EMC Q2 2014 Financial Results Tony Takazawa Vice President, Global Investor Relations

EMC Q2 2014
Financial Results
Tony Takazawa
Vice President, Global Investor Relations
July 23, 2014
© Copyright 2014 EMC Corporation. All rights reserved.
1
Forward-Looking Statements
This presentation contains “forward-looking statements” as defined under the Federal Securities Laws. 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 information technology
spending; (iii) the relative and varying rates of product price and component cost declines and the volume and mixture of
product and services revenues; (iv) competitive factors, including but not limited to pricing pressures and new product
introductions; (v) component and product quality and availability; (vi) fluctuations in VMware, Inc.’s operating results and
risks associated with trading of VMware stock; (vii) the transition to new products, the uncertainty of customer acceptance
of new product offerings and rapid technological and market change; (viii) risks associated with managing the growth of our
business, including risks associated with acquisitions and investments and the challenges and costs of integration,
restructuring and achieving anticipated synergies; (ix) the ability to attract and retain highly qualified employees; (x)
insufficient, excess or obsolete inventory; (xi) fluctuating currency exchange rates; (xii) threats and other disruptions to our
secure data centers or networks; (xiii) our ability to protect our proprietary technology; (xiv) war or acts of terrorism; and
(xv) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the
U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements
after the date of this presentation.
This presentation contains non-GAAP financial measures which include, but are not limited to, non-GAAP Gross Margin, nonGAAP Operating Margin, non-GAAP EPS, non-GAAP Net Income, Free Cash Flow and Non-GAAP Income Tax Rate. A
reconciliation to GAAP is included within this presentation and in the Current Report on Form 8-K furnished by EMC on July
23, 2014 which can be found at www.EMC.com or www.sec.gov.
© Copyright 2014 EMC Corporation. All rights reserved.
2
Joe Tucci
Chairman and CEO, EMC Corporation
© Copyright 2014 EMC Corporation. All rights reserved.
3
The World Is Changing
BILLIONS
OF USERS
Mobile
Cloud
Big Data
Mobile Devices
MILLIONS OF
OF APPS
Social
HUNDREDS OF MILLIONS
OF USERS
TENS OF THOUSANDS
OF APPS
LAN/Internet
Client/Server
PC
MILLIONS
OF USERS
THOUSANDS
OF APPS
Mainframe, Mini Computer
Source: IDC, 2012
© Copyright 2014 EMC Corporation. All rights reserved.
Terminals
4
Our “Stack” For The 3rd Platform
Federation Companies Are Strategically Aligned
Application & Data Platform
Data Center Infrastructure
Security
Information Infrastructure
© Copyright 2014 EMC Corporation. All rights reserved.
5
Customer Focused Solutions
5 Key Areas Of Future Investment For IT
Next Gen Apps
SECURITY
ANALYTICS
Traditional
Applications
PLATFORM
AS A SERVICE
VIRTUAL
WORKSPACE
BUSINESS
DATA LAKE
SOFTWARE-DEFINED
DATA CENTER
© Copyright 2014 EMC Corporation. All rights reserved.
6
Customer Focused Solutions
Proven & Tested In Joint Federation Labs
Next Gen Apps
PLATFORM
AS A SERVICE
VIRTUAL
WORKSPACE
SECURITY
ANALYTICS
Traditional
Applications
Hybrid Cloud
Partners
BUSINESS
DATA LAKE
vCloud
Hybrid Service
SOFTWARE-DEFINED
DATA CENTER
Converged Infrastructure
© Copyright 2014 EMC Corporation. All rights reserved.
7
Our “Stack” Gives Customers Choice
Federation Companies Are Free To Build Their Own Ecosystem
Application & Data Platform
Data Center Infrastructure
Security
Information Infrastructure
© Copyright 2014 EMC Corporation. All rights reserved.
8
Strategic Investments
Acquisitions/Investments
Market Opportunity
Revenue
Opportunity
Nicira/NSX
Software Defined Networking
$1B+
AirWatch
Mobile Device and Security Management
$1B+
Pivotal
Big/Fast Data
PaaS
$1B+
ViPR/ECS
Software Defined Storage
Elastic Cloud Storage
$1B+
XtremIO/ScaleIO
Next-Gen, Scale-out Flash/Block Storage
$1B+
DSSD
“New” Rack Scale Flash Storage
$1B+
© Copyright 2014 EMC Corporation. All rights reserved.
9
David Goulden
CEO, EMC Information Infrastructure
CFO, EMC Corporation
© Copyright 2014 EMC Corporation. All rights reserved.
