MCFE - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the McAfee Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker, Mr. Investor President, Vice Fleites, Relations. Eduardo sir. Please go ahead,

Eduardo Fleites

and for you Thank today. us its today's quarter earnings thank Participating December and a call Peter are you, Corporate financial this McAfee issued Good afternoon fourth Officer; Development. release and Senior announcing Vice results. results Bhamidipati, Chief year CEO; full operator. Earlier call for Agarwal, and Venkat President period press its President Financial McAfee on Leav, discuss Ashish of Strategy ended XXXX. joining to and the is this afternoon, hosting

While the those Form financial on this information by SEC our call performance, will for our report with reflect annual XX-K, items early March. which read discussed about to XXXX documents, within we we expect you encourage file complete to

note that begin, outlook, you call, and assumptions. operating this our on this to may to are no obligation developments related discussed want that forward-looking may of of undertake business information we that our of these management's revise call beliefs I as new reflect Please remind and matters which include occur. a goals to date today's on we result and statements the current based forward-looking statements as performance, financial opinions Before

today. various that uncertainties results described factors those statements actual are Forward-looking subject to cause could from and risks, expected our and other to materially differ

factors quarterly report call, section. with this XX-Q that of Exchange company's more Investor performance. will our these will discuss filed non-GAAP review McAfee's statements. will to where our and available see in would remind during Form of like call measures some results conference risk to most Relations also description on the website the about that be For cause under you materially A talking replay we on from Commission, of the a recent I detailed our please to Securities differ actual a upcoming factors, and could the be XX-K discussion you our

I find turn measures can call those President to of the over comparable will CEO. now a to nearest McAfee's GAAP measures release. the and Leav, reconciliation You earnings our in Peter

Peter Leav

was free top Eduardo, quarter as and of We afternoon. very a delivered cash profitability we you, XX% and results McAfee flow. increased $XXX significantly Thank with total revenue, year-over-year. robust good for growing line million, revenue QX strong

adjusted growth We core last year-over-year. and subscribers our of QX. also revenue with year. net QX, our $XXX number exceptional improved direct-to-consumer Consumer that we results, of a added XXX,XXX to In was quarter, margin another profitability platform, last of a growing to similar total the XX% net million, versus adds XX% with team Similar XX% delivered set Consumer another to in new industry-leading direct-to-consumer robust EBITDA

caps quarter year-over-year of consecutive direct-to-consumer another adds. Our and performance our revenue subscriber and sequential terrific growth marks quarter XXth year strong fourth of core

year, Consumer and XX the X.X during XX%, subscribers For revenue grew the last we months. full added new million net

will go Our to core a detail base year-over-year the results profit during quarter. EBITDA our QX his into Enterprise X% QX our of was more business overall expansion solid Venkat with long-tenured Enterprise growth. revenue growth strong major customer delivered and in contributor regarding remarks. our

margin XX% and of of $XXX versus XX% of EBITDA, generated and margin generated We XX% than XX% business. than organic year growth product driven full free last our revenue cash our offerings. on flow, McAfee approximately of Total our the and billion, Our billion strength representing growth in representing by increased versus clearly highly recurring focus financial by demonstrate XXXX execution team's a growth over in year. unlevered more net to a highlights more in $X XX% last million Consumer $X.X adjusted year.

in Looking at each segments depth. more of our

direct-to-consumer continues to America. channels, subscribers, and double-digit across reached acquisition Our in years XXXX, In for all while be Consumer FYXXXX, revenue growth have million strong accelerated than company. a engine profitability. customer year-on-year. Japan, the improving more America, resulting we Latin EMEA, an our several Consumer trajectory up for growth growth In robust in North core growth XX% double-digit franchise has business impressive sustained McAfee's a XX

double-digits the need Our product geographies, growth large also Consumers fuel to subscriber underscoring growth and approach increasingly concern power high will of risks commissioned of on our continue These market surveyed showing become external XXXX continues our addressable in concern average consumer advantages the crime an XX%. beyond. already have DTC online and users an was world. security to and adults will awareness company, around and an of in Consumer strategic business our of to expressed levels for XX,XXX internet-connected about the and believe all McAfee omnichannel holistic cyber with survey, trends increase. the MSI-ACI, suite. Based the digitized, we the for survey around respondents

another software tightly trustworthy needs with and shopping, privacy a increased trends the differentiated drivers of purchases and emerged the a top within and use the protection purchases household, During expectations security brand. more showed key consumer planning, usage protection. online are that for online policies. as increase identity transactions, the The with post-pandemic were banking, aligned internet software easy-to-understand also covers pressing will in security remain in study online online information security explosive multidevice recent the of personal transactions, the devices connectivity, work-from-home same study, web growth for these at are the for of proliferation financial of visits, device, survey offerings that consumer doctor showed personal and most personal pricing the high activities in those criteria broad that and software Meanwhile, protection, the levels. consumer McAfee's that

