Dell Reports Fiscal Year 2014 First Quarter Financial Results
Dell Reports Fiscal Year 2014 First Quarter Financial Results
- Revenue of $14.1 billion
- Enterprise Solutions, Services and Software revenue up 12 percent
- GAAP earnings of $0.07 per share; non-GAAP earnings of $0.21 per share
ROUND ROCK, Texas--(BUSINESS WIRE)-- Dell today announced fiscal 2014 first quarter results, with revenue of $14.1 billion, as the company grew revenue from Enterprise Solutions, Services and Software 12 percent year over year to $5.5 billion, or 8 percent growth, excluding the acquisition of Quest Software. Pricing adjustments that affected gross margins and continued acquisition-related costs in the quarter resulted in GAAP earnings of $0.07 per share and non-GAAP earnings of $0.21 per share.
"We made progress in building our enterprise solutions capabilities in the first quarter and are confident in our strategy to be the leading provider of end-to-end scalable solutions," said Brian Gladden, Dell chief financial officer. "In addition, we have taken actions to improve our competitive position in key areas of the business, especially in end-user computing, and it has affected profitability. We'll also continue to make important investments to support our strategy and drive long-term profitability."
- Revenue in the quarter was $14.1 billion, a 2 percent decrease from the previous year.
- GAAPoperating income for the quarter was $226 million, or 1.6 percent of revenue. Non-GAAP operating income was $590 million, or 4.2 percent of revenue.
- GAAP earnings per share in the quarter was 7 cents, down 81 percent from the previous year; non-GAAP EPS was 21 cents, down 51 percent.
- Cash used in operations in the quarter was $39 million. On a trailing, 12-month basis, Dell has generated $3.4 billion in cash flow. Dell ended the quarter with $13.2 billion in cash and investments.
Fiscal-Year 2014 First Quarter Results
|Operating Income (GAAP)||$||226||$||824||(73||)%|
|Net Income (GAAP)||$||130||$||635||(79||)%|
|Operating Income (non-GAAP)||$||590||$||1,010||(42||)%|
|Net Income (non-GAAP)||$||372||$||761||(51||)%|
Information about Dell's use of non-GAAP financial information is provided under "Non-GAAP Financial Measures" below. Non-GAAP financial information excludes amortization of purchased intangibles, severance and facility-actions, acquisition-related charges, costs incurred in Fiscal 2014 related to Dell's proposed merger, and other items. All comparisons in this press release are year over year unless otherwise noted.
Operating Segments Summary:
As previously announced, Dell has realigned its global operating segments to its end-to-end solutions portfolio in the Enterprise Solutions Group, Dell Services, Dell Software Group, and End User Computing Group.
- Enterprise SolutionsGroup revenue was $3.1 billion, a 10 percent increase. Operating income for the quarter was $136 million, a 71 percent increase. Dell server and networkingrevenueincreased 16 percent as the company gained share in the calendar first quarter. Dell networking continued to deliver strong growth, with a 24 percent revenue increase, including a 46 percent growth in the company's Force10 business. Dell storage revenue declined 10 percent.
- Dell Services revenue grew 2 percent to $2.1 billion driven by an 11 percent increase in revenue for infrastructure, cloud and security services. Support and deployment revenue increased 2 percent and applications and business process services declined 15 percent. Operating income was $370 million, a 10 percent increase.
- Dell Software revenue was $295 million, resulting in an operating loss. Dell enhanced its software capabilities during the quarter, investing in additional sales capability and research and development. Consistent with the company's business strategy when it acquired Quest Software, this business is on track to be accretive to earnings in the first quarter of fiscal year 2015.
- End User Computing revenue was $8.9 billionin the quarter, a 9 percent decrease. Operating income for the quarter was $224 million, a 65 percent decrease. Dell desktop and thin-client revenue declined 2 percent, mobility revenuedeclined 16 percent, and software from third parties and peripherals revenue declined 6 percent.
Given the company's announcement on Feb. 5 of a definitive merger agreement to take Dell private, the company is not providing an outlook for the fiscal 2014 second quarter.
Dell Inc. (NAS: DELL) listens to customers and delivers innovative technology and services that give them the power to do more. For more information, visit www.dell.com. As previously announced, the first-quarter analyst call with Brian Gladden, CFO, and Tom Sweet, corporate controller, will be webcast live today at 3:45 p.m. CDT and archived at www.dell.com/investor. To monitor highlighted facts from the analyst call, follow on the Dell Investor Relations Twitter account at: http://twitter.com/dellshares or hashtag #DellEarnings. To communicate directly with Dell, go to www.dell.com/dellshares.
Non-GAAP Financial Measures:
This press release includes information about non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively with non-GAAP gross margin and non-GAAP operating expenses, the "non-GAAP financial measures"), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. In the following tables, Dell has provided a reconciliation of each historical non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading "Reconciliation of Non-GAAP Financial Measures." Dell encourages investors to review the reconciliation in conjunction with Dell's presentation of these non-GAAP financial measures.
