Vmware, Inc.

Good day, and welcome to the VMware Fourth Quarter Fiscal Year 2022 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Paul Zients. Please go ahead.

Good afternoon, everyone, and welcome to VMware's Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. On the call, we have Raghu Raghuram, Chief Executive Officer, and Zane Rowe, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued after the close of market and is posted on our website where this call is being simultaneously webcast. Slides which accompany this webcast can be viewed in conjunction with live remarks and downloaded at the conclusion of the webcast from ir.vmware.com. On this call today, we will make forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially as a result of various risk factors described in the 10-Ks, 10-Qs, and 8-Ks VMware files with the SEC. We assume no obligation to and do not currently intend to update any such forward-looking statements. In addition, during today's call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of VMware's performance, should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Our non-GAAP measures exclude the effect on our GAAP results of stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition, disposition, certain litigation matters, and other items, as well as discrete items impacting our GAAP tax rate. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures, in the press release and on our Investor Relations website. The webcast replay of this call will be available for the next 60 days on our company website under the Investor Relations link. Our first quarter fiscal 23 quiet period begins the close of business Thursday, April 14, 2022. With that, I'll turn it over to Raghu.

Thanks, Paul. Good afternoon, and thank you for joining us. Q4 was a solid end to a good fiscal year. Revenue for the fourth quarter was $3.53 billion, an increase of 7% from the fourth quarter of fiscal year 21. Revenue for fiscal year 22 was $12.85 billion, an increase of 9% from fiscal year 21. We are at an exciting time in our industry as organizations large and small transform and modernize to become software-based digital enterprises. This transformation is characterized by an explosive growth in new business applications and new digital experiences delivered from the cloud, from the data centers, and from the edge to employees and consumers on diverse smart devices. This emerging distributed world of computing is what we call multi-cloud, and it is the next phase of enterprise technology. We aspire to be the leading platform vendor of this multi-cloud era, enabling businesses and organizations to build, run, and secure their applications, powering their transformation. We are pleased with the progress we have made over the past 12 months to capture this opportunity. At the start of the fiscal year 2022, we highlighted the focus areas that will help drive our customers' innovations and continue to drive value for our shareholders. The first is a focus on accelerating multi-cloud innovation and offerings, which we have begun through the delivery of our VMware cross-cloud services. a set of integrated SaaS offerings designed to deliver customers a faster and smarter path to the cloud. A second is a focus on accelerating our subscription and SaaS offerings. We have made strong progress here, including the launches of VMware Cloud Universal and vRealize Cloud Universal. At the end of fiscal year 22, our revenue from subscription and SaaS offerings rose to 25% of our overall revenue. Third is a successful completion of our spin-off from Dell Technologies to become a standalone company, positioning us well to become the Switzerland of this new multi-cloud industry. Fiscal year 23 is an important year in our transformation. The progress we will make this year will position us to drive accelerated growth in fiscal year 24 and beyond. During fiscal year 23, we expect to achieve our goal of making all of our major products available as subscription or SaaS offerings. Specifically, all of our STDC offerings will become available as cloud-delivered software, joining our Tanzu, cloud management, security, and end-user SaaS offerings, and will help further accelerate our business model transformation. The second area I'm excited about is the progress we are making in our multi-cloud capabilities across our portfolio. In order to drive this innovation, we are specifically focusing our product and go-to-market efforts on three big customer solution areas. One is accelerating our customers' application transformation by providing a modern app platform with the DevSecOps capabilities and multi-cloud management offerings to help them build, manage, and secure their modern apps on any cloud. Tanzu and cloud management form the core of this solution. Two is accelerating customers' ability to modernize and migrate their enterprise workloads to all major hyperscalers, sovereign clouds, private clouds, and the edge with VMware Cloud built on vSphere, NSX, and vSAN. And three is accelerating the delivery of an anywhere workspace for the distributed workforce of today and the future. Our SASE, Carbon Black, Workspace ONE, and Horizon offerings complete the solution. The Tanzu and cloud management portfolio accelerates our customer space of digital innovation by helping them build