Dell Technologies Inc. · NYSE:DELL
Dell Technologies — Merger or Acquisition (July 2018)
34 slides from Dell Technologies's merger presentation, Jul 2, 2018
Slide 1: The Essential and Trusted Technology Partner Leading the Way to Digital Transformation
The Essential and Trusted Technology Partner Leading the Way to Digital Transformation July 2, 2018 Filed by Dell Technologies Inc.; Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934. Subject Company: Dell Technologi
Slide 2: Important Notices
Important Notices No Offer or Solicitation This communication does not constitute an offer to sell or a solicitation of an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in whi
Slide 3: Important Notices (Cont'd)
Important Notices (Cont’d) Participants in the Solicitation Dell Technologies and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in favor of the proposed merger and the other tr
Slide 4: Today's Speakers
Today’s Speakers Michael Dell Jeff Clarke Tom Sweet Chairman and Vice Chairman, Chief Financial Officer Chief Executive Officer Products and Operations4
Slide 5: Transaction Overview
Transaction Overview For each Class V share, existing stockholders can elect to receive: 1.3665 shares of Dell Technologies Class C common stock, or Class V $109 in cash per DVMT share (~29% premium to the Class V share closing price prior to announcement) Stockholder Final consideration mix subject
Slide 6: Transaction Rationale
Transaction Rationale Simplifies Dell Technologies capital and ownership structure Creates attractive public security in leading global end-to-end infrastructure provider Enables strategic and financial flexibility for future initiatives 6
Slide 7: What Has Changed Since Going Private
What Has Changed Since Going Private Market Perception prior to What’s Changed? Today Take-Private in October 2013 Unmatched scale and breadth of IT solutions #1 Client1 revenue share(21 consecutive qtrs of YoY share gain) Client and Server Provider #1 x86 Server revenue share Essential and Trusted
Slide 8: Company Overview
Company Overview The Most Complete Portfolio of Technology Solutions: Software, Hardware and Services DIGITAL IT WORKFORCE SECURITY Cloud Native SW Multi-cloud Server, Client, Software & Software Defined Managed Security Development Management Storage, HCI Peripherals Data Center Services 8
Slide 9: Dell Technologies in Numbers
Dell Technologies in Numbers $83.5B $9.7B $7.7B+ $12B+ Non-GAAP Revenue Adjusted EBITDA (TTM) 1 Cash Flow from R&D Invested over (TTM)1 (11.6 % of Non-GAAP Revenue) Operations (TTM) Past 3 Fiscal Years2 #1 99% 40K+ 17% Virtualization, Storage, Sales Force Non-GAAP Revenue of Fortune 500 Served Serve
Slide 10: New Data Era Driving Significant Market Growth
New Data Era Driving Significant Market Growth Unprecedented Data Growth is Driving Accelerating IT Spend Growth of 4.5% in 20181 Significant IT Investment Required to Leverage Transformational Technologies 1 Edge Computing / IoT 2 Connectivity 3 AI / Machine Learning Server x86 / Client Client Clie
Slide 11: Dell Technologies Provides a Comprehensive Solution
Dell Technologies Provides a Comprehensive Solution Workforce Transformation Our Users Digital Transformation Security Transformation Applications IT Transformation Financial Global Services ServicesTM Infrastructure Services Consumption Enabled by Best-in-Class Go-To-Market and Channel Program with
Slide 12: Investment Highlights
Investment Highlights 1 Integrated, end-to-end technology provider at scale 2 Best-in-class go-to-market model 3 Unique portfolio of complementary solutions 4 Attractive financial model with accelerating momentum 5 Strong pro forma balance sheet and financial flexibility 6 World-class, founder-led m
