VMware Reports Fiscal Year 2021 First Quarter Results

28 May VMware Reports Fiscal Year 2021 First Quarter Results

Posted at 20:15h in by fiberguide 0 Comments

Total revenue growth of 12% year-over-year

Subscription and SaaS revenue growth of 39% year-over-year
PALO ALTO, Calif.–(BUSINESS WIRE)–VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the first quarter of fiscal 2021:

Revenue for the first quarter was $2.73 billion, an increase of 12% from the first quarter of fiscal 2020.

The combination of subscription and SaaS and license revenue was $1.23 billion, an increase of 17% from the first quarter of fiscal 2020.

Subscription and SaaS revenue for the first quarter was $572 million, an increase of 39% year-over-year.

GAAP net income for the first quarter was $386 million, or $0.92 per diluted share, compared to $380 million, or $0.89 per diluted share, for the first quarter of fiscal 2020. Non-GAAP net income for the first quarter was $640 million, or $1.52 per diluted share, up 21% per diluted share compared to $535 million, or $1.25 per diluted share, for the first quarter of fiscal 2020.

GAAP operating income for the first quarter was $418 million, an increase of 18% from the first quarter of fiscal 2020. Non-GAAP operating income for the first quarter was $818 million, an increase of 25% from the first quarter of fiscal 2020.

Operating cash flow for the first quarter was $1.37 billion. Free cash flow for the first quarter was $1.29 billion.

RPO for Q1 totalled $10.1 billion, up 19% year-over-year; total revenue plus sequential change in total unearned revenue grew 6% year-over-year.

The combination of subscription and SaaS and license revenue plus sequential change in unearned subscription and SaaS and license revenue grew 16% year-over-year.

“In these unprecedented times, we delivered solid performance and strong execution in Q1 FY21,” said Pat Gelsinger, VMware CEO. “Ensuring the safety and well-being of our employees and addressing our customers’ rapidly changing needs have been our top priorities. We serve as an essential digital service to those customers who provide essential services, helping them scale efficiently and more securely.”

“Q1 demonstrated our ability to drive a positive ROI and enhanced resilience for customers undergoing digital transformations,” said Zane Rowe, executive vice president and CFO, VMware. “The quarter also highlighted VMware’s strengths and opportunities in a challenging economic environment.”

Business Highlights & Strategic Announcements

VMware launched VMware Tanzu, a portfolio of products and services that enable enterprises to deliver better software faster. Customers can use the VMware Tanzu suite to automate the modern app lifecycle, run Kubernetes across clouds, and unify and optimize multi-cloud operations.

VMware acquired Octarine, which will bring intrinsic security to containerized applications running in Kubernetes and build security capabilities into the fabric of the existing IT and DevOps ecosystems.

VMware made major updates to its core portfolio across VMware Cloud Foundation, the largest evolution of vSphere in a decade, NSX-T, vSAN and vRealize Operations Cloud, continuing to bring innovation to its leading infrastructure stack that powers on-premises environments and public clouds across the world.

VMware introduced new security offerings, including new VMware Advanced Security for Cloud Foundation, which will enable customers to replace legacy security solutions and deliver unified protection across private and public clouds.

Deutsche Telekom and VMware announced that they are collaborating on an open and intelligent virtual RAN platform, based on O-RAN standards, to bring agility to radio access networks (RANs) for both existing LTE and future 5G networks.

VMware launched VMware Partner Connect, the new, simplified and flexible program that empowers partners with flexibility to meet customers’ needs, making VMware technologies and services opportunities more accessible.

VMware was positioned as a leader in the IDC MarketScape: Worldwide Virtual Client Computing 2019-2020 Vendor Assessment, which evaluated 10 virtual client computing (VCC) vendors.1

The company will host a conference call today at 1:30 p.m. PT/ 4:30 p.m. ET to review financial results and business outlook. A live web broadcast of the event will be available on the VMware investor relations website at http://ir.vmware.com. Slides will accompany the web broadcast. The replay of the webcast and slides will be available on the website for two months. In addition, six quarters of historical data for unearned revenue will also be made available at http://ir.vmware.com in conjunction with the conference call.

1“IDC MarketScape: Worldwide Virtual Client Computing 2019-2020 Vendor Assessment” (Doc #US45752419, January 2020).