10
EMC Federation
Q2’14
Growth Y/Y
Consolidated Revenue
$5.88B
5%
Pivotal
$0.05B
29%
VMware
$1.45B
17%
Information Infrastructure
$4.38B
1%
Note: Figures may not foot due to rounding
© Copyright 2014 EMC Corporation. All rights reserved.
11
EMC Consolidated Results
Q2’14
Growth Y/Y
$5.88B
5%
Non-GAAP EPS
$0.43
2%
Free Cash Flow
$930M
10%
Consolidated Revenue
Note: Free cash flow is a non-GAAP financial measure which is defined as net cash provided by operating activities, less additions to property, plant and
equipment and capitalized software development costs. See attached schedules for a reconciliation of net cash provided by operating activities to free
cash flow for the three and six months ended June 30, 2014 and 2013.
© Copyright 2014 EMC Corporation. All rights reserved.
Refer to the the Appendix for a complete reconciliation of GAAP to non-GAAP.
12
EMC Consolidated Results
Q2’14
Growth Y/Y
North America
$3.20B
3%
EMEA
$1.67B
12%
APJ
$0.80B
-4%
Latin America
$0.21B
14%
Consolidated
$5.88B
5%
BRIC + 13
5%
Note: Figures may not foot due to rounding
© Copyright 2014 EMC Corporation. All rights reserved.
13
Consolidated Non-GAAP EPS Results Y/Y
+$0.05
-$0.06
$0.42
Q2'13
Gross Profit
Operating
Expense
© Copyright 2014 EMC Corporation. All rights reserved.
Non-Operating
Expense
Tax Rate
Minority
Interest
Incremental
Dilution
+$0.02
$0.43
Sharecount
Q2'14
Refer to the the Appendix for a complete reconciliation of GAAP to non-GAAP.
14
Free Cash Flow, Cash Use & Cash Balance
Q2’14 FCF
Cash & Investments Balance*
Cash Use
VMware
Domestic
$2.0B
Q2’14
EMC Repurchase – EMC Shares**
EMC Repurchase – VMW Shares
$603M
VMware
International
$4.7B
EMC ex. VMware
Domestic
$3.7B
-
VMware Purchase – VMware Shares
$238M
Acquisitions, Net of Cash Acquired
$625M
**Note: Total amount: $595M, Paid in cash: $603M
$930M
EMC ex. VMware
International
$4.3B
EMC Consolidated $14.6B
*Note: Figures may not foot due to rounding
Note: Free cash flow is a non-GAAP financial measure which is defined as net cash provided by operating activities, less additions to property, plant and
equipment and capitalized software development costs. See attached schedules for a reconciliation of net cash provided by operating activities to free
cash flow for the three and six months ended June 30, 2014 and 2013.
© Copyright 2014 EMC Corporation. All rights reserved.
Refer to the the Appendix for a complete reconciliation of GAAP to non-GAAP.
15
EMC Federation Wins
Customer
Value Proposition
Federation Products and
Services
Federation solution combines virtualized infrastructure with
Vblock, Backup/Recovery,
tools for real-time intelligence
Pivotal Spring and HAWQ
Federation supports strategy to start private
Vblock, VCAC, vCloud
Global Agricultural
and evolve to public and hybrid clouds
Suite, Pivotal, Pivotal CF
Chose Federation for resilient converged infrastructure, cross- VNX, VPLEX, RecoverPoint,
US Security Firm
functional coordination and roadmap to cloud
VMware
Federation offers best-of-breed Big Data PaaS via multi-cloud- Vblock, Backup/Recovery,
Global Industrial
capable, globally deployable model
RSA, Pivotal
Partner used Federation to build client a truly scalable and
Global Business
Vblock and VCAC
flexible IT infrastructure with a multi-sourcing strategy
Consulting Firm
Global
Federation’s hybrid cloud toolset delivers application and
Vblock, vCHS, Pivotal
Pharmaceutical
workload mobility at a cost comparable to public cloud
Federation’s scalable technology makes the most of Big Data
Pivotal Greenplum DB,
US Retail
assets for new market intelligence service
Pivotal HD, Isilon
Consultant
VNX, Data Domain,
Federation provides health information exchange means to
US SaaS Company
RecoverPoint, vCHS,
build and scale its next-gen SaaS solution
Pivotal opportunity
European Telecom
© Copyright 2014 EMC Corporation. All rights reserved.
16
The EMC Federation
BIG DATA: Big-data Analytics, Cloud Foundry
SECURITY
Strategically Aligned, Focused And Free To Execute On Their Mission
INFORMATION INFRASTRUCTURE
© Copyright 2014 EMC Corporation. All rights reserved.
