false0001124610 0001124610 2020-02-27 2020-02-27



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRERT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 27, 2020
 
VMWARE, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-33622
 
94-3292913
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification Number)
 
3401 Hillview Avenue
Palo Alto
CA
 
94304
(Address of Principal Executive Offices)
 
(Zip code)
Registrant’s telephone number, including area code: (650427-5000

N/A
(Former Name or Former Address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A common stock
 
VMW
 
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02 Results of Operations and Financial Condition.
On February 27, 2020, VMware issued a press release announcing its financial results for the quarter and year ended January 31, 2020 (“Press Release”). The Press Release, which includes information regarding VMware’s use of non-GAAP financial measures, is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
The information in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act ”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.
 

Item 7.01 Regulation FD Disclosure.
On February 27, 2020, VMware also made available slides for its fourth quarter and full year fiscal 2020 earnings conference call conducted the same day on its investor relations webpage at ir.vmware.com, which are attached hereto as Exhibit 99.2 and are incorporated by reference herein.
    
The information in this Item 7.01 and Exhibit 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

Item 8.01 Other Events.

In December 2019, the staff of the Enforcement Division of the Securities and Exchange Commission (“SEC”) requested documents and information related to VMware’s backlog and associated accounting and disclosures. VMware is fully cooperating with the SEC’s investigation and is unable to predict the outcome of this matter at this time.


Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release of VMware, Inc. announcing financial results dated February 27, 2020
99.2 VMware Q4 & FY20 Earnings Conference Call Without FY21 Guidance slides dated February 27, 2020
        






SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
VMware, Inc.
 
 
 
 
 
 
 
 
Date: February 27, 2020
By:
 
/s/ Zane Rowe
 
 
 
Zane Rowe, Chief Financial Officer and Executive Vice President
 
 
 
 

 



Exhibit 99.1
VMware Reports Fourth Quarter and Fiscal Year 2020 Results

Delivers annual revenue of $10.81 billion; growth of 12% year-over-year
Subscription and SaaS increased 52% year-over-year, representing 18% of total revenue in Q4

PALO ALTO, Calif.,  February 27, 2020—VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the fourth quarter and full fiscal year 2020:
Quarterly Review
Revenue for the fourth quarter was $3.07 billion, an increase of 11% from the fourth quarter of fiscal 2019.
The combination of subscription and SaaS and license revenue was $1.59 billion, an increase of 14% from the fourth quarter of fiscal 2019.
Subscription and SaaS revenue for the fourth quarter was $556 million, an increase of 52% year-over-year.
GAAP net income for the fourth quarter was $321 million, or $0.76 per diluted share, compared to $496 million, or $1.17 per diluted share, for the fourth quarter of fiscal 2019. Non-GAAP net income for the fourth quarter was $868 million, or $2.05 per diluted share, up 9% per diluted share compared to $795 million, or $1.87 per diluted share, for the fourth quarter of fiscal 2019.
GAAP operating income for the fourth quarter was $250 million, a decrease of 58% from the fourth quarter of fiscal 2019. Non-GAAP operating income for the fourth quarter was $1.05 billion, an increase of 12% from the fourth quarter of fiscal 2019.
Operating cash flow for the fourth quarter was $1.09 billion. Free cash flow for the fourth quarter was $1.02 billion.
Total revenue plus sequential change in total unearned revenue grew 11% year-over-year.
The combination of subscription and SaaS and license revenue plus sequential change in unearned subscription and SaaS and license revenue grew 17% year-over-year.
Annual Review
Revenue for fiscal year 2020 was $10.81 billion, an increase of 12% from fiscal 2019.
The combination of subscription and SaaS and license revenue for fiscal 2020 was $5.06 billion, an increase of 16% from fiscal year 2019.
Subscription and SaaS revenue for fiscal year 2020 was $1.88 billion, an increase of 44% from fiscal year 2019.
GAAP net income for fiscal year 2020 was $6.41 billion, or $15.08 per diluted share, compared to $1.65 billion, or $3.92 per diluted share, for fiscal 2019. Non-GAAP net income for fiscal year 2020 was $2.66 billion, or $6.24 per diluted share, up 4% per diluted share compared to $2.52 billion, or $5.98 per diluted share, for fiscal 2019.
GAAP operating income for fiscal year 2020 was $1.44 billion, a decrease of 20% from fiscal 2019. Non-GAAP operating income for fiscal year 2020 was $3.26 billion, an increase of 11% from fiscal 2019.
Operating cash flow for fiscal year 2020 was $3.87 billion. Free cash flow for fiscal year 2020 was $3.59 billion




Cash was $2.91 billion, and unearned revenue was $9.27 billion, as of January 31, 2020.
“VMware delivered over $10 billion in revenue for the first time in company history in fiscal 2020, along with continued double-digit topline growth,” commented Pat Gelsinger, CEO, VMware. “Our results demonstrate the power of our broad-based portfolio and a strategy that continues to resonate with our customers.”

“We signed a record number of enterprise agreements above $10 million in Q4, including a significant increase in the value of subscription and SaaS offerings in the top ten agreements.” said Zane Rowe, executive vice president and CFO, VMware. “Subscription and SaaS revenue grew 52% year-over-year in the fourth quarter to $556 million, and is expected to continue strong growth in fiscal 2021.”

Growth rates in Q4 results include the recast of prior period financial information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control in accordance with generally accepted accounting principles (GAAP). Effective with the fourth quarter of fiscal year 2020, VMware is presenting a new revenue line item in its earnings reports entitled “subscription and SaaS revenue.” Accordingly, reported revenue consists of the following three components: license, subscription and SaaS, and services. Previously, subscription and SaaS revenue was referred to as “hybrid cloud subscription and SaaS revenue” and was allocated between license and services revenue. The cost of subscription and SaaS revenue was included in both cost of license revenue and cost of services revenue in prior periods and has been reclassified to conform with current period presentation.

To assist investors in their understanding of the impact of (1) combined Pivotal with VMware results in the recast financial statements and (2) reclassifying revenue from two to three categories, the company has posted a slide deck on its Investor Relations webpage at ir.vmware.com. The slide deck details the impact of Pivotal adjustments and the reclassification of revenues on VMware’s fourth quarter of fiscal 2020 results to enable investors to compare VMware’s performance in the quarter to the fourth quarter guidance that VMware provided on its previous quarter earnings call on November 26, 2019, which excluded Pivotal, as the acquisition had not been completed at that time, and did not separate out subscription and SaaS revenue. The slide deck also includes a similar comparison of VMware’s full year fiscal 2020 cash flows to November 26, 2019 guidance and a tabular summary of the differences in key metrics between VMware’s financial statements as previously reported and as recast for the seven fiscal quarters beginning with the first quarter of fiscal 2019 and for full year fiscal 2019.
Business Highlights & Strategic Announcements
VMware completed the acquisition of Pivotal on December 30, 2019. The combination of Pivotal’s developer-centric offerings with VMware’s upstream Kubernetes run-time infrastructure and management tools will allow VMware to deliver a comprehensive enterprise solution that enables dramatic improvements in developer productivity in the creation of modern applications.
At the RSA Conference, VMware advanced its Intrinsic Security Strategy for the world’s digital infrastructure by announcing “VMware Advanced Security for Cloud Foundation,” a new security suite that enables customers to replace legacy security solutions and deliver unified protection across private and public clouds. Product update announcements also included enhancements to the VMware Carbon Black Cloud and VMware Secure State.
VMware showcased how communications service providers (CSPs) across the world—including Millicom, Singtel, Telecom Italia, Telia Company and TIM Brasil—are adopting VMware’s Telco Cloud platform to accelerate time to revenue, automate service lifecycle and simplify operations management. VMware also unveiled new capabilities across its Telco and Edge Cloud product portfolio, including innovations to its telco cloud core, edge and RAN offerings.
VMware acquired Nyansa, which enables VMware to deliver an end-to-end network visibility, monitoring and remediation solution within VMware SD-WAN by VeloCloud that can proactively predict client problems, optimize application and network performance and better assure the behavior of critical IoT devices.
In the fourth quarter, VMware received further recognition from leading industry analysts:
VMware was positioned as a leader in The Forrester Wave™: Unified Endpoint Management, Q4 2019, which evaluated 13 unified endpoint management (UEM) vendors. VMware’s intelligence-driven digital




workspace platform, VMware Workspace ONE, was top ranked in the current offering and strategy categories. The platform also received the highest possible score in the product roadmap, roadmap execution, and partner ecosystem criteria, as well as in all of the report’s market presence criteria (i.e., customer count, Windows 10 customer count, devices under management, and revenue).1 
VMware was positioned as a leader in three recent IDC MarketScape reports related to the End-User Computing (EUC) space.2 

Recast Financial Statements and Addition of Subscription and SaaS Revenue Line item

On December 30, 2019, VMware completed its acquisition of Pivotal. As Pivotal was an entity under common control, pursuant to GAAP, financial statements for prior periods are required to be recast as if the entities were combined for all periods presented. Recast quarterly results on a GAAP and non-GAAP basis, consolidated statements of income and key cash flow metrics for fiscal year 2019 and fiscal year 2020 are included in this earnings press release. All comparisons of fiscal year and fourth quarter 2020 financial metrics to prior periods in this press release are comparisons to the recast financial metrics for the respective prior period.

To assist investors in their understanding of the impact of combining Pivotal with VMware results in the recast financial statements on prior periods and to compare current results to the financial results originally reported for prior periods, VMware is including tables attached to this press release showing the impact of Pivotal adjustments on its previously reported (1) GAAP and non-GAAP net income for each fiscal quarter for fiscal years 2019 and 2020 and for fiscal years 2019 and 2018; (2) fiscal year 2019 balance sheet; and (3) GAAP cash flows from operating activities and free cash flows for each fiscal quarter for fiscal years 2019 and 2020 and for fiscal years 2019 and 2018.

Additionally, effective with the fourth quarter of fiscal year 2020, VMware is presenting a new revenue line item in its earnings reports entitled “subscription and SaaS revenue.” Accordingly, reported revenue consists of the following three components: license, subscription and SaaS, and services. Previously, subscription and SaaS revenue was referred to as “hybrid cloud subscription and SaaS revenue” and was allocated between license and services revenue. In light of VMware’s recent acquisitions, management determined that revenue recognized from subscription and SaaS offerings will be presented separately. The new subscription and SaaS revenue line item includes revenue from VMware’s VCPP cloud offerings that are billed to customers on a consumption basis, revenue from Pivotal and other offerings that are billed on a subscription basis as well as revenue from SaaS offerings such as Workspace ONE and VMware Cloud on AWS. Revenue from prior periods has been reclassified to conform to the fourth quarter fiscal year 2020 presentation and is reflected in the recast quarterly financial statements for fiscal years 2019 and 2020 included in the tables accompanying this earnings press release.
The company will host a conference call today at 1:30 p.m. PT/ 4:30 p.m. ET to review financial results and business outlook. A live web broadcast of the event will be available on the VMware investor relations website at http://ir.vmware.com. Slides will accompany the web broadcast. The replay of the webcast and slides will be available on the website for two months. In addition, six quarters of historical data for unearned revenue will also be made available at http://ir.vmware.com in conjunction with the conference call.

1“The Forrester WaveTM: Unified Endpoint Management, Q4 2019”
2IDC MarketScape: Worldwide Unified Endpoint Management Software 2019-2020 Vendor Assessment (doc # US45355119, November 2019); IDC MarketScape: Worldwide Enterprise Mobility Management Software 2019-2020 Vendor Assessment (doc # US45353719, November 2019); and IDC MarketScape: Worldwide Enterprise Mobility Management Software for Ruggedized/IoT Device Deployments 2019-2020 Vendor Assessment (Doc #US45353819, November 2019)
# # #

About VMware




VMware software powers the world’s complex digital infrastructure. The company’s cloud, app modernization, networking, security, and digital workspace offerings help customers deliver any application on any cloud across any device. Headquartered in Palo Alto, California, VMware is committed to being a force for good, from its breakthrough technology innovations to its global impact. For more information, please visit https://www.vmware.com/company.html.
Additional Information
VMware’s website is located at www.vmware.com, and its investor relations website is located at http://ir.vmware.com. VMware’s goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about VMware, all of which is made available free of charge. The additional information includes: materials that VMware files with the SEC; announcements of investor conferences, speeches and events at which its executives talk about its products, services and competitive strategies; webcasts of its quarterly earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on its financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; other news, blogs and announcements that VMware may post from time to time that investors may find useful or interesting; and opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.
VMware, Pivotal, VMware Advances Security, Carbon Black, VMware Secure State, Nyansa, VeloCloud, Workspace ONE, VeloCloud, and VMware Cloud are registered trademarks or trademarks of VMware, Inc. or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding expected benefits to customers of VMware’s acquisitions of Pivotal and Nyansa, as well as products, solutions and services, including in areas of modern applications, security, telco and edge cloud, and VMware SD-WAN by Velocloud. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (1) adverse changes in general economic or market conditions; (2) delays or reductions in consumer, government and information technology spending; (3) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization software and cloud, end user and mobile computing, and security industries, as well as new product and marketing initiatives by VMware’s competitors; (4) the ability to successfully integrate into VMware acquired companies and assets and smoothly transition services related to divested assets from VMware; (5) rapid technological changes in the virtualization software and cloud, end user, security and mobile computing industries; (6) VMware’s customers’ ability to transition to new products, platforms, services, solutions and computing strategies in such areas as containerization, modern applications, intrinsic security and networking, cloud, digital workspaces, virtualization and the software defined data center, and the uncertainty of their acceptance of emerging technology; (7) VMware’s ability to enter into, maintain and extend strategically effective partnerships and alliances; (8) the continued risk of litigation and regulatory actions, including those related to the Carbon Black and Pivotal acquisitions; (9) VMware’s ability to protect its proprietary technology; (10) changes to product and service development timelines; (11) VMware’s relationship with Dell Technologies and Dell’s ability to control matters requiring stockholder approval, including the election of VMware’s board members and matters relating to Dell’s investment in VMware; (12) VMware’s ability to attract and retain highly qualified employees; (13) the ability of VMware to realize synergies from Dell; (14) risks associated with cyber-attacks, information security and privacy; (15) disruptions resulting from key management changes; (16) risks associated with international sales such as fluctuating currency exchange rates and increased trade barriers; (17) changes in VMware’s financial condition; (18) geopolitical changes such as Brexit and increased tariffs and trade barriers that could adversely impact our non-U.S. sales;




and (19) other business effects, including those related to industry, market, economic, political, regulatory and global health conditions, such as the coronavirus (COVID-19) public health emergency. These forward-looking statements are made as of the date of this press release, are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware’s most recent reports on Form 10-K and Form 10-Q and current reports on Form 8- K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

  
Contacts:

Paul Ziots
VMware Investor Relations
pziots@vmware.com
650-427-3267

Michael Thacker
VMware Global PR
mthacker@vmware.com
650-427-4454






VMware, Inc.

