Delaware | 7372 | 84-2467341 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Thomas Holden Benjamin Kozik Ropes & Gray LLP 3 Embarcadero Center San Francisco, CA 94111-4006 (415) 315-6300 | Sayed Darwish Chief Legal Officer McAfee Corp. 6220 America Center Drive San Jose, CA 95002 (866) 622-3911 | Katharine Martin Andrew Hill Andrew Gillman Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304-1050 (650) 493-9300 |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
Title of Each Class of Securities to be Registered | Shares to Be Registered (1) | Proposed Maximum Aggregate Offering Price per Share (2) | Proposed Maximum Aggregate Offering Price (1)(2) | Amount of Registration Fee (3) | ||||
Class A common stock, $0.001 par value per share | 23,000,000 | $26.54 | $610,420,000 | $66,596.83 | ||||
| (1) | Includes 3,000,000 shares of Class A common stock that may be sold if the underwriters’ option to purchase additional shares is exercised. |
| (2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended. In accordance with Rule 457(c) under the Securities Act of 1933, as amended, the price shown is the average of the high and low prices on August 31, 2021 as reported on the Nasdaq Stock Market LLC. |
| (3) | Previously paid. |
Per share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discounts and commissions (1) | $ | $ | ||||||
Proceeds to the selling stockholders, before expenses | $ | $ | ||||||
| (1) | We have agreed to reimburse the underwriters for certain expenses in connection with this offering. See “Underwriters (Conflicts of Interest)” for additional information regarding underwriting compensation. |
Morgan Stanley | Goldman Sachs & Co. LLC | TPG Capital BD, LLC |
BofA Securities | Citigroup |
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| F-1 | ||||
| • | “Enterprise Business” refers to certain of our Enterprise assets together with certain of our Enterprise liabilities, which were sold to STG pursuant to a definitive agreement dated March 6, 2021; |
| • | “fiscal 2018” refers to the fiscal year of Foundation Technology Worldwide LLC and its subsidiaries ended December 29, 2018; |
| • | “fiscal 2019” refers to our fiscal year ended December 28, 2019; |
| • | “fiscal 2020” refers to our fiscal year ended December 26, 2020; |
| • | “fiscal 2021” refers to our fiscal year ending December 25, 2021; |
| • | “Intel” refers to Intel Corporation; |
| • | “IPO” refers to the initial public offering of shares of Class A common stock of McAfee Corp.; |
| • | “Reorganization Transactions” refers to the reorganization transactions that are described under “Prospectus Summary—Summary of the Reorganization Transactions and Our Structure”; |
| • | “Sponsor Acquisition” refers to: (i) the conversion of McAfee, Inc., which was then a part of a business unit of Intel, into a limited liability company, McAfee, LLC, (ii) the contribution of McAfee, LLC to Foundation Technology Worldwide LLC, a wholly-owned subsidiary of Intel, (iii) the transfer beginning on April 3, 2017, by Intel and its subsidiaries of assets and liabilities of the Predecessor Business not already held through Foundation Technology Worldwide LLC to Foundation Technology Worldwide LLC, and (iv) the acquisition immediately thereafter on April 3, 2017, by our Sponsors and certain co-investors of a majority stake in Foundation Technology Worldwide LLC, following which our Sponsors and certain of theirco-investors owned 51.0% of the common equity interests in Foundation Technology Worldwide LLC, with certain affiliates of Intel retaining the remaining 49.0% of the common equity interests; |
| • | “Sponsors” refers to investment funds affiliated with or advised by TPG Global, LLC (“TPG”) and Thoma Bravo, L.P. (“Thoma Bravo”), respectively; and |
| • | “STG” refers to Symphony Technology Group. |
| • | Comprehensive and convenient security solutions to protect consumers across their digital footprint. |
| • | Consumer protection powered by seamless digital experience across device platforms. |
| • | Consumer products to address privacy needs. |
| • | Comprehensive threat intelligence leveraging a unique global sensor network. |
| • | Our solutions provide a seamless and user friendly experience. time-to-value |
| • | Our solutions have comprehensive features that provide consumers peace of mind that their online experience is protected. |
| • | Our solutions are supported by our global threat intelligence network, which is bolstered by artificial intelligence, machine learning, and deep learning to increase efficacy and efficiency. |
| • | Brand recognition |
| • | Holistic cybersecurity solutions seamlessly integrated across the consumers’ entire digital ecosystem. |
| • | Unique footprint across devices. |
| • | Scale and diversity of threat intelligence network |
| • | Differentiated omnichannel go-to-market |
| • | Experienced management team with deep cybersecurity expertise. go-to-market |
| • | Continue to leverage our strength as a trusted cybersecurity brand to increase sales from new and existing subscribers. |
| • | Invest in new and existing routes to market for subscribers. direct-to-consumer |
| • | Enhance and tailor the subscriber conversion and renewal process. |
| • | Continue to innovate and enhance our consumer security platform and user experience. |
| • | Continue to pursue targeted acquisitions. |
and believe we are well positioned to successfully execute on our acquisition strategy by leveraging our scale, global reach and routes to market, and data assets. |
| • | Device Security. Anti-Malware Software Total Protection / LiveSafe Secure Home Platform (“SHP”) . |
| • | Online Privacy and Comprehensive Internet Security. Safe Connect VPN TunnelBear any Wi-Fi connection safe and private. With bank-gradeAES 256-bit encryption, our solution keeps personal data, such as banking account credentials and credit card information protected while keeping IP addresses and physical locations private. This capability helps consumers prevent password and data theftand IP-based tracking and allows customers to access global content, by bypassing local censorship. Consumers can add an additional layer of protection with FileLock Shredder WebAdvisor Safe Family blocks age-inappropriate websites, provides device usage monitoring and device restriction services and gives parents the ability to track children’s devices. |
| • | Identity Protection. IdentityProtection |
credit monitoring and SSN trace, helping consumers take action to prevent from fraud. Our solution also helps consumers recover from fraud through our 24/7/365 support and range of additional services, such as our full-service ID restoration, stolen funds reimbursement, lost wallet recovery, and identify theft insurance, covering expenses up to $1 million. Our Password Manager or re-used passwords. |
| • | Platform Innovation. |
| • | Ability to Integrate with Our Partners. |
| • | Direct to consumer marketing. |
| • | PC OEMs. we pre-install a 30-day free a one-year or longer subscription and the OEM pays McAfee a royalty. During the subscription lifecycle, McAfee engages the consumer with our digital marketing engine to convert the consumer to a McAfee customer at the end of the subscription period. |
| • | Retail and eCommerce. |
| • | Communications Service Providers, ISPs and Mobile Providers. Verizon, T-Mobile, Lumen, Telefonica, NTT Docomo, Softbank, British Telecom, and Sky, to offer our mobile security and secure home platform products through the service providers. In some cases, we also partner with the service providers to integrate and bundle one or more of our security products into their mobile product value added service offerings. In addition to our partnerships with service providers, we partner with Samsungto pre-install one or more of our security products on their smartphones. |
| • | Search Providers |
| • | The COVID-19 pandemic has affected how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. |
| • | If we are unsuccessful at executing our business plan and necessary transition activities as a standalone consumer cybersecurity company following the recent sale of our Enterprise Business, our business and results of operations may be adversely affected and our ability to invest in and grow our business could be limited. |
| • | The cybersecurity market is rapidly evolving and becoming increasingly competitive in response to continually evolving cybersecurity threats from a variety of increasingly sophisticated cyberattackers. If we fail to anticipate changing customer requirements or industry and market developments, or we fail to adapt our business model to keep pace with evolving market trends, our financial performance will suffer. |
| • | We operate in a highly competitive environment, and we expect competitive pressures to increase in the future, which could cause us to lose market share. |
| • | Our results of operations can be difficult to predict and may fluctuate significantly, which could result in a failure to meet investor expectations. |
| • | Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates. |
| • | We face risks associated with past and future investments, acquisitions, and other strategic transactions. |
| • | Over the last several years, we have pursued a variety of strategic initiatives designed to optimize and reinforce our cybersecurity platform. If the benefits of these initiatives are less than we anticipate, or if the realization of such benefits is delayed, our business and results of operations may be harmed. |
| • | If our solutions have or are perceived to have defects, errors, or vulnerabilities, or if our solutions fail or are perceived to fail to detect, prevent, or block cyberattacks, including in circumstances where customers may fail to take action on attacks identified by our solutions, our reputation and our brand could suffer, which would adversely impact our business, financial condition, results of operations, and cash flows. |
| • | Failure to adapt our product and service offerings to changing customer demands, or lack of customer acceptance of new or enhanced solutions, could harm our business and financial results. |
| • | If the protection of our proprietary technology is inadequate, we may not be able to adequately protect our innovations and brand. |
| • | If we fail to maintain relationships with our channel partners, or if we must agree to significant adverse changes in the terms of our agreements with these partners, it may have an adverse effect on our ability to successfully and profitably market and sell our products and solutions. |
| • | If our security measures are breached or unauthorized access to our data is otherwise obtained, our brand, reputation, and business could be harmed, and we may incur significant liabilities. |
| • | We operate globally and are subject to significant business, economic, regulatory, social, political, and other risks in many jurisdictions. |
| • | We may become involved in litigation, investigations, and regulatory inquiries and proceedings that could negatively affect us and our reputation. |
| • | Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our market, expose us to interest rate risk, and prevent us from timely satisfying our obligations. |
| • | Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in acquisitions or other business activities necessary to achieve growth. |
| • | Our principal asset is our interest in Foundation Technology Worldwide LLC, and we are dependent upon Foundation Technology Worldwide LLC and its consolidated subsidiaries for our results of operations, cash flows, and distributions. |
| • | We will be required to pay certain Continuing Owners and certain Management Owners for certain tax benefits we may realize or are deemed to realize in accordance with the tax receivable agreement between us and such Continuing Owners and Management Owners, and we expect that the payments we will be required to make will be substantial. |
| • | In certain circumstances, under its limited liability company agreement, Foundation Technology Worldwide LLC will be required to make tax distributions to us, the Continuing Owners and certain Management Owners and the distributions that Foundation Technology Worldwide LLC will be required to make may be substantial. |
| • | a new limited liability company operating agreement (“New LLC Agreement”) was adopted for FTW making the Corporation the sole managing member of FTW; |
| • | the Corporation’s certificate of incorporation was amended and restated to, among other things, (i) provide for Class A common stock and Class B common stock and (ii) issue shares of Class B common stock to the Continuing Owners and Management Owners, on a one-to-one |
| • | the Corporation (i) issued 126.3 million shares of its Class A common stock to certain of the Continuing Owners in exchange for their contribution of LLC units or the equity of certain other entities, which pursuant to the Reorganization Transactions, became its direct or indirect subsidiaries and (ii) settled 5.7 million restricted stock units (“RSUs”) with shares of its Class A common stock, net of tax withholding, held by certain employees, which were satisfied in connection with the Reorganization Transactions. |
Issuer in this offering | McAfee Corp. |
Class A common stock offered by the selling stockholders | 20,000,000 shares (or 23,000,000 shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock). |
Underwriters’ option to purchase additional shares of Class A common stock from the selling stockholders | 3,000,000 shares. |
Class A common stock to be outstanding after this offering | 175,849,441 shares (or 178,003,855 shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock). |
Class B common stock to be outstanding after this offering | 255,532,090 shares (or 253,377,676 shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock). |
Voting power held by holders of Class A common stock after giving effect to this offering by the selling stockholders | 40.8% |
Voting power held by holders of Class B common stock after giving effect to this offering by the selling stockholders | 59.2% |
Voting rights | Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by law or as otherwise provided by our certificate of incorporation. Each share of Class A common stock and Class B common stock entitles its holder to one vote per share on all such matters. See “Description of Capital Stock.” |
Use of proceeds | The selling stockholders will receive all of the net proceeds from this offering. We will not receive any of the proceeds from the sale of shares of Class A common stock offered by the selling stockholders. We will, however, bear the costs associated with the sale of shares by the selling stockholders, other than underwriting discounts and commissions. See “Use of Proceeds.” |
Conflicts of Interest | Affiliates of TPG beneficially own in excess of 10% of our issued and outstanding common stock. Because TPG Capital BD, LLC, an |
affiliate of TPG, is an underwriter in this offering and its affiliates own in excess of 10% of our issued and outstanding common stock, TPG Capital BD, LLC is deemed to have a “conflict of interest” under Rule 5121 (“Rule 5121”) of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, this offering is being made in compliance with the requirements of Rule 5121. Pursuant to that rule, the appointment of a “qualified independent underwriter” is not required in connection with this offering as the member primarily responsible for managing the public offering does not have a conflict of interest, is not an affiliate of any member that has a conflict of interest and meets the requirements of paragraph (f)(12)(E) of Rule 5121. See “Underwriters (Conflicts of Interest).” |
Dividend Policy | Foundation Technology Worldwide LLC expects to pay a cash distribution to its members on a quarterly basis at an aggregate annual rate of approximately $200 million. McAfee Corp. is expected to receive a portion of any such distribution through the LLC Units it holds directly or indirectly through its wholly-owned subsidiaries on the record date for any such distribution declared by Foundation Technology Worldwide LLC, which is expected to equal the number of shares of Class A common stock outstanding on such date. McAfee Corp. expects to use the proceeds it receives from such quarterly distribution to declare a cash dividend on its shares of Class A common stock. We intend to fund any future dividends from distributions made by Foundation Technology Worldwide LLC from its available cash generated from operations. |
| In addition, in connection with the consummation of the sale of our Enterprise Business to STG, we declared a one-time special dividend of $4.50 to holders of record of our Class A common stock as of August 13, 2021, paid on August 27, 2021. Purchasers of shares in this offering will not be entitled to receive such special dividend with the respect to the shares of Class A common stock that they purchase in this offering. |
| The timing, declaration, amount of, and payment of any such dividends will be made at the discretion of McAfee Corp.’s board of directors, subject to applicable laws, and will depend upon many factors, including the amount of the distribution received by McAfee Corp. from Foundation Technology Worldwide LLC, our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that McAfee Corp.’s board of directors may deem relevant. Moreover, if, as expected, McAfee Corp. determines to initially pay a dividend following any quarterly distributions from Foundation Technology Worldwide LLC, there can be no assurance that McAfee Corp. will continue to pay dividends in the same amounts or at all thereafter. See “Dividend Policy.” |
Controlled Company | Following this offering, our Sponsors and Intel and certain of its affiliates will control approximately 77.7% of the combined voting |
power of our outstanding common stock. As a result, we will continue to be a “controlled company” under the Exchange’s corporate governance standards. Under these standards, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance standards. |
Risk factors | You should read the “Risk Factors” section of this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our Class A common stock. |
Exchange symbol | “MCFE” |
| • | 265,376,691 shares of Class A common stock issuable upon exchange or redemption of LLC Units, together with corresponding shares of Class B common stock; |
| • | 5,854,008 shares of Class A common stock that would be outstanding if all vested MIUs were exchanged for shares of Class A common stock, and 6,814,340 shares of Class A common stock that would be outstanding if all unvested MIUs were exchanged for shares of Class A common stock; |
| • | 23,847,140 shares of Class A common stock issuable upon vesting of outstanding RSUs; |
| • | 1,834,063 shares of Class A common stock issuable upon vesting of outstanding PSUs; |
| • | 482,231 shares of Class A common stock issuable upon exercise of vested option awards having a weighted average exercise price of $19.88 and 1,350,954 shares of Class A common stock issuable upon exercise of unvested option awards having a weighted average exercise price of $19.38; |
| • | 43,130,213 shares of Class A common stock reserved for future issuance under our 2020 equity incentive plan, without taking into account the “evergreen” provision of our 2020 equity incentive plan; and |
| • | 9,389,809 shares of Class A common stock authorized for sale under the Employee Stock Purchase Plan (“ESPP”) without taking into account the “evergreen” provision of our ESPP; |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions expect per share data) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Net revenue | $ | 1,161 | $ | 1,303 | $ | 1,558 | $ | 737 | $ | 909 | ||||||||||
Cost of sales (2) | 386 | 391 | 444 | 209 | 232 | |||||||||||||||
Gross profit | 775 | 912 | 1,114 | 528 | 677 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales and marketing (2) | 348 | 299 | 348 | 140 | 174 | |||||||||||||||
Research and development (2) | 186 | 161 | 188 | 75 | 92 | |||||||||||||||
General and administrative (2) | 170 | 182 | 235 | 100 | 93 | |||||||||||||||
Amortization of intangibles | 153 | 146 | 143 | 72 | 49 | |||||||||||||||
Restructuring charges | 19 | 6 | 2 | 1 | 8 | |||||||||||||||
Total operating expenses | 876 | 794 | 916 | 388 | 416 | |||||||||||||||
Operating income (loss) | (101 | ) | 118 | 198 | 140 | 261 | ||||||||||||||
Interest (expense) and other, net | (308 | ) | (296 | ) | (307 | ) | (149 | ) | (118 | ) | ||||||||||
Foreign exchange gain (loss), net | 30 | 21 | (104 | ) | (6 | ) | 15 | |||||||||||||
Income (loss) from continuing operations before income taxes | (379 | ) | (157 | ) | (213 | ) | (15 | ) | 158 | |||||||||||
Provision for income tax expense (benefit) | 29 | 38 | 5 | (5 | ) | 7 | ||||||||||||||
Income (loss) from continuing operations | (408 | ) | (195 | ) | (218 | ) | (10 | ) | 151 | |||||||||||
Income (loss) from discontinued operations, net of taxes | (104 | ) | (41 | ) | (71 | ) | 41 | 51 | ||||||||||||
Net income (loss) | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | $ | 31 | $ | 202 | |||||||
Less: Net income (loss) attributable to redeemable noncontrolling interests | N/A | N/A | (171 | ) | N/A | 136 | ||||||||||||||
Net income (loss) attributable to McAfee Corp. | N/A | N/A | $ | (118 | ) | N/A | $ | 66 | ||||||||||||
Net income (loss) attributable to McAfee Corp.: | ||||||||||||||||||||
Income (loss) from continuing operations attributable to McAfee Corp. | N/A | N/A | $ | (55 | ) | N/A | $ | 50 | ||||||||||||
Income (loss) from discontinued operations attributable to McAfee Corp. | N/A | N/A | (63 | ) | N/A | 16 | ||||||||||||||
Net income (loss) attributable to McAfee Corp. | N/A | N/A | $ | (118 | ) | N/A | $ | 66 | ||||||||||||
Earnings (loss) per share attributable to McAfee Corp., basic: | ||||||||||||||||||||
Continuing operations | N/A | N/A | $ | (0.34 | ) | N/A | $ | 0.31 | ||||||||||||
Discontinued operations | N/A | N/A | (0.39 | ) | N/A | 0.10 | ||||||||||||||
Earnings (loss) per share, basic (1) | N/A | N/A | $ | (0.73 | ) | N/A | $ | 0.40 | ||||||||||||
Earnings (loss) per share attributable to McAfee Corp., diluted: | ||||||||||||||||||||
Continuing operations | N/A | N/A | $ | (0.34 | ) | N/A | $ | 0.30 | ||||||||||||
Discontinued operations | N/A | N/A | (0.39 | ) | N/A | 0.09 | ||||||||||||||
Earnings (loss) per share, diluted (1) | N/A | N/A | $ | (0.73 | ) | N/A | $ | 0.39 | ||||||||||||
Weighted-average shares outstanding, basic | N/A | N/A | 162.3 | N/A | 163.7 | |||||||||||||||
Weighted-average shares outstanding, diluted | N/A | N/A | 162.3 | N/A | 179.5 | |||||||||||||||
Statements of Cash Flows Data | ||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||
Operating activities | $ | 319 | $ | 496 | $ | 760 | $ | 288 | $ | 448 | ||||||||||
Investing activities | (677 | ) | (63 | ) | (51 | ) | (33 | ) | (18 | ) | ||||||||||
Financing activities | 459 | (734 | ) | (651 | ) | (162 | ) | (239 | ) | |||||||||||
| (1) | Basic and diluted earnings (loss) per share of Class A common stock are applicable only for periods after October 22, 2020, which is the period following our IPO and related Reorganization Transactions. Refer to Note 17 in our audited consolidated financial statements included elsewhere in this prospectus |
| for information about the Net Loss Per Share during fiscal 2020. Refer to Note 15 Earnings Per Share in the notes to the unaudited condensed consolidated financial statements included elsewhere in this prospectus for information about the Earnings Per Share during the six months ended June 26, 2021. |
| (2) | Includes equity-based compensation expense as follows: |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Cost of sales | $ | 1 | $ | — | $ | 5 | $ | — | $ | 2 | ||||||||||
Sales and marketing | 1 | 1 | 23 | 1 | 7 | |||||||||||||||
Research and development | 1 | 1 | 40 | — | 10 | |||||||||||||||
General and administrative | 3 | 3 | 45 | 15 | 14 | |||||||||||||||
Total equity-based compensation expense from continuing operations | 6 | 5 | 113 | 16 | 33 | |||||||||||||||
Discontinued operations | 22 | 20 | 200 | 3 | 45 | |||||||||||||||
Total equity-based compensation expense | $ | 28 | $ | 25 | $ | 313 | $ | 19 | $ | 78 | ||||||||||
(in millions) | As of June 26, 2021 | |||
Cash and cash equivalents | $ | 420 | ||
Working capital (1) | (1,351 | ) | ||
Total assets | 5,437 | |||
Current and long-term deferred revenue | 1,019 | |||
Current and long-term debt, net of borrowing costs (2) | 3,948 | |||
Redeemable noncontrolling interests | 7,687 | |||
Accumulated deficit | (52 | ) | ||
| (1) | Working capital is comprised of current assets less current liabilities. |
| (2) | In connection with the consummation of the sale of our Enterprise Business to STG, we repaid $332 million of our First Lien USD Term Loan and €563 million of our First Lien EUR Term Loan in August 2021. See “Capitalization”. |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Net revenue | $ | 1,161 | $ | 1,303 | $ | 1,558 | $ | 737 | $ | 909 | ||||||||||
Operating income (loss) | $ | (101 | ) | $ | 118 | $ | 198 | $ | 140 | $ | 261 | |||||||||
Operating income (loss) margin | (8.7 | )% | 9.1 | % | 12.7 | % | 19.0 | % | 28.7 | % | ||||||||||
Net income (loss) | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | $ | 31 | $ | 202 | |||||||
Net income (loss) margin | (44.1 | )% | (18.1 | )% | (18.5 | )% | 4.2 | % | 22.2 | % | ||||||||||
Adjusted operating income | $ | 220 | $ | 427 | $ | 624 | $ | 303 | $ | 403 | ||||||||||
Adjusted operating income margin | 18.9 | % | 32.8 | % | 40.1 | % | 41.1 | % | 44.3 | % | ||||||||||
Adjusted EBITDA | $ | 247 | $ | 455 | $ | 651 | $ | 317 | $ | 417 | ||||||||||
Adjusted EBITDA margin | 21.3 | % | 34.9 | % | 41.8 | % | 43.0 | % | 45.9 | % | ||||||||||
Adjusted net income (loss) | $ | (57 | ) | $ | 116 | $ | 278 | $ | 127 | $ | 235 | |||||||||
Adjusted net income (loss) margin | (4.9 | )% | 8.9 | % | 17.8 | % | 17.2 | % | 25.9 | % | ||||||||||
Net cash provided by operating activities | 319 | 496 | 760 | 288 | 448 | |||||||||||||||
Net cash used in investing activities | (677 | ) | (63 | ) | (51 | ) | (33 | ) | (18 | ) | ||||||||||
Net cash provided by (used in) financing activities | 459 | (734 | ) | (651 | ) | (162 | ) | (239 | ) | |||||||||||
Free cash flow | 257 | 435 | 714 | 260 | 430 | |||||||||||||||
| • | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
| • | adjusted operating income and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; |
| • | adjusted operating income and adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; |
| • | adjusted operating income and adjusted EBITDA do not reflect income tax payments that may represent a reduction in cash available to us; and |
| • | other companies, including companies in our industry, may calculate adjusted operating income and adjusted EBITDA differently, which reduce their usefulness as comparative measures. |
| • | although amortization is non-cash charge, the assets being amortized may have to be replaced in the future, and adjusted net income does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
| • | adjusted net income does not reflect changes in, or cash requirements for, our working capital needs; |
| • | other companies, including companies in our industry, may calculate adjusted net income differently, which reduce its usefulness as comparative measures. |
| • | the level of competition in our markets, including the effect of new entrants, consolidation, and technological innovation; |
| • | macroeconomic conditions in our markets, both domestic and international, as well as the level of discretionary technology spending; |
| • | fluctuations in demand for our solutions; |
| • | disruptions in our business operations or target markets caused by, among other things, terrorism or other intentional acts, pandemics, such as the COVID-19 pandemic, riots, protests or political unrest, or earthquakes, floods, or other natural disasters; |
| • | variability and unpredictability in the rate of growth in the markets in which we compete; |
| • | technological changes in our markets; |
| • | our ability to renew existing subscribers, acquire new subscribers, and sell additional solutions; |
| • | execution of our business strategy and operating plan, and the effectiveness of our sales and marketing programs; |
| • | product announcements, introductions, transitions, and enhancements by us or our competitors, which could result in deferrals of customer orders; |
| • | the impact of our recent divesture of our enterprise business, and any stranded or other costs incurred in connection with the transaction and the efficacy of our cost optimization efforts following the transaction; |
| • | the impact of future acquisitions or divestitures; |
| • | changes in accounting rules and policies that impact our future results of operations compared to prior periods; and |
| • | the need to recognize certain revenue ratably over a defined period or to defer recognition of revenue to a later period, which may impact the comparability of our results of operations across those periods. |
| • | our channel partners are generally not subject to minimum sales requirements or any obligation to market our solutions to their customers; |
| • | many channel partner agreements are nonexclusive and may be terminated at any time without cause and or renegotiated with us on new terms that may be less favorable due to competitive conditions in our markets and other factors; |
| • | our channel partners may encounter issues or have violations of applicable law or regulatory requirements or otherwise cause damage to our reputation through their actions; |
| • | certain of our channel partners market and distribute competing solutions and may, from time to time, may place greater emphasis on the sale of these competing solutions due to pricing, promotions, and other terms offered by our competitors; |
| • | any consolidation of electronics retailers can increase their negotiating power with respect to software providers such as us and any decline in the number of physical retailers could decrease the channels of distribution for us; |
| • | the continued consolidation of online sales through a small number of larger channels has been increasing, which could reduce the channels available for online distribution of our solutions; and |
| • | sales through our partners are subject to changes in general economic conditions, strategic direction, competitive risks, and other issues that could result in a reduction of sales, or cause our partners to suffer financial difficulty which could delay payments to us, affecting our operating results. |
| • | global and local economic conditions; |
| • | differing employment practices and labor issues; |
| • | formal or informal imposition of new or revised export and/or import and doing-business regulations, including trade sanctions, taxes, and tariffs, which could be changed without notice; |
| • | regulations or restrictions on the use, import, or export of encryption technologies that could delay or prevent the acceptance and use of encryption products and public networks for secure communications; |
| • | compliance with evolving foreign laws, regulations, and other government controls addressing privacy, data protection, data localization, and data security; |
| • | ineffective legal protection of our intellectual property rights in certain countries; |
| • | increased uncertainties regarding social, political, immigration, and trade policies in the United States and abroad, such as those caused by recent U.S. legislation and the withdrawal of the United Kingdom (the “U.K.”) from the European Union (the “E.U.”), which is commonly referred to as “Brexit;” |
| • | geopolitical and security issues, such as armed conflict and civil or military unrest, crime, political instability, human rights concerns, and terrorist activity; |
| • | natural disasters, public health issues, pandemics (such as the COVID-19 pandemic), and other catastrophic events; |
| • | inefficient infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable provision of services from utilities, transportation, data hosting, or telecommunications providers; |
| • | other government restrictions on, or nationalization of, our operations in any country, or restrictions on our ability to repatriate earnings from a particular country; |
| • | seasonal reductions in business activity in the summer months in Europe and in other periods in other countries; |
| • | costs and delays associated with developing software and providing support in multiple languages; |
