Dell Technologies Inc.

Good afternoon and welcome to the fiscal year 2022 second quarter results conference call for Dell Technologies Incorporated. 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 Incorporated. 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. Mr. Williams, you may begin.

Rob Williams Thanks, Jamireya, and thanks everyone for joining us. With me today are Jeff Clark, Chuck Whitten, Tom Sweet, and Tyler Johnson. Our press release, financial tables, web deck, prepared remarks, and additional materials are available on our IR website. The guidance section will be covered on today's call. During this call, unless we otherwise indicate, all references to financial measures refer to non-GAAP financial measures, including non-GAAP revenue, gross margin, operating expenses, operating income, net income, earnings per share, EBITDA, adjusted EBITDA, and adjusted free cash flow. A reconciliation of these measures to their most directly comparable gap measures can be found in our web deck and press release. Also note that all growth percentages refer to year-over-year change unless otherwise specified. Additionally, 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 filings. We assume no obligation to update our forward-looking statements. Now I'll turn it over to Jeff.

Thanks, Rob. Hi, everyone. Thanks for joining us today. We've made it through the first half of the year, and in this incredibly unpredictable environment, we delivered our best second quarter ever. That's because whether we are reopening or reclosing, eating in restaurants or ordering out, returning to the office or staying at home, the one constant has been an unprecedented demand for technology. Another constant is our ability to execute against our stated strategy and deliver consistent performance no matter the market dynamics. In the last week of June, we released an investor presentation where we outlined our differentiated strategy to drive growth and value creation post the spinoff of the As we've engaged with investors, there are a number of key points I want to reiterate today from that presentation. These can also be found on slide four of today's Earnings Web Deck. First, we have leadership positions in large, stable, and expanding markets with strong underlying fundamentals. Q2 was an exceptional example of how we've leveraged our leadership positions to seize the opportunities in these growing markets. We set a second quarter record with revenue up 15% to $26.1 billion, and record second quarter EPS of $2.24 up 17%. We have talked previously about our ability to quickly pivot the business where the demand is strongest, and that was evident in these results. The need for better technology connectivity and productivity in the new do-anything-from-anywhere economy has driven strong IT spending across multiple industries and customer sizes, from large enterprises to medium businesses to small business and consumers, and we're leaning in to capture our share of the strong IT spending. Our client solutions group delivered a record revenue of $14.3 billion, up 27%, as we leaned into commercial, along with solutions in the broader client ecosystem, including software and peripherals, where we are number one in displays, and we believe we gain more than 100 basis points of share in calendar Q2. There are positive secular trends at play in client, especially in the areas we are most focused, notably the commercial market, premium price bands, and gaming, that should enable stable growth over the next few years. The infrastructure solutions group continued growth with revenue up 3% to $8.4 billion, primarily driven by growth in servers and networking as customers modernize their IT infrastructure to enable data-driven AI and machine learning technologies. We were also encouraged by the strengthening of storage during the quarter and the overall demand for hyper-converged infrastructure and mid-range storage. Tom will dive into more of the financial details of Q2 in just a moment. The second point is that we have durable competitive advantages that uniquely position us to win in our core and adjacent markets. A few I would call out that drove our Q2 performance. We have built an end-to-end innovation engine that delivers engineered solutions and software enhancements based on our unparalleled market reach and ability to see across a customer's full set of IT needs. These include management and orchestration, embedded intelligence, automation, predictive analytics, proactive support, telemetry, and intrinsic security. A key example is PowerStore, our microservices-based mid-range storage solution, which is ramping faster than any new architecture we've released with double-digit increases in net new storage buyers for both Q1 and Q2. We are utilizing our industry-leading scale and differentiated supply chain to successfully navigate through the operational challenges caused by the unprecedented demand that is way ahead of supply right now. Despite industry supply shortages, we shipped a record number of PCs and displays in the second quarter. The third point is that we're driving a differentiated strategy to seize the tremendous growth potential ahead. We are focused on winning the consolidation and modernizing our core businesses by driving ongoing share gains and improving margins through scale, engineering innovation, and product mid-shift. We are the clear number one in external storage, number one in hyper-converged infrastructure, number one in mainstream servers, number one in data protection appliances, and our client solutions business is number one in revenue. We have demonstrated the ability to adapt to the market dynamics over time as evidenced by a commercial client share gains in 30 of the last 34 quarters, and we have gained more than 700 basis points of share over that period. Additionally, we have gained more than 700 basis points of share for mainstream servers and approximately 200 basis points of share for external storage over the last five years. as of calendar q1 2021 according to ice idc data we are focused on the mid-range segment of storage and are pleased with the momentum we are seeing but we know we still have work to do when server and storage calendar q2 share data is released in september we expect share gains in both markets we are also prioritizing customer outcomes and modernizing our business model with apex which provides an incremental growth opportunity as we introduce more as-a-service solutions and gain traction with current offers. For example, in July we announced GE is using APEX data center utility to blend automation and software architecture to support its increasing workloads from traditional IT applications to data analytics. With APEX, GE can scale up or down its data center, storage, and compute resources on demand as the company executes an approach that adapts to each business unit strategy. We are innovating, integrating, and partnering to create the technology ecosystem of the future for our customers with our unique partnership with VMware as the centerpiece. We continue to drive new product innovation and business opportunities with VMware. For instance, in Q2, we launched new VxRail systems with the latest PowerEdge servers and new software advancements that deliver faster performance as well as simplify deployment and management. Additionally, we introduced VxRail dynamic nodes that expand how customers can use existing Dell technology storage resources to support new multi-cloud workloads. VxRail continues to be an area of growth and one of the fastest growing segments in storage with orders up 34% in Q2. We're also pursuing adjacent high value growth opportunities where we are uniquely positioned to win areas like multi-cloud, edge, telecom, data management, then open up adjacent multi-billion dollar markets. We are investing in these opportunities and expect meaningful contribution from them in years to come. And we're already seeing powerful customer use cases today. For example, our disruptive bet in telecommunications has led to multiple flagship wins to build open radio access networks, or Open RAN. We are working with Vodafone to build Europe's first commercial Open RAN bringing more broadband access to European businesses and communities, with Orange to launch Europe's first 5G standalone, fully end-to-end cloud network, and with Deutsche Telekom, whose multi-vendor Open RAN network in Brandenburg, Germany, is now live. These are just a few examples, and we are excited about the progress we are making in this space. With these leading market positions, durable competitive advantages, and a differentiated strategy, I believe we can drive consistent growth and significant value creation. I'm really excited about the opportunities ahead, and I look forward to talking in more detail at our virtual securities analyst meeting on September the 23rd. Before we go to Tom and our financial performance, let me introduce Chuck Witton. As most of you are aware, in June we announced Chuck was joining me as Co-Chief Operating Officer. He and I have worked together for many years alongside of the rest of the leadership team to help shape Dell's strategy and growth initiatives. Welcome, Chuck.