10-QPeriod: Q3 FY2022

Dell Technologies Inc. Quarterly Report for Q3 Ended Oct 29, 2021

Filed December 3, 2021For Securities:DELL

Summary

Dell Technologies Inc. reported robust financial results for the third quarter and the first nine months ended October 29, 2021. The company saw significant year-over-year growth in both revenue and net income across its key segments, driven by strong demand for its IT solutions. The Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG) both experienced revenue increases, with CSG showing particularly strong growth in commercial and consumer product sales. VMware, despite its pending spin-off, also contributed positively to revenue. The company also announced a new $5 billion stock repurchase program, signaling confidence in its financial position. The significant gain on the sale of Boomi substantially boosted net income for the period, though the core operational performance remained strong. Dell Technologies successfully navigated supply chain challenges and an inflationary cost environment, demonstrating resilience. The company's strategic focus on IT as-a-Service and flexible consumption models through its APEX offerings is expected to drive future growth and recurring revenue. Management is confident in the company's ability to meet its financial obligations and continue its deleveraging strategy, supported by strong operating cash flows and access to revolving credit facilities. The recent spin-off of VMware, Inc. on November 1, 2021, is expected to allow Dell Technologies to focus more on its core infrastructure and client solutions businesses.

Financial Highlights

56 data points
Beta

Revenue

$26.42B

20.9% Gross Margin

Net Income

$3.84B

14.5% Net Margin

EPS (Diluted)

$4.87

Total Assets

$135.68B

Cash & Equivalents

$22.41B

Free Cash Flow

$2.45B

Financial Statements
Beta
Revenue$26.42B
Cost of Revenue$20.89B
Gross Profit$5.53B
R&D Expenses$650.00M
SG&A Expenses$3.84B
Operating Expenses$4.49B
Operating Income$1.05B
Interest Expense$406.00M
Net Income$3.84B
EPS (Basic)$5.02
EPS (Diluted)$4.87
Shares Outstanding (Basic)766.00M
Shares Outstanding (Diluted)788.00M

Key Highlights

  • 1Total net revenue increased by 21% year-over-year for the third quarter and 16% for the first nine months.
  • 2Net income attributable to Dell Technologies Inc. significantly increased to $3.84 billion and $5.56 billion for the third quarter and first nine months, respectively.
  • 3Client Solutions Group (CSG) saw revenue growth of 35% year-over-year for the quarter and 28% for the nine months, driven by strong commercial and consumer demand.
  • 4Infrastructure Solutions Group (ISG) revenue increased by 5% year-over-year for the quarter and 4% for the nine months.
  • 5VMware revenue grew 10% year-over-year for the quarter and 9% for the nine months.
  • 6The company completed the sale of Boomi, recognizing a pre-tax gain of $4.0 billion.
  • 7A new $5 billion stock repurchase program was authorized, underscoring confidence in future financial performance.

Frequently Asked Questions

Dell Technologies saw strong performance driven by increased demand across its Client Solutions Group (CSG) and Infrastructure Solutions Group (ISG). CSG benefited from strong sales of commercial and consumer products as businesses and individuals invested in remote and hybrid work solutions. ISG experienced growth in servers and networking, supported by a general economic recovery and increased IT infrastructure spending. The VMware segment also contributed positively with growth in subscription and SaaS offerings.

The divestiture of Boomi on October 1, 2021, resulted in a pre-tax gain of $4.0 billion, significantly boosting Dell Technologies' net income for the period. The company recorded a net gain of $3.0 billion after taxes related to this sale, which was a strategic move to focus on core growth initiatives.

Dell Technologies completed the spin-off of VMware, Inc. on November 1, 2021. This strategic move aims to allow Dell to further focus on its core infrastructure and client solutions businesses. Dell received approximately $9.3 billion in cash from VMware as part of the transaction, which was used to repay debt. Going forward, VMware's results will be reported as discontinued operations, and Dell will maintain a strategic commercial relationship with VMware through a framework agreement.

Dell Technologies acknowledged ongoing industry-wide supply chain constraints and inflationary cost pressures. The company is actively managing these challenges by working closely with suppliers, optimizing its supply chain, and strategically managing pricing. Despite these pressures, Dell reported revenue growth, indicating successful navigation of these headwinds through proactive measures and resilient demand for its products and services.