Broad-based performance with growth in revenue
and profit for both Enterprise and Consumer segments
Announces Enterprise Security asset sale
agreement with Broadcom for $10.7 billion in cash
Symantec Corp. (NASDAQ: SYMC), the world’s leading cyber
security company, today reported results for its first quarter
fiscal year 2020 ended July 5, 2019. The company’s first quarter of
fiscal year 2020 consists of a 14 week period, compared to the
first quarter of fiscal year 2019, which consisted of a 13 week
period.
First Quarter Fiscal Year 2020 Financial Highlights:
- GAAP revenue was $1.247 billion, up 8% YoY and non-GAAP revenue
was $1.251 billion, up 7% YoY
- GAAP operating margin of 13%, up 13 ppt YoY and non-GAAP
operating margin of 30%, up 2 ppt YoY
- GAAP diluted EPS was $0.04, up $0.14 YoY and non-GAAP diluted
EPS was $0.43, up $0.08 YoY or 23% YoY
- Cash flow from operating activities of $325 million
“We are pleased with our performance in the first quarter,
achieving revenue above guidance in both Enterprise Security and
Consumer Cyber Safety,” said Rick Hill, Symantec Interim President
and CEO. “The performance of our management and employees has been
outstanding this quarter. In addition to delivering this
operational performance, our management team worked around the
clock to execute a definitive purchase agreement for the sale of
our Enterprise Security assets to Broadcom. I could not be prouder
or more thankful to each and every one of them. The Enterprise
Security assets, which include the Symantec name, will become part
of the Broadcom Software platform, and will ensure continued
cyber-security protection for our worldwide customers for whom our
Enterprise employees so tirelessly work. It is a validation of our
Integrated Cyber Defense strategy, the strength of the Symantec
Brand in Enterprise and the quality of the products that make the
world a safer place. This transaction enables us to unlock the
value of Enterprise Security for our shareholders, return capital
to our shareholders, and position our industry recognized franchise
in Consumer Cyber Safety, Norton LifeLock, for growth in Home and
Small Business.”
“We are also pleased to announce the Board of Directors approved
an increase of $1.1 billion to our existing remaining share
repurchase authorization, bringing the total available to $1.6
billion,” continued Mr. Hill. “These incremental share repurchases
will be executed opportunistically over time, after the close of
the transaction, and when funds are received and repatriated to
allow for their use in the buyback, while maintaining our current
debt levels.”
“We delivered better-than-expected results for the first quarter
and are executing on our stated goal to increase productivity and
reduce complexity in how we manage the business,” said Vincent
Pilette, Executive Vice President and CFO. “During the first
quarter of fiscal year 2020, we also identified structural savings
and management efficiencies that needed to be implemented to
achieve productivity gains across the company. In addition to the
sale of the Enterprise Security assets, simultaneously, but
entirely separately, we are implementing the fiscal year 2020
company-wide restructuring plan signaled during our last earnings
conference call.”
Fiscal Year 2020 Restructuring Plan
Today, Symantec announced a fiscal year 2020 restructuring plan
to improve productivity and reduce complexity in the way it manages
the business. The Company expects to reduce net global headcount by
approximately 7%. The Company also plans to downsize, vacate or
close certain facilities and data centers in connection with the
restructuring plan. The Company estimates that it will incur total
costs in connection with the restructuring of approximately $100
million, with approximately $75 million for severance and
termination benefits and $25 million for site closures. These
actions are expected to be completed in fiscal 2020.
Second Quarter Fiscal Year 2020 Guidance
Our second quarter guidance includes the Enterprise segment, as
we do not expect the sale of our Enterprise Security Assets to
Broadcom to close until after the second quarter.
Second Quarter Fiscal 2020
GAAP
Non-GAAP
Revenue
$1.153B - $1.203B
$1.155B - $1.205B
Operating Margin
10% - 12%
31% - 33%
EPS (Diluted)
$0.08 - $0.12
$0.40 - $0.44
Symantec's Board of Directors has declared a quarterly cash
dividend of $0.075 per common share to be paid on September 18,
2019, to all shareholders of record as of the close of business on
August 26, 2019.
