Dell Technologies Inc.

Good afternoon and welcome to the Fiscal Year 2020 Third Quarter Financial Results Conference Call for Dell Technologies, Inc. I'd like to inform all participants this call is being recorded at the request of Dell Technologies. This broadcast is the copyrighted property of Dell Technologies, Inc. Any rebroadcast of this information in whole or part without the prior written permission of Dell Technologies is prohibited. Following prepared remarks, we will conduct a question and answer session. If you have a question, simply press star, then 1 on your telephone keypad at any time during the presentation. I'd like to turn the call over to Rob Williams, Head of Investor Relations. Mr. Williams, you may begin.

Thanks, Erica, and thanks, everyone, for joining us. With me today are our Vice Chairman, Jeff Clark, our CFO, Tom Sweet, and our Treasurer, Tyler Johnson. During this call, unless we indicate otherwise, all references to financial measures refer to non-GAAP financial measures, including non-GAAP revenue, gross margin, operating expenses, operating income, net income, EPS, EBITDA, adjusted EBITDA, and adjusted free cash flow. A reconciliation of these measures to our most directly comparable GAAP measures can be found in our web deck and press release. Please also note that all growth percentages refer to year-over-year change unless otherwise specified. Finally, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking based on current expectation. Actual results and events could differ materially from those projected due to a number of risks and uncertainties which are discussed in our web deck and SEC reports. We assume no obligation to update our forward-looking statements. Now I'll turn it over to Jeff.

Thanks, Rob. At our September business update with investors, I talked about our two focus areas. First, innovating and integrating across Dell Technologies to create the technology infrastructure of the future. And second, innovating to win in the industry consolidation. We're making solid progress on both, which is what I will update you on today. Plus, I'll give you my take on the demand environment. Customers are looking to Dell Technologies to help them reinvent and automate all parts of their business, essentially help them build the infrastructure of the future so they can quickly respond to market trends, customer needs, and drive business outcomes. This drives long-term value for our customers and for us. It also drives us to innovate and invest in new technologies that are simpler, faster, and more capable, even autonomous, all designed to be consumed the way customers want based on their business needs. We continue to invest in our power portfolio across ISG, which represents our best innovation and capabilities for the data era. We ship PowerMax with storage class memory, an industry first to market, and it's now 50% faster. In September, we announced the PowerProtect DD series that now features a modern software stack with 38% faster backups and 36% faster restores. Most recently, at our Dell Technologies Summit earlier this month, we introduced our all-in-one autonomous infrastructure, Power One. Part of the Dell Technologies Cloud portfolio, Power One helps customers simplify their path to hybrid cloud, combining PowerEdge compute, PowerMax storage, PowerSwitch networking, PowerProtect data protection, and VMware virtualization all in a single system with intelligence built in to automate thousands of manual steps during its lifecycle. Further, we made the industry's broadest infrastructure portfolio simpler to consume with Dell Technologies On Demand, letting customers pay for infrastructure as they use it, freeing up resources, money, time, and people to focus on transforming their business in today's on-demand economy. This gives customers the ability to plan and predict around peak data consumption and IT spend cycles. We are excited about what these new innovations make possible for our customers and what they represent in terms of how we've readied ISG for the future over the past two years. We've stabilized the business, reclaimed share, simplified and powered up the portfolio, and added sales resources to fuel growth. At the Dell Technology Summit, Michael unveiled our ambitious new goals for 2030, focusing on inclusion, sustainability, transforming lives through technology and data privacy. For example, by 2030, our goal is that 100% of our packaging will be made from recycled or renewable material, and more than half of our product content will be made from recycled and renewable material. And for every product a customer buys, we will reuse or recycle an equivalent product. These initiatives follow what we've achieved over the past 10 years, like recovering more than 2 billion pounds of used electronics via responsible recycling, and reusing 100 million pounds of recycled content and other sustainable materials in our new products. We have a strong track record here to build on, which helps us win in the marketplace. We've made several important social impact commitments that are increasingly important to our customers, team members, and investors. I encourage you to learn more on our website and through the replay of the summit event. Before I get to the demand environment, I want to remind you of our operating framework that remains unchanged. We expect to outperform the market and take profitable share. We have gained 375 basis points of storage share over the last two years, 580 basis points of mainstream server revenue share over the last three years, and approximately 600 basis points of PC share over the last six years, now shifting to demand. From a customer set and geographic perspective, we see solid demand in small, medium, and commercial accounts with weakness in China and some softening in the large enterprise space. From a business unit perspective, we see softness in enterprise Infrastructure solutions demand, driven by servers, while client solutions and VMware are solid. Let me share a few examples. Our storage business grew 7%. We saw strong Q3 demand in data protection and hyper-converge, with VxRail orders up 82%. We expect to gain storage share in North America in calendar Q3. More importantly, our customers and sales teams are optimistic about our portfolio and positioning. The server demand environment remains challenged, as many customers continue to digest last year's unprecedented growth. Excluding Greater China, our Q3 server order revenue was down mid to high single digits. While the server market remains soft, we continue to focus on growing our server buyer base, which was up 5% growing year over year for the fifth consecutive quarter. In addition, our server business benefited from an increasing mix of high-value workload platforms increased memory and storage content, and component cost decreases. We expect to gain share in North America and EMEA and retain our number one share positions in x86 mainstream server revenue and units. Client solutions demand remains healthy, with tailwinds from the Windows 10 refresh cycle expected to continue and then fade into the first half of next year. IDC is projecting a declining post-Windows 10 demand which will be a headwind to CSG in fiscal 21 overall. In Q3, CSG delivered strong results across commercial. Going forward, we remain focused on direct growth and optimizing our channel relationships. We have invested in our sales forces in both small and medium businesses and continue to accelerate growth there. In consumer, we will focus on direct sales and high-end premium PCs, including XPS and gaming, as well as increasing our attach of services, software, and peripherals. We expect component costs to remain deflationary in aggregate through Q1 of next year, but at a significantly lower rate than the last three quarters. We are now seeing inflation in SSDs with 20% inflation expected in Q4 and DRAM inflation beginning in Q2 of 2020 per industry and analyst estimates. We clearly have captured the operating benefits from the significant cost declines in fiscal 20, and it will be our job to mitigate these expected increases for our customers and for Dell in fiscal 21. And finally, Intel CPU shortages have worsened quarter over quarter. The shortages are now impacting our commercial PC and premium consumer PC Q4 forecasted shipments. Now I will turn it over to Tom to take you through our financial results and guidance.