Annual Revenue Growth of 13% to a Record $5.21 Billion; Fourth Quarter Year-Over-Year Growth of 15% to a Record $1.48 Billion; Annual Revenue Growth of 17% and Fourth Quarter Year-Over-Year Growth of 20%, Excluding Pivotal and Divestitures in 2013(1); Annual Operating Cash Flow Increase of 34%; Fourth Quarter Year-Over-Year Operating Cash Flow Increase of 40%
PALO ALTO, CA--(Marketwired - Jan 28, 2014) - VMware, Inc. (
Quarterly Review
Annual Review
"Our strong performance throughout 2013 is evidence that our customers are embracing our vision and realizing value from our solutions," said Pat Gelsinger, chief executive officer, VMware. "In every region of the world, customers are making a long-term bet on VMware to help them transform their businesses for the mobile-cloud world."
"We delivered record 2013 results as customer demand across all our business offerings continues to thrive," said Jonathan Chadwick, chief financial officer, VMware. "We have increased our guidance for 2014 and are confident about our opportunities for long-term growth as we help our customers innovate for the future."
Recent Highlights & Strategic Announcements
VMware plans to host a conference call today to review its fourth quarter and full year 2013 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 60 days.
1 Comparative growth percentages exclude revenues in each period attributable to the products and services contributed to Pivotal Software, Inc. and all divestitures consummated by VMware in 2013
About VMware
VMware is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2013 revenues of $5.21 billion, VMware has more than 500,000 customers and 55,000 partners. The company is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.
VMware, VMworld, Desktop as a Service, vCenter, VCenter Operations Management Suite, IT Business Management Suite, vCloud Hybrid Service, NSX, vCloud Automation Center and VMware vCloud are registered trademarks or trademarks of VMware, Inc. in the United States and other jurisdictions. Other marks mentioned herein are trademarks, which are proprietary to VMware, Inc. or another company.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to VMware's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled "About Non-GAAP Financial Measures."
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding long-term customer commitments to VMware, VMware's guidance for 2014 and opportunities for long-term growth, the acquisition of Airwatch, the expected benefits to customers from the AirWatch acquisition, the future availability of announced products and services and their benefits to customers, including VMware's recently announced HIPAA compliance, and the benefits to customers of VMware's partnership with Palo Alto Networks. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in consumer, government and information technology spending; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization software and cloud, end user and mobile computing industries, and new product and marketing initiatives by VMware's competitors; (iv) factors that affect timing of license revenue recognition such as product announcements and promotions and beta programs; (v) VMware's customers' ability to transition to, new products and computing strategies such as cloud computing, desktop virtualization and the software-defined data center; (vi) the uncertainty of customer acceptance of emerging technology; (vii) changes in the willingness of customers to enter into longer term licensing and support arrangements; (viii) rapid technological changes in the virtualization software and cloud, end user and mobile computing industries; (ix) changes to product development timelines; (x) VMware's relationship with EMC Corporation and EMC's ability to control matters requiring stockholder approval, including the election of VMware's board members; (xi) VMware's ability to protect its proprietary technology; (xii) VMware's ability to attract and retain highly qualified employees; (xiii) the successful integration of acquired companies and assets into VMware; (xiv) fluctuating currency exchange rates and (xv) the satisfaction of closing conditions for the AirWatch acquisition, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act. 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 VMware's most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.
VMware, Inc. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) | ||||||||||||||||
(unaudited) | ||||||||||||||||
For the Three Months Ended | For the Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues: | ||||||||||||||||
