EX-99.1
Non-GAAP Financial Measures
In addition to McAfee’s results determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company believes the following non-GAAP measures presented in this presentation are useful in evaluating its operating performance: adjusted cost of sales, adjusted gross profit, adjusted sales and marketing expense, adjusted research and development expense, adjusted general and administrative expense, adjusted operating expense, adjusted operating income, adjusted interest expenses and other, net, adjusted income before income tax expense, adjusted provision for income tax expense, adjusted net income, adjusted net income excluding impact of foreign exchange, and adjusted EBITDA. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP financial measures used by other companies. A reconciliation has been provided in this presentation for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Readers are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
This presentation includes historical results, for the periods presented, of Foundation Technology Worldwide LLC, the predecessor McAfee Corp. for financial reporting purposes. The financial results of McAfee Corp. have not been included in this presentation as it is a recently incorporated entity and had no material assets or liabilities and no material business transactions or activities during the periods presented. Accordingly, these historical results do not purport to reflect what the results of operations of McAfee Corp. or Foundation Technology Worldwide LLC would have been had the IPO and related recapitalization transactions occurred prior to such periods.
Foundation Technology Worldwide LLC
Condensed Consolidated Statements of Operations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net revenue | $ | 637 | | $ | 654 | | $ | 662 | | $ | 682 | | | $ | 685 | | $ | 716 | | $ | 728 | |
Cost of sales | | 214 | | | 215 | | | 203 | | | 211 | | | | 204 | | | 206 | | | 209 | |
Gross profit | | 423 | | | 439 | | | 459 | | | 471 | | | | 481 | | | 510 | | | 519 | |
Gross margin percentage | | 66.4 | % | | 67.1 | % | | 69.3 | % | | 69.1 | % | | | 70.2 | % | | 71.2 | % | | 71.3 | % |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | |
Sales and marketing | | 193 | | | 190 | | | 184 | | | 203 | | | | 174 | | | 174 | | | 186 | |
Research and development | | 94 | | | 99 | | | 96 | | | 91 | | | | 94 | | | 92 | | | 88 | |
General and administrative | | 59 | | | 64 | | | 72 | | | 77 | | | | 78 | | | 60 | | | 62 | |
Amortization of intangibles | | 58 | | | 55 | | | 55 | | | 54 | | | | 55 | | | 55 | | | 55 | |
Restructuring charges | | 12 | | | 3 | | | (1 | ) | | 8 | | | | 9 | | | - | | | - | |
Total operating expenses | | 416 | | | 411 | | | 406 | | | 433 | | | | 410 | | | 381 | | | 391 | |
Operating income | | 7 | | | 28 | | | 53 | | | 38 | | | | 71 | | | 129 | | | 128 | |
Operating margin percentage | | 1.1 | % | | 4.3 | % | | 8.0 | % | | 5.6 | % | | | 10.4 | % | | 18.0 | % | | 17.6 | % |
Other Expense: | | | | | | | | | | | | | | | | | | | | | | |
Interest expense and other, net | | (70 | ) | | (73 | ) | | (76 | ) | | (76 | ) | | | (75 | ) | | (75 | ) | | (73 | ) |
Foreign exchange gain (loss), net | | 13 | | | (12 | ) | | 43 | | | (24 | ) | | | 11 | | | (17 | ) | | (43 | ) |
Income before income taxes | | (50 | ) | | (57 | ) | | 20 | | | (62 | ) | | | 7 | | | 37 | | | 12 | |
Provision for income tax expense | | 17 | | | 22 | | | 29 | | | 19 | | | | (2 | ) | | 15 | | | 12 | |
Net income (loss) | $ | (67 | ) | $ | (79 | ) | $ | (9 | ) | $ | (81 | ) | | $ | 9 | | $ | 22 | | $ | - | |
Foundation Technology Worldwide LLC
Adjusted Condensed Consolidated Statements of Operations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net revenue | $ | 637 | | $ | 654 | | $ | 662 | | $ | 682 | | | $ | 685 | | $ | 716 | | $ | 728 | |
Adjusted cost of sales | | 149 | | | 153 | | | 142 | | | 148 | | | | 143 | | | 154 | | | 157 | |
Adjusted gross profit | | 488 | | | 501 | | | 520 | | | 534 | | | | 542 | | | 562 | | | 571 | |
Adjusted gross margin percentage | | 76.6 | % | | 76.6 | % | | 78.5 | % | | 78.3 | % | | | 79.1 | % | | 78.5 | % | | 78.4 | % |
Adjusted operating expenses: | | | | | | | | | | | | | | | | | | | | | | |
Adjusted sales and marketing | | 187 | | | 186 | | | 182 | | | 197 | | | | 171 | | | 172 | | | 184 | |
Adjusted research and development | | 88 | | | 94 | | | 90 | | | 85 | | | | 91 | | | 89 | | | 87 | |
Adjusted general and administrative | | 44 | | | 49 | | | 53 | | | 55 | | | | 51 | | | 52 | | | 47 | |
Total adjusted operating expenses | | 319 | | | 329 | | | 325 | | | 337 | | | | 313 | | | 313 | | | 318 | |
Adjusted operating income | | 169 | | | 172 | | | 195 | | | 197 | | | | 229 | | | 249 | | | 253 | |
Adjusted operating margin percentage | | 26.5 | % | | 26.3 | % | | 29.5 | % | | 28.9 | % | | | 33.4 | % | | 34.8 | % | | 34.8 | % |
Other Expense: | | | | | | | | | | | | | | | | | | | | | | |
Adjusted interest expense and other, net | | (67 | ) | | (68 | ) | | (71 | ) | | (72 | ) | | | (70 | ) | | (71 | ) | | (68 | ) |
