VMW - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to the VMware Third Quarter Fiscal Year 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Paul Ziots, Vice President, Investor Relations. Please go ahead, sir.

Paul Ziots

Thank you. welcome third and earnings fiscal everyone call. conference afternoon, to quarter VMware’s XXXX Good

we Gelsinger, Financial have and call, the On Pat Executive President Zane Chief Vice and Chief Officer. Rowe, Officer Executive

we will Following their prepared take questions. remarks,

conclusion remarks Our to downloaded will can and any materially posted and no the obligation market call make the such forward-looking conjunction be various of described statements update that call do being viewed on result close which and and at a to XX-Ks, Slides live this is simultaneously where Actual in press webcast. are risk differ with currently ir.vmware.com. was subject X-Ks and website may the We including accompany from intend release be On after we files to those is risks today, of the forward-looking can issued in also SEC. our this results webcast with assume webcast of not factors uncertainties. statements. as XX-Qs this VMware

during a isolation call, considered are measures. which discuss non-GAAP will of These or today’s for not we certain measures. measures financial as to, as performance addition non-GAAP should financial in measures VMware’s from be GAAP substitute in used addition, In

divestitures rate our other exclude measures tax assets, acquisition, the employee related results non-GAAP non-GAAP intangible Our compensation, items, include adjustments. effect GAAP and of on stock-based transactions, stock acquired on and amortization of employer tax payroll

under be Relations on the measures replay Investor regarding Investor XX Webcast disclosures available the Relations additional find measures will and link. company on reconciliations our next this comparable can non-GAAP our call for of website days in You the including with press release these GAAP website.

to X on XXXX XX, quarter of XXXX call at compare to fiscal for included XXXX third fiscal quarter VMware’s With July through fourth Thursday, of over VMware’s September comparisons turn results November August that, XX, I financial quarterly through January XXXX. Year-over-year quiet fiscal Our results X quarter XXXX Pat. will X, the XXXX. third this begins it close period business

Pat Gelsinger

with pleased year-over-year product to very and XX% geographies. by grew growth earnings continue of $X.XX are QX share. the non-GAAP three in per across Revenue broad-based the all to our XX% which portfolio results, with driven We be strength

to strategy as a enterprise providing favorable of drive to cloud, products broad transition to hybrid from proving contributing to across our company virtualization Our excellent we go-to-market is software mobile, our for a and continue results successful to with geos plan. services continues a and on market resonate include compute and environment premises both security a cloud forward portfolio networking Factors strong with customers, that QX and execution strategy all cloud. across

our successful to industry ever. of Given our seasons and new in of one services products we quarter. news am I This is this be QX volume higher conference VMworld introduced always year VMworld lands proved excited finest our particularly influencers annual and demonstrating this annually, We vFORUM the innovation XXXX Europe have about past series our well as over problems. commitment quarter few our VMworld months. XX,XXX and Asia-Pacific customer US last XXXX solving and customers, partners VMworld complex the as across over to to welcomed

course across these advancements portfolio. the technology events, entire announced During our of we

scale. and hybrid Virginia AWS rich of VMware customers allowing that region. VMware pleased to with week software West service on Web to U.S. in the U.S. access public migrate, in enable cloud and particularly just and AWS Amazon will to Services on services brings across applications services. re:Invent consistent AWS run VMware environments And to protect availability East a and of announce run are customers to vSphere-based cloud add-on center and at We optimized region production defined to North capabilities AWS expansion featuring workloads AWS at data we partnership milestone initial cloud private, announced set the AWS the cloud operationally this another VMware AWS

workloads the workload interoperability cloud balancing. VMware extension migration services partner end-to-end initially At accelerate also and week, VMware a to networks cloud and cloud enabling unveiled into service on with will VMworld, announced cloud extension visibility partner It provides new we clouds. of security hybrid usage addition, Provider Hybrid networking VMware we public across service key on-premises with In hybrid service environments. environments. on AWS cloud and clouds cloud and The from design OVH. also Earlier AWS. across designed accelerate Platform, seamless that of dynamic on-boarding enable movement is we available to and Cloud IBM, VMware the workloads introduced costs this consistent availability and VMware VMware

VMware VMware unveiled cloud running VMware network commitment bad VMware, for new VMware therefore in We the least applications Wavefront call on with in do. allows and multiple flipping and on handles resources AppDefense the what and model has provides application and intrinsic applications. do core we security modern private for by we that instead management AppDefense enabling securing from what needs. near in analytics privilege the a of security applications chasing service intent-based organization critical virtualized breakthrough the and VMware ways helps two which this for to environment scale of conventional that Discovery, should an that public the offerings networking NSX example, container API on For good. it single focuses Cloud, will on that compute to VMware environments platform NSX running the high Building security consistent requirements a console clouds believe a done deliver ensuring the to native pivotal via business committed for to micro-segmentation vSphere security making franchise, or the environments. AppDefense applications. is is unveiled solution approach IT we cloud metrics monitoring what common for a VMware and service. and cloud and

to Service member to integrated operational innovative Kubernetes an that VMware jointly deliver of Dell VMware software infrastructure. another is enterprise-ready the with operate, unveil Pivotal Google needs of Pivotal Technologies the or IT. family Software, Pivotal PKS, purpose with collaboration solution is offering all deliver forces Container data deploy with an addressing designed easy built developer-ready Secondly, Kubernetes we and while center in defined joined to Container Service to

