EMC Q2 2015 FINANCIAL RESULTS TONY TAKAZAWA VICE PRESIDENT, GLOBAL INVESTOR RELATIONS

EMC Q2 2015
FINANCIAL RESULTS
TONY TAKAZAWA
VICE PRESIDENT, GLOBAL INVESTOR RELATIONS
JULY 22, 2015
© Copyright 2015 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 Revenue, non-GAAP
Gross Margin, non-GAAP 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 22, 2015 which can be found at www.EMC.com or www.sec.gov.
© Copyright 2015 EMC Corporation. All rights reserved.
2
JOE TUCCI
CHAIRMAN AND CEO, EMC CORPORATION
© Copyright 2015 EMC Corporation. All rights reserved.
3
ZANE ROWE
CFO, EMC CORPORATION
© Copyright 2015 EMC Corporation. All rights reserved.
4
EMC CONSOLIDATED NON-GAAP RESULTS
Consolidated Revenue
EPS
Q2’15
GROWTH Y/Y
$6.07B
3%
$0.43
0%
Notes:
• Refer to the Appendix for a complete reconciliation of GAAP to non- GAAP.
© Copyright 2015 EMC Corporation. All rights reserved.
5
EMC FEDERATION NON-GAAP RESULTS
CONSTANT
Q2’15 GROWTH Y/Y
CURRENCY
GROWTH Y/Y
Consolidated Revenue
$6.07B
3%
8%
Information Infrastructure
$4.42B
1%
6%
VMware
$1.59B
10%
13%
$64M
18%
19%
Pivotal
Notes
• Figures may not foot due to rounding.
• VMware results are within EMC.
• Refer to the Appendix for a complete reconciliation of GAAP to non-GAAP.
© Copyright 2015 EMC Corporation. All rights reserved.
6
CONSOLIDATED NON-GAAP REVENUE
Q2’15
GROWTH Y/Y
CONSTANT
CURRENCY
GROWTH Y/Y
North America
$3.48B
9%
9%
EMEA
$1.62B
-3%
8%
APJ
$795M
-1%
5%
Latin America
$179M
-15%
-4%
Consolidated
$6.07B
3%
8%
Notes:
• Figures may not foot due to rounding.
• Refer to the Appendix for a complete reconciliation of GAAP to non-GAAP.
© Copyright 2015 EMC Corporation. All rights reserved.
7
CONSOLIDATED NON-GAAP EPS RESULTS Y/Y
$0.43
- $0.06
Q2'14
Operating Expense
+ $0.04
Non-Operating
Expense
+ $0.02
$0.43
Sharecount
Q2'15
Notes:
• Figures may not foot due to rounding.
• Refer to the Appendix for a complete reconciliation of GAAP to non-GAAP.
© Copyright 2015 EMC Corporation. All rights reserved.
8
FREE CASH FLOW, CASH USE & CASH BALANCE
Q2’15 FCF $647M
CASH USE
$718M
VMware Purchase – VMware Shares
$412M
EMC Dividend Paid2
1
2
VMware Domestic
$1.4B
Q2’15
EMC Repurchase – EMC Shares1
Acquisitions, Net of Cash Acquired
CASH & INVESTMENTS BALANCE3
VMware
International
$5.6B
$12M
EMC ex. VMware
Domestic
$2.5B
$225M
EMC ex. VMware
International
$5.3B
Total amount: $587M, Paid in cash $718M
Declared in Q1’15
EMC CONSOLIDATED $14.8B
3
2Q’15 Short-term debt is $1.9B
Notes:
•
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, 2015 and 2014.
•
Refer to the Appendix for a complete reconciliation of GAAP to non-GAAP.
•
Figures may not foot due to rounding.
© Copyright 2015 EMC Corporation. All rights reserved.
9
DAVID GOULDEN
CEO, EMC INFORMATION INFRASTRUCTURE
© Copyright 2015 EMC Corporation. All rights reserved.
10
Q&A
© Copyright 2015 EMC Corporation. All rights reserved.
11
APPENDIX
© Copyright 2015 EMC Corporation. All rights reserved.
12
EMC 2015 UPDATED NON-GAAP BUSINESS OUTLOOK
2015
Revenue
$25.3B
Operating Income (% of Revenue)
20.7%
Income Tax Rate
23.6%
Weighted Average Shares, Diluted
1.96B
EPS
$1.87
FCF
$4.0B
Notes:
• 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 twelve months ended December 31, 2015.