Foreign exchange gain (loss), net | | 13 | | | (12 | ) | | 43 | | | (24 | ) | | | 11 | | | (17 | ) | | (43 | ) |
Adjusted income before income taxes | | 115 | | | 92 | | | 167 | | | 101 | | | | 170 | | | 161 | | | 142 | |
Adjusted provision for income tax expense | | 18 | | | 26 | | | 18 | | | 17 | | | | 12 | | | 16 | | | 13 | |
Adjusted net income | $ | 97 | | $ | 66 | | $ | 149 | | $ | 84 | | | $ | 158 | | $ | 145 | | $ | 129 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted net income excluding impact of foreign exchange | $ | 84 | | $ | 78 | | $ | 106 | | $ | 108 | | | $ | 147 | | $ | 162 | | $ | 172 | |
Foundation Technology Worldwide LLC
GAAP to Non-GAAP Reconciliations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Cost of Sales | | | | | | | | | | | | | | | | | | | | | | |
GAAP cost of sales expense | $ | 214 | | $ | 215 | | $ | 203 | | $ | 211 | | | $ | 204 | | $ | 206 | | $ | 209 | |
Amortization | | (63 | ) | | (61 | ) | | (61 | ) | | (63 | ) | | | (61 | ) | | (52 | ) | | (52 | ) |
Equity-based compensation | | (1 | ) | | - | | | - | | | - | | | | - | | | - | | | - | |
Cash in lieu of equity awards(1) | | (1 | ) | | (1 | ) | | - | | | - | | | | - | | | - | | | - | |
Adjusted cost of sales expense | $ | 149 | | $ | 153 | | $ | 142 | | $ | 148 | | | $ | 143 | | $ | 154 | | $ | 157 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Gross Profit | | | | | | | | | | | | | | | | | | | | | | |
GAAP gross profit | $ | 423 | | $ | 439 | | $ | 459 | | $ | 471 | | | $ | 481 | | $ | 510 | | $ | 519 | |
Amortization | | 63 | | | 61 | | | 61 | | | 63 | | | | 61 | | | 52 | | | 52 | |
Equity-based compensation | | 1 | | | - | | | - | | | - | | | | - | | | - | | | - | |
Cash in lieu of equity awards(1) | | 1 | | | 1 | | | - | | | - | | | | - | | | - | | | - | |
Adjusted gross profit | $ | 488 | | $ | 501 | | $ | 520 | | $ | 534 | | | $ | 542 | | $ | 562 | | $ | 571 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Sales and Marketing | | | | | | | | | | | | | | | | | | | | | | |
GAAP sales and marketing expense | $ | 193 | | $ | 190 | | $ | 184 | | $ | 203 | | | $ | 174 | | $ | 174 | | $ | 186 | |
Equity-based compensation | | (1 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | | (1 | ) | | (1 | ) | | (1 | ) |
Cash in lieu of equity awards(1) | | (2 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | | (1 | ) | | (1 | ) | | (1 | ) |
Transformation initiatives(5) | | (3 | ) | | (1 | ) | | - | | | (1 | ) | | | - | | | - | | | - | |
Executive severance(6) | | - | | | - | | | - | | | (3 | ) | | | (1 | ) | | - | | | - | |
Adjusted sales and marketing expense | $ | 187 | | $ | 186 | | $ | 182 | | $ | 197 | | | $ | 171 | | $ | 172 | | $ | 184 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Research and Development | | | | | | | | | | | | | | | | | | | | | | |
GAAP research and development expense | $ | 94 | | $ | 99 | | $ | 96 | | $ | 91 | | | $ | 94 | | $ | 92 | | $ | 88 | |
Equity-based compensation | | (4 | ) | | (2 | ) | | (3 | ) | | (3 | ) | | | (1 | ) | | (2 | ) | | (1 | ) |
Cash in lieu of equity awards(1) | | (2 | ) | | (3 | ) | | (2 | ) | | (2 | ) | | | (2 | ) | | (1 | ) | | - | |
Transformation initiatives(5) | | - | | | - | | | (1 | ) | | (1 | ) | | | - | | | - | | | - | |
Adjusted research and development expense | $ | 88 | | $ | 94 | | $ | 90 | | $ | 85 | | | $ | 91 | | $ | 89 | | $ | 87 | |
Foundation Technology Worldwide LLC
GAAP to Non-GAAP Reconciliations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted General and Administrative | | | | | | | | | | | | | | | | | | | | | | |
GAAP general and administrative expense | $ | 59 | | $ | 64 | | $ | 72 | | $ | 77 | | | $ | 78 | | $ | 60 | | $ | 62 | |
Equity-based compensation | | - | | | (3 | ) | | (3 | ) | | (2 | ) | | | (13 | ) | | (1 | ) | | (4 | ) |
Cash in lieu of equity awards(1) | | - | | | - | | | (1 | ) | | (1 | ) | | | - | | | - | | | - | |
Acquisition and integration costs(2) | | (6 | ) | | (6 | ) | | (6 | ) | | (5 | ) | | | (2 | ) | | (2 | ) | | (2 | ) |
Management fees(4) | | (2 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | | (2 | ) | | (2 | ) | | (2 | ) |
Transformation initiatives(5) | | (4 | ) | | (3 | ) | | (7 | ) | | (12 | ) | | | (8 | ) | | (2 | ) | | (7 | ) |
Executive severance(6) | | - | | | - | | | - | | | - | | | | (2 | ) | | (1 | ) | | - | |
Implementation costs for ASC 606 | | (3 | ) | | (1 | ) | | - | | | - | | | | - | | | - | | | - | |
Adjusted general and administrative expense | $ | 44 | | $ | 49 | | $ | 53 | | $ | 55 | | | $ | 51 | | $ | 52 | | $ | 47 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Amortization of Intangibles | | | | | | | | | | | | | | | | | | | | | | |
GAAP amortization of intangibles | $ | 58 | | $ | 55 | | $ | 55 | | $ | 54 | | | $ | 55 | | $ | 55 | | $ | 55 | |
Amortization of intangibles adjustment | | (58 | ) | | (55 | ) | | (55 | ) | | (54 | ) | | | (55 | ) | | (55 | ) | | (55 | ) |
