Total Revenue growth of 11% year-over-year
Subscription and SaaS ARR for the third quarter was $3.31 billion, an increase of 25% year-over-year
PALO ALTO, Calif.--(BUSINESS WIRE)-- VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the third quarter of fiscal year 2022:
“We are pleased with our continued strong performance in Q3. This quarter, as we unveiled many new offerings at VMworld, we showcased how we are helping customers transform their businesses today and that our innovation engine is thriving,” said Raghu Raghuram, CEO, VMware. “Our mission is to be the trusted software foundation to accelerate our customers’ innovation without compromise. We are committed to helping organizations unlock the full potential of multi-cloud.”
“We continued healthy revenue growth and profitability in Q3, with Subscription and SaaS ARR increasing 25% year-over-year to $3.3 billion,” said Zane Rowe, executive vice president and CFO, VMware. “Our performance in Q3 reflects strong year-over-year growth in major product categories as we deliver compelling value to our customers.”
Business Highlights & Strategic Announcements
1 Forrester, The Forrester New Wave™: Zero Trust Network Access, Q3, 2021, August 24, 2021
2 Gartner, Magic Quadrant for Unified Endpoint Management Tools, 16 August 2021
3 Gartner, Magic Quadrant for WAN Edge Infrastructure, 20 September 2021
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Gartner and Magic Quadrant are registered trademarks and service marks of Gartner, Inc. and/or its affiliates and are used herein with permission. All rights reserved.
4 IDC, Worldwide Cloud System and Service Management Software Market Shares, 2021: Growth Continues for Top Vendors, #US48074121, September 2021
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 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 ir.vmware.com in conjunction with the conference call.
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.
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 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; 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, VMworld, and Tanzu 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, 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 of VMware’s strategy, collaborations, partnerships and offerings. 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 VMware’s operations, financial condition, VMware’s customers, the business environment and global and regional economies; (2) the ability of VMware to 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; (3) the effect of the spin-off from Dell Technologies (“Dell”) and changes in VMware’s and Dell’s commercial relationships and go-to-market and technology collaborations on VMware’s ability to maintain relationships with its customers, suppliers and on VMware’s operating results and business generally; (4) changes to VMware’s and Dell’s respective financial conditions and strategic directions that could adversely impact their commercial relationship and collaborations; (5) the continued risk of litigation and regulatory actions; (6) adverse changes in general economic or market conditions; (7) delays or reductions in consumer, government and information technology spending; (8) competitive factors, including but not limited to 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; (9) rapid technological changes in the virtualization software and cloud, end user, edge security and mobile computing and telecom industries; (10) 