Revenue of $490 Million
Non-GAAP Operating Margin of 22%; GAAP Operating Margin of 5%
Non-GAAP Diluted EPS of $0.24; GAAP Diluted EPS of $0.09
PALO ALTO, CA--(Marketwire - October 21, 2009) - VMware, Inc. (
US revenues for the third quarter declined 1% to $246 million from the third quarter of 2008. International revenues for the third quarter grew 9% to $244 million from the third quarter of 2008.
Services revenues, which include software maintenance and professional services, were $250 million, an increase of 33% from the third quarter of 2008.
"In addition to achieving strong financial results in the quarter, we extended the value of our vSphere Platform with the delivery of the VMware vCenter Family of management products and the public availability of vCloud Express," said Paul Maritz, president and chief executive officer. "VMware is well positioned to help take our customers on an evolutionary path forward, one that offers a superior platform for both private and public cloud environments. As our portfolio grows in the fourth quarter with the anticipated release of VMware View 4 for the desktop, we expect customers to increasingly turn to VMware to help them simplify IT."
"Our solid third quarter results were driven by strength in the US Federal sector, increased transaction volumes and particularly robust growth in our maintenance renewals," said Mark Peek, chief financial officer. "While the economic environment remains challenging, we have improved visibility into our business and believe that the next two quarters will follow seasonal patterns. We are planning fourth quarter revenues to be between $540 and $560 million, with the first quarter of 2010 down sequentially."
Recent Strategic Announcements and Highlights
VMware plans to host a conference call today to review its third quarter results and to discuss its financial outlook. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed via the Web at http://ir.vmware.com. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 30 days.
Use of Non-GAAP Financial Measures
VMware has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. These non-GAAP financial measures, which are used as measures of VMware's performance, should be considered in addition to, not as a substitute for or in isolation from, measures of VMware's financial performance prepared in accordance with GAAP. These measures differ from GAAP in that they exclude stock-based compensation, amortization of intangible assets, employer payroll tax on employee stock transactions, acquisition related items, the net effect of the amortization and capitalization of software development costs. VMware's bases for these adjustments are described below.
VMware's management uses the non-GAAP financial measures referenced in this release and shown in the accompanying schedules to gain an understanding of VMware's comparative operating results (when comparing such results with previous periods or forecasts) and its future prospects and excludes the above-listed items from its internal operating plans and measurement of financial performance, including budgeting, calculating bonus payments, and forecasting future periods. These non-GAAP financial measures are used by VMware's management in their financial and operating decision-making because management believes they reflect VMware's ongoing business in a manner that allows meaningful period-to-period comparisons. As the non-GAAP financial measures exclude expenses that VMware believes are not reflective of ongoing operating results, management believes the non-GAAP financial measures enable management to better analyze trends in its business. When evaluating the performance of our individual functional groups, VMware does not consider the above-listed items that it excludes from its non-GAAP financial measures. Likewise, VMware excludes such items from its short and long-term operating plans. VMware's management also believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating VMware's current operating results and future prospects in the same manner as management does, if they so choose, and (b) an additional basis for comparing in a consistent manner VMware's current financial results with VMware's past financial results.
In addition to the foregoing, management believes that these non-GAAP measures are useful to investors and others in assessing VMware's operating performance due to the following factors:
In addition we provide measures of non-GAAP operating cash flows for the quarter and the trailing twelve month periods ending September 30, 2009 and 2008. Our definition of non-GAAP operating cash flows excludes the effects of capitalized software development costs and excess tax benefits related to stock-based compensation. VMware uses non-GAAP operating cash flows, among other measures, to evaluate the ability of our operations to generate cash. We exclude the capitalization of software under generally accepted accounting guidance from our non-GAAP operating cash flows to reflect management's perspective in assessing our operating results. If we did not capitalize costs under generally accepted accounting guidance, our GAAP operating cash flows would be lower as a result of additional expense recognized within net income and paid out in cash during the period. In addition, we account for share-based compensation under generally accepted accounting guidance, which requires that we report the excess income tax benefit from share-based compensation as a financing cash flow rather than as an operating cash flow. We have added this benefit back to our calculation of non-GAAP operating cash flows in order to generally classify cash flows arising from income taxes as operating cash flows. Management believes that information regarding non-GAAP operating cash flows provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, fund ongoing operations and to fund capital expenditures. Additionally, as non-GAAP operating cash flow is not a measure of liquidity calculated in accordance with GAAP, non-GAAP operating cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.
