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Symantec's Operating Margin and EPS Rise in Third Quarter Fiscal 2014; Full-Year 2014 Guidance Raised

MOUNTAIN VIEW, Calif. – Jan. 29, 2014 – Symantec Corp. (NASDAQ: SYMC) today reported revenue of $1.7 billion for its third quarter of fiscal year 2014, ended December 27, 2013, down 5 percent year-over-year and down 4 percent after adjusting for currency. Non-GAAP operating margin of 30.1 percent grew 370 basis points after adjusting for currency, resulting in non-GAAP earnings per share of $0.51, up 13 percent year-over-year. GAAP operating margin of 23.8 percent grew 680 basis points, resulting in GAAP earnings per share of $0.40, up 29 percent year-over-year.
"We benefited in the December quarter from improved total business activity after separating our sales organization into dedicated new business and renewal teams earlier this year," said Steve Bennett, president and chief executive officer, Symantec. "Although revenue declined, we exceeded our expectations in operating margin and EPS. While we won't be pleased until total business activity is growing again, I'm happy with our financial results given the massive changes in our business."
"Since July, we've made substantial progress in three areas -- offerings, go-to-market, and increased efficiency -- to drive improved long-term performance. We have the right strategy to leverage Symantec's assets and better solve our customers' biggest problems. We are where we expected to be at this point in our 3-to 5-year transformation, as we continue to make the changes needed to achieve our long-term targets."

GAAP Results for the Third Quarter of Fiscal Year 2014

  • GAAP operating margin was 23.8 percent, up 680 basis points year-over-year and up 625 basis points after adjusting for currency.
  • GAAP net income was $283 million, up 31 percent year-over-year.
  • GAAP diluted earnings per share were $0.40, up 29 percent year-over-year.
  • GAAP deferred revenue as of December 27, 2013 was $3.59 billion, down 6 percent year-over-year and down 5 percent after adjusting for currency.
  • Cash flow from operating activities was $329 million, down 29 percent year-over-year.

Non-GAAP Results for the Third Quarter of Fiscal Year 2014

  • Non-GAAP operating margin was 30.1 percent, up 420 basis points year-over-year and up 370 basis points after adjusting for currency.
  • Non-GAAP net income was $358 million, up 13 percent year-over-year.
  • Non-GAAP diluted earnings per share were $0.51, up 13 percent year-over-year.

Business Segment Highlights for the Quarter

  • The User Productivity & Protection segment represented 42 percent of total revenue and declined 4 percent year-over-year (as reported and after adjusting for currency) to $718 million.
  • The Information Security segment represented 19 percent of total revenue and declined 3 percent year-over-year (1 percent after adjusting for currency) to $327 million.
  • The Information Management segment represented 39 percent of total revenue and declined 6 percent year-over-year (7 percent after adjusting for currency) to $660 million.

Geographic Highlights for the Quarter

  • International revenue represented 53 percent of total revenue and decreased 4 percent year-over-year (3 percent after adjusting for currency).
  • The Europe, Middle East and Africa region represented 29 percent of total revenue and decreased 1 percent year-over-year (5 percent after adjusting for currency).
  • The Asia Pacific/Japan region represented 17 percent of total revenue and decreased 12 percent year-over-year (4 percent after adjusting for currency).
  • The Americas, including the United States, Latin America and Canada, represented 54 percent of total revenue and decreased 4 percent year-over-year (as reported and after adjusting for currency).

Capital Allocation

Symantec ended the quarter with cash, cash equivalents and short-term investments of $3.9 billion compared to $4.3 billion, a decrease of 9 percent year-over-year. On December 18, 2013, we paid a dividend of $0.15 per share for a total of $104 million. Also, during the quarter, Symantec repurchased 5.3 million shares for $125 million at an average price of $23.76. At the end of the third quarter, Symantec had $783 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 March 19, 2014 to all shareholders of record as of the close of business on February 24, 2014. The ex-dividend date will be February 20, 2014.

Fourth Quarter Fiscal Year 2014 Guidance

For the fourth quarter of fiscal 2014, we expect:
  • Revenue of $1.615 to $1.655 billion, compared to $1.748 billion in the year-ago period.
  • GAAP operating margin of 18.0 to 19.5 percent compared to 14.6 percent in the year-ago period.
  • Non-GAAP operating margin of 24.5 to 26.0 percent compared to 24.1 percent in the year-ago period.
  • GAAP diluted earnings per share between $0.29 and $0.31 as compared to $0.27 in the year-ago period.
  • Non-GAAP diluted earnings per share between $0.40 and $0.42 as compared to $0.44 in the year-ago period.
Guidance assumes an exchange rate of $1.36 per Euro for the March 2014 quarter versus the actual weighted average rate of $1.32 and an end of period rate of $1.28 per Euro for the March 2013 quarter. Our guidance assumes an effective tax rate of 28 percent and a common stock equivalents total for the quarter of 702 million shares.

Fiscal Year 2014 Guidance

For the fiscal year 2014, we expect:
  • Revenue of $6.666 to $6.706 billion, compared to $6.906 billion in the year-ago period.
  • GAAP operating margin of 17.6 to 17.9 percent compared to 16.0 percent in the year-ago period.
  • Non-GAAP operating margin of 26.9 to 27.2 percent compared to 25.5 percent in the year-ago period.
  • GAAP diluted earnings per share between $1.25 and $1.27 as compared to $1.06 in the year-ago period.
  • Non-GAAP diluted earnings per share between $1.85 and $1.87 as compared to $1.76 in the year-ago period.

Conference Call

Symantec has scheduled a conference call for 5 p.m. ET/2 p.m. PT today to discuss the results of its fiscal third quarter 2014, ended December 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.

About Symantec

Symantec protects the world's information, and is the 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 industry-leading expertise in protecting data, identities and interactions gives our customers' confidence in a connected world. More information is available at www.symantec.com or by connecting with Symantec at: go.symantec.com/socialmedia.
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 and the Symantec 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 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.

@Symantec