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; (11) VMware’s ability to enter into, maintain and extend strategically effective partnerships, collaborations and alliances; (12) VMware’s ability to protect its proprietary technology; (13) changes to product and services development timelines; (14) risks associated with cyber-attacks, information security and data privacy; (15) disruptions resulting from key management changes; (16) risks associated with international sales, such as fluctuating currency exchange rates and increased trade barriers; (17) changes in VMware’s financial condition; and (18) 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 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 |
| Nine Months Ended | ||||||||||||
|
| October 29, |
| October 30, |
| October 29, |
| October 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Revenue: |
|
|
|
|
|
|
|
| ||||||||
License |
| $ | 710 |
|
| $ | 639 |
|
| $ | 2,093 |
|
| $ | 2,019 |
|
Subscription and SaaS |
| 820 |
|
| 676 |
|
| 2,336 |
|
| 1,880 |
| ||||
Services |
| 1,658 |
|
| 1,549 |
|
| 4,891 |
|
| 4,574 |
| ||||
Total revenue |
| 3,188 |
|
| 2,864 |
|
| 9,320 |
|
| 8,473 |
| ||||
Operating expenses(1): |
|
|
|
|
|
|
|
| ||||||||
Cost of license revenue |
| 37 |
|
| 44 |
|
| 111 |
|
| 119 |
| ||||
Cost of subscription and SaaS revenue |
| 175 |
|
| 142 |
|
| 502 |
|
| 400 |
| ||||
Cost of services revenue |
| 362 |
|
| 330 |
|
| 1,051 |
|
| 969 |
| ||||
Research and development |
| 768 |
|
| 714 |
|
| 2,251 |
|
| 2,058 |
| ||||
Sales and marketing |
| 1,011 |
|
| 912 |
|
| 2,993 |
|
| 2,727 |
| ||||
General and administrative |
| 316 |
|
| 250 |
|
| 808 |
|
| 773 |
| ||||
Realignment |
| — |
|
| 44 |
|
| 1 |
|
| 47 |
| ||||
Operating income |
| 519 |
|
| 428 |
|
| 1,603 |
|
| 1,380 |
| ||||
Investment income |
| — |
|
| 1 |
|
| 1 |
|
| 7 |
| ||||
Interest expense |
| (74 | ) |
| (52 | ) |
| (173 | ) |
| (156 | ) | ||||
Other income (expense), net |
| 12 |
|
| 177 |
|
| (7 | ) |
| 186 |
| ||||
Income before income tax |
| 457 |
|
| 554 |
|
| 1,424 |
|
| 1,417 |
| ||||
Income tax provision |
| 59 |
|
| 120 |
|
| 190 |
|
| 150 |
| ||||
Net income |
| $ | 398 |
|
| $ | 434 |
|
| $ | 1,234 |
|
| $ | 1,267 |
|
Net income per weighted-average share, basic for Classes A and B |
| $ | 0.95 |
|
| $ | 1.03 |
|
| $ | 2.94 |
|
| $ | 3.02 |
|
Net income per weighted-average share, diluted for Classes A and B |
| $ | 0.94 |
|
| $ | 1.02 |
|
| $ | 2.92 |
|
| $ | 3.00 |
|
Weighted-average shares, basic for Classes A and B |
| 419,456 |
|
| 420,857 |
|
| 419,309 |
|
| 419,758 |
| ||||
Weighted-average shares, diluted for Classes A and B |
| 421,763 |
|
| 423,400 |
|
| 422,201 |
|
| 423,093 |
| ||||
__________ |
|
|
|
|
|
|
|
| ||||||||
(1) Includes stock-based compensation as follows: |
|
|
|
|
|
|
|
| ||||||||
Cost of license revenue |
| $ | — |
|
| $ | — |
|
| $ | 1 |
|
| $ | 1 |
|
Cost of subscription and SaaS revenue |
| 5 |
|
| 4 |
|
| 16 |
|
| 13 |
| ||||
Cost of services revenue |
| 21 |
|
| 25 |
|
| 70 |
|
| 74 |
| ||||
Research and development |
| 125 |
|
| 140 |
|
| 402 |
|
| 397 |
| ||||
Sales and marketing |
| 74 |
|
| 85 |
|
| 227 |
|
| 243 |
| ||||
General and administrative |
| 33 |
|
| 50 |
|
| 97 |
|
| 141 |
|
VMware, Inc. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(amounts in millions, except per share amounts, and shares in thousands) | |||||||
(unaudited) | |||||||
|
|
|
| ||||
| October 29, |
| January 29, | ||||
| 2021 |
| 2021 | ||||
ASSETS |
|
|
| ||||
Current assets: |
|
|
| ||||
Cash and cash equivalents | $ | 12,500 |
