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PALO ALTO, Calif., Jan. 28 /PRNewswire-FirstCall/ -- VMware, Inc. (NYSE: VMW) the global leader in virtualization solutions from the desktop to the datacenter, today announced financial results for the fourth quarter and full fiscal year 2007:
"VMware executed at a remarkable pace in 2007 as customer interest and partner attention increased several fold," said Diane Greene, president and chief executive officer of VMware. "We begin 2008 with more than 100,000 customers, 500 technology and consulting partners, nearly 10,000 go-to-market partners, and more than 5,000 employees. As others begin to enter the market, VMware and our partners are continuing to broaden and deepen our highly reliable end-to-end virtualization solutions.
"From the desktop to the datacenter, VMware products are providing significant capital and operational cost savings to customers," continued Greene. "VMware is enabling organizations of all sizes to deploy and manage two to three times the number of application workloads per administrator, while using four to 10 times less data center capacity. VMware's vision for the virtual datacenter is delivering tremendous value to our customers today and our product pipeline for 2008 promises to deliver much more."
VMware plans to host a conference call today to review its fourth-quarter and full-year financial results and provide forward-looking guidance for 2008. 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 Internet broadcast and related slides will be available live, and a replay will be available following completion of the live broadcast for approximately 30 days.
About VMware
VMware (NYSE: VMW) is the global leader in virtualization solutions from the desktop to the datacenter. Customers of all sizes rely on VMware to reduce capital and operating expenses, ensure business continuity, strengthen security and go green. With 2007 revenues of $1.3 billion, more than 100,000 customers, and more than 10,000 partners, VMware is one of the fastest growing public software companies. VMware is based in Palo Alto, California and on the web at http://www.vmware.com.
VMware is a registered 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.
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 continuing customer adoption and deployment of our products and architecture, achievement of data center efficiencies, our future product introductions and customer perceptions of their value. 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) the ability to develop, and to transition to, new products, the uncertainty of customer acceptance of emerging technology, and rapid technological and market change; (v) changes to product development timelines; (vi) VMware's relationship with EMC Corporation, and EMC's ability to control matters requiring stockholder approval, including the election of VMware's board members; (vi) the ability to protect our proprietary technology; (viii) our ability to attract and retain highly qualified employees; and (ix) fluctuating currency exchange rates. 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 the report on Form 10-Q for the fiscal quarter ended September 30, 2007, 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.
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, the write-off of in-process research and development, and the net effect of the amortization and capitalization of software development costs under Statement of Financial Accounting Standards No. 86 ("FAS86"), 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 (stock-based compensation, amortization of intangible assets, write-off of in-process research and development, and the net effect of the amortization and capitalization of software development costs under FAS86) 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 non-cash 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. 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) in 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:
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, in-process research and development, and the net effect of the amortization and capitalization of software development costs under FAS86, 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, the cash salary expense included in costs of revenues and operating expenses would be higher. 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. 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.
Contacts:
Michael Haase
VMware Investor Relations
mhaase@vmware.com
650-427-2875
Greg Eden
VMware Public Relations
eden@vmware.com
650-427-1095
Andrew Schmitt
OutCast Communications for VMware
Andrew@outcastpr.com
415-392-8282 x706
VMware, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
December 31, December 31,
