Quarterly dividend raised 67 percent to $0.125 per share
Announces leadership and board appointments
TEMPE, Ariz.--(BUSINESS WIRE)--NortonLifeLock Inc. (NASDAQ: NLOK), a global leader in consumer cyber safety, today reported results for its second quarter fiscal year 2020 ended October 4, 2019.
As a reminder, in connection with the sale of certain assets of our Enterprise Security business, effective November 4, 2019, we changed our corporate name from Symantec Corporation to NortonLifeLock Inc. The majority of our Enterprise Security business assets were classified as discontinued operations in our Condensed Consolidated Statements of Operations and thus excluded from continuing operations for all periods presented. Starting in the second quarter of fiscal 2020, we operate in one reportable segment. The assets and liabilities to be sold to Broadcom Inc., were classified as discontinued operations in our Condensed Consolidated Balance Sheets.
Second Quarter Fiscal 2020 Financial Highlights from Continuing Operations1
GAAP revenue was $608 million, as compared to $612 million in the year ago period
GAAP operating margin of 16.9% and non-GAAP operating margin of 29.3%
GAAP diluted EPS was $0.05 and non-GAAP diluted EPS was $0.18
We are also providing non-GAAP combined results of continuing operations and discontinued operations from divested assets from our Enterprise Security business to aid in the comparison to guidance we provided on August 8, 2019. The combined results are:
Revenue of $1,187 million, in-line with guidance of $1,155 to $1,205 million
Operating margin of 33.9%, up 220 basis points year-over-year, exceeding guidance of 31% to 33%
Fully diluted EPS of $0.46, up 10% year-over-year, exceeding guidance of $0.40 to $0.44
Capital Allocation Highlights
Company confirms intent to issue a $12 per share special dividend to shareholders, to be declared and distributed in the fourth quarter of fiscal 2020
Company raises its quarterly dividend to $0.125 per share in the third quarter, or $0.50 on an annual basis
Company has an existing $1.6 billion repurchase authorization
“I am proud of what this company accomplished in the second quarter,” said Rick Hill, NortonLifeLock’s Interim President and CEO. “In addition to the closing of the Broadcom transaction earlier this week, both the Enterprise Security and Consumer Cyber Safety businesses achieved revenue guidance we provided last quarter. As we move forward into transitioning to a pure play consumer company, I want to thank our employees for their dedication during this transformative period for the company. The board and I are excited to announce Vincent Pilette’s appointment as CEO, who joined us as CFO in May 2019. Under his leadership I believe NortonLifeLock will be able to capitalize on its growth opportunity and maximize value for our shareholders.”
“With the sale of our Enterprise Security assets complete, we are now able to have a singular focus on our goal to increase productivity and reduce the complexity in how we manage the business,” said Vincent Pilette, NortonLifeLock’s CFO. “During the second quarter, we were pleased to see stabilization in our direct customer count declines with ARPU growing both sequentially and year-over-year. Our original estimate of the stranded costs has now been lowered to $1.3 billion on an annualized basis with lower cash costs of $900 million. Additionally, our proceeds from the sale of our equity investments, combined with the planned sale of underutilized assets such as real estate, will cover the majority of the cash costs. We remain on track to eliminate the stranded costs over the next twelve months, with NortonLifeLock emerging as a steady, predictable business that can grow at mid-single digits with strong cash flow generation and earnings growth.”
In a separate press release, NortonLifeLock announced other leadership and board appointments.
Third Quarter Fiscal Year 2020 Guidance
Revenue in the range of $602 to $612 million
Non-GAAP EPS in the range of $0.05 to $0.10
No reconciliation of the forecasted range for non-GAAP EPS guidance is included in this release because it would be unreasonably burdensome to forecast the impacts of significant changes in our business such as the sale of our enterprise business, and related restructuring activities.
NortonLifeLock’s Board of Directors has declared a quarterly cash dividend of $0.125 per common share to be paid on December 18, 2019, to all shareholders of record as of the close of business on November 25, 2019.
To help 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 methods we use to produce non-GAAP results are not in accordance with GAAP and may differ from the methods used by other companies. Additional information regarding our non-GAAP measures are provided below.
For additional details regarding NortonLifeLock’s results and outlook, please see the Earnings Presentation and the Supplemental Information on the investor relations page of our website at: https://investor.nortonlifelock.com.