expected their connect clouds turning NSX digital close to second end-to-end acquire This enterprises further customers IDC The build Worldwide quarter acquisition In application lead will to excited announce and the to based year during VMware bring acquisition edge. first of on the and defined address its calendar Systems closes, industry-leading also ‘XX. hyperconverged VMware according to success fiscal them all Quarterly We VeloCloud transformation all of portfolio QX to wide-area manage, networking VMware applications acquisition vSAN, largest is the XXXX. infrastructure network the half industry-leading businesses the Converged expand hyperconverged cloud-delivered in for Additionally, SD-WAN devices. were running branch secure security of and to transition year will XXXX automation, of to the solutions enable customers virtualization service the network VMware to software Networks, cloud to into Tracker, sales software to run, help continuity, help enable their vendor from increasingly to providers. provider across technology area. and and a VMware closing, industry and Once was for intent to VMware software-defined its short datacenter platform, a are future or on VeloCloud

we also market. We see to innovate and products growth and broad-based our to across bringing continue strong portfolio continue new to services

about growth across and in our about strategy are to our business our QX. over it turn momentum talk in optimistic We more Zane? businesses. to the performance will now confident I Zane

Zane Rowe

Thank portfolio which Non-GAAP XX% XX% continued as and on-premises hybrid to revenue all QX revenue both VMware a over on customers a is the Air year-over-year. program, for you, EPS XX% operating share cloud known license across per was with XX% of Pat and as XX.X% a vCloud margin the again Network, was grew once partner represented total QX which SaaS you and for up quarter solutions. year-over-year. Hybrid formerly year-over-year share, X% count growing $X.XX non-GAAP with Cash was this today. software cash. amount for and $X.X had Unearned investments joining was end at commitment billion, provider of to billion shares. long-term. billion of $X.X Total and diluted quarter thanks $X.X We third solid billion and our revenue cloud in strategic strength for of and increased revenue quarter, short-term reflected us domestic million VMware totaled $XX.X XXX cloud approximately

the enterprise sequential Our unearned license the which last call rate the revenue included change XX% XX% strong growth in rate year-over-year. on revenue plus for unearned total a had license for of plus growth and the revenue change revenue mentioned sequential agreement of total the in QX, DXC

over million continued to from well XXX% growth underscoring also in commitment customers. which grew large we our in agreement, year-over-year QX. contribute recall, NSX as agreement NSX the license you included years support beginning next the the rates QX DXC beginning attached recurring several $XXX was in to renewal at As The enterprise this over revenue new services the a will to as high bookings license S&S of over bookings bookings. of DXC as business may NSX benefited strategic enterprise booked importance QX the in strong QX.

grew the branch storage implementations. including VxRail. this this on-premises specific license the manages service our data and over year-over-year. strong the and by deals announced Total by compute and management is up growth conference businesses, vSAN brings flat strategy hyperconverged hybrid for software and license service endpoint the performance at XXX% on year-over-year service software over management of VMware The bookings year-over-year. low also the were for again vSAN having hybrid mobile up cloud cloud to with new positive currently extending less management cloud bookings from bookings acquisition enhances this our quarter hybrid the cloud down earlier further XX% cloud quarter securely offerings, following bookings which license tied initial quarter, license AWS Workspace launch QX a bookings enthusiasm network the single-digits application driven for last in software. We on capabilities single-digits continues AWS our versus driven this year-over-year strong a purchase The our to our for VMworld by capabilities once mid to in capability week. the in on which VeloCloud Total were any network center in decisions and ONE including of device. re:Invent XX% customers large bookings their delivers Customer announcement EUC result new compute impact at any year. with up were both

accounting on geographies AWS a either on on impact cloud service repurchase we we while costs. Meaning, of a QX fiscal upcoming which customer from ASC ‘XX we adoption, adoption basis recognize in will of material We net the ‘XX In on over standard, software the expect the AWS will of completed new Technologies, capabilities $XXX year. strong the million on QX, XXX call. and Revenue add or revenue XXXX. infrastructure we expect quarter’s And revenue recognized A while additional net be Dell for service ramps. Class a don’t VMware announced last common stock was underlying will

In of $XXX end the the we stock million in over At just market addition, repurchases of authorizations. we open our billion stock had the remaining completed repurchase on quarter, $X during QX.

total for reflects Turning trajectory results to outlook taking we have pleased guidance as our on a XX% our QX, for XXXX, This continued of billion. and we initial QX for to well growth into stronger-than-expected rate $X.XXX account with as be fiscal fiscal in expect approximately fiscal thoughts XXXX XXXX year growth momentum our revenue this been year-over-year.

to $X.XX than XX% profit, we QX Taking now expect approximately up to margin fiscal expected share revenue account with diluted for $X.XXX a ‘XX be ‘XX Non-GAAP per stronger We into approximately our share is to fiscal expected XXX ‘XX expect shares. XX%. be operating operating earnings of non-GAAP year-over-year. million for billion, count for license fiscal be

we ‘XX the billion. bookings performance fiscal flow for fiscal to $X.X from With ‘XX for raising also cash are strong operations guidance for

QX We our of guidance revenue quarter. total portion be end level. backlog the be of with the $X.XXX billion revenue into any approximately to expect account QX backlog $XX expect million orders comparable at third we revenue backlog end. at of unfulfilled the license is $X.XXX QX, billion. For and takes with License QX the quarter exited ending license to license license

of XXX and For per expect on diluted to XX.X% share be to expect be operating margins the non-GAAP count shares. QX, we $X.XX earnings share non-GAAP million

