Strong Storage, VMware and PC Performance Power Dell Technologies' Third Quarter Results

ROUND ROCK, Texas, Nov. 26, 2019 /PRNewswire/ --

News summary

    --  Storage revenue up 7%; Client Solutions Group revenue up 5%
    --  VMware revenue up 11%
    --  Operating income of $836 million; non-GAAP operating income of $2.4
        billion
    --  Cash flow from operations of $1.8 billion
    --  Diluted earnings per share of $0.66; non-GAAP diluted earnings per share
        of $1.75

Full story
Dell Technologies (NYSE: DELL) announces financial results for its fiscal 2020 third quarter. Third quarter revenue was $22.8 billion, up 2 percent, and non-GAAP revenue was $22.9 billion, up 1 percent over the same period last year. Operating income was $836 million(1) compared to an operating loss of $356 million last year, and non-GAAP operating income was up 18 percent to $2.4 billion. Net income was $552 million or 2.4 percent of revenue, non-GAAP net income was $1.4 billion or 6.3 percent of non-GAAP revenue, and adjusted EBITDA was $2.9 billion or 12.5 percent of non-GAAP revenue. Cash flow from operations was $1.8 billion. Diluted earnings per share was $0.66 and non-GAAP diluted earnings per share was $1.75.

"Dell Technologies is innovating and integrating solutions across our entire portfolio to create the technology infrastructure of the future for our customers," said Jeff Clarke, vice chairman, Dell Technologies. "Our highly differentiated set of offerings enables us to continue to win in a consolidating industry, while also driving long-term value for all stakeholders."

Third Quarter Fiscal 2020 Financial Results


                                 
            
           Three Months Ended                                                             
        
              Nine Months Ended


                                November 1,                          November 2,                                      Change       November 1,                     November 2,               Change
                                       2019                                  2018                                                           2019                             2018



                                                                          
           (in millions, except percentages; unaudited)



     Total net revenue                     $
           22,844                                                     $
            22,482                            2%                    $
      68,122          $
        66,780     2%



     Operating income (loss)                  $
           836                                                      $
            (356)                         335%                     $
      1,905           $
        (522)  465%



     Net income (loss)                        $
           552                                                      $
            (895)                         162%                     $
      5,113         $
        (1,894)  370%





     Non-GAAP net revenue                  $
           22,928                                                     $
            22,651                            1%                    $
      68,372          $
        67,316     2%



     Non-GAAP operating income              $
           2,442                                                      $
            2,064                           18%                     $
      7,381           $
        6,198    19%



     Non-GAAP net income                    $
           1,445                                                      $
            1,197                           21%                     $
      4,405           $
        3,635    21%



     Adjusted EBITDA                        $
           2,857                                                      $
            2,426                           18%                     $
      8,586           $
        7,268    18%



                            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 $9.4 billion. The company repaid approximately $1.1 billion of gross debt in the quarter and approximately $3.5 billion year-to-date. The company has paid down more than $18 billion in gross debt over the three years since closing the EMC transaction and remains on track to repay approximately $5 billion of gross debt in fiscal 2020.

"This quarter's results were driven by the strength of our diverse model, with our storage, commercial client and VMware businesses performing very well," said Tom Sweet, chief financial officer, Dell Technologies. "We remain focused on long-term profitable growth, growing faster than competitors and the industry, growing operating income and EPS faster than revenue and generating strong cash flow over time."

Operating segments summary

Client Solutions Group revenue for the third quarter was $11.4 billion, up 5 percent versus the third quarter of last year. Commercial revenue grew 9 percent to $8.3 billion, and Consumer revenue was down 6 percent to $3.1 billion. Operating income was $739 million or 6.5 percent of Client Solutions Group revenue.

Key highlights:

    --  Double-digit unit and revenue growth in commercial desktops and
        workstations
    --  Outperformed the PC industry, gaining year-over-year worldwide share in
        total and commercial client units(2)
    --  Expanded PC as a service to include small businesses, offering growing
        companies full PC lifecycle management for a single, predictable price
        per month

Infrastructure Solutions Group revenue for the third quarter was $8.4 billion, a 6 percent decrease year-over-year. Storage revenue was $4.1 billion, up 7 percent year-over-year, while servers and networking decreased 16 percent to $4.2 billion. Operating income was $1.0 billion for the third quarter or 11.9 percent of Infrastructure Solutions Group revenue.

