(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
(Address of Principal Executive Offices) | (Zip code) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Emerging growth company |
VMware, Inc. | |||||||||||
Date: August 31, 2023 | By: | /s/ Karen Dykstra | |||||||||
Karen Dykstra Chief Financial Officer and Executive Vice President (Principal Financial Officer) | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) | ||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
August 4, | July 29, | August 4, | July 29, | |||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||
License | $ | 619 | $ | 796 | $ | 1,136 | $ | 1,369 | ||||||||||||||||||
Subscription and SaaS | 1,259 | 943 | 2,476 | 1,842 | ||||||||||||||||||||||
Services | 1,530 | 1,597 | 3,073 | 3,213 | ||||||||||||||||||||||
Total revenue | 3,408 | 3,336 | 6,685 | 6,424 | ||||||||||||||||||||||
Operating expenses(1): | ||||||||||||||||||||||||||
Cost of license revenue | 37 | 39 | 76 | 74 | ||||||||||||||||||||||
Cost of subscription and SaaS revenue | 203 | 196 | 411 | 387 | ||||||||||||||||||||||
Cost of services revenue | 399 | 369 | 796 | 744 | ||||||||||||||||||||||
Research and development | 835 | 803 | 1,682 | 1,577 | ||||||||||||||||||||||
Sales and marketing | 1,100 | 1,080 | 2,205 | 2,134 | ||||||||||||||||||||||
General and administrative | 287 | 276 | 660 | 527 | ||||||||||||||||||||||
Realignment | — | 7 | — | 7 | ||||||||||||||||||||||
Operating income | 547 | 566 | 855 | 974 | ||||||||||||||||||||||
Investment income | 74 | 7 | 138 | 8 | ||||||||||||||||||||||
Interest expense | (79) | (74) | (159) | (145) | ||||||||||||||||||||||
Other income (expense), net | 19 | (20) | 26 | (30) | ||||||||||||||||||||||
Income before income tax | 561 | 479 | 860 | 807 | ||||||||||||||||||||||
Income tax provision | 84 | 132 | 159 | 218 | ||||||||||||||||||||||
Net income | $ | 477 | $ | 347 | $ | 701 | $ | 589 | ||||||||||||||||||
Net income per weighted-average share, basic | $ | 1.11 | $ | 0.82 | $ | 1.63 | $ | 1.40 | ||||||||||||||||||
Net income per weighted-average share, diluted | $ | 1.10 | $ | 0.82 | $ | 1.62 | $ | 1.39 | ||||||||||||||||||
Weighted-average shares, basic | 430,395 | 422,002 | 429,290 | 421,294 | ||||||||||||||||||||||
Weighted-average shares, diluted | 434,090 | 424,125 | 432,839 | 423,561 | ||||||||||||||||||||||
__________ | ||||||||||||||||||||||||||
(1) Includes stock-based compensation as follows: | ||||||||||||||||||||||||||
Cost of license revenue | $ | — | $ | — | $ | 1 | $ | 1 | ||||||||||||||||||
Cost of subscription and SaaS revenue | 6 | 6 | 13 | 11 | ||||||||||||||||||||||
Cost of services revenue | 23 | 25 | 45 | 48 | ||||||||||||||||||||||
Research and development | 146 | 146 | 293 | 278 | ||||||||||||||||||||||
Sales and marketing | 88 | 93 | 166 | 174 | ||||||||||||||||||||||
General and administrative | 47 | 41 | 81 | 81 | ||||||||||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
(amounts in millions, except per share amounts, and shares in thousands) | |||||||||||
(unaudited) | |||||||||||
August 4, | February 3, | ||||||||||
2023 | 2023 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 6,801 | $ | 5,100 | |||||||
Accounts receivable, net of allowance of $10 and $9 | 2,432 | 2,510 | |||||||||
Due from related parties | 1,267 | 2,078 | |||||||||
Other current assets | 519 | 543 | |||||||||
Total current assets | 11,019 | 10,231 | |||||||||
Property and equipment, net | 1,644 | 1,623 | |||||||||
Deferred tax assets | 6,402 | 6,157 | |||||||||
