Revenue Performance - Total revenue for the nine months ended October 28, 2022, was $9.635 billion, representing a 3% increase from $9.320 billion in the same period of the previous year[130]. - Subscription and SaaS revenue increased by 21% to $2.830 billion for the nine months ended October 28, 2022, compared to $2.336 billion for the same period in 2021[130]. - Annual recurring revenue (ARR) reached $4.1 billion as of October 28, 2022, up from $3.3 billion as of October 29, 2021[133]. - License revenue decreased by 5% to $1.990 billion for the nine months ended October 28, 2022, compared to $2.093 billion for the same period in 2021[130]. - Revenue from Dell accounted for 37% of consolidated revenue for the three months ended October 28, 2022, compared to 38% in the same period in 2021[162]. - Reseller revenue for the three months ended October 28, 2022, was $1,184 million, slightly up from $1,183 million in the same period in 2021[163]. Financial Outlook and Expectations - The company expects operating margin to be negatively impacted in fiscal 2023 due to increased investment in subscription and SaaS offerings[124]. - The company expects fluctuations in backlog amounts and composition, which are not indicative of future sales or revenue[140]. - The company expects annual interest expense associated with the 2021 Senior Notes to be approximately $100 million[155]. - The company expects to use free cash flow primarily to repay outstanding indebtedness through the end of fiscal 2023[172]. Backlog and Performance Obligations - As of October 28, 2022, the aggregate transaction price allocated to remaining performance obligations was $11.9 billion, with approximately 56% expected to be recognized as revenue over the next twelve months[139]. - Total backlog as of October 28, 2022, was $85 million, with $35 million excluded from remaining performance obligations due to cancellation clauses[140]. Expenses and Costs - Cost of subscription and SaaS revenue increased by 11% to $189 million for the three months ended October 28, 2022, and by 16% to $565 million for the nine months ended October 28, 2022[145]. - Research and development expenses rose by 4% to $669 million for the three months ended October 28, 2022, and by 6% to $1.968 billion for the nine months ended October 28, 2022[149]. - Sales and marketing expenses increased by 5% to $977 million for the three months ended October 28, 2022, and by 6% to $2.938 billion for the nine months ended October 28, 2022[151]. - Cost of services revenue increased by 4% to $353 million for the three months ended October 28, 2022, and by 7% to $1.049 billion for the nine months ended October 28, 2022[147]. - Total expenses for research and development reached $832 million for the three months ended October 28, 2022, reflecting an 8% increase compared to the same period in 2021[149]. - The increase in sales and marketing expenses was driven by higher commission costs of $60 million and increased stock-based compensation of $51 million[151]. - General and administrative expenses decreased by $38 million (13%) for the three months ended October 28, 2022, compared to the same period in 2021, primarily due to the absence of $66 million in costs related to the Spin-Off[153]. Cash Flow and Financing Activities - Cash and cash equivalents as of October 28, 2022, were $3.972 billion, an increase from $3.633 billion as of January 28, 2022[170]. - Net cash provided by operating activities decreased by $553 million to $2.667 billion for the nine months ended October 28, 2022, compared to $3.220 billion for the same period in 2021[173][174]. - Cash used in financing activities increased by $6.873 billion during the nine months ended October 28, 2022, primarily due to the absence of net cash proceeds from senior notes issuance in the prior year[176]. - The company has unsecured senior notes outstanding with an aggregated carrying value of $9.2 billion as of October 28, 2022[178]. - Cash used in investing activities increased by $19 million during the nine months ended October 28, 2022, primarily due to increased additions to property and equipment[175]. - Interest paid for the Senior Notes was $184 million for the nine months ended October 28, 2022, compared to $139 million for the same period in 2021[178]. Geopolitical and Regulatory Impact - The company suspended sales and services in Russia and Belarus in response to geopolitical events, with no material impact on financial statements expected[127]. - The merger agreement with Broadcom is expected to be consummated in Broadcom's fiscal year 2023, pending regulatory approvals[126]. - The company entered into a Merger Agreement with Broadcom, which includes a termination fee of $1.5 billion if the transaction does not close by February 26, 2023[172]. Tax and Other Financial Metrics - The effective income tax rate for the three months ended October 28, 2022, was 27.6%, up from 12.9% in the same period in 2021, driven by a higher estimated annual income tax rate due to changes in tax laws[159]. - Other income (expense), net showed a decrease of $24 million (221%) for the three months ended October 28, 2022, compared to the same period in 2021, primarily due to net losses on investments in equity securities[158]. - Interest expense increased by $49 million (28%) for the nine months ended October 28, 2022, compared to the same period in 2021, driven by the issuance of $6.0 billion in unsecured senior notes[155].