About VMware

VMware software powers the world’s complex digital infrastructure. The company’s cloud, networking and security, and digital workspace offerings provide a dynamic and efficient digital foundation to customers globally, aided by an extensive ecosystem of partners. Headquartered in Palo Alto, California, VMware is committed to being a force for good, from its breakthrough innovations to its global impact. For more information, please visit https://www.vmware.com/company.html.

Additional Information

VMware’s website is located at www.vmware.com, and its investor relations website is located at http://ir.vmware.com. VMware’s goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about VMware, all of which is made available free of charge. The additional information includes: materials that VMware files with the SEC; announcements of investor conferences, speeches and events at which its executives talk about its products, services and competitive strategies; webcasts of its quarterly earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on its financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; other news, blogs and announcements that VMware may post from time to time that investors may find useful or interesting; and opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.

VMware, Tanzu, VMware Cloud Foundation, vSphere, vRealize, NSX-T, VMware Advanced Security and Carbon Black are registered trademarks or trademarks of VMware, Inc. or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding expected benefits to customers of VMware’s acquisition of Octarine, collaboration with Deutsche Telecom, as well as products, solutions and services, including, for example, VMware Tanzu, VMware Cloud Foundation, vSphere, vRealize Operations Cloud, NSX-T, vSAN, VMware Advanced Security for Cloud Foundation, VMware Carbon Black and VMware Partner Connect. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (1) the impact of the COVID-19 pandemic on our operations, financial condition, our customers, the business environment and the global and regional economies; (2) adverse changes in general economic or market conditions; (3) delays or reductions in consumer, government and information technology spending; (4) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization software and cloud, end user and mobile computing, and security industries, as well as new product and marketing initiatives by VMware’s competitors; (5) the ability to successfully integrate into VMware acquired companies and assets and smoothly transition services related to divested assets from VMware; (6) rapid technological changes in the virtualization software and cloud, end user, security and mobile computing industries; (7) VMware’s customers’ ability to transition to new products, platforms, services, solutions and computing strategies in such areas as containerization, modern applications, intrinsic security and networking, cloud, digital workspaces, virtualization and the software defined data center, and the uncertainty of their acceptance of emerging technology; (8) VMware’s ability to enter into, maintain and extend strategically effective partnerships and alliances; (9) the continued risk of litigation and regulatory actions; (10) VMware’s ability to protect its proprietary technology; (11) changes to product and service development timelines; (12) VMware’s relationship with Dell Technologies and Dell’s ability to control matters requiring stockholder approval, including the election of VMware’s board members and matters relating to Dell’s investment in VMware; (13) VMware’s ability to attract and retain highly qualified employees; (14) the ability of VMware to utilize our relationship with Dell to leverage go-to-market and product development activities; (15) risks associated with cyber-attacks, information security and data privacy; (16) disruptions resulting from key management changes; (17) risks associated with international sales such as fluctuating currency exchange rates and increased trade barriers; (18) changes in VMware’s financial condition; (19) geopolitical changes such as Brexit and increased tariffs and trade barriers that could adversely impact our non-U.S. sales; and (20) other business effects, including those related to industry, market, economic, political, regulatory and global health conditions. These forward-looking statements are made as of the date of this press release, are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware’s most recent reports on Form 10-K and Form 10-Q and current reports on Form 8- K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

VMware, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in millions, except per share amounts, and shares in thousands)

(unaudited)

Three Months Ended

May 1,

May 3,

2020

2019

Revenue:

License

660

646

Subscription and SaaS

572

411

Services

1,502

1,393

Total revenue

2,734

2,450

Operating expenses(1):

Cost of license revenue

Cost of subscription and SaaS revenue

Cost of services revenue

318

299

Research and development

665

590

Sales and marketing

917

868

General and administrative

246

209

Realignment and loss on disposition

—

Operating income

418

354

Investment income

Interest expense

(49

)

(34

)

Other income (expense), net

)

Income before income tax

368

351

Income tax benefit

(18

)

(14

)

Net income

386

365

Less: Net loss attributable to non-controlling interests

—

(15

)

Net income attributable to VMware, Inc.

