GAAP financial measures: non-GAAP
operating income, non-GAAP operating margin, non-GAAP net income,
non-GAAP net income per diluted share and free cash flow. VMware
has provided a reconciliation of each non-GAAP financial measure
used in this earnings release to the most directly comparable GAAP
financial measure. Other than free cash flow, 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,
certain litigation and other contingencies, 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 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.
- Certain litigation and other contingencies. VMware, from time
to time, may incur charges or benefits that are outside of the
ordinary course of VMware’s business related to litigation and
other contingencies. VMware believes it is useful to exclude such
charges or benefits because it does not consider such amounts to be
part of the ongoing operation of VMware’s business and because of
the singular nature of the claims underlying such matters.
- Tax adjustment. Non-GAAP financial information for the quarter
is adjusted for a tax rate equal to VMware’s annual estimated tax
rate on non-GAAP income. This rate is based on VMware’s estimated
annual GAAP income tax rate forecast, adjusted to account for items
excluded from GAAP income in calculating VMware’s non-GAAP income
as well as significant tax adjustments. VMware’s estimated tax rate
on non-GAAP income is determined annually and may be adjusted
during the year to take into account events or trends that VMware
management believes materially impact the estimated annual rate
including, but not limited to, significant changes resulting from
tax legislation, material changes in the geographic mix of revenue
and expenses, changes to our corporate structure and other
significant events. Due to the differences in the tax treatment of
items excluded from non-GAAP earnings, as well as the methodology
applied to VMware’s estimated annual tax rates as described above,
the estimated tax rate on non-GAAP income may differ from the GAAP
tax rate and from VMware’s actual tax liabilities.
Additionally, VMware’s management believes that the non-GAAP
financial measure of free cash flow is meaningful to investors
because management reviews cash flow generated from operations
after taking into consideration capital expenditures due to the
fact that these expenditures are considered to be a necessary
component of ongoing operations.
The use of non-GAAP financial measures has certain limitations
because they do not reflect all items of income and expense that
affect VMware’s operations. Specifically, in the case of
stock-based compensation, if VMware did not pay out a portion of
its compensation in the form of stock-based compensation and
related employer payroll taxes, the cash salary expense included in
operating expenses would be higher, which would affect VMware’s
cash position. VMware compensates for these limitations by
reconciling the non-GAAP financial measures to the most comparable
GAAP financial measures. These non-GAAP financial measures should
be considered in addition to, not as a substitute for or in
isolation from, measures prepared in accordance with GAAP and
should not be considered measures of VMware’s liquidity. Further,
these non-GAAP measures may differ from the non-GAAP information
used by other companies, including peer companies, and therefore
comparability may be limited.
Management encourages investors and others to review VMware’s
financial information in its entirety and not rely on a single
financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230601005643/en/
Jagroop Bal VMware Investor Relations ir@vmware.com
Doreen Ruyak VMware Global PR druyak@vmware.com 202-744-9767
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