|
| $ | 4,692 |
|
Short-term investments | 33 |
|
| 23 |
| ||
Accounts receivable, net of allowance of $8 and $5 | 1,675 |
|
| 1,929 |
| ||
Due from related parties, net | 660 |
|
| 1,438 |
| ||
Other current assets | 577 |
|
| 530 |
| ||
Total current assets | 15,445 |
|
| 8,612 |
| ||
Property and equipment, net | 1,411 |
|
| 1,334 |
| ||
Other assets | 2,645 |
|
| 2,697 |
| ||
Deferred tax assets | 5,830 |
|
| 5,781 |
| ||
Intangible assets, net | 781 |
|
| 993 |
| ||
Goodwill | 9,598 |
|
| 9,599 |
| ||
Total assets | $ | 35,710 |
|
| $ | 29,016 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
| ||||
Current liabilities: |
|
|
| ||||
Accounts payable | $ | 229 |
|
| $ | 131 |
|
Accrued expenses and other | 2,273 |
|
| 2,382 |
| ||
Current portion of long-term debt | 1,498 |
|
| — |
| ||
Unearned revenue | 5,808 |
|
| 5,873 |
| ||
Total current liabilities | 9,808 |
|
| 8,386 |
| ||
Note payable to Dell | — |
|
| 270 |
| ||
Long-term debt | 9,170 |
|
| 4,717 |
| ||
Unearned revenue | 4,425 |
|
| 4,441 |
| ||
Income tax payable | 781 |
|
| 805 |
| ||
Operating lease liabilities | 885 |
|
| 891 |
| ||
Other liabilities | 416 |
|
| 455 |
| ||
Total liabilities | 25,485 |
|
| 19,965 |
| ||
Contingencies |
|
|
| ||||
Stockholders’ equity: |
|
|
| ||||
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 112,441 and 112,082 shares | 1 |
|
| 1 |
| ||
Class B convertible common stock, par value $0.01; authorized 1,000,000 shares; issued and outstanding 307,222 shares | 3 |
|
| 3 |
| ||
Additional paid-in capital | 1,923 |
|
| 1,985 |
| ||
Accumulated other comprehensive loss | (3 | ) |
| (5 | ) | ||
Retained earnings | 8,301 |
|
| 7,067 |
| ||
Total stockholders’ equity | 10,225 |
|
| 9,051 |
| ||
Total liabilities and stockholders’ equity | $ | 35,710 |
|
| $ | 29,016 |
|
VMware, Inc. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(in millions) | |||||||||||||||
(unaudited) | |||||||||||||||
|
|
|
|
|
|
|
| ||||||||
| Three Months Ended |
| Nine Months Ended | ||||||||||||
| October 29, |
| October 30, |
| October 29, |
| October 30, | ||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Operating activities: |
|
|
|
|
|
|
| ||||||||
Net income | $ | 398 |
|
| $ | 434 |
|
| $ | 1,234 |
|
| $ | 1,267 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
| ||||||||
Depreciation and amortization | 281 |
|
| 261 |
|
| 825 |
|
| 757 |
| ||||
Stock-based compensation | 258 |
|
| 304 |
|
| 813 |
|
| 869 |
| ||||
Deferred income taxes, net | (61 | ) |
| 20 |
|
| (92 | ) |
| (177 | ) | ||||
Unrealized (gain) loss on equity securities, net | (10 | ) |
| (190 | ) |
| 25 |
|
| (197 | ) | ||||
(Gain) Loss on disposition of assets, revaluation and impairment, net | 1 |
|
| 15 |
|
| 4 |
|
| 22 |
| ||||
Loss on extinguishment of debt | — |
|
| — |
|
| — |
|
| 8 |
| ||||
Other | 3 |
|
| 2 |
|
| 6 |
|
| — |
| ||||
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
| ||||||||
Accounts receivable | 41 |
|
| 181 |
|
| 247 |
|
| 102 |
| ||||
Other current assets and other assets | (77 | ) |
| (277 | ) |
| (467 | ) |
| (622 | ) | ||||
Due to/from related parties, net | 255 |
|
| 225 |
|
| 777 |
|
| 785 |
| ||||
Accounts payable | 17 |
|
| (15 | ) |
| 87 |
|
| (4 | ) | ||||
Accrued expenses and other liabilities | 37 |
|
| 186 |
|
| (181 | ) |
| 393 |
| ||||
Income taxes payable | 53 |
|
| (2 | ) |
| 24 |
|
| (53 | ) | ||||
Unearned revenue | (106 | ) |
| (152 | ) |
| (82 | ) |
| (65 | ) | ||||
Net cash provided by operating activities | 1,090 |
|
| 992 |
|
| 3,220 |
|
| 3,085 |
| ||||
