Dell Technologies Reports First Quarter Fiscal 2020 Financial Results
ROUND ROCK, Texas, May 30, 2019 /PRNewswire/ --
News summary
-- First quarter revenue of $21.9 billion, up 3 percent; non-GAAP first
quarter revenue of $22.0 billion, up 2 percent
-- Operating income of $550 million; non-GAAP operating income of $2.2
billion
-- Diluted earnings per share of $0.38; non-GAAP diluted earnings per share
of $1.45
Full story
Dell Technologies (NYSE: DELL) today announced financial results for its fiscal 2020 first quarter ended May 3, 2019. First quarter revenue was $21.9 billion, up 3 percent, and non-GAAP revenue was $22.0 billion, up 2 percent over the same period in the prior year. The company generated operating income of $550 million(1), compared to an operating loss of $153 million last year, and non-GAAP operating income of $2.2 billion, compared to $2.0 billion last year. Net income was $329 million or 1.5 percent of revenue, non-GAAP net income was $1.2 billion or 5.5 percent of non-GAAP revenue, and adjusted EBITDA was $2.6 billion or 11.7 percent of non-GAAP revenue. Cash flow from operations was approximately $682 million for the quarter with diluted earnings per share of $0.38 and non-GAAP diluted earnings per share of $1.45.
"We're in the middle of a technology led investment cycle that's fueled by the explosion of data," said Jeff Clarke, vice chairman, Dell Technologies. "No one is better positioned to deliver the solutions customers need to grow in the data era. One example is our new Dell Technologies Cloud platform jointly engineered with VMware to expedite customers' moves to hybrid cloud environments."
Unveiled at Dell Technologies World earlier in the quarter, the Dell Technologies Cloud combines the power of VMware and Dell Technologies to make hybrid cloud environments simpler to deploy and manage with consistent infrastructure, operations, and services. Dell Technologies Cloud seamlessly extends from the public cloud into the data center with the option of hyperconverged or converged infrastructure, including VMware Cloud Foundation on VxRail, as well as being able to be consumed as a fully managed Data Center-as-a-Service, VMware Cloud on Dell EMC.
Also at Dell Technologies World 2019, the company extended its leadership in edge computing with the announcement of Unified Workspace, which integrates solutions across Dell devices and services, VMware Workspace ONE, and Secureworks to simplify the entire device lifecycle for IT.
First Quarter Fiscal 2020 Financial Results
Three Months Ended
May 3, 2019 May 4, 2018 Change
(in millions, except percentages; unaudited)
Total net revenue $
21,908 $
21,356 3%
Operating income (loss) $
550 $
(153) 459%
Net income (loss) $
329 $
(538) 161%
Non-GAAP net revenue $
21,990 $
21,543 2%
Non-GAAP operating income $
2,196 $
2,026 8%
Non-GAAP net income $
1,209 $
1,179 3%
Adjusted EBITDA $
2,573 $
2,383 8%
Information about Dell
Technologies' use of non-GAAP
financial information is provided
under "Non-GAAP Financial
Measures" below. All comparisons
in this press release are year-
over-year unless otherwise noted.
Dell Technologies ended the quarter with a cash and investments balance of $9.8 billion. The company paid down approximately $400 million in gross debt in the first quarter and approximately $15 billion in gross debt over the two and a half years since the closing of the EMC transaction, excluding Dell Financial Services-related debt, public subsidiary debt, and debt incurred to finance the Class V transaction. The company is on track to repay approximately $4.8 billion of gross debt in fiscal year 2020.
"I am pleased that we grew revenue and profitability while taking share in a dynamic environment," said Tom Sweet, chief financial officer, Dell Technologies. "We remain focused on long-term relative growth and innovating across our family of businesses to help our customers transform for their digital future."
Operating segments summary
Infrastructure Solutions Group revenue for the first quarter was $8.2 billion, a 5 percent decrease year-over-year. This was driven by a 1 percent decrease in storage revenue to $4.0 billion and a 9 percent decrease in server and networking revenue to $4.2 billion. Operating income was $843 million for the first quarter, or 10.3 percent of Infrastructure Solutions Group revenue.
