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Press Release Details

Dell Technologies Reports Fiscal Year 2018 Third Quarter Financial Results

December 7, 2017
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ROUND ROCK, Texas, Dec. 7, 2017 /PRNewswire/ --                                                     

Dell Technologies

News summary

  • Third quarter revenue of $19.6 billion, non-GAAP revenue of $19.9 billion
  • Cash flow from operations of $1.6 billion
  • Company unveils new capabilities and offerings, including new midrange storage solutions and Future-Proof Storage Loyalty Program

Full story

Dell Technologies (NYSE: DVMT) announces its fiscal 2018 third quarter results. For the third quarter, consolidated revenue was $19.6 billion and non-GAAP revenue was $19.9 billion. During the quarter, the company generated an operating loss of $533 million1, with non-GAAP operating income of $2.0 billion. The company generated cash flow from operations of $1.6 billion.

"In the third fiscal quarter, we delivered solid performance across the business," said Tom Sweet, chief financial officer, Dell Technologies. "Moving forward, we'll maintain our focus on profitable growth, generating strong cash flow and delivering a comprehensive and seamless solutions portfolio, incorporating the capabilities of all of the companies under Dell Technologies."

Fiscal year 2018 third quarter results:

                
                       
 

Three Months Ended

      

Nine Months Ended

    
 

November 3, 2017

  

October 28, 2016

  

Change

  

November 3, 2017

  

October 28, 2016

  

Change
 

(in millions, except percentages; unaudited)
                       

Net revenue

$             19,610

  

$           16,247

  

21 %

  

$             56,725

  

$             41,568

  

36 %

Operating loss

$                (533)

  

$           (1,512)

  

65 %

  

$             (3,012)

  

$             (1,584)

  

(90)%

Net loss from continuing operations

$                (941)

  

$           (1,637)

  

43 %

  

$             (3,302)

  

$             (2,323)

  

(42)%
                       

Non-GAAP net revenue

$             19,905

  

$           16,777

  

19 %

  

$             57,710

  

$             42,241

  

37 %

Non-GAAP operating income

$               1,986

  

$             1,975

  

1 %

  

$               4,735

  

$               3,270

  

45 %

Non-GAAP net income from continuing operations

$               1,109

  

$                970

  

14 %

  

$               2,563

  

$               1,596

  

61 %

Adjusted EBITDA

$               2,318

  

$             2,230

  

4 %

  

$               5,751

  

$               3,757

  

53 %

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.

"Our strategy to be the essential infrastructure provider is resonating with our customers, who turn to Dell Technologies to transform and digitize their environments," said Jeff Clarke, vice-chairman, Products & Operations, Dell Technologies. "We deliver a more holistic view and set of solutions, offering a higher level of innovation and integration across the edge, core and cloud that is unmatched in the industry."

Operating segments summary

Client Solutions Group (Dell) continued to outperform the market worldwide as the overall PC market moved back to positive year-over-year growth during the calendar quarter. Revenue for the third fiscal quarter was $10.0 billion, up 8 percent from the same quarter of fiscal 2017. Operating income was $672 million, a 6 percent increase.

Key highlights:

  • Double-digit revenue growth in notebooks for both commercial and consumer
  • Delivered 19th consecutive quarter of year-over-year PC unit share growth2
  • No. 1 workstation vendor worldwide, outperforming the industry and positive growth in every major region3
  • No. 1 displays provider worldwide for the 17th consecutive quarter4

Infrastructure Solutions Group (Dell EMC) experienced growth of 2 percent quarter over quarter, with third quarter revenue of $7.5 billion and operating income of $678 million. Servers and networking revenue was $3.9 billion, which was an increase of 32 percent year over year and 3 percent quarter over quarter. Storage revenue remained flat at $3.7 billion quarter over quarter.  

Key highlights:

  • Record revenue and double-digit growth for servers for 2nd consecutive quarter
  • Worldwide leader in servers, outgrowing the market in units and revenue for both mainstream and hyperscale5
  • Triple-digit growth in hyperconverged portfolio, led by VxRail
  • Double-digit demand growth for Isilon scale-out NAS and all-flash arrays

VMware segment revenue for the third quarter was $2.0 billion, with operating income of $639 million, or 32.7 percent of revenue.

