SAN JOSE, Calif .– (BUSINESS WIRE) – February 23, 2021
McAfee Corp. ("McAfee" or the "Company") (NASDAQ: MCFE), the device and cloud cybersecurity company, today announced its financial results for the three months and full fiscal year ended December 26, 2020.
This press release contains multimedia. The full version can be found here: https://www.businesswire.com/news/home/20210223006031/de/
Fourth quarter net sales were $ 777 million, 14% higher than a year earlier. For full-year 2020 net sales were $ 2.9 billion, an increase of 10%.
“McAfee had significant increases in revenue, subscribers, profitability and cash flow at year end. We secure the ever growing digital footprint of our customers as people live more of their lives online. This accelerated transformation, combined with our market leading capabilities, resulted in fourth quarter revenue growth of 23% in our consumer business, total net revenue growth of 14% and strong growth in Adjusted EBITDA. I am very pleased with the way our team has performed, which is a testament to the dedication of McAfee employees around the world, ”said Peter Leav, President and Chief Executive Officer of McAfee.
Financial highlights of the fourth quarter and full fiscal year 2020
Revenue:
- Consumer revenue for the fourth quarter was $ 426 million, up 23% year over year, and was $ 1.6 billion, up 20% over the full year of FY 20.
- Company revenue was $ 351 million for the fourth quarter, up 5% year over year, and $ 1.3 billion, up 1% for the full year of FY 20.
Non-leveraged free cash flow:
- Cash flow from operating activities for the fiscal year ended December 26, 2020 was $ 760 million, up 53% from $ 496 million for the fiscal year ended December 28, 2019.
- Unlevered free cash flow for the fiscal year ended December 26, 2020 was $ 982 million, more than 37% higher than the prior year.
Consumer KPIs:
- McAfee’s market-leading growth in consumer business is being driven by the acceleration of its business fundamentals, with Core DTC subscribers growing 18% year over year.
- McAfee ended the fourth quarter with 18.0 million Core DTC subscribers, adding around 2.8 million net new subscribers compared to the fourth quarter of 2019 and 668,000 net new subscribers in the last quarter alone.
- 13th consecutive quarter with positive quarterly and annual growth for Core DTC.
- After twelve months, the consumer retention rate after twelve months was 100%, compared with 97% in the same period of the previous year.
Current business highlights
- Announced with Asus a five-year extension for consumer security services across its product portfolio.
- Signed a three-year contract with LG to pre-install a 30-day free trial of McAfee consumer security on LG devices.
- Renewed agreement with Costco to continue offering consumer security products on PCs purchased through Costco.com.
- Expanded global relationship with Ingram Micro Inc. to now have access to McAfee enterprise products and solutions through Ingram Micro's global distribution network, including regional cloud marketplaces and competence centers.
- Entering into a corporate agreement with ECS, a world-class managed service provider and market leader in cybersecurity, cloud, AI and ServiceNow. ECS now provides capabilities to detect and respond to managed threats through McAfee MVISION EDR.
- Introduction of the availability of MVISION Extended Detection and Response (XDR) with cloud and network telemetry to standardize and optimize the detection and response of threats beyond endpoints.
Commenting on the company's financial results, Venkat Bhamidipati, CFO of McAfee said: “Across the company, results exceeded expectations based on strong execution and increased demand for our security offerings. In our consumer segment, we achieved subscriber growth among teenagers as we saw robust demand in the large, critical, and growing personal protection market. In our Enterprise segment, we increased quarterly revenue 5% year over year and increased profitability by focusing on core businesses and government customers while prioritizing our capital expenditures and streamlining costs. "
Financial outlook
McAfee offers the following expected financial projections for the quarter ended March 27, 2021:
Net sales of $ 725 million to $ 735 million
Total Adjusted EBITDA from $ 275 million to $ 285 million (1)
The financial outlook is subject to a number of important assumptions and risks, which investors should read carefully in the “Forward-Looking Statements” section below.
Webcast / conference call details
In connection with this announcement, McAfee will host a webcast conference call at 5:00 p.m. today, February 23, 2021. Eastern Time to discuss financial results. The list-only webcast is available at https://ir.mcafee.com/investors. Investors and attendees can access the conference call by calling (833) 301-1122 or, for international callers, (631) 658-1012. The conference ID is 7461775.
After the conference call, a replay of the webcast, supplementary financial information and earnings slides will be made available on the Investor Relations page of the McAfee website at https://ir.mcafee.com/news-and-events/events.
