0001124610-22-000041 10-Q 91 20220729 20220902 20220902 VMWARE, INC. 0001124610 7372 943292913 DE 0203 10-Q 34 001-33622 221225194 3401 HILLVIEW AVENUE PALO ALTO CA 94304 (650) 427-5000 3401 HILLVIEW AVENUE PALO ALTO CA 94304 VMWARE INC 20000923 10-Q 1 vmw-20220729.htm 10-Q vmw-20220729
00011246102/32023Q2FALSE Includes related party revenue as follows (refer to Note D):
License$436 $374 $690 $661 
Subscription and SaaS259 195 514 368 
Services633 606 1,274 1,194 
Includes stock-based compensation as follows:
Cost of license revenue$— $— $$
Cost of subscription and SaaS revenue11 11 
Cost of services revenue25 24 48 49 
Research and development146 150 278 277 
Sales and marketing93 81 174 153 
General and administrative41 33 81 64 
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 29, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission File Number 001-33622
_______________________________________________________

VMWARE, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________
Delaware94-3292913
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
3401 Hillview Avenue
Palo Alto,
CA
94304
(Address of principal executive offices)(Zip Code)
(650) 427-5000
(Registrant’s telephone number, including area code)
_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stockVMWNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of August 26, 2022, the number of shares of Class A common stock, par value $0.01 per share, of the registrant outstanding was 423,024,854.


VMware, Pivotal, Tanzu, Workspace ONE, Carbon Black, CloudHealth, VeloCloud, vRealize, vSphere, NSX and Nyansa are registered trademarks or trademarks of VMware, Inc. or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.
2

PART I
FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
Three Months EndedSix Months Ended
 July 29,July 30,July 29,July 30,
 2022202120222021
Revenue(1):
License$796 $738 $1,369 $1,384 
Subscription and SaaS943 776 1,842 1,516 
Services1,597 1,624 3,213 3,232 
Total revenue3,336 3,138 6,424 6,132 
Operating expenses(2):
Cost of license revenue39 37 74 75 
Cost of subscription and SaaS revenue196 170 387 327 
Cost of services revenue369 352 744 689 
Research and development803 775 1,577 1,483 
Sales and marketing1,080 1,023 2,134 1,981 
General and administrative276 256 527 492 
Realignment7  7 1 
Operating income566 525 974 1,084 
Investment income7 1 8 1 
Interest expense(74)(49)(145)(99)
Other income (expense), net(20)3 (30)(19)
Income before income tax479 480 807 967 
Income tax provision132 69 218 131 
Net income$347 $411 $589 $836 
Net income per weighted-average share, basic$0.82 $0.98 $1.40 $1.99 
Net income per weighted-average share, diluted$0.82 $0.97 $1.39 $1.98 
Weighted-average shares, basic422,002 419,355 421,294 419,235 
Weighted-average shares, diluted424,125 422,802 423,561 422,419 
__________
(1)   Includes related party revenue as follows (refer to Note C):
License$436 $374 $690 $661 
Subscription and SaaS259 195 514 368 
Services633 606 1,274 1,194 
(2)   Includes stock-based compensation as follows:
Cost of license revenue$ $ $1 $1 
Cost of subscription and SaaS revenue6 5 11 11 
Cost of services revenue25 24 48 49 
Research and development146 150 278 277 
Sales and marketing93 81 174 153 
General and administrative41 33 81 64 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3

VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
Three Months EndedSix Months Ended
July 29,July 30,July 29,July 30,
 2022202120222021
Net income$347 $411 $589 $836 
Other comprehensive income (loss):
Changes in fair value of effective foreign currency forward contracts:
Unrealized gains (losses), net of tax provision (benefit) of $(1), $, $(1) and $
(6)1 (9)2 
Reclassification of (gains) losses realized during the period, net of tax (provision) benefit of $, $, $ and $
2 (1)1  
Total other comprehensive income (loss)(4) (8)2 
Comprehensive income, net of taxes$343 $411 $581 $838 
The accompanying notes are an integral part of the condensed consolidated financial statements.
4