new applications more easily and deploy and operate them more securely in any Kubernetes environment on any cloud. We see opportunity in attracting and acquiring new customers through our Tanzu Kubernetes operations solutions while providing an evolutionary journey for our existing VMware Tanzu application services customers. A key Q4 accomplishment was making VMware Tanzu application platforms generally available. Customers are leaning into this new offering, including, for example, a next generation leading healthcare solutions company who's partnering with VMware to build a consumer-centric technology foundation. By utilizing the VMware Tanzu application platform, they can transform their developer experience and accelerate their development and delivery of differentiated consumer experiences. As we help customers accelerate app modernization, organizations are also looking to VMware for multi-cloud management offerings to establish consistent application and infrastructure operations. Our customers are using both modern apps and cloud management to modernize their digital infrastructure and bridge the gap across any cloud. VMware's management offerings play a key role as the central hybrid cloud control plane across our customers' private and public clouds. VMware Cloud is our modern cloud infrastructure that delivers the resiliency, security, and operational capabilities required in a trusted enterprise infrastructure foundation. Built on VMware Cloud Foundation, VMware Cloud is now available everywhere on hyperscaler clouds, in the data center, on sovereign clouds, in telcos, and at the edge. Our customers are pleased with the speed and cost benefits they get by using VMware when adopting and deploying their applications to the cloud. For example, Carhartt, an American apparel company, continuously innovates to deliver exceptional e-commerce and production environments. The global premium workwear brand used Azure VMware solution to establish a reliable cloud infrastructure for critical workloads and easy to manage more secure digital workspaces. Another key component to our cloud infrastructure stack is VMware vSAN, which continues to receive recognition, including being again named a leader in the Gartner Magic Quadrant for hyperconverged infrastructure software in November 2021. This year, we look forward to advancing our differentiation for running modern workloads with new releases of vSphere software and support for even greater choice and flexibility with our hyperscaler offerings. We continue to see momentum with all of our hyperscale cloud partners, providing more choice and more flexibility for our customers. We also support our customers' relationships with their preferred providers and system integrators. For example, to help global organizations accelerate IT and business reinvention, we recently announced an expansion of our strategic partnership with Kindle, focused on app modernization and multi-cloud services. Our Anywhere Workspace offering powers today's distributed workforce by removing the friction that can exist between IT systems and employees. This creates better employee experiences and broader, more effective security through a set of comprehensive SaaS services in user and endpoint management, edge, networking, and security. A powerful example of helping our customers with work from anywhere opportunities is the MD Anderson Cancer Center. Their use of Anywhere Workspace, including VMware SASE, has enabled their researchers and physicians to work remotely during the pandemic. Their researchers now have the ability to access sensitive and bandwidth-intensive data, like x-rays, from anywhere. This has freed up researcher time to focus on more critical patient care tasks. Across all of these multi-cloud services, we have built our cloud networking and advanced security services, which include NSX networking, SD-WAN, SASE, and security services, as well as Carbon Black Cloud, as a key component in providing consistent connectivity, visibility, and zero trust security across all clouds. We continue our commitment to embedding environmental, social, and governance into everything we do. VMware was recently recognized in the Just 100, a comprehensive ranking of ESG and stakeholder performance for the fifth consecutive year. This year, we ranked number one overall in the environmental category, leading all companies in sustainable products and pollution reduction. Additionally, on the social impact front, VMware was named among the best places to work by Glassdoor and achieved 100% on the Human Rights Campaign Foundation's 2021 Corporate Equality Index and named one of the best places to work for LGBTQ equality. In summary, we are pleased with our progress in fiscal year 22 and excited about our opportunities in fiscal year 23. We expect to unleash the next phase of product innovation as we focus on our mission of providing the trusted software foundation to accelerate our customers' digital innovation. And we expect to make significant progress on our business model transformation. Our progress in fiscal year 23 will position us to accelerate in fiscal year 24 as we continue to drive value for all of our stakeholders. Thank you to our customers, our partners, and the VMware team for helping close a successful fiscal year 22 and look forward to a great 23.