VMware : Q1 2022 10Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

• QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2021

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from	to
			Commission File Number 001-33622
	_______________________________________________________
			VMWARE, INC.
		(Exact name of registrant as specified in its charter)
	_______________________________________________________
Delaware					94-3292913
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
3401 Hillview Avenue
Palo Alto, CA					94304
(Address of principal executive offices)	(Zip Code)
	[phone]
			(Registrant's telephone number, including area code)
	_____________________________________________________
			Securities registered pursuant to Section 12(b) of the Act:
Title of each class			Trading Symbol(s)	Name of each exchange on which registered
Class A common stock			VMW		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of May 28, 2021, the number of shares of common stock, par value $0.01 per share, of the registrant outstanding was 418,930,983, of which 111,709,147 shares were Class A common stock and 307,221,836 were Class B common stock.

Table of Contents

	TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 5.	Other Information	60
Item 6.	Exhibits	60
	SIGNATURE	61

VMware, Pivotal, Workspace ONE, Carbon Black, Tanzu, CloudHealth, VeloCloud, Nyansa, vSphere, VMware vSAN, NSX, and Heptio are registered trademarks or trademarks of VMware or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective companies.

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
		VMware, Inc.
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	(amounts in millions, except per share amounts, and shares in thousands)
		(unaudited)
				Three Months Ended
				April 30,			May 1,
				2021				2020
Revenue(1):
	License		$	646			$	660
	Subscription and SaaS			741				572
	Services			1,607				1,502
Total revenue			2,994				2,734
Operating expenses(2):
	Cost of license revenue			37				40
	Cost of subscription and SaaS revenue			157				126
	Cost of services revenue			337				318
	Research and development			708				665
	Sales and marketing			959				917
	General and administrative			236				246
	Realignment			1				4
Operating income			559				418
Investment income			-				5
Interest expense			(50)				(49)
Other income (expense), net			(23)				(6)
Income before income tax			486				368
Income tax provision (benefit)			61				(18)
Net income		$	425			$	386
Net income per weighted-average share, basic for Classes A and B		$	1.01			$	0.92
Net income per weighted-average share, diluted for Classes A and B		$	1.01			$	0.92
Weighted-average shares, basic for Classes A and B			419,116				418,383
Weighted-average shares, diluted for Classes A and B			422,038				421,513
__________
(1)	Includes related party revenue as follows (refer to Note C):
	License		$	287			$	323
	Subscription and SaaS			173				115
	Services			588				444
(2)	Includes stock-based compensation as follows:
	Cost of subscription and SaaS revenue		$	5			$	4
	Cost of services revenue			25				22
	Research and development			127				125
	Sales and marketing			75				72
	General and administrative			31				49

The accompanying notes are an integral part of the condensed consolidated financial statements.

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VMware, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions) (unaudited)

			Three Months Ended
			April 30,					May 1,
	2021		2020
Net income		$		425			$		386
Other comprehensive income (loss):
Changes in fair value of effective foreign currency forward contracts:
Unrealized gains (losses), net of tax provision (benefit) of $- and ($2)				2					(13)
Foreign currency translation adjustments				-					(1)
Total other comprehensive income (loss)				2					(14)
Comprehensive income, net of taxes		$		427			$		372

The accompanying notes are an integral part of the condensed consolidated financial statements.

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VMware, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in millions, except per share amounts, and shares in thousands)

(unaudited)

		April 30,			January 29,
		2021				2021
ASSETS
Current assets:
Cash and cash equivalents	$	5,594			$	4,692
Short-term investments		120				23
Accounts receivable, net of allowance of $5 and $5		1,532				1,929
Due from related parties, net		753				1,438
Other current assets		537				530
Total current assets		8,536				8,612
Property and equipment, net		1,343				1,334
Other assets		2,592				2,697
Deferred tax assets		5,815				5,781
Intangible assets, net		926				993
Goodwill		9,599				9,599
Total assets	$	28,811			$	29,016
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	205			$	131
Accrued expenses and other		1,810				2,382
Unearned revenue		5,830				5,873
Total current liabilities		7,845				8,386
Note payable to Dell		270				270
Long-term debt		4,719				4,717
Unearned revenue		4,370				4,441
Income tax payable		816				805
Operating lease liabilities		891				891
Other liabilities		447				455
Total liabilities		19,358				19,965
Contingencies (refer to Note D)
Stockholders' equity:
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 111,488 and		1				1
112,082 shares
Class B convertible common stock, par value $0.01; authorized 1,000,000 shares; issued and outstanding 307,222		3				3
shares
Additional paid-in capital		1,960				1,985
Accumulated other comprehensive loss		(3)				(5)
Retained earnings		7,492				7,067
Total stockholders' equity		9,453				9,051
Total liabilities and stockholders' equity	$	28,811			$	29,016

The accompanying notes are an integral part of the condensed consolidated financial statements.

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