To help readers understand our past financial performance and
our future results, we supplement the financial results that we
provide in accordance with generally accepted accounting
principles, or GAAP, with non-GAAP financial measures. The methods
we use to produce non-GAAP results are not in accordance with GAAP
and may differ from the methods used by other companies. Additional
information regarding our non-GAAP measures are provided below.
In a separate press release, Symantec announced a definitive
agreement to sell its Enterprise Security assets to Broadcom for
$10.7 billion in cash. The transaction is expected to close before
the end of calendar year 2019.
For additional details regarding Symantec’s results and outlook,
please see the IR Earnings Deck and the Supplemental Information on
the investor relations page of our website at:
http://www.symantec.com/invest.
Conference Call
Symantec had previously scheduled a conference call for 5:00
p.m. ET / 2:00 p.m. PT today to discuss its results for its first
quarter fiscal year 2020 ended July 5, 2019 and to review guidance.
In light of the sale of the Company’s Enterprise Security assets
to Broadcom announced today, management will discuss the details of
the transaction and its first quarter fiscal year 2020 results on a
conference call now scheduled for today, August 8, 2019, at 5:45
p.m. ET / 2:45 p.m. PT. Interested parties may access the
conference call through Symantec’s Investor Relations website at
http://investor.symantec.com/investor-relations/events-calendar/.
For telephone access to the conference, call (877) 475-6198 within
the United States or (970) 297-2372 from outside the United States.
Please call 15 minutes early and give the operator conference ID
number 8350238.
A replay and our prepared remarks will be available on the
investor relations home page shortly after the call is
completed.
About Symantec
Symantec Corporation (NASDAQ: SYMC), the world’s leading cyber
security company, helps organizations, governments and people
secure their most important data wherever it lives. Organizations
across the world look to Symantec for strategic, integrated
solutions to defend against sophisticated attacks across endpoints,
cloud and infrastructure. Likewise, a global community of more than
50 million people and families rely on Symantec’s Norton and
LifeLock product suites to protect their digital lives at home and
across their devices. Symantec operates one of the world’s largest
civilian cyber intelligence networks, allowing it to see and
protect against the most advanced threats. For additional
information, please visit www.symantec.com or connect with us on
Facebook, Twitter, and LinkedIn.
NOTE TO EDITORS: If you would like additional information
on Symantec Corporation and its products, please visit the Symantec
News Room at http://www.symantec.com/news. All prices noted are in
U.S. dollars and are valid only in the United States.
Symantec, the Symantec logo and the Checkmark logo are
trademarks or registered trademarks of Symantec Corporation or its
affiliates in the U.S. and other countries. Other names may be
trademarks of their respective owners.
Forward-Looking Statements: This press release contains
statements which may be considered forward-looking within the
meaning of the U.S. federal securities laws. In some cases, you can
identify these forward-looking statements by the use of terms such
as “expect,” “will,” “continue,” “plan” or similar expressions, and
variations or negatives of these words, but the absence of these
words does not mean that a statement is not forward-looking. All
statements other than statements of historical fact are statements
that could be deemed forward-looking statements, including, but not
limited to: statements relating to the fiscal year 2020
restructuring plan and the costs and timing of the restructuring
plan; the information contained under the caption “Second Quarter
Fiscal Year 2020 Guidance”; the statement relating to the proposed
transaction to sell the Enterprise Security assets to Broadcom and
the expected timing to close that transaction; any other statements
of expectation or belief; and any statements of assumptions
underlying any of the foregoing. To the extent a forward-looking
statement contained in this release speaks as of a period covered
by prior guidance, the information in this release is intended to
supersede it. Investors should not rely on any prior guidance
provided by the company, including for full year fiscal year 2020.