CONSOLIDATED STATEMENTS OF INCOME
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
January 31,

February 1,
 
January 31,

February 1,
 
 
2020

2019(1)
 
2020

2019(1)
Revenue(2):
 
 
 
 
 
 
 
 
License
 
$
1,034


$
1,027


$
3,181


$
3,042

Subscription and SaaS
 
556

 
367

 
1,877


1,303

Services
 
1,483


1,365


5,753


5,268

Total revenue
 
3,073


2,759


10,811


9,613

Operating expenses(2)(3):
 
 
 
 
 
 
 
 
Cost of license revenue
 
50

 
40

 
166


150

Cost of subscription and SaaS revenue
 
106

 
86

 
400

 
280

Cost of services revenue
 
317

 
292

 
1,233


1,122

Research and development
 
676

 
596

 
2,522


2,173

Sales and marketing
 
1,003

 
889

 
3,677


3,230

General and administrative
 
592

 
258

 
1,293


846

Realignment and loss on disposition
 
79

 

 
79


9

Operating income
 
250

 
598

 
1,441


1,803

Investment income (loss)
 
20

 
(7
)
 
60

 
161

Interest expense
 
(41
)
 
(34
)
 
(149
)
 
(134
)
Other income (expense), net
 
10

 
9

 
86

 
(1
)
Income before income tax
 
239

 
566

 
1,438


1,829

Income tax provision (benefit)
 
(76
)
 
87

 
(4,918
)
 
239

Net income
 
315

 
479

 
6,356


1,590

Less: Net loss attributable to non-controlling interests
 
(6
)
 
(17
)
 
(56
)
 
(60
)
Net income attributable to VMware, Inc.
 
$
321

 
$
496

 
$
6,412

 
$
1,650

Net income per weighted-average share attributable to VMware, Inc. common stockholders, basic for Classes A and B
 
$
0.77

 
$
1.19

 
$
15.37


$
3.99

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B
 
$
0.76

 
$
1.17

 
$
15.08


$
3.92

Weighted-average shares, basic for Classes A and B
 
417,225

 
417,499

 
417,058


413,769

Weighted-average shares, diluted for Classes A and B
 
424,007

 
424,630

 
425,235


421,131

__________
 
 
 
 
 
 
 
 
(1)  Adjusted to reflect the recast of prior period information due to the Pivotal Software, Inc. ("Pivotal") acquisition, which was accounted for as a transaction between entities under common control.
(2)  Effective the fourth quarter of fiscal 2020, management decided to separately present revenue recognized from subscription and SaaS offerings. Historically, subscription and SaaS revenue was allocated between license and services revenue. Prior period amounts have been reclassified to conform with current period presentation. Historically, cost of subscription and SaaS revenue was allocated between cost of license revenue and cost of services revenue in prior year. Prior period amounts have been reclassified to conform with current period presentation.
(3)  Includes stock-based compensation as follows:
 
 
 
 
 
 
 
 
Cost of license revenue
 
$

 
$

 
$
1

 
$
1

Cost of subscription and SaaS revenue
 
3

 
2

 
13

 
7

Cost of services revenue
 
24

 
16

 
83

 
58

Research and development
 
130

 
105

 
459

 
391

Sales and marketing
 
91

 
63

 
293

 
226

General and administrative
 
64

 
34

 
168

 
117



VMware, Inc.

CONSOLIDATED BALANCE SHEETS
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
 
 
 
 
 
January 31,
 
February 1,
 
2020
 
2019(1)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
2,915

 
$
3,532

Short-term investments

 
19

Accounts receivable, net of allowance for doubtful accounts of $7 and $6(1)
1,883

 
1,723

Due from related parties, net
1,457

 
1,090

Other current assets
436

 
305

Total current assets
6,691

 
6,669

Property and equipment, net
1,280

 
1,162

Other assets
2,266

 
1,088

Deferred tax assets
5,556

 
290

Intangible assets, net
1,172

 
966

Goodwill
9,329

 
7,418

Total assets
$
26,294

 
$
17,593

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
208

 
$
153

Accrued expenses and other
2,151

 
1,664

Current portion of long-term debt and other borrowings
2,747

 

Unearned revenue
5,218

 
4,339

Total current liabilities
10,324

 
6,156

Note payable to Dell
270

 
270

Long-term debt
2,731

 
3,972

Unearned revenue
4,050

 
3,100

Income tax payable
817

 
889

Operating lease liabilities
746

 

Other liabilities
347

 
315

Total liabilities
19,285

 
14,702

Contingencies
 
 
 
Stockholders’ equity:
 
 
 
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 110,484 and 110,715 shares
1

 
1

Class B convertible common stock, par value $0.01; authorized 1,000,000 shares; issued and outstanding 307,222 and 300,000 shares
3

 
3

Additional paid-in capital
2,000

 
2,959

Accumulated other comprehensive loss
(4
)
 
(2
)
Retained earnings (Accumulated deficit)
5,009

 
(1,096
)
Total VMware, Inc. stockholders’ equity
7,009

 
1,865

Non-controlling interests

 
1,026

Total stockholders’ equity
7,009

 
2,891

Total liabilities and stockholders’ equity
$
26,294

 
$
17,593

__________
 
 
 
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.


VMware, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
January 31,
 
February 1,
 
January 31,
 
February 1,
 
2020
 
2019(1)
 
2020
 
2019(1)
Operating activities:
 
 
 
 
 
 
 
Net income
$
315

 
$
479

 
$
6,356

 
$
1,590

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
247

 
189

 
873

 
727

Stock-based compensation
312

 
220

 
1,017

 
800

Deferred income taxes, net
(146
)
 
(52
)
 
(5,284
)
 
(110
)
Unrealized (gain) loss on equity securities, net
(1
)
 

 
(31
)
 
14

Loss on disposition

 
1

 

 
7

(Gain) loss on disposition of assets, revaluation and impairment, net

 
5

 
(4
)
 
2

Other
6

 
3

 
9

 
11

Changes in assets and liabilities, net of acquisitions:
 
 
 
 
 
 
 
Accounts receivable
(283
)
 
(506
)
 
(119
)
 
(214
)
Other current assets and other assets
(224
)
 
(99
)
 
(668
)
 
(347
)
Due to/from related parties, net
(673
)
 
(503
)
 
(374
)
 
(480
)
Accounts payable
21

 
(18
)
 
35

 
105

Accrued expenses and other liabilities
499

 
411

 
417

 
290

Income taxes payable
(38
)
 
(49
)
 
(23
)
 
(40
)
Unearned revenue
1,050

 
939

 
1,668

 
1,302

Net cash provided by operating activities
1,085

 
1,020

 
3,872

 
3,657

Investing activities:
 
 
 
 
 
 
 
Additions to property and equipment
(64
)
 
(68
)
 
(279
)
 
(254
)
Purchases of available-for-sale securities

 

 

 
(780
)
Sales of available-for-sale securities

 
3,811

 

 
3,999

Maturities of available-for-sale securities

 
488

 

 
2,393

Purchases of strategic investments
(12
)
 
(5
)
 
(30
)
 
(8
)
Proceeds from disposition of assets

 
3

 
22

 
41

Business combinations, net of cash acquired, and purchases of intangible assets

 
(419
)
 
(2,437
)
 
(938
)
Net cash paid on disposition of a business

 

 
(4
)
 
(11
)
Net cash provided by (used in) investing activities
(76
)
 
3,810

 
(2,728
)
 
4,442

Financing activities:
 
 
 
 
 
 
 
Proceeds from the initial public offering of Pivotal, net of issuance costs paid

 

 

 
544

Proceeds from issuance of common stock
14

 
36

 
308

 
259

Borrowings under term loan, net of issuance costs
1,400

 

 
3,393

 

Borrowings on credit facility, net of debt issuance costs

 

 

 
15

Repayment of term loan
(500
)
 

 
(1,900
)
 

Repayments on credit facility

 

 

 
(35
)
Repurchase of common stock
(55
)
 
(42
)
 
(1,334
)
 
(42
)
Shares repurchased for tax withholdings on vesting of restricted stock
(141
)
 
(129
)
 
(534
)
 
(357
)
Payment for Special Dividend

 
(11,000
)
 

 
(11,000
)
Payment to acquire non-controlling interests
(1,666
)
 

 
(1,666
)
 

Contribution from Dell

 
3

 
27

 
44

Payment for common control transaction with Dell

 

 

 
(8
)
Principal payments on finance lease obligations

 

 
(1
)
 

Net cash used in financing activities
(948
)
 
(11,132
)
 
(1,707
)
 
(10,580
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(2
)
 

 
(2
)
 
1

Net increase (decrease) in cash, cash equivalents and restricted cash
59

 
(6,302
)
 
(565
)
 
(2,480
)
Cash, cash equivalents and restricted cash at beginning of the period
2,972

 
9,898

 
3,596

 
6,076

Cash, cash equivalents and restricted cash at end of the period
$
3,031

 
$
3,596

 
$
3,031

 
$
3,596

Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
Issuance of VMware Class B common shares for Pivotal Class B common shares held by Dell
$
1,101

 
$

 
$
1,101

 
$

Cash paid for interest
3

 
3

 
134

 
129

Cash paid for taxes, net
86

 
192

 
369

 
399

Non-cash items:
 
 
 
 
 
 
 
Changes in capital additions, accrued but not paid
$
13

 
$
(7
)
 
$
18

 
$
9

Changes in tax withholdings on vesting of restricted stock, accrued but not paid
(62
)
 
(44
)
 
(13
)
 
17

__________
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.


VMware, Inc.

GROWTH IN REVENUE PLUS SEQUENTIAL CHANGE IN UNEARNED REVENUE
(in millions)
(unaudited)
 
 
Growth in Total Revenue Plus Sequential Change in Unearned Revenue
 
 
 
 
 
 
 
Three Months Ended
 
 
January 31,
 
February 1,
 
 
2020
 
2019(1)
Total revenue, as reported
 
$
3,073

 
$
2,759

Sequential change in unearned revenue(2)
 
1,051

 
943

Total revenue plus sequential change in unearned revenue
 
$
4,124

 
$
3,702

Change (%) over prior year, as reported
 
11
%
 

 
 
 
 
 
 
 
 
 
 
Growth in License and Subscription and SaaS Revenue Plus Sequential Change in Unearned License and Subscription and SaaS Revenue
 
 
 
 
 
 
 
Three Months Ended
 
 
January 31,
 
February 1,
 
 
2020
 
2019(1)
Total license and subscription and SaaS revenue, as reported
 
$
1,590

 
$
1,394

Sequential change in unearned license and subscription and SaaS revenue
 
335

 
253

Total license and subscription and SaaS revenue plus sequential change in unearned license and subscription and SaaS revenue
 
$
1,925

 
$
1,647

Change (%) over prior year, as reported
 
17
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.
(2) Sequential change in unearned revenue consists of the change in total unearned revenue from the preceding quarter. Total unearned revenue consists of current and non-current unearned revenue amounts presented in the consolidated balance sheets. 



VMware, Inc.

