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    Dell Technologies Reports Fiscal Year 2018 First Quarter Financial Results

    ROUND ROCK, Texas, June 8, 2017 /PRNewswire/ -- 

    Dell Technologies

    News summary

    • First quarter revenue was $17.8 billion, non-GAAP revenue was $18.2 billion
    • Operating loss of $1.5 billion, non-GAAP operating income of $1.2 billion
    • Successfully integrated sales organization to execute one go-to-market motion for customers

    Full story

    Dell Technologies (NYSE: DVMT) announces its fiscal 2018 first quarter results, which reflect the growth and impact of the EMC transaction. 1

    For the first quarter, consolidated revenue was $17.8 billion and non-GAAP revenue was $18.2 billion. During the quarter, the company generated an operating loss of $1.5 billion, with a non-GAAP operating income of $1.2 billion.

    "We're pleased with overall results in the first quarter of our new go-to-market structure and the demand velocity we saw in a challenging component cost environment," said Tom Sweet, chief financial officer, Dell Technologies Inc. "I'm encouraged by these achievements and excited about the opportunities ahead as we continue to provide a broad portfolio of solutions for our customers' digital transformations."

    The company ended the quarter with a cash and investments balance of $14.9 billion. Since closing the EMC transaction, Dell Technologies has paid down approximately $7.1 billion in gross debt, resulting in a $200 million reduction in annualized interest expense on a run-rate basis. The company also has repurchased $1.1 billion of Class V Common Stock under both the previously announced Class V Group and DHI Group repurchase programs.

    Fiscal first quarter 2018 results








    Three Months Ended




    May 5, 2017


    April 29, 2016


    Change


    (in millions, except percentages; unaudited)







    Net revenue

    $                         17,816


    $                         12,241


    46 %

    Operating loss

    $                         (1,500)


    $                            (139)


    (979)%

    Net loss from continuing operations

    $                         (1,383)


    $                            (424)


    (226)%







    Non-GAAP net revenue

    $                         18,171


    $                         12,319


    48 %

    Non-GAAP operating income

    $                           1,197


    $                              539


    122 %

    Non-GAAP net income from continuing operations

    $                              581


    $                              264


    120 %

    Adjusted EBITDA

    $                           1,567


    $                              643


    144 %







    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.

    Operating segments summary

    Client Solutions Group continued to outgrow the market worldwide in unit shipments for both commercial and consumer product categories on a calendar year basis. Revenue for the first quarter was $9.1 billion, up 6 percent year over year. Operating income was $374 million for the quarter, or 4.1 percent of revenue.

    Key highlights: 

    • Increased PC shipments by 6.2 percent year-over-year, with 17 consecutive quarters of year-over-year PC unit share growth 2
    • Maintained No. 1 share position worldwide for displays, gaining unit share year-over-year for the 17th consecutive quarter 3
    • Only vendor to gain share year-over-year in both Fixed and Mobile workstation categories 4

    Infrastructure Solutions Group generated $6.9 billion of revenue in the first quarter, which includes $3.2 billion in servers and networking and $3.7 billion in storage, with an operating income of $323 million.

    Key highlights:

    • Remained the worldwide market share leader in x86 servers, with PowerEdge units and revenue growth up by double digits in the fiscal quarter 5
    • Demand for hyperconverged portfolio grew at a triple-digit rate, while demand for all-flash solutions grew at a very high double-digit rate
    • Increased demand for Virtustream Public Cloud for mission-critical applications by approximately 100 percent

    VMware segment revenue for the first quarter was $1.7 billion, with operating income of $486 million, or 28 percent of revenue.

    Early in the first quarter, the company successfully integrated the combined sales organization and is now operating with one common go-to-market sales motion for customers. Immediately following the quarter close, Dell Technologies hosted its second annual Dell EMC World conference last month in Las Vegas for 13,000 customers and partners. During the event the company launched approximately 40 innovative products and solutions, including the new 14th generation of Dell EMC PowerEdge servers, four flexible consumption models, seven all-flash and hybrid storage systems and the world's first artificial intelligence platform for women entrepreneurs. In addition, the company announced Dell Technologies Capital, its venture practice for the entire Dell Technologies family of businesses aimed at investments in early-stage startups.

    Conference call information

    As previously announced, the company will hold a conference call to discuss its first quarter performance today at 7 a.m. CDT. 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 30 days.

    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 98 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 © 2017 Dell Inc. or its subsidiaries. All Rights Reserved. Dell, Dell EMC, Dell Inc. and the Dell logo are trademarks of Dell Technologies in the United States and/or other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective companies. 