Revenue Performance - Total revenue for the six months ended July 29, 2022, was $6.424 billion, representing a 5% increase from $6.132 billion in the same period of 2021[123]. - Subscription and SaaS revenue increased by 22% to $943 million for the three months ended July 29, 2022, compared to $776 million in the same period of 2021[123]. - Annual recurring revenue (ARR) reached $3.9 billion as of July 29, 2022, up from $3.2 billion as of July 30, 2021[126]. - Remaining performance obligations totaled $12.1 billion as of July 29, 2022, with approximately 56% expected to be recognized as revenue over the next twelve months[132]. - License revenue for the six months ended July 29, 2022, was $1.369 billion, a decrease of 1% from $1.384 billion in the same period of 2021[123]. - Professional services revenue increased by 5% to $604 million for the six months ended July 29, 2022, compared to $575 million in the same period of 2021[127]. - Reseller revenue for the three months ended July 29, 2022, was $1,313 million, an increase from $1,162 million in the same period in 2021[156]. - Revenue from Dell accounted for 40% of consolidated revenue for the three months ended July 29, 2022, compared to 37% in the same period in 2021[155]. - Revenue recognized on transactions financed through Dell Financial Services (DFS) was $17 million for the six months ended July 29, 2022, compared to $15 million for the same period in 2021[160]. Expenses and Costs - Cost of license revenue for the three months ended July 29, 2022, was $39 million, remaining flat compared to $37 million for the same period in 2021[135]. - Cost of subscription and SaaS revenue increased by 16% to $190 million for the three months ended July 29, 2022, compared to $165 million for the same period in 2021[137]. - Cost of services revenue increased by 5% to $344 million for the three months ended July 29, 2022, compared to $328 million for the same period in 2021[139]. - Research and development expenses rose by 5% to $657 million for the three months ended July 29, 2022, compared to $625 million for the same period in 2021[142]. - Sales and marketing expenses increased by 5% to $987 million for the three months ended July 29, 2022, compared to $942 million for the same period in 2021[144]. - Total expenses for the three months ended July 29, 2022, were $1,080 million, up from $1,023 million for the same period in 2021, reflecting a 6% increase[144]. - General and administrative expenses increased by $20 million (4%) for the six months ended July 29, 2022, compared to the same period in 2021, primarily due to increased employee-related expenses and stock-based compensation[146]. - Cash-based employee-related expenses increased significantly across all categories, driven by headcount growth and salary increases[133]. - Increased travel-related expenses were noted due to lifted COVID-19 restrictions, impacting both sales and marketing expenses[144]. Financial Position and Cash Flow - Cash and cash equivalents decreased from $3.633 billion as of January 28, 2022, to $3.242 billion as of July 29, 2022[162]. - Net cash provided by operating activities was $1.402 billion for the six months ended July 29, 2022, down from $2.130 billion for the same period in 2021, a decrease of $728 million[165][166]. - Cash used in financing activities increased by $838 million during the six months ended July 29, 2022, primarily due to the repayment of $1.5 billion towards a senior unsecured term loan facility[168]. - Cash used in investing activities decreased by $23 million during the six months ended July 29, 2022, compared to the same period in 2021[167]. - The company has unsecured senior notes with an aggregated carrying value of $9.2 billion as of July 29, 2022, with interest paid amounting to $117 million for the six months ended July 29, 2022[169]. - The company plans to use free cash flow primarily