Dell Technologies Reports Fiscal Year 2017 Third Quarter

Dell Technologies Reports Fiscal Year 2017 Third Quarter Financial Results

These tables present information about the Company’s non-GAAP product net revenue, non-GAAP services net revenue, non-GAAP net revenue, non-GAAP product gross margin, non-GAAP services gross margin, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income from continuing operations, EBITDA, and adjusted EBITDA, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with generally accepted accounting principles in the United States of America (“GAAP”). A detailed discussion of Dell Technologies' reasons for including the non-GAAP financial measures, the limitations associated with those measures, the items excluded from non-GAAP metrics, and our reason for excluding those items are presented in "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" in Dell Technologies' quarterly report on Form 10-Q for the quarterly period ended October 28, 2016. Dell Technologies encourages investors to review the non-GAAP discussion in conjunction with the presentation of non-GAAP financial measures.



DELL TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures
(in millions, except percentages; unaudited; continued on next page)

	Three Months Ended						% Growth Rates Yr. to Yr.		Nine Months Ended						% Growth Rates Yr. to Yr.
	October 28, 2016			October 30, 2015			% Growth Rates Yr. to Yr.		October 28, 2016			October 30, 2015			% Growth Rates Yr. to Yr.

Product net revenue	$	12,366		$	10,638		16	%	$	33,510		$	32,100		4	%
Non-GAAP adjustments:
Impact of purchase accounting		261			(6	)				260			(20	)
Non-GAAP product net revenue	$	12,627		$	10,632		19	%	$	33,770		$	32,080		5	%

Services net revenue	$	3,881		$	2,036		91	%	$	8,058		$	6,132		31	%
Non-GAAP adjustments:
Impact of purchase accounting		269			113					413			390
Non-GAAP services net revenue	$	4,150		$	2,149		93	%	$	8,471		$	6,522		30	%

Net revenue	$	16,247		$	12,674		28	%	$	41,568		$	38,232		9	%
Non-GAAP adjustments:
Impact of purchase accounting		530			107					673			370
Non-GAAP net revenue	$	16,777		$	12,781		31	%	$	42,241		$	38,602		9	%

Product gross margin	$	1,804		$	1,310		38	%	$	4,654		$	3,745		24	%
Non-GAAP adjustments:
Impact of purchase accounting		437			12					461			22
Amortization of intangibles		604			98					806			295
Transaction-related expenses		18			-					16			1
Other corporate expenses		10			3					14			6
Non-GAAP product gross margin	$	2,873		$	1,423		102	%	$	5,951		$	4,069		46	%

Services gross margin	$	2,095		$	822		155	%	$	3,774		$	2,388		58	%
Non-GAAP adjustments:
Impact of purchase accounting		292			112					436			386
Amortization of intangibles		-			-					-			-
Transaction-related expenses		12			2					9			5
Other corporate expenses		52			-					54			1
Non-GAAP services gross margin	$	2,451		$	936		162	%	$	4,273		$	2,780		54	%

Gross margin	$	3,899		$	2,132		83	%	$	8,428		$	6,133		37	%
Non-GAAP adjustments:
Impact of purchase accounting		729			124					897			408
Amortization of intangibles		604			98					806			295
Transaction-related expenses		30			2					25			6
Other corporate expenses		62			3					68			7
Non-GAAP gross margin	$	5,324		$	2,359		126	%	$	10,224		$	6,849		49	%

Operating expenses	$	5,411		$	2,210		145	%	$	10,012		$	6,621		51	%
Non-GAAP adjustments:
Impact of purchase accounting		(121	)		(25	)				(157	)		(67	)
Amortization of intangibles		(560	)		(394	)				(1,340	)		(1,183	)
Transaction-related expenses		(1,170	)		(25	)				(1,304	)		(61	)
Other corporate expenses		(211	)		(14	)				(257	)		(31	)
Non-GAAP operating expenses	$	3,349		$	1,752		91	%	$	6,954		$	5,279		32	%



DELL TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures
(continued; in millions, except percentages; unaudited)

	Three Months Ended								Nine Months Ended
	October 28, 2016			October 30, 2015			% Growth Rates Yr. to Yr.		October 28, 2016			October 30, 2015			% Growth Rates Yr. to Yr.

