- Total Revenue Grew 10 Percent
and Consumer Revenue Grew 23 Percent Compared to Q3
2019
- Significant Acceleration of
Net New Core Direct to Consumer (“DTC”) Subscribers with Additional 2.4 Million
Subscribers, Up 16 Percent Year-Over-Year
- Operating Income for Consumer
Grew $35 Million and for Enterprise Grew $40 Million Compared to Q3
2019
- Double-Digit Adjusted EBITDA
Growth Across Both Consumer and Enterprise Segments Compared to Q3
2019
- Now Publicly Traded on NASDAQ
Following October 2020 IPO
McAfee Corp. (“McAfee,” or the “Company”) (NASDAQ: MCFE), the
device-to-cloud cybersecurity company, today announced its
financial results for the three and nine months ended September 26,
2020.
“We delivered strong third quarter results led by Consumer
revenue growth of 23 percent year-over-year, expanding
profitability, and strong cash flow generation which is a testament
to our team’s execution. Through more than 30 years of leadership
and innovation we have built a trusted global cybersecurity brand
by seamlessly securing a consumer’s digital experience and
defending many of the world’s largest organizations from
sophisticated attacks and nation-state threats. The cybersecurity
landscape has never been more intense and the need for our
solutions is as important as ever. We are very excited to embark on
this next leg of our journey as a public company,” said Peter Leav,
McAfee’s President and Chief Executive Officer.
Financial Highlights for the Third
Quarter of 2020 Compared to Prior Year Quarter
Revenue: Total net revenue for the quarter was $728
million, up 10 percent year-over-year. Consumer revenue was $395
million, reflecting 23 percent growth. Enterprise revenue for the
quarter was $333 million, with the percentage of revenue from core
Enterprise customers remaining above 80 percent of total Enterprise
revenue.
Net Income: McAfee reported breakeven net income for the
quarter.
Operating Income: Total operating income for the quarter
was $128 million, reflecting 142 percent growth. Operating income
margins more than doubled to 17.6 percent. Operating income for
Consumer was $106 million, reflecting 49 percent growth. Operating
income for Enterprise was $22 million, an increase of $40 million
from the prior year period.
Adjusted EBITDA: Total adjusted EBITDA for the quarter
was $265 million, reflecting 26 percent growth. Adjusted EBITDA
margins expanded by 470 basis points to 36.4 percent. Adjusted
EBITDA for Consumer was $181 million, reflecting 26 percent growth.
Adjusted EBITDA for Enterprise was $84 million, reflecting 27
percent growth. Adjusted EBITDA margin for Enterprise also saw
significant year over year improvement, coming in at 25.2 percent
compared to 19.4 percent in the comparable period.
Unlevered Free Cash Flow: Net cash provided by operating
activities was $464 million in the nine months ended September 26,
2020 compared to $285 million in the nine months ended September
28, 2019. Unlevered Free Cash Flow was $639 million for the nine
months ended September 26, 2020 compared to $454 million for the
nine months ended September 28, 2019.
Consumer KPIs: The market leading growth in McAfee’s
Consumer business is attributable to solid business fundamentals,
led by 16 percent year-over-year subscriber growth in Core DTC
subscribers. McAfee ended the third quarter with 17.3 million Core
DTC subscribers, adding over 2.4 million net new subscribers
compared to the third quarter of 2019 and 669,000 net new
subscribers during the past quarter alone. Consumer trailing
twelve-month dollar retention rate was 100 percent for the third
quarter, versus 96 percent in the comparable period last year. This
marks the 12th consecutive quarter of positive quarter over quarter
and year over year Core DTC subscriber growth.
Please refer to the section titled “Use of Non-GAAP Financial
Information” and the tables within this press release which contain
explanations and reconciliations of the Company’s non-GAAP
financial measures.