Key highlights:

    --  Strong adoption of the Dell Technologies Cloud with recent customer wins
        in the logistics, transportation, financial, communications and retail
        sectors
    --  Continued strong demand for our leading HCI solutions, with VxRail
        orders up 82 percent year-over-year
    --  Announced availability of Dell EMC PowerOne autonomous infrastructure to
        make deploying, managing and consuming IT easier for organizations

VMware revenue was $2.5 billion for the third quarter, up 11 percent driven by broad-based strength across a diverse product portfolio. Operating income for the third quarter was $717 million, or 28.9 percent of VMware revenue.

Earlier this month at the Dell Technologies Summit, the company ushered in a new decade of responsibility and innovation with the announcement of moonshot goals that will propel the company's social impact worldwide. The ambitious goals are the linchpin of the company's 2030 Progress Made Real plan, and are grounded in the belief that technology and data combined with human spirit are, and will always be, positive forces in the world.

Conference call information
As previously announced, the company will hold a conference call to discuss its third quarter performance and financial guidance today, November 26, 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 (C) 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 (PDC)
                                Tracker CY19Q3.

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 interests, 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 including tariffs and other effects of trade 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                                                                                                 
             
              Nine Months Ended


                                                                             November 1,                             November 2,                                           Change                                         November 1,                      November 2,                     Change
                                                                                    2019                                     2018                                                                                                  2019                              2018

                                                                                                                                                                                                                                                                                               ---


              Net revenue:



              Products                                                                   $
          17,485                                                           $
              17,625                                                          (1)%                         $
        52,349                           $
       52,445     -%



              Services                                                            5,359                                                    4,857                                                10%                                         15,773                                14,335                    10%



              Total net revenue                                                  22,844                                                   22,482                                                 2%                                         68,122                                66,780                     2%




              Cost of net revenue:



              Products                                                           13,558                                                   14,565                                               (7)%                                         40,526                                43,114                   (6)%



              Services                                                            2,160                                                    1,974                                                 9%                                          6,347                                 5,722                    11%



              Total cost of net revenue                                          15,718                                                   16,539                                               (5)%                                         46,873                                48,836                   (4)%




              Gross margin                                                        7,126                                                    5,943                                                20%                                         21,249                                17,944                    18%



              Operating expenses:



              Selling, general, and administrative                                5,028                                                    5,159                                               (3)%                                         15,677                                15,064                     4%



              Research and development                                            1,262                                                    1,140                                                11%                                          3,667                                 3,402                     8%



              Total operating expenses                                            6,290                                                    6,299                                                                                    -%                          19,344                         18,466                    5%




              Operating income (loss)                                               836                                                    (356)                                              335%                                          1,905                                 (522)                  465%



              Interest and other, net                                             (677)                                                   (639)                                              (6)%                                        (2,000)                              (1,564)                 (28)%




              Income (loss) before income taxes                                     159                                                    (995)                                              116%                                           (95)                              (2,086)                   95%



              Income tax benefit                                                  (393)                                                   (100)                                            (293)%                                        (5,208)                                (192)                             
       NM




              Net income (loss)                                                     552                                                    (895)                                              162%                                          5,113                               (1,894)                  370%



              Less: Net income (loss)                                                53                                                     (19)                                              379%                                            905                                   117                   674%
    attributable to non-controlling
    interests



              Net income (loss) attributable                                                $
          499                                                            $
              (876)                                                         157%                          $
        4,208                          $
       (2,011)  309%
    to Dell Technologies Inc.






              
                
                  Percentage of Total Net Revenue:

    ---


              Gross margin                                                 31
            %                                            26
            %                                                                                                          31
            %                  27
            %



              Selling, general, and administrative                         22
            %                                            23
            %                                                                                                          23
            %                  23
            %



              Research and development                                      6
            %                                             5
            %                                                                                                           5
            %                   5
            %



              Operating expenses                                           28
            %                                            28
            %                                                                                                          28
            %                  28
            %



              Operating income (loss)                                       4
            %                                           (2)
            %                                                                                                           3
            %                 (1)
            %



              Income (loss) before income taxes                             1
            %                                           (4)
            %                                                                                                                          %            (3)
            %



              Net income (loss)                                             2
            %                                           (4)
            %                                                                                                           8
            %                 (3)
            %



              Income tax rate                                                   (247.2)                                          10.1
            %                                                                                                                5482.1
                                                                                       %                                                                                                                                                                               %                 9.2
            %


                                                                                    
              
                DELL TECHNOLOGIES INC.

