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Innovation and Resiliency Drive Dell Technologies' First Quarter Fiscal 2021 Financial Results

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ROUND ROCK, Texas , May 28, 2020 /PRNewswire/ --

News summary

  • Dell Technologies effectively navigates COVID-19 environment with innovative products, broad capabilities, flexible supply chain and resilient global workforce
  • First quarter revenue of $21.9 billion
  • Operating income up 28% to $702 million , non-GAAP operating income of $2.2 billion
  • Client Solutions Group revenue up 2% to $11.1 billion ; VMware revenue up 12%

Full story
Dell Technologies (NYSE: DELL) announces financial results for its fiscal 2021 first quarter. First quarter revenue was $21.9 billion . During the quarter, the company generated operating income of $702 million , a 28 percent increase over the same period in the prior year, and non-GAAP operating income of $2.2 billion . Net income was $182 million , non-GAAP net income was $1.1 billion and adjusted EBITDA was $2.6 billion . Net cash used in operating activities was $0.8 billion . Diluted earnings per share was $0.19 and non-GAAP diluted earnings per share was $1.34 .

"Customers need essential technology now more than ever to put business continuity, remote working and learning plans into practice," said Jeff Clarke , vice chairman and chief operating officer, Dell Technologies. "In Q1, we saw orders with banking and financial services, government, healthcare and life sciences customers up 15 to 20 percent all to meet immediate needs of their customers, communities and patients. As the world pivots from response to recovery, we'll continue to put our broad capabilities to work to deliver differentiated results for our customers and our company."

First Quarter Fiscal 2021 Financial Results


Three Months Ended




May 1, 2020


May 3, 2019


Change


(in millions, except percentages; unaudited)

Total net revenue

$

21,897



$

21,908



%

Operating income

$

702



$

550



28

%

Net income

$

182



$

329



(45)

%







Non-GAAP net revenue

$

21,945



$

21,990



%

Non-GAAP operating income

$

2,161



$

2,196



(2)

%

Non-GAAP net income

$

1,143



$

1,209



(5)

%

Adjusted EBITDA

$

2,607



$

2,573



1

%

Information about Dell Technologies' use of non-GAAP financial information is provided under "Non-GAAP Financial Measures" below. All comparisons in this press release are year-over-year unless otherwise noted.

Dell Technologies ended the quarter with cash and investments of $13.2 billion , and total deferred revenue of $27.6 billion , up 14 percent year-over-year. Recurring revenue, which includes deferred revenue amortization, utility, and as-a-Service delivered as part of Dell Technologies on Demand, is now approximately $6 billion a quarter, up 16 percent year-over-year.

"Since February, almost everything in the world has changed. What remains unchanged is our ability to deliver for customers and run the business in a disciplined way for the long-term with an emphasis on growth, share gain, and a strong capital structure," said Tom Sweet , chief financial officer, Dell Technologies.

Operating segments summary

Client Solutions Group  revenue for the first quarter was $11.1 billion , up 2 percent versus the first quarter of last year. Operating income was $592 million or more than 5 percent of Client Solutions Group revenue.

Key highlights:

  • Double-digit unit and revenue growth in commercial notebooks and high-single-digit revenue growth in mobile workstations.
  • Powered by a resilient supply chain, outperformed the PC industry, as the only top 5 vendor gaining year-over-year worldwide share in total and commercial client units. 1
  • Moved up to #2 worldwide in commercial PC sales with a 26.2 percent-unit share. 1

Infrastructure Solutions Group  revenue for the first quarter was $7.6 billion , an 8 percent decrease year-over-year, with customers directing more spend towards remote work and business continuity solutions. Storage revenue was $3.8 billion , down 5 percent year-over-year, while servers and networking revenue was $3.8 billion , down 10 percent. Operating income was $732 million for the first quarter, or approximately 10 percent of Infrastructure Solutions Group revenue.

