10-QPeriod: Q3 FY2024

Dell Technologies Inc. Quarterly Report for Q3 Ended Aug 4, 2023

Filed September 12, 2023For Securities:DELL

Summary

Dell Technologies Inc. reported net revenue of $22.9 billion for the third quarter of Fiscal Year 2024, a decrease of 13% year-over-year, reflecting declines in both its Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG) segments. This reduction is primarily attributed to challenging macroeconomic conditions impacting IT spending. Despite the revenue decrease, the company demonstrated strong operational efficiency and cost management, leading to a stable non-GAAP operating income and a slight increase in gross margin percentage year-over-year, driven by lower input costs and strong pricing discipline. Financial services, through Dell Financial Services (DFS), continue to provide a stable revenue stream with new financing originations of $2.4 billion in the quarter. The company also maintained a strong liquidity position with $8.7 billion in cash, cash equivalents, and restricted cash, and $6.0 billion available under its revolving credit facility. Dell Technologies is actively managing its debt, with a principal repayment of $2.5 billion in the period, underscoring a commitment to deleveraging. The company is navigating the current economic climate by focusing on disciplined cost management and strategic investments in areas like AI, while continuing to return capital to shareholders through dividends and share repurchases.

Financial Highlights

54 data points
Beta

Revenue

$22.93B

23.6% Gross Margin

Net Income

$489.00M

2.1% Net Margin

EPS (Diluted)

$0.66

Total Assets

$85.66B

Cash & Equivalents

$8.36B

Free Cash Flow

$2.59B

Financial Statements
Beta
Revenue$22.93B
Cost of Revenue$17.52B
Gross Profit$5.42B
R&D Expenses$705.00M
SG&A Expenses$3.52B
Operating Expenses$4.22B
Operating Income$1.19B
Interest Expense$352.00M
Net Income$489.00M
EPS (Basic)$0.67
EPS (Diluted)$0.66
Shares Outstanding (Basic)726.00M
Shares Outstanding (Diluted)738.00M

Key Highlights

  • 1Total net revenue for Q3 FY24 was $22.9 billion, down 13% year-over-year, primarily due to declines in both ISG and CSG segments.
  • 2Gross margin percentage increased to 23.5% (up from 20.6% in Q3 FY23), reflecting lower input costs and strong pricing.
  • 3Operating income decreased 8% to $1.2 billion, while non-GAAP operating income remained relatively flat at $2.0 billion due to effective cost management.
  • 4The company ended the quarter with a strong liquidity position, holding $8.7 billion in cash, cash equivalents, and restricted cash.
  • 5Total debt decreased by $2.5 billion to $27.4 billion, indicating progress in deleveraging efforts.
  • 6Dell Financial Services (DFS) originated $2.4 billion in new financing in Q3 FY24, demonstrating continued customer demand for flexible payment options.
  • 7Net income attributable to Dell Technologies Inc. was $0.46 billion, a decrease of 10% year-over-year, impacted by lower revenue and higher tax expenses.

Frequently Asked Questions

Dell anticipates a decline in net revenue for the second half of Fiscal 2024 compared to the same period in Fiscal 2023, primarily driven by the Infrastructure Solutions Group (ISG). This outlook is attributed to the continued impact of macroeconomic conditions on demand and increasing competitive pricing pressure. However, the company expects this decline to be partially offset by disciplined cost management measures.

Dell Technologies is actively managing its debt and continues to pursue deleveraging as a long-term capital allocation strategy. In the six months ended August 4, 2023, the principal amount of debt decreased by $2.5 billion to $27.4 billion, primarily due to the repayment of $2.0 billion in Senior Notes. The company has access to its $6.0 billion revolving credit facility and $5.0 billion commercial paper program for liquidity needs.

Both the Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG) experienced revenue declines in the quarter. ISG net revenue decreased 11% year-over-year, driven by lower sales in servers, networking, and storage. CSG net revenue decreased 16% year-over-year, primarily due to a decline in units sold across both commercial and consumer segments, though average selling prices increased. Despite revenue declines, ISG operating income margin improved year-over-year due to lower input costs and strong pricing, while CSG operating income margin also improved due to similar factors, partially offset by increased operating expenses as a percentage of net revenue.

Dell Technologies' strategy focuses on becoming the most essential technology company for the data era. This involves growing core offerings, investing in emerging areas like artificial intelligence (AI), edge computing, telecom, and data management, and expanding 'as-a-Service' consumption models. The company aims to leverage its durable competitive advantages, such as its broad product portfolio, direct sales force, channel partners, and financing solutions, to navigate evolving IT needs and drive long-term sustainable growth.