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    Dell Technologies Reports Fiscal Year 2019 Third Quarter Financial Results

    ROUND ROCK, Texas, Nov. 29, 2018 /PRNewswire/ --                                             

    News summary

    • GAAP revenue up 15 percent to $22.5 billion
    • Third consecutive quarter of double-digit growth across all reportable segments
    • Continued cross-sell synergies across the family of businesses

    Full story

    Dell Technologies (NYSE: DVMT) announces its fiscal 2019 third quarter results. For the third quarter, revenue was $22.5 billion, up 15 percent, and non-GAAP revenue was $22.7 billion, up 14 percent from the prior period. During the quarter, the company generated a GAAP operating loss of $356 million1, with a non-GAAP operating income of $2.1 billion, down 2 percent. Cash flow from operations was approximately $833 million.

    "The digital transformation of our world is underway, and we are in the early stages of a massive, technology-led investment cycle," said Michael Dell, chairman and CEO, Dell Technologies. "Dell Technologies was created to meet this opportunity head on for our customers and our investors. You can see the proof in our strong growth, in our powerful innovation and in the depth of our customer relationships."

    The company ended the third quarter with a cash and investments balance of $20.4 billion. During the quarter, Dell Technologies paid down approximately $1.3 billion of core debt2. Within the past two years, the company has paid down approximately $14.4 billion in gross debt, excluding Dell Financial Services related and subsidiary debt.

    "Dell Technologies has assembled a broad set of capabilities and unique position that drive an attractive financial model," said Tom Sweet, chief financial officer, Dell Technologies. "Our third quarter of double-digit growth in all three of our reportable segments shows that our customers increasingly see us as a key partner with a deep portfolio to meet their needs, from the edge to the core to the cloud."

    DELL TECHNOLOGIES INC.












    Fiscal year 2019 third quarter results:























    Three Months Ended




    Nine Months Ended




    November 2, 2018


    November 3, 2017


    Change


    November 2, 2018


    November 3, 2017


    Change


    (in millions, except percentages; unaudited)













    Total net revenue

    $

    22,482


    $

    19,556


    15 %


    $

    66,780


    $

    57,077


    17 %

    Operating loss

    $

    (356)


    $

    (410)


    13 %


    $

    (522)


    $

    (2,347)


    78 %

    Net loss

    $

    (895)


    $

    (851)


    (5)%


    $

    (1,894)


    $

    (2,793)


    32 %













    Non-GAAP net revenue

    $

    22,651


    $

    19,851


    14 %


    $

    67,316


    $

    58,062


    16 %

    Non-GAAP operating income

    $

    2,064


    $

    2,109


    (2)%


    $

    6,198


    $

    5,400


    15 %

    Non-GAAP net income

    $

    1,200


    $

    1,199


    —%


    $

    3,723


    $

    3,072


    21 %

    Adjusted EBITDA

    $

    2,426


    $

    2,441


    (1)%


    $

    7,268


    $

    6,416


    13 %

    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.

    "Data is becoming the most valuable and differentiating asset for many organizations as it opens up new revenue streams and unearths opportunities for improvement in almost every part of an organization," said Jeff Clarke, vice chairman, Products & Operations, Dell Technologies. "This presents a tremendous opportunity for Dell Technologies given all of this data needs to be stored, protected, managed and analyzed, and we believe this is evidenced through the strong momentum we've seen in our business."

    Operating segments summary

    Infrastructure Solutions Group revenue for the third quarter was $8.9 billion, a 19 percent increase. This was driven by revenue of $3.9 billion in storage, a 6 percent increase, and $5.1 billion in servers and networking, a 30 percent increase. Operating income for the third quarter was $935 million, a 7 percent increase driven primarily by server and storage mix dynamics.

    Key third quarter highlights:

    • Servers and Networking delivered its sixth consecutive quarter of double-digit revenue growth
    • Triple-digit growth for VxRail on a demand basis, and now well above a $1 billion run rate
    • Demand was strong for file-based arrays where Dell Technologies is highly differentiated with unmatched scalability, performance and flexibility

    Client Solutions Group revenue for the third quarter was $10.9 billion, up 11 percent, with growth across both Commercial and Consumer. Commercial revenue grew 12 percent to $7.6 billion, and Consumer revenue was up 8 percent to $3.3 billion. Operating income for the third quarter was $447 million, or 4.1 percent of revenue. CSG operating income was down 29 percent against a strong prior period, and foreign exchange and supply chain headwinds.