Slide 13: Integrated, End-to-End Technology Provider at Scale
1 Integrated, End-to-End Technology Provider at Scale $84B $80B $56B $49B $45B $30B $6B Client Dell Technologies IBM HPQ Cisco Lenovo HPE NetApp Storage Server Networking Virtualization Cybersecurity Cloud Platform 13 Source: Company filings Note: TTM Non-GAAP revenue presented for all companies. Ci
Slide 14: Best-in-Class Go-to-Market Model
2 Best-in-Class Go-to-Market Model Dell Technologies Go-To-Market Model Highlights Broad go-to market reach across geographies and DT Select customer segments ï® Direct sales force Group — Enables deeper customer relationships with Enterprise greater opportunity for peripheral and services Group att
Slide 15: Unique Portfolio of Complementary Solutions
3 Unique Portfolio of Complementary Solutions Total Client Revenue / Revenue and Client1 Servers Profitability # Units # 1 Sector Size 1 Client Monitors Sector Size x86 Servers $189B Globally $76B External Storage PBBA / backup Server Storage All-flash Arrays Virtualization # Virtualization # 1 Sect
Slide 16: Driving Outperformance vs. Market
3 Driving Outperformance vs. Market HYPERCONVERGED SYSTEMS EXTERNAL STORAGE REVENUE1 MAINSTREAM SERVER REVENUE2 REVENUE3 Forecast Forecast Forecast +44.6% +0.5% +16.3% +51% +142% +112% +42.5% +39.1% +21.7% +30.4% +76% +71% +77% YoY +19.3% +24.7% +9.4% +18.9% +18.8% ISG -17.3% -23.2% TOTAL CLIENT COM
Slide 17: Attractive Financial Model & High FCF Conversion
4 Attractive Financial Model & High FCF Conversion Ex. Public Subs1 Publicly Traded Subsidiaries2 Consolidated Non-GAAP ($ in billions) TTM Q1 FY2019 Revenue $74.4 $8.1 $0.5 $0.5 $83.5 Operating Income $5.8 $2.7 $(0.1) $(0.0) $8.4 Op. Inc. Margin (%) 7.8% 33.6% N/A N/A 10.0% Net Income $2.7 $2.2 $(0
Slide 18: Significant Momentum Across Businesses
18 Significant Momentum Across Businesses Source: Dell Technologies Q1 FY2019 10-Q public filing. 1 See appendix for reconciliation of GAAP to Non-GAAP measures. Note: Financial metrics may not visually foot due to rounding. (Non-GAAP Revenue; $ in billions) Q1 FY2018 Q1 FY2019 % YoY Growth Infrastr
Slide 19: Strong Balance Sheet and Financial Flexibility
5 Strong Balance Sheet and Financial Flexibility ~$13B gross debt paid down since the EMC transaction Dell Technologies Core Debt Trajectory Pro Forma Liquidity Profile ~$10.7B1 of cash and investments will remain on balance sheet $48.8 $8.1B1 of cash and investments excluding VMware $39.8 $37.8 ~$5
Slide 20: World-Class, Founder-Led Management Team
6 World-Class, Founder-Led Management Team Michael S. Dell Chairman of the Board & Chief Executive Officer Tom Sweet Jeff Clarke Marius Haas Bill Scannell CFO Vice Chairman, President and Chief President, Global Products and Ops. Commercial Officer Enterprise Sales Dell EMC Pat Gelsinger Rob Mee Mik
Slide 21: Financial Policy & Objectives
Financial Policy & Objectives Simplifies Dell Technologies’ Capital Structure While Maintaining VMware Independence Remaining committed to a disciplined financial policy as we re-emerge in the public equity markets Commitment to Deleveraging and Disciplined Investment Approach Achieving an IG Rating
Slide 22: Financial Guidance on Non-GAAP Revenue / Income
Financial Guidance on Non-GAAP Revenue / Income FY2019 Guidance Long Term Targets 4 – 6% FY20-FY23 CAGR Total $86.5B - 88.5B at current market projections Non- ~5 – 7pts Mainstream Server growth premium vs. market GAAP ISG Growth 10% – 12% ~8 – 9pts External Storage growth premium vs. market Revenue
Slide 23: Illustrative Value Framework