segment, In ASUS at And with addition signings, signed offer whereby team's results, through including global public to renewal our channel Consumer we our a rate growth while on investing products. Consumer results simultaneously we signing driven on to five-year confident positive and sustainable recent to subscription continue investments and security consumer to to PCs us. and by significant our a PC market, in partnership security QX product, of include purchased our awareness costco.com opportunity subscriber the trends products retention. the as in of McAfee paid all extended capture most privacy also channel the costco.com, long-term acquisition achieving our security of see front the well in to double-digit will In and one-year scale McAfee. was are about importance highlighted We as McAfee provide a feel tremendous continuing agreement increased

net uplift Looking about effect of cohort we at we and DTC subscribers, which with the our with Consumer of potential benefit of remains renewal associated imperatives. million we expect thinking XXXX base market to the strategic much of flywheel greater execution also an our provide from key to strong revenue. our the to year us. a very to expansion The business, business, against finished strong XXXX expect Switching enterprise new X.X this front in

multi-cloud is complex, hybrid, of core customer focus the on long-tenured serving Our enterprise environments base. our

users, and offerings. enterprise. year-on-year strong We know innovation across security cloud in to is We the are in with the driving resonating our strategy device applications, EDR and security double-digit underlying protect our infrastructure given to growth data cloud help customers

growth cloud XX% by offering security MVISION the through drove competing significant XX was our Our orientation successfully a targeted equally additional shadow work national support the access data of remote in margin next edge is context McAfee, unified protection, as in and users. for To to product cloud adoption their by XX%, chosen anywhere healthcare important worker focus cloud quarter. EBITDA from marketplace, adjusted was full cloud delivering and This and expansion improving for to cloud provider how security, advanced were market McAfee's Mcafee's provide points from of generation security wind and full percentage customer on a the profitability web protection. need support needs. data SaaS in services a IT, and of security Both platform to protection this cloud threat secure their and around

ways, capabilities customers products, organizations to nature such and cyber security. customer threats. indiscriminate from converged been many and variety wins the these a of the high product functionality, space as the McAfee unprecedented of of far leader and organizations ability a cloud a the Our deliver recent spotlight data ability a to coordinated attacks. with as today, necessitate campaigns. Moreover, AI gateway thrust seminal for deliberate but meets now in largest it cloud UCE wake offering recently cybersecurity of extend and solution. whether with them breaches committed also government in large that McAfee's can The to and Recent anything, enterprises in delivers SolarWinds requirements our superior what rigorous in the we unified customer enterprise market or leading sophistication and profile state Sunburst defending criminal underscoring process guided is of and EDR more easily government certainly landscape. Cyber an This and to came offering. integrated these entities reminders and Gartner's were event Quadrant the in on unique for combine and of should MVISION is and the to of which will the insights, prepare compared chose the functionality edge than format. threat superior and with cloud protecting their the risks for attack, investigations, protection, of journey, SolarWinds distinction attacks, and preempt sophisticated seeing precision Magic coupled security in are McAfee's advantages has cloud position our better cybersecurity many down importance EPP attacks seamlessly solutions. our entities accompany world's increase for security evaluation WannaCry More They are for its McAfee's in stark events and In preventative hybrid on-premises, guided an platform this they into years, activity. important Sunburst, against a entails with scale controls. performed considered EDR to McAfee's

recognize to it of customers big operator. see be insufficient We'll the and We that detecting or in by who place, from safe executed focus investments on response year. expect as we would organization during And guards to security they changing a specific the coming have threat spending many quickly. more cyber landscape organizations advanced human one areas threats from the may of is an that expect

acceleration the the place digitization that is and solutions has understand we differentiated to We critical The served transformation timely. to in over has months performing is consumers, that the that taken digital expertise wave XX McAfee's more sweeping the world. never in urgency. mission bringing business role has enterprises in securing only been well. Our security past compound play governments

to there of become and These of telemedicine into consumers' woven digitally strong once that our lives McAfee financial to realm our now interaction Venkat have enabled success, you and again, results work, provide and the hard over expect permanently daily gone learn, focus exercise, to must have shop, McAfee nice to and on from allowed be to to execute and every I secure. year us your in bank, further has is conveniences haves team stream, strategy Thank New peace haves. mind. and experiences our members results. deliver on very to discuss QX for work will dedication, detail. partner call which full in XXXX the turn to customer they

Venkat Bhamidipati

finished the very and for afternoon, profitability increasing line double-digit increased business, resulting year Thanks, We execution demand with Across all results strong significantly. our and growth. revenue, bottom strong note in expectations, Peter, exceeded cash everyone. top good driven and by offerings, a and flow on security the