    Key third quarter highlights:

    • Outperformed the PC industry for total worldwide units, delivering above-market growth in desktops and notebooks and in total commercial units3
    • No. 1 share position worldwide for displays, gaining unit share year-over-year for the 22nd consecutive quarter4
    • Maintained position as No. 1 provider of workstations worldwide5, with growth in every region and double-digit growth in both fixed and mobile form factors

    VMware revenue for the third quarter was $2.2 billion, up 15 percent, with operating income of $768 million and 34.5 percent of revenue. The company continues to see revenue synergies through the collaboration across the Dell Technologies family of businesses. Earlier this month at VMworld Europe, Dell Technologies announced the VxBlock System 1000 as part of the Dell EMC Cloud Marketplace with new automation software and integration with VMware vRealize Suite, revolutionizing Converged Infrastructure operations by enabling administrators to expand resources in minutes versus hours. For the industry-leading hyper-converged infrastructure solution VxRail, the company announced an integrated cloud platform with support for VMware Cloud Foundation and fully automated network configuration with Dell EMC Networking SmartFabric Services.

    Third quarter revenue from other businesses, including Pivotal, Secureworks, RSA Security, Virtustream and Boomi, was $583 million, up 5 percent.

    Conference call information

    As previously announced, the company will hold a conference call to discuss its third quarter results today at 5:00 p.m. CST. The conference call will be broadcast live over the internet and can be accessed at investors.delltechnologies.com. For those unable to listen to the live broadcast, an archived version will be available at the same location for one year.

    A slide presentation containing additional financial and operating information may be downloaded from Dell Technologies' website at investors.delltechnologies.com.

    About Dell Technologies

    Dell Technologies is a unique family of businesses that provides the essential infrastructure for organizations to build their digital future, transform IT and protect their most important asset, information. The company services customers of all sizes across 180 countries – ranging from 99 percent of the Fortune 500 to individual consumers – with the industry's most comprehensive and innovative portfolio from the edge to the core to the cloud.

    Copyright © 2018 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

    Due to the EMC transaction, significant non-cash bridging items will remain between GAAP and non-GAAP results for the next few years.

    2

    Core debt represents the total principal amount of the company's debt, less unrestricted subsidiary debt, DFS related debt, and other debt. See slide presentation on the FY19Q3 Earnings Event page for full reconciliation of the core debt amount.

    3

    IDC WW Quarterly Personal Computing Device (PCD) Tracker CY18Q3

    4

    DisplaySearch Desktop Monitor Market Tracker CY18Q3

    5

    IDC WW Workstation Tracker CY18Q3

    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, 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 historical non-GAAP financial measure to the most directly comparable historical 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. In some cases, you can identify these statements by such forward-looking words as "anticipate," "believe," "confidence," "could," "estimate," "expect," "guidance," "intend," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should," "will" and "would," or similar words or expressions that refer to future events or outcomes.

    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 risks relating to the proposed exchange of shares of Dell Technologies Class V common stock for shares of Class C common stock or, at the holder's election, cash,  including but not limited to: (i) the failure to consummate or delay in consummating the proposed transaction, including the failure to obtain the requisite stockholder approvals or the failure of VMware, Inc. ("VMware") to pay the special dividend or any inability of Dell Technologies to pay the cash consideration to Class V holders; (ii) the risk as to the trading price of Class C common stock to be issued by Dell Technologies in the proposed transaction relative to the trading price of shares of Class V common stock and VMware common stock; and (iii) the risks discussed in the "Risk Factors" section of the registration statement on Form S-4 (File No. 333-226618) that has been filed with the Securities and Exchange Commission (the "SEC") and declared effective, and the risks discussed in the "Update to Risk Factors" section of the supplement to the definitive proxy statement/prospectus that has been filed with the SEC.  Other risks, uncertainties and factors include 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; 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; counterparty default risks; the loss by Dell Technologies of any services contracts with its customers, including government contracts, and its ability to perform such contracts at its estimated costs; 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; increased costs and additional regulations and requirements as a result of Dell Technologies operation as a public company; 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, and public health issues; Dell Technologies' substantial level of indebtedness; the impact of the financial performance of VMware; 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 February 2, 2018, 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 its date. Dell Technologies does not undertake to update, and expressly disclaims any duty to update, its forward-looking statements, whether as a result of circumstances or events that arise after the date they are made, new information, or otherwise.