| • | greater difficulty in identifying, attracting, and retaining local qualified personnel, and the costs and expenses associated with such activities; |
| • | longer payment cycles and greater difficulties in collecting accounts receivable; and |
| • | local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”) and other anti-corruption laws and regulations. |
| • | making it more difficult for us to make payments on the Senior Secured Credit Facilities and our other obligations; |
| • | increasing our vulnerability to general economic and market conditions and to changes in the industries in which we compete; |
| • | requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, future working capital, capital expenditures, investments or acquisitions, future strategic business opportunities, or other general corporate requirements; |
| • | restricting us from making acquisitions or causing us to make divestitures or similar transactions; |
| • | limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, investments, acquisitions, and general corporate or other purposes; |
| • | limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged; and |
| • | increasing our cost of borrowing. |
| • | incur additional indebtedness; |
| • | create or incur liens; |
| • | engage in consolidations, amalgamations, mergers, liquidations, dissolutions, or dispositions; |
| • | pay dividends and distributions on, or purchase, redeem, defease, or otherwise acquire or retire for value, our capital stock; |
| • | make acquisitions, investments, loans (including guarantees), advances, or capital contributions; |
| • | create negative pledges or restrictions on the payment of dividends or payment of other amounts owed from subsidiaries; |
| • | sell, transfer, or otherwise dispose of assets, including capital stock of subsidiaries; |
| • | make prepayments or repurchases of debt that is contractually subordinated with respect to right of payment or security; |
| • | engage in certain transactions with affiliates; |
| • | modify certain documents governing debt that is subordinated with respect to right of payment; |
| • | change our fiscal year; and |
| • | change our material lines of business. |
| • | limited in how we conduct our business; |
| • | unable to raise additional debt or equity financing to operate during general economic or business downturns; |
| • | unable to compete effectively or to take advantage of new business opportunities; and/or |
| • | limited in our ability to grow in accordance with, or otherwise pursue, our business strategy. |
| • | changes in the valuation of our deferred tax assets and liabilities; |
| • | expected timing and amount of the release of any tax valuation allowances; |
| • | tax effects of equity-based compensation; |
| • | costs related to intercompany restructurings; |
| • | changes in tax laws, regulations, or interpretations thereof; or |
| • | lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates. |
| • | a board of directors that is composed of a majority of “independent directors,” as defined under rules; |
| • | a compensation committee that is composed entirely of independent directors; and |
| • | a nominating and corporate governance committee that is composed entirely of independent directors. |
| • | actual or anticipated changes or fluctuations in our results of operations and whether our results of operations meet the expectations of securities analysts or investors; |
| • | actual or anticipated changes in securities analysts’ estimates and expectations of our financial performance; |
| • | announcements of new solutions, commercial relationships, acquisitions, or other events by us or our competitors; |
| • | general market conditions, including volatility in the market price and trading volume of technology companies in general and of companies in the IT security industry in particular; |
| • | changes in how current and potential customers perceive the effectiveness of our platform in protecting against advanced cyberattacks or other reputational harm; |
| • | network outages or disruptions of our solutions or their availability, or actual or perceived privacy, data protection, or network information breaches; |
| • | investors’ perceptions of our prospects and the prospects of the businesses in which we participate; |
| • | sales of large blocks of our Class A common stock, including sales by our executive officers, directors, and significant stockholders; |
| • | announced departures of any of our key personnel; |
| • | lawsuits threatened or filed against us or involving our industry, or both; |
| • | changing legal or regulatory developments in the United States and other countries; |
| • | any default or anticipated default under agreements governing our indebtedness; |
| • | adverse publicity about us, our products and solutions, or our industry; |
| • | effects of public health crises, such as the COVID-19 pandemic; |
| • | general economic conditions and trends; and |
| • | other events or factors, including those resulting from major catastrophic events, war, acts of terrorism, or responses to these events. |
| • | any derivative action or proceeding brought on our behalf; |
| • | any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; |
| • | any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our certificate of incorporation or our bylaws; |
| • | any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; and |
| • | any other action asserting a claim against us that is governed by the internal affairs doctrine (each, a “Covered Proceeding”). |
| • | the efficiency and success of our transition to a pure-play Consumer cybersecurity company following the sale of our Enterprise Business; |
| • | plans to develop and offer new products and services and enter new markets; |
| • | our expectations with respect to the continued stability and growth of our customer base; |
| • | anticipated trends, growth rates, and challenges in our business and in domestic and international markets; |
| • | our financial performance, including changes in and expectations with respect to revenues, and our ability to maintain profitability in the future; |
| • | investments or potential investments in new or enhanced technologies; |
| • | market acceptance of our solutions; |
| • | the success of our business strategy, including the growth in the market for cloud-based security solutions, acceptance of our own cloud-based solutions, and changes in our business model and operations; |
| • | our ability to cross-sell and up-sell to our existing subscribers; |
| • | our ability to maintain and expand our relationships with partners and on commercially acceptable terms, including our channel and strategic partners; |
| • | the effectiveness of our sales force, distribution channel, and marketing activities; |
| • | the growth and development of our direct and indirect channels of distribution; |
| • | our response to emerging and future cybersecurity risks; |
| • | our ability to continue to innovate and enhance our solutions; |
| • | our ability to develop new solutions and bring them to market in a timely manner; |
| • | our ability to prevent serious errors, defects, or vulnerabilities in our solutions; |
| • | our ability to develop solutions that interoperate with our subscribers’ existing systems and devices; |
| • | our ability to maintain, protect, and enhance our brand and intellectual property; |
| • | our continued use of open source software; |
| • | our ability to compete against established and emerging cybersecurity companies; |
| • | risks associated with fluctuations in exchange rates of the foreign currencies in which we conduct business; |
| • | past and future acquisitions, investments, and other strategic investments; |
| • | our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business both domestically and internationally; |
| • | the attraction, transition, and retention of management and other qualified personnel; |
| • | economic and industry trend analysis; |
| • | litigation, investigations, regulatory inquiries, and proceedings; |
| • | the increased expenses associated with being a public company; |
| • | our estimated total addressable market; |
| • | the future trading prices of our Class A common stock; |
| • | the impact of macroeconomic conditions on our business, including the impact of the COVID-19 on economic activity and financial markets; |
| • | our expectation regarding the impact of the COVID-19 pandemic, including its geographic spread and severity, and the related responses by governments and private industry on our business and financial condition, as well as the businesses and financial condition of our subscribers and partners; |
| • | the adequacy of our capital resources to fund operations and growth; |
| • | our Sponsors’ and Intel’s significant influence over us and our status as a “controlled company” under the rules of the Exchange; |
| • | risks relating to our corporate structure, tax rates, and tax receivable agreement; and |
| • | the other factors identified under the heading “Risk Factors” appearing elsewhere in this prospectus. |
| • | eMarketer, Global Commerce 2020, Ecommerce Decelerates amid Global Retail Contraction but Remains a Bright Spot, June 2020; |
| • | eMarketer, US Mobile Time Spent 2020, Lockdowns augment Gains in Time Spent with Mobile Devices, June 2020; |
| • | eMarketer, US Time Spent with Media 2020, Gains in Consumer Usage During the Year of COVID-19 and Beyond, April 2020; |
| • | Frost & Sullivan, Total Addressable Market (TAM) for the Global Consumer Cyber Security and Privacy Market, August 31, 2020; |
| • | ForgeRock, 2021 ForgeRock Consumer Identity Breach Report, The Year of the Great Digital Migration: How Usernames and Passwords Found Their Way Into the Crosshairs of Attackers, June 7, 2021; |
| • | Identity Theft Resource Center, Identity Theft Resource Center Reports 33 Percent Decrease in Data Breaches in the First Half of 2020, July 14, 2019 (https://www.idtheftcenter.org/identity-theft-resource-center-reports-33-percent-decrease-in-data-breaches-in-the-first-half-of-2020/); |
| • | IDC, New Media Market Model 1Q20 Deliverable, 12 June 2020; |
| • | IDC, Public Cloud Services Spending Guide Forecast Pivot, June 2020; |
| • | IDC, The State of U.S. Enterprise Mobile Workers: Information, Frontline, and Work from Home Trends in 2020, 28 July 2020; |
| • | IDC, Total Addressable Market (TAM) Calculator, 2020; |
| • | IDC, Worldwide Mobile Phone Forecast Update, 2020-2024, June 2020; |
| • | McAfee ATR Threats Report, April 2021; |
| • | RiskBased Security, 2020 Year End Data Breach QuickView Report, 2021; and |
| • | Statista, Global Consumer Survey - Average for 5 Countries (US, Japan, Germany, Australia, United Kingdom), 2018 & 2019. |
| • | the consummation of the sale of our Enterprise Business to STG on July 27, 2021; and |
| • | the application of the proceeds from the sale of our Enterprise Business to STG, including (i) the declaration and payment of a one time special dividend of $4.50 per share to holders of record of Class A common stock as of August 13, 2021 and a one-time special cash distribution to FTW members and (ii) the repayment of $332 million of our First Lien USD Term Loan and €563 million of our First Lien EUR Term Loan in August 2021. |
As of June 26, 2021 | ||||||||||||
(in millions) | Actual | Pro Forma Adjustments | Pro Forma | |||||||||
Cash and cash equivalents | $ | 420 | $ | 63 | (6) | $ | 483 | |||||
Long-term debt: | ||||||||||||
First Lien USD Term Loan | 2,717 | (1) | (332 | ) (3) | 2,385 | |||||||
First Lien EUR Term Loan | 1,276 | (2) | (673 | ) (3) | 603 | |||||||
Second Lien USD Term Loan | — | — | — | |||||||||
Revolving Credit Facility | — | — | — | |||||||||
Redeemable noncontrolling interests | 7,687 | (1,710 | ) (4) | 5,977 | ||||||||
Equity (deficit): | ||||||||||||
Class A common stock, $0.001 par value - 1,500,000,000 shares authorized, 166,004,840 shares issued and outstanding as of June 26, 2021 | — | — | — | |||||||||
Class B common stock, $0.001 par value - 300,000,000 shares authorized, 265,376,691 shares issued and outstanding as of June 26, 2021 | — | — | — | |||||||||
Additional paid-in capital | (9,306 | ) | (747 | ) (4) | (10,053 | ) | ||||||
Accumulated other comprehensive income (loss) | (33 | ) | — | (33 | ) | |||||||
Accumulated deficit | (52 | ) | (475 | ) (5) | (527 | ) | ||||||
Total deficit | (9,391 | ) | (1,222 | ) | (10,613 | ) | ||||||
Total capitalization | $ | 2,289 | $ | (3,937 | ) | $ | (1,648 | ) | ||||
| (1) | First Lien USD Term Loan of $2,717 million excludes discount and issuance costs of $33 million. |
| (2) | First Lien EUR Term Loan of $1,276 million excludes discount and issuance costs of $11 million. |
| (3) | Represents prepayment of $332 million of First Lien USD Term Loan and €563 million of First Lien EUR Term Loan ($673 million using our June 26, 2021 exchange rate of 1.1951), representing a total of $1,005 million on our condensed consolidated balance sheet as of June 26, 2021, excluding related discount and issuance costs. |
| (4) | Represents approximate paid distributions to LLC Unit holders ($1,710 million) along with dividend of $4.50 per share of Class A common stock based on Class A shares outstanding at June 26, 2021. |
| (5) | Includes estimated $300 million in required corporate taxes and related payments and $175 million in customary transaction and one-time charges. This amount excludes gain on sale of Enterprise Business expected to be in excess of $2 billion, net of taxes. |
| (6) | Includes the proceeds of $4.0 billion from sale of the Enterprise Business less the amounts described in footnotes (3), (4), and (5) above. |
| • | Device Security, home-use, protected from viruses, ransomware, malware, spyware, and phishing. |
| • | Online Privacy and Comprehensive Internet Security, Wi-Fi connections safe with our bank-grade AES256-bit encryption, keeping personal data protected while keeping IP addresses and physical locations private. |
| • | Identity Protection, |
| • | Net revenue increased by 20% to $1.6 billion |
| • | Net loss increased 22% to $289 million |
| • | Loss from continuing operations increased 12% to a loss of $218 million |
| • | Adjusted EBITDA increased 43% to $651 million |
| • | Cash provided by operating activities increased by 53% to $760 million |
| • | Free cash flow increased by 64% to $714 million |
| • | Net revenue increased by 23% to $909 million |
| • | Net income increased by 552% to $202 million |
| • | Income from continuing operations increased by 1,610% to $151 million |
| • | Adjusted EBITDA increased by 32% to $417 million |
| • | Net cash provided by operating activities increased by 56% to $448 million |
| • | Free cash flow increased by 65% to $430 million |
December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | ||||||||||||||||
Core Direct to Consumer Customers (in millions) | 14.1 | 15.2 | 18.0 | 16.6 | 19.4 | |||||||||||||||
TTM Dollar Based Retention—Core Direct to Consumer Customers | 93 | % | 97 | % | 100 | % | 98 | % | 100 | % | ||||||||||
Fiscal Year Ended | Three Months Ended | |||||||||||||||||||
December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | ||||||||||||||||
Monthly ARPC | $ | 5.79 | $ | 5.96 | $ | 6.01 | $ | 6.06 | $ | 5.99 | ||||||||||
| • | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
| • | adjusted operating income and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; |
| • | adjusted operating income and adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; |
| • | adjusted operating income and adjusted EBITDA do not reflect income tax payments that may represent a reduction in cash available to us; and |
| • | other companies, including companies in our industry, may calculate adjusted operating income and adjusted EBITDA differently, which reduce their usefulness as comparative measures. |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Net income (loss) | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | $ | 31 | $ | 202 | |||||||
Add: Amortization | 260 | 253 | 251 | 126 | 98 | |||||||||||||||
Add: Equity-based compensation | 6 | 5 | 113 | 16 | 33 | |||||||||||||||
Add: Cash in lieu of equity awards (1) | 5 | 3 | 1 | 1 | — | |||||||||||||||
Add: Acquisition and integration costs (2) | 7 | 8 | 8 | 3 | 2 | |||||||||||||||
Add: Restructuring charges (3) | 19 | 6 | 2 | 1 | 8 | |||||||||||||||
Add: Management fees (4) | 7 | 11 | 28 | 4 | — | |||||||||||||||
Add: Transformation (5) | 17 | 23 | 20 | 9 | 1 | |||||||||||||||
Add: Executive severance (6) | — | — | 3 | 3 | — | |||||||||||||||
Add: Interest expense and other, net | 308 | 296 | 307 | 149 | 118 | |||||||||||||||
Add: Provision for income tax expense (benefit) | 29 | 38 | 5 | (5 | ) | 7 | ||||||||||||||
Add: Foreign exchange loss (gain), net | (30 | ) | (21 | ) | 104 | 6 | (15 | ) | ||||||||||||
Less: (Income) loss from discontinued operations, net of taxes | 104 | 41 | 71 | (41 | ) | (51 | ) | |||||||||||||
Adjusted operating income | 220 | 427 | 624 | 303 | 403 | |||||||||||||||
Add: Depreciation | 28 | 29 | 28 | 14 | 14 | |||||||||||||||
Less: Other expense | (1 | ) | (1 | ) | (1 | ) | — | — | ||||||||||||
Adjusted EBITDA | $ | 247 | $ | 455 | $ | 651 | $ | 317 | $ | 417 | ||||||||||
Net revenue | $ | 1,161 | $ | 1,303 | $ | 1,558 | $ | 737 | $ | 909 | ||||||||||
Net income (loss) margin | (44.1 | )% | (18.1 | )% | (18.5 | )% | 4.2 | % | 22.2 | % | ||||||||||
Adjusted operating income margin | 18.9 | % | 32.8 | % | 40.1 | % | 41.1 | % | 44.3 | % | ||||||||||
Adjusted EBITDA margin | 21.3 | % | 34.9 | % | 41.8 | % | 43.0 | % | 45.9 | % | ||||||||||
| • | although amortization is a non-cash charge, the assets being amortized may have to be replaced in the future, and adjusted net income does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
| • | adjusted net income does not reflect changes in, or cash requirements for, our working capital needs; |
| • | other companies, including companies in our industry, may calculate adjusted net income differently, which reduce its usefulness as comparative measures. |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Net income (loss) | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | $ | 31 | $ | 202 | |||||||
Add: Amortization of debt discount and issuance costs | 15 | 17 | 36 | 9 | 8 | |||||||||||||||
Add: Amortization | 260 | 253 | 251 | 126 | 98 | |||||||||||||||
Add: Equity-based compensation | 6 | 5 | 113 | 16 | 33 | |||||||||||||||
Add: Cash in lieu of equity awards (1) | 5 | 3 | 1 | 1 | — | |||||||||||||||
Add: Acquisition and integration costs (2) | 7 | 8 | 8 | 3 | 2 | |||||||||||||||
Add: Restructuring charges (3) | 19 | 6 | 2 | 1 | 8 | |||||||||||||||
Add: Management fees (4) | 7 | 11 | 28 | 4 | — | |||||||||||||||
Add: Transformation (5) | 17 | 23 | 20 | 9 | 1 | |||||||||||||||
Add: Executive severance (6) | — | — | 3 | 3 | — | |||||||||||||||
Add: TRA adjustment (7) | — | — | 2 | — | 8 | |||||||||||||||
Add: Other | — | — | 2 | — | — | |||||||||||||||
Add: Provision for income taxes (benefit) | 29 | 38 | 5 | (5 | ) | 7 | ||||||||||||||
Add: Foreign exchange loss (gain), net (8) | (30 | ) | (21 | ) | 104 | 6 | (15 | ) | ||||||||||||
Less: (Income) loss from discontinued operations, net of taxes | 104 | 41 | 71 | (41 | ) | (51 | ) | |||||||||||||
Adjusted income (loss) before taxes | (73 | ) | 148 | 357 | 163 | 301 | ||||||||||||||
Adjusted provision for income taxes (9) | (16 | ) | 32 | 79 | 36 | 66 | ||||||||||||||
Adjusted net income (loss) | $ | (57 | ) | $ | 116 | $ | 278 | $ | 127 | $ | 235 | |||||||||
Net revenue | $ | 1,161 | $ | 1,303 | $ | 1,558 | $ | 737 | $ | 909 | ||||||||||
Net income (loss) margin | (44.1 | )% | (18.1 | )% | (18.5 | )% | 4.2 | % | 22.2 | % | ||||||||||
Adjusted net income (loss) margin | (4.9 | )% | 8.9 | % | 17.8 | % | 17.2 | % | 25.9 | % | ||||||||||
| (1) | As a result of the Sponsor Acquisition, cash awards were provided to certain employees who held Intel equity awards in lieu of equity in FTW. |
| (2) | Represents both direct and incremental costs in connection with business acquisitions, including acquisition consideration structured as cash retention, third party professional fees, and other integration costs. |
| (3) | Represents both direct and incremental costs associated with our separation from Intel as well as subsequent costs incurred to realign toward our core business and realign staffing. It includes implementing our stand alone back office and costs to execute strategic restructuring events, including third-party professional fees and services, transition services provided by Intel, severance, and facility restructuring costs. |
| (4) | Represents management fees paid to certain affiliates of our Sponsors and Intel pursuant to the Management Services Agreement. The Management Services Agreement has been terminated subsequent to the IPO and we paid a one-time fee of $22 million to such parties in October 2020. |
| (5) | Represents costs incurred in connection with transformation of the business post-Intel separation. Also includes the cost of workforce restructurings involving both eliminations of positions and relocations to lower cost locations in connection with our transformational initiatives, strategic initiatives to improve customer retention, activation to pay and cost synergies, inclusive of duplicative run rate costs related to facilities and data center rationalization, and other one-time costs. |
| (6) | Represents severance for executive terminations not associated with a strategic restructuring event. |
| (7) | Represents the impact on net income of adjustments to liabilities under our tax receivable agreement. |
| (8) | Represents foreign exchange gain (loss), net as shown on in our audited consolidated statement of operations and condensed consolidated statements of operations. This amount is attributable to gains or losses on non-U.S. Dollar denominated balances and is primarily due to unrealized gains or losses associated with our 1st Lien Euro Term Loan. |
| (9) | Prior to our IPO, our structure was that of a pass-through entity for U.S. federal income tax purposes with certain U.S. and foreign subsidiaries subject to income tax in their respective jurisdictions. Subsequent to the IPO, McAfee Corp. is taxed as a corporation and pays corporate federal, state, and local taxes on income allocated to it from FTW. This amount has been recast for periods reported previously. The adjusted provision for income taxes and adjusted provision for income taxes now represent the tax effect on net income, adjusted for all of the listed adjustments, assuming that all consolidated net income was subject to corporate taxation for all periods presented. We have assumed an annual effective tax rate of 22%, which represents our long term expected corporate tax rate excluding discrete and non-recurring tax items. |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Net cash provided by operating activities | $ | 319 | $ | 496 | $ | 760 | $ | 288 | $ | 448 | ||||||||||
Less: Capital expenditures (1) | (62 | ) | (61 | ) | (46 | ) | (28 | ) | (18 | ) | ||||||||||
Free cash flow (2) | $ | 257 | $ | 435 | $ | 714 | $ | 260 | $ | 430 | ||||||||||
| (1) | Capital expenditures includes payments for property and equipment and capitalized labor costs incurred in connection with certain software development activities. |
| (2) | Free cash flow includes $290 million, $281 million, and $268 million in cash interest payments for fiscal 2018, fiscal 2019, fiscal 2020, respectively, and $141 million and $101 million in cash interest payments for the six months ended June 27, 2020 and June 26, 2021, respectively. |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Impact of purchase accounting on net revenue | $ | (32 | ) | $ | (1 | ) | $ | — | $ | — | $ | — | ||||||||
Purchase accounting adjustments to cost of sales | (14 | ) | (1 | ) | 1 | 1 | — | |||||||||||||
Amortization of acquired and developed technologies | 107 | 107 | 108 | 54 | 49 | |||||||||||||||
Impact of purchase accounting on cost of sales | 93 | 106 | 109 | 55 | 49 | |||||||||||||||
Purchase accounting adjustments to operating expenses | (1 | ) | (1 | ) | — | — | — | |||||||||||||
Amortization of customer relationships | 153 | 146 | 143 | 72 | 49 | |||||||||||||||
Impact of purchase accounting on operating expenses | 152 | 145 | 143 | 72 | 49 | |||||||||||||||
Impact of purchase accounting on operating loss related to continuing operations | (277 | ) | (252 | ) | (252 | ) | (127 | ) | (98 | ) | ||||||||||
Impact of purchase accounting on operating loss related to discontinued operations | (322 | ) | (252 | ) | (187 | ) | (99 | ) | (36 | ) | ||||||||||
Total impact of purchase accounting | $ | (599 | ) | $ | (504 | ) | $ | (439 | ) | $ | (226 | ) | $ | (134 | ) | |||||
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Cost of sales | $ | 1 | $ | — | $ | 5 | $ | — | $ | 2 | ||||||||||
Sales and marketing | 1 | 1 | 23 | 1 | 7 | |||||||||||||||
Research and development | 1 | 1 | 40 | — | 10 | |||||||||||||||
General and administrative | 3 | 3 | 45 | 15 | 14 | |||||||||||||||
Total equity-based compensation expense from continuing operations | 6 | 5 | 113 | 16 | 33 | |||||||||||||||
Discontinued operations | 22 | 20 | 200 | 3 | 45 | |||||||||||||||
Total equity-based compensation expense | $ | 28 | $ | 25 | $ | 313 | $ | 19 | $ | 78 | ||||||||||
| • | Recognition of certain deferred tax assets and corresponding discrete income tax benefit up to $125 million. |
| • | Recognition of a long-term TRA liability and corresponding TRA expense of $170 million to $260 million, including the TRA liability recorded directly as a result of tax attributes utilized from the Enterprise Business divestiture. This TRA liability relates to net deferred tax assets that did not meet the probable recognition criteria as of December 26, 2020 and thus was not recorded in our consolidated balance sheet as of that date. |
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Net revenue | $ | 1,161 | $ | 1,303 | $ | 1,558 | $ | 737 | $ | 909 | ||||||||||
Cost of sales | 386 | 391 | 444 | 209 | 232 | |||||||||||||||
Gross profit | 775 | 912 | 1,114 | 528 | 677 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales and marketing | 348 | 299 | 348 | 140 | 174 | |||||||||||||||
Research and development | 186 | 161 | 188 | 75 | 92 | |||||||||||||||
General and administrative | 170 | 182 | 235 | 100 | 93 | |||||||||||||||
Amortization of intangibles | 153 | 146 | 143 | 72 | 49 | |||||||||||||||
Restructuring charges | 19 | 6 | 2 | 1 | 8 | |||||||||||||||
Total operating expenses | 876 | 794 | 916 | 388 | 416 | |||||||||||||||
Operating income (loss) | (101 | ) | 118 | 198 | 140 | 261 | ||||||||||||||
Interest (expense) and other, net | (308 | ) | (296 | ) | (307 | ) | (149 | ) | (118 | ) | ||||||||||
Foreign exchange gain (loss), net | 30 | 21 | (104 | ) | (6 | ) | 15 | |||||||||||||
Income (loss) from continuing operations before income taxes | (379 | ) | (157 | ) | (213 | ) | (15 | ) | 158 | |||||||||||
Provision for income tax expense (benefit) | 29 | 38 | 5 | (5 | ) | 7 | ||||||||||||||
Income (loss) from continuing operations | (408 | ) | (195 | ) | (218 | ) | (10 | ) | 151 | |||||||||||
Income (loss) from discontinued operations, net of taxes | (104 | ) | (41 | ) | (71 | ) | 41 | 51 | ||||||||||||
Net income (loss) | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | $ | 31 | $ | 202 | |||||||
Less: Net income (loss) attributable to redeemable noncontrolling interests | N/A | N/A | (171 | ) | N/A | 136 | ||||||||||||||
Net income (loss) attributable to McAfee Corp. | N/A | N/A | $ | (118 | ) | N/A | $ | 66 | ||||||||||||
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | ||||||||||||||||
Net revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Cost of sales | 33.2 | % | 30.0 | % | 28.5 | % | 28.4 | % | 25.5 | % | ||||||||||
Gross profit | 66.8 | % | 70.0 | % | 71.5 | % | 71.6 | % | 74.5 | % | ||||||||||
Operating expenses: | ||||||||||||||||||||
Sales and marketing | 30.0 | % | 22.9 | % | 22.3 | % | 19.0 | % | 19.1 | % | ||||||||||
Research and development | 16.0 | % | 12.4 | % | 12.1 | % | 10.2 | % | 10.1 | % | ||||||||||
General and administrative | 14.6 | % | 14.0 | % | 15.1 | % | 13.6 | % | 10.2 | % | ||||||||||
Amortization of intangibles | 13.2 | % | 11.2 | % | 9.2 | % | 9.8 | % | 5.4 | % | ||||||||||
Restructuring charges | 1.6 | % | 0.5 | % | 0.1 | % | 0.1 | % | 0.9 | % | ||||||||||
Total operating expenses | 75.5 | % | 60.9 | % | 58.8 | % | 52.6 | % | 45.8 | % | ||||||||||
Operating income (loss) | (8.7 | )% | 9.1 | % | 12.7 | % | 19.0 | % | 28.7 | % | ||||||||||
Interest (expense) and other, net | (26.5 | )% | (22.7 | )% | (19.7 | )% | (20.2 | )% | (13.0 | )% | ||||||||||
Foreign exchange gain (loss), net | 2.6 | % | 1.6 | % | (6.7 | )% | (0.8 | )% | 1.7 | % | ||||||||||
Income (loss) from continuing operations before income taxes | (32.6 | )% | (12.0 | )% | (13.7 | )% | (2.0 | )% | 17.4 | % | ||||||||||
Provision for income tax expense (benefit) | 2.5 | % | 2.9 | % | 0.3 | % | (0.7 | )% | 0.8 | % | ||||||||||
Income (loss) from continuing operations | (35.1 | )% | (15.0 | )% | (14.0 | )% | (1.4 | )% | 16.6 | % | ||||||||||
Income (loss) from discontinued operations, net of taxes | (9.0 | )% | (3.1 | )% | (4.6 | )% | 5.6 | % | 5.6 | % | ||||||||||
Net income (loss) | (44.1 | )% | (18.1 | )% | (18.5 | )% | 4.2 | % | 22.2 | % | ||||||||||
Less: Net income (loss) attributable to redeemable noncontrolling interests | N/A | N/A | (11.0 | )% | N/A | 15.0 | % | |||||||||||||
Net income (loss) attributable to McAfee Corp. | N/A | N/A | (7.6 | )% | N/A | 7.3 | % | |||||||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | Dollars | Percent | ||||||||||||
Net revenue | $ | 1,161 | $ | 1,303 | $ | 142 | 12.2 | % | ||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | Dollars | Percent | ||||||||||||
Cost of sales | $ | 386 | $ | 391 | $ | 5 | 1.3 | % | ||||||||
Gross profit margin | 66.8 | % | 70.0 | % | ||||||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | Dollars | Percent | ||||||||||||
Sales and marketing | $ | 348 | $ | 299 | $ | (49 | ) | (14.1 | )% | |||||||
Research and development | 186 | 161 | (25 | ) | (13.4 | )% | ||||||||||
General and administrative | 170 | 182 | 12 | 7.1 | % | |||||||||||
Amortization of intangibles | 153 | 146 | (7 | ) | (4.6 | )% | ||||||||||
Restructuring charges | 19 | 6 | (13 | ) | (68.4 | )% | ||||||||||
Total | $ | 876 | $ | 794 | $ | (82 | ) | (9.4 | )% | |||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | Dollars | Percent | ||||||||||||
Operating income (loss) | $ | (101 | ) | $ | 118 | $ | 219 | (216.8 | )% | |||||||
Operating income (loss) margin | (8.7 | )% | 9.1 | % | ||||||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | Dollars | Percent | ||||||||||||
Interest (expense) and other, net | $ | (308 | ) | $ | (296 | ) | $ | 12 | (3.9 | )% | ||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | Dollars | Percent | ||||||||||||
Provision for income tax expense | $ | 29 | $ | 38 | $ | 9 | 31.0 | % | ||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 29, 2018 | December 28, 2019 | Dollars | Percent | ||||||||||||
Net revenue | $ | 1,248 | $ | 1,332 | $ | 84 | 6.7 | % | ||||||||
Operating income (loss) | (72 | ) | 8 | 80 | (111.1 | )% | ||||||||||
Income (loss) from discontinued operations before income taxes | (71 | ) | 8 | 79 | (111.3 | )% | ||||||||||
Income tax expense | 33 | 49 | 16 | 48.5 | % | |||||||||||
Loss from discontinued operations, net of tax | (104 | ) | (41 | ) | 63 | (60.6 | )% | |||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 28, 2019 | December 26, 2020 | Dollars | Percent | ||||||||||||
Net revenue | $ | 1,303 | $ | 1,558 | $ | 255 | 19.6 | % | ||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 28, 2019 | December 26, 2020 | Dollars | Percent | ||||||||||||
Cost of sales | $ | 391 | $ | 444 | $ | 53 | 13.6 | % | ||||||||
Gross profit margin | 70.0 | % | 71.5 | % | ||||||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 28, 2019 | December 26, 2020 | Dollars | Percent | ||||||||||||
Sales and marketing | $ | 299 | $ | 348 | $ | 49 | 16.4 | % | ||||||||
Research and development | 161 | 188 | 27 | 16.8 | % | |||||||||||
General and administrative | 182 | 235 | 53 | 29.1 | % | |||||||||||
Amortization of intangibles | 146 | 143 | (3 | ) | (2.1 | )% | ||||||||||
Restructuring charges | 6 | 2 | (4 | ) | (66.7 | )% | ||||||||||
Total | $ | 794 | $ | 916 | $ | 122 | 15.4 | % | ||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 28, 2019 | December 26, 2020 | Dollars | Percent | ||||||||||||