Key highlights:
-- Newer software-defined data center solutions and hyper converged
infrastructure are growing rapidly, including VxRail, which grew triple
digits again during the first quarter
-- Launched midrange storage portfolio with new Unity XT solution announced
at Dell Technologies World 2019, as well as new Cloud Storage Services
extending support for hybrid cloud environments
-- Strengthened data protection portfolio with announcement of PowerProtect
X400 and PowerProtect Software platform offerings at Dell Technologies
World 2019
Client Solutions Group revenue for the first quarter was $10.9 billion, up 6 percent versus the first quarter of last year. Commercial revenue grew 13 percent to $8.3 billion, and Consumer revenue was down 10 percent to $2.6 billion. Operating income was $793 million for the first quarter, or 7.3 percent of Client Solutions Group revenue.
Key highlights:
-- Gained year-over-year worldwide PC share(2) for 25(th) consecutive
quarter
-- Double-digit revenue growth in commercial notebooks, desktops, and
workstations
-- Launched new Dell Latitude mobile PC portfolio with breakthroughs in
security, productivity, and connectivity
VMware revenue was $2.3 billion for the first quarter, up 13 percent driven by broad-based strength across a diverse product portfolio. Operating income for the first quarter was $614 million, or 26.9 percent of VMware revenue.
Conference call information
As previously announced, the company will hold a conference call to discuss its first quarter performance today, May 30, 2019 at 4:30 p.m. CDT. The conference call will be broadcast live over the internet and can be accessed at https://investors.delltechnologies.com/events-and-presentations/upcoming-events For those unable to listen to the live broadcast, an archived version will be available at the same location for one year.
A slide presentation containing additional financial and operating information may be downloaded from Dell Technologies' website at https://investors.delltechnologies.com/financial-information/quarterly-results
About Dell Technologies
Dell Technologies (NYSE:DELL) is a unique family of businesses that helps organizations and individuals build their digital future and transform how they work and live. The company provides customers with the industry's broadest and most innovative technology and services portfolio spanning from edge to core to cloud. The Dell Technologies family includes Dell, Dell EMC, Pivotal, RSA, Secureworks, Virtustream and VMware.
Copyright © 2019 Dell Inc. or its subsidiaries. All Rights Reserved. Dell Technologies, Dell, EMC and Dell EMC are trademarks of Dell Inc. or its subsidiaries. Other trademarks may be trademarks of their respective owners.
1( )Due to the EMC transaction, significant non-cash bridging items will remain between GAAP and non-GAAP results for the next few years.
2 IDC WW Quarterly Personal Computing Device (PCD) Tracker CY19Q1
Non-GAAP Financial Measures:
This press release presents information about Dell Technologies' non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income attributable to non-controlling interest, non-GAAP net income attributable to Dell Technologies Inc. - basic, non-GAAP net income attributable to Dell Technologies Inc. - diluted, non-GAAP earnings per share attributable to Dell Technologies Inc. - basic, non-GAAP earnings per share attributable to Dell Technologies Inc. - diluted, EBITDA, and adjusted EBITDA, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with generally accepted accounting principles in the United States of America ("GAAP"). A reconciliation of each non-GAAP financial measure to the most directly comparable historical GAAP financial measure is provided in the attached tables for each of the fiscal periods indicated.
Special Note on Forward-Looking Statements:
Statements in this press release that relate to future results and events are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933 and are based on Dell Technologies' current expectations. In some cases, you can identify these statements by such forward-looking words as "anticipate," "believe," "confidence," "could," "estimate," "expect," "guidance," "intend," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should," "will" and "would," or similar words or expressions that refer to future events or outcomes.