    1 Due to the EMC transaction and to a lesser extent the Dell going-private transaction, significant non-cash bridging items will remain between GAAP and non-GAAP results for the next few years. Prior-year historical Dell Technologies financials do not include EMC historical results, thereby impacting most year-over-year comparisons.
    2 IDC Worldwide Quarterly Personal Computing Device (PCD) Tracker CY17Q1
    3 IDC Worldwide Quarterly PC Monitor Tracker CY16Q4
    4 IDC Worldwide Quarterly Workstation Tracker CY17Q1
    5 IDC Worldwide Quarterly Server Tracker, June 2017

    Non-GAAP Financial Measures

    The press release presents 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 from continuing operations, 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 of the foregoing historical non-GAAP financial measures to the most directly comparable historical GAAP financial measures 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, 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; 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 becoming a newly 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; the costs, time, and effort required to be dedicated to the integration of the Dell and EMC businesses; the ability to realize the anticipated synergies from the merger with EMC; the ability to integrate EMC's technology, solutions, products, and services with those of Dell in an effective manner; 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 the Dell Technologies' business, financial condition, results of operations, and prospects, in its periodic reports filed with the Securities and Exchange Commission, including Dell Technologies' Annual Report on Form 10-K for the fiscal year ended February 3, 2017, and current reports on Form 8-K. These filings are available for review through the Securities and Exchange Commission'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.

     

     

    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




    May 5, 2017


    April 29, 2016


    Change

    Net revenue:






    Products

    $        12,968


    $            10,183


    27 %

    Services

    4,848


    2,058


    136 %

    Total net revenue

    17,816


    12,241


    46 %







    Cost of net revenue:






    Products

    11,459


    8,799


    30 %

    Services

    2,055


    1,249


    65 %

    Total cost of net revenue

    13,514


    10,048


    34 %







    Gross margin

    4,302


    2,193


    96 %







    Operating expenses:






    Selling, general, and administrative

    4,669


    2,068


    126 %

    Research and development

    1,133


    264


    329 %

    Total operating expenses

    5,802


    2,332


    149 %







    Operating loss

    (1,500)


    (139)


    (979)%







    Interest and other, net

    (573)


    (219)


    (162)%

    Loss from continuing operations before income taxes

    (2,073)


    (358)


    (479)%

    Income tax provision (benefit)

    (690)


    66


    NM

    Net loss from continuing operations

    (1,383)


    (424)


    (226)%

    Income from discontinued operations, net of income taxes


    479


    (100)%

    Net income (loss)

    (1,383)


    55


    NM

    Less: Net loss attributable to non-controlling interests

    (49)



    NA

    Net income (loss) attributable to Dell Technologies Inc.

    $        (1,334)


    $                   55


    NM







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






    Continuing operations - Class V Common Stock - basic

    $           0.57


    $                   —



    Continuing operations - DHI Group - basic

    $         (2.57)


    $              (1.05)



    Discontinued operations - DHI Group - basic

    $              —


    $               1.18









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






    Continuing operations - Class V Common Stock - diluted

    $           0.56


    $                   —



    Continuing operations - DHI Group - diluted

    $         (2.57)


    $              (1.05)



    Discontinued operations - DHI Group - diluted

    $              —


    $               1.18









    Weighted-average shares outstanding:






    Basic - Class V Common Stock

    207




    Diluted - Class V Common Stock

    207




    Basic - DHI Group

    566


    405



    Diluted - DHI Group

    566


    405









    Percentage of Total Net Revenue:






    Gross margin

    24 %


    18 %



    Selling, general, and administrative

    26 %


    17 %



    Research and development

    6 %


    2 %



    Operating expenses

    33 %


    19 %



    Operating loss

    (8)%


    (1)%



    Loss from continuing operations before income taxes

    (12)%


    (3)%



    Net loss from continuing operations

    (8)%


    (3)%









    Income tax rate

    33 %


    (18)%



     

     

    DELL TECHNOLOGIES INC.

    Condensed Consolidated Statements of Financial Position

    (in millions; unaudited)






    May 5, 2017


    February 3, 2017

    ASSETS

    Current assets:




    Cash and cash equivalents

    $          9,554


    $                   9,474

    Short-term investments

    1,620


    1,975

    Accounts receivable, net

    8,834


    9,420

    Short-term financing receivables, net

    3,255


    3,222

    Inventories, net

    2,466


    2,538

    Other current assets

    4,655


    4,144

      Total current assets

    30,384


    30,773

    Property, plant, and equipment, net

    5,438


    5,653

    Long-term investments

    3,772


    3,802

    Long-term financing receivables, net

    2,741


    2,651

    Goodwill

    38,930


    38,910

    Intangible assets, net

    33,283


    35,053

    Other non-current assets

    1,492


    1,364

    Total assets

    $      116,040


    $               118,206





    LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS' EQUITY

    Current liabilities:




    Short-term debt

    $          4,842


    $                   6,329

    Accounts payable

    15,064


    14,422

    Accrued and other

    6,376


    7,119

    Short-term deferred revenue

    10,354


    10,265

      Total current liabilities

    36,636


    38,135

    Long-term debt

    44,948


    43,061

    Long-term deferred revenue

    8,330


    8,431

    Other non-current liabilities

    8,435


    9,339

    Total liabilities

    98,349


    98,966





    Redeemable shares

    301


    231

    Stockholders' equity:




    Total Dell Technologies Inc. stockholders' equity

    11,532


    13,243

    Non-controlling interests

    5,858


    5,766

    Total stockholders' equity

    17,390


    19,009

    Total liabilities, redeemable shares, and stockholders' equity

    $      116,040


    $               118,206

     

     

     

    DELL TECHNOLOGIES INC.

    Condensed Consolidated Statements of Cash Flows

    (in millions; unaudited)






    Three Months Ended


    May 5, 2017


    April 29, 2016

    Cash flows from operating activities:




    Net income (loss)

    $        (1,383)


    $                   55

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

    1,623


    (118)

    Change in cash from operating activities

    240


    (63)

    Cash flows from investing activities:




    Investments:




      Purchases

    (559)


      Maturities and sales

    973


    12

    Capital expenditures

    (245)


    (92)

    Proceeds from sale of facilities, land, and other assets


    4

    Capitalized software development costs

    (89)


    Collections on purchased financing receivables

    3


    16

    Acquisition of businesses, net

    (12)


    Divestitures of businesses, net

    (20)


    Change in cash from investing activities

    51


    (60)

    Cash flows from financing activities:




    Proceeds from the issuance of common stock of subsidiaries

    8


    102

    Repurchases of DHI Group Common Stock

    (2)


    Repurchases of Class V Common Stock

    (368)


    Issuance of common stock under employee plans

    1


    Payments for debt issuance costs

    (5)


    (2)

    Proceeds from debt

    3,441


    552

    Repayments of debt

    (3,154)


    (1,041)

    Repurchases for tax withholdings on vesting of equity awards

    (126)


    (1)

    Other


    3

    Change in cash from financing activities

    (205)


    (387)





    Effect of exchange rate changes on cash and cash equivalents

    (6)


    73





    Change in cash and cash equivalents

    80


    (437)





    Cash and cash equivalents at beginning of the period, including amounts held for sale

    9,474


    6,576

    Cash and cash equivalents at end of the period

    $          9,554


    $              6,139

    Less: Cash included in current assets held for sale


    268

    Cash and cash equivalents from continuing operations

    $          9,554


    $              5,871

     

     

     

    DELL TECHNOLOGIES INC.

    Segment Information

    (in millions, except percentages; unaudited)








    Three Months Ended




    May 5, 2017


    April 29, 2016


    Change

    Client Solutions Group (CSG):






    Net Revenue:






      Commercial

    $          6,350


    $              6,145


    3 %

      Consumer

    2,706


    2,426


    12 %

      Total CSG net revenue

    $          9,056


    $              8,571


    6 %







    Operating Income:






      CSG operating income

    $             374


    $                 385


    (3)%

      % of CSG net revenue

    4 %


    4 %



      % of total segment operating income

    32 %


    67 %









    Infrastructure Solutions Group (ISG):






    Net Revenue:






      Servers and networking

    $          3,231


    $              3,075


    5 %

      Storage

    3,685


    538


    585 %

      Total ISG net revenue

    $          6,916


    $              3,613


    91 %







    Operating Income:






      ISG operating income

    $             323


    $                 192


    68 %

      % of ISG net revenue

    5 %


    5 %



      % of total segment operating income

    27 %


    33 %









    VMware:






    Net Revenue:






      Total VMware net revenue

    $          1,736


    $                   —


    NA







    Operating Income:






      VMware operating income

    $             486


    $                   —


    NA

      % of VMware net revenue

    28 %


    NA



      % of total segment operating income

    41 %


    NA









    Reconciliation to consolidated net revenue:






    Reportable segment net revenue

    $        17,708


    $            12,184



      Other businesses (a)

    462


    110



      Unallocated transactions (b)

    1


    25



      Impact of purchase accounting (c)

    (355)


    (78)



      Total net revenue

    $        17,816


    $            12,241









    Reconciliation to consolidated operating income (loss):






    Reportable segment operating income

    $          1,183


    $                 577



      Other businesses (a)

    3


    (16)



      Unallocated transactions (b)

    11


    (22)



      Impact of purchase accounting (c)

    (423)


    (106)



      Amortization of intangibles

    (1,776)


    (491)



      Transaction-related expenses (d)

    (191)


    (57)



      Other corporate expenses(e)

    (307)


    (24)



      Total operating loss

    $        (1,500)


    $                (139)



    _________________






    (a) Other businesses consist of RSA Information Security, SecureWorks, Pivotal, and Boomi offerings, and do not constitute a reportable segment, either individually or collectively, as the results of the businesses are not material to the Company's overall results and the businesses do not meet the criteria for reportable segments.

