McAfee’s Fourth Quarter Revenue Grows 14%, Powered by 23% Consumer Revenue Growth
02/23/2021 - 04:10 PM
McAfee Corp. (“McAfee,” or the “Company”) (NASDAQ: MCFE), the device-to-cloud cybersecurity company, today announced its financial results for the three months and full fiscal year ended December 26, 2020.
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In the fourth quarter net revenue was $777 million , up 14% year-over-year. For the full year 2020, net revenue was $2.9 billion , an increase of 10% .
“McAfee achieved significant increases in revenue, subscribers, profitability and cash flow to close out the year. We secure our customers’ ever increasing digital footprint as people are living more of their lives online. This accelerating transformation combined with our market leading capabilities drove 23% revenue growth in our consumer business, 14% growth in total net revenue, and strong growth in adjusted EBITDA in Q4. I am very pleased with our team’s execution, which is a testament to the dedication of McAfee employees worldwide,” said Peter Leav, McAfee’s President and Chief Executive Officer.
Fourth Quarter and Full Year Fiscal 2020 Financial Highlights
Revenue :
Consumer revenue for the fourth quarter was $426 million , reflecting 23% growth year-over-year and was $1.6 billion , up 20% for the full year FY20.
Enterprise revenue for the fourth quarter was $351 million , up 5% year-over-year and was $1.3 billion , up 1% for the full year FY20.
Unlevered Free Cash Flow :
Net cash provided by operating activities was $760 million in the year ended December 26, 2020, up 53% compared to $496 million in the year ended December 28, 2019.
Unlevered Free Cash Flow was $982 million for the year ended December 26, 2020, up more than 37% versus the prior year.
Consumer KPIs :
The market leading growth in McAfee’s Consumer business is being driven by accelerating business fundamentals, with 18% year-over-year growth in Core DTC subscribers.
McAfee ended the fourth quarter with 18.0 million Core DTC subscribers, adding approximately 2.8 million net new subscribers compared to the fourth quarter of 2019 and 668,000 net new subscribers during the past quarter alone.
13th consecutive quarter of positive quarter over quarter and year over year Core DTC subscriber growth.
Consumer trailing twelve-month dollar retention rate was 100% for the fourth quarter, versus 97% in the comparable period last year.
Recent Business Highlights
Announced a five year extension with Asus for consumer security services across their product portfolio.
Signed a three year agreement with LG to pre-install a 30-day free trial of McAfee consumer security on LG devices.
Renewed an agreement with Costco to continue to offer consumer security products on PCs purchased through Costco.com.
Expanded worldwide relationship with Ingram Micro Inc. to now provide access to McAfee enterprise products and solutions across Ingram Micro's global distribution network, including its regional Cloud Marketplaces and Centers of Excellence.
Formed an enterprise agreement with ECS, a top-rated managed service provider and leader in cybersecurity, cloud, AI and ServiceNow delivery, where ECS will now offer managed threat detection and response capabilities through McAfee MVISION EDR.
Introduced the availability of MVISION Extended Detection and Response (XDR) with inclusion of cloud and network telemetry, unifying and optimizing threat detection and response beyond endpoints.
Commenting on the company’s financial results, Venkat Bhamidipati, McAfee’s CFO added, “Across the business, results exceeded expectations driven by strong execution and increased demand for our security offerings. In our Consumer segment, we delivered high-teens subscriber growth as we saw robust demand in the large, critical, and growing personal protection market. In our Enterprise segment, we grew quarterly revenue by 5% year-over-year and increased profitability by focusing on core enterprise and government customers while prioritizing our investment spending and rationalizing costs.”
Financial Outlook
McAfee provides the following expected financial guidance for the quarter ending March 27, 2021:
Net Revenue of $725 million to $735 million
Total Adjusted EBITDA of $275 million to $285 million (1)
The financial outlook is subject to a number of important assumptions and risks referenced in the section entitled “Forward-Looking Statements” below, which investors should read carefully.
Webcast / Conference Call Details
In conjunction with this announcement, McAfee will host a webcast conference call today, February 23, 2021, at 5:00 p.m. Eastern Time to discuss its financial results. The listen-only webcast is available at https://ir.mcafee.com/investors . Investors and participants can access the conference call over the phone by dialing (833) 301-1122, or for international callers (631) 658-1012. The conference ID is 7461775.