XXXX, the the fiscal total planning we we strength For revenue of year-over-year. this have approximately seen expect and continuation on growth year XX% of are

will guidance further growth as well current cloud philosophy ‘XX our our margin as growth areas our expect for vSAN on services. investments, ‘XX SD-WAN are with with XXX VeloCloud, plans thoughts Consistent R&D in other for to approximately go-to-market invest We accounting XX.X%. non-GAAP for functions ASC initial of AWS operating on NSX, based and standards. as be as fiscal All such as we balancing fiscal cloud well VMware from with the and

we XXX the As ASC adopt accounting have previously, standards mentioned QX method we beginning full will retrospective fiscal XXXX. in using

impacts of the revenue to bookings sales expect on-premises correlation license and of licenses sales. our tighter While the adopting decline. Therefore, software connection XXX, the the revenue evaluate we with deferral we for of continue a license in on-premises to license will have ASC

our of time of of Currently, decline expenses new result, the revenue under accounting sale. license a we commission ASC over will longer time. Also, recognized period As the upon standards of to substantial be at adoption a XXX. expenses expect amount commission our recognized deferred a

we full the under commitment we by year FY as as QX For to compares fourth team. ASC summary, thanks as partners quarter our as platform well strong ‘XX quarter, execution strong call, and our historical XXX. our delivered and In another will well and to their loyal guidance customers relevant VMware provide

and With Paul. portfolios service our our cloud continue that, capabilities order turn and to in shareholders. for and will We the product to innovate I leverage help growth our invest to value to it and in of back generate customers hybrid

Paul Ziots

Zane. Thanks,

let’s people so Q&A, get started. we possible. yourself many Operator, I question can you Before one of consisting to ask begin one get the as as limit to will to part, we

Operator

We take ahead. our with first go America. Instructions] question Kash from Please Bank Rangan [Operator will of

Kash Rangan

that double-digit that have I AWS, you as business a that your of at embark have model, business the subscription, natural to more in Hi, guys of companies there to as start with believe your business and and partnership but look limitations or think customers extension to there, AWS on going future more see have look next infrastructure, embark the that as centers, also upon they I happy have quarter should force is year the it you is subscription model does become makes how be Nice Curious the how this know moved footprint here. see holidays business out data to new wonderful we but generally congratulations. after, growth VMware building forward if industry as year got VMware like. VMware rate natural doesn’t more software about towards we

terms As and sustain business revenue The does only Thank me. it growth you X, question, X recurring That’s of from look your of years out, this what the of your ability to model you. look Paul. your kind like in rate? nature

Pat Gelsinger

in Happy else Well, hey, question. for the to Thank the you holidays as call Kash. and everybody you well.

questions think the this an components, even software will increasingly compressed business frame Clearly, new like but vSAN of the we are our that we like think as these a good some component way in saw everyone to as I portion seeing infrastructure as-a-service in business our actually was like NSX, increasingly company, cloud six else and area to we into NSX those quarter. products, in but new good about that it. try Clearly, cloud, again we areas, of one, that see well. these industry the to about strong having of on-premise case growth

announced – see the a as business of don’t the on year, the growth well continue Program shift well as focus next that to that we high expect that and as our of VMware as high to continue we the the a well that see those going VMC in said, and we software other as we have we call SaaS Zane, to as cloud we rate over even increasing But net clearly, the opportunities computing VMC, leverage VMware rate. focus the we as all components end-user this of growth for increasingly AWS, to And services provide VMware also potential it the products business that software accelerating company, we on billing do favoring while Partner margin side our with material commented So, great and as investment are be service aspects on well the on are that business. of we over have to business Cloud our as focus like can a to drive continue sustained that of those will heard we the we on growth expect thoughts? that today, you piece the cloud combined going that be time software period.

Zane Rowe

‘XX mentioned our business. making beyond excited I are not view rate that of yes, so that about FY in lot at we Kash, include the material Pat. area, that would the initial SaaS it’s just a Pat add XX% we year, while investments with next the obviously the doesn’t on we for are as additional that for Sure, are excited growth

Paul Ziots

Kash. you, Thank

Next question please.

Operator

will We go Stanley. next with Keith Please ahead. Weiss question our take from Morgan

Keith Weiss

nice the Excellent. and quarter. Thank taking guys you very for question

terms further billings this and quarter, deferred? are building haven’t that are of DXC comes put In net it that front billings, XX% guys seen out that differed, buildup guys of more that license we penetration growth on we long-term getting a for of while. a you the up with guys XX% from plus long-term broadly contract are was or enterprise agreements all you Part

Pat Gelsinger

Sure. say number actually had It and a points definitely an broad-based the would start. several I will across see. agreement you The impact. was was products that of of DXC I growth fairly categories.

increase nice on basis. we strategic DXC, EAs then from represent excited quarter, XX% So, see our about but even a benefit you broadly at more a very get we are which the this year-over-year

Zane Rowe

just customers are bigger making are add in commitments. as seeing we business And strength just long-term overall, that I the

strategic of in all number breadth as quarter. products the this areas were All representing was large the EAs well of in big, the aspects EAs strategic is here. we growth reported renewal represented commitments, as of the EA The great those well essentially new

So, out ever unique continue to clearly biggest and but even the DXC that deal perform the factor if in metric this every deal rate a way, very that contributed was then well quarter. we

Paul Ziots

Thank you, Keith.