Furthermore, investors should not rely on any prior guidance for
the fiscal year 2020. These statements are subject to known and
unknown risks, uncertainties and other factors that may cause our
actual results, levels of activity, performance or achievements to
differ materially from results expressed or implied in this press
release. Such risk factors include, but are not limited to, those
related to: any of the conditions to the completion of the proposed
transaction for the sale of the Enterprise Security assets to
Broadcom; the occurrence of any event, change or other circumstance
that could give rise to the termination of the agreement for the
sale of the Enterprise Security assets to Broadcom; the effect of
the sale of the Enterprise Security assets on Symantec’s retained
businesses and products; retention of existing executive leadership
team members; difficulties in improving sales execution and product
development during leadership transitions; difficulties in
executing a new operating model for the consumer cyber safety
business; difficulties in reducing run rate expenses and
eliminating underutilized assets; general business and economic
conditions; matters arising out of our completed Audit Committee
investigation and the ongoing U.S. Securities and Exchange
Commission investigation; fluctuations and volatility in Symantec’s
stock price; the ability of Symantec to successfully execute
strategic plans; the ability to maintain customer and partner
relationships; the ability of Symantec to achieve its cost and
operating efficiency goals; the anticipated growth of certain
market segments; Symantec’s sales pipeline and business strategy;
fluctuations in tax rates and foreign currency exchange rates; the
timing and market acceptance of new product releases and upgrades;
and the successful development of new products and the degree to
which these products gain market acceptance. Additional information
concerning these and other risk factors is contained in the Risk
Factors sections of Symantec’s most recent reports on Form 10-K and
Form 10-Q. Symantec assumes no obligation, and does not intend, to
update these forward-looking statements as a result of future
events or developments.
USE OF NON-GAAP FINANCIAL INFORMATION: We use non-GAAP
measures of adjusted revenues, operating margin, net income and
earnings per share, which are adjusted from results based on GAAP
to include certain purchase accounting adjustments and exclude
certain expenses, gains and losses. Additionally, we provide the
non-GAAP metric of reported billings. These non-GAAP financial
measures are provided to enhance the user’s understanding of our
past financial performance and our prospects for the future. Our
management team uses these non-GAAP financial measures in assessing
Symantec’s performance, as well as in planning and forecasting
future periods. These non-GAAP financial measures are not computed
according to GAAP and the methods we use to compute them may differ
from the methods used by other companies. Non-GAAP financial
measures are supplemental, should not be considered a substitute
for financial information presented in accordance with GAAP and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with GAAP. Readers are encouraged
to review the reconciliation of our non-GAAP financial measures to
the comparable GAAP results, which is attached to our quarterly
earnings release and which can be found, along with other financial
information including the IR Earnings Deck and Supplemental
Information, on the investor relations page of our website at:
http://www.symantec.com/invest.
SYMANTEC CORPORATION
Condensed Consolidated Balance
Sheets
(In millions,
unaudited)
July 5, 2019
March 29, 2019 (1)
ASSETS
Current assets:
Cash and cash equivalents
$
1,532
$
1,791
Short-term investments
162
252
Accounts receivable, net
438
708
Other current assets
429
435
Total current assets
2,561
3,186
Property and equipment, net
784
790
Operating lease assets
183
—
Intangible assets, net
2,137
2,250
Goodwill
8,449
8,450
Other long-term assets
1,255
1,262
Total assets
$
15,369
$
15,938
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
135
$
165
Accrued compensation and benefits
198
257
Current portion of long-term debt
494
491
Contract liabilities
2,211
2,320
Current operating lease liabilities
45
—
Other current liabilities
525
533
Total current liabilities
3,608
3,766
Long-term debt
3,964
3,961
Long-term contract liabilities
688
736
Deferred income tax liabilities
548
577
Long-term income taxes payable
1,078
1,076
Long-term operating lease liabilities
163
—
Other long-term liabilities
70
84
Total liabilities
10,119
10,200
Total stockholders’ equity
5,250
5,738
Total liabilities and stockholders’
equity
$
15,369
$
15,938
(1) Derived from audited consolidated financial statements.