ADVANCED
SDDC, Hybrid-Cloud, End-User Computing
17
EMC Information Infrastructure
Q2’14
Growth Y/Y
$4.38B
1%
High-End
$1.03B
-14%
Unified & Backup/Recovery
$1.57B
6%
Emerging Storage
$0.47B
52%
Storage – Other & PS
$0.90B
-6%
RSA
$0.24B
6%
IIG
$0.16B
4%
EMC Information Infrastructure
Note: Figures may not foot due to rounding
© Copyright 2014 EMC Corporation. All rights reserved.
18
Customer Focused Solutions
Proven & Tested In Joint Federation Labs
Next Gen Apps
PLATFORM
AS A SERVICE
VIRTUAL
WORKSPACE
SECURITY
ANALYTICS
Traditional
Applications
Hybrid Cloud
Partners
BUSINESS
DATA LAKE
vCloud
Hybrid Service
SOFTWARE-DEFINED
DATA CENTER
Converged Infrastructure
© Copyright 2014 EMC Corporation. All rights reserved.
19
EMC 2014 Non-GAAP Business Outlook
2014
Revenue
$24.6B
Operating Income (% of Revenue)
24.0-24.5%
Income Tax Rate
23.5%
Weighted Average Shares, Diluted
2.05B
EPS
$1.91
Note: All dollar amounts and percentages presented on this slide should be considered to be approximations.
© Copyright 2014 EMC Corporation. All rights reserved.
Refer to the the Appendix for a complete reconciliation of GAAP to non-GAAP.
20
Q&A
© Copyright 2014 EMC Corporation. All rights reserved.
21
Appendix
© Copyright 2014 EMC Corporation. All rights reserved.
22
Capital Allocation

Expect to return over $7B during course of 2013 and 2014
– Initiated a quarterly dividend of $0.10/share in Q2 2013. Raised dividend by 15%
starting July, 2014.
– Plan to repurchase $6B of EMC shares over 2 years ending 12/31/2014
▪
▪

Long term intention to return ~50% of EMC (ex. VMW) FCF to shareholders
through combination of dividends and buybacks
–
–

Total buyback of $3B in 2013
Total buyback of $3B for 2014
25%-30% of EMC (ex. VMW) FCF returned to shareholders via buybacks
20%-25% of EMC (ex. VMW) FCF returned to shareholders via dividend
Cash returns to shareholders grow along with EMC (ex. VMW) FCF
© Copyright 2014 EMC Corporation. All rights reserved.
23
Supplemental Storage Revenue
Q2’14
Q2’13
High-End
$1.03B
$1.21B
Unified & Backup/Recovery
$1.57B
$1.49B
Emerging Storage
$0.47B
$0.31B
Other Storage
$0.42B
$0.48B
Storage PS
$0.47B
$0.47B
© Copyright 2014 EMC Corporation. All rights reserved.
24
VMware Incremental Dilution
(
)
VMware
Basic EPS
VMware
Diluted EPS
VMware Net Income
VMware Net Income
VMware Weighted
Average Shares, Basic
VMware Weighted
Average Shares, Diluted
X
VMware Shares
Owned by EMC
VMware
Incremental
Dilution
For illustrative purposes only.
© Copyright 2014 EMC Corporation. All rights reserved.
25
Use of Non-GAAP financial measures
This presentation, the accompanying schedules and the additional content that is available on EMC's website contain non-GAAP financial measures. These non-GAAP
financial measures, which are used as measures of EMC's performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC's financial
performance or liquidity prepared in accordance with GAAP. EMC's non-GAAP financial measures may be defined differently from time to time and may be defined
differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures in
this presentation.
Where specified in the accompanying schedules for various periods entitled "Reconciliation of GAAP to Non-GAAP," (a) certain items noted on each such specific schedule
(including, where noted, amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition and other related
charges, the amortization of VMware’s capitalized software from prior periods, a net gain on the disposition of certain lines of business and other, a gain on previously held
interests in strategic investments, an impairment of strategic investment and a VMware litigation charge are excluded from the non-GAAP financial measures and (b) the
benefit of the R&D tax credit for 2014 is included in the non-GAAP financial measures for the second quarter of 2014.
EMC’s management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC's comparative operating performance (when
comparing such results with previous periods or forecasts) and future prospects and includes the benefit of the R&D tax credit in, and excludes the above-listed items
from, its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by
EMC's management in their financial and operating decision-making because management believes they reflect EMC's ongoing business in a manner that allows meaningful
period-to-period comparisons. EMC's management believes that these non-GAAP financial measures provide useful information to investors and others (a) in
understanding and evaluating EMC's current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in
comparing in a consistent manner the Company's current financial results with the Company's past financial results.
