EMC: Fiscal 1Q12 Financial Results

EMC Corporation reported financial results for the first quarter of 2012 ended March 31 2012, marking the company’s ninth consecutive quarter of achieving year-over-year double-digit growth for consolidated revenue, net income and EPS.

First-quarter consolidated revenue was $5.1 billion, an increase of 11% compared with the year-ago quarter. First-quarter GAAP net income attributable to EMC increased 23% year over year to $587 million. First-quarter GAAP earnings per weighted average diluted share increased 29% year over year to $0.27. Non-GAAP net income attributable to the company for the first quarter was $818 million, an increase of 17% compared with the year-ago quarter. First-quarter non-GAAP earnings per weighted average diluted share were $0.37, an increase of 19% year over year.

During the first quarter, EMC generated operating cash flow of $1.7 billion and free cash flow of $1.4 billion, increases of 49% and 67% year over year, respectively. Additionally, the company expanded GAAP and non-GAAP gross margin and operating margin percentages on a year-over-year basis, and ended the quarter with $10.9 billion in cash and investments.

Joe Tucci, EMC chairman and CEO, said: "We are in a time of unprecedented IT and business transformation, propelled by the benefits of cloud computing, Big Data and trust. EMC is off to a strong start to 2012 and is exceptionally well-positioned to help customers take advantage of these major transformational shifts. We have never been more excited about what this great technology company can accomplish and look forward to helping our customers drive maximum value from their IT investments in the years ahead."

David Goulden, EMC EVP and CFO, said: "EMC’s solid first-quarter results are ongoing proof that we are executing on our strategy and on track to deliver our ‘triple play’ – simultaneously taking market share, reinvesting for growth and delivering improved earnings this year. Based upon our strong start to the year and our opportunity, we now have greater confidence in our ability to meet and potentially exceed our 2012 financial goals for consolidated revenue, non-GAAP EPS and free cash flow. Additionally, with continued steady execution, we are well on our way to achieving the financial potential of 2014 consolidated revenue of over $28 billion, which represents compound annual revenue growth of at least 13% from 2010 and non-GAAP EPS growth even greater than this."

First-Quarter Highlights
First-quarter highlights included strong customer demand for EMC’s market-leading mid-tier storage products portfolio (EMC’s mid-tier storage products include EMC VNX, EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Isilon, EMC Avamar and EMC Atmos hardware and software products.), which increased revenue 26% year over year.

The company’s Isilon scale-out NAS business nearly doubled its revenue year over year, a
nd its VNX unified storage family, Backup Recovery Systems (BRS) portfolio, and Greenplum portfolio each delivered year-over-year revenue growth.

Also during the quarter, EMC’s RSA Information Security business increased revenue 19% year over year and revenue from VMware grew 25% year over year. Additionally, EMC continued to experience strong customer demand for its broad portfolio of services to help customers accelerate to the cloud.

Finally, VCE, the Virtual Computing Environment Company formed by Cisco and EMC with investments from VMware and Intel, continued its momentum as customer adoption of Vblock Converged Infrastructure Platforms increased significantly on a year-over-year basis.

Consolidated first-quarter revenue from the United States increased 11% year over year to $2.6 billion, representing 52% of consolidated first-quarter revenue. Revenue from business operations outside of the United States increased 10% year over year to $2.5 billion and represented 48% of consolidated first-quarter revenue. Within this, revenue in Asia Pacific and Japan region reached an all-time record level, growing 20% year over year. Europe, Middle East and Africa region grew revenue 6% year over year and EMC’s Latin America region grew revenue 20% year over year.

Business Outlook
All dollar amounts and percentages set forth below should be considered to be approximations.

• Consolidated revenues are expected to meet and potentially exceed $22.0 billion for 2012.
• Consolidated GAAP operating income is expected to be 17.5% of revenues for 2012 and consolidated non-GAAP operating income is expected to be 24% of revenues for 2012. Excluded from consolidated non-GAAP operating income are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware’s capitalized software from prior periods, which account for 4%, 1.5%, 0.5% and 0.5% of revenues, respectively.
• Total consolidated GAAP non-operating expense, which includes investment income, interest expense and other income and expense, is expected to be $225 million in 2012 and total consolidated non-GAAP non-operating expense is expected to be $220 million in 2012. Excluded from non-GAAP non-operating expense is stock-based compensation expense of $5 million.
• Consolidated GAAP net income attributable to EMC is expected to be $2.8 billion in 2012 and consolidated non-GAAP net income attributable to EMC is expected to be $3.8 billion in 2012. Excluded from consolidated non-GAAP net income attributable to EMC are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware’s capitalized software from prior periods, which account for $650 million, $230 million, $90 million and $30 million, respectively.
• Consolidated GAAP earnings per weighted average diluted share are expected to meet and potentially exceed $1.25 for 2012 and consolidated non-GAAP earnings per weighted average diluted share are expected to meet and potentially exceed $1.70 for 2012. Excluded from consolidated non-GAAP earnings per weighted average diluted share are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware’s capitalized software from prior periods, which account for $0.29, $0.11, $0.04 and $0.01 per weighted average diluted share, respectively.
• The consolidated GAAP income tax rate is expected to be 20% for 2012. Excluding the impact of stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware’s capitalized software from prior periods, which collectively impact the tax rate by 1%, the consolidated non-GAAP income tax rate is expected to be 21% for 2012. This assumes that the U.S. research and development tax credit for 2012 is extended in the fourth quarter of 2012.
• GAAP net income attributable to the non-controlling interest in VMware is expected to be $159 million and non-GAAP net income attributable to the non-controlling interest in VMware is expected to be $250 million for 2012. Excluded from non-GAAP net income attributable to the non-controlling interest in VMware are stock-based compensation expense, intangible asset amortization and the amortization of VMware’s capitalized software from prior periods, which account for $72 million, $11 million and $8 million, respectively. The incremental dilution attributable to the shares of VMware held by EMC is expected to be $15 million for 2012.
• Consolidated net cash provided by operating activities is expected to be $6.2 billion for 2012 and free cash flow is expected to meet or potentially exceed $4.9 billion for 2012. Excluded from free cash flow are $900 million of additions to property, plant and equipment and $400 million of capitalized software development costs.
• The weighted average outstanding diluted shares are expected to be 2.22 billion for 2012.
• EMC expects to repurchase $700 million of the company’s common stock in 2012.