License | $ | 687 | $ | 597 | $ | 2,270 | $ | 2,087 | ||||||||
Services | 796 | 696 | 2,937 | 2,518 | ||||||||||||
Total revenues | 1,483 | 1,293 | 5,207 | 4,605 | ||||||||||||
Operating expenses (1): | ||||||||||||||||
Cost of license revenues | 47 | 63 | 210 | 237 | ||||||||||||
Cost of services revenues | 145 | 128 | 520 | 484 | ||||||||||||
Research and development | 284 | 268 | 1,082 | 999 | ||||||||||||
Sales and marketing | 507 | 478 | 1,815 | 1,645 | ||||||||||||
General and administrative | 122 | 103 | 419 | 368 | ||||||||||||
Realignment charges | 4 | - | 68 | - | ||||||||||||
Operating income | 374 | 253 | 1,093 | 872 | ||||||||||||
Investment income | 8 | 6 | 30 | 27 | ||||||||||||
Interest expense with EMC | (1 | ) | (1 | ) | (4 | ) | (5 | ) | ||||||||
Other income (expense), net | - | 2 | 28 | (1 | ) | |||||||||||
Income before income taxes | 381 | 260 | 1,147 | 893 | ||||||||||||
Income tax provision | 46 | 54 | 133 | 147 | ||||||||||||
Net income | $ | 335 | $ | 206 | $ | 1,014 | $ | 746 | ||||||||
Net income per weighted-average share, basic for Class A and Class B | $ | 0.78 | $ | 0.48 | $ | 2.36 | $ | 1.75 | ||||||||
Net income per weighted-average share, diluted for Class A and Class B | $ | 0.77 | $ | 0.47 | $ | 2.34 | $ | 1.72 | ||||||||
Weighted-average shares, basic for Class A and Class B | 430,174 | 427,266 | 429,093 | 426,658 | ||||||||||||
Weighted-average shares, diluted for Class A and Class B | 433,621 | 433,205 | 433,415 | 433,974 | ||||||||||||
______ | ||||||||||||||||
(1) Includes stock-based compensation as follows: | ||||||||||||||||
Cost of license revenues | $ | - | $ | 1 | $ | 2 | $ | 2 | ||||||||
Cost of services revenues | 8 | 7 | 29 | 28 | ||||||||||||
Research and development | 62 | 63 | 227 | 210 | ||||||||||||
Sales and marketing | 38 | 39 | 144 | 150 | ||||||||||||
General and administrative | 14 | 14 | 56 | 48 | ||||||||||||
Realignment charges | - | - | 6 | - | ||||||||||||
VMware, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(amounts in millions, except per share amounts, and shares in thousands) | ||||||||
(unaudited) | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,305 | $ | 1,609 | ||||
Short-term investments | 3,870 | 3,022 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $2 and $4 | 1,220 | 1,151 | ||||||
Due from related parties, net | - | 68 | ||||||
Deferred tax asset | 190 | 179 | ||||||
Other current assets | 96 | 91 | ||||||
Total current assets | 7,681 | 6,120 | ||||||
Property and equipment, net | 845 | 665 | ||||||
Other assets, net | 107 | 128 | ||||||
Deferred tax asset | 60 | 103 | ||||||
Intangible assets, net | 607 | 732 | ||||||
Goodwill | 3,027 | 2,848 | ||||||
Total assets | $ | 12,327 | $ | 10,596 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 109 | $ | 90 | ||||
Accrued expenses and other | 608 | 644 | ||||||
Due to related parties, net | 18 | - | ||||||
Unearned revenues | 2,558 | 2,196 | ||||||
Total current liabilities | 3,293 | 2,930 | ||||||
Note payable to EMC | 450 | 450 | ||||||
Unearned revenues | 1,534 | 1,265 | ||||||
Other liabilities | 234 | 211 | ||||||
Total liabilities | 5,511 | 4,856 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Class A common stock, par value $.01; authorized 2,500,000 shares; issued and outstanding 130,349 and 128,688 shares | 1 | 1 | ||||||
Class B convertible common stock, par value $.01; authorized 1,000,000 shares; issued and outstanding 300,000 shares | 3 | 3 | ||||||
Additional paid-in capital | 3,496 | 3,432 | ||||||
Accumulated other comprehensive income | 4 | 6 | ||||||
Retained earnings | 3,312 | 2,298 | ||||||
Total stockholders' equity | 6,816 | 5,740 | ||||||
Total liabilities and stockholders' equity | $ | 12,327 | $ | 10,596 | ||||
VMware, Inc. | |||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||
(in millions) | |||||||||||||||||
(unaudited) | |||||||||||||||||
For the Three Months Ended | For the Year Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Operating activities: | |||||||||||||||||
Net income | $ | 335 | $ | 206 | $ | 1,014 | $ | 746 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 76 | 93 | 337 | 355 | |||||||||||||
Stock-based compensation | 122 | 124 | 454 | 426 | |||||||||||||
Excess tax benefits from stock-based compensation | (10 | ) | (27 | ) | (70 | ) | (138 | ) | |||||||||
Deferred income taxes, net | 15 | (4 | ) | 56 | (74 | ) | |||||||||||
Non-cash realignment charges | - | - | 15 | - | |||||||||||||
Gain on disposition of certain lines of business and other, net | - | - | (31 | ) | - | ||||||||||||
Other | 4 | 4 | 7 | 2 | |||||||||||||