• All dollar amounts and percentages presented on this slide should be considered to be approximations.
• Refer to the Appendix for a complete reconciliation of GAAP to non-GAAP.
© Copyright 2015 EMC Corporation. All rights reserved.
13
EMC INFORMATION INFRASTRUCTURE
Q2’15
GROWTH Y/Y
$4.42B
1%
$892M
-13%
$1,432M
-9%
Emerging Storage
$718M
49%
Other Storage
$496M
18%
Storage PS
$490M
4%
RSA
$238M
-2%
ECD
$155M
-3%
EMC Information Infrastructure Revenue
High-End
Unified & Backup/Recovery
Notes:
• Figures may not foot due to rounding.
© Copyright 2015 EMC Corporation. All rights reserved.
14
EMC FEDERATION WIN
EXAMPLE #1
CUSTOMER
THEATRE
VALUE PROPOSITION
International
Insurance
Company
North
America
CIO and VP of Infrastructure recognized
the value of EHC to automate internal IT
processes and decided to establish
disaster recovery on the same
foundation. Included EHC automated
provisioning, converged infrastructure,
mitigated systems integration, and
lifecycle management. Successful
because Federation portfolio is trusted
as best-of-breed with executable
engineered solutions for ITaaS and agile
development.
© Copyright 2015 EMC Corporation. All rights reserved.
SOLUTION/FEDERATION
COMPANY
Enterprise Hybrid Cloud:
EMC
VMware
Pivotal
VCE
15
EMC FEDERATION WIN
EXAMPLE #2
CUSTOMER
THEATRE
VALUE PROPOSITION
Regional
Healthcare
Provider
North
America
Company needed to build out a
foundation for population health
analytics. In response, EMC proposed an
integrated solution with consulting,
Federation Business Data Lake, and
Pivotal software. EMC won by effectively
defining the execution model for the
integration of the data lake and the
supporting technologies.
© Copyright 2015 EMC Corporation. All rights reserved.
SOLUTION/FEDERATION
COMPANY
Business Data Lake:
EMC
Pivotal
16
EMC FEDERATION WIN
EXAMPLE #3
CUSTOMER
THEATRE
VALUE PROPOSITION
International
Bank
APJ
Bank needed to migrate to a cloudbased datacenter and improve IT agility,
requiring application management and
IT infrastructure solutions and services.
The customer also needed to improve
the visibility of IT process management.
EMC responded with the Federation’s
EHC and PaaS, and by introducing an
automatic storage management platform
on ViPR. EMC won due to the
completeness of its Federation offerings,
its cloud-based PaaS and IaaS, and the
strength of its ViPR solution.
© Copyright 2015 EMC Corporation. All rights reserved.
SOLUTION/FEDERATION
COMPANY
Enterprise Hybrid
Cloud/PaaS:
EMC
Pivotal
VMW
17
EMC FEDERATION WIN
EXAMPLE #4
CUSTOMER
THEATRE
VALUE PROPOSITION
International
Industrial
EMEA
Company needed an automated cloud
platform solution to run 3rd Platform
apps, having already identified several
use cases for IoT, including smart home
applications. In response, the Federation
partners focused on providing a
customized Federation solution using
ViPR, Cloud Foundry and SDDC. Due to
its superior technology stack and the
Federation approach, EMC won the deal
over competitors.
© Copyright 2015 EMC Corporation. All rights reserved.
SOLUTION/FEDERATION
COMPANY
Big Data/Cloud:
EMC
VMware
Pivotal
18
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 2015 EMC Corporation. All rights reserved.
19
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, a fair value adjustment on asset
held for sale, the VMware GSA settlement, a gain on previously held interests in strategic investments, an impairment of strategic investment, and VMware litigation and other
contingencies) are excluded from the non-GAAP financial measures and (b) a benefit for the R&D tax credit for the second quarters of 2015 and 2014 is included in the non-GAAP financial
measures for the second quarters of 2015 and 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.
This presentation also refers to growth rates at constant currency or adjusting for currency so that business results can be viewed without the impact of fluctuations in foreign currency
exchange rates, thereby facilitating period-to-period comparisons of EMC's business performance. To present this information, current period results for entities reporting in currencies
other than US dollars are converted into US dollars at the exchange rate applied in each month of the prior year quarter. Constant currency includes the impacts from EMC's hedging
program.
