Dell Technologies Inc.

Good afternoon and welcome to the fiscal year 2023 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. If you have a question, simply press star then one 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 for joining us. With me today are Jeff Clark, Chuck Witten, Tom Sweet, and Tyler Johnson. Our earnings materials are available on our IR website, and I encourage you to review our materials and presentation, which includes additional content to complement our discussion this afternoon. Guidance will be covered on today's call. During this call, unless otherwise indicated, all references to financial measures refer to non-GAAP financial measures, including non-GAAP revenue, gross margin, operating expenses, operating income, net income, and diluted earnings per share. A reconciliation of these measures to their most directly comparable gap measures can be found in our web deck and our press release. Growth percentages refer to year-over-year change unless otherwise specified. Statements made during this call that relate to future events and results 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 our SEC filings. We assume no obligation to update our forward-looking statements.

Now I'll turn it over to Chuck. Thanks, Rob. We are pleased with our FY23 execution and financial results given the macroeconomic backdrop. FY23 was ultimately a tale of two halves. With 12% growth in the first half, and revenue down 9% in the second half as the demand environment weakened over the course of the year. Net, we delivered record FY23 revenue of $102.3 billion, up 1% on the back of 17% growth in FY22, record op-inc of $8.6 billion, up 11%, and record EPS of $7.61, up 22%. ISG in particular had a strong year with record revenue of $38.4 billion, including record revenue in both servers and networking and storage, and record operating income of over $5 billion. Importantly, we are structural share gainers and continue to outperform the industry. We expect to gain over a point of share in mainstream server and storage revenue when the IDC calendar results come out later this month. In servers, we remain number one in the market and have gained nine points of mainstream server revenue share over the last 10 years. In storage, we are far and away the industry leader, bigger than number two, three, and four players combined, and have gained four points of share in the key mid-range portion of the market over the last five years. And in PCs, we gained over 140 basis points of commercial PC unit share in calendar 22, our 10th consecutive year of share gains. Focusing on Q4, we again proved our ability to deliver against our commitments and execute no matter the market environment. We delivered Q4 revenue of $25 billion, down 11%, with operating income of $2.2 billion and diluted EPS of $1.80, driven by strong ISG performance and disciplined cost management. ISG revenue was $9.9 billion, up 7%, with record profitability. ISG has now grown eight consecutive quarters, and our end-to-end business model has proven to be a demonstrable competitive advantage in this changing environment. We've enhanced our relevancy with customers as spending priorities shifted from CSG to ISG over the course of the year, and we positioned our business to capture growth where it materialized in the IT market. Specifically in ISG, we delivered record storage revenue of $5 billion, up 10%, including demand growth in PowerFlex, VxRail, Data Protection, and PowerStore. We are pleased with our momentum in storage. The investments we made over the years strengthening our portfolio are paying off and have allowed us to drive growth and share gain in what was a resilient storage market in 2022. We grew servers and networking 5% in a challenging server demand environment by optimizing server shipments along with strong attach and growing ASPs. a clear indication that we continue to sell deeper into customers' digital agendas. Turning to CSG, the PC market remains challenged. From a historic 2021, the PC market slowed markedly in June and experienced a sharp decline in calendar Q4. Consequently, our fiscal Q4 CSG revenue declined 23% to $13.4 billion. It was a continuation of trends we've seen in recent quarters. Commercial revenue fared better than consumer, down 17%, as customers delayed PC purchases in the face of macroeconomic and hiring uncertainty. Consumer was down 40%. Given the decline in revenue, CSG operating income was $671 million, or 5% of revenue, primarily driven by descaling, with revenue decreasing faster than OPEX. We are seeing increasing competitive pressure and elevated industry channel inventories but we continue to maintain pricing discipline, execute our direct attached motion, and focus on our relative performance in the most profitable segments of the PC market. In this challenged and uncertain environment, we've stuck to a playbook that has served us well across multiple cycles, staying customer-focused, driving differentiated relative performance, delivering against our innovation agenda, managing our cost position, maintaining pricing discipline, and sustaining our unique and winning culture. In short, we have focused on what we can control. And in Q4, we continued to take decisive action, extending our existing cost controls, pausing external hiring, limiting travel, and reducing outside services spent. We reduced our operating expenses, excluding compensation and benefits by 5% versus last year, normalized for the extra week and the quarter. We also made the difficult decision to reduce our workforce by an additional 5% as announced in February. We will continue to stay disciplined in our expense management as we navigate the current IT spending environment. In Q4, we also advanced our innovation agenda. We launched our next generation of PowerEdge servers with significantly enhanced AI and machine learning capabilities and improved energy and cost efficiency for data center, cloud, and edge environments, including new purpose-built XR servers for telecom, Open RAN, and mobile edge use cases. At Mobile World Congress this week, we announced new solutions and partnerships that will enable the telecommunications industry to accelerate the adoption of open network architecture, including Dell Telecom infrastructure blocks for Red Hat, an integrated solution specifically engineered, validated, and supported by Dell to help network operators run their telecom workloads more efficiently. And we continue to lead in defining the next era of hybrid work solutions. At CES, we made announcements in a number of areas, including high-margin peripherals that improve the employee experience, like our premier collaboration keyboard with dedicated touch controls to easily manage Zoom calls, and a series of new monitors, including a 32-inch ultra-sharp display with 6K resolution. We're proud of the substantial innovation that we've driven in all of our businesses in FY23, and we have more exciting announcements coming in May at Dell Technologies World. Let me conclude by offering some brief observations on the demand environment. The broad caution in the IT spending environment that we started calling out in Q2 persists as customers continue to scrutinize every dollar in the current macro environment. Exiting FY23, we saw select growth in verticals like financial services, transportation, and construction and real estate. However, we've continued to see demand softness across most other verticals, customer types, and regions. Underlying demand in PCs and servers remains weak, and we are seeing signs of changing customer behavior in storage. Though Q4 was a very good storage demand quarter, we saw lengthening sales cycles and more cautious storage spending with strengths in very large customers offset by declines in medium and small business. Given that backdrop, we expect at least the early part of FY24 to remain challenging. That said, our fundamental belief in both the long-term health of our markets and the advantage of our business model haven't changed. Data continues to increase exponentially in both quantity and value, and customers continue to see us as trusted partners, helping them navigate the complexities of hybrid work, multi-cloud, and the edge. Unlike in prior cycles, customers are not outright stopping digital investments. They continue to plan projects even as they scrutinize spend. This gives us confidence that we will see a rebound in spending and return to sequential growth later this year. We're industry leaders in our categories, we're central to the technology agendas of our customers, and we have a track record of meeting our commitments and improving our strategic position no matter the environment. We plan to stick to the playbook that served us well in FY23 and prior cycles. Control what we can control, stay disciplined and agile, invest for the long term, and meet our commitments to customers, team members, and other stakeholders. We've positioned the business to navigate the current uncertainty and for the inevitable rebound. Now over to Tom for the detailed financials and guidance.