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VMware Reports Fourth Quarter and Fiscal Year 2023 Results

PALO ALTO, Calif., March 02, 2023--VMware, Inc. (NYSE: VMW) announces financial results for the fourth quarter and full fiscal year 2023. Read More...

FY23 Total Revenue of $13.35 billion

FY23 Subscription and SaaS Revenue of $4.01 billion, an increase of 25% year-over-year

PALO ALTO, Calif., March 02, 2023–(BUSINESS WIRE)–VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the fourth quarter and full fiscal year 2023. The company’s fourth quarter of fiscal year 2023 was a 14-week fiscal quarter, while the fourth quarter of fiscal year 2022 was a 13-week fiscal quarter.1

Quarterly Review

  • Revenue for the fourth quarter was $3.71 billion, an increase of 5% from the fourth quarter of fiscal 2022.

  • The combination of subscription and SaaS and license revenue was $2.03 billion, an increase of 7% from the fourth quarter of fiscal 2022.

  • Subscription and SaaS revenue constituted 32% of our total revenue for the quarter.

  • Subscription and SaaS revenue for the fourth quarter was $1.18 billion, an increase of 36% year-over-year. Approximately 10 percentage points of this year-over-year growth was associated with the extra week in the fourth quarter of fiscal year 2023.

  • GAAP net income for the fourth quarter was $494 million, or $1.15 per diluted share, down 17% per diluted share compared to $586 million, or $1.39 per diluted share, for the fourth quarter of fiscal 2022. Non-GAAP net income for the fourth quarter was $915 million, or $2.13 per diluted share, up 5% per diluted share compared to $855 million, or $2.02 per diluted share, for the fourth quarter of fiscal 2022.2

  • GAAP operating income for the fourth quarter was $658 million, a decrease of 16% from the fourth quarter of fiscal 2022. Non-GAAP operating income for the fourth quarter was $1.14 billion, flat as compared to the fourth quarter of fiscal 2022.

  • Operating cash flow for the fourth quarter was $1.63 billion. Free cash flow for the fourth quarter was $1.51 billion.

  • RPO for the fourth quarter totaled $13.56 billion, up 13% year-over-year.

Annual Review

  • Revenue for fiscal year 2023 was $13.35 billion, an increase of 4% from fiscal year 2022.

  • The combination of subscription and SaaS and license revenue was $6.85 billion, an increase of 8% from fiscal year 2022.

  • Subscription and SaaS revenue represented 30% of our total revenue for the fiscal year.

  • Subscription and SaaS revenue for fiscal year 2023 was $4.01 billion, an increase of 25% from fiscal year 2022. Approximately 2 percentage points of this year-over-year growth was associated with the extra week in fiscal year 2023.

  • Subscription and SaaS ARR exiting fiscal year 2023 was $4.66 billion, an increase of 30% from fiscal year 2022.

  • GAAP net income for fiscal year 2023 was $1.31 billion, or $3.09 per diluted share, down 28% per diluted share compared to $1.82 billion, or $4.31 per diluted share, for fiscal year 2022. Non-GAAP net income for fiscal year 2023 was $2.78 billion, or $6.53 per diluted share, down 10% per diluted share compared to $3.06 billion, or $7.25 per diluted share, for fiscal year 2022.2

  • GAAP operating income for fiscal year 2023 was $2.02 billion, a decrease of 15% from fiscal year 2022. Non-GAAP operating income for fiscal year 2023 was $3.74 billion, a decrease of 5% from fiscal year 2022.

  • Operating cash flow for fiscal year 2023 was $4.30 billion. Free cash flow for fiscal year 2023 was $3.85 billion.

“We are very pleased with our fiscal year 2023 performance. These results reflect consistent customer appetite for our multi-cloud offerings and our ability to help companies with a cloud smart approach,” commented Raghu Raghuram, CEO, VMware. “We look forward to the merger with Broadcom, expected to close in Broadcom’s current fiscal year, as our combined solutions will enable customers greater choice and flexibility to build, run, manage, connect and protect their applications at scale.”

