Thread,
I decided to pay attention to the CC despite my moderate position in this stock. As a plug to my inspiration for this effort, you might visit JC's PC News'n'Links (JC is preparing a transcript for my largest holding, AMD) at
jc-news.com
My detailed notes are below -- hope this is useful to others. Please excuse any typos and I hope I captured the significant elements as well as a little bit of the spirit. Some of the areas of discussion were not familiar to me (Enterprise market details) so my notes are not as thorough in these areas.
The overall tone of the call was very positive and confident, perhaps even a little frustrated at the stock price (like myself)? I actually need to invest in some SYMC products as well as the stock...
Link for call: vcall.com
Regards,
-PT
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Symantec CC, Fiscal 1Q00
Helen Corkell (?), Senior Director of Investor Relations
John Thompson, CEO
Greg Meyers, CFO
Note: We have excluded operating results from divested companies from comparisons. See website for restated statements of prior quarters for this adjustment.
***Financial Highlights***
record revenue - $191.4M, +18% YOY
EPS - $0.67, +43% YOY (before amortization & one-time)
driven by: (1) strong enterprise; (2) robust international expansion; (3) satisfactory consumer given slow-down of spending overall
Enterprise: 50% of total, 42% prior QTR
Licensing: up 23% prior QTR
International: 44% of total, +27% YOY (Europe +24% Japan 35, Latin America +108)
Worldwide: +9% YOY, below expectations
Consumer Slow: (1) lower spending overall; (2) slowdown in PC (10% April, 2% May, QTQ? YOY?; (3) possible June QTR slower due to PC makers preparing for pending Windows ME
U.S. Market Share: Norton Internet Security 82%, Norton Anti-virus 57%, Norton Systemworks 84% - strong product positioning
Gross Margin 85.5% (82.1% prior year)
Higher margin due to dramatic shift from boxed product to higher margin corporate business
Balance of calendar year Gross Margin expected to be 84-85% (more consumer oriented in holiday period)
Operating Expenses 59% of total revenue, lower % of total due to expenses growing slower than revenues
Net Income $43M (28M), increase due to revenue growth and lower cost of goods sold
Balance Sheet - cash & investments $594M (?), increase of $80M prior QTR
Days Sales Outstanding - 26 days (30 days prior year)
Deferred Revenue - $115M ($69M prior year), change primarily due to corporate business licensing and support arrangements
***Future Expectations***
Meet annual revenue growth target of 20% - $840-850M for FY2001 (up from 705M, FY2000)
Raising EPS growth 23% to 30% - to $2.75 for FY2001 ($2.10 FY2000)
Should be noted continued improvement in revenue mix.
Moving toward goal of 55% corporate and 48% international by Mar QTR 2001 and believe we will meet goals
Comments on Upcoming September QTR: (1) typically slower revenue growth due to seasonal consumer spending patterns; (2) third month likely "hockey stick" growth due to holiday season consumer product rollouts and corporate agreements; (3) Windows ME may accentuate consumer effect
Est. Revenue $194-201M ($169.2M prior year), midpoint of range would be 17% revenue growth YOY
Est. EPS before amortization of good-will and one-time charges: $0.62-$0.68 for this revenue range, midpoint would be about 30% YOY growth
Our team is "happy" with progress.
John Thompson, CEO
team delivered fabulous QTR
6th consecutive QTR of meeting or beating forecast provided
We have gained significant momentum in enterprise segment around the world
Host of new products in 2H of year, positioning for accelerated performance
We are a predictably consistent company
Consumer: leader around the world; US market "we own 61% unit share and our share is rising, in fact up 7 points YOY in comparison to our most significant competitor McAfee whose share is down 7 points." 57% of revenue in this market, up 10 points vs McAfee -11 points. UK Market 27% share, 16 points ahead of our "most friendly" competitor Network Associates and gained revenue share to 19% vs 6% for McAfee
Norton Internet Security is world-wide standard in new category: 75% unit 82% revenue; in 6 mos has gone to #6 position in PC Data charts. New updates and versions for special markets. Similar in UK (skipped data).
Enormous channel buy-in for these new products. Results in higher blended ASP and better bottom line performance.
Earthlink agreement yesterday: provide Norton Personal Firewall for all DSL subscribers. Product also expected to be big in corporate market to protect mobile and home workers.
Norton Anti-Virus: #1 selling spot on PC Data chart market since March due to virus concerns and marketing; leading product, dominating world.
Lots of nice awards: Amazon.com study of top 100 selling software products, 7 SYMC products on list and you have to look way down the list to #85 to find one from "our friends in Santa Clara" (McAfee?)
OEM Agreements also doing well. Signed deal with Toshiba displacing Network Associates on 2 products. First manufacturer vendor to pre-load trial version (90 days) of Norton Internet Security for >700k users.