please. question Next

Operator

will take go next with Deutsche from Bank. ahead. Karl question our Keirstead We Please

Karl Keirstead

as fiscal growth I has for modeling range like. XX% operating for operating spirit anybody give And might noticed extraordinary operating Thank your us our equates give you get ‘XX is could the just cash but X guide is non-recurring, is performance Zane, us modeling have of but you. didn’t of ‘XX Zane. and that, that plus XX% margins. question least of through ‘XX of fiscal understand cash advice you. a kind fiscal first might would to any fiscal that flow factors year that in This I you don’t at been driven is we guess modeling I could there for that so the ‘XX? maybe be anyway you this the you months flow or Thank flow think skis what ahead great help don’t cash

Zane Rowe

question. sort couple operating benefits. we offering year at some while it’s of out, years a higher call flow cash are was that think Sure, year changing albeit we of that a a drive not think rate a I we fiscal the of normalized Yes, next And Karl. there, elements this would point growth what as you great indicative guidance year, for

would you But business. encourage of have expense to the We in you cash flow, movement just the I bit about as on sort think of little a about think got side. ongoing bookings also

year But we of the course year, had the that strong and year. a momentum look confident saw DXC, year. this We next year highlights the as continue we already very this through of with bookings feel we next very built year. have one this We as bookings, have being into that of obviously strong into

we looking cash you next revenue but on a now. just while a business give flow XX%, where guide the sense is our I business, So, color business lot call, at the the operating at give on wanted the and would is more right in obviously for highlight the to I just growth will

Karl Keirstead

Zane. you, Yes, that Thank helps.

Paul Ziots

Karl. Thanks,

Next question please.

Operator

go ahead. our take John DiFucci will from next question Jefferies. We with Please

John DiFucci

you. Thank

here. Keith second same like still surprising consecutive time, DXC, if that even impressive the and accelerated with really billings out quarter As the and of license even billings good strong is mentioned, kind you at the numbers and guidance which was back

a with vSAN these business So, we other significant NSX, thought bit. right or sure are in management where would now a and to to compute little had more see that model compute going than that’s barriers as a big tools Thanks. foundation Is happening being pickup we the Is to time compute had doing steady this of anyway to it thought start just more been And end-user a of just in vein want areas remains way, really and compute we pickup. understand on baton understand a they that, this had would continue back starting make very that computing I is still or supplemented significant forward. it we just these is your areas one passing in numbers? at Are other wane to you are more start way or it now? that study picking you up as significant those

Pat Gelsinger

quarter had is guide we performance into at new again get of security us rolled component the indicated, a AppDefense to vSphere. to the enhances we compute by that the thank foundational, Container accelerate meeting with these across installed allows but the with emphasize this and that balanced the although that very and broad view as John. of would Yes, with vSphere, is compute cloud VMware we Service growth a portfolio, management we VMware Pivotal into the build you it value year, our to bit. we And And sell as benefit solid on where NSX, And that it’s really performance base areas. vSAN, a a AWS the this that the cloud further on announcements also extend offering. also out quarter VMworld we new this key I adds platform with

new build vSphere. offerings on the also toward the specifically and IoT NFV of All

franchise as in So, as the areas value existing of continuing to value that to new be we are extend the enhance delivering considerable we even well.

extending So performance as into overall, new and balanced these we foundational areas. view it

Zane Rowe

John, view are changing we are on which we not I we up that the albeit compute last this fact quarter. add longer beat our would just changing not we that quarter term offered

Paul Ziots

you, John. Thank

please. question Next

Operator

take Mark next Murphy from question ahead. JPMorgan. will our go with Please We

Mark Murphy

ended that some Yes, seeing thank the cushion. next you had tangible also rolling large business my signs approach recently. stages much XG, of more am will very since a of feeling you spoken to or a I the and of U.S. I the providers I believe the the if of year, of have NFV starting of previously out add you XXXX are XXXX is wondering early on congrats. is X-year telecom wave any win you And to Pat, this few heels of I believe in as type you telecom cities that

that So, hold? taking are I if how am anymore confident just in you is curious

Pat Gelsinger

And here. Mark. general few comments maybe you thank a Yes,

but this is bit we starting think the build to occur. continue will timeline a and said we doing what is and broad really overlay are of to out, I where XXXX get some those XG to services, deployments going to crescendo the XXXX occurs people that’s etcetera the acceleration next to accelerate starting think as happen their right, I be real which most year, approximately XG with year, before, going in ‘XX, specific

making. dedicated that for now NFV of NFV functions, of we we there the available released launched open and version as virtual stack million XXX that what’s subscribers next are over called bundle VMware ready We now Dell validated the With are are We applications, telco we over have VMware. that VMware we XX it for Dell, with think service have that the crossed pleased some now of our infrastructure We running progress platform. for VNS those the are network platform NFV hosted a EMC very architectures.

several are wins also boy, Vodafone very to we of new for solid all major list are new list, names that on are have to these don’t this accounts So, win. just to add go quarter making we of as able we NFV progress, while we that had put our saying well like

momentum. partnership with – feeling we provider. So, maybe things because to good that like through very reinforces providers, of strategic about half overall, is really which we VeloCloud go the and that us, the are with have important business will It also well service service

building of will our to this Congress of solid probably that come have progress with this the them and phase us this when of quite many was is World is forward our the areas going quarter in of news Mobile business more the and a and stronger that’s we So, of relationship QX important good for big out in area journey. next of

Paul Ziots

Thank you, Mark.