SUPPLEMENTAL UNEARNED REVENUE SCHEDULE
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
January 31,
 
November 1,
 
August 2,
 
May 3,
 
February 1,
 
November 2,
 
2020
 
2019(1)
 
2019(1)
 
2019(1)
 
2019(1)
 
2018(1)
Unearned revenue as reported:
 
 
 
 
 
 
 
 
 
 
 
License
$
19

 
$
19

 
$
19

 
$
19

 
$
15

 
$
17

Subscription and SaaS(2)
1,534

 
1,199

 
976

 
953

 
916

 
661

Services
 
 
 
 
 
 
 
 
 
 
 
Software maintenance
6,700

 
6,106

 
6,042

 
5,754

 
5,741

 
5,161

Professional services
1,015

 
893

 
851

 
802

 
767

 
657

Total unearned revenue
$
9,268

 
$
8,217

 
$
7,888

 
$
7,528

 
$
7,439

 
$
6,496

 
 
 
 
 
 
 
 
 
 
 
 
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.
(2) Unearned subscription and SaaS revenue was allocated between unearned license revenue and unearned software maintenance revenue in prior periods and has been reclassified to conform with current period presentation.


VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Three Months Ended January 31, 2020
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Stock-Based
Compensation
 
Employer
Payroll Taxes
on Employee
Stock Transactions
 
Intangible
Amortization
 
Realignment
Charges
 
Acquisition, Disposition
and Other
Items
 
Certain Litigation and Other Contingencies
 
Tax
Adjustment
(1)
 
Non-GAAP
As Adjusted
(2)
Operating expenses(3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of license revenue
$
50

 

 

 
(27
)
 

 

 

 

 
$
23

Cost of subscription and SaaS revenue
$
106

 
(3
)
 

 
(25
)
 

 

 

 

 
$
79

Cost of services revenue
$
317

 
(24
)
 
(2
)
 

 

 

 

 

 
$
291

Research and development
$
676

 
(130
)
 
(2
)
 

 

 

 

 

 
$
543

Sales and marketing
$
1,003

 
(91
)
 

 
(34
)
 

 

 

 

 
$
881

General and administrative
$
592

 
(64
)
 
(3
)
 

 

 
(84
)
 
(237
)
 

 
$
202

Realignment and loss on disposition
$
79

 

 

 

 
(79
)
 

 

 

 
$

Operating income
$
250

 
312

 
7


86


79


84


237




$
1,054

Operating margin(2)
8.1
%
 
10.1
%
 
0.2
%
 
2.8
%
 
2.6
%
 
2.7
%
 
7.7
%
 

 
34.3
%
Other income (expense), net(4)
$
10

 

 

 

 

 
(1
)
 

 

 
$
10

Income before income tax
$
239

 
312

 
7


86


79


83


237




$
1,043

Income tax provision (benefit)
$
(76
)
 
 
 
 
 
 
 
 
 
 
 
 
 
242

 
$
166

Tax rate(2)
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16.0
%
Net income
$
315

 
312

 
7

 
86

 
79

 
83

 
237

 
(242
)
 
$
877

Less: Net income (loss) attributable to non-controlling interests
$
(6
)
 
23

 

 
7

 

 
1

 

 
(15
)
 
$
9

Net income attributable to VMware, Inc.
$
321

 
289


7


79


79


82


237


(227
)

$
868

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(2)(5)
$
0.76

 
$
0.68

 
$
0.02

 
$
0.19

 
$
0.19

 
$
0.19

 
$
0.56

 
$
(0.53
)
 
$
2.05

N/A - GAAP tax rate was not applicable due to the income tax benefit recorded for the three months ended January 31, 2020.
(1)
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2)
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(3) Cost of subscription and SaaS revenue was allocated between cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation.
(4)
Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized.
(5)
Calculated based upon 424,007 diluted weighted-average shares for Classes A and B.


VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Three Months Ended February 1, 2019
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP(1)
 
Stock-Based
Compensation
(1)
 
Employer
Payroll Taxes
on Employee
Stock Transactions
(1)
 
Intangible
Amortization
(1)
 
Acquisition, Disposition
and Other
Items
(1)
 
Tax
Adjustment
(1)(2)
 
Non-GAAP
As Adjusted
(1)(3)
Operating expenses(4):
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of license revenue
$
40

 

 

 
(20
)
 

 

 
$
20

Cost of subscription and SaaS revenue
$
86

 
(2
)
 

 
(25
)
 

 

 
$
58

Cost of services revenue
$
292

 
(16
)
 

 
(1
)
 
(1
)
 

 
$
274

Research and development
$
596

 
(105
)
 

 

 
(1
)
 

 
$
490

Sales and marketing
$
889

 
(63
)
 
(1
)
 
(17
)
 
(1
)
 

 
$
808

General and administrative
$
258

 
(34
)
 

 

 
(55
)
 

 
$
169

Realignment and loss on disposition
$

 

 

 

 

 

 
$

Operating income
$
598

 
220

 
1

 
63

 
58

 

 
$
940

Operating margin(3)
21.7
%
 
8.0
%
 
%
 
2.3
%
 
2.1
%
 

 
34.1
%
Investment income (loss)
$
(7
)
 

 

 

 
46

 

 
$
39

Other income (expense), net(5)
$
9

 

 

 

 
2

 

 
$
11

Income before income tax
$
566

 
220

 
1

 
63

 
106

 

 
$
956

Income tax provision
$
87

 
 
 
 
 
 
 
 
 
67

 
$
154

Tax rate(3)
15.4
%
 
 
 
 
 
 
 
 
 
 
 
16.0
%
Net income
$
479

 
220

 
1

 
63

 
106

 
(67
)
 
$
802

Less: Net income (loss) attributable to non-controlling interests
$
(17
)
 
20

 

 
7

 

 
(3
)
 
$
7

Net income attributable to VMware, Inc.
$
496

 
200

 
1

 
56

 
106

 
(64
)
 
$
795

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(3)(6)
$
1.17

 
$
0.47

 
$

 
$
0.13

 
$
0.25

 
$
(0.15
)
 
$
1.87

(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.
(2) 
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments, such as adjustments resulting from the U.S. Tax Cuts and Jobs Act enacted on December 22, 2017 (the "2017 Tax Act"). Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(3)
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(4) Cost of subscription and SaaS revenue was allocated between cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation.
(5)
Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized.
(6)
Calculated based upon 424,630 diluted weighted-average shares for Classes A and B.


VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Twelve Months Ended January 31, 2020
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Stock-Based
Compensation
 
Employer
Payroll Taxes
on Employee
Stock Transactions
 
Intangible
Amortization
 
Realignment
Charges
 
Acquisition, Disposition
and Other
Items
 
Certain Litigation and Other Contingencies
 
Tax
Adjustment
(1)
 
Non-GAAP
As Adjusted
(2)
Operating expenses(3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of license revenue
$
166

 
(1
)
 

 
(89
)
 

 

 

 

 
$
76

Cost of subscription and SaaS revenue
$
400

 
(13
)
 

 
(103
)
 

 

 

 

 
$
285

Cost of services revenue
$
1,233

 
(83
)
 
(2
)
 
(2
)
 

 

 

 

 
$
1,147

Research and development
$
2,522

 
(459
)
 
(3
)
 
(1
)
 

 

 

 

 
$
2,058

Sales and marketing
$
3,677

 
(293
)
 
(6
)
 
(105
)
 

 

 

 

 
$
3,273

General and administrative
$
1,293

 
(168
)
 
(3
)
 

 

 
(173
)
 
(237
)
 

 
$
711

Realignment and loss on disposition
$
79

 

 

 

 
(79
)
 

 

 

 
$

Operating income
$
1,441

 
1,017

 
14


300


79


173


237

 

 
$
3,261

Operating margin(2)
13.3
%
 
9.4
%
 
0.1
%
 
2.8
%
 
0.7
%
 
1.6
%
 
2.2
%
 

 
30.2
%
Other income (expense), net(4)
$
86

 

 

 

 

 
(35
)
 

 

 
$
50

Income before income tax
$
1,438

 
1,017

 
14

 
300

 
79

 
138

 
237

 

 
$
3,222

Income tax provision (benefit)
$
(4,918
)
(6) 
 
 
 
 
 
 
 
 
 
 
 
 
5,432

 
$
514

Tax rate(2)
N/M

(6) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16.0
%
Net income
$
6,356

 
1,017

 
14

 
300

 
79

 
138

 
237

 
(5,432
)
 
$
2,708

Less: Net income (loss) attributable to non-controlling interests
$
(56
)
 
97

 

 
33

 

 
3

 

 
(24
)
 
$
53

Net income attributable to VMware, Inc.
$
6,412

 
920

 
14

 
267

 
79

 
135

 
237

 
(5,408
)
 
$
2,655

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(2)(5)
$
15.08

 
$
2.16

 
$
0.03

 
$
0.63

 
$
0.19

 
$
0.32

 
$
0.56

 
$
(12.72
)
 
$
6.24

N/M - Tax rate calculated on a GAAP basis is not considered meaningful.
(1)
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2)
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(3) Cost of subscription and SaaS revenue was included in both cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation.
(4)
Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized.
(5)
Calculated based upon 425,235 diluted weighted-average shares for Classes A and B.
(6)
During the second quarter of fiscal 2020, we completed an intra-group transfer of certain of our intellectual property rights to our Irish subsidiary, where our international business is headquartered. A discrete tax benefit of $4.9 billion was recorded as a deferred tax asset. Due to the impact of the discrete tax benefit of $4.9 billion, the tax rate calculated on a GAAP basis is not considered meaningful.



VMware, Inc.

RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Twelve Months Ended February 1, 2019
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP(1)
 
Stock-Based
Compensation
(1)
 
Employer
Payroll Taxes
on Employee
Stock Transactions
(1)
 
Intangible
Amortization
(1)
 
Acquisition, Disposition
and Other Items
(1)
 
Tax
Adjustment
(1)(2)
 
Non-GAAP
As Adjusted
(1)(3)
Operating expenses(4):
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of license revenue
$
150

 
(1
)
 

 
(85
)
 

 

 
$
64

Cost of subscription and SaaS revenue
$
280

 
(7
)
 

 
(89
)
 

 

 
$
184

Cost of services revenue
$
1,122

 
(58
)
 
(1
)
 
(3
)
 
(2
)
 

 
$
1,058

Research and development
$
2,173

 
(391
)
 
(1
)
 

 
(3
)
 

 
$
1,778

Sales and marketing
$
3,230

 
(226
)
 
(4
)
 
(64
)
 
(1
)
 

 
$
2,935

General and administrative
$
846

 
(117
)
 
(1
)
 

 
(82
)
 

 
$
646

Realignment and loss on disposition
$
9

 

 

 

 
(9
)
 

 
$

Operating income
$
1,803

 
800

 
7

 
241

 
97

 

 
$
2,948

Operating margin(3)
18.8
%
 
8.3
%
 
0.1
%
 
2.5
%
 
1.0
%
 

 
30.7
%
Investment income (loss)
$
161

 

 

 

 
46

 

 
$
207

Other income (expense), net(5)
$
(1
)
 

 

 

 
10

 

 
$
9

Income before income tax
$
1,829

 
800

 
7

 
241

 
153

 

 
$
3,030

Income tax provision
$
239

 
 
 
 
 
 
 
 
 
247

 
$
486

Tax rate(3)
13.1
%
 
 
 
 
 
 
 
 
 
 
 
16.0
%
Net income
$
1,590

 
800

 
7

 
241

 
153

 
(247
)
 
$
2,544

Less: Net income (loss) attributable to non-controlling interests
$
(60
)
 
69

 

 
24

 
(1
)
 
(6
)
 
$
26

Net income attributable to VMware, Inc.
$
1,650

 
731

 
7

 
217

 
154

 
(241
)
 
$
2,518

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(3)(6)
$
3.92

 
$
1.74

 
$
0.02

 
$
0.51

 
$
0.37

 
$
(0.57
)
 
$
5.98

(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.
(2)
Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments, such as adjustments resulting from the 2017 Tax Act. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(3)
Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(4) Cost of subscription and SaaS revenue was included in both cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation.
(5)
Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized.
(6)
Calculated based upon 421,131 diluted weighted-average shares for Classes A and B.


VMware, Inc.

REVENUE BY TYPE
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
January 31,
 
February 1,
 
January 31,
 
February 1,
 
 
2020
 
2019(1)
 
2020
 
2019(1)
Revenue:
 
 
 
 
 
 
 
 
License
 
$
1,034

 
$
1,027

 
$
3,181


$
3,042

Subscription and SaaS(2)
 
556

 
367

 
1,877


1,303

Total license and subscription and SaaS
 
1,590

 
1,394

 
5,058

 
4,345

Services:
 
 
 
 
 



Software maintenance
 
1,235

 
1,133

 
4,754


4,351

Professional services
 
248

 
232

 
999


917

Total services
 
1,483

 
1,365

 
5,753

 
5,268

Total revenue
 
$
3,073

 
$
2,759

 
$
10,811

 
$
9,613

Percentage of revenue:
 
 
 
 
 
 
 
 
License
 
33.7
%
 
37.2
%
 
29.4
%
 
31.6
%
Subscription and SaaS(2)
 
18.1
%
 
13.3
%
 
17.4
%
 
13.6
%
Total license and subscription and SaaS
 
51.8
%
 
50.5
%
 
46.8
%
 
45.2
%
Services:
 
 
 
 
 
 
 
 
Software maintenance
 
40.2
%
 
41.1
%
 
44.0
%
 
45.3
%
Professional services
 
8.0
%
 
8.4
%
 
9.2
%
 
9.5
%
Total services
 
48.2
%
 
49.5
%
 
53.2
%
 
54.8
%
Total revenue
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
__________
 
 
 
 
 
 
 
 
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.
(2) Subscription and SaaS revenue was allocated between license revenue and services revenue in prior year and has been reclassified to conform with current period presentation.