VMware's non-GAAP financial measures may be defined differently than similar terms used by other companies and, accordingly, may not be comparable to similarly-titled non-GAAP financial measures used by other companies. There are significant limitations associated with the use of non-GAAP financial measures. Specifically, the non-GAAP financial measures that exclude stock-based compensation, intangible amortization, acquisition related items and the net effect of the amortization and capitalization of software development costs. do not include all items of income and expense that affect VMware's operations. More specifically, in the case of stock-based compensation, if VMware did not pay out a portion of its compensation in the form of stock-based compensation and related employer payroll taxes, the cash salary expense included in costs of revenues and operating expenses would be higher. Payment of employer payroll taxes on stock-based compensation is also a cash expense for VMware and impacts the Company's cash position. In the case of intangible amortization, while not directly affecting VMware's cash position, it represents the loss of value of intangible assets over time. A limitation of non-GAAP operating cash flows is that it cannot be combined with GAAP cash flows from investing and financing activities to yield the total increase or decrease in the cash balance for the periods reported. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company's unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period. As a result, non-GAAP net income and non-GAAP net income per share, which exclude this expense, do not reflect the full economic loss in value of those intangible assets. Management compensates for these limitations by reconciling the non-GAAP financial measures to VMware's financial results as determined in accordance with GAAP, which reconciliations are set forth in the accompanying schedules to this release, in the current report on Form 8-K furnished to the SEC on the date hereof and on http://ir.vmware.com.
Forward-Looking Statements
Statements made in this press release which are not statements of historical fact are forward-looking statements and are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate, but are not limited, to our financial outlook for the fourth quarter of 2009 and the first quarter of 2010, expectations for information technology spending, customer adoption of our technology platform, the superiority of our technology platform, the timing of new product releases and updates, and deployment of our products by customers. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in consumer or information technology spending; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization market, and new product and marketing initiatives by our competitors; (iv) factors that affect timing of license revenue recognition such as product announcements and beta programs; (v) our customers' ability to develop, and to transition to, new products, (vi) the uncertainty of customer acceptance of emerging technology; (vii) rapid technological and market changes in virtualization software and platforms for cloud and desktop computing; (viii) changes to product development timelines; (ix) VMware's relationship with EMC Corporation, and EMC's ability to control matters requiring stockholder approval, including the election of VMware's board members; (x) our ability to protect our proprietary technology; (xi) our ability to attract and retain highly qualified employees; and (xii) fluctuating currency exchange rates.
Ongoing uncertainty in global economic conditions including the timing and extent of recovery from the recent economic downturn poses a risk to the information technology spending as consumers and businesses may continue to defer purchases in response to tighter credit and negative financial news, which could negatively affect product demand and other related matters. Consequently, demand for VMware products could be different from VMware's expectations due to factors including changes in business and economic conditions, including conditions in the credit market that could affect consumer confidence; customer acceptance of VMware's and competitors' products; changes in customer order and payment patterns; changes in the willingness of customers to enter into longer term licensing and support arrangements, the ability of third party service providers to fulfill their obligations to us and the ability of our channel partners to pursue joint development and marketing initiatives with us.
These forward looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including our most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that we may file from time to time, which could cause actual results to vary from expectations. VMware disclaims any obligation to update any such forward-looking statements after the date of this release.
