01—Abstract
Summary
Summary of the 10-Q filed September 12, 2023. Cited figures are marked; the original filing is the authoritative source.
Dell Technologies Inc. reported net revenue of $22.9 billiona 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 billionb in the quarter.
The company also maintained a strong liquidity position with $8.7 billionc 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.
02—Key points
Key Highlights
- Total net revenue for Q3 FY24 was $22.9 billion, down 13% year-over-year, primarily due to declines in both ISG and CSG segments.
- Gross margin percentage increased to 23.5% (up from 20.6% in Q3 FY23), reflecting lower input costs and strong pricing.
- Operating income decreased 8% to $1.2 billion, while non-GAAP operating income remained relatively flat at $2.0 billion due to effective cost management.
- The company ended the quarter with a strong liquidity position, holding $8.7 billion in cash, cash equivalents, and restricted cash.
- Total debt decreased by $2.5 billion to $27.4 billion, indicating progress in deleveraging efforts.
- Dell Financial Services (DFS) originated $2.4 billion in new financing in Q3 FY24, demonstrating continued customer demand for flexible payment options.
- Net 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Dell Technologies Inc. kept $0.02.
- Revenue$22.93B100.0%
- Cost of revenue−$17.52B76.4%
- Gross profit$5.42B23.6%
- Operating costs−$4.22B18.4%
- Operating income$1.19B5.2%
- Interest, other & tax−$705.0M3.1%
- Net income$489.0M2.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed September 12, 2023Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $22.93B$24.72B | −7.2% |
| Cost of Revenue | $17.52B$19.01B | −7.9% |
| Gross Profit | $5.42B$5.71B | −5.1% |
| R&D Expenses | $705.00M$677.00M | +4.1% |
| SG&A Expenses | $3.52B$3.27B | +7.6% |
| Operating Expenses | $4.22B$3.94B | +7.0% |
| Operating Income | $1.19B$1.76B | −32.2% |
| Interest Expense | $352.00M$272.00M | +29.4% |
| Net Income | $489.00M$245.00M | +99.6% |
| EPS (Basic) | $0.67$0.34 | +97.1% |
| EPS (Diluted) | $0.66$0.33 | +100.0% |
| Shares Outstanding (Basic) | 726.00M728.00M | −0.3% |
| Shares Outstanding (Diluted) | 738.00M743.00M | −0.7% |
05—Questions
Frequently Asked Questions
What is Dell's outlook for the next quarter?
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.
How is Dell managing its debt?
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.
What is the performance of Dell's key segments, ISG and CSG?
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.
What is Dell's strategy for future growth?
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.
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