ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
−Removed: This management’s discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s annual report on Form 10-K for the fiscal year ended January 28, 2022 and the unaudited Condensed Consolidated Financial Statements included in this report.
+Added: This management’s discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s annual report on Form 10-K for the fiscal year ended February 3, 2023 and the unaudited Condensed Consolidated Financial Statements included in this report.
In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs, and that are subject to numerous risks and uncertainties.
5 unchanged sentences
and Dell Inc.’s consolidated subsidiaries, and references to “EMC” mean EMC Corporation and EMC Corporation’s consolidated subsidiaries.
−Removed: On November 1, 2021, the Company completed its spin-off of VMware, Inc.
−Removed: (individually and together with its consolidated subsidiaries, “VMware”).
−Removed: In accordance with applicable accounting guidance, the results of VMware, excluding Dell's resale of VMware offerings, are presented as discontinued operations in the Condensed Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for the three and nine months ended October 29, 2021.
−Removed: The Condensed Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations for the three and nine months ended October 29, 2021.
Our fiscal year is the 52- or 53-week period ending on the Friday nearest January 31.
−Removed: We refer to our fiscal year ending February 3, 2023 as “Fiscal 2023” and our fiscal year ended January 28, 2022 as “Fiscal 2022.” Fiscal 2023 will include 53 weeks and Fiscal 2022 included 52 weeks.
+Added: We refer to our fiscal year ending February 2, 2024 as “Fiscal 2024” and our fiscal year ended February 3, 2023 as “Fiscal 2023.” Fiscal 2024 will include 52 weeks and Fiscal 2023 included 53 weeks.
Company Overview
Dell Technologies helps organizations build their digital futures and individuals transform how they work, live, and play.
−Removed: We provide customers with one of the industry’s broadest and most innovative solutions portfolios for the data era, including traditional infrastructure and extending to multi-cloud environments.
−Removed: We continue to seamlessly deliver differentiated and holistic IT solutions to our customers which has helped drive consistent revenue growth.
−Removed: Dell Technologies’ integrated solutions help customers modernize their IT infrastructure, manage and operate in a multi-cloud world, address workforce transformation, and provide critical solutions that keep people and organizations connected.
+Added: We provide customers with one of the industry’s broadest and most innovative solutions portfolio for the data era, including traditional infrastructure and extending to multi-cloud environments.
+Added: Our differentiated and holistic IT solutions benefit our results and enable us to capture growth as customer spending priorities evolve.
+Added: Dell Technologies’ integrated solutions help customers modernize their IT infrastructure, manage and operate in a multicloud world, address workforce transformation, and provide critical solutions that keep people and organizations connected.
We are helping customers accelerate their digital transformations to improve and strengthen business and workforce productivity.
−Removed: With our extensive portfolio and our commitment to innovation, we offer secure, integrated solutions that extend from the edge to the core to the cloud, and we are at the forefront of the software-defined and cloud native infrastructure era.
−Removed: As further evidence of our commitment to innovation, we are evolving and expanding our IT as-a-Service and cloud offerings including Dell APEX solutions which provide our customers with greater flexibility to scale IT to meet their evolving business needs and budgets.
−Removed: Dell Technologies’ end-to-end portfolio is supported by a world-class organization that operates globally in approximately 180 countries across key functional areas, including technology and product development, marketing, sales, financial services, and services.
−Removed: Our go-to-market engine includes a 32,000-person sales force and a global network of over 200,000 channel partners.
−Removed: Dell Financial Services and its affiliates (“DFS”) offer customers payment flexibility and enable synergies across the business.
−Removed: We employ approximately 35,000 full-time service and support professionals and maintain more than 2,400 vendor-managed service centers.
−Removed: We manage a world-class supply chain that drives long-term growth and operating efficiencies, with approximately $75 billion in annual procurement expenditures and over 750 parts distribution centers.
−Removed: Together, these durable competitive advantages provide a critical foundation for our success.
+Added: With our extensive portfolio and our commitment to innovation, we offer secure, integrated solutions that extend from the edge to the core to the cloud, and we are at the forefront of software-defined and cloud native infrastructure solutions.
+Added: Dell Technologies operates globally in approximately 180 countries, supported by a world-class organization across key functional areas, including technology and product development, marketing, sales, financial services, and services.
+Added: We have a number of durable competitive advantages that provide a critical foundation for our success.
+Added: Our go-to-market model includes a 31,000-person direct sales force and a global network of approximately 240,000 channel partners.
+Added: We employ approximately 35,000 full-time service and support professionals and maintain approximately 2,200 vendor-managed service centers.
+Added: We also manage a world-class supply chain at significant scale with approximately $77 billion in annual procurement expenditures and over 725 parts distribution centers.
+Added: We further strengthen customer relationships through our financing offerings provided by Dell Financial Services and its affiliates (“DFS”) and our flexible consumption models, including utility, subscription, and as-a-Service models, which we continue to expand under Dell APEX.
+Added: These offerings enable our customers to pay over time and provide them with financial flexibility to meet their changing technological requirements.
Our Vision and Strategy
Our vision is to become the most essential technology company for the data era.
−Removed: We seek to address our customers’ evolving needs and their broader digital transformation objectives as they embrace today’s hybrid multi-cloud environment.
−Removed: We intend to execute on our vision by focusing on two overarching strategic priorities:
+Added: We help customers address their evolving IT needs and their broader digital transformation objectives as they embrace today’s multicloud world.
+Added: We intend to execute our vision by focusing on two strategic priorities:
• Grow and modernize our core offerings in the markets in which we predominantly compete
• Pursue attractive new growth opportunities such as Edge, Telecom, data management, and as-a-Service consumption models
−Removed: We believe that we are uniquely positioned in the data and multi-cloud era and that our results will benefit from our durable competitive advantages.
−Removed: We intend to continue to execute our business model to position our company for long-term success while balancing liquidity, profitability, and growth.
−Removed: We are seeing an accelerated rate of change in the IT industry and increased demand for simpler, more agile IT as companies leverage multiple clouds in their IT environments.
−Removed: COVID-19 accelerated the introduction and adoption of new technologies to ensure productivity and collaboration from anywhere.
+Added: We believe we are uniquely positioned in the data and multicloud era and that our results will continue to benefit from our durable competitive advantages.
+Added: We intend to continue to execute our business model and position our company for long-term success while balancing liquidity, profitability, and growth and keeping our purpose at the forefront of our decision-making:
+Added: to create technologies that drive human progress.
+Added: The IT industry is rapidly evolving with demand for simpler, more agile solutions as companies leverage multiple clouds across their increasingly complex IT environments.
To meet our customer needs, we continue to invest in research and development, sales, and other key areas of our business to deliver superior products and solutions capabilities and to drive long-term sustainable growth.
2 unchanged sentences
We are organized into two business units, referred to as Infrastructure Solutions Group and Client Solutions Group, which are our reportable segments.
−Removed: • Infrastructure Solutions Group (“ISG”) — ISG enables our customers’ digital transformation through our trusted multi-cloud, machine learning, artificial intelligence, and data analytics solutions which are built upon modern data center infrastructure.
−Removed: ISG helps customers in the area of hybrid cloud deployment with the goal of simplifying, streamlining, and automating cloud operations.
−Removed: ISG solutions are built for multi-cloud environments and are optimized to run cloud native workloads in both public and private clouds, as well as traditional on-premise workloads.
−Removed: Our comprehensive portfolio of advanced storage solutions includes traditional storage solutions as well as next-generation storage solutions (such as all-flash arrays, scale-out file, object platforms, and software-defined solutions).
−Removed: Our PowerStore offering, a differentiated midrange storage solution that enables seamless updates using microservices and container-based software architecture, allows us to compete more effectively within midrange storage.
−Removed: We continue to make enhancements to our storage solutions offerings and expect that these offerings will drive long-term improvements in the business.
−Removed: Our server portfolio includes high-performance rack, blade, tower, and hyperscale servers, optimized to run high value workloads, including artificial intelligence and machine learning.
+Added: • Infrastructure Solutions Group (“ISG”) — ISG enables our customers’ digital transformation with solutions that address the fundamental shift to multicloud environments, machine learning, artificial intelligence (“AI”), and data analytics.
+Added: ISG helps customers simplify, streamline, and automate cloud operations.
+Added: ISG solutions are built for multicloud environments and are optimized to run cloud native workloads in both public and private clouds, as well as traditional on-premise workloads.
+Added: Our comprehensive storage portfolio includes traditional as well as next-generation storage solutions, including all-flash arrays, scale-out file, object platforms, hyper-converged infrastructure, and software-defined storage.
+Added: We have simplified our storage portfolio and continue to make enhancements to our storage offerings that we expect will drive long-term improvements in the business.
+Added: Our server portfolio includes high-performance rack, blade, and tower servers.
+Added: Our servers are designed with the capability to run high value workloads across customers’ IT environments, including AI, machine learning, and edge workloads.
Our networking portfolio helps our business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes.
−Removed: Our strengths in server, storage, and virtualization software solutions enable us to offer leading converged and hyper-converged solutions, allowing our customers to accelerate their IT transformation by acquiring scalable integrated IT solutions instead of building and assembling their own IT platforms.
−Removed: ISG also offers attached software, peripherals and services, including support and deployment, configuration, and extended warranty services.
+Added: Our strengths in server, storage, and virtualization software solutions allow us to offer leading converged and hyper-converged solutions, enabling our customers to accelerate their IT transformation with scalable integrated solutions instead of building and assembling their own IT platforms.
+Added: ISG also offers software, peripherals, and services, including configuration, and support and deployment.
Approximately half of ISG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in the Europe, Middle East, and Africa region (“EMEA”) and the Asia-Pacific and Japan region (“APJ”).
−Removed: • Client Solutions Group (“CSG”) — CSG includes branded hardware (such as desktops, workstations, and notebooks) and branded peripherals (such as displays, docking stations, and other electronics), as well as third-party software and peripherals.
−Removed: CSG also includes services offerings, including support and deployment, configuration, and extended warranty services.
−Removed: Our computing devices are designed with our commercial and consumer customers’ needs in mind, and we seek to optimize performance, reliability, manageability, design, and security.
−Removed: For our customers that are seeking to simplify client lifecycle management, our Dell PC as-a-Service offering combines hardware, software, lifecycle services, and financing into one all-encompassing solution that provides predictable pricing per seat per month.
+Added: • Client Solutions Group (“CSG”) — CSG includes branded PCs including notebooks, desktops, and workstations and branded peripherals including displays and docking stations, as well as third-party software and peripherals.
+Added: CSG also includes services offerings, such as support and deployment, configuration, and extended warranties.
+Added: Our CSG offerings are designed with our customers’ needs in mind and we seek to optimize performance, reliability, manageability, design, and security.
+Added: Our commercial portfolio provides our customers with solutions centered around flexibility to address their complex needs such as IT modernization, hybrid work transformation, and other critical needs.
+Added: Within our high-end consumer and gaming offerings, we provide our customers with powerful performance, processing, and end-user experiences.
Approximately half of CSG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in EMEA and APJ.
−Removed: Our other businesses, described below, consist of our resale of standalone VMware offerings, referred to as VMware Resale, as well as product and service offerings of SecureWorks Corp.
−Removed: (“Secureworks”) and Virtustream.
+Added: Our “other businesses,” described below, primarily consist of our resale of standalone offerings of VMware, Inc.
+Added: (individually and together with its subsidiaries, “VMware”), referred to as “VMware Resale,” and offerings of SecureWorks Corp.
+Added: (“Secureworks”).
These businesses are not classified as reportable segments, either individually or collectively.
• VMware Resale consists of our sale of standalone VMware offerings.
−Removed: Under the Commercial Framework Agreement discussed below entered into as part of our spin-off of VMware, Dell Technologies continues to act as a key channel partner in this relationship, reselling VMware offerings to our customers.
−Removed: This partnership is intended to facilitate mutually beneficial growth for both Dell and VMware.
−Removed: VMware works with customers in the areas of hybrid and multi-cloud, modern applications, networking, security, and digital workspaces, helping customers manage their IT resources across private clouds and complex multi-cloud, multi-device environments.
+Added: Under our Commercial Framework Agreement with VMware discussed in this report, Dell Technologies continues to act as a key channel partner for VMware, reselling VMware’s offerings to our customers.
+Added: This partnership is intended to facilitate mutually beneficial growth for both Dell Technologies and VMware.
+Added: VMware works with customers in the areas of hybrid and multicloud, modern applications, networking, security, and digital workspaces, helping customers manage their IT resources across private clouds and complex multicloud, multi-device environments.
• Secureworks (NASDAQ:
−Removed: SCWX) is a leading global provider of intelligence-driven information security solutions singularly focused on protecting its clients from cyber attacks.
−Removed: The solutions offered by Secureworks enable organizations of varying size and complexity to fortify their cyber defenses to prevent security breaches, detect malicious activity in near real time, prioritize and respond rapidly to security incidents and predict emerging threats.
−Removed: • Virtustream offers cloud software and Infrastructure-as-a-Service solutions that enable customers to migrate, run, and manage mission-critical applications in cloud-based IT environments.
−Removed: We believe the collaboration, innovation, and coordination of the operations and strategies across the segments of our business, as well as our differentiated go-to-market model, will continue to drive revenue synergies.
−Removed: Through our research and development activities, we are able to engineer leading innovative solutions that incorporate the distinct set of hardware, software, and services across all segments of our business.
−Removed: Our products and services offerings are continually evolving in response to industry dynamics.
+Added: SCWX) is a leading global cybersecurity provider of technology-driven security solutions singularly focused on protecting its customers by outpacing and outmaneuvering the adversary.
+Added: The solutions offered by Secureworks enable organizations of varying size and complexity to prevent security breaches, detect malicious activity, respond rapidly when a security breach occurs, and identify emerging threats.
+Added: Our offerings are continually evolving in response to customer needs.
As a result, reclassifications of certain products and services solutions in major product categories may be required.
3 unchanged sentences
DFS originates, collects, and services customer receivables primarily related to the purchase or use of our product, software, and services solutions.
−Removed: We also arrange financing for some of our customers in various countries where DFS does not currently operate as a captive entity.
+Added: We also arrange financing for some of our customers in various countries where DFS does not currently operate as a captive enterprise.
We further strengthen customer relationships through flexible consumption models, including utility, subscription, and as-a-Service models, which enable us to offer our customers the option to pay over time to provide them with financial flexibility to meet their changing technological requirements.
−Removed: We have historically seen an increasing interest in our various financing options during times of macroeconomic uncertainty.
The results of these operations are allocated to our segments based on the underlying product or service financed and may be impacted by, among other items, changes in the interest rate environment and the translation of those changes to pricing.
For additional information about our financing arrangements, see Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report.
−Removed: Recent Transactions
−Removed: Spin-Off of VMware, Inc.
+Added: Product Backlog
+Added: Product backlog represents the value of unfulfilled manufacturing orders and is included as a component of remaining performance obligations to the extent we determine that the manufacturing orders are non-cancelable.
+Added: Our business model generally gives us the ability to optimize product backlog at any point in time, such as by expediting shipping or prioritizing customer orders for products that have shorter lead times.
+Added: Relationship with VMware
On November 1, 2021, we completed our spin-off of VMware by means of a special stock dividend (the “VMware Spin-off”).
−Removed: The VMware Spin-off was effectuated pursuant to a Separation and Distribution Agreement, dated as of April 14, 2021, between Dell Technologies and VMware.
−Removed: As part of the transaction, VMware paid a special cash dividend, pro rata, to each holder of VMware common stock in an aggregate amount equal to $11.5 billion, of which Dell Technologies received $9.3 billion.
−Removed: In connection with and upon completion of the VMware Spin-off, we entered into a Commercial Framework Agreement (the “CFA”) with VMware, which provides the framework under which we and VMware will continue our commercial relationship after the transaction.
+Added: In connection with and upon completion of the VMware Spin-off, we entered into a Commercial Framework Agreement (the “CFA”) with VMware, which provides the framework under which we and VMware continue our commercial relationship.
Pursuant to the CFA, we continue to act as a distributor of VMware’s standalone products and services and purchase such products and services for resale to customers.
We also continue to integrate VMware’s products and services with Dell Technologies’ offerings and sell them to customers.
−Removed: The results of such operations are presented as continuing operations within our Condensed Consolidated Statements of Income for all periods presented.
−Removed: The results of VMware, excluding Dell's resale of VMware offerings, are presented as discontinued operations in the Condensed Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for the three and nine months ended October 29, 2021.
−Removed: The Condensed Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations.
−Removed: See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about the VMware Spin-off.
−Removed: Boomi Divestiture — On October 1, 2021, we completed the sale of Boomi, Inc.
−Removed: (“Boomi”) and certain related assets for a total cash consideration of approximately $4.0 billion, resulting in a pre-tax gain on sale of $4.0 billion.
−Removed: The Company ultimately recorded a $3.0 billion gain, net of $1.0 billion in tax expense.
−Removed: Prior to the divestiture, the operating results of Boomi were included within other businesses and did not qualify for presentation as discontinued operations.
−Removed: See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about this transaction.
−Removed: Relationship with VMware
−Removed: The Company is considered to be a related party of VMware as a result of Michael Dell’s ownership interests in both Dell Technologies and VMware and Mr.
−Removed: Dell’s continued service as Chairman and Chief Executive Officer of Dell Technologies and as Chairman of the Board of VMware, Inc.
−Removed: Following the completion of the VMware Spin-off, the majority of transactions that occur between Dell Technologies and VMware consist of Dell Technologies’ purchase of VMware products and services for resale, either on a standalone basis or as a part of integrated offerings.
+Added: VMware is considered to be a related party of the Company as a result of Michael Dell’s ownership interests in both Dell Technologies and VMware and Mr.
+Added: Dell’s service as Chairman and Chief Executive Officer of Dell Technologies and as Chairman of the Board of VMware, Inc.
For more information regarding related party transactions with VMware, see Note 15 of the Notes to the Condensed Consolidated Financial Statements included in this report.
Strategic Investments and Acquisitions
−Removed: As part of our strategy, we will continue to evaluate opportunities for strategic investments through our venture capital investment arm, Dell Technologies Capital, with a focus on emerging technology areas that are relevant to all segments of our business and that will complement our existing portfolio of solutions.
−Removed: Our investment areas include storage, software-defined networking, management and orchestration, security, machine learning and artificial intelligence, Big Data and analytics, cloud, edge computing, and software development operations.
+Added: As part of our strategy, we will continue to evaluate opportunities for strategic investments through our venture capital investment arm, Dell Technologies Capital, with a focus on emerging technology areas that are relevant to our business and that will complement our existing portfolio of solutions.
+Added: Our investment areas include storage, software-defined networking, management and orchestration, security, machine learning and AI, Big Data and analytics, cloud, edge computing, and software development operations.
The technologies or products these companies have under development are typically in the early stages and may never have commercial value, which could result in a loss of a substantial part of our investment in the companies.
−Removed: During the first nine months of Fiscal 2023, we recognized a net loss of $197 million on our strategic investments, which was generally in line with overall public equity market declines.
−Removed: As of October 28, 2022 and January 28, 2022, we held strategic investments in non-marketable securities of $1.3 billion and $1.4 billion, respectively.
+Added: As of both May 5, 2023 and February 3, 2023, we held strategic investments in non-marketable securities of $1.3 billion.
See Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information.
1 unchanged sentence
Business Trends and Challenges
−Removed: Macroeconomic conditions continue to evolve globally and to affect the demand for our offerings.
−Removed: During the third quarter of Fiscal 2023, we experienced a decline in the demand for our CSG offerings, which continued to decrease in line with industry-wide declines.
−Removed: During the quarter, demand for our ISG offerings also declined, most notably for our server product offerings, as a result of customer uncertainty in response to the macroeconomic environment.
−Removed: We anticipate that challenges in the demand environment will impact ISG net revenue growth for the remainder of Fiscal 2023.
−Removed: Within CSG, we expect that demand for our offerings will result in a decrease in CSG net revenue for the remainder of Fiscal 2023.
+Added: Throughout the first quarter of Fiscal 2024, challenging global macroeconomic conditions continued to impact the demand for our offerings.
+Added: Within CSG, our net revenue performance was impacted by industry-wide declines in demand which began in the first half of Fiscal 2023.
+Added: Within ISG, our net revenue performance was impacted as we experienced declines in demand for both our servers and networking and storage offerings as customers exercised caution in response to the macroeconomic environment.
+Added: We expect that the macroeconomic environment will continue to impact our consolidated financial results for the remainder of Fiscal 2024.
+Added: We currently anticipate a decline in net revenue for the full fiscal year, notably in the first half of the year, which may put pressure on operating margins.
+Added: While we anticipate that the macroeconomic environment will continue to be challenging, we expect that demand declines will moderate through the remainder of Fiscal 2024.
We will continue to actively monitor global events and make prudent decisions to navigate this environment.
We believe our durable competitive advantages continue to position us for long-term success.
−Removed: Supply Chain — Dell Technologies maintains limited-source supplier relationships for certain components because the relationships are advantageous in the areas of performance, quality, support, delivery, capacity, and price considerations.
−Removed: During the first nine months of Fiscal 2023, we continued to be affected by industry-wide constraints in the supply of limited-source components in certain product offerings, principally within ISG.
−Removed: These constraints began to diminish during the third quarter of Fiscal 2023, primarily as a result of declines in overall demand environment as well as improving supply positions.
−Removed: We anticipate the supply of such components will continue to normalize through the remainder of Fiscal 2023 and as we enter Fiscal 2024.
−Removed: Supply chain dynamics also continue to impact logistics and component costs, which we refer to as input costs.
−Removed: Logistics costs remained elevated for the first nine months of Fiscal 2023 as a result of both expedited shipments and overall rate costs in the freight network.
−Removed: During the third quarter of Fiscal 2023, logistics costs began to decline as rate costs decreased and we reduced our use of expedited shipments.
−Removed: We expect that our logistics costs will continue to decline for the remainder of Fiscal 2023.
−Removed: Component costs were deflationary during the third quarter and first nine months of Fiscal 2023, a trend we expect to continue for the remainder of Fiscal 2023.
−Removed: We expect that industry-wide price increases of certain processors will affect our cost of net revenue beginning in Fiscal 2024.
−Removed: We anticipate that costs of our other key commodities will remain deflationary as we enter Fiscal 2024.
+Added: Supply Chain — Dell Technologies maintains single-source and limited-source supplier relationships for certain components because the relationships are advantageous in the areas of performance, quality, support, delivery, capacity, and price considerations.
+Added: During the first quarter of Fiscal 2024, our supply chain operated efficiently at standard lead times for our customers as we saw further improvement in the previously constrained supply of limited-source components.
+Added: We also benefited from declines in both logistics and component costs, which we refer to as input costs.
+Added: We expect that component cost deflation will continue at a more moderate rate during the second quarter of Fiscal 2024.
Component cost trends are dependent on the strength or weakness of actual end-user demand and supply dynamics, which will continue to evolve and ultimately impact the translation of the cost environment to pricing and operating results.
−Removed: In response to these pressures, we continue to take steps to actively address our customers’ demands while balancing profitability and growth.
−Removed: Product Backlog — Product backlog represents the value of unfulfilled manufacturing orders and is included as a component of remaining performance obligations to the extent we determine that the manufacturing orders are non-cancelable.
−Removed: Our business model generally gives us the ability to optimize product backlog at any point in time, such as by expediting shipping or prioritizing customer orders for products that have shorter lead times.
−Removed: We exited Fiscal 2022 with elevated backlog levels as a result of industry-wide constraints in the supply of limited-source components.
−Removed: During the first nine months of Fiscal 2023, we lowered our backlog levels across both CSG and ISG as supply positions improved and demand declined.
+Added: Logistics costs continued to decrease from previously elevated levels as a result of declines in both expedited shipments and overall rate costs in the freight network.
Foreign Currency Exposure — We manage our business on a U.S.
dollar basis.
−Removed: However, we have a large global presence, generating approximately half of our net revenue from sales to customers outside of the United States during the third quarter and first nine months of Fiscal 2023 and Fiscal 2022.
+Added: However, we have a large global presence, generating approximately half of our net revenue from sales to customers outside of the United States during the first quarter of Fiscal 2024 and Fiscal 2023.
As a result, our operating results can be, and particularly in recent periods have been, impacted by fluctuations in foreign currency exchange rates.
We utilize a comprehensive hedging strategy intended to mitigate the impact of foreign currency volatility over time, and we adjust pricing when possible to further minimize foreign currency impacts.
−Removed: Ukraine War — We are monitoring and responding to effects of the ongoing war in Ukraine.
−Removed: When Russia invaded Ukraine, we made the decision to not sell, service, or support products in Russia, Belarus, and restricted regions of Ukraine.
−Removed: Operations in Russia and Ukraine accounted for less than 1% of net revenue in Fiscal 2022.
−Removed: During the first nine months of Fiscal 2023, we recognized $181 million in costs associated with exiting our business in Russia, primarily related to asset impairments and other exit related costs.
−Removed: We have resumed product sales to non-sanctioned areas in Ukraine.
−Removed: We are focused on providing products and support to Ukrainian customers as they rebuild infrastructure and restore businesses and the financial sector.
−Removed: The war and the related economic sanctions are impacting markets worldwide.
−Removed: Our business may be adversely affected by potential effects of the war and such sanctions, including supply chain disruptions, product shipping delays, macroeconomic impacts resulting from the exclusion of Russian financial institutions from the global banking system, volatility in foreign exchange rates and interest rates, inflationary pressures, and heightened cybersecurity and data theft threats.
−Removed: The full impact of the war on our business operations and financial performance will depend on future developments.
−Removed: We will continue to monitor and assess the related restrictions and other effects and pursue prudent decisions for our team members, customers, and business.
−Removed: COVID-19 Pandemic and Response — We continue to monitor the COVID-19 pandemic and variants of the coronavirus, as well as the impact the pandemic has on our employees, customers, business partners, and communities.
−Removed: As discussed above, we continue to manage through the impacts of the COVID-19 pandemic on our supply chain.
−Removed: The ongoing impact of the COVID-19 pandemic on our business operations and financial performance remains uncertain and will depend on future developments.
−Removed: We will continue to actively monitor global events and pursue prudent decisions to navigate in this uncertain and ever-changing environment.
−Removed: For additional information about impacts of COVID-19 on our operations, see “Results of Operations—Consolidated Results” and “—Business Unit Results.”
−Removed: Inflation Reduction Act — During the third quarter of Fiscal 2023, the Inflation Reduction Act of 2022 (the “2022 Act”) was enacted into law.
−Removed: The statute includes a 15% corporate alternative minimum tax on adjusted financial statement income which is effective for the fiscal year ended February 2, 2024.
−Removed: The new law also imposes a 1% excise tax on share repurchases, which will be effective for repurchases made after December 31, 2022.
−Removed: We do not expect the 2022 Act to have a material impact on our consolidated financial statements or on our capital allocation decisions.
−Removed: We will continue to evaluate the impact of the law as further information becomes available.
−Removed: Other Macroeconomic Risks and Uncertainties — The impacts of trade protection measures, including increases in tariffs and trade barriers, changes in government policies and international trade arrangements, and geopolitical issues may affect our ability to conduct business in some non-U.S.
−Removed: We monitor and seek to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks.
ISG — We expect that ISG will continue to be impacted by the changing nature of the IT infrastructure market and competitive environment.
With our scale and strong solutions portfolio, we believe we are well-positioned to respond to ongoing competitive dynamics.
−Removed: Within our server and networking offerings, we will continue to be selective in determining whether to pursue certain large hyperscale and other server transactions.
+Added: Through our collaborative, customer-focused approach to innovation, we strive to deliver new and relevant solutions and software to our customers quickly and efficiently.
We continue to focus on customer base expansion and lifetime value of customer relationships.
−Removed: We expect that growth throughout industries will continue to generate long-term demand for our storage solutions and services.
−Removed: Cloud native applications are expected to continue as a primary growth driver in the infrastructure market.
+Added: Our customer base includes a growing number of service providers, such as cloud service providers, Software-as-a-Service companies, consumer webtech providers, and telecommunications companies.
+Added: These service providers turn to Dell Technologies for our advanced solutions that enable efficient infrastructure and service delivery at cloud scale.
+Added: While we are anticipating challenges in the demand environment as customers re-prioritize and exercise caution in response to macroeconomic conditions, we expect that data growth will continue to generate long-term demand for our storage solutions and services.
+Added: Cloud native applications are expected to continue to be a key trend in the infrastructure market.
We benefit from offering solutions that address the emerging trends of enterprises deploying software-defined storage, hyper-converged infrastructure, and modular solutions based on server-centric architectures.
−Removed: These trends are changing the way customers are consuming our traditional storage offerings.
+Added: These trends are changing the way customers are consuming our storage offerings.
We continue to expand our offerings in external storage arrays, which incorporate flexible, cloud-based functionality.
−Removed: Through our research and development efforts, we are developing new solutions in this rapidly changing industry that we believe will enable us to continue to provide superior solutions to our customers.
−Removed: Our customer base includes a growing number of service providers, such as cloud service providers, Software-as-a-Service companies, consumer webtech providers, and telecommunications companies.
−Removed: These service providers turn to Dell Technologies for our advanced solutions that enable efficient service delivery at cloud scale.
−Removed: Through our collaborative, customer-focused approach to innovation, we strive to deliver new and relevant solutions and software to the market quickly and efficiently.
+Added: Our storage business is subject to seasonal trends which we expect to continue.
+Added: We anticipate that ISG will benefit from the continued expansion of, and advances in, AI.
+Added: Through our server and storage offerings, as well as our AI validated design solutions, we are well positioned to capture growth and support our customers needs.
+Added: We continue to optimize and enhance our offerings to run high value and transformational workloads, such as AI.
CSG — Our CSG offerings are an important element of our strategy, generating strong cash flow and opportunities for cross-selling of complementary solutions.
−Removed: We are focused on commercial and high-end consumer computing devices as we believe they are the most stable and profitable segments of the PC market.
−Removed: Competitive dynamics continue to be a factor in our CSG business and to impact pricing and operating results.
−Removed: We remain committed to our long-term strategy for CSG and will continue to make investments to innovate across the portfolio while benefiting from consolidation trends that are occurring in the markets in which we compete.
+Added: Within CSG, while we participate in all segments of the PC market, we are focused on commercial and high-end consumer computing devices, as we believe they are the most stable and profitable.
+Added: Competitive dynamics continue to be a factor in our CSG business and continue to impact pricing and operating results.
+Added: We remain committed to our long-term CSG strategy and will continue to make investments to innovate across the portfolio.
We expect that the CSG demand environment will continue to be subject to seasonal trends.
Recurring Revenue and Consumption Models — Our customers are seeking new and innovative models that address how they consume our solutions.
−Removed: We offer options including as-a-Service, utility, leases, loans, and immediate pay models designed to match customers’ consumption and financing preferences.
+Added: In part, customers are looking for predictable cost models and to reduce complexity, align solution offerings to their business needs, and provide consistent operations throughout their IT enterprise.
+Added: We offer options including as-a-Service, subscription, utility, leases, loans, and immediate pay models designed to match customers' consumption and financing preferences.
We believe these options are particularly advantageous for our customers during times of economic uncertainty as they provide customers with financial flexibility to further enable them to procure our solutions.
−Removed: We continue to evolve and build momentum across our family of as-a-Service offerings as we pursue our strategy of modernizing our core business solutions, with Dell APEX at the forefront.
−Removed: We expect that our flexible consumption models and as-a-Service offerings will further strengthen our customer relationships and provide a foundation for growth in recurring revenue.
These offerings typically result in multiyear agreements which generate recurring revenue streams over the term of the arrangement.
+Added: We expect that these offerings will further strengthen our customer relationships and provide a foundation for growth in recurring revenue.
We define recurring revenue as revenue recognized that is primarily related to hardware and software maintenance as well as subscription, as-a-Service, usage-based offerings, and operating leases.
+Added: Ukraine War — We are monitoring and responding to effects of the ongoing war in Ukraine.
+Added: When Russia invaded Ukraine, we made the decision to not sell, service, or support products in Russia, Belarus, and restricted regions of Ukraine.
+Added: We have resumed product sales to non-sanctioned areas in Ukraine.
+Added: We are focused on providing products and support to Ukrainian customers as they rebuild infrastructure and restore businesses and the financial sector.
+Added: The war and the related economic sanctions are impacting markets worldwide.
+Added: Our business may be adversely affected by effects of the war and such sanctions, including supply chain disruptions, product shipping delays, macroeconomic impacts resulting from the exclusion of Russian financial institutions from the global banking system, volatility in foreign exchange rates and interest rates, inflationary pressures, and heightened cybersecurity and data theft threats.
+Added: The full impact of the war on our business operations and financial performance will depend on future developments.
+Added: We will continue to monitor and assess the related restrictions and other effects and pursue prudent decisions for our team members, customers, and business.
+Added: COVID-19 Pandemic and Response — We continue to monitor the COVID-19 pandemic and variants of the coronavirus, as well as the impact of the pandemic on our employees, customers, business partners, and communities.
+Added: Other Macroeconomic Risks and Uncertainties — The impacts of trade protection measures, including increases in tariffs and trade barriers, changes in government policies and international trade arrangements, and geopolitical issues may affect our ability to conduct business in some non-U.S.
+Added: We monitor and seek to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks.
Key Performance Metrics
2 unchanged sentences
In this management’s discussion and analysis, we use supplemental measures of our performance which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with GAAP.
−Removed: These non-GAAP financial measures include non-GAAP product net revenue;
−Removed: non-GAAP services net revenue;
−Removed: non-GAAP net revenue;
−Removed: non-GAAP product gross margin;
+Added: These non-GAAP financial measures include non-GAAP product gross margin;
non-GAAP services gross margin;
5 unchanged sentences
and adjusted EBITDA.
−Removed: The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net revenue, gross margin, operating expenses, operating income, or net income from continuing operations prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis.
−Removed: Effective in the first quarter of Fiscal 2023, non-GAAP product net revenue, services net revenue, and net revenue no longer differ from the most comparable GAAP financial measures.
−Removed: Such non-GAAP financial measures are provided below for all periods presented to show purchase accounting adjustments that impacted such financial measures in prior periods.
+Added: These non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for gross margin, operating expenses, operating income, or net income prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis.
We use non-GAAP financial measures to supplement financial information presented on a GAAP basis.
4 unchanged sentences
Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
−Removed: 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, and non-GAAP net income, as defined by us, exclude amortization of intangible assets, the impact of purchase accounting, transaction-related expenses, stock-based compensation expense, other corporate expenses and, for non-GAAP net income, fair value adjustments on equity adjustments and an aggregate adjustment for income taxes.
+Added: Non-GAAP product gross margin, non-GAAP services gross margin, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, and non-GAAP net income, as defined by us, exclude amortization of intangible assets, the impact of purchase accounting, transaction-related expenses, stock-based compensation expense, other corporate expenses and, for non-GAAP net income, fair value adjustments on equity adjustments and an aggregate adjustment for income taxes.
As the excluded items have a material impact on our financial results, our management compensates for this limitation by relying primarily on our GAAP results and using non-GAAP financial measures supplementally or for projections when comparable GAAP financial measures are not available.
6 unchanged sentences
• Amortization of Intangible Assets — Amortization of intangible assets primarily consists of amortization of customer relationships, developed technology, and trade names.
−Removed: In connection with our acquisition by merger of EMC on September 7, 2016, referred to as the “EMC merger transaction,” and the acquisition of Dell Inc.
−Removed: by Dell Technologies Inc.
−Removed: on October 29, 2013, referred to as the “going-private transaction,” all of the tangible and intangible assets and liabilities of EMC and Dell Inc.
+Added: In connection with our acquisition by merger of EMC, referred to as the “EMC merger transaction,” and the acquisition of Dell Inc.
+Added: by Dell Technologies Inc., referred to as the “going-private transaction,” all of the tangible and intangible assets and liabilities of EMC and Dell Inc.
and its consolidated subsidiaries, respectively, were accounted for and recognized at fair value on the transaction dates.
−Removed: Accordingly, for the periods presented, amortization of intangible assets represents amortization associated with intangible assets recognized in connection with the EMC merger transaction and the going-private transaction.
+Added: Accordingly, for the periods presented, amortization of intangible assets primarily represents amortization associated with intangible assets recognized in connection with the EMC merger transaction and the going-private transaction.
Amortization charges for purchased intangible assets are significantly impacted by the timing and magnitude of our acquisitions, and these charges may vary in amount from period to period.
We exclude these charges for purposes of calculating the non-GAAP financial measures presented below to facilitate an enhanced understanding of our current operating performance and provide more meaningful period to period comparisons.
−Removed: • Impact of Purchase Accounting — The impact of purchase accounting includes purchase accounting adjustments related to the EMC merger transaction and, to a lesser extent, the going-private transaction, recorded under the acquisition method of accounting in accordance with the accounting guidance for business combinations.
+Added: • Impact of Purchase Accounting — The impact of purchase accounting includes purchase accounting adjustments primarily related to the EMC merger transaction recorded under the acquisition method of accounting in accordance with the accounting guidance for business combinations.
Accordingly, all of the assets and liabilities acquired in such transactions were accounted for and recognized at fair value as of the respective transaction dates, and the fair value adjustments continue to amortize over the estimated useful lives in the periods following the transactions.
1 unchanged sentence
We believe that excluding the impact of purchase accounting for purposes of calculating the non-GAAP financial measures presented below facilitates an enhanced understanding of our current operating performance and provides more meaningful period to period comparisons.
−Removed: • Transaction-related (income) Expenses — Transaction-related expenses typically consist of acquisition, integration, and divestiture related costs, as well as the costs incurred in the VMware Spin-off, and are expensed as incurred.
+Added: • Transaction-Related (Income) Expenses — Transaction-related expenses typically consist of acquisition, integration, and divestiture related costs and are expensed as incurred.
These expenses primarily represent costs for legal, banking, consulting, and advisory services.
From time to time, this category also may include transaction-related income related to divestitures of businesses or asset sales.
−Removed: During the third quarter of Fiscal 2022, we recognized a pre-tax gain of $4.0 billion on the sale of Boomi.
We exclude these items for purposes of calculating the non-GAAP financial measures presented below to facilitate an enhanced understanding of our current operating performance and provide more meaningful period to period comparisons.
• Stock-based Compensation Expense — Stock-based compensation expense consists of equity awards granted based on the estimated fair value of those awards at grant date.
−Removed: We estimate the fair value of service-based stock options using the Black-Scholes valuation model.
To estimate the fair value of performance-based awards containing a market condition, we use the Monte Carlo valuation model.
−Removed: For all other share-based awards, the fair value is based on the closing price of the Class C Common Stock as reported on the NYSE on the date of grant.
+Added: For other share-based awards, the fair value is generally based on the closing price of the Class C Common Stock as reported on the NYSE on the date of grant.
Although stock-based compensation is an important aspect of the compensation of our employees and executives, the fair value of the stock-based awards may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards.
1 unchanged sentence
• Other Corporate Expenses — Other corporate expenses consist of impairment charges, incentive charges related to equity investments, severance, facility action, payroll taxes associated with stock-based compensation, and other costs.
−Removed: During the third quarter of Fiscal 2023, we recognized $1.0 billion of expense within interest and other, net, in connection with an agreement to settle the Class V transaction litigation.
−Removed: See Note 19 of the Notes to the Condensed Consolidated Financial Statements included in this report for information about this matter.
−Removed: Further, during the first nine months of Fiscal 2023, we recognized $181 million in costs associated with exiting our business in Russia, primarily related to asset impairments and other exit related costs.
Severance costs are primarily related to severance and benefits for employees terminated pursuant to cost savings initiatives.
−Removed: We continue to optimize our facilities footprint and may incur additional costs as we seek opportunities for operational efficiencies.
Other corporate expenses vary from period to period and are significantly impacted by the timing and nature of these events.
8 unchanged sentences
The following table presents a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure for the periods indicated:
−Removed: Three Months Ended Nine Months Ended
−Removed: 2022 % Change October 29,
−Removed: 2021 October 28,
−Removed: 2022 % Change October 29,
+Added: Three Months Ended
+Added: 2023 % Change April 29,
(in millions, except percentages)
−Removed: Product net revenue $ 18,938 (10) % $ 20,979 $ 60,212 5 % $ 57,361
−Removed: Non-GAAP adjustments:
−Removed: Impact of purchase accounting — — — —
−Removed: Non-GAAP product net revenue $ 18,938 (10) % $ 20,979 $ 60,212 5 % $ 57,361
−Removed: Services net revenue $ 5,783 6 % $ 5,445 $ 17,050 8 % $ 15,844
−Removed: Non-GAAP adjustments:
−Removed: Impact of purchase accounting — 8 — 24
−Removed: Non-GAAP services net revenue $ 5,783 6 % $ 5,453 $ 17,050 7 % $ 15,868
−Removed: Net revenue $ 24,721 (6) % $ 26,424 $ 77,262 6 % $ 73,205
−Removed: Non-GAAP adjustments:
−Removed: Impact of purchase accounting — 8 — 24
−Removed: Non-GAAP net revenue $ 24,721 (6) % $ 26,432 $ 77,262 6 % $ 73,229
Product gross margin $ 2,661 (23) % $ 3,455
7 unchanged sentences
Non-GAAP adjustments:
−Removed: Impact of purchase accounting — 8 — 24
Stock-based compensation expense 25 25
1 unchanged sentence
Non-GAAP services gross margin $ 2,403 2 % $ 2,364
−Removed: Three Months Ended Nine Months Ended
−Removed: 2022 % Change October 29,
−Removed: 2021 October 28,
−Removed: 2022 % Change October 29,
−Removed: (in millions, except percentages)
Gross margin $ 5,018 (13) % $ 5,784
13 unchanged sentences
Non-GAAP operating expenses $ 3,566 (6) % $ 3,806
+Added: Three Months Ended
+Added: 2023 % Change April 29,
+Added: (in millions, except percentages)
Operating income $ 1,069 (31) % $ 1,550
6 unchanged sentences
Non-GAAP operating income $ 1,598 (25) % $ 2,135
−Removed: Net income from continuing operations $ 241 (93) % $ 3,683 $ 1,816 (63) % $ 4,971
+Added: Net income $ 578 (46) % $ 1,069
Non-GAAP adjustments:
14 unchanged sentences
The following table presents a reconciliation of EBITDA and adjusted EBITDA to net income for the periods indicated:
−Removed: Three Months Ended Nine Months Ended
−Removed: 2022 % Change October 29,
−Removed: 2021 October 28,
−Removed: 2022 % Change October 29,
+Added: Three Months Ended
+Added: 2023 % Change April 29,
(in millions, except percentages)
−Removed: Net income from continuing operations $ 241 (93) % $ 3,683 $ 1,816 (63) % $ 4,971
+Added: Net income $ 578 (46) % $ 1,069
Interest and other, net (a) 364 337
4 unchanged sentences
Stock-based compensation expense 225 232
−Removed: Impact of purchase accounting (b) — 8 — 28
−Removed: Transaction-related expenses (c) 8 229 16 295
−Removed: Other corporate expenses (d) 109 24 401 292
+Added: Transaction-related expenses 3 5
+Added: Other corporate expenses 98 96
Adjusted EBITDA $ 2,204 (16) % $ 2,609
1 unchanged sentence
(a) See “Results of Operations — Interest and Other, Net” for more information on the components of interest and other, net.
−Removed: (b) This amount includes the non-cash purchase accounting adjustments related to the EMC merger transaction and the going-private transaction.
−Removed: (c) Transaction-related expenses consist of acquisition, integration, and divestiture related costs, as well as the costs incurred in the VMware Spin-off.
−Removed: (d) Other corporate expenses includes impairment charges, incentive charges related to equity investments, severance, facility action, payroll taxes associated with stock-based compensation, and other costs.
−Removed: During the first nine months of Fiscal 2023, other corporate expenses includes $181 million of costs incurred in connection with exiting our business in Russia.
RESULTS OF OPERATIONS
2 unchanged sentences
Unless otherwise indicated, all changes identified for the current period results represent comparisons to results for the prior corresponding fiscal period.
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021
−Removed: Net Revenue %
−Removed: Change Dollars % of
−Removed: Net Revenue Dollars % of
+Added: Three Months Ended
+Added: May 5, 2023 April 29, 2022
Net Revenue %
10 unchanged sentences
Operating income $ 1,069 5.1 % (31) % $ 1,550 5.9 %
−Removed: Net income from continuing operations $ 241 1.0 % (93) % $ 3,683 13.9 % $ 1,816 2.4 % (63) % $ 4,971 6.8 %
+Added: Net income $ 578 2.8 % (46) % $ 1,069 4.1 %
Non-GAAP Financial Information
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021
−Removed: Dollars % of Non-GAAP
−Removed: Net Revenue %
−Removed: Change Dollars % of Non-GAAP
−Removed: Net Revenue Dollars % of Non-GAAP
+Added: Three Months Ended
+Added: May 5, 2023 April 29, 2022
Net Revenue %
−Removed: Change Dollars % of Non-GAAP
+Added: Change Dollars % of
(in millions, except percentages)
−Removed: Non-GAAP net revenue:
−Removed: Products $ 18,938 76.6 % (10) % $ 20,979 79.4 % $ 60,212 77.9 % 5 % $ 57,361 78.3 %
−Removed: Services 5,783 23.4 % 6 % 5,453 20.6 % 17,050 22.1 % 7 % 15,868 21.7 %
−Removed: Total non-GAAP net revenue $ 24,721 100.0 % (6) % $ 26,432 100.0 % $ 77,262 100.0 % 6 % $ 73,229 100.0 %
Non-GAAP gross margin:
8 unchanged sentences
____________________
−Removed: (a) Product gross margin and non-GAAP product gross margin percentages are calculated as a percentage of product net revenue and non-GAAP product net revenue, respectively.
−Removed: (b) Services gross margin and non-GAAP services gross margin percentages are calculated as a percentage of services net revenue and non-GAAP services net revenue, respectively.
−Removed: 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, EBITDA, and adjusted EBITDA are not measurements of financial performance prepared in accordance with GAAP.
−Removed: Non-GAAP financial measures as a percentage of revenue are calculated based on non-GAAP net revenue.
+Added: (a) Product gross margin and non-GAAP product gross margin percentages are calculated as a percentage of product net revenue.
+Added: (b) Services gross margin and non-GAAP services gross margin percentages are calculated as a percentage of services net revenue.
+Added: 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, EBITDA, and adjusted EBITDA are not measurements of financial performance prepared in accordance with GAAP.
See “Non‑GAAP Financial Measures” for additional information about these non-GAAP financial measures, including our reasons for including these measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.
−Removed: During the third quarter of Fiscal 2023, our net revenue decreased 6%, primarily driven by a decrease in net revenue for CSG which was partially offset by growth in net revenue for ISG.
−Removed: CSG net revenue decreased as a result of an overall decline in the demand environment for our CSG offerings.
−Removed: Our net revenue during the first nine months of Fiscal 2023 increased 6%, primarily due to growth in net revenue for ISG.
−Removed: Growth in net revenue for ISG for the third quarter and first nine months of Fiscal 2023 was driven by strength across both servers and networking and storage.
−Removed: During the third quarter and first nine months of Fiscal 2023, our operating income increased 68% to $1.8 billion and 50% to $4.6 billion, respectively.
−Removed: These increases were primarily driven by growth in operating income for ISG and the favorable impact of a decrease in amortization of intangible assets.
−Removed: For the third quarter of Fiscal 2023, the increase was also attributable to a decrease in transaction-related expenses primarily associated with costs incurred in connection with the VMware Spin-off during the third quarter of Fiscal 2022 that did not reoccur during Fiscal 2023.
−Removed: Growth in ISG operating income for the third quarter and first nine months of Fiscal 2023 was driven by both our server and networking and storage offerings.
−Removed: During the third quarter and first nine months of Fiscal 2023, our non-GAAP operating income increased 22% to $2.4 billion and 16% to $6.5 billion driven by the same ISG dynamics discussed above.
−Removed: Operating income as a percentage of net revenue increased 310 basis points to 7.1% during the third quarter of Fiscal 2023 and 170 basis points to 5.9% during the first nine months of Fiscal 2023.
−Removed: For the third quarter of Fiscal 2023, the increase was principally attributable to improvement in gross margin as percentage of net revenue and to a decrease in operating expenses as a percentage of net revenue.
−Removed: Gross margin as a percentage of net revenue increased as a result of a shift in mix towards ISG and, to a lesser extent, a decrease in cost of net revenue as a result of a decline in input costs.
−Removed: For the first nine months of Fiscal 2023, the increase was principally due to a decrease in operating expenses as a percentage of net revenue, partially offset by a decline in gross margin as a percentage of net revenue.
−Removed: Gross margin percentage declined primarily due to the impacts of an overall increase in input costs and foreign currency exchange rate fluctuations, which were not entirely offset by pricing adjustments, as we balanced profitability with competitive positioning.
−Removed: For both the third quarter and first nine months of Fiscal 2023, operating expense as a percentage of net revenue declined due to disciplined cost management, a reduction in performance-based compensation, and the favorable impacts of a decrease in both the amortization of intangible assets and transaction-related expenses incurred in connection with the VMware Spin-off in Fiscal 2022.
−Removed: Non-GAAP operating income as a percentage of net revenue increased 220 basis points to 9.6% during the third quarter of Fiscal 2023 and 80 basis points to 8.4% during the first nine months of Fiscal 2023, driven by the same disciplined cost management and gross margin dynamics discussed above.
−Removed: Cash provided by operating activities was $0.9 billion and $7.2 billion during the first nine months of Fiscal 2023 and Fiscal 2022, respectively.
−Removed: During the first nine months of Fiscal 2022, $3.2 billion of the $7.2 billion total represented cash provided by operating activities attributable to VMware, Inc.
−Removed: Cash provided by operating activities during the first nine months of Fiscal 2023 declined primarily as a result of unfavorable working capital dynamics as compared to the first nine months of Fiscal 2022.
−Removed: Working capital was primarily impacted by increased inventory balances, as we proactively managed supply chain dynamics, coupled with the timing of purchases and payments to vendors during a declining demand environment.
−Removed: See “Liquidity, Cash Requirements, and Market Conditions” for further information on our cash flow metrics.
−Removed: We continue to see opportunities to create value and grow in response to demand for our IT solutions driven by a technology-enabled world.
−Removed: We have demonstrated our ability to adjust to changing market conditions with complementary solutions across both segments of our business, an agile workforce, and the strength of our global supply chain.
+Added: During the first quarter of Fiscal 2024, our net revenue decreased 20% driven by declines in both CSG and ISG net revenue which were impacted by challenging global macroeconomic conditions that continued to affect the demand for our offerings.
+Added: CSG net revenue declined primarily as a result of a decrease in units sold, partially offset by an increase in average selling prices.
+Added: ISG net revenue decreased primarily as a result of a decline in net revenue attributable to servers and networking and, to a lesser extent, a decline in storage net revenue.
+Added: During the first quarter of Fiscal 2024, our operating income and non-GAAP operating income decreased 31% to $1.1 billion and 25% to $1.6 billion, respectively.
+Added: The decreases were driven by both ISG and CSG operating income which declined as a result of a decrease in net revenue, partially offset by a reduction in operating expenses as a result of disciplined cost management.
+Added: The decline in ISG operating income was driven primarily by storage and the decline in CSG operating income was driven by both commercial and consumer.
+Added: During the first quarter of Fiscal 2024, operating income as a percentage of net revenue and non-GAAP operating income as a percentage of net revenue decreased 80 basis points to 5.1% and 60 basis points to 7.6%, respectively.
+Added: The decreases were primarily driven by an increase in operating expenses as a percentage of net revenue which was partially offset by an increase in gross margin as a percentage of net revenue.
+Added: The increase in operating expense as a percentage of net revenue was driven by a decline in net revenue that outpaced the impacts of cost management measures.
+Added: Gross margin as a percentage of net revenue increased primarily due to the impacts of an overall decrease in input costs coupled with an increase in average selling prices across our offerings as we maintained strong pricing discipline.
+Added: Cash provided by operating activities was $1.8 billion during the first quarter of Fiscal 2024 which primarily reflected strong working capital performance as we reduced inventory and accounts receivable.
+Added: The impact of strong working capital performance was partially offset by the effect of a decline in net revenue.
+Added: During the first quarter of Fiscal 2023, cash used by operating activities was $0.3 billion driven by seasonal sales trends affecting parts of our business and annual incentive-based personnel-related payments.
+Added: See “Liquidity, Cash Requirements, and Market Conditions” for additional information about our cash flow metrics.
+Added: Despite the near-term challenges driven by uncertainty in the macroeconomic environment, we continue to see opportunities to create value and grow as we respond to long-term demand for our IT solutions driven by a technology-enabled world.
+Added: We have demonstrated our ability to adjust to changing market conditions with complementary solutions and innovation across both segments of our business, an agile workforce, and the strength of our global supply chain.
As we continue to innovate and modernize our core offerings, we believe that Dell Technologies is well-positioned for long-term profitable growth.
−Removed: During the third quarter of Fiscal 2023, our net revenue decreased 6% primarily driven by a decline in net revenue for CSG that was partially offset by growth in net revenue for ISG.
−Removed: Our net revenue during the first nine months of Fiscal 2023 increased 6%, primarily due to growth in net revenue for ISG.
+Added: During the first quarter of Fiscal 2024, our net revenue decreased 20%, primarily driven by declines within CSG and ISG net revenue.
See “Business Unit Results” for further information.
• Product Net Revenue — Product net revenue includes revenue from the sale of hardware products and software licenses.
−Removed: During the third quarter of Fiscal 2023, our product net revenue decreased 10%, primarily driven by a decline in CSG product net revenue, which was partially offset by growth in ISG product net revenue.
−Removed: CSG product net revenue decreased primarily due to a decline in units sold for both our consumer and commercial offerings.
−Removed: During the first nine months of Fiscal 2023, our product net revenue increased 5%, driven primarily by growth within ISG product net revenue.
−Removed: For both the third quarter and first nine months of Fiscal 2023, ISG product net revenue growth was driven primarily by an increase in product net revenue from our server and networking offerings and, to a lesser extent, growth in product net revenue attributable to our storage offerings.
+Added: During the first quarter of Fiscal 2024, our product net revenue decreased 27% due to declines in both CSG and ISG product net revenue.
+Added: CSG product net revenue decreased primarily as a result of a decrease in units sold, which impacted both our commercial and consumer offerings, partially offset by an increase in average selling prices.
+Added: ISG product net revenue decreased primarily due to a decline in product net revenue for servers and networking, driven by a decrease in units sold, and, to a lesser extent, a decline in our product net revenue for storage offerings.
• Services Net Revenue — Services net revenue includes revenue from our services offerings and support services related to hardware products and software licenses.
−Removed: During the third quarter and first nine months of Fiscal 2023, services net revenue increased 6% and 8%, respectively, driven principally by strength in hardware support and maintenance and third-party software support and maintenance within CSG.
−Removed: A substantial portion of services net revenue is derived from offerings that have been deferred over a period of time, and, as a result, reported services net revenue growth rates will be different than reported product net revenue growth rates.
−Removed: From a geographical perspective, net revenue generated by sales to customers in all regions decreased during the third quarter of Fiscal 2023, driven by declines in CSG product net revenue, which was partially offset by growth in ISG product net revenue.
−Removed: During the first nine months of Fiscal 2023, net revenue increased in all regions, driven primarily by growth in ISG.
−Removed: During the third quarter and first nine months of Fiscal 2023, gross margin increased 3% to $5.7 billion and 4% to $16.9 billion, respectively, and non-GAAP gross margin increased 2% to $5.9 billion and 3% to $17.5 billion, respectively.
−Removed: These increases were driven by growth in ISG gross margin, partially offset by declines in CSG gross margin.
−Removed: For the first nine months of Fiscal 2023, the increase was further offset by a decline in other businesses gross margin.
−Removed: During the third quarter of Fiscal 2023, our gross margin and non-GAAP gross margin percentage increased 220 basis points to 23.1% and 200 basis points to 23.7%, respectively.
−Removed: These increases in gross margin percentage were primarily attributable to a shift in mix towards ISG and, to a lesser extent, a decrease in cost of net revenue as a result of a decline in input costs.
−Removed: During the first nine months of Fiscal 2023, gross margin and non-GAAP gross margin percentage decreased 30 basis points to 21.9% and 40 basis points to 22.6%, respectively.
−Removed: The declines in gross margin percentage were primarily due to the impacts of an overall increase in input costs and foreign currency exchange rate fluctuations, which were not entirely offset by pricing adjustments, as we balanced profitability with competitive positioning.
−Removed: • Product Gross Margin — During both the third quarter and first nine months of Fiscal 2023, product gross margin increased 6% to $3.3 billion and $9.9 billion, respectively, and non-GAAP product gross margin increased 4% to $3.5 billion and $10.3 billion, respectively.
−Removed: These increases were driven primarily by growth in ISG product gross margin due to continued growth in product net revenue for our server and networking offerings and, to a lesser extent, growth in product net revenue for our storage offerings.
−Removed: The increases in ISG product gross margin were partially offset by declines in CSG product gross margin.
−Removed: The decline in CSG product gross margin for the third quarter of Fiscal 2023 was principally due to a decrease in product net revenue for both our consumer and commercial offerings.
−Removed: For the first nine months of Fiscal 2023, the decline in CSG product gross margin was driven by a decrease in product net revenue for our consumer offerings.
−Removed: During the third quarter of Fiscal 2023, product gross margin percentage and non-GAAP product gross margin percentage increased 260 basis points to 17.6% and 240 basis points to 18.2%, respectively.
−Removed: The increases in product gross margin percentage were primarily attributable to growth in both ISG and CSG product gross margin percentages coupled with a shift in mix towards ISG.
−Removed: During the first nine months of Fiscal 2023, product gross margin percentage increased 10 basis points to 16.5%.
−Removed: The favorable impacts of a decrease in amortization of intangible assets coupled with a shift in mix towards ISG were mostly offset by an increase in input costs and foreign currency exchange rate fluctuations, which were not entirely offset by pricing adjustments.
−Removed: During the first nine months of Fiscal 2023, non-GAAP product gross margin percentage decreased 10 basis points to 17.1%, driven by the mix and input cost dynamics discussed above.
−Removed: • Services Gross Margin — During the third quarter of Fiscal 2023, both services gross margin and non-GAAP services gross margin remained flat at $2.4 billion, while, during the first nine months of Fiscal 2023, services gross margin and non-GAAP services gross margin increased 2% to $7.0 billion and 3% to $7.2 billion, respectively.
−Removed: Increases in CSG services gross margin for both periods were mostly offset by declines in other businesses services gross margin.
−Removed: CSG services gross margin increased as a result of growth within hardware support and maintenance associated with products sold in prior periods, while other businesses services gross margin declined due to the impacts of the divestiture of Boomi during the third quarter of Fiscal 2022.
−Removed: During the third quarter and first nine months of Fiscal 2023, services gross margin percentage decreased 290 basis points to 41.0% and 240 basis points to 41.0%, respectively, and non-GAAP services gross margin percentage decreased 270 basis points to 41.7% and 200 basis points to 42.0%, respectively.
−Removed: These decreases were driven by the impacts of the divestiture of Boomi during the third quarter of Fiscal 2022 coupled with declines in services gross margin percentage for ISG and, to a lesser extent, a shift in mix towards CSG.
+Added: During the first quarter of Fiscal 2024, services net revenue increased 4% driven primarily by growth within other businesses that was principally attributable to VMware Resale software maintenance sold in prior periods.
+Added: A substantial portion of services net revenue is derived from offerings that have been deferred over a period of time, and, as a result, reported growth rates for services net revenue will be different than reported growth rates for product net revenue.
+Added: From a geographical perspective, net revenue decreased in the Americas, EMEA, and APJ regions during the first quarter of Fiscal 2024.
+Added: During the first quarter of Fiscal 2024, gross margin and non-GAAP gross margin both decreased 13% to $5.0 billion and $5.2 billion, respectively, driven by declines in CSG and ISG gross margin which were primarily attributable to decreases in net revenue.
+Added: During the first quarter of Fiscal 2024, our gross margin and non-GAAP gross margin percentages increased 190 basis points to 24.0% and 200 basis points to 24.7%, respectively, primarily due to the impacts of an overall decline in input costs coupled with an increase in average selling price across our offerings as we maintained strong pricing discipline.
+Added: • Product Gross Margin — During the first quarter of Fiscal 2024, product gross margin and non-GAAP product gross margin both decreased 23% to $2.7 billion and $2.8 billion, respectively.
+Added: The decreases were primarily driven by declines in both ISG and CSG product gross margin.
+Added: The decrease in ISG product gross margin was principally attributable to decline in product gross margin within our storage offerings.
+Added: CSG product gross margin declined due to a decrease in product net revenue for both our commercial and consumer offerings.
+Added: During the first quarter of Fiscal 2024, product gross margin percentage and non-GAAP product gross margin percentage increased 80 basis points to 17.7% and 90 basis points to 18.4%, respectively, primarily driven by the impacts of an overall decline in input costs coupled with an increase in average selling price across our offerings as we maintained strong pricing discipline.
+Added: • Services Gross Margin — During the first quarter of Fiscal 2024, services gross margin and non-GAAP services gross margin increased 1% to $2.4 billion and 2% to $2.4 billion, respectively.
+Added: The increases were primarily attributable to growth within ISG services gross margin driven by support and maintenance associated with products sold in prior periods.
+Added: During the first quarter of Fiscal 2024, services gross margin percentage and non-GAAP services gross margin percentage decreased 120 basis points to 40.0% and 100 basis points to 40.8%, respectively.
+Added: The decreases were driven by a decline in services gross margin percentage for CSG, due to a shift in mix of CSG services delivered, coupled with a shift in mix towards other businesses services net revenue.
+Added: These impacts were partially offset by an increase in ISG services gross margin percentage.
Vendor Programs
6 unchanged sentences
We monitor our component costs and seek to address the effects of any changes to terms that might arise under our vendor rebate programs.
−Removed: Our gross margins for the third quarter and first nine months of Fiscal 2023 and for the third quarter and first nine months of Fiscal 2022 were not materially affected by any changes to the terms of our vendor rebate programs, as the amounts we received under these programs were generally stable relative to our total net cost.
+Added: Our gross margins for the first quarter of Fiscal 2024 were not materially affected by any changes to the terms of our vendor rebate programs, as the amounts we received under these programs were generally stable relative to our total net cost.
We are not aware of any significant changes to our vendor rebate programs that will materially impact our results in the near term.
−Removed: We anticipate that the impact of industry-wide price increases of certain processors will impact our cost of net revenue beginning in Fiscal 2024.
−Removed: We will continue to take pricing actions to balance profitability and growth while actively addressing our customers’ demands.
Operating Expenses
The following table presents information regarding our operating expenses for the periods indicated:
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021
+Added: Three Months Ended
+Added: May 5, 2023 April 29, 2022
Dollars % of Net Revenue %
−Removed: Change Dollars % of Net Revenue Dollars % of Net Revenue %
Change Dollars % of Net Revenue
4 unchanged sentences
Total operating expenses $ 3,949 18.9 % (7) % $ 4,234 16.2 %
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021
+Added: Three Months Ended
+Added: May 5, 2023 April 29, 2022
Dollars % of Net Revenue %
−Removed: Change Dollars % of Net Revenue Dollars % of Net Revenue %
Change Dollars % of Net Revenue
1 unchanged sentence
Non-GAAP operating expenses $ 3,566 17.1 % (6) % $ 3,806 14.5 %
−Removed: During the third quarter and first nine months of Fiscal 2023, total operating expenses decreased 12% and 7%, respectively, primarily driven by a decrease in selling, general, and administrative expenses.
−Removed: • Selling, General, and Administrative — Selling, general, and administrative (“SG&A”) expenses decreased 15% and 8% during the third quarter and first nine months of Fiscal 2023, respectively.
−Removed: The decreases in SG&A expenses were primarily attributable to decreases in amortization of intangible assets, employee compensation and benefits, and outside services expenses.
−Removed: Employee compensation and benefits expense decreased primarily as a result of a reduction in performance-based compensation and disciplined cost management.
−Removed: The decline in outside services expense was primarily attributable to expenses incurred in Fiscal 2022, principally related to the VMware Spin-off, that did not reoccur in Fiscal 2023.
+Added: During the first quarter of Fiscal 2024, total operating expenses decreased 7% due to a decrease in selling, general, and administrative expenses.
+Added: • Selling, General, and Administrative — Selling, general, and administrative (“SG&A”) expenses decreased 8% during the first quarter of Fiscal 2024, primarily due to decreases in employee compensation and benefits and advertising expenses as a result of disciplined cost management coupled with a reduction in our overall headcount.
• Research and Development — Research and development (“R&D”) expenses are primarily composed of personnel-related expenses incurred in connection with product development.
−Removed: R&D expenses increased 4% and 1% during the third quarter and first nine months of Fiscal 2023, respectively, driven by an increase in employee compensation and benefits as we continue to invest in R&D initiatives.
−Removed: As a percentage of net revenue, R&D expenses for the third quarter of Fiscal 2023 and Fiscal 2022 were 2.7% and 2.5%, respectively, and for the first nine months of Fiscal 2023 and Fiscal 2022, were 2.6% and 2.7%, respectively.
+Added: R&D expenses increased 1% during the first quarter of Fiscal 2024.
+Added: As a percentage of net revenue, R&D expenses for the first quarter of Fiscal 2024 and Fiscal 2023 were 3.3% and 2.6%, respectively.
We intend to continue supporting R&D initiatives to innovate and introduce new and enhanced solutions into the market.
−Removed: During the third quarter and first nine months of Fiscal 2023, non-GAAP operating expenses decreased 8% and 3%, respectively, principally due to a decline in employee compensation and benefits expense primarily resulting from a reduction in performance-based compensation and disciplined cost management.
+Added: During the first quarter of Fiscal 2024, non-GAAP operating expenses decreased 6% principally due to a decline in employee compensation and benefits as a result of a reduction in headcount coupled with continued disciplined cost management.
We continue to make selective investments designed to enable growth, marketing, and R&D, while balancing our efforts to drive cost efficiencies in the business.
1 unchanged sentence
Operating Income
−Removed: During the third quarter and first nine months of Fiscal 2023, our operating income increased 68% to $1.8 billion and 50% to $4.6 billion, respectively.
−Removed: These increases were primarily driven by growth in operating income for ISG and the favorable impact of a decrease in amortization of intangible assets.
−Removed: For the third quarter of Fiscal 2023, the increase was also attributable to a decrease in transaction-related expenses primarily associated with costs incurred in connection with the VMware Spin-off during the third quarter of Fiscal 2022 that did not reoccur during Fiscal 2023.
−Removed: Growth in ISG operating income for the third quarter and first nine months of Fiscal 2023 was driven by both our server and networking and storage offerings.
−Removed: During the third quarter and first nine months of Fiscal 2023, our non-GAAP operating income increased 22% to $2.4 billion and 16% to $6.5 billion, driven by the same ISG dynamics discussed above.
−Removed: Operating income as a percentage of net revenue increased 310 basis points to 7.1% during the third quarter of Fiscal 2023 and 170 basis points to 5.9% during the first nine months of Fiscal 2023.
−Removed: For the third quarter of Fiscal 2023, the increase was due to improvement in gross margin as percentage of net revenue and to a decrease in operating expenses as a percentage of net revenue.
−Removed: Gross margin as a percentage of net revenue increased as a result of a shift in mix towards ISG and, to a lesser extent, a decrease in cost of net revenue as a result of a decline in input costs.
−Removed: For the first nine months of Fiscal 2023, the increase was principally due to a decrease in operating expenses as a percentage of net revenue, partially offset by a decline in gross margin as a percentage of net revenue.
−Removed: Gross margin percentage declined primarily due to the impacts of an overall increase in input costs and foreign currency exchange rate fluctuations, which were not entirely offset by pricing adjustments, as we balanced profitability with competitive positioning.
−Removed: For both the third quarter and first nine months of Fiscal 2023, operating expense percentage declined due to disciplined cost management coupled with the favorable impacts of a decrease in the amortization of intangible assets and a decrease in transaction-related expenses incurred in connection with the VMware Spin-off in Fiscal 2022.
−Removed: Non-GAAP operating income as a percentage of net revenue increased 220 basis points to 9.6% during the third quarter of Fiscal 2023 and 80 basis points to 8.4% during the first nine months of Fiscal 2023, driven by the same disciplined cost management and gross margin dynamics discussed above.
+Added: During the first quarter of Fiscal 2024, our operating income and non-GAAP operating income decreased 31% to $1.1 billion and 25% to $1.6 billion, respectively.
+Added: The decreases were driven by both ISG and CSG operating income which declined as a result of a decrease in net revenue, partially offset by a reduction in operating expenses as a result of disciplined cost management.
+Added: The decline in ISG operating income was driven primarily by storage and the decline in CSG operating income was driven by both commercial and consumer.
+Added: During the first quarter of Fiscal 2024, operating income as a percentage of net revenue and non-GAAP operating income as a percentage of net revenue decreased 80 basis points to 5.1% and 60 basis points to 7.6%, respectively.
+Added: The decreases were primarily driven by an increase in operating expenses as a percentage of net revenue which was partially offset by an increase in gross margin as a percentage of net revenue.
+Added: The increase in operating expense as a percentage of net revenue was driven by a decline in net revenue that outpaced the impacts of cost management measures.
+Added: Gross margin as a percentage of net revenue increased primarily due to the impacts of an overall decrease in input costs coupled with an increase in average selling prices across our offerings as we maintained strong pricing discipline.
Interest and Other, Net
The following table presents information regarding interest and other, net for the periods indicated:
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021
+Added: Three Months Ended
+Added: May 5, 2023 April 29, 2022
(in millions)
4 unchanged sentences
Foreign exchange (32) (89)
−Removed: Gain on disposition of businesses and assets — 3,968 — 3,968
−Removed: Legal settlement (1,000) — (1,000) —
Other 29 (12)
Total interest and other, net $ (364) $ (337)
−Removed: During the third quarter and first nine months of Fiscal 2023, the change in interest and other, net was unfavorable by $4.8 billion and $5.2 billion, respectively.
−Removed: The unfavorable change was primarily attributable to the pre-tax gain of $4.0 billion on the sale of Boomi recognized during the third quarter of Fiscal 2022 and $1.0 billion of expense recognized in the third quarter of Fiscal 2023 in connection with an agreement to settle the Class V transaction litigation.
−Removed: These factors were partially offset by a decrease in interest expense as a result of lower average outstanding debt balances.
−Removed: For additional information about the settlement agreement, see Note 19 of the Notes to the Condensed Consolidated Financial Statements included in this report.
+Added: During the first quarter of Fiscal 2024, interest and other, net was unfavorable due to an increase in interest expense driven by the impact of rising interest rates on our DFS debt.
+Added: This increase was partially offset by reduced foreign exchange impacts and an increase in investment income.
Income and Other Taxes
The following table presents information regarding our income and other taxes for the periods indicated:
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 October 29, 2021 October 28, 2022 October 29, 2021
+Added: Three Months Ended
+Added: May 5, 2023 April 29, 2022
(in millions, except percentages)
2 unchanged sentences
Effective income tax rate 18.0 % 11.9 %
−Removed: For the third quarter of Fiscal 2023 and Fiscal 2022, our effective income tax rate was 46.9% and 19.0%, respectively.
−Removed: For the first nine months of Fiscal 2023 and Fiscal 2022, our effective income tax rate was 21.1% and 16.7%, respectively.
−Removed: For the third quarter and first nine months of Fiscal 2023, the changes in our effective tax rates were primarily attributable to changes in discrete tax items.
−Removed: Our effective tax rate for both the three and nine months ended October 28, 2022, includes the impact of a $1.0 billion expense recognized in connection with an agreement to settle the Class V transaction litigation.
−Removed: Other changes to our effective income tax rates were primarily driven by a change in the jurisdictional mix of income and higher U.S.
−Removed: tax on foreign operations, the effects of which were partially offset by higher benefits from foreign tax credits.
−Removed: See Note 19 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about the Class V litigation settlement agreement.
−Removed: tax on foreign operations was due to the capitalization of research and development costs.
−Removed: Under the Tax Cuts and Jobs Act, which was enacted on December 22, 2017, research and development expenses incurred for tax years beginning after December 31, 2021 must be capitalized and amortized ratably over five or 15 years for tax purposes, depending on where the research activities were conducted.
−Removed: Our effective income tax rate for the remaining quarter of Fiscal 2023 may be impacted by actions taken by the U.S.
−Removed: government to defer or repeal this provision, as well as by the actual mix of jurisdictions in which income is generated and the impact of any discrete tax items.
−Removed: If the provision is not deferred or repealed, we expect that its application will result in a significant increase in our cash tax liabilities for Fiscal 2023, as well as a significant increase to our deferred tax assets.
+Added: For the first quarter of Fiscal 2024 and Fiscal 2023, our effective income tax rate was 18.0% and 11.9%, respectively.
+Added: The change in our effective tax rate was primarily attributable to a change in our jurisdictional mix of income as well as higher U.S.
+Added: tax on foreign operations.
Our effective income tax rate can fluctuate depending on the geographic distribution of our worldwide earnings, as our foreign earnings are generally taxed at lower rates than in the United States.
−Removed: The differences between our effective income tax rate and the U.S.
−Removed: federal statutory rate of 21% principally result from the geographical distribution of income, differences between the book and tax treatment of certain items, and discrete tax items.
+Added: The differences between our effective income tax rates and the U.S.
+Added: federal statutory rate of 21% principally result from the geographical distribution of income, differences between the book and tax treatment of certain items, and the tax items discussed above.
In certain jurisdictions, our tax rate is significantly less than the applicable statutory rate as a result of tax holidays.
1 unchanged sentence
A significant portion of these income tax benefits relates to a tax holiday that will be effective until January 31, 2029.
−Removed: Our other tax holidays will expire in whole or in part during Fiscal 2030 through Fiscal 2031.
−Removed: Many of these tax holidays and reduced tax rates may be extended when certain conditions are met or may be terminated early if certain conditions are not met.
−Removed: As of October 28, 2022, we were not aware of any matters of noncompliance related to these tax holidays.
+Added: Most of our other tax holidays will expire in whole or in part during Fiscal 2030 through Fiscal 2033.
+Added: Many of these tax holidays and reduced tax rates may be extended when certain conditions are met or may be terminated early if certain conditions are not met or as a result of changes in tax legislation.
+Added: As of May 5, 2023, we were not aware of any matters of noncompliance or enacted tax legislative changes affecting these tax holidays.
For further discussion regarding tax matters, including the status of income tax audits, see Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report.
−Removed: See “Introduction – Business Trends and Challenges – Inflation Reduction Act” for a discussion of recent tax legislation.
−Removed: Net Income from Continuing Operations
−Removed: Net income from continuing operations was $0.2 billion and $3.7 billion for the third quarter of Fiscal 2023 and Fiscal 2022, respectively, and $1.8 billion and $5.0 billion for the first nine months of Fiscal 2023 and Fiscal 2022, respectively.
−Removed: The decreases were driven principally by an unfavorable change in interest and other, net, partially offset by an increase in operating income coupled with a decrease in tax expense.
−Removed: Non-GAAP net income was $1.7 billion and $1.3 billion for the third quarter of Fiscal 2023 and Fiscal 2022, respectively, and $4.4 billion and $3.5 billion for the first nine months of Fiscal 2023 and Fiscal 2022, respectively.
−Removed: The increases were primarily attributable to an increase in non-GAAP operating income and a favorable change in interest and other, net, partially offset by an increase in tax expense.
+Added: Net income was $0.6 billion and $1.1 billion for the first quarter of Fiscal 2024 and Fiscal 2023, respectively.
+Added: Non-GAAP net income was $1.0 billion and $1.4 billion for the first quarter of Fiscal 2024 and Fiscal 2023, respectively.
+Added: The decreases in both net income and non-GAAP net income were principally attributable to a decline in operating income.
Business Unit Results
3 unchanged sentences
The following table presents net revenue and operating income attributable to ISG for the periods indicated:
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 % Change October 29, 2021 October 28, 2022 % Change October 29, 2021
+Added: Three Months Ended
+Added: May 5, 2023 % Change April 29, 2022
(in millions, except percentages)
5 unchanged sentences
% of segment net revenue 9.7 % 11.7 %
−Removed: Net Revenue — During the third quarter and first nine months of Fiscal 2023, ISG net revenue increased 12% and 13%, respectively, driven by strength across both server and networking and storage offerings.
−Removed: Revenue from sales of servers and networking increased 14% and 17% during the third quarter and first nine months of Fiscal 2023, respectively.
−Removed: The increases were primarily driven by an increase in average selling price of our server offerings, the effect of which was partially offset by a decrease in units sold.
−Removed: The average selling price for our server offerings increased as a result of richer configurations and continued pricing discipline in response to the macroeconomic environment.
−Removed: During the third quarter and first nine months of Fiscal 2023, storage revenue increased 11% and 9%, respectively, due to continued strength across the majority of our storage offerings.
+Added: Net Revenue — During the first quarter of Fiscal 2024, ISG net revenue decreased 18%, driven by a decline in servers and networking net revenue and, to a lesser extent, storage net revenue as customers continue to exercise caution and manage investment in IT infrastructure in response to the macroeconomic environment.
+Added: Revenue from sales of servers and networking decreased 24% during the first quarter of Fiscal 2024, primarily driven by a decrease in units sold, the effect of which was partially offset by an increase in average selling price of our server offerings.
+Added: The average selling price for our server offerings increased as a result of richer configurations, the impact of attached offerings, and continued pricing discipline in response to the macroeconomic environment.
+Added: During the first quarter of Fiscal 2024, storage revenue decreased 11% due to a decline in net revenue across the majority of our storage offerings.
ISG customers are interested in new and innovative models that address how they consume our solutions.
−Removed: We offer options that include as-a-Service, utility, leases, and immediate pay models which are designed to match customers’ consumption and financing preferences.
+Added: We offer options that include as-a-Service, subscription, utility, leases, and immediate pay models which are designed to match customers’ consumption and financing preferences.
Our multiyear agreements typically result in recurring revenue streams over the term of the arrangement.
We expect that our flexible consumption models and as-a-Service offerings through Dell APEX will further strengthen our customer relationships and provide a foundation for growth in recurring revenue.
−Removed: From a geographical perspective, net revenue attributable to ISG increased in all regions during the third quarter and first nine months of Fiscal 2023.
−Removed: Operating Income — During the third quarter and first nine months of Fiscal 2023, ISG operating income as a percentage of net revenue increased 390 basis points to 14.3% and 180 basis points to 12.3%, respectively, principally due to a decrease in operating expenses as a percentage of net revenue that resulted from strong revenue growth and disciplined cost management.
−Removed: The increase in ISG operating income as a percentage of net revenue during the first nine months of Fiscal 2023 was partially offset by the impacts of an increase in cost of net revenue and foreign currency exchange rate fluctuations which were not entirely offset by pricing adjustments.
+Added: From a geographical perspective, net revenue attributable to ISG decreased in the Americas, EMEA, and APJ regions during the first quarter of Fiscal 2024.
+Added: Operating Income — During the first quarter of Fiscal 2024, ISG operating income as a percentage of net revenue decreased 200 basis points to 9.7% principally due to an increase in operating expenses as a percentage of net revenue that resulted from a decline in revenue that outpaced the impact of cost management measures.
+Added: The decline in operating expense as a percentage of net revenue was partially offset by the impacts of an overall decrease in input costs coupled with an increase in average selling price across our offerings.
Client Solutions Group
The following table presents net revenue and operating income attributable to CSG for the periods indicated:
−Removed: Three Months Ended Nine Months Ended
−Removed: October 28, 2022 % Change October 29, 2021 October 28, 2022 % Change October 29, 2021
+Added: Three Months Ended
+Added: May 5, 2023 % Change April 29, 2022
(in millions, except percentages)
5 unchanged sentences
% of segment net revenue 7.4 % 7.2 %
−Removed: Net Revenue — During the third quarter of Fiscal 2023, CSG net revenue decreased 17% primarily driven by declines in net revenue across both our commercial and consumer offerings.
−Removed: CSG net revenue during the first nine months of Fiscal 2023 increased 2%, driven by an increase in revenue attributable to our commercial offerings, which was partially offset by a decline in consumer net revenue.
−Removed: Commercial net revenue decreased 13% during the third quarter of Fiscal 2023 due to a decline in units sold, partially offset by the effect of an increase in the average selling price of our commercial offerings.
−Removed: During the first nine months of Fiscal 2023, commercial net revenue increased 7% as a result of an increase in the average selling price of our commercial offerings, the effect of which was partially offset by a decrease in units sold.
−Removed: Consumer net revenue decreased 29% and 13% during the third quarter and first nine months of Fiscal 2023, respectively, primarily due to a decrease in units sold, which was partially offset by the effect of an increase in the average selling price of our consumer offerings.
−Removed: Our average selling prices for our CSG offerings increased as a result of richer configurations, a shift in mix towards commercial offerings, and continued actions to manage pricing in response to the macroeconomic environment.
−Removed: From a geographical perspective, net revenue attributable to CSG decreased across all regions during the third quarter of Fiscal 2023.
−Removed: During the first nine months of Fiscal 2023, CSG net revenue increased in the Americas, remained flat in APJ, and decreased in EMEA.
−Removed: Operating Income — During the third quarter of Fiscal 2023, CSG operating income as a percentage of net revenue increased 80 basis points to 7.7% primarily as a result of a decrease in input costs.
−Removed: The effect of this impact was partially offset by operating expenses as a percentage of revenue, which increased as a result of a decline in CSG net revenue that outpaced a reduction in operating expenses.
−Removed: During the first nine months of Fiscal 2023, CSG operating income as a percentage of net revenue decreased 30 basis points to 7.0%, primarily due to the impacts of an increase in input costs and foreign currency exchange rate fluctuations which were not entirely offset by pricing adjustments, as we balanced profitability with competitive positioning.
−Removed: The effect of these impacts was partially offset by a decrease in operating expenses as a percentage of revenue as a result of disciplined cost management and a decline in performance-based compensation.
+Added: Net Revenue — During the first quarter of Fiscal 2024, CSG net revenue decreased 23%, driven by a decline in units sold as deteriorating macroeconomic conditions continue to impact industry-wide demand.
+Added: Commercial net revenue and consumer net revenue decreased 18% and 41%, respectively, during the first quarter of Fiscal 2024.
+Added: These decreases were primarily due to a decrease in units sold, which was only partially offset by the effect of an increase in the average selling price of our offerings.
+Added: Average selling prices for our CSG offerings increased during the first quarter of Fiscal 2024 primarily as a result of a shift in mix towards our commercial offerings coupled with richer configurations and the impact of attached offerings.
+Added: From a geographical perspective, net revenue attributable to CSG decreased in the Americas, EMEA, and APJ regions during the first quarter of Fiscal 2024.
+Added: Operating Income — During the first quarter of Fiscal 2024, CSG operating income as a percentage of net revenue increased 20 basis points to 7.4%, primarily due to the impacts of an overall decrease in input costs partially offset by an increase in operating expenses as a percentage of net revenue, which increased as a result of a decline in CSG net revenue that outpaced the impact of cost management measures.
OTHER BALANCE SHEET ITEMS
1 unchanged sentence
We sell products and services directly to customers and through a variety of sales channels, including retail distribution.
−Removed: Our accounts receivable, net, was $11.4 billion and $12.9 billion as of October 28, 2022 and January 28, 2022, respectively.
+Added: Our accounts receivable, net, was $9.4 billion and $12.5 billion as of May 5, 2023 and February 3, 2023, respectively.
+Added: The reduction in accounts receivable, net primarily reflects the decline in net revenue coupled with strong collections during the quarter.
We maintain an allowance for expected credit losses to cover receivables that may be deemed uncollectible.
The allowance for expected credit losses is an estimate based on an analysis of historical loss experience, current receivables aging, and management’s assessment of current conditions and its reasonable and supportable expectation of future conditions, as well as specific identifiable customer accounts that are deemed at risk.
−Removed: As of October 28, 2022 and January 28, 2022, the allowance for expected credit losses was $75 million and $90 million, respectively.
+Added: As of May 5, 2023 and February 3, 2023, the allowance for expected credit losses was $77 million and $78 million, respectively.
Based on our assessment, we believe that we are adequately reserved for expected credit losses.
−Removed: We are monitoring the impact of current economic conditions on our expected losses and have not experienced deterioration in delinquency or loss rates.
−Removed: We will continue to monitor the aging of our accounts receivable and take actions, where necessary, to reduce our exposure to credit losses.
+Added: We are monitoring the impact of current economic conditions and the aging of our accounts receivable on our expected losses and have not experienced deterioration in delinquency or loss rates.
+Added: We will continue to take actions, where necessary, to reduce our exposure to credit losses.
Dell Financial Services and Financing Receivables
−Removed: We offer or arranges various financing options and services for our customers globally, including through captive financing operations.
+Added: We offer or arrange various financing options and services for our customers globally, including through captive financing operations.
DFS originates, collects, and services customer receivables primarily related to the purchase of our product, software, and service solutions.
1 unchanged sentence
We have historically seen an increasing interest in our various financing options during times of macroeconomic uncertainty.
−Removed: New financing originations were $2.3 billion and $2.0 billion for the third quarter of Fiscal 2023 and Fiscal 2022, respectively, and $6.7 billion and $5.8 billion for the first nine months of Fiscal 2023 and Fiscal 2022, respectively.
+Added: New financing originations were $1.8 billion and $2.1 billion for the first quarter of Fiscal 2024 and Fiscal 2023, respectively.
Our leases are generally classified as sales-type leases or operating leases.
−Removed: Amounts due from lessees under sales-type leases or direct financing leases are recorded as part of financing receivables, with interest income recognized over the contract term.
−Removed: Upon commencement of sales-type leases, we typically qualify for up-front revenue recognition.
+Added: On commencement of sales-type leases, the Company recognizes profit up-front, and amounts due from the customer under the lease contract are recognized as financing receivables.
+Added: Interest income is recognized as net product revenue over the term of the lease.
Upon origination of operating leases, we record equipment under operating leases, classified as property, plant, and equipment.
Over the contract term of an operating lease, we recognize rental revenue and depreciation expense, classified as cost of net revenue.
−Removed: As of both October 28, 2022 and January 28, 2022, our financing receivables, net were $10.6 billion .
+Added: As of May 5, 2023 and February 3, 2023, our financing receivables, net were $10.5 billion and $10.9 billion, respectively .
We maintain an allowance to cover expected financing receivable credit losses and evaluate credit loss expectations based on our total portfolio.
−Removed: For the third quarter of Fiscal 2023 and Fiscal 2022, the principal charge-off rate for our financing receivables portfolio was 0.5% and 1.1%, respectively.
−Removed: For the first nine months of Fiscal 2023 and Fiscal 2022, the principal charge-off rate for our financing receivables portfolio was 0.5% and 0.7%, respectively.
+Added: For both the first quarter of Fiscal 2024 and Fiscal 2023, the principal charge-off rate for our financing receivables portfolio was 0.5%.
The credit quality of our financing receivables has improved in recent years as the mix of high-quality commercial accounts in our portfolio has continued to increase.
4 unchanged sentences
We retain a residual interest in equipment leased under our lease programs.
−Removed: As of October 28, 2022 and January 28, 2022, the residual interest recorded as part of financing receivables was $137 million and $217 million, respectively.
−Removed: The decline in residual interest was principally attributable to a corresponding increase in originations of operating leases.
+Added: As of May 5, 2023 and February 3, 2023, the residual interest recorded as part of financing receivables was $147 million and $142 million, respectively.
The amount of the residual interest is established at the inception of the lease based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and future value-at-risk demand valuation methods.
2 unchanged sentences
Further, the lease agreement defines applicable return conditions and remedies for non-compliance to ensure that the leased equipment will be in good operating condition upon return.
−Removed: No expected losses were recorded related to residual assets during the third quarter and first nine months of Fiscal 2023 and Fiscal 2022.
−Removed: As of October 28, 2022 and January 28, 2022, equipment under operating leases, net was $2.1 billion and $1.7 billion, respectively.
+Added: No expected losses were recorded related to residual assets during the first quarter of Fiscal 2024 and Fiscal 2023.
+Added: As of May 5, 2023 and February 3, 2023, equipment under operating leases, net was $2.2 billion and $2.2 billion, respectively.
We assess the carrying amount of the equipment under operating leases for impairment whenever events or circumstances may indicate that an impairment has occurred.
−Removed: No material impairment losses were recorded related to such equipment during the third quarter and first nine months of Fiscal 2023 and Fiscal 2022.
+Added: No material impairment losses were recorded related to such equipment during the first quarter of Fiscal 2024 and Fiscal 2023.
DFS offerings are initially funded through cash on hand at the time of origination, most of which is subsequently replaced with asset-backed financing.
4 unchanged sentences
Liquidity and Capital Resources
−Removed: To support our ongoing business operations, we rely on operating cash flows, which are impacted by trends in the demand environment, as our primary source of liquidity.
+Added: We rely on operating cash flows, which are impacted by trends in the demand environment, as our primary source of liquidity for our ongoing business operations.
We monitor the efficiency of our balance sheet to ensure that we have adequate liquidity to support our business and strategic initiatives.
2 unchanged sentences
We believe that our current cash and cash equivalents, together with cash that will be provided by future operations and borrowings expected to be available under our revolving credit facility and commercial paper program, will be sufficient over at least the next twelve months and for the foreseeable future thereafter to meet our material cash requirements, including funding of our operations, debt-related payments, capital expenditures, and other corporate needs.
−Removed: Our cash and cash equivalent balances will be impacted in the near-term as a result of certain non-recurring cash outflows, including payment of the Class V transaction litigation settlement.
As part of our overall capital allocation strategy, we intend to drive growth while maintaining our investment grade rating and focusing on returning capital to our stockholders through both share repurchase programs and dividend payments.
The following table presents our cash and cash equivalents as well as our available borrowings as of the dates indicated:
−Removed: October 28, 2022 January 28, 2022
+Added: May 5, 2023 February 3, 2023
(in millions)
1 unchanged sentence
Cash and cash equivalents $ 7,631 $ 8,607
−Removed: Remaining available borrowings under revolving credit facilities 4,999 4,969
+Added: Remaining available borrowings under 2021 Revolving Credit Facility 5,999 5,999
Total cash, cash equivalents, and available borrowings $ 13,630 $ 14,606
−Removed: During the first nine months of Fiscal 2023, cash and cash equivalents decreased by $4.6 billion, as a result of the return of capital to our stockholders through share repurchases and dividend payments, as well as capital expenditures.
−Removed: Our revolving credit facilities as of October 28, 2022 consist of the 2021 Revolving Credit Facility, which has a maximum capacity of $5.0 billion.
+Added: During the first quarter of Fiscal 2024, cash and cash equivalents decreased by $1.0 billion primarily as a result of the repayment of senior notes, the return of capital to our stockholders, and capital expenditures, partially offset by cash flows from operations.
+Added: As of May 5, 2023, our 2021 Revolving Credit Facility had a maximum capacity of $6.0 billion.
Available borrowings under this facility are reduced by draws on the facility and outstanding letters of credit.
−Removed: As of October 28, 2022, there were no borrowings outstanding under the facility and remaining available borrowings totaled approximately $5.0 billion.
−Removed: The 2021 Revolving Credit Facility also acts as a backstop to provide liquidity support for our commercial paper program discussed below.
−Removed: Subsequent to the close of the third quarter of Fiscal 2023, we entered into an amendment to the 2021 Revolving Credit Facility which, in part, increased the aggregate borrowing capacity to $6.0 billion.
−Removed: During the second quarter of Fiscal 2023, we established a commercial paper program under which we may issue unsecured notes in a maximum aggregate face amount of $5.0 billion outstanding at any time, with maturities up to 397 days from the date of issue.
−Removed: During the third quarter of Fiscal 2023, we issued and repaid unsecured notes under the program, which we utilized to support general corporate activities.
−Removed: As of October 28, 2022, we had no outstanding borrowings under the program.
+Added: As of May 5, 2023, there were no borrowings outstanding under the facility and remaining available borrowings totaled approximately $6.0 billion.
+Added: The 2021 Revolving Credit Facility also acts as a backstop to provide liquidity support for our commercial paper program.
+Added: During Fiscal 2023, we established a commercial paper program under which we may issue unsecured notes in a maximum aggregate face amount of $5.0 billion outstanding at any time, with maturities up to 397 days from the date of issue.
+Added: As of May 5, 2023, we had no outstanding borrowings under the program.
We may regularly use our available borrowings from the 2021 Revolving Credit Facility and issuances under the commercial paper program on a short-term basis for general corporate purposes.
See Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our debt.
−Removed: During the third quarter of Fiscal 2023, we entered into a factoring arrangement with a third-party financial institution to sell certain high-quality trade accounts receivable on a non-recourse basis and sold $500 million of receivables pursuant to this arrangement.
−Removed: Proceeds from the sales of trade receivables are included in cash from operating activities in the Condensed Consolidated Statements of Cash Flows.
−Removed: We may elect to factor trade accounts receivable from time to time as part of our overall liquidity and working capital management strategy.
The following table presents our outstanding debt as of the dates indicated:
−Removed: October 28, 2022 Change January 28, 2022
+Added: May 5, 2023 Change February 3, 2023
(in millions)
11 unchanged sentences
Total debt, carrying value $ 28,432 $ (1,156) $ 29,588
−Removed: As of October 28, 2022, the outstanding principal amount of our debt of increased $0.4 billion from January 28, 2022 to $27.6 billion, driven primarily by net DFS activity.
+Added: The outstanding principal amount of our debt decreased $1.2 billion to $28.7 billion as of May 5, 2023, driven primarily by the prepayment of $1.0 billion principal amount of senior notes.
We define core debt as the total principal amount of our debt, less DFS related debt and other debt.
−Removed: Our core debt was $16.2 billion and $16.1 billion as of October 28, 2022 and January 28, 2022, respectively.
+Added: Our core debt was $17.2 billion and $18.1 billion as of May 5, 2023 and February 3, 2023, respectively.
See Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our debt.
2 unchanged sentences
To fund expansion of the DFS business, we balance the use of the securitization and structured financing programs with other sources of liquidity.
−Removed: We approximate the amount of our debt used to fund the DFS business by applying a 7:1 debt-to-equity ratio to the sum of our financing receivables balance and equipment under our DFS operating leases, net.
+Added: We approximate the amount of our core debt used to fund the DFS business by applying a 7:1 debt-to-equity ratio to the sum of our financing receivables balance and equipment under our DFS operating leases, net.
The debt-to-equity ratio is based on the underlying credit quality of the assets.
See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our DFS debt.
−Removed: We have made steady progress in paying down debt and we will continue to pursue deleveraging as an important component of our overall strategy.
−Removed: As a result of our debt reduction and liability management strategy, we achieved an investment grade corporate family rating from three major credit rating agencies during Fiscal 2022.
−Removed: We believe we will continue to be able to make our debt principal and interest payments, including the short-term maturities, from existing and expected sources of cash, primarily from operating cash flows.
−Removed: Cash used for debt principal and interest payments may include short-term borrowings under our commercial paper program or our revolving credit facility.
+Added: We believe we will continue to be able to make our debt principal and interest payments, including short-term maturities, from existing and expected sources of cash, primarily from operating cash flows.
+Added: Cash used for debt principal and interest payments may include short-term borrowings under our commercial paper program, our revolving credit facility, or other borrowings.
Under our variable-rate debt, we could experience variations in our future interest expense from potential fluctuations in applicable reference rates, or from possible fluctuations in the level of DFS debt required to meet future demand for customer financing.
−Removed: There are no scheduled maturities related to our outstanding core debt during Fiscal 2023.
−Removed: However, at our sole discretion, we may purchase, redeem, prepay, refinance, or otherwise retire any amount of our outstanding indebtedness under the terms of such indebtedness at any time and from time to time, in open market or negotiated transactions with the holders of such indebtedness or otherwise, as we consider appropriate in light of market conditions and other relevant factors.
+Added: We have made steady progress in paying down debt and we will continue to pursue deleveraging over the long-term as an important component of our overall capital allocation strategy.
+Added: At our sole discretion, we may purchase, redeem, prepay, refinance, or otherwise retire any amount of our outstanding indebtedness under the terms of such indebtedness at any time and from time to time, in open market or negotiated transactions with the holders of such indebtedness or otherwise, as we consider appropriate in light of market conditions and other relevant factors.
The following table presents a summary of our Condensed Consolidated Statements of Cash Flows for the periods indicated:
−Removed: Nine Months Ended
−Removed: October 28, 2022 October 29, 2021
+Added: Three Months Ended
+Added: May 5, 2023 April 29, 2022
(in millions)
5 unchanged sentences
Change in cash, cash equivalents, and restricted cash $ (967) $ (2,806)
−Removed: Cash flows for the nine months ended October 29, 2021 are inclusive of cash flows attributable to VMware, Inc..
−Removed: Effective November 1, 2021, as a result of the VMware Spin-off, cash flows ceased to include cash flows attributable to VMware, Inc.
−Removed: See “Introduction” and Note 1 and Note 2 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information regarding the VMware Spin-off.
−Removed: Operating Activities — Cash provided by operating activities was $0.9 billion during the first nine months of Fiscal 2023 compared to $7.2 billion during the first nine months of Fiscal 2022.
−Removed: During the first nine months of Fiscal 2022, $3.2 billion of the total $7.2 billion represents cash provided by operating activities attributable to VMware, Inc.
−Removed: The decline in cash provided by operating activities was primarily attributable to unfavorable working capital dynamics as compared to the first nine months of Fiscal 2022.
−Removed: Working capital was primarily impacted by increased inventory balances, as we proactively managed supply chain dynamics, coupled with the timing of purchases and payments to vendors during a declining demand environment.
−Removed: Cash provided by operating activities during the first nine months of Fiscal 2022 was driven by strong profitability coupled with favorable working capital dynamics.
−Removed: Investing Activities — Investing activities primarily consist of cash used to fund capital expenditures for property, plant, and equipment, which includes equipment under DFS operating leases.
−Removed: Additional activities include capitalized software development costs, acquisitions and divestitures, strategic investments, and the maturities, sales, and purchases of investments.
−Removed: During the first nine months of Fiscal 2023, cash used in investing activities was $2.2 billion and was primarily applied to capital expenditures.
−Removed: For the first nine months of Fiscal 2022, cash provided by investing activities was $2.1 billion, primarily driven by net cash proceeds related to the divestiture of Boomi in the third quarter of Fiscal 2022, partially offset by cash used for capital expenditures.
−Removed: Financing Activities — Financing activities primarily consist of the proceeds and repayments of debt and cash used to repurchase common stock.
−Removed: Cash used in financing activities was $3.1 billion during the first nine months of Fiscal 2023 and primarily consisted of repurchases of common stock, inclusive of payments to settle employee tax withholding on stock-based compensation, and the payment of quarterly dividends.
−Removed: The effects of these financing activities were partially offset by net cash proceeds from DFS debt issuances.
−Removed: Cash used in financing activities was $1.0 billion during the first nine months of Fiscal 2022 and primarily consisted of debt repayments and repurchases of common stock by our public subsidiaries, partially offset by net cash proceeds from the issuance of VMware Notes and DFS debt.
+Added: Operating Activities — Cash provided by operating activities was $1.8 billion during the first quarter of Fiscal 2024, which primarily reflected strong working capital performance as we reduced inventory and accounts receivable.
+Added: The impact of strong working capital performance was partially offset by the effect of a decline in revenue and annual incentive-based personnel-related payments.
+Added: During the first quarter of Fiscal 2023, cash used by operating activities was $0.3 billion driven by seasonal sales trends affecting parts of our business and annual incentive-based personnel-related payments.
+Added: Investing Activities — Investing activities primarily consist of cash used to fund capital expenditures for property, plant, and equipment inclusive of equipment under DFS operating leases and equipment used to support our as-a-Service offerings, which we refer to collectively as revenue-generating assets.
+Added: Additional activities include capitalized software development costs, acquisitions and divestitures, and the maturities, sales, and purchases of investments.
+Added: Cash used in investing activities was $0.7 billion during both the first quarter of Fiscal 2024 and Fiscal 2023 and was primarily applied to capital expenditures.
+Added: Financing Activities — Financing activities primarily consist of the proceeds and repayments of debt and return of capital to our stockholders.
+Added: Cash used in financing activities was $2.0 billion during the first quarter of Fiscal 2024 and primarily consisted of principal repayments of our senior notes, repurchases of common stock, inclusive of payments to settle employee tax withholdings on stock-based compensation, and the payment of quarterly dividends.
+Added: During the first quarter of Fiscal 2023 cash used in financing activities was $1.7 billion and was primarily driven by repurchases of common stock.
DFS Cash Flow Impacts — DFS offerings are initially funded through cash on hand at the time of origination, most of which is subsequently replaced with asset-backed financing.
For DFS offerings that qualify as sales-type leases, the initial funding of financing receivables is reflected as an impact to cash flows from operations and is largely subsequently offset by cash proceeds from financing.
−Removed: For DFS operating leases, the initial funding is classified as a capital expenditure and reflected as cash flows used in investing activities.
−Removed: DFS new financing originations were $6.7 billion and $5.8 billion during the first nine months of Fiscal 2023 and Fiscal 2022, respectively.
−Removed: As of October 28, 2022, DFS had $10.6 billion of total net financing receivables and $2.1 billion of equipment under DFS operating leases, net.
−Removed: Cash Requirements and Expenditures
−Removed: Capital Expenditures — We spent $2.2 billion and $2.1 billion during the first nine months of Fiscal 2023 and Fiscal 2022, respectively, on property, plant, and equipment and capitalized software development costs, of which the funding of equipment under DFS operating leases totaled $0.8 billion and $0.6 billion, respectively.
+Added: For operating leases, the initial funding is classified as a capital expenditure and reflected as cash flows used in investing activities.
+Added: DFS new financing originations were $1.8 billion and $2.1 billion during the first quarter of Fiscal 2024 and Fiscal 2023, respectively.
+Added: As of May 5, 2023, the Company had $10.5 billion of total net financing receivables and $2.2 billion of equipment under operating leases, net.
+Added: Supply Chain Finance Program — We maintain a Supply Chain Finance Program (the "SCF Program”) which enables eligible suppliers to sell receivables due from us to a third-party financial institution at the suppliers’ sole discretion.
+Added: The SCF Program does not impact the Company's liquidity.
+Added: Payments by us to participating suppliers are remitted to the financial institution on the original invoice due date.
+Added: Further, we negotiate payment terms with our suppliers regardless of their decision to participate in the SCF Program.
+Added: Payments made under the SCF Program are included in cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.
+Added: See Note 17 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information regarding the SCF Program.
+Added: Capital Commitments
+Added: Capital Expenditures — We spent $0.7 billion during both the first quarter of Fiscal 2024 and Fiscal 2023 on property, plant, and equipment and capitalized software development costs.
+Added: Of total expenditures incurred during both the first quarter of Fiscal 2024 and Fiscal 2023, funding of revenue-generating assets totaled $0.3 billion.
Product demand, product mix, the use of contract manufacturers, and ongoing investments in operating and information technology infrastructure influence the level and prioritization of our capital expenditures.
−Removed: Aggregate capital expenditures for Fiscal 2023 are currently expected to total between $3.1 billion and $3.3 billion, of which approximately $1.1 billion of expenditures are expected to be applied to equipment under DFS operating leases and approximately $0.3 billion to capitalized software development costs.
+Added: Aggregate capital expenditures for Fiscal 2024 are currently expected to total between $3.2 billion and $3.4 billion, of which approximately $1.7 billion are expected to relate to revenue-generating assets.
Repurchases of Common Stock — Effective as of September 23, 2021, our Board of Directors approved a stock repurchase program with no fixed expiration date under which we are authorized to repurchase up to $5 billion of shares of our Class C Common Stock.
−Removed: During the first nine months of Fiscal 2023, we repurchased approximately 59 million shares of Class C Common Stock under this program for a total purchase price of approximately $2.7 billion.
−Removed: Dividend Payments — On February 24, 2022, the Company announced that its Board of Directors has adopted a dividend policy under which the Company intends to pay quarterly cash dividends on its common stock at an initial rate of $0.33 per share per fiscal quarter.
−Removed: During the nine months ended October 28, 2022, the Company paid the following dividends:
−Removed: Declaration Date Record Date Payment Date Dividend per Share Amount
−Removed: (in millions)
−Removed: February 24, 2022 April 20, 2022 April 29, 2022 $ 0.33 $ 248
−Removed: June 7, 2022 July 20, 2022 July 29, 2022 $ 0.33 $ 242
−Removed: September 6, 2022 October 19, 2022 October 28, 2022 $ 0.33 $ 238
+Added: During the first quarter of Fiscal 2024, the Company repurchased approximately 6.1 million shares of Class C Common Stock for a total purchase price of approximately $0.25 billion.
+Added: During the first quarter of Fiscal 2023, the Company repurchased approximately 29 million shares of Class C Common Stock for a total purchase price of approximately $1.5 billion.
+Added: Dividend Payments — On February 24, 2022, we announced that our Board of Directors adopted a dividend policy providing for our payment of quarterly cash dividends on our common stock at a rate of $0.33 per share per fiscal quarter beginning in the first quarter of Fiscal 2023.
+Added: On March 2, 2023, the Company announced that the Board of Directors approved a 12% increase in the quarterly dividend rate from $0.33 per share per fiscal quarter to a rate of $0.37 per share per fiscal quarter beginning in the first quarter of Fiscal 2024.
+Added: During the first quarter of Fiscal 2024 and Fiscal 2023, the Company paid $276 million and $248 million, respectively, in dividends and dividend equivalents.
Purchase Obligations — Purchase obligations are defined as contractual obligations to purchase goods or services that are enforceable and legally binding on us.
8 unchanged sentences
Purchase orders are not included in purchase obligations, as they typically represent our authorization to purchase rather than binding purchase obligations.
−Removed: As of October 28, 2022, such purchase obligations were $2.7 billion, $0.6 billion, and $0.8 billion for the remaining three months of Fiscal 2023, Fiscal 2024, and Fiscal 2025 and thereafter, respectively.
Market Conditions
10 unchanged sentences
We are exposed to interest rate risk related to our variable-rate debt portfolio.
−Removed: In the normal course of business we follow established policies and procedures to manage this risk, including monitoring of our asset and liability mix.
+Added: In the normal course of business we follow established policies and procedures to manage this risk, including monitoring of our asset and liability mix and the use of derivative instruments.
As a result, we do not anticipate any material losses from interest rate risk.
Summarized Guarantor Financial Information
−Removed: As discussed in Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this report, Dell International L.L.C.
+Added: Dell International L.L.C.
and EMC Corporation (the “Issuers”), both of which are wholly-owned subsidiaries of Dell Technologies Inc., completed private offerings of multiple series of senior secured notes issued on June 1, 2016, March 20, 2019, and April 9, 2020 (the “Senior Notes”).
5 unchanged sentences
were released.
−Removed: Guarantees — The Senior Notes are guaranteed on a joint and several unsecured basis by Dell Technologies Inc.
+Added: On January 24, 2023, the Issuers completed a public offering of unsecured senior notes (together with the Senior Notes, the “Registered Senior Notes”) in the aggregate principal amount of $2.0 billion.
+Added: The unsecured senior notes were sold pursuant to a shelf registration statement.
+Added: Guarantees — The Registered Senior Notes are guaranteed on a joint and several unsecured basis by Dell Technologies Inc.
and its wholly-owned subsidiaries, Denali Intermediate, Inc.
7 unchanged sentences
The following table presents summarized results of operations information for the Obligor Group for the period indicated:
−Removed: Nine Months Ended
−Removed: October 28, 2022
+Added: Three Months Ended
(in millions)
7 unchanged sentences
(a) Includes net revenue from services provided and product sales to Non-Obligor Subsidiaries of $192 million and $27 million, respectively.
−Removed: (b) Includes cost of net revenue from resale of solutions purchased from Non-Obligor Subsidiaries and the Related Party of $747 million and $382 million, respectively.
−Removed: Includes costs of net revenue from shared services provided by Non-Obligor Subsidiaries of $486 million.
−Removed: (c) Includes interest expense on inter-company loan payables of $969 million.
+Added: (b) Includes cost of net revenue from the resale of solutions purchased from Non-Obligor Subsidiaries and the Related Party of $222 million and $95 million, respectively.
+Added: Includes cost of net revenue from shared services provided by Non-Obligor Subsidiaries of $145 million.
+Added: (c) Includes interest expense on intercompany loan payables of $614 million and other expenses from services provided by Non-Obligor Subsidiaries of $42 million.
The following table presents summarized balance sheet information for the Obligor Group as of the dates indicated:
−Removed: October 28, 2022 January 28, 2022
+Added: May 5, 2023 February 3, 2023
(in millions)
9 unchanged sentences
Current liabilities $ 5,244 $ 6,611
−Removed: Intercompany payable 563 —
Due to related party 52 110
5 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.