Home Business Wire VMware Reports Fiscal Year 2022 Second Quarter Results

VMware Reports Fiscal Year 2022 Second Quarter Results

Total Revenue growth of 9% year-over-year

Subscription and SaaS revenue growth of 23% year-over-year

PALO ALTO, Calif.–(BUSINESS WIRE)–$VMW #earnings–VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the second quarter of fiscal year 2022:

  • Revenue for the second quarter was $3.14 billion, an increase of 9% from the second quarter of fiscal 2021.
  • The combination of subscription and SaaS and license revenue was $1.51 billion, an increase of 12% from the second quarter of fiscal 2021.
  • Subscription and SaaS revenue for the second quarter was $776 million, an increase of 23% year-over-year.
  • Subscription and SaaS ARR for the second quarter was $3.15 billion, an increase of 26% year-over-year.
  • GAAP net income for the second quarter was $411 million, or $0.97 per diluted share, down 8% per diluted share compared to $447 million, or $1.06 per diluted share, for the second quarter of fiscal 2021. Non-GAAP net income for the second quarter was $739 million, or $1.75 per diluted share, down 3% per diluted share compared to $766 million, or $1.81 per diluted share, for the second quarter of fiscal 2021.
  • GAAP operating income for the second quarter was $525 million, a decrease of 2% from the second quarter of fiscal 2021. Non-GAAP operating income for the second quarter was $924 million, a decrease of 3% from the second quarter of fiscal 2021.
  • Operating cash flow for the second quarter was $864 million. Free cash flow for the second quarter was $777 million.
  • RPO for the second quarter totaled $11.2 billion, up 8% year-over-year.
  • Company remains on track for planned spin-off from Dell Technologies Inc. in early November 2021.

Our customers are evolving their strategies from a ‘cloud first’ to a ‘cloud smart’ philosophy where they are picking the right clouds and cloud services for the right workload, and turning to a multi-cloud environment,” said Raghu Raghuram, VMware CEO. “We are delivering the multi-cloud platform for all applications, enabling the digital innovation and enterprise control that our customers need to accelerate their businesses today and in the future.”

We are pleased with our Q2 financial performance with Subscription and SaaS ARR increasing 26% year-over-year to $3.2 billion,” said Zane Rowe, executive vice president and CFO, VMware. “Our performance in Q2 reflects strong year-over-year product bookings growth in major categories, including our multi-cloud and modern applications businesses along with End-User Computing.”

Business Highlights & Strategic Announcements

  • VMware introduced VMware Anywhere Workspace, a solution that brings together VMware Workspace ONE, VMware SASE and VMware Carbon Black Cloud, empowering organizations to manage multi-modal employee experiences, better secure the distributed edge and automate the workspace.
  • VMware is working with Zoom Video Communications, Inc. to enable a better and more secure collaboration experience for hybrid work environments. The effort will deliver interoperability between VMware Anywhere Workspace and the Zoom collaboration platform to further improve ease of use, application and network performance and security.
  • VMware and Vapor IO announced they are building a Multi-Cloud Services Grid that integrates the VMware Telco Cloud Platform with Vapor IO’s Kinetic Grid platform, designed to greatly simplify and lower the costs of deploying distributed 5G systems and real-time applications.
  • Cohere Technologies and VMware are developing an open radio access network (O-RAN) solution to help communications service providers improve network and spectrum efficiencies and deliver new and differentiated services and experiences for their customers.
  • VMware announced expanded SaaS innovations to VMware Horizon, the company’s industry-leading virtual desktop infrastructure (VDI) and Desktop-as-a-Service (DaaS) platform. These new capabilities will make it easier for IT organizations to manage Horizon deployments wherever they may be, on-premises or in the cloud.
  • VMware received further recognition from leading industry analysts:
    • VMware was positioned as a Leader in “The Forrester Wave™: Endpoint Security Software As A Service, Q2 2021.”1
    • IDC ranked VMware No. 1 in worldwide IT automation and configuration management (ITACM) 2020 Market Share.2
    • IDC ranked VMware No. 1 in software-defined compute for 2020 market share.3

