Q4 GAAP revenue of $1.189 billion and non-GAAP
revenue of $1.195 billion
Fiscal year 2019 GAAP revenue of $4.731 billion
and non-GAAP revenue of $4.762 billion
Cash flow from operating activities for fiscal
year 2019 was $1.495 billion, up 57% year-over-year
Company repurchased 11 million shares and
retired $600 million in debt during the fourth quarter 2019
Symantec Corp. (NASDAQ: SYMC) today reported results for its
fourth quarter and full fiscal year 2019 ended March 29, 2019.
“We achieved company revenue in the fourth quarter in line with
guidance and generated strong cash flow from operating activities,”
said Richard S. Hill, Symantec Interim President and CEO. “Our
Consumer Cyber Safety segment continued to deliver solid results,
and we were pleased with increases in average revenue per user,
both year-over-year and sequentially. However, our Enterprise
Security revenue was below our guidance range due to lower than
expected bookings, which led to year-over-year reported billings
declining greater than we anticipated. Despite this weakness, we
remain confident in our Integrated Cyber Defense strategy, which
has produced a strong and competitive product portfolio. Moving
forward, in Enterprise Security we are focused on operational
discipline, increasing sales productivity, expanding operating
margins and managing the shift to our ratable cloud delivered
solutions. In Consumer Cyber Safety we will continue to execute on
multiple initiatives to drive revenue growth. With industry-leading
solutions across both our enterprise and consumer businesses, we
are optimistic that we are well positioned to execute against a
growing opportunity in the cyber defense market.”
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.
Fourth Quarter Fiscal 2019 Financial Highlights
- GAAP revenue was $1.189 billion,
non-GAAP revenue was $1.195 billion
- GAAP operating margin of 9%, non-GAAP
operating margin of 29%
- GAAP diluted EPS was $0.05, non-GAAP
diluted EPS was $0.39
- Cash flow from operating activities of
$547 million
Fiscal Year 2019 Financial Highlights
- GAAP revenue was $4.731 billion,
non-GAAP revenue was $4.762 billion
- GAAP operating margin of 8%, non-GAAP
operating margin of 30%
- GAAP diluted EPS was $0.05, non-GAAP
diluted EPS was $1.59
- Cash flow from operating activities of
$1.495 billion
Leadership Changes
In a separate press release issued today, Symantec announced
that Richard S. Hill has been named Interim President and CEO,
effective immediately. Mr. Hill succeeds Greg Clark, who has
stepped down as President and CEO and as a member of the Symantec
Board, also effective immediately. The Company will commence a
search process to find a permanent CEO.
Vincent Pilette, CFO of Logitech and former VP of Finance for
Hewlett Packard Enterprise’s server, storage and networking
business, has been appointed Executive Vice President and Chief
Financial Officer of Symantec, effective May 21, 2019. Mr.
Pilette’s appointment follows a comprehensive search process
initiated in connection with Nicholas Noviello’s departure as EVP
and CFO to pursue other opportunities, as announced on January 31,
2019.
First Quarter and Fiscal Year 2020
Guidance
First Quarter Fiscal
2020 GAAP Non-GAAP Revenue
$1.171B - $1.201B $1.175B - $1.205B Operating
Margin 5% - 7% 25% - 27% EPS (Diluted)
$0.01 - $0.05 $0.30 - $0.34
Fiscal Year 2020
Revenue $4.750B - $4.890B
$4.760B - $4.900B Operating Margin 13% - 15%
31% - 33% EPS (Diluted) $0.57 - $0.73 $1.65 -
$1.80
Symantec's Board of Directors has declared a quarterly cash
dividend of $0.075 per common share to be paid on June 26, 2019, to
all shareholders of record as of the close of business on June 10,
2019.
For additional details regarding Symantec’s results and outlook,
please see the Supplemental Information on the investor relations
page of our website at: http://www.symantec.com/invest.
Conference Call
Symantec has scheduled a conference call for 5:00 p.m. ET / 2:00
p.m. PT today to discuss its results for its fourth quarter and
full year fiscal 2019 ended March 29, 2019 and to review guidance.
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 4593466.