Investing activities: |
|
|
|
|
|
|
| ||||||||
Additions to property and equipment | (106 | ) |
| (84 | ) |
| (263 | ) |
| (247 | ) | ||||
Sales of investments in equity securities | 34 |
|
| — |
|
| 68 |
|
| — |
| ||||
Purchases of strategic investments | (1 | ) |
| (5 | ) |
| (7 | ) |
| (16 | ) | ||||
Proceeds from disposition of assets | 4 |
|
| — |
|
| 5 |
|
| 21 |
| ||||
Business combinations, net of cash acquired, and purchases of intangible assets | — |
|
| (56 | ) |
| (15 | ) |
| (390 | ) | ||||
Net cash used in investing activities | (69 | ) |
| (145 | ) |
| (212 | ) |
| (632 | ) | ||||
Financing activities: |
|
|
|
|
|
|
| ||||||||
Proceeds from issuance of common stock | 128 |
|
| 122 |
|
| 267 |
|
| 264 |
| ||||
Net proceeds from issuance of long-term debt | 5,944 |
|
| — |
|
| 5,944 |
|
| 1,979 |
| ||||
Repayment of term loan | — |
|
| (1,500 | ) |
| — |
|
| (1,500 | ) | ||||
Repayment of current portion of long-term debt | — |
|
| — |
|
| — |
|
| (1,257 | ) | ||||
Repayment of note payable to Dell | (270 | ) |
| — |
|
| (270 | ) |
| — |
| ||||
Repurchase of common stock | (143 | ) |
| (255 | ) |
| (872 | ) |
| (566 | ) | ||||
Shares repurchased for tax withholdings on vesting of restricted stock | (48 | ) |
| (44 | ) |
| (291 | ) |
| (319 | ) | ||||
Payment to acquire non-controlling interests | — |
|
| — |
|
| — |
|
| (91 | ) | ||||
Principal payments on finance lease obligations | (1 | ) |
| (1 | ) |
| (3 | ) |
| (3 | ) | ||||
Net cash provided by (used in) financing activities | 5,610 |
|
| (1,678 | ) |
| 4,775 |
|
| (1,493 | ) | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 6,631 |
|
| (831 | ) |
| 7,783 |
|
| 960 |
| ||||
Cash, cash equivalents and restricted cash at beginning of the period | 5,922 |
|
| 4,822 |
|
| 4,770 |
|
| 3,031 |
| ||||
Cash, cash equivalents and restricted cash at end of the period | $ | 12,553 |
|
| $ | 3,991 |
|
| $ | 12,553 |
|
| $ | 3,991 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
| ||||||||
Cash paid for interest | $ | 49 |
|
| $ | 51 |
|
| $ | 146 |
|
| $ | 142 |
|
Cash paid for taxes, net | 73 |
|
| 111 |
|
| 276 |
|
| 393 |
| ||||
Non-cash items: |
|
|
|
|
|
|
| ||||||||
Changes in capital additions, accrued but not paid | $ | (2 | ) |
| $ | (11 | ) |
| $ | 9 |
|
| $ | (18 | ) |
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 | ||||||
| October 29, |
| October 30, | ||||
| 2021 |
| 2020 | ||||
Total revenue, as reported | $ | 3,188 |
|
| $ | 2,864 |
|
Sequential change in unearned revenue(1) | (105 | ) |
| (150 | ) | ||
Total revenue plus sequential change in unearned revenue | $ | 3,083 |
|
| $ | 2,714 |
|
Change (%) over prior year, as reported | 14 | % |
|
| |||
|
|
|
| ||||
Growth in License and Subscription and SaaS Revenue Plus Sequential Change in Unearned License and Subscription and SaaS Revenue | |||||||
|
|
|
| ||||
| Three Months Ended | ||||||
| October 29, |
| October 30, | ||||
| 2021 |
| 2020 | ||||
Total license and subscription and SaaS revenue, as reported | $ | 1,530 |
|
| $ | 1,315 |
|
Sequential change in unearned license and subscription and SaaS revenue(2) | 27 |
|
| (23 | ) | ||
Total license and subscription and SaaS revenue plus sequential change in unearned license and subscription and SaaS revenue | $ | 1,557 |
|
| $ | 1,292 |
|
Change (%) over prior year, as reported | 21 | % |
|
|
__________ | ||
(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 consolidated balance sheets. |
(2) |
| Consists of the change in unearned license and subscription and SaaS revenue from the preceding quarter. |
