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Dell Technologies Reports Fiscal Year 2018 Third Quarter Financial Results

Dec 07, 2017

ROUND ROCK, Texas, Dec. 7, 2017 /PRNewswire via COMTEX News Network/ -- https://mma.prnewswire.com/media/455191/DellTech_Prm_Blue_rgb_Logo.jpg

News summary

-- Third quarter revenue of $19.6 billion, non-GAAP revenue of $19.9 billion

-- Cash flow from operations of $1.6 billion

-- Company unveils new capabilities and offerings, including new midrange storage solutions and Future-Proof Storage Loyalty Program

Full story

Dell Technologies (NYSE: DVMT) announces its fiscal 2018 third quarter results. For the third quarter, consolidated revenue was $19.6 billion and non-GAAP revenue was $19.9 billion. During the quarter, the company generated an operating loss of $533 million1, with non-GAAP operating income of $2.0 billion. The company generated cash flow from operations of $1.6 billion.

"In the third fiscal quarter, we delivered solid performance across the business," said Tom Sweet, chief financial officer, Dell Technologies. "Moving forward, we'll maintain our focus on profitable growth, generating strong cash flow and delivering a comprehensive and seamless solutions portfolio, incorporating the capabilities of all of the companies under Dell Technologies."

Fiscal year 2018 third quarter results:
                                               Three Months Ended                                    Nine Months Ended
                                               November 3, 2017        October 28, 2016      Change  November 3, 2017       October 28, 2016       Change
                                               (in millions, except percentages; unaudited)
Net revenue                                    $             19,610    $           16,247    21 %    $             56,725   $             41,568   36 %
Operating loss                                 $                (533)  $           (1,512)   65 %    $             (3,012)  $             (1,584)  (90)%
Net loss from continuing operations            $                (941)  $           (1,637)   43 %    $             (3,302)  $             (2,323)  (42)%
Non-GAAP net revenue                           $             19,905    $           16,777    19 %    $             57,710   $             42,241   37 %
Non-GAAP operating income                      $               1,986   $             1,975   1 %     $               4,735  $               3,270  45 %
Non-GAAP net income from continuing operations $               1,109   $                970  14 %    $               2,563  $               1,596  61 %
Adjusted EBITDA                                $               2,318   $             2,230   4 %     $               5,751  $               3,757  53 %

Information about Dell Technologies' use of non-GAAP financial information is provided under "Non-GAAP Financial Measures" below. All comparisons in this press release are year over year unless otherwise noted.

"Our strategy to be the essential infrastructure provider is resonating with our customers, who turn to Dell Technologies to transform and digitize their environments," said Jeff Clarke, vice-chairman, Products & Operations, Dell Technologies. "We deliver a more holistic view and set of solutions, offering a higher level of innovation and integration across the edge, core and cloud that is unmatched in the industry."

Operating segments summary

Client Solutions Group (Dell) continued to outperform the market worldwide as the overall PC market moved back to positive year-over-year growth during the calendar quarter. Revenue for the third fiscal quarter was $10.0 billion, up 8 percent from the same quarter of fiscal 2017. Operating income was $672 million, a 6 percent increase.

Key highlights:

-- Double-digit revenue growth in notebooks for both commercial and consumer

-- Delivered 19th consecutive quarter of year-over-year PC unit share growth2

-- No. 1 workstation vendor worldwide, outperforming the industry and positive growth in every major region3

-- No. 1 displays provider worldwide for the 17th consecutive quarter4

Infrastructure Solutions Group (Dell EMC) experienced growth of 2 percent quarter over quarter, with third quarter revenue of $7.5 billion and operating income of $678 million. Servers and networking revenue was $3.9 billion, which was an increase of 32 percent year over year and 3 percent quarter over quarter. Storage revenue remained flat at $3.7 billion quarter over quarter.

Key highlights:

-- Record revenue and double-digit growth for servers for 2nd consecutive quarter

-- Worldwide leader in servers, outgrowing the market in units and revenue for both mainstream and hyperscale5

-- Triple-digit growth in hyperconverged portfolio, led by VxRail

-- Double-digit demand growth for Isilon scale-out NAS and all-flash arrays

VMware segment revenue for the third quarter was $2.0 billion, with operating income of $639 million, or 32.7 percent of revenue.

