Dell Technologies Announces Second Quarter Fiscal 2023 Financial Results

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: risks and uncertainties relating to our spin-off of VMware, Inc., including the potential effects on our business of the transaction; the effects of the COVID-19 pandemic; 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, software, and services; cyber attacks or other data security incidents; Dell Technologies' foreign operations and ability to generate substantial non-U.S. net revenue; Dell Technologies' product, services, 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; material impairment of the value of goodwill or intangible assets; weak economic conditions and the effect of additional regulation on Dell Technologies' financial services activities; counterparty default risks; the loss by Dell Technologies of any contracts for ISG services and solutions and its ability to perform such contracts at their estimated costs; loss by Dell Technologies of government contracts; 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; disruptions in Dell Technologies' infrastructure; 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; compliance requirements of changing environmental and safety laws or other laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; the effect of global climate change and legal, regulatory, or market measures to address climate change; Dell Technologies' dependence on the services of Michael Dell and key employees; Dell Technologies' level of indebtedness; the effect of the transition from LIBOR as a reference rate to calculate interest rates under our variable-rate indebtedness; and business and financial factors and legal restrictions affecting continuation of Dell Technologies' quarterly cash dividend policy and dividend rate.

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 Dell Technologies' business, financial condition, results of operations, and prospects, in its reports filed with the SEC, including Dell Technologies' annual report on Form 10-K for the fiscal year ended January 28, 2022, quarterly reports on Form 10-Q, and current reports on Form 8-K. These filings are available for review through the SEC'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.

1 Based on units, as of Q2 CY2022 IDC data. Data between Q1 CY2013 and Q2 CY2022.

DELL TECHNOLOGIES INC. FINANCIAL INFORMATION

Basis of Presentation

Spin-Off of VMware, Inc. — On November 1, 2021, Dell Technologies Inc. completed its spin-off of VMware, Inc. ("VMware") by means of a special stock dividend (the "VMware Spin-off"). In accordance with applicable accounting guidance, the results of VMware, excluding Dell's resale of VMware offerings, are presented as discontinued operations in the Condensed Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for the three and six months ended July 30, 2021.  The Condensed Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations.

DELL TECHNOLOGIES INC.

Consolidated Statements of Income and Related Financial Highlights

(in millions, except percentages; unaudited)



Three Months Ended




Six Months Ended




July 29, 2022


July 30, 2021


Change


July 29, 2022


July 30, 2021


Change

Net revenue:












Products

$     20,810


$     18,895


10 %


$  41,274


$  36,382


13 %

Services

5,615


5,296


6 %


11,267


10,399


8 %

Total net revenue

26,425


24,191


9 %


52,541


46,781


12 %

Cost of net revenue:












Products

17,671


15,692


13 %


34,680


30,126


15 %

Services

3,315


3,024


10 %


6,638


5,916


12 %

Total cost of net revenue

20,986


18,716


12 %


41,318


36,042


15 %

Gross margin

5,439


5,475


(1) %


11,223


10,739


5 %

Operating expenses:












Selling, general, and administrative

3,543


3,761


(6) %


7,096


7,419


(4) %

Research and development

626


697


(10) %


1,307


1,316


(1) %

Total operating expenses

4,169


4,458


(6) %


8,403


8,735


(4) %

Operating income

1,270


1,017


25 %


2,820


2,004


41 %

Interest and other, net

(635)


(292)


(117) %


(972)


(580)


(68) %

Income before income taxes

635


725


(12) %


1,848


1,424


30 %

Income tax expense

129


96


34 %


273


136


101 %

Net income from continuing operations

506


629


(20) %


1,575


1,288


22 %

Income from discontinued operations, net of income taxes


251


(100) %



530


(100) %

Net income

506


880


(43) %


1,575


1,818


(13) %

Less: Net loss attributable to non-controlling interests

(5)


(2)


(150) %


(8)


(3)


(167) %

Less: Net income attributable to non-controlling interests of discontinued operations


51


(100) %



103


(100) %

Net income attributable to Dell Technologies Inc.

$           511


$           831


(39) %


$     1,583


$     1,718


(8) %













Percentage of Total Net Revenue:












Gross margin

20.6 %


22.6 %




21.4 %


23.0 %



Selling, general, and administrative

13.4 %


15.5 %




13.5 %


15.9 %



Research and development

2.4 %


2.9 %




2.5 %


2.8 %



Operating expenses

15.8 %


18.4 %




16.0 %


18.7 %



Operating income

4.8 %


4.2 %




5.4 %


4.3 %



Income before income taxes

2.4 %


3.0 %




3.5 %


3.0 %



Net income from continuing operations

1.9 %


2.6 %




3.0 %


2.8 %



Income tax rate

20.3 %


13.2 %




14.8 %


9.6 %




Amounts are based on underlying data and may not visually foot due to rounding.


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