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 2015 EMC Corporation. All rights reserved.
20
TRADEMARKS
EMC, ECS and ViPR 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 2015 EMC Corporation. All rights reserved.
21
EMC CORPORATION
Consolidated Income Statements
(in millions, except per share amounts)
(unaudited)
Three Months Ended
June 30,
June 30,
2015
2014
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
3,225
2,772
5,997
$
1,433
977
782
2,102
23
680
3,319
2,561
5,880
Six Months Ended
June 30,
June 30,
2015
2014
$
1,372
854
740
2,010
30
874
Non-operating income (expense):
Investment income
Interest expense
Other income (expense), net
Total non-operating income (expense)
26
(41)
24
9
35
(34)
(66)
(65)
Income before provision for income taxes
Income tax provision
689
170
809
187
Net income
Less: Net income attributable to the non-controlling interests in VMware, Inc.
519
(32)
622
(33)
6,130
5,480
11,610
$
2,762
1,922
1,570
4,139
158
1,059
6,327
5,032
11,359
2,668
1,690
1,472
3,861
149
1,519
51
(81)
34
4
71
(68)
(142)
(139)
1,063
252
1,380
326
811
(72)
1,054
(74)
Net income attributable to EMC Corporation
$
487
$
589
$
739
$
980
Net income per weighted average share, basic attributable to EMC Corporation
common shareholders
$
0.25
$
0.29
$
0.38
$
0.48
Net income per weighted average share, diluted attributable to EMC Corporation
common shareholders
$
0.25
$
0.28
$
0.37
$
0.47
Weighted average shares, basic
Weighted average shares, diluted
Cash dividends declared per common share
1,927
1,947
$
0.12
2,037
2,064
$
0.12
1,950
1,971
$
0.23
2,033
2,070
$
0.22
EMC CORPORATION
Consolidated Balance Sheets
(in millions, except per share amounts)
(unaudited)
June 30,
2015
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts and notes receivable, less allowance
for doubtful accounts of $71 and $72
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
Income taxes payable
Short-term debt
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 1,925 and 1,985 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
$
$
$
$
5,803
1,939
3,345
1,224
1,061
715
14,087
7,041
3,788
1,953
16,185
1,813
44,867
1,219
2,823
160
1,948
6,357
12,507
318
4,344
230
5,472
434
23,305
December 31,
2014
$
$
$
6,343
1,978
4,413
1,276
1,070
653
15,733
6,334
3,766
2,125
16,134
1,767
45,859
1,696
3,141
852
6,021
11,710
306
4,144
274
5,469
431
22,334
-
-
19
20,516
(458)
20,077
1,485
21,562
44,867
20
22,242
(366)
21,896
1,629
23,525
45,859
$
EMC CORPORATION
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Six Months Ended
June 30,
June 30,
2015
2014
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
$
13,137
(10,076)
68
(67)
(949)
2,113
$
12,644
(9,320)
97
(829)
2,592
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
Increase in restricted cash
Net cash used in investing activities
(449)
(262)
(4,212)
2,667
913
(61)
(160)
109
(1,455)
(472)
(245)
(5,765)
4,974
1,716
(1,694)
(83)
10
(63)
(76)
(1,698)
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
VMware repurchase of VMware's common stock
Excess tax benefits from stock-based compensation
Payment of long-term obligations
Net proceeds from the issuance of short-term obligations
Dividend payment
Contributions to non-controlling interests
Net cash used in financing activities
170
69
(2,063)
(850)
54
1,948
(456)
4
(1,124)
234
99
(994)
(407)
45
(1,665)
(407)
(3,095)
(74)
(3)
$
(540)
6,343
5,803
$
(2,204)
7,891
5,687
$
811
$
1,054
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
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 restructuring and other special charges
Stock-based compensation expense
Provision for 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
$
942
13
502
25
(48)
(54)
18
903
9
498
2
(168)
(45)
(45)
33
23
1,017
(45)
(3)
(443)
(480)
(650)
509
(1)
2,113
549
(183)
96
(241)
(279)
(336)
701
21
2,592
$
Reconciliation of GAAP to Non-GAAP*
(in millions, except per share amounts)
(unaudited)
Three Months Ended
Diluted
Earnings
June 30,
Per Share
2014
June 30,
2015
Net Income Attributable to EMC - GAAP
$
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
R&D tax credit
Fair value adjustment on asset held for sale
VMware GSA settlement
Gain on previously held interests in strategic investments
Impairment of strategic investment
VMware litigation and other contingencies
Net Income Attributable to EMC - Non-GAAP
487
$
181
66
16
29
12
12
42
$
845
Weighted average shares, diluted
Incremental VMware dilution
0.249
$
0.094
0.034
0.008
0.015
0.006
0.006
0.021
$
0.433
$
1,947
1
589
June 30,
2015
Consolidated Revenue - GAAP
$
VMware GSA settlement
Consolidated Revenue - Non-GAAP
Note: Schedules may not add or recalculate due to rounding.
