VMware(VMW) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 was $3.53 billion, an increase of 7$12.85 billion, up 9% from FY21 [5][17] - Subscription and SaaS revenue for Q4 was $868 million, growing 23$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$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$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$3.6 billion in FY22, up 24% versus FY21 [18] - RPO in Q4 was $12 billion, up 6$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]