REMAINING PERFORMANCE OBLIGATIONS | |||||||
(in millions) | |||||||
(unaudited) | |||||||
| |||||||
| |||||||
Growth in Remaining Performance Obligations | |||||||
|
|
|
| ||||
| October 29, |
| October 30, | ||||
| 2021 |
| 2020 | ||||
Remaining performance obligations(3) | $ | 11,123 |
|
| $ | 10,173 |
|
Change (%) over prior year | 9 | % |
|
| |||
|
|
|
| ||||
Remaining performance obligations, current(4) | $ | 6,232 |
|
| $ | 5,631 |
|
Change (%) over prior year | 11 | % |
|
|
__________ | |||||
(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) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| October 29, |
| July 30, |
| April 30, |
| January 29, |
| October 30, |
| July 31, | ||||||||||||
| 2021 |
| 2021 |
| 2021 |
| 2021 |
| 2020 |
| 2020 | ||||||||||||
Unearned revenue as reported: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
License | $ | 17 |
|
| $ | 20 |
|
| $ | 16 |
|
| $ | 15 |
|
| $ | 11 |
|
| $ | 11 |
|
Subscription and SaaS | 2,238 |
|
| 2,208 |
|
| 2,064 |
|
| 1,998 |
|
| 1,596 |
|
| 1,619 |
| ||||||
Services |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Software maintenance | 6,773 |
|
| 6,916 |
|
| 6,957 |
|
| 7,092 |
|
| 6,574 |
|
| 6,696 |
| ||||||
Professional services | 1,205 |
|
| 1,194 |
|
| 1,163 |
|
| 1,209 |
|
| 1,054 |
|
| 1,059 |
| ||||||
Total unearned revenue | $ | 10,233 |
|
| $ | 10,338 |
|
| $ | 10,200 |
|
| $ | 10,314 |
|
| $ | 9,235 |
|
| $ | 9,385 |
|
VMware, Inc. | |||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||
For the Three Months Ended October 29, 2021 | |||||||||||||||||||||||||||
(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 | $ | 37 |
|
| — |
|
| — |
|
| (10 | ) |
| — |
|
| — |
|
| $ | 27 |
| |||||
Cost of subscription and SaaS revenue | $ | 175 |
|
| (5 | ) |
| — |
|
| (43 | ) |
| — |
|
| — |
|
| $ | 127 |
| |||||
Cost of services revenue | $ | 362 |
|
| (21 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| $ | 341 |
| |||||
Research and development | $ | 768 |
|
| (125 | ) |
| — |
|
| (2 | ) |
| — |
|
| — |
|
| $ | 641 |
| |||||
Sales and marketing | $ | 1,011 |
|
| (74 | ) |
| (1 | ) |
| (20 | ) |
| — |
|
| — |
|
| $ | 915 |
| |||||
General and administrative | $ | 316 |
|
| (33 | ) |
| — |
|
| — |
|
| (82 | ) |
| — |
|
| $ | 202 |
| |||||
Operating income | $ | 519 |
|
| 258 |
|
| 1 |
|
| 75 |
|
| 82 |
|
| — |
|
| $ | 935 |
| |||||
Operating margin(2) | 16.3 | % |
| 8.1 | % |
| — | % |
| 2.4 | % |
| 2.6 | % |
| — |
|
| 29.3 | % | |||||||
Other income (expense), net(3) | $ | 12 |
|
| — |
|
| — |
|
| — |
|
| (10 | ) |
| — |
|
| $ | 2 |
| |||||
Income before income tax | $ | 457 |
|
| 258 |
|
| 1 |
|
| 75 |
|
| 72 |
|
| — |
|
| $ | 863 |
| |||||
Income tax provision | $ | 59 |
|
|
|
|
|
|
|
|
|
| 79 |
|
| $ | 138 |
| |||||||||
Tax rate(2) | 12.9 | % |
|
|
|
|
|
|
|
|
|
|
| 16.0 | % | ||||||||||||
Net income | $ | 398 |
|
| 258 |
|
| 1 |
|
| 75 |
|
| 72 |
|
| (79 | ) |
| $ | 725 |
| |||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) | $ | 0.94 |
|
| $ | 0.61 |
|
| $ | — |
|
| $ | 0.18 |
|
| $ | 0.17 |
|
| $ | (0.19 | ) |
| $ | 1.72 |
|
__________ | |||||||||||||||
(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 421,763 diluted weighted-average shares for Classes A and B. |
VMware, Inc. | |||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||
For the Three Months Ended October 30, 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 | $ | 44 |
|
| — |
|
| — |
|
| (11 | ) |
| — |
|
| — |
|
| — |
|
| $ | 33 |
| ||||||
Cost of subscription and SaaS revenue | $ | 142 |
