Revenue Performance - Total revenue for the three months ended April 29, 2022, was $3,088 million, representing a 3% increase from $2,994 million in the same period of 2021[119]. - License revenue decreased by 11% to $572 million in Q1 fiscal 2023 from $646 million in Q1 fiscal 2022, primarily due to a shift towards cloud-based solutions[119]. - Subscription and SaaS revenue increased by 21% to $899 million in Q1 fiscal 2023, up from $741 million in Q1 fiscal 2022, driven by higher sales of Workspace ONE and VMware Tanzu offerings[119]. - Annual recurring revenue (ARR) reached $3.7 billion as of April 29, 2022, compared to $3.0 billion as of April 30, 2021, indicating strong growth in subscription and SaaS contracts[123]. - Revenue from Dell accounted for 37% of consolidated revenue for the three months ended April 29, 2022, compared to 35% in the same period last year[151]. - Reseller revenue for the three months ended April 29, 2022, was $1,137 million, an increase from $1,036 million for the same period in 2021, representing a growth of 9.7%[152]. Financial Obligations and Cash Flow - Remaining performance obligations totaled $11.6 billion as of April 29, 2022, with approximately 57% expected to be recognized as revenue over the next twelve months[128]. - Customer deposits from transactions with Dell were $282 million as of April 29, 2022, compared to $298 million as of January 28, 2022, indicating a decrease of 5.4%[153]. - Cash and cash equivalents increased to $3,719 million as of April 29, 2022, up from $3,614 million as of January 28, 2022, reflecting a growth of 2.9%[159]. - Net cash provided by operating activities decreased by $261 million to $1,005 million for the three months ended April 29, 2022, compared to $1,266 million for the same period in 2021, a decline of 20.6%[164]. - Cash used in investing activities increased by $18 million to $91 million for the three months ended April 29, 2022, compared to $72 million for the same period in 2021, an increase of 25%[165]. - Cash used in financing activities increased by $518 million to $815 million for the three months ended April 29, 2022, compared to $297 million for the same period in 2021, a rise of 174.4%[166]. - The company has unsecured senior notes with an aggregated carrying value of $9.2 billion as of April 29, 2022, with interest paid of $70 million for the three months ended April 29, 2022[167]. - The Transition Tax liability related to the 2017 Tax Act was $504 million as of April 29, 2022, expected to be paid over the next four years[160]. - The company plans to use free cash flow primarily to repay outstanding indebtedness through the end of fiscal 2023, while continuing a balanced capital allocation policy[160]. Operational Expenses - The company expects operating margins to be negatively impacted in fiscal 2023 due to increased investments in its subscription and SaaS portfolio[113]. - The company reported a 1% increase in total services revenue to $1,617 million in Q1 fiscal 2023, driven by a rise in professional services revenue[119]. - Cost of subscription and SaaS revenue increased by $35 million (23%) to $187 million for the three months ended April 29, 2022, compared to $152 million in the same period last year[133]. - Cost of services revenue rose by $39 million (13%) to $352 million for the three months ended April 29, 2022, up from $312 million in the prior year[136]. - Research and development expenses increased by $62 million (11%) to $642 million for the three months ended April 29, 2022, compared to $581 million in the same period last year[138]. - Sales and marketing expenses grew by $88 million (10%) to $970 million for the three months ended April 29, 2022, up from $884 million in the prior year[140]. - General and administrative expenses increased by $15 million (6%) to $251 million for the three months ended April 29, 2022, compared to $236 million in the same period last year[143]. - Interest expense rose by $21 million (43%) to $71 million for the three months ended April 29, 2022, compared to $50 million in the same period last year, primarily due to the issuance of $6.0 billion in unsecured senior notes[145]. - Other income (expense), net improved by $14 million (56%) to $(10) million for the three months ended April 29, 2022, compared to $(23) million in the prior year[147]. - The effective income tax provision increased to $86 million for the three months ended April 29, 2022, with an effective tax rate of 26.1%, up from $61 million and 12.6% in the same period last year[148]. Strategic Initiatives - The proposed merger with Broadcom Inc. involves a cash consideration of $142.50 per share or an exchange ratio of 0.25200 shares of Broadcom common stock[114]. - Business operations in Russia and Belarus were suspended due to geopolitical events, but the financial impact on Q1 fiscal 2023 was not material[116]. - Total backlog as of April 29, 2022, was $25 million, down from $88 million as of January 28, 2022, indicating fluctuations in unfulfilled purchase orders[129]. - The company continues to invest in expanding its subscription and SaaS offerings, reflecting a strategic focus on growth in these areas[134]. - The company entered into a Merger Agreement with Broadcom on May 26, 2022, which includes a termination fee of $1.5 billion if the transaction does not close by February 26, 2023[160]. - No material changes to market risk exposures during the three months ended April 29, 2022[175].