Adjusted of XX% of growth year. points. For a of million $X.XX. was a fourth an margin in adjusted million, net the XX% expansion XX% and over representing was of up an This last quarter, basis XXX revenue resulted year-over-year EBITDA EPS $XXX $XXX

demand and personal growing Our in double-digit large consumer segment, our critical In grew significantly delivered of increased enterprise protection and subscriber by X% we profitable. robust growth segment revenue market. because

grew EBITDA net billion company billion, fiscal as was Full results, we Moving adjusted total, billion XX% in operating was XXXX EBITDA $X.X X% contributing for XX% net was revenue the representing $X.X full XX% drive revenue and topping margin growth. year. expenses for FY even to channels. growth consumer $X.X revenue an grew year-over-year X%, increase to Therefore, consumer enterprise McAfee's Year-over-year, billion, to key XX% XX% the invested year Adjusted net adjusted year $X in year. the declined versus total XXXX. of

business increase leverage more We efficient continue a resulting to our operating in model.

free representing unlevered free of and XXXX year, of flow $XXX up full the we XX% cash million, For margin versus an flow XX%. unlevered generated cash

the out a delivered to team Our solid close performance year.

Our with digitized our consumer our consumer products, more increasing of aspects momentum transact scenarios. security business continued as across work, lives its learn for the and are demand

conversion strategic and This omni-channel acquisition, as execution year-over-year quarters strong validates mentioned, this retention. of advantage sequential of the XX direct-to-consumer as and As Peter protection on subscriber offerings, marks our growth. personal and consecutive go-to-market well holistic

going to expect We momentum forward. continue this

adjusted from government were driven market-leading prioritization our saw very our EBITDA go-to-market cloud focus core results towards and strategy. on These enterprise and efforts also of by strong our enterprise We optimization improvement segment. R&D products device The to our of customers. continued

Now came improving expected XX% business turning total operating on income in focused profitability the to our focus operating in to compared expenses, growth. adjusted our demand improved we investments across various higher channels. while year We've quarter. remain balancing this Evidence seen where by of in our QX prior than product also partner our

this for revenue during the future well spend also While bodes marketing the drove increased it quarter, growth.

we quarter, and the catch-up primarily staffing included discussed of GAAP our recognizing of activities to our $XXX of equity-based million business and XX-Q charges S-X; noncash fourth quarter in for compensation restructuring in benefits. the million severance QX, $XXX Enterprise in $XX was and connection cumulative the in due consisting noncash other reorientation During departments, net the and realignment of of third with recognized our also primarily million loss in

Now during we strong fourth all segment, segment saw across Consumer the dimensions turning results quarter. In the key metrics. to and momentum

Consumer prior period, a was revenue reflecting million, quarter. XX% the versus net $XXX the For growth year

We basis. XX subscribers, core grow X.X In by XX subscriber million with We or XX% to DTC base million core robust subscribers trailing a year-over-year we increase month QX, direct-to-consumer grew continued base. the new XXX,XXX an net ended subscribers. our of QX on DTC

at mobile mix new in same channel and growth ARPC, provider last business. our which and quarter year. the initially change compared customer, subscribers, are revenue reflects average strong service also We ARPC. per monthly the or demand $X.XX for to finished of dilutive the This saw accelerated to $X.XX period

continued flywheel in upselling for retention unit month X.X subscribers the XX% not million, in last business, year-over-year was uplift renewal dollar improvements to execution in On for compared Also a in reflects driving customer packages. the XX growth. and value strong base Consumer $X.XX bodes strong greater year. DTC of EBITDA Adjusted period was subscriptions only XXX% renewals on ARPC customer for effect Given retention, the fourth came higher-value for This a versus Consumer net full at reflecting the of but prior quarter through XX% existing comparable the our Consumer business, year. $X.XX new $XXX XXXX also million basis, in revenue. the well to trailing year

We position. Consumer our continue to growth invest drive to in solidify and leadership

provide our As the X.X and million subscriptions, new DTC subscribers added in XXXX to renew derive value they offerings McAfee. from value lifetime significant their

results. Moving to up X%. million, Enterprise our $XXX fourth quarter was business Net revenue

see growth. core Unified of adopt We The generated fourth Edge of revenue. all net of from plus customers EDR quarter in revenue the XX% the percentage and our remained year-on-year continue which newer solutions, our to net enterprise over Enterprise Cloud customers total solid double-digit endpoint

XX% adjusted improvement, year-over-year EBITDA margin drive million, reflecting in to EBITDA saw Enterprise year-over-year adjusted to $XX compared last continue Enterprise coming period. We XX% growth. at significant year. XX% during expansion also EBITDA the QX meaningful was adjusted year-over-year segment

back to and total ended the balance sheet. million cash turning fourth $XXX in We and quarter and Now investments. results short-term with cash equivalents company

we second-lien reminder, a $XXX million. fees. $XXX raised $XXX these offering our last initial debt of in pay approximately to public our proceeds October, million million down IPO net of or We As used about

the prepay we we returns, annually fourth the pay of Based representing $XX now of business previously $XXX first-lien $XXX capital million increase generation to expect million communicated. cash are dividend quarter, solid on disciplined an debt. shareholder we based and our excess on used U.S. from drive what strategy cash raising addition, allocation annually, our to In in of the million to

early dividend was first XXXX in declared of this shareholders paid December to and in our was January Our year.