VMware, Inc.

REVENUE BY GEOGRAPHY
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
January 31,

February 1,
 
January 31,

February 1,
 
2020

2019(1)
 
2020

2019(1)
Revenue:
 
 
 
 
 
 
 
United States
$
1,569

 
$
1,280

 
$
5,405

 
$
4,696

International
1,504

 
1,479

 
5,406

 
4,917

Total revenue
$
3,073

 
$
2,759

 
$
10,811

 
$
9,613

Percentage of revenue:
 
 
 
 
 
 
 
United States
51.1
%
 
46.4
%
 
50.0
%
 
48.9
%
International
48.9
%
 
53.6
%
 
50.0
%
 
51.1
%
Total revenue
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.


VMware, Inc.

RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES
TO FREE CASH FLOWS
(A NON-GAAP FINANCIAL MEASURE)
(in millions)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
January 31,
 
February 1,
 
January 31,
 
February 1,
 
2020
 
2019(1)
 
2020
 
2019(1)
GAAP cash flows from operating activities
$
1,085

 
$
1,020

 
$
3,872

 
$
3,657

Capital expenditures
(64
)
 
(68
)
 
(279
)
 
(254
)
Free cash flows
$
1,021

 
$
952

 
$
3,593

 
$
3,403

(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control.



VMware, Inc.

SUPPLEMENTAL SCHEDULE OF FINANCIAL INFORMATION ADJUSTED FOR PIVOTAL ACQUISITION
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
During the fourth quarter of fiscal 2020, VMware acquired Pivotal, which was accounted for as a transaction between entities under common control. This transaction required prior period information to be recast for all periods presented, as if the combination had been in effect since the inception of the common control, which could include eliminations and other adjustments (referred to in the schedules below as "Pivotal Adjustments").
Condensed Consolidated Statements of Income Adjusted for Pivotal Acquisition
The following table presents the condensed consolidated statements of income for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 as adjusted for the Pivotal acquisition (tables in millions, except per share amounts, and shares in thousands):
 
Three Months Ended
 
Twelve Months Ended
 
November 1,
 
August 2,
 
May 3,
 
February 1,
 
November 2,
 
August 3,
 
May 4,
 
February 1,
 
February 2,
 
2019
 
2019
 
2019
 
2019
 
2018
 
2018
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
License
$
728

 
$
773

 
$
646

 
$
1,027

 
$
692

 
$
723

 
$
601

 
$
3,042

 
$
2,628

Subscription and SaaS
470

 
439

 
411

 
367

 
334

 
308

 
294

 
1,303

 
927

Services
1,458

 
1,420

 
1,393

 
1,365

 
1,337

 
1,301

 
1,264

 
5,268

 
4,781

Total revenue
2,656

 
2,632

 
2,450

 
2,759

 
2,363

 
2,332

 
2,159

 
9,613

 
8,336

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of license revenue
42

 
38

 
36

 
40

 
37

 
37

 
36

 
150

 
135

Cost of subscription and SaaS revenue
103

 
97

 
94

 
86

 
72

 
65

 
62

 
280

 
200

Cost of services revenue
311

 
306

 
299

 
292

 
279

 
279

 
271

 
1,122

 
1,072

Research and development
642

 
614

 
590

 
596

 
551

 
528

 
498

 
2,173

 
1,917

Sales and marketing
918

 
888

 
868

 
889

 
786

 
772

 
782

 
3,230

 
2,723

General and administrative
269

 
223

 
209

 
258

 
199

 
203

 
185

 
846

 
722

Realignment and loss on disposition

 

 

 

 
6

 
1

 
2

 
9

 
104

Operating income
371

 
466

 
354

 
598

 
433

 
447

 
323

 
1,803

 
1,463

Investment income (loss)
12

 
14

 
14

 
(7
)
 
63

 
57

 
48

 
161

 
120

Interest expense
(40
)
 
(34
)
 
(34
)
 
(34
)
 
(33
)
 
(34
)
 
(34
)
 
(134
)
 
(74
)
Other income (expense), net
17

 
41

 
17

 
9

 
(17
)
 
10

 
(1
)
 
(1
)
 
68

Income before income tax
360

 
487

 
351

 
566

 
446

 
480

 
336

 
1,829

 
1,577

Income tax provision (benefit)
(30
)
 
(4,798
)
 
(14
)
 
87

 
41

 
64

 
46

 
239

 
1,152

Net income
390

 
5,285

 
365

 
479

 
405

 
416

 
290

 
1,590

 
425

Less: Net loss attributable to non-controlling interests
(17
)
 
(18
)
 
(15
)
 
(17
)
 
(17
)
 
(17
)
 
(9
)
 
(60
)
 
(12
)
Net income attributable to VMware, Inc.
$
407

 
$
5,303

 
$
380

 
$
496

 
$
422

 
$
433

 
$
299

 
$
1,650

 
$
437

Net income per weighted-average share attributable to VMware, Inc. common stockholders, basic for Classes A and B
$
0.98

 
$
12.72

 
$
0.91

 
$
1.19

 
$
1.01

 
$
1.04

 
$
0.73

 
$
3.99

 
$
1.07

Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B
$
0.96

 
$
12.47

 
$
0.89

 
$
1.17

 
$
1.00

 
$
1.03

 
$
0.71

 
$
3.92

 
$
1.04

Weighted-average shares, basic for Classes A and B
416,387

 
416,983

 
417,636

 
417,499

 
415,930

 
414,334

 
409,266

 
413,769

 
410,315

Weighted-average shares, diluted for Classes A and B
423,035

 
425,091

 
426,697

 
424,630

 
422,629

 
421,421

 
418,836

 
421,131

 
420,887



VMware, Inc.

Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition
The following tables present the reconciliations of GAAP to non-GAAP data for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 as adjusted for the Pivotal acquisition (tables in millions, except per share amounts):
 
Three Months Ended November 1, 2019
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
431

 
(60
)
 
$
371

 
386

(1) 
$
758

Income tax provision (benefit)
45

 
(75
)
 
(30
)
 
147

(2) 
118

Net income attributable to VMware, Inc.
$
621

 
(214
)
 
$
407

 
195

(3) 
$
602

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
1.50

 
 
 
$
0.96

 
0.45

(4) 
$
1.42

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($256 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($74 million) and acquisition, disposition and other items ($55 million).
(2) Non-GAAP adjustments to income tax provision (benefit) were $147 million during the three months ended November 1, 2019.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($230 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($65 million), acquisition, disposition and other items ($43 million) and tax adjustment (-$144 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.54), intangible amortization ($0.15), acquisition, disposition and other items ($0.10) and tax adjustment (-$0.34).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 423,035 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.
 
Three Months Ended August 2, 2019
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
523

 
(57
)
 
$
466

 
330

(1) 
$
795

Income tax provision (benefit)
(4,925
)
 
127

 
(4,798
)
 
4,925

(2) 
127

Net income attributable to VMware, Inc.
$
4,926

 
377

 
$
5,303

 
(4,652
)
(3) 
$
650

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
11.83

 
 
 
$
12.47

 
(10.94
)
(4) 
$
1.53

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($234 million), employer payroll taxes on employee stock transactions ($4 million), intangible amortization ($70 million) and acquisition, disposition and other items ($22 million).
(2) Non-GAAP adjustments to income tax provision (benefit) were $4,925 million during the three months ended August 2, 2019.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($208 million), employer payroll taxes on employee stock transactions ($4 million), intangible amortization ($61 million), acquisition, disposition and other items (-$1 million) and tax adjustment (-$4,924 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.49), employer payroll taxes on employee stock transactions ($0.01), intangible amortization ($0.14), and tax adjustment (-$11.58).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 425,091 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.


VMware, Inc.

Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.)
 
Three Months Ended May 3, 2019
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
415

 
(61
)
 
$
354

 
300

(1) 
$
654

Income tax provision (benefit)
35

 
(49
)
 
(14
)
 
118

(2) 
104

Net income attributable to VMware, Inc.
$
505

 
(125
)
 
$
380

 
155

(3) 
$
535

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
1.21

 
 
 
$
0.89

 
0.35

(4) 
$
1.25

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($216 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($69 million) and acquisition, disposition and other items ($13 million).
(2) Non-GAAP adjustments to income tax provision (benefit) were $118 million during the three months ended May 3, 2019.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($194 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($60 million), acquisition, disposition and other items ($12 million) and tax adjustment (-$113 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.45), intangible amortization ($0.14), acquisition, disposition and other items ($0.03) and tax adjustment (-$0.27).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 426,697 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.
 
Three Months Ended February 1, 2019
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
664

 
(66
)
 
$
598

 
342

(1) 
$
940

Income tax provision
89

 
(2
)
 
87

 
67

(2) 
153

Net income attributable to VMware, Inc.
$
502

 
(6
)
 
$
496

 
299

(3) 
$
795

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
1.21

 
 
 
$
1.17

 
0.70

(4) 
$
1.87

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($220 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($63 million) and acquisition, disposition and other items ($58 million).
(2) Non-GAAP adjustments to income tax provision were $67 million during the three months ended February 1, 2019.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($200 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($56 million), acquisition, disposition and other items ($106 million) and tax adjustment (-$64 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.47), intangible amortization ($0.13), acquisition, disposition and other items ($0.25) and tax adjustment (-$0.15).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 424,630 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.


VMware, Inc.

Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.)
 
Three Months Ended November 2, 2018
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
495

 
(62
)
 
$
433

 
287

(1) 
$
720

Income tax provision
11

 
30

 
41

 
79

(2) 
120

Net income attributable to VMware, Inc.
$
334

 
88

 
$
422

 
200

(3) 
$
622

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
0.81

 
 
 
$
1.00

 
0.47

(4) 
$
1.47

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($211 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($60 million) and acquisition, disposition and other items ($14 million).
(2) Non-GAAP adjustments to income tax provision were $79 million during the three months ended November 2, 2018.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($192 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($53 million), acquisition, disposition and other items ($30 million) and tax adjustment (-$77 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.45), intangible amortization ($0.13), acquisition, disposition and other items ($0.07) and tax adjustment (-$0.18).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 422,629 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.
 
Three Months Ended August 3, 2018
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
509

 
(62
)
 
$
447

 
267

(1) 
$
714

Income tax provision
128

 
(64
)
 
64

 
54

(2) 
118

Net income attributable to VMware, Inc.
$
644

 
(211
)
 
$
433

 
180

(3) 
$
613

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
1.56

 
 
 
$
1.03

 
0.42

(4) 
$
1.45

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($196 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($60 million) and acquisition, disposition and other items ($9 million).
(2) Non-GAAP adjustments to income tax provision were $54 million during the three months ended August 3, 2018.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($177 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($53 million), acquisition, disposition and other items ($1 million) and tax adjustment (-$53 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.42), intangible amortization ($0.13) and tax adjustment (-$0.13).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 421,421 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.


VMware, Inc.

Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.)
 
Three Months Ended May 4, 2018
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
382

 
(59
)
 
$
323

 
248

(1) 
$
572

Income tax provision
233

 
(187
)
 
46

 
48

(2) 
94

Net income attributable to VMware, Inc.
$
942

 
(643
)
 
$
299

 
189

(3) 
$
488

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
2.29

 
 
 
$
0.71

 
0.45

(4) 
$
1.16

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($172 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($59 million) and acquisition, disposition and other items ($15 million).
(2) Non-GAAP adjustments to income tax provision were $48 million during the three months ended May 4, 2018.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($161 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($55 million), acquisition, disposition and other items ($18 million) and tax adjustment (-$47 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.39), intangible amortization ($0.13), acquisition, disposition and other items ($0.04) and tax adjustment (-$0.11).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 418,836 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.
 
Twelve Months Ended February 1, 2019
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
2,050

 
(247
)
 
$
1,803

 
1,145

(1) 
$
2,948

Income tax provision
461

 
(222
)
 
239

 
247

(2) 
486

Net income attributable to VMware, Inc.
$
2,422

 
(772
)
 
$
1,650

 
868

(3) 
$
2,518

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
5.85

 
 
 
$
3.92

 
2.07

(4) 
$
5.98

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($800 million), employer payroll taxes on employee stock transactions ($7 million), intangible amortization ($241 million) and acquisition, disposition and other items ($97 million).
(2) Non-GAAP adjustments to income tax provision were $247 million during the twelve months ended February 1, 2019.
(3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($731 million), employer payroll taxes on employee stock transactions ($7 million), intangible amortization ($217 million), acquisition, disposition and other items ($154 million) and tax adjustment (-$241 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($1.74), employer payroll taxes on employee stock transactions ($0.02), intangible amortization ($0.51), acquisition, disposition and other items ($0.37) and tax adjustment (-$0.57).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 421,131 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.


VMware, Inc.

Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.)
 