About McAfee
McAfee is the device-to-cloud cybersecurity company. Inspired by the power of collaboration, McAfee creates consumer and business solutions that make the world a safer place. www.mcafee.com
|
(1) |
Adjusted EBITDA is a non-GAAP financial measure and should be viewed in addition to, but not a substitute for, GAAP information. Because of the high degree of variability and the difficulty of identifying, including, but not including, certain items that affect net income (loss), we cannot forecast net income (loss), the most directly comparable GAAP financial measure, without undue effort limited to interest expenses and other net expenses for income tax expenses and foreign exchange gains (losses), net and stock-based compensation expenses, any of which may be material. Our forward-looking Adjusted EBITDA projections should not be used to predict our future net income (loss) as the difference between the two metrics will be different because of this and other items. |
Use of Non-GAAP Financial Information
In addition to McAfee's results, which are determined in accordance with generally accepted accounting principles (“GAAP”), McAfee believes that the following non-GAAP measures presented in this press release and discussed in the relevant conference call have been implemented in relation to the Operating performance is useful to evaluate: Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Net Income Margin, Adjusted Net Income Excluding Foreign Exchange Effects, Adjusted Net Income Excluding Foreign Exchange Rate Margins, Adjusted Earnings Per Share ("EPS"), and Unlevered Free Cash flow. Certain of these non-GAAP measures exclude stock-based compensation, depreciation, amortization, interest and other net expenses, provisions for income tax expenses, foreign exchange (profits) and losses, and net and other expenses that we do not believe will be these reflect our ongoing operations. McAfee believes that these non-GAAP financial metrics are used to improve the reader's understanding of our past financial performance and our future prospects. The McAfee management team uses these non-GAAP financial metrics to evaluate McAfee's performance and to plan and forecast future periods. The non-GAAP financial information is presented for informational purposes only and should not be viewed as a substitute for financial information presented in accordance with GAAP. They may differ from the non-GAAP measures with similar titles used by other companies. A reconciliation is provided here for each non-GAAP financial measure to the most directly comparable financial measure under GAAP. Readers are encouraged to review the applicable 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 the associated conference call may contain “forward-looking statements” within the meaning of US securities laws that involve significant risks and uncertainties. All statements other than statements of historical fact contained in this press release and on the appropriate conference call are forward-looking statements. These statements may contain words such as "anticipate", "estimate", "expect", "project", "plan", "intend", "believe", "may", "will", "should", "may" "Likely" and other words and terms of similar meaning used in connection with a discussion of the timing or nature of future operational or financial performance or other events. For example, any statements McAfee makes regarding its estimated and forecast financial results or its plans and goals for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated by the company. Specific factors that could cause such a difference include, but are not limited to, those previously disclosed in the company's other filings with the SEC including, but not limited to: the effects of the COVID-19 pandemic ; our ability to adapt to rapid technological change, advance industry standards, and change customer needs, requirements or preferences; our ability to improve and deliver our cloud-based offerings while continuing to effectively offer our on-premise offerings; our ability to maintain or improve our competitive position; the impact of a network or data security incident or unauthorized access to our network or our data or our customers' data on our business; the impact on our business if we cannot acquire new customers, if our customers do not renew their agreements with us, or if we are not able to expand sales with our existing customers or develop new solutions or solution packages, market acceptance to reach; our ability to effectively manage our growth, 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 improve and expand our sales and marketing capabilities; our ability to attract and retain highly qualified personnel to implement our growth plan; the risks associated with interruptions or performance problems with our technology, infrastructure and service providers; our reliance on cloud infrastructure services from Amazon Web Services; the impact of privacy concerns, evolving cloud computing regulations, cross-border data transfer restrictions, and other domestic and foreign laws and regulations; the impact of volatility on quarterly operating income; The risks associated with our revenue recognition policy and other factors may skew our financial results over a period of time. the impact on our customer base and business if we cannot improve our brand cost-effectively; our ability to comply with anti-corruption, bribery and similar laws; our ability to comply with government export and import controls and economic sanction laws; the possible adverse effects of legal proceedings; the impact of our often long and unpredictable sales cycle; our ability to identify suitable acquisition targets or otherwise successfully implement our growth strategy; the impact of changing our pricing model; our ability to meet service level commitments from our customer contracts; the impact on our business and reputation if we cannot provide high quality customer support; our reliance on strategic relationships with third parties; the impact of adverse general and industry-specific economic and market conditions and the reduction in IT and identity spending; the ability of our platform, solutions and solution packages to work with our customers' existing or future IT infrastructures; our reliance on adequate research and development resources and our ability to successfully complete acquisitions; our reliance on the integrity and scalability of our systems and infrastructures; our reliance on software and services from other parties; the effects of real or perceived errors, failures, weaknesses or errors in our solutions; our ability to protect our property rights; the impact on our business if we are subject to an infringement suit or a lawsuit that results in material damages; the risks associated with using open source software in our solutions, solution packages, and subscriptions; our reliance on SaaS providers to operate certain functions of our business; the risks associated with the compensation provisions in our agreements; the risks associated with liability claims if we breach our contracts; the effects of our customers' failure to pay us under the terms of their agreements; our ability to expand sales of our solutions and solution packages to customers outside of the United States; the risks associated with foreign currency fluctuations; the effects of Brexit; the impact of potentially adverse tax consequences related to our international business operations; the effects of changes in tax law or regulation; the effects of the tax law; our ability to maintain our corporate culture; our ability to develop and maintain proper and effective internal control over financial reporting; the limited experience of our management team in running a public company; the risks associated with locating businesses and employees in Israel; the risks associated with doing business with government agencies; and the impact of catastrophic events on our business. Given these factors, as well as other variables that could affect McAfee's results of operations, you should not rely on forward-looking statements, assume that past financial performance is a reliable indicator of future performance, or use historical trends to determine Anticipate results or trends in future periods. Forward-looking statements contained in this press release and related conference call speak only for events as of the date of this release. The company assumes no obligation to update or revise any forward-looking statements as a result of new information, future events or for any other reason, unless otherwise required by law.