    No Offer or Solicitation:
    This communication does not constitute an offer to sell or a solicitation of an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933 and otherwise in accordance with applicable law.

    Additional Information and Where to Find It:
    This communication is being made in respect of the proposed merger of a wholly-owned subsidiary of Dell Technologies Inc. (the "Company") with and into the Company, with the Company as the surviving entity, pursuant to which each share of Class V common stock of the Company will, at the election of the holder, convert into the right to receive shares of Class C common stock of the Company or cash, without interest, and each existing share of Class A common stock, Class B common stock and Class C common stock of the Company will be unaffected by the merger and remain outstanding. The proposed transaction requires the approval of a majority of the aggregate voting power of the outstanding shares of Class A common stock, Class B common stock and Class V common stock other than those held by affiliates of the Company, in each case, voting as a separate class, and all outstanding shares of common stock of the Company, voting together as a single class, and will be submitted to stockholders for their consideration. The Company has filed a registration statement on Form S-4 (File No. 333-226618). The registration statement was declared effective by the SEC on October 19, 2018, and a definitive proxy statement/prospectus was mailed on or about October 23, 2018 to each holder of Class A common stock, Class B common stock, Class C common stock and Class V common stock entitled to vote at the special meeting in connection with the proposed transaction. The Company also filed a supplement to the definitive proxy statement/prospectus on November 26, 2018, which was mailed on or about November 26, 2018 to each holder of Class A common stock, Class B common stock, Class C common stock and Class V common stock entitled to vote at the special meeting in connection with the proposed transaction. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS, THE SUPPLEMENT AND ANY OTHER DOCUMENTS RELATING TO THE TRANSACTION FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. You may get these documents, when available, for free by visiting EDGAR on the SEC website at www.sec.gov or by visiting the Company's website at http://investors.delltechnologies.com.

    Participants in the Solicitation:
    The Company and its consolidated subsidiaries and their directors, executive officers and other members of their management and employees, and Silver Lake Technology Management, L.L.C. and its managing partners and employees, may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in favor of the proposed merger and the other transactions contemplated by the amended merger agreement, including the exchange of shares of Class V common stock of the Company for shares of Class C common stock of the Company or cash. Information concerning persons who may be considered participants in such solicitation under the rules of the SEC, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in the aforementioned proxy statement/prospectus and the supplement that have been filed with the SEC.

    DELL TECHNOLOGIES INC.

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

    (in millions, except per share amounts and percentages; unaudited)














    Three Months Ended




    Nine Months Ended




    November 2, 2018


    November 3, 2017


    Change


    November 2, 2018


    November 3, 2017


    Change

    Net revenue:












    Products

    $

    17,625


    $

    15,120


    17 %


    $

    52,445


    $

    43,856


    20 %

    Services

    4,857


    4,436


    9 %


    14,335


    13,221


    8 %

    Total net revenue

    22,482


    19,556


    15 %


    66,780


    57,077


    17 %













    Cost of net revenue:












    Products

    14,565


    12,573


    16 %


    43,114


    37,171


    16 %

    Services

    1,974


    1,763


    12 %


    5,722


    5,261


    9 %

    Total cost of net revenue

    16,539


    14,336


    15 %


    48,836


    42,432


    15 %













    Gross margin

    5,943


    5,220


    14 %


    17,944


    14,645


    23 %













    Operating expenses:












    Selling, general, and administrative

    5,159


    4,559


    13 %


    15,064


    13,695


    10 %

    Research and development

    1,140


    1,071


    6 %


    3,402


    3,297


    3 %

    Total operating expenses

    6,299


    5,630


    12 %


    18,466


    16,992


    9 %













    Operating loss

    (356)


    (410)


    13 %


    (522)


    (2,347)


    78 %













    Interest and other, net

    (639)


    (682)


    6 %


    (1,564)


    (1,799)


    13 %

    Loss before income taxes

    (995)


    (1,092)


    9 %


    (2,086)


    (4,146)


    50 %

    Income tax benefit

    (100)


    (241)


    59 %


    (192)


    (1,353)


    86 %

    Net loss

    (895)


    (851)


    (5)%


    (1,894)


    (2,793)


    32 %

    Less: Net income (loss) attributable to non-controlling interests

    (19)


    (5)


    280 %


    117


    (44)


    (366)%

    Net loss attributable to Dell Technologies Inc.