This presentation also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating
activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the
ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes
that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments,
repurchase shares, pay dividends, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash
flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all
items of income and expense that affect EMC's operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable
to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these
limitations by also considering EMC's financial results as determined in accordance with GAAP.
© Copyright 2014 EMC Corporation. All rights reserved.
26
Trademarks
EMC, Data Domain, DSSD, ECS, Isilon, RSA, ScaleIO, Vblock, ViPR, VNX, VPLEX, VSPEX and
XtremIO are registered trademarks or trademarks of EMC Corporation in the United States
and/or other countries. All other trademarks used are the property of their respective
owners.
© Copyright 2014 EMC Corporation. All rights reserved.
27
EMC CORPORATION
Consolidated Income Statements
(in millions, except per share amounts)
(unaudited)
Three Months Ended
June 30,
June 30,
2014
2013
Revenues:
Product sales
Services
$
Cost and expenses:
Cost of product sales
Cost of services
Research and development
Selling, general and administrative
Restructuring and acquisition-related charges
Operating income
3,319
2,561
5,880
$
1,372
854
740
2,010
30
874
3,258
2,356
5,614
Six Months Ended
June 30,
June 30,
2014
2013
$
1,340
765
695
1,785
7
1,022
6,327
5,032
11,359
$
2,668
1,690
1,472
3,861
149
1,519
6,369
4,632
11,001
2,696
1,498
1,370
3,499
155
1,783
Non-operating income (expense):
Investment income
Interest expense
Other income (expense), net
Total non-operating income (expense)
35
(34)
(66)
(65)
34
(31)
(59)
(56)
Income before provision for income taxes
Income tax provision
809
187
966
216
1,380
326
1,657
292
Net income
Less: Net income attributable to the non-controlling interests in VMware, Inc.
622
(33)
750
(49)
1,054
(74)
1,365
(84)
71
(68)
(142)
(139)
67
(51)
(142)
(126)
Net income attributable to EMC Corporation
$
589
$
701
$
980
$
1,281
Net income per weighted average share, basic attributable to EMC Corporation
common shareholders
$
0.29
$
0.34
$
0.48
$
0.61
Net income per weighted average share, diluted attributable to EMC Corporation
common shareholders
$
0.28
$
0.32
$
0.47
$
0.59
Weighted average shares, basic
Weighted average shares, diluted
Cash dividends declared per common share
2,037
2,064
$
0.12
2,092
2,174
$
0.10
2,033
2,070
$
0.22
2,097
2,181
$
0.10
EMC CORPORATION
Consolidated Balance Sheets
(in millions, except per share amounts)
(unaudited)
June 30,
2014
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts and notes receivable, less allowance
for doubtful accounts of $65 and $62
Inventories
Deferred income taxes
Other current assets
Total current assets
Long-term investments
Property, plant and equipment, net
Intangible assets, net
Goodwill
Other assets, net
Total assets
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Notes converted and payable
Income taxes payable
Deferred revenue
Total current liabilities
Income taxes payable
Deferred revenue
Deferred income taxes
Long-term debt
Other liabilities
Total liabilities
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $0.01; authorized 25
shares; none outstanding
Common stock, par value $0.01; authorized 6,000
shares; issued and outstanding 2,029 and 2,020 shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net
Total EMC Corporation's shareholders' equity
Non-controlling interests
Total shareholders' equity
Total liabilities and shareholders' equity
$
$
$
$
5,687
1,962
3,344
1,397
969
586
13,945
6,985
3,606
2,147
15,802
1,953
44,438
1,186
2,750
261
5,693
9,890
298
4,032
489
5,494
379
20,582
December 31,
2013
$
$
$
7,891
2,773
3,861
1,334
912
507
17,278
6,924
3,478
1,780
14,424
1,965
45,849
1,434
2,783
1,665
639
5,278
11,799
296
3,701
421
5,494
352
22,063
-
-
20
818
21,648
(165)
22,321
1,535
23,856
44,438
20
1,406
21,114
(239)
22,301
1,485
23,786
45,849
$
EMC CORPORATION
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Six Months Ended
June 30,
June 30,
2014
2013
Cash flows from operating activities:
Cash received from customers
Cash paid to suppliers and employees
Dividends and interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
$
12,644
(9,320)
97
(829)
2,592
$
12,007
(8,485)
79
(18)
(642)
2,941
Cash flows from investing activities:
Additions to property, plant and equipment
Capitalized software development costs
Purchases of short- and long-term available-for-sale securities
Sales of short- and long-term available-for-sale securities