Recent Business
Highlights
- Consummated initial public offering of 37 million shares and
used a portion of the net proceeds to pay down second lien debt of
$525 million
- Recent Consumer channel partnership highlights include an
expanded relationship with one of the top 3 mobile service
providers in North America offering our holistic protection to its
tens of millions of customers; and an agreement with a leading
telecommunications provider to broadly make available our secure
home platform to its millions of broadband customers
- McAfee has also expanded our relationship with Amazon. With an
exclusive offer now available for Business Prime members, McAfee
and Amazon Business Prime partnered to solve cyber security and IT
resource challenges for small businesses
- McAfee was recently named a Leader in the 2020 Gartner Magic
Quadrant for Cloud Access Security Broker (or CASB), for the fourth
year in a row
- Hosted MPOWER, McAfee’s annual user conference virtually with
our partners to recognize our customers’ success, demonstrate
multiple new products, and deliver keynote presentations from
industry leaders
Commenting on the Company’s financial results, Venkat
Bhamidipati, McAfee’s CFO added, “At McAfee, we are committed to
driving shareholder value by generating double-digit revenue growth
at scale in our Consumer business, growing profitability across
both of our segments, and driving solid Unlevered Free Cash Flow.
We have also announced our intentions to pay out a quarterly
dividend to our new public shareholders and are targeting a
longer-term leverage ratio below 3x of net debt to Adjusted
EBITDA.”
Financial Outlook
McAfee provides the following expected financial guidance for
the quarter ending December 26, 2020:
Total Revenue of $732 million to $742
million
Total Adjusted EBITDA of $254 million
to $264 million
The financial outlook is subject to a number of important
assumptions and risks referenced in the section entitled
“Forward-Looking Statements” below, which investors should read
carefully.
Webcast / Conference Call Details
In conjunction with this announcement, McAfee will host a
webcast conference call today, November 19, 2020, at 5:00 p.m.
Eastern Time to discuss its financial results. The listen-only
webcast is available at https://ir.mcafee.com/investors. Investors
and participants can access the conference call over the phone by
dialing (833) 301-1122, or for international callers (631)
658-1012. The conference ID is 8669006.
Following the conference call, a replay of the webcast will be
made available for 30 days on the Investor Relations page of the
Company’s website at
https://ir.mcafee.com/news-and-events/events.
Use of Non-GAAP Financial Information
In addition to McAfee’s results determined in accordance with
generally accepted accounting principles in the United States
(“GAAP”), the Company believes the following non-GAAP measures
presented in this press release and discussed on the related
teleconference call are useful in evaluating its operating
performance: adjusted operating income, adjusted operating income
margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net
income, adjusted net income margin, and unlevered free cash flow.
Certain of these non-GAAP measures exclude equity-based
compensation, depreciation and amortization expense, interest
expense and other, net, provision for income tax expense, foreign
exchange (gain) and loss, net and other costs we do not believe are
reflective of our ongoing operations. McAfee believes that these
non-GAAP financial measures are provided to enhance the reader’s
understanding of our past financial performance and our prospects
for the future. McAfee’s management team uses these non-GAAP
financial measures in assessing McAfee’s performance, as well as in
planning and forecasting future periods. The non-GAAP financial
information is presented for supplemental informational purposes
only and should not be considered a substitute for financial
information presented in accordance with GAAP and may be different
from similarly titled non-GAAP measures used by other companies. A
reconciliation is provided herein for each non-GAAP financial
measure to the most directly comparable financial measure stated in
accordance with GAAP. Readers are encouraged to review the related
GAAP financial measures and the reconciliation of these non-GAAP
financial measures to their most directly comparable GAAP financial
measures.