question please. Next

Operator

will question from with Barclays. our ahead. Raimo We take Lenschow next Please go

Raimo Lenschow

from new the side like as I Thanks. well. my name. Congrats

we you early ramped no it and test a what is Thank and regions are seeing development, like Just new on you a question as speech. VMware little quick of AWS guidance? adoption a it couple work, long a Can how see it on from the out from customers the does around talk you. bit about workloads, is pattern those you

Pat Gelsinger

GAX beta as product platform, very are into announced and availability we version is the you with converting Yes, overall, Raimo. which And with will the we customers manager remains the it of on the early hybrid that new users the just product at re:Invent as zone, it opened sort clusters, second really to site fill say out billing now replication, stretched production. for extension, the enterprise I these, recovery all AZ cases second larger suitable this the up cloud And of enthusiasm networking, DR of thank we used AZ week, high. call right models, the vMotion

POC So, week now had have that that work, to have customers the tested grade have launched what tool we is this really most just far ability seamlessly to and and seeing we offering is production capabilities it of the that VMware with enthusiasm really we experience, to are so cloud. familiar the enterprise seen but for this extended operational

cases go we that the quickly production will start expect to as forward. We ramp used

Raimo Lenschow

you. Thank

Paul Ziots

Raimo. you, Thank

Next question please.

Operator

with to We will Sachs. Goldman ahead. Bellini go next go Heather Please

Heather Bellini

to you be very was Pat, seems also for obviously question, a to to be kind right, wondering it’s that are the am year be just that And as both conversations called well very the you had long spending that about I forward kind I environment proved helping these longer it seem as that so Yes, And you be IT much. what to of like Thank to side are ELA doing to with benefiting you very early renewals going you. much helping customers correct. here might year you for a as better on you enable how that hybrid that very, cloud cloud telling sides, Thank well you? to were on-premise. and about you your this how so transition of on look Great. take next and going talked

Pat Gelsinger

you, of bring much new as I this about clearly, I round where premise, cloud. IoT real described or can’t emphasize reflecting now you Heather. and things body latency some if We sort of that also the very well. have not is the and And all that it. materializing as for amount right cases also and applications say on to would that idea that’s student of been I the is bandwidth to have used hybrid say this IT edge a breaking tend and customers it’s hybrid to harder Thank and to the cloud of tech trip need back spend is And as the out tech Yes. re-platforming rate while industry speaking been have we is has now a

applications. the positive a is It to where to believe get cloud, public on-premise to indicate middle clearly efficient. going a way. cloud we on-premise the private into ability and our the native and of services hybrid their and It IBM gives in ability cloud, cloud new as flexibility. are well the being behavior a VMware environment to very without seamless this public partners Many able these re-platforming holistic very and more all combination as be So, think case on clearly a that now it in that that their it’s very of see of that’s private like used AWS. just customer that. realization of hybrid the some makes in customers of to VMware for in their lot whole a We more makes powerful cloud sit OVH They robust scale access is

ability applications. win, the really So, re-platforming win two or V invest be future. customers their model and is this believe will not don’t for support if to their and case them decade their a improve improves infinitum the in business I in have ad It to next win, they IT for of essentially

Heather Bellini

you much. very Thank

Paul Ziots

Heather. Thanks,

question Next please.

Operator

with next to Moerdler Bernstein. go go will Please ahead. We Mark

Tim Thornton

quarter. included about on quick a Thanks. NSX? a I thank I little actually that and wondering with Tim more Thornton just in the for speak you how Hi, Moerdler. question It’s and your Thanks was had conjunction view you any on congrats is expectation then VeloCloud. in you. opportunity on Mark guidance in could

Pat Gelsinger

it’s they redefines how it executing move into everywhere. for And of of the I element on into is and services networking and is then additional And numbers to our between start. the networking Zane data VeloCloud, it data offers VeloCloud delivers with making cloud this progress that many the and on allows powerful done, virtualized and It will we NSX me what layer. saw security their the quarter, they routing had looking vision. securely branch, for NSX these great because NSX applications, they let it Yes, obviously dedicated really traditionally done to that past. have to comment overall, the excited or more the vision are redefines where they about But we WAN all need looking this it’s let it. how support to MPLS means circuits And are things the software are you But is was the are effective in the how stretch market. center we to new guidance that branch to software-based aspect the for redefine in quite done datacenter, us are centers what the in as customers are between what’s transform that a branches, need

and as the us And helps excitement So, a VeloCloud is And SD-WAN have really path enterprise value is well the the gotten category NSX a everywhere. at service of for has we on had NSX we of acquisition us VeloCloud customers, the accomplish powerful proposition of this before as very that provider that’s becomes it lot momentum extension the and that. as from are vision VeloCloud whole exciting. and

Zane Rowe

don’t excited I it base are it well included our investment both the guidance. Tim, expect ‘XX add included obviously quite FY the whatever that material We will for opportunity but we is is but as acquisition just about would VeloCloud, in beyond out we break that. revenue as from incremental to not the get

Paul Ziots

Thank you, Tim.

please. question Next

Operator

question Winslow Fargo. We Wells ahead. Philip will next take Please from our go with

Michael Baresich

on Congrats on not Hi, easy some hybrid you you cloud customers, on-prem to for to double of customers seeing aren’t to as on-ramp quick you couple are can service? I some materially Thanks. on have but individual maybe Michael if even be This contributing markets? currently the buy they just AWS solid but click they follow-up otherwise strong yet, to partnership Baresich back willing with that had the quarter. Phil. as just to using AWS. resonating have it’s wanted last quarters, quite more really using are those now It’s said the guys. revenue planning with clearly a the circle of the this you international not who actually is then growth on yet And