Presentation of the financial measures
McAfee Corp. (the "Corporation") was incorporated on July 19, 2019 in Delaware. The Corporation was formed for the purpose of completing an initial public offering (the “IPO”) and related transactions to continue the business of the Foundation Technology Worldwide LLC (“FTW”) and its subsidiaries (the Company, FTW and its subsidiaries collectively the “ Companies"). As the sole managing member of FTW, the company operates and controls only the business and affairs of FTW. The company consolidates FTW's financial results and reports a redeemable non-controlling interest (“RNCI”) related to the LLC interests and management incentive units (MIUs) that it does not own.
|
MCAFEE CORP. |
||||||||||||||||
|
UNKNOWN ABRIDGED CONSOLIDATED OPERATING STATEMENTS |
||||||||||||||||
|
(in millions except amounts per share) |
||||||||||||||||
|
Three months ended |
end of year |
|||||||||||||||
|
December 26th |
December 28th |
December 26th |
December 28th |
|||||||||||||
|
Net sales |
$ |
777 |
$ |
682 |
$ |
2.906 |
$ |
2.635 |
||||||||
|
Cost of sales |
256 |
211 |
875 |
843 |
||||||||||||
|
Gross income |
521 |
471 |
2.031 |
1,792 |
||||||||||||
|
Operating expenses: |
||||||||||||||||
|
Sales and marketing |
292 |
203 |
826 |
770 |
||||||||||||
|
Research and Development |
201 |
91 |
475 |
380 |
||||||||||||
|
General and administrative |
132 |
77 |
332 |
272 |
||||||||||||
|
Amortization of intangible assets |
55 |
54 |
220 |
222 |
||||||||||||
|
Restructuring and transition fees |
16 |
8th |
25th |
22nd |
||||||||||||
|
Business expense |
696 |
433 |
1,878 |
1.666 |
||||||||||||
|
Operating profit (loss) |
(175 |
) |
38 |
153 |
126 |
|||||||||||
|
Interest expense and other, net |
(85 |
) |
(76 |
) |
(308 |
) |
(295 |
) |
||||||||
|
Exchange rate gain (loss), net |
(55 |
) |
(24 |
) |
(104 |
) |
20th |
|||||||||
|
Loss before income taxes |
(315 |
) |
(62 |
) |
(259 |
) |
(149 |
) |
||||||||
|
Provision for income tax expense |
5 |
19th |
30th |
87 |
||||||||||||
|
Annual deficit |
$ |
(320 |
) |
$ |
(81 |
) |
$ |
(289 |
) |
$ |
(236 |
) |
||||
|
Less: net loss due to redeemable non-controlling interests |
(202 |
) |
N / A |
(171 |
) |
N / A |
||||||||||
|
McAfee Corp. Net Loss |
$ |
(118 |
) |
N / A |
$ |
(118 |
) |
N / A |
||||||||
|
Net loss per share, basic and diluted (1) |
$ |
(0.73 |
) |
N / A |
$ |
(0.73 |
) |
N / A |
||||||||
|
Weighted average shares outstanding, base |
162.3 |
N / A |
162.3 |
N / A |
||||||||||||
|
Weighted average shares outstanding, diluted |
433.9 |
N / A |
433.9 |
N / A |
|
(1) |
For the fiscal year ending December 26, 2020, the basic and diluted earnings per ordinary share of class A only apply for the period from October 22, 2020 to December 26, 2020, the period after the initial public offering (“IPO”). ) and related reorganization transactions (as defined in Note 1 to the Consolidated Financial Statements to be included in our 2020 Annual Report on Form 10-K and to be filed with the Securities Exchange Commission). |
|
MCAFEE CORP. |
||||||||
|
UNKNOWN CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
|
(in millions, excluding shares and amounts per share) |
||||||||
|
December 26, 2020 |
December 28, 2019 |
|||||||
|
financial assets |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ |
231 |
$ |
167 |
||||
|
Claims, net |
392 |
409 |
||||||
|
Deferred costs |
233 |
187 |
||||||
|
Other current assets |
58 |
68 |
||||||
|
Total current assets |
914 |
831 |
||||||
|
Property, plant and equipment, net |
149 |
171 |
||||||
|
Goodwill |
2,431 |
2,428 |
||||||
|
Identified intangible assets, net |
1.644 |
2.071 |
||||||
|
Deferred tax claims |
67 |
55 |
||||||
|
Other long-term assets |
223 |
232 |
||||||
|
Total assets |
$ |
5.428 |
$ |
5.788 |
||||
|
Liabilities, repayable non-controlling interests, and deficits |
||||||||
|
Short-term liabilities: |
||||||||
|
Trade payables and other current liabilities |
$ |
266 |
$ |
196 |
||||
|
Accrued compensation and benefits |
197 |
209 |
||||||
|
Accumulated Marketing |
124 |
94 |
||||||
|
Pay taxes |
14th |
15th |
||||||
|
Long-term debt, current share |
44 |
43 |
||||||
|
Leasing liabilities, short-term portion |
25th |
29 |
||||||
|
Prepaid expenses |
1.715 |
1.574 |
||||||
|
Total short-term liabilities |
