VMware Reports Record Fourth Quarter and Full Year 2013 Results
Date : January 28, 2014Quarterly Review
- Revenues for the fourth quarter were
$1.48 billion , an increase of 15% from the fourth quarter of 2012. Excluding revenues attributable to Pivotal and all divestitures that occurred in 2013, revenues for the fourth quarter increased 20% from the fourth quarter of 2012.(1)
- Operating income for the fourth quarter was
$374 million , an increase of 48% from the fourth quarter of 2012. Non-GAAP operating income for the fourth quarter was$528 million , an increase of 25% from the fourth quarter of 2012.
- Net income for the fourth quarter was
$335 million , or$0.77 per diluted share, an increase of 62% per diluted share compared to$206 million , or$0.47 per diluted share, for the fourth quarter of 2012. Non-GAAP net income for the quarter was$436 million , or$1.01 per diluted share, an increase of 25% per diluted share compared to$349 million , or$0.81 per diluted share, for the fourth quarter of 2012.
- Operating cash flows for the fourth quarter were
$688 million , an increase of 40% from the fourth quarter of 2012. Free cash flows for the quarter were$590 million , an increase of 44% from the fourth quarter of 2012.
Annual Review
- Revenues for 2013 were
$5.21 billion , an increase of 13% from 2012 or an increase of 17% excluding revenues attributable to Pivotal and all divestitures that occurred in 2013.(1)
- Operating income for 2013 was
$1.09 billion , an increase of 25% from 2012. Non-GAAP operating income for 2013 was$1.77 billion , an increase of 19% from 2012.
- Net income for 2013 was
$1.01 billion , or$2.34 per diluted share, an increase of 36% compared to$746 million , or$1.72 per diluted share, for 2012. Non-GAAP net income for 2013 was$1.46 billion , or$3.37 per diluted share, an increase of 18% per diluted share compared to$1.24 billion , or$2.85 per diluted share, for 2012.
- Operating cash flows for 2013 were
$2.54 billion , an increase of 34% from 2012, and free cash flows for the year were$2.19 billion , an increase of 32% from 2012.
- Cash, cash equivalents and short-term investments were
$6.18 billion and unearned revenues were$4.09 billion as ofDecember 31, 2013 .
"Our strong performance throughout 2013 is evidence that our customers are embracing our vision and realizing value from our solutions," said
"We delivered record 2013 results as customer demand across all our business offerings continues to thrive," said
Recent Highlights & Strategic Announcements
- Following VMworld® 2013 and VMworld 2013 Europe, where
VMware hosted a combined total of over 31,000 registered attendees,VMware took VMworld on the road to theAsia Pacific Region and heldVMware vForum customer and partner user conferences in six countries hosting 27,000 attendees.
- Last week
VMware announced its intent to acquire AirWatch, the leader in Enterprise Mobile Management and Security. This acquisition will provide customers the most complete end-user computing solution to manage users, devices and applications across desktops and mobile environments.VMware also recently acquiredDesktone, Inc. , which pioneered Desktop as a Service® (DaaS) to deliver Windows desktops and applications as a cloud service to any user, anywhere, on any device.
VMware announced general availability of new and updated Management solutions purpose-built for the cloud, includingVMware vCloud® Automation Center™ 6.0,VMware vCenter™ Operations Management Suite™ 5.8 and VMware IT Business Management Suite™. These solutions simplify and automate how IT is managed, helping customers on their journey to deliver IT as a Service.
VMware vCloud Hybrid Service™ continues to see good customer traction and momentum having launched itsU.K private beta service in December and opened another new data center in the U.S.VMware also recently announced HIPAA compliance providing healthcare customers the agility and flexibility of vCloud Hybrid Service and the ability to collaborate, share, store and centralize Protected Healthcare Information to operate more efficiently while protecting patient privacy.
VMware announced general availability of VMware NSX™, the network virtualization platform, whichVMware expects to do for networking what server virtualization did for compute. In addition,VMware announced a partnership with security leader Palo Alto Networks to co-develop a solution that will enable customers to use the VMware NSX platform to automate provisioning and distribution of Palo Alto Networks technologies in their software-defined data centers.