VMware, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
July 29,January 28,
20222022
ASSETS
Current assets:
Cash and cash equivalents$3,242 $3,614 
Short-term investments 19 
Accounts receivable, net of allowance of $9 and $10
2,073 2,297 
Due from related parties1,267 1,438 
Other current assets636 598 
Total current assets7,218 7,966 
Property and equipment, net1,550 1,461 
Deferred tax assets5,986 5,906 
Intangible assets, net589 714 
Goodwill9,598 9,598 
Due from related parties189 199 
Other assets2,863 2,832 
Total assets$27,993 $28,676 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable$208 $234 
Accrued expenses and other2,683 2,806 
Unearned revenue6,388 6,479 
Due to related parties202 132 
Total current liabilities9,481 9,651 
Long-term debt11,181 12,671 
Unearned revenue4,843 4,743 
Income tax payable253 242 
Operating lease liabilities889 927 
Due to related parties802 909 
Other liabilities404 409 
Total liabilities27,853 29,552 
Contingencies (refer to Note D)
Stockholders’ equity (deficit):
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 422,622 and 418,808 shares
4 4 
Additional paid-in capital435  
Accumulated other comprehensive loss(13)(5)
Accumulated deficit(286)(875)
Total stockholders’ equity (deficit)140 (876)
Total liabilities and stockholders’ equity (deficit)$27,993 $28,676 
The accompanying notes are an integral part of the condensed consolidated financial statements.
5

VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Six Months Ended
 July 29,July 30,
 20222021
Operating activities:
Net income$589 $836 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization590 544 
Stock-based compensation593 555 
Deferred income taxes, net(80)(31)
(Gain) loss on equity securities and disposition of assets, net(12)37 
Other3 4 
Changes in assets and liabilities, net of acquisitions:
Accounts receivable222 206 
Other current assets and other assets(418)(390)
Due from related parties180 522 
Accounts payable(31)70 
Accrued expenses and other liabilities(319)(218)
Income taxes payable114 (29)
Unearned revenue9 24 
Due to related parties(38) 
Net cash provided by operating activities1,402 2,130 
Investing activities:
Additions to property and equipment(219)(157)
Sales of investments in equity securities20 34 
Purchases of strategic investments(8)(7)
Proceeds from disposition of assets90 1 
Business combinations, net of cash acquired, and purchases of intangible assets(4)(15)
Net cash used in investing activities(121)(144)
Financing activities:
Proceeds from issuance of common stock124 139 
Repayment of term loan(1,500) 
Repurchase of common stock(89)(729)
Shares repurchased for tax withholdings on vesting of restricted stock(205)(242)
Principal payments on finance lease obligations(2)(2)
Net cash used in financing activities(1,672)(834)
Net increase (decrease) in cash, cash equivalents and restricted cash(391)1,152 
Cash, cash equivalents and restricted cash at beginning of the period3,663 4,770 
Cash, cash equivalents and restricted cash at end of the period$3,272 $5,922 
Supplemental disclosures of cash flow information:
Cash paid for interest$140 $97 
Cash paid for taxes, net184 204 
Non-cash items:
Changes in capital additions, accrued but not paid$9 $11 
The accompanying notes are an integral part of the condensed consolidated financial statements.
6

VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in millions)
(unaudited)
Three Months Ended July 29, 2022
Class A
Common Stock
Additional
Paid-in
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
Loss
Stockholders’ Equity
(Deficit)
SharesPar Value
Balance, April 29, 2022421 $4 $227 $(633)$(9)$(411)
Proceeds from issuance of common stock— — 5 — — 5 
Issuance of restricted stock3 — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(1)— (115)— — (115)
Stock-based compensation— — 318 — — 318 
Total other comprehensive loss— — — — (4)(4)
Net income— — — 347 — 347 
Balance, July 29, 2022423 $4 $435 $(286)$(13)$140 
Six Months Ended July 29, 2022
Class A
Common Stock
Additional
Paid-in
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
Loss
Stockholders’ Equity
(Deficit)
SharesPar Value
Balance, January 28, 2022419 $4 $ $(875)$(5)$(876)
Proceeds from issuance of common stock1 — 124 — — 124 
Repurchase and retirement of common stock(1)— (89)— — (89)
Issuance of restricted stock5 — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(1)— (208)— — (208)
Stock-based compensation— — 608 — — 608 
Total other comprehensive loss— — — — (8)(8)
Net income— — — 589 — 589 
Balance, July 29, 2022423 $4 $435 $(286)$(13)$140 
Three Months Ended July 30, 2021
Class A
Common Stock
Class B
Convertible
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Stockholders’
Equity
SharesPar ValueSharesPar Value
Balance, April 30, 2021111 $1 307 $3 $1,960 $7,492 $(3)$9,453 
Proceeds from issuance of common stock— — — — 8 — — 8 
Repurchase and retirement of common stock(2)— — — (358)— — (358)
Issuance of restricted stock4 — — — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(1)— — — (191)— — (191)
Stock-based compensation— — — — 297 — — 297 
Net income— — — — — 411 — 411 
Balance, July 30, 2021112 $1 307 $3 $1,716 $7,903 $(3)$9,620 
Six Months Ended July 30, 2021
Class A
Common Stock
Class B
Convertible
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Loss
Stockholders’
Equity
SharesPar ValueSharesPar Value
Balance, January 29, 2021112 $1 307 $3 $1,985 $7,067 $(5)$9,051 
Proceeds from issuance of common stock2 — — — 139 — — 139 
Repurchase and retirement of common stock(5)— — — (729)— — (729)
Issuance of restricted stock4 — — — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(1)— — — (243)— — (243)
Stock-based compensation— — — — 564 — — 564 
Total other comprehensive income— — — — — — 2 2 
Net income— — — — — 836 — 836 
Balance, July 30, 2021112 $1 307 $3 $1,716 $7,903 $(3)$9,620 
The accompanying notes are an integral part of the condensed consolidated financial statements.
7

VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. Overview and Basis of Presentation
Company and Background
VMware, Inc. (“VMware”) originally pioneered the development and application of virtualization technologies with x86 server-based computing, separating application software from the underlying hardware, and then evolved to become the private cloud and mobility management leader. Building upon that leadership, VMware is focused on becoming the multi-cloud leader. Information technology (“IT”) driven innovation continues to disrupt markets and industries. Technologies emerge faster than organizations can absorb, creating increasingly complex environments. Organizations’ IT departments and corporate divisions are working at an accelerated pace to harness new technologies, platforms and cloud models, ultimately guiding businesses and their product teams through a digital transformation. To take on these challenges, the Company is helping customers drive their multi-cloud strategy by providing the multi-cloud platform for all applications, enabling digital innovation and enterprise control.
Basis of Presentation
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The fiscal year for VMware is the 52 or 53 weeks ending on the Friday nearest to January 31 of each year. Fiscal 2023 is a 53-week fiscal year, in which the first three quarters each has 13 weeks while the fourth quarter has 14 weeks. Fiscal 2022 was a 52-week fiscal year.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments and accruals, for a fair statement of VMware’s condensed consolidated results of operations, financial position and cash flows for the periods presented. Results of operations are not necessarily indicative of the results that may be expected for the full fiscal year 2023. Certain information and footnote disclosures typically included in annual consolidated financial statements have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in VMware’s Annual Report on Form 10-K filed on March 24, 2022.
On November 1, 2021, VMware’s spin-off from Dell Technologies Inc. (“Dell”) was completed (the “Spin-Off”). As a result of the Spin-Off, VMware became a standalone company and entities affiliated with Michael Dell (the “MSD Stockholders”), who serves as VMware’s Chairman of the Board and chairman and chief executive officer of Dell, and entities affiliated with Silver Lake Partners (the “SLP Stockholders”), of which Egon Durban, a VMware director, is a managing partner, became owners of direct interests in VMware representing 40.1% and 9.9%, respectively, of VMware’s outstanding stock, based on the shares outstanding as of July 29, 2022. Due to the MSD Stockholders’ and SLP Stockholders’ direct ownership in both VMware and Dell, as well as Mr. Dell’s executive position with Dell, transactions with Dell continue to be considered related party transactions following the Spin-Off.
Management believes the assumptions underlying the condensed consolidated financial statements are reasonable. However, the amounts recorded for VMware’s related party transactions with Dell and its consolidated subsidiaries may not be considered arm’s length with an unrelated third party. Therefore, the condensed consolidated financial statements included herein may not necessarily reflect the results of operations, financial position and cash flows had VMware engaged in such transactions with an unrelated third party during all periods presented. Accordingly, VMware’s historical financial information is not necessarily indicative of what the Company’s results of operations, financial position and cash flows will be in the future, if and when VMware contracts at arm’s length with unrelated third parties for products and services the Company receives from and provides to Dell.
Broadcom Merger Agreement
On May 26, 2022, VMware entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Broadcom Inc. (“Broadcom”). Under the terms of the Merger Agreement, each share of Class A common stock, par value $0.01 per share, of the Company (“Common Stock”) issued and outstanding immediately prior to the effective time of the transaction will be indirectly converted into the right to receive, at the election of the holder of such share of Common Stock, and subject to proration in accordance with the Merger Agreement as described below: (i) $142.50 per share in cash, without interest (the
8

VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
“Cash Consideration”), or (ii) 0.25200 (the “Exchange Ratio”) shares of common stock, par value $0.001 per share, of Broadcom (“Broadcom Common Stock”, and such consideration, the “Stock Consideration”). The stockholder election will be subject to a proration mechanism, such that the total number of shares of Common Stock entitled to receive the Cash Consideration and the total number of shares of Common Stock entitled to receive the Stock Consideration will, in each case, be equal to 50% of the aggregate number of shares of Common Stock issued and outstanding immediately prior to the consummation of the transaction. Holders of Common Stock that do not make an election will be treated as having elected to receive the Cash Consideration or the Stock Consideration in accordance with the proration methodology in the Merger Agreement.
The Merger Agreement contains customary representations, warranties and covenants. The Merger Agreement also contains termination rights for either or each of Broadcom and the Company. If the consummation of the transaction does not occur on or before February 26, 2023 by either party, subject to three extensions of three months each (at either Broadcom’s or the Company’s election) if on such date all of the closing conditions except those relating to regulatory approvals have been satisfied or waived, Broadcom would be required to pay the Company a termination fee of $1.5 billion. Upon termination of the Merger Agreement under certain specified circumstances, including by the Company to enter into a definitive agreement with respect to a superior proposal in accordance with the terms of the Merger Agreement, the Company would be required to pay Broadcom a termination fee in the amount of $1.5 billion.
The MSD Stockholders and the SLP Stockholders have signed voting agreements to vote in favor of the transaction, so long as the VMware Board continues to recommend the proposed transaction with Broadcom. Each such voting agreement will also terminate upon the termination of the Merger Agreement in accordance with its terms.
The transaction, which is expected to be consummated in Broadcom’s fiscal year 2023, is subject to the receipt of regulatory approvals and other customary closing conditions, including approval by VMware shareholders. If the transaction is consummated, the Common Stock will be delisted from the New York Stock Exchange and deregistered under the Securities Exchange Act of 1934, as amended.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of VMware and subsidiaries in which VMware has a controlling financial interest. All intercompany transactions and account balances between VMware and its subsidiaries have been eliminated in consolidation. Transactions with Dell and its consolidated subsidiaries are generally settled in cash and are classified on the condensed consolidated statements of cash flows based upon the nature of the underlying transaction. Amounts included in the current portion of due from related parties on the condensed consolidated balance sheets that are unrelated to Dell Financial Services and tax obligations are generally settled in cash within 60 days of each quarter-end.
Use of Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent liabilities at the date of the financial statements. Estimates are used for, but not limited to, trade receivable valuation, marketing development funds, expected period of benefit for deferred commissions, useful lives assigned to fixed assets and intangible assets, valuation of goodwill and definite-lived intangibles, income taxes, stock-based compensation and contingencies. Actual results could differ from those estimates. To the extent the Company’s actual results differ materially from those estimates and assumptions, VMware’s future financial statements could be affected. 
New Accounting Pronouncement
In November 2021, the Financial Accounting Standards Board issued an accounting standards update (“ASU”) 2021-10, Government Assistance (Topic 832), requiring annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The new standard is effective for annual periods beginning after December 15, 2021 but may be early adopted. The Company does not expect the adoption of the ASU to have a material impact on the Company’s condensed consolidated financial statements and plans to adopt the standard during fiscal 2023 on a prospective basis.
B. Revenue, Unearned Revenue and Remaining Performance Obligations
Revenue
Contract Assets
A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets include fixed-fee professional services where transfer of services has occurred in advance of the Company’s
9

VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
right to invoice. Contract assets are classified as accounts receivables upon invoicing. Contract assets are included in other current assets on the condensed consolidated balance sheets. Contract assets were $41 million and $36 million as of July 29, 2022 and January 28, 2022, respectively. Contract asset balances will fluctuate based upon the timing of the transfer of services, billings and customers’ acceptance of contractual milestones.
Contract Liabilities
Contract liabilities consist of unearned revenue, which is generally recorded when VMware has the right to invoice or payments have been received for undelivered products or services.
Customer Deposits
Purchased credits eligible for redemption of VMware’s hosted services (“cloud credits”) are included in customer deposits until the cloud credit is consumed or is contractually committed to a specific hosted service. Cloud credits are redeemable by the customer for the gross value of the hosted offering. Upon contractual commitment for a hosted service, the net value of the cloud credits that are expected to be recognized as revenue when the obligation is fulfilled will be classified as unearned revenue. Customer deposits also include prepayments from customers related to amounts received for contracts that include certain cancellation rights.
As of July 29, 2022, customer deposits related to customer prepayments and cloud credits of $593 million were included in accrued expenses and other, and $168 million were included in other liabilities on the condensed consolidated balance sheets. As of January 28, 2022, customer deposits related to customer prepayments and cloud credits of $470 million were included in accrued expenses and other, and $166 million were included in other liabilities on the condensed consolidated balance sheets.
Deferred Commissions
Deferred commissions are classified as current or non-current based on the duration of the expected period of benefit. Deferred commissions, including the employer portion of payroll taxes, included in other current assets as of July 29, 2022 and January 28, 2022 were $31 million and $17 million, respectively. Deferred commissions included in other assets were $1.3 billion and $1.2 billion as of July 29, 2022 and January 28, 2022, respectively.
Amortization expense for deferred commissions was included in sales and marketing on the condensed consolidated statements of income and was $158 million and $301 million during the three and six months ended July 29, 2022, respectively, and $128 million and $253 million during the three and six months ended July 30, 2021, respectively.
Unearned Revenue
Unearned revenue as of the periods presented consisted of the following (table in millions):
July 29,January 28,
20222022
Unearned license revenue$20 $19 
Unearned subscription and software-as-a-service (“SaaS”) revenue2,952 2,669 
Unearned software maintenance revenue6,903 7,208 
Unearned professional services revenue1,356 1,326 
Total unearned revenue$11,231 $11,222 
Unearned subscription and SaaS revenue is generally recognized over time as customers consume the services or ratably over the term of the subscription, commencing upon provisioning of the service.
Unearned software maintenance revenue is attributable to VMware’s maintenance contracts and is generally recognized ratably over the contract duration. The weighted-average remaining contractual term as of July 29, 2022 was approximately two years. Unearned professional services revenue results primarily from prepaid professional services and is generally recognized as the services are performed.
Total billings and revenue recognized during the three months ended July 29, 2022 were $2.5 billion and $2.2 billion, respectively, and did not include amounts for performance obligations that were fully satisfied upon delivery, such as on-premises licenses. Total billings and revenue recognized during the six months ended July 29, 2022 were each $4.3 billion and did not include amounts for performance obligations that were fully satisfied upon delivery, such as on-premises licenses.
Revenue recognized during the three and six months ended July 30, 2021 was $2.0 billion and $4.0 billion, respectively, and did not include amounts for performance obligations that were fully satisfied upon delivery, such as on-premises licenses.
10

VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Remaining Performance Obligations
Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted non-cancellable customer contracts at the end of any given period.
As of July 29, 2022, the aggregate transaction price allocated to remaining performance obligations was $12.1 billion, of which approximately 56% is expected to be recognized as revenue over the next twelve months and the remainder thereafter. As of January 28, 2022, the aggregate transaction price allocated to remaining performance obligations was $12.0 billion, of which approximately 57% was expected to be recognized as revenue during fiscal 2023 and the remainder thereafter.
C. Related Parties
Transactions with Dell continue to be considered related party transactions following the Spin-Off due to the MSD Stockholders’ and SLP Stockholders’ direct ownership in both VMware and Dell, as well as Mr. Dell’s executive position with Dell.
On November 1, 2021, in connection with the Spin-Off, VMware and Dell entered into the Commercial Framework Agreement to provide a framework under which the Company and Dell will continue their strategic commercial relationship, particularly with respect to projects mutually agreed by the parties as having the potential to accelerate the growth of an industry, product, service or platform that may provide the parties with a strategic opportunity. The Commercial Framework Agreement has an initial term of five years, with automatic one-year renewals occurring annually thereafter, subject to certain terms and conditions.
The information provided below includes a summary of transactions with Dell.
Transactions with Dell
VMware and Dell engaged in the following ongoing related party transactions, which resulted in revenue and receipts, and unearned revenue for VMware:
Pursuant to original equipment manufacturer (“OEM”) and reseller arrangements, Dell integrates or bundles VMware’s products and services with Dell’s products and sells them to end users. Dell also acts as a distributor, purchasing VMware’s standalone products and services for resale to end-user customers through VMware-authorized resellers. Revenue under these arrangements is presented net of related marketing development funds and rebates paid to Dell. In addition, VMware provides professional services to end users based upon contractual agreements with Dell.
Dell purchases products and services from VMware for its internal use.
From time to time, VMware and Dell enter into agreements to collaborate on technology projects, in connection with which Dell pays VMware for services or reimburses VMware for costs incurred by VMware.
During the three and six months ended July 29, 2022, revenue from Dell accounted for 40% and 39% of VMware’s consolidated revenue, respectively. During each of the three and six months ended July 29, 2022, revenue recognized on transactions where Dell acted as an OEM accounted for 13% of total revenue from Dell, and 5% of VMware’s consolidated revenue.
During the three and six months ended July 30, 2021, revenue from Dell accounted for 37% and 36% of VMware’s consolidated revenue, respectively. During the three and six months ended July 30, 2021, revenue recognized on transactions where Dell acted as an OEM accounted for 12% and 13% of total revenue from Dell, respectively, and, for each period, 5% of VMware’s consolidated revenue.
11

VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Dell purchases VMware products and services directly from VMware, as well as through VMware’s channel partners. Information about VMware’s revenue and receipts, and unearned revenue from such arrangements, for the periods presented consisted of the following (table in millions):
Revenue and ReceiptsUnearned Revenue
Three Months EndedSix Months EndedAs of
July 29,July 30,July 29,July 30,July 29,January 28,
202220212022202120222022
Reseller revenue$1,313 $1,162 $2,451 $2,198 $5,481 $5,550 
Internal-use revenue15 13 27 25 26 39 
Customer deposits resulting from transactions with Dell were $359 million and $298 million as of July 29, 2022 and January 28, 2022, respectively.
VMware and Dell engaged in the following ongoing related party transactions, which resulted in costs to VMware:
VMware purchases and leases products and purchases services from Dell.
From time to time, VMware and Dell enter into agreements to collaborate on technology projects, in connection with which VMware pays Dell for services provided to VMware by Dell.
In certain geographic regions where VMware does not have an established legal entity, VMware contracts with Dell subsidiaries for support services and support from Dell personnel who are managed by VMware. The costs incurred by Dell on VMware’s behalf related to these employees are charged to VMware with a mark-up intended to approximate costs that would have been incurred had VMware contracted for such services with an unrelated third party. These costs are included as expenses on VMware’s condensed consolidated statements of income and primarily include salaries, benefits, travel and occupancy expenses.
Prior to the Spin-Off, in certain geographic regions, Dell filed a consolidated indirect tax return, which included value added taxes and other indirect taxes collected by VMware from its customers. VMware remitted the indirect taxes to Dell, and Dell remitted the tax payment to the foreign governments on VMware’s behalf.
From time to time, VMware enters into agency arrangements with Dell that enable VMware to sell its subscriptions and services, leveraging the Dell enterprise relationships and end customer contracts.
Information about VMware’s payments for such arrangements during the periods presented consisted of the following (table in millions):
Three Months EndedSix Months Ended
July 29,July 30,July 29,July 30,
2022202120222021
Purchases and leases of products and purchases of services(1)
$53 $61 $95 $107 
Dell subsidiary support and administrative costs2 10 5 24 
(1) Amount includes indirect taxes that were remitted to Dell during the periods presented.
VMware also purchases Dell products through Dell’s channel partners, however such amounts were not material during the periods presented.
From time to time, VMware and Dell also enter into joint marketing, sales, branding and product development arrangements, for which both parties may incur costs.
Dell Financial Services (“DFS”)
DFS provides financing to certain of VMware’s end users at the end users’ discretion. Upon acceptance of the financing arrangement by both VMware’s end users and DFS, amounts classified as trade accounts receivable are reclassified to the current portion of due from related parties on the condensed consolidated balance sheets. Revenue recognized on transactions financed through DFS was recorded net of financing fees. Financing fees on arrangements accepted by both parties were $17 million and $15 million during the six months ended July 29, 2022 and July 30, 2021, respectively, and were not material during each of the three months ended July 29, 2022 and July 30, 2021.
12

VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Tax Agreements with Dell
Pursuant to the Tax Matters Agreement, effective April 14, 2021 (the “Tax Matters Agreement”), VMware and Dell agreed to terminate the former tax sharing agreement as amended on December 30, 2019 (the “Tax Sharing Agreement”, together with the Tax Matters Agreement and the Letter Agreement (as defined below), the “Tax Agreements”). The Tax Matters Agreement governs the Company’s and Dell’s respective rights and obligations, both for pre- and post-Spin-Off periods, regarding income and other taxes, and related matters, including tax liabilities and benefits, attributes and returns.
As a result of the Spin-Off, VMware is no longer a member of the Dell consolidated tax group, and the Company’s U.S. federal income tax will be reported separately from that of the Dell consolidated tax group. VMware and Dell have agreed to indemnify one another, pursuant to the Tax Matters Agreement, for certain tax liabilities or tax benefits relating to periods prior to the Spin-Off. Certain adjustments to these amounts that will be recognized in future periods will be recorded with an offset to other income (expense), net on the condensed consolidated statements of income. The actual amount that VMware may receive from or pay to Dell could vary depending on the outcome of tax matters arising from Dell’s future tax audits, which may not be resolved for several years.
As of the periods presented, amounts due to and due from Dell pursuant to the Tax Matters Agreement consisted of the following (table in millions):
July 29,January 28,
20222022
Due from related parties:
Current$ $6 
Non-current189 199
Due to related parties:
Current$