2,385 |
2,160 |
||||||
|
Long-term debt, net |
3,943 |
4.669 |
||||||
|
Deferred tax liabilities |
12 |
160 |
||||||
|
Other long-term liabilities |
204 |
175 |
||||||
|
Accruals and deferrals minus the current share |
684 |
718 |
||||||
|
Total liabilities |
7.228 |
7,882 |
||||||
|
Commitments and Contingent Liabilities |
||||||||
|
Redeemable non-controlling interests |
4,840 |
– – |
||||||
|
Equity / membership deficit: |
||||||||
|
Membership deficit |
– – |
(647 |
) |
|||||
|
Class A common stock, face value $ 0.001 – 1,500,000,000 authorized shares, As of December 26, 2020, 161,266,648 shares were issued and in circulation |
– – |
– – |
||||||
|
Class B common stock, face value $ 0.001 – 300,000,000 authorized shares, As of December 26, 2020, 267,065,127 shares were issued and in circulation |
– – |
– – |
||||||
|
Capital reserve |
(6.477 |
) |
– – |
|||||
|
Cumulative deficit |
(118 |
) |
(1.385 |
) |
||||
|
Cumulative other comprehensive income (loss) |
(45 |
) |
(62 |
) |
||||
|
Overall deficit |
(6,640 |
) |
(2.094 |
) |
||||
|
Total liabilities, repayable non-controlling interests, and deficit |
$ |
5.428 |
$ |
5.788 |
|
MCAFEE CORP. |
||||||||
|
UNKNOWN CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
|
(in millions) |
||||||||
|
end of year |
||||||||
|
December 26, 2020 |
December 28, 2019 |
|||||||
|
The cash flow from operating activities: |
||||||||
|
Annual deficit |
$ |
(289 |
) |
$ |
(236 |
) |
||
|
Adjustments to reconcile the net loss with the cash flow from operating activities: |
||||||||
|
Depreciation |
491 |
536 |
||||||
|
Equity-based payment |
313 |
25th |
||||||
|
Deferred taxes |
(10 |
) |
18th |
|||||
|
Exchange rate loss (net), net |
104 |
(20 |
) |
|||||
|
Other operational activities |
70 |
53 |
||||||
|
Change in assets and liabilities: |
||||||||
|
Claims, net |
15th |
(60 |
) |
|||||
|
Deferred costs |
(46 |
) |
(22 |
) |
||||
|
Other assets |
(9 |
) |
(71 |
) |
||||
|
Other current liabilities |
41 |
28 |
||||||
|
Prepaid expenses |
106 |
186 |
||||||
|
Other liabilities |
(26 |
) |
59 |
|||||
|
Cash generated from operations |
760 |
496 |
||||||
|
Cash flow from investing activities: |
||||||||
|
Acquisitions net of cash acquired |
(5 |
) |
(2 |
) |
||||
|
Additions to property, plant and equipment |
(42 |
) |
(56 |
) |
||||
|
Other investing activities |
(4th |
) |
(5 |
) |
||||
|
Cash flow from investing activities |
(51 |
) |
(63 |
) |
||||
|
Cash flow from financing activities: |
||||||||
|
IPO proceeds, less subscription discounts and commissions |
586 |
– – |
||||||
|
Use of the proceeds from the issue of Class A common shares for purchase Foundation Technology Worldwide LLC ("FTW") entities |
(33 |
) |
– – |
|||||
|
Income from the issue of member shares |
2 |
1 |
||||||
|
Payment for the long-term debt to third parties |
(869 |
) |
(67 |
) |
||||
|
Long-term debt income |
– – |
685 |
||||||
|
Payment for issue costs |
(5 |
) |
(6 |
) |
||||
|
Distributions to FTW members |
(277 |
) |
(1.334 |
) |
||||
|
Payment of withholding tax on withheld stocks and shares |
(24 |
) |
(8th |
) |
||||
|
Payment of IPO-related costs |
(8th |
) |
– – |
|||||
|
Other financing activities |
(23 |
) |
(5 |
) |
||||
|
Cash flow from financing activities |
(651 |
) |
(734 |
) |
||||
|
Effect of exchange rate fluctuations on cash and cash equivalents |
6th |
– – |
||||||
|
Change in cash and cash equivalents |
64 |
(301 |
) |
|||||
|
Cash and cash equivalents, beginning of the period |
167 |
468 |
||||||
|
Cash and cash equivalents, end of the reporting period |
$ |
231 |
$ |
167 |
||||
|
Supplementary information on non-cash investment and financing activities and Cash flow information: |
||||||||
|
Acquisition of property, plant and equipment included in current liabilities |
$ |
(2 |
) |
$ |
(8th |
) |
||
|
Distributions to FTW members included in liabilities |
(27 |
) |
(4th |
) |
||||
|
Dividend payments included in liabilities |
(14 |
) |
– – |
|||||
|
Withholding tax on retained stocks and shares included in liabilities |
(4th |
) |
– – |
|||||
|
Other |
(3 |
) |
(2 |
) |
||||
|
Cash payment during the period for: |
||||||||
|
Interest less cash flow hedges |
(268 |
) |
(281 |
) |
||||
|
Taxes on income and earnings minus refunds |
(49 |
) |
(47 |
) |
MCAFEE CORP.