SYMANTEC CORPORATION
Condensed Consolidated
Statements of Operations
(In millions, except per share
data, unaudited)
Three Months Ended
July 5, 2019
June 29, 2018
Net revenues
$
1,247
$
1,156
Cost of revenues
272
249
Gross profit
975
907
Operating expenses:
Sales and marketing
393
386
Research and development
241
237
General and administrative
108
133
Amortization of intangible assets
51
53
Restructuring, transition and other
costs
25
96
Total operating expenses
818
905
Operating income
157
2
Interest expense
(49
)
(52
)
Other expense, net
—
(19
)
Income (loss) from continuing operations
before income taxes
108
(69
)
Income tax expense (benefit)
82
(4
)
Income (loss) from continuing
operations
26
(65
)
Income from discontinued operations
—
5
Net income (loss)
$
26
$
(60
)
Income (loss) per share - basic:
Continuing operations
$
0.04
$
(0.10
)
Discontinued operations
$
—
$
0.01
Net income (loss) per share - basic
(1)
$
0.04
$
(0.10
)
Income (loss) per share - diluted:
Continuing operations
$
0.04
$
(0.10
)
Discontinued operations
$
—
$
0.01
Net income (loss) per share - diluted
(1)
$
0.04
$
(0.10
)
Weighted-average shares outstanding:
Basic
619
624
Diluted
642
624
(1) Net income (loss) per share may not add due to rounding.
SYMANTEC CORPORATION
Condensed Consolidated
Statements of Cash Flows
(In millions,
unaudited)
Three Months Ended
July 5, 2019
June 29, 2018
OPERATING ACTIVITIES:
Net income (loss)
$
26
$
(60
)
Income from discontinued operations
—
(5
)
Adjustments:
Amortization and depreciation
158
152
Impairments of long-lived assets
3
4
Stock-based compensation expense
80
113
Deferred income taxes
(30
)
(42
)
Loss from equity interest
11
26
Other
13
(47
)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net
270
321
Accounts payable
(21
)
19
Accrued compensation and benefits
(46
)
(77
)
Contract liabilities
(161
)
(106
)
Income taxes payable
72
(1
)
Other assets
5
(5
)
Other liabilities
(55
)
39
Net cash provided by operating
activities
325
331
INVESTING ACTIVITIES:
Purchases of property and equipment
(49
)
(44
)
Payments for acquisitions, net of cash
acquired
—
(5
)
Proceeds from maturities and sales of
short-term investments
92
64
Other
(5
)
(5
)
Net cash provided by investing
activities
38
10
FINANCING ACTIVITIES:
Net proceeds from sales of common stock
under employee stock incentive plans
37
4
Tax payments related to restricted stock
units
(52
)
(42
)
Dividends and dividend equivalents
paid
(51
)
(60
)
Repurchases of common stock
(559
)
—
Net cash used in financing activities
(625
)
(98
)
Effect of exchange rate fluctuations on
cash and cash equivalents
3
(16
)
Change in cash and cash equivalents
(259
)
227
Beginning cash and cash equivalents
1,791
1,774
Ending cash and cash equivalents
$
1,532
$
2,001
SYMANTEC CORPORATION
Reconciliation of Selected
GAAP Measures to Non-GAAP Measures (1)
(In millions, except per share
data, unaudited)
Three Months Ended
July 5, 2019
June 29, 2018
Net revenues
$
1,247
$
1,156
Contract liabilities fair value
adjustment
4
9
Net revenues (Non-GAAP)
$
1,251
$
1,165
Operating income
$
157
$
2
Contract liabilities fair value
adjustment
4
9
Stock-based compensation
80
113
Amortization of intangible assets
112
111
Restructuring, transition and other
costs
25
96
Other
1
(3
)
Operating income (Non-GAAP)
$
379
$
328
Operating margin
13
%
0
%
Operating margin (Non-GAAP)
30
%
28
%
Net income (loss)
$
26
$
(60
)
Adjustments to income (loss) from
continuing operations:
Contract liabilities fair value
adjustment
4
9
Stock-based compensation
80
113
Amortization of intangible assets
112
111
Restructuring, transition and other
costs
25
96
Other
1
(3
)
Non-cash interest expense
6
6
Loss from equity interest
11
26
Total adjustments to GAAP income (loss)
before provision for income taxes
239
358
Income tax effect of non-GAAP
