(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: May 28, 2020 | By: | /s/ Zane Rowe | |
Zane Rowe, Chief Financial Officer and Executive Vice President | |||
• | 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. |
• | 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 |
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 | 70 | 36 | ||||||
Cost of subscription and SaaS revenue | 96 | 94 | ||||||
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 | 4 | — | ||||||
Operating income | 418 | 354 | ||||||
Investment income | 5 | 14 | ||||||
Interest expense | (49 | ) | (34 | ) | ||||
Other income (expense), net | (6 | ) | 17 | |||||
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 | $ | 4 | $ | 3 | ||||
Cost of services revenue | 22 | 18 | ||||||
Research and development | 125 | 102 | ||||||
Sales and marketing | 72 | 63 | ||||||
General and administrative | 49 | 30 |
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(amounts in millions, except per share amounts, and shares in thousands) | |||||||
(unaudited) | |||||||
May 1, | January 31, | ||||||
2020 | 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 | 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 | 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 | 2,047 | 2,000 | |||||
Accumulated other comprehensive loss | (18 | ) | (4 | ) | |||
Retained earnings | 5,395 | 5,009 | |||||
Total stockholders’ equity | 7,428 | 7,009 | |||||
Total liabilities and stockholders’ equity | $ | 28,442 | $ | 26,294 |
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 | (6 | ) | 3 | ||||
(Gain) loss on disposition of assets, revaluation and impairment, net | 6 | (5 | ) | ||||
Other | (4 | ) | 1 | ||||
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 | ) | 16 | ||||
Accrued expenses and other liabilities | (249 | ) | (356 | ) | |||
Income taxes payable | 15 | (45 | ) | ||||
Unearned revenue | (53 | ) | 90 | ||||
Net cash provided by operating activities | 1,374 | 1,395 | |||||
Investing activities: | |||||||
Additions to property and equipment | (87 | ) | (73 | ) | |||
Purchases of strategic investments | (5 | ) | — | ||||
Proceeds from disposition of assets | 4 | 22 | |||||
Business combinations, net of cash acquired, and purchases of intangible assets | (38 | ) | (45 | ) | |||
Net cash paid on disposition of a business | — | (4 | ) | ||||
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 | (1 | ) | — | ||||
Net cash provided by (used in) financing activities | 1,793 | (661 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1 | ) | — | ||||
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 | $ | 74 | $ | 62 | |||
Cash paid for taxes, net | 76 | 88 | |||||
Non-cash items: | |||||||
Changes in capital additions, accrued but not paid | $ | (7 | ) | $ | 3 |
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 | ) | 89 | |||||
Total revenue plus sequential change in unearned revenue | $ | 2,684 | $ | 2,539 | ||||
Change (%) over prior year, as reported | 6 | % | ||||||
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 | 41 | 41 | ||||||
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 | 16 | % | ||||||
__________ | ||||||||
(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. |
SUPPLEMENTAL UNEARNED REVENUE SCHEDULE | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
May 1, | January 31, | November 1, | August 2, | May 3, | February 1, | ||||||||||||||||||
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||
Unearned revenue as reported: | |||||||||||||||||||||||
License | $ | 15 | $ | 19 | $ | 19 | $ | 19 | $ | 19 | $ | 15 | |||||||||||
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 |
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 | $ | 70 | — | — | (42 | ) | — | — | — | $ | 27 | ||||||||||||||||||||
Cost of subscription and SaaS revenue | $ | 96 | (4 | ) | — | (12 | ) | — | — | — | $ | 81 | |||||||||||||||||||
Cost of services revenue | $ | 318 | (22 | ) | — | (1 | ) | — | — | — | $ | 295 | |||||||||||||||||||
Research and development | $ | 665 | (125 | ) | — | — | — | — | — | $ | 540 | ||||||||||||||||||||
Sales and marketing | $ | 917 | (72 | ) | (3 | ) | (25 | ) | — | (2 | ) | — | $ | 816 | |||||||||||||||||
General and administrative | $ | 246 | (49 | ) | — | — | — | (39 | ) | — | $ | 157 | |||||||||||||||||||
Realignment and loss on disposition | $ | 4 | — | — | — | (4 | ) | — | — | $ | — | ||||||||||||||||||||
Operating income | $ | 418 | 272 | 3 | 80 | 4 | 41 | — | $ | 818 | |||||||||||||||||||||
Operating margin(2) | 15.3 | % | 10.0 | % | 0.1 | % | 2.9 | % | 0.1 | % | 1.5 | % | — | 29.9 | % | ||||||||||||||||
Other income (expense), net(3) | $ | (6 | ) | — | — | — | — | (6 | ) | — | $ | (12 | ) | ||||||||||||||||||
Income before income tax | $ | 368 | 272 | 3 | 80 | 4 | 35 | — | $ | 762 | |||||||||||||||||||||
Income tax provision (benefit) | $ | (18 | ) | 140 | $ | 122 | |||||||||||||||||||||||||
Tax rate(2) | N/A | 16.0 | % | ||||||||||||||||||||||||||||
Net income | $ | 386 | 272 | 3 | 80 | 4 | 35 | (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. |
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 | $ | 36 | — | — | (20 | ) | — | — | $ | 16 | |||||||||||||||||
Cost of subscription and SaaS revenue | $ | 94 | (3 | ) | — | (26 | ) | — | — | $ | 65 | ||||||||||||||||
Cost of services revenue | $ | 299 | (18 | ) | — | (1 | ) | — | — | $ | 279 | ||||||||||||||||
Research and development | $ | 590 | (102 | ) | — | — | — | — | $ | 489 | |||||||||||||||||
Sales and marketing | $ | 868 | (63 | ) | (2 | ) | (22 | ) | — | — | $ | 781 | |||||||||||||||
General and administrative | $ | 209 | (30 | ) | — | — | (13 | ) | — | $ | 166 | ||||||||||||||||