June 30,
2014
5,997
$
76
$
6,073
5,880
-
$
5,880
$
180
65
22
29
12
(45)
24
6
$
882
* 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.
Three Months Ended
Diluted
Earnings
Per Share
0.285
0.087
0.032
0.011
0.014
0.006
(0.022)
0.011
0.003
$
0.427
$
2,064
1
Reconciliation of GAAP to Non-GAAP
(in millions)
(unaudited)
Three Months Ended
June 30,
June 30,
2015
2014
Gross Margin - GAAP
$
Stock-based compensation expense
Intangible asset amortization
VMware GSA Settlement
3,587
$
3,654
37
62
76
37
61
-
Gross Margin - Non-GAAP
$
3,762
$
3,752
Revenues:
GAAP
Non-GAAP
$
$
5,997
6,073
$
$
5,880
5,880
Gross Margin Percentages:
GAAP
Non-GAAP
59.8%
61.9%
62.1%
63.8%
Three Months Ended
June 30,
June 30,
2015
2014
Operating Margin - GAAP
$
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
VMware litigation and other contingencies
VMware GSA Settlement
680
$
258
100
21
49
70
874
262
100
28
52
11
-
Operating Margin - Non-GAAP
$
1,178
$
1,327
Revenues:
GAAP
Non-GAAP
$
$
5,997
6,073
$
$
5,880
5,880
Operating Margin Percentages:
GAAP
Non-GAAP
Note: Schedules may not add or recalculate due to rounding.
11.3%
19.4%
14.9%
22.6%
Reconciliation of GAAP to Non-GAAP
(in millions)
(unaudited)
Three Months Ended June 30, 2015
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
Fair value adjustment on asset held for sale
VMware GSA Settlement
EMC Consolidated - Non-GAAP
689
$
170
24.6%
58
29
5
15
(13)
8
18
22.6%
29.1%
26.4%
31.4%
N/A
38.0%
25.5%
290
24.0%
258
100
21
49
20
70
$
1,207
$
Three Months Ended
June 30,
June 30,
2015
2014
Cash Flow from Operations
Capital expenditures
Capitalized software development costs
Free Cash Flow
Note: Schedules may not add or recalculate due to rounding.
$
$
1,033
(252)
(134)
647
$
$
1,253
(196)
(127)
930
Six Months Ended
June 30,
June 30,
2015
2014
$
$
2,113
(449)
(262)
1,402
$
$
2,592
(472)
(245)
1,875
Reconciliation of GAAP to Non-GAAP
Q2 '15 vs Q2'14 Constant Currency Revenue Growth
(unaudited)
EMC
Information
Infrastructure
Information
Storage
Revenue growth - GAAP
Impact of VMware GSA Settlement
Revenue growth - Non-GAAP
1%
-
1%
5
5
6%
6%
Europe, Middle
East and Africa
Revenue growth - GAAP
Impact of VMware GSA Settlement
Revenue growth - Non-GAAP
Impact of currency
Revenue growth on a constant currency basis
(3)%
-
Asia Pacific
and Japan
(1)%
-
(3)%
18%
18%
4%
2%
6
1
10%
3%
1
19%
Latin
America
4
13%
North
America
6%
(15)%
3
-
(1)%
(15)%
11
6
11
8%
5%
(4)%
This presentation refers to growth rates at constant currency or adjusting for currency so that business results can be
viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period
comparisons of EMC's business performance. To present this information, current period results for entities reporting in
currencies other than US dollars are converted into US dollars at the exchange rate applied in each month of the prior year
quarter. Constant currency includes the impacts from EMC's hedging program.
Note: Schedule may not add or recalculate due to rounding.