Additional highlights

During the third quarter, Dell Technologies paid down $1.7 billion in debt, and since the close of the EMC transaction, it has paid down $9.7 billion of gross debt, excluding DFS-related debt. Also since closing the EMC transaction, the company has repurchased a total of 23.4 million shares of Class V common stock under the previously announced repurchase programs. The company ended the quarter with a cash and investments balance of $18.0 billion.

During the quarter, Dell Technologies launched a dedicated Internet of Things (IoT) division aimed at coordinating development of IoT products and services across all of our businesses. This comprehensive approach includes IoT-specific products, labs, partner program and consumption models to help customers speed the implementation of their IoT solutions.

Subsequent to the end of the quarter, Dell EMC announced the expansion of its industry-leading midrange storage portfolio with two new SC All-Flash data storage arrays, along with key software updates to Dell EMC Unity designed to boost efficiency and cost savings for mixed block and file workloads. Additionally, Dell EMC launched its new Future-Proof Storage Loyalty Program to help customers protect their investment.

Conference call information

As previously announced, the company will hold a conference call to discuss its third quarter performance this morning at 7 a.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.

Additional resources

  • Find out more about how Dell Technologies is collaboratively solving customers' biggest challenges by visiting our Annual Report to Customers
  • Follow the latest news on Twitter from @DellTech

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 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. As a result of the EMC merger transaction completed on September 7, 2016 and its impact on the third quarter and first nine months of Fiscal 2018, our results for the fiscal periods discussed herein are not directly comparable.
2 IDC WW Quarterly Personal Computing Device (PCD) Tracker CY17Q3
3 IDC WW Quarterly Workstation Tracker CY17Q3
4 DisplaySearch Desktop Monitor Market Tracker CY17Q2
5 IDC WW Quarterly Server Tracker CY17Q3

Non-GAAP Financial Measures:

This 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 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; 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 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, quarterly reports on Form 10-Q, 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

      

Nine Months Ended

    
 

November 3, 2017

  

October 28, 2016

  

Change

  

November 3, 2017

  

October 28, 2016

  

Change

Net revenue:

                      

Products

$             14,680

  

$             12,366

  

19 %

  

$             42,003

  

$             33,510

  

25 %

Services

4,930

  

3,881

  

27 %

  

14,722

  

8,058

  

83 %

Total net revenue

19,610

  

16,247

  

21 %

  

56,725

  

41,568

  

36 %
                       

Cost of net revenue:

                      

Products

12,369

  

10,562

  

17 %

  

36,206

  

28,856

  

25 %

Services

2,078

  

1,786

  

16 %

  

6,245

  

4,284

  

46 %

Total cost of net revenue

14,447

  

12,348

  

17 %

  

42,451

  

33,140

  

28 %
                       

Gross margin

5,163

  

3,899

  

32 %

  

14,274

  

8,428

  

69 %
                       

Operating expenses:

                      

Selling, general, and administrative

4,625

  

4,556

  

2 %

  

13,989

  

8,647

  

62 %

Research and development

1,071

  

855

  

25 %

  

3,297

  

1,365

  

142 %

Total operating expenses

5,696

  

5,411

  

5 %

  

17,286

  

10,012

  

73 %
                       

Operating loss

(533)

  

(1,512)

  

65 %

  

(3,012)

  

(1,584)

  

(90)%
                       

Interest and other, net

(682)

  

(794)

  

14 %

  

(1,800)

  

(1,362)

  

(32)%

Loss from continuing operations before income taxes

(1,215)

  

(2,306)

  

47 %

  

(4,812)

  

(2,946)

  

(63)%

Income tax benefit

(274)

  

(669)

  

59 %

  

(1,510)

  

(623)

  

(142)%

Net loss from continuing operations

(941)

  

(1,637)

  

43 %

  

(3,302)

  

(2,323)

  

(42)%

Income (loss) from discontinued operations, net of income taxes

—

  

(438)

  

100 %

  

—

  

875

  

(100)%

Net loss

(941)

  

(2,075)

  

55 %

  

(3,302)

  

(1,448)

  

(128)%

Less: Net loss attributable to non-controlling interests

(4)

  

(11)

  

64 %

  

(85)

  

(12)

  

(608)%

Net loss attributable to Dell Technologies Inc.