Changes in assets and liabilities, net of acquisitions: | |||||||||||||||||
Accounts receivable | (431 | ) | (470 | ) | (71 | ) | (268 | ) | |||||||||
Other assets | 13 | 9 | (59 | ) | (112 | ) | |||||||||||
Due to/from related parties, net | (23 | ) | (22 | ) | 60 | 6 | |||||||||||
Accounts payable | 14 | (2 | ) | 30 | 24 | ||||||||||||
Accrued expenses | 93 | 85 | 1 | 22 | |||||||||||||
Income taxes receivable from EMC | 1 | 19 | 17 | 19 | |||||||||||||
Income taxes payable | 23 | 11 | 19 | 138 | |||||||||||||
Unearned revenues | 456 | 467 | 756 | 751 | |||||||||||||
Net cash provided by operating activities | 688 | 493 | 2,535 | 1,897 | |||||||||||||
Investing activities: | |||||||||||||||||
Additions to property and equipment | (98 | ) | (82 | ) | (345 | ) | (234 | ) | |||||||||
Purchases of available-for-sale securities | (953 | ) | (469 | ) | (3,181 | ) | (3,189 | ) | |||||||||
Sales of available-for-sale securities | 527 | 227 | 1,599 | 1,880 | |||||||||||||
Maturities of available-for-sale securities | 120 | 134 | 717 | 902 | |||||||||||||
Proceeds from disposition of certain lines of business | - | - | 37 | - | |||||||||||||
Business acquisitions, net of cash acquired | (105 | ) | - | (289 | ) | (1,344 | ) | ||||||||||
Other investing | 1 | (37 | ) | (10 | ) | (50 | ) | ||||||||||
Net cash used in investing activities | (508 | ) | (227 | ) | (1,472 | ) | (2,035 | ) | |||||||||
Financing activities: | |||||||||||||||||
Proceeds from issuance of common stock | 12 | 39 | 197 | 253 | |||||||||||||
Repurchase of common stock | (116 | ) | (160 | ) | (508 | ) | (467 | ) | |||||||||
Excess tax benefits from stock-based compensation | 10 | 27 | 70 | 138 | |||||||||||||
Shares repurchased for tax withholdings on vesting of restricted stock | (44 | ) | (43 | ) | (126 | ) | (133 | ) | |||||||||
Net cash used in financing activities | (138 | ) | (137 | ) | (367 | ) | (209 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | 42 | 129 | 696 | (347 | ) | ||||||||||||
Cash and cash equivalents at beginning of the period | 2,263 | 1,480 | 1,609 | 1,956 | |||||||||||||
Cash and cash equivalents at end of the period | $ | 2,305 | $ | 1,609 | $ | 2,305 | $ | 1,609 | |||||||||
VMware, Inc. | |||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL REVENUES SCHEDULE | |||||||||||||||||||||||||||||||||||||||
(INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA) | |||||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Three Months Ended | For the Year Ended | |||||||||||||||||||||||||||||||||||||
December 31, 2013 |
September 30, 2013 |
June 30, 2013 |
March 31, 2013 |
December 31, 2012 |
September 30, 2012 |
June 30, 2012 |
March 31, 2012 |
December 31, 2013 |
December 31, 2012 |
||||||||||||||||||||||||||||||
Revenues as reported (1): | |||||||||||||||||||||||||||||||||||||||
License | $ | 687 | $ | 564 | $ | 531 | $ | 488 | $ | 597 | $ | 491 | $ | 517 | $ | 482 | $ | 2,270 | $ | 2,087 | |||||||||||||||||||
Software maintenance | 699 | 644 | 614 | 605 | 591 | 551 | 519 | 492 | 2,563 | 2,153 | |||||||||||||||||||||||||||||
Professional services | 97 | 81 | 98 | 98 | 105 | 92 | 87 | 81 | 374 | 365 | |||||||||||||||||||||||||||||
Total revenues | $ | 1,483 | $ | 1,289 | $ | 1,243 | $ | 1,191 | $ | 1,293 | $ | 1,134 | $ | 1,123 | $ | 1,055 | $ | 5,207 | $ | 4,605 | |||||||||||||||||||
Change (%) over prior year | |||||||||||||||||||||||||||||||||||||||
License | 15.1 | % | 14.8 | % | 2.6 | % | 1.3 | % | 16.1 | % | 10.7 | % | 11.3 | % | 15.0 | % | 8.7 | % | |||||||||||||||||||||
Software maintenance | 18.3 | % | 16.9 | % | 18.3 | % | 23.0 | % | 27.5 | % | 29.0 | % | 34.4 | % | 35.3 | % | 19.0 | % | |||||||||||||||||||||
Professional services | -8.4 | % | -11.4 | % | 13.4 | % | 20.8 | % | 27.0 | % | 28.6 | % | 23.7 | % | 33.0 | % | 2.5 | % | |||||||||||||||||||||
Total revenues | 14.7 | % | 13.7 | % | 10.7 | % | 12.9 | % | 22.0 | % | 20.4 | % | 21.9 | % | 25.1 | % | 13.1 | % | |||||||||||||||||||||
Revenues as reported, excluding Pivotal (2) | |||||||||||||||||||||||||||||||||||||||
License | $ | 687 | $ | 564 | $ | 531 | $ | 485 | $ | 589 | $ | 486 | $ | 508 | $ | 478 | $ | 2,266 | $ | 2,061 | |||||||||||||||||||
Software maintenance | 699 | 644 | 614 | 601 | 587 | 546 | 515 | 489 | 2,559 | 2,137 | |||||||||||||||||||||||||||||
Professional services | 97 | 81 | 98 | 84 | 77 | 72 | 68 | 69 | 360 | 287 | |||||||||||||||||||||||||||||
Total revenues | $ | 1,483 | $ | 1,289 | $ | 1,243 | $ | 1,170 | $ | 1,253 | $ | 1,104 | $ | 1,091 | $ | 1,036 | $ | 5,185 | $ | 4,485 | |||||||||||||||||||
Change (%) over prior year | |||||||||||||||||||||||||||||||||||||||