Intangible assets, net | 368 | 478 | |||||||||
Goodwill | 9,598 | 9,598 | |||||||||
Due from related parties | 267 | 208 | |||||||||
Other assets | 2,901 | 2,942 | |||||||||
Total assets | $ | 32,199 | $ | 31,237 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 217 | $ | 267 | |||||||
Accrued expenses and other | 2,358 | 2,568 | |||||||||
Customer deposits | 2,017 | 1,087 | |||||||||
Current portion of long-term debt | 1,000 | 1,000 | |||||||||
Unearned revenue | 6,739 | 7,079 | |||||||||
Due to related parties | 404 | 390 | |||||||||
Total current liabilities | 12,735 | 12,391 | |||||||||
Long-term debt | 9,449 | 9,440 | |||||||||
Unearned revenue | 5,351 | 5,664 | |||||||||
Income tax payable | 381 | 287 | |||||||||
Operating lease liabilities | 785 | 845 | |||||||||
Due to related parties | 504 | 648 | |||||||||
Other liabilities | 447 | 428 | |||||||||
Total liabilities | 29,652 | 29,703 | |||||||||
Contingencies | |||||||||||
Stockholders’ equity: | |||||||||||
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 431,379 and 426,741 shares | 4 | 4 | |||||||||
Additional paid-in capital | 1,409 | 1,095 | |||||||||
Accumulated other comprehensive loss | (6) | (4) | |||||||||
Retained earnings | 1,140 | 439 | |||||||||
Total stockholders’ equity | 2,547 | 1,534 | |||||||||
Total liabilities and stockholders’ equity | $ | 32,199 | $ | 31,237 | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Operating activities: | |||||||||||||||||||||||
Net income | $ | 477 | $ | 347 | $ | 701 | $ | 589 | |||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||||
Depreciation and amortization | 336 | 302 | 666 | 590 | |||||||||||||||||||
Stock-based compensation | 310 | 311 | 599 | 593 | |||||||||||||||||||
Deferred income taxes, net | (150) | (37) | (237) | (80) | |||||||||||||||||||
(Gain) loss on equity securities and disposition of assets, net | 3 | (3) | 4 | (12) | |||||||||||||||||||
Other | — | — | 6 | 3 | |||||||||||||||||||
Changes in assets and liabilities, net of acquisitions: | |||||||||||||||||||||||
Accounts receivable | (600) | (453) | 72 | 222 | |||||||||||||||||||
Other current assets and other assets | (188) | (175) | (291) | (418) | |||||||||||||||||||
Due from related parties | (667) | (621) | 752 | 180 | |||||||||||||||||||
Accounts payable | (9) | (3) | (49) | (31) | |||||||||||||||||||
Accrued expenses, customer deposits and other liabilities | 1,234 | 345 | 717 | (319) | |||||||||||||||||||
Income taxes payable | (69) | 41 | 37 | 114 | |||||||||||||||||||
Unearned revenue | (114) | 366 | (653) | 9 | |||||||||||||||||||
Due to related parties | (119) | (23) | (130) | (38) | |||||||||||||||||||
Net cash provided by operating activities | 444 | 397 | 2,194 | 1,402 | |||||||||||||||||||
Investing activities: | |||||||||||||||||||||||
Additions to property and equipment | (94) | (113) | (199) | (219) | |||||||||||||||||||
Sales of investments in equity securities | — | — | — | 20 | |||||||||||||||||||
Purchases of strategic investments | (3) | — | (3) | (8) | |||||||||||||||||||
Proceeds from disposition of assets | 10 | 84 | 10 | 90 | |||||||||||||||||||
Business combinations, net of cash acquired, and purchases of intangible assets | — | (1) | (8) | (4) | |||||||||||||||||||
Net cash used in investing activities | (87) | (30) | (200) | (121) | |||||||||||||||||||
Financing activities: | |||||||||||||||||||||||
Proceeds from issuance of common stock | 4 | 5 | 5 | 124 | |||||||||||||||||||
Repayment of term loan | — | (750) | — | (1,500) | |||||||||||||||||||