About VMware
VMware delivers solutions for business infrastructure virtualization that enable IT organizations to energize businesses of all sizes. With the industry leading virtualization platform -- VMware vSphere™ -- customers rely on VMware to reduce capital and operating expenses, improve agility, ensure business continuity, strengthen security and go green. With 2008 revenues of $1.9 billion, more than 150,000 customers and 22,000 partners, VMware is the leader in virtualization which consistently ranks as a top priority among CIOs. VMware is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.
VMware is a registered trademark or trademark of VMware, Inc. in the United States and/or other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective companies.
VMware, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands, except per share amounts) | ||||||||
(unaudited) | ||||||||
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,176,161 | $ | 1,840,812 | ||||
Accounts receivable, less allowance for doubtful accounts of $1,665 and $1,690 | 255,700 | 338,014 | ||||||
Deferred tax asset, current portion | 54,810 | 44,573 | ||||||
Income taxes receivable from EMC | — | 111,050 | ||||||
Other current assets | 75,462 | 55,639 | ||||||
Total current assets | 2,562,133 | 2,390,088 | ||||||
Property and equipment, net | 407,739 | 418,212 | ||||||
Capitalized software development costs, net and other | 161,002 | 134,553 | ||||||
Deferred tax asset, net of current portion | 99,878 | 68,280 | ||||||
Intangible assets, net | 98,617 | 56,984 | ||||||
Goodwill | 1,113,411 | 771,088 | ||||||
Total assets | $ | 4,442,780 | $ | 3,839,205 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 36,390 | $ | 74,708 | ||||
Accrued expenses | 237,607 | 211,519 | ||||||
Due to EMC, net | 23,304 | 33,407 | ||||||
Income taxes payable | 4,607 | 15,761 | ||||||
Deferred revenue, current portion | 645,464 | 544,355 | ||||||
Total current liabilities | 947,372 | 879,750 | ||||||
Note payable to EMC | 450,000 | 450,000 | ||||||
Deferred revenue, net of current portion | 344,165 | 325,634 | ||||||
Deferred tax liability | 62,954 | 47,825 | ||||||
Other liabilities | 89,088 | 65,929 | ||||||
Total liabilities | 1,893,579 | 1,769,138 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Class A common stock, par value $.01; authorized 2,500,000 shares; issued and outstanding 99,798 and 90,448 shares | 998 | 904 | ||||||
Class B convertible common stock, par value $.01; authorized 1,000,000 shares; issued and outstanding 300,000 shares | 3,000 | 3,000 | ||||||
Additional paid-in capital | 2,197,144 | 1,836,513 | ||||||
Accumulated other comprehensive income | 3,026 | — | ||||||
Retained earnings | 345,033 | 229,650 | ||||||
Total stockholders' equity | 2,549,201 | 2,070,067 | ||||||
Total liabilities and stockholders' equity | $ | 4,442,780 | $ | 3,839,205 | ||||
VMware, Inc. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
(unaudited) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues: | ||||||||||||||||
License | $ | 240,271 | $ | 285,086 | $ | 725,236 | $ | 863,299 | ||||||||
Services | 249,480 | 187,035 | 690,500 | 503,125 | ||||||||||||
489,751 | 472,121 | 1,415,736 | 1,366,424 | |||||||||||||
Operating expenses: | ||||||||||||||||
Cost of license revenues | 37,529 | 21,535 | 85,741 | 66,033 | ||||||||||||
Cost of services revenues | 58,544 | 52,919 | 166,481 | 166,122 | ||||||||||||