1 Forrester, Chris Sherman, The Forrester Wave™: Endpoint Security Software As A Service, Q2, 2021, May 13, 2021

2 IDC, “Worldwide IT Automation and Configuration Management Software Market Shares, 2020: Moderate Growth Amid Pandemic Disruption,” doc #US47758721, June 2021

3 IDC, “Worldwide Software-Defined Compute Software Market Shares, 2020: Growth Shifts to Containers,” doc #US47298521, June 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 http://ir.vmware.com. Slides will accompany the web broadcast. The replay of the webcast and slides will be available on the website for two months. In addition, six quarters of historical data for unearned revenue will also be made available at http://ir.vmware.com in conjunction with the conference call.

About VMware

VMware software powers the world’s complex digital infrastructure. The company’s cloud, app modernization, networking, security, and digital workspace offerings help customers deliver any application on any cloud across any device. Headquartered in Palo Alto, California, VMware is committed to being a force for good, from its breakthrough technology innovations to its global impact. For more information, please visit https://www.vmware.com/company.html.

Additional Information

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

VMware, Anywhere Workspace, Carbon Black and Horizon 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 represents the annualized value of our 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. For consumption-based offerings, ARR represents the annualized quarterly revenue based on revenue recognized for the current reporting period. We use ARR as one of our operating measures to assess the health and trajectory of our subscription and SaaS business. ARR should be viewed independently of revenue and unearned revenue as ARR is a performance metric and is not intended to be a substitute for, or combined with, any of these items.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding the proposed spin-off from Dell; customer trends; and the expected benefits to customers of partnerships, products, solutions and service 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 delay or failure to consummate the spin-off from Dell Technologies; (2) the impact of the COVID-19 pandemic on our operations, financial condition, our customers, the business environment and the global and regional economies; (3) adverse changes in general economic or market conditions; (4) delays or reductions in consumer, government and information technology spending; (5) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization software and cloud, end user and mobile computing, modern applications and security industries, as well as new product and marketing initiatives by VMware’s competitors; (6) the ability to successfully integrate into VMware acquired companies and assets and smoothly transition services related to divested assets from VMware; (7) rapid technological changes in the virtualization software and cloud, end user, security, modern applications and mobile computing industries; (8) VMware’s customers’ ability to transition to new products, platforms, services, solutions and computing strategies in such areas as containerization, modern applications, intrinsic security and networking, cloud, digital workspaces, virtualization and the software defined data center, and the uncertainty of their acceptance of emerging technology; (9) VMware’s ability to enter into, maintain and extend strategically effective partnerships, collaborations and alliances; (10) the continued risk of litigation and regulatory actions; (11) VMware’s ability to protect its proprietary technology; (12) changes to product and service development timelines; (13) VMware’s relationship with Dell Technologies and Dell’s ability to control matters requiring stockholder approval, including the election of VMware’s board members and matters relating to Dell’s investment in VMware; (14) VMware’s ability to attract and retain highly qualified employees; (15) the ability of VMware to utilize our relationship with Dell to leverage go-to-market and product development activities; (16) risks associated with cyber-attacks, information security and data privacy; (17) disruptions resulting from key management changes; (18) risks associated with international sales such as fluctuating currency exchange rates and increased trade barriers; (19) changes in VMware’s financial condition; (20) geopolitical changes such as Brexit and increased tariffs and trade barriers that could adversely impact our non-U.S. sales; (21) the ability of VMware to adapt our offerings, business operations and go-to-market activities to changes in how customers consume information technology resources, such as through subscription and SaaS offerings; and (22) other business effects, including those related to industry, market, economic, political, regulatory and global health conditions. These forward-looking statements are made as of the date of this press release, are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware’s most recent reports on Form 10-K and Form 10-Q and current reports on Form 8- K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

VMware, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)

Three Months Ended

Six Months Ended

July 30,

July 31,

July 30,

July 31,

2021

2020

2021

2020

Revenue:

License

$

738

$

719

$

1,384

$

1,379

Subscription and SaaS

776

631

1,516

1,204

Services

1,624

1,525

3,232

3,026

Total revenue

3,138

2,875

6,132

5,609

Operating expenses(1):

