VMware(US:VMW)2022-03-24 20:12Debt 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]