to repay outstanding indebtedness through the end of fiscal 2023[163]. Strategic Developments - The company expects operating margin to be negatively impacted in fiscal 2023 due to increased investment in subscription and SaaS offerings[117]. - The company suspended sales and services in Russia and Belarus in response to geopolitical events, with no material impact on financial statements expected[120]. - The merger agreement with Broadcom includes a cash consideration of $142.50 per share or an exchange ratio of 0.25200 shares of Broadcom common stock[118]. - The Merger Agreement with Broadcom includes a termination fee of $1.5 billion if the transaction does not occur by February 26, 2023[163]. - The company suspended its stock repurchase program in connection with the Merger Agreement and did not repurchase common stock during the three months ended July 29, 2022[172]. Tax and Interest - Interest expense rose by $45 million (46%) for the six months ended July 29, 2022, compared to the same period in 2021, driven by the issuance of $6.0 billion in unsecured senior notes[148]. - The income tax provision for the three months ended July 29, 2022, was $132 million, with an effective tax rate of 27.6%, up from 14.4% in the same period in 2021[152]. - The effective tax rate may be significantly affected by the composition of earnings in U.S. and non-U.S. jurisdictions, particularly with the impact of the Inflation Reduction Act starting in fiscal 2024[152]. - The liability related to the one-time Transition Tax was $445 million as of July 29, 2022, expected to be paid over the next three years[163]. - The company expects annual interest expense associated with the 2021 Senior Notes to be approximately $100 million[148]. Customer and Market Dynamics - Customer deposits from transactions with Dell were $359 million as of July 29, 2022, up from $298 million as of January 28, 2022[157]. - Purchases and leases of products and services from Dell amounted to $53 million for the three months ended July 29, 2022, down from $61 million in the same period in 2021[159]. - Other income (expense), net decreased by $24 million for the three months ended July 29, 2022, resulting in a 528% decline compared to the same period in 2021, primarily due to net losses on investments in equity securities[150].

Revenue Performance - Total revenue for the three months ended April 29, 2022, was $3,088 million, representing a 3% increase from $2,994 million in the same period of 2021[119]. - License revenue decreased by 11% to $572 million in Q1 fiscal 2023 from $646 million in Q1 fiscal 2022, primarily due to a shift towards cloud-based solutions[119]. - Subscription and SaaS revenue increased by 21% to $899 million in Q1 fiscal 2023, up from $741 million in Q1 fiscal 2022, driven by higher sales of Workspace ONE and VMware Tanzu offerings[119]. - Annual recurring revenue (ARR) reached $3.7 billion as of April 29, 2022, compared to $3.0 billion as of April 30, 2021, indicating strong growth in subscription and SaaS contracts[123]. - Revenue from Dell accounted for 37% of consolidated revenue for the three months ended April 29, 2022, compared to 35% in the same period last year[151]. - Reseller revenue for the three months ended April 29, 2022, was $1,137 million, an increase from $1,036 million for the same period in 2021, representing a growth of 9.7%[152]. Financial Obligations and Cash Flow - Remaining performance obligations totaled $11.6 billion as of April 29, 2022, with approximately 57% expected to be recognized as revenue over the next twelve months[128]. - Customer deposits from transactions with Dell were $282 million as of April 29, 2022, compared to $298 million as of January 28, 2022, indicating a decrease of 5.4%[153]. - Cash and cash equivalents increased to $3,719 million as of April 29, 2022, up from $3,614 million as of January 28, 2022, reflecting