01—Abstract
Summary
Summary of the 10-Q filed June 12, 2023. Cited figures are marked; the original filing is the authoritative source.
Dell Technologies Inc. reported a notable decline in net revenue for the first quarter of Fiscal 2024, down 20%a year-over-year, primarily driven by challenging global macroeconomic conditions impacting demand for both its Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG) offerings.
While revenue saw a significant drop, the company managed to improve its gross margin percentage due to lower input costs and strong pricing discipline. Operating income, however, saw a substantial decrease of 31%b due to the revenue decline outpacing cost management efforts. Despite the revenue headwinds, Dell Technologies generated positive cash flow from operations, primarily driven by strong working capital performance, including reductions in inventory and accounts receivable.
The company maintained a solid liquidity position with substantial cash and equivalents and available borrowings. Management expects the macroeconomic environment to remain challenging for the full fiscal year, with a potential impact on operating margins, but anticipates demand declines to moderate. The company continues to focus on innovation and cost management to navigate the current environment and position itself for long-term growth.
02—Key points
Key Highlights
- Net revenue decreased by 20% to $20.92 billion, primarily due to lower demand in both ISG (-18%) and CSG (-23%) segments, influenced by global macroeconomic challenges.
- Operating income declined significantly by 31% to $1.07 billion, reflecting lower revenue and operating expenses not fully offsetting the revenue decrease.
- Gross margin percentage improved to 24.0% (up from 22.1% YoY) driven by decreased input costs and strong pricing discipline, despite a 13% decrease in total gross margin dollars.
- Cash flow from operations was positive at $1.78 billion, a significant turnaround from a $0.27 billion outflow in the prior year, mainly due to improved working capital management (reduced inventory and receivables).
- The company ended the quarter with $7.63 billion in cash and cash equivalents and $6.0 billion in available borrowing capacity under its revolving credit facility, indicating a strong liquidity position.
- Dell repurchased $0.25 billion of its Class C Common Stock in the quarter, a decrease from $1.5 billion in the prior year's comparable period, aligning with its capital allocation strategy.
- The company reaffirmed its commitment to returning capital to stockholders through share repurchases and an increased quarterly dividend of $0.37 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Dell Technologies Inc. kept $0.03.
- Revenue$20.92B100.0%
- Cost of revenue−$15.84B75.7%
- Gross profit$5.08B24.3%
- Operating costs−$3.95B18.9%
- Operating income$1.13B5.4%
- Interest, other & tax−$494.0M2.4%
- Net income$637.0M3.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed June 12, 2023Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $20.92B$26.43B | −20.8% |
| Cost of Revenue | $15.84B$20.99B | −24.5% |
| Gross Profit | $5.08B$5.44B | −6.6% |
| R&D Expenses | $688.00M$626.00M | +9.9% |
| SG&A Expenses | $3.26B$3.54B | −8.0% |
| Operating Expenses | $3.95B$4.17B | −5.3% |
| Operating Income | $1.13B$1.27B | −10.9% |
| Interest Expense | $405.00M$298.00M | +35.9% |
| Net Income | $637.00M$511.00M | +24.7% |
| EPS (Basic) | $0.88$0.69 | +27.5% |
| EPS (Diluted) | $0.86$0.68 | +26.5% |
| Shares Outstanding (Basic) | 724.00M739.00M | −2.0% |
| Shares Outstanding (Diluted) | 737.00M755.00M | −2.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of Dell's revenue decline in the quarter?
The primary driver of Dell's revenue decline was the challenging global macroeconomic environment, which negatively impacted demand for its products and services across both the Client Solutions Group (CSG) and Infrastructure Solutions Group (ISG) segments.
How did Dell manage its profitability despite the revenue decrease?
Despite the revenue decrease, Dell improved its gross margin percentage to 24.0% by benefiting from lower input costs and maintaining strong pricing discipline. However, operating income declined due to the revenue drop outpacing cost management efforts.
What is Dell's outlook for the remainder of the fiscal year?
Dell anticipates the macroeconomic environment will continue to be challenging for the full fiscal year, potentially impacting operating margins, but expects demand declines to moderate through the remainder of the year. The company is focused on innovation and cost management to navigate these conditions.
What is Dell's liquidity and capital position?
Dell maintains a strong liquidity position, with $7.63 billion in cash and cash equivalents and $6.0 billion in available borrowing capacity under its revolving credit facility. The company generated positive cash flow from operations, primarily driven by effective working capital management.
06—Continue