EMC: Fiscal 1Q15 Financial Results

EMC Corporation reported first-quarter 2015 financial results.

Consolidated first-quarter revenue was $5.6 billion, up 2% year over year and up 6% on a constant currency basis.

GAAP earnings per weighted average diluted share was $0.13, down 32% year over year. Non-GAAP earnings per weighted average diluted share was $0.31, down 11% compared with the year-ago quarter.

EMC generated $1.1 billion in operating cash flow and $755 million in free cash flow in the first quarter, and ended the quarter with $13.5 billion in cash and investments.

The company repurchased approximately $1.5 billion worth of its common stock in the first quarter and returned approximately $230 million to shareholders via a quarterly dividend.

Joe Tucci, chairman and CEO, said: “We are pleased that we slightly exceeded our first-quarter non-GAAP EPS expectations; however, we fell a bit short on first-quarter storage revenue due to geo-political factors in Russia and China and not executing as crisply as we had expected in the first quarter. That said: we are confident that we will meet our business outlook for the year. Our investments in high-growth areas are bearing fruit, and the scale and strength of our federated businesses continue to provide a steadily increasing number of large, multi-national customers with the capabilities needed to build their digital agendas and undergo massive IT transformations.“

Zane Rowe, CFO, said: “Our financial results were broadly in line with our expectations for the quarter and previously disclosed outlook for the year, thanks to the hard work of the entire EMC team. By realigning our organization and optimizing our investments, we were able to drive further cost efficiencies in the quarter. We are well positioned for the remainder of 2015 with a strong portfolio, tremendous potential in our six key growth opportunities, and increasing strategic relevance with customers. We will continue to aggressively look for opportunities to grow the revenue line, become more efficient and increase shareholder value.”

David Goulden, CEO, information infrastructure, said: “With most of the factors that impacted first-quarter storage revenue versus our expectations now behind us, the future is rich with opportunity for EMC information infrastructure. We continue to expand our lead in traditional storage market segments by bridging the gap between current and newer storage technologies to lead customers into a new digital age. We are evolving our storage portfolio and have leading positions in newer technologies – including flash, scale-out file and object storage, software-defined storage and converged infrastructure – that are growing much faster than traditional storage. Our market-segment share in most of these areas exceeds our strong leadership in traditional external storage. Finally, by working more closely with our Federation partners to leverage our best-of-breed portfolio and collective influence, our strategic relevance with our largest customers continues to grow and open up new opportunities.”

Business Highlights

• EMC Information Infrastructure: First-quarter revenue was down 1% year over year, and up 3% on a constant currency basis. Information Storage revenue in the first quarter was flat, and up 3% on a constant currency basis. Within the Converged Infrastructure business, Vblock-related first-quarter revenue was up more than 30% compared to the year-ago quarter. Emerging Storage revenue had solid growth in the first quarter, with notably strong growth for XtremIO and Isilon products. RSA first-quarter revenue grew 1% year over year.
• VMware: First-quarter 2015 revenue within EMC was up 12% year over year as the business continued making significant progress on its strategic initiatives focused on the software-defined data center, hybrid cloud solutions and end-user computing.
• Pivotal: First-quarter revenue grew 8% year over year and, most importantly, Pivotal’s subscription revenue was up year over year in the first quarter as Pivotal continues its transition to a software subscription business model. Customers are benefiting from leveraging the Pivotal portfolio to build third-platform applications to transform their businesses.

Global Highlights
EMC’s consolidated first-quarter revenue from North America grew 5% year over year. AsiaPac and Japan and Latin America grew 1% and 8% year over year, respectively, and up 6% and 14% respectively on a constant currency basis. First-quarter revenue from EMC’s Europe, Middle East and Africa region was down 2% year over year, and up 5% year over year on a constant currency basis.

Business Outlook

• Consolidated revenues are expected to be $25.7 billion for 2015.
• Consolidated GAAP operating income is expected to be 13.5% of revenues for 2015 and consolidated non-GAAP4 operating income is expected to be 21.0% of revenues for 2015.
• Consolidated GAAP earnings per weighted average diluted share are expected to be $1.23 for 2015 and consolidated non-GAAP4 earnings per weighted average diluted share are expected to be $1.91 for 2015.
• The consolidated GAAP income tax rate is expected to be 22.6% and the consolidated non-GAAP4 income tax rate is expected to be 23.6% for 2015. This assumes that the U.S. R&D tax credit is enacted during 2015.
• Consolidated net cash provided by operating activities is expected to be $5.7 billion for 2015 and free cash flow is expected to be $4.1 billion for 2015.
• The weighted average outstanding diluted shares are expected to be 1.96 billion for 2015.
• EMC expects to repurchase an aggregate of $3.0 billion of the company’s common stock in 2015.