$               (937)

  

$           (2,064)

  

55 %

  

$             (3,217)

  

$             (1,436)

  

(124)%
                       

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

                      

Continuing operations - Class V Common Stock - basic

$                1.10

  

$                0.79

      

$                2.50

  

$                0.79

    

Continuing operations - DHI Group - basic

$              (2.05)

  

$              (3.62)

      

$              (6.57)

  

$              (5.70)

    

Discontinued operations - DHI Group - basic

$                   —

  

$              (0.88)

      

$                   —

  

$                2.01

    
                       

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

                      

Continuing operations - Class V Common Stock - diluted

$                1.09

  

$                0.78

      

$                2.46

  

$                0.78

    

Continuing operations - DHI Group - diluted

$              (2.05)

  

$              (3.63)

      

$              (6.58)

  

$              (5.70)

    

Discontinued operations - DHI Group - diluted

$                   —

  

$              (0.88)

      

$                   —

  

$                2.01

    
                       

Weighted-average shares outstanding:

                      

Basic - Class V Common Stock

202

  

222

      

204

  

222

    

Diluted - Class V Common Stock

202

  

222

      

204

  

222

    

Basic - DHI Group

567

  

497

      

567

  

436

    

Diluted - DHI Group

567

  

497

      

567

  

436

    
                       

Percentage of Total Net Revenue:

                      

Gross margin

26 %

  

24 %

      

25 %

  

20 %

    

Selling, general, and administrative

24 %

  

28 %

      

25 %

  

21 %

    

Research and development

5 %

  

5 %

      

6 %

  

3 %

    

Operating expenses

29 %

  

33 %

      

30 %

  

24 %

    

Operating loss

(3)%

  

(9)%

      

(5)%

  

(4)%

    

Loss from continuing operations before income taxes

(6)%

  

(14)%

      

(8)%

  

(7)%

    

Net loss from continuing operations

(5)%

  

(10)%

      

(6)%

  

(6)%

    
                       

Income tax rate

23 %

  

29 %

      

31 %

  

21 %

    

 

 

DELL TECHNOLOGIES INC.

Condensed Consolidated Statements of Financial Position

(in millions; unaudited)
       
 

November 3, 2017

  

February 3, 2017

ASSETS

Current assets:

      

Cash and cash equivalents

$                11,706

  

$                  9,474

Short-term investments

2,008

  

1,975

Accounts receivable, net

9,189

  

9,420

Short-term financing receivables, net

3,643

  

3,222

Inventories, net

2,582

  

2,538

Other current assets

5,397

  

4,144

Total current assets

34,525

  

30,773

Property, plant, and equipment, net

5,378

  

5,653

Long-term investments

4,273

  

3,802

Long-term financing receivables, net

3,317

  

2,651

Goodwill

39,330

  

38,910

Intangible assets, net

29,846

  

35,053

Other non-current assets

1,725

  

1,364

Total assets

$              118,394

  

$              118,206
       

LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS' EQUITY

Current liabilities:

      

Short-term debt

$                  6,235

  

$                  6,329

Accounts payable

16,711

  

14,422

Accrued and other

6,901

  

7,119

Short-term deferred revenue

10,895

  

10,265

Total current liabilities

40,742

  

38,135

Long-term debt

45,416

  

43,061

Long-term deferred revenue

9,161

  

8,431

Other non-current liabilities

7,487

  

9,339

Total liabilities

102,806

  

98,966
       

Redeemable shares

362

  

231

Stockholders' equity:

      

Total Dell Technologies Inc. stockholders' equity

9,519

  

13,243

Non-controlling interests

5,707

  

5,766

Total stockholders' equity

15,226

  

19,009

Total liabilities, redeemable shares, and stockholders' equity

$              118,394

  

$              118,206
       

 

 

DELL TECHNOLOGIES INC.