Dell Technologies' results or events in future periods could differ materially from those expressed or implied by these forward-looking statements because of risks, uncertainties, and other factors that include, but are not limited to, the following: competitive pressures; Dell Technologies' reliance on third-party suppliers for products and components, including reliance on single-source or limited-source suppliers; Dell Technologies' ability to achieve favorable pricing from its vendors; adverse global economic conditions and instability in financial markets; Dell Technologies' execution of its growth, business and acquisition strategies; the success of Dell Technologies' cost efficiency measures; Dell Technologies' ability to manage solutions and products and services transitions in an effective manner; Dell Technologies' ability to deliver high-quality products and services; Dell Technologies' foreign operations and ability to generate substantial non-U.S. net revenue; Dell Technologies' product, customer, and geographic sales mix, and seasonal sales trends; the performance of Dell Technologies' sales channel partners; access to the capital markets by Dell Technologies or its customers; weak economic conditions and additional regulation; counterparty default risks; the loss by Dell Technologies of any services contracts with its customers, including government contracts, and its ability to perform such contracts at its estimated costs; Dell Technologies' ability to develop and protect its proprietary intellectual property or obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; infrastructure disruptions, cyberattacks, or other data security breaches; Dell Technologies' ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other tax compliance matters; impairment of portfolio investments; unfavorable results of legal proceedings; increased costs and additional regulations and requirements as a result of Dell Technologies' operation as a public company; Dell Technologies' ability to develop and maintain effective internal control over financial reporting; compliance requirements of changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; Dell Technologies' substantial level of indebtedness; the impact of the financial performance of VMware; and the market volatility of Dell Technologies' pension plan assets.
This list of risks, uncertainties, and other factors is not complete. Dell Technologies discusses some of these matters more fully, as well as certain risk factors that could affect Dell Technologies' business, financial condition, results of operations, and prospects, in its reports filed with the SEC, including Dell Technologies' annual report on Form 10-K for the fiscal year ended February 1, 2019, quarterly reports on Form 10-Q, and current reports on Form 8-K. These filings are available for review through the SEC's website at www.sec.gov. Any or all forward-looking statements Dell Technologies makes may turn out to be wrong and can be affected by inaccurate assumptions Dell Technologies might make or by known or unknown risks, uncertainties and other factors, including those identified in this press release. Accordingly, you should not place undue reliance on the forward-looking statements made in this press release, which speak only as of its date. Dell Technologies does not undertake to update, and expressly disclaims any duty to update, its forward-looking statements, whether as a result of circumstances or events that arise after the date they are made, new information, or otherwise.
DELL TECHNOLOGIES INC.
Condensed Consolidated Statements of Income (Loss) and Related Financial Highlights
(in millions, except percentages; unaudited)
Three Months Ended
May 3, 2019 May 4, 2018 Change
---
Net revenue:
Products $
16,754 $
16,671 -%
Services 5,154 4,685 10%
Total net revenue 21,908 21,356 3%
Cost of net revenue:
Products 13,079 13,606 (4)%
Services 2,032 1,872 9%
Total cost of net revenue 15,111 15,478 (2)%
Gross margin 6,797 5,878 16%
Operating expenses:
Selling, general, and administrative 5,071 4,944 3%
Research and development 1,176 1,087 8%
Total operating expenses 6,247 6,031 4%
Operating income (loss) 550 (153) 459%
Interest and other, net (693) (470) (47)%
Loss before income taxes (143) (623) 77%
Income tax benefit (472) (85) (455)%
Net income (loss) 329 (538) 161%
Less: Net income attributable to non-controlling interests 36 98 63%
Net income (loss) attributable to Dell Technologies Inc. $
293 $
(636) 146%
Percentage of Total Net Revenue:
---
Gross margin 31
% 28
%
Selling, general, and administrative 23
% 23
%
Research and development 5
% 5
%
Operating expenses 29
% 28
%
Operating income (loss) 3
% (1)
%
Loss before income taxes (1)
% (3)
%
Net income (loss) 2
% (3)
%
Income tax rate 330.1
% 13.6
%
DELL TECHNOLOGIES INC.