                                                                                 
      
                Consolidated Statements of Financial Position

                                                                                   
              
                (in millions; unaudited)






                                                                                                                                                    November 1,              February 1,
                                                                                                                                                           2019                      2019

                                                                                                                                                                                     ---

                                                                                            
              
                ASSETS



     Current assets:



     Cash and cash equivalents                                                                                                                                   $
       8,555                         $
       9,676



     Accounts receivable, net                                                                                                                           11,447                             12,371



     Short-term financing receivables, net                                                                                                               4,589                              4,398



     Inventories, net                                                                                                                                    3,257                              3,649



     Other current assets                                                                                                                                6,924                              6,044



     Total current assets                                                                                                                               34,772                             36,138



     Property, plant, and equipment, net                                                                                                                 5,787                              5,259



     Long-term investments                                                                                                                                 838                              1,005



     Long-term financing receivables, net                                                                                                                4,465                              4,224



     Goodwill                                                                                                                                           41,688                             40,089



     Intangible assets, net                                                                                                                             19,174                             22,270



     Other non-current assets                                                                                                                           10,090                              2,835




     Total assets                                                                                                                                              $
       116,814                       $
       111,820





                                                                               
     
        LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS' EQUITY (DEFICIT)



     Current liabilities:



     Short-term debt                                                                                                                                             $
       7,664                         $
       4,320



     Accounts payable                                                                                                                                   19,443                             19,213



     Accrued and other                                                                                                                                   8,161                              8,495



     Short-term deferred revenue                                                                                                                        13,787                             12,944



     Total current liabilities                                                                                                                          49,055                             44,972



     Long-term debt                                                                                                                                     44,727                             49,201



     Long-term deferred revenue                                                                                                                         12,116                             11,066



     Other non-current liabilities                                                                                                                       6,105                              6,327




     Total liabilities                                                                                                                                 112,003                            111,566




     Redeemable shares                                                                                                                                     934                              1,196



     Stockholders' equity (deficit):



     Total Dell Technologies Inc. stockholders' equity (deficit)                                                                                       (1,804)                           (5,765)



     Non-controlling interests                                                                                                                           5,681                              4,823




     Total stockholders' equity (deficit)                                                                                                                3,877                              (942)



     Total liabilities, redeemable shares, and stockholders' equity (deficit)                                                                                  $
       116,814                       $
       111,820


                                                                                               
              
                DELL TECHNOLOGIES INC.

                                                                                      
          
                Condensed Consolidated Statements of Cash Flows

                                                                                              
              
                (in millions; unaudited)






                                                                                              Three Months Ended                                                            Nine Months Ended


                                                                          November 1,                                           November 2,               November 1,                         November 2,
                                                                                 2019                                                   2018                       2019                                 2018

                                                                                                                                                                                                      ---


              Cash flows from operating activities:



              Net income (loss)                                                          $
          552                                                                    $
            (895)                     $
         5,113   $
       (1,894)



              Adjustments to reconcile net income (loss) to net                1,269                                                              1,728                                                670           6,519
    cash provided by operating activities



              Change in cash from operating activities                         1,821                                                                833                                              5,783           4,625




              Cash flows from investing activities:



              Investments:



              Purchases                                                         (72)                                                              (24)                                             (142)          (912)



              Maturities and sales                                                19                                                                863                                                449           2,185



              Capital expenditures                                             (529)                                                             (300)                                           (1,612)          (861)



              Capitalized software development costs                            (80)                                                              (86)                                             (264)          (246)



              Acquisition of businesses, net                                 (2,045)                                                             (493)                                           (2,429)          (493)



              Divestitures of businesses, net                                      -                                                                                                                                142



              Asset acquisitions, net                                            (8)                                                              (21)                                               (8)           (59)



              Asset dispositions, net                                              -                                                               (6)                                               (3)           (12)



              Other                                                               16                                                                  8                                                 27              35




              Change in cash from investing activities                       (2,699)                                                              (59)                                           (3,982)          (221)




              Cash flows from financing activities:



              Share repurchases for tax withholdings of equity awards           (44)                                                              (52)                                             (407)          (251)