Twelve Months Ended February 2, 2018
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
(6)
 
Non-GAAP Adjustments
 
Non-GAAP
As Adjusted
(6)
Operating income
$
1,702

 
(239
)
 
$
1,463

 
1,026

(1) 
$
2,489

Income tax provision
1,155

 
(3
)
 
1,152

 
(627
)
(2) 
525

Net income attributable to VMware, Inc.
$
659

 
(222
)
 
$
437

 
1,578

(3) 
$
2,016

 
 
 
 
 
 
 
 
 
 
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6)
$
1.59

 
 
 
$
1.04

 
3.74

(4) 
$
4.79

__________
(1) Non-GAAP adjustments to operating income include stock-based compensation ($712 million), employer payroll taxes on employee stock transactions ($6 million), intangible amortization ($174 million) and acquisition, disposition and other items ($134 million).
(2) Non-GAAP adjustments to income tax provision were -$627 million during the twelve months ended February 2, 2018.
(3) Non-GAAP adjustments to net income attributable to VMware Inc. include stock-based compensation ($683 million), employer payroll taxes on employee stock transactions ($6 million), intangible amortization ($172 million), acquisition, disposition and other items ($88 million), loss on share repurchase ($2 million) and tax adjustment ($627 million).
(4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($1.62), employer payroll taxes on employee stock transactions ($0.01), intangible amortization ($0.41), acquisition, disposition and other items ($0.21) and tax adjustment ($1.49).
(5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 420,887 diluted weighted-average shares for Classes A and B.
(6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data.


VMware, Inc.

Condensed Consolidated Balance Sheet Adjusted for Pivotal Acquisition
The following table presents the condensed consolidated balance sheet for fiscal 2019 as originally reported and as adjusted for the Pivotal acquisition (tables in millions):
 
February 1, 2019
 
GAAP
As Originally Reported
 
Pivotal
Adjustments
 
Combined
GAAP
As Adjusted
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
2,830

 
702

 
$
3,532

Short-term investments
19

 

 
19

Accounts receivable, net of allowance for doubtful accounts
1,576

 
147

 
1,723

Due from related parties, net
937

 
153

 
1,090

Other current assets
289

 
16

 
305

Total current assets
5,651

 
1,018

 
6,669

Property and equipment, net
1,133

 
29

 
1,162

Other assets
1,853

 
(765
)
 
1,088

Deferred tax assets
103

 
187

 
290

Intangible assets, net
541

 
425

 
966

Goodwill
5,381

 
2,037

 
7,418

Total assets
$
14,662

 
2,931

 
$
17,593

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
135

 
18

 
$
153

Accrued expenses and other
1,593

 
71

 
1,664

Unearned revenue
3,968

 
371

 
4,339

Total current liabilities
5,696

 
460

 
6,156

Note payable to Dell
270

 

 
270

Long-term debt
3,972

 

 
3,972

Unearned revenue
3,010

 
90

 
3,100

Income tax payable
889

 

 
889

Other liabilities
274

 
41

 
315

Total liabilities
14,111

 
591

 
14,702

Contingencies
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
Class A common stock
1

 

 
1

Class B convertible common stock
3

 

 
3

Additional paid-in capital
531

 
2,428

 
2,959

Accumulated other comprehensive income (loss)
2

 
(4
)
 
(2
)
Retained earnings (Accumulated deficit)
14

 
(1,110
)
 
(1,096
)
Total VMware, Inc. stockholders’ equity
551

 
1,314

 
1,865

Non-controlling interests

 
1,026

 
1,026

Total stockholders’ equity
551

 
2,340

 
2,891

Total liabilities and stockholders’ equity
$
14,662

 
2,931

 
$
17,593



VMware, Inc.

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows Adjusted for Pivotal Acquisition
The following table presents the reconciliation of GAAP cash flows from operating activities to free cash flows as adjusted for the Pivotal acquisition for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 (table in millions):
 
Three Months Ended
 
Twelve Months Ended
 
November 1,
 
August 2,
 
May 3,
 
February 1,
 
November 2,
 
August 3,
 
May 4,
 
February 1,
 
February 2,
 
2019
 
2019
 
2019
 
2019
 
2018
 
2018
 
2018
 
2019
 
2018
GAAP cash flows from operating activities
$
751

 
$
641

 
$
1,395

 
$
1,020

 
$
733

 
$
805

 
$
1,101

 
$
3,657

 
$
3,101

Capital expenditures
(52
)
 
(91
)
 
(73
)
 
(68
)
 
(60
)
 
(63
)
 
(63
)
 
(254
)
 
(276
)
Free cash flows
$
699

 
$
550

 
$
1,322

 
$
952

 
$
673

 
$
742

 
$
1,038

 
$
3,403

 
$
2,825

The following tables present the reconciliation of GAAP cash flows from operating activities to free cash flows as originally reported and as adjusted for the Pivotal acquisition for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 (tables in millions):
 
Three Months Ended November 1, 2019
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
810

 
(59
)
 
$
751

Capital expenditures
(50
)
 
(2
)
 
(52
)
Free cash flows
$
760

 
(61
)
 
$
699

 
Three Months Ended August 2, 2019
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
699

 
(58
)
 
$
641

Capital expenditures
(88
)
 
(3
)
 
(91
)
Free cash flows
$
611

 
(61
)
 
$
550

 
Three Months Ended May 3, 2019
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
1,273

 
122

 
$
1,395

Capital expenditures
(71
)
 
(2
)
 
(73
)
Free cash flows
$
1,202

 
120

 
$
1,322






VMware, Inc.

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows Adjusted for Pivotal Acquisition (cont.)
 
Three Months Ended February 1, 2019
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
1,012

 
8

 
$
1,020

Capital expenditures
(66
)
 
(2
)
 
(68
)
Free cash flows
$
946

 
6

 
$
952

 
Three Months Ended November 2, 2018
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
769

 
(36
)
 
$
733

Capital expenditures
(57
)
 
(3
)
 
(60
)
Free cash flows
$
712

 
(39
)
 
$
673

 
Three Months Ended August 3, 2018
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
787

 
18

 
$
805

Capital expenditures
(61
)
 
(2
)
 
(63
)
Free cash flows
$
726

 
16

 
$
742

 
Three Months Ended May 4, 2018
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
1,095

 
6

 
$
1,101

Capital expenditures
(61
)
 
(2
)
 
(63
)
Free cash flows
$
1,034

 
4

 
$
1,038

 
Twelve Months Ended February 1, 2019
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
3,663

 
(6
)
 
$
3,657

Capital expenditures
(245
)
 
(9
)
 
(254
)
Free cash flows
$
3,418

 
(15
)
 
$
3,403



VMware, Inc.

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows Adjusted for Pivotal Acquisition (cont.)
 
Twelve Months Ended February 2, 2018
 
As Originally Reported
 
Pivotal
Adjustments
 
Combined
As Adjusted
GAAP cash flows from operating activities
$
3,218

 
(117
)
 
$
3,101

Capital expenditures
(263
)
 
(13
)
 
(276
)
Free cash flows
$
2,955

 
(130
)
 
$
2,825



VMware, Inc.

About Non-GAAP Financial Measures
To provide investors and others with additional information regarding VMware’s results, VMware has disclosed in this earnings release the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share and free cash flow. VMware has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. These non-GAAP financial measures, other than free cash flow, differ from GAAP in that they exclude stock-based compensation, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition, disposition and other items, certain litigation and other contingencies, loss on share repurchase and discrete items that impacted our GAAP tax rate, each as discussed below. Our non-GAAP financial measures also reflect the application of our non-GAAP tax rate. Free cash flow differs from GAAP cash flow from operating activities with respect to the treatment of capital expenditures.
VMware’s management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware’s financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware’s business, as they exclude charges and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flow provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.
Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware’s operating performance due to the following factors:

Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, the expense for the fair value of the stock-based instruments VMware utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of VMware’s core business.

Employer payroll taxes on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and other factors that are beyond VMware’s control and do not correlate to the operation of the business.

Amortization of acquired intangible assets. A portion of the purchase price of VMware’s acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However, VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.

Realignment charges. Realignment charges include workforce reductions, asset impairments, losses on asset disposals and costs to exit facilities. VMware’s management believes it is useful to exclude these items, when significant, as they are not reflective of VMware’s core business and operating results.

Acquisition, disposition and other items. As VMware does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, VMware believes it is useful to exclude acquisition, disposition and other items when looking for a consistent basis for comparison across accounting periods. These items include:
Direct costs of acquisitions and dispositions, such as transaction and advisory fees.
Costs associated with integrating acquired businesses.
Accruals for the portion of merger consideration payable in installments that may be paid in cash or VMware stock, at the option of VMware.
Gains or losses on equity investments, whether realized or unrealized.
Charges recognized for non-recoverable strategic investments or gains recognized on the disposition of strategic investments.


VMware, Inc.

Gains or losses on sale or disposal of distinct lines of business or product offerings, or transactions with features similar to discontinued operations, including recoveries or charges recognized to adjust the fair value of assets that qualify as “held for sale.”

Certain litigation and other contingencies. VMware, from time to time, may incur charges or benefits that are outside of the ordinary course of VMware’s business related to litigation and other contingencies. VMware believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of VMware’s business and because of the singular nature of the claims underlying such matters.

Gain or loss on share repurchase. In December 2016, VMware entered into a stock purchase agreement with Dell and Dell’s wholly-owned subsidiary, EMC Equity Assets LLC, pursuant to which VMware agreed to purchase $500 million of VMware Class A common stock. The derivative asset was measured at fair value on a recurring basis and resulted in the recognition of gains and losses, which were recorded to other income (expense), net on the condensed consolidated statements of income. On February 15, 2017, the stock purchase agreement with Dell was completed. VMware’s management believes it is useful to exclude the mark-to-market adjustment on the derivative asset, as it is not reflective of VMware’s core business and operating results.

Tax adjustment. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to VMware’s annual estimated tax rate on non-GAAP income. This rate is based on VMware’s estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating VMware’s non-GAAP income as well as significant tax adjustments. VMware’s estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that VMware management believes materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to VMware’s estimated annual tax rates as described above, the estimated tax rate on non-GAAP income may differ from the GAAP tax rate and from VMware’s actual tax liabilities.

Additionally, VMware’s management believes that the non-GAAP financial measure of free cash flow is meaningful to investors because management reviews cash flow generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.
The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware’s operations. Specifically, in the case of stock-based compensation, if VMware did not pay out a portion of its compensation in the form of stock-based compensation and related employer payroll taxes, the cash salary expense included in operating expenses would be higher, which would affect VMware’s cash position. VMware compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP and should not be considered measures of VMware’s liquidity. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited.
Management encourages investors and others to review VMware’s financial information in its entirety and not rely on a single financial measure.


VMW Q4 & FY20 Earnings Conference Call Slide Deck without FY21 Guidance February 27, 2020 ©2020 VMware, Inc.


 
VMware Delivers the Digital Foundation Build, Run, Manage, Connect and Protect Any App on Any Cloud on Any Device Any Device Intrinsic Intrinsic Security Any Application Traditional Cloud Native SaaS Edge Private Public Any Cloud Hybrid Hybrid Telco ©2020 VMware, Inc. 2


 
Overview of Results: Revenue Highlights Q4FY20 (1) Actual ($M) YoY Growth Total Revenue 3,073 11.4% Subscription & SaaS and License Revenue 1,590 14.1% Subscription & SaaS Revenue 556 51.7% FY20 (1) Actual ($M) YoY Growth Total Revenue 10,811 12.5% Subscription & SaaS and License Revenue 5,058 16.4% Subscription & SaaS Revenue 1,877 44.1% (1) Year-over-year comparisons are to Q4 FY19 and FY19 amounts as adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control. ©2020 VMware, Inc. 3


 
Subscription & SaaS Q4FY20 18% of total revenue Subscription & SaaS Revenue contains: VMware Cloud Provider Program, VMware Cloud on AWS Pivotal Portion of EUC/Workspace One revenue recognized as SaaS Carbon Black CloudHealth Technologies, VeloCloud, Horizon Cloud Wavefront, AppDefense and other “as a service” offerings ©2020 VMware, Inc. 4


 
Income Statement Highlights Q4FY19(1) Q4FY20 FY19(1) FY20 License Revenue ($M) 1,027 1,034 3,042 3,181 Subscription & SaaS Revenue ($M) 367 556 1,303 1,877 Services Revenue ($M) 1,365 1,483 5,268 5,753 Total Revenue ($M) 2,759 3,073 9,613 10,811 Non-GAAP Operating Margin(2) 34.1% 34.3% 30.7% 30.2% Non-GAAP Net Income per Diluted (2)(3) 1.87 2.05 5.98 6.24 Share ($) (1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control. (2) See Appendix for reconciliation to GAAP. (3) Based on net income attributable to VMware. ©2020 VMware, Inc. 5


 
Select Financial Measures (1) FY19 FY20 Headcount 24,193 30,938 Cash, Cash Equivalents & Short-Term Investments ($M) 3,532 2,915 Operating Cash Flow ($M) 3,657 3,872 CapEx ($M) 254 279 Unearned Revenue Total ($M) 7,439 9,268 Long-Term Unearned Revenue ($M)(2) 3,100 4,050 (1) Dollar amounts adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control. (2) Non-current unearned revenue as reported on VMware’s consolidated balance sheets. ©2020 VMware, Inc. 6


