01—Abstract
Summary
Summary of the 10-K filed March 29, 2019. Cited figures are marked; the original filing is the authoritative source.
Dell Technologies' Fiscal Year 2019 10-K filing highlights a company in transition, marked by the significant "Class V transaction" completed in December 2018.
This transaction eliminated the tracking stock structure tied to Dell's interest in VMware, simplifying the capital structure by exchanging Class V stock for cash and Class C common stock. Financially, the company experienced robust revenue growth across its three reportable segments: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware. ISG saw strong performance in servers and networking, while storage revenue also grew.
CSG demonstrated resilience with increased commercial product sales and higher average selling prices. VMware continued its impressive growth trajectory in software licenses and maintenance services. Despite the overall revenue growth, Dell Technologies reported an operating loss of $191 milliona for FY19, a significant improvement from the prior year's $2.4 billion operating loss, largely due to reduced amortization of intangible assets and purchase accounting adjustments related to the EMC merger.
The company's focus on integrating its diverse businesses and driving operational efficiencies remains a key strategic theme. Dell Technologies continues to invest in research and development, aiming to innovate and maintain its competitive position in the rapidly evolving IT landscape, while managing a substantial debt load from previous acquisitions.
02—Key points
Key Highlights
- Completed the "Class V transaction" in December 2018, simplifying the capital structure by eliminating tracking stock and issuing Class C common stock.
- Reported strong revenue growth across all three segments: ISG (up 19%), CSG (up 10%), and VMware (up 14%) for FY19.
- ISG revenue was driven by significant increases in servers and networking, alongside growth in storage solutions.
- CSG achieved revenue growth through increased commercial product sales and higher average selling prices.
- VMware continued robust growth in software licenses and maintenance services, contributing significantly to overall revenue.
- Reduced operating loss to $191 million in FY19 from $2.4 billion in FY18, primarily due to lower amortization and purchase accounting adjustments.
- Maintained a strong liquidity position with $9.7 billion in cash and cash equivalents and substantial available borrowings as of February 1, 2019.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Dell Technologies Inc. lost $0.03.
- Revenue$90.62B100.0%
- Cost of revenue−$65.57B72.4%
- Gross profit$25.05B27.6%
- Operating costs−$25.24B27.9%
- Operating income−$191.0M0.2%
- Interest, other & tax−$2.12B2.3%
- Net income−$2.31B2.5%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 29, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $90.62B$78.66B | +15.2% |
| Cost of Revenue | $65.57B$58.50B | +12.1% |
| Gross Profit | $25.05B$20.54B | +22.0% |
| R&D Expenses | $4.60B$4.38B | +5.0% |
| SG&A Expenses | $20.64B$18.57B | +11.2% |
| Operating Expenses | $25.24B$22.95B | +10.0% |
| Operating Income | -$191.00M-$2.42B | +92.1% |
| Interest Expense | $2.49B$2.41B | +3.4% |
| Net Income | -$2.31B-$2.85B | +18.9% |
| EPS (Basic) | $5.84— | — |
| EPS (Diluted) | $5.50— | — |
| Shares Outstanding (Basic) | 720.00M— | — |
| Shares Outstanding (Diluted) | 750.00M— | — |
05—Questions
Frequently Asked Questions
What was the primary purpose and impact of the "Class V transaction"?
The "Class V transaction," completed in December 2018, was designed to simplify Dell Technologies' capital structure by eliminating the tracking stock feature associated with its interest in VMware. This transaction exchanged outstanding Class V Common Stock for a combination of cash and Class C common stock, effectively consolidating the company's ownership and operations under a single class of common stock.
How did the company's main business segments perform in Fiscal Year 2019?
Dell Technologies saw significant revenue growth across its three reportable segments. The Infrastructure Solutions Group (ISG) grew by 19%, driven by servers, networking, and storage. The Client Solutions Group (CSG) grew by 10%, supported by commercial products and higher average selling prices. VMware also experienced strong growth of 14%, primarily from software licenses and maintenance services.
What is the company's financial health and debt situation after the EMC merger and Class V transaction?
Dell Technologies reported total debt of $54.2 billion as of February 1, 2019. While the company experienced an operating loss of $191 million in FY19, this was a substantial improvement from the prior year. The company maintained a strong liquidity position with $9.7 billion in cash and cash equivalents and sufficient available borrowings to fund operations. However, the significant debt level remains a key financial consideration for investors.
What are the key risks highlighted in the 10-K filing?
Key risks identified include intense competition in the technology industry, reliance on single-source or limited-source suppliers, adverse global economic conditions, the need to successfully execute its growth strategy including product transitions, and potential impacts from foreign currency exchange rate fluctuations. Additionally, the company faces risks related to its substantial level of indebtedness and the financial performance of VMware, Inc.
06—Continue