              Proceeds from the issuance of common stock of subsidiaries         143                                                                114                                                294             767



              Repurchases of common stock of subsidiaries                      (241)                                                               (1)                                           (1,285)            (1)



              Proceeds from debt                                               5,455                                                              1,806                                             17,656           6,443



              Repayments of debt                                             (5,037)                                                           (2,721)                                          (18,948)        (9,669)



              Other                                                               46                                                                (3)                                                90           (133)



              Change in cash from financing activities                           322                                                              (857)                                           (2,600)        (2,844)




              Effect of exchange rate changes on cash, cash                     (38)                                                              (46)                                             (100)          (262)
    equivalents, and restricted cash




              Change in cash, cash equivalents, and restricted cash            (594)                                                             (129)                                             (899)          1,298



              Cash, cash equivalents, and restricted cash at                   9,935                                                             15,805                                             10,240          14,378
    beginning of the period



              Cash, cash equivalents, and restricted cash at end of                    $
          9,341                                                                   $
            15,676                      $
         9,341    $
       15,676
    the period


                                                                                                                         
              
                DELL TECHNOLOGIES INC.

                                                                                                                           
              
                Segment Information

                                                                                                               
     
            (in millions, except percentages; unaudited; continued on next page)






                                                                          
              
           Three Months Ended                                                                                  
        
              Nine Months Ended


                                                                          November 1,                              November 2,                                         Change                      November 1,                     November 2,                Change
                                                                                 2019                                      2018                                                                             2019                             2018

                                                                                                                                                                                                                                                                 ---


       
                
                  Infrastructure Solutions Group (ISG):

    ---


       Net Revenue:



       Servers and networking                                                          $
          4,241                                                           $
              5,054                                      (16)%                      $
      12,858                 $
      14,700 (13)%



       Storage                                                                 4,149                                                   3,883                                                 7%                      12,355                           12,131             2%



       Total ISG net revenue                                                           $
          8,390                                                           $
              8,937                                       (6)%                      $
      25,213                 $
      26,831  (6)%






       Operating Income:



       ISG operating income                                                              $
          996                                                             $
              935                                         7%                       $
      2,889                  $
      2,886    -%




       
                % of ISG net revenue                                          12                                                      10                                                                                                 11                     11
                                                                                    %                                                      %                                                                                                   %                     %



       
                % of total reportable segment operating income                41                                                      43                                                                                                 39                     45
                                                                                    %                                                      %                                                                                                   %                     %





       
                
                  Client Solutions Group (CSG):

    ---


       Net Revenue:



       Commercial                                                                      $
          8,330                                                           $
              7,613                                         9%                      $
      25,714                 $
      23,085   11%



       Consumer                                                                3,080                                                   3,292                                               (6)%                       8,354                            9,219           (9)%



       Total CSG net revenue                                                          $
          11,410                                                          $
              10,905                                         5%                      $
      34,068                 $
      32,304    5%






       Operating Income:



       CSG operating income                                                              $
          739                                                             $
              447                                        65%                       $
      2,514                  $
      1,405   79%




       
                % of CSG net revenue                                           6                                                       4                                                                                                  7                      4
                                                                                    %                                                      %                                                                                                   %                     %



       
                % of total reportable segment operating income                30                                                      21                                                                                                 34                     22
                                                                                    %                                                      %                                                                                                   %                     %





       
                
                  VMware:

    ---


       Net Revenue:



       Total VMware net revenue                                                        $
          2,483                                                           $
              2,229                                        11%                       $
      7,231                  $
      6,451   12%






       Operating Income:



       VMware operating income                                                           $
          717                                                             $
              768                                       (7)%                       $
      2,093                  $
      2,117  (1)%




       
                % of VMware net revenue                                       29                                                      34                                                                                                 29                     33
                                                                                    %                                                      %                                                                                                   %                     %



       
                % of total reportable segment operating income                29                                                      36                                                                                                 28                     33
                                                                                    %                                                      %                                                                                                   %                     %


                                                                                                                               
          
                DELL TECHNOLOGIES INC.