Repurchase of common stock | — | — | — | (89) | |||||||||||||||||||
Shares repurchased for tax withholdings on vesting of restricted stock | (112) | (111) | (300) | (205) | |||||||||||||||||||
Principal payments on finance lease obligations | (1) | (1) | (3) | (2) | |||||||||||||||||||
Net cash used in financing activities | (109) | (857) | (298) | (1,672) | |||||||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 248 | (490) | 1,696 | (391) | |||||||||||||||||||
Cash, cash equivalents and restricted cash at beginning of the period | 6,575 | 3,762 | 5,127 | 3,663 | |||||||||||||||||||
Cash, cash equivalents and restricted cash at end of the period | $ | 6,823 | $ | 3,272 | $ | 6,823 | $ | 3,272 | |||||||||||||||
Supplemental disclosures of cash flow information: | |||||||||||||||||||||||
Cash paid for interest | $ | 68 | $ | 59 | $ | 154 | $ | 140 | |||||||||||||||
Cash paid for taxes, net | 353 | 114 | 416 | 184 | |||||||||||||||||||
Non-cash items: | |||||||||||||||||||||||
Changes in capital additions, accrued but not paid | $ | (3) | $ | 16 | $ | (12) | $ | 9 | |||||||||||||||
GROWTH IN REVENUE PLUS SEQUENTIAL CHANGE IN UNEARNED REVENUE | |||||||||||
(in millions) | |||||||||||
(unaudited) | |||||||||||
Growth in Total Revenue Plus Sequential Change in Unearned Revenue | |||||||||||
Three Months Ended | |||||||||||
August 4, | July 29, | ||||||||||
2023 | 2022 | ||||||||||
Total revenue, as reported | $ | 3,408 | $ | 3,336 | |||||||
Sequential change in unearned revenue(1) | (115) | 365 | |||||||||
Total revenue plus sequential change in unearned revenue | $ | 3,293 | $ | 3,701 | |||||||
Change (%) over prior year, as reported | (11) | % | |||||||||
Growth in Subscription and SaaS Revenue Plus Sequential Change in Unearned Subscription and SaaS Revenue | |||||||||||
Three Months Ended | |||||||||||
August 4, | July 29, | ||||||||||
2023 | 2022 | ||||||||||
Subscription and SaaS revenue, as reported | $ | 1,259 | $ | 943 | |||||||
Sequential change in unearned subscription and SaaS revenue(2) | 102 | 281 | |||||||||
Subscription and SaaS revenue plus sequential change in unearned subscription and SaaS revenue | $ | 1,361 | $ | 1,224 | |||||||
Change (%) over prior year, as reported | 11 | % | |||||||||
__________ | |||||||||||
(1) Consists of the change in total unearned revenue from the preceding quarter. Total unearned revenue consists of current and non-current unearned revenue amounts presented in the condensed consolidated balance sheets. | |||||||||||
(2) Consists of the change in unearned subscription and SaaS revenue from the preceding quarter. | |||||||||||
REMAINING PERFORMANCE OBLIGATIONS | |||||||||||
(in millions) | |||||||||||
(unaudited) | |||||||||||
Growth in Remaining Performance Obligations | |||||||||||
August 4, | July 29, | ||||||||||
2023 | 2022 | ||||||||||
Remaining performance obligations(3) | $ | 12,875 | $ | 12,103 | |||||||
Change (%) over prior year | 6 | % | |||||||||
Remaining performance obligations, current(4) | $ | 7,019 | $ | 6,767 | |||||||
Change (%) over prior year | 4 | % | |||||||||
__________ | |||||||||||
(3) Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period. | |||||||||||
(4) Current remaining performance obligations represent the amount expected to be recognized as revenue over the next twelve months. |
SUPPLEMENTAL UNEARNED REVENUE SCHEDULE | |||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||
August 4, | May 5, | February 3, | October 28, | July 29, | April 29, | ||||||||||||||||||||||||||||||
