Symantec (SYMC)

Q1 2012 Earnings Call

July 27, 2011 5:00 pm ET


Enrique Salem - Chief Executive Officer, President and Director

James Beer - Chief Financial Officer and Executive Vice President

Helyn Corcos - Vice President of Investors Relations


Philip Rueppel

Dennis Simson - Crédit Suisse AG

Adam Holt - Morgan Stanley

Brent Thill - UBS Investment Bank

Daniel Ives - FBR Capital Markets & Co.

Walter Pritchard - Citigroup Inc

Brad Zelnick - Macquarie Research

Craig Nankervis - First Analysis Securities Corporation

Robert Breza - RBC Capital Markets, LLC

Unknown Analyst -

James Wesman

Gregg Moskowitz - Cowen and Company, LLC



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Good day and welcome to the Symantec's First Quarter 2012 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Ms. Helyn Corcos, Vice President, Investor Relations. Please go ahead.

Helyn Corcos

Good afternoon, and thank you for joining our call to discuss fiscal first quarter 2012 financial results. With me today are Enrique Salem, Symantec's President and CEO; and James Beer, Symantec's Executive Vice President and CFO. In

a moment, I will turn the call over to Enrique. He will discuss Symantec's execution during the quarter, then James will provide highlights of our financial results, as well as discuss our guidance assumptions as outlined in the press release. This will be followed by a question-and-answer session.

Today's call is being recorded and will be available for replay on Symantec's Investor Relations website. A copy of today's press release and supplemental financial information are posted on our website as well. And a copy of today's prepared remarks will be available on the Investor Relations website shortly after the call is completed.

Before we begin, I'd like to remind you that we will review our financial results focusing on year-over-year constant currency growth rates unless otherwise stated. Sequential growth rates are based on as recorded results. For the June 2011 quarter, the actual weighted exchange rate was $1.44 per euro and the end of period rate was $1.45 per euro, compared to our guided rate of $1.42 per euro. For the June 2010 quarter, the actual weighted average rate was $1.26 per euro and the end of period rate was $1.26 per euro. We've included a summary of the year-over-year constant currency and actual growth rates in our press release tables and in our supplemental information, which can be accessed on our Investor Relations website.

We made modifications to our segment reporting this quarter. Managed Security Services were moved to the Security and Compliance segment from the Services segment. Total MSS revenue of $72 million and $71 million moved in fiscal 2011 and fiscal 2012, respectively. Historical compares for our fiscal years 2011 and 2010, reflecting our modified segment reporting are available on our website and in our supplemental financial information.

Some of the information discussed on this call, including our projections regarding revenue, operating results, deferred revenue, cash flow from operations, amortization of acquisition-related intangibles and stock-based compensation for the coming quarter contain forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. Additional information concerning these risks and uncertainties can be found in the company's most recent periodic reports filed with the U.S. Securities and Exchange Commission. Symantec assumes no obligation to update any forward-looking statements.

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles or GAAP, Symantec reports non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in the press release and on our website.

And now, I'd like to introduce our CEO, Mr. Enrique Salem.

Enrique Salem

Thank you, Helyn and good afternoon, everyone. Our team executed very well, delivering record June quarter results. We had a great start to our fiscal year, continuing the momentum we've been building over the past 4 quarters. Our third consecutive quarter of double-digit bookings growth resulted in the strongest June quarter, revenue, deferred revenue and operating cash flow in Symantec's history. Performance was driven by strength in Backup, Data Loss Prevention, Managed Security Services and Consumer, as well as ongoing stabilization of our Storage and Availability Management business. In addition, our authentication business once again exceeded expectations and delivered its fourth consecutive quarter of better-than-expected results.

Now, let's take a closer look at some of the highlights from the quarter. I'm very pleased with our sales team's performance this quarter. Focused execution, combined with industry-leading security, backup and data center solutions, helped us deliver strong results across all regions. Customers are expanding their commitment to Symantec as our sales force successfully cross sells the entire product portfolio. During the June quarter, 48% of our deals over $1 million included sales from both our security and compliance and storage and server management segments, as compared to 26% for the year-ago period. License revenue grew, for the second consecutive quarter, driven by Data Loss Prevention and Backup, as well as ongoing stabilization in the storage and availability management business.

Our storage and availability management business posted its third consecutive quarter of year-over-year bookings growth, driven by increased penetration on the Linux and Windows platforms. Customers are recommitting to our storage management products as we differentiate ourselves from native tools. Our ability to help organizations accelerate the utilization of virtualization, cloud adoption and reduce storage costs are helping us win competitive deals. We're pleased with the success we're having with our partnership with Red Hat as we help organizations migrate to Linux. Furthermore, we're gaining traction with our new ApplicationHA solution, which was jointly developed with VMware. This product helps organizations virtualize their business-critical applications with confidence and reduce costs as they virtualize their infrastructure.

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