Forward-Looking Statements
In addition to historical consolidated financial information,
certain statements in this press release and on the related
teleconference call may contain “forward-looking statements” within
the meaning U.S. federal securities laws that involve substantial
risks and uncertainties. All statements other than statements of
historical fact included in this press release and on the related
teleconference call are forward-looking statements. These
statements may include words such as “anticipate,” “estimate,”
“expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,”
“should,” “can have,” “likely” and other words and terms of similar
meaning in connection with any discussion of the timing or nature
of future operating or financial performance or other events. For
example, all statements McAfee makes relating to its estimated and
projected costs, expenditures, cash flows, growth rates and
financial results or its plans and objectives for future
operations, growth initiatives, or strategies are forward-looking
statements. All forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those that the Company expected. Specific factors that could
cause such a difference include, but are not limited to, those
disclosed previously in the Company’s other filings with the SEC
which include, but are not limited to: the impact of the COVID-19
outbreak; our ability to adapt to rapid technological change,
evolving industry standards and changing customer needs,
requirements or preferences; our ability to enhance and deploy our
cloud-based offerings while continuing to effectively offer our
on-premise offerings; our ability to maintain or improve our
competitive position; the impact on our business of a network or
data security incident or unauthorized access to our network or
data or our customers’ data; the effects on our business if we are
unable to acquire new customers, if our customers do not renew
their arrangements with us, or if we are unable to expand sales to
our existing customers or develop new solutions or solution
packages that achieve market acceptance; our ability to manage our
growth effectively, execute our business plan, maintain high levels
of service and customer satisfaction or adequately address
competitive challenges; our dependence on our senior management
team and other key employees; our ability to enhance and expand our
sales and marketing capabilities; our ability to attract and retain
highly qualified personnel to execute our growth plan; the risks
associated with interruptions or performance problems of our
technology, infrastructure and service providers; our dependence on
Amazon Web Services cloud infrastructure services; the impact of
data privacy concerns, evolving regulations of cloud computing,
cross-border data transfer restrictions and other domestic and
foreign laws and regulations; the impact of volatility in quarterly
operating results; the risks associated with our revenue
recognition policy and other factors may distort our financial
results in any given period; the effects on our customer base and
business if we are unable to enhance our brand cost-effectively;
our ability to comply with anti-corruption, anti-bribery and
similar laws; our ability to comply with governmental export and
import controls and economic sanctions laws; the potential adverse
impact of legal proceedings; the impact of our frequently long and
unpredictable sales cycle; our ability to identify suitable
acquisition targets or otherwise successfully implement our growth
strategy; the impact of a change in our pricing model; our ability
to meet service level commitments under our customer contracts; the
impact on our business and reputation if we are unable to provide
high-quality customer support; our dependence on strategic
relationships with third parties; the impact of adverse general and
industry-specific economic and market conditions and reductions in
IT and identity spending; the ability of our platform, solutions
and solution packages to interoperate with our customers’ existing
or future IT infrastructures; our dependence on adequate research
and development resources and our ability to successfully complete
acquisitions; our dependence on the integrity and scalability of
our systems and infrastructures; our reliance on software and
services from other parties; the impact of real or perceived
errors, failures, vulnerabilities or bugs in our solutions; our
ability to protect our proprietary rights; the impact on our
business if we are subject to infringement claim or a claim that
results in a significant damage award; the risks associated with
our use of open source software in our solutions, solution packages
and subscriptions; our reliance on SaaS vendors to operate certain
functions of our business; the risks associated with indemnity
provisions in our agreements; the risks associated with liability
claims if we breach our contracts; the impact of the failure by our
customers to pay us in accordance with the terms of their
agreements; our ability to expand the sales of our solutions and
solution packages to customers located outside of the United
States; the risks associated with exposure to foreign currency
fluctuations; the impact of Brexit; the impact of potentially
adverse tax consequences associated with our international
operations; the impact of changes in tax laws or regulations; the
impact of the Tax Act; our ability to maintain our corporate
culture; our ability to develop and maintain proper and effective
internal control over financial reporting; our management team’s
limited experience managing a public company; the risks associated
with having operations and employees located in Israel; the risks
associated with doing business with governmental entities; and the
impact of catastrophic events on our business. Given these factors,
as well as other variables that may affect McAfee’s operating
results, you should not rely on forward-looking statements, assume
that past financial performance will be a reliable indicator of
future performance, or use historical trends to anticipate results
or trends in future periods. The forward-looking statements
included in this press release and on the related teleconference
call relate only to events as of the date hereof. The Company
undertakes no obligation to update or revise any forward-looking
statement as a result of new information, future events or
otherwise, except as otherwise required by law.
Presentation of Financial Measures
This press release presents historical results, for the periods
presented, of Foundation Technology Worldwide LLC, the predecessor
McAfee Corp. for financial reporting purposes (together with McAfee
Corp., referred to as “McAfee” or the “Company”). The financial
results of McAfee Corp. have not been included in this press
release as it is a recently incorporated entity and had no material
assets or liabilities and no material business transactions or
activities during the periods presented. Accordingly, these
historical results do not purport to reflect what the results of
operations of McAfee Corp. or Foundation Technology Worldwide LLC
would have been had the IPO and related recapitalization
transactions occurred prior to such periods.