$XX prior cash year, related a which is full including the timing profitability million than little had in approximately well-managed operations of to $XXX and the For year. increased million $XXX flow to receivables, earlier working The compared million performance is better from increased attributable we around improvement and XX% to came expected. in capital,

contracts to XXXX, terminate included IPO. conjunction $XXX For the flow which with million, management was full unlevered fees in year cash free the

to Turning guidance.

are revenue expect total providing consolidated $XXX guidance within million. net XX% Consumer the first year-over-year. and for million revenue EBITDA. adjusted to and XX% expectation net ranges quarter we grow We that be guidance this between will Embedded company In is current $XXX quarter, net between revenue our and

$XX expect XX%. for the expected and Furthermore, tax We rate million quarter EBITDA is total net between interest cash to anticipate be adjusted million. be $XXX of normalized to million. The expense to $XXX $XX we million first non-GAAP

approximately Finally, of you XXX shares. assume count diluted fully million share should a

Enterprise our reduction prioritize excellence we our to drive and across completed investments, all a and go have Enterprise continue in operational market, R&D activities other restructuring we As QX. to optimize functions, workforce

for to the GAAP the include costs, million QX $XX expect take in restructuring related to these actions. million and million of we in $XX of charge a Our QX results of $XX to approximately restructuring remainder charge

of initiatives, the achieve a momentum XXXX. close after very next result our out we're with approximately $XX cost-saving pleased over Overall, these we expect to net months. of to million savings reinvestment As XX

We all advantages. constitute sophisticated continue to our McAfee's execute long-term and on relationships platform competitive strategy. loyal sustainable product of facets

that, our We operator you to I'll to and We long-term continued are reporting call growth progress look begin turn the our to McAfee customers forward to and the of for profitability. positioning over committed Q&A. back success time. to the With

Operator

Our Hamza ahead. question Morgan Instructions] with [Operator Fodderwala go from Please comes you. Thank first Stanley.

Hamza Fodderwala

you about PC consumer guideposts And should favorable right? that's from to Enterprise I didn't pretty in that maybe wanted sort the the that of the thank right? year, given it sense it's environment, that's for question double the much think a slightly sort sort the explicit quarter, you ask in just for any growth give standpoint, guidance. to a that still a demand somewhere us, for seems guys, full you you're But like grew business range, can down. revenue my that the of give or reasonable. given of so taking I probably outlook questions. be see, know ARPU of Hey uplift I sort then flattish pretty that digits this about

shouldn't any in growth a sort range? why at mid-single-digit on that there see we revenue total is of least basis, So reason revenue

Venkat Bhamidipati

Hamza, the question. Hey, you thank much so for

things additional couple a well. and of have thoughts framing Just my Peter as from side, might

overall about you, of QX, was think there. our there if we drivers for it down break to in X%, But revenue kind for you if I three So were Enterprise right? kind grew of key

of First, accounting. have kind you out to purchase price take the

So take hardware. the that growth that, QX you And if benefited apples-to-apples from both licensing be essentially which we've on some now and in out, high revenue yield would involved products, certainly noncore within X%.

we're while So in there is growth the onetime our mentioned, Enterprise products pleased the cloud revenue. as we overall element some with to

that So year, the that, if for revenue, for we'll think projecting of adjust you to come we're sort of normalized rest Enterprise back I levels. the

to – renewal. tailwinds. strong us, with we we've that pretty the a customers retention rate as million have that a the DTC we we been base. continue the experiencing, we constitute for we Now we row, strong respect dollar we strong That's upsell, in see pleased continue about, as X.X especially we're that grown months. Consumer, up leverage adds had. and last that XX with those very, quarters XX for talked cross-sell And to I come We've as think biggest very where Obviously, added tailwind where given the for in expect strong these to

the growth the that's year. kind guiding QX. full to the in good we're certainly, business. pretty feel And about to dynamics consumer We're guiding – that we're we not XX% not And for XX% so the of of

Hamza Fodderwala

so business I on mentioned around Got just demand right, right? there to follow-up million standpoint, we environment. you subscriber the it. from double-digit pretty to But are one mean new a COVID. net that million. in adds? XXXX, drill out of above into in added subscribers over it's will of a we'll a just tailwinds. you be subscribers Maybe business, relates I tougher wanted you the some as to it subscriber that sort historical net growth the adds, this facing reversion So X.X ARPU think here X right? net Consumer trend to still quick comps year, think and your prior to historically, this likely I you've new think But a net look adds know had Do adds? that favorable you're as your do Or see continue you terms PC little