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | ||||||||||||||||||||||||||||||
Unearned revenue as reported: | |||||||||||||||||||||||||||||||||||
License | $ | 11 | $ | 17 | $ | 21 | $ | 28 | $ | 20 | $ | 20 | |||||||||||||||||||||||
Subscription and SaaS | 4,488 | 4,386 | 4,401 | 3,197 | 2,952 | 2,671 | |||||||||||||||||||||||||||||
Services | |||||||||||||||||||||||||||||||||||
Software maintenance | 6,095 | 6,348 | 6,805 | 6,636 | 6,903 | 6,877 | |||||||||||||||||||||||||||||
Professional services | 1,496 | 1,454 | 1,516 | 1,356 | 1,356 | 1,298 | |||||||||||||||||||||||||||||
Total unearned revenue | $ | 12,090 | $ | 12,205 | $ | 12,743 | $ | 11,217 | $ | 11,231 | $ | 10,866 | |||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended August 4, 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 | Tax Adjustment(1) | Non-GAAP As Adjusted(3) | |||||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||
Cost of license revenue | $ | 37 | — | — | (9) | — | — | $ | 28 | ||||||||||||||||||||||||||||||||
Cost of subscription and SaaS revenue | $ | 203 | (6) | — | (33) | (1) | — | $ | 163 | ||||||||||||||||||||||||||||||||
Cost of services revenue | $ | 399 | (23) | — | — | (9) | — | $ | 366 | ||||||||||||||||||||||||||||||||
Research and development | $ | 835 | (146) | (1) | (2) | (1) | — | $ | 685 | ||||||||||||||||||||||||||||||||
Sales and marketing | $ | 1,100 | (88) | (3) | (14) | (10) | — | $ | 986 | ||||||||||||||||||||||||||||||||
General and administrative | $ | 287 | (47) | — | — | (36) | — | $ | 203 | ||||||||||||||||||||||||||||||||
Operating income | $ | 547 | 310 | 4 | 58 | 57 | — | $ | 977 | ||||||||||||||||||||||||||||||||
Operating margin(3) | 16.0 | % | 9.1 | % | 0.1 | % | 1.7 | % | 1.7 | % | — | 28.7 | % | ||||||||||||||||||||||||||||
Other income (expense), net(4) | $ | 19 | — | — | — | 6 | — | $ | 25 | ||||||||||||||||||||||||||||||||
Income before income tax | $ | 561 | 310 | 4 | 58 | 63 | — | $ | 997 | ||||||||||||||||||||||||||||||||
Income tax provision | $ | 84 | 120 | $ | 205 | ||||||||||||||||||||||||||||||||||||
Tax rate(2)(3) | 15.0 | % | 20.5 | % | |||||||||||||||||||||||||||||||||||||
Net income | $ | 477 | 310 | 4 | 58 | 63 | (120) | $ | 792 | ||||||||||||||||||||||||||||||||
Net income per weighted-average share, diluted(3)(5) | $ | 1.10 | $ | 0.71 | $ | 0.01 | $ | 0.13 | $ | 0.15 | $ | (0.28) | $ | 1.83 | |||||||||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||||||||||||||
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | |||||||||||||||||||||||||||||||||||||||||
(2) Our annual effective tax rate is based upon, among other things, current tax law, including Internal Revenue Code Section 174 relating to research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. If in the future this provision is deferred, modified or repealed, our effective tax rate may fluctuate significantly in the quarter in which such change in law becomes effective. | |||||||||||||||||||||||||||||||||||||||||
(3) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. | |||||||||||||||||||||||||||||||||||||||||
(4) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. | |||||||||||||||||||||||||||||||||||||||||
(5) Calculated based upon 434,090 diluted weighted-average shares of common stock. | |||||||||||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months Ended August 4, 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 | $ | 76 | (1) | — | (18) | — | — | — | $ | 58 | |||||||||||||||||||||||||||||||||||||
