INDEPENDENT NEWS

Symantec Reports Record Revenue And Earnings

Published: Thu 23 Oct 2003 04:03 PM
News Release
Symantec Reports Record Revenue And Earnings, Raises Fiscal Year Guidance
Consumer Performance Exceeds Expectations Following Numerous Threat Outbreaks During the Quarter
CUPERTINO, Calif. – Oct. 23, 2003 – Symantec Corp. (Nasdaq: SYMC), the world leader in Internet security, today reported results for the fiscal second quarter 2004 ended Oct. 3, 2003. Symantec posted revenue for the quarter of $429 million, a 32 percent increase compared to $325 million for the same quarter last year, driven by strong enterprise security growth and higher than expected results in the consumer segment.
GAAP Results: Net income for the fiscal second quarter was $83 million, compared to $52 million for the same quarter last year. Earnings per share was $0.49, compared to earnings per share of $0.33 for the year-ago quarter.
Non-GAAP Results: Non-GAAP net income for the fiscal second quarter was $91 million, compared to $60 million for the same quarter last year. Non-GAAP earnings per share was $0.53, compared to earnings per share of $0.38 for the year-ago quarter. Non-GAAP results and related reconciliation, as outlined in the attached consolidated statements, exclude expenses from the amortization of other intangibles from acquisitions and acquired in-process research and development as well as related income tax benefits. See “Use of Non-GAAP Financial Information” below.
“It was a stellar quarter across the board with strong performances in all regions,” said John W. Thompson, Symantec chairman and CEO. “Our integrated approach for enterprises and consumers continues to gain momentum and set the bar for the rest of the industry.”
Revenue Components
For the quarter, Symantec’s worldwide enterprise business, including enterprise security, enterprise administration, and services, represented 55 percent of total revenue. Symantec’s enterprise security business represented 41 percent of total revenue and grew 25 percent year-over-year; the enterprise administration business represented 12 percent of revenues and declined 8 percent in line with expectations; and the services business grew 53 percent and represented 2 percent of total revenue. Symantec’s consumer business grew 56 percent and represented 45 percent of total revenue.
International revenues represented 50 percent of total revenue in the second quarter and grew 39 percent over the same quarter last year. Canada led the increase for the quarter with 49 percent growth, followed by the Europe, Middle East and Africa region with 46 percent growth. Japan recorded 27 percent year-over-year growth, Asia Pacific recorded 24 percent growth and Latin America had 9 percent growth. The United States grew at 26 percent.
Business Outlook
Forward-looking guidance for the fiscal third quarter ending Jan. 2, 2004, is as follows:
- Revenue is expected to be in the range of $440 to $460 million.
- GAAP earnings per share is expected to be $0.52 at the midpoint of the revenue guidance.
- Non-GAAP earnings per share is expected to be $0.56 at the midpoint of the revenue guidance.
Forward-looking guidance for the fiscal year, ending April 2, 2004, updated to reflect the fiscal year-to-date actual performance and estimated results for the fiscal third and fourth quarters is as follows:
- Revenue is expected to be approximately $1.73 billion.
- GAAP earnings per share is expected to be $1.90 at the stated revenue forecast, up 15 cents from previous guidance.
- Non-GAAP earnings per share is expected to be $2.10 at the stated revenue forecast, up 14 cents from previous guidance.
Non-GAAP earnings per share excludes the pre-tax amortization of other intangibles from acquisitions, acquired in-process research and development, and other items such as patent settlement and restructuring charges of approximately $11 million and $58 million for the quarter ending Jan. 2, 2004, and the fiscal year ending April 2, 2004, respectively.
Quarterly Highlights
- Symantec signed 129 contracts worldwide worth more than $100,000 each, including 36 worth more than $300,000 each and 6 worth more than $1 million each, during the quarter.
- Symantec signed new or extended agreements with customers including Nextel; Cinergy, one of the nation's largest utility companies; Digex, Incorporated, a leading provider of enterprise hosting services; Rinker Materials, one of the nation's leaders in building and construction materials; Qualex, Inc., the largest wholesale and on-site photofinishing company in the world; Storage Technologies Corp., a worldwide data storage company; Sykes Enterprises, a global leader in providing outsourced customer management solutions and services; and CenturyTel, Inc., the nation's eighth largest local telephone exchange company.
- Symantec also signed new or extended agreements with public sector and education customers including Temple University; the State of Tennessee; the U.S. Department of the Interior; the U.S. Environmental Protection Agency; the U.S. Department of State; the U.S. Army; and the Internal Revenue Service.
- Around the world, Symantec signed contracts with customers including South Korea-based Samsung Electronics; Jainam Technologies, a leading IT solutions company in India; and ANZ Bank, one of Australia's largest financial institutions.
- Symantec introduced its new line of firewall appliances, the Symantec Gateway Security 5400 Series. The 5400 series offers a unique combination of superior price performance, integrated protection, and flexible licensing. The appliance provides comprehensive gateway level protection by integrating full inspection firewall, intrusion prevention, intrusion detection, antivirus, content filtering, virtual private networking (VPN), and anti-spam technology into a single device.
- During the quarter, Symantec updated the world’s premier global early warning system with the launch of Symantec Deep Sight Threat Management System 5.0.
The early warning security system gathers firewall, intrusion detection and now antivirus data from more than 20,000 partners worldwide to provide proactive alerts on active attacks to customers. The system now includes an optional custom reports add-on, enabling organisations to mine the global event database by time, country, and industry to better analyse security events.
- Symantec also announced the Symantec AntiVirus for Handhelds product line to protect consumers and enterprise users. Symantec AntiVirus for Handhelds – Corporate Edition integrates with existing enterprise infrastructures and improves management by providing a centralized view of virus protection information.
- In addition, Symantec launched its 2004 line of consumer security products including Norton Internet Security, Norton AntiVirus, Norton Personal Firewall, Norton AntiSpam and Norton SystemWorks, which includes Norton Password Manager. The new products provide protection from viruses, intrusion attempts, and privacy threats and now offer expanded protection from emerging threats including spyware, adware, keystroke logging programs, and spam.
About Symantec
Symantec, the world leader in Internet security technology, provides a broad range of content and network security software and appliance solutions to individuals, enterprises and service providers. The company is a leading provider of client, gateway and server security solutions for virus protection, firewall and virtual private network, vulnerability management, intrusion detection, Internet content and e-mail filtering, remote management technologies and security services to enterprises and service providers around the world. Symantec’s Norton brand of consumer security products is a leader in worldwide retail sales and industry awards. Headquartered in Cupertino, Calif., Symantec has worldwide operations in 36 countries. For more information, please visit www.symantec.com.
NOTE TO EDITORS: If you would like additional information on Symantec Corporation and its products, please view the Symantec Press Center at http://www.symantec.com/PressCenter/ on Symantec's Web site. All prices noted are in US dollars and are valid only in the United States.
Symantec and the Symantec logo are trademarks or registered trademarks, in the United States and certain other countries, of Symantec Corporation. Additional company and product names may be trademarks or registered trademarks of the individual companies and are respectfully acknowledged.
FORWARD LOOKING STATEMENT: This press release contains forward-looking statements, including forecasts of future revenue and earnings per share, expected activities, and other financial and business results that involve 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 by this press release. Such risk factors include, among others: the sustainability of recent growth rates, particularly in consumer products; the anticipation of the growth of certain market segments, particularly enterprise security; the positioning of Symantec's products in those segments; the competitive environment in the software industry; general market conditions, fluctuations in currency exchange rates, changes to operating systems and product strategy by vendors of operating systems; and whether Symantec can successfully develop new products and the degree to which these gain market acceptance. Actual results may differ materially from those contained in the forward-looking statements in this press release. Additional information concerning these and other risk factors is contained in the Risk Factors sections of Symantec’s previously filed Form 10-K and 10-Q. Symantec assumes no obligation to update any forward-looking information contained in this press release except as otherwise required by law.
USE OF NON-GAAP FINANCIAL INFORMATION: In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Symantec reports non-GAAP financial results. Non-GAAP net income and earnings per share exclude acquisition related charges, such as amortization of other intangibles and in-process research and development, and certain other identified charges, such as restructuring and patent settlement, as well as the tax effect of these items. Symantec's management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method Symantec uses to produce non-GAAP results is not computed according to GAAP, is likely to differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which is attached to this release and can be found on the investor relations Web site at www.symantec.com/invest/center.html.
###
SYMANTEC CORPORATION
GAAP Consolidated Statements of Operations
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands, except per share data; unaudited) 2003 2002 2003 2002
Net revenues $ 428,665 $ 325,231 $ 819,789 $ 641,272
Cost of revenues 74,810 61,159 142,388 116,611
Gross margin 353,855 264,072 677,401 524,661
Operating expenses:
Research and development 59,596 47,344 120,201 92,832
Sales and marketing 155,705 124,896 297,542 240,064
General and administrative 21,174 17,254 47,546 32,608
Amortization of other intangibles from acquisitions 756 665 1,547 1,201
Acquired in-process research and development 1,000 4,700 1,000 4,700
Restructuring, site closures and other 2 (1,179) 570 4,874
Patent Settlement -- -- 13,917 --
Total operating expenses 238,233 193,680 482,323 376,279
Operating income 115,622 70,392 195,078 148,382
Interest income 8,807 9,723 18,904 19,369
Interest expense (5,291) (5,292) (10,582) (10,583)
Income, net of expense, from sale of technologies
and product lines 2,158 2,444 4,326 4,680
Other income (expense), net 673 (134) (38) (1,125)
Income before income taxes 121,969 77,133 207,688 160,723
Provision for income taxes 38,536 25,139 65,474 52,160
Net income $ 83,433 $ 51,994 $ 142,214 $ 108,563
Net income per share – diluted* $ 0.49 $ 0.33 $ 0.85 $ 0.69
Shares used to compute net income
per share – diluted* 178,415 168,489 176,786 168,743
* For the three and six months ended September 30, 2003 and 2002, diluted net income per share is calculated using the if-converted method. Under this method, the numerator excludes the interest expense from the 3% convertible subordinated notes, net of income tax, of $3.6M and $7.2M for the three and six months ended September 30, 2003 and 2002, respectively, and the denominator includes shares issuable from the assumed conversion of the 3% convertible subordinated notes.