(1) Comparative growth percentages exclude revenues in each period attributable to the products and services contributed to
About
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding long-term customer commitments to
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
For the Three Months Ended Ended
-------------------------------------- --------------------
December September March December September
31, 30, June 30, 31, 31, 30,
2013 2013 2013 2013 2012 2012
Revenues as
reported (1):
License $ 687 $ 564 $ 531 $ 488 $ 597 $ 491
Software
maintenance 699 644 614 605 591 551
Professional
services 97 81 98 98 105 92
-------- -------- -------- -------- -------- --------
Total revenues $ 1,483 $ 1,289 $ 1,243 $ 1,191 $ 1,293 $ 1,134
======== ======== ======== ======== ======== ========
Change (%) over
prior year
License 15.1% 14.8% 2.6% 1.3% 16.1% 10.7%
Software
maintenance 18.3% 16.9% 18.3% 23.0% 27.5% 29.0%
Professional
services -8.4% -11.4% 13.4% 20.8% 27.0% 28.6%
-------- -------- -------- -------- -------- --------
Total revenues 14.7% 13.7% 10.7% 12.9% 22.0% 20.4%
======== ======== ======== ======== ======== ========
Revenues as
reported,
excluding
Pivotal (2)
License $ 687 $ 564 $ 531 $ 485 $ 589 $ 486
Software
maintenance 699 644 614 601 587 546
Professional
services 97 81 98 84 77 72
-------- -------- -------- -------- -------- --------
Total revenues $ 1,483 $ 1,289 $ 1,243 $ 1,170 $ 1,253 $ 1,104
======== ======== ======== ======== ======== ========
Change (%) over
prior year
License 16.6% 16.0% 4.4% 1.5% 15.7% 11.2%
Software
maintenance 19.2% 17.8% 19.3% 23.0% 27.5% 28.9%
Professional
services 24.5% 14.0% 45.1% 19.8% 6.4% 12.3%
-------- -------- -------- -------- -------- --------
Total revenues 18.3% 16.8% 14.0% 12.8% 20.3% 19.4%
======== ======== ======== ======== ======== ========
Revenues as
reported,
excluding
Pivotal and all
dispositions
(3)
License $ 687 $ 562 $ 526 $ 476 $ 581 $ 479
Software
maintenance 699 642 611 590 574 535
Professional
services 97 81 98 83 77 70
-------- -------- -------- -------- -------- --------
Total revenues $ 1,483 $ 1,285 $ 1,235 $ 1,149 $ 1,232 $ 1,084
======== ======== ======== ======== ======== ========
Change (%) over
prior year
License 18.2% 17.3% 5.3% 1.1% 16.0% 11.8%
Software
maintenance 21.8% 20.0% 21.3% 23.4% 27.2% 28.5%
Professional
services 24.8% 15.4% 45.6% 19.9% 6.3% 11.3%
-------- -------- -------- -------- -------- --------
Total revenues 20.3% 18.5% 15.4% 12.9% 20.3% 19.4%
======== ======== ======== ======== ======== ========
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
Pivotal - - - 22 40 30
All
dispositions - 4 8 20 21 20
-------- -------- -------- -------- -------- --------
Revenues as
reported (1) $ 1,483 $ 1,289 $ 1,243 $ 1,191 $ 1,293 $ 1,134
======== ======== ======== ======== ======== ========
For the Three
Months Ended For the Year Ended
------------------ ------------------
March December December
June 30, 31, 31, 31,
2012 2012 2013 2012
Revenues as
reported (1):
License $ 517 $ 482 $ 2,270 $ 2,087
Software
maintenance 519 492 2,563 2,153
Professional
services 87 81 374 365
-------- -------- -------- --------
Total revenues $ 1,123 $ 1,055 $ 5,207 $ 4,605
======== ======== ======== ========
Change (%) over
prior year
License 11.3% 15.0% 8.7%
Software
maintenance 34.4% 35.3% 19.0%
Professional
services 23.7% 33.0% 2.5%
-------- -------- --------
Total revenues 21.9% 25.1% 13.1%
======== ======== ========
Revenues as
reported,
excluding
Pivotal (2)
License $ 508 $ 478 $ 2,266 $ 2,061
Software
maintenance 515 489 2,559 2,137
Professional
services 68 69 360 287
-------- -------- -------- --------
Total revenues $ 1,091 $ 1,036 $ 5,185 $ 4,485
======== ======== ======== ========
Change (%) over
prior year
License 9.8% 15.1% 10.0%
Software
maintenance 34.3% 35.0% 19.7%
Professional
services 8.3% 24.3% 25.6%
-------- -------- --------
Total revenues 20.0% 24.4% 15.6%
======== ======== ========
Revenues as
reported,
excluding
Pivotal and all
dispositions
(3)
License $ 500 $ 471 $ 2,251 $ 2,031
Software
maintenance 504 478 2,542 2,090
Professional
services 67 69 359 284
-------- -------- -------- --------
Total revenues $ 1,071 $ 1,018 $ 5,152 $ 4,405
======== ======== ======== ========
Change (%) over
prior year
License 9.2% 14.5% 10.9%
Software
maintenance 33.1% 33.7% 21.6%
Professional
services 8.1% 24.3% 26.2%
-------- -------- --------
Total revenues 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)