Realignment and loss on disposition | $ | — | — | — | — | — | — | $ | — | ||||||||||||||||||
Operating income | $ | 354 | 216 | 2 | 69 | 13 | — | $ | 654 | ||||||||||||||||||
Operating margin(2) | 14.4 | % | 8.8 | % | 0.1 | % | 2.8 | % | 0.5 | % | — | 26.7 | % | ||||||||||||||
Other income (expense), net(3) | $ | 17 | — | — | — | (1 | ) | — | $ | 16 | |||||||||||||||||
Income before income tax | $ | 351 | 216 | 2 | 69 | 12 | — | $ | 650 | ||||||||||||||||||
Income tax provision (benefit) | $ | (14 | ) | 118 | $ | 104 | |||||||||||||||||||||
Tax rate(2) | N/A | 16.0 | % | ||||||||||||||||||||||||
Net income | $ | 365 | 216 | 2 | 69 | 12 | (118 | ) | $ | 546 | |||||||||||||||||
Less: Net income (loss) attributable to non-controlling interests | $ | (15 | ) | 22 | — | 9 | — | (5 | ) | $ | 11 | ||||||||||||||||
Net income attributable to VMware, Inc. | $ | 380 | 194 | 2 | 60 | 12 | (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. | |||||||||||||||||||||||||||
(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 426,697 diluted weighted-average shares for Classes A and B. |
REVENUE BY TYPE | ||||||||
(in millions) | ||||||||
(unaudited) | ||||||||
Three Months Ended | ||||||||
May 1, | May 3, | |||||||
2020 | 2019 | |||||||
Revenue: | ||||||||
License | $ | 660 | $ | 646 | ||||
Subscription and SaaS | 572 | 411 | ||||||
Total license and subscription and SaaS | 1,232 | 1,057 | ||||||
Services: | ||||||||
Software maintenance | 1,245 | 1,148 | ||||||
Professional services | 257 | 245 | ||||||
Total services | 1,502 | 1,393 | ||||||
Total revenue | $ | 2,734 | $ | 2,450 | ||||
Percentage of revenue: | ||||||||
License | 24.1 | % | 26.4 | % | ||||
Subscription and SaaS | 21.0 | % | 16.7 | % | ||||
Total license and subscription and SaaS | 45.1 | % | 43.1 | % | ||||
Services: | ||||||||
Software maintenance | 45.5 | % | 46.8 | % | ||||
Professional services | 9.4 | % | 10.1 | % | ||||
Total services | 54.9 | % | 56.9 | % | ||||
Total revenue | 100.0 | % | 100.0 | % |
REVENUE BY GEOGRAPHY | |||||||
(in millions) | |||||||
(unaudited) | |||||||
Three Months Ended | |||||||
May 1, | May 3, | ||||||
2020 | 2019 | ||||||
Revenue: | |||||||
United States | $ | 1,363 | $ | 1,196 | |||
International | 1,371 | 1,254 | |||||
Total revenue | $ | 2,734 | $ | 2,450 | |||
Percentage of revenue: | |||||||
United States | 49.9 | % | 48.8 | % | |||
International | 50.1 | % | 51.2 | % | |||
Total revenue | 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 | |||||||
May 1, | May 3, | ||||||
2020 | 2019 | ||||||
GAAP cash flows from operating activities | $ | 1,374 | $ | 1,395 | |||
Capital expenditures | (87 | ) | (73 | ) | |||
Free cash flows | $ | 1,287 | $ | 1,322 |
• | Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, the expense for the fair value of the stock-based instruments VMware utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of VMware’s core business. |
• | Employer payroll taxes on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and other factors that are beyond VMware’s control and do not correlate to the operation of the business. |
• | Amortization of acquired intangible assets. A portion of the purchase price of VMware’s acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However, VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods. |
• | Realignment charges. Realignment charges include workforce reductions, asset impairments, losses on asset disposals and costs to exit facilities. VMware’s management believes it is useful to exclude these items, when significant, as they are not reflective of VMware’s core business and operating results. |
• | Acquisition, disposition and other items. As VMware does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, VMware believes it is useful to exclude acquisition, disposition and other items when looking for a consistent basis for comparison across accounting periods. These items include: |
– | Direct costs of acquisitions and dispositions, such as transaction and advisory fees. |
– | Costs associated with integrating acquired businesses. |
– | Accruals for the portion of merger consideration payable in installments that may be paid in cash or VMware stock, at the option of VMware. |
– | Gains or losses on equity investments, whether realized or unrealized. |
– | Charges recognized for non-recoverable strategic investments or gains recognized on the disposition of strategic investments. |
– | Gains or losses on sale or disposal of distinct lines of business or product offerings, or transactions with features similar to discontinued operations, including recoveries or charges recognized to adjust the fair value of assets that qualify as “held for sale.” |
• | Tax adjustment. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to VMware’s annual estimated tax rate on non-GAAP income. This rate is based on VMware’s estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating VMware’s non-GAAP income as well as significant tax adjustments. VMware’s estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that VMware management believes materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to VMware’s estimated annual tax rates as described above, the estimated tax rate on non-GAAP income may differ from the GAAP tax rate and from VMware’s actual tax liabilities. |
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Cover Page |
May 22, 2020 |
---|---|
Cover page. | |
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 | May 22, 2020 |
Entity Registrant Name | VMWARE, INC. |
City Area Code | 650 |
Local Phone Number | 427-5000 |
Entity Central Index Key | 0001124610 |
Amendment Flag | false |