License | 16.6 | % | 16.0 | % | 4.4 | % | 1.5 | % | 15.7 | % | 11.2 | % | 9.8 | % | 15.1 | % | 10.0 | % | |||||||||||||||||||||
Software maintenance | 19.2 | % | 17.8 | % | 19.3 | % | 23.0 | % | 27.5 | % | 28.9 | % | 34.3 | % | 35.0 | % | 19.7 | % | |||||||||||||||||||||
Professional services | 24.5 | % | 14.0 | % | 45.1 | % | 19.8 | % | 6.4 | % | 12.3 | % | 8.3 | % | 24.3 | % | 25.6 | % | |||||||||||||||||||||
Total revenues | 18.3 | % | 16.8 | % | 14.0 | % | 12.8 | % | 20.3 | % | 19.4 | % | 20.0 | % | 24.4 | % | 15.6 | % | |||||||||||||||||||||
Revenues as reported, excluding Pivotal and all dispositions (3) | |||||||||||||||||||||||||||||||||||||||
License | $ | 687 | $ | 562 | $ | 526 | $ | 476 | $ | 581 | $ | 479 | $ | 500 | $ | 471 | $ | 2,251 | $ | 2,031 | |||||||||||||||||||
Software maintenance | 699 | 642 | 611 | 590 | 574 | 535 | 504 | 478 | 2,542 | 2,090 | |||||||||||||||||||||||||||||
Professional services | 97 | 81 | 98 | 83 | 77 | 70 | 67 | 69 | 359 | 284 | |||||||||||||||||||||||||||||
Total revenues | $ | 1,483 | $ | 1,285 | $ | 1,235 | $ | 1,149 | $ | 1,232 | $ | 1,084 | $ | 1,071 | $ | 1,018 | $ | 5,152 | $ | 4,405 | |||||||||||||||||||
Change (%) over prior year | |||||||||||||||||||||||||||||||||||||||
License | 18.2 | % | 17.3 | % | 5.3 | % | 1.1 | % | 16.0 | % | 11.8 | % | 9.2 | % | 14.5 | % | 10.9 | % | |||||||||||||||||||||
Software maintenance | 21.8 | % | 20.0 | % | 21.3 | % | 23.4 | % | 27.2 | % | 28.5 | % | 33.1 | % | 33.7 | % | 21.6 | % | |||||||||||||||||||||
Professional services | 24.8 | % | 15.4 | % | 45.6 | % | 19.9 | % | 6.3 | % | 11.3 | % | 8.1 | % | 24.3 | % | 26.2 | % | |||||||||||||||||||||
Total revenues | 20.3 | % | 18.5 | % | 15.4 | % | 12.9 | % | 20.3 | % | 19.4 | % | 19.2 | % | 23.5 | % | 16.9 | % | |||||||||||||||||||||
Reconciliation of "revenues as reported" to"revenues as reported, excluding Pivotaland all dispositions": | |||||||||||||||||||||||||||||||||||||||
Revenues as reported, excluding Pivotal and all dispositions (3) | |||||||||||||||||||||||||||||||||||||||
$ | 1,483 | $ | 1,285 | $ | 1,235 | $ | 1,149 | $ | 1,232 | $ | 1,084 | $ | 1,071 | $ | 1,018 | $ | 5,152 | $ | 4,405 | ||||||||||||||||||||
Pivotal | - | - | - | 22 | 40 | 30 | 32 | 19 | 22 | 120 | |||||||||||||||||||||||||||||
All dispositions | - | 4 | 8 | 20 | 21 | 20 | 20 | 18 | 33 | 80 | |||||||||||||||||||||||||||||
Revenues as reported (1) | $ | 1,483 | $ | 1,289 | $ | 1,243 | $ | 1,191 | $ | 1,293 | $ | 1,134 | $ | 1,123 | $ | 1,055 | $ | 5,207 | $ | 4,605 | |||||||||||||||||||
(1) Represents revenues reported each quarter. |
(2) Represents revenues reported each quarter less the revenues attributable to products and services contributed by VMware to Pivotal Software, Inc. ("Pivotal") on April 1, 2013. All quarters have been adjusted to exclude the related revenues. |
(3) Represents revenues reported each quarter less a) the revenues attributable to products and services contributed by VMware to Pivotal on April 1, 2013 and b) the revenues attributable to all lines of businesses which were disposed of in 2013, including Zimbra which was disposed of in July 2013. All quarters have been adjusted to exclude the related revenues. |
VMware, Inc. | ||||||||||||||||||||||||||||||||
SUPPLEMENTAL UNEARNED REVENUES SCHEDULE | ||||||||||||||||||||||||||||||||
(INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA) | ||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
December 31, 2013 |
September 30, 2013 |
June 30, 2013 |
March 31, 2013 |
December 31, 2012 |
September 30, 2012 |
June 30, 2012 |
March 31, 2012 |
|||||||||||||||||||||||||
Unearned revenues as reported (1) | ||||||||||||||||||||||||||||||||
License | $ | 465 | $ | 415 | $ | 427 | $ | 446 | $ | 463 | $ | 366 | $ | 376 | $ | 373 | ||||||||||||||||
Software maintenance | 3,304 | 2,937 | 2,903 | 2,797 | 2,755 | 2,415 | 2,357 | 2,246 | ||||||||||||||||||||||||
Professional services | 323 | 284 | 266 | 247 | 243 | 212 | 209 | 189 | ||||||||||||||||||||||||
Total unearned revenues | $ | 4,092 | $ | 3,636 | $ | 3,596 | $ | 3,490 | $ | 3,461 | $ | 2,993 | $ | 2,942 | $ | 2,808 | ||||||||||||||||
Change (%) over prior year | ||||||||||||||||||||||||||||||||
License | 0.5 | % | 13.3 | % | 13.7 | % | 19.6 | % | 18.9 | % | 35.8 | % | 56.5 | % | 48.4 | % | ||||||||||||||||
Software maintenance | 19.9 | % | 21.6 | % | 23.2 | % | 24.5 | % | 29.1 | % | 33.8 | % | 39.8 | % | 41.3 | % | ||||||||||||||||
Professional services | 33.1 | % | 34.3 | % | 26.8 | % | 30.6 | % | 30.8 | % | 32.5 | % | 37.9 | % | 37.3 | % | ||||||||||||||||