Key highlights:

  • Began shipping PowerStore an innovative autonomous storage platform built from the ground up to support multiple workloads for the midrange segment, the biggest part of the external storage market. PowerStore includes CloudIQ storage monitoring and analytics software that combines machine learning and human intelligence. Dell Technologies will integrate CloudIQ across the full Dell Technologies infrastructure portfolio for greater insights. Dell EMC Cloud Storage Services can connect PowerStore to all of the big three public clouds as a managed service.
  • Earlier this month, announced Dell Technologies Cloud OneFS for Google Cloud to help organizations control exponential data and application growth and ease the flow of files across their private clouds and Google Cloud.
  • Added a one-year term to Dell Technologies On Demand flexible consumption offerings, which can also be used with the Dell Technologies Cloud Platform to consume cloud infrastructure and rapidly get a hybrid cloud up and running.

VMware  revenue was $2.8 billion for the first quarter, up 12 percent driven by broad-based strength across a diverse product portfolio. Operating income for the quarter was $773 million , or approximately 28 percent of VMware revenue.

Key highlights:

  • Announced the new VMware Tanzu Portfolio and its suite of tools for deploying and managing Kubernetes and the new VMware vSphere 7.       
  • Released VMware Cloud Foundation 4, which delivers intrinsic security and lifecycle management across software-defined compute, storage and networking, and hybrid cloud environments.

Conference call information
As previously announced, the Company will hold a conference call to discuss its first quarter performance today, May 28, 2020 at 4:30 p.m. CDT .  The conference call will be broadcast live over the internet and can be accessed at https://investors.delltechnologies.com/events-and-presentations/upcoming-events

For those unable to listen to the live broadcast, an archived version will be available at the same location for one year.

Additional financial and operating information may be downloaded from https://investors.delltechnologies.com/financial-information/quarterly-results

About Dell Technologies
Dell Technologies  (NYSE:DELL) helps organizations and individuals build their digital future and transform how they work, live and play. The company provides customers with the industry's broadest and most innovative technology and services portfolio for the data era.

Copyright © 2020 Dell Inc. or its subsidiaries.  All Rights Reserved. Dell Technologies, Dell, EMC and Dell EMC are trademarks of Dell Inc. or its subsidiaries.  Other trademarks may be trademarks of their respective owners.

1.  IDC WW Quarterly Personal Computing Device (PDC) Tracker CY20Q1.

Non-GAAP Financial Measures:
This press release presents information about Dell Technologies' non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, non-GAAP net income attributable to non-controlling interests, non-GAAP net income attributable to Dell Technologies Inc. - basic, non-GAAP net income attributable to Dell Technologies Inc. - diluted, non-GAAP earnings per share attributable to Dell Technologies Inc. - basic, non-GAAP earnings per share attributable to Dell Technologies Inc. - diluted, EBITDA, and adjusted EBITDA, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with generally accepted accounting principles in the United States of America ("GAAP"). A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided in the attached tables for each of the fiscal periods indicated.

Special Note on Forward-Looking Statements:
Statements in this press release that relate to future results and events are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933 and are based on Dell Technologies' current expectations. The words "may," "will," "anticipate," "estimate," "expect," "intend," "plan," "aim," "seek," and similar expressions as they relate to Dell Technologies or its management are intended to identify these forward-looking statements.

Dell Technologies' results or events in future periods could differ materially from those expressed or implied by these forward-looking statements because of risks, uncertainties, and other factors that include, but are not limited to, the following: competitive pressures; Dell Technologies' reliance on third-party suppliers for products and components, including reliance on single-source or limited-source suppliers; Dell Technologies' ability to achieve favorable pricing from its vendors; adverse global economic conditions and instability in financial markets, including as a result of the COVID-19 pandemic; Dell Technologies' execution of its growth, business and acquisition strategies; the success of Dell Technologies' cost efficiency measures; Dell Technologies' ability to manage solutions and products and services transitions in an effective manner; Dell Technologies' ability to deliver high-quality products and services; Dell Technologies' foreign operations and ability to generate substantial non-U.S. net revenue; Dell Technologies' product, customer, and geographic sales mix, and seasonal sales trends; the performance of Dell Technologies' sales channel partners; access to the capital markets by Dell Technologies or its customers; weak economic conditions and additional regulation including tariffs and other effects of trade regulation; counterparty default risks; effects of customer defaults or the exercise of customer rights on the ability of Dell Technologies to produce revenue under its contracts for services and solutions at expected levels and to perform such contracts at estimated costs; the loss by Dell Technologies of government contracts; Dell Technologies' ability to develop and protect its proprietary intellectual property or obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; infrastructure disruptions, cyberattacks, or other data security breaches; Dell Technologies' ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other tax compliance matters; impairment of portfolio investments; unfavorable results of legal proceedings; Dell Technologies' ability to develop and maintain effective internal control over financial reporting; compliance requirements of changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, climate change, and public health issues, including those relating to the COVID-19 pandemic; Dell Technologies' substantial level of indebtedness; the impact of the financial performance of VMware Inc.; and the market volatility of Dell Technologies' pension plan assets.