Debt and Financial Obligations - As of January 28, 2022, the company had an aggregate of $12.7 billion of outstanding indebtedness[74] - The company has entered into a $1.5 billion unsecured revolving credit facility, which is currently undrawn[74] - The company intends to reduce its indebtedness during the next fiscal years, relying on cash generated from operations[74] - VMware incurred $10.0 billion in indebtedness to fund the special dividend, including $6.0 billion in senior notes issued in August 2021[207] - The total principal amount of VMware's long-term debt as of January 28, 2022, was $9.25 billion, an increase from $4.75 billion as of January 29, 2021[294] - VMware's outstanding balance on the 2021 Term Loan was $3.5 billion as of January 28, 2022, after repaying $500 million on January 25, 2022[295] - VMware established a revolving credit facility with a borrowing capacity of up to $1.5 billion, which replaced the previous $1.0 billion facility[296] Tax Liabilities and Compliance - The company estimates a potential impact on fiscal 2023 cash from operations possibly exceeding $500 million due to changes in tax provisions[76] - The company is undergoing audits by the IRS for fiscal years 2015 through 2019, which may result in additional tax liabilities[78] - The company is subject to potential tax liabilities due to its former membership in Dell's consolidated tax group[75] - Changes in tax laws and regulations could materially affect the company's effective tax rate and financial condition[76] - The 2017 Tax Act requires the company to amortize research and development expenditures over five to fifteen years, affecting cash flow[76] - The effective tax rate for the year ended January 28, 2022, was 13%, a slight decrease from 14% for the year ended January 29, 2021[328] - VMware's gross unrecognized tax benefits decreased from $508 million as of January 28, 2022, to $527 million, with additions of $68 million related to current year tax positions[336] Revenue and Financial Performance - Total revenue for the year ended January 28, 2022, was $12.9 billion[191] - Net income attributable to VMware, Inc. for the year ended January 28, 2022, was $1,820 million, down from $2,058 million in the previous year, a decrease of 11.6%[197] - Total revenue for the year ended January 28, 2022, was $12,851 million, an increase from $11,767 million in the previous year, representing a growth of 9.2%[195] - VMware recognized $9.1 billion in total billings and $8.2 billion in revenue for the year ended January 28, 2022, compared to $8.4 billion in billings and $7.4 billion in revenue for the year ended January 29, 2021[248] Cybersecurity Risks - Cybersecurity risks are increasing as the company relies on IT systems and cloud-based environments to conduct business operations[79] - Cyber-attacks are increasing in number and sophistication, posing risks to the company's proprietary information and IT services[80] - The company has faced unauthorized access incidents in the past, which could lead to significant liability claims and regulatory actions[80] - The complexity of the company's technical environment increases the risk of vulnerabilities being introduced into its products and services[81] Legal and Regulatory Proceedings - The company is involved in various legal and regulatory proceedings that could negatively impact its business and financial condition[83] - VMware is currently involved in multiple legal proceedings, including a lawsuit filed by Cirba Inc. for patent infringement[264] - VMware accrued a total of $237 million for patent infringement damages, which was later derecognized following a new trial order[266] Acquisitions and Investments - VMware completed the acquisition of Pivotal for $2.0 billion, enhancing its cloud-native Kubernetes portfolio[274] - The acquisition of Carbon Black was executed at a price of $26.00 per share, totaling $2.0 billion net of cash acquired[274] - VMware acquired SaltStack, Inc. for $51 million, which included $29 million of identifiable intangible assets and $24 million of goodwill[269] - VMware's acquisitions during fiscal 2021 included five other non-material acquisitions totaling $62 million, enhancing product features for VMware Carbon Black Cloud and vRealize Operations[273] Stockholder Influence and Equity - MSD Stockholders and SLP Stockholders hold significant influence, owning 40.2% and 10.0% of VMware's outstanding stock respectively as of March 15, 2022[89] - The combined ownership of MSD and SLP Stockholders is 62.9%, which may conflict with the interests of other stockholders[90] - VMware's stock repurchase program had $1.7 billion remaining available for repurchase as of January 28, 2022[342] Cash Flow and Liquidity - Cash and cash equivalents decreased to $3,614 million as of January 28, 2022, from $4,692 million in the previous year, a decline of 22.9%[199] - Net cash provided by operating activities was $4,357 million, slightly down from $4,409 million year-over-year[201] - Cash, cash equivalents, and restricted cash at the end of the period totaled $3,663 million, down from $4,770 million at the beginning of the period[201] Goodwill and Intangible Assets - Goodwill and amortizable intangible assets were valued at $9.6 billion and $714 million respectively as of January 28, 2022[92] - The carrying amount of definite-lived intangible assets decreased from $993 million as of January 29, 2021, to $714 million as of January 28, 2022, reflecting amortization expenses of $303 million[276] - Goodwill decreased slightly from $9.599 billion as of January 29, 2021, to $9.598 billion as of January 28, 2022, due to business combinations and related adjustments[280] Foreign Currency Risks - Fluctuations in foreign currency exchange rates may adversely affect operating results, particularly due to business conducted outside the U.S. dollar[92] - Approximately 70% of VMware's sales are denominated in U.S. dollars, with significant invoicing in euros, British pounds, Japanese yen, Australian dollars, and Chinese renminbi[174] - VMware utilizes derivative financial instruments, primarily foreign currency forward contracts, to manage foreign currency exchange rate risks[174] Environmental, Social, and Governance (ESG) Goals - The company has committed to a 2030 Agenda focused on ESG goals, which includes sustainability and diversity initiatives[94] - Failure to meet ESG reporting expectations may result in reputational harm and increased litigation risk[94]