adjustments
(49
)
(61
)
Significant tax matters (2)
62
—
Total adjustment to GAAP provision for
income taxes
13
(61
)
Total adjustment to continuing
operations
252
297
Total adjustment from discontinued
operations
—
(5
)
Net income (Non-GAAP)
$
278
$
232
Diluted net income (loss) per
share
$
0.04
$
(0.10
)
Adjustments to diluted net income per
share:
Contract liabilities fair value
adjustment
0.01
0.01
Stock-based compensation
0.12
0.18
Amortization of intangible assets
0.17
0.18
Restructuring, transition and other
costs
0.04
0.15
Other
—
—
Non-cash interest expense
0.01
0.01
Loss from equity interest
0.02
0.04
Total adjustment to GAAP income (loss)
before provision for income taxes
0.37
0.57
Income tax effect of non-GAAP
adjustments
(0.08
)
(0.10
)
Significant tax matters (2)
0.10
—
Total adjustment to GAAP provision for
income taxes
0.02
(0.10
)
Total adjustment to continuing
operations
0.39
0.48
Adjustment for discontinued operations
—
(0.01
)
Incremental dilution effect
—
(0.02
)
Diluted net income per share (Non-GAAP)
(3)
$
0.43
$
0.35
Diluted weighted-average shares
outstanding
642
624
Incremental dilution
—
47
Diluted weighted-average shares
outstanding (Non-GAAP) (4)
642
671
(1) This presentation includes non-GAAP measures. Non-GAAP
financial measures are supplemental and should not be considered a
substitute for financial information presented in accordance with
GAAP. For a detailed explanation of these non-GAAP measures, please
see Appendix A.
(2) During Q1FY20, we recorded charges to account for uncertain
tax positions related to the Ninth Circuit's recent holding in
Altera Corp. v. Commissioner. See Appendix A for additional
information.
(3) Net income per share amounts may not add due to
rounding.
(4) Diluted GAAP and non-GAAP weighted-average shares
outstanding are the same, except in periods in which there is a
GAAP loss from continuing operations. In accordance with GAAP, we
do not present dilution for GAAP in periods in which there is a
loss from continuing operations. However, if there is non-GAAP net
income, we present dilution for non-GAAP weighted-average shares
outstanding in an amount equal to the dilution that would have been
presented had there been GAAP income from continuing operations for
the period.
SYMANTEC CORPORATION
Reconciliation of GAAP Revenue
to Non-GAAP Reported Billings (1)
(In millions,
unaudited)
Three Months Ended
July 5, 2019
June 29, 2018
Total Company Reported Billings
(Non-GAAP)
Total revenue
$
1,247
$
1,156
Add: Contract liabilities (end of
period)
2,899
2,767
Less: Contract liabilities (beginning of
period)
(3,056
)
(3,103
)
Contract liabilities adjustment due to
adoption of the new revenue recognition standard (2)
—
169
Other contract liabilities adjustments
—
7
Reported billings (Non-GAAP)
$
1,090
$
996
Enterprise Security Reported Billings
(Non-GAAP)
Total revenue
$
611
$
556
Add: Contract liabilities (end of
period)
1,888
1,714
Less: Contract liabilities (beginning of
period)
(2,002
)
(2,010
)
Contract liabilities adjustment due to
adoption of the new revenue recognition standard (2)
—
186
Other contract liabilities adjustments
—
7
Reported billings (Non-GAAP)
$
497
$
453
Consumer Cyber Safety Reported Billings
(Non-GAAP)
Total revenue
$
636
$
600
Add: Contract liabilities (end of
period)
1,011
1,053
Less: Contract liabilities (beginning of
period)
(1,054
)
(1,093
)
Contract liabilities adjustment due to
adoption of the new revenue recognition standard (2)
—
(17
)
Reported billings (Non-GAAP)
$
593
$
543
(1) This presentation includes non-GAAP measures. Non-GAAP
financial measures are supplemental and should not be considered a
substitute for financial information presented in accordance with
GAAP. For a detailed explanation of these non-GAAP measures, please
see Appendix A.