“We delivered strong performance to close out our fiscal year 2023, achieving over $13 billion in total revenue and $4 billion in subscription and SaaS revenue for the year,” said Zane Rowe, executive vice president and CFO, VMware. “We grew subscription and SaaS ARR 30% year-over-year, totaling $4.66 billion, an increase of over $1 billion in ARR for fiscal 2023, reflecting the strength of our subscription and SaaS portfolio and progress on our business model transition.”

Business Highlights & Strategic Announcements

  • At VMware Explore Europe 2022, the company announced new technology offerings to enable customers to accelerate their digital transformation, including:

    • Sovereign SaaS innovations that enable partners to deliver services equivalent to those found in public clouds, while also better assuring data is protected, compliant and resident within national territories. Solutions include VMware Tanzu on sovereign cloud and VMware Aria Operations Compliance pack for sovereign clouds. Additionally, VMware achieved partner momentum having doubled the number of VMware Sovereign Cloud providers to 36 partners globally, up from 14 in April 2022.

    • VMware SD-WAN solutions that help enterprises more securely, reliably and optimally deliver applications, data and services—no matter where they reside—to the site, branch and home, across any network to any device.

    • New Anywhere Workspace platform capabilities for Digital Employee Experience Management (DEEM), Workspace ONE Freestyle Orchestrator and VMware Horizon Cloud that help further ease management burdens for IT teams and improve their productivity with automation.

  • VMware and Equinix expanded their global relationship and unveiled VMware Cloud on Equinix Metal, a new distributed cloud service that will deliver a more performant, secure and cost-effective cloud option to support enterprise applications.

  • VMware and Hewlett Packard Enterprise expanded their partnership to bring together HPE GreenLake and VMware Cloud to deliver a fully integrated solution with a simple pay-as-you-go hybrid cloud consumption model.

  • VMware was positioned as a Leader in the IDC MarketScape: Worldwide Virtual Client Computing 2022-2023 Vendor Assessment across both strategies and capabilities.3 The report highlighted VMware’s diverse ecosystem and growing body of certified engineers.

  • VMware was positioned as a Leader in the IDC MarketScape: European End User Experience Management 2022 Vendor Assessment across both strategies and capabilities.4 The report highlighted VMware’s portfolio of technologies and ability to add new virtual environments during performance issues.

  • VMware received recognition for its ongoing leadership in ESG, demonstrating progress on its 2030 Agenda:

    • For the third consecutive year, VMware was recognized by the 2022 Dow Jones Sustainability Indices, ranking in the 99th percentile for all companies.

    • For the sixth consecutive year, VMware was included in the JUST 100, a comprehensive ranking of ESG and stakeholder performance among America’s largest publicly traded companies. Within the software industry, VMware ranked number one in the “workers” category, demonstrating a commitment to fair and livable wages, worker safety, cultivating a diverse workplace, investing in workforce training and providing benefits and work-life balance.

    • VMware was named one of the Best Places to Work in IT by Computerworld for the 9th consecutive year.

1The extra week during the fourth quarter of fiscal 2023 resulted in incremental ratable and professional services revenue on a comparable basis. For more information about impacts of the extra week in fiscal 2023, see the table titled “Supplemental Reconciliation of GAAP to non-GAAP Data—Estimated Impact on Revenue Growth Rates Associated with the Extra Week.”

2Our annual effective tax rate is based upon, among other things, current tax law, including Internal Revenue Code Section 174 relating to research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. If in the future this provision is deferred, modified or repealed, our effective tax rate may fluctuate significantly in the quarter in which such change in law becomes effective.

3IDC MarketScape: Worldwide Virtual Client Computing 2022-2023 Vendor Assessment (Doc #US49857422, December 2022)

4IDC MarketScape: European End User Experience Management 2022 Vendor Assessment (Doc #EUR148395522, December 2022)

About VMware

VMware is a leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control. As a trusted foundation to accelerate innovation, VMware software gives businesses the flexibility and choice they need to build the future. Headquartered in Palo Alto, California, VMware is committed to building a better future through the company’s 2030 Agenda. For more information, please visit vmware.com/company.

Definitive Agreement to be Acquired by Broadcom

VMware has entered into a definitive agreement to be acquired by Broadcom Inc. (“Broadcom”). The transaction, which is expected to be completed in Broadcom’s fiscal year 2023, is subject to the receipt of regulatory approvals and other customary closing conditions. Please refer to the May 26, 2022 announcement entitled, “Broadcom to Acquire VMware for Approximately $61 Billion in Cash and Stock,” available on news.vmware.com.

