Press Release

EMC Reports Fourth-Quarter and Full-Year 2015 Results

Story Highlights

 

  • Full-year GAAP and non-GAAP revenue each up 1% year over year (up 5% on a constant currency basis); Full-year GAAP and non-GAAP EPS of $1.01 and $1.82, respectively
  • Q4 revenue was flat year over year (up 3% on a constant currency basis); Q4 GAAP and non-GAAP EPS of $0.39 and $0.65, respectively
HOPKINTON, Mass., January 27, 2016 - 

EMC Corporation (NYSE:EMC) today reported fourth-quarter and full-year 2015 financial results.

Fourth-quarter consolidated revenue was $7 billion, flat year over year (up 3% on a constant currency basis2). GAAP net income attributable to EMC was $771 million in the fourth quarter, and GAAP earnings per weighted average diluted share was $0.39 in the fourth quarter. Non-GAAP1 net income attributable to EMC was $1.3 billion in the fourth quarter, and non-GAAP1 earnings per weighted average diluted share in the fourth quarter was $0.65.

Full-year 2015 GAAP and non-GAAP3 revenue was $24.7 billion and $24.8 billion, respectively, up 1% year over year (up 5% on a constant currency basis2. GAAP net income attributable to EMC for 2015 was $2 billion, and GAAP earnings per weighted average diluted share was $1.01. Non-GAAP3 net income attributable to EMC for 2015 was $3.6 billion, and non-GAAP3 earnings per weighted average diluted share for 2015 was $1.82.

EMC generated $1.9 billion in operating cash flow and $1.5 billion in free cash flow4 in the fourth quarter, and ended the quarter with $14.8 billion in cash and investments. EMC returned approximately $229 million to shareholders via a quarterly dividend.

Joe Tucci, EMC Chairman and CEO, said, “The fourth quarter of 2015 follows 24 consecutive quarters of reported year-over-year top-line growth; an accomplishment very few of our peers have matched. 2015 brought geopolitical and other market-wide uncertainties, while secular technology trends continued to accelerate. EMC anticipated and focused on capturing the massive growth opportunity these trends will avail, and we are well equipped in 2016 with some of the most exciting technology advancements in our history.”

Tucci added, “Together, EMC and Dell will be better positioned in the market. We believe that the coming together of the companies is the best strategic option for all stakeholders. I'm pleased to report that progress on closing the transaction remains on track under the original terms and timeline.”

Zane Rowe, EMC CFO, said, “As we work toward closing the transaction with Dell to build one of the world's premier IT powerhouses, we continue to focus on synergies and operating efficiencies across our business. Our previously announced $850 million cost reduction and business transformation plan is on track and the initial $50 million cost reduction target was met in Q4. We are confident that we will exceed our goal, thanks to our unified team's effort and focus.”

David Goulden, CEO of EMC Information Infrastructure, said, “Customers are buying ‘just enough' and ‘just in time' for their traditional environments. They are also transforming existing IT systems toward a Hybrid Cloud or building and deploying new digital applications. In some cases they are doing it all simultaneously. Against this market backdrop, our storage business revenue grew 3% in constant currency for the full year. Looking forward, I am excited about our position in 2016 as we further expand our industry-leading Storage and Converged Infrastructure portfolio, which is built upon the architectural pillars of the modern data center – Flash, Scale-Out, Software Defined, Cloud Enabled and Trusted technologies.”