Consolidated Statements of Financial Position
(in millions; unaudited)
May 3, 2019 February 1, 2019
---
ASSETS
Current assets:
Cash and cash equivalents $
9,040 $
9,676
Short-term investments -
Accounts receivable, net 10,517 12,371
Short-term financing receivables, net 4,277 4,398
Inventories, net 3,360 3,649
Other current assets 6,461 6,044
Total current assets 33,655 36,138
Property, plant, and equipment, net 5,505 5,259
Long-term investments 782 1,005
Long-term financing receivables, net 4,131 4,224
Goodwill 40,015 40,089
Intangible assets, net 20,948 22,270
Other non-current assets 4,856 2,835
Total assets $
109,892 $
111,820
===
LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term debt $
4,884 $
4,320
Accounts payable 18,097 19,213
Accrued and other 7,455 8,495
Short-term deferred revenue 13,043 12,944
Total current liabilities 43,479 44,972
Long-term debt 48,640 49,201
Long-term deferred revenue 11,135 11,066
Other non-current liabilities 6,525 6,327
---
Total liabilities 109,779 111,566
---
Redeemable shares 1,774 1,196
Stockholders' equity (deficit):
Total Dell Technologies Inc. stockholders' equity (deficit) (6,464) (5,765)
Non-controlling interests 4,803 4,823
Total stockholders' equity (deficit) (1,661) (942)
Total liabilities, redeemable shares, and stockholders' equity (deficit) $
109,892 $
111,820
===
DELL TECHNOLOGIES INC.
Condensed Consolidated Statements of Cash Flows
(in millions; unaudited)
Three Months Ended
May 3, 2019 May 4, 2018
---
Cash flows from operating activities:
Net income (loss) $
329 $
(538)
Adjustments to reconcile net loss to net cash provided by operating activities 353 1,697
Change in cash from operating activities 682 1,159
---
Cash flows from investing activities:
Investments:
Purchases (38) (439)
Maturities and sales 337 531
Capital expenditures (610) (273)
Proceeds from sale of facilities, land, and other assets - 10
Capitalized software development costs (106) (89)
Collections on purchased financing receivables 7 10
Acquisition of businesses, net (45)
Divestitures of businesses, net - 142
Asset acquisitions, net - (38)
Asset dispositions, net (3) (3)
---
Change in cash from investing activities (458) (149)
---
Cash flows from financing activities:
Share repurchases for tax withholdings of equity awards (215) (100)
Proceeds from the issuance of common stock of subsidiaries 133 642
Repurchases of common stock of subsidiaries (592)
Proceeds from debt 9,563 1,863
Repayments of debt (9,569) (1,822)
Other (39) (40)
Change in cash from financing activities (719) 543
---
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (36) (86)
---
Change in cash, cash equivalents, and restricted cash (531) 1,467
Cash, cash equivalents, and restricted cash at beginning of the period 10,240 14,378
Cash, cash equivalents, and restricted cash at end of the period $
9,709 $
15,845
===
DELL TECHNOLOGIES INC.
Segment Information
(in millions, except percentages; unaudited; continued on next page)
Three Months Ended
May 3, 2019 May 4, 2018 Change
---
Infrastructure Solutions Group (ISG):
---
Net Revenue:
Servers and networking $
4,180 $
4,585 (9)%
Storage 4,022 4,082 (1)%
Total ISG net revenue $
8,202 $
8,667 (5)%
Operating Income:
ISG operating income $
843 $
939 (10)%
% of ISG net revenue 10 11
% %
% of total reportable segment operating income 37 45
% %
Client Solutions Group (CSG):
---
Net Revenue:
Commercial $
8,307 $
7,363 13%
Consumer 2,603 2,908 (10)%
Total CSG net revenue $
10,910 $
10,271 6%
Operating Income:
CSG operating income $
793 $
533 49%
% of CSG net revenue 7 5
% %
% of total reportable segment operating income 35 26
% %
VMware:
---
Net Revenue:
Total VMware net revenue $
2,282 $
2,028 13%
Operating Income:
VMware operating income $
614 $
613 -%
% of VMware net revenue 27 30
% %
% of total reportable segment operating income 27 29
% %
DELL TECHNOLOGIES INC.