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, including the
information contained under the caption “First Quarter and Fiscal
Year 2020 Guidance” and the statements regarding Symantec’s
leadership changes and Symantec’s prospects for growth and value
creation, Symantec’s planned cash dividend, as well as other
projected financial and business results, including demand for its
products and services, Symantec’s enhanced capabilities, and
Symantec’s continued cost and operating efficiencies. 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 those related to: retention of existing executive
leadership team members; difficulties in improving sales execution
and product development during leadership transitions; general
business and economic conditions; our ability to integrate acquired
businesses and realize the expected benefits of the acquisitions;
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. Actual results may
differ materially from those contained in the forward-looking
statements in this press release. Symantec assumes no obligation,
and does not intend, to update these forward-looking statements as
a result of future events or developments. 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.
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 (previously referred to as
implied 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 Supplemental Information, on the investor
relations page of our website at: http://www.symantec.com/invest.
SYMANTEC CORPORATION
Condensed Consolidated Balance
Sheets (1)
(In millions, unaudited) March 29, 2019
March 30, 2018 (2) ASSETS Current
assets: Cash and cash equivalents $ 1,791 $ 1,774 Short-term
investments 252 388 Accounts receivable, net 708 809 Other current
assets 435 522 Total current assets 3,186 3,493 Property and
equipment, net 790 778 Intangible assets, net 2,250 2,643 Goodwill
8,450 8,319 Other long-term assets 1,262 526 Total assets $
15,938 $ 15,759
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 165 $ 168 Accrued
compensation and benefits 257 262 Current portion of long-term debt
491 — Contract liabilities (3) 2,320 2,368 Other current
liabilities 533 372 Total current liabilities 3,766 3,170
Long-term debt 3,961 5,026 Long-term contract liabilities (3) 736
735 Deferred income tax liabilities 577 592 Long-term income taxes
payable 1,076 1,126 Other long-term liabilities 84 87 Total
liabilities 10,200 10,736 Total stockholders’ equity 5,738
5,023 Total liabilities and stockholders’ equity $ 15,938 $
15,759
____________________
(1) We adopted the new revenue recognition accounting
standard (ASC 606) on a modified retrospective basis during Q1
FY19. The results as of March 29, 2019 are presented under the new
revenue recognition accounting standard, while prior period amounts
are not adjusted and continue to be reported under the prior
revenue recognition accounting standard (ASC 605). (2) Derived from
audited consolidated financial statements. (3) As a result of the
new revenue recognition accounting standard (ASC 606), amounts we
have previously referred to as deferred revenue are now referred to
as contract liabilities, which consist of the total of what is now
identified as deferred revenue and customer deposit liabilities in
all schedules throughout this document.
SYMANTEC
CORPORATION
Condensed Consolidated Statements of
Operations (1)
(In millions, except per share data, unaudited)
Three Months Ended Year Ended March
29, 2019 March 30, 2018 March 29, 2019
March 30, 2018 (2) Net revenues $ 1,189 $
1,210 $ 4,731 $ 4,834 Cost of revenues 279 264 1,050
1,032 Gross profit 910 946 3,681 3,802 Operating
expenses: Sales and marketing 378 354 1,493 1,593 Research and
development 236 257 913 956 General and administrative 102 143 447
574 Amortization of intangible assets 51 54 207 220 Restructuring,
transition and other costs 36 132 241 410
Total operating expenses 803 940 3,301