Maturities of short- and long-term available-for-sale securities
Business acquisitions, net of cash acquired
Purchases of strategic and other related investments
Sales of strategic and other related investments
Joint venture funding
Proceeds from divestiture of business
Increase in restricted cash
Net cash used in investing activities
(472)
(245)
(5,765)
4,974
1,716
(1,694)
(83)
10
(63)
(76)
(1,698)
(437)
(219)
(6,456)
2,394
564
(207)
(46)
(158)
31
(4,534)
Cash flows from financing activities:
Proceeds from the issuance of EMC's common stock
Proceeds from the issuance of VMware's common stock
EMC repurchase of EMC's common stock
EMC purchase of VMware's common stock
VMware repurchase of VMware's common stock
Excess tax benefits from stock-based compensation
Payment of long- and short-term obligations
Proceeds from long- and short-term obligations
Third party contribution to Pivotal
Dividend payment
Net cash (used in) provided by financing activities
234
99
(994)
(407)
45
(1,665)
(407)
(3,095)
175
115
(991)
(160)
(302)
63
(21)
5,463
105
4,447
(3)
(42)
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
(2,204)
7,891
5,687
$
2,812
4,714
7,526
$
1,054
$
1,365
Reconciliation of net income to net cash provided
by operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Non-cash interest expense on debt
Non-cash restructuring and other special charges
Stock-based compensation expense
Provision for (recovery of) doubtful accounts
Deferred income taxes, net
Excess tax benefits from stock-based compensation
Gain on previously held interests in strategic investments
Impairment of strategic investment
Other, net
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable
Inventories
Other assets
Accounts payable
Accrued expenses
Income taxes payable
Deferred revenue
Other liabilities
Net cash provided by operating activities
$
903
9
498
2
(168)
(45)
(45)
33
23
803
24
7
441
(3)
(55)
(63)
11
549
(183)
96
(241)
(279)
(336)
701
21
2,592
243
(178)
119
(28)
(211)
(290)
766
(10)
2,941
$
Reconciliation of GAAP to Non-GAAP*
(in millions, except per share amounts)
(unaudited)
Three Months Ended
Diluted
Earnings
June 30,
Per Share
2013
June 30,
2014
Net Income Attributable to EMC GAAP
$
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
Amortization of VMware's capitalized software from prior periods
Net gain on disposition of certain lines of business and other
Gain on previously held interests in strategic investments
Impairment of strategic investment
VMware litigation charge
R&D tax credit
Net Income Attributable to EMC Non-GAAP
Weighted average shares, diluted
Incremental VMware dilution
589
$
180
65
22
29
(45)
24
6
12
$
882
0.285
$
0.087
0.032
0.011
0.014
(0.022)
0.011
0.003
0.006
$
0.427
$
2,064
1
701
$
140
65
3
2
7
(11)
$
907
* Net of tax and non-controlling interests in VMware, Inc., except weighted average shares, diluted. See Income Tax Provision and Net
Income Attributable to VMware lines in Supplemental Information schedules.
Note: Schedules may not add or recalculate due to rounding.
Diluted
Earnings
Per Share
0.322
0.065
0.030
0.001
0.001
0.003
(0.005)
$
0.416
$
2,174
2
Reconciliation of GAAP to Non-GAAP
(in millions)
(unaudited)
Three Months Ended
June 30,
June 30,
2014
2013
Gross Margin GAAP
$
Stock-based compensation expense
Intangible asset amortization
Amortization of VMware's capitalized software from prior periods
3,654
$
3,509
37
61
-
30
58
12
Gross Margin Non-GAAP
$
3,752
$
3,609
Revenues
$
5,880
$
5,614
Gross Margin Percentages:
GAAP
Non-GAAP
62.1%
63.8%
62.5%
64.3%
Three Months Ended
June 30,
June 30,
2014
2013
Operating Margin GAAP
$
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
Amortization of VMware's capitalized software from prior periods
VMware litigation charge
874
$
262
100
28
52
11
1,022
218
97
5
2
12
-
Operating Margin Non-GAAP
$
1,327
$
1,356
Revenues
$
5,880
$
5,614
Operating Margin Percentages:
GAAP
Non-GAAP
Note: Schedules may not add or recalculate due to rounding.
14.9%
22.6%
18.2%
24.2%
Reconciliation of GAAP to Non-GAAP
(in millions)
(unaudited)
Three Months Ended June 30, 2014
Income Before
Tax Provision
Tax
Tax
(Benefit)
Rate
EMC Consolidated GAAP
$
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
R&D tax credit
Net gain on previously held interests in strategic investments
Impairment of strategic investment
VMware litigation charge
EMC Consolidated Non-GAAP
809
$
187
23.1%
59
30
6
18
(13)
9
4
22.9%
29.8%
19.0%
34.9%
0.0%
0.7%
28.8%
38.0%
300
24.0%
262
100
28
53
(45)
33
11
$
1,251
$
Three Months Ended
June 30,
June 30,
2013
2014
Cash Flow from Operations
Capital expenditures
Capitalized software development costs
Free Cash Flow
Note: Schedules may not add or recalculate due to rounding.
