VMware (VMW) Q4 Earnings & Revenues Beat, '19 View Positive

VMware Inc. VMW delivered fourth-quarter fiscal 2018 non-GAAP earnings of $1.68 per share, which beat the Zacks Consensus Estimate by a nickel and increased 17.5% from the year-ago quarter.

Notably, VMware revised fiscal calendar effective Jan 1, 2017. The company’s first fiscal year under its revised calendar began on Feb 4, 2017 and ended on Feb 2, 2018.

Revenues of $2.31 billion also topped the consensus mark of $2.26 billion and increased 13.6% on a year-over-year basis. Strong top-line growth was primarily driven by robust performance from NSX and vSAN product line.

Region wise, U.S. revenues (48.1% of total revenues) increased 10.9%, while International (51.9%) grew 16.3% from the year-ago quarter. EMEA delivered robust performance in the reported quarter.

Services revenues (53.7% of total revenues) increased 8.4% to $1.24 billion. License revenues (46.3% of total revenues) increased 20.4% year over year to $1.06 billion.
 

Vmware, Inc. Price, Consensus and EPS Surprise

 

Vmware, Inc. Price, Consensus and EPS Surprise | Vmware, Inc. Quote

 

Hybrid Cloud and SaaS represented more than 8% of total revenues. VMware Cloud Provider Program (“VCPP”) increased more than 30% from the year-ago quarter.

Robust Bookings

NSX license bookings increased 24% year over year and its adoption continues to expand beyond micro-segmentation, automation and application continuity to cloud and container networking, as well as brand's transformation and security.

Moreover, vSAN licensed bookings soared 100% on a year-over-year basis. EUC license bookings were up over 30% driven by robust performance from Workspace ONE, VMware’s platform that securely delivers any application to any device.

However, Compute license bookings (almost 35% of total license bookings) declined 4% from the year-ago quarter. Total Compute bookings increased in the low-single digits range on a year-over-year basis.

Management software license bookings increased more than 10% on a year-over-year basis. Total Management bookings also increased more than 10%.

VMware exited fourth-quarter 2018 with almost $100 million of license backlog, roughly $10 million higher on a sequential basis.

Product Portfolio Expands

During the quarter, VMware introduced VMware Cloud Foundation 2.3, the latest release of its integrated hybrid cloud platform. The company also launched VMware Pulse IoT Center, the first solution in a new family of VMware Internet of Things (IoT) offerings.

The company also announced the general availability of Pivotal Container Service (“PKS”), collaboration with Pivotal Software and Alphabet’s GOOGL Google Cloud.

Further, VMware-IBM partnership continued to gain traction. Vodafone, Amdocs and Ricoh were notable customer wins during the quarter.

During the quarter, VMware cloud on Amazon's AMZN Amazon Web Services (“AWS”) introduced additional VMware capabilities and support for VMware Site Recovery and VMware vMotion.

Operating Details

Non-GAAP gross margin expanded 20 basis points (bps) on a year-over-year basis to 88.6%. License gross margin expanded 50 bps, while services gross margin contracted 80 bps in the quarter.

Research & development (R&D) and sales & marketing (S&M) expenses as percentage of revenues increased 50 bps and 10 bps, respectively. This was partially offset by lower general & administrative (G&A) expense, which declined 90 bps from the year-ago quarter.

Non-GAAP operating expenses as a percentage of revenues declined 30 bps to 51.3%.

As a result, non-GAAP operating margin expanded 60 bps to 37.3% in the quarter.

Guidance

For first-quarter fiscal 2019, revenues are expected to be $1.955 billion, up 10.1% year over year. The Zacks Consensus Estimate currently stands at $1.93 billion.

License revenues are expected to increase 13.5% from the year-ago quarter to $730 million.

Non-GAAP operating margin is anticipated to be 28.5%. Non-GAAP earnings are expected to be $1.14 per share. The Zacks Consensus Estimate for earnings is currently pegged at $1.08 per share.

For fiscal 2019, revenues are projected to increase 10.8% to almost $8.725 billion. The Zacks Consensus Estimate currently is at $8.66 billion.

License revenues are expected to increase 11.3% year over year to $3.565 billion.

Non-GAAP operating margin is anticipated to be 33.3%. Non-GAAP earnings are expected to be $6.02 per share. The Zacks Consensus Estimate for earnings is currently pegged at $5.57 per share.

VMware projects cash flow from operations to grow approximately 11% to $3.55 billion. Capital expenditures are expected to be $280 million and free cash flow of approximately $3.27 billion.

Zacks Rank & Stocks to Consider

VMware carries a Zacks Rank #3 (Hold).

Aspen Technology AZPN is a better-ranked stock in the same sector with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Aspen Technology is pegged at 10.50%.

Don’t Even Think About Buying Bitcoin Until You Read This

The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.

Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 4 crypto-related stocks now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Vmware, Inc. (VMW) : Free Stock Analysis Report
 
Aspen Technology, Inc. (AZPN) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research