UNKNOWN NON-GAAP FINANCIAL MEASURES
(in millions)
We have included both GAAP financial measures and certain non-GAAP financial measures, including Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Net Income Margin, and Adjusted Net Income with no impact from Adjusted net income excluding the impact of the foreign exchange margin, adjusted diluted earnings per share, and non-leveraged free cash flow and metrics based on these financial metrics.
Adjusted Income from Operations, Adjusted Income from Operations, Adjusted EBITDA, and Adjusted EBITDA
Entire company
The following table shows a reconciliation of our Adjusted Operating Income and Adjusted EBITDA to our net loss for the periods presented:
|
Three months ended |
end of year |
|||||||||||||||
|
(in millions) |
December 26th |
December 28th |
December 26th |
December 28th |
||||||||||||
|
Annual deficit |
$ |
(320 |
) |
$ |
(81 |
) |
$ |
(289 |
) |
$ |
(236 |
) |
||||
|
Add: amortization |
106 |
117 |
436 |
470 |
||||||||||||
|
Add: Equity-based compensation |
288 |
6th |
313 |
25th |
||||||||||||
|
Add: Cash Instead of Stock Rewards (1) |
2 |
4th |
8th |
19th |
||||||||||||
|
Add: acquisition and integration costs (2) |
2 |
5 |
8th |
23 |
||||||||||||
|
Add: Restructuring and Transition (3) |
16 |
8th |
25th |
22nd |
||||||||||||
|
Add: Management Fees (4) |
22nd |
2 |
28 |
8th |
||||||||||||
|
Add: Implementation costs for adopting ASC Topic 606 |
– – |
– – |
– – |
4th |
||||||||||||
|
Add: Transformation Initiatives (5) |
11 |
14th |
28 |
33 |
||||||||||||
|
Add: Executive compensation (6) |
1 |
3 |
5 |
3 |
||||||||||||
|
Add: Interest expense and others, net |
85 |
76 |
308 |
295 |
||||||||||||
|
Add: Provision for income tax expense |
5 |
19th |
30th |
87 |
||||||||||||
|
Add: Exchange rate loss (profit), net |
55 |
24 |
104 |
(20 |
) |
|||||||||||
|
Adjusted operating profit |
273 |
197 |
1.004 |
733 |
||||||||||||
|
Add: Depreciation |
13 |
19th |
55 |
66 |
||||||||||||
|
Less: other expenses |
(1 |
) |
– – |
(2 |
) |
– – |
||||||||||
|
Adjusted EBITDA |
$ |
285 |
$ |
216 |
$ |
1,057 |
$ |
799 |
||||||||
|
Net sales |
$ |
777 |
$ |
682 |
$ |
2.906 |
$ |
2.635 |
||||||||
|
Net loss margin |
(41.2 |
)% |
(11.9 |
)% |
(9.9 |
)% |
(9.0 |
)% |
||||||||
|
Adjusted operating profit margin |
35.1 |
%. |
28.9 |
%. |
34.5 |
%. |
27.8 |
%. |
||||||||
|
Adjusted EBITDA margin |
36.7 |
%. |
31.7 |
%. |
36.4 |
%. |
30.3 |
%. |
See Appendix A for explanations of non-GAAP measures and other items.
Consumer segment
The following table shows a reconciliation of our consumer-adjusted operating income and consumer-adjusted EBITDA to our consumer operating income for the periods shown:
|
Three months ended |
end of year |
|||||||||||||||
|
(in millions) |
December 26th |
December 28th |
December 26th |
December 28th |
||||||||||||
|
Operating Income – Consumers |
$ |
26th |
$ |
79 |
$ |
333 |
$ |
277 |
||||||||
|
Add: amortization |
63 |
62 |
252 |
253 |
||||||||||||
|
Add: Equity-based compensation |
74 |
1 |
84 |
4th |
||||||||||||
|
Add: Cash Instead of Stock Rewards (1) |
– – |
1 |
– – |
2 |
||||||||||||
|
Add: acquisition and integration costs (2) |
2 |
2 |
8th |
8th |
||||||||||||
|
Add: Restructuring and Transition (3) |
1 |
– – |
2 |
2 |
||||||||||||
|
Add: Management Fees (4) |
12 |
– – |
13 |
1 |
||||||||||||
|
Add: Implementation costs for adopting ASC Topic 606 |
– – |
– – |
– – |
1 |
||||||||||||
|
Add: Transformation Initiatives (5) |
5 |
3 |
10 |
6th |
||||||||||||
|
Add: Executive compensation (6) |
– – |
1 |
– – |
1 |
||||||||||||
|
Adjusted Income from Operations – Consumers |
183 |
149 |
702 |
555 |
||||||||||||
|
Add: Depreciation |
5 |
8th |
20th |
25th |
||||||||||||
|
Adjusted EBITDA – Consumers |
$ |
188 |
$ |
157 |
$ |
722 |
$ |
580 |
||||||||
|
Net Sales – Consumers |
$ |
426 |
$ |
347 |
$ |
1.558 |
$ |
1.303 |
||||||||
|
Operating Profit Margin – Consumers |
6.1 |
%. |
22.8 |
%. |
21.4 |
%. |
21.3 |
%. |
||||||||
|
Adjusted Operating Profit Margin – Consumers |
43.0 |
%. |
42.9 |
%. |
45.1 |
%. |
42.6 |
%. |
||||||||
|
Adjusted EBITDA Margin – Consumers |
44.1 |
%. |
45.2 |
%. |
46.3 |
%. |
44.5 |
%. |
See Appendix A for explanations of non-GAAP measures and other items.