386

380

Net income per weighted-average share attributable to VMware, Inc. common stockholders, basic for Classes A and B

0.92

0.91

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B

0.92

0.89

Weighted-average shares, basic for Classes A and B

418,383

417,636

Weighted-average shares, diluted for Classes A and B

421,513

426,697

__________

(1) Includes stock-based compensation as follows:

Cost of subscription and SaaS revenue

Cost of services revenue

Research and development

125

102

Sales and marketing

General and administrative

VMware, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in millions, except per share amounts, and shares in thousands)

(unaudited)

May 1,

January 31,

2020

ASSETS

Current assets:

Cash and cash equivalents

5,946

2,915

Accounts receivable, net of allowance for doubtful accounts of $6 and $7

1,535

1,883

Due from related parties, net

767

1,457

Other current assets

457

436

Total current assets

8,705

6,691

Property and equipment, net

1,292

1,280

Other assets

2,328

2,266

Deferred tax assets

5,658

5,556

Intangible assets, net

1,106

1,172

Goodwill

9,353

9,329

Total assets

28,442

26,294

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

195

208

Accrued expenses and other

1,922

2,151

Current portion of long-term debt and other borrowings

2,748

2,747

Unearned revenue

5,182

5,218

Total current liabilities

10,047

10,324

Note payable to Dell

270

Long-term debt

4,712

2,731

Unearned revenue

4,036

4,050

Income tax payable

816

817

Operating lease liabilities

787

746

Other liabilities

346

347

Total liabilities

21,014

19,285

Contingencies

Stockholders’ equity:

Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 112,068 and 110,484 shares

Class B convertible common stock, par value $0.01; authorized 1,000,000 shares; issued and outstanding 307,222 shares

Additional paid-in capital

2,047

2,000

Accumulated other comprehensive loss

(18

)

Retained earnings

5,395

5,009

Total stockholders’ equity

7,428

7,009

Total liabilities and stockholders’ equity

28,442

26,294

VMware, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

Three Months Ended

May 1,

May 3,

2020

2019

Operating activities:

Net income

386

365

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

244

201

Stock-based compensation

272

216

Deferred income taxes, net

(98

)

(18

)

Unrealized (gain) loss on equity securities, net

)

(Gain) loss on disposition of assets, revaluation and impairment, net

)

Other

)

Changes in assets and liabilities, net of acquisitions:

Accounts receivable

352

438

Other current assets and other assets

(171

)

(125

)

Due to/from related parties, net

690

614

Accounts payable

(10

)

Accrued expenses and other liabilities

(249

)

(356

)

Income taxes payable

(45

)

Unearned revenue

(53

)

Net cash provided by operating activities

1,374

1,395

Investing activities:

Additions to property and equipment

(87

)

(73

)

Purchases of strategic investments

)

—

Proceeds from disposition of assets

Business combinations, net of cash acquired, and purchases of intangible assets

(38

)

(45

)

Net cash paid on disposition of a business

—

)

Net cash used in investing activities

(126

)

(100

)

Financing activities:

Proceeds from issuance of common stock

106

134

Net proceeds from issuance of long-term debt

1,984

—

Repurchase of common stock

(181

)

(591

)

Shares repurchased for tax withholdings on vesting of restricted stock

(115

)

(204

)

Principal payments on finance lease obligations

)

—

Net cash provided by (used in) financing activities

1,793

(661

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

)

—

Net increase in cash, cash equivalents and restricted cash

3,040

634

Cash, cash equivalents and restricted cash at beginning of the period

3,031

3,596

Cash, cash equivalents and restricted cash at end of the period

6,071

4,230

Supplemental disclosures of cash flow information:

Cash paid for interest

Cash paid for taxes, net

Non-cash items:

Changes in capital additions, accrued but not paid

)

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 1,

May 3,

2020

2019

Total revenue, as reported

2,734

2,450

Sequential change in unearned revenue(1)

(50

)

Total revenue plus sequential change in unearned revenue

2,684

2,539

Change (%) over prior year, as reported

Growth in License and Subscription and SaaS Revenue Plus Sequential Change in Unearned License and Subscription and SaaS Revenue

Three Months Ended

May 1,

May 3,

2020

2019

Total license and subscription and SaaS revenue, as reported

1,232

1,057

Sequential change in unearned license and subscription and SaaS revenue

Total license and subscription and SaaS revenue plus sequential change in unearned license and subscription and SaaS revenue

1,273

1,098

Change (%) over prior year, as reported

__________

(1) Sequential change in unearned revenue 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.