Research and development | 133,509 | 85,315 | 360,290 | 318,698 | ||||||||||||
Sales and marketing | 185,222 | 167,914 | 506,787 | 475,478 | ||||||||||||
General and administrative | 51,711 | 43,418 | 148,299 | 129,682 | ||||||||||||
Operating income | 23,236 | 101,020 | 148,138 | 210,411 | ||||||||||||
Investment income | 1,621 | 7,654 | 7,179 | 21,968 | ||||||||||||
Interest expense with EMC, net | (1,319 | ) | (3,823 | ) | (5,992 | ) | (13,221 | ) | ||||||||
Other income (expense), net | 8,336 | (1,321 | ) | 6,887 | (497 | ) | ||||||||||
Income before income taxes | 31,874 | 103,530 | 156,212 | 218,661 | ||||||||||||
Income tax provision (benefit) | (6,345 | ) | 20,242 | 15,523 | 39,982 | |||||||||||
Net income | $ | 38,219 | $ | 83,288 | $ | 140,689 | $ | 178,679 | ||||||||
Net income per weighted-average share, basic for Class A and Class B | $ | 0.10 | $ | 0.21 | $ | 0.36 | $ | 0.47 | ||||||||
Net income per weighted-average share, diluted for Class A and Class B | $ | 0.09 | $ | 0.21 | $ | 0.35 | $ | 0.45 | ||||||||
Weighted-average shares, basic for Class A and Class B | 396,366 | 387,621 | 392,712 | 383,876 | ||||||||||||
Weighted-average shares, diluted for Class A and Class B | 402,888 | 394,232 | 397,433 | 397,093 |
VMware, Inc. | |||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(in thousands) | |||||||||||||||
(unaudited) | |||||||||||||||
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income | $ | 38,219 | $ | 83,288 | $ | 140,689 | $ | 178,679 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 55,420 | 40,644 | 141,730 | 117,537 | |||||||||||
Stock-based compensation, excluding amounts capitalized | 62,352 | 35,317 | 163,623 | 119,550 | |||||||||||
Excess tax benefits from stock-based compensation | (8,365 | ) | (5,844 | ) | (12,838 | ) | (85,271 | ) | |||||||
Gain on acquisition | (5,859 | ) | — | (5,859 | ) | — | |||||||||
Other | 2,606 | 1,242 | 3,240 | 2,300 | |||||||||||
Changes in assets and liabilities, net of acquisitions: | |||||||||||||||
Accounts receivable | 5,091 | 20,803 | 85,782 | (3,483 | ) | ||||||||||
Other assets | (8,820 | ) | (2,369 | ) | (7,924 | ) | (15,650 | ) | |||||||
Due to/from EMC, net | (5,645 | ) | 2,904 | (15,056 | ) | 43,190 | |||||||||
Accounts payable | (2,203 | ) | 7,629 | (30,585 | ) | (7,946 | ) | ||||||||
Accrued expenses | 20,404 | (18,058 | ) | 34,292 | (17,569 | ) | |||||||||
Income taxes receivable from EMC | 20,028 | 10,450 | 107,927 | (97,064 | ) | ||||||||||
Income taxes payable | (9,840 | ) | 17,563 | 11,270 | 28,069 | ||||||||||
Deferred income taxes, net | (11,596 | ) | (8,876 | ) | (26,195 | ) | 37,843 | ||||||||
Deferred revenue | 47,574 | 58,812 | 111,829 | 227,134 | |||||||||||
Net cash provided by operating activities | 199,366 | 243,505 | 701,925 | 527,319 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Additions to property and equipment | (14,245 | ) | (32,664 | ) | (79,913 | ) | (133,585 | ) | |||||||
Capitalized software development costs | (8,844 | ) | (37,961 | ) | (53,524 | ) | (53,895 | ) | |||||||
Purchase of investments | (5,720 | ) | — | (31,465 | ) | (1,750 | ) | ||||||||
Business acquisitions, net of cash acquired | (356,278 | ) | (57,363 | ) | (356,278 | ) | (90,652 | ) | |||||||
Decrease in restricted cash | — | — | 549 | 896 | |||||||||||
