VMware’s ( VMW Quick Quote VMW - Free Report) first-quarter fiscal 2022 non-GAAP earnings of $1.76 per share beat the Zacks Consensus Estimate by 1.2% and grew 15.8% year over year. Moreover, revenues of $2.99 billion surpassed the consensus mark by 1.1% and also improved 9.5% on a year-over-year basis. Top-Line Details
Region-wise, U.S. revenues (49% of revenues) increased 7.6% year over year to $1.47 billion. International revenues (51%) grew 11.5% from the year-ago quarter to $1.53 billion.
Services revenues (53.7% of revenues) rose 7% year over year to $1.61 billion. Software Maintenance revenues (82.2% of Services revenues) climbed 6.1% to $1.32 billion. Professional Services revenues (17.8% of Services revenues) were $286 million, up 11.3% year over year.
Total License and Subscription & SaaS revenues (46.3% of revenues) improved 12.6% from the year-ago quarter to $1.39 billion.
License revenues (46.6% of License and Subscription & SaaS revenues) declined 2.1% year over year to $646 million. Subscription & SaaS revenues (53.4% of segment revenues) increased 29.5% year over year to $741 million, driven by strong growth in VCPP, modern applications, end-user computing, CarbonBlack and VMware Cloud on AWS. At the end of the first quarter, ARR for Subscription & SaaS was $3 billion, up 30% from the year-ago quarter. VMware continued to witness momentum in the Tanzu platform across key verticals, including financial services. The company also secured a key win with Telecom Italia in the reported quarter. Moreover, VMware Tanzu was recently selected by the U.S. Army Futures Command. In fiscal first quarter, Tanzu was included in five of the company’s top 10 deals. Operating Details
Research & development (R&D) expenses as a percentage of revenues decreased 40 basis points (bps) year over year to 19.3%.
Moreover, sales & marketing (S&M) expenses as a percentage of revenues decreased 100 bps on a year-over-year basis to 28.8%. However, general & administrative (G&A) expenses as a percentage of revenues increased 40 bps to 6.1%. Non-GAAP operating margin expanded 90 bps on a year-over-year basis to 30.8% in the reported quarter, driven by higher revenues and lower spending. Balance Sheet & Cash Flow
As of Apr 30, 2021, VMware’s cash & cash equivalents were $5.71 billion compared with $4.72 billion as of Jan 29, 2021.
Total debt was $4.72 billion as of Apr 30, 2021, unchanged sequentially. Operating cash flow was $1.27 billion compared with $1.32 billion reported in the previous quarter. Free cash flow was $1.20 billion compared with $1.24 billion reported in the previous quarter. Revenue Performance Obligation increased 9% year over year to $11 billion. Key Q1 Highlights
On Apr 15, VMware and
Dell Technologies ( DELL Quick Quote DELL - Free Report) announced terms under which the former will be spun off from the latter. The terms include significant simplification of the corporate ownership structure and an $11.5-$12 billion special cash dividend to all VMware stockholders immediately prior to the spin off. Dell’s stockholders will receive about 0.44 shares of VMware for each of their shares, based on outstanding shares as of Mar 16. The transaction is expected to close during the fourth quarter of calendar 2021. In terms of product announcements, VMware introduced VMware Cloud that includes VMware Cloud Universal, a flexible subscription plan that simplifies the purchase and consumption of VMware multi-cloud infrastructure and management services. VMware Cloud Universal enables customers to deploy applications on their choice of three VMware technology-based infrastructure stacks - VMware Cloud Foundation, VMware Cloud on AWS or VMware Cloud on Dell EMC. The company also announced innovations across its VMware vRealize Cloud Management portfolio of on-premises and Software as a Service (SaaS) solutions. The new features will enable customers to more securely deploy and operate their hybrid and multi-cloud environments. The new features also expand VMware’s support for Amazon Web Services, Google Cloud, Microsoft Azure and VMware Cloud on AWS. Moreover, the company released updated vSphere 7 and vSAN 7 that help IT teams support new and existing applications with infrastructure that is developer and AI-ready. In collaboration with NVIDIA ( NVDA Quick Quote NVDA - Free Report) , VMware delivers an AI-Ready Enterprise platform that combines VMware vSphere and NVIDIA AI Enterprise suite. During the quarter, VMware unveiled expanded cloud workload protection capabilities to deliver better security for containers and Kubernetes. It also announced VMware Anywhere Workspace, a solution designed to help customers deliver a distributed workforce environment. VMware Anywhere Workspace combines three solutions - VMware Workspace ONE, VMware Carbon Black Cloud and VMware SASE – and is powered by VMware’s SD-WAN technology. Guidance
For second-quarter fiscal 2022, VMware expects revenues of roughly $3.100 billion, suggesting 8% year-over-year growth. Subscription & SaaS and License revenues are expected to be $1.485 billion, indicating nearly 10% growth year over year.
Non-GAAP operating margin is anticipated to be 28%. Moreover, non-GAAP earnings are expected to be $1.62 per share for second-quarter fiscal 2022. For fiscal 2022, VMware expects revenues of roughly $12.80 billion, suggesting 9% year-over-year growth. Subscription & SaaS and License revenues are expected to be $6.33 billion, indicating nearly 12.5% growth year over year. Non-GAAP operating margin is anticipated to be 28.5%. Moreover, non-GAAP earnings are expected to be $6.88 per share for fiscal 2022. Further, cash flow from operations, capital expenditure and free cash flow are expected to be $3.90 billion, $380 million and $3.52 billion, respectively. Zacks Rank & A Key Pick
VMware has a Zacks Rank #3 (Hold).
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