2007 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $1,231,168 $176,134
Accounts receivable, less allowance for
doubtful accounts of $1,603 and $2,139 283,824 193,710
Due from EMC, net - 2,245
Deferred tax asset 54,386 27,656
Other current assets 33,956 22,686
------------ ---------
Total current assets 1,603,334 422,431
Property and equipment, net 276,983 48,675
Other assets, net 71,695 49,912
Deferred tax asset 72,249 20,935
Intangible assets, net 32,073 43,515
Goodwill 639,366 560,482
------------ ---------
Total assets $2,695,700 $1,145,950
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $61,503 $44,227
Accrued expenses 173,610 103,321
Due to EMC, net 2,759 -
Income taxes payable to EMC, current portion 68,823 87,598
Deferred revenue, current portion 363,317 242,603
--------- --------
Total current liabilities 670,012 477,749
Note payable to EMC 450,000 800,000
Deferred revenue, net of current portion 189,479 63,912
Deferred tax liability 27,327 30,579
Income taxes payable to EMC,
net of current portion 18,265 4,522
Commitments and contingencies
Stockholder's equity (deficit):
Class A common stock, par value $.01;
authorized 2,500,000 shares; issued
and outstanding 82,924 and 32,500 shares 829 325
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 1,352,788 -
Accumulated deficit (16,000) (234,137)
--------- --------
Total stockholders' equity (deficit) 1,340,617 (230,812)
--------- --------
Total liabilities and stockholders'
equity (deficit) $2,695,700 $1,145,950
========== ==========
VMware, Inc.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
For the Three Months For the Year
Ended December 31, Ended December 31,
2007 2006 2007 2006
-------------------- -------------------
Revenues:
License $284,282 $161,998 $905,368 $491,902
Services 128,193 67,583 420,443 212,002
--------- -------- -------- -------
412,475 229,581 1,325,811 703,904
Operating expenses:
Cost of license revenues 20,330 14,485 80,876 59,202
Cost of services revenues 46,852 22,765 137,798 64,180
Research and development 91,562 50,131 285,941 148,254
Sales and marketing 138,763 80,603 450,195 238,327
General and administrative 38,494 25,088 135,660 69,602
In-process research and
development - - - 3,700
--------- -------- -------- -------
Operating income 76,474 36,509 235,341 120,639
Investment income 11,224 613 22,942 2,497
Interest income (expense) with
EMC, net (4,496) 627 (17,757) 293
Other income (expense), net 58 (6) (48) (882)
--------- -------- -------- -------
Income before taxes 83,260 37,743 240,478 122,547
Income tax provision 5,105 6,764 22,341 36,832
--------- -------- -------- -------
Income before cumulative effect
of a change in accounting
principle 78,155 30,979 218,137 85,715
Cumulative effect of a change in
accounting principle, net of tax
of $108 - - - 175
--------- -------- -------- -------
Net income $78,155 $30,979 $218,137 $85,890
========= ======== ======== =======
Net income per weighted average
share, basic for Class A and
Class B:
Income per share before
cumulative effect of a change in
accounting principle $0.21 $0.09 $0.62 $0.26
Cumulative effect of a change in
accounting principle - - - -
--------- -------- -------- -------
Net income per share $0.21 $0.09 $0.62 $0.26
========= ======== ======== =======
Net income per weighted average
share, diluted for Class A and
Class B:
Income per share before
cumulative effect of a change in
accounting principle $0.19 $0.09 $0.61 $0.26
Cumulative effect of a change in
accounting principle - - - -
--------- -------- -------- -------
Net income per share $0.19 $0.09 $0.61 $0.26
========= ======== ======== =======
Weighted average shares, basic
for Class A and Class B 379,953 332,500 350,493 332,500
Weighted average shares, diluted
for Class A and Class B 402,604 332,500 359,189 332,500
VMware, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Three Months For the Year
Ended December 31, Ended December 31,
------------------- ------------------
2007 2006 2007 2006
------ ------ ------ ------
Cash flows from operating
activities:
Net income $78,155 $30,979 $218,137 $85,890
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 31,565 20,127 104,027 66,573
In-process research and
development - - - 3,700
Stock-based compensation 33,052 16,206 92,406 51,226
Other adjustments 227 4,921 (167) 5,076
Changes in assets and
liabilities, net of
acquisitions:
Accounts receivable (119,941) (80,107) (88,969) (97,992)
Other assets 1,689 1,543 (977) (9,076)
Due to (from) EMC, net 79,440 57,204 5,004 (48,365)
Accounts payable (5,388) 12,666 15,571 31,762
Accrued expenses 50,819 22,437 61,620 60,904
Income taxes payable to EMC (78,209) (37,847) (17,812) (6,006)
Deferred income taxes, net (33,412) (20,202) (78,486) (21,888)
Deferred revenue 125,577 96,889 242,082 158,059
--------- -------- --------- --------