Net cash used in investing activities | (385,087 | ) | (127,988 | ) | (520,631 | ) | (278,986 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Proceeds from issuance of common stock | 84,917 | 34,090 | 166,523 | 167,417 | |||||||||||
Excess tax benefits from stock-based compensation | 8,365 | 5,844 | 12,838 | 85,271 | |||||||||||
Shares repurchased for tax withholdings on vesting of restricted stock | (7,060 | ) | (4,339 | ) | (25,306 | ) | (40,817 | ) | |||||||
Net cash provided by financing activities | 86,222 | 35,595 | 154,055 | 211,871 | |||||||||||
Net increase (decrease) in cash and cash equivalents | (99,499 | ) | 151,112 | 335,349 | 460,204 | ||||||||||
Cash and cash equivalents at beginning of the period | 2,275,660 | 1,540,260 | 1,840,812 | 1,231,168 | |||||||||||
Cash and cash equivalents at end of the period | $ | 2,176,161 | $ | 1,691,372 | $ | 2,176,161 | $ | 1,691,372 |
VMware, Inc. | |||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2009 | |||||||||||||||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Tax on Employee Stock Transactions |
Intangible Amortization |
Acquisition Related Items | Capitalized Software Development Costs (1) |
Stock-Based Compensation Included in Capitalized Software Development |
Non-GAAP, as adjusted | ||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||
Cost of license revenues | $ | 37,529 | $ | (330 | ) | $ | (6 | ) | $ | (2,893 | ) | — | $ | (27,030 | ) | — | $ | 7,270 | |||||||||||||||
Cost of services revenues | $ | 58,544 | (4,003 | ) | (26 | ) | — | — | — | — | $ | 54,515 | |||||||||||||||||||||
Research and development | $ | 133,509 | (34,250 | ) | (452 | ) | (40 | ) | — | 10,597 | (1,753 | ) | $ | 107,611 | |||||||||||||||||||
Sales and marketing | $ | 185,222 | (15,763 | ) | (183 | ) | (388 | ) | — | — | — | $ | 168,888 | ||||||||||||||||||||
General and administrative | $ | 51,711 | (8,006 | ) | (105 | ) | (126 | ) | (773 | ) | — | — | $ | 42,701 | |||||||||||||||||||
Operating income | $ | 23,236 | 62,352 | 772 | 3,447 | 773 | 16,433 | 1,753 | $ | 108,766 | |||||||||||||||||||||||
Other income, net | $ | 8,336 | — | — | — | (5,859 | ) | — | — | $ | 2,477 | ||||||||||||||||||||||
Income before income taxes | $ | 31,874 | 62,352 | 772 | 3,447 | (5,086 | ) | 16,433 | 1,753 | $ | 111,545 | ||||||||||||||||||||||
Income tax provision (benefit) | $ | (6,345 | ) | 13,923 | 279 | 1,133 | — | 6,937 | 469 | $ | 16,396 | ||||||||||||||||||||||
Quarterly tax rate | -19.9 | % | 14.7 | % | |||||||||||||||||||||||||||||
Net income | $ | 38,219 | 48,429 | 493 | 2,314 | (5,086 | ) | 9,496 | 1,284 | $ | 95,149 | ||||||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B | $ | 0.10 | $ | 0.12 | $ | 0.00 | $ | 0.01 | $ | (0.01 | ) | $ | 0.02 | $ | 0.00 | $ | 0.24 | ||||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B | $ | 0.09 | $ | 0.12 | $ | 0.00 | $ | 0.01 | $ | (0.01 | ) | $ | 0.03 | $ | 0.00 | $ | 0.24 | ||||||||||||||||
Weighted-average shares, basic for Class A and Class B | 396,366 | 396,366 | 396,366 | 396,366 | 396,366 | 396,366 | 396,366 | 396,366 | |||||||||||||||||||||||||
Weighted-average shares, diluted for Class A and Class B | 402,888 | 402,888 | 402,888 | 402,888 | 402,888 | 402,888 | 402,888 | 402,888 | |||||||||||||||||||||||||
(1) For the third quarter of 2009, VMware capitalized $10.6 million (including $1.8 million of stock-based compensation) of costs incurred for the development of software products. Amortization expense from capitalized amounts was $27.0 million for the third quarter of 2009. | |||||||||||||||||||||||||||||||||