Cost of license revenue

37

35

75

74

Cost of subscription and SaaS revenue

170

132

327

258

Cost of services revenue

352

321

689

639

Research and development

775

679

1,483

1,344

Sales and marketing

1,023

897

1,981

1,814

General and administrative

256

277

492

523

Realignment

1

4

Operating income

525

534

1,084

953

Investment income

1

1

1

7

Interest expense

(49

)

(55

)

(99

)

(104

)

Other income (expense), net

3

15

(19

)

8

Income before income tax

480

495

967

864

Income tax provision

69

48

131

31

Net income

$

411

$

447

$

836

$

833

Net income per weighted-average share, basic for Classes A and B

$

0.98

$

1.06

$

1.99

$

1.99

Net income per weighted-average share, diluted for Classes A and B

$

0.97

$

1.06

$

1.98

$

1.97

Weighted-average shares, basic for Classes A and B

419,355

420,031

419,235

419,208

Weighted-average shares, diluted for Classes A and B

422,802

423,050

422,419

422,428

(1) Includes stock-based compensation as follows:

Cost of license revenue

$

$

$

1

$

1

Cost of subscription and SaaS revenue

5

5

11

9

Cost of services revenue

24

26

49

48

Research and development

150

132

277

257

Sales and marketing

81

88

153

159

General and administrative

33

42

64

91

VMware, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(unaudited)

July 30,

January 29,

2021

2021

ASSETS

Current assets:

Cash and cash equivalents

$

5,855

$

4,692

Short-term investments

82

23

Accounts receivable, net of allowance of $4 and $5

1,718

1,929

Due from related parties, net

915

1,438

Other current assets

604

530

Total current assets

9,174

8,612

Property and equipment, net

1,373

1,334

Other assets

2,678

2,697

Deferred tax assets

5,785

5,781

Intangible assets, net

856

993

Goodwill

9,598

9,599

Total assets

$

29,464

$

29,016

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

220

$

131

Accrued expenses and other

2,176

2,382

Unearned revenue

5,879

5,873

Total current liabilities

8,275

8,386

Note payable to Dell

270

270

Long-term debt

4,721

4,717

Unearned revenue

4,459

4,441

Income tax payable

768

805

Operating lease liabilities

912

891

Other liabilities

439

455

Total liabilities

19,844

19,965

Contingencies

Stockholders’ equity:

Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 111,753 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

1,716

1,985

Accumulated other comprehensive loss

(3

)

(5

)

Retained earnings

7,903

7,067

Total stockholders’ equity

9,620

9,051

Total liabilities and stockholders’ equity

$

29,464

$

29,016

VMware, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

Three Months Ended

Six Months Ended

July 30,

July 31,

July 30,

July 31,

2021

2020

2021

2020

Operating activities:

Net income

$

411

$

447

$

836

$

833

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

Depreciation and amortization

275

252

544

496

Stock-based compensation

293

293

555

565

Deferred income taxes, net

17

(98

)

(31

)

(196

)

Unrealized (gain) loss on equity securities, net

(1

)

34

(6

)

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

2

1

3

7

Loss on extinguishment of debt

8

8

Other

2

2

4

(2

)

Changes in assets and liabilities, net of acquisitions:

Accounts receivable

(189

)

(432

)

206

(79

)

Other current assets and other assets

(229

)

(173

)

(390

)

(345

)

Due to/from related parties, net

(162

)

(130

)

522

560

Accounts payable

5

21

70

11

Accrued expenses and other liabilities

412

455

(218

)

207

Income taxes payable

(110

)

(66

)

(29

)

(51

)

Unearned revenue

138

139

24

86

Net cash provided by operating activities

864

719

2,130

2,094

Investing activities:

Additions to property and equipment

(87

)

(76

)

(157

)

(163

)

Sales of investments in equity securities

26

34

Purchases of strategic investments

(6

)

(6

)

(7

)

(11

)

Proceeds from disposition of assets

1

18

1

21

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

(6

)