This list of risks, uncertainties, and other factors is not complete. Dell Technologies discusses some of these matters more fully, as well as certain risk factors that could affect Dell Technologies' business, financial condition, results of operations, and prospects, in its reports filed with the SEC, including Dell Technologies' annual report on Form 10-K for the fiscal year ended January 31, 2020 , quarterly reports on Form 10-Q, and current reports on Form 8-K. These filings are available for review through the SEC's website at www.sec.gov . Any or all forward-looking statements Dell Technologies makes may turn out to be wrong and can be affected by inaccurate assumptions Dell Technologies might make or by known or unknown risks, uncertainties and other factors, including those identified in this press release. Accordingly, you should not place undue reliance on the forward-looking statements made in this press release, which speak only as of the date such statements are made. Dell Technologies does not undertake to update any forward-looking statement after the date as of which such statement was made, whether to reflect changes in circumstances or Dell Technologies' expectations, the occurrence of unanticipated events, or otherwise.

DELL TECHNOLOGIES INC.

Condensed Consolidated Statements of Income (Loss) and Related Financial Highlights

(in millions, except percentages; unaudited)



Three Months Ended




May 1, 2020


May 3, 2019


Change

Net revenue (a):






Products

$

16,038



$

16,575



(3)

%

Services

5,859



5,333



10

%

Total net revenue

21,897



21,908



%

Cost of net revenue:






Products

12,804



13,079



(2)

%

Services

2,240



2,032



10

%

Total cost of net revenue

15,044



15,111



%

Gross margin

6,853



6,797



1

%

Operating expenses:






Selling, general, and administrative

4,886



5,071



(4)

%

Research and development

1,265



1,176



8

%

Total operating expenses

6,151



6,247



(2)

%

Operating income

702



550



28

%

Interest and other, net

(566)



(693)



18

%

Income (loss) before income taxes

136



(143)



195

%

Income tax benefit

(46)



(472)



90

%

Net income

182



329



(45)

%

Less: Net income attributable to non-controlling interests

39



36



8

%

Net income attributable to Dell Technologies Inc.

$

143



$

293



(51)

%







Percentage of Total Net Revenue:





Gross margin

31

%


31

%



Selling, general, and administrative

22

%


23

%



Research and development

6

%


5

%



Operating expenses

28

%


29

%



Operating income

3

%


3

%



Income (loss) before income taxes

1

%


(1)

%



Net income

1

%


2

%



Income tax rate

(33.8)

%


330.1

%














(a)

During the fourth quarter of Fiscal 2020, the Company reclassified revenue associated with certain service and software-as-a-service offerings from product revenue to services revenue.  There was no change to total revenue as a result of the reclassifications.  Prior period results have been recast to conform with current period presentation.

 

DELL TECHNOLOGIES INC.

Consolidated Statements of Financial Position

(in millions; unaudited)



May 1, 2020


January 31, 2020


ASSETS

Current assets:




Cash and cash equivalents

$

12,229



$

9,302


Accounts receivable, net

10,797



12,484


Short-term financing receivables, net

4,752



4,895


Inventories, net

3,616



3,281


Other current assets

7,437



6,906


Current assets held for sale

2,100




Total current assets

40,931



36,868


Property, plant, and equipment, net

6,100



6,055


Long-term investments

974



864


Long-term financing receivables, net

4,710



4,848


Goodwill

40,248



41,691


Intangible assets, net

16,827



18,107


Other non-current assets

10,446



10,428


Total assets

$

120,236



$

118,861



LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:




Short-term debt

$

8,375



$

7,737


Accounts payable

18,432



20,065


Accrued and other

8,073



9,773


Short-term deferred revenue

14,766



14,881


Current liabilities held for sale

365




Total current liabilities

50,011



52,456


Long-term debt

48,353



44,319


Long-term deferred revenue

12,851



12,919


Other non-current liabilities

5,340



5,383


Total liabilities

116,555



115,077


Redeemable shares

441



629


Stockholders' equity (deficit):




Total Dell Technologies Inc. stockholders' deficit

(1,614)



(1,574)


Non-controlling interests

4,854



4,729


Total stockholders' equity (deficit)

3,240



3,155


Total liabilities, redeemable shares, and stockholders' equity (deficit)

$

120,236



$

118,861


 

DELL TECHNOLOGIES INC.