$
$
1,253
(196)
(127)
930
$
$
1,228
(272)
(113)
843
Six Months Ended
June 30,
June 30,
2014
2013
$
$
2,592
(472)
(245)
1,875
$
$
2,941
(437)
(219)
2,285
Reconciliation of GAAP to Non-GAAP
(in millions, except per share amounts)
(unaudited)
Twelve
Months Ending
December 31,
2014
Operating Income as a % of Revenue - GAAP
16.3% - 16.8%
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
4.5%
1.6%
0.8%
0.8%
Operating Income as a % of Revenue - Non-GAAP
24.0% - 24.5%
Twelve
Months Ending
December 31,
2014
Diluted Earnings Per Share - GAAP
$
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
One-time items
Diluted Earnings Per Share - Non-GAAP
1.30
0.36
0.13
0.08
0.05
(0.01)
$
1.91
Twelve
Months Ending
December 31,
2014
Tax Rate - GAAP
23.0%
Impact of stock-based compensation expense,
intangible asset amortization, restructuring charges,
acquisition and other related charges and one-time
items
0.5%
Tax Rate - Non-GAAP
23.5%
Twelve
Months Ending
December 31,
2014
Cash Flow from Operations
$
Capital expenditures
Capitalized software development costs
Free Cash Flow
7,230
(950)
(480)
$
5,800
Supplemental Information
For the Three Months Ended June 30, 2014
(in millions)
(unaudited)
Stock-Based
Compensation
Expense
Acquisition and
Other Related
Charges
Restructuring
Charges
Intangible Asset
Amortization
R&D Tax Credit
Gain on Previously
Held Interests in
Strategic
Investments
Impairment of
Strategic
Investment
VMware Litigation
Charge
EMC Consolidated
Cost of revenue
$
(37)
$
(61)
$
-
$
-
$
-
$
-
$
-
$
-
Research and development
(100)
(3)
-
-
-
-
-
-
Selling, general and administrative
(125)
(36)
-
(50)
-
-
-
(11)
(2)
-
-
-
-
1
-
(45)
Restructuring and acquisition-related charges
-
-
(28)
Non-operating (income) expense
-
-
-
Income tax provision (benefit)
Net income attributable to VMware
59
30
(23)
(5)
6
-
18
(13)
-
(6)
(1)
-
33
-
9
4
-
(1)
EMC Information Infrastructure plus Pivotal
Cost of revenue
$
(25)
$
(34)
$
-
$
Research and development
(34)
(1)
-
Selling, general and administrative
(64)
(30)
-
Restructuring and acquisition-related charges
-
-
(29)
Non-operating (income) expense
-
-
-
Income tax provision (benefit)
31
Net income attributable to VMware
21
-
-
-
-
$
-
$
-
-
-
-
(8)
-
-
-
-
(2)
-
-
-
-
(45)
2
-
$
-
6
-
$
(9)
-
-
-
-
33
-
9
-
-
-
VMware within EMC
Cost of revenue
$
(12)
$
(27)
$
-
$
-
$
-
$
-
$
-
$
-
Research and development
(66)
(2)
-
-
-
-
-
-
Selling, general and administrative
(61)
(6)
-
(42)
-
-
-
(11)
Restructuring and acquisition-related charges
-
-
-
-
-
-
-
Non-operating (income) expense
-
-
-
-
-
-
Income tax provision (benefit)
Net income attributable to VMware
1
-
1
28
9
-
16
(4)
-
-
4
(23)
(5)
-
(6)
(1)
-
-
(1)
Supplemental Information
For the Three Months Ended June 30, 2013
(in millions)
(unaudited)
Stock-Based
Compensation
Expense
Intangible Asset
Amortization
Acquisition and
Other Related
Charges
Restructuring
Charges
Amortization of
VMware's
Capitalized
Software from Prior
Periods
Net Gain on
Disposition of
Certain Lines of
Business and
Other
EMC Consolidated
Cost of revenue
$
Research and development
Selling, general and administrative
(30)
$
(58)
-
$
-
$
(12)
$
-
(83)
(2)
-
-
-
-
(105)
(37)
-
-
-
-
-
-
-
(19)
Restructuring and acquisition-related charges
-
-
Non-operating (income) expense
-
-
Income tax provision (benefit)
Net income attributable to VMware
$
(5)
(2)
-
62
28
(16)
(4)
2
-
-
4
(5)
-
(1)
3
EMC Information Infrastructure plus Pivotal
Cost of revenue
$
(21)
$
(35)
$
-
$
-
$
-
$
-