Condensed Consolidated Statements of Cash Flows

(in millions; unaudited)
               
 

Three Months Ended

  

Nine Months Ended
 

November 3, 2017

  

October 28, 2016

  

November 3, 2017

  

October 28, 2016

Cash flows from operating activities:

              

Net loss

$                   (941)

  

$                (2,075)

  

$                (3,302)

  

$                (1,448)

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

2,564

  

1,829

  

6,981

  

3,017

Change in cash from operating activities

1,623

  

(246)

  

3,679

  

1,569

Cash flows from investing activities:

              

Investments:

              

Purchases

(1,194)

  

(503)

  

(3,454)

  

(511)

Maturities and sales

935

  

543

  

2,993

  

561

Capital expenditures

(341)

  

(182)

  

(902)

  

(417)

Proceeds from sale of facilities, land, and other assets

—

  

5

  

—

  

24

Capitalized software development costs

(94)

  

(85)

  

(281)

  

(85)

Collections on purchased financing receivables

15

  

6

  

25

  

31

Acquisition of businesses, net

—

  

(37,614)

  

(223)

  

(37,614)

Divestitures of businesses, net

—

  

—

  

—

  

—

Asset acquisitions, net

(9)

  

—

  

(95)

  

—

Asset dispositions, net

(12)

  

—

  

(53)

  

—

Other

—

  

(8)

  

—

  

(48)

Change in cash from investing activities

(700)

  

(37,838)

  

(1,990)

  

(38,059)

Cash flows from financing activities:

              

Payment of dissenting shares obligation

—

  

—

  

—

  

(446)

Proceeds from the issuance of DHI Group Common Stock

—

  

4,404

  

—

  

4,404

Proceeds from the issuance of common stock of subsidiaries

30

  

1

  

110

  

101

Repurchases of DHI Group Common Stock

(4)

  

(8)

  

(6)

  

(10)

Repurchases of Class V Common Stock

(300)

  

(132)

  

(722)

  

(132)

Repurchases of common stock of subsidiaries

(555)

  

(611)

  

(555)

  

(611)

Issuance of common stock under employee plans

—

  

—

  

1

  

—

Payments for debt issuance costs

(39)

  

(834)

  

(44)

  

(849)

Proceeds from debt

8,416

  

43,838

  

13,192

  

45,986

Repayments of debt

(5,872)

  

(7,000)

  

(11,181)

  

(9,638)

Share repurchases for tax withholdings on vesting of equity awards

(105)

  

(26)

  

(299)

  

(28)

Other

—

  

4

  

—

  

10

Change in cash from financing activities

1,571

  

39,636

  

496

  

38,787
               

Effect of exchange rate changes on cash and cash equivalents

(1)

  

(21)

  

47

  

31
               

Change in cash and cash equivalents

2,493

  

1,531

  

2,232

  

2,328
               

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

9,213

  

7,373

  

9,474

  

6,576

Cash and cash equivalents at end of the period

$                11,706

  

$                  8,904

  

$                11,706

  

$                  8,904

Less: Cash included in current assets held for sale

—

  

82

  

—

  

82

Cash and cash equivalents from continuing operations

$                11,706

  

$                  8,822

  

$                11,706

  

$                  8,822
               

 

 

DELL TECHNOLOGIES INC.

Segment Information

(in millions, except percentages; unaudited)
                       
 

Three Months Ended

      

Nine Months Ended

    
 

November 3, 2017

  

October 28, 2016

  

Change

  

November 3, 2017

  

October 28, 2016

  

Change

Client Solutions Group (CSG):

                      

Net Revenue:

                      

Commercial

$                     6,907

  

$                     6,400

  

8 %

  

$                   20,453

  

$                   19,343

  

6 %

Consumer

3,052

  

2,787

  

10 %

  

8,413

  

7,635

  

10 %

Total CSG net revenue

$                     9,959

  

$                     9,187

  

8 %

  

$                   28,866

  

$                   26,978

  

7 %
                       

Operating Income:

                      

CSG operating income

$                        672

  

$                        634

  

6 %

  

$                     1,612

  

$                     1,503

  

7 %

% of CSG net revenue

7 %

  

7 %

      

6 %

  

6 %

    

% of total segment operating income

34 %

  

30 %

      

34 %

  

44 %

    
                       

Infrastructure Solutions Group (ISG):

                      

Net Revenue:

                      

Servers and networking

$                     3,851

  

$                     2,910

  

32 %

  

$                   10,822

  

$                     9,222

  

17 %

Storage

3,667

  

3,079

  

19 %

  

11,018

  

4,159

  

165 %

Total ISG net revenue

$                     7,518

  

$                     5,989

  

26 %

  

$                   21,840

  

$                   13,381

  

63 %
                       

Operating Income:

                      

ISG operating income

$                        678

  

$                        897

  

(24)%

  

$                     1,431

  

$                     1,389

  

3 %

% of ISG net revenue

9 %

  

15 %

      