3,753 Operating income 107 6 380 49 Interest expense (51 )
(57 ) (208 ) (256 ) Gain (loss) on divestiture — (5 ) — 653 Other
expense, net (4 ) (9 ) (64 ) (9 ) Income (loss) from continuing
operations before income taxes 52 (65 ) 108 437 Income tax expense
(benefit) 22 (7 ) 92 (690 ) Income (loss) from
continuing operations 30 (58 ) 16 1,127 Income (loss) from
discontinued operations, net of income taxes 4 (1 ) 15
11 Net income (loss) $ 34 $ (59 ) $ 31
$ 1,138 Income (loss) per share - basic: Continuing
operations $ 0.05 $ (0.09 ) $ 0.03 $ 1.83 Discontinued operations $
0.01 $ (0.00 ) $ 0.02 $ 0.02 Net income (loss) per share - basic
(3) $ 0.05 $ (0.10 ) $ 0.05 $ 1.85 Income (loss) per share -
diluted: Continuing operations $ 0.05 $ (0.09 ) $ 0.02 $ 1.69
Discontinued operations $ 0.01 $ (0.00 ) $ 0.02 $ 0.02 Net income
(loss) per share - diluted (3) $ 0.05 $ (0.10 ) $ 0.05 $ 1.70
Weighted-average shares outstanding: Basic 637 621 632 616
Diluted 662 621 661 668
____________________
(1) We adopted the new revenue recognition accounting
standard (ASC 606) on a modified retrospective basis during Q1
FY19. The results for Q4 FY19 and FY19 are presented under the new
revenue recognition accounting standard, while prior period amounts
are not adjusted and continue to be reported under the prior
revenue recognition accounting standard (ASC 605). (2) Derived from
audited consolidated financial statements. (3) 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 Year Ended March 29, 2019
March 30, 2018 March 29, 2019 March
30, 2018 (1) OPERATING ACTIVITIES: Net income
(loss) $ 34 $ (59 ) $ 31 $ 1,138 (Income) loss from discontinued
operations, net of income taxes (4 ) 1 (15 ) (11 ) Adjustments:
Amortization and depreciation 158 155 615 640 Impairments of
long-lived assets 2 34 10 81 Stock-based compensation expense 87
162 352 610 Loss from equity interest 17 26 101 26 Deferred income
taxes (52 ) (27 ) (70 ) (1,848 ) (Gain) loss on divestiture — 5 —
(653 ) Other 18 8 (14 ) 45 Changes in operating assets and
liabilities, net of acquisitions and divestiture: Accounts
receivable, net 16 (132 ) 113 (170 ) Accounts payable (29 ) (9 ) 6
(4 ) Accrued compensation and benefits 28 20 2 (33 ) Contract
liabilities 145 354 215 541 Income taxes payable 84 (74 ) 67 880
Other assets (33 ) (187 ) (32 ) (199 ) Other liabilities 76
(1 ) 114 (86 ) Net cash provided by continuing operating
activities 547 276 1,495 957 Net cash used in discontinued
operating activities — (10 ) — (7 ) Net cash provided
by operating activities 547 266 1,495 950
INVESTING
ACTIVITIES: Purchases of property and equipment (54 ) (37 )
(207 ) (142 ) Payments for acquisitions, net of cash acquired (139
) 1 (180 ) (401 ) Proceeds from divestiture, net of cash
contributed and transaction costs — (13 ) — 933 Purchases of
short-term investments — (28 ) — (436 ) Proceeds from maturities
and sales of short-term investments 20 24 139 49 Proceeds from sale
of property — — 26 — Other (7 ) (4 ) (19 ) (24 ) Net cash used in
investing activities (180 ) (57 ) (241 ) (21 )
FINANCING
ACTIVITIES: Repayments of debt (600 ) (570 ) (600 ) (3,210 )
Net proceeds from sales of common stock under employee stock
incentive plans 11 38 19 121 Tax payments related to restricted
stock units (5 ) (10 ) (173 ) (107 ) Dividends and dividend
equivalents paid (48 ) (48 ) (217 ) (211 ) Repurchases of common
stock (234 ) — (234 ) — Payment for dissenting LifeLock shareholder
settlement — — — (68 ) Other (4 ) — (4 ) — Net cash
used in financing activities (880 ) (590 ) (1,209 ) (3,475 ) Effect
of exchange rate fluctuations on cash and cash equivalents (5 ) 13
(28 ) 73 Change in cash and cash equivalents (518 )
(368 ) 17 (2,473 ) Beginning cash and cash equivalents 2,309
2,142 1,774 4,247 Ending cash and cash
equivalents $ 1,791 $ 1,774 $ 1,791 $ 1,774
____________________
(1) Derived from audited consolidated financial statements.