EMC
Consolidated
-
1%
Impact of currency
Revenue growth on a constant currency basis
1%
Pivotal
VMware
Virtual
Infrastructure
9%
9%
4
8%
Reconciliation of GAAP to Non-GAAP
(in billions, except per share amounts)
(unaudited)
Twelve
Months Ending
December 31,
2015
Consolidated Revenue - GAAP
$
GSA settlement
Consolidated Revenue - Non-GAAP
25.2
0.1
$
25.3
Twelve
Months Ending
December 31,
2015
Operating Income as a % of Revenue - GAAP
12.8%
Stock-based compensation expense
Intangible asset amortization
Restructuring charges
Acquisition and other related charges
One time items
4.4
1.5
0.9
0.7
0.4
Operating Income as a % of Revenue - Non-GAAP
20.7%
Twelve
Months Ending
December 31,
2015
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
1.17
0.42
0.13
0.08
0.05
0.02
$
1.87
Twelve
Months Ending
December 31,
2015
Tax Rate - GAAP
22.5%
Impact of stock-based compensation expense,
intangible asset amortization, restructuring charges and
acquisition and other related charges
1.1
Tax Rate - Non-GAAP
23.6%
Twelve
Months Ending
December 31,
2015
Cash Flow from Operations
$
Capital expenditures
Capitalized software development costs
Free Cash Flow
Note: Schedules may not add or recalculate due to rounding.
5.5
(1.0)
(0.5)
$
4.0
Supplemental Information
For the Three Months Ended June 30, 2015
(in millions)
(unaudited)
Stock-Based
Compensation
Expense
Intangible Asset
Amortization
Acquisition and
Other Related
Charges
Restructuring
Charges
Fair Value
Adjustment on
Asset Held for
Sale
R&D Tax
Credit
Vmware GSA
Settlement
EMC Consolidated
Revenue
$
-
$
-
$
-
$
-
$
-
$
-
$
76
Cost of revenue
(37)
(62)
-
-
-
-
-
Research and development
(91)
(1)
-
-
-
-
-
(130)
(37)
-
(47)
-
-
(2)
-
-
Selling, general and administrative
Restructuring and acquisition-related charges
-
-
(21)
Non-operating (income) expense
-
-
-
Income tax provision (benefit)
Net income attributable to VMware
58
29
(19)
(5)
5
-
-
20
15
(13)
(5)
(1)
-
6
-
8
18
-
(10)
EMC Information Infrastructure plus Pivotal
Revenue
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Cost of revenue
(27)
(33)
-
-
-
-
-
Research and development
(38)
(1)
-
-
-
-
-
Selling, general and administrative
(70)
(30)
-
(5)
-
-
-
Restructuring and acquisition-related charges
-
-
(23)
(2)
-
-
-
Non-operating (income) expense
-
-
-
Income tax provision (benefit)
33
Net income attributable to VMware
20
-
6
-
-
-
-
20
-
8
-
(7)
-
-
-
-
VMware within EMC
Revenue
$
-
$
-
$
-
$
-
$
-
$
-
$
76
Cost of revenue
(10)
(29)
-
-
-
-
-
Research and development
(53)
-
-
-
-
-
-
Selling, general and administrative
(60)
-
(42)
-
-
Restructuring and acquisition-related charges
-
-
-
-
-
-
Non-operating (income) expense
-
-
-
-
-
-
Income tax provision (benefit)
Net income attributable to VMware
(7)
2
-
25
9
(19)
(5)
(1)
-
6
15
(6)
-
18
(5)
(1)
-
(10)
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
Gain on Previously
Held Interests in
Strategic
Investments
R&D Tax
Credit
Impairment of
Strategic
Investment
VMware Litigation
and Other
Contingencies
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, 2015
(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
$
1,521
250
1,271
322
745
(2)
206
7
213
41
172
$
GAAP Adjustments
and Eliminations
VMware within EMC
GAAP
$
$
(9)
(4)
(5)
(2)
(2)
-
$
(1)
4
3
6
(3)
(32)
(35)
$
1,512
246
1,266
320
743
(2)
205
11
216
47
169
(32)
137
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
Note: Schedules may not add due to rounding.
$
$
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
Segment Information
For the Three Months Ended June 30, 2015
(in millions)
(unaudited)
EMC Information Infrastructure
Enterprise
RSA
Information
Content
Information
Storage
Division
Security
Revenues
Product revenues
Services revenues
Total consolidated revenues
Gross profit
$
$
2,092
$
40
115
155
$
105
$
97
141
238
$
2,646
1,775
4,421
2,355
53.3%
20
44
64
$
$
635
953
1,588
$
(76)
(76)
$
423
1,254
1,677
267
640
907
92
208
23
323
782
2,102
23
2,907
704
15.7%
474
29.8%
(498)
680
11.3%
Non-operating income (expense), net
Income tax provision (benefit)
Net income
18
183
539
11
107
378
(20)
(120)
(398)
9
170
519
Net income attributable to the non-controlling
interests in VMware, Inc.
-
(72)
40
(32)
Operating income (expense)
Operating margin percentage
40.0%
398
1,201
1,599
$
756
17.1%
25
53
78
$
(52)
(80.5)%
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.
$
539
$
306
(175)
3,225
2,772
5,997
1,381
Research and development
Selling, general and administrative
Restructuring and acquisition-related charges
Total operating expenses
26
2,666
1,819
4,485
Consolidated
87.0%
67.8%
158
$
Corporate
Reconciling
Items
2,381
51.9%
66.6%
Pivotal
VMware
VMware
Virtual
Infrastructure
53.1%
Gross profit percentage
$
2,509
1,519
4,028
EMC
Information
Infrastructure
EMC
Information
Infrastructure
plus
Pivotal
3,587
59.8%
$
(358)
$
487
Segment Information
For the Three Months Ended June 30, 2014
(in millions)
(unaudited)
EMC Information Infrastructure
Enterprise
RSA
Information
Content
Information
Storage
Division
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 operating 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
$
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
Supplemental Information
(in millions)
(unaudited)
Q1 2014
Information Storage:
Product Revenues
Services Revenues
Total Information Storage Revenues
Enterprise Content Division:
Product Revenues
Services Revenues
Total Enterprise Content Division Revenues
RSA Information Security:
Product Revenues
Services Revenues
Total RSA Information Security Revenues
EMC Information Infrastructure:
Product Revenues
Services Revenues
Total EMC Information Infrastructure Revenues
Pivotal:
Product Revenues
Services Revenues
Total Pivotal Revenues
VMware Virtual Infrastructure:
Product Revenues
Services Revenues
Total VMware Virtual Infrastructure Revenues
Corporate Reconciling Items
Consolidated Revenues:
Product Revenues
Services Revenues
Total Consolidated Revenues
Percentage impact to EMC revenue growth rate
due to changes in exchange rates from the prior year
$
$
$
$
$
$
$
$
$
Q2 2014
2,302
1,378
3,680
$
$
35
119
154
$
104
140
244
$
2,441
1,637
4,078
$
$
$
$
11
38
49
$
$
$
556
796
1,352
$
$
$
$
$
Q3 2014
2,551
1,425
3,976
$
$
37
121
158
$
104
139
243
$
2,692
1,685
4,377
$
$
$
$
15
39
54
$
$
$
612
837
1,449
-
$
3,008
2,471
5,479
$
(0.4)%
$
$
Q4 2014
2,595
1,456
4,051
$
$
36
118
154
$
114
147
261
$
2,745
1,721
4,466
$
$
$
$
17
41
58
$
$
$
638
870
1,508
-
$
3,319
2,561
5,880
$
0.5%
$
$
FY 2014
3,338
1,497
4,835
56
118
174
$
$
$
$
139
148
287
$
3,533
1,763
5,296
$
$
$
21
44
65
$
$
$
768
919
1,687
-
$
3,400
2,632
6,032
$
(0.1)%
$
$
$
Q1 2015
10,785
5,757
16,542
$
$
164
476
640
$
462
573
1,035
$
11,411
6,806
18,217
65
162
227
$
$
$
$
$
$
$
$
2,575
3,421
5,996
-
$
4,322
2,726
7,048
$
(1.7)%
$
Q2 2015
2,179
1,484
3,663
$
$
27
111
138
$
100
148
248
$
2,306
1,743
4,049
$
16
38
54
$
$
$
$
$
$
$
583
927
1,510
-
$
-
$
14,051
10,389
24,440
$
2,905
2,708
5,613
$
(0.5)%
$
(3.1)%
$
$
2,509
1,519
4,028
40
115
155
97
141
238
2,646
1,775
4,421
20
44
64
635
953
1,588
(76)
3,225
2,772
5,997
(4.4)%