|
| (4 | ) |
| — |
|
| (48 | ) |
| — |
|
| — |
|
| — |
|
| $ | 90 |
| ||||||
Cost of services revenue | $ | 330 |
|
| (25 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| $ | 305 |
| ||||||
Research and development | $ | 714 |
|
| (140 | ) |
| — |
|
| (1 | ) |
| — |
|
| — |
|
| — |
|
| $ | 573 |
| ||||||
Sales and marketing | $ | 912 |
|
| (85 | ) |
| (1 | ) |
| (23 | ) |
| — |
|
| — |
|
| — |
|
| $ | 803 |
| ||||||
General and administrative | $ | 250 |
|
| (50 | ) |
| — |
|
| — |
|
| — |
|
| (28 | ) |
| — |
|
| $ | 172 |
| ||||||
Realignment | $ | 44 |
|
| — |
|
| — |
|
| — |
|
| (44 | ) |
| — |
|
| — |
|
| $ | — |
| ||||||
Operating income | $ | 428 |
|
| 304 |
|
| 1 |
|
| 83 |
|
| 44 |
|
| 28 |
|
| — |
|
| $ | 888 |
| ||||||
Operating margin(2) | 14.9 | % |
| 10.6 | % |
| — | % |
| 2.9 | % |
| 1.5 | % |
| 1.0 | % |
| — |
|
| 31.0 | % | ||||||||
Other income (expense), net(3) | $ | 177 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (175 | ) |
| — |
|
| $ | 1 |
| ||||||
Income before income tax | $ | 554 |
|
| 304 |
|
| 1 |
|
| 83 |
|
| 44 |
|
| (147 | ) |
| — |
|
| $ | 838 |
| ||||||
Income tax provision | $ | 120 |
|
|
|
|
|
|
|
|
|
|
|
| 14 |
|
| $ | 134 |
| |||||||||||
Tax rate(2) | 21.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| 16.0 | % | ||||||||||||||
Net income | $ | 434 |
|
| 304 |
|
| 1 |
|
| 83 |
|
| 44 |
|
| (147 | ) |
| (14 | ) |
| $ | 704 |
| ||||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) | $ | 1.02 |
|
| $ | 0.72 |
|
| $ | — |
|
| $ | 0.20 |
|
| $ | 0.10 |
|
| $ | (0.35 | ) |
| $ | (0.03 | ) |
| $ | 1.66 |
|
__________ | |||||||||||||||||
(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 423,400 diluted weighted-average shares for Classes A and B. |
VMware, Inc. | |||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||
For the Nine Months Ended October 29, 2021 | |||||||||||||||||||||||||||||||
(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 | $ | 111 |
|
| (1 | ) |
| — |
|
| (30 | ) |
| — |
|
| — |
|
| — |
|
| $ | 80 |
| ||||||
Cost of subscription and SaaS revenue | $ | 502 |
|
| (16 | ) |
| — |
|
| (128 | ) |
| — |
|
| — |
|
| — |
|
| $ | 358 |
| ||||||
Cost of services revenue | $ | 1,051 |
|
| (70 | ) |
| (1 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| $ | 979 |
| ||||||
Research and development | $ | 2,251 |
|
| (402 | ) |
| (1 | ) |
| (5 | ) |
| — |
|
| — |
|
| — |
|
| $ | 1,842 |
| ||||||
Sales and marketing | $ | 2,993 |
|
| (227 | ) |
| (5 | ) |
| (66 | ) |
| — |
|
| — |
|
| — |
|
| $ | 2,696 |
| ||||||
General and administrative | $ | 808 |
|
| (97 | ) |
| (1 | ) |
| — |
|
| — |
|
| (126 | ) |
| — |
|
| $ | 584 |
| ||||||
Realignment | $ | 1 |
|
| — |
|
| — |
|
| — |
|
| (1 | ) |
| — |
|
| — |
|
| $ | — |
| ||||||
Operating income | $ | 1,603 |
|
| 813 |
|
| 8 |
|
| 229 |
|
| 1 |
|
| 126 |
|
| — |
|
| $ | 2,781 |
| ||||||
Operating margin(2) | 17.2 | % |
| 8.7 | % |
| 0.1 | % |
| 2.5 | % |
| — | % |
| 1.4 | % |
| — |
|
| 29.8 | % | ||||||||
Other income (expense), net(3) | $ | (7 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| 28 |
|
| — |
|
| $ | 20 |
| ||||||
Income before income tax | $ | 1,424 |
|
| 813 |
|
| 8 |
|
| 229 |
|
| 1 |
|
| 154 |
|
| — |
|
| $ | 2,629 |
| ||||||
Income tax provision | $ | 190 |
|
|
|
|
|
|
|
|
|
|
|
| 231 |
|
| $ | 421 |
| |||||||||||
Tax rate(2) | 13.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| 16.0 | % | ||||||||||||||
Net income | $ | 1,234 |
|
| 813 |
|
| 8 |
|
| 229 |
|
| 1 |
|
| 154 |
|
| (231 | ) |
| $ | 2,208 |