Total unearned revenues | 18.3 | % | 21.5 | % | 22.2 | % | 24.3 | % | 27.8 | % | 34.0 | % | 41.6 | % | 41.9 | % | ||||||||||||||||
Unearned revenues as reported, excluding Pivotal and all dispositions (2) | ||||||||||||||||||||||||||||||||
License | $ | 465 | $ | 414 | $ | 427 | $ | 407 | $ | 414 | $ | 327 | $ | 336 | $ | 352 | ||||||||||||||||
Software maintenance | 3,304 | 2,933 | 2,903 | 2,736 | 2,671 | 2,346 | 2,289 | 2,189 | ||||||||||||||||||||||||
Professional services | 323 | 285 | 266 | 246 | 241 | 210 | 207 | 186 | ||||||||||||||||||||||||
Total unearned revenues | $ | 4,092 | $ | 3,632 | $ | 3,596 | $ | 3,389 | $ | 3,326 | $ | 2,883 | $ | 2,832 | $ | 2,727 | ||||||||||||||||
Change (%) over prior year | ||||||||||||||||||||||||||||||||
License | 12.3 | % | 26.4 | % | 27.1 | % | 15.7 | % | 11.6 | % | 25.9 | % | 49.4 | % | 45.4 | % | ||||||||||||||||
Software maintenance | 23.7 | % | 25.0 | % | 26.8 | % | 25.0 | % | 28.5 | % | 33.3 | % | 38.7 | % | 40.4 | % | ||||||||||||||||
Professional services | 34.4 | % | 35.7 | % | 28.7 | % | 31.7 | % | 30.8 | % | 31.9 | % | 36.2 | % | 36.0 | % | ||||||||||||||||
Total unearned revenues | 23.0 | % | 26.0 | % | 27.0 | % | 24.3 | % | 26.3 | % | 32.3 | % | 39.7 | % | 40.7 | % | ||||||||||||||||
Reconciliation of "unearned revenues as reported" to "unearned revenues as reported, excluding Pivotal and all dispositions": | ||||||||||||||||||||||||||||||||
Unearned revenues as reported, excluding Pivotal and all dispositions (2) | $ | 4,092 | $ | 3,632 | $ | 3,596 | $ | 3,389 | $ | 3,326 | $ | 2,883 | $ | 2,832 | $ | 2,727 | ||||||||||||||||
Pivotal and all dispositions | - | 4 | - | 101 | 135 | 110 | 110 | 81 | ||||||||||||||||||||||||
Unearned revenues as reported (1) | $ | 4,092 | $ | 3,636 | $ | 3,596 | $ | 3,490 | $ | 3,461 | $ | 2,993 | $ | 2,942 | $ | 2,808 | ||||||||||||||||
(1) Represents unearned revenues reported each quarter. |
(2) Represents unearned revenues reported each quarter less a) the unearned revenues attributable to products and services contributed by VMware to Pivotal on April 1, 2013 and b) the unearned revenues attributable to all lines of businesses which were disposed of in 2013, including Zimbra which was disposed of in July 2013. All quarters have been adjusted to exclude the related unearned revenues. |
VMware, Inc. | ||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | ||||||||||||||||||||||||||||||||
For the Three Months Ended December 31, 2013 | ||||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) | ||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Taxes on Employee Stock Transactions |
Intangible Amortization |
Realignment Charges |
Acquisition and Other Related Items |
Tax Adjustment (1) |
Non-GAAP, as adjusted |
|||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Cost of license revenues | $ | 47 | - | - | (23 | ) | - | - | - | $ | 24 | |||||||||||||||||||||
Cost of services revenues | $ | 145 | (8 | ) | - | - | - | - | - | $ | 137 | |||||||||||||||||||||
Research and development | $ | 284 | (62 | ) | (1 | ) | (1 | ) | - | - | - | $ | 220 | |||||||||||||||||||
Sales and marketing | $ | 507 | (38 | ) | - | (1 | ) | - | - | - | $ | 468 | ||||||||||||||||||||
General and administrative | $ | 122 | (14 | ) | - | - | - | (2 | ) | - | $ | 106 | ||||||||||||||||||||
Realignment charges | $ | 4 | - | - | - | (4 | ) | - | - | $ | - | |||||||||||||||||||||
Operating income | $ | 374 | 122 | 1 | 25 | 4 | 2 | - | $ | 528 | ||||||||||||||||||||||
Operating margin (2) | 25.2 | % | 8.2 | % | 0.1 | % | 1.7 | % | 0.3 | % | 0.1 | % | - | 35.6 | % | |||||||||||||||||
Income before income taxes | $ | 381 | 122 | 1 | 25 | 4 | 2 | - | $ | 535 | ||||||||||||||||||||||
Income tax provision | $ | 46 | 53 | $ | 99 | |||||||||||||||||||||||||||
Tax rate (2) | 12.1 | % | 18.5 | % | ||||||||||||||||||||||||||||
Net income | $ | 335 | 122 | 1 | 25 | 4 | 2 | (53 | ) | $ | 436 | |||||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B (2) (3) | ||||||||||||||||||||||||||||||||
$ | 0.78 | $ | 0.28 | $ | - | $ | 0.06 | $ | 0.01 | $ | - | $ | (0.12 | ) | $ | 1.01 | ||||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B (2) (4) | ||||||||||||||||||||||||||||||||
$ | 0.77 | $ | 0.28 | $ | - | $ | 0.06 | $ | 0.01 | $ | - | $ | (0.11 | ) | $ | 1.01 | ||||||||||||||||
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | ||||||||||||||||||||||||||||||||
(2) Operating margin, tax rate and net income per weighted-average share information are calculated based upon the respective underlying, non-rounded data. | ||||||||||||||||||||||||||||||||