The Gartner content described herein, (the "Gartner Content")
represent(s) research opinion or viewpoints published, as part of a
syndicated subscription service, by Gartner, Inc. ("Gartner"), and
are not representations of fact. Gartner Content speaks as of its
original publication date (and not as of the date of this press
release) and the opinions expressed in the Gartner Content are
subject to change without notice.
About McAfee
McAfee is the device-to-cloud cybersecurity company. Inspired by
the power of working together, McAfee creates consumer and business
solutions that make the world a safer place. www.mcafee.com
McAfee technologies’ features and benefits depend on system
configuration and may require enabled hardware, software, or
service activation. No computer system can be absolutely secure.
McAfee® and the McAfee logo are trademarks of McAfee, LLC or its
subsidiaries in the United States and other countries. Other marks
and brands may be claimed as the property of others.
FOUNDATION TECHNOLOGY
WORLDWIDE LLC
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(in millions except per unit
data)
Three Months Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net revenue
$
728
$
662
$
2,129
$
1,953
Cost of sales
209
203
619
632
Gross profit
519
459
1,510
1,321
Operating expenses:
Sales and marketing
186
184
534
567
Research and development
88
96
274
289
General and administrative
62
72
200
195
Amortization of intangibles
55
55
165
168
Restructuring charges
—
(1
)
9
14
Total operating expenses
391
406
1,182
1,233
Operating income
128
53
328
88
Interest expense and other, net
(73
)
(76
)
(223
)
(219
)
Foreign exchange gain (loss), net
(43
)
43
(49
)
44
Income (loss) before income taxes
12
20
56
(87
)
Provision for income tax expense
12
29
25
68
Net income (loss)
$
—
$
(9
)
$
31
$
(155
)
Other comprehensive income (loss):
Gain (loss) on interest rate cash flow
hedges, net of tax
$
6
$
(12
)
$
(75
)
$
(75
)
Total comprehensive income (loss)
$
6
$
(21
)
$
(44
)
$
(230
)
Net income (loss) per unit, basic
$
—
$
(0.02
)
$
0.08
$
(0.41
)
Net income (loss) per unit, diluted
$
—
$
(0.02
)
$
0.08
$
(0.41
)
Weighted-average units outstanding,
basic
379.3
377.0
378.4
376.4
Weighted-average units outstanding,
diluted
379.3
377.0
388.3
376.4
FOUNDATION TECHNOLOGY
WORLDWIDE LLC
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(in millions)
As of September 26,
2020
As of December 28,
2019
Assets
Current assets:
Cash and cash equivalents
$
348
$
167
Accounts receivable, net
311
409
Deferred costs
216
187
Other current assets
77
68
Total current assets
952
831
Property and equipment, net
154
171
Goodwill
2,431
2,428
Identified intangible assets, net
1,748
2,071
Deferred tax assets
59
55
Other long-term assets
209
232
Total assets
$
5,553
$
5,788
Liabilities, redeemable units, and
deficit
Current liabilities:
Accounts payable and other current
liabilities
$
195
$
196
Accrued compensation and benefits
150
209
Accrued marketing
105
94
Income taxes payable
13
15
Long-term debt, current portion
44
43
Lease liabilities, current portion
22
29
Deferred revenue
1,605
1,574
Total current liabilities
2,134
2,160
Long-term debt, net
4,698
4,669
Deferred tax liabilities
165
160
Other long-term liabilities
218
175
Deferred revenue, less current portion
661
718
Total liabilities
7,876
7,882
Commitments and contingencies
Redeemable units
41
—
Deficit:
Accumulated other comprehensive income
(loss)
(137
)
(62
)
Members’ deficit
(873
)
(647
)
Accumulated deficit
(1,354
)
(1,385
)
Total deficit
(2,364
)
(2,094
)
Total liabilities, redeemable units, and
deficit
$
5,553
$
5,788
FOUNDATION TECHNOLOGY
WORLDWIDE LLC
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Nine Months Ended September
26, 2020
Nine Months Ended September
28, 2019
Cash flows from operating
activities:
Net income (loss)
$
31
$
(155
)
Adjustments to reconcile net income (loss)
to net cash
provided by operating activities:
Depreciation and amortization
372
400
Equity-based compensation
25
19
Deferred taxes
3
13
Foreign exchange (gain) loss, net
49
(44
)
Other operating activities
40
37
Change in assets and liabilities:
Accounts receivable, net
94
71
Deferred costs
(29
)
(12
)
Other assets
(10
)
(61
)
Other current liabilities