| ||||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) | $ | 2.92 |
|
| $ | 1.93 |
|
| $ | 0.02 |
|
| $ | 0.54 |
|
| $ | — |
|
| $ | 0.36 |
|
| $ | (0.55 | ) |
| $ | 5.23 |
|
__________ | |||
(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 422,201 diluted weighted-average shares for Classes A and B. |
VMware, Inc. | |||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||
For the Nine Months Ended October 30, 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 | $ | 119 |
|
| (1 | ) |
| — |
|
| (33 | ) |
| — |
|
| — |
|
| — |
|
| $ | 85 |
| ||||||
Cost of subscription and SaaS revenue | $ | 400 |
|
| (13 | ) |
| — |
|
| (138 | ) |
| — |
|
| — |
|
| — |
|
| $ | 249 |
| ||||||
Cost of services revenue | $ | 969 |
|
| (74 | ) |
| (1 | ) |
| (1 | ) |
| — |
|
| — |
|
| — |
|
| $ | 894 |
| ||||||
Research and development | $ | 2,058 |
|
| (397 | ) |
| (1 | ) |
| (1 | ) |
| — |
|
| (2 | ) |
| — |
|
| $ | 1,658 |
| ||||||
Sales and marketing | $ | 2,727 |
|
| (243 | ) |
| (4 | ) |
| (71 | ) |
| — |
|
| (2 | ) |
| — |
|
| $ | 2,404 |
| ||||||
General and administrative | $ | 773 |
|
| (141 | ) |
| (1 | ) |
| — |
|
| — |
|
| (104 | ) |
| — |
|
| $ | 527 |
| ||||||
Realignment | $ | 47 |
|
| — |
|
| — |
|
| — |
|
| (47 | ) |
| — |
|
| — |
|
| $ | — |
| ||||||
Operating income | $ | 1,380 |
|
| 869 |
|
| 7 |
|
| 244 |
|
| 47 |
|
| 108 |
|
| — |
|
| $ | 2,656 |
| ||||||
Operating margin(2) | 16.3 | % |
| 10.3 | % |
| 0.1 | % |
| 2.9 | % |
| 0.6 | % |
| 1.3 | % |
| — |
|
| 31.3 | % | ||||||||
Other income (expense), net(3) | $ | 186 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (182 | ) |
| — |
|
| $ | 5 |
| ||||||
Income before income tax | $ | 1,417 |
|
| 869 |
|
| 7 |
|
| 244 |
|
| 47 |
|
| (74 | ) |
| — |
|
| $ | 2,512 |
| ||||||
Income tax provision | $ | 150 |
|
|
|
|
|
|
|
|
|
|
|
| 252 |
|
| $ | 402 |
| |||||||||||
Tax rate(2) | 10.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| 16.0 | % | ||||||||||||||
Net income | $ | 1,267 |
|
| 869 |
|
| 7 |
|
| 244 |
|
| 47 |
|
| (74 | ) |
| (252 | ) |
| $ | 2,110 |
| ||||||
Net income per weighted-average share, diluted for Classes A and B(2)(4) | $ | 3.00 |
|
| $ | 2.05 |
|
| $ | 0.02 |
|
| $ | 0.58 |
|
| $ | 0.11 |
|
| $ | (0.17 | ) |
| $ | (0.59 | ) |
| $ | 4.99 |
|
__________ | |||||||||||||||||
(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 423,093 diluted weighted-average shares for Classes A and B. |
VMware, Inc. | ||||||||||||||||
REVENUE BY TYPE | ||||||||||||||||
(in millions) | ||||||||||||||||
(unaudited) | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended |
| Nine Months Ended | ||||||||||||
|
| October 29, |
| October 30, |
| October 29, |
| October 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Revenue: |
|
|
|
|
|
|
|
| ||||||||
License |
| $ | 710 |
|
| $ | 639 |
|
| $ | 2,093 |
|
| $ | 2,019 |
|
Subscription and SaaS |
| 820 |
|
| 676 |
|
| 2,336 |
|
| 1,880 |
| ||||
Total license and subscription and SaaS |
| 1,530 |
|
| 1,315 |
|
| 4,429 |
|
| 3,899 |
| ||||
Services: |
|
|
|
|
|
|
|
| ||||||||
Software maintenance |
| 1,354 |
|
| 1,282 |
|
| 4,011 |
|
| 3,797 |
| ||||
Professional services |
| 304 |
|
| 267 |
|
| 880 |
|
| 777 |
| ||||
Total services |
| 1,658 |
|
| 1,549 |
|
| 4,891 |
|
| 4,574 |
| ||||
Total revenue |
| $ | 3,188 |
|
| $ | 2,864 |
|
| $ | 9,320 |
|
| $ | 8,473 |
|
Percentage of revenue: |
|
|
|
|
|
|
|
| ||||||||
License |
| 22.3 | % |
| 22.3 | % |
| 22.5 | % |
| 23.8 | % | ||||
Subscription and SaaS |
| 25.7 | % |
| 23.6 | % |
| 25.0 | % |
| 22.2 | % | ||||
