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VMware, Inc. (VMW)

Q2 2018 Earnings Conference Call

August 24, 2017 17:00 ET


Paul Ziots - VP of Investor Relations

Pat Gelsinger - Chief Executive Officer

Zane Rowe - Executive Vice President and Chief Financial Officer


Karl Keirstead - Deutsche Bank

Mark Murphy - JPMorgan

Matt Hedberg - RBC Capital Markets

Keith Weiss - Morgan Stanley

Walter Pritchard - Citi

John DiFucci - Jefferies

Brad Reback - Stifel

Michael Tourette - Raymond James

Kash Rangan - Bank of America Merrill Lynch

Raimo Lenschow - Barclays

Kirk Materne - Evercore ISI

Abhey Lamba - Mizuho Securities

Jayson Noland - Baird



Good day, and welcome to the VMware Second Quarter Fiscal Year 2018 Earnings Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Mr. Paul Ziots, Vice President of Investor Relations. Please go ahead, sir.

Paul Ziots

Thank you. Good afternoon, everyone, and welcome to VMware's second quarter fiscal 2018 earnings conference call. On the call, we have Pat Gelsinger, Chief Executive Officer; and Zane Rowe, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will take questions.

Our press release was issued after close of market and is posted on our Web site where this call is being simultaneously webcast. Slides which accompany this webcast can be viewed in conjunction with live remarks and can also be downloaded at the conclusion of the webcast from ir.vmware.com.

On this call today, we will make forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially as a result of various risk factors including those described in the 10-Ks, 10-Qs and 8-Ks VMware files with the SEC. We assume no obligation to and do not currently intend to update any such forward-looking statements.

In addition, during today's call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures which are used as measures of VMware's performance should be considered in addition to, not as a substitute for or in isolation from GAAP measures. Our non-GAAP measures exclude the effect on our GAAP results of stock-based compensation, amortization of acquired intangible assets, employer payroll tax on employee stock transactions, acquisition, divestitures and other related items, and include non-GAAP tax rate adjustments. You can find additional disclosures regarding these non-GAAP measures including reconciliations with comparable GAAP measures in the press release and on our Investor Relations website.

The webcast replay of this call will be available for the next 60 days on our company website under the Investor Relations link. Our third quarter fiscal 2018 quiet period begins at the close of business Thursday, October 19, 2017.

Year-over-year comparisons of quarterly financial results included on this call compare results for VMware's fiscal 2018 second quarter May 6 through August 4, 2017 to VMware's fiscal 2016 second quarter of April 1 through June 30, 2016.

With that, I'll turn it over to Pat.

Pat Gelsinger

Thank you, Paul and a very good afternoon everyone.

We are very pleased with our Q2 results which were driven by broad-based strength across the product portfolio in all three geographies. Revenue grew 12% year-over-year with non-GAAP earnings of $1.19 per share. We feel confident about our continued growth as we move into the second half of the year and as announced last week we have increased our guidance for fiscal 2018. Zane will address this more specifically later in the call.

As we continue our multi-year journey from a compute virtualization company to offer a broad portfolio of products driving efficiency and digital transformation. Customers are increasingly turning to VMware to help them run, manage, secure and connect their applications across all clouds and all devices.

The number of factors contributed to our strength in Q2 and increased outlook for the year, these include our cloud strategy and products resonating with customers, continued strength in our sales execution and ecosystem momentum across all geos and the strengthening of the overall market environment for enterprise software.

During the quarter, we launched a number of new product offerings in compute management and end user computing. We also received strong analyst validation across the portfolio. In June, we announced the major upgrade to the VMware vRealize cloud management platform for managing a multi-cloud environment.

This offering enables customers to manage and provision at scale including compute network storage and application services across multi-cloud environments. For the fourth year in a row IDC named VMware as a global market share leader in both cloud systems management and datacenter automation. We continue to be pleased with the adoption of NSX. We believe NSX inclusion in all of our top 10 deals this quarter is a strong indication that the market is standardizing on VMware NSX to transform datacenters.

We advanced our position as a visionary in the July 2017 Gartner Magic Quadrant for datacenter networking. We believe that the majority of our vSAN customers are now running business critical applications and databases on the platform. Following the release of vSAN 6.6 in April, we are continuing to see tremendous momentum with nearly 10,000 customers.

In our end user computing business, we are particularly pleased by market adoption of Workspace ONE. Workspace ONE is redefining the category by providing a complete solution across any app and across the broadest set of devices and operating systems in the industry. Customers are replacing the silos of the current endpoint solutions with Workspace ONE consolidating their mobile identity and desktop solutions into a single platform.

This quarter Trend Micro also joined McAfee and Symantec in VMware's mobile security alliance. During the quarter our leadership in enterprise mobility management or EMM was again acknowledged by leading analyst firm Gartner who named VMware AirWatch leader in the June 2017 magic quadrant for EMM suites and positioned us with the highest and ability to execute and complete [this vision] [ph]. We were also named as a leader in the IDC EMM MarketScape.

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