                                                                                                                                
          
                Segment Information

                                                                                                              
              
            (in millions, except percentages; unaudited; continued)






                                                                                                               Three Months Ended                                                                           Nine Months Ended


                                                                                            November 1,                                       November 2,                                 November 1,                         November 2,
                                                                                                   2019                                               2018                                         2019                                 2018

                                                                                                                                                                                                                                      ---


       
                
                  Reconciliation to consolidated net revenue:

    ---


       Reportable segment net revenue                                                                  $
           22,283                                                                                 $
            22,071                     $
         66,512  $
      65,586



       Other businesses (a)                                                                        644                                                            583                                                                1,859           1,736



       Unallocated transactions (b)                                                                  1                                                            (3)                                                                   1             (6)



       Impact of purchase accounting (c)                                                          (84)                                                         (169)                                                               (250)          (536)



       Total consolidated net revenue                                                                  $
           22,844                                                                                 $
            22,482                     $
         68,122  $
      66,780






       
                
                  Reconciliation to consolidated operating income (loss):

    ---


       Reportable segment operating income                                                              $
           2,452                                                                                  $
            2,150                      $
         7,496   $
      6,408



       Other businesses (a)                                                                        (8)                                                          (40)                                                                (86)          (139)



       Unallocated transactions (b)                                                                (2)                                                          (46)                                                                (29)           (71)



       Impact of purchase accounting (c)                                                          (96)                                                         (193)                                                               (299)          (630)



       Amortization of intangibles                                                             (1,057)                                                       (1,546)                                                             (3,334)        (4,594)



       Transaction-related expenses (d)                                                           (76)                                                         (167)                                                               (165)          (437)



       Stock-based compensation expense (e)                                                      (322)                                                         (256)                                                               (886)          (671)



       Other corporate expenses (f)                                                               (55)                                                         (258)                                                               (792)          (388)



       Total consolidated operating income (loss)                                                         $
           836                                                                                  $
            (356)                     $
         1,905   $
      (522)





               (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
                                  includes 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
                                  that closed in
                                  September 2016.


               (d)               Transaction-
                                  related expenses
                                  includes
                                  acquisition,
                                  integration, and
                                  divestiture
                                  related costs, as
                                  well as the costs
                                  incurred in the
                                  Class V
                                  transaction that
                                  closed in December
                                  2018.


               (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
                                  impairment charges
                                  and severance,
                                  facility action,
                                  and other 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 interests, 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 these reports 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                                                                       
        
              Nine Months Ended


                                             November 1,                         November 2,                           Change                            November 1,                     November 2,               Change
                                                    2019                                 2018                                                                     2019                             2018

                                                                                                                                                                                                                      ---


     Non-GAAP net revenue                                $
        22,928                                         $
              22,651                                               1%                      $
      68,372           $
      67,316  2%



     Non-GAAP gross margin                                $
        7,768                                          $
              7,000                                              11%                      $
      23,188           $
      20,985 10%



     
                % of non-GAAP net revenue          34                                          31                                                                                                34                    31
                                                       %                                          %                                                                                                  %                    %



     Non-GAAP operating expenses                          $
        5,326                                          $
              4,936                                               8%                      $
      15,807           $
      14,787  7%



     
                % of non-GAAP net revenue          23                                          22                                                                                                23                    22
                                                       %                                          %                                                                                                  %                    %



     Non-GAAP operating income                            $
        2,442                                          $
              2,064                                              18%                       $
      7,381            $
      6,198 19%



     
                % of non-GAAP net revenue          11                                           9                                                                                                11                     9
                                                       %                                          %                                                                                                  %                    %



     Non-GAAP net income (a)                              $
        1,445                                          $
              1,197                                              21%                       $
      4,405            $
      3,635 21%



     
                % of non-GAAP net revenue           6                                           5                                                                                                 6                     5
                                                       %                                          %                                                                                                  %                    %



     Adjusted EBITDA                                      $
        2,857                                          $
              2,426                                              18%                       $
      8,586            $
      7,268 18%



     
                % of non-GAAP net revenue          12                                          11                                                                                                13                    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                                                                                        
        
              Nine Months Ended


                                       November 1,                             November 2,                                     Change                                 November 1,                     November 2,                 Change
                                              2019                                     2018                                                                                    2019                             2018

                                                                                                                                                                                                                                     ---


     Net revenue                                   $
          22,844                                                     $
              22,482                                                    2%                       $
       68,122              $
       66,780     2%



     Non-GAAP adjustments:



     Impact of purchase accounting             84                                                169                                                                                                           250                       536



     Non-GAAP net revenue                          $
          22,928                                                     $
              22,651                                                    1%                       $
       68,372              $
       67,316     2%