Additional Information

VMware’s website is located at vmware.com, and its investor relations website is located at ir.vmware.com. VMware’s goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about VMware, all of which is made available free of charge. The additional information includes: materials that VMware files with the SEC; announcements of investor conferences, speeches and events at which its executives talk about its products, services and competitive strategies; webcasts of its earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on its financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; ESG (environmental, social and governance) information; other news, blogs and announcements that VMware may post from time to time that investors may find useful or interesting; and opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.

VMware, Explore, VMware Aria, Tanzu, Workspace ONE, and Horizon 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.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”

Annual Recurring Revenue (“ARR”)

ARR is an operating measure VMware uses to assess the strength of the Company’s subscription and SaaS offerings. ARR is a performance metric and should be viewed independently of, and not as a substitute for or combined with, revenue and unearned revenue. ARR represents the annualized value of VMware’s committed customer subscription and SaaS contracts as of the end of the reporting period, assuming any contract that expires during the next 12 months is renewed on its existing terms and any applicable termination for convenience clauses are not exercised, except that, for consumption-based subscription and SaaS offerings, ARR represents the annualized quarterly revenue based on revenue recognized for the current reporting period.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding the expected benefits to customers, partners and stockholders of VMware’s strategy, offerings, and partnerships; portfolio; progress in VMware’s business model transition; and the proposed acquisition of VMware by Broadcom, related timing of its consummation and benefits to customers of combined VMware and Broadcom solutions. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (1) the satisfaction of the conditions precedent to consummation of the proposed acquisition, and the ability to consummate the proposed acquisition, on a timely basis or at all; (2) business disruption following the announcement of the proposed acquisition, including disruption of current plans and operations; (3) the effects of the proposed acquisition, the spin-off of VMware from Dell and changes in VMware’s and Dell’s commercial relationships and go-to-market strategy on VMware’s ability to (a) enter into, maintain and extend strategically effective partnerships, collaborations and alliances, (b) maintain and establish new relationships with customers, partners and suppliers, and (c) maintain operating results and VMware’s business generally; (4) difficulties in retaining and hiring key personnel and employees, including due to the proposed acquisition; (5) the ability to implement plans, forecasts and other expectations with respect to the business after the completion of the proposed acquisition and realize synergies; (6) the impact of the COVID-19 pandemic on VMware’s operations, financial condition, customers, the business environment and global and regional economies; (7) the ability of VMware to transition its business model and adapt its offerings, business operations and go-to-market activities to changes in how customers consume information technology resources, such as through subscription and SaaS offerings and its subscription and SaaS portfolio; (8) changes to VMware’s and Dell’s respective financial conditions and strategic directions, including potential effects of the proposed acquisition of VMware by Broadcom, that could adversely impact the VMware-Dell commercial relationship and collaborations; (9) the continued risk of on-going and new litigation and regulatory actions, including the outcome of any legal proceedings related to the proposed acquisition; (10) adverse changes in general economic or market conditions; (11) delays or reductions in consumer, government and information technology spending, including due to the announced acquisition; (12) competitive factors, such as pricing pressures, industry consolidation, entry of new competitors into the industries in which VMware competes, as well as new product and marketing initiatives by VMware’s competitors; (13) rapid technological changes in the virtualization software, cloud, end user, edge security and mobile computing and telecom industries; (14) the uncertainty of VMware’s customers’ acceptance of and ability to transition to emerging technologies and new offerings and computing strategies in the industries in which VMware competes; (15) VMware’s ability to protect its proprietary technology; (16) changes to product and services development timelines; (17) risks associated with cyber-attacks, information security and data privacy; (18) disruptions resulting from key management changes; (19) risks associated with international sales, such as fluctuating currency exchange rates and increased trade barriers; (20) changes in VMware’s financial condition; and (21) other impacts to VMware’s business, including those related to industry, market, economic, political, regulatory and global health conditions. These forward-looking statements are made as of the date of this press release, are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware’s most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that VMware may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

VMware, Inc.