Peter Leav

question. Hey Hamza, it's Peter. I appreciate the

is care seeing sequenced bigger continuing quite will people your in seen that this and yes, PC what in piece, subscribers more is attack QX. the transformation. X.X and be months math some surface And over world, We new think QX. over the as bit XX from added But is banking we've added digital record. on XXX,XXX of understood. talked And example. we time, than we're in time, a belief I online, past a We've I XXX,XXX would online. added expand. that seen know the moving an We've health paced right? channels, the the this And about We say DTC certainly, into right. subscriber not So is you part, it's add an things in digital firm of acceleration flywheel the just But I are market think the And over changing our business. I new to there sense. think a mobile a million is And

of So if will, degree there is a you seeing. broadening, that we're

us And grew you is more obviously broader double-digit year we've I channel that's of year. things XXXX interesting after Now trough PC was a that's PC have with been sort were retail, mobile growing, well. shipments, etail, expansive at nice McAfee a the year growing we and as with channel with for It was of been because for and down. And story, year very year, Direct, much a but that's after still think a one the an growth shipments McAfee clip. know, solid changed

it's a is flywheel a also component the market. changing So but

a will where will I But well, a most lightest much but market also be years the to the to consumer good that from changing. from to see QX, standpoint, for business come are compares the how seasonal typically summarized overstate frankly. and QX voluminous. aspect is fruition. We So a is and the story standpoint. it as QX many actually to a come, that's tougher There's think you not

Operator

you. Thank

will Please from Brian with question Essex next Goldman ahead. go Sachs. come Our

Brian Essex

Hi, to that a good on market competitively, And How you customer donating the EPP coming benefiting afternoon, little legacy of is growth? sense customers, in and share customers? Peter, net a of are share love vendors know thank maybe from? adds Enterprise how you're head there core on pretty mean kind strong your the noted question of quarter? the EDR dynamics of side. was for that I you I taking customer how question. bit you from Like were Are in just some new going this from? guess growth to endpoint And the head? would net in competitive some had where with I I EDR know traction. the and is and cloud driving

Peter Leav

Sure, Brian. I'll each. on try to touch

this attacks Sunburst like hadn't that the would related are well, about broadening things we would a is And and to they are patching. in That's as well a not case. to similar And the bit And of that side to bomb absolutely the and nation we market also, spend need that a talked changed Enterprise protection. example that just the impacted off. cyber and is different as that SolarWinds more to be on a of increase realizing A campaigns that. if from and be very going in fundamental is across So threat all attack, a something that, going the of and many ways, of customers the Enterprise done We states really indiscriminate to market an about entities where remarks very, is That occur forever talked to but against we've bit, for and goes efficiencies in I the campaign. that level governments against was, is is a going indiscriminate saying like changing this McAfee. they preface as precision-guided see well. it be is protect the earlier by changing. And of an vein, continue landscape is need. in need playing And not change. anticipate

have So over insights, X telemetry we know, and governments EDR can anonymize we we data billion have a enterprises that midsize Because you invested, partners, And have and with around data capabilities companies, preventive think no in the in as have. because integration those we and XDR endpoints, and access to we and large into about now endpoints. the that with and with through moving with have many else either we're so way. world and different predict points. a And preempt in we way frankly, one control help can

is So within our opportunity seeing the core wins an there because ways base. that we're are coming in expansive many

the growth come global be the more stories will DLP CASB been growth very us. We much arenas with percentage IT XX.X entities. and in the large that's will that good the large customers, doing globally focused have the a X.X gateway edge spent IT base, web opportunity Insights, We we're cloud spend, in of what this our averaged years. trillion roughly X,XXX that and very in know, a know, year, more names there's you of As And because But so top steady averaged percentage products XXX. and government transition. with is EPO those you with and cloud there's for Cloud expected a on. our with with unified that with and to components EDR been And are secure we're market-leading those seven

we're in to fruition. also coming expanding competition, winning base, against and things absolutely our Now are we're but both

we you going to see as not margins. balance know, opportunity while continue an have, grow. will lines expand also we're We other to product both so to we that

that. I your So hit hopefully in questions most of

Brian Essex

just it. a appreciate Yes. I Maybe follow-up. quick

and a that products – path how the of nonrecurring? those play that that out, other we migrate so? the percentage would more or is year platform will revenue as are anticipate towards I mean versus kind sense revenue So greater over maybe might you might you a And declining, along next get on the of what recurring rate kind of recurring of shift of

Peter Leav

as are certainly say business And we that recurring gives absolutely revenue nice towards XXXX and us expect, grows for I'd to more case, headlights cloud good be at ratable that into the business. continue that also more the clip. will moving and beyond. the we And a and some in very total

put what we exactly and that's that's in to route So the process, expect that's continue.