Financial Data and Key Metrics Changes - Revenue for Q4 was $3.53 billion, an increase of 7% from Q4 FY21. Total revenue for FY22 was $12.85 billion, up 9% from FY21 [5][17] - Subscription and SaaS revenue for Q4 was $868 million, growing 23% year-over-year. For FY22, subscription and SaaS revenue totaled $3.2 billion, representing 25% of total revenue [17][18] - Non-GAAP operating income for Q4 was $1.137 billion, with a non-GAAP operating margin of 32.2% and non-GAAP earnings per share of $2.02 [19] - Cash flow from operations for FY22 was $4.4 billion, with Q4 cash flow from operations at $1.137 billion [20] Business Line Data and Key Metrics Changes - Subscription and SaaS revenue grew to 25% of overall revenue by the end of FY22, with a goal to surpass $4 billion in FY23 [17][23] - In Q4, license revenue grew 2% year-over-year to $1.035 billion, while term license revenue was $191 million, up from $95 million in Q3 [18] - Services revenue for Q4 was $1.628 billion, an increase of approximately 3.5% year-over-year [19] Market Data and Key Metrics Changes - Total subscription and SaaS ARR increased to $3.6 billion in FY22, up 24% versus FY21 [18] - RPO in Q4 was $12 billion, up 6% year-over-year, with current RPO at $6.8 billion, up 9% year-over-year [20] Company Strategy and Development Direction - The company aims to be a leading platform vendor in the multi-cloud era, focusing on accelerating multi-cloud innovation and offerings [6][7] - Plans for FY23 include making all major products available as subscription or SaaS offerings, with a focus on accelerating the subscription and SaaS transformation [8][23] - The company is emphasizing partnerships and expanding its strategic alliances to enhance its multi-cloud capabilities [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about FY23, expecting to drive accelerated growth and innovation in the multi-cloud space [16][23] - The company is aware of macroeconomic factors, including the impact of the Ukraine conflict, but remains focused on long-term strategic goals [29][45] Other Important Information - VMware was recognized for its commitment to environmental, social, and governance (ESG) practices, ranking 1 in the environmental category [15] - The company repurchased approximately 2.5 million shares in Q4 at an average price of $119 per share [22] Q&A Session Summary Question: Can you talk about the rollout of subscription and SaaS offerings in FY23? - Management highlighted the excitement around FY23 and the completion of making all SDDC products available as subscription offerings, with a focus on sales incentives and partner certifications [28][34] Question: What are you seeing in terms of customer behavior post-pandemic? - Management noted an increase in strategic decisions by customers to accelerate digital transformation and cloud migration, with a focus on cloud-smart approaches [40][41] Question: Did the Omicron variant affect your quarter? - Management stated there was no significant impact from Omicron on bookings or quarter performance, and they have accounted for macroeconomic factors in their guidance [44][45] Question: How much of the subscription revenue is from new sales versus existing maintenance? - Approximately $100 million in subscription revenue in Q4 came from converting existing maintenance to subscription, with ongoing opportunities to grow subscription percentages [51][52] Question: How does the reduction in valuations affect M&A strategy? - The M&A strategy remains unchanged, focusing on tuck-in acquisitions based on product needs rather than valuation changes [58]

Table of Contents 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 October 29, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | --- | --- | |-------------------|----------------------------------------|----------------------------------------------- ...

VMware, Inc. (NYSE:VMW) Q3 2022 Earnings Conference Call November 23, 2021 4:30 PM ET Company Participants Paul Ziots - Vice President of Investor Relations Raghu Raghuram - Chief Executive Officer Zane Rowe - Executive Vice President and Chief Financial Officer Sumit Dhawan - President Conference Call Participants Matthew Hedberg - RBC Capital Markets Mark Murphy - JPMorgan Chase & Co. Raimo Lenschow - Barclays Bank PLC Mark Moerdler - Sanford C. Bernstein & Co. LLC Phil Winslow - Credit Suisse Mauricio Ro ...

Financial Analyst Meeting October 7, 2021 ©2021 VMware, Inc. Agenda Strategy Customers Product Financial Raghu Raghuram Chief Executive Officer Sumit Dhawan President Ajay Patel General Manager, Modern Apps & Management Business Group Zane Rowe Chief Financial Officer Mark Lohmeyer General Manager, Cloud Infrastructure Business Group ©2021 VMware, Inc. 2 Strategy Raghu Raghuram CEO ©2021 VMware, Inc. 3 The Next Phase for VMware: Multi-Cloud & Apps Platform Strong track record of driving innovative industry- ...