VMware Reports Fiscal Year 2020 Third Quarter Results

Total revenue growth of 12% year-over-year
Strong Q3 performance across the broad product and solutions portfolio
PALO ALTO, Calif., Nov. 26, 2019 (GLOBE NEWSWIRE) — VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the third quarter of fiscal year 2020:Revenue for the third quarter was $2.46 billion, an increase of 12% from the third quarter of fiscal 2019.License revenue for the third quarter was $974 million, an increase of 10% from the third quarter of fiscal 2019.
VMware closed the acquisition of Carbon Black, a leader in cloud-native endpoint protection, on October 8.
GAAP net income for the third quarter was $621 million, including an unrealized gain of $249 million on an investment in Pivotal Software, or $1.50 per diluted share, compared to $334 million, or $0.81 per diluted share, for the third quarter of fiscal 2019. Non-GAAP net income for the third quarter was $617 million, or $1.49 per diluted share, down 4% per diluted share compared to $645 million, or $1.56 per diluted share, for the third quarter of fiscal 2019.GAAP operating income for the third quarter was $431 million, a decrease of 13% from the third quarter of fiscal 2019. Non-GAAP operating income for the third quarter was $759 million, an increase of 2% from the third quarter of fiscal 2019.Operating cash flow for the third quarter was $810 million. Free cash flow for the third quarter was $760 million.
Total revenue plus sequential change in total unearned revenue grew 18% year-over-year. Total revenue plus sequential change in total unearned revenue excluding unearned revenue assumed in the acquisition of Carbon Black grew 12% year-over-year.
License revenue plus sequential change in unearned license revenue grew 21% year-over-year. License revenue plus sequential change in unearned license revenue excluding unearned revenue assumed in the acquisition of Carbon Black grew 13% year-over-year.“Q3 was another solid quarter for VMware, and we’re pleased with our results. We continue to see traction and customer momentum in support of VMware’s vision to deliver a software architecture that enables any app, on any cloud, delivered to any device,” commented Pat Gelsinger, CEO, VMware. “We are thrilled to welcome Carbon Black to the VMware family, and we remain on track to close the acquisition of Pivotal by the end of the fiscal year. Customers globally have resoundingly affirmed that both acquisitions will offer tremendous value as we help them with their digital transformations.”“We’re pleased with our financial performance and execution this quarter, which reflected broad-based strength across our product and solutions portfolio,” said Zane Rowe, executive vice president and CFO, VMware. “Hybrid Cloud Subscription and SaaS revenue grew to over 13 percent of total revenue in Q3, and we expect this category will continue to grow significantly next year, including the contributions of Carbon Black and Pivotal.”Business Highlights & Strategic AnnouncementsAt the VMworld 2019 and vForum events, VMware hosted over 65,000 customers, partners and influencers, and introduced a wave of new products, solutions and services showcasing its vision of a software architecture that enables any app, on any cloud and any device. The news across both VMworld events includes:VMware unveiled VMware Tanzu, a new portfolio of products and services to transform the way enterprises build, run and manage software on Kubernetes, including:Project Pacific—a technology preview focused on transforming VMware vSphere into a Kubernetes-native platform in a future release; andVMware Tanzu Mission Control—a single point of control from which customers will manage all their Kubernetes clusters regardless of where they run.VMware detailed new and expanded security solutions that advance the company’s vision of intrinsic security, making it more automated, proactive and pervasive across the entire distributed enterprise. This includes Dell’s announcement that Carbon Black Cloud, along with Dell Trusted Devices and Secureworks, is now the preferred endpoint security solution for Dell commercial customers.VMware Cloud on AWS is now available in the AWS EU (Stockholm) region, bringing the total number of available global regions in Europe to five, and globally to 17 in just over two years.VMware unveiled new Workspace ONE Intelligent Hub innovations aimed at further improving the employee experience.VMware announced the continuation of its partnership with Microsoft with many new technology initiatives to help customers accelerate their digital transformation journeys, including the introduction of VMware Workspace ONE for Microsoft Endpoint Manager to enable modern