Pat Gelsinger

of some is clearly doesn’t on amount won’t it’s AWS who least AWS. going enterprise with AWS, on used by customers that So, an and at have rare you enterprise now find pretty customer experimentation

say are And multi-cloud present AWS flexible at for expansion, and and finding able an in get just some to expansion, customers, where strategy like the some cases that level least very tires. test are And our VMware where customers is presence XXX% what having So we data future, on-premise it certain on-premise VMware their and build it’s might also powerful as in obviously cloud. it’s are early we I VMware geo making on-demand my I they investments. cloud cloud they capacity, that that things greater that’s we builds don’t get built that have or with capacity flexibility other investments be the comfortable invest and in confidence some while from to it, expect and boy, to that to go as in migrations, strategic have am seamlessly more I’d and of cloud credit my financially can we VMware we account experimentation this test have a I early public almost geography, also strategically that, as is as I me we as is kicking want take used of are cloud elegant to of dab oh, high. the holistic that they at POC the rate go can center well of seeing technically that and with mechanisms continue just the of benefit to operate a you

those every entertainment, right, governments, etcetera. professional We also service state provider, universities pharmaceuticals, see vertical, early cases media used local across essentially industries,

it’s sense that So in as really well. broad-based

what So is interested a VMware are like. basically, everywhere customer, they yes, this there look in exploring might

Zane Rowe

had three In EMEA Michael, a I you We Paul all will across standout strong particular, the add saw cuts geos. off. growth quarter. of before just balanced

team. So, congrats to EMEA the

countries. saw in growth also XX our We of X top

and overall well strong globe? the growth So, around balanced

Paul Ziots

before a baby, Winslow, on, I to we we to new Thank gave shout who give Phil just amazing. our also he move to a his And birth you, call, wife shortly want think out I healthy before learned Michael. and

Phil. congratulations, So

Next question, please.

Operator

We Please go to next will Stifel. ahead. Brad go Reback with

Brad Reback

on if of broader which much the and business? how margin that into is specifically the Zane, is year-over-year much. ‘XX very Thanks. we about the of to guide, reinvestment much Thanks tied how think Great. VeloCloud contraction

ZaneRowe

Hi, not saw guide in we operating part number ‘XX fact, all. a higher we the create businesses about Brad. and in and our in also outperformed actually guide in philosophy our year FY level and of are making margin number of the change have have highlighted year. at investments growth. significant a revenue continue VeloCloud It’s management cloud original growth those investments of as that this I And tell in is that number is of businesses you businesses. the sure. a will for and growth than guide to our cloud Yes, as think original it’s at for balancing the and we there no made this you success our seen we is a a we make

we about growth So, and – the operating revenue actually very view think solid really verified initial is growth. XX% are has that ‘XX margin margin that the we our actually that excited considering

Pat Gelsinger

go the business. not business we the will really just to justifying the I growth Yes. investments have materialize we growth if areas conviction in And add that is that, great in potentials. And those overall that to demanding are seeing

as starting SD-WAN our longer to We next with term are are and resonance build customers from getting IoT well the strategic well we and as NFV, VeloCloud. great as investments

feeding as engines So, the well. it’s growth term to are seeds for well as the as the performing longer that starting lay

Brad Reback

Great. Thanks very much.

Paul Ziots

Thank you, Brad.

Next question, please.

Operator

our next take will James. with Turits Please go Raymond from We question Michael ahead.

Michael Turits

assumed forward as deals not not at you Hey, really into big look ELAs part or guys. I or ELAs look sort at ELAs business? of ‘XX that we or growth this the did that’s about whether below the in should in just something run-rate or those will and cycle rate that’s be part the I into of when wanted looks ELA where which ask of whether how that year whether August, above pulled at to and two the you

ZaneRowe

sort Sure. broader I then start and ELA the of some can maybe will Pat give business. on color

at of opportunity look yearly a we year renewals saw saw than for this ‘XX we FY we As expect year. much perspective be greater from value we would like to this renewal

at ELA faster a percent seen total obviously XX%, we we what and So at historically. on have with pace the strategic our are and have the growing been very pleased as our pleased ELAs a mix have of again we opportunities

we As increasing we year. it opportunity, see at renewal look that next

Pat Gelsinger

the numbers on you to of as of we for saw I us, long-term amount NSX, that us is accounts And our think quite into more basis commitment that opportunity that on is that products that seen of the longer the from increasing it’s to getting seeing ‘XX just year it’s bump important are EUC, buying EAs are really vSAN had really the into every the just right, effectiveness long-term but that their for buying from and we Yes. we it stunning. customers into are EAs increasing a term more they the which we have overall strategic ‘XX unique a while really is amount

Michael Turits

Okay. Thanks.

Paul Ziots

you, Thank Michael.

please. question, Next

Operator

next to MoffettNathanson. go Adam Please with We’ll Holt go ahead.