(2) We adopted the new revenue recognition accounting standard
(ASC 606) on a modified retrospective basis during Q1 FY19 which
required an adjustment to the opening Q1FY19 contract liabilities
balance. This accounting adjustment is excluded from our reported
billings calculation.
SYMANTEC CORPORATION
Guidance and Reconciliation of
GAAP to Non-GAAP Revenue, Operating Income and EPS (1) (2)
(In millions, except per share
data, unaudited)
Second Quarter Fiscal Year 2020
Revenue Guidance
GAAP revenue range
$1,153
—
$1,203
Adjustment:
Contract liabilities fair value
adjustment
$2
Non-GAAP revenue range
$1,155
—
$1,205
Operating Margin Guidance and
Reconciliation
GAAP operating margin
10%
—
12%
Adjustments:
Contract liabilities fair value
adjustment
0%
Stock-based compensation
6%
Amortization of intangible assets
10%
—
9%
Restructuring, transition and other
costs
5%
Non-GAAP operating margin
31%
—
33%
Earnings Per Share Guidance and
Reconciliation
GAAP diluted income per share range
(3)
$0.08
—
$0.12
Adjustments:
Contract liabilities fair value
adjustment
$0.00
Stock-based compensation
$0.11
Amortization of intangible assets
$0.17
Restructuring, transition and other
costs
$0.10
Non-cash interest expense
$0.01
Income tax effects and adjustments
($0.07)
Non-GAAP diluted earnings per share range
(3)
$0.40
—
$0.44
(1) This presentation includes non-GAAP measures. Non-GAAP
financial measures are supplemental and should not be considered a
substitute for financial information presented in accordance with
GAAP. For a detailed explanation of these non-GAAP measures, please
see Appendix A.
(2) Amounts may not add due to rounding.
(3) GAAP income per share, adjustments per share and non-GAAP
income per share are calculated using diluted share count of 648
million for Q2 FY20.
SYMANTEC CORPORATION
Appendix A
Explanation of Non-GAAP Measures
Objective of non-GAAP measures: We
believe our presentation of non-GAAP financial measures, when taken
together with corresponding GAAP financial measures, provides
meaningful supplemental information regarding the Company’s
operating performance for the reasons discussed below. Our
management team uses these non-GAAP financial measures in assessing
Symantec’s performance, as well as in planning and forecasting
future periods. Due to the importance of these measures in managing
the business, we use non-GAAP measures in the evaluation of
management’s compensation. These non-GAAP financial measures are
not computed according to GAAP and the methods we use to compute
them may differ from the methods used by other companies. Non-GAAP
financial measures are supplemental and should not be considered a
substitute for financial information presented in accordance with
GAAP and should be read only in conjunction with our consolidated
financial statements prepared in accordance with GAAP.
Contract liabilities adjustment:
Our non-GAAP net revenues eliminate the impact of contract
liabilities purchase accounting adjustments required by GAAP. GAAP
requires an adjustment to the liability for acquired contract
liabilities such that the liability approximates how much we, the
acquirer, would have to pay a third party to assume the liability.
We believe that eliminating the impact of this adjustment improves
the comparability of revenues between periods. Also, although the
adjustment amounts will never be recognized in our GAAP financial
statements, we do not expect the acquisitions to affect the future
renewal rates of revenues excluded by the adjustments. In addition,
our management uses non-GAAP net revenues, adjusted for the impact
of purchase accounting adjustments to assess our operating
performance and overall revenue trends. Nevertheless, non-GAAP net
revenues has limitations as an analytical tool and should not be
considered in isolation or as a substitute for GAAP net revenues.
We believe these adjustments are useful to investors as an
additional means to reflect revenue trends of our business.
However, other companies in our industry may not calculate these
measures in the same manner which may limit their usefulness for
comparative purposes.