management for Windows 10 and Azure VMware Solutions momentum with new industries and geographies, the addition of new cloud migration capabilities with VMware HCX and the ability to extend Azure to the branch and edge with VMware SD-WAN by VeloCloud.VMware continues to advance technology as a force for good, including by:supporting TechSoup, a one-stop shop for global nonprofits and their initiatives, to significantly expand its offerings and nearly double the number of nonprofit organizations it serves; andsigning the United Nations Global Compact—a commitment to adopting sustainable and socially responsible business practices, as well as catalyzing action to advance the United Nation’s 17 Sustainable Development Goals by 2030.At Oracle OpenWorld in September, VMware and Oracle announced an expanded partnership to help customers support their hybrid cloud strategies by running VMware Cloud Foundation on Oracle Cloud Infrastructure. Oracle will also provide technical support for Oracle software running in VMware environments both in customer on-premises data centers and Oracle-certified cloud environments.VMware completed its acquisition of Carbon Black, a leader in cloud-native endpoint protection, in October. Carbon Black will form the nucleus of VMware’s security offerings, focusing on helping VMware customers with advanced cybersecurity protection and in-depth behavioral insight to help stop sophisticated attacks and accelerate response.In August, the company was positioned as a Leader in “The Forrester Wave™: Infrastructure Automation Platforms, Q3 2019.” According to Forrester’s report, VMware achieved the highest possible score in the criteria of deployment, integrations, community support, vision, market approach, planned enhancements, and innovation in pricing.1In November, the company was positioned as a Leader in “The Forrester Wave™: Unified Endpoint Management, Q4 2019.” According to Forrester’s report, VMware achieved the highest possible score in the product roadmap, roadmap execution, and partner ecosystem criteria, as well as all of the market presence criteria (i.e., customer count, Windows 10 customer count, devices under management, and revenue).2In the Gartner Magic Quadrant for Hyperconverged Infrastructure (published Nov. 25, 2019), VMware was recognized as a Leader. The report, evaluating 15 vendors, listed VMware in the Leaders quadrant based on Gartner’s evaluation of our ability to execute and completeness of vision.3The company will host a conference call today at 1:30 p.m. PT/ 4:30 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 unearned revenue will also be made available at http://ir.vmware.com in conjunction with the conference call.__________________________________________1 Forrester, Chris Gardner, The Forrester Wave™: Infrastructure Automation Platforms, Q3 2019, August 7, 2019.
2 Forrester, Andrew Hewitt, et.al., The Forrester Wave™: Unifed Endpoint Management, Q4 2019, November 11, 2019
3 Magic Quadrant for Hyperconverged Infrastructure, Jeffrey Hewitt et al, November 25, 2019.  Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
About VMware
VMware software powers the world’s complex digital infrastructure. The company’s cloud, networking and security, and digital workspace offerings provide a dynamic and efficient digital foundation to customers globally, aided by an extensive ecosystem of partners. Headquartered in Palo Alto, California, VMware is committed to being a force for good, from its breakthrough innovations to its global impact. For more information, please visit https://www.vmware.com/company.html.
Additional Information
VMware’s website is located at www.vmware.com, and its investor relations website is located at http://ir.vmware.com. VMware’s goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about VMware, all of which is made available free of charge. The additional information includes: materials that VMware files with the SEC; announcements of investor conferences, speeches and events at which its executives talk about its products, services and competitive strategies; webcasts of its quarterly earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on its financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; other news, blogs and announcements that VMware may post from time to time that investors may find useful or interesting; and opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.
VMware, VMworld, Tanzu, Tanzu Mission Control, Project Pacific, Carbon Black, Workspace ONE, VeloCloud, and VMware Cloud Foundation are registered trademarks or trademarks of VMware, Inc. or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.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.”