Operating loss	$	(1,512	)	$	(78	)	NM		$	(1,584	)	$	(488	)	(225	%)
Non-GAAP adjustments:
Impact of purchase accounting		850			149					1,054			475
Amortization of intangibles		1,164			492					2,146			1,478
Transaction-related expenses		1,200			27					1,329			67
Other corporate expenses		273			17					325			38
Non-GAAP operating income	$	1,975		$	607		225	%	$	3,270		$	1,570		108	%

Net loss from continuing operations	$	(1,637	)	$	(264	)	(520	%)	$	(2,323	)	$	(1,000	)	(132	%)
Non-GAAP adjustments:
Impact of purchase accounting		850			149					1,054			475
Amortization of intangibles		1,164			492					2,146			1,478
Transaction-related expenses		1,200			21					1,326			41
Other corporate expenses		273			23					325			58
Aggregate adjustment for income taxes		(880	)		(127	)				(932	)		(381	)
Non-GAAP net income from continuing operations	$	970		$	294		230	%	$	1,596		$	671		138	%

Net loss from continuing operations	$	(1,637	)	$	(264	)	(520	%)	$	(2,323	)	$	(1,000	)	(132	%)
Adjustments:
Interest and other, net		794			203					1,362			600
Income tax benefit		(669	)		(17	)				(623	)		(88	)
Depreciation and amortization		1,576			627					2,799			1,871
EBITDA	$	64		$	549		(88	%)	$	1,215		$	1,383		(12	%)

EBITDA	$	64		$	549		(88	%)	$	1,215		$	1,383		(12	%)
Adjustments:
Stock based compensation expense		144			17					177			46
Impact of purchase accounting		693			118					851			392
Transaction-related expenses		1,200			21					1,366			41
Other corporate expenses		129			6					148			18
Adjusted EBITDA	$	2,230		$	711		214	%	$	3,757		$	1,880		100	%



DELL TECHNOLOGIES INC.
Segment Information
(in millions, except percentages; unaudited)

	Three Months Ended						% Growth		Nine Months Ended						% Growth
	October 28,			October 30,			Rates		October 28,			October 30,			Rates
	2016			2015			Yr. to Yr.		2016			2015			Yr. to Yr.
Client Solutions Group (CSG):
Net Revenue:
Commercial	$	6,400		$	6,437		(1	%)	$	19,343		$	19,778		(2	%)
Consumer		2,787			2,499		12	%		7,635			7,262		5	%
Total CSG net revenue	$	9,187		$	8,936		3	%	$	26,978		$	27,040		0	%

Operating Income:
CSG operating income	$	634		$	384		65	%	$	1,503		$	926		62	%
% of CSG net revenue		6.9	%		4.3	%				5.6	%		3.4	%
% of total segment operating income		30.5	%		59.9	%				43.7	%		54.4	%

Infrastructure Solutions Group (ISG):
Net Revenue:
Servers and networking	$	2,910		$	3,163		(8	%)	$	9,222		$	9,527		(3	%)
Storage		3,079			548		462	%		4,159			1,655		151	%
Total ISG net revenue	$	5,989		$	3,711		61	%	$	13,381		$	11,182		20	%

Operating Income:
ISG operating income	$	897		$	257		249	%	$	1,389		$	776		79	%
% of ISG net revenue		15.0	%		6.9	%				10.4	%		6.9	%
% of total segment operating income		43.1	%		40.1	%				40.4	%		45.6	%

VMware:
Total VMware net revenue	$	1,289		$	-		NA		$	1,289		$	-		NA

Operating Income:
VMware operating income	$	548		$	-		NA		$	548		$	-		NA
% of VMware net revenue		42.5	%	NA						42.5	%	NA
% of total segment operating income		26.4	%	NA						15.9	%	NA

Reconciliation to consolidated net revenue:
Reportable segment net revenue	$	16,465		$	12,647				$	41,648		$	38,222
Other businesses (a)		312			104					530			279
Unallocated transactions (b)		-			30					63			101
Impact of purchase accounting (c)		(530	)		(107	)				(673	)		(370	)
Total consolidated net revenue	$	16,247		$	12,674				$	41,568		$	38,232

Reconciliation to consolidated operating income (loss):
Reportable segment operating income	$	2,079		$	641				$	3,440		$	1,702
Other businesses (a)		(13	)		(15	)				(48	)		(50	)
Unallocated transactions (b)		(91	)		(19	)				(122	)		(82	)
Impact of purchase accounting (c)		(850	)		(149	)				(1,054	)		(475	)
Amortization of intangibles		(1,164	)		(492	)				(2,146	)		(1,478	)
Transaction-related expenses (d)		(1,200	)		(27	)				(1,329	)		(67	)
Other corporate expenses (e)		(273	)		(17	)				(325	)		(38	)
Total operating loss	$	(1,512	)	$	(78	)			$	(1,584	)	$	(488	)

_________________

(a) Other businesses consist of RSA Information Security, SecureWorks, Pivotal, and Boomi offerings, and do not constitute reportable segments.

(b) Unallocated transactions includes long-term incentives, certain short-term incentive compensation expenses, and other corporate items that are not allocated to Dell Technologies' reportable segments.

(c) Impact of purchase accounting includes non-cash purchase accounting adjustments related to the EMC merger transaction, as well as the going-private transaction.

(d) Transaction-related expenses includes acquisition and integration related costs.

(e) Other corporate expenses includes severance and facility action costs as well as stock-based compensation expense.

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