Results and revised fiscal year outlook reflect the significant transformation now underway
While positioning the company for greater long-term growth, despite lower revenue, Symantec delivered better than expected operating margin and EPS
MOUNTAIN VIEW, Calif. - October 23, 2013 - Symantec Corp. (Nasdaq: SYMC) today reported revenue of $1.64 billion for its second quarter of fiscal year 2014, ended September 27, 2013, down 4 percent year-over-year and down 3 percent after adjusting for currency.
"Since announcing our strategy in January, we made significant changes that will help us become more successful at delivering value to customers and partners. We've reallocated resources to develop new integrated offerings, split the sales organization into renewals and new business teams, and simplified our management structure," said Steve Bennett, president and chief executive officer, Symantec. "While this was a challenging quarter in our transition year, we expect our actions to translate into growth. We remain committed to our FY15-FY17 targets and are confident that we are on the right track."
"The actions we took were necessary and will build a strong foundation for long-term growth," said Drew Del Matto, acting chief financial officer, Symantec. "We fell short on revenue in the September quarter, but over-delivered on operating margin and EPS. Due to the second quarter shortfall and the significant changes we are driving, we are lowering our FY14 guidance."
GAAP Results for the Second Quarter of Fiscal Year 2014
- GAAP operating margin was 15.1 percent compared with 17.5 percent for the same quarter last year.
- GAAP net income was $241 million compared with net income of $189 million for the year-ago period.
- GAAP diluted earnings per share were $0.34, up 26 percent year-over-year.
- GAAP deferred revenue as of September 27, 2013 was $3.50 billion compared with $3.62 billion as of September 28, 2012, down 3 percent year-over-year.
- Cash flow from operating activities was $191 million, up 7 percent year-over-year.
Non-GAAP Results for the Second Quarter of Fiscal Year 2014
- Non-GAAP operating margin was 27.6 percent compared with 27.0 percent for the same quarter last year, up 60 basis points year-over-year and flat after adjusting for currency.
- Non-GAAP net income was $355 million, compared to $318 million for the year-ago period, up 12 percent year-over-year.
- Non-GAAP diluted earnings per share were $0.50, compared with $0.45 for the year-ago period, an increase of 11 percent.
Business Segment and Geographic Highlights for the Quarter
In alignment with our 4.0 strategy, we created three new business segments. Below is a breakdown of our results by segments and geographies.
- The User Productivity & Protection segment, which is comprised of endpoint security and management, encryption, and our mobile offerings, represented 44 percent of total revenue and declined 3 percent year-over-year (2 percent after adjusting for currency) to $719 million.
- The Information Security segment declined 2 percent year-over-year (1 percent after adjusting for currency) to $316 million. This segment represented 19 percent of total revenue and includes Symantec's security capabilities such as our mail & web security, authentication services, data center security, Managed Security Services (MSS), hosted security services, and Data Loss Prevention (DLP) businesses.
- The Information Management segment represented 37 percent of total revenue and declined 5 percent year-over-year (6 percent after adjusting for currency) to $602 million. This segment is comprised of offerings related to backup and recovery, information intelligence, which includes archiving and e-discovery, and information availability, which we previously referred to as storage management.
- International revenue represented 52 percent of total revenue and decreased 3 percent year-over-year (2 percent after adjusting for currency).
- The Europe, Middle East and Africa region represented 28 percent of total revenue and increased 4 percent year-over-year (down 1 percent after adjusting for currency).
- The Asia Pacific/Japan region represented 18 percent of total revenue and decreased 14 percent year-over-year (5 percent after adjusting for currency).
- The Americas, including the United States, Latin America and Canada, represented 54 percent of total revenue and decreased 3 percent year-over-year (4 percent after adjusting for currency).
Symantec ended the quarter with cash, cash equivalents and short-term investments of $3.8 billion compared to $4.0 billion, a decrease of 4 percent year-over-year. On September 18, 2013, we paid a dividend of $0.15 per share for a total of $105 million. Also, during the quarter, Symantec repurchased 5.0 million shares for $125 million at an average price of $24.99. At the end of the second quarter, Symantec had $908 million remaining for future repurchases in the current board authorized stock repurchase plan.
Symantec's Board of Directors has declared a quarterly cash dividend of $0.15 per common share to be paid on December 18, 2013 to all shareholders of record as of the close of business on November 25, 2013. The ex-dividend date will be November 21, 2013.
Fiscal Year 2014 Guidance
Given the September quarter shortfall and the significant transformation we are driving, we have lowered our annual guidance. For fiscal 2014, Symantec expects:
- Revenue to decline 3 to 4 percent in constant currency
- Non-GAAP operating margin to expand by 30 to 60 basis points
- Non-GAAP earnings per share to be between -1.0 and 1.5 percent compared to the prior fiscal year
Third Quarter Fiscal Year 2014 Guidance
For the third quarter of fiscal 2014, Symantec expects:
- Revenue of $1.63 billion to $1.67 billion, compared to $1.79 billion in the year-ago period.
- GAAP operating margin of 17.0 percent to 17.6 percent compared to 17.0 percent in the year-ago period.
- Non-GAAP operating margin of 25.6 percent to 26.2 percent compared to 25.9 percent in the year-ago period.
- GAAP diluted earnings per share between $0.26 and $0.28 as compared to $0.31 in the year-ago period.
- Non-GAAP diluted earnings per share between $0.41 and $0.43 as compared to $0.45 in the year-ago period.
Guidance assumes an exchange rate of $1.35 per Euro for the December 2013 quarter versus the actual weighted average rate of $1.30 and an end of period rate of $1.32 per Euro for the December 2012 quarter. Our guidance assumes an effective tax rate of 28 percent and a common stock equivalents total for the quarter of approximately 707 million shares.
Symantec has scheduled a conference call for 5 p.m. ET/2 p.m. PT today to discuss the results of its fiscal second quarter 2014, ended September 27, 2013 and to review guidance. Interested parties may access the conference call on the Internet at http://www.symantec.com/invest. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. A replay and script of our officers' remarks will be available on the investor relations' home page shortly after the call is completed.
Symantec protects the world's information, and is a global leader in security, backup and availability solutions. Our innovative products and services protect people and information in any environment - from the smallest mobile device, to the enterprise data center, to cloud-based systems. Our world-renowned expertise in protecting data, identities and interactions gives our customers confidence in a connected world. More information is available at www.symantec.com
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Forward-looking Statements: This press release contains statements regarding our financial and business results, which may be considered forward-looking within the meaning of the U.S. federal securities laws, including projections of future revenue, operating margin and earnings per share, as well as projections of amortization of acquisition-related intangibles and stock-based compensation and restructuring charges. 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: general economic conditions; maintaining customer and partner relationships; the anticipated growth of certain market segments, particularly with regard to security and storage; the competitive environment in the software industry; changes to operating systems and product strategy by vendors of operating systems; fluctuations in currency exchange rates; the timing and market acceptance of new product releases and upgrades; the successful development of new products and integration of acquired businesses, and the degree to which these products and businesses gain market acceptance. Actual results may differ materially from those contained in the forward-looking statements in this press release. We assume no obligation, and do not intend, to update these forward-looking statements as a result of future events or developments. Additional information concerning these and other risks factors is contained in the Risk Factors sections of our Form 10-K for the year ended March 29, 2013.
USE OF NON-GAAP FINANCIAL INFORMATION: Our results of operations have undergone significant change due to a series of acquisitions, the impact of stock-based compensation, impairment charges and other corporate events. To help our 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 method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Investors 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, on the investor relations' page of our website at www.symantec.com/invest.