    $

    (876)


    $

    (846)


    (4)%


    $

    (2,011)


    $

    (2,749)


    27 %













    Earnings (loss) per share attributable to Dell Technologies Inc. - basic:












       Class V Common Stock - basic

    $

    0.83


    $

    0.98




    $

    4.80


    $

    2.58



       DHI Group - basic

    $

    (1.84)


    $

    (1.84)




    $

    (5.23)


    $

    (5.78)















    Earnings (loss) per share attributable to Dell Technologies Inc. - diluted:












       Class V Common Stock - diluted

    $

    0.81


    $

    0.96




    $

    4.72


    $

    2.54



       DHI Group - diluted

    $

    (1.84)


    $

    (1.84)




    $

    (5.25)


    $

    (5.79)















    Weighted-average shares outstanding:












       Basic - Class V Common Stock

    199


    202




    199


    204



       Diluted - Class V Common Stock

    199


    202




    199


    204



       Basic - DHI Group

    567


    567




    567


    567



       Diluted - DHI Group

    567


    567




    567


    567















    Percentage of Total Net Revenue:












    Gross margin

    26 %


    27 %




    27 %


    26 %



    Selling, general, and administrative

    23 %


    23 %




    23 %


    24 %



    Research and development

    5 %


    5 %




    5 %


    6 %



    Operating expenses

    28 %


    29 %




    28 %


    30 %



    Operating loss

    (2)%


    (2)%




    (1)%


    (4)%



    Loss before income taxes

    (4)%


    (6)%




    (3)%


    (7)%



    Net loss

    (4)%


    (4)%




    (3)%


    (5)%















    Income tax rate

    10.1 %


    22.1 %




    9.2 %


    32.6 %



     

    DELL TECHNOLOGIES INC.

    Consolidated Statements of Financial Position

    (in millions; unaudited)






    November 2, 2018


    February 2, 2018

    ASSETS

    Current assets:




       Cash and cash equivalents

    $                   15,152


    $                   13,942

       Short-term investments

    2,322


    2,187

       Accounts receivable, net

    11,113


    11,721

       Short-term financing receivables, net

    4,134


    3,919

       Inventories, net

    3,793


    2,678

       Other current assets

    6,445


    5,881

       Total current assets

    42,959


    40,328

    Property, plant, and equipment, net

    5,228


    5,390

    Long-term investments

    2,972


    4,163

    Long-term financing receivables, net

    3,946


    3,724

    Goodwill

    39,651


    39,920

    Intangible assets, net

    23,787


    28,265

    Other non-current assets

    2,698


    2,403

    Total assets

    $                 121,241


    $                 124,193





    LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS' EQUITY

    Current liabilities:




       Short-term debt

    $                     8,150


    $                     7,873

       Accounts payable

    19,748


    18,334

       Accrued and other

    7,606


    8,026

       Short-term deferred revenue

    12,079


    11,606

       Total current liabilities

    47,583


    45,839

    Long-term debt

    40,507


    43,998

    Long-term deferred revenue

    10,064


    9,210

    Other non-current liabilities

    6,567


    7,277

    Total liabilities

    104,721


    106,324





    Redeemable shares

    2,095


    384

    Stockholders' equity:




       Total Dell Technologies Inc. stockholders' equity

    7,592


    11,719

       Non-controlling interests

    6,833


    5,766

     Total stockholders' equity

    14,425


    17,485

     Total liabilities, redeemable shares, and stockholders' equity

    $                 121,241


    $                 124,193

     

    DELL TECHNOLOGIES INC.