(12
)
(27
)
Deferred revenue
(26
)
20
Other liabilities
(73
)
24
Net cash provided by operating
activities
464
285
Cash flows from investing
activities:
Acquisitions, net of cash acquired
(5
)
(2
)
Additions to property and equipment
(32
)
(37
)
Other investing activities
(3
)
(3
)
Net cash used in investing activities
(40
)
(42
)
Cash flows from financing
activities:
Proceeds from the issuance of Member
units
2
—
Payment for the long-term debt due to
third party
(33
)
(56
)
Proceeds from long-term debt
—
685
Payment for debt issuance costs
—
(6
)
Distributions to Members
(200
)
(1,081
)
Other financing activities
(14
)
(11
)
Net cash used in financing activities
(245
)
(469
)
Effect of exchange rate fluctuations on
cash and cash equivalents
2
(2
)
Net increase (decrease) in cash and cash
equivalents
181
(228
)
Cash and cash equivalents, beginning of
period
167
468
Cash and cash equivalents, end of
period
$
348
$
240
Supplemental disclosures of noncash
investing and financing
activities and cash flow information:
Acquisition of property and equipment
included in current liabilities
$
(2
)
$
(6
)
Distributions to Members included in
liabilities
(5
)
(4
)
Cash paid during the period for:
Interest, net of cash flow hedges
(210
)
(209
)
Income taxes, net of refunds
(35
)
(35
)
FOUNDATION TECHNOLOGY WORLDWIDE LLC
UNAUDITED NON-GAAP FINANCIAL MEASURES (in millions)
We have included both financial measures compiled in accordance
with GAAP and certain non-GAAP financial measures in this Quarterly
Report on Form 10-Q, including adjusted operating income, adjusted
operating income margin, adjusted EBITDA, adjusted EBITDA margin,
adjusted net income, adjusted net income margin, and unlevered free
cash flow and ratios based on these financial measures.
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA and Adjusted EBITDA Margin
Total Company
The following table presents a reconciliation of our adjusted
operating income and adjusted EBITDA to our net income (loss) for
the periods presented:
Three Months Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net income (loss)
$
—
$
(9
)
$
31
$
(155
)
Add: Amortization
107
116
330
353
Add: Equity-based compensation
6
7
25
19
Add: Cash in lieu of equity awards(1)
1
4
6
15
Add: Acquisition and integration
costs(2)
2
6
6
18
Add: Restructuring and transition(3)
—
(1
)
9
14
Add: Management fees(4)
2
2
6
6
Add: Implementation costs of adopting ASC
Topic 606
—
—
—
4
Add: Transformation initiatives(5)
7
8
17
19
Add: Executive severance(6)
—
—
4
—
Add: Interest expense and other, net
73
76
223
219
Add: Provision for income tax expense
12
29
25
68
Add: Foreign exchange loss (gain), net
43
(43
)
49
(44
)
Adjusted operating income
253
195
731
536
Add: Depreciation
13
15
42
47
Less: Other expense
(1
)
—
(1
)
—
Adjusted EBITDA
$
265
$
210
$
772
$
583
Net revenue
$
728
$
662
$
2,129
$
1,953
Net income (loss) margin
—
(1.4
)%
1.5
%
(7.9
)%
Adjusted operating income margin
34.8
%
29.5
%
34.3
%
27.4
%
Adjusted EBITDA margin
36.4
%
31.7
%
36.3
%
29.9
%
See Appendix A for an explanation of non-GAAP measures and other
items.
Consumer Segment
The following table presents a reconciliation of our Consumer
adjusted operating income and Consumer adjusted EBITDA to our
Consumer operating income for the periods presented:
Three Months Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Operating income — Consumer
$
106
$
71
$
307
$
198
Add: Amortization
63
63
188
191
Add: Equity-based compensation
2
1
11
3
Add: Cash in lieu of equity awards(1)
—
—
—
1
Add: Acquisition and integration
costs(2)
2
2
6
6
Add: Restructuring and transition(3)
—
—
1
2
Add: Management fees(4)
1
—
1
1
Add: Implementation costs of adopting ASC
Topic 606
—
—
—
1
Add: Transformation initiatives(5)
3
2
4
3
Add: Executive severance(6)
—
—
1
—
Adjusted operating income — Consumer
177
139
519
406
Add: Depreciation
4
5
15
17
Adjusted EBITDA — Consumer
$
181
$
144
$
534
$
423
Net revenue — Consumer
$
395
$
322
$
1,132
$
956
Operating income margin — Consumer
26.8
%
22.0
%
27.1
%
20.7
%
Adjusted operating income margin —
Consumer
44.8
%
43.2
%
45.8
%
42.5
%
Adjusted EBITDA margin — Consumer
45.8
%
44.7
%
47.2
%
44.2
%
See Appendix A for an explanation of non-GAAP measures and other
items.