Additional highlights

During the third quarter, Dell Technologies paid down $1.7 billion in debt, and since the close of the EMC transaction, it has paid down $9.7 billion of gross debt, excluding DFS-related debt. Also since closing the EMC transaction, the company has repurchased a total of 23.4 million shares of Class V common stock under the previously announced repurchase programs. The company ended the quarter with a cash and investments balance of $18.0 billion.

During the quarter, Dell Technologies launched a dedicated Internet of Things (IoT) division aimed at coordinating development of IoT products and services across all of our businesses. This comprehensive approach includes IoT-specific products, labs, partner program and consumption models to help customers speed the implementation of their IoT solutions.

Subsequent to the end of the quarter, Dell EMC announced the expansion of its industry-leading midrange storage portfolio with two new SC All-Flash data storage arrays, along with key software updates to Dell EMC Unity designed to boost efficiency and cost savings for mixed block and file workloads. Additionally, Dell EMC launched its new Future-Proof Storage Loyalty Program to help customers protect their investment.

Conference call information

As previously announced, the company will hold a conference call to discuss its third quarter performance this morning at 7 a.m. CST. The conference call will be broadcast live over the internet and can be accessed at investors.delltechnologies.com. For those unable to listen to the live broadcast, an archived version will be available at the same location for one year.

A slide presentation containing additional financial and operating information may be downloaded from Dell Technologies' website at investors.delltechnologies.com.

Additional resources

-- Find out more about how Dell Technologies is collaboratively solving customers' biggest challenges by visiting our Annual Report to Customers

-- Follow the latest news on Twitter from @DellTech

About Dell Technologies

Dell Technologies is a unique family of businesses that provides the essential infrastructure for organizations to build their digital future, transform IT and protect their most important asset, information. The company services customers of all sizes across 180 countries - ranging from 98 percent of the Fortune 500 to individual consumers - with the industry's most comprehensive and innovative portfolio from the edge to the core to the cloud.

Copyright © 2017 Dell Inc. or its subsidiaries. All Rights Reserved. Dell, Dell Inc. and the Dell logo are trademarks of Dell Technologies in the United States and/or other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective companies.

1 Due to the EMC transaction and to a lesser extent the Dell going-private transaction, significant non-cash bridging items will remain between GAAP and non-GAAP results for the next few years. As a result of the EMC merger transaction completed on September 7, 2016 and its impact on the third quarter and first nine months of Fiscal 2018, our results for the fiscal periods discussed herein are not directly comparable. 2 IDC WW Quarterly Personal Computing Device (PCD) Tracker CY17Q3 3 IDC WW Quarterly Workstation Tracker CY17Q3 4 DisplaySearch Desktop Monitor Market Tracker CY17Q2 5 IDC WW Quarterly Server Tracker CY17Q3

Non-GAAP Financial Measures:

This press release presents information about the Company's non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income from continuing operations, EBITDA and adjusted EBITDA, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with generally accepted accounting principles in the United States of America ("GAAP"). A reconciliation of each of the foregoing historical non-GAAP financial measures to the most directly comparable historical GAAP financial measures is provided in the attached tables for each of the fiscal periods indicated.

Special Note on Forward-Looking Statements:

Statements in this press release that relate to future results and events are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933 and are based on Dell Technologies' current expectations. In some cases, you can identify these statements by such forward-looking words as "anticipate," "believe," "confidence," "could," "estimate," "expect," "guidance," "intend," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should," "will" and "would," or similar words or expressions that refer to future events or outcomes.

