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VMware, Inc. (VMW)

Q3 2019 Earnings Conference Call

November 29, 2018, 17:00 ET

Executives

Paul Ziots - VP, IR

Patrick Gelsinger - CEO & Director

Zane Rowe - CFO & EVP

Analysts

Kasthuri Rangan - Bank of America Merrill Lynch

John DiFucci - Jefferies

Karl Keirstead - Deutsche Bank

Matthew Hedberg - RBC Capital Markets

Jason Ader - William Blair & Company

Michael Turits - Raymond James & Associates

Alexander Kurtz - KeyBanc Capital Markets

Heather Bellini - Goldman Sachs Group

Daniel Ives - Wedbush Securities

Presentation

Operator

Good day, and welcome to the VMware Third Quarter Fiscal Year 2019 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, Investor Relations. Please go ahead, sir.

Paul Ziots

Thank you. Good afternoon, everyone, and welcome to VMware's Third Quarter Fiscal 2019 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 the close of market and is posted on our website, where this call is being simultaneously webcast. Slides, which accompany this webcast, can be viewed in conjunction with live remarks. It 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 to stock-based compensation; amortization of acquired intangible assets; employer payroll tax and employee stock transactions; acquisition, disposition and other related items, including the gains or losses on Pivotal Software; and discrete items impacting our GAAP tax rate. 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 fourth quarter fiscal 2019 quiet period begins at the close of business, Thursday, January 17, 2019.

In addition, VMware adopted ASC 606 on a full retrospective basis effective February 3, 2018. Accordingly, the financial results for the third quarter of fiscal 2019 presented in our press release and discussed on this call have been prepared under ASC 606. In order to provide meaningful comparisons to prior periods, VMware has included statements of incoming cash flows for the 3 and 9 months ended November 3, 2017, adjusted for ASC 606, and the balance sheet as of the end of fiscal 2018 just for ASC 606 on our press release. All year-over-year comparisons discussed on this call, including third quarter fiscal 2019 results and our forward-looking guidance for fiscal 2019 are comparisons to the corresponding periods of fiscal 2018 as adjusted for ASC 606.

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

Patrick Gelsinger

Thank you, Paul. Q3 was another strong quarter for VMware, and we're pleased with our results, which continue to be driven by broad-based strength across our diverse product portfolio and all 3 geographies. In Q3, total revenue increased 14% year-over-year with non-GAAP earnings per share growth of 26% to $1.56 per share. Customers continue to turn to VMware to help them run, manage, secure and connect their applications in this multi-cloud, multi-device world. The increasing importance of hybrid cloud and expectations for IT infrastructure to just work are expanding and driving core IT decisions towards VMware. We hosted our annual industry conference, VMworld, in Las Vegas and later, in Barcelona. We had tremendous engagement with our customers and partners and unveiled key new product offerings, two acquisitions, expanded partnerships as well as new innovative projects.

This past quarter, VMware Cloud on AWS saw further momentum with data center expansion across multiple regions globally, including the U.S., Europe, and now Asia Pacific, including Sydney and Tokyo. I was pleased to have Andy Jassy join me on stage at VMworld 2018 to announce the new Amazon Relational Database Service on VMware. Amazon RDS on VMware will make it easy for customers to set up, operate and scale databases in VMware-based software-defined data centers and hybrid environments. This allows us to bring AWS services to hundreds of thousands of customers that use VMware as their private cloud infrastructure of choice. This week, I was pleased to join Andy on stage at re:Invent, where we announced two new offerings for AWS Outposts. AWS Outposts offers customers a seamless cloud experience for their on-premises environment. As an extension of the VMware Cloud on AWS, we will offer a variant, which is specifically designed for AWS Outposts.

Further, we announced VMware Cloud Foundation for EC2 that provides AWS native Outposts customers a software-defined data center experience, utilizing key VMware technologies such as NSX, vRealize Automation and Network Insights, and AppDefense. Our partnership with AWS is expanding rapidly, and these offerings extend VMware's hybrid cloud vision with consistent infrastructure and operations for all VMware and AWS customers.

Read the rest of this transcript on seekingalpha.com