VMware, Inc. (NYSE: VMW) This fall 2021 earnings name dated Feb. 25, 2021
Company Members:
Paul Ziots — Vice President of Investor Relations
Zane Rowe — Chief Monetary Officer, Interim Chief Govt Officer and Govt Vice President
Presentation:
Operator
Women and gents, thanks for standing by, and welcome to the VMware’s Fourth Quarter and Fiscal Yr 2021 Earnings Name. Right now, all members are in a listen-only mode. Please be suggested that right now’s convention is being recorded. After the audio system’ presentation, there can be a question-and-answer session. [Operator Instructions]
I might now like handy the convention over to your first speaker for right now, the Vice President, Investor Relations, Mr. Paul Ziots. Thanks. Please go forward, sir.
Paul Ziots — Vice President of Investor Relations
Thanks. Good afternoon, everybody, and welcome to VMware’s fourth quarter and monetary yr 2021 earnings convention name. On the decision, now we have Zane Rowe, CFO and Interim CEO. Following Zane’s ready remarks, we are going to take questions. Raghu Raghuram, COO, Merchandise and Cloud Companies; and Sanjay Poonen, COO, Buyer Operations, will be part of for Q&A.
Our press launch was issued after shut of market and is posted on our web site the place this name is being concurrently webcast. Slides which accompany this webcast will be considered along side stay remarks and downloaded on the conclusion of the webcast from ir.vmware.com.
On this name right now, we are going to make forward-looking statements which might be topic to dangers and uncertainties. Precise outcomes might differ materially because of varied danger elements described within the 10-Ks, 10-Qs and 8-Ks VMware information with the SEC. We assume no obligation to and don’t presently intend to replace any such forward-looking statements. As well as, throughout right now’s name, we are going to talk about sure non-GAAP monetary measures. These non-GAAP monetary measures, that are used as measures of VMware’s efficiency needs to be thought-about along with, not as a substitution for or in isolation from, GAAP measures. Our non-GAAP measures exclude the impact on our GAAP outcomes of stock-based compensation, amortization of acquired intangible belongings, employer payroll tax and worker inventory transactions, acquisition, disposition, sure litigation issues and different objects in addition to discrete objects impacting our GAAP tax charge. You’ll find further disclosures concerning these non-GAAP measures, together with reconciliations with comparable GAAP measures within the press launch and in our Investor Relations web site.
The webcast replay of this name can be obtainable for the following 60 days on our firm web site beneath the Investor Relations hyperlink. Our first quarter fiscal 2022 quiet interval begins on the shut of enterprise, Thursday, April 15, 2021.
With that, I’ll flip it over to Zane.
Zane Rowe — Chief Monetary Officer, Interim Chief Govt Officer and Govt Vice President
Thanks, Paul, and thanks to everybody for becoming a member of us right now. We notice you’re used to listening to Pat’s voice as we begin these quarterly convention calls. I need to thank Pat for his management, which helped put VMware able to execute on our technique and drive long-term worth. Pat is a real companion and a buddy, and naturally, will nonetheless be a VMware Board member.
We’re happy with our This fall monetary efficiency, because it was a very good end to the fiscal yr. This fall whole income elevated 7% year-over-year, with non-GAAP EPS up over 8%. We completed fiscal 2021 with $11.8 billion in whole income and non-GAAP EPS of $7.20 a share.
This previous yr was one in all unprecedented disruption and uncertainty, and we’re happy with what the group achieved. As we shortly tailored to a distributed workforce, we helped our prospects speed up their work-from-anywhere journey and their utility and cloud monetization initiatives. We’re seeing prospects proceed to decide on VMware to assist them ship the digital basis to energy their apps, clouds, safety and consumer experiences. Giant world prospects proceed to align and companion with us, and the character of our strategic relationships with our largest prospects continues to develop.
In This fall, we closed offers with important aerospace and telco prospects and noticed specific power within the monetary sector, together with wins with HSBC and Wells Fargo. We see monetary providers prospects using a mixture of franchise options, starting from fashionable apps and cloud infrastructure, to networking in our digital workspace choices. We additionally proceed to see momentum with key communication service suppliers, akin to NTT DOCOMO and Telia rising their concentrate on VMware options, in addition to new and expanded contracts with further Tier 1 communication service suppliers globally.
Within the retail sector, a big buyer that’s standardized on our applied sciences of their non-public cloud is leveraging VMware as a platform for his or her cloud migrations, whereas additionally investing in edge cloud infrastructure and utilizing Tanzu for containers of their retail edge areas. We see this as a repeatable use case for different retailers, together with different e-commerce app improvement use instances, retailers are constructing on prime of Tanzu.