    (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 and facility action costs as well as 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 from continuing operations, 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




    May 5, 2017


    April 29, 2016


    Change







    Non-GAAP net revenue

    $        18,171


    $            12,319


    48 %







    Non-GAAP gross margin

    $          5,646


    $              2,385


    137 %

    % of non-GAAP net revenue

    31 %


    19 %









    Non-GAAP operating expenses

    $          4,449


    $              1,846


    141 %

    % of non-GAAP net revenue

    24 %


    15 %









    Non-GAAP operating income

    $          1,197


    $                 539


    122 %

    % of non-GAAP net revenue

    7 %


    4 %









    Non-GAAP net income from continuing operations

    $             581


    $                 264


    120 %

    % of non-GAAP net revenue

    3 %


    2 %









    Adjusted EBITDA

    $          1,567


    $                 643


    144 %

    % of non-GAAP net revenue

    9 %


    5 %



     

     

    DELL TECHNOLOGIES INC.

    Reconciliation of Selected Non-GAAP Financial Measures

    (in millions, except percentages; unaudited)








    Three Months Ended




    May 5, 2017


    April 29, 2016


    Change







    Net revenue

    $        17,816


    $            12,241


    46 %

    Non-GAAP adjustments:






      Impact of purchase accounting

    355


    78



      Non-GAAP net revenue

    $        18,171


    $            12,319


    48 %







    Gross margin

    $          4,302


    $              2,193


    96 %

    Non-GAAP adjustments:






      Impact of purchase accounting

    365


    89



      Amortization of intangibles

    950


    101



      Transaction-related expenses

    7


    (1)



      Other corporate expenses

    22


    3



      Non-GAAP gross margin

    $          5,646


    $              2,385


    137 %







    Operating expenses

    $          5,802


    $              2,332


    149 %

    Non-GAAP adjustments:






      Impact of purchase accounting

    (58)


    (17)



      Amortization of intangibles

    (826)


    (390)



      Transaction-related expenses

    (184)


    (58)



      Other corporate expenses

    (285)


    (21)



      Non-GAAP operating expenses

    $          4,449


    $              1,846


    141 %







    Operating loss

    $        (1,500)


    $                (139)


    (979)%

    Non-GAAP adjustments:






      Impact of purchase accounting

    423


    106



      Amortization of intangibles

    1,776


    491



      Transaction-related expenses

    191


    57



      Other corporate expenses

    307


    24



      Non-GAAP operating income

    $          1,197


    $                 539


    122 %







    Net loss from continuing operations

    $        (1,383)


    $                (424)


    (226)%

    Non-GAAP adjustments:






      Impact of purchase accounting

    423


    106



      Amortization of intangibles

    1,776


    491



      Transaction-related expenses

    191


    57



      Other corporate expenses

    307


    24



      Aggregate adjustment for income taxes

    (733)


    10



      Non-GAAP net income from continuing operations

    $             581


    $                 264


    120 %







    Net loss from continuing operations

    $        (1,383)


    $                (424)


    (226)%

    Adjustments:






      Interest and other, net

    573


    219



      Income tax provision (benefit)

    (690)


    66



      Depreciation and amortization

    2,212


    618



      EBITDA

    $             712


    $                 479


    49 %







    EBITDA

    $             712


    $                 479


    49 %

    Adjustments:






      Stock-based compensation expense

    201


    14



      Impact of purchase accounting

    357


    83



      Transaction-related expenses

    191


    57



      Other corporate expenses

    106


    10



      Adjusted EBITDA

    $          1,567


    $                 643


    144 %

     

     

    To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/dell-technologies-reports-fiscal-year-2018-first-quarter-financial-results-300470675.html

    SOURCE Dell Technologies

    MEDIA CONTACTS: Dave Farmer, (508) 293-7206, dave.farmer@dell.com, or Lauren Lee, (512) 728-4374, lauren.lee@dell.com; INVESTOR RELATIONS CONTACTS: Kristy Harris Bias, (512) 728-1658, kristy.harris.bias@dell.com, or Karen Litzler-Hollier, (512) 728-0388, karen.litzler-hollie@dell.com