Symantec: Fiscal 3Q14 Financial Results

Symantec Corp. reported revenue of $1.7 billion for its third quarter of fiscal year 2014, ended December 27, 2013, down 5% year-over-year and down 4% after adjusting for currency.

Non-GAAP operating margin of 30.1% grew 370 basis points after adjusting for currency, resulting in non-GAAP earnings per share of $0.51, up 13% year-over-year. GAAP operating margin of 23.8% grew 680 basis points, resulting in GAAP earnings per share of $0.40, up 29% 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 CEO, 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 Third Quarter of Fiscal Year 2014

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

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

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

Business Segment Highlights for the Quarter

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

Geographic Highlights for the Quarter

• International revenue represented 53% of total revenue and decreased 4% year-over-year (3% after adjusting for currency).
• The EMEA region represented 29% of total revenue and decreased 1% year-over-year (5% after adjusting for currency).
• The AsiaPac/Japan region represented 17% of total revenue and decreased 12% year-over-year (4% after adjusting for currency).
• The Americas, including the United States, Latin America and Canada, represented 54% of total revenue and decreased 4% 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% year-over-year. On December 18, 2013, it paid a dividend of $0.15 per share for a total of $104 million. Also, during the quarter, it repurchased 5.3 million shares for $125 million at an average price of $23.76. At the end of the third quarter, it had $783 million remaining for future repurchases in the current board authorized stock repurchase plan.

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.

For the fourth quarter of fiscal 2014, the company expects:

• 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% compared to 14.6% in the year-ago period.
• Non-GAAP operating margin of 24.5 to 26.0% compared to 24.1% 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% and a common stock equivalents total for the quarter of 702 million shares.

For fiscal year 2014, the company expects:

• 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% compared to 16.0% in the year-ago period.
• Non-GAAP operating margin of 26.9 to 27.2% compared to 25.5% 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.