Our work with life sciences and healthcare prospects is enabling their crucial apps to run on our hybrid cloud and helps to safe their consumer gadgets for workers working from anyplace. As well as, our companion ecosystem is driving momentum for VMware options. We’re increasing the attain of our options by way of key strategic partnerships from our VCPP companions to hyperscalers, to system integrators. For instance, earlier this month, we introduced an growth of our partnership with Accenture, ensuing within the launch of their devoted VMware enterprise unit. The group will carry collectively roughly 2,000 professionals throughout a wide range of industries with experience in hybrid cloud and cloud migrations, cloud-native and utility modernization, in addition to safety. We additionally lately shaped a joint innovation lab with Lumen, designed to drive edge computing, safety and safe entry service edge or SASE for purchasers in quite a few industries.
Trying on the broader portfolio, we proceed to additional our multi-cloud technique and are seeing traction as prospects align app necessities to the cloud of their alternative, whether or not it’s non-public, hybrid or public. This quarter, we expanded our resell program with AWS to incorporate further VMware applied sciences and providers akin to VMware Cloud, Catastrophe Restoration and vRealize. Moreover, VMware Cloud on Dell EMC, a Dell Applied sciences cloud service from VMware expanded to the EMEA market with quick availability within the UK, Germany and France.
We proceed to ship on innovation with Tanzu. With the announcement of common availability of Tanzu Superior version, we now have three Tanzu additions out there; Fundamental, Commonplace and Superior. Every addition is focused at a standard buyer problem of modernizing infrastructure and functions. Tanzu Superior consists of all of the capabilities that enterprises have to embrace DevSecOps and handle full container life cycle. We proceed to see sturdy constructive reception to all three Tanzu additions.
We additionally added container safety to VMware Carbon Black Cloud, leveraging know-how from our current Octarine acquisition to supply visibility into on-prem and public cloud Kubernetes clusters. Our NSX portfolio provides a complete set of L2 to L7 capabilities, carried out fully in software program. We lately launched the newest model of NSX, which included enhancements throughout routing, identification firewall, load balancing and cloud. In FY ’21, VMware was acknowledged by prime trade analyst companies as a pacesetter in 13 key studies throughout cloud administration, networking, hyperconverged infrastructure and end-user computing.
In November, Forrester named VMware a pacesetter within the Forrester Wave Hybrid Cloud Administration This fall 2020. Extra lately, we had been named a pacesetter in December’s 2020 Gartner Magic Quadrant for Hyperconverged Infrastructure Software program. And in January, VMware was positioned as a pacesetter in three IDC Marketscape studies associated to the end-user computing house, together with the Worldwide Unified Endpoint Administration Software program 2021 Vendor Evaluation.
From a broader company perspective, I’m personally happy to focus on that we lately unveiled our 2030 agenda, which encapsulates how we are going to drive ESG objectives into each facet of our enterprise. Our 2030 agenda is built-in into the enterprise and is concentrated on three enterprise outcomes; belief, fairness, and sustainability. Not too long ago, we additionally carried out effectively within the areas of sustainability, incomes the excellence of being included within the 2020 Dow Jones Sustainability Index among the many world’s main ESG benchmarks.
Now, let’s transfer to extra element on our enterprise efficiency in addition to our forecast. In This fall, the mix of subscription, SaaS, and license income grew 8% year-over-year to $1.721 billion. We noticed giant enterprise demand power all through the quarter, which allowed us to shut a report 35 offers over $10 million. This was balanced with good efficiency in our industrial enterprise as effectively. Subscription and SaaS income elevated 27% year-over-year for the quarter, with sturdy progress in our VMware Cloud Supplier Program, end-user computing, Carbon Black, and VMware Cloud on AWS choices. We proceed to speculate and anticipate to see additional progress on this vital space for us in FY 2022 and past. Our focus is on scaling current choices in addition to including new options. VMC on AWS as soon as once more had a terrific quarter, with each workloads and income practically doubling year-over-year as we proceed to develop performance and use case adoption.
As of the top of This fall, ARR for subscription and SaaS was $2.9 billion, a rise of 27% year-over-year. License income for the quarter declined 2% year-over-year to $1.014 billion. Now, this was higher than anticipated as we had a powerful deal closure charge all through the quarter. Non-GAAP working earnings elevated 8% year-over-year in This fall to $1.133 billion, primarily pushed by better-than-expected income progress. Non-GAAP working margin for the quarter was 34.4%, with non-GAAP earnings per share of $2.21 on a share depend of 423 million diluted shares. We ended the quarter with $10.3 billion in unearned income and $4.7 billion in money, money equivalents, and short-term investments.