Cost of subscription and SaaS revenue | $ | 411 | (13) | — | (66) | (1) | — | — | $ | 331 | |||||||||||||||||||||||||||||||||||||
Cost of services revenue | $ | 796 | (45) | (1) | — | (19) | — | — | $ | 732 | |||||||||||||||||||||||||||||||||||||
Research and development | $ | 1,682 | (293) | (1) | (5) | (1) | — | — | $ | 1,381 | |||||||||||||||||||||||||||||||||||||
Sales and marketing | $ | 2,205 | (166) | (5) | (29) | (21) | — | — | $ | 1,982 | |||||||||||||||||||||||||||||||||||||
General and administrative | $ | 660 | (81) | (1) | — | (89) | (85) | — | $ | 405 | |||||||||||||||||||||||||||||||||||||
Operating income | $ | 855 | 599 | 8 | 118 | 131 | 85 | — | $ | 1,796 | |||||||||||||||||||||||||||||||||||||
Operating margin(3) | 12.8 | % | 9.0 | % | 0.1 | % | 1.8 | % | 2.0 | % | 1.3 | % | — | 26.9 | % | ||||||||||||||||||||||||||||||||
Other income (expense), net(4) | $ | 26 | — | — | — | 6 | — | — | $ | 32 | |||||||||||||||||||||||||||||||||||||
Income before income tax | $ | 860 | 599 | 8 | 118 | 137 | 85 | — | $ | 1,807 | |||||||||||||||||||||||||||||||||||||
Income tax provision | $ | 159 | 211 | $ | 371 | ||||||||||||||||||||||||||||||||||||||||||
Tax rate(2)(3) | 18.5 | % | 20.5 | % | |||||||||||||||||||||||||||||||||||||||||||
Net income | $ | 701 | 599 | 8 | 118 | 137 | 85 | (211) | $ | 1,436 | |||||||||||||||||||||||||||||||||||||
Net income per weighted-average share, diluted(3)(5) | $ | 1.62 | $ | 1.38 | $ | 0.02 | $ | 0.27 | $ | 0.32 | $ | 0.20 | $ | (0.49) | $ | 3.32 | |||||||||||||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||||||||||||||||||||
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | |||||||||||||||||||||||||||||||||||||||||||||||
(2) Our annual effective tax rate is based upon, among other things, current tax law, including the impacts of Internal Revenue Code Section 174 relating to research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. If in the future this provision is deferred, modified or repealed, our effective tax rate may fluctuate significantly in the quarter in which such change in law becomes effective. | |||||||||||||||||||||||||||||||||||||||||||||||
(3) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. | |||||||||||||||||||||||||||||||||||||||||||||||
(4) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. | |||||||||||||||||||||||||||||||||||||||||||||||
(5) Calculated based upon 432,839 diluted weighted-average shares of common stock. | |||||||||||||||||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended July 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 | Realignment Charges | Acquisition, Disposition and Other Items | Tax Adjustment(1) | Non-GAAP As Adjusted(2) | ||||||||||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
Cost of license revenue | $ | 39 | — | — | (9) | — | — | — | $ | 30 | |||||||||||||||||||||||||||||||||||||
Cost of subscription and SaaS revenue | $ | 196 | (6) | — | (36) | — | — | — | $ | 154 | |||||||||||||||||||||||||||||||||||||
Cost of services revenue | $ | 369 | (25) | — | — | — | — | — | $ | 343 | |||||||||||||||||||||||||||||||||||||
Research and development | $ | 803 | (146) | (1) | (3) | — | — | — | $ | 654 | |||||||||||||||||||||||||||||||||||||
Sales and marketing | $ | 1,080 | (93) | (3) | (15) | — | — | — | $ | 971 | |||||||||||||||||||||||||||||||||||||
General and administrative | $ | 276 | (41) | — | — | — | (15) | — | $ | 219 | |||||||||||||||||||||||||||||||||||||
Realignment | $ | 7 | — | — | — | (7) | — | — | $ | — | |||||||||||||||||||||||||||||||||||||