a growth of 2.9%[159]. - Net cash provided by operating activities decreased by $261 million to $1,005 million for the three months ended April 29, 2022, compared to $1,266 million for the same period in 2021, a decline of 20.6%[164]. - Cash used in investing activities increased by $18 million to $91 million for the three months ended April 29, 2022, compared to $72 million for the same period in 2021, an increase of 25%[165]. - Cash used in financing activities increased by $518 million to $815 million for the three months ended April 29, 2022, compared to $297 million for the same period in 2021, a rise of 174.4%[166]. - The company has unsecured senior notes with an aggregated carrying value of $9.2 billion as of April 29, 2022, with interest paid of $70 million for the three months ended April 29, 2022[167]. - The Transition Tax liability related to the 2017 Tax Act was $504 million as of April 29, 2022, expected to be paid over the next four years[160]. - The company plans to use free cash flow primarily to repay outstanding indebtedness through the end of fiscal 2023, while continuing a balanced capital allocation policy[160]. Operational Expenses - The company expects operating margins to be negatively impacted in fiscal 2023 due to increased investments in its subscription and SaaS portfolio[113]. - The company reported a 1% increase in total services revenue to $1,617 million in Q1 fiscal 2023, driven by a rise in professional services revenue[119]. - Cost of subscription and SaaS revenue increased by $35 million (23%) to $187 million for the three months ended April 29, 2022, compared to $152 million in the same period last year[133]. - Cost of services revenue rose by $39 million (13%) to $352 million for the three months ended April 29, 2022, up from $312 million in the prior year[136]. - Research and development expenses increased by $62 million (11%) to $642 million for the three months ended April 29, 2022, compared to $581 million in the same period last year[138]. - Sales and marketing expenses grew by $88 million (10%) to $970 million for the three months ended April 29, 2022, up from $884 million in the prior year[140]. - General and administrative expenses increased by $15 million (6%) to $251 million for the three months ended April 29, 2022, compared to $236 million in the same period last year[143]. - Interest expense rose by $21 million (43%) to $71 million for the three months ended April 29, 2022, compared to $50 million in the same period last year, primarily due to the issuance of $6.0 billion in unsecured senior notes[145]. - Other income (expense), net improved by $14 million (56%) to $(10) million for the three months ended April 29, 2022, compared to $(23) million in the prior year[147]. - The effective income tax provision increased to $86 million for the three months ended April 29, 2022, with an effective tax rate of 26.1%, up from $61 million and 12.6% in the same period last year[148]. Strategic Initiatives - The proposed merger with Broadcom Inc. involves a cash consideration of $142.50 per share or an exchange ratio of 0.25200 shares of Broadcom common stock[114]. - Business operations in Russia and Belarus were suspended due to geopolitical events, but the financial impact on Q1 fiscal 2023 was not material[116]. - Total backlog as of April 29, 2022, was $25 million, down from $88 million as of January 28, 2022, indicating fluctuations in unfulfilled purchase orders[129]. - The company continues to invest in expanding its subscription and SaaS offerings, reflecting a strategic focus on growth in these areas[134]. - The company entered into a Merger Agreement with Broadcom on May 26, 2022, which includes a termination fee of $1.5 billion if the transaction does not close by February 26, 2023[160]. - No material changes to market risk exposures during the three months ended April 29, 2022[175].