Money move from operations for fiscal 2021 was $4.4 billion, which was effectively forward of our expectations. This fall money move from operations was $1.324 billion and free money move was $1.242 billion. Now, this power was primarily on account of our emphasis on closing sure offers previous to calendar year-end, which resulted in receiving the related money in FY 2021 relatively than FY 2022. As well as, we benefited from early collections and superior funds from companions and prospects in addition to sure different expenditures which had been decrease than anticipated in FY 2021.
With subscription and SaaS changing into a bigger share of whole income, we’re now offering our end-of-period whole and present RPO. For This fall, RPO was $11.3 billion, up 10% on a year-over-year foundation and present RPO was $6.2 billion, up 12% year-over-year. Complete backlog was $93 million, considerably all of which include orders acquired on the final day of the quarter that weren’t shipped that day and orders held on account of our export management course of. License backlog at quarter-end was $23 million.
General, our product portfolio carried out effectively in This fall, with prospects persevering with to buy options that include a number of merchandise. Core SDDC product bookings elevated 12% year-over-year in This fall, highlighted by power in our vRealize administration choices, which at the moment are obtainable each on a perpetual and SaaS foundation. Compute product bookings additionally carried out effectively, rising within the low single-digits year-over-year.
NSX and vSAN had single-digit year-over-year declines, which was an enchancment for each versus Q3 of FY 2021. These two applied sciences proceed to be additional built-in into our broader options. Three quarters of our EUC product bookings at the moment are SaaS. EUC’s ACV SaaS progress charge was 30% year-over-year in This fall, pushed primarily by Horizon and our initiatives associated to anyplace workspace. Given our concentrate on SaaS ACV, EUC product bookings decreased within the high-single digits year-over-year. Carbon Black Cloud as soon as once more grew within the high-double digits year-over-year, and we proceed to make progress in increasing our endpoint and workload safety capabilities and delivering intrinsic safety worth to our prospects.
Our Tanzu portfolio exceeded expectations and had a powerful connect charge in eight of the highest 10 VMware offers in This fall. In This fall, we repurchased 2.7 million shares within the open market at a mean worth of $140 per share. On the finish of This fall, we’ve utilized over $1.4 billion from our present repurchase authorization of $2.5 billion.
Turning to steerage for fiscal 2022. We anticipate whole income of roughly $12.700 billion or a progress charge of 8%, which is per the early outlook offered on our final name. We anticipate to generate roughly $6.300 billion from the mix of subscription of SaaS and license income or a rise of 12% with roughly 55% of this quantity from subscription in SaaS. We anticipate non-GAAP working margin of 28% with non-GAAP earnings per share of $6.68 beneath diluted share depend of 422 million shares.
As I discussed earlier, we had very sturdy money move from operations in This fall on account of quite a few initiatives that resulted in exceeding our money move steerage by over $650 million. Whereas we’re extraordinarily happy with this consequence, the majority of this over-achievement was accelerated from our upcoming fiscal yr. Taking that into consideration for FY 2022, we presently anticipate money move from operations of $3.8 billion and free money move of $3.42 billion. On a normalized foundation, bearing in mind the acceleration of money into FY 2021, money move from operations can be roughly flat on a year-over-year foundation for FY 2022, in step with our working efficiency.
For Q1, we anticipate whole income of roughly $2.910 billion or a progress charge of 6%. We anticipate roughly $1.320 billion from mixed subscription and SaaS and license income in Q1, a rise of seven% year-over-year, with over 55% of this quantity from subscription and SaaS. Our anticipated progress charge for Q1 license income was impacted by continued progress in subscription and SaaS and the power we noticed in Q1 final yr. We anticipate non-GAAP working margin of 27.5% for Q1, with non-GAAP earnings per share of $1.49 on a diluted share depend of 422 million shares.
In closing, we’re happy with our This fall efficiency, the enhancements we’re seeing within the macro atmosphere, and are increasing alternatives to have interaction with our prospects and companions. We’re dedicated to executing at scale as we proceed to construct our subscription and SaaS enterprise and put money into our future progress, whereas delivering applied sciences and options right now that assist our prospects and companions with their digital transformations.
Earlier than we go to questions, I’m happy to let you know that we’re making progress on the potential spinoff of VMware from Dell. Whereas our particular committee of Unbiased Administrators continues to judge the spin-off, we imagine that it might be value-enhancing to VMware and its stockholders. We won’t be commenting additional on these discussions till there’s extra definitive information to share.
With that, I’ll flip it again to Paul for Q&A.
Paul Ziots — Vice President of Investor Relations
Thanks, Zane. Earlier than we start the Q&A, I’ll ask you to restrict yourselves to 1 query consisting of 1 half, so we will get to as many individuals as potential. Raghu and Sanjay are becoming a member of us now for Q&A. Operator, let’s get began.
We’re nonetheless processing the Q&A portion of the convention name. We can be updating it as quickly as we analyze and course of the con name. Keep tuned right here for extra updates.