(3) Calculated based upon 430,174 basic weighted-average shares for Class A and Class B. | ||||||||||||||||||||||||||||||||
(4) Calculated based upon 433,621 diluted weighted-average shares for Class A and Class B. | ||||||||||||||||||||||||||||||||
VMware, Inc. | ||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | ||||||||||||||||||||||||||||||||
For the Three Months Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) | ||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Taxes on Employee Stock Transactions |
Intangible Amortization |
Acquisition Related Items |
Capitalized Software Development Costs (1) |
Tax Adjustment (2) |
Non-GAAP, as adjusted |
|||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Cost of license revenues | $ | 63 | (1 | ) | - | (25 | ) | - | (13 | ) | - | $ | 24 | |||||||||||||||||||
Cost of services revenues | $ | 128 | (7 | ) | - | (1 | ) | - | - | - | $ | 120 | ||||||||||||||||||||
Research and development | $ | 268 | (63 | ) | (1 | ) | (1 | ) | - | - | - | $ | 203 | |||||||||||||||||||
Sales and marketing | $ | 478 | (39 | ) | (1 | ) | (3 | ) | - | - | - | $ | 435 | |||||||||||||||||||
General and administrative | $ | 103 | (14 | ) | (1 | ) | - | (1 | ) | - | - | $ | 87 | |||||||||||||||||||
Operating income | $ | 253 | 124 | 3 | 30 | 1 | 13 | - | $ | 424 | ||||||||||||||||||||||
Operating margin (3) | 19.5 | % | 9.6 | % | 0.3 | % | 2.4 | % | - | 1.0 | % | - | 32.8 | % | ||||||||||||||||||
Income before income taxes | $ | 260 | 124 | 3 | 30 | 1 | 13 | - | $ | 431 | ||||||||||||||||||||||
Income tax provision | $ | 54 | 28 | $ | 82 | |||||||||||||||||||||||||||
Tax rate (3) | 20.8 | % | 19.0 | % | ||||||||||||||||||||||||||||
Net income | $ | 206 | 124 | 3 | 30 | 1 | 13 | (28 | ) | $ | 349 | |||||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B (3) (4) | ||||||||||||||||||||||||||||||||
$ | 0.48 | $ | 0.29 | $ | 0.01 | $ | 0.07 | $ | - | $ | 0.03 | $ | (0.06 | ) | $ | 0.82 | ||||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B (3) (5) | ||||||||||||||||||||||||||||||||
$ | 0.47 | $ | 0.29 | $ | 0.01 | $ | 0.07 | $ | - | $ | 0.03 | $ | (0.06 | ) | $ | 0.81 | ||||||||||||||||
(1) For the fourth quarter of 2012, no costs were capitalized for the development of software products. Amortization expense from previously capitalized amounts was $13. | ||||||||||||||||||||||||||||||||
(2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | ||||||||||||||||||||||||||||||||
(3) Operating margin, tax rate and net income per weighted-average share information are calculated based upon the respective underlying, non-rounded data. | ||||||||||||||||||||||||||||||||
(4) Calculated based upon 427,266 basic weighted-average shares for Class A and Class B. | ||||||||||||||||||||||||||||||||
(5) Calculated based upon 433,205 diluted weighted-average shares for Class A and Class B. | ||||||||||||||||||||||||||||||||
VMware, Inc. | |||||||||||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||||||||||
For the Year Ended December 31, 2013 | |||||||||||||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) | |||||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Taxes on Employee Stock Transactions |
Intangible Amortization |
Realignment Charges |
Acquisition and Other Related Items |
Capitalized Software Development Costs (1) |
Gain on Disposition of Certain Lines of Business & Other, Net |
Tax Adjustment (2) |
Non-GAAP, as adjusted |
||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||
Cost of license revenues | $ | 210 | (2 | ) | - | (90 | ) | - | - | (34 | ) | - | - | $ | 84 | ||||||||||||||||||||||||||
Cost of services revenues | $ | 520 | (29 | ) | (1 | ) | (2 | ) | - | - | - | - | - | $ | 488 | ||||||||||||||||||||||||||
Research and development | $ | 1,082 | (227 | ) | (4 | ) | (4 | ) | - | - | - | - | - | $ | 847 | ||||||||||||||||||||||||||
Sales and marketing | $ | 1,815 | (144 | ) | (3 | ) | (7 | ) | - | - | - | - | - | $ | 1,661 | ||||||||||||||||||||||||||
General and administrative | $ | 419 | (56 | ) | (2 | ) | - | - | (5 | ) | - | - | - | $ | 356 | ||||||||||||||||||||||||||
Realignment charges | $ | 68 | - | - | - | (68 | ) | - | - | - | - | $ | - | ||||||||||||||||||||||||||||
Operating income | $ | 1,093 | 458 | 10 | 103 | 68 | 5 | 34 | - | - | $ | 1,771 | |||||||||||||||||||||||||||||
Operating margin (3) | 21.0 | % | 8.8 | % | 0.2 | % | 2.0 | % | 1.3 | % | - | 0.7 | % | - | - | 34.0 | % | ||||||||||||||||||||||||
Other income (expense), net | $ | 28 | - | - | - | - | - | - | (31 | ) | - | $ | (3 | ) | |||||||||||||||||||||||||||
Income before income taxes | $ | 1,147 | 458 | 10 | 103 | 68 | 5 | 34 | (31 | ) | - | $ | 1,794 | ||||||||||||||||||||||||||||