(296

)

(15

)

(335

)

Net cash used in investing activities

(72

)

(360

)

(144

)

(488

)

Financing activities:

Proceeds from issuance of common stock

8

36

139

142

Net proceeds from issuance of long-term debt

(5

)

1,979

Repayment of current portion of long-term debt

(1,257

)

(1,257

)

Repurchase of common stock

(358

)

(130

)

(729

)

(311

)

Shares repurchased for tax withholdings on vesting of restricted stock

(186

)

(161

)

(242

)

(276

)

Payment to acquire non-controlling interests

(91

)

(91

)

Principal payments on finance lease obligations

(1

)

(1

)

(2

)

(1

)

Net cash provided by (used in) financing activities

(537

)

(1,609

)

(834

)

185

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

1

Net increase (decrease) in cash, cash equivalents and restricted cash

255

(1,249

)

1,152

1,791

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

5,667

6,071

4,770

3,031

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

$

5,922

$

4,822

$

5,922

$

4,822

Supplemental disclosures of cash flow information:

Cash paid for interest

$

50

$

17

$

97

$

91

Cash paid for taxes, net

166

206

204

282

Non-cash items:

Changes in capital additions, accrued but not paid

$

8

$

(1

)

$

11

$

(7

)

VMware, Inc.

GROWTH IN REVENUE PLUS SEQUENTIAL CHANGE IN UNEARNED REVENUE

(in millions)

(unaudited)

Growth in Total Revenue Plus Sequential Change in Unearned Revenue

Three Months Ended

July 30,

July 31,

2021

2020

Total revenue, as reported

$

3,138

$

2,875

Sequential change in unearned revenue(1)

138

167

Total revenue plus sequential change in unearned revenue

$

3,276

$

3,042

Change (%) over prior year, as reported

8

%

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

Three Months Ended

July 30,

July 31,

2021

2020

Total license and subscription and SaaS revenue, as reported

$

1,514

$

1,350

Sequential change in unearned license and subscription and SaaS revenue(2)

148

36

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

$

1,662

$

1,386

Change (%) over prior year, as reported

20

%

(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

July 30,

July 31,

2021

2020

Remaining performance obligations(3)

$

11,201

$

10,335

Change (%) over prior year

8

%

Remaining performance obligations, current(4)

$

6,249

$

5,625

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)

July 30,

April 30,

January 29,

October 30,

July 31,

May 1,

2021

2021

2021

2020

2020

2020

Unearned revenue as reported:

License

$

20

$

16

$

15

$

11

$

11

$

15

Subscription and SaaS

2,208

2,064

1,998

1,596

1,619

1,579

Services

Software maintenance

6,916

6,957

7,092

6,574

6,696

6,611

Professional services

1,194

1,163

1,209

1,054

1,059

1,013

Total unearned revenue

$

10,338

$

10,200

$

10,314

$

9,235

$

9,385

$

9,218

VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA

For the Three Months Ended July 30, 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

$

170

(5

)

(43

)

$

121

Cost of services revenue

$

352

(24

)

(1

)

$

326

Research and development

$

775

(150

)

(1

)

(2

)

$

622

Sales and marketing

$

1,023

(81

)

(3

)

(22

)

$

919

General and administrative

$

256

(33

)

(1

)

(23

)

$

199

Operating income

$

525

293

6

77

23

$

924

Operating margin(2)

16.7

%

9.3

%

0.2

%

2.4

%

0.7

%

29.4

%

Other income (expense), net(3)

$

3

1

$

4

Income before income tax

$

480

293

6

77

24

$

880

Income tax provision

$

69

71

$

141

Tax rate(2)

14.4

%

16.0

%

Net income

$

411

293

6

77

24

(71

)

$

739

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

$

0.97

$

0.69

$

0.02

$

0.18

$

0.06

$

(0.17

)

$

1.75

(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 422,802 diluted weighted-average shares for Classes A and B.

Contacts

Paul Ziots

VMware Investor Relations

pziots@vmware.com
650-427-3267

Michael Thacker

VMware Global PR

mthacker@vmware.com
650-427-4454

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