VMware reports fiscal 2018 first quarter results

Year-over-year revenue growth of 9% to $1.74 billion, supported by strong growth across all regions

PALO ALTO, CA -- (Marketwired) -- 06/01/17 -- VMware, Inc.(NYSE: VMW) , a global leader in cloud infrastructure and business mobility, today announced financial results for fiscal 2018 first quarter:

• Revenue for the first quarter was $1.74 billion, an increase of 9% from the first quarter of 2016.
• License revenue for the first quarter was $610 million, an increase of 7% from the first quarter of 2016.
• GAAP net income for the first quarter was $232 million, or $0.56 per diluted share, up 48% per diluted share compared to $161 million, or $0.38 per diluted share, for the first quarter of 2016. Non-GAAP net income for the quarter was $412 million, or $0.99 per diluted share, up 15% per diluted share compared to $366 million, or $0.86 per diluted share, for the first quarter of 2016.
• GAAP operating income for the first quarter was $238 million, an increase of 24% from the first quarter of 2016. Non-GAAP operating income for the first quarter was $495 million, an increase of 11% from the first quarter of 2016.
• Operating cash flows for the first quarter were $775 million. Free cash flows for the quarter were $726 million.
• Cash, cash equivalents and short-term investments were $8.6 billion, and unearned revenue was $5.2 billion as of May 5, 2017.
• Total revenue plus sequential change in total unearned revenue grew 10% year-over-year. Excluding the impact on unearned revenue from the sale of vCloud Air, total revenue plus sequential change in total unearned revenue grew 12% year-over-year.
• License revenue plus sequential change in unearned license revenue grew 7% year-over-year. Excluding the impact on unearned revenue from the sale of vCloud Air, license revenue plus sequential change in unearned license revenue grew 10% year-over-year.

"We are very pleased with our strong Q1 results. Our strategy is resonating across the regions and driving increased customer interest for our SDDC and cloud portfolio as well as our digital workspace offerings," said Pat Gelsinger, chief executive officer, VMware. "We also drove momentum across our partner ecosystem, featuring announcements with Dell EMC, Google, Microsoft and Oracle providing customers more complete solutions across clouds, applications and devices."

Zane Rowe, executive vice president and chief financial officer, VMware, said, "Q1 was a great start to the year. We're pleased with our performance and remain committed to providing value to our customers as they build out their private, public and hybrid cloud strategies."

Recent Highlights & Strategic Announcements

• In April, VMware introduced a new release of VMware vSAN™, featuring industry-first native hyper-converged infrastructure (HCI) security, lower total cost of ownership (TCO) and significantly higher all-flash performance. These combined benefits will help customers accelerate their data center modernization efforts.
• At Mobile World Congress, Pat Gelsinger took part in a keynote with Patrick Adiba, Group Executive Vice President at Atos. The keynote highlighted how mobile technology enabled by VMware can play a pivotal role in today's event experience. In addition, VMware unveiled VMware vCloud® NFV™ 2.0, which is designed to modernize and transform network architectures and operations for global communications service providers (CSPs) as they evolve their networks to support 5G and the Internet of Things.
• OVH Group, a global hyper-scale cloud provider and vCloud Air Network partner, completed the acquisition of vCloud Air, including data center and customer operations, customers and an enterprise-ready support team. OVH will continue operations of the acquired service as "vCloud Air powered by OVH" and will leverage VMware's hybrid cloud technology. In addition, OVH will continue to partner with VMware on go-to-market and customer support.

• Throughout the quarter, a number of alliances were expanded that enable VMware's End-User Computing platforms to manage more devices, applications and endpoints:

• VMware announced it will deliver VMware Horizon Cloud on Microsoft Azure. The integration helps customers accelerate the move to Windows 10 and brings VMware virtual desktops to Azure in the enterprise.

• VMware and Oracle announced a new relationship to simplify management and enable advanced security features for Oracle's suite of mobile business applications and Oracle Mobile Cloud Service (OMCS) for mobile devices.
• VMware and Google announced plans to accelerate the adoption of Chromebooks.

• VMware announced a partnership expansion with Samsung to unify the mobile and desktop experiences for the benefit of business users with the Galaxy S8 and Workspace ONE.

• At Dell EMC World 2017, VMware unveiled an extended strategic alliance with Pivotal to deliver new "Developer-Ready Infrastructure," with the integration of VMware'sSoftware-Defined Data Center and Pivotal Cloud Foundry. The first example of this integration is with NSX.

• VMware unveiled VMware Pulse IoT Center, a secure, enterprise grade Internet of Things (IoT) infrastructure management solution that will help customers more efficiently manage, operate, scale and protect their IoT projects from the edge to the cloud.
• For the third year in a row, VMware was named one of the 2017 Fortune 100 Best Companies to Work For, according to global research and consulting firm Great Place to Work and Fortune.

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 unearned revenue that include year-over-year comparisons will also be made available at http://ir.vmware.com in conjunction with the conference call.

Revised Fiscal Calendar - Year-over-Year Comparisons of Quarterly Results and Sequential Change in Unearned Revenue Balances

VMware revised its fiscal calendar effective January 1, 2017. VMware's first fiscal year under its revised fiscal calendar began on February 4, 2017 and will end February 2, 2018. The period from January 1, 2017 through February 3, 2017 has been recorded as a transition period and will be reported as a separate period in VMware's Form 10-Q filing for the first quarter of fiscal 2018.

Year-over-year comparisons of quarterly financial results included in this press release and the attached financial tables compare results for VMware's fiscal 2018 first quarter (February 4, 2017 through May 5, 2017) to VMware's fiscal 2016 first quarter (January 1, 2016 through March 31, 2016). Sequential changes in total unearned revenue and unearned license revenue for the first quarter of fiscal 2018 compare VMware's total unearned revenue and unearned license revenue balances as of February 3, 2017, the last day of the transition period, to the respective balances as of May 5, 2017, the last day of VMware's fiscal 2018 first quarter.