$ 1,071 $ 1,018 $ 5,152 $ 4,405
Pivotal 32 19 22 120
All
dispositions 20 18 33 80
-------- -------- -------- --------
Revenues as
reported (1) $ 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)
September
December 31, 30, June 30, March 31,
2013 2013 2013 2013
Unearned revenues as
reported (1)
License $ 465 $ 415 $ 427 $ 446
Software
maintenance 3,304 2,937 2,903 2,797
Professional
services 323 284 266 247
------------ ------------ ------------ ------------
Total unearned
revenues $ 4,092 $ 3,636 $ 3,596 $ 3,490
============ ============ ============ ============
Change (%) over
prior year
License 0.5% 13.3% 13.7% 19.6%
Software
maintenance 19.9% 21.6% 23.2% 24.5%
Professional
services 33.1% 34.3% 26.8% 30.6%
------------ ------------ ------------ ------------
Total unearned
revenues 18.3% 21.5% 22.2% 24.3%
============ ============ ============ ============
Unearned revenues as
reported, excluding
Pivotal and all
dispositions (2)
License $ 465 $ 414 $ 427 $ 407
Software
maintenance 3,304 2,933 2,903 2,736
Professional
services 323 285 266 246
------------ ------------ ------------ ------------
Total unearned
revenues $ 4,092 $ 3,632 $ 3,596 $ 3,389
============ ============ ============ ============
Change (%) over
prior year
License 12.3% 26.4% 27.1% 15.7%
Software
maintenance 23.7% 25.0% 26.8% 25.0%
Professional
services 34.4% 35.7% 28.7% 31.7%
------------ ------------ ------------ ------------
Total unearned
revenues 23.0% 26.0% 27.0% 24.3%
============ ============ ============ ============
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
Pivotal and all
dispositions - 4 - 101
------------ ------------ ------------ ------------
Unearned revenues as
reported (1) $ 4,092 $ 3,636 $ 3,596 $ 3,490
============ ============ ============ ============
September
December 31, 30, June 30, March 31,
2012 2012 2012 2012
Unearned revenues as
reported (1)
License $ 463 $ 366 $ 376 $ 373
Software
maintenance 2,755 2,415 2,357 2,246
Professional
services 243 212 209 189
------------ ------------ ------------ ------------
Total unearned
revenues $ 3,461 $ 2,993 $ 2,942 $ 2,808
============ ============ ============ ============
Change (%) over
prior year
License 18.9% 35.8% 56.5% 48.4%
Software
maintenance 29.1% 33.8% 39.8% 41.3%
Professional
services 30.8% 32.5% 37.9% 37.3%
------------ ------------ ------------ ------------
Total unearned
revenues 27.8% 34.0% 41.6% 41.9%
============ ============ ============ ============
Unearned revenues as
reported, excluding
Pivotal and all
dispositions (2)
License $ 414 $ 327 $ 336 $ 352
Software
maintenance 2,671 2,346 2,289 2,189
Professional
services 241 210 207 186
------------ ------------ ------------ ------------
Total unearned
revenues $ 3,326 $ 2,883 $ 2,832 $ 2,727
============ ============ ============ ============
Change (%) over
prior year
License 11.6% 25.9% 49.4% 45.4%
Software
maintenance 28.5% 33.3% 38.7% 40.4%
Professional
services 30.8% 31.9% 36.2% 36.0%
------------ ------------ ------------ ------------
Total unearned
revenues 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) $ 3,326 $ 2,883 $ 2,832 $ 2,727
Pivotal and all
dispositions 135 110 110 81
------------ ------------ ------------ ------------
Unearned revenues as
reported (1) $ 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)
Employer
Payroll Taxes
on Employee Intangible
Stock-Based Stock Amortiz-
GAAP Compensation Transactions ation
---------- ---------- ---------- ----------
Operating expenses:
Cost of license revenues $ 47 - - (23)
Cost of services revenues $ 145 (8) - -
Research and development $ 284 (62) (1) (1)
Sales and marketing $ 507 (38) - (1)
General and administrative $ 122 (14) - -
Realignment charges $ 4 - - -
Operating income $ 374 122 1 25
Operating margin (2) 25.2% 8.2% 0.1% 1.7%
Income before income taxes $ 381 122 1 25
Income tax provision $ 46
Tax rate (2) 12.1%
Net income $ 335 122 1 25
Net income per weighted-
average share, basic for
Class A and Class B (2) (3)
$ 0.78 $ 0.28 $ - $ 0.06
Net income per weighted-
average share, diluted for
Class A and Class B (2) (4)
$ 0.77 $ 0.28 $ - $ 0.06
Acquisition
and Other Tax Non-GAAP,
Realignment Related Adjustment as
Charges Items (1) adjusted
---------- ---------- ---------- ----------
Operating expenses:
Cost of license revenues - - - $ 24
Cost of services revenues - - - $ 137
Research and development - - - $ 220
Sales and marketing - - - $ 468
General and administrative - (2) - $ 106
Realignment charges (4) - - $ -