Fourth-Quarter and Full-Year 2015 Highlights

  • EMC Information Infrastructure business fourth-quarter revenue was down 4% year over year (down 1% on a constant currency basis2) and full-year 2015 revenue was down 2% year over year (up 2% on a constant currency basis2). Information Storage fourth-quarter revenue was down 4% year over year (flat on a constant currency basis2) and full-year 2015 revenue was down 1% year over year (up 3% on a constant currency basis2). EMC XtremIO ended the year with over $1 billion in revenue. VCE exited 2015 with an annualized demand5 run rate exceeding $3 billion. Virtustream ended the fourth quarter with the strongest quarterly bookings in its history.
  • VMware fourth-quarter and full-year GAAP revenue within EMC was up 10% and 9% year over year, respectively. Fourth-quarter and full-year non-GAAP3 revenue within EMC were both up 10% year over year (both up 13% on a constant currency basis2). VMware customers continue to invest in Software-Defined Data Centers, Hybrid Cloud solutions and End-User Computing. 
  • Pivotal continues to gain momentum as it helps the world's largest enterprises successfully expand their digital capabilities, with fourth-quarter revenue up 25% year over year. Pivotal continues its transition to a subscription business model, with annual recurring revenue6 up 40% compared to the previous quarter with strong performance in all geographies and product areas, while continuing to expand its customer base across many industries including Automotive, Financial Services, Insurance, Retail and Telecommunications.

Global Highlights

Consolidated fourth-quarter revenue from North America was flat year over year. Fourth-quarter revenue from the Europe, Middle East and Africa region was down 1% year over year (up 7% on a constant currency basis2). Asia Pacific and Japan fourth-quarter revenue was flat year over year (up 4% on a constant currency basis2). Latin America fourth-quarter revenue was down 16% year over year (down 5% on a constant currency basis2).

Given the announcement made on October 12, 2015 regarding EMC's entry into a definitive merger agreement, the company will not be providing outlook for its 2016 financial results.

Details will be provided during today's  8:30 a.m. ET live webcast for investors, which is available on the EMC Investor Relations website (http://www.emc.com/ir).

Resources

About Dell EMC

EMC Corporation is a global leader in enabling businesses and service providers to transform their operations and deliver IT as a service. Fundamental to this transformation is cloud computing. Through innovative products and services, EMC accelerates the journey to cloud computing, helping IT departments to store, manage, protect and analyze their most valuable asset — information — in a more agile, trusted and cost-efficient way. Additional information about EMC can be found at www.EMC.com.

Press Contacts

Katryn McGaughey
508-293-7717
katryn.mcgaughey@emc.com

1Items excluded from the non-GAAP results for the fourth quarters of 2015 and 2014 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition and other related charges, the reversal of the benefit of the R&D tax credit included in the first three quarters of 2015, a gain on previously held interests in strategic investments and joint venture, special tax items and merger-related costs. See attached schedules for GAAP to non-GAAP reconciliations.

2This release refers to growth rates at constant currency or adjusting for currency so that business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of EMC's business performance. To present this information, current period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate applied in each month of the prior year quarter. Constant currency includes the impacts from EMC's hedging program.

3Items excluded from the non-GAAP results for the full years 2015 and 2014 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition and other related charges, a gain on previously held interests in strategic investments and joint venture, an impairment of strategic investment, a fair value adjustment on assets held for sale, VMware litigation and other contingencies, VMware GSA settlement, special tax items and merger-related costs. See attached schedules for GAAP to non-GAAP reconciliations.

4Free 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 three and twelve months ended December 31, 2015 and 2014.

5Demand run rate is an annualized calculation of orders received in the applicable period for the sale of VCE and related products and services. 

6Annual Recurring Revenue (“ARR”) is an operational performance metric used to assess the health and trajectory of our Pivotal segment. We calculate ARR as the value of contracted recurring revenue of term subscriptions which includes both current subscriptions and contracted subscriptions with a future start date, adjusted by the actual churn in the period. ARR should be viewed independently of revenue and any other GAAP measure.

EMC and XtremIO are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries.  All other trademarks used are the property of their respective owners.