Special Note on Forward Looking Statements:
Statements in this press release that relate to future results and events are forward-looking statements and are based on Dell's current expectations. In some cases, you can identify these statements by such forward-looking words as "anticipate," "believe," "could," "estimate," "expect," "intend," "confidence," "may," "plan," "potential," "should," "will" and "would," or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: effects of our proposed merger; intense competition; Dell's reliance on third-party suppliers for product components, including reliance on several single-sourced or limited-sourced suppliers; Dell's ability to achieve favorable pricing from its vendors; weak global economic conditions and instability in financial markets; Dell's ability to manage effectively the change involved in implementing strategic initiatives; successful implementation of Dell's acquisition strategy; Dell's cost-efficiency measures; Dell's ability to effectively manage periodic product and services transitions; Dell's ability to deliver consistent quality products and services; Dell's ability to generate substantial non-U.S. net revenue; Dell's product, customer, and geographic sales mix, and seasonal sales trends; the performance of Dell's sales channel partners; access to the capital markets by Dell or its customers; weak economic conditions and additional regulation affecting our financial services activities; counterparty default; customer terminations of or pricing changes in services contracts, or Dell's failure to perform as it anticipates at the time it enters into services contracts; loss of government contracts; Dell's ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; infrastructure disruptions; cyber-attacks or other data security breaches; Dell's 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 compliance matters; impairment of portfolio investments; unfavorable results of legal proceedings; Dell's ability to attract, retain, and motivate key personnel; Dell's ability to maintain strong internal controls; changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; and other risks and uncertainties discussed in Dell's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its fiscal year ended February 1, 2013. Factors or risks that could cause our actual results to differ materially from the results we anticipate also include: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (2) the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; (3) the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters delivered pursuant to the merger agreement; (4) risks related to disruption of management's attention from the Company's ongoing business operations due to the transaction; and (5) the effect of the announcement of the proposed merger on the Company's relationships with its customers, operating results and business generally.Dell assumes no obligation to update its forward-looking statements.
Additional Information and Where to Find It
In connection with the proposed merger transaction, the Company filed with the SEC an amended preliminary proxy statement and other documents relating to the proposed merger on May 13, 2013.When completed, a definitive proxy statement and a form of proxy will be filed with the SEC and mailed to the Company's stockholders. Stockholders are urged to read the definitive proxy statement when it becomes available and any other documents to be filed with the SEC in connection with the proposed merger or incorporated by reference in the proxy statement because they will contain important information about the proposed merger.
Investors will be able to obtain a free copy of documents filed with the SEC at the SEC's website athttp://www.sec.gov. In addition, investors may obtain a free copy of the Company's filings with the SEC from the Company's website athttp://content.dell.com/us/en/corp/investor-financial-reporting.aspxor by directing a request to: Dell Inc. One Dell Way, Round Rock, Texas 78682, Attn: Investor Relations, (512) 728-7800,email@example.com.
The Company and its directors, executive officers and certain other members of management and employees of the Company may be deemed "participants" in the solicitation of proxies from stockholders of the Company in favor of the proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the stockholders of the Company in connection with the proposed mergerand their direct or indirect interests, by security holdings or otherwise, which may be different from those of the Company's stockholders generally, will be set forth in the proxy statement and the other relevant documents to be filed with the SEC. You can find information about the Company's executive officers and directors in its Annual Report on Form 10-K for the fiscal year ended February 1, 2013 and in its definitive proxy statement filed with the SEC on Schedule 14A on May 24, 2012.
Consolidated statements of income, financial position and cash flows and other financial data follow.
Dell is a trademark of Dell Inc. Dell disclaims any proprietary interest in the marks and names of others.
Condensed Consolidated Statement of Income and Related Financial Highlights
(in millions, except per share data and percentages)
|Three Months Ended||% Growth Rates|
|May 3,||May 4,|
|2013||2012||Yr. to Yr.|
|Services, including software related||3,172||2,999||6||%|
Total net revenue
|Cost of net revenue|
|Services, including software related||2,083||2,025||3||%|
|Total cost of net revenue||11,327||11,355||0||%|
|Selling, general and administrative||2,208||2,009||10||%|
|Research, development, and engineering||313||234||34||%|
|Total operating expenses||2,521||2,243||12||%|
|Interest and other, net||(68||)||(32||)||(114||%)|
|Income before income taxes||158||792||(80||%)|
|Income tax provision||28||157||(82||%)|
|Earnings per share:|
Cash dividends declared per common share
|Weighted average shares outstanding:|
Percentage of Total Net Revenue:
|Selling, general and administrative||15.7||%||13.9||%|
|Research, development, and engineering||2.2||%||1.7||%|
|Income before income taxes||1.1||%||5.5||%|
|Income tax rate||17.6||%||19.8||%|
Average total revenue/unit (approximate)
|Note: Percentage growth rates and ratios are calculated based on underlying data in thousands.|
|(in millions, except percentages)|
|Three Months Ended||% Growth Rates|
|May 3,||May 4,|
|2012||Yr. to Yr.|
End User Computing ("EUC"):
|Desktops and Thin Client||$||3,273||$||3,335||(2||%)|
|Third-Party software and peripherals||2,029||2,169||(6||%)|
|Total EUC Revenue||8,920||9,832||(9||%)|
|External EUC revenue||8,714||9,632|
|Internal EUC revenue||206||200|
|EUC operating income||224||639||(65||%)|
|% of segment revenue||2.5||%||6.5||%|
|% of total segment operating income||35||%||61||%|
Enterprise Solutions Group ("ESG"):
|Servers, peripherals, and networking||2,669||2,343||14||%|
|Total ESG revenue||3,093||2,816||10||%|
|External ESG revenue||2,959||2,681|
|Internal ESG revenue||134||135|
|ESG operating income||136||79||71||%|
|% of segment revenue||4.4||%||2.8||%|
|% of total segment operating income||21||%||8||%|
Dell Software Group:
|Total Dell Software Group revenue||295||38||NM|
|Dell Software Group operating income||(85||
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