 
Comparison of Q4FY20 Reported Results to VMware Standalone Guidance As Presented in Non-GAAP as Adjusted to Prior Non-GAAP Excluding November 26, 2019 February 27, 2020 Adjusted excluding Revenue Categories Pivotal adjusted to Guidance(2)(4) Earnings Release(1) Pivotal(2)(3) prior Revenue Q4-20 in $ millions Categories(2) License Revenue 1,034 1,034 291 1,325 1,390 y/y 1% 1% - 8% 13% Subscription & SaaS Revenue 556 407 (407) - - y/y 52% 58% - - - Total License and Subscription & SaaS 1,590 1,441 (116) - - Revenue y/y 14% 12.1% - - - Services Revenue 1,483 1,433 116 1,549 - y/y 9% 10% - 14% - Total Revenue 3,073 2,874 - 2,874 2,950 y/y 11% 10.9% - 10.9% 14% Non-GAAP Operating Margin(3) 34.3% 36.6% - 36.6% 37.6% y/y 20 bps (68 bps) - (68 bps) - Diluted Share Count 424 415 - 415 414 Non-GAAP Net Income Per Diluted Share(3)(5) $2.05 $2.09 - $2.09 $2.16 y/y 9% 5% - 5% 9% Note: Totals may not sum due to rounding. (1) Year-over-year growth comparisons are to Q4 FY19 amounts as adjusted to reflect the recast of prior period financial statements due to the Pivotal acquisition. (2) Year-over-year growth comparisons calculated from financial statements as originally reported. (3) See Appendix for reconciliation to GAAP. (4) The Q4-20 guidance that VMware provided on its November 26, 2019 earnings call was for “standalone” VMware (excluding Pivotal). (5) Based©2020 VMware,on net income Inc. attributable to VMware, Inc. 7


 
Comparison of FY20 Reported Cash Flow to VMware Standalone Guidance As Presented in Impact Attributable Excluding Pivotal(2) November 26, 2019 February 27, 2020 to Pivotal Guidance(2) Earnings FY-20 in $ millions Release(1) Cash Flows from Operations 3,872 (41) 3,913 3,850 y/y 6% - 7% 5% CapEx (279) (8) (271) (280) Free Cash Flow(3) 3,593 (49) 3,642 3,570 y/y 6% - 7% 4% Note: Totals may not sum due to rounding. (1) Year-over-year growth comparisons are to Q4 FY19 amounts as adjusted to reflect the recast of prior period financial statements due to the Pivotal acquisition. (2) Year-over-year growth comparisons calculated from financial statements as originally reported. (3) Free Cash Flow is a non-GAAP financial measure calculated by subtracting CapEx from Cash Flows From Operations. See table above. ©2020 VMware, Inc. 8


 
Bookings for Key Products NSX Q4FY20 YoY Growth FY20 $ FY20 YoY Growth Product Bookings (1) Increased over 20% Increased over 30% Total Bookings Over $1.7B Increased nearly 30% vSAN Q4FY20 YoY Growth FY20 $ FY20 YoY Growth Product Bookings (1) Increased mid-teens Increased over 30% Total Bookings Over $900M Increased approximately 40% EUC Q4FY20 YoY Growth FY20 $ FY20 YoY Growth Product Bookings (1) Increased over 30% Increased over 20% Total Bookings Over $1.7B Increased low double-digits Core SDDC Q4FY20 YoY Growth FY20 YoY Growth Product Bookings (1) Decreased in low single-digits Increased mid single-digits Total Bookings Flat Increased mid single-digits (1) Includes Subscription and SaaS and license bookings. Equivalent to “License Bookings” as stated in prior periods. ©2020 VMware, Inc. 9


 
Q&A ©2019 VMware, Inc. 10


 
Appendix Enterprise Agreements 51% of total bookings 31 deals over $10M 10 of the top 10 deals included NSX 10 of the top 10 deals included Management 10 of the top 10 deals included vSAN 8 of the top 10 deals included EUC 6 of the top 10 deals included VMware Cloud Foundation ©2020 VMware, Inc. 11


 
Appendix VMware, Inc. GROWTH IN REVENUE PLUS SEQUENTIAL CHANGE IN UNEARNED REVENUE (in millions) (unaudited) Growth in Total Revenue Plus Sequential Change in Unearned Revenue Three Months Ended January 31, February 1, 2020 2019(1) Total revenue, as reported $ 3,073 $ 2,759 Sequential change in unearned revenue(2) 1,051 943 Total revenue plus sequential change in unearned revenue $ 4,124 $ 3,702 Change (%) over prior year, as reported 11 % Growth in License and Subscription and SaaS Revenue Plus Sequential Change in Unearned License and Subscription and SaaS Revenue Three Months Ended January 31, February 1, 2020 2019(1) Total license and subscription and SaaS revenue, as reported $ 1,590 $ 1,394 Sequential change in unearned license and subscription and SaaS revenue 335 253 Total license and subscription and SaaS revenue plus sequential change in unearned license and subscription and SaaS revenue $ 1,925 $ 1,647 Change (%) over prior year, as reported 17 % (1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control. (2) Sequential change in unearned revenue consists of the change in total unearned revenue from the preceding quarter. Total unearned revenue consists of current and non-current unearned revenue amounts presented in the consolidated balance sheets.  ©2020 VMware, Inc. 12


 
Appendix VMware, Inc. GROWTH IN REVENUE PLUS SEQUENTIAL CHANGE IN UNEARNED REVENUE (in millions) (unaudited) Growth in Total Revenue Plus Sequential Change in Unearned Revenue Excluding Pivotal Three Months Ended January 31, February 1, 2020 2019(1) Total revenue, as reported $ 3,073 $ 2,759 Total revenue, excluding impact of Pivotal 2,874 2,592 Sequential change in unearned revenue, as reported(2) 1,051 943 Sequential change in unearned revenue, excluding impact of Pivotal 908 777 Total revenue plus sequential change in unearned revenue, as reported $ 4,124 $ 3,702 Total revenue plus sequential change in unearned revenue, excluding impact of Pivotal $ 3,782 $ 3,369 Change (%) over prior year, as reported 11 % Change (%) over prior year, excluding impact of Pivotal 12 % (1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control. (2) Sequential change in unearned revenue consists of the change in total unearned revenue from the preceding quarter. Total unearned revenue consists of current and non-current unearned revenue amounts presented in the consolidated balance sheets.  ©2020 VMware, Inc. 13


 
Q4FY20 Growth in License Revenue plus Sequential Change in Unearned License Revenue As Previously Classified Three Months Ended January 31, February 1, 2020 2019(1) Total license and subscription and SaaS revenue, as reported $ 1,590 $ 1,394 Less: subscription and SaaS revenue, as reported 556 367 Plus: portion of subscription and SaaS revenue, as previously classified as license revenue 291 203 License revenue as previously classified(2) $ 1,325 $ 1,230 Sequential change in unearned license and subscription and SaaS revenue, as reported $ 335 $ 253 Less: sequential change in unearned subscription and SaaS revenue, as reported 335 255 Plus: portion of sequential change of unearned subscription and SaaS revenue, as previously classified as unearned license revenue 100 45 Sequential change in unearned license revenue as previously classified(2) $ 100 $ 43 Total license revenue plus sequential change in unearned license revenue as previously classified(2) $ 1,425 $ 1,273 Change (%) over prior year, as previously classified(2) 12% Note: Effective with the fourth quarter of fiscal year 2020, VMware is presenting a new revenue line item in its earnings reports entitled “subscription and SaaS revenue” and revenue from prior periods has been reclassified to conform to the fourth quarter fiscal year 2020 presentation. Previously, subscription and SaaS revenue was allocated between license and services revenue. The above table shows the portion of the subscription and SaaS revenue that would have been classified as license revenue under the prior revenue classifications. (1) As recast to include Pivotal pursuant to GAAP accounting for acquisition of Pivotal as a transaction between entities under common control. (2) Subscription and SaaS revenue attributable to Pivotal did not include license revenue as previously classified. As a result, this reflects the VMware, Inc. standalone amounts. ©2020 VMware, Inc. 14


 
Summary of FY19 Recast Financials Note: Totals may not sum due to rounding. (1) See Appendix for reconciliation to GAAP; (2) Based on net income attributable to VMware, Inc. ©2020 VMware, Inc. 15


 
Summary of FY20 Recast Financials Note: Totals may not sum due to rounding. (1) See Appendix for reconciliation to GAAP; (2) Based on net income attributable to VMware, Inc. ©2020 VMware, Inc. 16


 
Reconciliation of Q4FY20 Results to VMware Standalone Results Reconciliation of GAAP to Non-GAAP Data excluding Pivotal For the Three Months Ended January 31, 2020 Impact Attributable to Non-GAAP as Total Non-GAAP Non-GAAP, as Acquisition of Adjusted excluding GAAP Adjustments(1) Adjusted(2) Pivotal(3) Pivotal Revenue $ 3,073 — 3,073 199 $ 2,874 Operating income $ 250 805 1,054 1 $ 1,053 Operating margin (2) 8.1% 26.2% 34.3% N/A 36.6% Other income (expense) - (including Investment income & interest expense) $ (11) (1) (11) 11 $ (23) Income before income tax $ 239 804 1,043 13 $ 1,030 Income tax provision $ (76) 242 166 1 $ 165 Tax rate (2) N/A (4) — 16.0% 16.0% 16.0% Net income $ 315 562 877 11 $ 865 Less: Net income (loss) attributable to non-controlling interest $ (6) 15 9 9 — Net income attributable to VMware, Inc. $ 321 547 868 2 $ 865 Weighted-average shares, diluted for Classes A and B 424,007 — 424,007 9,230(5) 414,777 Net income per weighted-average share attributable to VMware, Inc. $ 0.76 — $ 2.05 — $ 2.09 (1) Non-GAAP Adjustments sum from reconciliation of GAAP to Non-GAAP data for three months ended January 31, 2020, which include adjustments related to stock-based compensation, employer payroll taxes on employee stock transactions, intangible amortization, realignment charges, acquisition, disposition and other items, certain litigation and other contingencies, and tax adjustment. (2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. (3) Reflects Pivotal operations during Q4-20 and adjustments to VMware, Inc. standalone and Pivotal financials for periods under recast. (4) GAAP tax rate was not applicable due to the income tax benefit recorded for the three months ended January 31, 2020. (5) Represents increase in weighted-average diluted shares due to Pivotal acquisition for the issuance of VMware's Class B common stock to Dell Technologies as merger consideration and issuance of VMware's Class A common stock for substitution of employee equity grants. ©2020 VMware, Inc. 17


 
Reconciliation of Q4FY19 VMware Standalone Results Includes bridge to revenue as originally classified Reconciliation of GAAP to Non-GAAP Data excluding Pivotal For the Three Months Ended February 1, 2019 Non-GAAP Impact excluding Pivotal Attributable to Non-GAAP as Adjusted to Prior adjusted to prior Total Non-GAAP Non-GAAP, as Acquisition of Adjusted excluding Revenue Revenue (1) (2) (3) (4) GAAP Adjustments Adjusted Pivotal Pivotal Categories Categories License revenue $ 1,027 — 1,027 — $ 1,028 203 1,231 Subscription and SaaS revenue 367 — 367 109 258 (258) — Services revenue 1,365 — 1,365 60 1,305 55 1,360 Total revenue $ 2,759 — 2,759 168 $ 2,591 — 2,591 Operating income $ 598 342 940 (27) $ 967 (3) Operating margin 21.7% 12.4% 34.1% N/A 37.3% Other income (expense) - (including Investment income & interest expense) $ (32) 48 16 2 $ 13 Income before income tax $ 566 390 956 (24) $ 980 Income tax provision $ 87 67 154 (3) $ 157 (3) Tax rate 15.4% — 16.0% 16.0% 16.0% Net income (loss) $ 479 323 802 (21) $ 823 Less: Net income (loss) attributable to non-controlling interest $ (17) 24 7 7 — Net income (loss) attributable to VMware, Inc. $ 496 299 795 (28) $ 823 Weighted-average shares, diluted for Classes A and B 424,630 — 424,630 8,179(5) 416,451 Net income per weighted-average share attributable to VMware, Inc. $ 1.17 — $ 1.87 — $ 1.98 (1) As recast to include Pivotal pursuant to GAAP accounting for acquisition of Pivotal as a transaction between entities under common control. (2) Non-GAAP Adjustments sum from reconciliation of GAAP to Non-GAAP data for three months ended February 1, 2019, which include adjustments related to stock-based compensation, employer payroll taxes on employee stock transactions, intangible amortization, realignment charges, acquisition, disposition and other items, other contingencies and tax adjustment. (3) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. (4) Reflects Pivotal operations during Q4-20 and adjustments to VMware, Inc. standalone and Pivotal financials for periods under recast. (5) Represents increase in weighted-average diluted shares due to Pivotal acquisition for the issuance of VMware's Class B common stock to Dell Technologies as merger consideration and issuance of VMware's Class A common stock for substitution of employee equity grants. ©2020 VMware, Inc. 18