EMC Corporation Disclosure Regarding Forward Looking Statements

This communication contains forward-looking information about EMC Corporation and the proposed transaction that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. 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) the failure to obtain the approval of EMC shareholders in connection with the proposed transaction; (ii) the failure to consummate or delay in consummating the proposed transaction for other reasons; (iii) the risk that a condition to closing of the proposed transaction may not be satisfied or that required financing for the proposed transaction may not be available or may be delayed; (iv) the risk that a regulatory approval that may be required for the proposed transaction is delayed, is not obtained, or is obtained subject to conditions that are not anticipated; (v) risk as to the trading price of Class V Common Stock to be issued by Denali Holding Inc. in the proposed transaction relative to the trading price of shares of VMware, Inc.'s common stock; (vi) the effect of the proposed transaction on VMware's business and operating results and impact on the trading price of shares of Class V Common Stock of Denali Holding Inc. and shares of VMware common stock; (vii) the diversion of management time on transaction-related issues; (viii) adverse changes in general economic or market conditions; (ix) delays or reductions in information technology spending; (x) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (xi) competitive factors, including but not limited to pricing pressures and new product introductions; (xii) component and product quality and availability; (xiii) fluctuations in VMware's operating results and risks associated with trading of VMware common stock; (xiv) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (xv) the ability to attract and retain highly qualified employees; (xvi) insufficient, excess or obsolete inventory; (xvii) fluctuating currency exchange rates; (xviii) threats and other disruptions to our secure data centers or networks; (xix) our ability to protect our proprietary technology; (xx) war or acts of terrorism; and (xxi) 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 (the “SEC”). Except to the extent otherwise required by federal securities law, EMC disclaims any obligation to update any such forward-looking statements after the date of this communication.

Additional Information and Where to Find It

This communication does not constitute an offer to sell or a solicitation of an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law. This communication is being made in respect of the proposed business combination transaction between EMC Corporation and Denali Holding Inc. The proposed transaction will be submitted to the shareholders of EMC for their consideration. In connection with the issuance of Class V Common Stock of Denali Holding Inc. in the proposed transaction, Denali Holding Inc. has filed with the SEC a Registration Statement on Form S-4 (File No. 333-208524) that includes a preliminary proxy statement/prospectus regarding the proposed transaction, and each of Denali Holding Inc. and EMC plans to file with the SEC other documents regarding the proposed transaction. After the registration statement has been declared effective by the SEC, a definitive proxy statement/prospectus will be mailed to each EMC shareholder entitled to vote at the special meeting in connection with the proposed transaction. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS RELATING TO THE TRANSACTION FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors may obtain copies of the preliminary proxy statement/prospectus and all other documents filed with the SEC regarding the proposed transaction, free of charge, at the SEC's website (http://www.sec.gov). Investors may also obtain these documents, free of charge, from EMC's website (www.EMC.com) under the link “Investor Relations” and then under the tab “Financials” then “SEC Filings”, or by directing a request to: EMC Corporation, 176 South Street, Hopkinton, Massachusetts, 01748, Attn: Investor Relations, 866-362-6973.

Participants in the Solicitation

EMC Corporation and its directors, executive officers and other members of management and employees may be deemed to be “participants” in the solicitation of proxies from EMC shareholders in connection with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of EMC shareholders in connection with the proposed transaction and a description of their direct and indirect interest, by security holdings or otherwise, is set forth in the preliminary proxy statement/prospectus filed with the SEC in connection with the proposed transaction. You can find information about EMC's executive officers and directors in its definitive proxy statement filed with the SEC on March 20, 2015 and in its Annual Report on Form 10-K filed with the SEC on February 27, 2015. You can obtain free copies of these documents at the SEC's website (http://www.sec.gov). You can also obtain free copies of these documents from EMC using the contact information above.

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 stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition and other related charges, a gain on previously held interests in strategic investments and joint venture, an impairment of strategic investment, a fair value adjustment on assets held for sale, VMware litigation and other contingencies, VMware GSA settlement, the reversal of the benefit of the R&D tax credit included in the first three quarters of 2015, special tax items and merger-related costs) 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 includes the benefit of the R&D tax credit in, 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, pay dividends, 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.

This release also refers to growth rates at constant currency or adjusting for currency so that business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of EMC's business performance. To present this information, current period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate applied in each month of the prior year quarter. Constant currency includes the impacts from EMC's hedging program.

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.

Notes: