00011246101/282022Q2FALSEIncludes related party revenue as follows (refer to Note C):
License$374 $364 $661 $687 
Subscription and SaaS195 122 368 237 
Services607 478 1,194 921 
Includes stock-based compensation as follows:
Cost of license revenue— — 
Cost of subscription and SaaS revenue11 
Cost of services revenue24 26 49 48 
Research and development150 132 277 257 
Sales and marketing81 88 153 159 
General and administrative33 42 64 91 
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission File Number 001-33622
_______________________________________________________
VMWARE, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________
Delaware94-3292913
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
3401 Hillview Avenue
Palo Alto,
CA
94304
(Address of principal executive offices)(Zip Code)
(650) 427-5000
(Registrant’s telephone number, including area code)
_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stockVMWNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of August 27, 2021, the number of shares of common stock, par value $0.01 per share, of the registrant outstanding was 418,751,917, of which 111,530,081 shares were Class A common stock and 307,221,836 were Class B common stock.


Table of Contents
TABLE OF CONTENTS
Page
VMware, Pivotal, vSphere, vRealize, Workspace ONE, Carbon Black, Tanzu, CloudHealth, VeloCloud, NSX, VMware vSAN, Horizon, Heptio, CloudHealth, and Nyansa are registered trademarks or trademarks of VMware or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective companies.

2

Table of Contents
PART I
FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
Three Months EndedSix Months Ended
 July 30,July 31,July 30,July 31,
 2021202020212020
Revenue(1):
License$738 $719 $1,384 $1,379 
Subscription and SaaS776 631 1,516 1,204 
Services1,624 1,525 3,232 3,026 
Total revenue3,138 2,875 6,132 5,609 
Operating expenses(2):
Cost of license revenue37 35 75 74 
Cost of subscription and SaaS revenue170 132 327 258 
Cost of services revenue352 321 689 639 
Research and development775 679 1,483 1,344 
Sales and marketing1,023 897 1,981 1,814 
General and administrative256 277 492 523 
Realignment  1 4 
Operating income525 534 1,084 953 
Investment income1 1 1 7 
Interest expense(49)(55)(99)(104)
Other income (expense), net3 15 (19)8 
Income before income tax480 495 967 864 
Income tax provision69 48 131 31 
Net income$411 $447 $836 $833 
Net income per weighted-average share, basic for Classes A and B$0.98 $1.06 $1.99 $1.99 
Net income per weighted-average share, diluted for Classes A and B$0.97 $1.06 $1.98 $1.97 
Weighted-average shares, basic for Classes A and B419,355 420,031 419,235 419,208 
Weighted-average shares, diluted for Classes A and B422,802 423,050 422,419 422,428 
__________
(1)   Includes related party revenue as follows (refer to Note C):
License$374 $364 $661 $687 
Subscription and SaaS195 122 368 237 
Services606 478 1,194 921 
(2)   Includes stock-based compensation as follows:
Cost of license revenue$ $ $1 $1 
Cost of subscription and SaaS revenue5 5 11 9 
Cost of services revenue24 26 49 48 
Research and development150 132 277 257 
Sales and marketing81 88 153 159 
General and administrative33 42 64 91 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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Table of Contents
VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
Three Months EndedSix Months Ended
July 30,July 31,July 30,July 31,
 2021202020212020
Net income$411 $447 $836 $833 
Other comprehensive income (loss):
Changes in fair value of effective foreign currency forward contracts:
Unrealized gains (losses), net of tax provision (benefit) of $, $1, $ and ($1)
1 5 2 (5)
Reclassification of (gains) losses realized during the period, net of tax (provision) benefit of $, $1, $ and $
(1)3   
Net change in fair value of effective foreign currency forward contracts 8 2 (5)
Foreign currency translation adjustments 1   
Total other comprehensive income (loss) 9 2 (5)
Comprehensive income, net of taxes$411 $456 $838 $828 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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VMware, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
July 30,January 29,
20212021
ASSETS
Current assets:
Cash and cash equivalents$5,855 $4,692 
Short-term investments82 23 
Accounts receivable, net of allowance of $4 and $5
1,718 1,929 
Due from related parties, net915 1,438 
Other current assets604 530 
Total current assets9,174 8,612 
Property and equipment, net1,373 1,334 
Other assets2,678 2,697 
Deferred tax assets5,785 5,781 
Intangible assets, net856 993 
Goodwill9,598 9,599 
Total assets$29,464 $29,016 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$220 $131 
Accrued expenses and other2,176 2,382 
Unearned revenue5,879 5,873 
Total current liabilities8,275 8,386 
Note payable to Dell270 270 
