EMC Reports Record First-Quarter Results
- Record first-quarter consolidated revenue up 18% year over year
- All-time record consolidated quarterly revenue for Asia Pacific and Japan region
- Record first-quarter GAAP net income up 28% year over year
- Strong year-over-year percentage increase in gross and operating margins
HOPKINTON, Mass. April 20, 2011EMC Corporation (NYSE:EMC) today reported record financial results for the first quarter of 2011. Continued healthy customer demand for EMC's information infrastructure and virtual infrastructure products and services, and strong performance within the company's Europe/Middle East/Africa and Asia Pacific/Japan regions, contributed to EMC achieving record first-quarter consolidated revenue, record first-quarter net income, and strong year-over-year percentage increase in operating and gross margins.
First-quarter consolidated revenue was $4.6 billion, an increase of 18% compared with the year-ago quarter. First-quarter GAAP net income attributable to EMC increased 28% year over year to $477.1 million. First-quarter GAAP diluted earnings per share were $0.21, up 24% year over year. Non-GAAP⊃1; net income attributable to EMC for the first quarter was $700.4 million, an increase of 27% compared with the year-ago quarter. First-quarter non-GAAP⊃1; earnings per diluted share were $0.31, an increase of 19% year over year.
During the first quarter, EMC expanded gross and operating margins substantially on a year-over-year basis. The company achieved operating cash flow of $1.1 billion and free cash flow⊃2; of $857.3 million, and ended the first quarter with $9.5 billion in cash and investments.
Joe Tucci, EMC Chairman and Chief Executive Officer, said, "EMC is off to a strong start in 2011 with significant opportunity and long-term growth potential ahead. With market-leading virtualization and information infrastructure products and services, and a strong partner ecosystem, we are positioned squarely at the intersection of two of the most sweeping trends in IT – cloud computing and Big Data. These assets, along with a robust innovation pipeline, uniquely align EMC to help customers accelerate their journey to cloud computing and unlock the full value of their information."
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, "For the fifth consecutive quarter EMC achieved our financial 'triple play' – gaining market share, investing aggressively to take advantage of the rapidly emerging opportunities offered by cloud computing and Big Data, and improving profitability. Financial strength and flexibility, combined with an intense focus on customers, enable us to continually identify and successfully execute on opportunities that increase our value proposition to customers and reward shareholders. Given the strong growth we saw in the quarter and the opportunity we see throughout 2011, we are now even more confident that we can meet and potentially exceed our 2011 consolidated revenue, non-GAAP EPS and free cash flow goals while continuing to achieve our 'triple play' over the long term."
First-quarter highlights included strong customer demand for the company's market-leading high-end EMC Symmetrix storage product portfolio, which increased revenue 25% compared with the year-ago quarter, and EMC's portfolio of mid-tier storage products⊃3;, which grew revenue 20% year over year. Revenue from VMware (NYSE: VMW), which is majority-owned by EMC, increased 33% and revenue from EMC's RSA information security business grew 8% year over year. Additional first-quarter highlights included consistently strong revenue growth for EMC's backup and recovery solutions, led by EMC Data Domain products. The new Isilon Storage Division exceeded revenue expectations in its first quarter within EMC, while the Data Computing Division continued to perform well with highly differentiated Greenplum offerings in the Big Data warehousing and analytics space.
Also during the quarter, VCE – the Virtual Computing Environment Company formed by Cisco and EMC with investments from VMware and Intel – experienced increasing customer traction and an expanding pipeline for its Vblock converged architecture.
EMC's consolidated first-quarter revenue from the United States reached $2.4 billion, an increase of 12% year over year, representing 51% of consolidated first-quarter revenue. Revenue from EMC's business operations outside of the United States reached $2.2 billion, an increase of 26% year over year, representing 49% of consolidated first-quarter revenue. Within this, consolidated revenue in EMC's Europe/Middle East/Africa region increased 21% and consolidated revenue in EMC's Asia Pacific/Japan region reached an all-time record amount, growing 43% year over year.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof. These statements supersede all prior statements regarding 2011 financial results.
All dollar amounts and percentages set forth below should be considered to be approximations.
- Consolidated revenues are expected to be $19.6 billion for 2011.
- Consolidated GAAP operating income is expected to be 16.5% to 17.5% of revenues for 2011 and consolidated non-GAAP operating income is expected to be 23% to 24% of revenues for 2011. Excluded from consolidated non-GAAP operating income are restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization, which account for less than 1%, 5% and 2% of revenues, respectively.
- Total consolidated GAAP non-operating expense, which includes investment income, interest expense and other expense, is expected to be $120 million in 2011 and total consolidated non-GAAP non-operating expense is expected to be $175 million in 2011. Excluded from non-GAAP non-operating expense is a non-recurring gain on strategic investments of $55 million.