Corporate segment
The following table shows a reconciliation of our enterprise-adjusted operating income and enterprise-adjusted EBITDA to our enterprise operating loss for the periods presented:
|
Three months ended |
end of year |
|||||||||||||||
|
(in millions) |
December 26th |
December 28th |
December 26th |
December 28th |
||||||||||||
|
Operating Loss – Company |
$ |
(201 |
) |
$ |
(41 |
) |
$ |
(180 |
) |
$ |
(151 |
) |
||||
|
Add: amortization |
43 |
55 |
184 |
217 |
||||||||||||
|
Add: Equity-based compensation |
214 |
5 |
229 |
21st |
||||||||||||
|
Add: Cash Instead of Stock Rewards (1) |
2 |
3 |
8th |
17th |
||||||||||||
|
Add: acquisition and integration costs (2) |
– – |
3 |
– – |
15th |
||||||||||||
|
Add: Restructuring and Transition (3) |
15th |
8th |
23 |
20th |
||||||||||||
|
Add: Management Fees (4) |
10 |
2 |
15th |
7th |
||||||||||||
|
Add: Implementation costs for adopting ASC Topic 606 |
– – |
– – |
– – |
3 |
||||||||||||
|
Add: Transformation Initiatives (5) |
6th |
11 |
18th |
27 |
||||||||||||
|
Add: Executive compensation (6) |
1 |
2 |
5 |
2 |
||||||||||||
|
Adjusted Income from Operations – Company |
90 |
48 |
302 |
178 |
||||||||||||
|
Add: Depreciation |
8th |
11 |
35 |
41 |
||||||||||||
|
Less: other expenses |
(1 |
) |
– – |
(2 |
) |
– – |
||||||||||
|
Adjusted EBITDA Company |
$ |
97 |
$ |
59 |
$ |
335 |
$ |
219 |
||||||||
|
Net sales – company |
$ |
351 |
$ |
335 |
$ |
1,348 |
$ |
1,332 |
||||||||
|
Operating Loss Margin – Business |
(57.3 |
)% |
(12.2 |
)% |
(13.4 |
)% |
(11.3 |
)% |
||||||||
|
Adjusted Operating Income Margin – Businesses |
25.6 |
%. |
14.3 |
%. |
22.4 |
%. |
13.4 |
%. |
||||||||
|
Adjusted EBITDA Margin – Companies |
27.6 |
%. |
17.6 |
%. |
24.9 |
%. |
16.4 |
%. |
See Appendix A for explanations of non-GAAP measures and other items.
Adjusted Net Income, Adjusted Net Income Margin, Adjusted Net Income Excluding Foreign Exchange Effects, and Adjusted Net Income Excluding Foreign Exchange Margin Effects
The following table reconciles our Adjusted Net Income and Adjusted Net Income excluding foreign exchange effects to our net loss for the periods presented:
|
Three months ended |
end of year |
|||||||||||||||
|
(in millions except amounts per share) |
December 26th |
December 28th |
December 26th |
December 28th |
||||||||||||
|
Annual deficit |
$ |
(320 |
) |
$ |
(81 |
) |
$ |
(289 |
) |
$ |
(236 |
) |
||||
|
Add: Amortization of Debt Discount and Issue Costs |
22nd |
4th |
36 |
17th |
||||||||||||
|
Add: amortization |
106 |
117 |
436 |
470 |
||||||||||||
|
Add: Equity-based compensation |
288 |
6th |
313 |
25th |
||||||||||||
|
Add: Cash Instead of Stock Rewards (1) |
2 |
4th |
8th |
19th |
||||||||||||
|
Add: acquisition and integration costs (2) |
2 |
5 |
8th |
23 |
||||||||||||
|
Add: Restructuring and Transition (3) |
16 |
8th |
25th |
22nd |
||||||||||||
|
Add: Management Fees (4) |
22nd |
2 |
28 |
8th |
||||||||||||
|
Add: Implementation costs for adopting ASC Topic 606 |
– – |
– – |
– – |
4th |
||||||||||||
|
Add: Transformation Initiatives (5) |
11 |
14th |
28 |
33 |
||||||||||||
|
Add: Executive compensation (6) |
1 |
3 |
5 |
3 |
||||||||||||
|
Add: Provision for income taxes |
5 |
19th |
30th |
87 |
||||||||||||
|
Add: TRA customization (7) |
2 |
– – |
2 |
– – |
||||||||||||
|
Add: Others |
2 |
– – |
2 |
– – |
||||||||||||
|
Adjusted earnings before taxes |
$ |
159 |
$ |
101 |
$ |
632 |
$ |
475 |
||||||||
|
Adjusted provision for income taxes (8) |
36 |
23 |
139 |
105 |
||||||||||||
|
Adjusted net income |
$ |
123 |
$ |
78 |
$ |
493 |
$ |
370 |
||||||||
|
Adjusted earnings before taxes |
$ |
159 |
$ |
101 |
$ |
632 |
$ |
475 |
||||||||
|
Add: Exchange rate loss (profit), net (9) |
55 |
24 |
104 |
(20 |
) |
|||||||||||
|
Adjusted earnings before taxes excluding exchange rate effects |
214 |
125 |
736 |
455 |
||||||||||||
|
Adjusted provision for income taxes excluding exchange rate effects (8) |
47 |
28 |
162 |
100 |
||||||||||||
|
Adjusted net income excluding exchange rate effects |