Operating income | $ | 566 | 311 | 4 | 63 | 7 | 15 | — | $ | 965 | |||||||||||||||||||||||||||||||||||||
Operating margin(2) | 17.0 | % | 9.3 | % | 0.1 | % | 1.9 | % | 0.2 | % | 0.4 | % | — | 28.9 | % | ||||||||||||||||||||||||||||||||
Other income (expense), net(3) | $ | (20) | — | — | — | — | (3) | — | $ | (21) | |||||||||||||||||||||||||||||||||||||
Income before income tax | $ | 479 | 311 | 4 | 63 | 7 | 12 | — | $ | 877 | |||||||||||||||||||||||||||||||||||||
Income tax provision | $ | 132 | 47 | $ | 180 | ||||||||||||||||||||||||||||||||||||||||||
Tax rate(2) | 27.6 | % | 20.5 | % | |||||||||||||||||||||||||||||||||||||||||||
Net income | $ | 347 | 311 | 4 | 63 | 7 | 12 | (47) | $ | 697 | |||||||||||||||||||||||||||||||||||||
Net income per weighted-average share, diluted(2)(4) | $ | 0.82 | $ | 0.73 | $ | 0.01 | $ | 0.15 | $ | 0.02 | $ | 0.03 | $ | (0.11) | $ | 1.64 | |||||||||||||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||||||||||||||||||||
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | |||||||||||||||||||||||||||||||||||||||||||||||
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. | |||||||||||||||||||||||||||||||||||||||||||||||
(3) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. | |||||||||||||||||||||||||||||||||||||||||||||||
(4) Calculated based upon 424,125 diluted weighted-average shares of common stock. | |||||||||||||||||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months Ended July 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 | Realignment Charges | Acquisition, Disposition and Other Items | Tax Adjustment(1) | Non-GAAP As Adjusted(2) | ||||||||||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
Cost of license revenue | $ | 74 | (1) | — | (19) | — | — | — | $ | 54 | |||||||||||||||||||||||||||||||||||||
Cost of subscription and SaaS revenue | $ | 387 | (11) | — | (73) | — | — | — | $ | 303 | |||||||||||||||||||||||||||||||||||||
Cost of services revenue | $ | 744 | (48) | (1) | — | — | — | — | $ | 695 | |||||||||||||||||||||||||||||||||||||
Research and development | $ | 1,577 | (278) | (1) | (5) | — | — | — | $ | 1,293 | |||||||||||||||||||||||||||||||||||||
Sales and marketing | $ | 2,134 | (174) | (3) | (32) | — | — | — | $ | 1,925 | |||||||||||||||||||||||||||||||||||||
General and administrative | $ | 527 | (81) | (1) | — | — | (28) | — | $ | 417 | |||||||||||||||||||||||||||||||||||||
Realignment | $ | 7 | — | — | — | (7) | — | — | $ | — | |||||||||||||||||||||||||||||||||||||
Operating income | $ | 974 | 593 | 6 | 129 | 7 | 28 | — | $ | 1,737 | |||||||||||||||||||||||||||||||||||||
Operating margin(2) | 15.2 | % | 9.2 | % | 0.1 | % | 2.0 | % | 0.1 | % | 0.4 | % | — | 27.0 | % | ||||||||||||||||||||||||||||||||
Other income (expense), net(3) | $ | (30) | — | — | — | — | (12) | — | $ | (41) | |||||||||||||||||||||||||||||||||||||
Income before income tax | $ | 807 | 593 | 6 | 129 | 7 | 16 | — | $ | 1,559 | |||||||||||||||||||||||||||||||||||||
Income tax provision | $ | 218 | 101 | $ | 320 | ||||||||||||||||||||||||||||||||||||||||||
Tax rate(2) | 27.0 | % | 20.5 | % | |||||||||||||||||||||||||||||||||||||||||||
Net income | $ | 589 | 593 | 6 | 129 | 7 | 16 | (101) | $ | 1,239 | |||||||||||||||||||||||||||||||||||||
Net income per weighted-average share, diluted(2)(4) | $ | 1.39 | $ | 1.40 | $ | 0.01 | $ | 0.30 | $ | 0.02 | $ | 0.04 | $ | (0.24) | $ | 2.93 | |||||||||||||||||||||||||||||||
__________ | |||||||||||||||||||||||||||||||||||||||||||||||
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | |||||||||||||||||||||||||||||||||||||||||||||||