     Gross margin                                   $
          7,126                                                      $
              5,943                                                   20%                       $
       21,249              $
       17,944    18%



     Non-GAAP adjustments:



     Amortization of intangibles              517                                                726                                                                                                         1,555                     2,154



     Impact of purchase accounting             86                                                171                                                                                                           255                       549



     Transaction-related expenses               -                                               102                                                                                                           (5)                      239



     Stock-based compensation expense          33                                                 20                                                                                                            91                        54



     Other corporate expenses                   6                                                 38                                                                                                            43                        45



     Non-GAAP gross margin                          $
          7,768                                                      $
              7,000                                                   11%                       $
       23,188              $
       20,985    10%






     Operating expenses                             $
          6,290                                                      $
              6,299                                                    -%                      $
       19,344              $
       18,466     5%



     Non-GAAP adjustments:



     Amortization of intangibles            (540)                                             (820)                                                                                                      (1,779)                  (2,440)



     Impact of purchase accounting           (10)                                              (22)                                                                                                         (44)                     (81)



     Transaction-related expenses            (76)                                              (65)                                                                                                        (170)                    (198)



     Stock-based compensation expense       (289)                                             (236)                                                                                                        (795)                    (617)



     Other corporate expenses                (49)                                             (220)                                                                                                        (749)                    (343)



     Non-GAAP operating expenses                    $
          5,326                                                      $
              4,936                                                    8%                       $
       15,807              $
       14,787     7%






     Operating income (loss)                          $
          836                                                      $
              (356)                                                 335%                        $
       1,905               $
       (522)  465%



     Non-GAAP adjustments:



     Amortization of intangibles            1,057                                              1,546                                                                                                         3,334                     4,594



     Impact of purchase accounting             96                                                193                                                                                                           299                       630



     Transaction-related expenses              76                                                167                                                                                                           165                       437



     Stock-based compensation expense         322                                                256                                                                                                           886                       671



     Other corporate expenses                  55                                                258                                                                                                           792                       388



     Non-GAAP operating income                      $
          2,442                                                      $
              2,064                                                   18%                        $
       7,381               $
       6,198    19%


                                                                                                  
          
                DELL TECHNOLOGIES INC.

                                                                                       
         
            Reconciliation of Selected Non-GAAP Financial Measures

                                                                                       
         
            (in millions, except percentages; unaudited; continued)






                                                                    Three Months Ended                                                                        
        
              Nine Months Ended


                                                   November 1,                           November 2,                                     Change                 November 1,                     November 2,               Change
                                                          2019                                   2018                                                                    2019                             2018

                                                                                                                                                                                                                            ---


     Net income (loss)                                          $
         552                                                      $
              (895)                                  162%                       $
      5,113             $
        (1,894)  370%



     Non-GAAP adjustments:



     Amortization of intangibles                        1,057                                            1,546                                                                                         3,334                  4,594



     Impact of purchase accounting                         96                                              193                                                                                           299                    630



     Transaction-related expenses                          76                                              167                                                                                           165                    437



     Stock-based compensation expense                     322                                              256                                                                                           886                    671



     Other corporate expenses                              55                                              258                                                                                           792                    388



     Fair value adjustments on equity investments        (18)                                              17                                                                                         (160)                 (229)



     Aggregate adjustment for income taxes              (695)                                           (345)                                                                                      (6,024)                 (962)




     Non-GAAP net income (a)                                  $
         1,445                                                      $
              1,197                                    21%                       $
      4,405               $
        3,635    21%






     Net income (loss)                                          $
         552                                                      $
              (895)                                  162%                       $
      5,113             $
        (1,894)  370%



     Adjustments:



     Interest and other, net                              677                                              639                                                                                         2,000                  1,564



     Income tax benefit                                 (393)                                           (100)                                                                                      (5,208)                 (192)



     Depreciation and amortization                      1,494                                            1,961                                                                                         4,608                  5,806



     EBITDA                                                   $
         2,330                                                      $
              1,605                                    45%                       $
      6,513               $
        5,284    23%






     EBITDA                                                   $
         2,330                                                      $
              1,605                                    45%                       $
      6,513               $
        5,284    23%



     Adjustments:



     Stock-based compensation expense                     322                                              256                                                                                           886                    671



     Impact of purchase accounting                         84                                              169                                                                                           251                    536



     Transaction-related expenses                          76                                              158                                                                                           165                    409



     Other corporate expenses                              45                                              238                                                                                           771                    368



     Adjusted EBITDA                                          $
         2,857                                                      $
              2,426                                    18%                       $
      8,586               $
        7,268    18%





                                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
               (a)                items.