Research and development
(32)
(1)
-
-
-
-
Selling, general and administrative
(60)
(35)
-
-
-
-
Restructuring and acquisition-related charges
-
-
-
-
Non-operating (income) expense
-
-
-
-
-
-
-
-
-
-
-
Income tax provision (benefit)
35
Net income attributable to VMware
(4)
22
-
(1)
2
-
-
VMware within EMC
Cost of revenue
$
(9)
$
(23)
$
-
$
-
$
(12)
$
-
Research and development
(51)
(1)
-
-
-
-
Selling, general and administrative
(45)
(2)
-
-
-
-
Restructuring and acquisition-related charges
-
-
-
-
Non-operating (income) expense
-
-
-
(19)
Income tax provision (benefit)
Net income attributable to VMware
(1)
(1)
-
-
27
6
-
-
4
(5)
(16)
(4)
-
-
(1)
3
Supplemental Information
For the Three Months Ended June 30, 2014
(in millions)
(unaudited)
VMware
Standalone
GAAP
Revenue
Cost of revenue
Gross margin
Research and development
Selling, general and administrative
Restructuring and acquisition-related charges
Operating income
Non-operating income (expense)
Income before taxes
Income tax provision (benefit)
Net income
Net income attributable to VMware
Net income attributable to EMC
$
1,457
218
1,239
317
723
(1)
200
2
202
35
167
$
GAAP Adjustments
and Eliminations
VMware within EMC
GAAP
$
$
(8)
(2)
(6)
(3)
(1)
(2)
5
3
3
$
(33)
(33)
$
1,449
216
1,233
314
722
(1)
198
7
205
38
167
(33)
134
Supplemental Information
For the Three Months Ended June 30, 2013
(in millions)
(unaudited)
VMware
Standalone
GAAP
Revenue
Cost of revenue
Gross margin
Research and development
Selling, general and administrative
Restructuring and acquisition-related charges
Operating income
Non-operating income (expense)
Income before taxes
Income tax provision (benefit)
Net income
Net income attributable to VMware
Net income attributable to EMC
Note: Schedules may not add due to rounding.
$
$
1,243
173
1,070
261
538
1
270
24
294
49
245
GAAP Adjustments
and Eliminations
VMware within EMC
GAAP
$
$
$
(5)
1
(6)
(3)
(2)
1
(1)
(2)
(3)
12
(15)
(49)
(63)
$
1,238
174
1,064
258
536
1
269
22
291
61
230
(49)
181
Segment Information
For the Three Months Ended June 30, 2014
(in millions)
(unaudited)
EMC Information Infrastructure
Information
RSA
Information
Intelligence
Information
Storage
Group
Security
Revenues
Product revenues
Services revenues
Total consolidated revenues
Gross profit
Gross profit percentage
$
$
2,551
1,425
3,976
$
2,192
$
55.1%
37
121
158
$
100
$
63.2%
104
139
243
EMC
Information
Infrastructure
$
162
2,454
66.7%
56.1%
Research and development
Selling, general and administrative
Restructuring and acquisition-related charges
Total costs and expenses
Operating income (expense)
Operating margin percentage
2,692
1,685
4,377
Pivotal
$
956
21.9%
15
39
54
$
26
47.2%
358
1,140
1,498
$
EMC
Information
Infrastructure
plus
Pivotal
33
46
79
$
(53)
(99.4)%
2,707
1,724
4,431
VMware
Virtual
Infrastructure
within EMC
$
612
837
1,449
Corporate
Reconciling
Items
$
-
Consolidated
$
3,319
2,561
5,880
2,480
1,272
(98)
3,654
55.9%
87.8%
-
62.1%
391
1,186
1,577
246
602
848
103
222
30
355
740
2,010
30
2,780
903
20.4%
424
29.3%
(453)
-
874
14.9%
Non-operating income (expense), net
Income tax provision (benefit)
Net income
(84)
209
610
8
91
341
11
(113)
(329)
(65)
187
622
Net income attributable to the non-controlling
interests in VMware, Inc.
-
(69)
36
(33)
Net income attributable to EMC Corporation
Note: This segment information is presented on a consistent basis with the presentation in our quarterly and annual filings with the SEC. This schedule may
not recalculate due to rounding.
