VMware Reports Second Quarter 2013 Results
- Year-over-Year Revenue Growth of 11% to $1.24 Billion
- GAAP Operating Margin of 21.7%; Non-GAAP Operating Margin of 33.5%, a record high
- GAAP EPS of $0.57; Non-GAAP EPS of $0.79
Supplemental Financial Tables
Non-GAAP Financial Measures
PALO ALTO, Calif., July 23, 2013 — VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced financial results for the second quarter of 2013:
- Revenues for the second quarter were $1.24 billion, an increase of 11% from the second quarter of 2012. Excluding revenues attributable to GoPivotal and all divestitures that occurred in 2013, revenues for the second quarter increased 15% from the second quarter of 2012.1
- Operating income for the second quarter was $270 million, an increase of 28% from the second quarter of 2012. Non-GAAP operating income for the second quarter was $417 million, an increase of 16% from the second quarter of 2012.
- Net income for the second quarter was $244 million, or $0.57 per diluted share, up 28% per diluted share compared to $192 million, or $0.44 per diluted share, for the second quarter of 2012. Non-GAAP net income for the quarter was $343 million, or $0.79 per diluted share, up 16% per diluted share compared to $296 million, or $0.68 per diluted share, for the second quarter of 2012.
- Operating cash flows for the second quarter were $534 million, an increase of 36% from the second quarter of 2012. Free cash flows for the quarter were $458 million, an increase of 32% from the second quarter of 2012.
- Cash, cash equivalents and short-term investments were $5.32 billion and unearned revenue was $3.60 billion as of June 30, 2013.
Annual 2013 revenues are expected to be in the range of $5.12 billion to $5.26 billion, and annual license revenues are expected to be in the range of $2.21 billion to $2.29 billion. Excluding revenues attributable to GoPivotal and all divestitures that occurred in 2013, this represents growth rates of 15% to 18% for total revenues and 8% to 12% for license revenues.1
Third quarter 2013 revenues are expected to be in the range of $1.27 billion to $1.30 billion, and third quarter license revenues are expected to be between $535 million and $555 million. Excluding revenues attributable to GoPivotal and all divestitures that occurred in 2013, this represents growth rates of 17% to 20% for total revenues and 12% to 16% for license revenues.1
"The second quarter was a strong finish to a solid first half of 2013 for VMware," said Pat Gelsinger, chief executive officer, VMware. "We see a significant market opportunity in the second half of 2013 and beyond. VMware continues to succeed because we are uniquely positioned to help customers move from the client-server era to the mobile-cloud era of computing. As we help them bridge to this new world, we're empowering businesses to capture new levels of efficiency, control and agility."
"We are pleased with our second quarter results," said Jonathan Chadwick, chief financial officer, VMware. "We exceeded the high end of our revenue guidance and achieved a record high non-GAAP operating margin in Q2. The company is aligned and focused, and we enter the second half of the year with significant momentum.”
Recent Highlights & Strategic Announcements
- On May 21, 2013, VMware unveiled VMware vCloud® Hybrid Service™, an Infrastructure as a Service (“IaaS”) cloud operated by VMware and built on the trusted foundation of VMware vSphere®, giving customers a common platform to seamlessly extend their data center to the cloud.
- On May 22, 2013, VMware and SAP AG announced a new model to deliver SAP Core Solutions and SAP HANA® in the newly announced VMware vCloud® Hybrid Service™. The joint offering is designed to allow customers to consume SAP solutions on VMware vCloud Hybrid Service in a true Opex model with subscription pricing for both software and infrastructure services. The joint offering is expected to deliver a fully managed subscription service offered by VMware on-premise, in the cloud or within hybrid deployments.
- On June 10, 2013, VMware announced that NTT Communications (“NTT Com”), the cloud service provider of one of the world's largest telecommunications companies NTT Group, will deploy VMware network virtualization as a core technology for its new cloud service, Enterprise Cloud (“EC”). By incorporating VMware network virtualization into its EC service, NTT Com will provide seamless and flexible connectivity between customer data centers and the NTT Com cloud without changing the IP addresses of a customer's existing, on-premise environment.
- On June 11, 2013, VMware introduced VMware® vCenter™ Log Insight™, a new automated log management and analytics product for the Cloud Era. By extending analytics to logs, VMware enables IT organizations to gain real-time insights from vast amounts of log data generated by applications, physical hardware and virtualized infrastructure, helping to minimize troubleshooting times as well as improve operational efficiency and reduce IT costs.
- In May and June of 2013, VMware made announcements regarding VMware vSphere® integration with Apache Hadoop. MapR Technologies, Inc. and VMware announced that MapR’s Distribution for Apache Hadoop is now certified for VMware vSphere. In addition, Cloudera and VMware announced that Cloudera Enterprise is now certified to run on vSphere. Through the VMware Ready™ program, VMware and Cloudera completed a detailed joint validation process, which enables enterprises to simplify and accelerate the use of Apache Hadoop within virtual and cloud environments.
The company will host a conference call today at 2:00 p.m. PT/ 5:00 p.m. ET to review financial results and business outlook. A live web broadcast of the event will be available on the VMware Investor Relations website at http://ir.vmware.com. Slides will accompany the web broadcast. The replay of the webcast and slides will be available on the website for two months. In addition, six quarters of historical data for revenue and unearned revenue, excluding revenue generated each period by the products and services contributed to GoPivotal on April 1, 2013 and the products and services associated with the divestures that occurred in 2013, will also be made available at http://ir.vmware.com in conjunction with the conference call. Please also note that beginning with the third quarter of 2013, VMware will provide forward-looking guidance that it presents in connection with quarterly earnings announcements only on its quarterly earnings conference calls. VMware does not plan to provide this information in its quarterly earnings press releases.
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1Comparative growth percentages exclude revenues in each period attributable to the products and services contributed to GoPivotal, Inc. and the products and services associated with divestitures consummated by VMware in 2013. On a GAAP basis, the range of expected annual 2013 revenues represents growth rates of 11% to 14%, the range of expected annual license revenues represents growth rates of 6% to 10%, the range of expected third quarter 2013 revenues represents growth rates of 12% to 15% and the range of expected third quarter 2013 license revenues represents growth rates of 9% to 13%.
VMware is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2012 revenues of $4.61 billion, VMware has more than 500,000 customers and 55,000 partners. The company is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.
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Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”
This press release contains forward-looking statements including, among other things, statements regarding VMware’s expected third quarter and annual revenue and license revenue projections, VMware’s market opportunity in the second half of 2013 and beyond, VMware’s continued success and momentum, expectations regarding future services and products, expectations regarding future customers and the benefits of products, and expectations regarding VMware’s guidance practices in the future. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in consumer, government and information technology spending; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization market, and new product and marketing initiatives by our competitors; (iv) factors that affect timing of license revenue recognition such as product announcements and promotions and beta programs; (v) our customers’ ability to develop, and to transition to, new products and computing strategies such as cloud computing, desktop virtualization and the software defined data center; (vi) the uncertainty of customer acceptance of emerging technology; (vii) changes in the willingness of customers to enter into longer term licensing and support arrangements; (viii) rapid technological and market changes in virtualization software and platforms for cloud, end user and mobile computing; (ix) changes to product development timelines; (x) VMware’s relationship with EMC Corporation and EMC’s ability to control matters requiring stockholder approval, including the election of VMware’s board members; (xi) our ability to protect our proprietary technology; (xii) our ability to attract and retain highly qualified employees; (xiii) the successful integration of acquired companies and assets into VMware; and (xiv) fluctuating currency exchange rates. These forward-looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including our most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.