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VMware(VMW) - 2024 Q1 - Quarterly Report
VMWVMware(VMW)2023-06-08 20:04

Revenue Growth and Performance - Subscription and SaaS revenue increased by 35% to 1.217billioninQ12024comparedto1.217 billion in Q1 2024 compared to 899 million in Q1 2023[98] - Total revenue grew 6% to 3.277billioninQ12024comparedto3.277 billion in Q1 2024 compared to 3.088 billion in Q1 2023[98] - International revenue grew 10% to 1.722billioninQ12024comparedto1.722 billion in Q1 2024 compared to 1.570 billion in Q1 2023[98] - Annual Recurring Revenue (ARR) for subscription and SaaS reached 4.8billionasofMay5,2023,upfrom4.8 billion as of May 5, 2023, up from 3.7 billion in the same period last year[103] Revenue Decline and Challenges - License revenue decreased by 10% to 517millioninQ12024comparedto517 million in Q1 2024 compared to 572 million in Q1 2023[98] - Software maintenance revenue decreased by 6% to 1.234billioninQ12024comparedto1.234 billion in Q1 2024 compared to 1.310 billion in Q1 2023[98] - Unearned subscription and SaaS revenue stood at 4.386billionasofMay5,2023,slightlydownfrom4.386 billion as of May 5, 2023, slightly down from 4.401 billion as of February 3, 2023[102] - Total backlog decreased to 28millionasofMay5,2023from28 million as of May 5, 2023 from 72 million as of February 3, 2023[109] Cost and Expense Increases - Cost of subscription and SaaS revenue increased by 8% to 202millioninQ12024comparedto202 million in Q1 2024 compared to 187 million in Q1 2023[112] - Cost of services revenue increased by 23million(723 million (7%) to 375 million, driven by 29milliongrowthincash−basedemployee−relatedexpenses[114]−Researchanddevelopmentexpensesroseby29 million growth in cash-based employee-related expenses[114] - Research and development expenses rose by 72 million (9%) to 847million,primarilydueto847 million, primarily due to 56 million increase in cash-based employee-related expenses[115] - Sales and marketing expenses grew by 50million(550 million (5%) to 1,104 million, mainly from 30millionhighercommissioncostsandmerger−relatedexpenses[116]−Generalandadministrativeexpensessurgedby30 million higher commission costs and merger-related expenses[116] - General and administrative expenses surged by 122 million (49%) to 373million,largelydueto373 million, largely due to 85 million accrual for patent lawsuit and 52millionmerger−relatedcosts[118]−Totalexpensesincreasedby652 million merger-related costs[118] - Total expenses increased by 6% to 397 million, representing 26% of services revenue[113] Financial Position and Cash Flow - Cash and cash equivalents increased to 6,548million,withoperatingcashflowgrowingby6,548 million, with operating cash flow growing by 744 million to 1,750million[129][131]−Cashusedininvestingactivitiesincreasedby1,750 million[129][131] - Cash used in investing activities increased by 23 million in Q2 2023 compared to Q2 2022, primarily due to the absence of proceeds from sales of equity securities[132] - Cash used in financing activities decreased by 628millioninQ22023comparedtoQ22022,drivenbytheabsenceofa628 million in Q2 2023 compared to Q2 2022, driven by the absence of a 750 million senior unsecured term loan repayment and suspension of stock repurchase programs[133] - The company repurchased 94millionworthofsharesfortaxwithholdingsonrestrictedstockvestinginQ22023[134]DebtandInterestExpenses−Thecompanyhas94 million worth of shares for tax withholdings on restricted stock vesting in Q2 2023[134] Debt and Interest Expenses - The company has 9.2 billion in unsecured senior notes outstanding as of May 5, 2023, with interest payments of 67millioninQ22023[135]−Thecompanyhasa67 million in Q2 2023[135] - The company has a 4.0 billion senior unsecured term loan facility, with an outstanding balance of 1.2billionasofMay5,2023andinterestpaymentsof1.2 billion as of May 5, 2023 and interest payments of 17 million in Q2 2023[136] - Interest expense rose by 9million(139 million (13%) to 80 million, primarily from higher rates on senior unsecured term loan facility[120] Investment and Income - Investment income increased significantly by 63millionto63 million to 64 million, driven by higher yields on cash equivalents[119] Tax and Legal Provisions - Effective income tax rate remained stable at 25.0%, with 75millionincometaxprovision[124]StrategicandForward−LookingStatements−ThecompanysuspendeditsstockrepurchaseprograminconnectionwiththeMergerAgreementanddidnotrepurchaseanycommonstockafterQ12023[137]−Thecompany′sforward−lookingstatementsincludeexpectationsregardingthetimingandcompletionoftheproposedtransactionwithBroadcom,futurefinancialperformance,andimpactsofcorporatetransactions[139]−Thecompany′smarketriskexposuresremainedunchangedduringQ22023[142]RevenuefromKeyPartners−RevenuefromDellaccountedfor3675 million income tax provision[124] Strategic and Forward-Looking Statements - The company suspended its stock repurchase program in connection with the Merger Agreement and did not repurchase any common stock after Q1 2023[137] - The company's forward-looking statements include expectations regarding the timing and completion of the proposed transaction with Broadcom, future financial performance, and impacts of corporate transactions[139] - The company's market risk exposures remained unchanged during Q2 2023[142] Revenue from Key Partners - Revenue from Dell accounted for 36% of total revenue, with 1,156 million in reseller revenue and 13millionininternal−userevenue[127]RemainingPerformanceObligations−Remainingperformanceobligationstotaled13 million in internal-use revenue[127] Remaining Performance Obligations - Remaining performance obligations totaled 13.0 billion as of May 5, 2023, with 54% expected to be recognized within the next 12 months[107]