$
610
$
272
$
(293)
$
589
Segment Information
For the Three Months Ended June 30, 2013
(in millions)
(unaudited)
EMC Information Infrastructure
Information
RSA
Information
Intelligence
Information
Storage
Group
Security
Revenues
Product revenues
Services revenues
Total consolidated revenues
Gross profit
Gross profit percentage
$
$
2,577
1,377
3,954
$
2,236
$
56.5%
39
113
152
$
96
$
63.1%
98
130
228
EMC
Information
Infrastructure
$
148
2,480
65.1%
57.2%
Research and development
Selling, general and administrative
Restructuring and acquisition-related charges
Total costs and expenses
Operating income (expense)
Operating margin percentage
2,714
1,620
4,334
Pivotal
$
985
22.7%
15
27
42
$
20
48.0%
377
1,118
1,495
$
EMC
Information
Infrastructure
plus
Pivotal
26
36
62
$
(42)
(99.6)%
2,729
1,647
4,376
VMware
Virtual
Infrastructure
within EMC
$
529
709
1,238
2,500
1,109
57.1%
89.6%
403
1,154
1,557
943
21.6%
Corporate
Reconciling
Items
$
-
Consolidated
$
(100)
3,258
2,356
5,614
3,509
-
62.5%
207
489
696
85
142
7
234
695
1,785
7
2,487
413
33.4%
(334)
-
1,022
18.2%
Non-operating income (expense), net
Income tax provision (benefit)
Net income
(78)
214
651
3
93
323
19
(91)
(224)
(56)
216
750
Net income attributable to the non-controlling
interests in VMware, Inc.
-
(67)
18
(49)
Net income attributable to EMC Corporation
Note: This segment information is presented on a consistent basis with the presentation in our quarterly and annual filings with the SEC. The segment
disclosures have been recast to reflect the Information Storage acquisition of the Data Computing Applicance and implementation services businesses from
the Pivotal segment during the first quarter of 2014. None of the segment reclassifications impact EMC’s previously reported consolidated financial
statements. This schedule may not recalculate due to rounding.
$
651
$
256
$
(206)
$
701
Supplemental Information
(in millions)
(unaudited)
Q1 2013
Q2 2013
Q3 2013
Q4 2013
FY 2013
Q1 2014
Q2 2014
Information Storage:
Product Revenues
Services Revenues
$
2,472
1,326
$
2,577
1,377
$
2,430
1,376
$
3,260
1,445
$
10,738
5,524
$
2,302
1,378
$
2,551
1,425
Total Information Storage Revenues
$
3,798
$
3,954
$
3,806
$
4,705
$
16,262
$
3,680
$
3,976
Information Intelligence Group:
Product Revenues
Services Revenues
$
43
112
$
39
113
$
32
117
$
65
124
$
180
467
$
35
119
$
37
121
Total Information Intelligence Group Revenues
$
155
$
152
$
149
$
189
$
647
$
154
$
158
RSA Information Security:
Product Revenues
Services Revenues
$
100
133
$
98
130
$
120
132
$
136
139
$
453
534
$
104
140
$
104
139
Total RSA Information Security Revenues
$
233
$
228
$
252
$
275
$
987
$
244
$
243
EMC Information Infrastructure:
Product Revenues
Services Revenues
$
2,615
1,571
$
2,714
1,620
$
2,582
1,625
$
3,461
1,708
$
11,371
6,525
$
2,441
1,637
$
2,692
1,685
Total EMC Information Infrastructure Revenues
$
4,186
$
4,334
$
4,207
$
5,169
$
17,896
$
4,078
$
4,377
Pivotal:
Product Revenues
Services Revenues
$
13
22
$
15
27
$
20
27
$
18
37
$
66
113
$
11
38
$
15
39
Total Pivotal Revenues
$
35
$
42
$
47
$
55
$
179
$
49
$
54
VMware:
Product Revenues
Services Revenues
$
484
682
$
529
709
$
563
722
$
676
782
$
2,253
2,894
$
556
796
$
612
837
Total VMware Revenues
$
1,166
$
1,238
$
1,285
$
1,458
$
5,147
$
1,352
$
1,449
Consolidated Revenues:
Product Revenues
Services Revenues
$
3,112
2,275
$
3,258
2,356
$
3,165
2,374
$
4,155
2,527
$
13,690
9,532
$
3,008
2,471
$
3,319
2,561
Total Consolidated Revenues
$
5,387
$
5,614
$
5,539
$
6,682
$
23,222
$
5,479
$
5,880
Percentage impact to EMC revenue growth rate
due to changes in exchange rates from the prior year
(0.5)%
(0.7)%
(0.8)%
(0.5)%
(0.6)%
(0.4)%
0.5%
Note: During the first quarter of 2014, EMC acquired Pivotal's Data Computing Appliance and implementation services. The results of the acquired businesses have been adjusted in this
presentation to be included in the Information Storage segment and excluded from the Pivotal segment as if the transaction had occurred retroactively. None of the segment
reclassifications impact EMC’s previously reported consolidated financial statements. This schedule may not recalculate due to rounding.