VMware, Inc. | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2008 | |||||||||||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Tax on Employee Stock Transactions |
Intangible Amortization |
Capitalized Software Development Costs (1) |
Stock-Based Compensation Included in Capitalized Software Development |
Non-GAAP, as adjusted | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Cost of license revenues | $ | 21,535 | $ | (264 | ) | $ | (3 | ) | $ | (3,529 | ) | $ | (11,046 | ) | — | $ | 6,693 | ||||||||||||
Cost of services revenues | $ | 52,919 | (3,660 | ) | (29 | ) | — | — | — | $ | 49,230 | ||||||||||||||||||
Research and development | $ | 85,315 | (15,331 | ) | (296 | ) | — | 45,788 | (7,827 | ) | $ | 107,649 | |||||||||||||||||
Sales and marketing | $ | 167,914 | (13,138 | ) | (90 | ) | (898 | ) | — | — | $ | 153,788 | |||||||||||||||||
General and administrative | $ | 43,418 | (2,924 | ) | (35 | ) | (648 | ) | — | — | $ | 39,811 | |||||||||||||||||
Operating income | $ | 101,020 | 35,317 | 453 | 5,075 | (34,742 | ) | 7,827 | $ | 114,950 | |||||||||||||||||||
Income before income taxes | $ | 103,530 | 35,317 | 453 | 5,075 | (34,742 | ) | 7,827 | $ | 117,460 | |||||||||||||||||||
Income tax provision (benefit) | $ | 20,242 | 8,689 | 106 | 1,902 | (8,388 | ) | 1,821 | $ | 24,372 | |||||||||||||||||||
Quarterly tax rate | 19.6 | % | 20.7 | % | |||||||||||||||||||||||||
Net income | $ | 83,288 | 26,628 | 347 | 3,173 | (26,354 | ) | 6,006 | $ | 93,088 | |||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B | $ | 0.21 | $ | 0.07 | $ | 0.00 | $ | 0.01 | $ | (0.07 | ) | $ | 0.02 | $ | 0.24 | ||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B | $ | 0.21 | $ | 0.07 | $ | 0.00 | $ | 0.01 | $ | (0.07 | ) | $ | 0.02 | $ | 0.24 | ||||||||||||||
Weighted-average shares, basic for Class A and Class B | 387,621 | 387,621 | 387,621 | 387,621 | 387,621 | 387,621 | 387,621 | ||||||||||||||||||||||
Weighted-average shares, diluted for Class A and Class B | 394,232 | 394,232 | 394,232 | 394,232 | 394,232 | 394,232 | 394,232 | ||||||||||||||||||||||
(1) For the third quarter of 2008, VMware capitalized $45.8 million (including $7.8 million of stock-based compensation) of costs incurred for the development of software products. Amortization expense from capitalized amounts was $11.0 million for the third quarter of 2008. |
VMware, Inc. | |||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2009 | |||||||||||||||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Tax on Employee Stock Transactions |
Intangible Amortization |
Acquisition Related Items | Capitalized Software Development Costs (1) |
Stock-Based Compensation Included in Capitalized Software Development |
Non-GAAP, as adjusted | ||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||
Cost of license revenues | $ | 85,741 | $ | (973 | ) | $ | (11 | ) | $ | (8,407 | ) | — | $ | (55,311 | ) | — | $ | 21,039 | |||||||||||||||
Cost of services revenues | $ | 166,481 | (10,941 | ) | (47 | ) | — | — | — | — | $ | 155,493 | |||||||||||||||||||||
Research and development | $ | 360,290 | (84,587 | ) | (1,058 | ) | (40 | ) | — | 65,366 | (11,842 | ) | $ | 328,129 | |||||||||||||||||||
Sales and marketing | $ | 506,787 | (42,908 | ) | (364 | ) | (1,204 | ) | — | — | — | $ | 462,311 | ||||||||||||||||||||