Operating income | $ | 118 | $ | 198 | $ | 80 | 67.8 | % | ||||||||
Operating income margin | 9.1 | % | 12.7 | % | ||||||||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 28, 2019 | December 26, 2020 | Dollars | Percent | ||||||||||||
Interest (expense) and other, net | $ | (296 | ) | $ | (307 | ) | $ | (11 | ) | 3.7 | % | |||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 28, 2019 | December 26, 2020 | Dollars | Percent | ||||||||||||
Provision for income tax expense | $ | 38 | $ | 5 | $ | (33 | ) | (86.8 | )% | |||||||
Fiscal Year Ended | Variance in | |||||||||||||||
(in millions except percentages) | December 28, 2019 | December 26, 2020 | Dollars | Percent | ||||||||||||
Net revenue | $ | 1,332 | $ | 1,348 | $ | 16 | 1.2 | % | ||||||||
Operating income (loss) | 8 | (46 | ) | (54 | ) | (675.0 | )% | |||||||||
Income (loss) from discontinued operations before income taxes | 8 | (46 | ) | (54 | ) | (675.0 | )% | |||||||||
Income tax expense | 49 | 25 | (24 | ) | (49.0 | )% | ||||||||||
Loss from discontinued operations, net of tax | (41 | ) | (71 | ) | (30 | ) | 73.2 | % | ||||||||
Six Months Ended | Variance in | |||||||||||||||
(in millions except percentages) | June 27, 2020 | June 26, 2021 | Dollars | Percent | ||||||||||||
Net revenue | $ | 737 | $ | 909 | $ | 172 | 23.3 | % | ||||||||
Six Months Ended | ||||||||||||||||
(in millions except percentages) | June 27, 2020 | % of Total | June 26, 2021 | % of Total | ||||||||||||
Americas | $ | 482 | 65.4 | % | $ | 601 | 66.1 | % | ||||||||
EMEA | 175 | 23.7 | % | 213 | 23.4 | % | ||||||||||
APJ | 80 | 10.9 | % | 95 | 10.5 | % | ||||||||||
Total net revenue | $ | 737 | 100.0 | % | $ | 909 | 100.0 | % | ||||||||
Six Months Ended | ||||||||||||||||
(in millions except percentages) | June 27, 2020 | % of Total | June 26, 2021 | % of Total | ||||||||||||
Direct to Consumer | $ | 575 | 78.0 | % | $ | 673 | 74.0 | % | ||||||||
Indirect | 162 | 22.0 | % | 236 | 26.0 | % | ||||||||||
Total net revenue | $ | 737 | 100.0 | % | $ | 909 | 100.0 | % | ||||||||
Six Months Ended | Variance in | |||||||||||||||
(in millions except percentages) | June 27, 2020 | June 26, 2021 | Dollars | Percent | ||||||||||||
Cost of sales | $ | 209 | $ | 232 | $ | 23 | 11.0 | % | ||||||||
Gross profit margin | 71.6 | % | 74.5 | % | ||||||||||||
Six Months Ended | Variance in | |||||||||||||||
(in millions except percentages) | June 27, 2020 | June 26, 2021 | Dollars | Percent | ||||||||||||
Sales and marketing | $ | 140 | $ | 174 | $ | 34 | 24.3 | % | ||||||||
Research and development | 75 | 92 | 17 | 22.7 | % | |||||||||||
General and administrative | 100 | 93 | (7 | ) | (7.0 | )% | ||||||||||
Amortization of intangibles | 72 | 49 | (23 | ) | (31.9 | )% | ||||||||||
Restructuring charges | 1 | 8 | 7 | 700.0 | % | |||||||||||
Total | $ | 388 | $ | 416 | $ | 28 | 7.2 | % | ||||||||
Six Months Ended | Variance in | |||||||||||||||
(in millions except percentages) | June 27, 2020 | June 26, 2021 | Dollars | Percent | ||||||||||||
Operating income | $ | 140 | $ | 261 | $ | 121 | 86.4 | % | ||||||||
Operating income margin | 19.0 | % | 28.7 | % | ||||||||||||
Six Months Ended | Variance in | |||||||||||||||
(in millions except percentages) | June 27, 2020 | June 26, 2021 | Dollars | Percent | ||||||||||||
Interest (expense) and other, net | $ | (149 | ) | $ | (118 | ) | $ | 31 | (20.8 | )% | ||||||
Six Months Ended | Variance in | |||||||||||||||
(in millions except percentages) | June 27, 2020 | June 26, 2021 | Dollars | Percent | ||||||||||||
Provision for income tax (benefit) | $ | (5 | ) | $ | 7 | $ | 12 | (240.0 | )% | |||||||
Six Months Ended | Variance in | |||||||||||||||
(in millions except percentages) | June 27, 2020 | June 26, 2021 | Dollars | Percent | ||||||||||||
Net revenue | $ | 664 | $ | 677 | $ | 13 | 2.0 | % | ||||||||
Operating income | 58 | 73 | 15 | 25.9 | % | |||||||||||
Income from discontinued operations before income taxes | 58 | 69 | 11 | 19.0 | % | |||||||||||
Income tax expense | 17 | 18 | 1 | 5.9 | % | |||||||||||
Income from discontinued operations, net of tax | 41 | 51 | 10 | 24.4 | % | |||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
(in millions except per share data) | September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | ||||||||||||||||||||||||
Net revenue | $ | 322 | $ | 347 | $ | 354 | $ | 383 | $ | 395 | $ | 426 | $ | 442 | $ | 467 | ||||||||||||||||
Cost of sales | 95 | 99 | 99 | 110 | 112 | 123 | 116 | 116 | ||||||||||||||||||||||||
Gross profit | 227 | 248 | 255 | 273 | 283 | 303 | 326 | 351 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Sales and marketing | 73 | 84 | 60 | 80 | 88 | 120 | 85 | 89 | ||||||||||||||||||||||||
Research and development | 40 | 37 | 38 | 37 | 35 | 78 | 44 | 48 | ||||||||||||||||||||||||
General and administrative | 50 | 53 | 58 | 42 | 43 | 92 | 48 | 45 | ||||||||||||||||||||||||
Amortization of intangibles | 36 | 36 | 36 | 36 | 36 | 35 | 36 | 13 | ||||||||||||||||||||||||
Restructuring charges | — | 1 | 1 | — | — | 1 | 8 | — | ||||||||||||||||||||||||
Total operating expenses | 199 | 211 | 193 | 195 | 202 | 326 | 221 | 195 | ||||||||||||||||||||||||
Operating income (loss) | 28 | 37 | 62 | 78 | 81 | (23 | ) | 105 | 156 | |||||||||||||||||||||||
Interest (expense) and other, net | (76 | ) | (77 | ) | (75 | ) | (74 | ) | (73 | ) | (85 | ) | (60 | ) | (58 | ) | ||||||||||||||||
Foreign exchange gain (loss), net | 44 | (24 | ) | 11 | (17 | ) | (43 | ) | (55 | ) | 35 | (20 | ) | |||||||||||||||||||
Income (loss) from continuing operations before income taxes | (4 | ) | (64 | ) | (2 | ) | (13 | ) | (35 | ) | (163 | ) | 80 | 78 | ||||||||||||||||||
Provision for income tax expense (benefit) | 17 | 9 | (10 | ) | 5 | 5 | 5 | (3 | ) | 10 | ||||||||||||||||||||||
Income (loss) from continuing operations | (21 | ) | (73 | ) | 8 | (18 | ) | (40 | ) | (168 | ) | 83 | 68 | |||||||||||||||||||
Income (loss) from discontinued operations, net of taxes | 12 | (8 | ) | 1 | 40 | 40 | (152 | ) | 11 | 40 | ||||||||||||||||||||||
Net income (loss) | $ | (9 | ) | $ | (81 | ) | $ | 9 | $ | 22 | $ | — | $ | (320 | ) | $ | 94 | $ | 108 | |||||||||||||
Less: Net income (loss) attributable to redeemable noncontrolling interests | N/A | N/A | N/A | N/A | N/A | (202 | ) | 64 | 72 | |||||||||||||||||||||||
Net income (loss) attributable to McAfee Corp. | N/A | N/A | N/A | N/A | N/A | $ | (118 | ) | $ | 30 | $ | 36 | ||||||||||||||||||||
Net income (loss) attributable to McAfee Corp.: | ||||||||||||||||||||||||||||||||
Income (loss) from continuing operations attributable to McAfee Corp. | N/A | N/A | N/A | N/A | N/A | $ | (55 | ) | $ | 27 | $ | 23 | ||||||||||||||||||||
Income (loss) from discontinued operations attributable to McAfee Corp. | N/A | N/A | N/A | N/A | N/A | (63 | ) | 3 | 13 | |||||||||||||||||||||||
Net income (loss) attributable to McAfee Corp. | N/A | N/A | N/A | N/A | N/A | $ | (118 | ) | $ | 30 | $ | 36 | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
(in millions except per share data) | September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | ||||||||||||||||||||||||
Earnings (loss) per share attributable to McAfee Corp., basic: | ||||||||||||||||||||||||||||||||
Continuing operations | N/A | N/A | N/A | N/A | N/A | $ | (0.34 | ) | $ | 0.17 | $ | 0.14 | ||||||||||||||||||||
Discontinued operations | N/A | N/A | N/A | N/A | N/A | (0.39 | ) | 0.02 | 0.08 | |||||||||||||||||||||||
Earnings (loss) per share, basic | N/A | N/A | N/A | N/A | N/A | $ | (0.73 | ) | $ | 0.18 | $ | 0.22 | ||||||||||||||||||||
Earnings (loss) per share attributable to McAfee Corp., diluted: | ||||||||||||||||||||||||||||||||
Continuing operations | N/A | N/A | N/A | N/A | N/A | $ | (0.34 | ) | $ | 0.16 | $ | 0.14 | ||||||||||||||||||||
Discontinued operations | N/A | N/A | N/A | N/A | N/A | (0.39 | ) | 0.02 | 0.07 | |||||||||||||||||||||||
Earnings (loss) per share, diluted | N/A | N/A | N/A | N/A | N/A | $ | (0.73 | ) | $ | 0.18 | $ | 0.21 | ||||||||||||||||||||
Weighted-average shares outstanding, basic | N/A | N/A | N/A | N/A | N/A | 162.3 | 162.4 | 165.0 | ||||||||||||||||||||||||
Weighted-average shares outstanding, diluted | N/A | N/A | N/A | N/A | N/A | 162.3 | 176.3 | 182.8 | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | |||||||||||||||||||||||||
Net revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||
Cost of sales | 29.5 | % | 28.5 | % | 28.0 | % | 28.7 | % | 28.4 | % | 28.9 | % | 26.2 | % | 24.8 | % | ||||||||||||||||
Gross profit | 70.5 | % | 71.5 | % | 72.0 | % | 71.3 | % | 71.6 | % | 71.1 | % | 73.8 | % | 75.2 | % | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Sales and marketing | 22.7 | % | 24.2 | % | 16.9 | % | 20.9 | % | 22.3 | % | 28.2 | % | 19.2 | % | 19.1 | % | ||||||||||||||||
Research and development | 12.4 | % | 10.7 | % | 10.7 | % | 9.7 | % | 8.9 | % | 18.3 | % | 10.0 | % | 10.3 | % | ||||||||||||||||
General and administrative | 15.5 | % | 15.3 | % | 16.4 | % | 11.0 | % | 10.9 | % | 21.6 | % | 10.9 | % | 9.6 | % | ||||||||||||||||
Amortization of intangibles | 11.2 | % | 10.4 | % | 10.2 | % | 9.4 | % | 9.1 | % | 8.2 | % | 8.1 | % | 2.8 | % | ||||||||||||||||
Restructuring charges | — | 0.3 | % | 0.3 | % | — | — | 0.2 | % | 1.8 | % | — | ||||||||||||||||||||
Total operating expenses | 61.8 | % | 60.8 | % | 54.5 | % | 50.9 | % | 51.1 | % | 76.5 | % | 50.0 | % | 41.8 | % | ||||||||||||||||
Operating income (loss) | 8.7 | % | 10.7 | % | 17.5 | % | 20.4 | % | 20.5 | % | (5.4 | )% | 23.8 | % | 33.4 | % | ||||||||||||||||
Interest (expense) income and other, net | (23.6 | )% | (22.2 | )% | (21.2 | )% | (19.3 | )% | (18.5 | )% | (20.0 | )% | (13.6 | )% | (12.4 | )% | ||||||||||||||||
Foreign exchange gain (loss), net | 13.7 | % | (6.9 | )% | 3.1 | % | (4.4 | )% | (10.9 | )% | (12.9 | )% | 7.9 | % | (4.3 | )% | ||||||||||||||||
Income (loss) from continuing operations before income taxes | (1.2 | )% | (18.4 | )% | (0.6 | )% | (3.4 | )% | (8.9 | )% | (38.3 | )% | 18.1 | % | 16.7 | % | ||||||||||||||||
Provision for income tax expense (benefit) | 5.3 | % | 2.6 | % | (2.8 | )% | 1.3 | % | 1.3 | % | 1.2 | % | (0.7 | )% | 2.1 | % | ||||||||||||||||
Income (loss) from continuing operations | (6.5 | )% | (21.0 | )% | 2.3 | % | (4.7 | )% | (10.1 | )% | (39.4 | )% | 18.8 | % | 14.6 | % | ||||||||||||||||
Income (loss) from discontinued operations, net of taxes | 3.7 | % | (2.3 | )% | 0.3 | % | 10.4 | % | 10.1 | % | (35.7 | )% | 2.5 | % | 8.6 | % | ||||||||||||||||
Net income (loss) | (2.8 | )% | (23.3 | )% | 2.5 | % | 5.7 | % | — | (75.1 | )% | 21.3 | % | 23.1 | % | |||||||||||||||||
Less: Net income (loss) attributable to redeemable noncontrolling interests | N/A | N/A | N/A | N/A | N/A | (47.4 | )% | 14.5 | % | 15.4 | % | |||||||||||||||||||||
Net income (loss) attributable to McAfee Corp. | N/A | N/A | N/A | N/A | N/A | (27.7 | )% | 6.8 | % | 7.7 | % | |||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
(in millions except percentages) | September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | ||||||||||||||||||||||||
Net revenue | $ | 322 | $ | 347 | $ | 354 | $ | 383 | $ | 395 | $ | 426 | $ | 442 | $ | 467 | ||||||||||||||||
Net income (loss) | $ | (9 | ) | $ | (81 | ) | $ | 9 | $ | 22 | $ | — | $ | (320 | ) | $ | 94 | $ | 108 | |||||||||||||
Net income (loss) margin | (2.8 | )% | (23.3 | )% | 2.5 | % | 5.7 | % | — | (75.1 | )% | 21.3 | % | 23.1 | % | |||||||||||||||||
Adjusted operating income | $ | 104 | $ | 119 | $ | 152 | $ | 151 | $ | 158 | $ | 163 | $ | 192 | $ | 211 | ||||||||||||||||
Adjusted operating income margin | 32.3 | % | 34.3 | % | 42.9 | % | 39.4 | % | 40.0 | % | 38.3 | % | 43.4 | % | 45.2 | % | ||||||||||||||||
Adjusted EBITDA | $ | 112 | $ | 126 | $ | 159 | $ | 158 | $ | 164 | $ | 170 | $ | 199 | $ | 218 | ||||||||||||||||
Adjusted EBITDA margin | 34.8 | % | 36.3 | % | 44.9 | % | 41.3 | % | 41.5 | % | 39.9 | % | 45.0 | % | 46.7 | % | ||||||||||||||||
Adjusted net income | $ | 26 | $ | 36 | $ | 64 | $ | 63 | $ | 70 | $ | 81 | $ | 110 | $ | 125 | ||||||||||||||||
Adjusted net income margin | 8.1 | % | 10.4 | % | 18.1 | % | 16.4 | % | 17.7 | % | 19.0 | % | 24.9 | % | 26.8 | % | ||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
(in millions) | September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | ||||||||||||||||||||||||
Net cash provided by operating activities | 189 | 211 | 171 | 117 | 176 | 296 | 259 | 189 | ||||||||||||||||||||||||
Net cash used in investing activities | (18 | ) | (21 | ) | (21 | ) | (12 | ) | (7 | ) | (11 | ) | (11 | ) | (7 | ) | ||||||||||||||||
Net cash provided by (used in) financing activities | (62 | ) | (265 | ) | 239 | (401 | ) | (83 | ) | (406 | ) | (130 | ) | (109 | ) | |||||||||||||||||
Free cash flow | 171 | 190 | 150 | 110 | 169 | 285 | 248 | 182 | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
(in millions except percentages) | September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | ||||||||||||||||||||||||
Net income (loss) | $ | (9 | ) | $ | (81 | ) | $ | 9 | $ | 22 | $ | — | $ | (320 | ) | $ | 94 | $ | 108 | |||||||||||||
Add: Amortization | 63 | 62 | 63 | 63 | 62 | 63 | 63 | 35 | ||||||||||||||||||||||||
Add: Equity-based compensation | 1 | 1 | 14 | 2 | 5 | 92 | 14 | 19 | ||||||||||||||||||||||||
Add: Cash in lieu of equity awards (1) | — | 1 | — | 1 | — | — | — | — | ||||||||||||||||||||||||
Add: Acquisition and integration costs (2) | 2 | 2 | 1 | 2 | 2 | 3 | 1 | 1 | ||||||||||||||||||||||||
Add: Restructuring charges (3) | — | 1 | 1 | — | — | 1 | 8 | — | ||||||||||||||||||||||||
Add: Management fees (4) | 3 | 3 | 2 | 2 | 2 | 22 | — | — | ||||||||||||||||||||||||
Add: Transformation (5) | 7 | 12 | 7 | 2 | 6 | 5 | 1 | — | ||||||||||||||||||||||||
Add: Executive severance (6) | — | — | 2 | 1 | — | — | — | — | ||||||||||||||||||||||||
Add: Interest expense and other, net | 76 | 77 | 75 | 74 | 73 | 85 | 60 | 58 | ||||||||||||||||||||||||
Add: Provision for income tax expense (benefit) | 17 | 9 | (10 | ) | 5 | 5 | 5 | (3 | ) | 10 | ||||||||||||||||||||||
Add: Foreign exchange loss (gain), net (8) | (44 | ) | 24 | (11 | ) | 17 | 43 | 55 | (35 | ) | 20 | |||||||||||||||||||||
Less: (Income) loss from discontinued operations, net of taxes | (12 | ) | 8 | (1 | ) | (40 | ) | (40 | ) | 152 | (11 | ) | (40 | ) | ||||||||||||||||||
Adjusted operating income | 104 | 119 | 152 | 151 | 158 | 163 | 192 | 211 | ||||||||||||||||||||||||
Add: Depreciation | 6 | 8 | 7 | 7 | 7 | 7 | 7 | 7 | ||||||||||||||||||||||||
Less: Other expense | 2 | (1 | ) | — | — | (1 | ) | — | — | — | ||||||||||||||||||||||
Adjusted EBITDA | $ | 112 | $ | 126 | $ | 159 | $ | 158 | $ | 164 | $ | 170 | $ | 199 | $ | 218 | ||||||||||||||||
Net revenue | $ | 322 | $ | 347 | $ | 354 | $ | 383 | $ | 395 | $ | 426 | $ | 442 | $ | 467 | ||||||||||||||||
Net income (loss) margin | (2.8 | )% | (23.3 | )% | 2.5 | % | 5.7 | % | — | (75.1 | )% | 21.3 | % | 23.1 | % | |||||||||||||||||
Adjusted operating income margin | 32.3 | % | 34.3 | % | 43.2 | % | 39.4 | % | 40.0 | % | 38.3 | % | 43.4 | % | 45.2 | % | ||||||||||||||||
Adjusted EBITDA margin | 34.8 | % | 36.3 | % | 45.2 | % | 41.3 | % | 41.5 | % | 39.9 | % | 45.0 | % | 46.7 | % | ||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
(in millions except percentages) | September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | ||||||||||||||||||||||||
Net income (loss) | $ | (9 | ) | $ | (81 | ) | $ | 9 | $ | 22 | $ | — | $ | (320 | ) | $ | 94 | $ | 108 | |||||||||||||
Add: Amortization of debt discount and issuance costs | 5 | 4 | 5 | 4 | 5 | 22 | 4 | 4 | ||||||||||||||||||||||||
Add: Amortization | 63 | 62 | 63 | 63 | 62 | 63 | 63 | 35 | ||||||||||||||||||||||||
Add: Equity-based compensation | 1 | 1 | 14 | 2 | 5 | 92 | 14 | 19 | ||||||||||||||||||||||||
Add: Cash in lieu of equity awards (1) | — | 1 | �� | — | 1 | — | — | — | — | |||||||||||||||||||||||
Add: Acquisition and integration costs (2) | 2 | 2 | 1 | 2 | 2 | 3 | 1 | 1 | ||||||||||||||||||||||||
Add: Restructuring charges (3) | — | 1 | 1 | — | — | 1 | 8 | — | ||||||||||||||||||||||||
Add: Management fees (4) | 3 | 3 | 2 | 2 | 2 | 22 | — | — | ||||||||||||||||||||||||
Add: Transformation (5) | 7 | 12 | 7 | 2 | 6 | 5 | 1 | — | ||||||||||||||||||||||||
Add: Executive severance (6) | — | — | 2 | 1 | — | — | — | — | ||||||||||||||||||||||||
Add: TRA adjustment (7) | — | — | — | — | — | 2 | 5 | 3 | ||||||||||||||||||||||||
Add: Other | — | — | — | — | — | 2 | — | — | ||||||||||||||||||||||||
Add: Provision for income taxes (benefit) | 17 | 9 | (10 | ) | 5 | 5 | 5 | (3 | ) | 10 | ||||||||||||||||||||||
Add: Foreign exchange loss (gain), net (8) | (44 | ) | 24 | (11 | ) | 17 | 43 | 55 | (35 | ) | 20 | |||||||||||||||||||||
Less: (Income) loss from discontinued operations, net of taxes | (12 | ) | 8 | (1 | ) | (40 | ) | (40 | ) | 152 | (11 | ) | (40 | ) | ||||||||||||||||||
Adjusted income before taxes | 33 | 46 | 82 | 81 | 90 | 104 | 141 | 160 | ||||||||||||||||||||||||
Adjusted provision for income taxes (9) | 7 | 10 | 18 | 18 | 20 | 23 | 31 | 35 | ||||||||||||||||||||||||
Adjusted net income | $ | 26 | $ | 36 | $ | 64 | $ | 63 | $ | 70 | $ | 81 | $ | 110 | $ | 125 | ||||||||||||||||
Net revenue | $ | 322 | $ | 347 | $ | 354 | $ | 383 | $ | 395 | $ | 426 | $ | 442 | $ | 467 | ||||||||||||||||
Net income (loss) margin | (2.8 | )% | (23.3 | )% | 2.5 | % | 5.7 | % | — | (75.1 | )% | 21.3 | % | 23.1 | % | |||||||||||||||||
Adjusted net income margin | 8.1 | % | 10.4 | % | 18.1 | % | 16.4 | % | 17.7 | % | 19.0 | % | 24.9 | % | 26.8 | % | ||||||||||||||||
| (1) | As a result of the Sponsor Acquisition, cash awards were provided to certain employees who held Intel equity awards in lieu of equity in FTW. |
| (2) | Represents both direct and incremental costs in connection with business acquisitions, including acquisition consideration structured as cash retention, third party professional fees, and other integration costs. |
| (3) | Represents both direct and incremental costs associated with our separation from Intel as well as subsequent costs incurred to realign toward our core business. It includes implementing our stand alone back office and costs to execute strategic restructuring events, including third-party professional fees and services, transition services provided by Intel, severance, and facility restructuring costs. |
| (4) | Represents management fees paid to certain affiliates of our Sponsors and Intel pursuant to the Management Services Agreement. The Management Services Agreement has been terminated subsequent to the IPO and we paid a one-time fee of $22 million to such parties in October 2020. |
| (5) | Represents costs incurred in connection with transformation of the business post-Intel separation. Also includes the cost of workforce restructurings involving both eliminations of positions and relocations to lower cost locations in connection with our transformational initiatives, strategic initiatives to improve customer retention, activation to pay and cost synergies, inclusive of duplicative run rate costs related to facilities and data center rationalization, and other one-time costs. |
| (6) | Represents severance for executive terminations not associated with a strategic restructuring event. |
| (7) | Represents the impact of net income of adjustments of liabilities under our tax receivable agreement. |
| (8) | Represents Foreign exchange gain (loss), net as shown on the condensed consolidated statements of operations. This amount is attributable to gains or losses on non-U.S. Dollar denominated balances and is primarily due to unrealized gains or losses associated with our 1st Lien Euro Term Loan. |
| (9) | Prior to our IPO, our structure was that of a pass-through entity for U.S. federal income tax purposes with certain U.S. and foreign subsidiaries subject to income tax in their respective jurisdictions. Subsequent to the IPO, McAfee Corp. is taxed as a corporation and pays corporate federal, state, and local taxes on income allocated to it from Foundation Technology Worldwide LLC. This amount has been recast for periods reported previously. The adjusted provision for income taxes now represents the tax effect on net income, adjusted for all of the listed adjustments, assuming that all consolidated net income was subject to corporate taxation for all periods presented. We have assumed an annual effective tax rate of 22% which represents our long term expected corporate tax rate excluding discrete and non-recurring tax items. |
Three Months Ended | ||||||||||||||||||||||||||||||||
(in millions) | September 28, 2019 | December 28, 2019 | March 28, 2020 | June 27, 2020 | September 26, 2020 | December 26, 2020 | March 27, 2021 | June 26, 2021 | ||||||||||||||||||||||||
Net cash provided by operating activities | $ | 189 | $ | 211 | $ | 171 | $ | 117 | $ | 176 | $ | 296 | $ | 259 | $ | 189 | ||||||||||||||||
Less: Capital expenditures (1) | (18 | ) | (21 | ) | (21 | ) | (7 | ) | (7 | ) | (11 | ) | (11 | ) | (7 | ) | ||||||||||||||||
Free cash flow | $ | 171 | $ | 190 | $ | 150 | $ | 110 | $ | 169 | $ | 285 | $ | 248 | $ | 182 | ||||||||||||||||
| (1) | Capital expenditures includes payments for property and equipment and capitalized labor costs incurred in connection with certain software development activities. |
Declaration Date | Record Date | Payment Date | Dividend per Share | Amount (in millions) | ||||||||
December 9, 2020 | December 24, 2020 | January 7, 2021 | $ | 0.087 | $ | 14 | ||||||
March 11, 2021 | March 26, 2021 | April 9, 2021 | $ | 0.115 | $ | 19 | ||||||
June 10, 2021 | June 25, 2021 | July 9, 2021 | $ | 0.115 | $ | 19 | ||||||
Fiscal Year Ended | Six Months Ended | |||||||||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | June 27, 2020 | June 26, 2021 | |||||||||||||||
Net cash provided by operating activities | $ | 319 | $ | 496 | $ | 760 | $ | 288 | $ | 448 | ||||||||||
Net cash used in investing activities | (677 | ) | (63 | ) | (51 | ) | (33 | ) | (18 | ) | ||||||||||
Net cash provided by (used in) financing activities | 459 | (734 | ) | (651 | ) | (162 | ) | (239 | ) | |||||||||||
Effect of exchange rate fluctuations on cash and cash equivalents | (4 | ) | — | 6 | (3 | ) | (2 | ) | ||||||||||||
Change in cash and cash equivalents | $ | 97 | $ | (301 | ) | $ | 64 | $ | 90 | $ | 189 | |||||||||
Payments Due by Period (1) | ||||||||||||||||||||
(in millions) | Total | Less than 1 Year | 1-3 Years | 3-5 Years | Over 5 Years | |||||||||||||||
Long-term debt (2) | $ | 4,038 | $ | 44 | $ | 89 | $ | 3,905 | $ | — | ||||||||||
Cash interest (3) | 686 | 197 | 365 | 124 | — | |||||||||||||||
Purchase obligations (4) | 149 | 49 | 84 | 16 | — | |||||||||||||||
Operating lease obligations, including imputed interests | 123 | 25 | 33 | 22 | 43 | |||||||||||||||
Total | $ | 4,996 | $ | 315 | $ | 571 | $ | 4,067 | $ | 43 | ||||||||||
| (1) | Includes both continuing and discontinued operations and excludes any obligations under the tax receivable agreement. Although the actual timing and amount of any payments that we make to the TRA Beneficiaries under the tax receivable agreement will vary, we expect that those payments will be significant. Refer to “—Tax Receivable Agreement” above. |
| (2) | See Note 13 to our audited consolidated financial statements included elsewhere in this prospectus for further information on our long-term debt. |
| (3) | Interest payments were calculated based on the interest rate in effect on December 26, 2020 and based upon expected debt balances after mandatory repayments related to the First Lien USD Term Loan, and First Lien Euro Term Loan, and include the impact of our interest rate swaps. See Note 13 to our audited consolidated financial statements for further information on the First Lien USD Term Loan and First Lien Euro Term Loan and Note 15 to our audited consolidated financial statements included elsewhere in this prospectus for further information on our interest rate swaps. |
| (4) | Subsequent to December 26, 2020, we have executed contracts with additional unconditional purchase commitments. As of June 26, 2021, including amounts associated with our discontinued operations, we have unconditional purchase obligations of $431 million that expire at various dates through 2026 and guarantees of $11 million that expire at various dates through 2028. See Note 19 to our audited consolidated financial statements and Note 17 to our condensed consolidated financial statements included elsewhere in this prospectus. |
1. | Identify the contract(s) with a customer non-cancelable purchase order or agreement that creates enforceable rights and obligations. |
2. | Identify the performance obligations in the contract |
3. | Determine the transaction price |
4. | Allocate the transaction price to the performance obligations in the contract |
5. | Recognize revenue when (or as) we satisfy a performance obligation |
| (1) | fair value of the unit; |
| (2) | life of the award; |
| (3) | volatility of the unit price; and |
| (4) | dividend yield |
| • | Whether the contract involves the use of a distinct identified asset; |
| • | Whether we obtain the right to obtain substantially all the economic benefits from the use of the asset throughout the period; and |
| • | Whether we have a right to direct the use of the asset. |
| • | Comprehensive and convenient security solutions to protect consumers across their digital footprint. |
| • | Online protection powered by seamless digital experience across devices and platforms. |
| • | Consumer products to address privacy needs. Wi-Fi connection, requiring virtual private network (“VPN”) solutions to secure personally identifiable information over unsecured networks. |
| • | Comprehensive real time threat intelligence leveraging a unique global sensor network. |
| • | Brand recognition |
| • | Holistic cybersecurity solutions seamlessly integrated across the consumers’ entire digital ecosystem. |
of our consumers and their loved ones, across multitude of devices and platforms. With a single interface, simple set up and intuitive user experience, we provide a seamless and integrated digital moat. |
| • | Unique footprint across devices . |
| • | Scale and diversity of threat intelligence network . |
| • | Deep and innovative threat research expertise. |
| • | Differentiated omnichannel go-to-market |
| • | Experienced management team with deep cybersecurity expertise. go-to-market |
| • | Continue to leverage our strength as a trusted cybersecurity brand to increase sales from new and existing subscribers. |
| • | Invest in new and existing routes to market for subscribers. direct-to-consumer |
| • | Enhance and tailor the subscriber conversion and renewal process. |
| • | Continue to innovate and enhance our consumer security platform and user experience. |
invest in new product and platform innovation to help protect data wherever it resides or travels and defend against threats across multiple domains. At the product level, we have created a platform of integrated solutions that aligns with consumer needs for a holistic, easy to use cybersecurity solution. We will continue to utilize our “test and learn” design methodology to improve the customer experience while ensuring our products deliver value and an engaging experience on PC, mobile, tablet, and online. As the digital world gets more complex, our approach is to continue to offer unified solutions that meet customer needs. |
| • | Continue to pursue targeted acquisitions. |
| • | Device Security. Anti-Malware Software |
Windows protected from viruses, ransomware, malware, spyware and phishing as of June 26, 2021. Our net promoter score grew from 36 in 2019 to 45 as of June 26, 2021. Additionally, these 600 million devices help power our threat intelligence engine. As consumers expand their digital footprint with an increasing number of devices and share personal data among them by hopping from one device to another, our threat intelligence engine becomes more robust. We built our Total Protection / LiveSafe Secure Home Platform (“SHP”) . |
| • | Online Privacy and Comprehensive Internet Security. Safe Connect VPN TunnelBear any Wi-Fi connection safe and private. With bank-gradeAES 256-bit encryption, our solution keeps personal data, such as banking account credentials and credit card information protected while keeping IP addresses and physical locations private. This capability helps consumers prevent password and data theftand IP-based tracking and allows customers to access global content, by bypassing local censorship. Consumers can add an additional layer of protection with FileLock Shredder WebAdvisor Safe Family blocks age-inappropriate websites, provides device usage monitoring and device restriction services and gives parents the ability to track children’s devices. |
| • | Identity Protection. Identity Protection Service Password Manager or re-used passwords. |
| • | Platform Innovation. |
| • | Ability to Integrate with Our Partners. |
| • | Direct to consumer marketing . |
| • | PC OEMs . we pre-install a 30-day free a one-year or longer subscription and the OEM pays McAfee a royalty. During the subscription lifecycle, McAfee engages the consumer with our digital marketing engine to convert the consumer to a McAfee Direct to Consumer subscriber at the end of the initial subscription period. |
| • | Retail and eCommerce . We partner with major retailers worldwide including Office Depot, Staples, Walmart, Sam’s Club, MediaMarkt, Best Buy, and Amazon, to offer consumers a McAfee subscription for purchase through the retailer stores and ecommerce websites. During the subscription lifecycle McAfee engages the consumer with our digital marketing engine to convert the consumer to a McAfee Direct to Consumer subscriber at the end of the initial subscription period. |
| • | Communications Service Providers, ISPs and Mobile Providers Verizon, T-Mobile, Lumen, Telefonica, NTT Docomo, Softbank, British Telecom, and Sky, to offer our mobile security and secure home platform products through the service providers. In some cases, we also partner with the service providers to integrate and bundle one or more of our security products into their mobile product value added service offerings. In addition to our partnerships with service providers, we partner with Samsungto pre-install one or more of our security products on their smartphones. |
| • | Search Providers. |
| • | brand recognition and reputation; |
| • | scale and diversity of threat intelligence network; |
| • | tenure and strength of customer and partner relationships; |
| • | breadth and integration of product offerings; |
| • | unique footprint across devices; |
| • | product features, reliability, performance, and effectiveness; |
| • | price and total cost of ownership; |
| • | strength and productivity of sales and marketing efforts; |
| • | quality of customer service; and |
| • | financial resources and stability. |
| • | We write clear, searchable, and applicable job descriptions for candidates of all backgrounds. By leveraging the only augmented writing platform that addresses language as well as content, all candidates can find and understand our open roles. |
| • | We assemble a diverse hiring panel for every role, so each candidate is considered from varying perspectives. |
| • | To plant a firm cultural foundation and minimize any unconscious bias, we train all recruiters and hiring managers to use our values-based behavioral interview approach. |
| • | We provide a Return to Workplace program to tap into the experiences of women and men who may have paused their career to raise children, care for loved ones, or serve their country. |
| • | Our internship program serves as the training ground for top talent around the world, welcoming qualified, interested students of all backgrounds |
| • | Because each person plays a role, McAfee employees included an inclusion goal as part of their individual goals. |
| • | We sponsor 6 McAfee Communities to support members and allies within each of our African Heritage, Veterans, Latino, Women, LGBTQ, and Differently Abled communities. |
| • | We provide mentors for members of our WISE (Women in Security) community. |
| • | We ensure fair and equal compensation based on contributions and impact to the company through our annual pay parity analysis. |
| • | We provide a Diversity Impact analysis to ensure that at a minimum, any promotion or rewards are representative of each diverse group’s population within the organization. |
| • | We focus our global benefits strategy on providing inclusive and family friendly benefits. |
Name | Age | Position | ||
Peter Leav | 50 | President, Chief Executive Officer and Director | ||
Venkat Bhamidipati | 53 | Executive Vice President and Chief Financial Officer | ||
Terry Hicks | 57 | Executive Vice President and General Manager, Consumer Business | ||
Sohaib Abbasi | 64 | Director | ||
Mary Cranston | 73 | Director | ||
Tim Millikin | 38 | Director | ||
Jon Winkelried | 61 | Director | ||
Kathy Willard | 54 | Director | ||
Jeff Woolard | 52 | Director |
| • | that our board that is composed of a majority of “independent directors,” as defined under rules; |
| • | that the compensation committee that is composed entirely of independent directors; and |
| • | that the nominating and corporate governance committee that is composed entirely of independent directors. |
| • | Class I, which consists of Jon Winkelried, Jeff Woolard, and Kathy Willard, whose terms will expire at our annual meeting of stockholders to be held in 2024; |
| • | Class II, which consists of Tim Millikin and Sohaib Abbasi, whose terms will expire at our annual meeting of stockholders to be held in 2022; and |
| • | Class III, which consists of Peter Leav and Mary Cranston, whose terms will expire at our annual meeting of stockholders to be held in 2023. |
| • | for so long as TPG owns at least 25% of the shares of our Class A and Class B common stock held by TPG upon completion of our IPO (and the expected use of proceeds therefrom), including any exercise of the underwriters’ option to purchase additional shares, and the Reorganization Transactions, TPG will be entitled to designate six individuals for nomination, including three unaffiliated directors who meet the independence criteria set forth in Rule 10A-3 under the Exchange Act; |
| • | for so long as TPG owns less than 25% but at least 10% of the shares of our Class A and Class B common stock held by TPG upon completion of our IPO (and the expected use of proceeds therefrom), including any exercise of the underwriters’ option to purchase additional shares, and the Reorganization Transactions, TPG will be entitled to designate two individuals for nomination, including one unaffiliated director who meets the independence criteria set forth in Rule 10A-3 under the Exchange Act; |
| • | for so long as Intel Americas, Inc. and its affiliates owns at least 25% of the shares of our Class A and Class B common stock held by Intel Americas, Inc. and its affiliates upon completion of our IPO (and the expected use of proceeds therefrom), including any exercise of the underwriters’ option to purchase additional shares, and the Reorganization Transactions, Intel Americas, Inc. will be entitled to designate two individuals for nomination; and |
| • | for so long as Intel Americas, Inc. and its affiliates owns less than 25% but at least 10% of the shares of our Class A and Class B common stock held by Intel Americas, Inc. and its affiliates upon completion of our IPO (and the expected use of proceeds therefrom), including any exercise of the underwriters’ option to purchase additional shares, and the Reorganization Transactions, Intel Americas, Inc. will be entitled to designate one individual for nomination. |
Name | Title | |
Peter Leav (1) | President and Chief Executive Officer | |
Venkat Bhamidipati (2) | Executive Vice President and Chief Financial Officer | |
Lynne Doherty McDonald (3) | Former Executive Vice President, Global Sales and Marketing, Enterprise Business Group | |
Terry Hicks | Executive Vice President, Consumer Business Group | |
Ashutosh Kulkarni (4) | Former Executive Vice President and Chief Product Officer, Enterprise Business Group | |
Ashish Agarwal (5) | Senior Vice President, Strategy and Corporate Development | |
Christopher Young (6) | Former Chief Executive Officer | |
Michael Berry (7) | Former Executive Vice President, Chief Financial Officer | |
John Giamatteo (8) | Former President and Chief Revenue Officer, Enterprise Business Group |
| (1) | Peter Leav’s employment with us commenced on February 3, 2020. |
| (2) | Venkat Bhamidipati’s employment with us commenced on September 2, 2020. |
| (3) | Lynne Doherty McDonald’s employment with us commenced on May 4, 2020, and terminated on July 27, 2021 in connection with the consummation of the sale of our Enterprise Business. |
| (4) | Ashutosh Kulkarni’s employment with us terminated on January 1, 2021. |
| (5) | Ashish Agarwal served as our interim Chief Financial Officer from March 13, 2020 until September 2, 2020. |
| (6) | Christopher Young’s employment with us terminated on February 3, 2020. |
| (7) | Michael Berry’s employment with us terminated on March 13, 2020. |
| (8) | John Giamatteo’s employment with us terminated on January 10, 2020. |
| • | Attract and retain talent |
| • | Pay-for-performance |
| • | Align executive goals and compensation with equityholder interests |
| • | Providing a significant percentage of target annual cash compensation delivered in the form of variable compensation tied to performance |
| • | Using simple and common performance measures that we believe are core drivers of the Company’s operational performance and equityholder value |
| • | Emphasizing future pay opportunity through equity awards, which represent a significant component of compensation |
| • | Using multi-year vesting for equity compensation, which requires our executive officers to hold sufficient unvested equity value to provide a meaningful retention incentive |
| • | Adopting equity ownership requirements for executives (including significant transfer restrictions on pre-IPO equity issued to our named executive officers that continue to apply afterour post-IPO lock-up expired |
| • | Adopting a clawback policy that applies to our executive officers |
| • | Using comparable market data to assess the competitive market position of our executive compensation program |
| • | Engaging independent outside consulting firms to validate market practices and trends for our industry |
| • | Not providing tax gross-ups on change in control benefits |
| • | Not providing excessive executive perquisites |
| • | Not offering a defined benefit pension plan for our executives |
| • | Not repricing stock options, profits interests or other “appreciation” awards |
| • | Market competition for a particular position; |
| • | Internal pay equity considerations; |
| • | Experience and past performance inside or outside the Company; |
| • | Role and responsibilities within the Company; |
| • | Long-term potential with the Company; |
| • | Personal performance and contributions; and |
| • | Business conditions. |
| Cadence Design Systems | Carbon Black | Citrix Systems | ||
| F5 Networks | FireEye | ForeScout Technologies | ||
| Fortinet | Juniper Networks | Symantec | ||
| Nuance Communications | Open Text | Palo Alto Networks | ||
| Proofpoint | Splunk | Synopsys | ||
| Teradata | ||||
Named Executive Officer | 2020 Base Salary at Year-End | |||
Peter Leav | $ | 900,000 | ||
Venkat Bhamidipati | $ | 650,000 | ||
Lynne Doherty McDonald | $ | 850,000 | ||
Terry Hicks | $ | 650,000 | ||
Ashutosh Kulkarni | $ | 625,000 | ||
Ashish Agarwal | $ | 425,000 | ||
Named Executive Officer | Target Annual Incentive for Fiscal 2020 (1) | |||
Peter Leav | $ | 1,228,279 | ||
Venkat Bhamidipati | $ | 214,891 | ||
Lynne Doherty McDonald (2) | $ | 148,767 | ||
Terry Hicks | $ | 750,035 | ||
Ashutosh Kulkarni | $ | 625,000 | ||
Ashish Agarwal | $ | 209,440 | ||
| (1) | Amounts in this column reflect the annual incentive targets for fiscal 2020. The annual incentive target for Peter Leav, Venkat Bhamidipati and Lynne Doherty McDonald reflects a pro-rated target based on the number of days during fiscal 2020 that the named executive officer was employed. The amount for Ashish Agarwal reflectsa pro-rated target based on the named executive officer’s annual incentive target as in effect for different periods during fiscal 2020. |
| (2) | As described below, in addition to the AIP, Lynne Doherty McDonald was also eligible in fiscal 2020 for a commission arrangement. |
Named Executive Officer | AIP Alignment | |
Peter Leav | Corporate | |
Venkat Bhamidipati | Corporate | |
Lynne Doherty McDonald | Enterprise | |
Terry Hicks | Consumer | |
Ashutosh Kulkarni | Enterprise | |
Ashish Agarwal | Corporate |
Corporate | Consumer | Enterprise | ||
| Annual Cash EBITDA for the Company (25% weighting) | Corporate Attainment (1) (25% weighting) | Corporate Attainment (1) (25% weighting) | ||
| Annual Billings for the Company (25% weighting) | Adjusted Cash EBITDA for the Consumer business unit (25% weighting) | Adjusted Cash EBITDA for the Enterprise business unit (25% weighting) | ||
| Annual Net Revenue for the Company (25% weighting) | Annual Billings for the Consumer business unit (25% weighting) | Annual Billings for the Enterprise business unit (25% weighting) | ||
| Annual Adjusted Unlevered Free Cash Flow for the Company (25% weighting) | Annual Net Revenue for the Consumer business unit (25% weighting) | Annual Net Revenue for the Enterprise business unit (25% weighting) | ||
| (1) | Performance as measured against the “Corporate” goals reflected in the leftmost column is collectively referred to as “Corporate Attainment”. |
Financial Metric | Description | |
Annual Cash EBITDA | Annual Cash EBITDA is a non-GAAP financial measure, which is defined as net income (loss), excluding the impact of amortization of intangible assets, equity-based compensation expense, interest expense and other, net, provision for income tax expense, foreign exchange (gain) loss, net, and other costs that we do not believe are reflective of our ongoing operations, and excluding the impact of depreciation expense andother non-operating costs (as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), and further adjusted to eliminate the impact of purchase accounting, capital expenditures, capitalized software expenses and other revenue that we not believe is reflective our ongoing operations, plus the change in year-over-year deferred revenue. | |
Annual Billings | Annual Billings is a non-GAAP financial measure, which is defined as net revenue plus the change in deferred revenue from the beginning to the end of the period, excluding the impact of deferred revenue assumed through acquisitions during the period. Annual Billings includes changes in our deferred revenue during the period. | |
Annual Net Revenue | Annual net revenue is as determined under GAAP. | |
Annual Adjusted Unlevered Free Cash Flow | Annual Adjusted Unlevered Free Cash Flow is a non-GAAP financial measure that represents net cash from operating activities less capital expenditures, and then adding back interest payments and items related to projects with a limited time frame that are outside normal operating activities and are generally transformational in nature. | |
Performance Metric | Goal | Fiscal 2020 Actual | Percentage Achieved | |||||||||
Annual Cash EBITDA – Corporate | $ | 1,034 | $ | 1,182 | 113 | % | ||||||
Annual Cash EBITDA – Consumer | $ | 780 | $ | 854 | 109 | % | ||||||
Annual Cash EBITDA – Enterprise (1) | $ | 259 | $ | 329 | 127 | % | ||||||
Annual Billings – Corporate | $ | 2,902 | $ | 3,013 | 104 | % | ||||||
Annual Billings – Consumer | $ | 1,526 | $ | 1,683 | 110 | % | ||||||
Annual Billings – Enterprise | $ | 1,380 | $ | 1,330 | 96 | % | ||||||
Annual Net Revenue – Corporate | $ | 2,743 | $ | 2,906 | 106 | % | ||||||
Annual Net Revenue – Consumer | $ | 1,435 | $ | 1,558 | 109 | % | ||||||
Annual Net Revenue – Enterprise | $ | 1,308 | $ | 1,348 | 103 | % | ||||||
Annual Adjusted Unlevered Free Cash Flow | $ | 911 | $ | 1,085 | 119 | % | ||||||
| (1) | The Annual Cash EBITDA goal with respect to Lynne Doherty McDonald’s AIP opportunity was pro-rated to reflect performance in the second through fourth quarters of fiscal 2020 only, resulting in a percentage achieved of 126%. |
Named Executive Officer | Actual Payout ($) | |||
Peter Leav (1) | 2,000,008 | |||
Venkat Bhamidipati (1) | 291,069 | |||
Lynne Doherty McDonald (1)(2) | 257,739 | |||
Terry Hicks | 1,197,056 | |||
Ashutosh Kulkarni (3) | — | |||
Ashish Agarwal | 324,213 | |||
| (1) | AIP targets (and, as a result, AIP payouts) for Peter Leav, Venkat Bhamidipati and Lynne Doherty McDonald were prorated due to their hire dates after the beginning of fiscal 2020. |
| (2) | As described below, in addition to the AIP, Lynne Doherty McDonald was also eligible in fiscal 2020 for a cash-based commission arrangement. |
| (3) | Ashutosh Kulkarni was no longer employed by us at the time the AIP was paid and therefore was not entitled to, and did not receive, any payout under the AIP for fiscal 2020. |
Attainment (% of Goal) | Commission Rate | |||
0-100% | 0.036 | % | ||
>100-101% | 0.125 | % | ||
>101-102.5% | 0.214 | % | ||
>102.5% | 0.285 | % | ||
Named Executive Officer | RSUs | PSUs | MIUs | |||||||||
Peter Leav (Initial Hiring Grants) (1) | 1,874,456 | — | 1,249,636 | |||||||||
Peter Leav (Annual Review Grant) (2) | 484,496 | 484,496 | — | |||||||||
Peter Leav (Distribution Adjustment Grants) (3) | 189,928 | — | — | |||||||||
Venkat Bhamidipati (Initial Hiring Grants) (1) | 800,000 | — | 800,000 | |||||||||
Venkat Bhamidipati (Distribution Adjustment Grants) (3) | 93,528 | — | — | |||||||||
Lynne Doherty McDonald (Initial Hiring Grants) (1) | 500,000 | — | 2,435,504 | |||||||||
Lynne Doherty McDonald (Distribution Adjustment Grant) (3) | 23,024 | — | — | |||||||||
Terry Hicks (Annual Review Grant) (2) | 116,279 | 77,519 | — | |||||||||
Terry Hicks (Distribution Adjustment Grants) (3) | 17,816 | — | — | |||||||||
Ashutosh Kulkarni (Distribution Adjustment Grants) (3) | 18,228 | — | — | |||||||||
Ashish Agarwal (Special Leadership Grants) (4) | 222,224 | — | — | |||||||||
Ashish Agarwal (Annual Review Grant) (2) | 90,843 | 64,599 | — | |||||||||
Ashish Agarwal (Distribution Adjustment Grant) (3) | 14,356 | — | — | |||||||||
| (1) | Granted to each of Peter Leav, Venkat Bhamidipati and Lynne Doherty McDonald under our pre-IPO incentive equity program described above in connection with their respective hires. |
| (2) | Granted in fiscal 2020 in connection with the fiscal 2021 annual compensation review under our post-IPO incentive equity program described above. |
| (3) | Reflects “make whole” RSU grants to each named executive officer in connection with distributions made to our equityholders during fiscal 2020. These “make whole” grants vest on the same basis as the awards to which they relate. |
| (4) | In connection with assuming the interim Chief Financial Officer position, Ashish Agarwal was awarded two special RSU grants – one on May 18, 2020 and the other on August 13, 2020. The grants were meant to recognize Ashish’s increased role and extraordinary and critical contributions during our IPO process. |
Position | Applicable Target | |
Chief Executive Officer | 2.5x of target annual cash compensation | |
Executive Vice Presidents | 1.5x of target annual cash compensation | |
Employees at the level of Senior Vice President or above who have been designated by the Board | 1.0x of target annual cash compensation | |
Non-employee director | $500,000 |
Name and principal position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Non-equity Incentive Plan Compensation ($) (4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (5) | All Other Compensation ($) (6) | Total ($) | ||||||||||||||||||||||||
Peter Leav President and Chief Executive Officer | 2020 | 825,000 | — | 26,484,443 | 2,000,088 | — | 6,000 | 29,315,531 | ||||||||||||||||||||||||
Venkat Bhamidipati Executive Vice President and Chief Financial Officer | 2020 | 214,205 | — | 16,820,194 | 291,069 | — | 11,671 | 17,377,139 | ||||||||||||||||||||||||
Lynne Doherty McDonald | 2020 | 563,447 | 1,133,236 | 9,910,749 | 535,570 | — | 6,000 | 12,149,002 | ||||||||||||||||||||||||
Former Executive Vice President, Global Sales and Marketing, Enterprise Business Group | ||||||||||||||||||||||||||||||||
Terry Hicks | 2020 | 650,000 | — | 1,714,635 | 1,197,056 | — | 6,000 | 3,567,691 | ||||||||||||||||||||||||
Executive Vice | 2019 | 650,000 | — | 768,215 | 1,265,684 | — | 3,885 | 2,687,784 | ||||||||||||||||||||||||
President, Consumer Business Group | 2018 | 103,409 | 160,000 | 4,560,708 | 139,377 | — | 2,167 | 4,965,661 | ||||||||||||||||||||||||
Ashutosh Kulkarni | 2020 | 627,368 | — | — | — | — | 24,000 | 651,368 | ||||||||||||||||||||||||
Former Executive Vice | 2019 | 600,000 | 1,800,000 | 1,536,429 | 1,012,500 | — | 50,596 | 4,999,525 | ||||||||||||||||||||||||
President, Enterprise Business Group | 2018 | 122,917 | 1,000,000 | 3,572,551 | 148,669 | — | 2,986 | 4,847,123 | ||||||||||||||||||||||||
Ashish Agarwal Senior Vice President, Strategy and Corporate Development and former interim Chief Financial Officer | 2020 | 393,750 | 325,000 | 3,980,269 | 324,213 | — | 11,590 | 5,034,822 | ||||||||||||||||||||||||
Christopher Young Former Chief Executive Officer | 2020 | 70,000 | — | — | — | — | 3,649,468 | 3,719,468 | ||||||||||||||||||||||||
| 2019 | 800,000 | — | — | 1,800,000 | — | 56,000 | 2,656,000 | |||||||||||||||||||||||||
| 2018 | 725,000 | — | — | 1,047,206 | — | 25,815 | 1,798,021 | |||||||||||||||||||||||||
Michael Berry | 2020 | 125,000 | — | — | — | — | 6,139 | 131,139 | ||||||||||||||||||||||||
Former Executive Vice | 2019 | 537,500 | — | 2,500,033 | 939,478 | — | 5,500 | 3,982,511 | ||||||||||||||||||||||||
President and Chief Financial Officer | 2018 | 475,000 | — | 542,851 | 607,644 | — | 8,505 | 1,634,000 | ||||||||||||||||||||||||
Name and principal position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Non-equity Incentive Plan Compensation ($) (4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (5) | All Other Compensation ($) (6) | Total ($) | ||||||||||||||||||||||||
John Giamatteo | 2020 | 19,697 | — | — | — | — | 3,972,137 | 3,991,833 | ||||||||||||||||||||||||
Former President and | 2019 | 650,000 | 500,000 | 291,494 | 637,504 | — | 29,642 | 2,108,640 | ||||||||||||||||||||||||
Chief Revenue Officer, Enterprise Business Group | 2018 | 575,625 | 500,000 | 4,806,293 | 858,424 | — | 10,010 | 6,750,352 | ||||||||||||||||||||||||
| (1) | Amounts reported in this column reflect the base salaries earned for fiscal 2020, 2019 and 2018, as applicable. The base salaries for Peter Leav, Venkat Bhamidipati and Lynne Doherty McDonald in fiscal 2020, and Ashutosh Kulkarni and Terry Hicks in fiscal 2018, were pro-rated to reflect their respective hire dates with the Company after the beginning of fiscal 2020. The base salaries for Ashish Agarwal in fiscal 2020, and Michael Berry in fiscal 2019, were prorated to reflectthe mid-year changes in the named executive officer’s base salary rate and/or our payroll periods. The base salaries for Christopher Young, Michael Berry and John Giamatteo relate to the periods in fiscal 2020 prior to the time of their termination. |
| (2) | The amount reported in this column for Lynne Doherty McDonald in fiscal 2020 represents two installments of a sign-on bonus paid in connection with Lynne’s hire in May 2020 as well as the minimum amount to which Lynne was entitled under Lynne’s special commission arrangement for the fiscal quarter in which Lynne joined the Company. The amount shown for Ashish Agarwal represents six installments of the special monthly leadership bonus ($25,000 per month) payable to Ashish during the time Ashish served as our interim Chief Financial Officer and an additional $175,000, which was paid to Ashish as a signing bonus on the first anniversary of Ashish’s date of hire. The amounts reported in this column for John Giamatteo in fiscal 2018 and 2019 represent two installments ofa one-time recognition bonus paid in connection with John’s promotion in June 2018. The amounts reported in this column for Ashutosh Kulkarni and Terry Hicks in fiscal 2018represent sign-on bonuses paid in the applicable year in connection with the commencement of their employment with the Company. The amount reported in this column for Ashutosh Kulkarni in fiscal 2019 represents two installments ofa one-time retention bonus. Please see “Compensation Discussion and Analysis” above for further information regarding the bonuses that were paid in fiscal 2020. |
| (3) | Amounts reported in this column reflect the aggregate grant date fair value of RSUs (issued by FTW prior to our IPO and by the Company after our IPO), PSUs and MIUs awarded in fiscal 2020, 2019 and 2018, as applicable, computed in accordance with FASB ASC Topic 718, Compensation—Stock Compensation and, in the case of the performance-based awards, calculated based on the probable level of achievement of the underlying performance conditions. Because the performance conditions applicable to certain performance-based awards included market-based vesting conditions outside of the control of the Company, the grant date fair value of the awards based on the probable level of achievement of the performance conditions was zero under applicable accounting rules. Assuming satisfaction of the underlying performance conditions, the grant date fair value of the fiscal 2018 performance-based awards would be as follows for each of the recipient named executive officers: Michael Berry, $247,489; John Giamatteo, $804,006; Terry Hicks, $2,964,571; and Ashutosh Kulkarni, $2,322,247. Because the performance metrics applicable to the PSUs issued to Peter Leav and Terry Hicks were not determined in fiscal 2020, under the applicable accounting rules, the PSUs were not treated as granted and therefore no value is shown above related to those awards. Excluded from this table are the cash payments of $1,709,001 and $657,506 received by Christopher Young and John Giamatteo, respectively, in fiscal 2018 with respect to certain forfeited Intel awards (which were payable in connection with substitute awards issued when the Company was divested by Intel in fiscal 2017) as such amounts were accounted for under FASB ASC Topic 718 and would be considered fiscal 2017 compensation under SEC executive compensation disclosure rules. Also excluded from this table are (i) 58,808 RSUs granted to Terry Hicks and 46,064 RSUs granted to Ashutosh Kulkarni, in each case, in connection with our June 2019 distribution, and (ii) 189,928 RSUs granted to Peter Leav, 93,528 RSUs granted to Venkat Bhamidipati, 23,024 RSUs granted to Lynne Doherty McDonald, 17,816 RSUs granted to Terry Hicks, 18,228 RSUs granted to Ashutosh Kulkarni and 14,356 RSUs granted to Ashish Agarwal, in each case, in connection with the October 2020 distributions by FTW of cash and securities of a corporate subsidiary, which, in each case, were treated as adjustments to previously granted awards and did not result in any incremental charge under FASB ASC Topic 718 for the fiscal year of the distribution or any prior fiscal year. John Giamatteo also received 43,368 RSUs in connection with our June 2019 distribution as an adjustment to John’s June 2018 RSU grant but due to a provision of John’s June 2018 promotion letter allowing John certain equity sale opportunities, the issuance of those RSUs resulted in a recognition of the grant date fair value reflected above. See Note 12 to our audited financial statements that appear in our Annual |
| Report on Form 10-K for the year ended December 26, 2020 |
| (4) | Amounts reported in this column represent cash payments made to the named executive officers under the AIP and, in the case of Lynne Doherty McDonald, a fiscal 2020 commission payout (less the guaranteed minimum amount for the fiscal quarter in which Lynne joined the Company). In the case of Peter Leav, Venkat Bhamidipati and Lynne, their respective fiscal 2020 AIP payouts (and Lynne’s fiscal 2020 commission payout) were prorated to reflect their respective hire dates after the beginning of 2020. In the case of Ashish Agarwal, the fiscal 2020 AIP payout was pro-rated to reflect changes in Ashish’s AIP target over the course of fiscal 2020. In the case of Ashutosh Kulkarni and Terry Hicks, their respective fiscal 2018 AIP payouts were prorated to reflecttheir mid-year hire dates. In connection with Christopher Young’s termination of employment with McAfee, we agreed to pay Christopher’s 2019 AIP payout by assuming 100% achievement of the applicable individual performance goals. Please see “Compensation Discussion and Analysis” for further information regarding the AIP. |
| (5) | While Christopher Young participated in our nonqualified deferred compensation plan (as described below), the fiscal 2019 and fiscal 2020 earnings on Christopher’s balance were not “above-market” as determined under applicable SEC rules and no amount is required to be disclosed here. |
| (6) | The amount reported in this column for fiscal 2020 consists of (i) 401(k) matching contributions for each of the named executive officers, (ii) financial planning services provided to Venkat Bhamidipati ($5,671), Ashutosh Kulkarni ($18,000) and Ashish Agarwal ($5,474) during fiscal 2020, (iii) severance amounts paid to Christopher Young and John Giamatteo during fiscal 2020 in the amounts of $3,647,468 and $3,972,137, respectively, (iv) a nominal points-based recognition program award provided to Ashish Agarwal and Michael Berry and (v) tax reimbursements for Ashish and Michael of $36 and $34, respectively, associated with the points-based recognition program in the case of Ashish and Michael. |
Estimated Possible Payouts Under Non-equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||||||||
Name | Grant date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||
Peter Leav | — | — | 1,228,279 | 4,913,116 | — | — | — | — | — | |||||||||||||||||||||||||||
| 2/3/2020 | — | — | — | — | — | — | 1,249,636 | (2) | 2,784,459 | (2) | ||||||||||||||||||||||||||
| 2/24/2020 | — | — | — | — | — | — | 1,874,456 | (3) | 16,199,986 | (3) | ||||||||||||||||||||||||||
| 10/20/2020 | — | — | — | — | — | — | 189,928 | (4) | — | (4) | ||||||||||||||||||||||||||
| 12/15/2020 | — | — | — | — | — | — | 484,496 | (3) | 7,499,998 | (3) | ||||||||||||||||||||||||||
| — | — | — | — | 339,471 | 484,496 | (5) | 629,845 | — | — | (5) | ||||||||||||||||||||||||||
Venkat Bhamidipati | — | — | 214,891 | 859,564 | — | — | — | — | — | |||||||||||||||||||||||||||
| 8/13/2020 | — | — | — | — | — | — | 800,000 | (2) | 5,364,194 | (2) | ||||||||||||||||||||||||||
| 8/13/2020 | — | — | — | — | — | — | 800,000 | (3) | 11,456,000 | (3) | ||||||||||||||||||||||||||
| 10/20/2020 | — | — | — | — | — | — | 93,528 | (4) | — | (4) | ||||||||||||||||||||||||||
Lynne Doherty McDonald | — | — | 148,767 | 595,068 | — | — | — | — | — | |||||||||||||||||||||||||||
| — | — | 446,311 | (6) | — | — | — | — | — | — | |||||||||||||||||||||||||||
| 5/19/2020 | — | — | — | — | — | — | 2,435,504 | (2) | 5,589,499 | (2) | ||||||||||||||||||||||||||
| 5/19/2020 | — | — | — | — | — | — | 500,000 | (3) | 4,321,250 | (3) | ||||||||||||||||||||||||||
| 10/20/2020 | — | — | — | — | — | — | 23,024 | (4) | — | (4) | ||||||||||||||||||||||||||
Terry Hicks | — | — | 750,035 | 3,000,140 | — | — | — | — | — | |||||||||||||||||||||||||||
| 10/20/2020 | — | — | — | — | — | — | 17,816 | (4) | — | (4) | ||||||||||||||||||||||||||
| 12/15/2020 | — | — | — | — | — | — | 116,279 | (3) | 1,714,635 | (3) | ||||||||||||||||||||||||||
| — | — | — | — | 54,263 | 77,519 | (5) | 100,775 | — | — | (5) | ||||||||||||||||||||||||||
Ashutosh Kulkarni | — | — | 625,000 | 2,500,000 | — | — | — | — | — | |||||||||||||||||||||||||||
| 10/20/2020 | — | — | — | — | — | — | 18,228 | (4) | — | (4) | ||||||||||||||||||||||||||
Estimated Possible Payouts Under Non-equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||||||||
Name | Grant date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||
Ashish Agarwal | — | — | 209,440 | 837,760 | — | — | — | — | — | |||||||||||||||||||||||||||
| 5/19/2020 | — | — | — | — | — | — | 111,112 | (3) | 960,285 | (3) | ||||||||||||||||||||||||||
| 8/13/2020 | — | — | — | — | — | — | 111,112 | (3) | 1,591,124 | (3) | ||||||||||||||||||||||||||
| 10/20/2020 | — | — | — | — | — | — | 14,356 | (4) | — | (4) | ||||||||||||||||||||||||||
| 12/15/2020 | — | — | — | — | — | — | 96,899 | (3) | 1,428,860 | (3) | ||||||||||||||||||||||||||
| — | — | — | — | 45,219 | 64,599 | (5) | 83,979 | — | — | (5) | ||||||||||||||||||||||||||
Christopher Young | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Michael Berry | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
John Giamatteo | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| (1) | Except as described in footnote 6 below, these amounts represent target and maximum cash award levels set in fiscal 2020 under the AIP. Under our AIP design for fiscal 2020, no threshold applied to AIP bonuses. Maximum payouts assume that the AIP was funded at maximum levels based on applicable Company and/or business unit performance and individual performance was also achieved at maximum levels. For Ashish Agarwal, the AIP threshold, target and maximum cash award levels for fiscal 2020 are based on Ashish’s blended annual base salary for the year. In the case of Peter Leav, Venkat Bhamidipati and Lynne Doherty McDonald, their respective fiscal 2020 AIP threshold, target and maximum levels were prorated to reflect their hire dates after the beginning of fiscal 2020. The amount actually paid to each named executive officer under the AIP is reported as Non-Equity Incentive Plan Compensation in the “Summary Compensation Table for Fiscal 2020.” Because Christopher Young, Michael Berry, and John Giamatteo terminated early in fiscal 2020, they were not eligible for a bonus under our AIP in fiscal 2020. |
| (2) | These amounts represent time-based MIUs, which were scheduled to vest 6.25% per quarter beginning on the last day of the quarter in which the vesting commencement date fell, provided that the named executive officer remained continuously employed by the Company through each vesting date, unless certain requirements for accelerated vesting were met (see “—Potential Payments Upon Termination or Change in Control for Fiscal 2020” narrative for a description of these requirements). |
| (3) | These amounts represent time-based RSUs, which were scheduled to vest 6.25% per quarter beginning on the last day of the quarter in which the vesting commencement date fell, provided that the named executive officer remained continuously employed by the Company through each vesting date, unless certain requirements for accelerated vesting were met (see “—Potential Payments Upon Termination or Change in Control for Fiscal 2020” narrative for a description of these requirements). |
| (4) | These amounts represent additional time- and/or performance-based RSUs granted in connection with the October 2020 distributions by FTW of cash and securities of a corporate subsidiary. The time-based RSUs vest on a quarterly basis beginning on the last day of the quarter in which the grant date fell provided that the named executive officer has remained continuously employed by the Company through each vesting date, unless the named executive officer meets certain requirements for accelerated vesting (see “—Potential Payments Upon Termination or Change in Control for Fiscal 2020” narrative for a description of these requirements). During fiscal 2020, the performance-based RSUs were eligible to vest 100% upon TPG |
| (5) | On December 15, 2020, grants of PSUs were approved for Peter Leav, Terry Hicks and Ashish Agarwal in the amounts reflected above, respectively. Because the performance metrics applicable to these PSUs were not determined in fiscal 2020, there is no grant date under applicable accounting rules and no amount is reflected above related to these grants. |
| (6) | This amount represents the target cash award levels set in fiscal 2020 under Lynne Doherty McDonald’s special commission arrangement, which was prorated to reflect Lynne’s mid-year hire date. The amount actually paid to Lynne under this commission arrangement is reportedas Non-Equity Incentive Plan Compensation in the “Summary Compensation Table for Fiscal 2020” and Bonus (to the extent guaranteed). |
Stock Awards | ||||||||||||||||||||
Name | Grant Date (1) | Number of Shares or Units That Have Not Vested (#) | Market Value of Shares or Units That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares or Units that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units that Have Not Vested ($) (2) | |||||||||||||||
Peter Leav | 2/3/2020 | 1,015,332 | (3) | 11,651,239 | — | — | ||||||||||||||
| 2/24/2020 | 1,522,996 | (5) | 27,048,409 | — | — | |||||||||||||||
| 10/20/2020 | 189,928 | (5) | 3,373,121 | — | — | |||||||||||||||
| 12/15/2020 | 484,496 | (5) | 8,604,649 | 339,147 | (7) | 6,023,251 | (7) | |||||||||||||
Venkat Bhamidipati | 8/13/2020 | 750,000 | (3) | 8,754,600 | — | — | ||||||||||||||
| 8/13/2020 | 750,000 | (5) | 13,320,000 | — | — | |||||||||||||||
| 10/20/2020 | 93,528 | (5) | 1,661,057 | — | — | |||||||||||||||
Lynne Doherty McDonald | 5/19/2020 | 2,131,068 | (3) | 24,078,511 | — | — | ||||||||||||||
| 5/19/2020 | 437,500 | (5) | 7,770,000 | — | — | |||||||||||||||
| 10/20/2020 | 23,024 | (5) | 408,906 | — | — | |||||||||||||||
Terry Hicks | 11/14/2018 | 397,456 | (3) | 4,631,157 | 794,916 | (4) | 9,262,361 | |||||||||||||
| 11/14/2018 | 75,000 | (5) | 1,332,000 | 150,000 | (6) | 2,664,000 | ||||||||||||||
| 6/22/2019 | 15,672 | (5) | 278,335 | 31,364 | (6) | 557,025 | ||||||||||||||
| 10/20/2020 | 8,276 | (5) | 146,982 | 9,540 | (6) | 169,430 | ||||||||||||||
| 11/22/2019 | 66,668 | (5) | 1,184,024 | — | — | |||||||||||||||
| 12/15/2020 | 116,279 | (5) | 2,065,115 | 54,263 | (7) | 963,711 | (7) | |||||||||||||
Ashutosh Kulkarni | 11/14/2018 | 311,340 | (3) | 3,629,477 | 622,684 | (4) | 7,259,001 | |||||||||||||
| 11/14/2018 | 58,752 | (5) | 1,043,436 | 117,500 | (6) | 2,086,800 | ||||||||||||||
| 6/22/2019 | 12,256 | (5) | 217,667 | 24,568 | (6) | 436,328 | ||||||||||||||
| 11/22/2019 | 133,332 | (5) | 2,367,976 | — | — | |||||||||||||||
| 10/20/2020 | 10,752 | (5) | 190,956 | 7,476 | (6) | 132,774 | ||||||||||||||
Ashish Agarwal | 9/19/2019 | 186,048 | (3) | 1,991,142 | — | — | ||||||||||||||
| 9/19/2019 | 38,196 | (5) | 678,361 | — | — | |||||||||||||||
| 11/22/2019 | 33,336 | (5) | 592,047 | — | — | |||||||||||||||
| 5/19/2020 | 97,224 | (5) | 1,726,698 | — | — | |||||||||||||||
| 8/13/2020 | 104,168 | 1,850,024 | — | — | ||||||||||||||||
| 10/20/2020 | 14,356 | 254,963 | — | — | ||||||||||||||||
| 12/15/2020 | 96,899 | (5) | 1,720,926 | 45,219 | (7) | 803,089 | (7) | |||||||||||||
Stock Awards | ||||||||||||||||||||
Name | Grant Date (1) | Number of Shares or Units That Have Not Vested (#) | Market Value of Shares or Units That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares or Units that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units that Have Not Vested ($) (2) | |||||||||||||||
Christopher Young | — | — | — | — | — | |||||||||||||||
Michael Berry | — | — | — | — | — | |||||||||||||||
John Giamatteo | — | — | — | — | — | |||||||||||||||
| (1) | Reflects RSUs, PSUs and MIUs granted under our long-term incentive plans. |
| (2) | The value is determined based on the closing price of a share of our Class A common stock as of the end of fiscal 2020 ($17.76). Where applicable, the fair market value of an MIU reflects the value of a Class A Unit of FTW less any unsatisfied return threshold. |
| (3) | Represents time-based MIUs, which were scheduled to vest 6.25% per calendar quarter beginning on the last day of the quarter in which the vesting commencement date fell, provided that the named executive officer has remained continuously employed by the Company through each vesting date, unless certain requirements for accelerated vesting were met (see “—Potential Payments Upon Termination or Change in Control for Fiscal 2020” narrative for a description of these requirements). |
| (4) | Represents performance-based MIUs, which, at the end of fiscal 2020, were eligible to vest based upon TPG’s investment funds receiving specified investment returns, provided that the named executive officer remained continuously employed by the Company through the applicable vesting date (see “—Potential Payments Upon Termination or Change in Control for Fiscal 2020” narrative for a description of these requirements). |
| (5) | Represents time-based RSUs, which are (or, in the case of Ashutosh Kulkarni, were) eligible to vest on a quarterly basis (beginning with the last day of the quarter in which the vesting commencement date fell) over four years, provided that the named executive officer remained continuously employed by the Company through each vesting date, unless certain requirements for accelerated vesting were met (see “—Potential Payments Upon Termination or Change in Control for Fiscal 2020” narrative for a description of these requirements). |
| (6) | Represents performance-based RSUs, which at the end of fiscal 2020, were eligible to vest 100% upon TPG’s investment funds receiving a specified investment return, provided that the named executive officer has remained continuously employed by the Company through the vesting date. |
| (7) | On December 15, 2020, grants of PSUs were approved for Peter Leav, Terry Hicks and Ashish Agarwal, which are reflected above assuming threshold performance levels. These PSUs are eligible to vest based on performance over a three-year period. PSUs granted in fiscal 2020 will be eligible to vest based on achievement of performance targets related to Annual Cash EBITDA, Annual Adjusted Unlevered Free Cash Flow and Annual Billings based on the performance of McAfee as a whole. However, because the targets applicable to these PSUs were not determined as of the end of fiscal 2020, no grant date for accounting purposes had occurred as of that time. |
Stock and Unit Awards | ||||||||
Name | Number of Shares or Units Acquired on Vesting (1) (#) | Value Realized on Vesting (2) ($) | ||||||
Peter Leav | 585,764 | 3,037,493 | ||||||
Venkat Bhamidipati | 100,000 | 432,125 | ||||||
Lynne Doherty McDonald | 366,936 | 540,156 | ||||||
Terry Hicks | 266,300 | 693,291 | ||||||
Ashutosh Kulkarni | 235,664 | 776,950 | ||||||
Ashish Agarwal | 113,480 | 396,068 | ||||||
Christopher Young | 1,478,748 | 12,780,080 | ||||||
Michael Berry | 58,648 | 432,479 | ||||||
John Giamatteo | 76,360 | 418,235 | ||||||
| (1) | Amounts reported in this column represent the number of the named executive officer’s RSUs and/or MIUs that vested during fiscal 2020. In certain cases, these Class A Units and MIUs remain subject to transfer restrictions as described above in “IPO-Related Changes to Pre-IPO Equity Holdings and Post-Lockup Transfer Restrictionson Pre-IPO Equity” in the “Compensation Discussion and Analysis”. |
| (2) | Because the Company’s equity was not publicly traded prior to October 22, 2020, there was no ascertainable public market value for units of FTW that became vested prior to that date. For Class A Units and/or MIUs that vested prior to October 22, 2020, the market value reported in this table is based upon the Board’s last determination of the fair market value of the Company’s equity prior to the relevant vesting date (in each case, $8.64 per Class A Unit of FTW). For shares of Class A common stock that vested on or after October 22, 2020, the value is determined based on the closing price of our Class A common stock on the relevant vesting date. Where applicable, the fair market value of an MIU of FTW reflects the value of a Class A Unit of FTW less any unsatisfied return threshold. |
Name | Executive Contributions in Fiscal 2020($) | Registrant Contributions in Fiscal 2020($) | Aggregate Earnings in Fiscal 2020($) | Aggregate Withdrawals/ Distributions($) | Aggregate Balance at 2020 FYE($) | |||||||||||||||
Peter Leav | — | — | — | — | — | |||||||||||||||
Venkat Bhamidipati | — | — | — | — | — | |||||||||||||||
Lynne Doherty McDonald | — | — | — | — | — | |||||||||||||||
Terry Hicks | — | — | — | — | — | |||||||||||||||
Ashutosh Kulkarni | — | — | — | — | — | |||||||||||||||
Ashish Agarwal | — | — | — | — | — | |||||||||||||||
Christopher Young | — | — | 1,542 | 534,363 | — | |||||||||||||||
Michael Berry | — | — | — | — | — | |||||||||||||||
John Giamatteo | — | — | — | — | — | |||||||||||||||
Name | Severance Payment ($) (2) | Prorated Annual Incentive Award ($) (3) | Prior Year’s Incentive Award ($) (4) | Value of Accelerated Equity Awards ($) (5) | Welfare Benefits ($) (6) | Aggregate Payments ($) | ||||||||||||||||||
Peter Leav | 3,375,000 | 2,000,088 | — | — | 47,529 | 5,422,617 | ||||||||||||||||||
Venkat Bhamidipati | 1,300,000 | 291,069 | — | — | 15,824 | 1,606,893 | ||||||||||||||||||
Lynne Doherty McDonald (7) | ___ | — | — | ___ | 15,711 | 1,915,711 | ||||||||||||||||||
Terry Hicks | 1,400,035 | — | — | — | 18,706 | 1,418,741 | ||||||||||||||||||
Ashutosh Kulkarni (7) | — | — | — | — | — | — | ||||||||||||||||||
Ashish Agarwal | 650,000 | — | — | — | 26,242 | 676,242 | ||||||||||||||||||
Christopher Young (8) | 2,000,000 | 101,639 | 1,800,000 | 11,797,013 | 18,088 | 15,716,740 | ||||||||||||||||||
Michael Berry (7) | — | — | — | — | — | — | ||||||||||||||||||
John Giamatteo (9) | 3,972,137 | — | — | — | — | 3,972,137 | ||||||||||||||||||
| (1) | A qualifying termination means termination of the named executive officer’s employment (or, in certain cases, employment or other service) by the Company without cause or resignation for good reason, in either case, other than in connection with a change in control (as determined under the applicable arrangement). |
| (2) | Except in the case of John Giamatteo, amounts reported in this column represent the sum of the named executive officer’s base salary and the named executive officer’s annual incentive target, in each case, as in effect on the last business day of fiscal 2020. In the case of John Giamatteo, the amount shown above reflects the full amount of John’s severance payment under John’s separation agreement. |
| (3) | Under the terms of their employment agreements, Peter Leav and Venkat Bhamidipati would be entitled to a prorated incentive payout for the year of termination based on actual performance if a qualifying termination of employment occurred on the last day of fiscal 2020. The amounts reported in this column represent the fiscal 2020 annual incentive award, which is also reported in the “Summary Compensation Table for Fiscal 2020” as 2020 compensation. Peter was also entitled to this amount upon a termination of employment due to death or disability. Under Christopher Young’s separation agreement, Christopher received a pro-rated target bonus for fiscal 2020 based on the number of days Christopher was employed by the Company during fiscal 2020. |
| (4) | Under the terms of Christopher Young’s separation agreement, Christopher received an amount equal to Christopher’s fiscal 2019 annual bonus, calculated and determined based on actual Company performance and assuming individual performance goals were met at 100% of target. |
| (5) | With respect to Christopher Young, amounts reported in this column represent the value of the accelerated vesting of Christopher’s MIUs as of the date they vested pursuant to the terms of Christopher’s separation agreement (which, in each case, was $8.64). As described above, Peter Leav’s MIU, RSU and PSU award agreements provide that if Peter experiences a qualifying termination within 24 months following the sale of a Divested Business that is not part of a change in control, then, subject to certain conditions, a portion of the then unvested and outstanding award will vest as of immediately prior to such termination. While Peter would not be entitled to any accelerated vesting of Peter long-term incentive awards in connection with a qualifying termination alone, assuming (i) the sale of a Divested Business (which would include the Enterprise Division Sale, as discussed above) and qualifying termination occurred on December 26, 2020, (ii) the actual distributed proceeds ( i.e. |
| (6) | Amounts reported in this column represent the estimated value of continued welfare benefits that the indicated named executive officers would have been entitled to receive upon a qualifying termination of employment. |
| (7) | Neither Michael Berry nor Ashutosh Kulkarni was paid any severance when the applicable named executive officer terminated employment with us. When Lynne Doherty McDonald’s employment with us terminated in connection with the Enterprise Division Sale, Lynne received the amounts shown in the table above entitled “Potential Payments Upon a Qualifying Termination of Employment”. The value of Lynne’s accelerated vesting of RSUs is based on the closing price of a share of a share of our Class A common stock on July 27, 2021. |
| (8) | Reflects the amount paid to Christopher Young under the terms of Christopher’s separation agreement. |
| (9) | Reflects the amount paid to John Giamatteo under the terms of John’s separation agreement. |
Name | Severance Payment ($) (2) | Prorated Annual Incentive Award ($) (3) | Value of Accelerated Equity Awards ($) (4) | Welfare Benefits ($) (5) | Aggregate Payments ($) | |||||||||||||||
Peter Leav | 4,500,000 | 2,000,088 | 59,282,067 | 63,372 | 65,845,527 | |||||||||||||||
Venkat Bhamidipati | 1,950,000 | 291,069 | 23,735,657 | 23,736 | 26,000,462 | |||||||||||||||
Lynne Doherty McDonald (6) | — | — | — | — | — | |||||||||||||||
Terry Hicks | 2,100,053 | 1,197,056 | 23,667,166 | 28,059 | 26,992,334 | |||||||||||||||
Ashutosh Kulkarni (6) | — | — | — | — | — | |||||||||||||||
Ashish Agarwal | 975,000 | 324,213 | 9,977,625 | 39,362 | 11,316,200 | |||||||||||||||
Christopher Young (6) | — | — | — | — | — | |||||||||||||||
Michael Berry (6) | — | — | — | — | — | |||||||||||||||
John Giamatteo (6) | — | — | — | — | — | |||||||||||||||
| (1) | A qualifying termination means a termination of the named executive officer’s employment by the Company without cause or by the named executive officer for good reason, in either case, within the applicable protection period related to a change in control (as described above). Ashutosh Kulkarni, Christopher Young, Michael Berry, and John Giamatteo did not receive any payments related to a change in control in connection with their termination of employment with us. |
| (2) | Amounts reported in this column represent the value of the accelerated vesting of the named executive officer’s RSUs, MIUs and/or PSUs that were outstanding and unvested as of our last business day of fiscal 2020 (December 24, 2020), determined based on the closing price of a share of our Class A common stock on that day ($17.76). Where applicable, the fair market value of an MIU reflects the value of a Class A Unit less any unsatisfied return threshold. |
| (3) | Under the terms of their employment agreements, Peter Leav and Venkat Bhamidipati are entitled to a prorated incentive payout for the year of termination based on actual performance. Under the Severance Agreements, in connection with a Qualifying Change in Control Termination, an applicable Covered Executive would be eligible to receive the pro rata portion of the Covered Executive’s annual bonus, based on actual performance for the year in which termination occurs, payable at the time at the time annual bonuses are payable to senior executives of the Company and its affiliates generally. The amounts reported in this column represent the fiscal 2020 annual incentive award, which is also reported in the “Summary Compensation Table for Fiscal 2020” as 2020 compensation, except that for Ashutosh Kulkarni (who |
| terminated employment with the Company as of January 1, 2021 and did not receive any payment under the AIP in respect of fiscal 2020), it reflects the target amount of the named executive officer’s annual bonus. |
| (4) | All long-term incentive awards held by Peter Leav and Venkat Bhamidipati would automatically vest in full as of immediately prior to the consummation of the change in control (with Peter Leav’s PSUs, deemed earned based on target performance (which is assumed for purposes of the table above) or, if higher and if determinable, based on the actual performance of the Company and/or FTW, as applicable, through the date of the change in control (or an earlier date selected for administrative convenience)). In addition, as described further above, other named executive officers are entitled to acceleration of their equity awards under the Severance Agreements and/or the terms of applicable long-term incentive awards upon a qualifying termination in connection with a change in control. The table above assumes that, with respect to long-term incentive awards granted prior to our IPO that vest based on TPG achieving certain investment returns, those investment returns are achieved in connection with the change in control. |
| (5) | Amounts reported in this column represent the estimated value of continued welfare benefits that the indicated named executive officers would have been entitled to receive upon a qualifying termination of employment. |
| (6) | The employment of Christopher Young, Michael Berry and John Giamatteo with the Company terminated during fiscal 2020. The actual amount of severance paid to Christopher and John is reflected above under the heading “Potential Payments Upon a Qualifying Termination of Employment”. Neither Michael nor Ashutosh Kulkarni was paid any severance when the applicable named executive officer terminated employment with us. When Lynne Doherty McDonald’s employment with us terminated in connection with the Enterprise Division Sale, Lynne received the amounts shown above. |
Name | Fees Earned or Paid in Cash ($) (1)(2) | Stock Awards ($) (3) | Total ($) | |||||||||
Sohaib Abbasi | 76,331 | 109,986 | 186,317 | |||||||||
Mary Cranston | 80,320 | 109,986 | 190,306 | |||||||||
Tim Millikin | — | — | — | |||||||||
Kathy Willard | 76,773 | 109,986 | 186,759 | |||||||||
Jon Winkelried | — | — | — | |||||||||
Jeff Woolard | — | — | — | |||||||||
| (1) | Non-employee directors employed by TPG or Intel do not receive compensation for their services on the Board. |
| (2) | Under our non-employee director compensation program in effect during2020, non-employee directors earned an annual cash fee and, following our IPO, certain cash fees for committee membership or chair service, in each case, payable quarterly in arrears. These fees are described further below. The amounts reported in this column reflect the director fees earned during fiscal 2020. Sohaib Abbasi elected to receive Sohaib’s annual cash retainer in the form of RSUs. The number of shares delivered under to Sohaib’squarterly shares-in-lieu-of-cash award |
| (3) | In fiscal 2020, each covered director (as described below) received a pro-rated equity-award, as described below, as part of the transition ournew post-IPO non-employee director Form 10-K for the year ended December 26, 2020 |
Board or Committee Member | Board or Committee Chair | |||||||
Annual cash retainer | $ | 75,000 | $ | — | ||||
Additional annual cash retainer for Leadership Development and Compensation Committee | $ | 7,500 | $ | 20,000 | ||||
Additional annual cash retainer for Nominating and Corporate Governance Committee | $ | 5,000 | $ | 15,000 | ||||
Additional annual cash retainer for Audit Committee | $ | 10,000 | $ | 25,000 | ||||
| • | we have been or are to be a participant; |
| • | the amount involved exceeds or will exceed $120,000; and |
| • | any of our directors, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with any of these individuals had or will have a direct or indirect material interest. |
Class A common stock beneficially owned (1) | ||||||||||||||||||||||||||||||||
Shares of Class A common stock beneficially owned before this offering | Class A Shares being offered (with no option) | Class A Shares being offered (with option) | Shares of Class A common stock beneficially owned after this offering (with no option) | Shares of Class A common stock beneficially owned after this offering (with option) | ||||||||||||||||||||||||||||
Number | Percentage | Number | Percentage | Number | Percentage | |||||||||||||||||||||||||||
Name of beneficial owner | ||||||||||||||||||||||||||||||||
5% Stockholders and Selling Stockholders | ||||||||||||||||||||||||||||||||
Parties to the Stockholders Agreement (3) | 174,939,679 | 78.1 | % | 19,725,166 | 22,725,166 | 164,957,461 | 70.6 | % | 163,629,186 | 69.5 | % | |||||||||||||||||||||
TPG Funds (4) | 124,520,762 | 55.6 | % | 6,473,440 | 7,457,986 | 118,047,322 | 50.5 | % | 117,062,776 | 49.7 | % | |||||||||||||||||||||
Intel Americas, Inc. (5) | 5,696,831 | 3.4 | % | 9,665,332 | 11,135,332 | 5,696,831 | 3.0 | % | 5,696,831 | 3.0 | % | |||||||||||||||||||||
Thoma Bravo Funds (6) | 18,852,120 | 11.4 | % | 2,241,496 | 2,582,405 | 16,688,240 | 9.5 | % | 16,549,056 | 9.3 | % | |||||||||||||||||||||
Snowlake Investment Pte Ltd (7) | 25,869,966 | 15.6 | % | 1,344,898 | 1,549,443 | 24,525,068 | 13.9 | % | 24,320,523 | 13.7 | % | |||||||||||||||||||||
Sayed Darwish (8) | 247,653 | * | 28,660 | 28,660 | 218,993 | * | 218,993 | * | ||||||||||||||||||||||||
Ashish Agarwal (9) | 224,370 | * | 31,769 | 31,769 | 192,601 | * | 192,601 | * | ||||||||||||||||||||||||
Directors and Named Executive Officers | ||||||||||||||||||||||||||||||||
Peter Leav (10) | 966,261 | * | 129,591 | 129,591 | 836,670 | * | 836,760 | * | ||||||||||||||||||||||||
Venkat Bhamidipati (11) | 420,042 | * | 29,630 | 29,630 | 390,412 | * | 390,412 | * | ||||||||||||||||||||||||
Terry Hicks (12) | 662,498 | * | 55,184 | 55,184 | 607,314 | * | 607,314 | * | ||||||||||||||||||||||||
Jon Winkelried (13) | — | * | — | — | — | * | — | * | ||||||||||||||||||||||||
Tim Millikin (13) | — | * | — | — | — | * | — | * | ||||||||||||||||||||||||
Mary Cranston | 50,868 | * | — | — | 50,868 | * | 50,868 | * | ||||||||||||||||||||||||
Sohaib Abbasi | 68,875 | * | — | — | 68,875 | * | 68,875 | * | ||||||||||||||||||||||||
Kathy Willard | 27,404 | * | — | — | 27,404 | * | 27,404 | * | ||||||||||||||||||||||||
Jeff Woolard | — | * | — | — | — | * | — | * | ||||||||||||||||||||||||
All directors and executive officers as a group (10 people) (14) | 2,266,534 | 1.4% | 214,405 | 214,405 | 2,052,129 | 1.2% | 2,052,129 | 1.2% | ||||||||||||||||||||||||
Class B common stock beneficially owned (2) | ||||||||||||||||||||||||||||||||
Shares of Class B common stock beneficially owned before this offering | Class B Shares being redeemed (with no option) | Class B Shares being redeemed (with option) | Shares of Class B common stock beneficially owned after this offering (with no option) | Shares of Class B common stock beneficially owned after this offering (with option) | ||||||||||||||||||||||||||||
Number | Percentage | Number | Percentage | Number | Percentage | |||||||||||||||||||||||||||
Name of beneficial owner | ||||||||||||||||||||||||||||||||
5% Stockholders and Selling Stockholders | ||||||||||||||||||||||||||||||||
Parties to the Stockholders Agreement (3) | 262,420,115 | 98.9 | % | 9,802,045 | 11,956,459 | 252,618,070 | 98.9 | % | 250,463,656 | 98.8 | % | |||||||||||||||||||||
TPG Funds (4) | 57,933,633 | 21.8 | % | 59,097 | 541,786 | 57,874,536 | 22.6 | % | 57,391,847 | 22.7 | % | |||||||||||||||||||||
Intel Americas, Inc. (5) | 180,222,000 | 67.9 | % | 9,665,332 | 11,135,332 | 170,556,668 | 66.7 | % | 169,086,668 | 66.7 | % | |||||||||||||||||||||
Thoma Bravo Funds (6) | 24,264,482 | 9.1 | % | 77,616 | 279,341 | 24,186,866 | 9.5 | % | 23,985,141 | 9.5 | % | |||||||||||||||||||||
Snowlake Investment Pte Ltd (7) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Sayed Darwish (8) | 51,692 | * | — | — | 51,692 | * | 51,692 | * | ||||||||||||||||||||||||
Ashish Agarwal (9) | 66,192 | * | — | — | 66,192 | * | 66,192 | * | ||||||||||||||||||||||||
Directors and Named Executive Officers | ||||||||||||||||||||||||||||||||
Peter Leav (10) | 252,464 | * | — | — | 252,464 | * | 252,464 | * | ||||||||||||||||||||||||
Venkat Bhamidipati (11) | 37,444 | * | — | — | 37,444 | * | 37,444 | * | ||||||||||||||||||||||||
Terry Hicks (12) | 62,664 | * | 42,556 | 42,556 | 20,108 | * | 20,108 | * | ||||||||||||||||||||||||
Jon Winkelried (13) | — | * | — | — | — | * | — | * | ||||||||||||||||||||||||
Tim Millikin (13) | — | * | — | — | — | * | — | * | ||||||||||||||||||||||||
Mary Cranston | — | * | — | — | * | * | ||||||||||||||||||||||||||
Sohaib Abbasi | — | * | — | — | * | * | ||||||||||||||||||||||||||
Kathy Willard | — | * | — | — | * | * | ||||||||||||||||||||||||||
Jeff Woolard | — | * | — | — | — | * | — | * | ||||||||||||||||||||||||
All directors and executive officers as a group (10 people) (14) | 352,572 | * | 42,556 | 42,556 | 310,016 | * | 310,016 | * | ||||||||||||||||||||||||
| * | Represents beneficial ownership of less than 1%. |
| (1) | The LLC Units held by Continuing Owners are exchangeable for cash or, at our option, shares of our Class A common stock on a one-for-one |
| (2) | The holders of shares of Class B common stock reflected in this table also reflect an equal number of LLC Units beneficially owned by or redeemed by such holder in connection with this offering, as applicable. |
| (3) | Pursuant to the stockholders agreement entered into in connection with our IPO, TPG and Intel have the right to nominate directors and the stockholders party thereto, which include the TPG Funds (as defined below), Intel Americas, Inc., the Thoma Bravo Funds (as defined below) and the GIC Investor (as defined below), will agree to vote for such nominees. See “Certain Relationships and Related Transactions—Recapitalization Transactions in Connection with our IPO—Stockholders Agreement.” |
| (4) | Shares of Class A common stock shown as beneficially owned by the TPG Funds (as defined below) before this offering include: (a) 27,652,384 shares of Class A common stock held by TPG VII Manta Blocker Co-Invest I, L.P., a Delaware limited partnership (“TPG Co-Invest I”); (b) 30,487,224 shares of Class A common stock held by TPG VII Manta AIV I, L.P., a Delaware limited partnership (“TPG AIV I”); (c) 5,332,913 shares of Class A common stock held by TPG VII Side-bySide Separate Account I, L.P. (“TPG Side-by-Side”); (d) 213,376 shares of Class A common stock and 3,968,935 shares of Class A common stock underlying an identical number of LLC Units and shares of Class B common stock held by TPG VII Manta AIV Co-Invest, L.P., a Delaware limited partnership (“TPG Manta AIV Co-Invest”); and (e) 2,901,232 shares of Class A common stock and 53,964,698 shares of Class A common stock underlying an identical number of LLC Units and shares of Class B common stock held by TPG VII Manta Holdings II, L.P., a Delaware limited partnership (“TPG Manta Holdings II”, and, together with TPG Co- |
| Invest I, TPG AIV I, TPG Side-by-Side, and TPG Manta AIV Co-Invest, the “TPG Funds”). Shares of Class B common stock shown as beneficially owned by the TPG Funds before this offering include: (a) 3,968,935 shares of Class B common stock held by TPG Manta AIV Co-Invest; and (b) 53,964,698 shares of Class B common stock by TPG Manta Holdings II. In this offering: (a) TPG Co-Invest I will sell 1,437,560 shares of Class A common stock (or 1,656,198 shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares); (b) TPG AIV I will sell 1,584,934 shares of Class A common stock (or 1,825,987 shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares); (c) TPG Side-by-Side will sell 277,241 shares of Class A common stock (or 319,407 shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares); (d) TPG Manta AIV Co-Invest will sell 213,376 shares of Class A common stock and 4,049 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock (or 37,117 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock, if the underwriters exercise in full their option to purchase additional shares); and (e) TPG Manta Holdings II will sell 2,901,232 shares of Class A common stock and 55,048 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock (or 504,669 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock, if the underwriters exercise in full their option to purchase additional shares). The general partner of each of (i) TPG Co-Invest I, (ii) TPG AIV I, (iii) TPG VII Manta AIVCo-Invest, and (iv) TPG Manta Holdings II is TPG VII Manta GenPar, L.P., a Delaware limited partnership, whose general partner is TPG VII Manta GenPar Advisors, LLC, a Delaware limited liability company, whose sole member is TPG Holdings II, L.P., a Delaware limited partnership, whose general partner is TPG HoldingsII-A, LLC, a Delaware limited liability company, whose sole member is TPG Group Holdings (SBS), L.P., a Delaware limited partnership (“TPG Group Holdings”), whose general partner is TPG Group Holdings (SBS) Advisors, LLC, a Delaware limited liability company, whose sole member is TPG Group Holdings (SBS) Advisors, Inc., a Delaware corporation. The general partner of TPG VIISide-by-Side III-A, L.P., a Cayman Islands limited partnership, whose general partner is TPG HoldingsIII-A, Inc., a Cayman Islands exempted company, whose sole shareholder is TPG Group Holdings. David Bonderman and James G. Coulter are the sole shareholders of TPG Group Holdings (SBS) Advisors, Inc. and may therefore be deemed to beneficially own the securities held by the TPG Funds. Messrs. Bonderman and Coulter disclaim beneficial ownership of the securities held by the TPG Funds except to the extent of their pecuniary interest therein. The address of each of the TPG Funds and Messrs. Bonderman and Coulter is c/o TPG Global, LLC, 301 Commerce Street, Suite 3300, Fort Worth, TX 76102. |
| (5) | In this offering Intel Americas, Inc. will sell 9,665,332 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock (or 11,135,332 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock, if the underwriters exercise in full their option to purchase additional shares). Intel Corporation may also be deemed to beneficially own these shares due to its ownership of Intel Americas Inc. Intel Corporation’s and Intel Americas, Inc. has an address c/o Intel Corporation, 2200 Mission College Boulevard, Santa Clara, California 95054. |
| (6) | Shares of Class A common stock shown as beneficially owned by the Thoma Bravo Funds before this offering include: (a) 71,344 shares of Class A common stock held by Thoma Bravo Partners XII AIV, L.P. (“TB Partners XII”); (b) 17,603,384 shares of Class A common stock held by Thoma Bravo Fund XII-A, L.P. (“TB XII-A”); (c) 1,156,028 shares of Class A common stock held by Thoma Bravo Fund XII AIV, L.P. (“TB XII”); (d) 11,312 shares of Class A common stock held by Thoma Bravo Executive Fund XII AIV, L.P. (“TB Executive XII”); and (e) 10,052 shares of Class A common stock held by Thoma Bravo Executive Fund XII-a AIV, L.P. (“TB Executive XII-a” and, together with TB Partners XII, TB XII-A, TB XII, and TB Executive XII, the “Thoma Bravo Funds”). Shares of Class B common stock shown as beneficially owned by the Thoma Bravo Funds before this offering include: (a) 2,364,188 shares of Class B common stock held by TB Partners XII; (b) 21,502,869 shares of Class B common stock held by TB XII; (c) 210,435 shares of Class B common stock held by TB Executive XII; and (d) 186,990 shares of Class B common stock held by TB Executive XII-a. In this offering: (a) TB Partners XII will sell 71,344 shares of Class A common stock and 55,272 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock (or 74,529 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock, if |
| the underwriters exercise in full their option to purchase additional shares); (b) TB XII-A will sell 915,144 shares of Class A common stock (or 1,054,328 shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares); (c) TB XII will sell 1,156,028 shares of Class A common stock and 21,936 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock (or 201,093 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock, if the underwriters exercise in full their option to purchase additional shares); (d) TB Executive XII will sell 11,312 shares of Class A common stock and 216 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock (or 1,969 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock, if the underwriters exercise in full their option to purchase additional shares); and (e) TB Executive XII-a will sell 10,052 shares of Class A common stock and 192 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock (or 1,750 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock, if the underwriters exercise in full their option to purchase additional shares). The general partner of each of the Thoma Bravo Funds (other than TB Partners XII) is TB Partners XII. Thoma Bravo UGP, LLC (“TB UGP”) is the ultimate general partner of TB Partners XII. TB UGP’s voting and investment decisions are made by an investment committee comprised of Seth Boro, Orlando Bravo, S. Scott Crabill, Lee Mitchell, Holden Spaht and Carl Thoma. By virtue of the relationships described in this footnote, TB UGP may be deemed to exercise shared voting and dispositive power with respect to the shares held directly by the Thoma Bravo Funds. Messrs. Boro, Bravo, Crabill, Mitchell, Spaht and Thoma disclaim beneficial ownership of the shares held directly by the Thoma Bravo Funds. The address of each of the Thoma Bravo Funds and TB UGP is c/o Thoma Bravo, L.P., 150 North Riverside Plaza, Suite 2800, Chicago, Illinois 60606. |
| (7) | Snowlake Investment Pte Ltd. (the “GIC Investor”) shares the power to vote and the power to dispose of these shares with GIC Special Investments Pte. Ltd. (“GIC SI”), and GIC Pte. Ltd. (“GIC”), both of which are private limited companies incorporated in Singapore. GIC SI is wholly owned by GIC and is the private equity investment arm of GIC. GIC is wholly owned by the Government of Singapore and was set up with the sole purpose of managing Singapore’s foreign reserves. The Government of Singapore disclaims beneficial ownership of these shares. The business address for the GIC Investor is 168 Robinson Road, #37-01 Capital Tower, Singapore 068912.” |
| (8) | Includes 16,037 shares of Class A common stock underlying RSUs and 40,592 shares of Class A common stock underlying MIUs held by Mr. Darwish that have vested or will vest within 60 days. |
| (9) | Includes 27,252 shares of Class A common stock underlying RSUs and 16,912 shares of Class A common stock underlying MIUs held by Mr. Agarwal that have vested or will vest within 60 days. |
| (10) | Includes 164,312 shares of Class A common stock underlying RSUs and 78,100 shares of Class A common stock underlying MIUs held by Mr. Leav that have vested or will vest within 60 days. |
| (11) | Includes 57,022 shares of Class A common stock underlying RSUs and 50,000 shares of Class A common stock underlying MIUs held by Mr. Bhamidipati that have vested or will vest within 60 days. |
| (12) | Includes 25,047 shares of Class A common stock underlying RSUs and 49,684 shares of Class A common stock underlying MIUs held by Mr. Hicks that have vested or will vest within 60 days. In this offering Mr. Hicks will sell 12,628 shares of Class A common stock and 42,556 shares of Class A common stock issuable upon the exchange of an equal number of LLC Units, together with corresponding shares of Class B common stock. |
| (13) | Does not include shares of Class A common stock beneficially owned by the TPG Funds. Mr. Winkelried is Co-Chief Executive Officer and Partner of TPG. Mr. Millikin is a Partner of TPG. The address of each of Messrs. Winkelried and Millikin is c/o TPG Global, LLC, 301 Commerce Street, Suite 3300, Fort Worth, TX 76102. |
| (14) | Includes 602,220 shares of Class A common stock, 1,392,896 shares of Class A common stock underlying MIUs that have vested or will vest within 60 days, 16,503 options to purchase shares of Class A common stock exercisable within 60 days, 254,915 shares of Class A common stock underlying RSUs that have vested or will vest within 60 days and 352,572 shares of Class B common stock, in each case held by our current directors, our current executive officers, and our named executive officers as a group. |
| • | 100% of net cash proceeds above a threshold amount of certain asset sales and casualty events, subject to (i) step-downs to (x) 50% if our first lien net leverage ratio is less than or equal to 3.25 to 1.00, but greater than 2.50 to 1.00 and (y) 0% if our first lien net leverage ratio is less than or equal to 2.50 to 1.00 and (ii) reinvestment rights and certain other exceptions; |
| • | 100% of net cash proceeds of the incurrence of certain debt, other than certain debt permitted under the First Lien Credit Agreement; and |
| • | 50% of annual excess cash flow, subject to (i) a step-down to 25% if our first lien net leverage ratio is less than or equal to 3.25 to 1.00, but greater than 2.50 to 1.00, and (ii) a step-down to 0% if our first lien net leverage ratio is less than or equal to 2.50 to 1.00; provided that such a prepayment is required only in the amount (if any) by which such prepayment exceeds $35 million in such fiscal year. |
| • | incur additional indebtedness; |
| • | create or incur liens; |
| • | engage in consolidations, amalgamations, mergers, liquidations, dissolutions, or dispositions; |
| • | pay dividends and distributions on, or purchase, redeem, defease, or otherwise acquire or retire for value, our capital stock; |
| • | make acquisitions, investments, loans (including guarantees), advances, or capital contributions; |
| • | create negative pledges or restrictions on the payment of dividends or payment of other amounts owed from subsidiaries; |
| • | sell, transfer or otherwise dispose of assets, including capital stock of subsidiaries; |
| • | make prepayments or repurchases of debt that is contractually subordinated with respect to right of payment or security; |
| • | engage in certain transactions with affiliates; |
| • | modify certain documents governing debt that is subordinated with respect to right of payment; |
| • | change our fiscal year; and |
| • | change our material lines of business. |
| • | if we amend our amended and restated certificate of incorporation to increase the authorized shares of a class of stock, or to increase or decrease the par value of a class of stock, then such class would be required to vote separately to approve the proposed amendment; or |
| • | if we amend our amended and restated certificate of incorporation in a manner that alters or changes the powers, preferences or special rights of a class of stock in a manner that affects holders of such class of stock adversely, then such class would be required to vote separately to approve such proposed amendment. |
| • | the holder will not transfer any shares of Class B common stock to any person unless the holder transfers an equal number of LLC Units to the same person; and |
| • | in the event the holder transfers any LLC Units to any person, the holder will transfer an equal number of shares of Class B common stock to the same person. |
| • | Classified board. one-third of our board of directors is elected each year. The classification of directors has the effect of making it more difficult for stockholders to change the composition of our board. Our board of directors is currently composed of seven members. |
| • | No cumulative voting. |
| • | Requirements for removal of directors |
| • | Advance notice procedures |
| • | Actions by written consent; special meetings of stockholders |
| • | Supermajority approval requirements |
| • | Authorized but unissued shares |
| • | an individual citizen or resident of the United States; |
| • | a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| • | an estate the income of which is subject to United States federal income taxation regardless of its source; or |
| • | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
| • | the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of thenon-U.S. holder or, in certain cases involving individual holders, a fixed base of thenon-U.S. holder); |
| • | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or |
| • | we are or have been a “United States real property holding corporation” for United States federal income tax purposes during the applicable period specified in the Code, and certain other conditions are met. |
Name | Number of Shares | |||
Morgan Stanley & Co. LLC | ||||
Goldman Sachs & Co. LLC | ||||
TPG Capital BD, LLC | ||||
BofA Securities, Inc. | ||||
Citigroup Global Markets Inc. | ||||
Total: | ||||
Total | ||||||||||||
Per Share | No Exercise | Full Exercise | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discounts and commissions to be paid by the selling stockholders | $ | $ | $ | |||||||||
Proceeds, before expenses, to selling stockholders | $ | $ | $ | |||||||||
| • | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or units of Foundation Technology Worldwide LLC beneficially owned by the locked-up party or any securities convertible into or exercisable or exchangeable for shares of common stock or units of Foundation Technology Worldwide LLC; |
| • | file any registration statement with the SEC relating to the offering of any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock; or |
| • | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock or units of Foundation Technology Worldwide LLC, |
| (a) | transactions relating to shares of Class A common stock acquired in open market transactions or in this offering, in each case, upon the completion of this offering; |
| (b) | the transfer of securities by bona fide gift; |
| (c) | transfers of shares of securities (i) as a result of the operation of law through estate, other testamentary document or intestate succession, (ii) to any immediate family member of the lock-up party or any trust for the direct or indirect benefit of thelock-up party or any immediate family member of thelock-up party, (iii) pursuant to a qualified domestic order or in connection with a divorce settlement,provided lock-up agreement, and, in the case of clause (c)(iii) only, if thelocked-up party is required to file a report under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of shares of Common Stock during the restricted period, thelocked-up party shall include a statement in such report to the effect that such transfer occurred by operation of law or by court order, including pursuant to a domestic order or in connection with a divorce settlement;provided further |
| (d) | transfers of the lock-up party’s securities pursuant to an order of a court or pursuant to an order of a court or regulatory agency or to comply with any regulations related to the locked- up party’s |
| ownership of securities; provided |
| (e) | distributions of the locked-up parties securities to partners, members, nominees, stockholders or holders of similar equity interests in thelock-up party not involving a disposition of value; |
| (f) | transfers of the locked-up parties securities to a corporation, partnership, limited liability company, investment fund or other entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, thelocked-up party, or is wholly-owned by thelocked-up party and/or by members of the immediate family of thelocked-up party, or, in the case of an investment fund, that is managed by, or is under common management with, thelocked-up party (including, for the avoidance of doubt, a fund managed by the same manager or managing member or general partner or management company or by an entity controlling, controlled by, or under common control with such manager or managing member or general partner or management company as thelocked-up party or who shares a common investment advisor with thelocked-up party);provided that locked-up party is required to file a report under Section 16(a) of the Exchange Act during the restricted period, thelocked-up party shall include a statement in any such report regarding the circumstances of the transfer. |
| (g) | exercise or settlement of stock options, restricted stock units or other equity awards pursuant to any plan or agreement granting such an award to an employee or other service provider of us or our affiliates, which plan or agreement is described in the registration statement related to the Public Offering or the Prospectus (and any related transfer to us of securities necessary to generate such amount of cash needed for the payment of taxes, including estimated taxes, due as a result of such settlement or exercise whether by means of a “net settlement” or “cashless basis”); provided that provided further locked-up party is required to file a report under Section 16(a) of the Exchange Act during the Restricted Period, thelocked-up party shall include a statement in any such report to the effect that (i) such transfer is in connection with the vesting or settlement of restricted stock units or incentive units, or the “net” or “cashless” exercise of options or other rights to purchase shares of Common Stock, as applicable and (ii) the transaction was only with us; |
| (h) | dispositions to us upon exercise of our right to repurchase or reacquire the locked-up party’s securities in the event thelocked-up party ceases to provide services to us pursuant to agreements in effect on the date hereof, including without limitation our equity incentive plans, which plan or agreement is described in the registration statement related to this offering or the Prospectus that permit us to repurchase or reacquire, at cost, such securities upon termination of thelocked-up party’s services to us;provided |
| (i) | transfers of Securities pursuant to a bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of Common Stock involving a “change of control” of us, made to all holders of Common Stock involving a change of control (as defined below) of us which occurs after the consummation of the Public Offering, is open to all holders of our capital stock and has been approved by our board of directors; provided |
| the beneficial owner (as defined in Rules 13d-3 and13d-5 of the Exchange Act) of 50% of total voting power of the voting stock of us) (or the surviving entity); |
| (j) | if permitted by us, the establishment of a trading plan on behalf of a shareholder, officer or director of us pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Common Stock,provided locked-up party or us regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of shares of Common Stock may be made under such plan during the restricted period; |
| (k) | the sale or transfer of Common Stock pursuant to a 10b5-1 Plan in effect as of the date hereof (an “Existing Plan”), provided that to the extent a public filing under the Exchange Act, if any, is required in connection with such sale or transfer, such filing shall include a statement to the effect that the sale or transfer was made pursuant to such Existing Plan; |
| (l) | the exchange of any units of Foundation Technology Worldwide LLC (or securities convertible into or exercisable or exchangeable for units of Foundation Technology Worldwide LLC) and a corresponding number of shares of Class B common stock into or for shares of Class A common stock (or securities convertible into or exercisable or exchangeable for Class A common stock pursuant to the New LLC Agreement, as defined and described in the Prospectus); provided locked-up party or us regarding the exchange, such announcement or filing shall include a statement to the effect that such exchange occurred pursuant to the New LLC Agreement among us and certain owners of Foundation Technology Worldwide LLC and no transfer of the shares of Class A common stock or other securities received upon exchange may be made during the restricted period; |
| (m) | the transfer, conversion, reclassification, redemption or exchange of any securities pursuant to the reorganization transactions described in the Prospectus; provided provided further locked-up party or us regarding the transfer, conversion, reclassification, redemption or exchange, as applicable, such announcement or filing shall include a statement to the effect that such transfer, conversion, reclassification, redemption or exchange, occurred pursuant to the Amended and Restated Foundation Technology Worldwide LLC Operating Agreement and no transfer of the shares of Class A common stock or other securities received upon exchange may be made during the restricted period; |
| (n) | for certain shareholders, pledges to any third-party pledgee in a bona fide locked-up party and/or its affiliates or any similar arrangement relating to a financing agreement for the benefit of thelocked-up party and/or its affiliates,provided |
| (o) | the transfer of the locked-up party’s securities pursuant to the terms of the underwriting agreement and to the underwriters in connection with this offering contemplated by the underwriting agreement; and |
| (p) | the transfer of the locked-up party’s securities to us or any of our subsidiaries in the manner described in “Use of Proceeds” in the Prospectus. |
| • | to any legal entity which is a qualified investor as defined in the Prospectus Regulation; |
| • | to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior consent of the representative for any such offer; or |
| • | In any other circumstances falling within Article 1(4) of the Prospectus Regulation; |
| (a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue or sale of the shares of Class A common stock in circumstances in which Section 21(1) of the FSMA does not apply to the company or the selling stockholders; and |
| (b) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of Class A common stock in, from or otherwise involving the United Kingdom. |
| • | does not constitute a disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (Cth) (the “Corporations Act”); |
| • | has not been, and will not be, lodged with the Australian Securities and Investments Commission (“ASIC”), as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document for the purposes of the Corporations Act; and |
| • | may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, available under section 708 of the Corporations Act (“Exempt Investors”). |
| a) | released, issued, distributed or caused to be released, issued or distributed to the public in France; |
| b) | used in connection with any offer for subscription or sale of the notes to the public in France. |
| c) | to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case acting for their own account, or otherwise in circumstances in which no offer to the public occurs, all as defined in and in accordance with Articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 andD.764-1 of the French Code monétaire et financier; |
| d) | to investment services providers authorized to engage in portfolio management on behalf of third parties; or |
| e) | in a transaction that, in accordance with Article L.411-2-I-1°-or-2° -or 3° of the French Code monétaire et financier and Article211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (offre au public). |
| (a) | the offer, transfer, sale, renunciation or delivery is to: |
| (i) | persons whose ordinary business is to deal in securities, as principal or agent; |
| (ii) | the South African Public Investment Corporation; |
| (iii) | persons or entities regulated by the Reverse Bank of South Africa; |
| (iv) | authorized financial service providers under South African law; |
| (v) | financial institutions recognized as such under South African law; |
| (vi) | a wholly-owned subsidiary of any person or entity contemplated in (iii), (iv) or (v), acting as agent in the capacity of an authorized portfolio manager for a pension fund or collective investment scheme (in each case duly registered as such under South African law); or |
| (vii) | any combination of the person in (i) to (vi); or |
| (b) | the total contemplated acquisition cost of the securities, for any single addressee acting as principal is equal to or greater than ZAR1,000,000. |
| • | From June 2017 through January 2018, a business relationship between PwC China and a controlled subsidiary, located in China, of a sister entity under common control with McAfee existed, which allowed for the joint pursuit of business opportunities. |
| • | From June 2018 through February 2019, a software reselling arrangement, deemed an impermissible business relationship, including the performance of a management function, between PwC India and a controlled subsidiary, located in India, of a sister entity under common control with McAfee existed. |
| • | From April 2017 through July 2019, PwC US provided services pursuant to a contingent fee benefitting an upstream affiliate of the Company. In July 2019, PwC US agreed to waive the fee and terminate the remaining services. |
| • | From April 2017 through December 2018 and from July 2018 through June 2019, PwC US provided non-audit services which included certain employee activities benefiting an upstream affiliate of the Company. |
| • | From October 2020 through January 15, 2021, a business relationship between PwC Australia and a sister entity under common control with McAfee existed, which allowed for the joint delivery of services to a third party client. |
Page | ||||
AUDITED CONSOLIDATED FINANCIAL STATEMENTS | ||||
| F-2 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
| F-8 | ||||
| F-10 | ||||
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
| F-50 | ||||
| F-51 | ||||
| F-52 | ||||
| F-53 | ||||
| F-54 | ||||
| F-56 | ||||
December 28, 2019 | December 26, 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 167 | $ | 231 | ||||
Accounts receivable, net | 70 | 102 | ||||||
Deferred costs | 111 | 137 | ||||||
Other current assets | 49 | 42 | ||||||
Current assets of discontinued operations | 434 | 402 | ||||||
Total current assets | 831 | 914 | ||||||
Property and equipment, net | 115 | 115 | ||||||
Goodwill | 1,018 | 1,018 | ||||||
Identified intangible assets, net | 980 | 729 | ||||||
Deferred tax assets | 21 | 24 | ||||||
Other long-term assets | 58 | 68 | ||||||
Long-term assets of discontinued operations | 2,765 | 2,560 | ||||||
Total assets | $ | 5,788 | $ | 5,428 | ||||
Liabilities, redeemable noncontrolling interests and deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and other current liabilities | $ | 145 | $ | 227 | ||||
Accrued compensation and benefits | 188 | 179 | ||||||
Accrued marketing | 87 | 118 | ||||||
Income taxes payable | 15 | 14 | ||||||
Long-term debt, current portion | 43 | 44 | ||||||
Lease liabilities, current portion | 13 | 10 | ||||||
Deferred revenue | 710 | 823 | ||||||
Current liabilities of discontinued operations | 959 | 970 | ||||||
Total current liabilities | 2,160 | 2,385 | ||||||
Long-term debt, net | 4,669 | 3,943 | ||||||
Deferred tax liabilities | 156 | 5 | ||||||
Other long-term liabilities | 119 | 153 | ||||||
Deferred revenue, less current portion | 67 | 80 | ||||||
Long-term liabilities of discontinued operations | 711 | 662 | ||||||
Total liabilities | 7,882 | 7,228 | ||||||
Commitments and contingencies (Note 19) | 0 | 0 | ||||||
Redeemable noncontrolling interests | — | 4,840 | ||||||
Equity (deficit): | ||||||||
Members’ deficit | (647 | ) | — | |||||
Class A common stock, $0.001 par value—1,500,000,000 shares authorized, 161,267,412 shares issued and outstanding as of December 26, 2020 | 0 | 0 | ||||||
Class B common stock, $0.001 par value—300,000,000 shares authorized, 267,065,127 shares issued and outstanding as of December 26, 2020 | 0 | 0 | ||||||
Additional paid-in capital | — | (6,477 | ) | |||||
Accumulated deficit | (1,385 | ) | (118 | ) | ||||
Accumulated other comprehensive loss | (62 | ) | (45 | ) | ||||
Total deficit | (2,094 | ) | (6,640 | ) | ||||
Total liabilities, redeemable noncontrolling interests and deficit | $ | 5,788 | $ | 5,428 | ||||
Fiscal Year Ended | ||||||||||||
(in millions) except per unit and per share data | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Net revenue | $ | 1,161 | $ | 1,303 | $ | 1,558 | ||||||
Cost of sales | 386 | 391 | 444 | |||||||||
Gross profit | 775 | 912 | 1,114 | |||||||||
Operating expenses: | ||||||||||||
Sales and marketing | 348 | 299 | 348 | |||||||||
Research and development | 186 | 161 | 188 | |||||||||
General and administrative | 170 | 182 | 235 | |||||||||
Amortization of intangibles | 153 | 146 | 143 | |||||||||
Restructuring charges (Note 9) | 19 | 6 | 2 | |||||||||
Total operating expenses | 876 | 794 | 916 | |||||||||
Operating income (loss) | (101 | ) | 118 | 198 | ||||||||
Interest (expense) and other, net | (308 | ) | (296 | ) | (307 | ) | ||||||
Foreign exchange gain (loss), net | 30 | 21 | (104 | ) | ||||||||
Loss from continuing operations before income taxes | (379 | ) | (157 | ) | (213 | ) | ||||||
Provision for income tax expense | 29 | 38 | 5 | |||||||||
Loss from continuing operations | (408 | ) | (195 | ) | (218 | ) | ||||||
Loss from discontinued operations, net of taxes | (104 | ) | (41 | ) | (71 | ) | ||||||
Net loss | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | |||
Less: Net loss attributable to redeemable noncontrolling interests | N/A | N/A | (171 | ) | ||||||||
Net loss attributable to McAfee Corp. | N/A | N/A | $ | (118 | ) | |||||||
Net loss attributable to McAfee Corp.: | ||||||||||||
Loss from continuing operations attributable to McAfee Corp. | N/A | N/A | $ | (55 | ) | |||||||
Loss from discontinued operations attributable to McAfee Corp. | N/A | N/A | (63 | ) | ||||||||
Net loss attributable to McAfee Corp. | N/A | N/A | $ | (118 | ) | |||||||
Loss per share attributable to McAfee Corp., basic: | ||||||||||||
Continuing operations | N/A | N/A | $ | (0.34 | ) | |||||||
Discontinued operations | N/A | N/A | (0.39 | ) | ||||||||
Loss per share, basic (1) | N/A | N/A | $ | (0.73 | ) | |||||||
Loss per share attributable to McAfee Corp., diluted: | ||||||||||||
Continuing operations | N/A | N/A | $ | (0.34 | ) | |||||||
Discontinued operations | N/A | N/A | (0.39 | ) | ||||||||
Loss per share, diluted (1) | N/A | N/A | $ | (0.73 | ) | |||||||
Weighted-average shares outstanding, basic | N/A | N/A | 162.3 | |||||||||
Weighted-average shares outstanding, diluted | N/A | N/A | 162.3 | |||||||||
| (1) | 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). See Note 17 Net Loss per Share, to the Notes to Consolidated Financial Statements for the number of shares used in the computation of net loss per share of Class A common stock and the basis for the computation of net loss per share. |
Year Ended | ||||||||||||
December 29, 2018 | December 28, 2019 | December 26, 2020 | ||||||||||
Net loss | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | |||
Other comprehensive loss: | ||||||||||||
Interest rate cash flow hedges: | ||||||||||||
Loss on interest rate cash flow hedges, net of tax | (6 | ) | (67 | ) | (98 | ) | ||||||
Reclassification adjustments for loss on interest rate cash flow hedges | 8 | 4 | 40 | |||||||||
Pension and postretirement benefits loss, net of tax | — | (1 | ) | (1 | ) | |||||||
Total comprehensive loss | $ | (510 | ) | $ | (300 | ) | $ | (348 | ) | |||
Less: Comprehensive loss attributable to redeemable noncontrolling interests | N/A | N/A | (234 | ) | ||||||||
Total comprehensive loss attributable to McAfee Corp. | N/A | N/A | $ | (114 | ) | |||||||
Year Ended | ||||||||||||
December 29, 2018 | December 28, 2019 | December 26, 2020 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (512 | ) | $ | (236 | ) | $ | (289 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 543 | 536 | 491 | |||||||||
Equity-based compensation | 28 | 25 | 313 | |||||||||
Deferred taxes | 9 | 18 | (10 | ) | ||||||||
Foreign exchange (gain) loss, net | (30 | ) | (20 | ) | 104 | |||||||
Other operating activities | 18 | 53 | 70 | |||||||||
Change in assets and liabilities: | ||||||||||||
Accounts receivable, net | 29 | (60 | ) | 15 | ||||||||
Deferred costs | (26 | ) | (22 | ) | (46 | ) | ||||||
Other assets | (54 | ) | (71 | ) | (9 | ) | ||||||
Other current liabilities | 1 | 28 | 41 | |||||||||
Deferred revenue | 309 | 186 | 106 | |||||||||
Other liabilities | 4 | 59 | (26 | ) | ||||||||
Net cash provided by operating activities | 319 | 496 | 760 | |||||||||
Cash flows from investing activities: | ||||||||||||
Acquisitions, net of cash acquired | (615 | ) | (2 | ) | (5 | ) | ||||||
Additions to property and equipment | (61 | ) | (56 | ) | (42 | ) | ||||||
Other investing activities | (1 | ) | (5 | ) | (4 | ) | ||||||
Net cash used in investing activities | (677 | ) | (63 | ) | (51 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from IPO, net of underwriters discount and commissions | — | — | 586 | |||||||||
Use of proceeds from issuance of Class A common stock to purchase Foundation Technology Worldwide LLC (“FTW”) units | — | — | (33 | ) | ||||||||
Proceeds from the issuance of Member units | — | 1 | 2 | |||||||||
Proceeds from Excess Separation Note from Member of FTW | 20 | — | — | |||||||||
Payment for the long-term debt due to third party | (87 | ) | (67 | ) | (869 | ) | ||||||
Proceeds from long-term debt | 504 | 685 | — | |||||||||
Payment for debt issuance costs | (10 | ) | (6 | ) | (5 | ) | ||||||
Net change in principal due to debt modification | 52 | — | — | |||||||||
Distributions to members of FTW | — | (1,334 | ) | (277 | ) | |||||||
Payment of tax withholding for shares and units withheld | (10 | ) | (8 | ) | (24 | ) | ||||||
Payment of IPO related expenses | — | — | (8 | ) | ||||||||
Other financing activities | (10 | ) | (5 | ) | (23 | ) | ||||||
Net cash provided by (used in) financing activities | 459 | (734 | ) | (651 | ) | |||||||
Effect of exchange rate fluctuations on cash and cash equivalents | (4 | ) | — | 6 | ||||||||
Change in cash and cash equivalents | 97 | (301 | ) | 64 | ||||||||
Cash and cash equivalents, beginning of period | 371 | 468 | 167 | |||||||||
Cash and cash equivalents, end of period | $ | 468 | $ | 167 | $ | 231 | ||||||
Supplemental disclosures of noncash investing and financing activities and cash flow information: | ||||||||||||
Acquisition of property and equipment included in current liabilities | $ | (5 | ) | $ | (8 | ) | $ | (2 | ) | |||
Distributions to members of FTW included in liabilities | — | (4 | ) | (27 | ) | |||||||
Dividends payable included in liabilities | — | — | $ | (14 | ) | |||||||
Tax withholding for shares and units withheld included in liabilities | — | — | (4 | ) | ||||||||
Other | — | (2 | ) | (3 | ) | |||||||
Cash paid during the period for: | ||||||||||||
Interest, net of cash flow hedges | (290 | ) | (281 | ) | (268 | ) | ||||||
Income taxes, net of refunds | (49 | ) | (47 | ) | (49 | ) | ||||||
Foundation Technology Worldwide, LLC (prior to Reorganization Transactions) | McAfee Corp. Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Members’ Equity (Deficit) | Accumulated Deficit | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Deficit | Redeemable Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 30, 2017 | $ | — | $ | 663 | $ | (607 | ) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 56 | |||||||||||||||||||||||||||||||||||||||||||
Cumulative effect adjustment from adoption of ASC Topic 606 | — | — | (29 | ) | — | — | — | — | — | — | — | — | — | (29 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 2 | — | — | — | — | — | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based awards expense, net of equity withheld to cover taxes | — | 19 | — | — | — | — | — | — | — | — | — | — | 19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit repurchases | — | (7 | ) | — | — | — | — | — | — | — | — | — | — | (7 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | (512 | ) | — | — | — | — | — | — | — | — | — | (512 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 29, 2018 | 2 | 675 | (1,148 | ) | — | — | — | — | — | — | — | — | — | (471 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect adjustments from adoption of ASC Topic 842 | — | — | (1 | ) | — | — | — | — | — | — | — | — | — | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to Members | — | (1,338 | ) | — | — | — | — | — | — | — | — | — | — | (1,338 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | (64 | ) | — | — | — | — | — | — | — | — | — | — | — | (64 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based awards expense, net of equity withheld to cover taxes | — | 17 | — | — | — | — | — | — | — | — | — | — | 17 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit issuances | — | 1 | — | — | — | — | — | — | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit repurchases | — | (2 | ) | — | — | — | — | — | — | — | — | — | — | (2 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | (236 | ) | — | — | — | — | — | — | — | — | — | (236 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 28, 2019 | $ | (62 | ) | $ | (647 | ) | $ | (1,385 | ) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2,094 | ) | ||||||||||||||||||||||||||||||||||||||||
Activity prior to Reorganization Transactions and IPO | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to Members | — | (276 | ) | — | — | — | — | — | — | — | — | — | — | (276 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax (Note 16) | (71 | ) | — | — | — | — | — | — | — | — | — | — | — | (71 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based awards expense, net of equity withheld to cover taxes | — | 24 | — | — | — | — | — | — | — | — | — | — | 24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit issuances | — | 2 | — | — | — | — | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit repurchases (Note 7) | — | (10 | ) | — | — | — | — | — | — | — | — | — | — | (10 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification of redeemable units (Note 7) | — | (41 | ) | — | — | — | — | — | — | — | — | — | — | (41 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification of redeemable units (Note 7) | — | 41 | — | — | — | — | — | — | — | — | — | — | 41 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 26 | — | — | — | — | — | — | — | — | — | 26 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | 2 | — | — | — | — | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity in connection with Reorganization Transactions and IPO | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of reorganization transactions | 133 | 905 | 1,359 | — | — | — | — | (2,264 | ) | — | (133 | ) | (2,397 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock, net of costs | — | — | — | 126,314,024 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class B common stock | — | — | — | — | — | 268,779,392 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Initial effect of the Reorganization Transactions and IPO on redeemable noncontrolling interests | — | — | — | — | — | — | — | 968 | — | 84 | 1,052 | (1,052 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proceeds from IPO on sale of Class A shares | — | — | — | 30,982,558 | — | — | — | 586 | — | — | 586 | — | 586 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of FTW LLC units | — | — | — | — | — | (1,714,265 | ) | — | (33 | ) | — | — | (33 | ) | — | (33 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
IPO costs capitalized | — | — | — | — | — | — | — | (11 | ) | — | — | (11 | ) | — | (11 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Foundation Technology Worldwide, LLC (prior to Reorganization Transactions) | McAfee Corp. Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Members’ Equity (Deficit) | Accumulated Deficit | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Deficit | Redeemable Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax adjustment | — | — | — | — | — | — | — | 148 | — | — | 148 | — | 148 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance subsequent to Reorganization Transactions and IPO | — | — | — | 157,296,582 | — | 267,065,127 | — | (606 | ) | — | (49 | ) | (655 | ) | (1,052 | ) | (1,707 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Activity subsequent to Reorganization Transactions and IPO | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to RNCI | — | — | — | — | — | — | — | — | — | — | — | (24 | ) | (24 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared | — | — | — | — | — | — | — | (14 | ) | — | — | (14 | ) | — | (14 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax (Note 16) | — | — | — | — | — | — | — | — | — | 4 | 4 | 8 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense, net of withholding to cover taxes | — | — | — | 3,970,830 | — | — | — | 261 | — | — | 261 | — | 261 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (118 | ) | — | (118 | ) | (197 | ) | (315 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | (13 | ) | — | — | (13 | ) | — | (13 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of change in ownership in RNCI | — | — | — | — | — | — | — | (174 | ) | — | — | (174 | ) | 174 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value adjustment for RNCI | — | — | — | — | — | — | — | (5,931 | ) | — | — | (5,931 | ) | 5,931 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 26, 2020 | $ | — | $ | — | $ | — | 161,267,412 | $ | — | 267,065,127 | $ | — | $ | (6,477 | ) | $ | (118 | ) | $ | (45 | ) | $ | (6,640 | ) | $ | 4,840 | $ | (1,800 | ) | |||||||||||||||||||||||||||||||||||||||
| • | a new limited liability company operating agreement (“New LLC Agreement”) was adopted for FTW making the Corporation the sole managing member of FTW; |
| • | the Corporation’s certificate of incorporation was amended and restated to, among other things, (i) provide for Class A common stock and Class B common stock and (ii) issue shares of Class B common stock to the Continuing Owners and Management Owners, on a 1-to-1 |
| • | the Corporation (i) issued 126.3 million shares of its Class A common stock to certain of the Continuing Owners in exchange for their contribution of LLC units or the equity of certain other entities, which pursuant to the Reorganization Transactions, became its direct or indirect subsidiaries |
and (ii) settled 5.7 million restricted stock units (“RSUs”) with shares of its Class A common stock, net of tax withholding, held by certain employees, which were satisfied in connection with the Reorganization Transactions; and |
| • | the Corporation entered into (i) a tax receivable agreement (“TRA”) with certain of our Continuing Owners and certain Management Owners (collectively “TRA Beneficiaries”) and (ii) a stockholders agreement and a registration rights agreement with investment funds affiliated with or advised by TPG Global, LLC (“TPG”) and Thoma Bravo, L.P. (“Thoma Bravo”), respectively, and Intel Americas, Inc. (“Intel”). |
| • | projections of future cash flows related to revenue share and related agreements with our personal computer original equipment manufacturer partners; |
| • | amounts classified as discontinued operations; |
| • | fair value estimates for assets and liabilities acquired in business combinations; |
| • | the valuation and recoverability of identified intangible assets and goodwill; |
| • | recognition and measurement of current and deferred income taxes as well as our uncertain tax positions; |
| • | fair value of our equity awards; |
| • | fair value of long-term debt and related swaps; |
| • | amount of liability related to the tax receivable agreement; |
| • | determining the nature and timing of satisfaction of performance obligations, assessing any associated material rights and determining the standalone selling price (“SSP”) of performance obligations; and |
| • | determining our technology constrained customer life. |
1. | Identify the contract(s) with a customer non-cancelable purchase order or agreement that creates enforceable rights and obligations. |
2. | Identify the performance obligations in the contract |
3. | Determine the transaction price |
4. | Allocate the transaction price to the performance obligations in the contract |
5. | Recognize revenue when (or as) we satisfy a performance obligation |
| • | fair value of the unit; |
| • | life of the award; |
| • | volatility of the unit price; and |
| • | dividend yield |
| • | Whether the contract involves the use of a distinct identified asset; |
| • | Whether we obtain the right to obtain substantially all the economic benefits from the use of the asset throughout the period; and |
| • | Whether we have a right to direct the use of the asset. |
(in millions) | December 28, 2019 | December 26, 2020 | ||||||
Assets: | ||||||||
Accounts receivable, net | $ | 339 | $ | 290 | ||||
Deferred costs | 76 | 96 | ||||||
Other current assets | 19 | 16 | ||||||
Total current assets of discontinued operations | 434 | 402 | ||||||
Property and equipment, net | 56 | 34 | ||||||
Intangible assets, net | 1,091 | 915 | ||||||
Goodwill | 1,410 | 1,413 | ||||||
Deferred tax assets | 34 | 43 | ||||||
Other long-term assets | 174 | 155 | ||||||
Total assets of discontinued operations | $ | 3,199 | $ | 2,962 | ||||
Liabilities: | ||||||||
Accounts payable and other current liabilities | $ | 51 | $ | 39 | ||||
Accrued compensation and benefits | 21 | 18 | ||||||
Accrued marketing | 7 | 6 | ||||||
Lease liabilities, current portion | 16 | 15 | ||||||
Deferred revenue | 864 | 892 | ||||||
Total current liabilities of discontinued operations | 959 | 970 | ||||||
Deferred tax liabilities | 4 | 7 | ||||||
Other long-term liabilities | 56 | 51 | ||||||
Deferred revenue, less current portion | 651 | 604 | ||||||
Total liabilities of discontinued operations | $ | 1,670 | $ | 1,632 | ||||
Fiscal Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Net revenue | $ | 1,248 | $ | 1,332 | $ | 1,348 | ||||||
Operating income (loss) | (72 | ) | 8 | (46 | ) | |||||||
Income (loss) from discontinued operations before income taxes | (71 | ) | 8 | (46 | ) | |||||||
Income tax expense | 33 | 49 | 25 | |||||||||
Loss from discontinued operations, net of tax | (104 | ) | (41 | ) | (71 | ) | ||||||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Amortization and depreciation | $ | 254 | $ | 253 | $ | 212 | ||||||
Stock-based compensation expense | 22 | 20 | 200 | |||||||||
Purchases of property and equipment | 27 | 15 | 7 | |||||||||
(in millions) | December 28, 2019 | December 26, 2020 | ||||||
Capitalized acquisition costs within: | ||||||||
Deferred costs | $ | 109 | $ | 135 | ||||
Other long-term assets | 9 | 18 | ||||||
Total capitalized acquisition costs | $ | 118 | $ | 153 | ||||
Capitalized fulfillment costs within: | ||||||||
Deferred costs | $ | 2 | $ | 2 | ||||
Total capitalized fulfillment costs | $ | 2 | $ | 2 | ||||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Amortization of capitalized acquisition costs: | ||||||||||||
Net revenue | $ | 25 | $ | 23 | $ | 17 | ||||||
Cost of sales | 141 | 154 | 193 | |||||||||
Sales and marketing | 8 | 7 | 7 | |||||||||
Total amortization of capitalized acquisition costs from continuing operations | 174 | 184 | 217 | |||||||||
Discontinued operations | 50 | 74 | 82 | |||||||||
Total amortization of capitalized acquisition costs | $ | 224 | $ | 258 | $ | 299 | ||||||
Amortization of capitalized fulfillment costs: | ||||||||||||
Cost of sales | $ | 6 | $ | 5 | $ | 3 | ||||||
Discontinued operations | 5 | 7 | 10 | |||||||||
Total amortization of capitalized acquisition costs | $ | 11 | $ | 12 | $ | 13 | ||||||
Year Ended | ||||||||
(in millions) | December 28, 2019 | �� | December 26, 2020 | |||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 38 | $ | 38 | ||||
Right-of-use | 48 | 24 | ||||||
Lease expense from continuing operations | 21 | 16 | ||||||
Lease expense from discontinued operations | 25 | 21 | ||||||
Total lease expense | $ | 46 | $ | 37 | ||||
(in millions) | December 28, 2019 | December 26, 2020 | ||||||
Other long-term assets | $ | 37 | $ | 33 | ||||
Lease liabilities, current portion | $ | 13 | $ | 10 | ||||
Other long-term liabilities | 38 | 37 | ||||||
Total lease liabilities | $ | 51 | $ | 47 | ||||
Weighted Average Remaining Lease Term (in years) | 8 | 8 | ||||||
Weighted Average Discount Rate (percentage) | 6.3 | % | 6.3 | % | ||||
(in millions) | December 26, 2020 | |||
2021 | $ | 11 | ||
2022 | 7 | |||
2023 | 6 | |||
2024 | 5 | |||
2025 | 5 | |||
Thereafter | 26 | |||
Total lease payments | 60 | |||
Less imputed interest | (13 | ) | ||
Total lease liabilities | $ | 47 | ||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Beginning outstanding deferred cash and equity balance | $ | — | $ | 13 | $ | 20 | ||||||
Accruals | 39 | 35 | 12 | |||||||||
Restricted Class A Unit Vesting | (9 | ) | (12 | ) | (3 | ) | ||||||
Cash payment | (17 | ) | (16 | ) | (16 | ) | ||||||
Ending outstanding deferred cash and equity balance | $ | 13 | $ | 20 | $ | 13 | ||||||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Sales with related parties: | ||||||||||||
Intel | $ | 3 | $ | 10 | $ | 1 | ||||||
TPG | — | — | 1 | |||||||||
TPG affiliates | 5 | 4 | 2 | |||||||||
Other | 1 | 2 | 2 | |||||||||
Total | $ | 9 | $ | 16 | $ | 6 | ||||||
Payments to related parties: | ||||||||||||
Intel | $ | 7 | $ | 6 | $ | 15 | ||||||
TPG | 5 | 6 | 17 | |||||||||
TPG affiliates | 35 | 29 | 30 | |||||||||
Other | 6 | 21 | 16 | |||||||||
Total | $ | 53 | $ | 62 | $ | 78 | ||||||
(in millions) | December 28, 2019 | December 26, 2020 | ||||||
Intel receivable (1) | ||||||||
Tax indemnity | $ | 10 | $ | 8 | ||||
Total | 10 | 8 | ||||||
Intel payable (1) | ||||||||
Tax indemnity | (4 | ) | (2 | ) | ||||
Total | (4 | ) | (2 | ) | ||||
Total, net (2) | $ | 6 | $ | 6 | ||||
| (1) | We have the contractual right of offset of our receivables and payables with Intel. |
| (2) | As of December 26, 2020, $3 million and $3 million are recorded in Other current assets and Other long-term assets on the consolidated balance sheet, respectively. As of December 28, 2019, $2 million and $4 million are recorded in Other current assets and Other long-term assets on the consolidated balance sheet, respectively. |
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
United States | $ | 630 | $ | 739 | $ | 943 | ||||||
United Kingdom | 136 | 132 | 141 | |||||||||
Other (1) | 395 | 432 | 474 | |||||||||
Total net revenue | $ | 1,161 | $ | 1,303 | $ | 1,558 | ||||||
| (1) | No other individual country accounted for more than 10% of net revenue. |
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Employee severance and benefits | $ | 11 | $ | 5 | $ | 2 | ||||||
Facility Restructuring | 1 | 1 | — | |||||||||
Transition Charges | 7 | — | — | |||||||||
Total | $ | 19 | $ | 6 | $ | 2 | ||||||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Employee severance and benefits | $ | 16 | $ | 15 | $ | 23 | ||||||
Facility Restructuring | 1 | 1 | — | |||||||||
Total | $ | 17 | $ | 16 | $ | 23 | ||||||
(in millions) | Total | |||
Employee severance and benefits | ||||
As of December 30, 2017 | $ | 4 | ||
Additional accruals | 27 | |||
Cash payments | (30 | ) | ||
As of December 29, 2018 | 1 | |||
Additional accruals | 20 | |||
Cash payments | (19 | ) | ||
As of December 28, 2019 | 2 | |||
Additional accruals | 25 | |||
Cash payments | (11 | ) | ||
As of December 26, 2020 | $ | 16 | ||
Facility Restructuring | ||||
As of December 30, 2017 | $ | 7 | ||
Additional accruals | 2 | |||
Cash payments | (5 | ) | ||
As of December 29, 2018 | 4 | |||
Adjustment (1) | (4 | ) | ||
As of December 28, 2019 | — | |||
Additional accruals | — | |||
Cash payments | — | |||
As of December 26, 2020 | $ | — | ||
| (1) | Represents a reclassification to reduce ROU assets as part of the transition to ASC Topic 842. |
(in millions) | Total | |||
Balance as of December 29, 2018 | $ | 1,018 | ||
Additions | 0 | |||
Balance as of December 28, 2019 | $ | 1,018 | ||
Additions | 0 | |||
Balance as of December 26, 2020 | $ | 1,018 | ||
December 28, 2019 | December 26, 2020 | |||||||||||||||||||||||
(in millions) | Gross Assets | Accumulated Amortization | Net | Gross Assets | Accumulated Amortization | Net | ||||||||||||||||||
Intangible assets subject to amortization: | ||||||||||||||||||||||||
Customer relationships and other | $ | 758 | $ | (413 | ) | $ | 345 | $ | 758 | $ | (556 | ) | $ | 202 | ||||||||||
Acquired and developed technology | 517 | (293 | ) | 224 | 517 | (401 | ) | 116 | ||||||||||||||||
Total intangible assets subject to amortization | 1,275 | (706 | ) | 569 | 1,275 | (957 | ) | 318 | ||||||||||||||||
Intangible assets not subject to amortization: | ||||||||||||||||||||||||
Brand | 411 | 0 | 411 | 411 | 0 | 411 | ||||||||||||||||||
Total intangible assets not subject to amortization | 411 | 0 | 411 | 411 | 0 | 411 | ||||||||||||||||||
Total intangible assets | $ | 1,686 | $ | (706 | ) | $ | 980 | $ | 1,686 | $ | (957 | ) | $ | 729 | ||||||||||
Year Ended | ||||||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | Statements of Operations Classification | ||||||||||||
Customer relationships and other | $ | 153 | $ | 146 | $ | 143 | Amortization of intangibles | |||||||||
Acquired and developed technology | 107 | 107 | 108 | Cost of sales | ||||||||||||
Total | $ | 260 | $ | 253 | $ | 251 | ||||||||||
(in millions) | Total | |||
2021 | $ | 170 | ||
2022 | 76 | |||
2023 | 28 | |||
2024 | 20 | |||
2025 | 19 | |||
Thereafter | 5 | |||
Total | $ | 318 | ||
(in millions) | December 28, 2019 | December 26, 2020 | ||||||
Land, buildings and leasehold improvements | $ | 44 | $ | 63 | ||||
Computer equipment, software and other | 126 | 132 | ||||||
Construction in progress | 24 | 23 | ||||||
Total property and equipment | 194 | 218 | ||||||
Less: accumulated depreciation | (79 | ) | (103 | ) | ||||
Total property and equipment, net | $ | 115 | $ | 115 | ||||
Fiscal Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Cost of sales | $ | 1 | $ | 0 | $ | 5 | ||||||
Sales and marketing | 1 | 1 | 23 | |||||||||
Research and development | 1 | 1 | 40 | |||||||||
General and administrative | 3 | 3 | 45 | |||||||||
Total equity-based compensation expense from continuing operations | 6 | 5 | 113 | |||||||||
Discontinued operations | 22 | 20 | 200 | |||||||||
Total equity-based compensation expense | $ | 28 | $ | 25 | $ | 313 | ||||||
Number of Units (in millions) | Weighted Average Grant-Date Fair Value | |||||||
Balance as of October 21, 2020 | — | $ | — | |||||
Grants | 2.0 | $ | 15.97 | |||||
Grants replacing pre-IPO Awards | 27.6 | $ | 17.39 | |||||
Vested at IPO | (5.7 | ) | $ | 20.00 | ||||
Vested | (0.1 | ) | $ | 8.38 | ||||
Forfeited | (0.3 | ) | $ | 19.35 | ||||
Balance as of December 26, 2020 | 23.5 | $ | 16.65 | |||||
Number of Units (in millions) | Weighted Average Grant-Date Fair Value | |||||||
Balance as of October 21, 2020 | — | $ | — | |||||
Grants replacing pre-IPO CRSUs | 0.2 | $ | 19.28 | |||||
Grants replacing pre-IPO RSUs | 0.1 | $ | 8.25 | |||||
Balance as of December 26, 2020 | 0.3 | $ | 14.30 | |||||
Time-based | Performance-based | |||||||||||||||
Number of Units (in millions) | Weighted Average Grant-Date Fair Value | Number of Units (in millions) | Weighted Average Grant-Date Fair Value | |||||||||||||
Balance as of October 21, 2020 | — | $ | — | — | $ | — | ||||||||||
Grants | 0.5 | $ | 6.35 | — | ||||||||||||
Grants in connection with IPO | 1.3 | $ | 7.70 | 0.6 | $ | 7.84 | ||||||||||
Vested | (0.5 | ) | $ | 7.84 | — | |||||||||||
Balance as of December 26, 2020 | 1.3 | $ | 7.29 | 0.6 | $ | 7.84 | ||||||||||
Exercisable as of December 26, 2020 | 0.5 | — | ||||||||||||||
Weighted average strike price | $ | 20.00 | $ | — | ||||||||||||
Year Ended | ||||
December 26, 2020 | ||||
Estimated values | $ | 15.48 - $20.00 | ||
Expected life (in years) | 5.02 | |||
Risk-free interest rate | 0.37% - 0.83% | |||
Dividend yield | 1.50% - 2.25% | |||
Volatility | 40.00% | |||
Time-based | Performance-based | |||||||||||||||
Number of Units (in millions) | Weighted Average Grant-Date Fair Value | Number of Units (in millions) | Weighted Average Grant-Date Fair Value | |||||||||||||
Balance as of December 28, 2019 | 4.9 | $ | 2.98 | 6.0 | $ | 1.14 | ||||||||||
Grants | 5.6 | $ | 3.42 | — | — | |||||||||||
Vested | (2.2 | ) | $ | 4.15 | (0.9 | ) | $ | 8.64 | ||||||||
Forfeited | (1.6 | ) | $ | 2.64 | (2.4 | ) | $ | 0.92 | ||||||||
Balance as of December 26, 2020 | 6.7 | $ | 3.47 | 2.7 | $ | 1.41 | ||||||||||
Year Ended | ||||||||||||
December 29, 2018 | December 28, 2019 | December 26, 2020 | ||||||||||
Estimated values | $ | 10.67 - $10.85 | $ | 8.64 | $ | 8.64 - $14.32 | ||||||
Expected life (in years) | 3.69 | 3.17 | 2.82 | |||||||||
Risk-free interest rate | 2.2% - 2.91% | 1.43% - 1.67% | 0.18% - 1.34% | |||||||||
Dividend yield | 0.0% | 0.0% | 0.0% | |||||||||
Volatility | 40.35% - 43.31% | 35.91% - 36.37% | 35.00% - 40.97% | |||||||||
Number of Units (in millions) | Weighted Average Grant-Date Fair Value | |||||||
Balance as of December 28, 2019 | 2.9 | $ | 8.08 | |||||
Grants | 4.3 | $ | 9.46 | |||||
Vested | (1.4 | ) | $ | 8.80 | ||||
Forfeited | (0.7 | ) | $ | 9.14 | ||||
Converted into Class A Share RSUs | (5.1 | ) | $ | 8.13 | ||||
Balance as of December 26, 2020 | — | $ | — | |||||
(in millions) | Number of Time-based Units | Number of Performance- based Units | ||||||
Balance as of December 28, 2019 | 4.1 | 4.3 | ||||||
Grants | 1.4 | — | ||||||
Time-vested | (1.5 | ) | — | |||||
Forfeited | (0.8 | ) | (0.8 | ) | ||||
Converted into Class A Share RSUs | (3.2 | ) | (3.5 | ) | ||||
Balance as of December 26, 2020 | — | — | ||||||
(in millions) | Number of Units | |||
Balance as of December 28, 2019 | 5.2 | |||
Grants | 9.7 | |||
Time-vested | (2.5 | ) | ||
Forfeited | (1.0 | ) | ||
Converted into Class A Share RSUs | (11.4 | ) | ||
Balance as of December 26, 2020 | — | |||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Beginning retention awards balance | $ | 29 | $ | 11 | $ | 7 | ||||||
Accruals, net of forfeitures | 36 | 19 | 8 | |||||||||
Cash payments | (51 | ) | (23 | ) | (15 | ) | ||||||
Reclass to Intel Receivable | (3 | ) | — | — | ||||||||
Ending retention awards balance | $ | 11 | $ | 7 | $ | — | ||||||
(in millions) | December 28, 2019 | December 26, 2020 | ||||||
Long-term debt, net: | ||||||||
1 st Lien USD Term Loan(1) | $ | 3,020 | $ | 2,701 | ||||
1 st Lien Euro Term Loan(2) | 1,200 | 1,298 | ||||||
2 nd Lien USD Term Loan(3) | 509 | — | ||||||
Long-term debt, net of unamortized discounts | 4,729 | 3,999 | ||||||
Unamortized deferred financing costs | (17 | ) | (12 | ) | ||||
Current installments of long-term debt | (43 | ) | (44 | ) | ||||
Total | $ | 4,669 | $ | 3,943 | ||||
| (1) | During the year ended December 26, 2020, the weighted average interest rate was 4.4% |
| (2) | During the year ended December 26, 2020, the weighted average interest rate was 3.5% |
| (3) | During the year ended December 26, 2020, the weighted average interest rate was 9.7% |
Debt | Issue Date | Issue Principal | Interest Rate (1) | Interest Payment Frequency | Maturity Date | |||||||
1 st Lien | June 2019 | $ | 3,087 | 375 pts above LIBOR | Monthly | September 2024 | ||||||
1 st Lien | June 2019 | € | 1,092 | 350 pts above EURIBOR | Quarterly | September 2024 | ||||||
(in millions) | ||||
2021 | $ | 44 | ||
2022 | 45 | |||
2023 | 44 | |||
2024 | 3,905 | |||
2025 | — | |||
Thereafter | — | |||
Total debt repayment obligations | $ | 4,038 | ||
| • | 100% of net cash proceeds above a threshold amount of certain asset sales and casualty events, subject to (i) step-downs to (x) 50 % if our first lien net leverage ratio is less than or equal to 3.25 to 1.00, but greater than 2.50 to 1.00 and (y)0 % if our first lien net leverage ratio is less than or equal to 2.50 to 1.00 and (ii) reinvestment rights and certain other exceptions; |
| • | 100% of net cash proceeds of the incurrence of certain debt, other than certain debt permitted under the 1st Lien Credit Facility; and |
| • | 50% of annual excess cash flow, subject to (i) a step-down to 25 % if our first lien net leverage ratio is less than or equal to 3.25 to 1.00, but greater than 2.50 to 1.00, and (ii) a step-down to 0% if our first lien net leverage ratio is less than or equal to 2.50 to 1.00; provided that such a prepayment is required only in the amount (if any) by which such prepayment exceeds $35 million in such fiscal year. |
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
U.S. | $ | (405 | ) | $ | (199 | ) | $ | (238 | ) | |||
Non-U.S. | 26 | 42 | 25 | |||||||||
Loss from continuing operations before income taxes | $ | (379 | ) | $ | (157 | ) | $ | (213 | ) | |||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Current: | ||||||||||||
State | $ | 3 | $ | — | $ | 2 | ||||||
Non-U.S. | 23 | 31 | 7 | |||||||||
Total current | 26 | 31 | 9 | |||||||||
Deferred: | ||||||||||||
Federal | 6 | 1 | 1 | |||||||||
State | 1 | 2 | — | |||||||||
Non-U.S. | (4 | ) | 4 | (5 | ) | |||||||
Total deferred | 3 | 7 | (4 | ) | ||||||||
Provision for income tax expense | $ | 29 | $ | 38 | $ | 5 | ||||||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Income taxes computed at the U.S. federal statutory rate | $ | (81 | ) | $ | (33 | ) | $ | (45 | ) | |||
Non-U.S. income taxed at different rates | 3 | 8 | 4 | |||||||||
Withholding taxes | 9 | 6 | 6 | |||||||||
State tax expense | 4 | 2 | 2 | |||||||||
Partnership earnings flow through to partners | 93 | 45 | 22 | |||||||||
Redeemable noncontrolling interest | — | — | 17 | |||||||||
Valuation allowances | — | — | 24 | |||||||||
Foreign tax credits | — | — | (2 | ) | ||||||||
Uncertain tax positions | 1 | 9 | (11 | ) | ||||||||
Investment in partnerships | — | — | (11 | ) | ||||||||
Other | — | 1 | (1 | ) | ||||||||
Provision for income tax expense | $ | 29 | $ | 38 | $ | 5 | ||||||
(in millions) | December 28, 2019 | December 26, 2020 | ||||||
Deferred tax assets: | ||||||||
Accrued compensation and other benefits | $ | 2 | $ | 2 | ||||
Deferred revenue | 20 | 24 | ||||||
Share-based compensation | — | 3 | ||||||
Net operating losses | 31 | 74 | ||||||
Credits | 10 | 51 | ||||||
Intangibles | — | 151 | ||||||
Interest expense carryforward | 2 | 5 | ||||||
Other | — | 0 | ||||||
Total deferred tax assets | 65 | 310 | ||||||
Deferred tax liabilities: | ||||||||
Licenses and intangibles | (6 | ) | — | |||||
Unremitted earnings of non-US subsidiaries | (2 | ) | (1 | ) | ||||
Investment in partnership | (188 | ) | (78 | ) | ||||
Other | — | 0 | ||||||
Total deferred tax liabilities | (196 | ) | (79 | ) | ||||
Valuation allowance | (4 | ) | (212 | ) | ||||
Net deferred tax assets (liabilities) | $ | (135 | ) | $ | 19 | |||
Reported as: | ||||||||
Deferred tax assets | $ | 21 | $ | 24 | ||||
Deferred tax liabilities | (156 | ) | (5 | ) | ||||
Net deferred tax assets (liabilities) | $ | (135 | ) | $ | 19 | |||
Year Ended | ||||||||||||
(in millions) | December 29, 2018 | December 28, 2019 | December 26, 2020 | |||||||||
Beginning gross unrecognized tax benefits | $ | 10 | $ | 12 | $ | 27 | ||||||
Settlements with taxing authorities | (1 | ) | — | — | ||||||||
Increases in tax positions for prior years | 1 | — | — | |||||||||
Decreases in tax positions for prior years | (1 | ) | — | (14 | ) | |||||||
Increases in tax positions for current year | 3 | 15 | 4 | |||||||||
Ending gross unrecognized tax benefits | $ | 12 | $ | 27 | $ | 17 | ||||||
(in millions) | Level 1 | Level 2 | Level 3 | |||||||||
As of December 28, 2019 | ||||||||||||
Financial instruments not carried at fair value: | ||||||||||||
Long-term debt, gross of discounts and deferred issuance costs (Note 13) | $ | — | $ | (4,817 | ) | $ | — | |||||
Financial instruments carried at fair value: | ||||||||||||
Interest rate swaps | $ | — | $ | (61 | ) | $ | — | |||||
As of December 26, 2020 | ||||||||||||
Financial instruments not carried at fair value: | ||||||||||||
Long-term debt, gross of discounts and deferred issuance costs (Note 13) | $ | — | $ | (4,033 | ) | $ | — | |||||
Financial instruments carried at fair value: | ||||||||||||
Interest rate swaps | $ | — | $ | (119 | ) | $ | — | |||||
Notional Value (in millions) | Effective Date | Expiration Date | Fixed Rate | |||
| $225 | January 29, 2018 | January 29, 2021 | 2.33% | |||
| $250 | January 29, 2018 | January 29, 2022 | 2.41% | |||
| $275 | January 29, 2018 | January 29, 2023 | 2.48% | |||
| $275 | January 29, 2018 | January 29, 2023 | 2.49% | |||
| $475 | March 29, 2019 | March 29, 2024 | 2.40% | |||
| $750 | March 4, 2020 | September 29, 2024 | 2.07% | |||
| $250 | March 29, 2020 | March 29, 2024 | 0.93% | |||
| $225 | January 29, 2021 | January 29, 2024 | 0.42% |
(in millions) | Gross amounts recognized | Gross amount offset in Balance Sheets | Net amounts presented in Balance Sheets | |||||||||
As of December 28, 2019 | ||||||||||||
Accounts payable and other current liabilities | $ | (19 | ) | $ | — | $ | (19 | ) | ||||
Other long-term liabilities | (42 | ) | — | (42 | ) | |||||||
As of December 26, 2020 | ||||||||||||
Accounts payable and other current liabilities | $ | (43 | ) | $ | — | $ | (43 | ) | ||||
Other long-term liabilities | (76 | ) | — | (76 | ) | |||||||
(in millions except per share data) | Year Ended | |||||||||||
December 26, 2020 | ||||||||||||
Continuing Operations | Discontinued Operations | Total | ||||||||||
Numerator: | ||||||||||||
Net loss | $ | (218 | ) | $ | (71 | ) | $ | (289 | ) | |||
Less: Net (income) loss attributable to FTW prior to the Reorganization Transactions | 74 | (100 | ) | (26 | ) | |||||||
Less: Net loss attributable to redeemable noncontrolling interests after the Reorganization Transactions | 89 | 108 | 197 | |||||||||
Net loss attributable to McAfee Corp., basic and diluted | $ | (55 | ) | $ | (63 | ) | $ | (118 | ) | |||
Denominator: | ||||||||||||
Weighted average shares of Class A common stock outstanding, basic and diluted | 162.3 | 162.3 | 162.3 | |||||||||
Earnings (loss) per share attributable to McAfee Corp., basic | ||||||||||||
Earnings (loss) per share, basic | $ | (0.34 | ) | $ | (0.39 | ) | $ | (0.73 | ) | |||
Earnings (loss) per share attributable to McAfee Corp., diluted | ||||||||||||
Earnings (loss) per share, diluted (1) | $ | (0.34 | ) | $ | (0.39 | ) | $ | (0.73 | ) | |||
| (1) | Excluded from dilution includes a one for one conversion of our RNCI’s 267.1 million LLC units and an exchange of 5.4 million MIUs for their common equivalent of Class A common stock, based on the value of such MIUs relative to their applicable distribution threshold. 25.2 million weighted average units were also excluded from dilution. The excluded shares consist of RSUs, PSUs and stock options that were excluded |
| from dilution because their effects would have been anti-dilutive for the year ended December 26, 2020 and unvested 9.3 million MIUs outstanding with a weighted average unsatisfied distribution threshold of $5.91. |
(in millions) | December 26, 2020 | |||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ | 231 | ||
Accounts receivable, net | 102 | |||
Deferred costs | 137 | |||
Other current assets | 42 | |||
Current assets of discontinued operations | 402 | |||
Total current assets | 914 | |||
Property and equipment, net | 115 | |||
Goodwill | 1,018 | |||
Identified intangible assets, net | 729 | |||
Deferred tax assets | 25 | |||
Receivable from Parent, net | 46 | |||
Other long-term assets | 67 | |||
Long-term assets of discontinued operations | 2,560 | |||
Total assets | $ | 5,474 | ||
Liabilities and deficit | ||||
Current liabilities: | ||||
Accounts payable and other current liabilities | $ | 211 | ||
Accrued compensation and benefits | 179 | |||
Accrued marketing | 118 | |||
Income taxes payable | 14 | |||
Long-term debt, current portion | 44 | |||
Lease liabilities, current portion | 10 | |||
Liability to parent | — | |||
Deferred revenue | 823 | |||
Current liabilities of discontinued operations | 970 | |||
Total current liabilities | 2,369 | |||
Long-term debt, net | 3,943 | |||
Deferred tax liabilities | 5 | |||
Other long-term liabilities | 153 | |||
Deferred revenue, less current portion | 80 | |||
Long-term liabilities of discontinued operations | 662 | |||
Total liabilities | 7,212 | |||
Members’ deficit: | ||||
Deficit attributable to Continuing LLC Owners | (1,092 | ) | ||
Deficit attributable to McAfee Corp. | (646 | ) | ||
Total deficit | (1,738 | ) | ||
Total liabilities and deficit | $ | 5,474 | ||
(in millions) | ||||
2021 | $ | 49 | ||
2022 | 45 | |||
2023 | 39 | |||
2024 | 12 | |||
2025 | 4 | |||
Thereafter | — | |||
Total | $ | 149 | ||
December 26, 2020 | June 26, 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 231 | $ | 420 | ||||
Accounts receivable, net | 102 | 95 | ||||||
Deferred costs | 137 | 163 | ||||||
Other current assets | 42 | 44 | ||||||
Current assets of discontinued operations | 402 | 317 | ||||||
Total current assets | 914 | 1,039 | ||||||
Property and equipment, net | 115 | 103 | ||||||
Goodwill | 1,018 | 1,018 | ||||||
Identified intangible assets, net | 729 | 631 | ||||||
Deferred tax assets | 24 | 25 | ||||||
Other long-term assets | 68 | 93 | ||||||
Long-term assets of discontinued operations | 2,560 | 2,528 | ||||||
Total assets | $ | 5,428 | $ | 5,437 | ||||
Liabilities, redeemable noncontrolling interests and deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and other current liabilities | $ | 227 | $ | 257 | ||||
Accrued compensation and benefits | 179 | 117 | ||||||
Accrued marketing | 118 | 94 | ||||||
Income taxes payable | 14 | 18 | ||||||
Long-term debt, current portion | 44 | 44 | ||||||
Lease liabilities, current portion | 10 | 9 | ||||||
Deferred revenue | 823 | 926 | ||||||
Current liabilities of discontinued operations | 970 | 925 | ||||||
Total current liabilities | 2,385 | 2,390 | ||||||
Long-term debt, net | 3,943 | 3,904 | ||||||
Deferred tax liabilities | 5 | 7 | ||||||
Other long-term liabilities | 153 | 138 | ||||||
Deferred revenue, less current portion | 80 | 93 | ||||||
Long-term liabilities of discontinued operations | 662 | 609 | ||||||
Total liabilities | 7,228 | 7,141 | ||||||
Commitments and contingencies (Note 17) | ||||||||
Redeemable noncontrolling interests | 4,840 | 7,687 | ||||||
Equity (deficit): | ||||||||
Class A common stock, $0.001 par value—1,500,000,000 shares authorized, 166,004,840 shares issued and outstanding as of June 26, 2021 and 161,267,412 shares issued and outstanding as of December 26, 2020 | 0 | 0 | ||||||
Class B common stock, $0.001 par value—300,000,000 shares authorized, 265,376,691 shares issued and outstanding as of June 26, 2021 and 267,065,127 shares issued and outstanding as of December 26, 2020 | 0 | 0 | ||||||
Additional paid-in capital | (6,477 | ) | (9,306 | ) | ||||
Accumulated deficit | (118 | ) | (52 | ) | ||||
Accumulated other comprehensive income (loss) | (45 | ) | (33 | ) | ||||
Total deficit | (6,640 | ) | (9,391 | ) | ||||
Total liabilities, redeemable noncontrolling interests and deficit | $ | 5,428 | $ | 5,437 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | |||||||||||||
Net revenue | $ | 383 | $ | 467 | $ | 737 | $ | 909 | ||||||||
Cost of sales | 110 | 116 | 209 | 232 | ||||||||||||
Gross profit | 273 | 351 | 528 | 677 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 80 | 89 | 140 | 174 | ||||||||||||
Research and development | 37 | 48 | 75 | 92 | ||||||||||||
General and administrative | 42 | 45 | 100 | 93 | ||||||||||||
Amortization of intangibles | 36 | 13 | 72 | 49 | ||||||||||||
Restructuring charges (Note 9) | — | — | 1 | 8 | ||||||||||||