                                                                                                                                                       
              
                DELL TECHNOLOGIES INC.

                                                                                                                                       
              
                Reconciliation of Selected Non-GAAP Financial Measures

                                                                                                                                             
              
                For the Three Months Ended November 1, 2019

                                                                                                                                         
              
                (in millions, except per share amounts; unaudited)






                                                                   GAAP                      Amortization of                Impact of                 Transaction-                                     Stock-based                 Other                Fair value                    Aggregate    Non-GAAP
                                                                                 intangibles                      purchase                 related                                       compensation                    corporate          adjustments                    adjustment
                                                                                                                 accounting               expenses                                          expense                       expenses           on equity                     for income
                                                                                                                                                                                                                                            investments                       taxes

                                                                                                                                                                                                                                                                                                        ---


              Net income                                                $
      552                                                 1,057                                      96                                                           76                            322                                  55                (18)         (695)           $
     1,445



              Less: Net income attributable to non-controlling      53                                       75                                                   5                                                  13                                            55                                                     (50)          (27)          124
    interests (a)




              Net income attributable to Dell Technologies Inc. -  499                                      982                                                  91                                                  63                                           267                          55                  32             (668)         1,321
    basic




              Incremental dilution from VMware, Inc. attributable  (6)                                                                                                                                                                                                                                        (6)
    to Dell Technologies Inc. (b)




              Net income attributable to Dell Technologies Inc. -       $
      493                                                                                                                                                                                                                                    $
      1,315
    diluted






              Earnings per share - basic                               $
      0.69                                                                                                                                                                                                                                     $
      1.82



              Earnings per share - diluted                             $
      0.66                                                                                                                                                                                                                                     $
      1.75





              Weighted-average shares outstanding - basic          725                                                                                                                                                                                                                                         725



              Weighted-average shares outstanding - diluted        750                                                                                                                                                                                                                                         750





               (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, Inc.'s
                                  basic and diluted
                                  earnings per share
                                  by the number of
                                  shares of VMware,
                                  Inc. common stock
                                  held by Dell
                                  Technologies Inc.


                                                                                                                                                         
              
                DELL TECHNOLOGIES INC.

                                                                                                                                           
             
               Reconciliation of Selected Non-GAAP Financial Measures

                                                                                                                                                
             
                For the Nine Months Ended November 1, 2019

                                                                                                                                             
             
               (in millions, except per share amounts; unaudited)






                                                                    GAAP                       Amortization of                  Impact of                 Transaction-                                     Stock-based                Other                Fair value                    Aggregate     Non-GAAP
                                                                                   intangibles                         purchase                 related                                      compensation                   corporate          adjustments                    adjustment
                                                                                                                     accounting                expenses                                        expense                       expenses           on equity                     for income
                                                                                                                                                                                                                                               investments                       taxes

                                                                                                                                                                                                                                                                                                            ---


              Net income                                                $
      5,113                                                   3,334                                     299                                                         165                            886                                   792                   (160)         (6,024)           $
     4,405



              Less: Net income attributable to non-controlling      905                                         219                                                  17                                                 18                                           152                                                             24            (971)         364
    interests (a)




              Net income attributable to Dell Technologies Inc. - 4,208                                       3,115                                                 282                                                147                                           734                          792                    (184)             (5,053)         4,041
    basic




              Incremental dilution from VMware, Inc. attributable  (81)                                                                                                                                                                                                                                            (25)
    to Dell Technologies Inc. (b)




              Net income attributable to Dell Technologies Inc. -       $
      4,127                                                                                                                                                                                                                                           $
      4,016
    diluted






              Earnings per share - basic                                 $
      5.84                                                                                                                                                                                                                                            $
      5.61



              Earnings per share - diluted                               $
      5.50                                                                                                                                                                                                                                            $
      5.35





              Weighted-average shares outstanding - basic           720                                                                                                                                                                                                                                              720



              Weighted-average shares outstanding - diluted         750                                                                                                                                                                                                                                              750





               (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, Inc.'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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SOURCE Dell Technologies