Dell Technologies' results or events in future periods could differ materially from those expressed or implied by these forward-looking statements because of risks, uncertainties, and other factors that include, but are not limited to, the following: competitive pressures; Dell Technologies' reliance on third-party suppliers for products and components, including reliance on single-source or limited-source suppliers; Dell Technologies' ability to achieve favorable pricing from its vendors; adverse global economic conditions and instability in financial markets; Dell Technologies' execution of its growth, business and acquisition strategies; the success of Dell Technologies' cost efficiency measures; Dell Technologies' ability to manage solutions and products and services transitions in an effective manner; Dell Technologies' ability to deliver high-quality products and services; Dell Technologies' foreign operations and ability to generate substantial non-U.S.net revenue; Dell Technologies' product, customer, and geographic sales mix, and seasonal sales trends; the performance of Dell Technologies' sales channel partners; access to the capital markets by Dell Technologies or its customers; weak economic conditions and additional regulation; counterparty default risks; the loss by Dell Technologies of any services contracts with its customers, including government contracts, and its ability to perform such contracts at its estimated costs; Dell Technologies' ability to develop and protect its proprietary intellectual property or obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; infrastructure disruptions, cyberattacks, or other data security breaches; Dell Technologies' ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other tax compliance matters; impairment of portfolio investments; unfavorable results of legal proceedings; increased costs and additional regulations and requirements as a result of Dell Technologies operation as a public company; Dell Technologies' ability to develop and maintain effective internal control over financial reporting; compliance requirements of changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; the costs, time, and effort required to be dedicated to the integration of the Dell and EMC businesses; the ability to realize the anticipated synergies from the merger with EMC; the ability to integrate EMC's technology, solutions, products, and services with those of Dell in an effective manner; the impact of the financial performance of VMware; and the market volatility of Dell Technologies' pension plan assets.

This list of risks, uncertainties, and other factors is not complete. Dell Technologies discusses some of these matters more fully, as well as certain risk factors that could affect the Dell Technologies' business, financial condition, results of operations, and prospects, in its reports filed with the Securities and Exchange Commission, including Dell Technologies' Annual Report on Form 10-K for the fiscal year ended February 3, 2017, quarterly reports on Form 10-Q, and current reports on Form 8-K. These filings are available for review through the Securities and Exchange Commission's website at www.sec.gov. Any or all forward-looking statements Dell Technologies makes may turn out to be wrong and can be affected by inaccurate assumptions Dell Technologies might make or by known or unknown risks, uncertainties and other factors, including those identified in this press release. Accordingly, you should not place undue reliance on the forward-looking statements made in this press release, which speak only as of its date. Dell Technologies does not undertake to update, and expressly disclaims any duty to update, its forward-looking statements, whether as a result of circumstances or events that arise after the date they are made, new information, or otherwise.