Segment Information
(in millions, except percentages; unaudited; continued)
Three Months Ended
May 3, 2019 May 4, 2018
---
Reconciliation to consolidated net revenue:
---
Reportable segment net revenue $
21,394 $
20,966
Other businesses (a) 596 579
Unallocated transactions (b) - (2)
Impact of purchase accounting (c) (82) (187)
Total consolidated net revenue $
21,908 $
21,356
===
Reconciliation to consolidated operating income (loss):
---
Reportable segment operating income $
2,250 $
2,085
Other businesses (a) (53) (50)
Unallocated transactions (b) (1) (9)
Impact of purchase accounting (c) (101) (222)
Amortization of intangibles (1,217) (1,522)
Transaction-related expenses (d) (42) (166)
Stock-based compensation expense (e) (263) (199)
Other corporate expenses (f) (23) (70)
Total consolidated operating income (loss) $
550 $
(153)
===
________________
(a) Pivotal, SecureWorks, RSA Security,
Virtustream, and Boomi constitute
"Other businesses" and do not meet
the requirements for a reportable
segment, either individually or
collectively. The results of
Other businesses are not material
to the Company's overall results.
(b) Unallocated transactions include
long-term incentives, certain
short-term incentive compensation
expenses, and other corporate
items that are not allocated to
Dell Technologies' reportable
segments.
(c) Impact of purchase accounting
includes non-cash purchase
accounting adjustments that are
primarily related to the EMC
merger transaction.
(d) Transaction-related expenses
includes acquisition, integration,
and divestiture related costs, as
well as the costs incurred in the
Class V transaction.
(e) Stock-based compensation expense
consists of equity awards granted
based on the estimated fair value
of those awards at grant date.
(f) Other corporate expenses includes
severance and facility action
costs.
SUPPLEMENTAL SELECTED NON-GAAP FINANCIAL MEASURES
These tables present information about the Company's non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income attributable to non-controlling interest, non-GAAP net income attributable to Dell Technologies Inc. - basic, non-GAAP net income attributable to Dell Technologies Inc. - diluted, non-GAAP earnings per share attributable to Dell Technologies Inc. - basic, non-GAAP earnings per share attributable to Dell Technologies Inc. - diluted, EBITDA, and adjusted EBITDA, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with generally accepted accounting principles in the United States of America ("GAAP"). A detailed discussion of Dell Technologies' reasons for including these non-GAAP financial measures, the limitations associated with these measures, the items excluded from these measures, and our reason for excluding those items are presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" in our periodic reports filed with the SEC. Dell Technologies encourages investors to review the non-GAAP discussion in conjunction with the presentation of non-GAAP financial measures.
DELL TECHNOLOGIES INC.
Selected Non-GAAP Financial Measures
(in millions, except percentages; unaudited)
Three Months Ended
May 3, 2019 May 4, 2018 Change
---
Non-GAAP net revenue $
21,990 $
21,543 2%
Non-GAAP gross margin $
7,434 $
6,919 7%
% of non-GAAP net revenue 34 32
% %
Non-GAAP operating expenses $
5,238 $
4,893 7%
% of non-GAAP net revenue 24 23
% %
Non-GAAP operating income $
2,196 $
2,026 8%
% of non-GAAP net revenue 10 9
% %
Non-GAAP net income (a) $
1,209 $
1,179 3%
% of non-GAAP net revenue 5 5
% %
Adjusted EBITDA $
2,573 $
2,383 8%
% of non-GAAP net revenue 12 11
% %
________________
(a) Non-GAAP net income has been
recast to exclude fair value
adjustments on equity investments,
the corresponding tax effects of
those adjustments, and discrete
tax items.
DELL TECHNOLOGIES INC.
