Symantec Reports Strong Second Quarter Earnings Growth
CUPERTINO, Calif. – Oct. 29, 2008 – Symantec Corp. (Nasdaq: SYMC) today reported the results of its second quarter of fiscal year 2009, ended Oct. 3, 2008. GAAP revenue for the quarter was $1.518 billion and non-GAAP revenue was $1.523 billion, up 6 percent over the comparable period a year ago. Foreign currency movements positively impacted non-GAAP revenue by approximately 3.5 percentage points year-over-year, and negatively impacted revenue by 2 percentage points sequentially.
GAAP Results: GAAP operating margins for the second quarter were 14.3 percent. GAAP net income for the second quarter of fiscal year 2009 was $140 million compared with $50 million for the same quarter last year. GAAP diluted earnings per share were $0.16 compared with earnings per share of $0.06 for the same quarter last year. GAAP deferred revenue at the end of the quarter was $2.713 billion compared with $2.599 billion for the same quarter last year.
Cash flow from operating activities for the second quarter of fiscal year 2009 was $248 million compared with $331 million for the same quarter last year. This reduction was driven by increased cash tax payments versus the year ago period in which we received a tax refund, resulting in a year-over-year differential of more than $100 million.
Non-GAAP Results: Non-GAAP operating margins for the second quarter were 29.1 percent, up 390 basis points year-over-year. Non-GAAP net income for the second quarter of fiscal year 2009 was $311 million, up 18 percent compared with $263 million for the same quarter last year. Non-GAAP diluted earnings per share were $0.37, up 28 percent compared with earnings per share of $0.29 for the year ago quarter. Non-GAAP deferred revenue was $2.721 billion, up 4 percent compared with $2.624 billion at the end of the second quarter of fiscal year 2008. Foreign currency movements negatively impacted non-GAAP deferred revenue by 1 percentage point year-over-year, and negatively impacted deferred revenue by 5 percentage points sequentially.
For a detailed reconciliation of our GAAP to non-GAAP results, please refer to the attached condensed consolidated financial statements.
During the September 2008 quarter we repurchased 9.3 million shares, equivalent to $200 million. There is $600 million left in the current stock repurchase board authorization.
"In the face of a slowing economic environment around the world, Symantec continued to generate growth in both our core business and in high growth areas which are becoming increasingly important to our customers," said John W. Thompson, chairman and chief executive officer, Symantec. "I am also quite pleased with our continued operating margin expansion and earnings growth, which is a result of our ongoing focus on managing costs and expenses."
Business Segment and Geographic Highlights
For the quarter, Symantec's Storage and Server Management segment represented 38 percent of total non-GAAP revenue and grew 12 percent year-over-year. The Consumer business represented 29 percent of total non-GAAP revenue and grew 2 percent year-over-year. The Security and Compliance segment represented 26 percent of total non-GAAP revenue and grew 1 percent year-over-year. Services represented 7 percent of total non-GAAP revenue and grew 16 percent year-over-year.
International revenue represented 50 percent of total non-GAAP revenue in the second quarter of fiscal year 2009 and grew 5 percent year-over-year. The Europe, Middle East and Africa region represented 32 percent of total non-GAAP revenue for the quarter and grew 3 percent year-over-year. The Asia Pacific/Japan revenue for the quarter represented 14 percent of total non-GAAP revenue and grew 11 percent year-over-year. The Americas, including the United States, Latin America and Canada, represented 54 percent of total non-GAAP revenue and increased 6 percent year-over-year.
Symantec signed 326 agreements worldwide versus 302 in the same period a year ago with a contract value of more than $300,000 each. Of the 326 agreements, 77 had a value of more than $1 million each versus 64 in the same period a year ago. In the second quarter of fiscal year 2009, 87 percent of the large transactions included multiple products.
Symantec signed new or extended agreements with customers including HealthEast Care System, the largest health care provider in the Twin Cities' East Metro area; Flagstar Bank, a community bank with 175 banking centers in Michigan, Indiana and Georgia and 150 loan offices in 23 states; the United States Air Force, one of seven uniformed services of the United States; Consonus Technologies, a leading provider of IT infrastructure, data center, and managed services solutions; United States Forest Service; Horizon Blue Cross Blue Shield of New Jersey, the state's largest health insurer; Northern Norway Regional Health Authority, which is responsible for public hospitals in northern Norway; Bundesagentur für Arbeit of Nuremberg, Germany; NTT DOCOMO, a leading Japanese mobile communications company; CBA/Commonwealth Bank, one of Australia's leading providers of integrated financial services; and Korea Exchange, a world-class Premier Exchange.
Third Quarter Fiscal Year 2009 Guidance
Guidance assumes an exchange rate of $1.25 per Euro for the December 2008 quarter versus the actual average rate of $1.45 per Euro and the end period rate of $1.47 per Euro for the December 2007 quarter.
For the third quarter of fiscal year 2009, ending Jan. 2, 2009, GAAP revenue is estimated between $1.446 billion and $1.496 billion. GAAP diluted earnings per share are estimated between $0.11 and $0.14. GAAP deferred revenue is expected to be in the range of $2.696 billion and $2.821 billion.
Non-GAAP revenue for the quarter is estimated between $1.450 billion and $1.500 billion. Non-GAAP diluted earnings per share are estimated between $0.30 and $0.33. Non-GAAP deferred revenue is expected to be in the range of $2.700 billion and $2.825 billion.
Symantec has scheduled a conference call for 5 p.m. ET/2 p.m. PT today to discuss the results from the second quarter of fiscal year 2009, ended Oct. 3, 2008, 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 Web site 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 is a global leader in providing security, storage and systems management solutions to help businesses and consumers secure and manage their information. Headquartered in Cupertino, Calif., Symantec has operations in more than 40 countries. 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 statements relating to projections of future revenue, earnings per share and deferred revenue, 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: 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 Factor section of our Form 10-K for the year ended March 28, 2008.
USE OF NON-GAAP FINANCIAL INFORMATION: Our results of operations have undergone significant change due to a series of acquisitions, the impact of SFAS 123(R) 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 Web site at www.symantec.com/invest.
Symantec Corporation - Condensed Consolidated Balance Sheets (pdf)