- Consolidated GAAP net income is expected to be $2.5 billion in 2011 and consolidated non-GAAP net income is expected to be $3.3 billion in 2011. Excluded from consolidated non-GAAP net income are restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments, which account for $70 million, $590 million, $200 million and a gain of $30 million, respectively.
- Consolidated GAAP diluted earnings per share are expected to be $1.09 for 2011 and consolidated non-GAAP diluted earnings per share are expected to be $1.46 for 2011. Excluded from consolidated non-GAAP diluted earnings per share are restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments which are expected to be $0.03, $0.26, $0.09 and ($0.01) per diluted share, respectively, for 2011.
- The consolidated GAAP income tax rate is expected to be 20% for 2011. Excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments, which collectively impact the tax rate by 2%, the consolidated non-GAAP income tax rate is expected to be 22% for 2011.
- GAAP net income attributable to the non-controlling interest in VMware is expected to be $117 million and non-GAAP net income attributable to the non-controlling interest in VMware is expected to be $175 million for 2011. Excluded from non-GAAP net income attributable to the non-controlling interest in VMware are acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments which are expected to be $1 million, $57 million, $8 million and ($8 million), respectively. The incremental dilution attributable to the shares of VMware held by EMC is expected to be $15 million for 2011.
- The weighted-average outstanding diluted shares are expected to be 2.26 billion for 2011.
- Consolidated net cash provided by operating activities is expected to be $5.3 billion for 2011, and free cash flow is expected to be $4.0 billion in 2011. Excluded from free cash flow are $900 million of additions to property, plant and equipment and $440 million of capitalized software development costs.
- EMC expects to repurchase $1.5 billion of the company's stock in 2011.
- EMC will host its first-quarter 2011 earnings conference call today at 8:30 a.m. ET, which will be available via webcast on EMC's Investor Relations website at http://www.emc.com/ir
- Visit http://ir.vmware.com for more information about VMware's first-quarter financial results.
EMC Corporation (NYSE: EMC) is the world's leading developer and provider of information infrastructure technology and solutions that enable organizations of all sizes to transform the way they compete and create value from their information. Information about EMC's products and services can be found at www.EMC.com
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⊃1;Items excluded from the non-GAAP results for the first quarters of 2011 and 2010 are amounts relating to restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization. See attached schedules for reconciliation of GAAP to non-GAAP.
⊃2; Free cash flow is a non-GAAP financial measure which is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized software development costs. See attached schedules for a reconciliation of net cash provided by operating activities to free cash flow for the first quarters of 2011 and 2010.
⊃3; Mid-tier platform products include hardware and software products from EMC VNX, EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Isilon, EMC Avamar and EMC Atmos.
EMC, Atmos, Avamar, Celerra, Centera, CLARiiON, Data Domain, Greenplum, Isilon, RSA, Symmetrix, VNX and Vblock are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries. VMware is a registered trademark or trademark of VMware, Inc. in the United States and/or other countries. All other trademarks used are the property of their respective owners.
This release contains "forward-looking statements" as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) component and product quality and availability; (vi) fluctuations in VMware, Inc.'s operating results and risks associated with trading of VMware stock; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) risks associated with managing the growth of our business, including risks associated with acquisitions and investments and the challenges and costs of integration, restructuring and achieving anticipated synergies; (ix) the ability to attract and retain highly qualified employees; (x) insufficient, excess or obsolete inventory; (xi) fluctuating currency exchange rates; (xii) threats and other disruptions to our secure data centers or networks; (xiii) our ability to protect our proprietary technology; (xiv) war or acts of terrorism; and (xv) other one-time events and other important factors disclosed previously and from time to time in EMC's filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this release.
Use of Non-GAAP Financial Measures
This release, the accompanying schedules and the additional content that is available on EMC's website contain non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC's performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC's financial performance or liquidity prepared in accordance with GAAP. EMC's non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures in this release.
Where specified in the accompanying schedules for various periods entitled "Reconciliation of GAAP to Non-GAAP," certain items noted on each such specific schedule (including, where noted, amounts relating to restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization) are excluded from the non-GAAP financial measures.
EMC's management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC's comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above-listed items from its internal financial statements for purposes of its internal budgets and each reporting segment's financial goals. These non-GAAP financial measures are used by EMC's management in their financial and operating decision-making because management believes they reflect EMC's ongoing business in a manner that allows meaningful period-to-period comparisons. EMC's management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC's current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company's current financial results with the Company's past financial results.
This release also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC's operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC's financial results as determined in accordance with GAAP.
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