 
Appendix VMware, Inc. RECONCILIATION OF GAAP TO NON-GAAP DATA For the Three Months Ended January 31, 2020 (amounts in millions, except per share amounts, and shares in thousands) (unaudited) Employer Payroll Taxes Acquisition, Certain on Employee Disposition Litigation and Stock-Based Stock Intangible Realignment and Other Other Tax Non-GAAP GAAP Compensation Transactions Amortization Charges Items Contingencies Adjustment(1) As Adjusted(2) Operating expenses(3): Cost of license revenue $ 50 — — (27) — — — — $ 23 Cost of subscription and SaaS revenue $ 106 (3) — (25) — — — — $ 79 Cost of services revenue $ 317 (24) (2) — — — — — $ 291 Research and development $ 676 (130) (2) — — — — — $ 543 Sales and marketing $ 1,003 (91) — (34) — — — — $ 881 General and administrative $ 592 (64) (3) — — (84) (237) — $ 202 Realignment and loss on disposition $ 79 — — — (79) — — — $ — Operating income $ 250 312 7 86 79 84 237 — $ 1,054 Operating margin(2) 8.1% 10.1% 0.2% 2.8% 2.6% 2.7% 7.7% — 34.3% Other income (expense), net(4) $ 10 — — — — (1) — — $ 10 Income before income tax $ 239 312 7 86 79 83 237 — $ 1,043 Income tax provision (benefit) $ (76) 242 $ 166 Tax rate(2) N/A 16.0% Net income $ 315 312 7 86 79 83 237 (242) $ 877 Less: Net income (loss) attributable to non- controlling interests $ (6) 23 — 7 — 1 — (15) $ 9 Net income attributable to VMware, Inc. $ 321 289 7 79 79 82 237 (227) $ 868 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(2)(5) $ 0.76 $ 0.68 $ 0.02 $ 0.19 $ 0.19 $ 0.19 $ 0.56 $ (0.53) $ 2.05 N/A - GAAP tax rate was not applicable due to the income tax benefit recorded for the three months ended January 31, 2020. (1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. (2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. (3) Cost of subscription and SaaS revenue was allocated between cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation. (4) Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized. (5) Calculated based upon 424,007 diluted weighted-average shares for Classes A and B. ©2020 VMware, Inc. 19


 
VMware, Inc. RECONCILIATION OF GAAP TO NON-GAAP DATA Appendix For the Three Months Ended February 1, 2019 (amounts in millions, except per share amounts, and shares in thousands) (unaudited) Employer Payroll Taxes Acquisition, on Employee Disposition Stock-Based Stock Intangible and Other Tax Non-GAAP GAAP(1) Compensation(1) Transactions(1) Amortization(1) Items(1) Adjustment(1)(2) As Adjusted(1)(3) Operating expenses(4): Cost of license revenue $ 40 — — (20) — — $ 20 Cost of subscription and SaaS revenue $ 86 (2) — (25) — — $ 58 Cost of services revenue $ 292 (16) — (1) (1) — $ 274 Research and development $ 596 (105) — — (1) — $ 490 Sales and marketing $ 889 (63) (1) (17) (1) — $ 808 General and administrative $ 258 (34) — — (55) — $ 169 Realignment and loss on disposition $ — — — — — — $ — Operating income $ 598 220 1 63 58 — $ 940 Operating margin(3) 21.7% 8.0% —% 2.3% 2.1% — 34.1% Investment income (loss) $ (7) — — — 46 — $ 39 Other income (expense), net(5) $ 9 — — — 2 — $ 11 Income before income tax $ 566 220 1 63 106 — $ 956 Income tax provision $ 87 67 $ 154 Tax rate(3) 15.4% 16.0% Net income $ 479 220 1 63 106 (67) $ 802 Less: Net income (loss) attributable to non-controlling interests $ (17) 20 — 7 — (3) $ 7 Net income attributable to VMware, Inc. $ 496 200 1 56 106 (64) $ 795 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(3)(6) $ 1.17 $ 0.47 $ — $ 0.13 $ 0.25 $ (0.15) $ 1.87 (1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control. (2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments, such as adjustments resulting from the U.S. Tax Cuts and Jobs Act enacted on December 22, 2017 (the "2017 Tax Act"). Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. (3) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. (4) Cost of subscription and SaaS revenue was allocated between cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation. (5) Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized. (6) Calculated based upon 424,630 diluted weighted-average shares for Classes A and B. ©2020 VMware, Inc. 20


 
VMware, Inc. RECONCILIATION OF GAAP TO NON-GAAP DATA Appendix For the Twelve Months Ended January 31, 2020 (amounts in millions, except per share amounts, and shares in thousands) (unaudited) Employer Payroll Taxes Acquisition, on Employee Disposition Certain Litigation Stock-Based Stock Intangible Realignment and Other and Other Tax Non-GAAP GAAP Compensation Transactions Amortization Charges Items Contingencies Adjustment(1) As Adjusted(2) Operating expenses(3): Cost of license revenue $ 166 (1) — (89) — — — — $ 76 Cost of subscription and SaaS $ 400 (13) — (103) — — — — $ 285 Cost of services revenue $ 1,233 (83) (2) (2) — — — — $ 1,147 Research and development $ 2,522 (459) (3) (1) — — — — $ 2,058 Sales and marketing $ 3,677 (293) (6) (105) — — — — $ 3,273 General and administrative $ 1,293 (168) (3) — — (173) (237) — $ 711 Realignment and loss on disposition $ 79 — — — (79) — — — $ — Operating income $ 1,441 1,017 14 300 79 173 237 — $ 3,261 Operating margin(2) 13.3% 9.4% 0.1% 2.8% 0.7% 1.6% 2.2% — 30.2% Other income (expense), net(4) $ 86 — — — — (35) — — $ 50 Income before income tax $ 1,438 1,017 14 300 79 138 237 — $ 3,222 Income tax provision (benefit) $ (4,918) (6) 5,432 $ 514 Tax rate(2) N/M (6) 16.0% Net income $ 6,356 1,017 14 300 79 138 237 (5,432) $ 2,708 Less: Net income (loss) attributable to non-controlling interests $ (56) 97 — 33 — 3 — (24) $ 53 Net income attributable to VMware, Inc. $ 6,412 920 14 267 79 135 237 (5,408) $ 2,655 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(2)(5) $ 15.08 $ 2.16 $ 0.03 $ 0.63 $ 0.19 $ 0.32 $ 0.56 $ (12.72) $ 6.24 N/M - Tax rate calculated on a GAAP basis is not considered meaningful. (1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. (2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. (3) Cost of subscription and SaaS revenue was included in both cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation. (4) Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized. (5) Calculated based upon 425,235 diluted weighted-average shares for Classes A and B. (6) During the second quarter of fiscal 2020, we completed an intra-group transfer of certain of our intellectual property rights to our Irish subsidiary, where our international business is headquartered. A discrete tax benefit of $4.9 billion was recorded as a deferred tax asset. Due to the impact of the discrete tax benefit of $4.9 billion, the tax rate calculated on a GAAP basis is not considered meaningful. ©2020 VMware, Inc. 21


 
VMware, Inc. RECONCILIATION OF GAAP TO NON-GAAP DATA Appendix For the Twelve Months Ended February 1, 2019 (amounts in millions, except per share amounts, and shares in thousands) (unaudited) Employer Payroll Taxes Acquisition, on Employee Disposition Stock-Based Stock Intangible and Other Tax Non-GAAP GAAP(1) Compensation(1) Transactions(1) Amortization(1) Items(1) Adjustment(1)(2) As Adjusted(1)(3) Operating expenses(4): Cost of license revenue $ 150 (1) — (85) — — $ 64 Cost of subscription and SaaS revenue $ 280 (7) — (89) — — $ 184 Cost of services revenue $ 1,122 (58) (1) (3) (2) — $ 1,058 Research and development $ 2,173 (391) (1) — (3) — $ 1,778 Sales and marketing $ 3,230 (226) (4) (64) (1) — $ 2,935 General and administrative $ 846 (117) (1) — (82) — $ 646 Realignment and loss on disposition $ 9 — — — (9) — $ — Operating income $ 1,803 800 7 241 97 — $ 2,948 Operating margin(3) 18.8% 8.3% 0.1% 2.5% 1.0% — 30.7% Investment income (loss) $ 161 — — — 46 — $ 207 Other income (expense), net(5) $ (1) — — — 10 — $ 9 Income before income tax $ 1,829 800 7 241 153 — $ 3,030 Income tax provision $ 239 247 $ 486 Tax rate(3) 13.1% 16.0% Net income $ 1,590 800 7 241 153 (247) $ 2,544 Less: Net income (loss) attributable to non-controlling interests $ (60) 69 — 24 (1) (6) $ 26 Net income attributable to VMware, Inc. $ 1,650 731 7 217 154 (241) $ 2,518 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(3)(6) $ 3.92 $ 1.74 $ 0.02 $ 0.51 $ 0.37 $ (0.57) $ 5.98 (1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition, which was accounted for as a transaction between entities under common control. (2) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments, such as adjustments resulting from the 2017 Tax Act. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. (3) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data. (4) Cost of subscription and SaaS revenue was included in both cost of license revenue and cost of services revenue in prior year and has been reclassified to conform with current period presentation. (5) Non-GAAP adjustment to other income (expense), net includes gains or losses on equity investments, whether realized or unrealized. (6) Calculated based upon 421,131 diluted weighted-average shares for Classes A and B. ©2020 VMware, Inc. 22


 
VMware, Inc. Appendix SUPPLEMENTAL SCHEDULE OF FINANCIAL INFORMATION ADJUSTED FOR PIVOTAL ACQUISITION (amounts in millions, except per share amounts, and shares in thousands) (unaudited) During the fourth quarter of fiscal 2020, VMware acquired Pivotal, which was accounted for as a transaction between entities under common control. This transaction required prior period information to be recast for all periods presented, as if the combination had been in effect since the inception of the common control, which could include eliminations and other adjustments (referred to in the schedules below as "Pivotal Adjustments"). Condensed Consolidated Statements of Income Adjusted for Pivotal Acquisition The following table presents the condensed consolidated statements of income for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 as adjusted for the Pivotal acquisition (tables in millions, except per share amounts, and shares in thousands): Three Months Ended Twelve Months Ended November 1, August 2, May 3, February 1, November 2, August 3, May 4, February 1, February 2, 2019 2019 2019 2019 2018 2018 2018 2019 2018 Revenue: License $ 728 $ 773 $ 646 $ 1,027 $ 692 $ 723 $ 601 $ 3,042 $ 2,628 Subscription and SaaS 470 439 411 367 334 308 294 1,303 927 Services 1,458 1,420 1,393 1,365 1,337 1,301 1,264 5,268 4,781 Total revenue 2,656 2,632 2,450 2,759 2,363 2,332 2,159 9,613 8,336 Operating expenses: Cost of license revenue 42 38 36 40 37 37 36 150 135 Cost of subscription and SaaS revenue 103 97 94 86 72 65 62 280 200 Cost of services revenue 311 306 299 292 279 279 271 1,122 1,072 Research and development 642 614 590 596 551 528 498 2,173 1,917 Sales and marketing 918 888 868 889 786 772 782 3,230 2,723 General and administrative 269 223 209 258 199 203 185 846 722 Realignment and loss on disposition — — — — 6 1 2 9 104 Operating income 371 466 354 598 433 447 323 1,803 1,463 Investment income (loss) 12 14 14 (7) 63 57 48 161 120 Interest expense (40) (34) (34) (34) (33) (34) (34) (134) (74) Other income (expense), net 17 41 17 9 (17) 10 (1) (1) 68 Income before income tax 360 487 351 566 446 480 336 1,829 1,577 Income tax provision (benefit) (30) (4,798) (14) 87 41 64 46 239 1,152 Net income 390 5,285 365 479 405 416 290 1,590 425 Less: Net loss attributable to non-controlling interests (17) (18) (15) (17) (17) (17) (9) (60) (12) Net income attributable to VMware, Inc. $ 407 $ 5,303 $ 380 $ 496 $ 422 $ 433 $ 299 $ 1,650 $ 437 Net income per weighted-average share attributable to VMware, Inc. common stockholders, basic for Classes A and B $ 0.98 $ 12.72 $ 0.91 $ 1.19 $ 1.01 $ 1.04 $ 0.73 $ 3.99 $ 1.07 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B $ 0.96 $ 12.47 $ 0.89 $ 1.17 $ 1.00 $ 1.03 $ 0.71 $ 3.92 $ 1.04 Weighted-average shares, basic for Classes A and B 416,387 416,983 417,636 417,499 415,930 414,334 409,266 413,769 410,315 Weighted-average shares, diluted for Classes A and B 423,035 425,091 426,697 424,630 422,629 421,421 418,836 421,131 420,887 ©2020 VMware, Inc. 23