Operating income 4 2 - $ 528
Operating margin (2) 0.3% 0.1% - 35.6%
Income before income taxes 4 2 - $ 535
Income tax provision 53 $ 99
Tax rate (2) 18.5%
Net income 4 2 (53) $ 436
Net income per weighted-
average share, basic for
Class A and Class B (2) (3)
$ 0.01 $ - $ (0.12) $ 1.01
Net income per weighted-
average share, diluted for
Class A and Class B (2) (4)
$ 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)
Employer
Payroll
Taxes
on Employee
Stock-Based Stock Intangible
GAAP Compensation Transactions Amortization
------------ ------------ ------------ ------------
Operating expenses:
Cost of license
revenues $ 63 (1) - (25)
Cost of services
revenues $ 128 (7) - (1)
Research and
development $ 268 (63) (1) (1)
Sales and marketing $ 478 (39) (1) (3)
General and
administrative $ 103 (14) (1) -
Operating income $ 253 124 3 30
Operating margin (3) 19.5% 9.6% 0.3% 2.4%
Income before income
taxes $ 260 124 3 30
Income tax provision $ 54
Tax rate (3) 20.8%
Net income $ 206 124 3 30
Net income per
weighted-average
share, basic for
Class A and Class B
(3) (4)
$ 0.48 $ 0.29 $ 0.01 $ 0.07
Net income per
weighted-average
share, diluted for
Class A and Class B
(3) (5)
$ 0.47 $ 0.29 $ 0.01 $ 0.07
Capitalized
Acquisition Software Tax
Related Development Adjustment Non-GAAP,
Items Costs (1) (2) as adjusted
------------ ------------ ------------ ------------
Operating expenses:
Cost of license
revenues - (13) - $ 24
Cost of services
revenues - - - $ 120
Research and
development - - - $ 203
Sales and marketing - - - $ 435
General and
administrative (1) - - $ 87
Operating income 1 13 - $ 424
Operating margin (3) - 1.0% - 32.8%
Income before income
taxes 1 13 - $ 431
Income tax provision 28 $ 82
Tax rate (3) 19.0%
Net income 1 13 (28) $ 349
Net income per
weighted-average
share, basic for
Class A and Class B
(3) (4)
$ - $ 0.03 $ (0.06) $ 0.82
Net income per
weighted-average
share, diluted for
Class A and Class B
(3) (5)
$ - $ 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)
Employer
Payroll Taxes
on Employee Intangible
Stock-Based Stock Amortiz- Realignment
GAAP Compensation Transactions ation Charges
--------- --------- --------- --------- ---------
Operating expenses:
Cost of license
revenues $ 210 (2) - (90) -
Cost of services
revenues $ 520 (29) (1) (2) -
Research and
development $ 1,082 (227) (4) (4) -
Sales and marketing $ 1,815 (144) (3) (7) -
General and
administrative $ 419 (56) (2) - -
Realignment charges $ 68 - - - (68)
Operating income $ 1,093 458 10 103 68
Operating margin (3) 21.0% 8.8% 0.2% 2.0% 1.3%
Other income
(expense), net $ 28 - - - -
Income before income
taxes $ 1,147 458 10 103 68
Income tax provision $ 133
Tax rate (3) 11.6%
Net income $ 1,014 458 10 103 68
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
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
Gain on
Disposition
of
Acquisition Capitalized Certain
and Other Software Lines of Tax Non-GAAP,
Related Development Business & Adjust- as
Items Costs (1) Other, Net ment (2) adjusted
--------- --------- --------- --------- ---------
Operating expenses:
Cost of license
revenues - (34) - - $ 84
Cost of services
revenues - - - - $ 488
Research and
development - - - - $ 847
Sales and marketing - - - - $ 1,661
General and
administrative (5) - - - $ 356
Realignment charges - - - - $ -
Operating income 5 34 - - $ 1,771
Operating margin (3) - 0.7% - - 34.0%
Other income
(expense), net - - (31) - $ (3)
Income before income
taxes 5 34 (31) - $ 1,794
Income tax provision 199 $ 332
Tax rate (3) 18.5%
Net income 5 34 (31) (199) $ 1,462
Net income per
weighted-average
share, basic for
Class A and Class B
(3) (4)
$ 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)
$ - $ 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)
Employer
Payroll
Taxes
on Employee
Stock-Based Stock Intangible
GAAP Compensation Transactions Amortization
------------ ------------ ------------ ------------
Operating expenses:
Cost of license
revenues $ 237 (2) - (72)
Cost of services
revenues $ 484 (28) (1) (4)
Research and
development $ 999 (210) (6) (4)
Sales and marketing $ 1,645 (150) (5) (12)
General and
administrative $ 368 (48) (2) -
Operating income $ 872 438 14 92
Operating margin (3) 18.9% 9.5% 0.3% 2.0%
Income before income
taxes $ 893 438 14 92
Income tax provision $ 147
Tax rate (3) 16.5%
Net income $ 746 438 14 92
Net income per
weighted-average
share, basic for
Class A and Class B
(3) (4)
$ 1.75 $ 1.03 $ 0.03 $ 0.22
Net income per