    Condensed Consolidated Statements of Cash Flows

    (in millions; unaudited)










    Three Months Ended


    Nine Months Ended


    November 2, 2018


    November 3, 2017


    November 2, 2018


    November 3, 2017

    Cash flows from operating activities:








         Net loss

    $                      (895)


    $                      (851)


    $                   (1,894)


    $                   (2,793)

         Adjustments to reconcile net loss to net cash provided by operating activities

    1,728


    2,490


    6,519


    6,537

        Change in cash from operating activities

    833


    1,639


    4,625


    3,744

    Cash flows from investing activities:








         Investments:








         Purchases

    (24)


    (1,194)


    (912)


    (3,454)

         Maturities and sales

    863


    935


    2,185


    2,993

    Capital expenditures

    (300)


    (341)


    (861)


    (902)

    Proceeds from sale of facilities, land, and other assets



    10


    Capitalized software development costs

    (86)


    (94)


    (246)


    (281)

    Collections on purchased financing receivables

    8


    15


    25


    25

    Acquisition of businesses, net

    (493)



    (493)


    (223)

    Divestitures of businesses, net



    142


    Asset acquisitions, net 

    (21)


    (9)


    (59)


    (95)

    Asset dispositions, net

    (6)


    (12)


    (12)


    (53)

    Other




       Change in cash from investing activities

    (59)


    (700)


    (221)


    (1,990)

    Cash flows from financing activities:








         Payment of dissenting shares obligation



    (76)


         Share repurchases for tax withholdings of equity awards

    (52)


    (105)


    (251)


    (299)

         Proceeds from the issuance of DHI Group Common Stock




         Proceeds from the issuance of common stock of subsidiaries 

    114


    30


    767


    110

         Repurchases of DHI Group Common Stock


    (4)


    (47)


    (6)

         Repurchases of Class V Common Stock


    (300)



    (722)

         Repurchases of common stock of subsidiaries

    (1)


    (555)


    (1)


    (555)

         Payments for debt issuance costs

    (3)


    (39)


    (11)


    (44)

         Proceeds from debt

    1,806


    8,412


    6,443


    13,168

         Repayments of debt

    (2,721)


    (5,837)


    (9,669)


    (11,128)

         Other



    1


    1

       Change in cash from financing activities

    (857)


    1,602


    (2,844)


    525









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

    (46)


    (1)


    (262)


    47









    Change in cash, cash equivalents, and restricted cash

    (129)


    2,540


    1,298


    2,326









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

    15,805


    9,618


    14,378


    9,832

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

    $                   15,676


    $                   12,158


    $                   15,676


    $                   12,158

     

    DELL TECHNOLOGIES INC.

    Segment Information

    (in millions, except percentages; unaudited)














    Three Months Ended




    Nine Months Ended




    November 2, 2018


    November 3, 2017


    Change


    November 2, 2018


    November 3, 2017


    Change

    Infrastructure Solutions Group (ISG):












      Net Revenue:












       Servers and networking

    $

    5,054


    $

    3,875


    30 %


    $

    14,700


    $

    10,908


    35 %

       Storage

    3,883


    3,660


    6 %


    12,131


    11,055


    10 %

       Total ISG net revenue

    $

    8,937


    $

    7,535


    19 %


    $

    26,831


    $

    21,963


    22 %













       Operating Income:












       ISG operating income

    $

    935


    $

    870


    7 %


    $

    2,886


    $

    2,023


    43 %

       % of ISG net revenue

    10 %


    12 %




    11 %


    9 %



       % of total segment operating income

    43 %


    41 %




    45 %


    37 %















    Client Solutions Group (CSG):












       Net Revenue:












       Commercial

    $

    7,613


    $

    6,778


    12 %


    $

    23,085


    $

    20,327


    14 %

       Consumer

    3,292


    3,051


    8 %


    9,219


    8,416


    10 %

       Total CSG net revenue

    $

    10,905


    $

    9,829


    11 %


    $

    32,304


    $

    28,743


    12 %













       Operating Income:












       CSG operating income

    $

    447


    $

    630


    (29)%


    $

    1,405


    $

    1,483


    (5)%

       % of CSG net revenue

    4 %


    6 %




    4 %


    5 %



       % of total segment operating income

    21 %


    29 %




    22 %


    27 %















    VMware:












       Net Revenue:












    Total VMware net revenue

    $

    2,229


    $

    1,933


    15 %


    $

    6,451


    $

    5,735


    12 %













       Operating Income:












       VMware operating income

    $

    768


    $

    634


    21 %


    $

    2,117


    $

    1,973


    7 %

       % of VMware net revenue

    34 %


    33 %




    33 %


    34 %



       % of total segment operating income

    36 %


    30 %




    33 %


    36 %















    Reconciliation to consolidated net revenue:












       Reportable segment net revenue

    $

    22,071


    $

    19,297




    $

    65,586


    $

    56,441



       Other businesses (a)

    583


    557




    1,736


    1,629



       Unallocated transactions (b)

    (3)


    (3)




    (6)


    (8)



       Impact of purchase accounting (c)

    (169)


    (295)




    (536)


    (985)



       Total net revenue

    $

    22,482


    $

    19,556




    $

    66,780


    $

    57,077















    Reconciliation to consolidated operating income (loss):












       Reportable segment operating income

    $

    2,150


    $

    2,134




    $

    6,408


    $

    5,479



       Other businesses (a)

    (40)


    (19)




    (139)


    (71)



       Unallocated transactions (b)

    (46)


    (6)




    (71)


    (8)



       Impact of purchase accounting (c)

    (193)


    (366)




    (630)


    (1,195)



       Amortization of intangibles

    (1,546)


    (1,734)




    (4,594)


    (5,250)



       Transaction-related expenses (d)

    (167)


    (86)




    (437)


    (415)



       Other corporate expenses (e)

    (514)


    (333)




    (1,059)


    (887)



       Total operating loss

    $

    (356)


    $

    (410)




    $

    (522)


    $

    (2,347)



    _________________












    (a) Pivotal, SecureWorks, RSA Security, Virtustream, and Boomi constitute "Other businesses" and do not meet the requirements for a reportable segment, either individually or collectively.  The results of Other businesses are not material to the Company's overall results.

    (b) Unallocated transactions includes long-term incentives, certain short-term incentive compensation expenses, and other corporate items that are not allocated to Dell Technologies' reportable segments.

    (c) Impact of purchase accounting includes non-cash purchase accounting adjustments that are primarily related to the EMC merger transaction.

    (d) Transaction-related expenses includes acquisition, integration, and divestiture related costs.

    (e) Other corporate expenses includes severance, facility action costs, goodwill impairment charges, and stock-based compensation expense.

     

    SUPPLEMENTAL SELECTED NON-GAAP FINANCIAL MEASURES

    These tables present information about the Company's non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, 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 detailed discussion of Dell Technologies' reasons for including these non-GAAP financial measures, the limitations associated with these measures, the items excluded from these measures, and our reason for excluding those items are presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" in our periodic reports filed with the SEC. Dell Technologies encourages investors to review the non-GAAP discussion in conjunction with the presentation of non-GAAP financial measures.

     

    DELL TECHNOLOGIES INC.

    Selected Non-GAAP Financial Measures

    (in millions, except percentages; unaudited)














    Three Months Ended




    Nine Months Ended




    November 2, 2018


    November 3, 2017


    Change


    November 2, 2018


    November 3, 2017


    Change













    Non-GAAP net revenue

    $                   22,651


    $                   19,851


    14 %


    $                   67,316


    $                   58,062


    16 %













    Non-GAAP gross margin

    $                     7,000


    $                     6,474


    8 %


    $                   20,985


    $                   18,534


    13 %

    % of non-GAAP net revenue

    31 %


    33 %




    31 %


    32 %















    Non-GAAP operating expenses

    $                     4,936


    $                     4,365


    13 %


    $                   14,787


    $                   13,134


    13 %

    % of non-GAAP net revenue

    22 %


    22 %




    22 %


    23 %















    Non-GAAP operating income

    $                     2,064


    $                     2,109


    (2)%


    $                     6,198


    $                     5,400


    15 %

    % of non-GAAP net revenue

    9 %


    11 %




    9 %


    9 %















    Non-GAAP net income

    $                     1,200


    $                     1,199


    —%


    $                     3,723


    $                     3,072


    21 %

    % of non-GAAP net revenue

    5 %


    6 %




    6 %


    5 %















    Adjusted EBITDA

    $                     2,426


    $                     2,441


    (1)%


    $                     7,268


    $                     6,416


    13 %

    % of non-GAAP net revenue

    11 %


    12 %




    11 %


    11 %



     

    DELL TECHNOLOGIES INC.