Illustrative Value Framework ($ in billions) Free Cash TTM Non-GAAP Revenue Net Income Flow¹ Represents levered Dell Consolidated Dell Technologies $ 83.5 $ 4.8 $ 6.1 free cash flow after tax and debt service Technologies (-) VMware2 8.1 2.2 3.3 (Excluding (-) Pivotal2 0.5 (0.1) (0.1) Publicly Trade
Slide 24: Illustrative Implied Valuation Multiple
Illustrative Implied Valuation Multiple Max. Cash Zero Cash Election Election Illustrative Value of DVMT Per Share ($) (1) $109.00 $109.00 A (x) Total DVMT Shares (M) 199.4 199.4 B (=) Illustrative Value of Total DVMT Consideration ($B) $21.7 $21.7 C = A * B (-) Illustrative DVMT Cash Election ($B)
Slide 25: Committed Long-Term Stockholders
Committed Long-Term Stockholders Michael Dell will continue to serve as Chairman and CEO Michael remains a committed stockholder and will beneficially own ~47 – 54% of Dell Technologies on a fully diluted basis Michael’s shares will be subject to 180-day lockup period Silver Lake remains a committed
Slide 26: Michael Dell Closing Thoughts
Michael Dell Closing Thoughts 26
Slide 27: Appendix: Supplementary Materials
Appendix: Supplementary Materials 27
Slide 28: Capital Structure
Capital Structure1 Q1 FY2019 ($ in billions) EMC Close 1Q’18 2Q’18 3Q’18 4Q’18 1Q’19 Cash & Short-Term Investments $ 15.5 $ 14.9 $ 15.2 $ 18.0 $ 20.3 $ 21.7 Cash & Short-Term Investments (excluding VMware) 6.8 6.0 6.0 6.1 8.3 8.1 Core Secured Debt 2 35.4 30.7 29.3 29.1 28.7 29.1 Core Unsecured Debt
Slide 29: GAAP to Non-GAAP Reconciliation Summary Overview
GAAP to Non-GAAP Reconciliation Summary Overview Ex. Public Subs VMW PVTL SCWX Dell Technologies Consolidated ($ in millions) Calculated Core Dell Q1 FY19 TTM Q1 FY19 TTM GAAP Net revenue 73,267 8,105 544 480 82,396 Impact of purchase accounting 1,101 - - - 1,101 Non-GAAP Net revenue 74,368 8,105 54
Slide 30: GAAP to Non-GAAP Reconciliation (Cont'd)
GAAP to Non-GAAP Reconciliation (Cont’d) Dell Technologies Consolidated ($ in millions) FY18 + Q1 FY19 - Q1 FY18 TTM GAAP Net revenue 79,040 21,356 18,000 82,396 Impact of purchase accounting 1,269 187 355 1,101 Non-GAAP Net revenue 80,309 21,543 18,355 83,497 GAAP Operating income / (loss) (2,416)
Slide 31: GAAP to Non-GAAP Reconciliation (Cont'd) Secureworks
GAAP to Non-GAAP Reconciliation (Cont’d) Secureworks ($ in millions) FY18 + Q1 FY19 - Q1 FY18 TTM GAAP Net revenue 468 126 114 480 Impact of purchase accounting - - Non-GAAP Net revenue 468 126 114 480 GAAP Operating income / (loss) (83) (18) (19) (82) Amortization of intangibles 28 7 7 28 Impact of
Slide 32: GAAP to Non-GAAP Reconciliation (Cont'd) Pivotal
GAAP to Non-GAAP Reconciliation (Cont’d) Pivotal ($ in millions) FY18 + Q1 FY19 - Q1 FY18 TTM GAAP Net revenue 509 156 121 544 Impact of purchase accounting - - - - Non-GAAP Net revenue 509 156 121 544 GAAP Operating income / (loss) (168) (34) (48) (153) Amortization of intangibles 11 2 3 10 Impact
Slide 33: GAAP to Non-GAAP Reconciliation (Cont'd) VMware
GAAP to Non-GAAP Reconciliation (Cont’d) VMware ($ in millions) FY18 + Q1 FY19 - Q1 FY18 TTM GAAP Net revenue 7,862 2,008 1,765 8,105 Impact of purchase accounting - - - - Non-GAAP Net revenue 7,862 2,008 1,765 8,105 GAAP Operating income / (loss) 1,702 382 261 1,823 Amortization of intangibles 132
Slide 34: GAAP to Non-GAAP Reconciliation (Cont'd) Derived Core Dell
GAAP to Non-GAAP Reconciliation (Cont’d) Derived “Core Dell” (Excluding Public Subsidiaries) ($ in millions) FY18 + Q1 FY19 - Q1 FY18 TTM GAAP Net revenue 70,201 19,066 16,000 73,267 Impact of purchase accounting 1,269 187 355 1,101 Non-GAAP Net revenue 71,470 19,253 16,355 74,368 GAAP Operating inc
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