Long-term debt4,721 4,717 
Unearned revenue4,459 4,441 
Income tax payable768 805 
Operating lease liabilities912 891 
Other liabilities439 455 
Total liabilities19,844 19,965 
Contingencies (refer to Note D)
Stockholders’ equity:
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 111,753 and 112,082 shares
1 1 
Class B convertible common stock, par value $0.01; authorized 1,000,000 shares; issued and outstanding 307,222 shares
3 3 
Additional paid-in capital1,716 1,985 
Accumulated other comprehensive loss(3)(5)
Retained earnings7,903 7,067 
Total stockholders’ equity9,620 9,051 
Total liabilities and stockholders’ equity$29,464 $29,016 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Six Months Ended
 July 30,July 31,
 20212020
Operating activities:
Net income$836 $833 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization544 496 
Stock-based compensation555 565 
Deferred income taxes, net(31)(196)
Unrealized (gain) loss on equity securities, net34 (6)
(Gain) loss on disposition of assets, revaluation and impairment, net3 7 
Loss on extinguishment of debt 8 
Other4 (2)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable206 (79)
Other current assets and other assets(390)(345)
Due to/from related parties, net522 560 
Accounts payable70 11 
Accrued expenses and other liabilities(218)207 
Income taxes payable(29)(51)
Unearned revenue24 86 
Net cash provided by operating activities2,130 2,094 
Investing activities:
Additions to property and equipment(157)(163)
Sales of investments in equity securities34  
Purchases of strategic investments(7)(11)
Proceeds from disposition of assets1 21 
Business combinations, net of cash acquired, and purchases of intangible assets(15)(335)
Net cash used in investing activities(144)(488)
Financing activities:
Proceeds from issuance of common stock139 142 
Net proceeds from issuance of long-term debt 1,979 
Repayment of current portion of long-term debt (1,257)
Repurchase of common stock(729)(311)
Shares repurchased for tax withholdings on vesting of restricted stock(242)(276)
Payment to acquire non-controlling interests (91)
Principal payments on finance lease obligations(2)(1)
Net cash provided by (used in) financing activities(834)185 
Net increase in cash, cash equivalents and restricted cash1,152 1,791 
Cash, cash equivalents and restricted cash at beginning of the period4,770 3,031 
Cash, cash equivalents and restricted cash at end of the period$5,922 $4,822 
Supplemental disclosures of cash flow information:
Cash paid for interest$97 $91 
Cash paid for taxes, net204 282 
Non-cash items:
Changes in capital additions, accrued but not paid$11 $(7)
The accompanying notes are an integral part of the condensed consolidated financial statements.
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VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
Three Months Ended July 30, 2021
Class A
Common Stock
Class B
Convertible
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Stockholders’
Equity
SharesPar ValueSharesPar Value
Balance, April 30, 2021
111 $1 307 $3 $1,960 $7,492 $(3)$9,453 
Proceeds from issuance of common stock— — — — 8 — — 8 
Repurchase and retirement of common stock(2)— — — (358)— — (358)
Issuance of restricted stock4 — — — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(1)— — — (191)— — (191)
Stock-based compensation— — — — 297 — — 297 
Net income— — — — — 411 — 411 
Balance, July 30, 2021
112 $1 307 $3 $1,716 $7,903 $(3)$9,620 
Six Months Ended July 30, 2021
Class A
Common Stock
Class B
Convertible
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Stockholders’
Equity
SharesPar ValueSharesPar Value
Balance, January 29, 2021
112 $1 307 $3 $1,985 $7,067 $(5)$9,051 
Proceeds from issuance of common stock2 — — — 139 — — 139 
Repurchase and retirement of common stock(5)— — — (729)— — (729)
Issuance of restricted stock4 — — — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(1)— — — (243)— — (243)
Stock-based compensation— — — — 564 — — 564 
Total other comprehensive income (loss)— — — — — — 2 2 
Net income— — — — — 836 — 836 
Balance, July 30, 2021
112 $1 307 $3 $1,716 $7,903 $(3)$9,620 
Three Months Ended July 31, 2020
Class A
Common Stock
Class B
Convertible
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Stockholders’
Equity
SharesPar ValueSharesPar Value
Balance, May 1, 2020
112 $1 307 $3 $2,047 $5,395 $(18)$7,428 
Proceeds from issuance of common stock1 — — — 31 — — 31 
Repurchase and retirement of common stock(1)— — — (130)— — (130)
Issuance of restricted stock2 — — — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(1)— — — (120)— — (120)
Stock-based compensation— — — — 287 — — 287 
Amount due from tax sharing arrangement— — — — (45)— — (45)
Total other comprehensive income (loss)— — — — — — 9 9 
Net income— — — — — 447 — 447 
Balance, July 31, 2020
113 $1 307 $3 $2,070 $5,842 $(9)$7,907 
Six Months Ended July 31, 2020
Class A