$ |
167 |
$ |
97 |
$ |
574 |
$ |
355 |
||||||||
|
Net sales |
$ |
777 |
$ |
682 |
$ |
2.906 |
$ |
2.635 |
||||||||
|
Net loss margin |
(41.2 |
)% |
(11.9 |
)% |
(9.9 |
)% |
(9.0 |
)% |
||||||||
|
Adjusted net profit margin |
15.8 |
%. |
11.4 |
%. |
17.0 |
%. |
14.0 |
%. |
||||||||
|
Adjusted net income excluding the impact of the foreign exchange margin |
21.5 |
%. |
14.2 |
%. |
19.8 |
%. |
13.5 |
%. |
||||||||
|
Net loss per share, diluted |
$ |
(0.73 |
) |
|||||||||||||
|
Adjusted EPS (a) |
$ |
0.38 |
||||||||||||||
|
Weighted average shares outstanding, base |
162.3 |
|||||||||||||||
|
Influence on the dilution |
||||||||||||||||
|
Share bonuses |
4.6 |
|||||||||||||||
|
Assumed Conversion of LLC Units and Vested MIUs |
272.5 |
|||||||||||||||
|
Weighted average shares outstanding, diluted (10) |
439.4 |
|
(on) |
Adjusted EPS is calculated by dividing adjusted net income excluding foreign exchange for the full quarter by the weighted average of diluted shares in issue. |
See Appendix A for explanations of non-GAAP measures and other items.
Free cash flow with no leverage
The following table shows a reconciliation of our non-leveraged free cash flow to our cash flow from operating activities for the periods shown:
|
end of year |
||||||||
|
(in millions) |
December 26, 2020 |
December 28, 2019 |
||||||
|
Cash generated from operations |
$ |
760 |
$ |
496 |
||||
|
Add: Interest Payments |
268 |
281 |
||||||
|
Less: investments (1) |
(46 |
) |
(61 |
) |
||||
|
Free cash flow with no leverage |
$ |
982 |
$ |
716 |
||||
|
Cash flow from investing activities |
$ |
(51 |
) |
$ |
(63 |
) |
||
|
Cash flow from financing activities |
$ |
(651 |
) |
$ |
(734 |
) |
|
(1) |
The investments include payments for property, plant and equipment and capitalized labor costs incurred in connection with certain software development activities. |
MCAFEE CORP.
APPENDIX A.
STATEMENT OF NON-GAAP MEASURES AND OTHER ITEMS
Adjusted Income from Operations, Adjusted Income from Operations, Adjusted EBITDA, and Adjusted EBITDA
We define adjusted operating income for the whole of society as net income (loss), excluding the effects of amortization of intangible assets, share-based compensation expenses, interest expenses and other net provisions for income tax expenses and foreign exchange losses, net and other costs that we do not believe that they reflect our ongoing operations. We define Adjusted Operating Income for our Consumer and Corporate segments as the operating income (loss) of the segment, excluding the effects of amortization of intangible assets, share-based compensation expenses, and other costs attributable to the segment that we believe are not the segment reflect ongoing activities. We present this reconciliation of Adjusted Income from Operations (Loss) to Income from Operations for the Consumer and Corporate segments because Income from Operations (Loss) is the primary measure of profitability used to assess segment performance and is therefore the most directly comparable GAAP Is the financial measure of our business segments. Adjusted operating profit margin is calculated as adjusted operating profit divided by net sales. We define Adjusted EBITDA as adjusted operating income excluding the impact of depreciation and other non-operating costs. The Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by net sales.
Adjusted Net Income, Adjusted Net Income Margin, Adjusted Net Income Excluding Foreign Exchange Effects, and Adjusted Net Income Excluding Foreign Exchange Margin Effects
We define Adjusted Net Income as net income (loss) excluding the effects of amortization of intangible assets, amortization of issue costs, share-based compensation expenses, other costs and certain one-time tax benefits and expenses that we do not believe would affect our ongoing operations and the tax implications of these adjustments to reflect. Adjusted net profit margin is calculated as adjusted net profit divided by net sales.
