Johannesburg, 27 Oct 2014
EMC (NYSE:EMC) has reported third-quarter 2014 financial results, including record third-quarter consolidated revenue of $6 billion, an increase of 9% year over year. GAAP net income attributable to EMC was $587 million. GAAP earnings per weighted average diluted share was $0.28, up 4% year over year. Non-GAAP^1 net income attributable to EMC was $903 million. Non-GAAP^1 earnings per weighted average diluted share was $0.44, up 10% year over year.
EMC generated $1.7 billion in operating cash flow and $1.3 billion in free cash flow^2 in the third quarter. EMC ended the quarter with $15.4 billion in cash and investments. The company repurchased approximately $375 million worth of its common stock in the third quarter and returned approximately $240 million to shareholders via a quarterly dividend.
Joe Tucci, EMC Chairman and Chief Executive Officer, said: "EMC's continued momentum is evidence that our strategy and execution are working. Our strategically aligned businesses - EMC Information Infrastructure, VMware, Pivotal and RSA - are well positioned to capitalise on the massive IT market opportunity in front of us. From my conversations with customers, it's clear that we have the right best-of-breed technologies in cloud, mobile, big data and security, and offer a level of choice and flexibility second-to-none. We are extremely well positioned to help customers maximise their existing IT platforms and build a third IT platform to redefine their businesses with a whole generation of new applications."
David Goulden, CEO of EMC Information Infrastructure, said: "EMC's solid third-quarter performance was in line with our expectations, as customers continue to seek strong and well-equipped partners to help them achieve their new IT goals. EMC is growing faster than many of our peers because we continue to make the right strategic investments - assembling a leading portfolio of technology assets over several years - that enable customers to use cloud, mobile, big data and security technologies to create competitive advantage."
Zane Rowe, EMC CFO, added: "These results demonstrate the soundness of EMC's strategy, a formula combining industry-leading assets, talent, and a uniquely flexible business model that puts customer choice first. Following my first three weeks at EMC, I can say, without hesitation, that I am excited to be part of a company that is central to this future-defining industry transformation, and look forward to being part of the team helping EMC create value for shareholders, customers and employees."
Third-quarter highlights
* EMC Information Infrastructure business revenue was up 6% year over year. Information Storage revenue growth accelerated to 6% year over year. The new VMAX high-end storage system became generally available towards the end of the third quarter; shipments of the new systems in the third quarter were in line with expectations. Unified and Backup and Recovery portfolios continued solid revenue growth of 6% year over year. Emerging Storage^3revenue grew 47% year over year, with notably strong growth for EMC XtremIO, EMC ViPR and EMC ScaleIO. EMC Isilon revenue growth accelerated in the third quarter, benefiting from newer growth vectors where Hadoop capabilities allow efficient analysis of big data. RSA grew revenue 4% year over year as security remains a priority for organisations building hybrid clouds.
* VMware continued its rapid growth trajectory with revenue within EMC up 17% year over year as customers continue investing in software-defined data centre, hybrid cloud solutions and end-user computing.
* Pivotal grew revenue 24% year over year. Pivotal is the fastest growing of EMC's federated businesses, benefiting from the transition to next-generation applications by organisations.
Global highlights
EMC's consolidated third-quarter revenue from North America grew 8% year over year, representing 55% of consolidated third-quarter revenue. Revenue from EMC's Europe, Middle East and Africa region grew 15% year over year, Asia Pacific and Japan grew 4% year over year and Latin America grew 1% year over year. Revenue from the BRIC+13 markets grew 9% year over year.
Business outlook
EMC is updating its expectations for 2014 to reflect the impact of foreign currency fluctuations, the timing of EMC's second-half share buyback, and the revised free cash flow outlook from VMware.
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 made by EMC regarding 2014 financial results.
All dollar amounts and percentages set forth below should be considered to be approximations.
* Consolidated revenues are expected to be $24.5 billion for 2014.
* Consolidated GAAP operating income is expected to be 16.5% of revenues for 2014 and consolidated non-GAAP4operating income is expected to be 24.0% of revenues for 2014.
* Consolidated GAAP earnings per weighted average diluted share are expected to be $1.29 for 2014 and consolidated non-GAAP4 earnings per weighted average diluted share are expected to be $1.90 for 2014.
* The consolidated GAAP income tax rate is expected to be 23.0% and the consolidated non-GAAP4 income tax rate is expected to be 23.5% for 2014. This assumes that the US research and development tax credit is extended during 2014.
* Consolidated net cash provided by operating activities is expected to be $6.80 billion for 2014 and free cash flow^2 is expected to be $5.35 billion for 2014.
* The weighted average outstanding diluted shares are expected to be 2.06 billion for 2014.
* EMC expects to repurchase an aggregate of $3.0 billion of the company's common stock in 2014.
Resources
* The third-quarter 2014 Web cast will be available for replay on the EMC Investor Relations Web site at http://www.emc.com/ir
* EMC financial results are also available on the US Securities and Exchange Commission Web site
* Visit http://ir.vmware.com for more detail on VMware's third-quarter 2014 financial results
* Download the EMC Investor Relations App here
* Visit EMC Pulse for breaking product and technology news from EMC
* Visit EMC Reflections for executive insight on business and IT trends
* Connect with EMC via @EMCCorp, LinkedIn and Facebook
References
1 Items excluded from the non-GAAP results for the third quarters of 2014 and 2013 are amounts relating to stock-based compensation expense, intangible asset amortisation, restructuring charges, acquisition and other related charges, the amortisation of VMware's capitalised software from prior periods, a net gain on the disposition of certain lines of business and other, special tax charges and a VMware litigation and other contingencies charge. A benefit of the US research and development ("R&D") tax credit for the third quarter of 2014 is included in the non-GAAP results for the third quarter of 2014 as if the credit had been extended. See attached schedules for GAAP to non-GAAP reconciliations.
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 capitalised software development costs. See attached schedules for a reconciliation of net cash provided by operating activities to free cash flow for the three and nine months ended 30 September 2014 and 2013.
3 EMC's Emerging Storage business primarily includes product and maintenance revenues from EMC Isilon, EMC Atmos, EMC VPLEX, EMC ViPR, EMC ScaleIO, EMC Elastic Cloud Storage Appliance, EMC RecoverPoint, Data Computing Appliance, ASD Suites and EMC vFlash and EMC XtremIO families.
4 Items excluded from the non-GAAP business outlook for 2014 are amounts relating to stock-based compensation expense, intangible asset amortisation, restructuring charges, acquisition and other related charges and other one-time items. The benefit of the R&D tax credit is included in the GAAP and non-GAAP business outlook for 2014. See attached schedules for GAAP to non-GAAP reconciliations.
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