Following the conference call, a replay of the webcast, supplemental financial information and earnings slides will be made available on the Investor Relations page of the McAfee’s 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 working together, 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 considered in addition to, but not as a substitute for, information provided in accordance with GAAP. We are not able to forecast net income (loss), the most directly comparable GAAP financial measure, on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect net income (loss) including, but not limited to, interest expense and other, net, provision for income tax expense and foreign exchange gain (loss), net and equity-based compensation expense, any of which may be significant. Our forward-looking guidance regarding adjusted EBITDA should not be used to predict our future net income (loss), as the difference between the two measures varies as a result of these 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 in the United States (“GAAP”), the Company believes the following non-GAAP measures presented in this press release and discussed on the related teleconference call are useful in evaluating its operating performance: adjusted operating income, adjusted operating income margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income margin, adjusted net income excluding impact of foreign exchange, adjusted net income excluding impact of foreign exchange margin, adjusted earnings per share (“EPS”) and unlevered free cash flow. Certain of these non-GAAP measures exclude equity-based compensation, depreciation and amortization expense, interest expense and other, net, provision for income tax expense, foreign exchange (gain) and loss, net and other costs we do not believe are reflective of our ongoing operations. McAfee believes that these non-GAAP financial measures are provided to enhance the reader’s understanding of our past financial performance and our prospects for the future. McAfee’s management team uses these non-GAAP financial measures in assessing McAfee’s performance, as well as in planning and forecasting future periods. The non-GAAP financial information is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided herein for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Readers are encouraged to review the related 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 on the related teleconference call may contain “forward-looking statements” within the meaning U.S. federal securities laws that involve substantial risks and uncertainties. All statements other than statements of historical fact included in this press release and on the related teleconference call are forward-looking statements. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements McAfee makes relating to its estimated and projected financial results or its plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that the Company expected. Specific factors that could cause such a difference include, but are not limited to, those disclosed previously in the Company’s other filings with the SEC which include, but are not limited to: the impact of the COVID-19 pandemic; our ability to adapt to rapid technological change, evolving industry standards and changing customer needs, requirements or preferences; our ability to enhance and deploy our cloud-based offerings while continuing to effectively offer our on-premise offerings; our ability to maintain or improve our competitive position; the impact on our business of a network or data security incident or unauthorized access to our network or data or our customers’ data; the effects on our business if we are unable to acquire new customers, if our customers do not renew their arrangements with us, or if we are unable to expand sales to our existing customers or develop new solutions or solution packages that achieve market acceptance; our ability to manage our growth effectively, 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 enhance and expand our sales and marketing capabilities; our ability to attract and retain highly qualified personnel to execute our growth plan; the risks associated with interruptions or performance problems of our technology, infrastructure and service providers; our dependence on Amazon Web Services cloud infrastructure services; the impact of data privacy concerns, evolving regulations of cloud computing, cross-border data transfer restrictions and other domestic and foreign laws and regulations; the impact of volatility in quarterly operating results; the risks associated with our revenue recognition policy and other factors may distort our financial results in any given period; the effects on our customer base and business if we are unable to enhance our brand cost-effectively; our ability to comply with anti-corruption, anti-bribery and similar laws; our ability to comply with governmental export and import controls and economic sanctions laws; the potential adverse impact of legal proceedings; the impact of our frequently long and unpredictable sales cycle; our ability to identify suitable acquisition targets or otherwise successfully implement our growth strategy; the impact of a change in our pricing model; our ability to meet service level commitments under our customer contracts; the impact on our business and reputation if we are unable to provide high-quality customer support; our dependence on strategic relationships with third parties; the impact of adverse general and industry-specific economic and market conditions and reductions in IT and identity spending; the ability of our platform, solutions and solution packages to interoperate