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Symantec Reports Record June Quarter Revenue and Non-GAAP EPS

MOUNTAIN VIEW, CA — (Marketwired) — 07/30/13 — Symantec Corp. (NASDAQ: SYMC)

Highlights:

Organic FX adjusted revenue grew 3%

Non-GAAP operating margin expanded to 25.3%

Non-GAAP EPS of $0.44 grew 7%

Symantec Corp. (NASDAQ: SYMC) today reported the results of its first quarter of fiscal year 2014, ended June 28, 2013. GAAP revenue for the fiscal first quarter was $1.71 billion, up 2 percent year-over-year and up 3 percent after adjusting for currency.

: #Symantec reports record June quarter revenue and non-GAAP EPS:

“I-m proud of the team-s performance despite the ongoing work to right-size and transform the company. I-m also pleased that we delivered better than expected results,” said Steve Bennett, president and chief executive officer, Symantec. “While the hard work is just beginning, I-m confident we have the right team in place to execute our multi-year roadmaps, implement our critical go-to-market changes and continue to make progress on our successful transformation.”

“We achieved better than expected results driven by strength in our backup, information security and endpoint security businesses,” said James Beer, executive vice president and chief financial officer, Symantec. “During a period of planning and significant resource reallocation, we executed well and grew organic revenue by 3 percent. The magnitude of change we are undertaking is substantial and so as we move increasingly into the implementation phase of our transformation, we remain cautious on our outlook for the coming quarter.”

GAAP operating margin was 13.1 percent compared with 15.0 percent for the same quarter last year.

GAAP net income was $157 million compared with net income of $160 million for the year-ago period.

GAAP diluted earnings per share were $0.22, flat compared to a year ago.

GAAP deferred revenue as of June 28, 2013, was $3.812 billion compared with $3.745 billion as of June 29, 2012, up 2 percent year-over-year and up 3 percent after adjusting for currency.

Cash flow from operating activities was $312 million compared with $340 million for the year ago period.

Non-GAAP operating margin was 25.3 percent compared with 24.9 percent for the same quarter last year, up 40 basis points year-over-year and up 36 basis points after adjusting for currency.

Non-GAAP net income was $308 million, compared to $297 million for the year-ago period, up 4 percent year-over-year.

Non-GAAP diluted earnings per share were $0.44, compared with $0.41 for the year-ago period, an increase of 7 percent.

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 43 percent of total revenue and declined 1 percent year-over-year (increased 1 percent after adjusting for currency) to $732 million.

The Information Security segment grew 7 percent year-over-year (9 percent after adjusting for currency) to $336 million. This segment represented 20 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 grew 4 percent year-over-year on an actual and currency adjusted basis to $641 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 51 percent of total revenue and increased 2 percent (4 percent after adjusting for currency).

The Europe, Middle East and Africa region represented 27 percent of total revenue and increased 8 percent year-over-year (6 percent after adjusting for currency).

The Asia Pacific/Japan revenue represented 18 percent of total revenue and decreased 5 percent year-over-year (increased 1 percent after adjusting for currency).

The Americas, including the United States, Latin America and Canada, represented 55 percent of total revenue and increased 3 percent year-over-year on an actual and currency-adjusted basis.

Symantec ended the quarter with cash, cash equivalents and short-term investments of $3.8 billion compared to $4.1 billion, a decrease of 8 percent year-over-year as we paid off our $1 billion of convertible notes that matured in June 2013. On June 27th, Symantec paid our first dividend of 15¢ per share for a total of $105 million. Also, during the quarter, Symantec repurchased 5.2 million shares for $125 million at an average price of $23.96. At the end of the first quarter, Symantec had $1 billion 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 September 18, 2013 to all shareholders of record as of the close of business on August 26, 2013. The ex-dividend date will be August 22, 2013.

For fiscal 2014, we are reconfirming our revenue guidance of 0-2% growth year-over-year and non-GAAP operating margin expansion of 200 basis points — both on a constant currency basis. We expect non-GAAP EPS to grow between 5-7% year-over-year. We expect currency to be a headwind year over year driven primarily by weakness in the Yen. We also expect cash flow from operations to be down approximately $200 million year-over-year driven by severance cash payments.

Our September quarter guidance takes into consideration the significant changes our sales organization will be undergoing as well as the associated risk. We are confident that these changes will improve execution in the long-term, but may impact results in the short-term.

For the second quarter of fiscal 2014, Symantec expects:

GAAP revenue of $1.65 billion to $1.69 billion, compared to $1.70 billion in the year ago period.

GAAP operating margin of 13.6 percent to 14.2 percent compared to 17.5 percent in the year ago period.

Non-GAAP operating margin of 25.8 percent to 26.4 percent compared to 27 percent in the year ago period.

GAAP diluted earnings per share between $0.22 and $0.24 as compared to $0.27 in the year ago period.

Non-GAAP diluted earnings per share between $0.42 and $0.44 as compared to $0.45 in the year ago period.

Guidance assumes an exchange rate of $1.31 per Euro for the September 2013 quarter versus the actual weighted average rate of $1.25 and an end of period rate of $1.29 per Euro for the September 2012 quarter. Our guidance assumes an effective tax rate of 27.5 percent and a common stock equivalents total for the quarter of approximately 705 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 first quarter 2014, ended June 28, 2013 and to review guidance. Interested parties may access the conference call on the Internet at . 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 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 or by connecting with Symantec at: .

If you would like additional information on Symantec Corporation and its products, please visit the Symantec News Room at . 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 section 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 .

Change in accounting policy: Effective March 30, 2013, we changed our accounting policy for sales commissions that are incremental and directly related to customer sales contracts in which revenue is deferred. These commission costs are accrued and capitalized upon execution of a non-cancelable customer contract, and subsequently expensed over the term of such contract in proportion to the related future revenue streams. For commission costs where revenue is recognized, the related commission costs are recorded in the period of revenue recognition. Prior to this change in accounting policy, commission costs were expensed in the period in which they were incurred. The adoption of this accounting policy change has been applied retrospectively to all periods presented in this document, in which the cumulative effect of the change has been reflected as of the beginning of the first period presented.

Segment reporting: We previously announced our new strategic direction during the fourth quarter of fiscal 2013. As part of the strategy, we made changes to the organization and to performance measurements. During the first quarter of fiscal 2014, we modified our segment reporting structure to more readily match our operating structure. The historical periods presented have been adjusted to reflect the modified reporting structure, which are now the following:

User Productivity & Protection

Information Security

Information Management

Historically, we reported our Other segment which consisted primarily of sunset products and products nearing the end of their life cycle. As such there was no revenue associated with this segment. Additionally, this Other segment included certain general and administrative expenses, amortization of intangible assets, stock-based compensation expense, restructuring and transition expenses, and certain indirect costs that were not charged to the other operating segments. Effective fiscal 2014, we will allocate all of our shared expenses from this Other segment to the three new segments except for the following reconciling items: stock-based compensation, amortization of intangible assets, restructuring and transition, impairment of intangible assets, impairment of assets held for sale, acquisition/divestiture-related expenses and settlements of litigation.

The non-GAAP financial measures included in the tables adjust for the following items: business combination accounting entries, stock-based compensation expense, restructuring and transition charges, charges related to the amortization of intangible assets, impairments of assets and certain other items. We believe the presentation of these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding the Company-s operating performance for the reasons discussed below. Our management uses these non-GAAP financial measures in assessing the Company-s operating results, as well as when planning, forecasting and analyzing future periods. We believe that these non-GAAP financial measures also facilitate comparisons of the Company-s performance to prior periods and to our peers and that investors benefit from an understanding of these non-GAAP financial measures.

Stock-based compensation: Consists of expenses for employee stock options, restricted stock units, restricted stock awards, performance based awards and our employee stock purchase plan determined in accordance with the authoritative guidance on stock-based compensation. When evaluating the performance of our individual business units and developing short and long term plans, we do not consider stock-based compensation charges. Our management team is held accountable for cash-based compensation, but we believe that management is limited in its ability to project the impact of stock-based compensation and accordingly is not held accountable for its impact on our operating results. Although stock-based compensation is necessary to attract and retain quality employees, our consideration of stock-based compensation places its primary emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. In addition, for comparability purposes, we believe it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies. Furthermore, unlike cash-based compensation, the value of stock-based compensation is determined using complex formulas that incorporate factors, such as market volatility, that are beyond our control.

Amortization of intangible assets: When conducting internal development of intangible assets, accounting rules require that we expense the costs as incurred. In the case of acquired businesses, however, we are required to allocate a portion of the purchase price to the accounting value assigned to intangible assets acquired and amortize this amount over the estimated useful lives of the acquired intangible assets. The acquired company, in most cases, has itself previously expensed the costs incurred to develop the acquired intangible assets, and the purchase price allocated to these assets is not necessarily reflective of the cost we would incur in developing the intangible asset. We eliminate these amortization charges from our non-GAAP operating results to provide better comparability of pre- and post-acquisition operating results and comparability to results of businesses utilizing internally developed intangible assets.

Restructuring and transition: We have engaged in various restructuring and transition activities over the past several years that have resulted in costs associated with severance, facilities costs, and transition and other related costs. Transition and other related costs consist of severance costs associated with acquisition integrations in efforts to streamline our business operations, associated with the implementation of a new Enterprise Resource Planning system, and costs related to the outsourcing of certain back office functions. Each restructuring and transition activity has been a discrete event based on a unique set of business objectives or circumstances, and each has differed from the others in terms of its operational implementation, business impact and scope. We do not engage in restructuring or transition activities in the ordinary course of business. While our operations previously benefited from the employees and facilities covered by our various restructuring charges, these employees and facilities have benefited different parts of our business in different ways, and the amount of these charges has varied significantly from period to period. We believe that it is important to understand these charges and, we believe that investors benefit from excluding these charges from our operating results to facilitate a more meaningful evaluation of current operating performance and comparisons to past operating performance.

Acquisition/divestiture-related expenses: The authoritative guidance on business combinations requires us to record in the statement of income, certain items that at the time of an acquisition would have been recorded to goodwill under the old authoritative guidance. We have excluded the effect of acquisition-related expenses from our non-GAAP operating expenses and net income measures. We incurred expenses in connection with our acquisitions, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition/divestiture-related expenses consist of professional service expenses. We believe it is useful for investors to understand the effects of these items on our operations. Although acquisition/divestiture-related expenses generally diminish over time with respect to past transactions, we generally will incur these expenses in connection with any future transactions.

Non-cash interest expense: Effective April 4, 2009, we adopted authoritative guidance on convertible debt instruments, which changed the method of accounting for our convertible notes. Under this authoritative guidance, our EPS and net income calculated in accordance with GAAP have been reduced as a result of recognizing incremental non-cash interest expense. We believe it is useful to provide a non-GAAP financial measure that excludes this incremental non-cash interest expense in order to better understand the long-term performance of our core business and to facilitate the comparison of our results to the results of our peer companies.

Loss on sale of assets: During the first quarter of fiscal 2013, management sold certain intangible assets pertaining to the former Storage and Server Management segment and incurred a loss of $7 million. These intangible assets were acquired, in addition to other intangible assets, in a recent acquisition and did not meet the long-term strategic objectives of the segment. We have included the impact of this item in the Other (Expense) Income, net in our GAAP income statement. The Company-s management excluded this item when evaluating its ongoing operating performance, and therefore excluded this loss when presenting non-GAAP financial measures.

Gain on sale of short-term investments: This constitutes the gain from the sale of the Company-s short-term investments. The Company-s management excludes this gain when evaluating its ongoing performance and therefore excludes this gain when presenting non-GAAP financial measures.

Mara Mort
Symantec Corp.
415-850-8645

Helyn Corcos
Symantec Corp.
650-527-5523