Total operating expenses | 195 | 195 | 388 | 416 | ||||||||||||
Operating income | 78 | 156 | 140 | 261 | ||||||||||||
Interest expense and other, net | (74 | ) | (58 | ) | (149 | ) | (118 | ) | ||||||||
Foreign exchange gain (loss), net | (17 | ) | (20 | ) | (6 | ) | 15 | |||||||||
Income (loss) from continuing operations before income taxes | (13 | ) | 78 | (15 | ) | 158 | ||||||||||
Provision for income tax expense (benefit) | 5 | 10 | (5 | ) | 7 | |||||||||||
Income (loss) from continuing operations | (18 | ) | 68 | (10 | ) | 151 | ||||||||||
Income from discontinued operations, net of taxes | 40 | 40 | 41 | 51 | ||||||||||||
Net income | $ | 22 | $ | 108 | $ | 31 | $ | 202 | ||||||||
Less: Net income attributable to redeemable noncontrolling interests | N/A | 72 | N/A | 136 | ||||||||||||
Net income attributable to McAfee Corp. | N/A | $ | 36 | N/A | $ | 66 | ||||||||||
Net income attributable to McAfee Corp.: | ||||||||||||||||
Income from continuing operations attributable to McAfee Corp. | N/A | $ | 23 | N/A | $ | 50 | ||||||||||
Income from discontinued operations attributable to McAfee Corp. | N/A | 13 | N/A | 16 | ||||||||||||
Net income attributable to McAfee Corp. | N/A | $ | 36 | N/A | $ | 66 | ||||||||||
Earnings per share attributable to McAfee Corp., basic: | ||||||||||||||||
Continuing operations | N/A | $ | 0.14 | N/A | $ | 0.31 | ||||||||||
Discontinued operations | N/A | 0.08 | N/A | 0.10 | ||||||||||||
Earnings per share, basic (1) | N/A | $ | 0.22 | N/A | $ | 0.40 | ||||||||||
Earnings per share attributable to McAfee Corp., diluted: | ||||||||||||||||
Continuing operations | N/A | $ | 0.14 | N/A | $ | 0.30 | ||||||||||
Discontinued operations | N/A | 0.07 | N/A | 0.09 | ||||||||||||
Earnings per share, diluted (1) | N/A | $ | 0.21 | N/A | $ | 0.39 | ||||||||||
Weighted-average shares outstanding, basic | N/A | 165.0 | N/A | 163.7 | ||||||||||||
Weighted-average shares outstanding, diluted | N/A | 182.8 | N/A | 179.5 | ||||||||||||
| (1) | Basic and diluted earnings per share of Class A common stock are not applicable prior to the initial public offering (“IPO”) and related Reorganization Transactions (as defined in Note 1 to the condensed consolidated financial statements). See Note 15 Earnings Per Share in the notes to the condensed consolidated financial statements for the number of shares used in the computation of earnings per share of Class A common stock and the basis for the computation of earnings per share. May not foot due to rounding. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | |||||||||||||
Net income | $ | 22 | $ | 108 | $ | 31 | $ | 202 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Interest rate cash flow hedges: | ||||||||||||||||
Gain (loss) on interest rate cash flow hedges, net of tax | (17 | ) | — | (96 | ) | 9 | ||||||||||
Reclassification adjustments for income on interest rate cash flow hedges | 11 | 12 | 15 | 24 | ||||||||||||
Pension and postretirement benefits income, net of tax | — | — | — | 1 | ||||||||||||
Total comprehensive income (loss) | $ | 16 | $ | 120 | $ | (50 | ) | $ | 236 | |||||||
Less: Comprehensive income attributable to redeemable noncontrolling interests | N/A | 80 | N/A | 158 | ||||||||||||
Total comprehensive income attributable to McAfee Corp. | N/A | $ | 40 | N/A | $ | 78 | ||||||||||
Six Months Ended | ||||||||
June 27, 2020 | June 26, 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 31 | $ | 202 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 252 | 153 | ||||||
Equity-based compensation | 19 | 78 | ||||||
Deferred taxes | 5 | — | ||||||
Foreign exchange (gain) loss, net | 6 | (15 | ) | |||||
Other operating activities | 27 | 29 | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable, net | 126 | 100 | ||||||
Deferred costs | (22 | ) | (32 | ) | ||||
Other assets | (14 | ) | (45 | ) | ||||
Other current liabilities | (29 | ) | 6 | |||||
Deferred revenue | (27 | ) | 10 | |||||
Other liabilities | (86 | ) | (38 | ) | ||||
Net cash provided by operating activities | 288 | 448 | ||||||
Cash flows from investing activities: | ||||||||
Acquisitions, net of cash acquired | (5 | ) | — | |||||
Additions to property and equipment | (25 | ) | (14 | ) | ||||
Other investing activities | (3 | ) | (4 | ) | ||||
Net cash used in investing activities | (33 | ) | (18 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from the issuance of Member units | 1 | — | ||||||
Payment for the long-term debt | (21 | ) | (22 | ) | ||||
Distributions to members of FTW | (130 | ) | (148 | ) | ||||
Payment of dividends | — | (33 | ) | |||||
Payment of tax withholding for shares and units withheld | (2 | ) | (38 | ) | ||||
Payment of IPO related expenses | — | (3 | ) | |||||
Other financing activities | (10 | ) | 5 | |||||
Net cash used in financing activities | (162 | ) | (239 | ) | ||||
Effect of exchange rate fluctuations on cash and cash equivalents | (3 | ) | (2 | ) | ||||
Change in cash and cash equivalents | 90 | 189 | ||||||
Cash and cash equivalents, beginning of period | 167 | 231 | ||||||
Cash and cash equivalents, end of period | $ | 257 | $ | 420 | ||||
Supplemental disclosures of noncash investing and financing activities and cash flow information: | ||||||||
Acquisition of property and equipment included in current liabilities | $ | (5 | ) | $ | (6 | ) | ||
Distributions to members of FTW included in liabilities | (1 | ) | (31 | ) | ||||
Dividends payable included in liabilities | — | (19 | ) | |||||
Other | 3 | — | ||||||
Cash paid during the period for: | ||||||||
Interest, net of cash flow hedges | (141 | ) | (101 | ) | ||||
Income taxes, net of refunds | (22 | ) | (29 | ) | ||||
Foundation Technology Worldwide, LLC (prior to Reorganization Transactions) | McAfee Corp. Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Members’ Equity (Deficit) | Accumulated Deficit | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Deficit | Redeemable Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 28, 2019 | $ | (62 | ) | $ | (647 | ) | $ | (1,385 | ) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2,094 | ) | ||||||||||||||||||||||||||||||||||||||||
Distributions to Members | — | (131 | ) | — | — | — | — | — | — | — | — | — | — | (131 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | (81 | ) | — | — | — | — | — | — | — | — | — | — | — | (81 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based awards expense, net of equity withheld to cover taxes | — | 17 | — | — | — | — | — | — | — | — | — | — | 17 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit issuances | — | 1 | — | — | — | — | — | — | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit repurchases (Note 6) | — | (10 | ) | — | — | — | — | — | — | — | — | — | — | (10 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification of redeemable units (Note 6) | — | (17 | ) | — | — | — | — | — | — | — | — | — | — | (17 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 31 | — | — | — | — | — | — | — | — | — | 31 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | 2 | — | — | — | — | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 27, 2020 | $ | (143 | ) | $ | (785 | ) | $ | (1,354 | ) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2,282 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at December 26, 2020 | $ | — | $ | — | $ | — | 161,267,412 | $ | — | 267,065,127 | $ | — | $ | (6,477 | ) | $ | (118 | ) | $ | (45 | ) | $ | (6,640 | ) | $ | 4,840 | $ | (1,800 | ) | |||||||||||||||||||||||||||||||||||||||
Distributions to RNCI | — | — | — | — | — | — | — | — | — | — | — | (152 | ) | (152 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared | — | — | — | — | — | — | — | (38 | ) | — | — | (38 | ) | — | (38 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | — | — | — | — | 12 | 12 | 22 | 34 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based awards expense, net of equity withheld to cover taxes | — | — | — | 2,237,271 | — | — | — | 45 | — | — | 45 | — | 45 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuances | — | — | — | 222,153 | — | — | — | 5 | — | — | 5 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RNCI units conversion into Class A shares | — | — | — | 2,278,004 | — | (1,688,436 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | 66 | — | 66 | 136 | 202 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of change in ownership in RNCI | — | — | — | — | — | — | — | (42 | ) | — | — | (42 | ) | 42 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value adjustment for RNCI | — | — | — | — | — | — | — | (2,799 | ) | — | — | (2,799 | ) | 2,799 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 26, | $ | — | $ | — | $ | ��� | 166,004,840 | $ | — | 265,376,691 | $ | — | $ | (9,306 | ) | $ | (52 | ) | $ | (33 | ) | $ | (9,391 | ) | $ | 7,687 | $ | (1,704 | ) | |||||||||||||||||||||||||||||||||||||||
Foundation Technology Worldwide, LLC (prior to Reorganization Transactions) | McAfee Corp. Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Members’ Equity (Deficit) | Accumulated Deficit | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Retained Earnings / Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Deficit | Redeemable Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 28, 2020 | $ | (137 | ) | $ | (707 | ) | $ | (1,376 | ) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2,220 | ) | ||||||||||||||||||||||||||||||||||||||||
Distributions to Members | — | (81 | ) | — | — | — | — | — | — | — | — | — | — | (81 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | (6 | ) | — | — | — | — | — | — | — | — | — | — | — | (6 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based awards expense, net of equity withheld to cover taxes | — | 2 | — | �� | — | — | — | — | — | — | — | — | — | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit issuances | — | 1 | — | — | — | — | — | — | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 22 | — | — | — | — | — | — | — | — | — | 22 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 27, 2020 | $ | (143 | ) | $ | (785 | ) | $ | (1,354 | ) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2,282 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 27, 2021 | $ | — | $ | — | $ | — | 162,372,554 | $ | — | 267,065,127 | $ | — | $ | (7,835 | ) | $ | (88 | ) | $ | (37 | ) | $ | (7,960 | ) | $ | 6,177 | $ | (1,783 | ) | |||||||||||||||||||||||||||||||||||||||
Distributions to RNCI | — | — | — | — | — | — | — | — | — | — | — | (65 | ) | (65 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared | — | — | — | — | — | — | — | (19 | ) | — | — | (19 | ) | — | (19 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | — | — | — | — | 4 | 4 | 8 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based awards expense, net of equity withheld to cover taxes | — | — | — | 1,132,129 | — | — | — | 38 | — | — | 38 | — | 38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issuances | — | — | — | 222,153 | — | — | — | 5 | — | — | 5 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RNCI units conversion into Class A shares | — | — | — | 2,278,004 | — | (1,688,436 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | 36 | — | 36 | 72 | 108 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of change in ownership in RNCI | — | — | — | — | — | — | — | (38 | ) | — | — | (38 | ) | 38 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value adjustment for RNCI | — | — | — | — | — | — | — | (1,457 | ) | — | — | (1,457 | ) | 1,457 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 26, 2021 | $ | — | $ | — | $ | — | 166,004,840 | $ | — | 265,376,691 | $ | — | $ | (9,306 | ) | $ | (52 | ) | $ | (33 | ) | $ | (9,391 | ) | $ | 7,687 | $ | (1,704 | ) | |||||||||||||||||||||||||||||||||||||||
| • | a new limited liability company operating agreement (“New LLC Agreement”) was adopted for FTW making the Corporation the sole managing member of FTW; |
| • | the Corporation’s certificate of incorporation was amended and restated to, among other things, (i) provide for Class A common stock and Class B common stock and (ii) issue shares of Class B common stock to the Continuing Owners and Management Owners, on a one-to-one |
| • | the Corporation (i) issued 126.3 million shares of its Class A common stock to certain of the Continuing Owners in exchange for their contribution of LLC units or the equity of certain other |
entities, which pursuant to the Reorganization Transactions, became its direct or indirect subsidiaries and (ii) settled 5.7 million restricted stock units (“RSUs”) with shares of its Class A common stock, net of tax withholding, held by certain employees, which were satisfied in connection with the Reorganization Transactions; and |
| • | the Corporation entered into (i) a tax receivable agreement (“TRA”) with certain of our Continuing Owners and certain Management Owners (collectively “TRA Beneficiaries”) and (ii) a stockholders agreement and a registration rights agreement with investment funds affiliated with or advised by TPG Global, LLC (“TPG”) and Thoma Bravo, L.P. (“Thoma Bravo”), respectively, and Intel Americas, Inc. (“Intel”). |
| • | projections of future cash flows related to revenue share and related agreements with our personal computer original equipment manufacturer partners; |
| • | amounts classified as discontinued operations; |
| • | the valuation and recoverability of identified intangible assets and goodwill; |
| • | recognition and measurement of current and deferred income taxes as well as our uncertain tax positions; |
| • | fair value of our equity awards; |
| • | fair value of long-term debt and related swaps; |
| • | amount of liability related to the tax receivable agreement; |
| • | determining the nature and timing of satisfaction of performance obligations, assessing any associated material rights and determining the standalone selling price (“SSP”) of performance obligations; and |
| • | determining our technology constrained customer life. |
(in millions) | December 26, 2020 | June 26, 2021 | ||||||
Assets: | ||||||||
Accounts receivable, net | $ | 290 | $ | 194 | ||||
Deferred costs | 96 | 102 | ||||||
Other current assets | 16 | 21 | ||||||
Total current assets of discontinued operations | 402 | 317 | ||||||
Property and equipment, net | 34 | 37 | ||||||
Intangible assets, net | 915 | 881 | ||||||
Goodwill | 1,413 | 1,413 | ||||||
Deferred tax assets | 43 | 40 | ||||||
Other long-term assets | 155 | 157 | ||||||
Total assets of discontinued operations | $ | 2,962 | $ | 2,845 | ||||
Liabilities: | ||||||||
Accounts payable and other current liabilities | $ | 39 | $ | 37 | ||||
Accrued compensation and benefits | 18 | 18 | ||||||
Accrued marketing | 6 | 8 | ||||||
Lease liabilities, current portion | 15 | 17 | ||||||
Deferred revenue | 892 | 845 | ||||||
Total current liabilities of discontinued operations | 970 | 925 | ||||||
Deferred tax liabilities | 7 | 6 | ||||||
Other long-term liabilities | 51 | 58 | ||||||
Deferred revenue, less current portion | 604 | 545 | ||||||
Total liabilities of discontinued operations | $ | 1,632 | $ | 1,534 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | ||||||||||||
Net revenue | $ | 333 | $ | 346 | $ | 664 | $ | 677 | ||||||||
Operating income | $ | 49 | $ | 54 | $ | 58 | $ | 73 | ||||||||
Income before income taxes | $ | 49 | $ | 51 | $ | 58 | $ | 69 | ||||||||
Income tax expense | $ | 9 | $ | 11 | $ | 17 | $ | 18 | ||||||||
Income from discontinued operations, net of taxes | $ | 40 | $ | 40 | $ | 41 | $ | 51 | ||||||||
Six Months Ended | ||||||||
(in millions) | June 27, 2020 | June 26, 2021 | ||||||
Depreciation and amortization | $ | 112 | $ | 41 | ||||
Equity-based compensation expense | $ | 3 | $ | 45 | ||||
Additions to property and equipment | $ | 4 | $ | 3 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
(in millions except percentages) | June 27, 2020 | % of Total | June 26, 2021 | % of Total | June 27, 2020 | % of Total | June 26, 2021 | % of Total | ||||||||||||||||||||||||
Americas | $ | 251 | 65.5 | % | $ | 309 | 66.2 | % | $ | 482 | 65.4 | % | $ | 601 | 66.1 | % | ||||||||||||||||
EMEA | 90 | 23.5 | % | 109 | 23.3 | % | 175 | 23.7 | % | 213 | 23.4 | % | ||||||||||||||||||||
APJ | 42 | 11.0 | % | 49 | 10.5 | % | 80 | 10.9 | % | 95 | 10.5 | % | ||||||||||||||||||||
Total net revenue | $ | 383 | 100.0 | % | $ | 467 | 100.0 | % | $ | 737 | 100.0 | % | $ | 909 | 100.0 | % | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
(in millions except percentages) | June 27, 2020 | % of Total | June 26, 2021 | % of Total | June 27, 2020 | % of Total | June 26, 2021 | % of Total | ||||||||||||||||||||||||
Direct to Consumer | $ | 294 | 76.8 | % | $ | 344 | 73.7 | % | $ | 575 | 78.0 | % | $ | 673 | 74.0 | % | ||||||||||||||||
Indirect | 89 | 23.2 | % | 123 | 26.3 | % | 162 | 22.0 | % | 236 | 26.0 | % | ||||||||||||||||||||
Total net revenue | $ | 383 | 100.0 | % | $ | 467 | 100.0 | % | $ | 737 | 100.0 | % | $ | 909 | 100.0 | % | ||||||||||||||||
Six Months Ended | ||||||||
(in millions) | June 27, 2020 | June 26, 2021 | ||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 20 | $ | 19 | ||||
Right-of-use | 14 | 20 | ||||||
Lease expense from continuing operations | $ | 9 | $ | 7 | ||||
Lease expense from discontinued operations | 10 | 11 | ||||||
Total lease expense | $ | 19 | $ | 18 | ||||
(in millions) | December 26, 2020 | June 26, 2021 | ||||||
Other long-term assets | $ | 33 | $ | 31 | ||||
Lease liabilities, current portion | $ | 10 | $ | 9 | ||||
Other long-term liabilities | 37 | 34 | ||||||
Total lease liabilities | $ | 47 | $ | 43 | ||||
Weighted Average Remaining Lease Term (in years) | 8 | 8 | ||||||
Weighted Average Discount Rate (percentage) | 6.3 | % | 6.1 | % | ||||
(in millions) | June 26, 2021 | |||
Remainder of 2021 | $ | 5 | ||
2022 | 8 | |||
2023 | 6 | |||
2024 | 5 | |||
2025 | 5 | |||
Thereafter | 26 | |||
Total lease payments | 55 | |||
Less imputed interest | (12 | ) | ||
Total lease liabilities | $ | 43 | ||
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | ||||||||||||
FTW members excluding McAfee Corp. | $ | 81 | $ | 65 | $ | 131 | $ | 152 | ||||||||
McAfee Corp. | — | 39 | — | 90 | ||||||||||||
Total tax and excess cash distributions declared | $ | 81 | $ | 104 | $ | 131 | $ | 242 | ||||||||
Declaration Date | Record Date | Payment Date | Dividend per Share | Amount (in millions) | ||||
December 9, 2020 | December 24, 2020 | January 2021 | $0.087 | $14 | ||||
March 11, 2021 | March 26, 2021 | April 9, 2021 | $0.115 | $19 | ||||
June 10, 2021 | June 25, 2021 | July 9, 2021 | $0.115 | $19 |
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | ||||||||||||
Sales with related parties: | ||||||||||||||||
TPG affiliates | $ | 0 | $ | 0 | $ | 1 | $ | 1 | ||||||||
Other | 2 | 0 | 2 | — | ||||||||||||
Total | $ | 2 | $ | 0 | $ | 3 | $ | 1 | ||||||||
Payments to related parties: | ||||||||||||||||
Intel | $ | 2 | $ | 0 | $ | 2 | $ | 1 | ||||||||
TPG | 4 | — | 5 | — | ||||||||||||
TPG affiliates | 7 | 8 | 15 | 18 | ||||||||||||
Other | 2 | 2 | 9 | 2 | ||||||||||||
Total | $ | 15 | $ | 10 | $ | 31 | $ | 21 | ||||||||
(in millions) | December 26, 2020 | June 26, 2021 | ||||||
Intel receivable (1) | ||||||||
Tax indemnity | $ | 8 | $ | 9 | ||||
Total | 8 | 9 | ||||||
Intel payable (1) | ||||||||
Tax indemnity | (2 | ) | (3 | ) | ||||
Total | (2 | ) | (3 | ) | ||||
Total, net (2) | $ | 6 | $ | 6 | ||||
| (1) | We have the contractual right of offset of our receivables and payables with Intel. |
| (2) | As of June 26, 2021, $5 million and $1 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet. As of December 26, 2020, $3 million and $3 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet. |
December 26, 2020 | June 26, 2021 | |||||||||||||||||||||||
(in millions) | Gross Assets | Accumulated Amortization | Net | Gross Assets | Accumulated Amortization | Net | ||||||||||||||||||
Intangible assets subject to amortization: | ||||||||||||||||||||||||
Customer relationships and other | $ | 758 | $ | (556 | ) | $ | 202 | $ | 758 | $ | (605 | ) | $ | 153 | ||||||||||
Acquired and developed technology | 517 | (401 | ) | 116 | 517 | (450 | ) | 67 | ||||||||||||||||
Total intangible assets subject to amortization | 1,275 | (957 | ) | 318 | 1,275 | (1,055 | ) | 220 | ||||||||||||||||
Intangible assets not subject to amortization: | ||||||||||||||||||||||||
Brand | 411 | 0 | 411 | 411 | 0 | 411 | ||||||||||||||||||
Total intangible assets not subject to amortization | 411 | 0 | 411 | 411 | 0 | 411 | ||||||||||||||||||
Total intangible assets | $ | 1,686 | $ | (957 | ) | $ | 729 | $ | 1,686 | $ | (1,055 | ) | $ | 631 | ||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
(in millions) | June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | Statements of Operations Classification | |||||||||||||
Customer relationships and other | $ | 36 | $ | 13 | $ | 49 | $ | 72 | Amortization of intangibles | |||||||||
Acquired and developed technology | 27 | 22 | 49 | 54 | Cost of sales | |||||||||||||
Total | $ | 63 | $ | 35 | $ | 98 | $ | 126 | ||||||||||
(in millions) | Total | |||
Remainder of 2021 | $ | 72 | ||
2022 | 76 | |||
2023 | 28 | |||
2024 | 20 | |||
2025 | 19 | |||
Thereafter | 5 | |||
Total | $ | 220 | ||
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | ||||||||||||
U.S. | $ | 231 | $ | 284 | $ | 442 | $ | 552 | ||||||||
Other (1) | 152 | 183 | 295 | 357 | ||||||||||||
Total net revenue | $ | 383 | $ | 467 | $ | 737 | $ | 909 | ||||||||
| (1) | NaN other individual country accounted for more than 10% of net revenue. |
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | ||||||||||||
Employee severance and benefits | $ | — | $ | — | $ | 1 | $ | 8 | ||||||||
Restructuring charges attributable to continuing operations | — | — | 1 | 8 | ||||||||||||
Employee severance and benefits | — | 2 | 8 | 24 | ||||||||||||
Facility restructuring | — | — | — | 1 | ||||||||||||
Restructuring charges attributable to discontinued operations | — | 2 | 8 | 25 | ||||||||||||
Total restructuring charges | $ | — | $ | 2 | $ | 9 | $ | 33 | ||||||||
(in millions) | Total | |||
Employee severance and benefits | ||||
As of December 26, 2020 | $ | 16 | ||
Additional accruals | 32 | |||
Cash payments | (41 | ) | ||
As of June 26, 2021 | $ | 7 | ||
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | June 27, 2020 | June 26, 2021 | June 27, 2020 | June 26, 2021 | ||||||||||||
Cost of sales | $ | — | $ | 1 | $ | — | $ | 2 | ||||||||
Sales and marketing | — | 4 | 1 | 7 | ||||||||||||
Research and development | — | 7 | — | 10 | ||||||||||||
General and administrative | 2 | 7 | 15 | 14 | ||||||||||||
Total equity-based compensation expense from continuing operations | 2 | 19 | 16 | 33 | ||||||||||||
Discontinued operations | 2 | 33 | 3 | 45 | ||||||||||||
Total equity-based compensation expense | $ | 4 | $ | 52 | $ | 19 | $ | 78 | ||||||||
(in millions) | ||||
Outstanding deferred cash and equity balance at December 26, 2020 | $ | 13 | ||
Accruals | 3 | |||
Cash payment | (15 | ) | ||
Outstanding deferred cash and equity balance at June 26, 2021 | $ | 1 | ||
(in millions) | December 26, 2020 | June 26, 2021 | ||||||
Long-term debt, net: | ||||||||
1 st Lien USD Term Loan(1) | $ | 2,701 | $ | 2,690 | ||||
1 st Lien Euro Term Loan(2) | 1,298 | 1,269 | ||||||
Long-term debt, net of unamortized discounts | 3,999 | 3,959 | ||||||
Unamortized deferred financing costs | (12 | ) | (11 | ) | ||||
Current installments of long-term debt | (44 | ) | (44 | ) | ||||
Total | $ | 3,943 | $ | 3,904 | ||||
| (1) | During the six months ended June 26, 2021, the weighted average interest rate was 3.9% |
| (2) | During the six months ended June 26, 2021, the weighted average interest rate was 3.5% |
| • | Recognition of certain deferred tax assets and corresponding discrete income tax benefit up to $125 million. |
| • | Recognition of a long-term TRA liability and corresponding TRA expense of $170 million to $260 million, including the TRA liability recorded directly as a result of tax attributes utilized from the Enterprise Business divestiture (Note 3). This TRA liability relates to net deferred tax assets that did not meet the probable recognition criteria as of December 26, 2020 and thus was not recorded in our consolidated balance sheet as of that date. |
(in millions) | Level 1 | Level 2 | Level 3 | |||||||||
As of December 26, 2020 | ||||||||||||
Financial instruments not carried at fair value: | ||||||||||||
Long-term debt, gross of discounts and deferred issuance costs (Note 11) | $ | — | $ | (4,033 | ) | $ | — | |||||
Financial instruments carried at fair value: | ||||||||||||
Interest rate swaps | $ | — | $ | (119 | ) | $ | — | |||||
As of June 26, 2021 | ||||||||||||
Financial instruments not carried at fair value: | ||||||||||||
Long-term debt, gross of discounts and deferred issuance costs (Note 11) | $ | — | $ | (3,991 | ) | $ | — | |||||
Financial instruments carried at fair value: | ||||||||||||
Interest rate swaps | $ | — | $ | (86 | ) | $ | — | |||||
Notional Value (in millions) | Effective Date | Expiration Date | Fixed Rate | |||
$250 | January 29, 2018 | January 29, 2022 | 2.41% | |||
$275 | January 29, 2018 | January 29, 2023 | 2.48% | |||
$275 | January 29, 2018 | January 29, 2023 | 2.49% | |||
$475 | March 29, 2019 | March 29, 2024 | 2.40% | |||
$750 | March 4, 2020 | September 29, 2024 | 2.07% | |||
$250 | March 29, 2020 | March 29, 2024 | 0.93% | |||
$225 | January 29, 2021 | January 29, 2024 | 0.42% |
(in millions) | Gross amounts recognized | Gross amount offset in Balance Sheets | Net amounts presented in Balance Sheets | |||||||||
As of December 26, 2020 | ||||||||||||
Accounts payable and other current liabilities | $ | (43 | ) | $ | — | $ | (43 | ) | ||||
Other long-term liabilities | (76 | ) | — | (76 | ) | |||||||
As of June 26, 2021 | ||||||||||||
Accounts payable and other current liabilities | $ | (41 | ) | $ | — | $ | (41 | ) | ||||
Other long-term liabilities | (45 | ) | — | (45 | ) | |||||||
December 26, 2020 | June 26, 2021 | |||||||||||||||
(in millions except percentages) | Units Outstanding | Ownership % | Units Outstanding | Ownership % | ||||||||||||
Number of LLC Units held by McAfee Corp. | 161.3 | 37.2 | % | 166.0 | 38.0 | % | ||||||||||
Number of LLC Units and vested MIUs held by RNCI | 272.5 | 62.8 | % | 271.3 | 62.0 | % | ||||||||||
Total LLC Units and vested MIUs outstanding | 433.8 | 100.0 | % | 437.3 | 100.0 | % | ||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
(in millions except per share data) | June 26, 2021 | June 26, 2021 | ||||||||||||||||||||||
Continuing Operations | Discontinued Operations | Total | Continuing Operations | Discontinued Operations | Total | |||||||||||||||||||
Numerator: | ||||||||||||||||||||||||
Net income attributable to McAfee Corp., basic | $ | 23 | $ | 13 | $ | 36 | $ | 50 | $ | 16 | $ | 66 | ||||||||||||
Net income attributable to change in ownership percentage due to dilutive equity awards | 2 | — | 2 | 4 | — | 4 | ||||||||||||||||||
Less: Provision for income tax expense (1) | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Net income attributable to McAfee Corp., diluted | $ | 25 | $ | 13 | $ | 38 | $ | 54 | $ | 16 | $ | 70 | ||||||||||||
Denominator: | ||||||||||||||||||||||||
Weighted average shares of Class A common stock outstanding, basic | 165.0 | 165.0 | 165.0 | 163.7 | 163.7 | 163.7 | ||||||||||||||||||
Dilutive impact of equity awards (2) | 17.8 | 17.8 | 17.8 | 15.8 | 15.8 | 15.8 | ||||||||||||||||||
Weighted average shares of Class A common stock outstanding, diluted | 182.8 | 182.8 | 182.8 | 179.5 | 179.5 | 179.5 | ||||||||||||||||||
Earnings per share attributable to McAfee Corp., basic | ||||||||||||||||||||||||
Earnings per share, basic (3) | $ | 0.14 | $ | 0.08 | $ | 0.22 | $ | 0.31 | $ | 0.10 | $ | 0.40 | ||||||||||||
Earnings per share attributable to McAfee Corp., diluted | ||||||||||||||||||||||||
Earnings per share, diluted (4) | $ | 0.14 | $ | 0.07 | $ | 0.21 | $ | 0.30 | $ | 0.09 | $ | 0.39 | ||||||||||||
| (1) | Represents incremental income tax provision we would have recognized due to change in ownership. |
| (2) | Represents the dilutive impact of equity awards. |
| (3) | Amounts may not add due to rounding. |
| (4) | For the three and six months ended June 26, 2021, 271.5 million and 272.7 million weighted average units were excluded from dilution, respectively. The excluded units consist primarily of RNCI that is excluded from dilution because its effects would have been anti-dilutive. |
(in millions) | December 26, 2020 | June 26, 2021 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 231 | $ | 416 | ||||
Accounts receivable, net | 102 | 95 | ||||||
Deferred costs | 137 | 163 | ||||||
Other current assets | 42 | 44 | ||||||
Current assets of discontinued operations | 402 | 317 | ||||||
Total current assets | 914 | 1,035 | ||||||
Property and equipment, net | 115 | 103 | ||||||
Goodwill | 1,018 | 1,018 | ||||||
Identified intangible assets, net | 729 | 631 | ||||||
Deferred tax assets | 25 | 25 | ||||||
Receivable from Parent, net | 46 | 0 | ||||||
Other long-term assets | 67 | 93 | ||||||
Long-term assets of discontinued operations | 2,560 | 2,528 | ||||||
Total assets | $ | 5,474 | $ | 5,433 | ||||
Liabilities and deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and other current liabilities | $ | 211 | $ | 236 | ||||
Accrued compensation and benefits | 179 | 117 | ||||||
Accrued marketing | 118 | 94 | ||||||
Income taxes payable | 14 | 18 | ||||||
Long-term debt, current portion | 44 | 44 | ||||||
Lease liabilities, current portion | 10 | 9 | ||||||
Liability to Parent, net | — | 3 | ||||||
Deferred revenue | 823 | 926 | ||||||
Current liabilities of discontinued operations | 970 | 925 | ||||||
Total current liabilities | 2,369 | 2,372 | ||||||
Long-term debt, net | 3,943 | 3,904 | ||||||
Deferred tax liabilities | 5 | 7 | ||||||
Other long-term liabilities | 153 | 126 | ||||||
Deferred revenue, less current portion | 80 | 93 | ||||||
Long-term liabilities of discontinued operations | 662 | 609 | ||||||
Total liabilities | 7,212 | 7,111 | ||||||
Members’ deficit: | ||||||||
Deficit attributable to Continuing LLC Owners | (1,092 | ) | (1,041 | ) | ||||
Deficit attributable to McAfee Corp. | (646 | ) | (637 | ) | ||||
Total deficit | (1,738 | ) | (1,678 | ) | ||||
Total liabilities and deficit | $ | 5,474 | $ | 5,433 | ||||
Item | Amount to be paid | |||
SEC registration fee | $ | 66,597 | ||
FINRA filing fee | $ | 69,402 | ||
Printing and engraving expenses | $ | 250,000 | ||
Legal fees and expenses | $ | 750,000 | ||
Accounting fees and expenses | $ | 1,000,000 | ||
Transfer agent and registrar fees and expenses | $ | 11,800 | ||
Miscellaneous expenses | $ | 25,000 | ||
Total | $ | 2,172,799 | ||
Exhibit Number | Exhibit Description | Incorporated by Reference | ||||||||||||||||
Form | File No. | Exhibit | Filing Date | |||||||||||||||
| 10.37+ | Form of Subscription Agreement | S-1/A | 333-249101 | 10.35 | 10/8/2020 | |||||||||||||
| 10.38+ | Form of Indemnification Agreement | S-1/A | 333-249101 | 10.36 | 10/13/2020 | |||||||||||||
| 10.39+ | McAfee Non-Employee Director Compensation Policy | S-1/A | 333-249101 | 10.37 | 10/8/2020 | |||||||||||||
| 10.40+ | Form of Equity Adjustment Agreement for Senior Management | S-1/A | 333-249101 | 10.38 | 10/8/2020 | |||||||||||||
| 21.1 | List of Subsidiaries of McAfee Corp. | 10-K | 001-39651 | 21.1 | 03/01/2021 | |||||||||||||
| 23.1* | Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP | |||||||||||||||||
| 23.2 | Consent of Ropes & Gray LLP (included in Exhibit 5.1) | S-1 | 333-259367 | 5.1 | 9/7/2021 | |||||||||||||
| 24.1 | Power of Attorney | S-1 | 333-259367 | 24.1 | 9/7/2021 | |||||||||||||
| 101.INS* | Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| + | Indicates management contract or compensatory plan or arrangement. |
| * | Filed herewith. |
MCAFEE CORP. | ||
| By: | /s/ Peter Leav | |
Name: Title: | Peter Leav President and Chief Executive Officer | |
Signature | Title | Date | ||
/s/ Peter Leav Peter Leav | President, Chief Executive Officer, and Director (Principal Executive Officer) | September 8, 2021 | ||
/s/ Venkat Bhamidipati Venkat Bhamidipati | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | September 8, 2021 | ||
/s/ Christine Kornegay Christine Kornegay | Vice President and Chief Accounting Officer (Principal Accounting Officer) | September 8, 2021 | ||
* Sohaib Abbasi | Director | September 8, 2021 | ||
* Mary Cranston | Director | September 8, 2021 | ||
* Tim Millikin | Director | September 8, 2021 | ||
* Jon Winkelried | Director | September 8, 2021 | ||
Signature | Title | Date | ||
* Kathy Willard | Director | September 8, 2021 | ||
* Jeff Woolard | Director | September 8, 2021 | ||
| *By: | /s/ Peter Leav | |
Peter Leav Attorney-in-Fact | ||