Ray McDonough

product you this Hi, NSX, question has the there on on significantly quarter you I as to know taking can questions. in as compared to bit fiscal extend size opportunities and progressing a the Thanks year benefit, insured the large obviously McDonough for ago at Holt. a platform accelerated were look Ray growth but deals is you that provide a see the out in anymore which deal of is ‘XX surrounds with My VeloCloud? color you called the seeing Adam how there for the you and

Pat Gelsinger

the Yes. but Overall, benefited we was deal, deal, NSX. quarter out DXC the QX by really DXC had an if performance factor in even NSX very good uniquely for exceptional we

that that container business. the NSX we we essentially developer-ready infrastructure, built emphasize I focused but size on We remains Zane higher and would very has do new bigger service services overall everything smaller are that most AWS, now is you cloud pivotal gotten the I our if actually VMware know over NSX maybe much into it’s part also X,XXX for those or transformational with customers. a don’t there, is through deal larger answer the can of announced on it EAs vCloud or deals of cloud.

to continues the to-date, So, we application around public as cloud. the the security the me that with customers already micro-segmentation the used NSX for multi-data to number continue be cases The technology driver are broaden VeloCloud cases connectivity of as is one pathway the commented. broadening used it get but have center though acceleration, really comfortable to further everywhere extends and even benefits

was DXC healthcare seeing well. many strength in in overall, deal benefiting into deal, part it’s regulated the but and different industries vertical as the we Vodafone are aspects really note as you critical many across of So, as segments

networking a and the industry. hundreds this year becomes So, thrilled, really of customers next we our over virtual we customers X,XXX well into for continued that believe this believe growth thousands time, is because of the value that tens because of is and opportunity that, but us in beyond were everywhere

ZaneRowe

size as as number have Ray, I been customers with products. as just the add, returning Pat well mentioned we will the the pleased with of deal

DXC accelerating enhanced the solid. it’s within still the as growth was deal being Pat same and or So, out The even without customers. with pointed is adoption

forget about So, the this product we year and of next.

Paul Ziots

Thank you, Ray.

next please. Your question

Operator

go with Credit next go Zelnick ahead. will to We Suisse. Brad Please

Brad Zelnick

congratulate Thank you you news of lot to very much. There good a on. is

and NSX is and specifically require have technology container there cloud features guys. there of quite the place Thanks. or So, more of out focused security have nice on? you NSXT VMworld, within a see do containers job in the do make with question security Coming will more firewalls across traditional really even segmentation, to inherent traditional security other you network done AppDefense and which how will role portfolio. and within bit a the My think customers you rely

Pat Gelsinger

aggressive steps And mean, encryption, that more micro-segmentation, said, core in taking multi-factoral AppDefense the with EUC vSAN are with provide, the NSX overall products we build with I we compute. more you infrastructure security to as and authentication now Yes. into

aspect our is So that key idea of building in to strategy. security a

that chasing from opposed aspect of to bad, second detect able easier being do deviations is as we are the will on to as we good finding The and we model security than little finding piece lot is to ensuring its head a turning good say are bad.

the has more, to we the something think going approach. overall with tech security to wrong I said customers clearly are is view that new a failed area more customers I losing security. So, overall, we of as address aggressive very we boy, have have in right and what our are the accomplish of spending industry Right, the have our delivering industry they really and in

about So, we quite doing that things are excited we are there. the

hardware-centric really over As all need Alto continue of one those firewalls and more with traditional focuses will which their think into vendors future multi-cloud we of security the traditional as And to security hardware-oriented Checkpoint some others, firewall multi-cloud world become on to them firewalls, we baking be every they a see software-driven products software of called service our needs your network with focused North-South question with as a re-conceding we the in but in, increasingly that capabilities over reconsidered with opportunities them are Palo sort time. partnering also are traditional partnership technologies, like delivered be those we of but it be to and reconceived conjunction their be maybe Networks, how hardware, time. will and East-West software-driven software-based in way are in

is to continues but to approach we pretty a domain differently way. big as into need stepping overall software important aggressive and market customers, think that So, in industry right forward be it collectively and a VMware that an I for

Brad Zelnick

very Thanks Pat. much,

Paul Ziots

Brad. Thank you,

Next question please.

Operator

our question will go Matt We RBC with Please next ahead. take from Capital. Hedberg

Matt Hedberg

Thanks my Yes. taking Hi, question. guys. for

the were I expanded of prominently comment and cloud new re:Invent a great sounds, bit VMworld about this that an at It Europe see approach? little you relationship was how availability featured curious at your You partnership really was but it more out guys features hybrid and of you with IBM. week. broadens sort that some talked to Can about really

Pat Gelsinger

with VMware IBM the and stacks. foundation offerings one accelerated cloud about you, is cloud more you. of Thank think building dimensions. more is hear the having and great from IBM and Matt for VMware their them IBM One couple could VMware-based our and partners to it of cloud positioned key of on Overall, you different success partnership, Yes. software in we the as a customers IBM

very growth going great that’s well, So, rates.

X,XXX I IBM. are plus think customers with at now we

building new enhance offering QRadar the dimension are And and for IBM Second offerings instance, them. then saying our and partnering of areas are their QRadar. to security is with AppDefense, with question around build with service last that we that the the and we AppDefense

into well is well us services to very on side being with really in overall about the integrators hybrid that centers ability existing with experience, the the on dynamic are Europe call right leaning We environments by great clouds transform new partner the with way workloads in forward cloud extension. a that way launched practice the IBM we excited of step and those And where IBM both into just with as well a as off as new enable data modern have a operate us. basis one cloud environments. day we to also modern fully It’s minute, well, with a at we VMworld is that big are new optimized by in that hybrid as day what them as are momentum as truly thrilled seeing with dimensions are they as and area global their are system hats multiple across technology the partnership in we really so as minute

Paul Ziots

Thank you, Matt.

question, please. Next

Operator

go Please to Moskowitz We will go ahead. Cowen & next with Gregg Company.