DELL TECHNOLOGIES INC.
Condensed Consolidated Statements of Income (Loss) and Related Financial Highlights
(in millions, except per share amounts and percentages; unaudited)
                                                                            Three Months Ended                                     Nine Months Ended
                                                                            November 3, 2017        October 28, 2016       Change  November 3, 2017        October 28, 2016       Change
Net revenue:
Products                                                                    $             14,680    $             12,366   19 %    $             42,003    $             33,510   25 %
Services                                                                    4,930                   3,881                  27 %    14,722                  8,058                  83 %
Total net revenue                                                           19,610                  16,247                 21 %    56,725                  41,568                 36 %
Cost of net revenue:
Products                                                                    12,369                  10,562                 17 %    36,206                  28,856                 25 %
Services                                                                    2,078                   1,786                  16 %    6,245                   4,284                  46 %
Total cost of net revenue                                                   14,447                  12,348                 17 %    42,451                  33,140                 28 %
Gross margin                                                                5,163                   3,899                  32 %    14,274                  8,428                  69 %
Operating expenses:
Selling, general, and administrative                                        4,625                   4,556                  2 %     13,989                  8,647                  62 %
Research and development                                                    1,071                   855                    25 %    3,297                   1,365                  142 %
Total operating expenses                                                    5,696                   5,411                  5 %     17,286                  10,012                 73 %
Operating loss                                                              (533)                   (1,512)                65 %    (3,012)                 (1,584)                (90)%
Interest and other, net                                                     (682)                   (794)                  14 %    (1,800)                 (1,362)                (32)%
Loss from continuing operations before income taxes                         (1,215)                 (2,306)                47 %    (4,812)                 (2,946)                (63)%
Income tax benefit                                                          (274)                   (669)                  59 %    (1,510)                 (623)                  (142)%
Net loss from continuing operations                                         (941)                   (1,637)                43 %    (3,302)                 (2,323)                (42)%
Income (loss) from discontinued operations, net of income taxes             --                      (438)                  100 %   --                      875                    (100)%
Net loss                                                                    (941)                   (2,075)                55 %    (3,302)                 (1,448)                (128)%
Less: Net loss attributable to non-controlling interests                    (4)                     (11)                   64 %    (85)                    (12)                   (608)%
Net loss attributable to Dell Technologies Inc.                             $               (937)   $           (2,064)    55 %    $             (3,217)   $             (1,436)  (124)%
Earnings (loss) per share attributable to Dell Technologies Inc. - basic:
Continuing operations - Class V Common Stock - basic                        $                1.10   $                0.79          $                2.50   $                0.79
Continuing operations - DHI Group - basic                                   $              (2.05)   $              (3.62)          $              (6.57)   $              (5.70)
Discontinued operations - DHI Group - basic                                 $                   --  $              (0.88)          $                   --  $                2.01
Earnings (loss) per share attributable to Dell Technologies Inc. - diluted:
Continuing operations - Class V Common Stock - diluted                      $                1.09   $                0.78          $                2.46   $                0.78
Continuing operations - DHI Group - diluted                                 $              (2.05)   $              (3.63)          $              (6.58)   $              (5.70)
Discontinued operations - DHI Group - diluted                               $                   --  $              (0.88)          $                   --  $                2.01
Weighted-average shares outstanding:
Basic - Class V Common Stock                                                202                     222                            204                     222
Diluted - Class V Common Stock                                              202                     222                            204                     222
Basic - DHI Group                                                           567                     497                            567                     436
Diluted - DHI Group                                                         567                     497                            567                     436
Percentage of Total Net Revenue:
Gross margin                                                                26 %                    24 %                           25 %                    20 %
Selling, general, and administrative                                        24 %                    28 %                           25 %                    21 %
Research and development                                                    5 %                     5 %                            6 %                     3 %
Operating expenses                                                          29 %                    33 %                           30 %                    24 %
Operating loss                                                              (3)%                    (9)%                           (5)%                    (4)%
Loss from continuing operations before income taxes                         (6)%                    (14)%                          (8)%                    (7)%
Net loss from continuing operations                                         (5)%                    (10)%                          (6)%                    (6)%
Income tax rate                                                             23 %                    29 %                           31 %                    21 %
DELL TECHNOLOGIES INC.
Condensed Consolidated Statements of Financial Position
(in millions; unaudited)
                                                               November 3, 2017          February 3, 2017
ASSETS
Current assets:
Cash and cash equivalents                                      $                11,706   $                  9,474
Short-term investments                                         2,008                     1,975
Accounts receivable, net                                       9,189                     9,420
Short-term financing receivables, net                          3,643                     3,222