General and administrative | $ | 148,299 | (24,214 | ) | (282 | ) | (374 | ) | (773 | ) | — | — | $ | 122,656 | |||||||||||||||||||
Operating income | $ | 148,138 | 163,623 | 1,762 | 10,025 | 773 | (10,055 | ) | 11,842 | $ | 326,108 | ||||||||||||||||||||||
Other income, net | $ | 6,887 | — | — | — | (5,859 | ) | — | — | $ | 1,028 | ||||||||||||||||||||||
Income before income taxes | $ | 156,212 | 163,623 | 1,762 | 10,025 | (5,086 | ) | (10,055 | ) | 11,842 | $ | 328,323 | |||||||||||||||||||||
Income tax provision (benefit) | $ | 15,523 | 33,706 | 534 | 3,456 | — | (1,739 | ) | 2,439 | $ | 53,919 | ||||||||||||||||||||||
Quarterly tax rate | 9.9 | % | 16.4 | % | |||||||||||||||||||||||||||||
Net income | $ | 140,689 | 129,917 | 1,228 | 6,569 | (5,086 | ) | (8,316 | ) | 9,403 | $ | 274,404 | |||||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B | $ | 0.36 | $ | 0.33 | $ | 0.00 | $ | 0.02 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.02 | $ | 0.70 | |||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B | $ | 0.35 | $ | 0.33 | $ | 0.00 | $ | 0.02 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.02 | $ | 0.69 | |||||||||||||||
Weighted-average shares, basic for Class A and Class B | 392,712 | 392,712 | 392,712 | 392,712 | 392,712 | 392,712 | 392,712 | 392,712 | |||||||||||||||||||||||||
Weighted-average shares, diluted for Class A and Class B | 397,433 | 397,433 | 397,433 | 397,433 | 397,433 | 397,433 | 397,433 | 397,433 | |||||||||||||||||||||||||
(1) For the first nine months of 2009, VMware capitalized $65.4 million (including $11.8 million of stock-based compensation) of costs incurred for the development of software products. Amortization expense from capitalized amounts was $55.3 million for the first nine months of 2009. | |||||||||||||||||||||||||||||||||
VMware, Inc. | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2008 | |||||||||||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Tax on Employee Stock Transactions |
Intangible Amortization |
Capitalized Software Development Costs (1) |
Stock-Based Compensation Included in Capitalized Software Development |
Non-GAAP, as adjusted | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Cost of license revenues | $ | 66,033 | $ | (803 | ) | $ | (28 | ) | $ | (8,133 | ) | $ | (40,185 | ) | — | $ | 16,884 | ||||||||||||
Cost of services revenues | $ | 166,122 | (10,716 | ) | (220 | ) | — | — | — | $ | 155,186 | ||||||||||||||||||
Research and development | $ | 318,698 | (55,907 | ) | (2,735 | ) | — | 65,641 | (11,746 | ) | $ | 313,951 | |||||||||||||||||
Sales and marketing | $ | 475,478 | (36,138 | ) | (1,234 | ) | (2,689 | ) | — | — | $ | 435,417 | |||||||||||||||||
General and administrative | $ | 129,682 | (15,986 | ) | (512 | ) | (1,942 | ) | — | — | $ | 111,242 | |||||||||||||||||
Operating income | $ | 210,411 | 119,550 | 4,729 | 12,764 | (25,456 | ) | 11,746 | $ | 333,744 | |||||||||||||||||||
Income before income taxes | $ | 218,661 | 119,550 | 4,729 | 12,764 | (25,456 | ) | 11,746 | $ | 341,994 | |||||||||||||||||||
Income tax provision (benefit) | $ | 39,982 | 27,102 | 1,245 | 4,605 | (7,497 | ) | 2,678 | $ | 68,115 | |||||||||||||||||||
Quarterly tax rate | 18.3 | % | 19.9 | % | |||||||||||||||||||||||||