Gregg Moskowitz

DSO Okay, and thank well. can bit were forward? sure quarter helped Zane, this well quite you more your but a DXC net going as as there, I lower this DSOs am broadly talk than quarter. expectations about the as usual much you your deal linearity congratulations Thanks.

ZaneRowe

Gregg. Yes,

DSOs. clearly that’s helped the helped year We as of shifted with the are you third DXC linearity there. also But case from just the clearly the fiscal benefiting to in quarter new agreement

we we to the normalize some about in quarter, So, a least expect this think more early would future deals it a quarter. from of little happened for you at benefit DSOs, but number as that

Greg Moskowitz

Thank you.

Paul Ziots

you, Thank Gregg.

Next question please.

Operator

Bachman go with will Bank to Montreal. next Keith We ahead. Please go of

Keith Bachman

dimensions in wanted I’ll you my sounds to to expectation. just and quarter. very compute, wanted you to your which sounds had add thank the well another XX%, to next of total single-digits expect compute that it very about year I as like grow much. clarify ask grow – morning. solid Hi, for like Good it as congratulations And low you guidance of to was continue the to Phil.

a that benefiting for seems from you results of Oracle is year you Microsoft, bit for little think really fact to even across ‘XX particular? driving or you spending infrastructure or into In do renewed be the year there ongoing you. what more benefit think on-premise think it calendar Hat, this momentum a companies, VMware. so for like Red do speak at compute, Do strong continues that cloud are VMware board. Thank what would in you is lot

ZaneRowe

Zane. I is this will So, start. Keith,

next we revenue growth compute within initial think right XX% You low year be will view about aggregate. estimate. We the single-digits exactly in that in for are as our believe

we So, that’s view today. have the

Pat Gelsinger

conversation to things these over a Alright – will very there on that’s years, quickly compute I intelligent, cloud the able regard with to customers, we go I that I I’ll into going to here be mean cloud three X first I really say that many might am few boy, of term boy, only, and going really comments And the right, Yes. or not back the the last a an I I to get exciting future, transform and but I if balanced with I a as and has curated longer on-premise wow, got am boy, a I at portfolio our as to those slow say to new is thought. right, anymore all environments I this to going customers are lead this of am to said, is more replatform competent they this is hard, application might to than their applications, is been need don’t this refactor rebuild look looked this things got and is those, application lot I to do that shift decades. heavy,

really as with their very a how new they approach, it container-oriented embrace and complements say micro we with in very apps I’ll are portfolio balanced might how now containerize overall but a they investments now and think as they customers services existing well. oriented And understanding thoughtful become their conversation So, on it’s services and application way.

fairly is expect powerful well. cloud I’ll ways holistically multiple new they to to They cloud get on to to I going multi-cloud about to refresh environments. to without in they a to conversation how schedule right, think as cloud on-premises new this the investments a going asked. applications people like are with balanced on we need to more value call and as in VMware re-factoring able overall, move the come, their So be services AWS, own be say even bad having extensions years that embrace from for tools have actually cloud don’t their as make, will the capabilities we the hybrid have a move They way they cloud to

be this of going gets as the things also we be last So, be believe be did tends our on the available demonstrate from that’s used to to like balanced cloud the into Amazon, as that X,XXX overall like services grass the tech was on for And the you the and early And to actually that right what demonstration I expect multiple will this valuable driving that think into might longer public week as think a And service being have Amazon I service grass answer us these in cloud and referred available for franchise a strong, Q&A providers on-premise cloud a only well more the proof-of-concept bring IoT that from to Amazon, I I that review noticed bringing is commented will providers the be we on available lambda to premise. cases take things And just that future. decades with like and the able premise. we IoT future. going and back that functions and hybrid in years environment to result, view on cloud but a of green balance the the green is today IBM for other term also on-premise the compute as increasingly for future. from in will and

ZaneRowe

in It we have if might Keith. you, we one more. time Thank looks like squeeze

Paul Ziots

Thank you.

last we please. here have the quickly, one question more in if for We time it squeeze

Operator

go Lamba Please We ahead. will Mizuho go Securities. to with Abhey

Abhey Lamba

things as for next of on thinking year’s thinking this are for about am Yes, kind there Zane, about question we from cash earlier just that thanks one-time any year about me cash flows are flow. next we follow-up squeezing going to I year. Paul, should be in.

just we bookings should the Thank earlier? thinking be So, about indicated you you.

ZaneRowe

Abhey, it’s a good question.

of called As I earlier, that no there would about year I sort this already. we would one-time out in expect are callouts as mentioned of any elements this moving haven’t there number year, are think you say around but

look years align with for future will next we color you give that am the expect the to years. future business flows So, growth speaking that generally on call. at cash you business as our think we in I happy more on

Paul Ziots

solid guidance fiscal very in a Thank you, We the raise expectations for third it’s for quarter. set And Abhey. closing, ‘XX. year. We

is strategy Our resonating customers. with

about Thank sure time businesses and the you year growth all great We momentum all out across a and VMware. joining holidays our optimistic for we you. our as are of wish appreciate in your interest finish we we call a and happy

Operator

this conference may gentlemen, Ladies call. and and will at participation for We you you this your time. disconnect today’s thank conclude

Vmware (VMW) 30 Nov 172018 Q3 Earnings call transcript