Common Stock
Class B
Convertible
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Stockholders’
Equity
SharesPar ValueSharesPar Value
Balance, January 31, 2020
110 $1 307 $3 $2,000 $5,009 $(4)$7,009 
Proceeds from issuance of common stock2 — — — 142 — — 142 
Repurchase and retirement of common stock(2)— — — (311)— — (311)
Issuance of restricted stock5 — — — — — — — 
Shares withheld for tax withholdings on vesting of restricted stock(2)— — — (275)— — (275)
Stock-based compensation— — — — 559 — — 559 
Amount due from tax sharing arrangement— — — — (45)— — (45)
Total other comprehensive income (loss)— — — — — — (5)(5)
Net income— — — — — 833 — 833 
Balance, July 31, 2020
113 $1 307 $3 $2,070 $5,842 $(9)$7,907 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. Overview and Basis of Presentation
Company and Background
VMware, Inc. (“VMware” or the “Company”) originally pioneered the development and application of virtualization technologies with x86 server-based computing, separating application software from the underlying hardware. Information technology (“IT”) driven innovation continues to disrupt markets and industries. Technologies emerge faster than organizations can absorb, creating increasingly complex environments. IT is working at an accelerated pace to harness new technologies, platforms and cloud models, ultimately guiding businesses through a digital transformation. To take on these challenges, VMware is working with customers in the areas of hybrid and multi-cloud, virtual cloud networking, digital workspaces, modern applications and intrinsic security. VMware’s software provides a flexible digital foundation to enable customers in their digital transformation.
Accounting Principles
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments and accruals, for a fair statement of VMware’s condensed consolidated results of operations, financial position and cash flows for the periods presented. Results of operations are not necessarily indicative of the results that may be expected for the full fiscal year 2022. Certain information and footnote disclosures typically included in annual consolidated financial statements have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in VMware’s Annual Report on Form 10-K filed on March 26, 2021.
Effective September 7, 2016, Dell Technologies Inc. (“Dell”) (formerly Denali Holding Inc.) acquired EMC Corporation (“EMC”), VMware’s parent company, including EMC’s majority control of VMware. As of July 30, 2021, Dell controlled 80.6% of VMware’s outstanding common stock and 97.5% of the combined voting power of VMware’s outstanding common stock, including 31 million shares of VMware’s Class A common stock (“Class A Stock”) and all of VMware’s Class B common stock (“Class B Stock”).
As VMware is a majority-owned and controlled subsidiary of Dell, its results of operations and financial position are consolidated with Dell’s financial statements.
On April 14, 2021, VMware and Dell entered into a Separation and Distribution Agreement (the “Separation Agreement”), pursuant to which, subject to the satisfaction of all closing conditions, Dell will distribute the shares of Class A Stock and Class B Stock (collectively, the “Common Stock”) owned by its wholly owned subsidiaries, to the holders of shares of Dell as of a record date determined pursuant to the Separation Agreement on a pro rata basis (the “Spin-Off”). Immediately following, and automatically as a result of the Spin-Off, and prior to receipt thereof by Dell’s stockholders, each share of Class B Stock will automatically convert into one fully paid and non-assessable share of Class A Stock. Subject to the various conditions, VMware will also pay a cash dividend, pro rata, to each of the holders of Common Stock (including Dell) immediately prior to the Spin-Off in an aggregate amount equal to an amount to be mutually agreed by Dell and VMware between $11.5 billion and $12.0 billion (the “Special Dividend”). As a result of the Spin-Off, Michael Dell, chairman and chief executive officer of Dell, and Silver Lake Partners, of which Egon Durban, a VMware director, is a managing partner, will own direct interests in VMware. Dell would receive approximately $9.3 billion to $9.7 billion in cash based on Dell's current 80.6% ownership in VMware as of July 30, 2021. VMware expects to fund the Special Dividend through its cash reserves and incremental indebtedness. Refer to Note N for more information regarding the Company’s incremental indebtedness, including its recent notes offering. The Spin-Off is expected to close during the fourth quarter of calendar 2021, subject to certain closing conditions, including receipt of a favorable Internal Revenue Service ruling that the distribution of shares to Dell and its stockholders will qualify as generally tax-free for United States (“U.S.”) federal income tax purposes.