Enterprise Segment
The following table presents a reconciliation of our Enterprise
adjusted operating income and Enterprise adjusted EBITDA to our
Enterprise operating income (loss) for the periods presented:
Three Months Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Operating income (loss) — Enterprise
$
22
$
(18
)
$
21
$
(110
)
Add: Amortization
44
53
142
162
Add: Equity-based compensation
4
6
14
16
Add: Cash in lieu of equity awards(1)
1
4
6
14
Add: Acquisition and integration
costs(2)
—
4
—
12
Add: Restructuring and transition(3)
—
(1
)
8
12
Add: Management fees(4)
1
2
5
5
Add: Implementation costs of adopting ASC
Topic 606
—
—
—
3
Add: Transformation initiatives(5)
4
6
13
16
Add: Executive severance(6)
—
—
3
—
Adjusted operating income — Enterprise
76
56
212
130
Add: Depreciation
9
10
27
30
Less: Other expense
(1
)
—
(1
)
—
Adjusted EBITDA — Enterprise
$
84
$
66
$
238
$
160
Net revenue — Enterprise
$
333
$
340
$
997
$
997
Operating income (loss) margin —
Enterprise
6.6
%
(5.3
)%
2.1
%
(11.0
)%
Adjusted operating income margin —
Enterprise
22.8
%
16.5
%
21.3
%
13.0
%
Adjusted EBITDA margin — Enterprise
25.2
%
19.4
%
23.9
%
16.0
%
See Appendix A for an explanation of non-GAAP measures and other
items.
Adjusted Net Income and Adjusted Net Income Margin
The following table presents a reconciliation of our adjusted
net income to our net income (loss) for the periods presented:
Three Months Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net income (loss)
$
—
$
(9
)
$
31
$
(155
)
Add: Amortization of debt discount and
issuance costs
5
5
14
13
Add: Amortization
107
116
330
353
Add: Equity-based compensation
6
7
25
19
Add: Cash in lieu of equity awards(1)
1
4
6
15
Add: Acquisition and integration
costs(2)
2
6
6
18
Add: Restructuring and transition(3)
—
(1
)
9
14
Add: Management fees(4)
2
2
6
6
Add: Implementation costs of adopting ASC
Topic 606
—
—
—
4
Add: Transformation initiatives(5)
7
8
17
19
Add: Executive severance(6)
—
—
4
—
Add: Adjustment to provision for income
taxes(7)
(1
)
11
(16
)
6
Adjusted net income
$
129
$
149
$
432
$
312
Net revenue
$
728
$
662
$
2,129
$
1,953
Net income (loss) margin
—
(1.4
)%
1.5
%
(7.9
)%
Adjusted net income margin
17.7
%
22.5
%
20.3
%
16.0
%
See Appendix A for an explanation of non-GAAP measures and other
items.
Unlevered Free Cash Flow
The following table presents a reconciliation of our unlevered
free cash flow to our net cash provided by operating activities for
the periods presented:
Nine Months Ended September
26, 2020
Nine Months Ended September
28, 2019
Net cash provided by operating
activities
$
464
$
285
Add: Interest payments
210
209
Less: Capital expenditures(1)
(35
)
(40
)
Unlevered free cash flow
$
639
$
454
Net cash used in investing activities
$
(40
)
$
(42
)
Net cash used in financing activities
$
(245
)
$
(469
)
(1)
Capital expenditures includes payments for
property and equipment and capitalized labor costs incurred in
connection with certain software development activities.