Total license and subscription and SaaS |
| 48.0 | % |
| 45.9 | % |
| 47.5 | % |
| 46.0 | % | ||||
Services: |
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|
|
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| ||||||||
Software maintenance |
| 42.5 | % |
| 44.8 | % |
| 43.0 | % |
| 44.8 | % | ||||
Professional services |
| 9.5 | % |
| 9.3 | % |
| 9.5 | % |
| 9.2 | % | ||||
Total services |
| 52.0 | % |
| 54.1 | % |
| 52.5 | % |
| 54.0 | % | ||||
Total revenue |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % |
VMware, Inc. | |||||||||||||||
REVENUE BY GEOGRAPHY | |||||||||||||||
(in millions) | |||||||||||||||
(unaudited) | |||||||||||||||
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| Three Months Ended |
| Nine Months Ended | ||||||||||||
| October 29, |
| October 30, |
| October 29, |
| October 30, | ||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Revenue: |
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|
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|
|
| ||||||||
United States | $ | 1,582 |
|
| $ | 1,466 |
|
| $ | 4,587 |
|
| $ | 4,268 |
|
International | 1,606 |
|
| 1,398 |
|
| 4,733 |
|
| 4,205 |
| ||||
Total revenue | $ | 3,188 |
|
| $ | 2,864 |
|
| $ | 9,320 |
|
| $ | 8,473 |
|
Percentage of revenue: |
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|
|
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| ||||||||
United States | 49.6 | % |
| 51.2 | % |
| 49.2 | % |
| 50.4 | % | ||||
International | 50.4 | % |
| 48.8 | % |
| 50.8 | % |
| 49.6 | % | ||||
Total revenue | 100.0 | % |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % |
VMware, Inc. | |||||||||||||||
RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||
TO FREE CASH FLOWS | |||||||||||||||
(A NON-GAAP FINANCIAL MEASURE) | |||||||||||||||
(in millions) | |||||||||||||||
(unaudited) | |||||||||||||||
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| Three Months Ended |
| Nine Months Ended | ||||||||||||
| October 29, |
| October 30, |
| October 29, |
| October 30, | ||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
GAAP cash flows from operating activities | $ | 1,090 |
|
| $ | 992 |
|
| $ | 3,220 |
|
| $ | 3,085 |
|
Capital expenditures | (106 | ) |
| (84 | ) |
| (263 | ) |
| (247 | ) | ||||
Free cash flows | $ | 984 |
|
| $ | 908 |
|
| $ | 2,957 |
|
| $ | 2,838 |
|
VMware, Inc.
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. These non-GAAP financial measures, other than free cash flow, differ from GAAP in that they exclude stock-based compensation, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition, disposition and other items, and discrete items that impacted our GAAP tax rate, each as discussed below. Our non-GAAP financial measures also reflect the application of our non-GAAP tax rate. Free cash flow differs from GAAP cash flow from operating activities with respect to the treatment of capital expenditures.
VMware’s management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware’s financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware’s business, as they exclude charges and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flow provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.
Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware’s operating performance due to the following factors:
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/20211123006126/en/
Paul Ziots VMware Investor Relations pziots@vmware.com 650-427-3267
Michael Thacker VMware Global PR mthacker@vmware.com 650-427-4454
Source: VMware, Inc.