Net income | $ | 178,679 | 92,448 | 3,484 | 8,159 | (17,959 | ) | 9,068 | $ | 273,879 | |||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B | $ | 0.47 | $ | 0.24 | $ | 0.01 | $ | 0.02 | $ | (0.05 | ) | $ | 0.02 | $ | 0.71 | ||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B | $ | 0.45 | $ | 0.23 | $ | 0.01 | $ | 0.02 | $ | (0.04 | ) | $ | 0.02 | $ | 0.69 | ||||||||||||||
Weighted-average shares, basic for Class A and Class B | 383,876 | 383,876 | 383,876 | 383,876 | 383,876 | 383,876 | 383,876 | ||||||||||||||||||||||
Weighted-average shares, diluted for Class A and Class B | 397,093 | 397,093 | 397,093 | 397,093 | 397,093 | 397,093 | 397,093 | ||||||||||||||||||||||
(1) For the first nine months of 2008, VMware capitalized $65.6 million (including $11.7 million of stock-based compensation) of costs incurred for the development of software products. Amortization expense from capitalized amounts was $40.2 million for the first nine months of 2008. |
VMware, Inc. | |||||||||||||||||
REVENUE BY TYPE | |||||||||||||||||
(in thousands) | |||||||||||||||||
(unaudited) | |||||||||||||||||
For the Three Months | For the Nine Months | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||||
Revenues: | |||||||||||||||||
License | $ | 240,271 | $ | 285,086 | $ | 725,236 | $ | 863,299 | |||||||||
Services: | |||||||||||||||||
Software maintenance | 212,818 | 147,310 | 577,553 | 395,415 | |||||||||||||
Professional services | 36,662 | 39,725 | 112,947 | 107,710 | |||||||||||||
Total services | 249,480 | 187,035 | 690,500 | 503,125 | |||||||||||||
$ | 489,751 | $ | 472,121 | $ | 1,415,736 | $ | 1,366,424 | ||||||||||
Percentage of revenues: | |||||||||||||||||
License | 49.1 | % | 60.4 | % | 51.2 | % | 63.2 | % | |||||||||
Services: | |||||||||||||||||
Software maintenance | 43.4 | % | 31.2 | % | 40.8 | % | 28.9 | % | |||||||||
Professional services | 7.5 | % | 8.4 | % | 8.0 | % | 7.9 | % | |||||||||
Total services | 50.9 | % | 39.6 | % | 48.8 | % | 36.8 | % | |||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
VMware, Inc. | |||||||
RECONCILIATION OF GAAP TO NON-GAAP CASH FLOWS | |||||||
FROM OPERATING ACTIVITIES | |||||||
For the Three Months Ended September 30, 2009 and 2008 | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
For the Three Months Ended September 30, | |||||||
2009 | 2008 | ||||||
GAAP cash flows from operating activities | $ | 199,366 | $ | 243,505 | |||
Capitalized software development costs | (8,844 | ) | (37,961 | ) | |||
Excess tax benefits from stock-based compensation | 8,365 | 5,844 | |||||
Non-GAAP cash flows from operating activities | $ | 198,887 | $ | 211,388 |
VMware, Inc. | |||||||
RECONCILIATION OF GAAP TO NON-GAAP CASH FLOWS | |||||||
FROM OPERATING ACTIVITIES | |||||||
For the Trailing Twelve Months Ended September 30, 2009 and 2008 | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
For the Trailing Twelve Months Ended September 30, | |||||||
2009 | 2008 | ||||||
GAAP cash flows from operating activities | $ | 974,737 | $ | 690,893 | |||
Capitalized software development costs | (90,529 | ) | (68,772 | ) | |||
Excess tax benefits from stock-based compensation | 13,343 | 85,271 | |||||
Non-GAAP cash flows from operating activities | $ | 897,551 | $ | 707,392 |
Contacts:
Michael Haase
VMware Investor Relations
mhaase@vmware.com
650-427-2875
Gloria Lee
VMware Investor Relations
glee@vmware.com
650-427-3267
Melinda Marks
VMware Public Relations
mmarks@vmware.com
1-650-427-1103