Operator

Thank you.

Please come Patrick question Bank. go Colville Deutsche with next from will Our ahead.

Patrick Colville

congrats of guys Hi, are thank you you seem and Because metric to reporting the it. was I taking but quarter, Enterprise end question last great a my year. billings? you can't on a find that so much provided Question, that for

Venkat Bhamidipati

is this Venkat. Patrick,

of core on the I think been Enterprise, for we revenue have tend that, have In last the the given I and a the view billing Consumer giving from time it two for customers that annual one flows made core to Enterprise. is to episodic. metrics And key be we're as is and going both customers we're think we billings revenue and lumpy we the the and focused points derive that XX-K on through. itself, the

an on basis. So going provide annual that yes, we are to

Patrick Colville

Consumer ask Okay. that follow-up That's a could on been business the the – all mean appreciated. And cylinders. on has firing segment. I I

contracts any be of? OEM there the to call terms that us in you are calendar of TC out aware In we renewal should for up should XXXX, that

Peter Leav

XXXX. in nothing short for Patrick, Peter. is renewal The answer Hey there's up it's

Patrick Colville

very Okay, clear. Appreciate time. the that’s

Peter Leav

Thank you.

Venkat Bhamidipati

Thank you.

Operator

Thank you.

from question Our Sandler. go will Owens Piper ahead. Please next with come Rob

Rob Owens

into my QX. to question. rip drill for Great. little bit I you Thanks down here wanted talked the about taking in a

not whether little quarter? could and you the or some did could that's relative the a you discounted this how But You articulate cost pressure some Enterprise go business, to create Thanks. of deeper or savings. forecasted maybe

Venkat Bhamidipati

is this in so restructuring perspective. with hit of activity respect but aspects facilities most mentioned, the restructuring whether we're to expenses Rob, of other Enterprise, there's Yes. will the it's it's other infrastructure-related McAfee or rationalizing, or primarily from IT – I actually that a And QX activities.

that within selling we've What certainly previously in into priority savings, we as the in are a or the areas, are reimagine is endpoint some we are expecting into Within cloud strategically invest workloads. to perspective, plus XXX reinvesting Just the continuing to of for whether in capacity, half Or of this that it's put we additional redeploying million. strategic over little to go articulated. R&D, EDR areas – instance. Enterprise $XXX – we're annualized about we in doing market,

So we rationalization we're see to going the over is reinvest smart growth said, we like being areas where I yield, total about making XXX. that strength. sure and But for

Rob Owens

big And of the second Great. around the you? saw know running malware. I recently a the Macs color. not how appreciate a people is MX business, is targeting Mac for that it's Thanks. but Are business the one news it's growing processor. portion I naked? the still We

Peter Leav

missed Peter. it. It's jump of I Yes. I'll part in.

but asking can about Matt, I'm – but you're just Macs, ask, to fuzzy can was you little us. it a sorry ask, again? to sorry think but I you for I'm ask Rob, that

Rob Owens

Absolutely.

is to much of Macs-centric? how your you? Sorry we've for With the relative of I area most consumers Macs running a this that Has Thanks. their guess it seen, business, much new regard mix Mac of naked? malware Are still growing about that. been and to

Peter Leav

Thanks. you. got I

continued again, including sense. is know, channel see mobile that a have. But Macs, also gamut as – iOS the is the we you of may and cover departure what growing the a of to in because but of volume MAC an not bit a seeing uptick. This the something however we've massive of So entirety consumer a

it's component been But just we been seen suit we've related a a as for a us cover that massive So volume, this something gamut. volume has not departure. as strong to the

Rob Owens

you. thank right, All

Operator

Thank you.

from will go Mizuho. Moskowitz next Gregg ahead. Our Please come question with

Gregg Moskowitz

much. Okay, very Hi thanks guys.

I just question, trailing retention months the guess dollar-based rate. first on XX consumer So

you've and earlier, security, And usage of through you so also walk larger to greater need can you able And here have a improvement past online XXX%. of in reached in show XXXX. now a for as you greater addition how couple up it's been the renewals then tranche So over much years? mentioned to coming

dollar-based this sustain level of so McAfee And if wondering retention. I'm can think you

Peter Leav

Gregg, Peter. it's Hey

chance. have is a of me really recall FYXXXX, our let happened XX%. improved. realm in with now And because things. year, start team it's not testament triple DRR it was done gotten And to digits, So we the number the has into And and really by which what has a of every how you'll

digital as been we part and make opportunity our marketing for SAT marketing deliberate We've about scores performance see it pleased for and And to invested really what with NPS and a well. continued have customers an and as of consumers. to have conversion. been the We in what improved very, better better very experience go up customer and we've is

the a base, were way, subscribers. adding engine, you've renewal becomes added part and more subscribers. We and of And new was we we've new more outlined. this component higher were which more the by more as pre-COVID retaining of So that

we so ago. focus. not a would been did making things or work or easier new do has An with it three and for experience. subscriber. pay, better our user this that experience. we a be the years in we've Fewer So make clicks, easier example call are what There last year a done it OOBE, We and to two out-of-box just partners easier that

lot has So We but still been from of perspective. work DRR to the that. a really helped on team have a that's fixated do,

bit a the that's So how. about

is the far range if NPS have solid expecting. things front, this what of they percentage. this to and absolutely With again to of really the hold adding with and make and diligently we're scores that. the we're as front see to them, ensuring triple-digit to gone with through obviously team be to know million partners, the continue on in of we expectation subscribers what and customer that our X.X DRR, that have work higher continue we we that that have But And that's very to up SAT one new on is and pleased As helps. going that's that. But expect going a sure and we're

Gregg Moskowitz

if Very clear, for assumptions around I lower you much. level you you relates roughly return know XXXX for a Venkat. say a in high much very XXXX. from if And your even course as just But helps of normalization, expenses? XXXX? It margins to OpEx thorough haven't guided had Peter. it you to Can a could in of of talk how sort operating tailwind T&E follow-up will, from answer. to A quick Thanks that, for

Peter Leav

be may muted. Venkat

we’ve make got… sure, sorry, me Let

Venkat Bhamidipati

was I sorry muted. Yes,

no is couple for clearly how much we where tools, a we $XX that in benefited. But a collaboration, doing one the I'll have in to of communication which was investing future, the benefited to for year been we McAfee the million Certainly, is of things we cloud-based tools. invested is travel So million have or things $XX consider. almost call from range little XXXX travel. certainly

world selective. to with do – sort it of certainly back, very we when of that certainly travel the that expect returns normal, we’ll travel, level but it’s If where marketing or non-customer full expect be don’t is required of tailwind give So else, we coming required, we’ll future sales we’ve think run I are in for basis. to for virtual on facing some everyone to learned as some But technology going actually investments made And invest. roles, company the like we’ve a well. the the is lasting us

virtual. that’s and being there’s learned as lessons processes new new – of So result a

that and required, if if we’ll again, make certainly investment. it’s customer-facing it’s So

Gregg Moskowitz

Perfect. Thank you for the color.

Operator

Fatima next Boolani will question with from go Our Please come ahead. UBS.

Fatima Boolani

to to up that the what on with engagement has I’ll been net I opportunity. you trends adoption? Thank to like the relatively to from start Consumer follow side? looking Venkat. Peter, you early respect talk and questions. Peter, channel impacts business? frankly, Any I’ll Good new for speak can And with about you Any the for wanted my afternoon. with Amazon taking you,

Peter Leav

alignment what is the Fatima, but had what anticipated. still Amazon we piece, so on we’re seeing days, to it’s early

question, also our you’ll of a a was bundle into PCs and earlier bit this beyond Prime option businesses can ensure support that access protected, kind some of services. removal sort additional also Business that again, providing little for it’s And additional tech But comprehensive and toe protection, from of employees resolution dip iOS overview there or to VPN the agents And in the stay licensing built with we included an of Macs are IT about XX And So scope services, standing consumer of devices. as then recall, owners obviously was by family. offering, to members. AV, solution for a classic And well as and are back And it devices. opportunity our support Android the we’ve as help. of and to protection, standpoint. for McAfee and we’ve password for manager to kind virus part the to XX/X

line it ramping. to expectations. would anticipated So a We with of that it’s still bit take early time in days. about start That’s

going the a built to at progress example, over not, of TAM QX mover it big and looking Venkat’s bit, it’s into we’ll to for something forecasts. course see is broaden enable to not We’re a us projection that continued But just That’s time. for needle look as the short-term.

Fatima Boolani

that first business the for I right, rate appreciate Venkat, guide implied if quarter a just my math Enterprise side, done growth Enterprise color. of on decline. the your and in you so mid-single-digit sort decay based I’ve on the implies

the incident. more back help some the you SolarWinds some positive underwrite Sunburst relative to that puts of with especially of sort I’m expectation, so the wondering and trends takes if commentary And of on Enterprise the us that of and spending can around

tailwinds pretty guide? dynamic erosion your to the Enterprise it business wanted how relative in understand of me. for Thank I just some precipitous So better reconcile that a on from the to to you. That’s