Inventory fair value adjustment:
Purchase accounting requires us to measure acquired inventory at
fair value. The fair value of inventory reflects the acquired
company’s cost of manufacturing plus a portion of the expected
profit margin. These non-GAAP adjustments to our cost of revenues
exclude the expected profit margin component that is recorded under
purchase accounting associated with our acquisitions. We believe
the adjustments are useful to investors as an additional means to
reflect cost of revenues and gross margin trends of our
business.
Stock-based compensation: This
consists of expenses for employee restricted stock units,
performance-based awards, bonus share programs, stock options and
our employee stock purchase plan, determined in accordance with
GAAP. We evaluate our performance both with and without these
measures because stock-based compensation is a non-cash expense and
can vary significantly over time based on the timing, size, nature
and design of the awards granted, and is influenced in part by
certain factors that are generally beyond our control, such as the
volatility of the market value of our common stock. In addition,
for comparability purposes, we believe it is useful to provide a
non-GAAP financial measure that excludes stock-based compensation
to facilitate the comparison of our results to those of other
companies in our industry.
Amortization of intangible assets:
Amortization of intangible assets consists of amortization of
acquisition-related intangibles assets such as developed
technology, customer relationships and trade names acquired in
connection with business combinations. We record charges relating
to the amortization of these intangibles within both cost of
revenues and operating expenses in our GAAP financial statements.
Under purchase accounting, we are required to allocate a portion of
the purchase price to intangible assets acquired and amortize this
amount over the estimated useful lives of the acquired intangible
assets. However, the purchase price allocated to these assets is
not necessarily reflective of the cost we would incur to internally
develop the intangible asset. Further, amortization charges for our
acquired intangible assets are inconsistent in size and are
significantly impacted by the timing and valuation of our
acquisitions. We eliminate these charges from our non-GAAP
operating results to facilitate an evaluation of our current
operating performance and provide better comparability to our past
operating performance.
Restructuring, transition and other
costs: Restructuring charges are costs associated with a
formal restructuring plan and are primarily related to employee
severance and benefit arrangements. Other charges include
facilities and other exit and disposal costs, including asset
write-offs. Transition costs are associated with formal discrete
strategic information technology initiatives and primarily consist
of consulting charges associated with our enterprise resource
planning and supporting systems and costs to automate business
processes. In addition, transition costs include expenses
associated with our divestitures. We exclude restructuring,
transition and other costs from our non-GAAP results as we believe
that these costs are incremental to core activities that arise in
the ordinary course of our business and do not reflect our current
operating performance, and that excluding these charges facilitates
a more meaningful evaluation of our current operating performance
and comparisons to our past operating performance.
Acquisition-related costs: These
represent the transaction and business integration costs related to
significant acquisitions that are charged to operating expense in
our GAAP financial statements. These costs include incremental
expenses incurred to affect these business combinations such as
advisory, legal, accounting, valuation, and other professional or
consulting fees. We exclude these costs from our non-GAAP results
as they have no direct correlation to the operation of our
business, and because we believe that the non-GAAP financial
measures excluding these costs provide meaningful supplemental
information regarding the spending trends of our business. In
addition, these costs vary, depending on the size and complexity of
the acquisitions, and are not indicative of costs of future
acquisitions.
Litigation settlement: We may
periodically incur charges or benefits related to litigation
settlements. We exclude these charges and benefits when associated
with a significant settlement because we do not believe they are
reflective of ongoing business and operating results.
Non-cash interest expense and amortization
of debt issuance costs: In accordance with GAAP, we
separately account for the value of the conversion feature on our
convertible notes as a debt discount that reflects our assumed
non-convertible debt borrowing rates. We amortize the discount and
debt issuance costs over the term of the related debt. We exclude
the difference between the imputed interest expense, which includes
the amortization of the conversion feature and of the issuance
costs, and the coupon interest payments because we believe that
excluding these costs provides meaningful supplemental information
regarding the cash cost of our convertible debt and enhance
investors’ ability to view the Company’s results from management’s
perspective.
