Symantec: Fiscal 1Q13 Financial Results

Symantec Corp. reported the results of its first quarter of fiscal year 2013, ended June 29, 2012. GAAP revenue for the fiscal first quarter was $1.668 billion, up 1% year-over-year and up 4% after adjusting for currency.

"Symantec delivered another solid quarter. The company’s investment in cloud security and mobility continues to gain momentum and position us well worldwide," said Steve Bennett, chairman, president and CEO, Symantec. "We are making progress on many fronts, but believe we can further accelerate the company’s value to employees, customers, partners and shareholders."

"We delivered record June quarter revenue and deferred revenue, as well as growth in earnings per share despite an 11% foreign currency headwind," said James Beer, EVP and CFOP, Symantec. "We saw strength in endpoint protection, consumer security, authentication services, data loss prevention, and backup appliances."

GAAP operating margin for the first quarter of fiscal year 2013 was 16.1% compared with 18.3% for the same quarter last year. GAAP net income for the fiscal first quarter was $172 million compared with net income of $191 million for the year-ago period. GAAP diluted earnings per share were $0.24 compared with $0.25 for the year ago quarter. Variation in year-over-year GAAP results were as expected due to increases in restructuring costs and IT infrastructure investments.

GAAP deferred revenue as of June 29, 2012, was $3.745 billion compared with $3.689 billion as of July 1, 2011, up 2% year-over-year and up 5% after adjusting for currency. Cash flow from operating activities for the first quarter of fiscal year 2013 was $340 million compared with $503 million for the year ago period.

Non-GAAP operating margin for the first quarter of fiscal year 2013 was 26.1% compared with 27.0% for the same quarter last year. Non-GAAP net income for the first quarter was $309 million, flat compared to the year-ago period. Non-GAAP diluted earnings per share were $0.43 compared with earnings per share of $0.40 for the year-ago quarter, an increase of 7% year-over-year.

Symantec ended the quarter with cash, cash equivalents and short-term investments of $4.1 billion. During the quarter, it repurchased 19 million shares for $301 million at an average price of $15.59. It has $683 million remaining in the current board authorized stock repurchase plan.

Business Segment and Geographic Highlights
For the quarter, Symantec’s Consumer segment represented 31% of total revenue and decreased 1% year-over-year (increased 2% after adjusting for currency). The Security and Compliance segment represented 30% of total revenue and increased 7% year-over-year (increased 10% after adjusting for currency). The Storage and Server Management segment represented 35% of total revenue and decreased 2% year-over-year (increased 1% after adjusting for currency) at $584 million. Services represented 4% of total revenue and declined 2% year-over-year (increased 1% after adjusting for currency).

International revenue represented 51% of total revenue in the first quarter of fiscal year 2013 with a flat growth rate year-over-year (increased 6% after adjusting for currency). The Europe, Middle East and Africa region represented 26% of total revenue for the quarter and decreased 8% year-over-year (increased 3% after adjusting for currency). The AsiaPac/Japan revenue for the quarter represented 19% of total revenue and increased 9% year-over-year (increased 10% after adjusting for currency). The Americas, including the United States, Latin America and Canada, represented 55% of total revenue and increased 3% year-over-year on an actual and currency-adjusted basis.

Acquisition Highlights
Our acquisitions exceeded our expectations this quarter, generating $24 million in revenue from the Clearwell and LiveOffice acquisitions as we leveraged the scope and scale of the Symantec sales force.

Second Quarter Fiscal Year 2013 Guidance
Guidance assumes an exchange rate of $1.23 per Euro for the September 2012 quarter versus the actual weighted average rate of $1.41 and an end of period rate of $1.34 per Euro for the September 2011 quarter. Guidance assumes an effective tax rate of 28.5% and a common stock equivalents total for the quarter of approximately 710 million shares.

Given the recent strengthening of the US dollar relative to other currencies, for the second quarter of fiscal year 2013, ending Sept. 28, 2012, GAAP revenue is estimated between $1.635 billion and $1.665 billion, as compared to revenue of $1.68 billion during the September 2011 quarter. Symantec is expecting revenue to decline 1% to 3% year-over-year as reported, and be up 1% to 3% in constant currency.

As a result of raising a billion dollars in senior unsecured notes during June, our interest expense for the next four quarters will be higher by $8 million per quarter. This will decrease EPS by $0.008 per quarter for a total of approximately $0.03 dilution through June 2013.

GAAP diluted earnings per share are estimated between $0.15 and $0.19 as compared to $0.24 in the year ago period. Non-GAAP diluted earnings per share are estimated between $0.35 and $0.39 as compared to $0.39 in the year ago period, down 10% to flat on an as reported basis.

GAAP deferred revenue is expected to be in the range of $3.49 billion and $3.55 billion, compared to $3.45 billion at the end of September 2011. Symantec is expecting deferred revenue to be up 1% to 3% year-over-year as reported, and up 3% to 4% in constant currency.