Net cash provided by operating
activities 163,574 124,816 552,436 279,863
--------- -------- --------- --------
Cash flows from investing
activities:
Additions to property and
equipment, net (45,101) (10,614) (136,395) (52,574)
Purchase of headquarters
facilities from EMC - - (132,564) -
Capitalized software
development costs (14,877) (4,458) (47,735) (32,523)
Business acquisitions, net of
cash acquired (7,017) - (82,535) (46,541)
Decrease (increase) in
restricted cash 673 1,385 (4,466) (10,744)
--------- -------- --------- --------
Net cash used in investing
activities (66,322) (13,687) (403,695) (142,382)
--------- -------- --------- --------
Cash flows from financing
activities:
Proceeds from Class A common
stock issued in IPO, net of
issuance costs - - 1,035,233 -
Proceeds from Class A common
stock issued to Intel
Capital, net of issuance
costs - - 218,300 -
Proceeds from exercises of
stock options - - 2,760 -
Repayment of note payable to
EMC - - (350,000) -
--------- -------- --------- --------
Net cash provided by financing
activities - - 906,293 -
--------- -------- --------- --------
Net increase in cash and cash
equivalents 97,252 111,129 1,055,034 137,481
Cash and cash equivalents at
beginning of the period 1,133,916 65,005 176,134 38,653
--------- -------- --------- --------
Cash and cash equivalents at
end of the period $1,231,168 $176,134 $1,231,168 $176,134
--------- -------- --------- --------
VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Three Months Ended December 31, 2007
(in thousands, except per share amounts)
(unaudited)
Stock-based
Compensation
Included in
Capitalized Capitalized
Stock- Intangible Software Software
Based Amorti- Develop- Develop- Non-
Compen- zation ment ment GAAP, as
GAAP sation & Other Costs(1) Costs adjusted
------------------------------------------------------
Operating
expenses:
Cost of
license
revenues $20,330 (236) (5,027) (10,478) - $4,589
Cost of
services
revenues $46,852 (2,462) 144 - - $44,534
Research and
development $91,562 (15,257) 1,996 17,246 (2,369) $93,178
Sales and
marketing $138,763 (9,510) 137 - - $129,390
General and
administrative $38,494 (5,587) - - - $32,907
Operating income $76,474 33,052 2,750 (6,768) 2,369 $107,877
Income before taxes $83,260 33,052 2,750 (6,768) 2,369 $114,663
Income tax
provision $5,105 6,484 1,015 (1,267) 479 $11,816
Quarterly tax rate 6.1% 10.3%
Net income $78,155 26,568 1,735 (5,501) 1,890 $102,847
Net income per
weighted
average
share, basic
for Class
A and Class B $0.21 $0.07 $0.00 $(0.01) $0.00 $0.27
Net income per
weighted
average share,
diluted for Class A
and
Class B $0.19 $0.07 $0.00 $(0.01) $0.00 $0.26
Weighted average
shares,
basic for Class
A and Class B 379,953 379,953 379,953 379,953 379,953 379,953
Weighted average
shares, diluted
for Class A
and Class B 402,604 402,604 402,604 402,604 402,604 402,604
(1) For the fourth quarter of 2007, VMware capitalized $17.2 million
(including $2.4 million of stock-based compensation) of costs
incurred for the development of software products. Amortization
expense from previously capitalized amounts was $10.5 million for the
fourth quarter of 2007.
VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Three Months Ended December 31, 2006
(in thousands, except per share amounts)
(unaudited)
Stock-based
Compensation
Included in
Capitalized Capitalized
Stock- Software Software
Based Intangible Develop- Develop- Non-
Compen- Amorti- ment ment GAAP, as
GAAP sation zation Costs(1) Costs adjusted
----------------------------------------------------------
Operating
expenses:
Cost of
license
revenues $14,485 (37) (5,532) (8,063) - $853
Cost of
services
revenues $22,765 (718) - - - $22,047
Research and
development $50,131 (9,001) - 5,131 (673) $45,588
Sales and
marketing $80,603 (3,643) (548) - - $76,412
General and
administrative $25,088 (2,807) (372) - - $21,909
Operating
income $36,509 16,206 6,452 2,932 673 $62,772
Income before
taxes $37,743 16,206 6,452 2,932 673 $64,006
Income tax
provision $6,764 4,257 2,453 1,115 177 $14,766
Net income $30,979 11,949 3,999 1,817 496 $49,240
Net income per
weighted average
share, basic
for Class A and
Class B $0.09 $0.04 $0.01 $0.01 $0.00 $0.15
Net income per
weighted average
share, diluted for
Class A and
Class B $0.09 $0.04 $0.01 $0.01 $0.00 $0.15
Weighted average
shares, basic for
Class A and
Class B 332,500 332,500 332,500 332,500 332,500 332,500
Weighted average
shares, diluted
for Class A and
Class B 332,500 332,500 332,500 332,500 332,500 332,500
(1) For the fourth quarter of 2006, VMware capitalized $5.1 million
(including $0.7 million of stock-based compensation), of costs
incurred for the development of software products. Amortization
expense from previously capitalized amounts was $8.1 million for the
fourth quarter of 2006.
VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Year Ended December 31, 2007
(in thousands, except per share amounts)
(unaudited)
Stock-based
Compensation
Included in
Capitalized Capitalized
Stock- Intangible Software Software
Based Amor- Develop- Develop- Non-
Compen- tization ment ment GAAP, as
GAAP sation & Other Costs(1) Costs adjusted
-----------------------------------------------------------
Operating
expenses:
Cost of
license
revenues $80,876 (558) (20,810) (36,407) - $23,101
Cost of
services
revenues $137,798 (6,070) 144 - - $131,872
Research
and
development $285,941 (42,934) 1,996 56,840 (9,105) $292,738
Sales and
marketing $450,195 (26,288) (1,787) - - $422,120
General and
administrative $135,660 (16,556) (1,476) - - $117,628
Operating income $235,341 92,406 21,933 (20,433) 9,105 $338,352
Income before
taxes $240,478 92,406 21,933 (20,433) 9,105 $343,489
Income tax
provision $22,341 21,227 8,113 (5,256) 2,091 $48,516
Annual tax rate 9.3% 14.1%
Net income $218,137 71,179 13,820 (15,177) 7,014 $294,973
Net income per
weighted average
share, basic for
Class A and
Class B $0.62 $0.20 $0.04 $(0.04) $0.02 $0.84
Net income per
weighted average
share, diluted
for Class A and
Class B $0.61 $0.20 $0.04 $(0.04) $0.02 $0.82
Weighted average
shares, basic for
Class A and
Class B 350,493 350,493 350,493 350,493 350,493 350,493
Weighted average
shares, diluted
for Class A and
Class B 359,189 359,189 359,189 359,189 359,189 359,189
(1) For the year ended December 31, 2007, VMware capitalized $56.8 million
(including $9.1 million of stock-based compensation) of costs incurred
for the development of software products. Amortization expense from
previously capitalized amounts was $36.4 million for the year
ended December 31, 2007.
VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Year Ended December 31, 2006
(in thousands, except per share amounts)
(unaudited)
Stock-based
Compensation
Capital- Included in
ized Capitalized
Stock- IPR&D and Software Software
Based Intangible Develop- Develop- Non-
Compen- Amorti- ment ment GAAP, as
GAAP sation zation Costs(1) Costs adjusted
--------------------------------------------------------
Operating expenses:
Cost of license
revenues $59,202 (99) (21,840) (22,299) - $14,964
Cost of services
revenues $64,180 (2,384) - - - $61,796
Research and
development $148,254 (26,342) - 43,012 (10,489) $154,435
Sales and
marketing $238,327 (12,020) (2,188) - - $224,119
General and
administrative $69,602 (10,381) (1,494) - - $57,727
In-process research
and development $3,700 - (3,700) - - $-
Operating income $120,639 51,226 29,222 (20,713) 10,489 $190,863
Income before
taxes $122,547 51,226 29,222 (20,713) 10,489 $192,771
Income tax
provision $36,832 13,457 9,698 (7,871) 2,758 $54,874
Net income $85,890 37,769 19,524 (12,842) 7,731 $138,072
Net income per
weighted average
share, basic for
Class A and
Class B $0.26 $0.11 $0.06 $(0.04) $0.02 $0.42
Net income per
weighted average
share, diluted for
Class A and
Class B $0.26 $0.11 $0.06 $(0.04) $0.02 $0.42
Weighted average
shares, basic for
Class A and
Class B 332,500 332,500 332,500 332,500 332,500 332,500
Weighted average
shares, diluted for
Class A and
Class B 332,500 332,500 332,500 332,500 332,500 332,500
(1) For the year ended December 31, 2006, VMware capitalized $43.0 million
(including $10.5 million of stock-based compensation) of costs
incurred for the development of software products. Amortization
expense from previously capitalized amounts was $22.3 million for the
year ended December 31, 2006.
SOURCE VMware, Inc. - 01/28/2008
CONTACT:
Michael Haase, Investor Relations,
+1-650-427-2875,
mhaase@vmware.com, or
Greg Eden, Public Relations,
+1-650-427-1095,
eden@vmware.com, both of VMware; or
Andrew Schmitt of OutCast Communications,
+1-415-392-8282, ext. 706, Andrew@outcastpr.com, for VMware
Web site: http://www.vmware.com
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