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding VMware’s acquisition of Carbon Black and the proposed acquisition of Pivotal Software, such as the expected timing for the completion of the Pivotal acquisition and the potential benefits to VMware and its customers of and the growth opportunities and expansion of VMware’s offerings associated with the acquisitions; anticipated growth in Hybrid Cloud Subscription and SaaS revenue in fiscal 2021; expected benefits to and adoption by customers of VMware products, solutions and services, including, for example, those relating to VMware Tanzu, Project Pacific, VMware’s security solutions (including with respect to Carbon Black Cloud) and Workspace ONE Intelligence Hub; and expected benefits to customers of VMware’s partnerships with Microsoft, Oracle and Dell. 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: (1) the satisfaction or waiver of the conditions to closing the proposed acquisition of Pivotal in the anticipated timeframe or at all; (2) uncertainties as to the outcome of the vote by Pivotal stockholders to approve the Pivotal acquisition; (3) the possibility that the Pivotal acquisition does not close; (4) the possibility that competing offers may be made; (5) risks related to the ability to realize the anticipated benefits of the acquisition of Carbon Black and proposed acquisition of Pivotal, including the possibility that the expected benefits from the acquisitions will not be realized or will not be realized within the expected time period; (6) the risk that acquired businesses will not be integrated successfully; (7) disruptions from the transactions may make it more difficult to maintain business and operational relationships; (8) negative effects of the consummation of the proposed Pivotal acquisition on the market price of VMware’s common stock, credit ratings and operating results; (9) the continued risk of litigation and regulatory actions related to the Carbon Black and proposed Pivotal acquisitions; (10) other business effects, including those related to industry, market, economic, political or regulatory conditions; (11) other unexpected costs or delays in connection with acquisitions; (12) adverse changes in general economic or market conditions; (13) delays or reductions in consumer, government and information technology spending; (14) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization software and cloud, end user and mobile computing industries, and new product and marketing initiatives by VMware’s competitors; (15) VMware’s customers’ ability to transition to new products and computing strategies such as cloud computing, desktop virtualization and the software defined data center; (16) VMware’s ability to enter into, maintain and extend strategically effective partnerships and alliances; (17) the uncertainty of customer acceptance of emerging technology; (18) the ability to successfully integrate into VMware acquired companies and assets and smoothly transition services related to divested assets from VMware; (19) rapid technological changes in the virtualization software and cloud, end user, security and mobile computing industries; (20) changes to product and service development timelines; (21) VMware’s relationship with Dell Technologies and Dell’s ability to control matters requiring stockholder approval, including the election of VMware’s board members and matters relating to Dell’s investment in VMware; (22) VMware’s ability to protect its proprietary technology; (23) VMware’s ability to attract and retain highly qualified employees; (24) the ability of VMware to realize synergies from Dell; (25) disruptions resulting from key management changes; (26) risks associated with international sales such as fluctuating currency exchange rates and increased trade barriers; (27) changes in VMware’s financial condition; (28) risks associated with cyber-attacks, information security and privacy; and (29) geopolitical changes such as Brexit and increased tariffs and trade barriers that could adversely impact our non-U.S. sales. These forward-looking statements are made as of the date of this press release, 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 VMware’s 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.
Additional Information about the Pivotal Acquisition and Where to Find ItThis communication may be deemed to be solicitation material in respect of the proposed merger with Pivotal (the “Pivotal Merger”). This communication does not constitute an offer to sell or the solicitation of an offer to buy VMware securities or the solicitation of any vote or approval. The proposed Pivotal Merger will be submitted to Pivotal’s stockholders for their consideration. In connection with the proposed transaction, Pivotal has filed a preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission (the “SEC”). The preliminary proxy statement contains important information about the Pivotal Merger and related matters. Promptly after being filed with the SEC, the definitive proxy statement and a proxy card will be mailed to Pivotal’s stockholders.BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION, INVESTORS AND STOCKHOLDERS OF PIVOTAL ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER RELEVANT MATERIALS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The preliminary proxy statement, the definitive proxy statement, any amendments or supplements thereto and other relevant materials, and any other documents filed by Pivotal with the SEC, may be obtained once such documents are filed with the SEC free of charge at the SEC’s website at www.sec.gov.In addition, Pivotal’s stockholders may obtain free copies of the documents filed with the SEC through the Investors portion of Pivotal’s website at pivotal.io/investors or by contacting Pivotal’s Investor Relations Department via e-mail at ir@pivotal.io.Pivotal, VMware, Dell Technologies Inc. and certain of their respective executive officers, directors, other members of management and employees, may under the rules of the SEC, be deemed to be “participants” in the solicitation of proxies from Pivotal’s stockholders in connection with the proposed transaction. Information regarding the persons who may be considered “participants” in the solicitation of proxies will be set forth in Pivotal’s preliminary and definitive proxy statements when filed with the SEC and other relevant documents to be filed with the SEC in connection with the proposed transaction, each of which can be obtained free of charge from the sources indicated above when they become available. Information regarding certain of these persons and their beneficial ownership of Pivotal’s common stock is also set forth in Pivotal’s preliminary proxy statement on Schedule 14A filed with the SEC on October 10, 2019 and Pivotal’s proxy statement for its 2019 annual meeting of stockholders filed on May 3, 2019 with the SEC, which may both be obtained free of charge from the sources indicated above.Contacts:Paul Ziots
VMware Investor Relations
Michael Thacker
VMware Global PR

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