SYMANTEC CORPORATION
Reconciliation of Selected GAAP
Measures to Non-GAAP Measures (1) (2)
(In millions, except per share data, unaudited)
Three Months Ended Year Ended March
29, 2019 March 30, 2018 March 29, 2019
March 30, 2018 Net revenues $ 1,189 $ 1,210 $
4,731 $ 4,834 Contract liabilities fair value adjustment 6
12 31 126
Net revenues (Non-GAAP) $
1,195 $ 1,222 $ 4,762 $ 4,960
Operating income $ 107 $ 6 $ 380 $ 49 Contract liabilities
fair value adjustment 6 12 31 126 Stock-based compensation 87 162
352 610 Amortization of intangible assets 111 112 443 453
Restructuring, transition and other costs 36 132 241 410
Acquisition-related costs — 9 3 60 Litigation settlement — 2
(5 ) 2
Operating income (Non-GAAP) $ 347
$ 435 $ 1,445 $ 1,710
Operating margin 9 % 0 % 8 % 1 %
Operating margin
(Non-GAAP) 29 % 36 % 30 % 34 %
Net income (loss)
$ 34 $ (59 ) $ 31 $ 1,138 Adjustments to income (loss) from
continuing operations: Contract liabilities fair value adjustment 6
12 31 126 Stock-based compensation 87 162 352 610 Amortization of
intangible assets 111 112 443 453 Restructuring, transition and
other costs 36 132 241 410 Acquisition-related costs — 9 3 60
Litigation settlement — 2 (5 ) 2 Non-cash interest expense 7 9 26
50 (Gain) loss on divestiture and gain on sale of assets — 2 — (656
) Loss from equity interest 17 26 101 26 Income tax reform — 151 —
(659 ) Other income tax effects and adjustments (38 ) (261 ) (158 )
(434 ) Total adjustment from continuing operations 226 356 1,034
(12 ) Total adjustment from discontinued operations (4 ) 1
(15 ) (11 )
Net income (Non-GAAP) $ 256 $ 298
$ 1,050 $ 1,115
Diluted net income (loss)
per share $ 0.05 $ (0.10 ) $ 0.05 $ 1.70 Adjustments to diluted
net income per share: Contract liabilities fair value adjustment
0.01 0.02 0.05 0.19 Stock-based compensation 0.13 0.26 0.53 0.91
Amortization of intangible assets 0.17 0.18 0.67 0.68
Restructuring, transition and other costs 0.05 0.21 0.36 0.61
Acquisition-related costs — 0.01 0.00 0.09 Litigation settlement —
0.00 (0.01 ) 0.00 Non-cash interest expense 0.01 0.01 0.04 0.07
(Gain) loss on divestiture and gain on sale of assets — 0.00 —
(0.98 ) Loss from equity interest 0.03 0.04 0.15 0.04 Income tax
reform — 0.24 — (0.99 ) Other income tax effects and adjustments
(0.06 ) (0.42 ) (0.24 ) (0.65 ) Total adjustment from continuing
operations 0.34 0.57 1.56 (0.02 ) Total adjustment from
discontinued operations (0.01 ) 0.00 (0.02 ) (0.02 ) Incremental
dilution effect — (0.04 ) — —
Diluted net
income per share (Non-GAAP) (3) $ 0.39 $ 0.44
$ 1.59 $ 1.67
Diluted
weighted-average shares outstanding 662 621 661 668 Incremental
dilution — 54 — —
Diluted weighted-average shares outstanding
(Non-GAAP) (4) 662 675 661 668
____________________
(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. The results for Q4 FY19 and FY19 are presented
under the new revenue recognition accounting standard, while prior
period amounts are not adjusted and continue to be reported under
the prior revenue recognition accounting standard (ASC 605). (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)(2)(3)
(In millions, unaudited) Three Months
Ended March 29, 2019 March 30, 2018
Total Company Reported Billings (Non-GAAP) Total
revenue $ 1,189 $ 1,210 Add: Contract liabilities (end of
period) 3,056 3,103 Less: Contract liabilities (beginning of
period) (2,915 ) (2,730 ) Other contract liabilities adjustments
(4) 2 15
Reported billings (Non-GAAP) $ 1,332
$ 1,598
Enterprise Security Reported
Billings (Non-GAAP) Total revenue $ 584 $ 597 Add:
Contract liabilities (end of period) 2,002 2,010 Less: Contract
liabilities (beginning of period) (1,876 ) (1,685 ) Other contract
liabilities adjustments (4) 2 15
Reported billings
(Non-GAAP) $ 712 $ 937
Consumer Cyber
Safety Reported Billings (Non-GAAP) (5) Total
revenue $ 605 $ 613 Add: Contract liabilities (end of period)
1,054 1,093 Less: Contract liabilities (beginning of period) (1,039
) (1,045 )
Reported billings (Non-GAAP) $ 620 $ 661
____________________
(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. The results for Q4 FY19 and FY19 are presented
under the new revenue recognition accounting standard, while prior
period amounts are not adjusted and continue to be reported under
the prior revenue recognition accounting standard (ASC 605). (3)
Reported billings was previously referred to as implied billings.
The calculation did not change. (4) Other contract liabilities
adjustments include the change in contract liabilities related to
Veritas discontinued operations. (5) Consumer Cyber Safety was
previously named Consumer Digital Safety.
SYMANTEC
CORPORATION
Guidance and Reconciliation of GAAP to
Non-GAAP Revenue, Operating Income and EPS (1) (2)
(In millions, except per share data, unaudited)
First Quarter Fiscal Year 2020
Revenue Guidance GAAP revenue range $1,171 — $1,201
Adjustment: Contract liabilities fair value adjustment $4 Non-GAAP
revenue range $1,175 — $1,205
Operating Margin Guidance
and Reconciliation GAAP operating margin 5 % — 7 % Adjustments:
Contract liabilities fair value adjustment 0 % Stock-based
compensation 8 % Amortization of intangible assets 10 %
Restructuring, transition and other costs 2 % Non-GAAP operating
margin 25 % — 27 %
Earnings Per Share Guidance and
Reconciliation GAAP diluted income per share range (3) $0.01 —
$0.05 Adjustments: Contract liabilities fair value adjustment $0.01
Stock-based compensation $0.14 Amortization of intangible assets
$0.17 Restructuring, transition and other costs $0.03 Other $0.01
Income tax effects and adjustments ($0.07 ) Non-GAAP diluted
earnings per share range (3) $0.30
—
$0.34
Fiscal Year 2020 Revenue Guidance
GAAP revenue range $4,750
—
$4,890 Adjustment: Contract liabilities fair value adjustment $10
Non-GAAP revenue range $4,760 — $4,900
Operating Margin
Guidance and Reconciliation GAAP operating margin 13 % — 15 %
Adjustments: Contract liabilities fair value adjustment 0 %
Stock-based compensation 7 % Amortization of intangible assets 10 %
Restructuring, transition and other costs 1 % Non-GAAP operating
margin 31 % — 33 %
Earnings Per Share Guidance and
Reconciliation GAAP diluted income per share range (3) $0.57 —
$0.73 Adjustments: Contract liabilities fair value adjustment $0.02
Stock-based compensation $0.53 Amortization of intangible assets
$0.70 Restructuring, transition and other costs $0.08 Other $0.03
Income tax effects and adjustments ($0.29 ) Non-GAAP diluted
earnings per share range (3) $1.65 — $1.80 (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 650 million and a range of 634 million to 644
million for Q1 FY20 and FY20, respectively.
SYMANTEC CORPORATIONAppendix
AExplanation 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, including in fiscal
2018 related to our WSS and PKI solutions. 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:
Prior to the third quarter of fiscal 2018, we used a projected
long-term non-GAAP tax rate that reflected the elimination of the
effects of the non-GAAP adjustments to our operating results
described above and significant discrete items, as well as certain
unique GAAP reporting requirements under discontinued operations as
a result of the sale of our information management business
(Veritas) in order to provide better consistency across the interim
financial reporting periods. Starting with the third quarter of
fiscal 2018, as a result of U.S. tax reform, we use a non-GAAP tax
rate that excludes (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. We believe making these
adjustments facilitates a better evaluation of our current
operating performance and comparisons to past operating results.
Our tax rate is subject to change for a variety of reasons, such as
significant changes in the geographic earnings mix due to
acquisition and divestiture activities or fundamental tax law
changes in major jurisdictions where we operate.
Discontinued operations: In August
2015, we entered into a definitive agreement to sell the assets of
Veritas to Carlyle. The transaction closed on January 29, 2016. The
results of Veritas 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 (previously referred to
as implied 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/20190509005935/en/
MEDIA CONTACT:Lauren ArmstrongSymantec Corp.(650)
448-7352Lauren_Armstrong@symantec.comINVESTOR CONTACT:Cynthia
HiponiaSymantec Corp.(650) 527-8020Cynthia_Hiponia@symantec.com
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