Adjustments for Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income excluding foreign exchange
Adjusted Net Income and Adjusted Net Income excluding foreign exchange assume the total net income of McAfee Corp. attributable to the full exchange of all outstanding LLC shares for Class A common shares of McAfee Corp. assumes and adjusts for the effects of amortization of intangible assets, amortization of issuance costs, share-based compensation expenses, other costs, and certain one-time tax benefits and expenses that we do not believe to reflect our ongoing business operations. The adjusted provision for income taxes and the adjusted provision for income taxes without exchange rate effects represent the tax effect on earnings, adjusted for all the adjustments listed, assuming that the entire consolidated earnings for all periods presented were subject to corporate income tax. We have adopted a rate of 22%, which represents our long-term expected corporate tax rate without any discrete and one-off tax items. This amount has been rewritten for previously reported periods.
Adjusted net profit margin is calculated as adjusted net profit divided by net sales. Adjusted net income, excluding foreign exchange margin effects, is calculated as adjusted net income, excluding foreign exchange effects, divided by net sales. Adjusted Net Income, Adjusted Net Income Excluding Foreign Exchange Rates, Adjusted Net Income Margin, and Adjusted Net Income Excluding Foreign Exchange Margins are subject to limitations as an analytical tool and you should not use them in isolation or as a substitute for analyzing our results as reported under GAAP.
The following is additional information about the adjustments to Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income excluding foreign exchange:
|
(1) |
Following the acquisition of a majority stake in FTW by our sponsors from Intel in April 2017 (“Sponsor Acquisition”), certain employees who received Intel Equity Awards instead of Equity in Foundation Technology Worldwide LLC (“FTW”) were granted cash awards ”). In addition, as a result of the Skyhigh Acquisition, certain employees who held Skyhigh Share Rewards instead of FTW Shares and who were vested over multiple periods of time due to employee service requirements received cash awards. Because these rollover awards reflect one-time grants to former Intel and Skyhigh Networks employees in connection with these transactions, we believe these costs do not reflect our ongoing results. |
|
|
(2) |
Represents both direct and incremental costs associated with corporate acquisitions, including acquisition considerations structured as cash withholding, third party fees, and other integration costs. |
|
|
(3) |
Represents both direct and incremental costs associated with our separation from Intel, including maintaining our back office and the costs of conducting strategic restructuring events, including professional fees and third-party services, transition services provided by Intel, severance payments and costs for the Restructuring of facilities. |
|
|
(4) |
Represents management fees paid to certain affiliates of our sponsors and Intel under the Management Services Agreement. The Management Services Agreement was terminated after the IPO and we paid these parties a one-time fee of $ 22 million in October 2020. |
|
|
(5) |
Represents the costs associated with reorganizing the business after the Intel separation. Also includes the costs of restructuring the workforce, including both downsizing and relocating to locations with lower costs associated with MAP and other transformation initiatives, strategic initiatives to improve customer loyalty, activation of pay, and cost synergies, including double costs for the rate of operation related to facilities, include, and data center rationalization. |
|
|
(6) |
Represents the severance payment for executive redundancies that are not related to a strategic restructuring event. |
|
|
(7) |
Represents the effect of the net income from adjustments to liabilities under our tax receivable agreement. |
|
|
(8th) |
Prior to our IPO, our structure was that of a pass-through for US federal income tax purposes with certain US and foreign subsidiaries that are subject to income tax in their respective jurisdictions. After the IPO, McAfee Corp. as a corporation, pays federal, state, and local corporate taxes on taxes assigned to it by Foundation Technology Worldwide LLC. This amount has been rewritten for previously reported periods. The adjusted provision for income taxes now represents the tax effect on the result, adjusted for all the adjustments listed, assuming that the entire consolidated result was subject to corporation tax for all periods shown. We have adopted a rate of 22%, which represents our long-term expected corporate tax rate without any discrete and one-off tax items. |
|
|
(9) |
Represents the net exchange rate gain (loss) as reported in the consolidated income statement. This amount is primarily due to realized and unrealized gains or losses on non-US Dollar denominated balances and is primarily due to unrealized gains or losses related to our Euro Term Loan with First Lien. |
|
|
(10) |
Represent weighted average shares outstanding for the period October 22, 2020 through December 26, 2020, which is the period after the IPO and related reorganization transactions, and include the dilutive effects of our outstanding share awards and the assumed conversion of our LLC Units and MIUs not owned by the corporation. |
Free cash flow with no leverage
We define the non-leveraged free cash flow as the net cash flow from operating activities plus interest payments minus investments. We view non-leveraged free cash flow as a liquidity measure that provides management and investors with useful information about the amount of money the company is generating 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: http://www.businesswire.com/news/home/20210223006031/de/
CONTACT: Investor contact:
Eduardo Fleites
[email protected] contact:
Jaime Le
KEYWORD: UNITED STATES NORTH AMERICA CALIFORNIA
KEYWORD IN INDUSTRY: DATA MANAGEMENT SECURITY TECHNOLOGY MOBILE / WIRELESS SOFTWARE NETWORKS INTERNET
SOURCE: McAfee
Copyright Business Wire 2021.
PUB: 02/23/2021 4:10 p.m. / DISC: 02/23/2021 4:10 p.m.
http://www.businesswire.com/news/home/20210223006031/de