Debt and Financial Obligations - As of January 28, 2022, the company had an aggregate of $12.7 billion of outstanding indebtedness[74] - The company has entered into a $1.5 billion unsecured revolving credit facility, which is currently undrawn[74] - The company intends to reduce its indebtedness during the next fiscal years, relying on cash generated from operations[74] - VMware incurred $10.0 billion in indebtedness to fund the special dividend, including $6.0 billion in senior notes issued in August 2021[207] - The total principal amount of VMware's long-term debt as of January 28, 2022, was $9.25 billion, an increase from $4.75 billion as of January 29, 2021[294] - VMware's outstanding balance on the 2021 Term Loan was $3.5 billion as of January 28, 2022, after repaying $500 million on January 25, 2022[295] - VMware established a revolving credit facility with a borrowing capacity of up to $1.5 billion, which replaced the previous $1.0 billion facility[296] Tax Liabilities and Compliance - The company estimates a potential impact on fiscal 2023 cash from operations possibly exceeding $500 million due to changes in tax provisions[76] - The company is undergoing audits by the IRS for fiscal years 2015 through 2019, which may result in additional tax liabilities[78] - The company is subject to potential tax liabilities due to its former membership in Dell's consolidated tax group[75] - Changes in tax laws and regulations could materially affect the company's effective tax rate and financial condition[76] - The 2017 Tax Act requires the company to amortize research and development expenditures over five to fifteen years, affecting cash flow[76] - The effective tax rate for the year ended January 28, 2022, was 13%, a slight decrease from 14% for the year ended January 29, 2021[328] - VMware's gross unrecognized tax benefits decreased from $508 million as of January 28, 2022, to $527 million, with additions of $68 million related to current year tax positions[336] Revenue and Financial Performance - Total revenue for the year ended January 28, 2022, was $12.9 billion[191] - Net income attributable to VMware, Inc. for the year ended January 28, 2022, was $1,820 million, down from $2,058 million in the previous year, a decrease of 11.6%[197] - Total revenue for the year ended January 28, 2022, was $12,851 million, an increase from $11,767 million in the previous year, representing a growth of 9.2%[195] - VMware recognized $9.1 billion in total billings and $8.2 billion in revenue for the year ended January 28, 2022, compared to $8.4 billion in billings and $7.4 billion in revenue for the year ended January 29, 2021[248] Cybersecurity Risks - Cybersecurity risks are increasing as the company relies on IT systems and cloud-based environments to conduct business operations[79] - Cyber-attacks are increasing in number and sophistication, posing risks to the company's proprietary information and IT services[80] - The company has faced unauthorized access incidents in the past, which could lead to significant liability claims and regulatory actions[80] - The complexity of the company's technical environment increases the risk of vulnerabilities being introduced into its products and services[81] Legal and Regulatory Proceedings - The company is involved in various legal and regulatory proceedings that could negatively impact its business and financial condition[83] - VMware is currently involved in multiple legal proceedings, including a lawsuit filed by Cirba Inc. for patent infringement[264] - VMware accrued a total of $237 million for patent infringement damages, which was later derecognized following a new trial order[266] Acquisitions and Investments - VMware completed the acquisition of Pivotal for $2.0 billion, enhancing its cloud-native Kubernetes portfolio[274] - The acquisition of Carbon Black was executed at a price of $26.00 per share, totaling $2.0 billion net of cash acquired[274] - VMware acquired SaltStack, Inc. for $51 million, which included $29 million of identifiable intangible assets and $24 million of goodwill[269] - VMware's acquisitions during fiscal 2021 included five other non-material acquisitions totaling $62 million, enhancing product features for VMware Carbon Black Cloud and vRealize Operations[273] Stockholder Influence and Equity - MSD Stockholders and SLP Stockholders hold significant influence, owning 40.2% and 10.0% of VMware's outstanding stock respectively as of March 15, 2022[89] - The combined ownership of MSD and SLP Stockholders is 62.9%, which may conflict with the interests of other stockholders[90] - VMware's stock repurchase program had $1.7 billion remaining available for repurchase as of January 28, 2022[342] Cash Flow and Liquidity - Cash and cash equivalents decreased to $3,614 million as of January 28, 2022, from $4,692 million in the previous year, a decline of 22.9%[199] - Net cash provided by operating activities was $4,357 million, slightly down from $4,409 million year-over-year[201] - Cash, cash equivalents, and restricted cash at the end of the period totaled $3,663 million, down from $4,770 million at the beginning of the period[201] Goodwill