Adjusted amortization of intangibles | $ | - | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Restructuring Charges | | | | | | | | | | | | | | | | | | | | | | |
GAAP restructuring charges | $ | 12 | | $ | 3 | | $ | (1 | ) | $ | 8 | | | $ | 9 | | $ | - | | $ | - | |
Restructuring charges adjustment | | (12 | ) | | (3 | ) | | 1 | | | (8 | ) | | | (9 | ) | | - | | | - | |
Adjusted restructuring charges | $ | - | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - | |
Foundation Technology Worldwide LLC
GAAP to Non-GAAP Reconciliations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
GAAP total operating expenses | $ | 416 | | $ | 411 | | $ | 406 | | $ | 433 | | | $ | 410 | | $ | 381 | | $ | 391 | |
Amortization | | (58 | ) | | (55 | ) | | (55 | ) | | (54 | ) | | | (55 | ) | | (55 | ) | | (55 | ) |
Equity-based compensation | | (5 | ) | | (6 | ) | | (7 | ) | | (6 | ) | | | (15 | ) | | (4 | ) | | (6 | ) |
Cash in lieu of equity awards(1) | | (4 | ) | | (5 | ) | | (4 | ) | | (4 | ) | | | (3 | ) | | (2 | ) | | (1 | ) |
Acquisition and integration costs(2) | | (6 | ) | | (6 | ) | | (6 | ) | | (5 | ) | | | (2 | ) | | (2 | ) | | (2 | ) |
Restructuring and transition(3) | | (12 | ) | | (3 | ) | | 1 | | | (8 | ) | | | (9 | ) | | - | | | - | |
Management fees(4) | | (2 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | | (2 | ) | | (2 | ) | | (2 | ) |
Transformation initiatives(5) | | (7 | ) | | (4 | ) | | (8 | ) | | (14 | ) | | | (8 | ) | | (2 | ) | | (7 | ) |
Executive severance(6) | | - | | | - | | | - | | | (3 | ) | | | (3 | ) | | (1 | ) | | - | |
Implementation costs for ASC 606 | | (3 | ) | | (1 | ) | | - | | | - | | | | - | | | - | | | - | |
Adjusted operating expenses | $ | 319 | | $ | 329 | | $ | 325 | | $ | 337 | | | $ | 313 | | $ | 313 | | $ | 318 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Operating Income | | | | | | | | | | | | | | | | | | | | | | |
GAAP operating income | $ | 7 | | $ | 28 | | $ | 53 | | $ | 38 | | | $ | 71 | | $ | 129 | | $ | 128 | |
Amortization | | 121 | | | 116 | | | 116 | | | 117 | | | | 116 | | | 107 | | | 107 | |
Equity-based compensation | | 6 | | | 6 | | | 7 | | | 6 | | | | 15 | | | 4 | | | 6 | |
Cash in lieu of equity awards(1) | | 5 | | | 6 | | | 4 | | | 4 | | | | 3 | | | 2 | | | 1 | |
Acquisition and integration costs(2) | | 6 | | | 6 | | | 6 | | | 5 | | | | 2 | | | 2 | | | 2 | |
Restructuring and transition(3) | | 12 | | | 3 | | | (1 | ) | | 8 | | | | 9 | | | - | | | - | |
Management fees(4) | | 2 | | | 2 | | | 2 | | | 2 | | | | 2 | | | 2 | | | 2 | |
Transformation initiatives(5) | | 7 | | | 4 | | | 8 | | | 14 | | | | 8 | | | 2 | | | 7 | |
Executive severance(6) | | - | | | - | | | - | | | 3 | | | | 3 | | | 1 | | | - | |
Implementation costs for ASC 606 | | 3 | | | 1 | | | - | | | - | | | | - | | | - | | | - | |
Adjusted operating income | $ | 169 | | $ | 172 | | $ | 195 | | $ | 197 | | | $ | 229 | | $ | 249 | | $ | 253 | |
Foundation Technology Worldwide LLC
GAAP to Non-GAAP Reconciliations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Interest Expense and Other, net | | | | | | | | | | | | | | | | | | | | | | |
GAAP interest expense and other, net | $ | (70 | ) | $ | (73 | ) | $ | (76 | ) | $ | (76 | ) | | $ | (75 | ) | $ | (75 | ) | $ | (73 | ) |
Amortization of debt issuance costs | | 3 | | | 5 | | | 5 | | | 4 | | | | 5 | | | 4 | | | 5 | |
Adjusted interest expense and other, net | $ | (67 | ) | $ | (68 | ) | $ | (71 | ) | $ | (72 | ) | | $ | (70 | ) | $ | (71 | ) | $ | (68 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Income Before Income Tax Expense | | | | | | | | | | | | | | | | | | | | | | |
GAAP income before income tax expense | $ | (50 | ) | $ | (57 | ) | $ | 20 | | $ | (62 | ) | | $ | 7 | | $ | 37 | | $ | 12 | |
Amortization of debt issuance costs | | 3 | | | 5 | | | 5 | | | 4 | | | | 5 | | | 4 | | | 5 | |
Amortization | | 121 | | | 116 | | | 116 | | | 117 | | | | 116 | | | 107 | | | 107 | |
Equity-based compensation | | 6 | | | 6 | | | 7 | | | 6 | | | | 15 | | | 4 | | | 6 | |
Cash in lieu of equity awards(1) | | 5 | | | 6 | | | 4 | | | 4 | | | | 3 | | | 2 | | | 1 | |
Acquisition and integration costs(2) | | 6 | | | 6 | | | 6 | | | 5 | | | | 2 | | | 2 | | | 2 | |
Restructuring and transition(3) | | 12 | | | 3 | | | (1 | ) | | 8 | | | | 9 | | | - | | | - | |
Management fees(4) | | 2 | | | 2 | | | 2 | | | 2 | | | | 2 | | | 2 | | | 2 | |
Transformation initiatives(5) | | 7 | | | 4 | | | 8 | | | 14 | | | | 8 | | | 2 | | | 7 | |
Executive severance(6) | | - | | | - | | | - | | | 3 | | | | 3 | | | 1 | | | - | |
Implementation costs for ASC 606 | | 3 | | | 1 | | | - | | | - | | | | - | | | - | | | - | |
Adjusted income before income tax expense | $ | 115 | | $ | 92 | | $ | 167 | | $ | 101 | | | $ | 170 | | $ | 161 | | $ | 142 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Provision for Income Tax Expense | | | | | | | | | | | | | | | | | | | | | | |
GAAP provision for income tax expense | $ | 17 | | $ | 22 | | $ | 29 | | $ | 19 | | | $ | (2 | ) | $ | 15 | | $ | 12 | |
Adjustment to provision for income tax expense(7) | | 1 | | | 4 | | | (11 | ) | | (2 | ) | | | 14 | | | 1 | | | 1 | |
Adjusted provision for income tax expense | $ | 18 | | $ | 26 | | $ | 18 | | $ | 17 | | | $ | 12 | | $ | 16 | | $ | 13 | |
Foundation Technology Worldwide LLC
GAAP to Non-GAAP Reconciliations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Net Income and Adjusted Net Income Excluding Impact of Foreign Exchange | | | | | | | | | | | | | | | | | | | | | | |
GAAP net income | $ | (67 | ) | $ | (79 | ) | $ | (9 | ) | $ | (81 | ) | | $ | 9 | | $ | 22 | | $ | - | |
Amortization of debt issuance costs | | 3 | | | 5 | | | 5 | | | 4 | | | | 5 | | | 4 | | | 5 | |
Amortization | | 121 | | | 116 | | | 116 | | | 117 | | | | 116 | | | 107 | | | 107 | |
Equity-based compensation | | 6 | | | 6 | | | 7 | | | 6 | | | | 15 | | | 4 | | | 6 | |
Cash in lieu of equity awards(1) | | 5 | | | 6 | | | 4 | | | 4 | | | | 3 | | | 2 | | | 1 | |
Acquisition and integration costs(2) | | 6 | | | 6 | | | 6 | | | 5 | | | | 2 | | | 2 | | | 2 | |
Restructuring and transition(3) | | 12 | | | 3 | | | (1 | ) | | 8 | | | | 9 | | | - | | | - | |
Management fees(4) | | 2 | | | 2 | | | 2 | | | 2 | | | | 2 | | | 2 | | | 2 | |
Transformation initiatives(5) | | 7 | | | 4 | | | 8 | | | 14 | | | | 8 | | | 2 | | | 7 | |
Executive severance(6) | | - | | | - | | | - | | | 3 | | | | 3 | | | 1 | | | - | |
Implementation costs for ASC 606 | | 3 | | | 1 | | | - | | | - | | | | - | | | - | | | - | |
Adjustment to provision for income taxes(7) | | (1 | ) | | (4 | ) | | 11 | | | 2 | | | | (14 | ) | | (1 | ) | | (1 | ) |
Adjusted net income | $ | 97 | | $ | 66 | | $ | 149 | | $ | 84 | | | $ | 158 | | $ | 145 | | $ | 129 | |
GAAP foreign exchange loss (gain), net | | (13 | ) | | 12 | | | (43 | ) | | 24 | | | | (11 | ) | | 17 | | | 43 | |
Adjusted net income excluding impact of foreign exchange | $ | 84 | | $ | 78 | | $ | 106 | | $ | 108 | | | $ | 147 | | $ | 162 | | $ | 172 | |
Foundation Technology Worldwide LLC
GAAP to Non-GAAP Reconciliations – Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted EBTIDA | | | | | | | | | | | | | | | | | | | | | | |
GAAP net income | $ | (67 | ) | $ | (79 | ) | $ | (9 | ) | $ | (81 | ) | | $ | 9 | | $ | 22 | | $ | - | |
Amortization | | 121 | | | 116 | | | 116 | | | 117 | | | | 116 | | | 107 | | | 107 | |
Equity-based compensation | | 6 | | | 6 | | | 7 | | | 6 | | | | 15 | | | 4 | | | 6 | |
Cash in lieu of equity awards(1) | | 5 | | | 6 | | | 4 | | | 4 | | | | 3 | | | 2 | | | 1 | |
Acquisition and integration costs(2) | | 6 | | | 6 | | | 6 | | | 5 | | | | 2 | | | 2 | | | 2 | |
Restructuring and transition(3) | | 12 | | | 3 | | | (1 | ) | | 8 | | | | 9 | | | - | | | - | |
Management fees(4) | | 2 | | | 2 | | | 2 | | | 2 | | | | 2 | | | 2 | | | 2 | |
Transformation initiatives(5) | | 7 | | | 4 | | | 8 | | | 14 | | | | 8 | | | 2 | | | 7 | |
Executive severance(6) | | - | | | - | | | - | | | 3 | | | | 3 | | | 1 | | | - | |
Implementation costs for ASC 606 | | 3 | | | 1 | | | - | | | - | | | | - | | | - | | | - | |
GAAP interest expense and other, net | | 70 | | | 73 | | | 76 | | | 76 | | | | 75 | | | 75 | | | 73 | |
GAAP provision for income tax expense | | 17 | | | 22 | | | 29 | | | 19 | | | | (2 | ) | | 15 | | | 12 | |
GAAP foreign exchange loss (gain), net | | (13 | ) | | 12 | | | (43 | ) | | 24 | | | | (11 | ) | | 17 | | | 43 | |
Depreciation | | 16 | | | 16 | | | 15 | | | 19 | | | | 16 | | | 13 | | | 13 | |
Other expense | | - | | | - | | | - | | | - | | | | - | | | - | | | (1 | ) |
Adjusted EBITDA | $ | 185 | | $ | 188 | | $ | 210 | | $ | 216 | | | $ | 245 | | $ | 262 | | $ | 265 | |
Foundation Technology Worldwide LLC – Consumer Segment
Condensed Consolidated Statements of EBITDA– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net revenue | $ | 314 | | $ | 320 | | $ | 322 | | $ | 347 | | | $ | 354 | | $ | 383 | | $ | 395 | |
Cost of sales | | 91 | | | 97 | | | 90 | | | 94 | | | | 96 | | | 106 | | | 107 | |
Gross profit | | 223 | | | 223 | | | 232 | | | 253 | | | | 258 | | | 277 | | | 288 | |
Gross margin percentage | | 71.0 | % | | 69.7 | % | | 72.0 | % | | 72.9 | % | | | 72.9 | % | | 72.3 | % | | 72.9 | % |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | |
Sales and marketing | | 63 | | | 66 | | | 67 | | | 80 | | | | 56 | | | 75 | | | 84 | |
Research and development | | 34 | | | 35 | | | 33 | | | 32 | | | | 36 | | | 35 | | | 34 | |
General and administrative | | 21 | | | 23 | | | 25 | | | 26 | | | | 32 | | | 27 | | | 28 | |
Amortization of intangibles | | 38 | | | 36 | | | 36 | | | 35 | | | | 36 | | | 36 | | | 36 | |
Restructuring charges | | 2 | | | 1 | | | - | | | 1 | | | | 1 | | | - | | | - | |
Total operating expenses | | 158 | | | 161 | | | 161 | | | 174 | | | | 161 | | | 173 | | | 182 | |
Operating income | | 65 | | | 62 | | | 71 | | | 79 | | | | 97 | | | 104 | | | 106 | |
Operating margin percentage | | 20.7 | % | | 19.4 | % | | 22.0 | % | | 22.8 | % | | | 27.4 | % | | 27.2 | % | | 26.8 | % |
Other Expense: | | | | | | | | | | | | | | | | | | | | | | |
Depreciation | | 6 | | | 6 | | | 5 | | | 8 | | | | 6 | | | 5 | | | 4 | |
EBITDA | $ | 71 | | $ | 68 | | $ | 76 | | $ | 87 | | | $ | 103 | | $ | 109 | | $ | 110 | |
Foundation Technology Worldwide LLC – Consumer Segment
Adjusted Condensed Consolidated Statements of EBITDA– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net revenue | $ | 314 | | $ | 320 | | $ | 322 | | $ | 347 | | | $ | 354 | | $ | 383 | | $ | 395 | |
Adjusted cost of sales | | 64 | | | 70 | | | 63 | | | 67 | | | | 69 | | | 79 | | | 80 | |
Adjusted gross profit | | 250 | | | 250 | | | 259 | | | 280 | | | | 285 | | | 304 | | | 315 | |
Adjusted gross margin percentage | | 79.6 | % | | 78.1 | % | | 80.4 | % | | 80.7 | % | | | 80.5 | % | | 79.4 | % | | 79.7 | % |
Adjusted operating expenses: | | | | | | | | | | | | | | | | | | | | | | |
Adjusted sales and marketing | | 63 | | | 66 | | | 67 | | | 79 | | | | 56 | | | 75 | | | 84 | |
Adjusted research and development | | 33 | | | 35 | | | 33 | | | 31 | | | | 36 | | | 35 | | | 34 | |
Adjusted general and administrative | | 17 | | | 19 | | | 20 | | | 21 | | | | 21 | | | 24 | | | 20 | |
Total adjusted operating expenses | | 113 | | | 120 | | | 120 | | | 131 | | | | 113 | | | 134 | | | 138 | |
Adjusted operating income | | 137 | | | 130 | | | 139 | | | 149 | | | | 172 | | | 170 | | | 177 | |
Adjusted operating margin percentage | | 43.6 | % | | 40.6 | % | | 43.2 | % | | 42.9 | % | | | 48.6 | % | | 44.4 | % | | 44.8 | % |
Other Expense: | | | | | | | | | | | | | | | | | | | | | | |
Depreciation | | 6 | | | 6 | | | 5 | | | 8 | | | | 6 | | | 5 | | | 4 | |
Adjusted EBITDA | $ | 143 | | $ | 136 | | $ | 144 | | $ | 157 | | | $ | 178 | | $ | 175 | | $ | 181 | |
Foundation Technology Worldwide LLC – Consumer Segment
GAAP to Non-GAAP Reconciliations– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Cost of Sales | | | | | | | | | | | | | | | | | | | | | | |
GAAP cost of sales expense | $ | 91 | | $ | 97 | | $ | 90 | | $ | 94 | | | $ | 96 | | $ | 106 | | $ | 107 | |
Amortization | | (26 | ) | | (27 | ) | | (27 | ) | | (27 | ) | | | (27 | ) | | (27 | ) | | (27 | ) |
Equity-based compensation | | (1 | ) | | - | | | - | | | - | | | | - | | | - | | | - | |
Adjusted cost of sales expense | $ | 64 | | $ | 70 | | $ | 63 | | $ | 67 | | | $ | 69 | | $ | 79 | | $ | 80 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Gross Profit | | | | | | | | | | | | | | | | | | | | | | |
GAAP gross profit | $ | 223 | | $ | 223 | | $ | 232 | | $ | 253 | | | $ | 258 | | $ | 277 | | $ | 288 | |
Amortization | | 26 | | | 27 | | | 27 | | | 27 | | | | 27 | | | 27 | | | 27 | |
Equity-based compensation | | 1 | | | - | | | - | | | - | | | | - | | | - | | | - | |
Adjusted gross profit | $ | 250 | | $ | 250 | | $ | 259 | | $ | 280 | | | $ | 285 | | $ | 304 | | $ | 315 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Sales and Marketing | | | | | | | | | | | | | | | | | | | | | | |
GAAP sales and marketing expense | $ | 63 | | $ | 66 | | $ | 67 | | $ | 80 | | | $ | 56 | | $ | 75 | | $ | 84 | |
Executive severance(6) | | - | | | - | | | - | | | (1 | ) | | | - | | | - | | | - | |
Adjusted sales and marketing expense | $ | 63 | | $ | 66 | | $ | 67 | | $ | 79 | | | $ | 56 | | $ | 75 | | $ | 84 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Research and Development | | | | | | | | | | | | | | | | | | | | | | |
GAAP research and development expense | $ | 34 | | $ | 35 | | $ | 33 | | $ | 32 | | | $ | 36 | | $ | 35 | | $ | 34 | |
Equity-based compensation | | (1 | ) | | - | | | - | | | - | | | | - | | | - | | | - | |
Cash in lieu of equity awards(1) | | - | | | - | | | - | | | (1 | ) | | | - | | | - | | | - | |
Adjusted research and development expense | $ | 33 | | $ | 35 | | $ | 33 | | $ | 31 | | | $ | 36 | | $ | 35 | | $ | 34 | |
Foundation Technology Worldwide LLC – Consumer Segment
GAAP to Non-GAAP Reconciliations– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted General and Administrative | | | | | | | | | | | | | | | | | | | | | | |
GAAP general and administrative expense | $ | 21 | | $ | 23 | | $ | 25 | | $ | 26 | | | $ | 32 | | $ | 27 | | $ | 28 | |
Equity-based compensation | | - | | | (1 | ) | | (1 | ) | | (1 | ) | | | (7 | ) | | (1 | ) | | (2 | ) |
Cash in lieu of equity awards(1) | | - | | | - | | | (1 | ) | | - | | | | - | | | - | | | - | |
Acquisition and integration costs(2) | | (2 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | | (2 | ) | | (2 | ) | | (2 | ) |
Management fees(4) | | - | | | - | | | - | | | - | | | | - | | | - | | | (1 | ) |
Transformation initiatives(5) | | (1 | ) | | (1 | ) | | (1 | ) | | (2 | ) | | | (2 | ) | | - | | | (3 | ) |
Implementation costs for ASC 606 | | (1 | ) | | - | | | - | | | - | | | | - | | | - | | | - | |
Adjusted general and administrative expense | $ | 17 | | $ | 19 | | $ | 20 | | $ | 21 | | | $ | 21 | | $ | 24 | | $ | 20 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Amortization of Intangibles | | | | | | | | | | | | | | | | | | | | | | |
GAAP amortization of intangibles | $ | 38 | | $ | 36 | | $ | 36 | | $ | 35 | | | $ | 36 | | $ | 36 | | $ | 36 | |
Amortization of intangibles adjustment | | (38 | ) | | (36 | ) | | (36 | ) | | (35 | ) | | | (36 | ) | | (36 | ) | | (36 | ) |
Adjusted amortization of intangibles | $ | - | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Restructuring Charges | | | | | | | | | | | | | | | | | | | | | | |
GAAP restructuring charges | $ | 2 | | $ | 1 | | $ | - | | $ | 1 | | | $ | 1 | | $ | - | | $ | - | |
Restructuring charges adjustment | | (2 | ) | | (1 | ) | | - | | | (1 | ) | | | (1 | ) | | - | | | - | |
Adjusted restructuring charges | $ | - | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - | |
Foundation Technology Worldwide LLC – Consumer Segment
GAAP to Non-GAAP Reconciliations– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
GAAP total operating expenses | $ | 158 | | $ | 161 | | $ | 161 | | $ | 174 | | | $ | 161 | | $ | 173 | | $ | 182 | |
Amortization | | (38 | ) | | (36 | ) | | (36 | ) | | (35 | ) | | | (36 | ) | | (36 | ) | | (36 | ) |
Equity-based compensation | | (1 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | | (7 | ) | | (1 | ) | | (2 | ) |
Cash in lieu of equity awards(1) | | - | | | - | | | (1 | ) | | (1 | ) | | | - | | | - | | | - | |
Acquisition and integration costs(2) | | (2 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | | (2 | ) | | (2 | ) | | (2 | ) |
Restructuring and transition(3) | | (2 | ) | | (1 | ) | | - | | | (1 | ) | | | (1 | ) | | - | | | - | |
Management fees(4) | | - | | | - | | | - | | | - | | | | - | | | - | | | (1 | ) |
Transformation initiatives(5) | | (1 | ) | | (1 | ) | | (1 | ) | | (2 | ) | | | (2 | ) | | - | | | (3 | ) |
Executive severance(6) | | - | | | - | | | - | | | (1 | ) | | | - | | | - | | | - | |
Implementation costs for ASC 606 | | (1 | ) | | - | | | - | | | - | | | | - | | | - | | | - | |
Adjusted operating expenses | $ | 113 | | $ | 120 | | $ | 120 | | $ | 131 | | | $ | 113 | | $ | 134 | | $ | 138 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Operating Income | | | | | | | | | | | | | | | | | | | | | | |
GAAP operating income | $ | 65 | | $ | 62 | | $ | 71 | | $ | 79 | | | $ | 97 | | $ | 104 | | $ | 106 | |
Amortization | | 64 | | | 63 | | | 63 | | | 62 | | | | 63 | | | 63 | | | 63 | |
Equity-based compensation | | 2 | | | 1 | | | 1 | | | 1 | | | | 7 | | | 1 | | | 2 | |
Cash in lieu of equity awards(1) | | - | | | - | | | 1 | | | 1 | | | | - | | | - | | | - | |
Acquisition and integration costs(2) | | 2 | | | 2 | | | 2 | | | 2 | | | | 2 | | | 2 | | | 2 | |
Restructuring and transition(3) | | 2 | | | 1 | | | - | | | 1 | | | | 1 | | | - | | | - | |
Management fees(4) | | - | | | - | | | - | | | - | | | | - | | | - | | | 1 | |
Transformation initiatives(5) | | 1 | | | 1 | | | 1 | | | 2 | | | | 2 | | | - | | | 3 | |
Executive severance(6) | | - | | | - | | | - | | | 1 | | | | - | | | - | | | - | |
Implementation costs for ASC 606 | | 1 | | | - | | | - | | | - | | | | - | | | - | | | - | |
Adjusted operating income | $ | 137 | | $ | 130 | | $ | 139 | | $ | 149 | | | $ | 172 | | $ | 170 | | $ | 177 | |
Foundation Technology Worldwide LLC – Enterprise Segment
Condensed Consolidated Statements of EBITDA– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net revenue | $ | 323 | | $ | 334 | | $ | 340 | | $ | 335 | | | $ | 331 | | $ | 333 | | $ | 333 | |
Cost of sales | | 123 | | | 118 | | | 113 | | | 117 | | | | 108 | | | 100 | | | 102 | |
Gross profit | | 200 | | | 216 | | | 227 | | | 218 | | | | 223 | | | 233 | | | 231 | |
Gross margin percentage | | 61.9 | % | | 64.7 | % | | 66.8 | % | | 65.1 | % | | | 67.4 | % | | 70.0 | % | | 69.4 | % |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | |
Sales and marketing | | 130 | | | 124 | | | 117 | | | 123 | | | | 118 | | | 99 | | | 102 | |
Research and development | | 60 | | | 64 | | | 63 | | | 59 | | | | 58 | | | 57 | | | 54 | |
General and administrative | | 38 | | | 41 | | | 47 | | | 51 | | | | 46 | | | 33 | | | 34 | |
Amortization of intangibles | | 20 | | | 19 | | | 19 | | | 19 | | | | 19 | | | 19 | | | 19 | |
Restructuring charges | | 10 | | | 2 | | | (1 | ) | | 7 | | | | 8 | | | - | | | - | |
Total operating expenses | | 258 | | | 250 | | | 245 | | | 259 | | | | 249 | | | 208 | | | 209 | |
Operating income | | (58 | ) | | (34 | ) | | (18 | ) | | (41 | ) | | | (26 | ) | | 25 | | | 22 | |
Operating margin percentage | | (18.0 | %) | | (10.2 | %) | | (5.3 | %) | | (12.2 | %) | | | (7.9 | %) | | 7.5 | % | | 6.6 | % |
Other Expense: | | | | | | | | | | | | | | | | | | | | | | |
Depreciation | | 10 | | | 10 | | | 10 | | | 12 | | | | 10 | | | 8 | | | 9 | |
Other income/(expense) | | - | | | - | | | - | | | - | | | | - | | | - | | | (1 | ) |
EBITDA | $ | (48 | ) | $ | (24 | ) | $ | (8 | ) | $ | (29 | ) | | $ | (16 | ) | $ | 33 | | $ | 30 | |
Foundation Technology Worldwide LLC – Enterprise Segment
Adjusted Condensed Consolidated Statements of EBITDA– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net revenue | $ | 323 | | $ | 334 | | $ | 340 | | $ | 335 | | | $ | 331 | | $ | 333 | | $ | 333 | |
Adjusted cost of sales | | 85 | | | 83 | | | 79 | | | 81 | | | | 74 | | | 75 | | | 77 | |