Management believes the assumptions underlying the condensed consolidated financial statements are reasonable. However, the amounts recorded for VMware’s related party transactions with Dell and its consolidated subsidiaries may not be
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VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

considered arm’s length with an unrelated third party. Therefore, the condensed consolidated financial statements included herein may not necessarily reflect the results of operations, financial position and cash flows had VMware engaged in such transactions with an unrelated third party during all periods presented. Accordingly, VMware’s historical financial information is not necessarily indicative of what the Company’s results of operations, financial position and cash flows will be in the future, if and when VMware contracts at arm’s length with unrelated third parties for products and services the Company receives from and provides to Dell.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of VMware and subsidiaries in which VMware has a controlling financial interest. All intercompany transactions and account balances between VMware and its subsidiaries have been eliminated in consolidation. Transactions with Dell and its consolidated subsidiaries are generally settled in cash and are classified on the condensed consolidated statements of cash flows based upon the nature of the underlying transaction.
Use of Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent liabilities at the date of the financial statements. Estimates are used for, but not limited to, trade receivable valuation, marketing development funds, expected period of benefit for deferred commissions, useful lives assigned to fixed assets and intangible assets, valuation of goodwill and definite-lived intangibles, income taxes, stock-based compensation and contingencies. Actual results could differ from those estimates. To the extent the Company’s actual results differ materially from those estimates and assumptions, VMware’s future financial statements could be affected. 
Recently Adopted Accounting Standards
Effective January 30, 2021, VMware adopted, on a modified retrospective basis, Accounting Standards Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This update simplifies the accounting for convertible instruments and contracts in an entity’s own equity and amends the diluted earnings per share guidance for greater consistency within the standard. The standard did not have an impact on the Company’s condensed consolidated financial statements except for the calculation of the year-to-date weighted-average diluted share count, which did not have a material impact on the Company’s diluted net income per share for the six months ended July 30, 2021.
Effective January 30, 2021, VMware adopted ASU No. 2019-12, Income Taxes (Topic 740), simplifying the accounting for income taxes. The standard did not have a material impact on the Company’s condensed consolidated financial statements.
B. Revenue, Unearned Revenue and Remaining Performance Obligations
Revenue
Contract Assets
A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets include fixed fee professional services where transfer of services has occurred in advance of the Company’s right to invoice. Contract assets are classified as accounts receivables upon invoicing. Contract assets are included in other current assets on the condensed consolidated balance sheets. Contract assets were $45 million and $43 million as of July 30, 2021 and January 29, 2021, respectively. Contract asset balances will fluctuate based upon the timing of the transfer of services, billings and customers’ acceptance of contractual milestones.
Contract Liabilities
Contract liabilities consist of unearned revenue, which is generally recorded when VMware has the right to invoice or payments have been received for undelivered products or services.
Customer Deposits
Customer deposits include prepayments from customers related to amounts received for contracts that include certain cancellation rights. Purchased credits eligible for redemption of VMware’s hosted services (“cloud credits”) are included in customer deposits until the cloud credit is consumed or is contractually committed to a specific hosted service. Cloud credits are redeemable by the customer for the gross value of the hosted offering. Upon contractual commitment for a hosted service, the net value of the cloud credits that are expected to be recognized as revenue when the obligation is fulfilled will be classified as unearned revenue.
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VMware, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

As of July 30, 2021, customer deposits related to customer prepayments and cloud credits of $310 million were included in accrued expenses and other, and $158 million were included in other liabilities on the condensed consolidated balance sheets. As of January 29, 2021, customer deposits related to customer prepayments and cloud credits of $294 million were included in accrued expenses and other, and $163 million were included in other liabilities on the condensed consolidated balance sheets.
Deferred Commissions
Deferred commissions are classified as current or non-current based on the duration of the expected period of benefit. Deferred commissions, including the employer portion of payroll taxes, included in other current assets as of July 30, 2021 and January 29, 2021 were $15 million and $31 million, respectively. Deferred commissions included in other assets were $1.2 billion and $1.1 billion as of July 30, 2021 and January 29, 2021, respectively.
Amortization expense for deferred commissions was included in sales and marketing on the condensed consolidated statements of income and was $128 million and $253 million during the three and six months ended July 30, 2021, respectively, and $106 million and $206 million during the three and six months ended July 31, 2020, respectively.
Unearned Revenue
Unearned revenue as of the periods presented consisted of the following (table in millions):
July 30,January 29,
20212021
Unearned license revenue$