Consumer business will be preparing for strong finish. Norton A-V 2000. All Windows security products will be ME compatible. Mac product upgrades this QTR as well.
Consumer business growth will support expansion into Enterprise market.
ISP Progress: Yahoo (38M e-mail users) "testimony to scaleability." #2 ISP Earthlink deal 50,000 licenses of Norton Personal Firewall among their 3.4M subscribers. Other agreements signed and several expected. Created unit focused on unique needs of this segment.
Greatest highlight: Enterprise. Big deals around the world. 500k seats displaced from competitors. Comment on "yesterday's call" [McAfee?] someone suggested they were winning 90% of the deals they compete with us on... if market growing 18-22% and we are growing 28% how does this work? 93 deals in QTR of 10,000 nodes (highest number of deals this size ever). A few to put this in context: companies, seats, who we displaced. Expanding sales operation world-wide (European office #4 in Prague), general agreement with Legend in China anticipated to be big in future.
Telesales team greatly exceeding goals ($300k ->>$500k avg this QTR).
Tech Support Sales +65% YOY France, +75% YOY in US.
Professional Services Team +$8M (didn't mention compared to when), +20% QTQ, +149% YOY
Bookings Grew: +$14M, +87% sequential, new business w/standing start in Dec. Momentum and traction in the market place.
Launched 3 new services: (1) in anti-virus arena; (2) internet filtering; (3) eCommerce assessments (how to protect environments from malicious attack).
Love-Bug Response: within 2 hours of sample received we had a definition available for our customers that was the most comprehensive available in marketplace and recognized all 35 variants of the virus.
Symantec Enterprise Security (SES) Launched. Integrated multi-platform product.
We are prepared for the most significant product launches this quarter.
Esupport Products (PCAnywhere and Ghost)30% of revenue, +28% in QTR.
Very pleased with our technology and our initiatives in new technology (PALM product developed but evaluating potential market).
Enterprise market is showing the results we projected last QTR.
Consistent, predicable results: 6 QTRs.
Confident customers believe and trust SYMC so we are confident in increasing our projections for revenues and EPS.
***Q&A
Q#1 (Rob Owens, Pacific Crest): Retail growth seems high relative to PC Data results for first two months.
A: June was very strong (we just saw data). PC Data only shows US market and we had strength in Europe.
Q: Domestic faster than international?
A: Japan actually fastest growth but small base.
Q#2 (Rob Owens, Pacific Crest):: Projected GM of 84-85%. Why not higher due to Enterprise growth?
A: Holiday seasons 48-50% Enterprise then increasing in following QTRs.
Q#3 (Kevin Wagner, Adam Smith Park & Hill): Great QTR. Question on corporate sales cycle, any change?
A: At high-end of range (10-15k seats) will tend to be at the further end of the range (60-90 days) due to integrated solutions.
Q#4: John McTeef (?) (Prudential Securities). Great execution. Inventory in channel typical?
A: Revenue recognition side most certainly. Blocking & tackling: as well represented on shelves as past.
Q: No change in policy?
A: No
Q: Windows ME transition preparation?
A: All products will be ME compliant. Old bug-a-boo reliance on consumer slow-down in anticipation. Better now with enterprise balance which is more planned acquisition calendars. Well positioned to deal with OS changes.
Cash flow from Operations?
About $50-70M, collections absolutely massive.
Q#5 (Mary O'Rourke, AG Edwards): Average deal size? Pricing trend in US retail market?
Stable retail prices overall. Crazy pricing from last year has abated. With family packaging prices up a couple dollars. In North America we do 25-28k transactions per QTR so average deal size against that? I would say median (half above/below) probably 550 licenses, $1500-1800.
Q#6 (Chuck Jones, SSB/_____ for Chuck): Earthlink deal. Service is free to customer so how do you make money on this deal?
A: They paid us. Earthlink paid us for 50k licenses and we gave electronic coupons so customers can redeem for license. We have the money in the bank.
Q#7 (Aaron Pratt, Advent) Hey guys. How do you recognize revenues on Earthlink?
A: Subscribe over time one year term of contract.
Q: ISP and hosting products question. State of Igear/Mailgear.
A: Doing well. Making use of acquired technology for "carrier class" products (i.e. for Yahoo).
Q: You commented that retail slower due to PC slowdown but aren't SYMC products typically lagging PC sales changes?
A: Market was so slow we saw impact. Need for products is here and now so previous ratios may not hold for new product introductions.
Q: Windows ME in mid-September, so retail lag until December?
A: More like an update cycle. Not HW & SW. We will be fully in the channel with products and will scale with consumer demand.
Closing Remarks
Congratulate our team. Thanks for your interest in our company and what we are trying to accomplish in the market. Intensive competitive but we are confident. |