Income tax provision | $ | 133 | 199 | $ | 332 | ||||||||||||||||||||||||||||||||||||
Tax rate (3) | 11.6 | % | 18.5 | % | |||||||||||||||||||||||||||||||||||||
Net income | $ | 1,014 | 458 | 10 | 103 | 68 | 5 | 34 | (31 | ) | (199 | ) | $ | 1,462 | |||||||||||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B (3) (4) | |||||||||||||||||||||||||||||||||||||||||
$ | 2.36 | $ | 1.07 | $ | 0.02 | $ | 0.24 | $ | 0.16 | $ | 0.01 | $ | 0.08 | $ | (0.07 | ) | $ | (0.46 | ) | $ | 3.41 | ||||||||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B (3) (5) | |||||||||||||||||||||||||||||||||||||||||
$ | 2.34 | $ | 1.06 | $ | 0.02 | $ | 0.24 | $ | 0.16 | $ | - | $ | 0.08 | $ | (0.07 | ) | $ | (0.46 | ) | $ | 3.37 | ||||||||||||||||||||
(1) For the year ended December 31, 2013, no costs were capitalized for the development of software products. Amortization expense from previously capitalized amounts was $34. | |||||||||||||||||||||||||||||||||||||||||
(2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | |||||||||||||||||||||||||||||||||||||||||
(3) Operating margin, tax rate and net income per weighted-average share information are calculated based upon the respective underlying, non-rounded data. | |||||||||||||||||||||||||||||||||||||||||
(4) Calculated based upon 429,093 basic weighted-average shares for Class A and Class B. | |||||||||||||||||||||||||||||||||||||||||
(5) Calculated based upon 433,415 diluted weighted-average shares for Class A and Class B. | |||||||||||||||||||||||||||||||||||||||||
VMware, Inc. | |||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||||||
For the Year Ended December 31, 2012 | |||||||||||||||||||||||||||||||||
(amounts in millions, except per share amounts, and shares in thousands) | |||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||
GAAP | Stock-Based Compensation |
Employer Payroll Taxes on Employee Stock Transactions |
Intangible Amortization |
Acquisition Related Items |
Capitalized Software Development Costs (1) |
Tax Adjustment (2) |
Non-GAAP, as adjusted |
||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||
Cost of license revenues | $ | 237 | (2 | ) | - | (72 | ) | - | (71 | ) | - | $ | 92 | ||||||||||||||||||||
Cost of services revenues | $ | 484 | (28 | ) | (1 | ) | (4 | ) | - | - | - | $ | 451 | ||||||||||||||||||||
Research and development | $ | 999 | (210 | ) | (6 | ) | (4 | ) | - | - | - | $ | 779 | ||||||||||||||||||||
Sales and marketing | $ | 1,645 | (150 | ) | (5 | ) | (12 | ) | - | - | - | $ | 1,478 | ||||||||||||||||||||
General and administrative | $ | 368 | (48 | ) | (2 | ) | - | (4 | ) | - | - | $ | 314 | ||||||||||||||||||||
Operating income | $ | 872 | 438 | 14 | 92 | 4 | 71 | - | $ | 1,491 | |||||||||||||||||||||||
Operating margin (3) | 18.9 | % | 9.5 | % | 0.3 | % | 2.0 | % | 0.2 | % | 1.5 | % | - | 32.4 | % | ||||||||||||||||||
Income before income taxes | $ | 893 | 438 | 14 | 92 | 4 | 71 | - | $ | 1,512 | |||||||||||||||||||||||
Income tax provision | $ | 147 | 129 | $ | 276 | ||||||||||||||||||||||||||||
Tax rate (3) | 16.5 | % | 18.3 | % | |||||||||||||||||||||||||||||
Net income | $ | 746 | 438 | 14 | 92 | 4 | 71 | (129 | ) | $ | 1,236 | ||||||||||||||||||||||
Net income per weighted-average share, basic for Class A and Class B (3) (4) | |||||||||||||||||||||||||||||||||
$ | 1.75 | $ | 1.03 | $ | 0.03 | $ | 0.22 | $ | 0.01 | $ | 0.17 | $ | (0.31 | ) | $ | 2.90 | |||||||||||||||||
Net income per weighted-average share, diluted for Class A and Class B (3) (5) | |||||||||||||||||||||||||||||||||
$ | 1.72 | $ | 1.01 | $ | 0.03 | $ | 0.21 | $ | 0.01 | $ | 0.16 | $ | (0.29 | ) | $ | 2.85 | |||||||||||||||||
(1) For the year ended December 31, 2012, no costs were capitalized for the development of software products. Amortization expense from previously capitalized amounts was $71. | |||||||||||||||||||||||||||||||||
(2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. | |||||||||||||||||||||||||||||||||
(3) Operating margin, tax rate and net income per weighted-average share information are calculated based upon the respective underlying, non-rounded data. | |||||||||||||||||||||||||||||||||
(4) Calculated based upon 426,658 basic weighted-average shares for Class A and Class B. | |||||||||||||||||||||||||||||||||
(5) Calculated based upon 433,974 diluted weighted-average shares for Class A and Class B. | |||||||||||||||||||||||||||||||||
VMware, Inc. | |||||||||||||||||
REVENUES BY TYPE | |||||||||||||||||
(in millions) | |||||||||||||||||
(unaudited) | |||||||||||||||||