SYMANTEC CORPORATION
Non-GAAP Consolidated Statements of Income
Non-GAAP amounts exclude all acquisition related amortization, in-process research and development, restructuring charges, and patent settlement.
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands, except per share data; unaudited) 2003 2002 2003 2002
Net revenues $ 428,665 $ 325,231 $ 819,789 $ 641,272
Cost of revenues 64,570 54,478 123,383 103,601
Gross margin 364,095 270,753 696,406 537,671
Operating expenses:
Research and development 59,596 47,344 120,201 92,832
Sales and marketing 155,705 124,896 297,542 240,064
General and administrative 21,174 17,254 47,546 32,608
Total operating expenses 236,475 189,494 465,289 365,504
Operating income 127,620 81,259 231,117 172,167
Interest income 8,807 9,723 18,904 19,369
Interest expense (5,291) (5,292) (10,582) (10,583)
Income, net of expense, from sale of technologies
and product lines 2,158 2,444 4,326 4,680
Other income (expense), net 673 (134) (38) (1,125)
Income before income taxes 133,967 88,000 243,727 184,508
Provision for income taxes 42,869 28,160 77,992 59,043
Net income $ 91,098 $ 59,840 $ 165,735 $ 125,465
Net income per share – diluted* $ 0.53 $ 0.38 $ 0.98 $ 0.79
Shares used to compute net income per share – diluted* 178,415 168,489 176,786 168,743
* For the three and six months ended September 30, 2003 and 2002, diluted net income per share is calculated using the if-converted method. Under this method, the numerator excludes the interest expense from the 3% convertible subordinated notes, net of income tax, of $3.6M and $7.2M for the three and six months ended September 30, 2003 and 2002, respectively, and the denominator includes shares issuable from the assumed conversion of the 3% convertible subordinated notes.
Reconciliation of Non-GAAP Consolidated Statements of Income to the GAAP Consolidated Statements of Income
Three Months Ended Six Months Ended
September 30, September 30,
(In thousands, except per share data; unaudited) 2003 2002 2003 2002
Non-GAAP net income $ 91,098 $ 59,840 $ 165,735 $ 125,465
Cost of revenues:
Amortization of other intangibles from acquisitions (10,240) (6,681) (19,005) (13,546)
Operating expenses
Amortization of other intangibles from acquisitions (756) (665) (1,547) (665)
Acquired in-process research and development (1,000) (4,700) (1,000) (4,700)
Restructuring, site closures and other (2) 1,179 (570) (4,874)
Patent Settlement -- -- (13,917) --
Income tax benefit 4,333 3,021 12,518 6,883
Net income $ 83,433 $ 51,994 $ 142,214 $ 108,563
Net income per share – diluted $ 0.49 $ 0.33 $ 0.85 $ 0.69
Shares used to compute net income
per share – diluted 178,415 168,489 176,786 168,743
SYMANTEC CORPORATION
Consolidated Balance Sheets
September 30, March 31,
(In thousands) 2003 2003
ASSETS (unaudited)
Current assets:
Cash, cash equivalents and short-term investments $ 2,026,570 $ 1,705,658
Trade accounts receivable, net 224,954 149,664
Inventories 11,587 5,912
Deferred income taxes 94,081 92,284
Other 50,803 34,628
Total current assets 2,407,995 1,988,146
Property, equipment and leasehold improvements, net 364,657 333,275
Deferred income taxes 7,600 7,986
Acquired product rights, net 115,635 73,125
Goodwill, net 853,629 833,449
Other, net 28,285 29,749
$ 3,777,801 $ 3,265,730
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 80,052 $ 67,720
Accrued compensation and benefits 85,135 90,947
Deferred revenue 719,411 589,629
Other accrued expenses 76,937 69,363
Income taxes payable 86,251 76,965
Total current liabilities 1,047,786 894,624
Convertible subordinated notes 599,993 599,998
Other long-term obligations 5,903 6,729
Commitments and contingencies
Stockholders’ equity:
Common stock 1,537 1,488
Capital in excess of par value 1,485,907 1,335,028
Accumulated other comprehensive income 96,719 30,121
Retained earnings 539,956 397,742
Total stockholders’ equity 2,124,119 1,764,379
$ 3,777,801 $ 3,265,730

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