CONSOLIDATED STATEMENTS OF INCOME

(amounts in millions, except per share amounts, and shares in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

February 3,

January 28,

February 3,

January 28,

2023

2022

2023

2022

Revenue:

License

$

845

$

1,035

$

2,835

$

3,128

Subscription and SaaS

1,183

868

4,012

3,205

Services

1,686

1,628

6,503

6,518

Total revenue

3,714

3,531

13,350

12,851

Operating expenses(1):

Cost of license revenue

42

41

154

152

Cost of subscription and SaaS revenue

204

188

788

690

Cost of services revenue

412

378

1,540

1,429

Research and development

908

806

3,317

3,057

Sales and marketing

1,173

1,075

4,391

4,067

General and administrative

315

260

1,130

1,068

Realignment

2

8

1

Operating income

658

783

2,022

2,387

Investment income

38

65

2

Interest expense

(83

)

(80

)

(304

)

(252

)

Other income (expense), net

53

(41

)

9

(52

)

Income before income tax

666

662

1,792

2,085

Income tax provision

172

76

478

265

Net income

$

494

$

586

$

1,314

$

1,820

Net income per weighted-average share, basic

$

1.16

$

1.39

$

3.11

$

4.34

Net income per weighted-average share, diluted

$

1.15

$

1.39

$

3.09

$

4.31

Weighted-average shares, basic

425,814

420,089

423,150

419,504

Weighted-average shares, diluted

429,809

422,976

425,860

422,394

__________

(1) Includes stock-based compensation as follows:

Cost of license revenue

$

$

$

1

$

1

Cost of subscription and SaaS revenue

7

5

25

21

Cost of services revenue

27

22

106

92

Research and development

174

126

616

528

Sales and marketing

99

75

376

302

General and administrative

42

34

166

131

VMware, Inc.

CONSOLIDATED BALANCE SHEETS

(amounts in millions, except per share amounts, and shares in thousands)

(unaudited)

February 3,

January 28,

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

$

5,100

$

3,614

Short-term investments

19

Accounts receivable, net of allowance of $9 and $10

2,510

2,297

Due from related parties

2,078

1,438

Other current assets

543

598

Total current assets

10,231

7,966

Property and equipment, net

1,623

1,461

Deferred tax assets

6,157

5,906

Intangible assets, net

478

714

Goodwill

9,598

9,598

Due from related parties

208

199

Other assets

2,942

2,832

Total assets

$

31,237

$

28,676

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$

267

$

234

Accrued expenses and other

2,568

2,336

Customer deposits

1,087

470

Current portion of long-term debt

1,000

Unearned revenue

7,079

6,479

Due to related parties

390

132

Total current liabilities

12,391

9,651

Long-term debt

9,440

12,671

Unearned revenue

5,664

4,743

Income tax payable

287

242

Operating lease liabilities

845

927

Due to related parties

648

909

Other liabilities

428

409

Total liabilities

29,703

29,552

Contingencies

Stockholders’ equity (deficit):

Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 426,741 and 418,808 shares

4

4

Additional paid-in capital

1,095

Accumulated other comprehensive loss

(4

)

(5

)

Retained earnings (accumulated deficit)

439

(875

)

Total stockholders’ equity (deficit)

1,534

(876

)

Total liabilities and stockholders’ equity (deficit)

$

31,237

$

28,676

VMware, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

Three Months Ended

Twelve Months Ended

February 3,

January 28,

February 3,

January 28,

2023

2022

2023

2022

Operating activities:

Net income

$

494

$

586

$

1,314

$

1,820

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

328

284

1,234

1,110

Stock-based compensation

349

262

1,290

1,075

Deferred income taxes, net

(37

)

12

(218

)

(80

)

(Gain) loss on equity securities and disposition of assets, net

4

5

(6

)

33

Loss on extinguishment of debt

21

2

21

Other

1

4

5

10

Changes in assets and liabilities, net of acquisitions:

Accounts receivable

(602

)

(626

)

(218

)

(379

)

Other current assets and other assets

(281

)

(385

)

(792

)

(852

)

Due from related parties

(1,274

)

(683

)

(647

)

95

Accounts payable

(10

)

11

38

98

Accrued expenses, customer deposits and other liabilities

1,026

668

499

487

Income taxes payable

75

5

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