10-QPeriod: Q2 FY2020

Dell Technologies Inc. Quarterly Report for Q2 Ended May 3, 2019

Filed June 10, 2019For Securities:DELL

Summary

Dell Technologies Inc. reported a net income of $329 million for the three months ended May 3, 2019, a significant improvement from a net loss of $538 million in the same period last year. Total net revenue also increased by 3% year-over-year to $21.9 billion, driven by growth in the Client Solutions Group (CSG) and VMware segments. The Infrastructure Solutions Group (ISG) experienced a slight revenue decline, but operating income improved. The company continues to manage its substantial debt load, having recently completed refinancing activities to smooth out maturity profiles. Key financial highlights include a substantial increase in operating income due to reduced amortization and purchase accounting adjustments, alongside growth in non-GAAP operating income. Dell Technologies also generated $682 million in cash from operating activities. The company's strategic focus remains on delivering integrated IT solutions and maintaining financial discipline, including debt reduction efforts, to drive long-term profitable growth.

Financial Highlights

53 data points
Beta

Revenue

$21.91B

31.0% Gross Margin

Net Income

$293.00M

1.3% Net Margin

EPS (Diluted)

$0.38

Total Assets

$109.89B

Cash & Equivalents

$9.04B

Free Cash Flow

-$34.00M

Financial Statements
Beta
Revenue$21.91B
Cost of Revenue$15.11B
Gross Profit$6.80B
R&D Expenses$1.18B
SG&A Expenses$5.07B
Operating Expenses$6.25B
Operating Income$550.00M
Net Income$293.00M
EPS (Basic)$0.41
EPS (Diluted)$0.38
Shares Outstanding (Basic)717.00M
Shares Outstanding (Diluted)751.00M

Key Highlights

  • 1Net income turned positive, reaching $329 million compared to a net loss of $538 million in the prior year's quarter.
  • 2Total net revenue grew 3% year-over-year to $21.9 billion, driven by strong performance in Client Solutions Group (CSG) and VMware.
  • 3Operating income significantly improved to $550 million from a loss of $153 million in the prior year, largely due to decreased amortization and purchase accounting adjustments.
  • 4Cash flow from operating activities was $682 million, a decrease from $1.16 billion in the prior year period, primarily due to higher seasonal personnel payments.
  • 5The company reported $40.0 billion in goodwill and $20.9 billion in intangible assets, net, as of May 3, 2019.
  • 6Total debt remained substantial at $53.5 billion (carrying value) as of May 3, 2019, with ongoing efforts to manage maturities and costs.
  • 7VMware's net revenue grew 13% year-over-year, contributing significantly to the overall company performance, with an operating income of $614 million.

Frequently Asked Questions

Dell Technologies reported a net income of $329 million for the three months ended May 3, 2019, a significant turnaround from a net loss of $538 million in the same period last year. Total net revenue increased by 3% to $21.9 billion, primarily driven by growth in the Client Solutions Group and VMware segments. Operating income also saw a substantial improvement.

Dell Technologies maintains a significant debt level, with a carrying value of $53.5 billion as of May 3, 2019. The company has been actively managing its debt, including refinancing activities in March 2019 to smooth out maturity profiles and reduce interest costs. The focus remains on paying down core debt and managing interest payments from existing and expected sources of cash.

Revenue growth was primarily driven by the Client Solutions Group (CSG), which saw a 6% increase in net revenue, particularly in commercial products. VMware also contributed significantly with a 13% increase in net revenue, driven by software license and maintenance services growth. While the Infrastructure Solutions Group (ISG) saw a slight revenue decrease, its operating income improved.

Dell Technologies aims for long-term profitable growth by focusing on its integrated IT solutions and maintaining financial discipline. The company expects continued demand for flexible consumption models and invests in R&D to innovate and introduce new solutions. However, the CSG business faces cyclicality and competitive pressures, while ISG is impacted by the evolving IT infrastructure market.