Reconciliation of Selected Non-GAAP Financial Measures
(in millions, except percentages; unaudited; continued on next page)
Three Months Ended
May 3, 2019 May 4, 2018 Change
---
Net revenue $
21,908 $
21,356 3%
Non-GAAP adjustments:
Impact of purchase accounting 82 187
Non-GAAP net revenue $
21,990 $
21,543 2%
Gross margin $
6,797 $
5,878 16%
Non-GAAP adjustments:
Amortization of intangibles 519 710
Impact of purchase accounting 84 193
Transaction-related expenses (5) 116
Stock-based compensation expense 26 16
Other corporate expenses 13 6
Non-GAAP gross margin $
7,434 $
6,919 7%
Operating expenses $
6,247 $
6,031 4%
Non-GAAP adjustments:
Amortization of intangibles (698) (812)
Impact of purchase accounting (17) (29)
Transaction-related expenses (47) (50)
Stock-based compensation expense (237) (183)
Other corporate expenses (10) (64)
Non-GAAP operating expenses $
5,238 $
4,893 7%
Operating income (loss) $
550 $
(153) 459%
Non-GAAP adjustments:
Amortization of intangibles 1,217 1,522
Impact of purchase accounting 101 222
Transaction-related expenses 42 166
Stock-based compensation expense 263 199
Other corporate expenses 23 70
Non-GAAP operating income $
2,196 $
2,026 8%
DELL TECHNOLOGIES INC.
Reconciliation of Selected Non-GAAP Financial Measures
(in millions, except percentages; unaudited; continued)
Three Months Ended
May 3, 2019 May 4, 2018 Change
---
Net income (loss) $
329 $
(538) 161%
Non-GAAP adjustments:
Amortization of intangibles 1,217 1,522
Impact of purchase accounting 101 222
Transaction-related expenses 42 166
Stock-based compensation expense 263 199
Other corporate expenses 23 70
Fair value adjustments on equity investments (62) (107)
Aggregate adjustment for income taxes (704) (355)
Non-GAAP net income (a) $
1,209 $
1,179 3%
Net income (loss) $
329 $
(538) 161%
Adjustments:
Interest and other, net 693 470
Income tax provision (benefit) (472) (85)
Depreciation and amortization 1,616 1,914
EBITDA $
2,166 $
1,761 23%
EBITDA $
2,166 $
1,761 23%
Adjustments:
Stock-based compensation expense 263 199
Impact of purchase accounting 83 222
Transaction-related expenses 42 166
Other corporate expenses 19 35
Adjusted EBITDA $
2,573 $
2,383 8%
_________________
(a) Non-GAAP net income has been recast
to exclude fair value adjustments on
equity investments, the
corresponding tax effects of those
adjustments, and discrete tax items.
DELL TECHNOLOGIES INC.
Reconciliation of Selected Non-GAAP Financial Measures
For the Three Months Ended May 3, 2019
(in millions, except per share amounts; unaudited)
GAAP
Amortization of Impact of Transaction-
Stock-based Other Fair value Aggregate Non-
intangibles purchase related compensation corporate adjustments adjustment GAAP
accounting expenses expense expenses on equity for income
investments taxes
Net income $
329 1,217 101 42 263 23 (62) (704) $
1,209
Less: Net income attributable to non-controlling interests (a) 36 72 6 3 46 (25) (29) 109
---
Net income attributable to Dell Technologies Inc. - basic 293 1,145 95 39 217 23 (37) (675) 1,100
---
Incremental dilution from VMware, Inc. attributable to Dell Technologies Inc. (b) (8) (8)
Net income attributable to Dell Technologies Inc. - diluted $
285 $
1,092
Earnings per share - basic $
0.41 $
1.53
Earnings per share - diluted $
0.38 $
1.45
Weighted-average shares outstanding - basic 717 717
Weighted-average shares outstanding - diluted 751 751
_____________________
(a) Net income attributable to non-controlling
interests is calculated by multiplying the
minority interest percentage of VMware Inc.,
Pivotal Software Inc., and SecureWorks Corp. by
their non-GAAP net income adjustments for the
period presented.
(b) Incremental dilution from VMware, Inc.
attributable to Dell Technologies Inc.
represents the impact of VMware Inc.'s dilutive
securities on the diluted earnings per share of
Dell Technologies Inc. and is calculated by
multiplying the difference between VMware's
basic and diluted earnings per share by the
number of shares of VMware Inc. common stock
held by Dell Technologies Inc.
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