VMware, Inc.

SUPPLEMENTAL UNEARNED REVENUE SCHEDULE

(in millions)

(unaudited)

May 1,

January 31,

November 1,

August 2,

May 3,

February 1,

2020

2019

Unearned revenue as reported:

License

Subscription and SaaS

1,579

1,534

1,199

976

953

916

Services

Software maintenance

6,611

6,700

6,106

6,042

5,754

5,741

Professional services

1,013

1,015

893

851

802

767

Total unearned revenue

9,218

9,268

8,217

7,888

7,528

7,439

VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA

For the Three Months Ended May 1, 2020

(amounts in millions, except per share amounts, and shares in thousands)

(unaudited)

GAAP

Stock-Based
Compensation

Employer
Payroll Taxes
on Employee
Stock
Transactions

Intangible
Amortization

Realignment
Charges

Acquisition,
Disposition
and Other
Items

Tax
Adjustment(1)

Non-GAAP
As Adjusted(2)

Operating expenses:

Cost of license revenue

—

(42

)

—

Cost of subscription and SaaS revenue

)

—

(12

)

—

Cost of services revenue

318

(22

)

—

)

—

295

Research and development

665

(125

)

—

540

Sales and marketing

917

(72

)

(25

)

—

)

—

816

General and administrative

246

(49

)

—

(39

)

—

157

Realignment and loss on disposition

—

)

—

Operating income

418

272

—

818

Operating margin(2)

15.3

10.0

0.1

2.9

0.1

1.5

—

29.9

Other income (expense), net(3)

)

—

)

—

(12

)

Income before income tax

368

272

—

762

Income tax provision (benefit)

(18

)

140

122

Tax rate(2)

N/A

16.0

Net income

386

272

(140

)

640

Net income per weighted-average share, diluted for Classes A and B(2)(4)

0.92

0.65

0.01

0.19

0.01

0.08

(0.33

)

1.52

__________

N/A – GAAP tax rate was not applicable due to the income tax benefit recorded for the three months ended May 1, 2020.

(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 equity investments, whether realized or unrealized.

(4) Calculated based upon 421,513 diluted weighted-average shares for Classes A and B.

VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA

For the Three Months Ended May 3, 2019

(amounts in millions, except per share amounts, and shares in thousands)

(unaudited)

GAAP

Stock-Based
Compensation

Employer
Payroll Taxes
on Employee
Stock
Transactions

Intangible
Amortization

Acquisition,
Disposition
and Other
Items

Tax
Adjustment(1)

Non-GAAP
As Adjusted(2)

Operating expenses:

Cost of license revenue

—

(20

)

—

Cost of subscription and SaaS revenue

)

—

(26

)

—

Cost of services revenue

299

(18

)

—

)

—

279

Research and development

590

(102

)

—

489

Sales and marketing

868

(63

)

(22

)

—

781

General and administrative

209

(30

)

—

(13

)

—

166

Realignment and loss on disposition

—

Operating income

354

216

—

654

Operating margin(2)

14.4

8.8

0.1

2.8

0.5

—

26.7

Other income (expense), net(3)

—

)

—

Income before income tax

351

216

—

650

Income tax provision (benefit)

(14

)

118

104

Tax rate(2)

N/A

16.0

Net income

365

216

(118

)

546

Less: Net income (loss) attributable to non-controlling interests

(15

)

—

)

Net income attributable to VMware, Inc.

380

194

(113

)

535

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(2)(4)

0.89

0.45

—

0.14

0.03

(0.27

)

1.25

__________

N/A – GAAP tax rate was not applicable due to the income tax benefit recorded for the three months ended May 3, 2019.

(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 equity investments, whether realized or unrealized.

(4) Calculated based upon 426,697 diluted weighted-average shares for Classes A and B.

Contacts
Paul Ziots
VMware Investor Relations
[email protected]

Michael Thacker
VMware Global PR
[email protected]
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VMware Reports Fiscal Year 2021 First Quarter Results

28 May VMware Reports Fiscal Year 2021 First Quarter Results

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