Dell Technologies Inc.

Good afternoon and welcome to the fiscal year 2020 fourth quarter and year end 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. To ask a question, simply press star, then 1 on your telephone keypad at any time during the presentation. I'd now like to turn the call over to Rob Williams, Head of Investor Relations. Mr. Williams, you may begin.

Thanks, everyone, for joining us. With me today is our Vice Chairman and Chief Operating Officer, 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, EBITDA, adjusted EBITDA, and adjusted free cash flow. A reconciliation of these measures to the 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 and that VMware historical segment results have been recast to include pivotal results. Finally, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking statements based on current expectations. 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. As Dell Technologies begins our fourth year as a combined company, we've never been better positioned to help our customers unlock the potential of all of the data coming their way. No one stores, processes, moves, and protects more data than we do across any environment. No competitor enjoys our advantage positions across physical and virtual infrastructure. Our investment in talent, Innovation and breadth of capabilities gives us an advantage starting position as we head into the data decade. I am optimistic, yet I know we have some hills to climb. That is evident in our FY20 results. In FY20, we delivered revenue of $92.5 billion and EPS of $7.35. Revenue grew modestly at 1%. We delivered strong profitability with operating income up 15%. I know you want to understand what is going on with infrastructure solutions group results, so let's start there. In ISG, our FY20 revenue was down 7% to $34 billion, but up 10% versus FY18 as large enterprise customers digested FY19 CAPEX investments and China slowed. Server and networking revenue declined in FY20, but profitability was up as we didn't chase unprofitable server deals in a down market. Our long-term server share trajectory remains strong. We are winning in the consolidation, gaining approximately 590 basis points of share over the last three years. And we have been number one in mainstream server revenue for seven quarters, according to IDC. In FY21, we're planning for both the overall server market and our server revenue to return to growth, driven by higher value workload servers, increasingly more robust AI and machine learning solutions, and distributed IT requirements at the edge. According to IDC, mainstream server revenue is expected to grow at 3.3% in calendar year 2020, and we plan to grow it at premium to the IDC forecast. Shifting to storage. Roughly two and a half years ago, we began to take actions to stabilize the business and lay the foundation for growth. We have reclaimed over 300 basis points of share since 2017. One action, we have invested approximately $1 billion on a run rate basis into sales coverage, capacity, and marketing, including critical investment and storage specialists. This year, these specialists will reach full productivity. Earlier this month, we combined into one sales organization, and we will realize the next level of synergies and cross-sell opportunities, like selling more storage and data protection to our server customers. We have made considerable progress simplifying our storage portfolio, moving from over 80 products two years ago to roughly 20 today, including our new mid-range storage solution being evaluated now by dozens of customers. And by Dell Technology World in May, we will have refreshed our entire storage product lineup under the PowerBrand, completing a two-and-a-half-year journey of modernizing our entire ISG portfolio. We have never been more competitive from top to bottom. We are planning to grow FY21 storage revenue at a premium to the market with growth strongest in HCI, followed by core storage and data protections. Our team is tenured and ready to sell. The business is simplified and stabilized, and the portfolio is the best it's ever been. FY21 is the year of ISG. FY20 was an outstanding year for the client solutions group, with a record revenue of $45.8 billion, up 6%, with commercial up 11%. We shipped a record 46.5 million units during the calendar year. We executed well. taking advantage of tailwinds from the Windows 10 refresh cycle, declining component costs, while navigating through CPU shortages and a dynamic tariff environment. What's more, we're winning in the consolidation, taking share and growing at a premium to the market. We have gained share for seven years in a row, according to IDC, and the plan is to continue this momentum as the market consolidates further. In FY21, We expect the PC market to remain solid through the first part of the year before declining in the second half. This means we're facing a tougher compare as the Windows 10 refresh wanes. IDC forecasts PC units to be down 7.1% this year. The result is a slowing CSG revenue, making growth in ISG that much more important. But that's the advantage of our diversified business, including VMware. Our VMware business unit had another strong year with FY20 revenue of $10.9 billion, up 12%, another year of double-digit revenue growth, and the business is well-positioned going forward. For example, we have hundreds of thousands of VMware customers today, and the combined workloads running on the VMware installed base are bigger than all of the public clouds combined. And more customers have decided multi-cloud is the answer. Couple VMware Cloud Foundation and NSX with our leading Dell EMC infrastructure, and we have the industry's best multi-cloud solution. The advantage of the Dell Technology Cloud is an operating model that provides consistency across the entire ecosystem. In application development, we've strengthened and simplified our approach with VMware's acquisition of Pivotal, combining critical IP and go-to-market capabilities. With Project Pacific, VMware is integrating and embedding Kubernetes into vSphere. And with Tanzu, they are building an enterprise-grade container-based development platform, and it runs anywhere. In security, Carbon Black is integrated into our commercial PC security offering, and we are seeing promising attach rates already. Going forward, expect us to continue to innovate across the portfolio. We've put together a model that allows us to work across Dell Technologies to do joint product planning and development, collaborative innovation and integration to deliver better end-to-end solutions for our customers. We are also seeing increasing customer traction with our co-engineered first and best solutions, including Dell Technology Cloud, Unified Workspace, VxRail with VCF, and Smart Fabric Director with NSX. This is especially true when we collaboratively go to market as one unified Dell technology sales team to help our customers on their digital transformation journey. We do this with our largest customers today, and it is a unique customer experience that only Dell Technologies can provide. Customers love it, and it's driving differentiated growth. For this set of customers, we saw FY20 revenue grow in every major line of business and 9% in total. Looking at the rest of our customer segment performance, enterprise preferred accounts orders revenue grew 6%. Our commercial business orders revenue, excluding China, grew 9% in FY20. The investments we have made in small and medium business have both delivered strong double digit orders revenue growth in FY20. This segment is especially valuable to VMware as we work together to reach downstream, and grow the VMware customer base with Dell's direct reach and demand market. And the good news is the volume of VMware deals going through Dell is increasing across the board as we simplify and streamline our go-to-market. For example, in DFS, VMware originations grew 15% to $1.4 billion in FY20. And when a VMware transaction includes a DFS payment solution, the transaction is more profitable, is significantly larger in size, longer in duration, and includes more services. We are still in the early innings of realizing our full go-to-market synergies with significant cross-sell opportunities. For example, we have approximately 30,000 server customers every quarter, and only half of them buy storage from Dell Technologies. To address this opportunity, we've rolled out our new global power-up program across all segments, to enable selling across our lines of businesses, providing additional incentives and marketing programs to sell new lines of business to existing customers who do not purchase them today. While there is more work ahead, I am confident in our strategy, and we are increasingly well-positioned for the long term. Our job is clear. Ignite ISG growth, manage the Win10 transition, and drive Dell Technologies synergies. Dell Technologies has no ceiling on the potential in the data era. We remain focused on maximizing value for our aligned shareholders. And now I'll turn it over to Tom.