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. | |||||||||||||||||||||||||||||||||||||||||||||||
(3) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized. | |||||||||||||||||||||||||||||||||||||||||||||||
(4) Calculated based upon 423,561 diluted weighted-average shares for Classes A and B. | |||||||||||||||||||||||||||||||||||||||||||||||
REVENUE BY TYPE | ||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
August 4, | July 29, | August 4, | July 29, | |||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||
License | $ | 619 | $ | 796 | $ | 1,136 | $ | 1,369 | ||||||||||||||||||
Subscription and SaaS | 1,259 | 943 | 2,476 | 1,842 | ||||||||||||||||||||||
Services: | ||||||||||||||||||||||||||
Software maintenance | 1,222 | 1,299 | 2,456 | 2,609 | ||||||||||||||||||||||
Professional services | 308 | 298 | 617 | 604 | ||||||||||||||||||||||
Total services | 1,530 | 1,597 | 3,073 | 3,213 | ||||||||||||||||||||||
Total revenue | $ | 3,408 | $ | 3,336 | $ | 6,685 | $ | 6,424 | ||||||||||||||||||
Percentage of revenue: | ||||||||||||||||||||||||||
License | 18.2 | % | 23.9 | % | 17.0 | % | 21.3 | % | ||||||||||||||||||
Subscription and SaaS | 36.9 | % | 28.2 | % | 37.0 | % | 28.7 | % | ||||||||||||||||||
Services: | ||||||||||||||||||||||||||
Software maintenance | 35.8 | % | 38.9 | % | 36.7 | % | 40.6 | % | ||||||||||||||||||
Professional services | 9.1 | % | 9.0 | % | 9.3 | % | 9.4 | % | ||||||||||||||||||
Total services | 44.9 | % | 47.9 | % | 46.0 | % | 50.0 | % | ||||||||||||||||||
Total revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
REVENUE BY GEOGRAPHY | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
United States | $ | 1,621 | $ | 1,648 | $ | 3,176 | $ | 3,166 | |||||||||||||||
International | 1,787 | 1,688 | 3,509 | 3,258 | |||||||||||||||||||
Total revenue | $ | 3,408 | $ | 3,336 | $ | 6,685 | $ | 6,424 | |||||||||||||||
Percentage of revenue: | |||||||||||||||||||||||
United States | 47.6 | % | 49.4 | % | 47.5 | % | 49.3 | % | |||||||||||||||
International | 52.4 | % | 50.6 | % | 52.5 | % | 50.7 | % | |||||||||||||||
Total revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||||||||
TO FREE CASH FLOWS | |||||||||||||||||||||||
(A NON-GAAP FINANCIAL MEASURE) | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
GAAP cash flows from operating activities | $ | 444 | $ | 397 | $ | 2,194 | $ | 1,402 | |||||||||||||||
Capital expenditures | (94) | (113) | (199) | (219) | |||||||||||||||||||
Free cash flows | $ | 350 | $ | 284 | $ | 1,995 | $ | 1,183 | |||||||||||||||
Cover Page |
Aug. 31, 2023 |
---|---|
Cover [Abstract] | |
Document Type | 8-K |
Entity Emerging Growth Company | false |
Title of 12(b) Security | Class A common stock |
Written Communications | false |
Entity Address, Address Line One | 3401 Hillview Avenue |
Entity Incorporation, State or Country Code | DE |
Entity File Number | 001-33622 |
Entity Tax Identification Number | 94-3292913 |
Entity Address, City or Town | Palo Alto |
Entity Address, State or Province | CA |
Entity Address, Postal Zip Code | 94304 |
Soliciting Material | false |
Pre-commencement Tender Offer | false |
Pre-commencement Issuer Tender Offer | false |
Trading Symbol | VMW |
Security Exchange Name | NYSE |
Document Period End Date | Aug. 31, 2023 |
Entity Registrant Name | VMWARE, INC. |
City Area Code | 650 |
Local Phone Number | 427-5000 |
Entity Central Index Key | 0001124610 |
Amendment Flag | false |
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