10-QPeriod: Q2 FY2019

Dell Technologies Inc. Quarterly Report for Q2 Ended May 4, 2018

Filed June 12, 2018For Securities:DELL

Summary

Dell Technologies Inc.'s Form 10-Q filing for the period ending May 4, 2018, reveals a significant increase in net revenue, up 19% year-over-year to $21.4 billion, driven by strong performance across all three business units: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware. This revenue growth was achieved despite an operating loss that narrowed considerably to $0.2 billion, from $1.3 billion in the prior year, primarily due to improved profitability in ISG and CSG and a reduction in amortization and purchase accounting adjustments. The company generated $1.2 billion in cash from operating activities, a substantial improvement from $0.3 billion in the prior year, indicating better working capital management and improved profitability. While the company reported a net loss of $0.5 billion, it's important to note the significant year-over-year improvement from a $1.2 billion net loss. Investors should monitor the ongoing integration of the EMC acquisition and the continued execution of strategic initiatives aimed at digital transformation and market leadership.

Financial Highlights

51 data points
Beta

Revenue

$21.36B

27.5% Gross Margin

Net Income

-$636.00M

-3.0% Net Margin

Total Assets

$123.22B

Cash & Equivalents

$15.32B

Free Cash Flow

$886.00M

Financial Statements
Beta
Revenue$21.36B
Cost of Revenue$15.48B
Gross Profit$5.88B
R&D Expenses$1.09B
SG&A Expenses$4.94B
Operating Expenses$6.03B
Operating Income-$153.00M
Net Income-$636.00M

Key Highlights

  • 1Net revenue increased by 19% year-over-year to $21.4 billion, driven by strong performance across ISG, CSG, and VMware.
  • 2Operating loss significantly narrowed to $0.2 billion from $1.3 billion in the prior year, reflecting improved operational efficiencies and profitability.
  • 3Cash from operating activities surged to $1.2 billion, a substantial increase from $0.3 billion in the prior year, indicating improved cash generation.
  • 4The company adopted new accounting standards for revenue recognition and measurement of financial assets/liabilities, with retrospective adjustments impacting prior period reporting.
  • 5VMware's contribution remains significant, with its segment revenue growing 12% year-over-year.
  • 6Total debt remains substantial at approximately $52.7 billion, though the company has access to significant cash and available borrowing capacity.
  • 7The company continues to navigate the complexities of the Tax Cuts and Jobs Act of 2017, with provisional estimates recorded for its impact.

Frequently Asked Questions

Dell Technologies demonstrated strong top-line revenue growth of 19% year-over-year, indicating healthy demand for its products and services. The company also showed significant improvement in operating loss and a substantial increase in cash from operations, suggesting progress in profitability and cash generation. However, a net loss was still reported, and the company carries a significant debt load. Overall, the trend is positive with strong revenue growth and improving cash flow, but continued focus on debt management and achieving consistent profitability is warranted.

All three reportable segments showed growth. The Infrastructure Solutions Group (ISG) saw a 25% revenue increase, driven by servers and networking. The Client Solutions Group (CSG) increased revenue by 14%, led by commercial notebooks, workstations, and desktops. VMware continued its strong performance with a 12% revenue increase. While VMware's operating income as a percentage of net revenue decreased slightly, all segments contributed positively to the company's overall revenue growth.

Dell Technologies adopted new accounting standards for revenue recognition (ASC 606) and the measurement of financial assets and liabilities. These adoptions, applied retrospectively or with cumulative adjustments, have impacted previously reported financial data. The adoption of the revenue recognition standard, in particular, led to adjustments in revenue, deferred revenue, and operating expenses. Investors should review the 'Notes to Condensed Consolidated Financial Statements,' specifically Note 1 and Note 2, for detailed information on these impacts and the retrospective adjustments made.

Dell Technologies has a substantial total debt of approximately $52.7 billion. However, the company maintains significant liquidity, with $15.3 billion in cash and cash equivalents and an additional $4.9 billion in available borrowings under revolving credit facilities as of May 4, 2018. This strong liquidity position, combined with improved operating cash flows, provides the company with flexibility to manage its debt obligations and fund its strategic initiatives.