7 %

  

10 %

    

% of total segment operating income

34 %

  

43 %

      

30 %

  

40 %

    
                       

VMware:

                      

Net Revenue:

                      

Total VMware net revenue

$                     1,953

  

$                     1,289

  

52 %

  

$                     5,596

  

$                     1,289

  

334 %
                       

Operating Income:

                      

VMware operating income

$                        639

  

$                        548

  

17 %

  

$                     1,686

  

$                        548

  

208 %

% of VMware net revenue

33 %

  

43 %

      

30 %

  

43 %

    

% of total segment operating income

32 %

  

26 %

      

36 %

  

16 %

    
                       

Reconciliation to consolidated net revenue:

                      

Reportable segment net revenue

$                   19,430

  

$                   16,465

      

$                   56,302

  

$                   41,648

    

Other businesses (a)

475

  

312

      

1,409

  

530

    

Unallocated transactions (b)

—

  

—

      

(1)

  

63

    

Impact of purchase accounting (c)

(295)

  

(530)

      

(985)

  

(673)

    

Total net revenue

$                   19,610

  

$                   16,247

      

$                   56,725

  

$                   41,568

    
                       

Reconciliation to consolidated operating income (loss):

                      

Reportable segment operating income

$                     1,989

  

$                     2,079

      

$                     4,729

  

$                     3,440

    

Other businesses (a)

6

  

(13)

      

10

  

(48)

    

Unallocated transactions (b)

(9)

  

(91)

      

(4)

  

(122)

    

Impact of purchase accounting (c)

(366)

  

(850)

      

(1,195)

  

(1,054)

    

Amortization of intangibles

(1,734)

  

(1,164)

      

(5,250)

  

(2,146)

    

Transaction-related expenses (d)

(86)

  

(1,200)

      

(415)

  

(1,329)

    

Other corporate expenses (e)

(333)

  

(273)

      

(887)

  

(325)

    

Total operating loss

$                      (533)

  

$                   (1,512)

      

$                   (3,012)

  

$                   (1,584)

    

_________________

                      

(a) Other businesses consist of RSA Information Security, SecureWorks, Pivotal, and Boomi, 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

      

Nine Months Ended

    
 

November 3, 2017

  

October 28, 2016

  

Change

  

November 3, 2017

  

October 28, 2016

  

Change
                       

Non-GAAP net revenue

$                19,905

  

$              16,777

  

19 %

  

$                57,710

  

$              42,241

  

37 %
                       

Non-GAAP gross margin

$                  6,417

  

$                5,324

  

21 %

  

$                18,163

  

$              10,224

  

78 %

% of non-GAAP net revenue

32 %

  

32 %

      

31 %

  

24 %

    
                       

Non-GAAP operating expenses

$                  4,431

  

$                3,349

  

32 %

  

$                13,428

  

$                6,954

  

93 %

% of non-GAAP net revenue

22 %

  

20 %

      

23 %

  

16 %

    
                       

Non-GAAP operating income

$                  1,986

  

$                1,975

  

1 %

  

$                  4,735

  

$                3,270

  

45 %

% of non-GAAP net revenue

10 %

  

12 %

      

8 %

  

8 %

    
                       

Non-GAAP net income from continuing operations

$                  1,109

  

$                   970

  

14 %

  

$                  2,563

  

$                1,596

  

61 %

% of non-GAAP net revenue

6 %

  

6 %

      

4 %

  

4 %

    
                       

Adjusted EBITDA

$                  2,318

  

$                2,230

  

4 %

  

$                  5,751

  

$                3,757

  

53 %

% of non-GAAP net revenue

12 %

  

13 %

      

10 %

  

9 %

    

 

 

 

DELL TECHNOLOGIES INC.