with our customers’ existing or future IT infrastructures; our dependence on adequate research and development resources and our ability to successfully complete acquisitions; our dependence on the integrity and scalability of our systems and infrastructures; our reliance on software and services from other parties; the impact of real or perceived errors, failures, vulnerabilities or bugs in our solutions; our ability to protect our proprietary rights; the impact on our business if we are subject to infringement claim or a claim that results in a significant damage award; the risks associated with our use of open source software in our solutions, solution packages and subscriptions; our reliance on SaaS vendors to operate certain functions of our business; the risks associated with indemnity provisions in our agreements; the risks associated with liability claims if we breach our contracts; the impact of the failure by our customers to pay us in accordance with the terms of their agreements; our ability to expand the sales of our solutions and solution packages to customers located outside of the United States; the risks associated with exposure to foreign currency fluctuations; the impact of Brexit; the impact of potentially adverse tax consequences associated with our international operations; the impact of changes in tax laws or regulations; the impact of the Tax Act; our ability to maintain our corporate culture; our ability to develop and maintain proper and effective internal control over financial reporting; our management team’s limited experience managing a public company; the risks associated with having operations and employees located in Israel; the risks associated with doing business with governmental entities; and the impact of catastrophic events on our business. Given these factors, as well as other variables that may affect McAfee’s operating results, you should not rely on forward-looking statements, assume that past financial performance will be a reliable indicator of future performance, or use historical trends to anticipate results or trends in future periods. The forward-looking statements included in this press release and on the related teleconference call relate only to events as of the date hereof. The Company undertakes no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Presentation of Financial Measures
McAfee Corp. (the “Corporation”) was incorporated in Delaware on July 19, 2019. The Corporation was formed for the purpose of completing an initial public offering (the “IPO”) and related transactions in order to carry on the business of Foundation Technology Worldwide LLC (“FTW”) and its subsidiaries (the Corporation, FTW and its subsidiaries are collectively the “Company”). The Corporation, as the sole managing member of FTW, exclusively operates and controls the business and affairs of FTW. The Corporation consolidates the financial results of FTW and reports a redeemable noncontrolling interest (“RNCI”) related to the LLC Units and Management Incentive Units (MIUs) not owned by the Corporation.
MCAFEE CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions except per share amounts)
Three Months Ended
Year Ended
December 26,
December 28,
December 26,
December 28,
Net revenue
$
777
$
682
$
2,906
$
2,635
Cost of sales
256
211
875
843
Gross profit
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 intangibles
55
54
220
222
Restructuring and transition charges
16
8
25
22
Total operating expenses
696
433
1,878
1,666
Operating income (loss)
(175
)
38
153
126
Interest expense and other, net
(85
)
(76
)
(308
)
(295
)
Foreign exchange gain (loss), net
(55
)
(24
)
(104
)
20
Loss before income taxes
(315
)
(62
)
(259
)
(149
)
Provision for income tax expense
5
19
30
87
Net loss
$
(320
)
$
(81
)
$
(289
)
$
(236
)
Less: Net loss attributable to redeemable noncontrolling interests
(202
)
N/A
(171
)
N/A
Net loss attributable to McAfee Corp.
$
(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, basic
162.3
N/A
162.3
N/A
Weighted-average shares outstanding, diluted
433.9
N/A
433.9
N/A
(1)
For the year ended December 26, 2020, basic and diluted earnings per share of Class A common stock are applicable only for the period from October 22, 2020 through December 26, 2020, which is the period following 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 to be filed with the Securities Exchange Commission).
MCAFEE CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
December 26, 2020
December 28, 2019
Assets
Current assets:
Cash and cash equivalents
$
231
$
167
Accounts receivable, net
392
409
Deferred costs
233
187
Other current assets
58
68
Total current assets
914
831
Property and equipment, net
149
171
Goodwill
2,431
MCFE Rankings
N/A Ranked by Stock Gains
MCFE Stock Data
Industry
Data Processing, Hosting, and Related Services
Sector
Information
Tags
Technology Services, Information Technology Services, Packaged Software, Information, Data Processing, Hosting, and Related Services
About MCFE
McAfee Corp. is a leader in personal security for consumers. Focused on protecting people, not just devices, McAfee consumer solutions adapt to users’ needs in an always online world, empowering them to live securely through integrated, intuitive solutions that protects their families and communities with the right security at the right moment.
McAfee technologies’ features and benefits depend on system configuration and may require enabled hardware, software, or service activation. No computer system can be absolutely secure. McAfee® and the McAfee logo are trademarks of McAfee, LLC or its subsidiaries in the United States and other countries. Other marks and brands may be claimed as the property of others.