Condensed Consolidated Statements of Cash Flows

(in millions; unaudited)



Three Months Ended


May 1, 2020


May 3, 2019

Cash flows from operating activities:




Net income

$

182



$

329


Adjustments to reconcile net income to net cash provided by (used in) operating activities:

(978)



353


Change in cash from operating activities

(796)



682


Cash flows from investing activities:




Purchases of investments

(56)



(38)


Maturities and sales of investments

39



337


Capital expenditures and capitalized software development costs

(559)



(716)


Acquisition of businesses and assets, net

(38)



(45)


Divestitures of businesses and assets, net

120



(3)


Other

9



7


Change in cash from investing activities

(485)



(458)


Cash flows from financing activities:




Proceeds from the issuance of common stock

116



134


Repurchases of parent common stock inclusive of tax withholdings

(240)



(6)


Repurchases of subsidiary common stock inclusive of tax withholdings

(300)



(803)


Proceeds from debt

10,135



9,563


Repayments of debt

(5,405)



(9,569)


Other

(42)



(38)


Change in cash from financing activities

4,264



(719)


Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(136)



(36)


Change in cash, cash equivalents, and restricted cash

2,847



(531)


Cash, cash equivalents, and restricted cash at beginning of the period

10,151



10,240


Cash, cash equivalents, and restricted cash at end of the period

$

12,998



$

9,709


 

DELL TECHNOLOGIES INC.

Segment Information

(in millions, except percentages; unaudited; continued on next page)



Three Months Ended




May 1, 2020


May 3, 2019


Change

Infrastructure Solutions Group (ISG):

Net Revenue:






Servers and networking

$

3,758



$

4,180



(10)

%

Storage

3,811



4,022



(5)

%

Total ISG net revenue

$

7,569



$

8,202



(8)

%







Operating Income:






ISG operating income

$

732



$

843



(13)

%

% of ISG net revenue

10

%


10

%



% of total reportable segment operating income

35

%


38

%









Client Solutions Group (CSG):

Net Revenue:






Commercial

$

8,634



$

8,307



4

%

Consumer

2,470



2,603



(5)

%

Total CSG net revenue

$

11,104



$

10,910



2

%







Operating Income:






CSG operating income

$

592



$

793



(25)

%

% of CSG net revenue

5

%


7

%



% of total reportable segment operating income

28

%


36

%









VMware (a):

Net Revenue:






Total VMware net revenue

$

2,755



$

2,457



12

%







Operating Income:






VMware operating income

$

773



$

595



30

%

% of VMware net revenue

28

%


24

%



% of total reportable segment operating income

37

%


27

%














(a)

During the fourth quarter of Fiscal 2020, the Company reclassified Pivotal operating results from Other businesses to the VMware reportable segment.  There was no change to consolidated results as a result of the reclassification.  Prior period results have been recast to conform with current period presentation.

 

...

DELL TECHNOLOGIES INC.

Segment Information

(in millions, except percentages; unaudited; continued)



Three Months Ended


May 1, 2020


May 3, 2019

Reconciliation to consolidated net revenue:



Reportable segment net revenue (a)

$

21,428



$

21,569


Other businesses (a) (b)

517



421


Unallocated transactions (c)




Impact of purchase accounting (d)

(48)



(82)


Total consolidated net revenue

$

21,897



$

21,908






Reconciliation to consolidated operating income:

Reportable segment operating income (a)

$

2,097



$

2,231


Other businesses (a) (b)

65



(34)


Unallocated transactions (c)

(1)



(1)


Impact of purchase accounting (d)

(63)



(101)


Amortization of intangibles

(855)



(1,217)


Transaction-related expenses (e)

(76)



(42)


Stock-based compensation expense (f)

(370)