Venkat Bhamidipati

All for right. question. Thanks, the Fatima,

the about is is to the things. way talked as the of think which about revenue So I combination I sort results, QX, QX a unpacked it of three

our mentioned price The increase largely increased about that X/X we hardware, with which that continue. We of to see and are expect EC, it the licensing that. UCE. remaining from goodness X% in remaining of into seeing from quarter cloud of favorable year. the The came EDR products, the I goodness I’d of respect and actually X/X the came call first is are we – thing to trends Those going of that yield growth end did did continue X%, terms non-core. that to in accounting. the of the goodness purchase of some Of of strong don’t both see continued we revenue is growth, X% we’re some

tends And strong sequential the quarter to – – is point us. decline, I’ll on a as a QX be seasonally QX for strong not so seasonally. last Now strong clearly make year the

trends earlier will saw the So that billing we continue.

that’s slight revenue. we’re decline So guiding why to a in

Operator

you. Thank

Hedberg RBC Matt Our go question Capital with ahead. from next Markets. will Please come

Matt Hedberg

the guiding my think quarter. this Thanks well Consumer Thanks, for I midpoint, did for guys. growth taking you’re XX% questions. at exceptionally QX. Obviously, And in

– about just obviously, trying anything sequential seen that don’t sequential Looking sort data, our sequentially. ever just a a wonder, get trend I historically. growth unique we’ve I year-on-year I that for based part? I’m strong on on down a at than that QX? know just don’t, of Consumer different Was But Consumer just little conservatism been the with QX on your to there is in has understanding the what better that – – sequential forecasted. but anything basis, is

Venkat Bhamidipati

Got it. This is Venkat.

consider, terms So a couple subscriber is the total we’re very, QX, And been quarters there in subscriber growth of of adds. XX%. One things of quite XX of momentum has right, significantly Matt. pleased to with growth XX%, revenue last over certainly the very in

that. with pleased So very, very

a feel we seasonality remember, decline, with to actually it’s XX% QX comfortable midpoint see XX% degree of year XX%. Going We XX% but level tough between compare – a the from of sequential to XXXX pretty some a from going But there’s of range. QX of going back even that And just though in decline. didn’t was and time, relative QX XXXX QX. last to

guidance a seasonality across momentum and geographies growth, with in very element between into subscriber obviously pleased all we QX the slight QX terms built the that there’s and So channels of but as we’re all of well.

Matt Hedberg

you net mean trend guess is question Okay. was the and that you’re and sense been guess to that the bit but trying up I a then – is should follow-up. little for balancing better year, down, ARPC that. a over I we to should the Obviously, year, it adds. though, It And that how I that. Thanks, continue sort for about still about strong the over to strong the of we renewals guiding has adds. Venkat, – think get higher fiscal basis, expect ARPC several full we on years. last a year-on-year think for year, Just total should just to on course not time? of was maybe noted the net

Peter Leav

quickly Matt, it’s on that. I’ll jump in Peter.

perspective be a those we sort at subscribers, when This it’s will somewhat broadly, it going period one full we’re that So could decision time. that full of a make. to look it’s be I we shorter And volume new quarter a a That you’re look is make. very well. And a of XXXX, you ARPC year continue think year classic of grow, decisions, and did decision summarized from it over of at quarters. to when business trade-off it right, to when happy which is adding or pick to we’re dilutive a our few really

this of ARPC having time, we cessation at rather haste the the the the hit over like improve. is time, such economics, that is target than and growth it’s of course of with to Over going just But that fact level we’re ARPC ARPC growth. an we a that improving through

So want I we make clear. just that make sure to

substantive improve the to add we subscribers. to on of prior do to of don’t get fashion, been but to we’ve our XX a on time, numbers trajectory any intention hasty that every quarters want continue have in there new that terrific it we ARPC opportunity such to over We

Operator

am further no I’ll I queue speakers, back questions remarks. call this at in you And showing the further time. over to for turn any the

Peter Leav

may didn’t you I sure did closing. sure entirety, was have I to that in get complete more? know want Matt, a its Or But leave to without want Sorry, we’re make I answer. Matt’s it? make we question we there answered we though. dropped.

Operator

go [Operator Matt. Instructions] ahead, Okay,

Matt Hedberg

on I was the makes of mean on guys. question. a sense. new answered again. the trade-off the the considering quarter. mute about that renewal guys. strong like Congrats that’s think expectations, just And ton I think a sounds I Peter, No, right sub that sense. of that, Sorry I That really on ton was adds. makes And It it a that,

Peter Leav

their join of on focus back the the our say as appreciate to IR IR also joining into partners. to is thank customers to like look around thank for lot that, all by With want our including We again you public lot. Eduardo. updating Thanks team have I’d the And has today. a markets. I McAfee, XXXX. on thanks do you forward for to the to We’d entree welcome McAfee next call. know, for team thank A this and to incredible all at you our much. the all Happy year, we our an like team him world you like way. I’d Matt, to it. happened He continued our team. the very

Operator

for Ladies call. Thank and your you today’s gentlemen, conference this participation. concludes

You disconnect. now may

McAfee (MCFE) 24 Feb 212020 Q4 Earnings call transcript