 
VMware, Inc. Appendix Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition The following tables present the reconciliations of GAAP to non-GAAP data for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 as adjusted for the Pivotal acquisition (tables in millions, except per share amounts): Three Months Ended November 1, 2019 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 431 (60) $ 371 386 (1) $ 758 Income tax provision (benefit) 45 (75) (30) 147 (2) 118 Net income attributable to VMware, Inc. $ 621 (214) $ 407 195 (3) $ 602 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 1.50 $ 0.96 0.45 (4) $ 1.42 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($256 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($74 million) and acquisition, disposition and other items ($55 million). (2) Non-GAAP adjustments to income tax provision (benefit) were $147 million during the three months ended November 1, 2019. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($230 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($65 million), acquisition, disposition and other items ($43 million) and tax adjustment (-$144 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.54), intangible amortization ($0.15), acquisition, disposition and other items ($0.10) and tax adjustment (-$0.34). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 423,035 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. Three Months Ended August 2, 2019 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 523 (57) $ 466 330 (1) $ 795 Income tax provision (benefit) (4,925) 127 (4,798) 4,925 (2) 127 Net income attributable to VMware, Inc. $ 4,926 377 $ 5,303 (4,652) (3) $ 650 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 11.83 $ 12.47 (10.94) (4) $ 1.53 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($234 million), employer payroll taxes on employee stock transactions ($4 million), intangible amortization ($70 million) and acquisition, disposition and other items ($22 million). (2) Non-GAAP adjustments to income tax provision (benefit) were $4,925 million during the three months ended August 2, 2019. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($208 million), employer payroll taxes on employee stock transactions ($4 million), intangible amortization ($61 million), acquisition, disposition and other items (-$1 million) and tax adjustment (-$4,924 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.49), employer payroll taxes on employee stock transactions ($0.01), intangible amortization ($0.14), and tax adjustment (-$11.58). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 425,091 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. ©2020 VMware, Inc. 24


 
VMware, Inc. Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.) Appendix Three Months Ended May 3, 2019 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 415 (61) $ 354 300 (1) $ 654 Income tax provision (benefit) 35 (49) (14) 118 (2) 104 Net income attributable to VMware, Inc. $ 505 (125) $ 380 155 (3) $ 535 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 1.21 $ 0.89 0.35 (4) $ 1.25 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($216 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($69 million) and acquisition, disposition and other items ($13 million). (2) Non-GAAP adjustments to income tax provision (benefit) were $118 million during the three months ended May 3, 2019. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($194 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($60 million), acquisition, disposition and other items ($12 million) and tax adjustment (-$113 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.45), intangible amortization ($0.14), acquisition, disposition and other items ($0.03) and tax adjustment (-$0.27). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 426,697 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. Three Months Ended February 1, 2019 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 664 (66) $ 598 342 (1) $ 940 Income tax provision 89 (2) 87 67 (2) 153 Net income attributable to VMware, Inc. $ 502 (6) $ 496 299 (3) $ 795 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 1.21 $ 1.17 0.70 (4) $ 1.87 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($220 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($63 million) and acquisition, disposition and other items ($58 million). (2) Non-GAAP adjustments to income tax provision were $67 million during the three months ended February 1, 2019. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($200 million), employer payroll taxes on employee stock transactions ($1 million), intangible amortization ($56 million), acquisition, disposition and other items ($106 million) and tax adjustment (-$64 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.47), intangible amortization ($0.13), acquisition, disposition and other items ($0.25) and tax adjustment (-$0.15). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 424,630 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. ©2020 VMware, Inc. 25


 
VMware, Inc. Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.) Appendix Three Months Ended November 2, 2018 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 495 (62) $ 433 287 (1) $ 720 Income tax provision 11 30 41 79 (2) 120 Net income attributable to VMware, Inc. $ 334 88 $ 422 200 (3) $ 622 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 0.81 $ 1.00 0.47 (4) $ 1.47 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($211 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($60 million) and acquisition, disposition and other items ($14 million). (2) Non-GAAP adjustments to income tax provision were $79 million during the three months ended November 2, 2018. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($192 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($53 million), acquisition, disposition and other items ($30 million) and tax adjustment (-$77 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.45), intangible amortization ($0.13), acquisition, disposition and other items ($0.07) and tax adjustment (-$0.18). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 422,629 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. Three Months Ended August 3, 2018 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 509 (62) $ 447 267 (1) $ 714 Income tax provision 128 (64) 64 54 (2) 118 Net income attributable to VMware, Inc. $ 644 (211) $ 433 180 (3) $ 613 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 1.56 $ 1.03 0.42 (4) $ 1.45 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($196 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($60 million) and acquisition, disposition and other items ($9 million). (2) Non-GAAP adjustments to income tax provision were $54 million during the three months ended August 3, 2018. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($177 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($53 million), acquisition, disposition and other items ($1 million) and tax adjustment (-$53 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.42), intangible amortization ($0.13) and tax adjustment (-$0.13). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 421,421 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. ©2020 VMware, Inc. 26


 
VMware, Inc. Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.) Appendix Three Months Ended May 4, 2018 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 382 (59) $ 323 248 (1) $ 572 Income tax provision 233 (187) 46 48 (2) 94 Net income attributable to VMware, Inc. $ 942 (643) $ 299 189 (3) $ 488 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 2.29 $ 0.71 0.45 (4) $ 1.16 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($172 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($59 million) and acquisition, disposition and other items ($15 million). (2) Non-GAAP adjustments to income tax provision were $48 million during the three months ended May 4, 2018. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($161 million), employer payroll taxes on employee stock transactions ($2 million), intangible amortization ($55 million), acquisition, disposition and other items ($18 million) and tax adjustment (-$47 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($0.39), intangible amortization ($0.13), acquisition, disposition and other items ($0.04) and tax adjustment (-$0.11). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 418,836 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. Twelve Months Ended February 1, 2019 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 2,050 (247) $ 1,803 1,145 (1) $ 2,948 Income tax provision 461 (222) 239 247 (2) 486 Net income attributable to VMware, Inc. $ 2,422 (772) $ 1,650 868 (3) $ 2,518 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 5.85 $ 3.92 2.07 (4) $ 5.98 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($800 million), employer payroll taxes on employee stock transactions ($7 million), intangible amortization ($241 million) and acquisition, disposition and other items ($97 million). (2) Non-GAAP adjustments to income tax provision were $247 million during the twelve months ended February 1, 2019. (3) Non-GAAP adjustments to net income attributable to VMware, Inc. include stock-based compensation ($731 million), employer payroll taxes on employee stock transactions ($7 million), intangible amortization ($217 million), acquisition, disposition and other items ($154 million) and tax adjustment (-$241 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($1.74), employer payroll taxes on employee stock transactions ($0.02), intangible amortization ($0.51), acquisition, disposition and other items ($0.37) and tax adjustment (-$0.57). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 421,131 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. ©2020 VMware, Inc. 27


 
Appendix VMware, Inc. Reconciliations of GAAP to Non-GAAP Data Adjusted for Pivotal Acquisition (cont.) Twelve Months Ended February 2, 2018 GAAP Combined As Originally Pivotal GAAP Non-GAAP Non-GAAP Reported Adjustments As Adjusted(6) Adjustments As Adjusted(6) Operating income $ 1,702 (239) $ 1,463 1,026 (1) $ 2,489 Income tax provision 1,155 (3) 1,152 (627) (2) 525 Net income attributable to VMware, Inc. $ 659 (222) $ 437 1,578 (3) $ 2,016 Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B(5)(6) $ 1.59 $ 1.04 3.74 (4) $ 4.79 __________ (1) Non-GAAP adjustments to operating income include stock-based compensation ($712 million), employer payroll taxes on employee stock transactions ($6 million), intangible amortization ($174 million) and acquisition, disposition and other items ($134 million). (2) Non-GAAP adjustments to income tax provision were -$627 million during the twelve months ended February 2, 2018. (3) Non-GAAP adjustments to net income attributable to VMware Inc. include stock-based compensation ($683 million), employer payroll taxes on employee stock transactions ($6 million), intangible amortization ($172 million), acquisition, disposition and other items ($88 million), loss on share repurchase ($2 million) and tax adjustment ($627 million). (4) Non-GAAP adjustments to net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, include stock-based compensation ($1.62), employer payroll taxes on employee stock transactions ($0.01), intangible amortization ($0.41), acquisition, disposition and other items ($0.21) and tax adjustment ($1.49). (5) Combined GAAP as adjusted and non-GAAP as adjusted net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted, were calculated based upon 420,887 diluted weighted-average shares for Classes A and B. (6) Totals may not sum, due to rounding. Net income per weighted-average share attributable to VMware, Inc. common stockholders was calculated based upon the respective underlying, non-rounded data. ©2020 VMware, Inc. 28


 
VMware, Inc. Appendix Condensed Consolidated Balance Sheet Adjusted for Pivotal Acquisition The following table presents the condensed consolidated balance sheet for fiscal 2019 as originally reported and as adjusted for the Pivotal acquisition (tables in millions): February 1, 2019 GAAP Combined As Originally Pivotal GAAP Reported Adjustments As Adjusted ASSETS Current assets: Cash and cash equivalents $ 2,830 702 $ 3,532 Short-term investments 19 — 19 Accounts receivable, net of allowance for doubtful accounts 1,576 147 1,723 Due from related parties, net 937 153 1,090 Other current assets 289 16 305 Total current assets 5,651 1,018 6,669 Property and equipment, net 1,133 29 1,162 Other assets 1,853 (765) 1,088 Deferred tax assets 103 187 290 Intangible assets, net 541 425 966 Goodwill 5,381 2,037 7,418 Total assets $ 14,662 2,931 $ 17,593 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 135 18 $ 153 Accrued expenses and other 1,593 71 1,664 Unearned revenue 3,968 371 4,339 Total current liabilities 5,696 460 6,156 Note payable to Dell 270 — 270 Long-term debt 3,972 — 3,972 Unearned revenue 3,010 90 3,100 Income tax payable 889 — 889 Other liabilities 274 41 315 Total liabilities 14,111 591 14,702 Contingencies Stockholders’ equity: Class A common stock 1 — 1 Class B convertible common stock 3 — 3 Additional paid-in capital 531 2,428 2,959 Accumulated other comprehensive income (loss) 2 (4) (2) Retained earnings (Accumulated deficit) 14 (1,110) (1,096) Total VMware, Inc. stockholders’ equity 551 1,314 1,865 Non-controlling interests — 1,026 1,026 Total stockholders’ equity 551 2,340 2,891 Total liabilities and stockholders’ equity $ 14,662 2,931 $ 17,593 ©2020 VMware, Inc. 29


 
Appendix VMware, Inc. Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows Adjusted for Pivotal Acquisition The following table presents the reconciliation of GAAP cash flows from operating activities to free cash flows as adjusted for the Pivotal acquisition for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 (table in millions): Three Months Ended Twelve Months Ended November 1, August 2, May 3, February 1, November 2, August 3, May 4, February 1, February 2, 2019 2019 2019 2019 2018 2018 2018 2019 2018 GAAP cash flows from operating activities $ 751 $ 641 $ 1,395 $ 1,020 $ 733 $ 805 $ 1,101 $ 3,657 $ 3,101 Capital expenditures (52) (91) (73) (68) (60) (63) (63) (254) (276) Free cash flows $ 699 $ 550 $ 1,322 $ 952 $ 673 $ 742 $ 1,038 $ 3,403 $ 2,825 The following tables present the reconciliation of GAAP cash flows from operating activities to free cash flows as originally reported and as adjusted for the Pivotal acquisition for the first three quarters of fiscal 2020, the four quarters of fiscal 2019, and the annual periods of fiscal 2019 and fiscal 2018 (tables in millions): Three Months Ended November 1, 2019 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 810 (59) $ 751 Capital expenditures (50) (2) (52) Free cash flows $ 760 (61) $ 699 Three Months Ended August 2, 2019 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 699 (58) $ 641 Capital expenditures (88) (3) (91) Free cash flows $ 611 (61) $ 550 Three Months Ended May 3, 2019 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 1,273 122 $ 1,395 Capital expenditures (71) (2) (73) Free cash flows $ 1,202 120 $ 1,322 ©2020 VMware, Inc. 30


 
VMware, Inc. Appendix Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows Adjusted for Pivotal Acquisition (cont.) Three Months Ended February 1, 2019 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 1,012 8 $ 1,020 Capital expenditures (66) (2) (68) Free cash flows $ 946 6 $ 952 Three Months Ended November 2, 2018 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 769 (36) $ 733 Capital expenditures (57) (3) (60) Free cash flows $ 712 (39) $ 673 Three Months Ended August 3, 2018 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 787 18 $ 805 Capital expenditures (61) (2) (63) Free cash flows $ 726 16 $ 742 Three Months Ended May 4, 2018 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 1,095 6 $ 1,101 Capital expenditures (61) (2) (63) Free cash flows $ 1,034 4 $ 1,038 Twelve Months Ended February 1, 2019 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 3,663 (6) $ 3,657 Capital expenditures (245) (9) (254) Free cash flows $ 3,418 (15) $ 3,403 ©2020 VMware, Inc. 31


 
Appendix VMware, Inc. Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows Adjusted for Pivotal Acquisition (cont.) Twelve Months Ended February 2, 2018 As Originally Pivotal Combined Reported Adjustments As Adjusted GAAP cash flows from operating activities $ 3,218 (117) $ 3,101 Capital expenditures (263) (13) (276) Free cash flows $ 2,955 (130) $ 2,825 ©2020 VMware, Inc. 32