    Reconciliation of Selected Non-GAAP Financial Measures

    (in millions, except percentages; unaudited)














    Three Months Ended




    Nine Months Ended




    November 2, 2018


    November 3, 2017


    Change


    November 2, 2018


    November 3, 2017


    Change













    Net revenue

    $                   22,482


    $                   19,556


    15 %


    $                   66,780


    $                   57,077


    17 %

       Non-GAAP adjustments:












       Impact of purchase accounting

    169


    295




    536


    985



       Non-GAAP net revenue

    $                   22,651


    $                   19,851


    14 %


    $                   67,316


    $                   58,062


    16 %













    Gross margin

    $                     5,943


    $                     5,220


    14 %


    $                   17,944


    $                   14,645


    23 %

       Non-GAAP adjustments:












       Amortization of intangibles

    726


    914




    2,154


    2,784



       Impact of purchase accounting

    171


    307




    549


    1,020



       Transaction-related expenses

    102


    5




    239


    22



       Other corporate expenses

    58


    28




    99


    63



       Non-GAAP gross margin

    $                     7,000


    $                     6,474


    8 %


    $                   20,985


    $                   18,534


    13 %













    Operating expenses

    $                     6,299


    $                     5,630


    12 %


    $                   18,466


    $                   16,992


    9 %

       Non-GAAP adjustments:












       Amortization of intangibles

    (820)


    (820)




    (2,440)


    (2,466)



       Impact of purchase accounting

    (22)


    (59)




    (81)


    (175)



       Transaction-related expenses

    (65)


    (81)




    (198)


    (393)



       Other corporate expenses

    (456)


    (305)




    (960)


    (824)



       Non-GAAP operating expenses

    $                     4,936


    $                     4,365


    13 %


    $                   14,787


    $                   13,134


    13 %













    Operating loss

    $                      (356)


    $                      (410)


    13 %


    $                      (522)


    $                   (2,347)


    78 %

       Non-GAAP adjustments:












       Amortization of intangibles

    1,546


    1,734




    4,594


    5,250



       Impact of purchase accounting

    193


    366




    630


    1,195



       Transaction-related expenses

    167


    86




    437


    415



       Other corporate expenses

    514


    333




    1,059


    887



       Non-GAAP operating income

    $                     2,064


    $                     2,109


    (2)%


    $                     6,198


    $                     5,400


    15 %













    Net loss

    $                      (895)


    $                      (851)


    (5)%


    $                   (1,894)


    $                   (2,793)


    32 %

       Non-GAAP adjustments:












       Amortization of intangibles

    1,546


    1,734




    4,594


    5,250



       Impact of purchase accounting

    193


    366




    630


    1,195



       Transaction-related expenses

    167


    86




    437


    415



       Other corporate expenses

    514


    333




    1,059


    887



       Aggregate adjustment for income taxes

    (325)


    (469)




    (1,103)


    (1,882)



       Non-GAAP net income

    $                     1,200


    $                     1,199


    0 %


    $                     3,723


    $                     3,072


    21 %













    Net loss

    $                      (895)


    $                      (851)


    (5)%


    $                   (1,894)


    $                   (2,793)


    32 %

       Adjustments:












       Interest and other, net

    639


    682




    1,564


    1,799



       Income tax benefit

    (100)


    (241)




    (192)


    (1,353)



       Depreciation and amortization

    1,961


    2,137




    5,806


    6,491



       EBITDA

    $                     1,605


    $                     1,727


    (7)%


    $                     5,284


    $                     4,144


    28 %













    EBITDA

    $                     1,605


    $                     1,727


    (7)%


    $                     5,284


    $                     4,144


    28 %

       Adjustments:












       Stock-based compensation expense

    256


    221




    671


    630



       Impact of purchase accounting

    169


    298




    536


    990



       Transaction-related expenses

    158


    86




    409


    415



       Other corporate expenses

    238


    109




    368


    237



       Adjusted EBITDA

    $                     2,426


    $                     2,441


    (1)%


    $                     7,268


    $                     6,416


    13 %

     

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    SOURCE Dell Technologies

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