Reconciliation of Selected Non-GAAP Financial Measures

(in millions, except percentages; unaudited)
                       
 

Three Months Ended

      

Nine Months Ended

    
 

November 3, 2017

  

October 28, 2016

  

Change

  

November 3, 2017

  

October 28, 2016

  

Change
                       

Net revenue

$                   19,610

  

$                   16,247

  

21 %

  

$                   56,725

  

$                   41,568

  

36 %

Non-GAAP adjustments:

                      

Impact of purchase accounting

295

  

530

      

985

  

673

    

Non-GAAP net revenue

$                   19,905

  

$                   16,777

  

19 %

  

$                   57,710

  

$                   42,241

  

37 %
                       

Gross margin

$                     5,163

  

$                     3,899

  

32 %

  

$                   14,274

  

$                     8,428

  

69 %

Non-GAAP adjustments:

                      

Impact of purchase accounting

307

  

729

      

1,020

  

897

    

Amortization of intangibles

914

  

604

      

2,784

  

806

    

Transaction-related expenses

5

  

30

      

22

  

25

    

Other corporate expenses

28

  

62

      

63

  

68

    

Non-GAAP gross margin

$                     6,417

  

$                     5,324

  

21 %

  

$                   18,163

  

$                   10,224

  

78 %
                       

Operating expenses

$                     5,696

  

$                     5,411

  

5 %

  

$                   17,286

  

$                   10,012

  

73 %

Non-GAAP adjustments:

                      

Impact of purchase accounting

(59)

  

(121)

      

(175)

  

(157)

    

Amortization of intangibles

(820)

  

(560)

      

(2,466)

  

(1,340)

    

Transaction-related expenses

(81)

  

(1,170)

      

(393)

  

(1,304)

    

Other corporate expenses

(305)

  

(211)

      

(824)

  

(257)

    

Non-GAAP operating expenses

$                     4,431

  

$                     3,349

  

32 %

  

$                   13,428

  

$                     6,954

  

93 %
                       

Operating loss

$                      (533)

  

$                   (1,512)

  

65 %

  

$                   (3,012)

  

$                   (1,584)

  

(90)%

Non-GAAP adjustments:

                      

Impact of purchase accounting

366

  

850

      

1,195

  

1,054

    

Amortization of intangibles

1,734

  

1,164

      

5,250

  

2,146

    

Transaction-related expenses

86

  

1,200

      

415

  

1,329

    

Other corporate expenses

333

  

273

      

887

  

325

    

Non-GAAP operating income

$                     1,986

  

$                     1,975

  

1 %

  

$                     4,735

  

$                     3,270

  

45 %
                       

Net loss from continuing operations

$                      (941)

  

$                   (1,637)

  

43 %

  

$                   (3,302)

  

$                   (2,323)

  

(42)%

Non-GAAP adjustments:

                      

Impact of purchase accounting

366

  

850

      

1,195

  

1,054

    

Amortization of intangibles

1,734

  

1,164

      

5,250

  

2,146

    

Transaction-related expenses

86

  

1,200

      

415

  

1,326

    

Other corporate expenses

333

  

273

      

887

  

325

    

Aggregate adjustment for income taxes

(469)

  

(880)

      

(1,882)

  

(932)

    

Non-GAAP net income from continuing operations

$                     1,109

  

$                        970

  

14 %

  

$                     2,563

  

$                     1,596

  

61 %
                       

Net loss from continuing operations

$                      (941)

  

$                   (1,637)

  

43 %

  

$                   (3,302)

  

$                   (2,323)

  

(42)%

Adjustments:

                      

Interest and other, net

682

  

794

      

1,800

  

1,362

    

Income tax benefit

(274)

  

(669)

      

(1,510)

  

(623)

    

Depreciation and amortization

2,137

  

1,576

      

6,491

  

2,799

    

EBITDA

$                     1,604

  

$                          64

  

NM

  

$                     3,479

  

$                     1,215

  

186 %
                       

EBITDA

$                     1,604

  

$                          64

  

NM

  

$                     3,479

  

$                     1,215

  

186 %

Adjustments:

                      

Stock-based compensation expense

221

  

144

      

630

  

177

    

Impact of purchase accounting

298

  

693

      

990

  

851

    

Transaction-related expenses

86

  

1,200

      

415

  

1,366

    

Other corporate expenses

109

  

129

      

237

  

148

    

Adjusted EBITDA

$                     2,318

  

$                     2,230

  

4 %

  

$                     5,751

  

$                     3,757

  

53 %
                       

 

 

 

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SOURCE Dell Technologies

MEDIA: Dave Farmer, (508) 293-7206, dave.farmer@dell.com, or Lauren Lee, (512) 728-4374, lauren.lee@dell.com; INVESTOR RELATIONS: Karen Litzler-Hollier, (512) 728-0388, karen.litzler-hollie@dell.com, or Hall Butler, (512) 723-4963, hall.butler@dell.com