For the Three Months Ended | For the Year Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Revenues: | |||||||||||||||||
License | $ | 687 | $ | 597 | $ | 2,270 | $ | 2,087 | |||||||||
Services: | |||||||||||||||||
Software maintenance | 699 | 591 | 2,563 | 2,153 | |||||||||||||
Professional services | 97 | 105 | 374 | 365 | |||||||||||||
Total services | 796 | 696 | 2,937 | 2,518 | |||||||||||||
Total revenues | $ | 1,483 | $ | 1,293 | $ | 5,207 | $ | 4,605 | |||||||||
Percentage of revenues: | |||||||||||||||||
License | 46.3 | % | 46.1 | % | 43.6 | % | 45.3 | % | |||||||||
Services: | |||||||||||||||||
Software maintenance | 47.2 | % | 45.7 | % | 49.2 | % | 46.8 | % | |||||||||
Professional services | 6.5 | % | 8.2 | % | 7.2 | % | 7.9 | % | |||||||||
Total services | 53.7 | % | 53.9 | % | 56.4 | % | 54.7 | % | |||||||||
Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
VMware, Inc. | ||||||||||||||||
REVENUES BY GEOGRAPHY | ||||||||||||||||
(in millions) | ||||||||||||||||
(unaudited) | ||||||||||||||||
For the Three Months Ended | For the Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues: | ||||||||||||||||
United States | $ | 712 | $ | 639 | $ | 2,485 | $ | 2,229 | ||||||||
International | 771 | 654 | 2,722 | 2,376 | ||||||||||||
Total revenues | $ | 1,483 | $ | 1,293 | $ | 5,207 | $ | 4,605 | ||||||||
Percentage of revenues: | ||||||||||||||||
United States | 48.0 | % | 49.4 | % | 47.7 | % | 48.4 | % | ||||||||
International | 52.0 | % | 50.6 | % | 52.3 | % | 51.6 | % | ||||||||
Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
VMware, Inc. | |||||||||||||||
RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||
TO FREE CASH FLOWS | |||||||||||||||
(A NON-GAAP FINANCIAL MEASURE) | |||||||||||||||
(in millions) | |||||||||||||||
(unaudited) | |||||||||||||||
For the Three Months Ended | For the Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
GAAP cash flows from operating activities | $ | 688 | $ | 493 | $ | 2,535 | $ | 1,897 | |||||||
Capital expenditures | (98 | ) | (82 | ) | (345 | ) | (234 | ) | |||||||
Free cash flows | $ | 590 | $ | 411 | $ | 2,190 | $ | 1,663 | |||||||
About Non-GAAP Financial Measures
To provide investors and others with additional information regarding VMware's results, we have disclosed in this press release the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP income per diluted share, and free cash flows. 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, other than free cash flows, differ from GAAP in that they exclude stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition and other-related items and the net effect of the amortization and capitalization of software development costs and gain on disposition of certain lines of business and other net, each as discussed below. Free cash flows differ from GAAP cash flows from operating activities in its treatment of capital expenditures.
We have also presented in this press release quarterly and annual historical data for revenue and unearned revenue, excluding revenue generated each period by the products and services contributed to Pivotal Software, Inc. on April 1, 2013 and the products and services associated with the divestures consummated by us in 2013. We believe these measures are useful to investors because they allow investors to make meaningful comparisons of our revenues and unearned revenues across periods.
VMware's management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware's financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware's business, as they exclude expenses and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flows provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.
Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware's operating performance due to the following factors:
Additionally, we believe that the non-GAAP financial measure free cash flows is meaningful to investors because we review cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.
The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware's operations. 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 operating expenses would be higher, which would affect VMware's cash position. VMware compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP and should not be considered measures of VMware's liquidity. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review VMware's financial information in its entirety and not rely on a single financial measure.
Contact Information:
Contacts:
Paul Ziots
VMware Investor Relations
pziots@vmware.com
650-427-3267
Joan Stone
VMware Global Communications
joanstone@vmware.com
650-427-4436