and Intangible Assets - Goodwill and amortizable intangible assets were valued at $9.6 billion and $714 million respectively as of January 28, 2022[92] - The carrying amount of definite-lived intangible assets decreased from $993 million as of January 29, 2021, to $714 million as of January 28, 2022, reflecting amortization expenses of $303 million[276] - Goodwill decreased slightly from $9.599 billion as of January 29, 2021, to $9.598 billion as of January 28, 2022, due to business combinations and related adjustments[280] Foreign Currency Risks - Fluctuations in foreign currency exchange rates may adversely affect operating results, particularly due to business conducted outside the U.S. dollar[92] - Approximately 70% of VMware's sales are denominated in U.S. dollars, with significant invoicing in euros, British pounds, Japanese yen, Australian dollars, and Chinese renminbi[174] - VMware utilizes derivative financial instruments, primarily foreign currency forward contracts, to manage foreign currency exchange rate risks[174] Environmental, Social, and Governance (ESG) Goals - The company has committed to a 2030 Agenda focused on ESG goals, which includes sustainability and diversity initiatives[94] - Failure to meet ESG reporting expectations may result in reputational harm and increased litigation risk[94]

Financial Data and Key Metrics Changes - Revenue for Q4 was $3.53 billion, an increase of 7% from Q4 FY21. Total revenue for FY22 was $12.85 billion, up 9% from FY21 [5][17] - Subscription and SaaS revenue for Q4 was $868 million, growing 23% year-over-year. For FY22, subscription and SaaS revenue totaled $3.2 billion, representing 25% of total revenue [17][18] - Non-GAAP operating income for Q4 was $1.137 billion, with a non-GAAP operating margin of 32.2% and non-GAAP earnings per share of $2.02 [19] - Cash flow from operations for FY22 was $4.4 billion, with Q4 cash flow from operations at $1.137 billion [20] Business Line Data and Key Metrics Changes - Subscription and SaaS revenue grew to 25% of overall revenue by the end of FY22, with a goal to surpass $4 billion in FY23 [17][23] - In Q4, license revenue grew 2% year-over-year to $1.035 billion, while term license revenue was $191 million, up from $95 million in Q3 [18] - Services revenue for Q4 was $1.628 billion, an increase of approximately 3.5% year-over-year [19] Market Data and Key Metrics Changes - Total subscription and SaaS ARR increased to $3.6 billion in FY22, up 24% versus FY21 [18] - RPO in Q4 was $12 billion, up 6% year-over-year, with current RPO at $6.8 billion, up 9% year-over-year [20] Company Strategy and Development Direction - The company aims to be a leading platform vendor in the multi-cloud era, focusing on accelerating multi-cloud innovation and offerings [6][7] - Plans for FY23 include making all major products available as subscription or SaaS offerings, with a focus on accelerating the subscription and SaaS transformation [8][23] - The company is emphasizing partnerships and expanding its strategic alliances to enhance its multi-cloud capabilities [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about FY23, expecting to drive accelerated growth and innovation in the multi-cloud space [16][23] - The company is aware of macroeconomic factors, including the impact of the Ukraine conflict, but remains focused on long-term strategic goals [29][45] Other Important Information - VMware was recognized for its commitment to environmental, social, and governance (ESG) practices, ranking 1 in the environmental category [15] - The company repurchased approximately 2.5 million shares in Q4 at an average price of $119 per share [22] Q&A Session Summary Question: Can you talk about the rollout of subscription and SaaS offerings in FY23? - Management highlighted the excitement around FY23 and the completion of making all SDDC products available as subscription offerings, with a focus on sales incentives and partner certifications [28][34] Question: What are you seeing in terms of customer behavior post-pandemic? - Management noted an increase in strategic decisions by customers to accelerate digital transformation and cloud migration, with a focus on cloud-smart approaches [40][41] Question: Did the Omicron variant affect your quarter? - Management stated there was no significant impact from Omicron on bookings or quarter performance, and they have accounted for macroeconomic factors in their guidance [44][45] Question: How much of the subscription revenue is from new sales versus existing maintenance? - Approximately $100 million in subscription revenue in Q4 came from converting existing maintenance to subscription, with ongoing opportunities to grow subscription percentages [51][52] Question: How does the reduction in valuations affect M&A strategy? - The M&A strategy remains unchanged, focusing on tuck-in acquisitions based on product needs rather than valuation changes [58]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 29, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | --- | --- | |-------------------|----------------------------------------|----------------------------------------------- ...