FOUNDATION TECHNOLOGY WORLDWIDE LLC APPENDIX
A EXPLANATION OF NON-GAAP MEASURES AND OTHER ITEMS
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA and Adjusted EBITDA Margin
We define adjusted operating income for the total Company as net
income (loss), excluding the impact of amortization of intangible
assets, equity-based compensation expense, interest expense and
other, net, provision for income tax expense, foreign exchange
(gain) loss, net, and other costs that we do not believe are
reflective of our ongoing operations. We define adjusted operating
income for our Consumer and Enterprise segments as segment
operating income (loss), excluding the impact of amortization of
intangible assets, equity-based compensation expense and other
costs attributable to the segment that we do not believe are
reflective of the segment’s ongoing operations. We present this
reconciliation of adjusted operating income (loss) to operating
income for Consumer and Enterprise segments because operating
income (loss) is the primary measure of profitability used to
assess segment performance and is therefore the most directly
comparable GAAP financial measure for our operating segments.
Adjusted operating income margin is calculated as adjusted
operating income divided by net revenue. We define adjusted EBITDA
as adjusted operating income, excluding the impact of depreciation
expense and other non-operating costs. Adjusted EBITDA margin is
calculated as adjusted EBITDA divided by net revenue.
Adjusted Net Income and Adjusted Net Income Margin
We define adjusted net income as net income (loss), excluding
the impact of amortization of intangible assets, amortization of
debt issuance costs, equity-based compensation expense, other
costs, and certain non-recurring tax benefits and expenses that we
do not believe to be reflective of our ongoing operations and the
tax impact of these adjustments. Adjusted net income margin is
calculated as adjusted net income divided by net revenue.
Adjustments for Adjusted Operating Income, Adjusted EBITDA,
and Adjusted Net Income
Below are additional information to the adjustments for adjusted
operating income, adjusted EBITDA, and adjusted net income:
(1)
As a result of the Sponsor
Acquisition, cash awards were provided to certain employees who
held Intel equity awards in lieu of equity in Foundation Technology
Worldwide LLC. In addition, as a result of the Skyhigh acquisition,
cash awards were provided to certain employees who held Skyhigh
equity awards in lieu of equity in Foundation Technology Worldwide
LLC and vest over multiple periods based on employee service
requirements. As these rollover awards reflect one-time grants to
former employees of the Predecessor Business and Skyhigh Networks
in connection with these transactions, and the Company does not
have a comparable cash-based compensation plan or program in
existence, we believe this expense is not reflective of our ongoing
results.
(2)
Represents both direct and
incremental costs in connection with business acquisitions,
including acquisition consideration structured as cash retention,
third party professional fees, and other integration costs.
(3)
Represents both direct and
incremental costs associated with our separation from Intel,
including standing up our back office and costs to execute
strategic restructuring events, including third-party professional
fees and services, transition services provided by Intel,
severance, and facility restructuring costs.
(4)
Represents management fees paid
to certain affiliates of our Sponsors and Intel pursuant to the
Management Services Agreement. The Management Services Agreement
has been terminated subsequent to the IPO and we paid a one-time
fee of $22 million to such parties in October 2020.
(5)
Represents costs incurred in
connection with transformation of the business post-Intel
separation. Also includes the cost of workforce restructurings
involving both eliminations of positions and relocations to lower
cost locations in connection with MAP and other transformational
initiatives, strategic initiatives to improve customer retention,
activation to pay and cost synergies, inclusive of duplicative run
rate costs related to facilities and data center
rationalization.
(6)
Represents severance to be paid
for executive terminations not associated with a strategic
restructuring event.
(7)
Represents the tax impact of all
of the above adjustments, as well as excluding the non-recurring
tax benefits and expenses related to changes resulting from tax
legislation, the assessment or resolution of tax audits or other
significant events.
Unlevered free cash flow
We define unlevered free cash flow as net cash provided by
operating activities add interest payments less capital
expenditures. We consider unlevered free cash flow to be a
liquidity measure that provides useful information to management
and investors about the amount of cash generated by the business
that can be used for strategic opportunities, including investing
in our business, making strategic acquisitions, and strengthening
the balance sheet.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201119006253/en/
Investor Relations Contact: Chris Mammone
investor@mcafee.com
Media Contact: Jaime Le media@mcafee.com
McAfee (NASDAQ:MCFE)
Historical Stock Chart
From Mar 2024 to Apr 2024
McAfee (NASDAQ:MCFE)
Historical Stock Chart
From Apr 2023 to Apr 2024