Dell Technologies Inc. Q1 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Headline Results

  • Revenue: $22 billion, up 2% year-over-year. Growth was impacted by a 280 bps FX headwind.
  • Operating income: $2.2 billion, up 8% year-over-year.
  • Gross margin: $7.4 billion (33.8% of revenue), up 170 bps year-over-year due to lower component costs.
  • Non-GAAP EPS: $1.45, benefiting from strong operating performance and lower tax rate.
  • Deferred revenue: $24.2 billion, up 15% year-over-year.
  • Cash flow from operations: $682 million (seasonally low quarter); adjusted free cash flow: $116 million.
  • Debt reduction: $400 million repaid in Q1; $15 billion total repaid since EMC merger; on track for $4.8 billion in FY20.

Business Unit Performance

Infrastructure Solutions Group (ISG)
  • ISG revenue: $8.2 billion, down 5% year-over-year.
  • Storage revenue: $4 billion, down 1%, but with solid year-over-year order growth. Backlog built due to late-quarter order activity.
  • Servers & networking: $4.2 billion, down 9% year-over-year. Prior-year comp was very strong (41% growth in Q1 FY19).
  • Server softness mainly in China and large enterprise deals with low profitability.
  • ISG operating income: $843 million (10.3% margin), down 50 bps due to sales coverage investments.
VMware
  • Revenue: $2.3 billion, up 13% year-over-year.
  • Operating income: $614 million (26.9% margin).

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Operator: Good afternoon, and welcome to the Fiscal Year 2020 First Quarter Financial Results Conference Call for Dell Technologies Incorporated. I'd like to inform all participants, this call is being recorded at the request of Dell Technologies. This broadcast is the copyrighted property of Dell Technologies Incorporated. Any rebroadcast of this information, in whole or part, without prior written permission of Dell Technologies is prohibited. Following the prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] I'd like to turn the call over to Rob Williams, Head of Investor Relations. Mr. Williams, you may begin. Robert Williams: Thanks, Ian, and thanks for joining us. With me today are our Vice Chairman, Jeff Clarke; our CFO, Tom Sweet; and our Treasurer, Tyler Johnson. During this call, we will reference non-GAAP financial measures, including non-GAAP revenues, gross margins, operating expenses, operating income, net income, EPS, EBITDA, adjusted EBITDA, and adjusted free cash flow. A reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and press release. Please also note that all growth percentages refer to year-over-year change, unless otherwise specified. Finally, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking statements based on current expectations. Actual results and events could differ materially

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