Inventories, net                                               2,582                     2,538
Other current assets                                           5,397                     4,144
Total current assets                                           34,525                    30,773
Property, plant, and equipment, net                            5,378                     5,653
Long-term investments                                          4,273                     3,802
Long-term financing receivables, net                           3,317                     2,651
Goodwill                                                       39,330                    38,910
Intangible assets, net                                         29,846                    35,053
Other non-current assets                                       1,725                     1,364
Total assets                                                   $              118,394    $              118,206
LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt                                                $                  6,235  $                  6,329
Accounts payable                                               16,711                    14,422
Accrued and other                                              6,901                     7,119
Short-term deferred revenue                                    10,895                    10,265
Total current liabilities                                      40,742                    38,135
Long-term debt                                                 45,416                    43,061
Long-term deferred revenue                                     9,161                     8,431
Other non-current liabilities                                  7,487                     9,339
Total liabilities                                              102,806                   98,966
Redeemable shares                                              362                       231
Stockholders' equity:
Total Dell Technologies Inc. stockholders' equity              9,519                     13,243
Non-controlling interests                                      5,707                     5,766
Total stockholders' equity                                     15,226                    19,009
Total liabilities, redeemable shares, and stockholders' equity $              118,394    $              118,206
DELL TECHNOLOGIES INC.
Condensed Consolidated Statements of Cash Flows
(in millions; unaudited)
                                                                                  Three Months Ended                                   Nine Months Ended
                                                                                  November 3, 2017           October 28, 2016          November 3, 2017          October 28, 2016
Cash flows from operating activities:
Net loss                                                                          $                   (941)  $                (2,075)  $                (3,302)  $                (1,448)
Adjustments to reconcile net loss to net cash provided by operating activities    2,564                      1,829                     6,981                     3,017
Change in cash from operating activities                                          1,623                      (246)                     3,679                     1,569
Cash flows from investing activities:
Investments:
Purchases                                                                         (1,194)                    (503)                     (3,454)                   (511)
Maturities and sales                                                              935                        543                       2,993                     561
Capital expenditures                                                              (341)                      (182)                     (902)                     (417)
Proceeds from sale of facilities, land, and other assets                          --                         5                         --                        24
Capitalized software development costs                                            (94)                       (85)                      (281)                     (85)
Collections on purchased financing receivables                                    15                         6                         25                        31
Acquisition of businesses, net                                                    --                         (37,614)                  (223)                     (37,614)
Divestitures of businesses, net                                                   --                         --                        --                        --
Asset acquisitions, net                                                           (9)                        --                        (95)                      --
Asset dispositions, net                                                           (12)                       --                        (53)                      --
Other                                                                             --                         (8)                       --                        (48)
Change in cash from investing activities                                          (700)                      (37,838)                  (1,990)                   (38,059)
Cash flows from financing activities:
Payment of dissenting shares obligation                                           --                         --                        --                        (446)
Proceeds from the issuance of DHI Group Common Stock                              --                         4,404                     --                        4,404
Proceeds from the issuance of common stock of subsidiaries                        30                         1                         110                       101
Repurchases of DHI Group Common Stock                                             (4)                        (8)                       (6)                       (10)
Repurchases of Class V Common Stock                                               (300)                      (132)                     (722)                     (132)
Repurchases of common stock of subsidiaries                                       (555)                      (611)                     (555)                     (611)
Issuance of common stock under employee plans                                     --                         --                        1                         --
Payments for debt issuance costs                                                  (39)                       (834)                     (44)                      (849)
Proceeds from debt                                                                8,416                      43,838                    13,192                    45,986
Repayments of debt                                                                (5,872)                    (7,000)                   (11,181)                  (9,638)
Share repurchases for tax withholdings on vesting of equity awards                (105)                      (26)                      (299)                     (28)
Other                                                                             --                         4                         --                        10
Change in cash from financing activities                                          1,571                      39,636                    496                       38,787
Effect of exchange rate changes on cash and cash equivalents                      (1)                        (21)                      47                        31
Change in cash and cash equivalents                                               2,493                      1,531                     2,232                     2,328
Cash and cash equivalents at beginning of period, including amounts held for sale 9,213                      7,373                     9,474                     6,576
Cash and cash equivalents at end of the period                                    $                11,706    $                  8,904  $                11,706   $                  8,904
Less: Cash included in current assets held for sale                               --                         82                        --                        82
Cash and cash equivalents from continuing operations                              $                11,706    $                  8,822  $                11,706   $                  8,822
DELL TECHNOLOGIES INC.
Segment Information
(in millions, except percentages; unaudited)
                                                        Three Months Ended                                                                      Nine Months Ended
                                                        November 3, 2017              October 28, 2016              Change                      November 3, 2017             October 28, 2016              Change
Client Solutions Group (CSG):
Net Revenue:
Commercial                                              $                     6,907   $                     6,400   8 %                         $                   20,453   $                   19,343    6 %
Consumer                                                3,052                         2,787                         10 %                        8,413                        7,635                         10 %
Total CSG net revenue                                   $                     9,959   $                     9,187   8 %                         $                   28,866   $                   26,978    7 %
Operating Income:
CSG operating income                                    $                        672  $                        634  6 %                         $                     1,612  $                     1,503   7 %
% of CSG net revenue                                    7 %                           7 %                                                       6 %                          6 %
% of total segment operating income                     34 %                          30 %                                                      34 %                         44 %
Infrastructure Solutions Group (ISG):
Net Revenue:
Servers and networking                                  $                     3,851   $                     2,910   32 %                        $                   10,822   $                     9,222   17 %
Storage                                                 3,667                         3,079                         19 %                        11,018                       4,159                         165 %
Total ISG net revenue                                   $                     7,518   $                     5,989   26 %                        $                   21,840   $                   13,381    63 %
Operating Income:
ISG operating income                                    $                        678  $                        897  (24)%                       $                     1,431  $                     1,389   3 %
% of ISG net revenue                                    9 %                           15 %                                                      7 %                          10 %
% of total segment operating income                     34 %                          43 %                                                      30 %                         40 %
VMware:
Net Revenue:
Total VMware net revenue                                $                     1,953   $                     1,289   52 %                        $                     5,596  $                     1,289   334 %
Operating Income:
VMware operating income                                 $                        639  $                        548  17 %                        $                     1,686  $                        548  208 %
% of VMware net revenue                                 33 %                          43 %                                                      30 %                         43 %
% of total segment operating income                     32 %                          26 %                                                      36 %                         16 %
Reconciliation to consolidated net revenue:
Reportable segment net revenue                          $                   19,430    $                   16,465                                $                   56,302   $                   41,648
Other businesses (a)                                    475                           312                                                       1,409                        530
Unallocated transactions (b)                            --                            --                                                        (1)                          63
Impact of purchase accounting (c)                       (295)                         (530)                                                     (985)                        (673)
Total net revenue                                       $                   19,610    $                   16,247                                $                   56,725   $                   41,568
Reconciliation to consolidated operating income (loss):
Reportable segment operating income                     $                     1,989   $                     2,079                               $                     4,729  $                     3,440
Other businesses (a)                                    6                             (13)                                                      10                           (48)
Unallocated transactions (b)                            (9)                           (91)                                                      (4)                          (122)
Impact of purchase accounting (c)                       (366)                         (850)                                                     (1,195)                      (1,054)
Amortization of intangibles                             (1,734)                       (1,164)                                                   (5,250)                      (2,146)
Transaction-related expenses (d)                        (86)                          (1,200)                                                   (415)                        (1,329)
Other corporate expenses (e)                            (333)                         (273)                                                     (887)                        (325)
Total operating loss                                    $                      (533)  $                   (1,512)                               $                   (3,012)  $                   (1,584)
_________________
(a) Other businesses consist of RSA Information Security, SecureWorks, Pivotal, and Boomi, and do not constitute a reportable segment, either individually or collectively, as the results of the businesses are not material to the Company's overall results and the businesses do not meet the criteria for reportable segments.
(b) Unallocated transactions includes long-term incentives, certain short-term incentive compensation expenses, and other corporate items that are not allocated to Dell Technologies' reportable segments.
(c) Impact of purchase accounting includes non-cash purchase accounting adjustments that are primarily related to the EMC merger transaction.
(d) Transaction-related expenses includes acquisition, integration, and divestiture related costs.
(e) Other corporate expenses includes severance and facility action costs as well as stock-based compensation expense.

SUPPLEMENTAL SELECTED NON-GAAP FINANCIAL MEASURES These tables present information about the Company's non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income from continuing operations, EBITDA, and adjusted EBITDA, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with generally accepted accounting principles in the United States of America ("GAAP"). A detailed discussion of Dell Technologies' reasons for including these non-GAAP financial measures, the limitations associated with these measures, the items excluded from these measures, and our reason for excluding those items are presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" in our periodic reports filed with the SEC. Dell Technologies encourages investors to review the non-GAAP discussion in conjunction with the presentation of non-GAAP financial measures.

DELL TECHNOLOGIES INC.
Selected Non-GAAP Financial Measures
(in millions, except percentages; unaudited)
                                               Three Months Ended                                         Nine Months Ended
                                               November 3, 2017          October 28, 2016         Change  November 3, 2017          October 28, 2016        Change
Non-GAAP net revenue                           $                19,905   $              16,777    19 %    $                57,710   $              42,241   37 %
Non-GAAP gross margin                          $                  6,417  $                5,324   21 %    $                18,163   $              10,224   78 %
% of non-GAAP net revenue                      32 %                      32 %                             31 %                      24 %
Non-GAAP operating expenses                    $                  4,431  $                3,349   32 %    $                13,428   $                6,954  93 %
% of non-GAAP net revenue                      22 %                      20 %                             23 %                      16 %
Non-GAAP operating income                      $                  1,986  $                1,975   1 %     $                  4,735  $                3,270  45 %
% of non-GAAP net revenue                      10 %                      12 %                             8 %                       8 %
Non-GAAP net income from continuing operations $                  1,109  $                   970  14 %    $                  2,563  $                1,596  61 %
% of non-GAAP net revenue                      6 %                       6 %                              4 %                       4 %
Adjusted EBITDA                                $                  2,318  $                2,230   4 %     $                  5,751  $                3,757  53 %
% of non-GAAP net revenue                      12 %                      13 %                             10 %                      9 %
DELL TECHNOLOGIES INC.
Reconciliation of Selected Non-GAAP Financial Measures
(in millions, except percentages; unaudited)
                                               Three Months Ended                                                   Nine Months Ended
                                               November 3, 2017              October 28, 2016               Change  November 3, 2017             October 28, 2016             Change
Net revenue                                    $                   19,610    $                   16,247     21 %    $                   56,725   $                   41,568   36 %
Non-GAAP adjustments:
Impact of purchase accounting                  295                           530                                    985                          673
Non-GAAP net revenue                           $                   19,905    $                   16,777     19 %    $                   57,710   $                   42,241   37 %
Gross margin                                   $                     5,163   $                     3,899    32 %    $                   14,274   $                     8,428  69 %
Non-GAAP adjustments:
Impact of purchase accounting                  307                           729                                    1,020                        897
Amortization of intangibles                    914                           604                                    2,784                        806
Transaction-related expenses                   5                             30                                     22                           25
Other corporate expenses                       28                            62                                     63                           68
Non-GAAP gross margin                          $                     6,417   $                     5,324    21 %    $                   18,163   $                   10,224   78 %
Operating expenses                             $                     5,696   $                     5,411    5 %     $                   17,286   $                   10,012   73 %
Non-GAAP adjustments:
Impact of purchase accounting                  (59)                          (121)                                  (175)                        (157)
Amortization of intangibles                    (820)                         (560)                                  (2,466)                      (1,340)
Transaction-related expenses                   (81)                          (1,170)                                (393)                        (1,304)
Other corporate expenses                       (305)                         (211)                                  (824)                        (257)
Non-GAAP operating expenses                    $                     4,431   $                     3,349    32 %    $                   13,428   $                     6,954  93 %
Operating loss                                 $                      (533)  $                   (1,512)    65 %    $                   (3,012)  $                   (1,584)  (90)%
Non-GAAP adjustments:
Impact of purchase accounting                  366                           850                                    1,195                        1,054
Amortization of intangibles                    1,734                         1,164                                  5,250                        2,146
Transaction-related expenses                   86                            1,200                                  415                          1,329
Other corporate expenses                       333                           273                                    887                          325
Non-GAAP operating income                      $                     1,986   $                     1,975    1 %     $                     4,735  $                     3,270  45 %
Net loss from continuing operations            $                      (941)  $                   (1,637)    43 %    $                   (3,302)  $                   (2,323)  (42)%
Non-GAAP adjustments:
Impact of purchase accounting                  366                           850                                    1,195                        1,054
Amortization of intangibles                    1,734                         1,164                                  5,250                        2,146
Transaction-related expenses                   86                            1,200                                  415                          1,326
Other corporate expenses                       333                           273                                    887                          325
Aggregate adjustment for income taxes          (469)                         (880)                                  (1,882)                      (932)
Non-GAAP net income from continuing operations $                     1,109   $                        970   14 %    $                     2,563  $                     1,596  61 %
Net loss from continuing operations            $                      (941)  $                   (1,637)    43 %    $                   (3,302)  $                   (2,323)  (42)%
Adjustments:
Interest and other, net                        682                           794                                    1,800                        1,362
Income tax benefit                             (274)                         (669)                                  (1,510)                      (623)
Depreciation and amortization                  2,137                         1,576                                  6,491                        2,799
EBITDA                                         $                     1,604   $                          64  NM      $                     3,479  $                     1,215  186 %
EBITDA                                         $                     1,604   $                          64  NM      $                     3,479  $                     1,215  186 %
Adjustments:
Stock-based compensation expense               221                           144                                    630                          177
Impact of purchase accounting                  298                           693                                    990                          851
Transaction-related expenses                   86                            1,200                                  415                          1,366
Other corporate expenses                       109                           129                                    237                          148
Adjusted EBITDA                                $                     2,318   $                     2,230    4 %     $                     5,751  $                     3,757  53 %

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SOURCE Dell Technologies

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SOURCE: Comtex

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