Adjusted gross profit | | 238 | | | 251 | | | 261 | | | 254 | | | | 257 | | | 258 | | | 256 | |
Adjusted gross margin percentage | | 73.7 | % | | 75.1 | % | | 76.8 | % | | 75.8 | % | | | 77.6 | % | | 77.5 | % | | 76.9 | % |
Adjusted operating expenses: | | | | | | | | | | | | | | | | | | | | | | |
Adjusted sales and marketing | | 124 | | | 120 | | | 115 | | | 118 | | | | 115 | | | 97 | | | 100 | |
Adjusted research and development | | 55 | | | 59 | | | 57 | | | 54 | | | | 55 | | | 54 | | | 53 | |
Adjusted general and administrative | | 27 | | | 30 | | | 33 | | | 34 | | | | 30 | | | 28 | | | 27 | |
Total adjusted operating expenses | | 206 | | | 209 | | | 205 | | | 206 | | | | 200 | | | 179 | | | 180 | |
Adjusted operating income | | 32 | | | 42 | | | 56 | | | 48 | | | | 57 | | | 79 | | | 76 | |
Adjusted operating margin percentage | | 9.9 | % | | 12.6 | % | | 16.5 | % | | 14.3 | % | | | 17.2 | % | | 23.7 | % | | 22.8 | % |
Other Expense: | | | | | | | | | | | | | | | | | | | | | | |
Depreciation | | 10 | | | 10 | | | 10 | | | 11 | | | | 10 | | | 8 | | | 9 | |
Other income/(expense) | | - | | | - | | | - | | | - | | | | - | | | - | | | (1 | ) |
Adjusted EBITDA | $ | 42 | | $ | 52 | | $ | 66 | | $ | 59 | | | $ | 67 | | $ | 87 | | $ | 84 | |
Foundation Technology Worldwide LLC – Enterprise Segment
GAAP to Non-GAAP Reconciliations– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Cost of Sales | | | | | | | | | | | | | | | | | | | | | | |
GAAP cost of sales expense | $ | 123 | | $ | 118 | | $ | 113 | | $ | 117 | | | $ | 108 | | $ | 100 | | $ | 102 | |
Amortization | | (37 | ) | | (34 | ) | | (34 | ) | | (36 | ) | | | (34 | ) | | (25 | ) | | (25 | ) |
Cash in lieu of equity awards(1) | | (1 | ) | | (1 | ) | | - | | | - | | | | - | | | - | | | - | |
Adjusted cost of sales expense | $ | 85 | | $ | 83 | | $ | 79 | | $ | 81 | | | $ | 74 | | $ | 75 | | $ | 77 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Gross Profit | | | | | | | | | | | | | | | | | | | | | | |
GAAP gross profit | $ | 200 | | $ | 216 | | $ | 227 | | $ | 218 | | | $ | 223 | | $ | 233 | | $ | 231 | |
Amortization | | 37 | | | 34 | | | 34 | | | 36 | | | | 34 | | | 25 | | | 25 | |
Cash in lieu of equity awards(1) | | 1 | | | 1 | | | - | | | - | | | | - | | | - | | | - | |
Adjusted gross profit | $ | 238 | | $ | 251 | | $ | 261 | | $ | 254 | | | $ | 257 | | $ | 258 | | $ | 256 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Sales and Marketing | | | | | | | | | | | | | | | | | | | | | | |
GAAP sales and marketing expense | $ | 130 | | $ | 124 | | $ | 117 | | $ | 123 | | | $ | 118 | | $ | 99 | | $ | 102 | |
Equity-based compensation | | (1 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | | (1 | ) | | (1 | ) | | (1 | ) |
Cash in lieu of equity awards(1) | | (2 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | | (1 | ) | | (1 | ) | | (1 | ) |
Transformation initiatives(5) | | (3 | ) | | (1 | ) | | - | | | (1 | ) | | | - | | | - | | | - | |
Executive severance(6) | | - | | | - | | | - | | | (2 | ) | | | (1 | ) | | - | | | - | |
Adjusted sales and marketing expense | $ | 124 | | $ | 120 | | $ | 115 | | $ | 118 | | | $ | 115 | | $ | 97 | | $ | 100 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Research and Development | | | | | | | | | | | | | | | | | | | | | | |
GAAP research and development expense | $ | 60 | | $ | 64 | | $ | 63 | | $ | 59 | | | $ | 58 | | $ | 57 | | $ | 54 | |
Equity-based compensation | | (3 | ) | | (2 | ) | | (3 | ) | | (3 | ) | | | (1 | ) | | (2 | ) | | (1 | ) |
Cash in lieu of equity awards(1) | | (2 | ) | | (3 | ) | | (2 | ) | | (1 | ) | | | (2 | ) | | (1 | ) | | - | |
Transformation initiatives(5) | | - | | | - | | | (1 | ) | | (1 | ) | | | - | | | - | | | - | |
Adjusted research and development expense | $ | 55 | | $ | 59 | | $ | 57 | | $ | 54 | | | $ | 55 | | $ | 54 | | $ | 53 | |
Foundation Technology Worldwide LLC – Enterprise Segment
GAAP to Non-GAAP Reconciliations– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted General and Administrative | | | | | | | | | | | | | | | | | | | | | | |
GAAP general and administrative expense | $ | 38 | | $ | 41 | | $ | 47 | | $ | 51 | | | $ | 46 | | $ | 33 | | $ | 34 | |
Equity-based compensation | | - | | | (2 | ) | | (2 | ) | | (1 | ) | | | (6 | ) | | - | | | (2 | ) |
Cash in lieu of equity awards(1) | | - | | | - | | | - | | | (1 | ) | | | - | | | - | | | - | |
Acquisition and integration costs(2) | | (4 | ) | | (4 | ) | | (4 | ) | | (3 | ) | | | - | | | - | | | - | |
Management fees(4) | | (2 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | | (2 | ) | | (2 | ) | | (1 | ) |
Transformation initiatives(5) | | (3 | ) | | (2 | ) | | (6 | ) | | (10 | ) | | | (6 | ) | | (2 | ) | | (4 | ) |
Executive severance(6) | | - | | | - | | | - | | | - | | | | (2 | ) | | (1 | ) | | - | |
Implementation costs for ASC 606 | | (2 | ) | | (1 | ) | | - | | | - | | | | - | | | - | | | - | |
Adjusted general and administrative expense | $ | 27 | | $ | 30 | | $ | 33 | | $ | 34 | | | $ | 30 | | $ | 28 | | $ | 27 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Amortization of Intangibles | | | | | | | | | | | | | | | | | | | | | | |
GAAP amortization of intangibles | $ | 20 | | $ | 19 | | $ | 19 | | $ | 19 | | | $ | 19 | | $ | 19 | | $ | 19 | |
Amortization of intangibles adjustment | | (20 | ) | | (19 | ) | | (19 | ) | | (19 | ) | | | (19 | ) | | (19 | ) | | (19 | ) |
Adjusted amortization of intangibles | $ | - | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Restructuring Charges | | | | | | | | | | | | | | | | | | | | | | |
GAAP restructuring charges | $ | 10 | | $ | 2 | | $ | (1 | ) | $ | 7 | | | $ | 8 | | $ | - | | $ | - | |
Restructuring charges adjustment | | (10 | ) | | (2 | ) | | 1 | | | (7 | ) | | | (8 | ) | | - | | | - | |
Adjusted restructuring charges | $ | - | | $ | - | | $ | - | | $ | - | | | $ | - | | $ | - | | $ | - | |
Foundation Technology Worldwide LLC – Enterprise Segment
GAAP to Non-GAAP Reconciliations– Fiscal Quarters
(in millions)
(unaudited)
| 2019 | | | 2020 | |
| Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | |
Adjusted Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
GAAP total operating expenses | $ | 258 | | $ | 250 | | $ | 245 | | $ | 259 | | | $ | 249 | | $ | 208 | | $ | 209 | |
Amortization | | (20 | ) | | (19 | ) | | (19 | ) | | (19 | ) | | | (19 | ) | | (19 | ) | | (19 | ) |
Equity-based compensation | | (4 | ) | | (5 | ) | | (6 | ) | | (5 | ) | | | (8 | ) | | (3 | ) | | (4 | ) |
Cash in lieu of equity awards(1) | | (4 | ) | | (5 | ) | | (3 | ) | | (3 | ) | | | (3 | ) | | (2 | ) | | (1 | ) |
Acquisition and integration costs(2) | | (4 | ) | | (4 | ) | | (4 | ) | | (3 | ) | | | - | | | - | | | - | |
Restructuring and transition(3) | | (10 | ) | | (2 | ) | | 1 | | | (7 | ) | | | (8 | ) | | - | | | - | |
Management fees(4) | | (2 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | | (2 | ) | | (2 | ) | | (1 | ) |
Transformation initiatives(5) | | (6 | ) | | (3 | ) | | (7 | ) | | (12 | ) | | | (6 | ) | | (2 | ) | | (4 | ) |
Executive severance(6) | | - | | | - | | | - | | | (2 | ) | | | (3 | ) | | (1 | ) | | - | |
Implementation costs for ASC 606 | | (2 | ) | | (1 | ) | | - | | | - | | | | - | | | - | | | - | |
Adjusted operating expenses | $ | 206 | | $ | 209 | | $ | 205 | | $ | 206 | | | $ | 200 | | $ | 179 | | $ | 180 | |
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted Operating Income | | | | | | | | | | | | | | | | | | | | | | |
GAAP operating income | $ | (58 | ) | $ | (34 | ) | $ | (18 | ) | $ | (41 | ) | | $ | (26 | ) | $ | 25 | | $ | 22 | |
Amortization | | 57 | | | 53 | | | 53 | | | 55 | | | | 53 | | | 44 | | | 44 | |
Equity-based compensation | | 4 | | | 5 | | | 6 | | | 5 | | | | 8 | | | 3 | | | 4 | |
Cash in lieu of equity awards(1) | | 5 | | | 6 | | | 3 | | | 3 | | | | 3 | | | 2 | | | 1 | |
Acquisition and integration costs(2) | | 4 | | | 4 | | | 4 | | | 3 | | | | - | | | - | | | - | |
Restructuring and transition(3) | | 10 | | | 2 | | | (1 | ) | | 7 | | | | 8 | | | - | | | - | |
Management fees(4) | | 2 | | | 2 | | | 2 | | | 2 | | | | 2 | | | 2 | | | 1 | |
Transformation initiatives(5) | | 6 | | | 3 | | | 7 | | | 12 | | | | 6 | | | 2 | | | 4 | |
Executive severance(6) | | - | | | - | | | - | | | 2 | | | | 3 | | | 1 | | | - | |
Implementation costs for ASC 606 | | 2 | | | 1 | | | - | | | - | | | | - | | | - | | | - | |
Adjusted operating income | $ | 32 | | $ | 42 | | $ | 56 | | $ | 48 | | | $ | 57 | | $ | 79 | | $ | 76 | |
Foundation Technology Worldwide LLC
Adjustments for Adjusted EBITDA and Adjusted Net Income and Adjusted Net Income Excluding Impact of Foreign Exchange
Below are additional information to the adjustments for adjusted EBITDA, adjusted net income and adjusted net income excluding impact of foreign exchange:
| (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 Foundation Technology Worldwide LLC. In addition, as a result of the Skyhigh acquisition, cash awards were provided to certain employees who held Skyhigh equity awards in lieu of equity in Foundation Technology Worldwide LLC and vest over multiple periods based on employee service requirements. As these rollover awards reflect one‐time grants to former employees of the Predecessor Business and Skyhigh Networks in connection with these transactions, and the Company does not have a comparable cash-based compensation plan or program in existence, we believe this expense is not reflective of our ongoing results. |
| (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, including implementing our own 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 MAP and other 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. |
| (6) | Represents severance to be paid for executive terminations not associated with a strategic restructuring event. |
| (7) | Represents the tax impact of all of the above adjustments, as well as excluding the non‐recurring tax benefits and expenses related to changes resulting from tax legislation, the assessment or resolution of tax audits or other significant events. |