Financial Performance - VMware reported Q3 fiscal year 2022 revenue of $3.2 billion, with non-GAAP earnings of $1.72 per diluted share, exceeding expectations [7][19] - Combined subscription and SaaS and license revenue grew 16% year-over-year to $1.5 billion, with subscription and SaaS revenue of $820 million up 21% year-over-year [19][20] - Non-GAAP operating income for the quarter was $935 million, with a non-GAAP operating margin of 29.3% [20] - The company ended the quarter with $10.2 billion in unearned revenue and $12.5 billion in cash, cash equivalents, and short-term investments [20][21] Business Lines Performance - Subscription and SaaS ARR reached $3.3 billion, up 25% year-over-year, with strong contributions from VCPP, Tanzu, EUC, Carbon Black, and VMware Cloud on AWS [19][20] - License revenue grew 11% year-over-year to $710 million, with core SDDC product bookings increasing over 20% year-over-year [19][22] - VMware Cloud services saw momentum, particularly with hyperscalers like Amazon, Microsoft, Google, and Oracle [22] Market Data - VMware was ranked number one in the IDC report for Cloud System and Service Management Software Market Shares [13] - The company received recognition as a leader in the Gartner Magic Quadrant for Unified Endpoint Management Tools and WAN Edge Infrastructure [15] Company Strategy and Industry Competition - VMware aims to be a leader in multi-cloud solutions, focusing on delivering a cloud-native app platform, migrating enterprise applications, and building secure edge solutions [8][12] - The company is enhancing its product offerings, including the introduction of Project Arctic and VMware Sovereign Cloud initiative [11][12] - VMware's strategy includes tailoring go-to-market programs and sales incentives to drive subscription and SaaS growth [35] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's multi-cloud strategy and its ability to leverage partnerships for growth [27] - The company anticipates total revenue for fiscal 2022 to reach $12.83 billion, with a growth rate of approximately 9% year-over-year [24] - For Q4, VMware expects total revenue of $3.51 billion, reflecting a growth rate of approximately 7% year-over-year [25] Other Important Information - VMware completed a special dividend of $11.5 billion in conjunction with its spin-off from Dell Technologies [21] - The company repurchased approximately 1 million shares at an average price of $150 per share [23] Q&A Session Summary Question: License revenue performance and subscription trends - Management noted that license revenue was stronger than expected, while subscription and SaaS performance was in line with expectations, with a healthy year-over-year increase in ARR [30][32] Question: Partner ecosystem excitement post-spin-off - Management observed excitement among partners, with some planning to increase VMware-certified personnel and engage in co-marketing efforts [38][39] Question: Impact of term licenses on revenue - Approximately 13.5% of license revenue came from term licenses, which are seen as a bridge to subscription and SaaS offerings [49] Question: Adoption of vSphere 7 with Tanzu - Management reported successful adoption of vSphere 7, with customers appreciating the ability to run containers natively [52][54] Question: Impact of hardware supply shortages - Management indicated that while chip shortages are affecting the economy, VMware has not seen significant impacts on its business due to its software-centric model [58] Question: Guidance for Q4 and fiscal year-end - Management expressed optimism about Q4, noting strong demand and execution, while acknowledging that some deals may have landed in Q3 [64]

Financial Analyst Meeting October 7, 2021 ©2021 VMware, Inc. Agenda Strategy Customers Product Financial Raghu Raghuram Chief Executive Officer Sumit Dhawan President Ajay Patel General Manager, Modern Apps & Management Business Group Zane Rowe Chief Financial Officer Mark Lohmeyer General Manager, Cloud Infrastructure Business Group ©2021 VMware, Inc. 2 Strategy Raghu Raghuram CEO ©2021 VMware, Inc. 3 The Next Phase for VMware: Multi-Cloud & Apps Platform Strong track record of driving innovative industry- ...