NortonLifeLock has scheduled a conference call for 5:00 p.m. ET / 2:00 p.m. PT today to discuss its results for its second quarter fiscal 2020 ended October 4, 2019 and to review guidance. Interested parties may access the conference call through NortonLifeLock’s Investor Relations website at http://investor.nortonlifelock.com/investor-relations/events-calendar/. For telephone access to the conference, call (877) 475-6198 within the United States or (970) 297-2372 from outside the United States. Please call 15 minutes early and give the operator conference ID number 4271719.
A replay and our prepared remarks will be available on the investor relations home page shortly after the call is completed.
NortonLifeLock Inc. (NASDAQ: NLOK) is a global leader in consumer Cyber Safety. NortonLifeLock is dedicated to helping secure the devices, identities, online privacy, and home and family needs of nearly 50 million consumers, providing them with a trusted ally in a complex digital world. For more information, please visit www.NortonLifeLock.com.
This press release contains statements which may be considered forward-looking within the meaning of the U.S. federal securities laws. In some cases, you can identify these forward-looking statements by the use of terms such as “expect,” “will,” “continue,” or similar expressions, and variations or negatives of these words, but the absence of these words does not mean that a statement is not forward-looking. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to: the statements under “Third Quarter Fiscal Year 2020 Guidance;” the amount and distribution of the anticipated special dividend; the effects of the sale of substantially all of the Enterprise Security business on the Company’s business; the timing and amount of stock repurchases; the operating model of NortonLifeLock; NortonLifeLock’s future revenue and earnings growth and cash flow from operations; the amount and character of, and time to eliminate, stranded costs; the Company’s ability to monetize and use the proceeds of sales of underutilized assets to offset the cash costs to eliminate stranded costs and the resulting effect on the value of our NortonLifeLock business for shareholders; any other statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. 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, but are not limited to, those related to: whether the NortonLifeLock board declares a special dividend, and its ultimate size, which is based on a number of assumptions regarding the realizable net cash proceeds from the transaction and other cash flow items; the effect of the sale of substantially all of the Enterprise Security assets on NortonLifeLock’s retained businesses and products; retention of existing executive leadership team members; difficulties in improving sales and product development during leadership transitions; difficulties in executing a new operating model for the consumer cyber safety business; lower than anticipated returns from the Company's investments in direct customer acquisition; difficulties and delays in reducing run rate expenses and monetizing underutilized assets; general business and economic conditions; matters arising out of our completed Audit Committee investigation and the ongoing U.S. Securities and Exchange Commission investigation; fluctuations and volatility in NortonLifeLock’s stock price; the ability of NortonLifeLock to successfully execute strategic plans; the ability to maintain customer and partner relationships; the ability of NortonLifeLock to achieve its cost and operating efficiency goals; the anticipated growth of certain market segments; NortonLifeLock’s sales and business strategy; fluctuations in tax rates and foreign currency exchange rates; the timing and market acceptance of new product releases and upgrades; and the successful development of new products and the degree to which these products gain market acceptance. Additional information concerning these and other risk factors is contained in the Risk Factors sections of NortonLifeLock’s most recent reports on Form 10-K and Form 10-Q. NortonLifeLock assumes no obligation, and does not intend, to update these forward-looking statements as a result of future events or developments.
Use of Non-GAAP Financial Information: We use non-GAAP measures of adjusted revenues, operating margin, net income and earnings per share, which are adjusted from results based on GAAP to include certain purchase accounting adjustments and exclude certain expenses, gains and losses. We also provide the non-GAAP metric of reported billings. In addition, we are presenting certain combined non-GAAP continuing operations and non-GAAP discontinued operations results, excluding the results of discontinued operations related to our Veritas divestiture, in order to facilitate a reader’s understanding of our Q2FY20 financial performance compared to the Q2FY20 guidance provided on August 8, 2019, and the comparable prior year period. These non-GAAP financial measures are provided to enhance the user’s understanding of our past financial performance and our prospects for the future. Our management team uses these non-GAAP financial measures in assessing Symantec’s performance, as well as in planning and forecasting future periods. These non-GAAP financial measures are not computed according to GAAP and the methods we use to compute them may differ from the methods used by other companies. Non-GAAP financial measures are supplemental, should not be considered a substitute for financial information presented in accordance with GAAP and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Readers 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 including the Supplemental Information, on the investor relations page of our website at: https://investor.nortonlifelock.com.
1 Revenues and associated costs of our ID Analytics solutions, which were formerly included in the Enterprise Security segment, are now included in continuing operations in our remaining reportable segment.