weighted-average
share, diluted for
Class A and Class B
(3) (5)
$ 1.72 $ 1.01 $ 0.03 $ 0.21
Capitalized
Acquisition Software Tax
Related Development Adjustment Non-GAAP,
Items Costs (1) (2) as adjusted
------------ ------------ ------------ ------------
Operating expenses:
Cost of license
revenues - (71) - $ 92
Cost of services
revenues - - - $ 451
Research and
development - - - $ 779
Sales and marketing - - - $ 1,478
General and
administrative (4) - - $ 314
Operating income 4 71 - $ 1,491
Operating margin (3) 0.2% 1.5% - 32.4%
Income before income
taxes 4 71 - $ 1,512
Income tax provision 129 $ 276
Tax rate (3) 18.3%
Net income 4 71 (129) $ 1,236
Net income per
weighted-average
share, basic for
Class A and Class B
(3) (4)
$ 0.01 $ 0.17 $ (0.31) $ 2.90
Net income per
weighted-average
share, diluted for
Class A and Class B
(3) (5)
$ 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
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
Management believes these non-GAAP financial measures are useful to investors and others in assessing
- Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of our employees and executives, the expense for the fair value of the stock-based instruments we utilize may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Additionally, in order to establish the amount of expense to recognize for performance-based stock awards, which are also an element of our ongoing stock-based compensation, we are required to apply judgment to estimate the probability of the extent to which performance objectives will be achieved. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies.
- Employer payroll tax on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on
VMware's stock price and other factors that are beyond our control and do not correlate to the operation of the business.
- Amortization of acquired intangible assets. A portion of the purchase price of
VMware's acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However,VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition's purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore,VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.
- Realignment charges: Realignment charges include workforce reductions, asset impairments and losses on asset disposals, and costs to exit facilities. We believe it is useful to exclude these items, when significant, as they are not reflective of our ongoing business and operating results.
- Acquisition and other-related items. Acquisition and other -related items include direct costs of acquisitions and dispositions, such as transaction and advisory fees, which vary significantly and are unique to each transaction. Additionally,
VMware does not acquire or dispose of businesses on a predictable cycle.
- Capitalized software development costs. Capitalized software development costs encompass capitalization of development costs and the subsequent amortization of the capitalized costs over the useful life of the product. Amortization and capitalization of software development costs can vary significantly depending upon the timing of products reaching technological feasibility and being made generally available. We did not capitalize software development costs related to product offerings in either fiscal year 2013 or fiscal year 2012 given our current go-to-market strategy. In future periods, we do not expect amortization expense as previously capitalized software development costs have become fully amortized.
- Gain on disposition of certain lines of business and other, net. In 2013, we recognized a gain as a result of exiting certain lines of business under our business realignment plan, which was partially offset by a charge recognized for a non-recoverable strategic investment. These transactions resulted in a net gain of
$31 million . To the extent that significant gains or losses are realized on such dispositions and strategic investments, they do not occur on a predictable cycle, and such gains and losses are not reflective of our ongoing business and operating results.
- Tax adjustment. 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 our non-GAAP income. 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.
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
Contacts:Paul Ziots VMware Investor Relations pziots@vmware.com 650-427-3267Joan Stone VMware Global Communications joanstone@vmware.com 650-427-4436
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