Gain on divestitures: We
periodically recognize gains on divestitures. We have excluded
these gains for purposes of calculating our non-GAAP results. We
believe making these adjustments facilitates a better evaluation of
our current operating performance and comparisons to past operating
results.
Gain (loss) from equity interest:
We record gains or losses in equity method investments representing
net income or loss attributable to our noncontrolling interest in
companies over which we have limited control and visibility. We
exclude such gains and losses in full because we lack control over
the operations of the investee and the related gains and losses are
not indicative of our ongoing core results.
Income tax effects and adjustments:
During the first quarter of fiscal 2020, we adopted a projected
long-term non-GAAP tax rate of 20.0% in order to provide better
consistency across the interim financial reporting periods by
eliminating the income tax effects of the non-GAAP adjustment to
our operating results described above, as well as significant
discrete items. Our long-term rate could be subject to change for a
variety of reasons, such as significant changes in the geographic
earnings mix including acquisition or divestiture activity, or
fundamental tax law changes in major jurisdictions where we
operate. We will evaluate and assess the appropriateness of this
rate annually, giving due consideration to the impacts of
significant events and structural changes in the Company. We
believe making these adjustments facilitates a better evaluation of
our current operating performance and comparisons to past operating
results. On June 7, 2019, a three-judge panel from the Ninth
Circuit Court of Appeals issued an opinion in Altera Corp. v.
Commissioner which reversed a United States Tax Court decision
regarding the treatment of share-based compensation expense in a
cost sharing arrangement. As a result, we recorded a cumulative
income tax expense of $62 million in the first quarter of fiscal
2020, which has been excluded from our non-GAAP tax provision. For
fiscal 2019, as a result of U.S. tax reform, we used a non-GAAP tax
rate that excluded (1) the discrete impacts of changes in tax
legislation, (2) most other significant discrete items, (3) certain
unique GAAP reporting requirements under discontinued operations
and (4) the income tax effects of the non-GAAP adjustment to our
operating results described above.
Discontinued operations: In January
2016, we completed the sale of assets related to our Veritas
operations. The results of Veritas operations are presented as
discontinued operations in our Consolidated Statements of
Operations and thus have been excluded from non-GAAP net income and
segment results for all reported periods.
Diluted GAAP and non-GAAP weighted-average
shares outstanding: Diluted GAAP and non-GAAP
weighted-average shares outstanding are the same, except in periods
that there is a GAAP loss from continuing operations. In accordance
with GAAP, we do not present dilution for GAAP in periods in which
there is a loss from continuing operations. However, if there is
non-GAAP net income, we present dilution for non-GAAP
weighted-average shares outstanding in an amount equal to the
dilution that would have been presented had there been GAAP income
from continuing operations for the period.
Reported billings: We define
reported billings as total revenue plus the change in adjusted
contract liabilities. The change in contract liabilities excludes
contract liabilities acquired or divested during the period as well
as the change in contract liabilities related to discontinued
operations that does not amortize to revenue from continuing
operations. We consider reported billings to be a useful metric for
management and investors because it facilitates an analysis of
changes in contract liabilities balances that are an indicator of
the health and visibility of our business. There are several
limitations related to the use of reported billings versus revenue
calculated in accordance with GAAP. First, reported billings
include amounts that have not yet been recognized as revenue.
Second, our calculation of reported billings may be different from
other companies in our industry, some of which may not use reported
billings, may calculate reported billings differently, may have
different reported billing frequencies, or may use other financial
measures to evaluate their performance, all of which could reduce
the usefulness of reported billings as a comparative measure. We
compensate for these limitations by providing specific information
regarding GAAP revenue and evaluating reported billings together
with revenue calculated in accordance with GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190808005879/en/
MEDIA CONTACT: Deirdre Sena Symantec Corp. (310) 922-6956
Deirdre_Sena@symantec.com
INVESTOR CONTACT: Cynthia Hiponia Symantec Corp. (650) 527-8020
Cynthia_Hiponia@symantec.com
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