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McAfee’s First Quarter as a Pure-Play Consumer Business Grows 25%

McAfees First Quarter as a Pure Play Consumer Business Grows 25%

McAfee Corp. (“McAfee,” or the “Company”) (NASDAQ: MCFE), today announced its financial results for the three months ended March 27, 2021.

  • Core Direct to Consumer (“DTC”) Subscribers Increased by 20% to 18.9 Million, Up 885,000 QoQ
  • Net Cash Provided by Operating Activities Grew 51% YoY to $259 Million
  • Board of Directors declared a cash dividend of $0.115 per share of Class A common stock

“McAfee achieved significant increases in revenue, subscribers, profitability, and cash flow to start Fiscal 2021. We continue to secure our customers’ ever-increasing digital footprint as people are living more of their lives online. This accelerating transformation combined with our market-leading capabilities drove 25% year-over-year consumer revenue growth and an additional 885,000 net new direct-to-consumer subscribers in Q1. I am very pleased with our team’s continued execution across all regions,” said Peter Leav, McAfee’s President and Chief Executive Officer.

On March 8th, 2021, McAfee announced the pending sale of certain assets together with certain liabilities of our Enterprise business segment (substantially all of our “Enterprise Business”). For presentation purposes related to this announcement, the related assets, liabilities and financial results of the Enterprise Business were classified as discontinued operations in our condensed consolidated financial statements and are thus excluded from continuing operations for all periods presented. Moving forward McAfee will operate as one reportable segment.

First Quarter Fiscal 2021 Financial Highlights from Continuing Operations

  • Net revenue was $442 million, reflecting a 25% growth year-over-year
  • Net Income of $83 million or a Net Income Margin of 19%, as compared to $8 million or a Net Income Margin of 2% in the year ago period
  • Adjusted EBITDA of $199 million or a 45% Adjusted EBITDA Margin, inclusive of approximately $22 million stranded costs

First Quarter Fiscal 2021 Financial Highlights from Continuing and Discontinued Operations

  • Net revenue was $773 million, reflecting a 13% growth year-over-year
  • Net Income of $94 million or a Net Income Margin of 12%, as compared to $9 million or a Net Income Margin of 1% in the year ago period
  • Adjusted EBITDA of $316 million or a 41% Adjusted EBITDA Margin
  • McAfee’s combined Net cash provided by operating activities was $259 million for the quarter, up 51% year-over-year
  • McAfee’s combined Unlevered Free Cash Flow was $298 million for the quarter, up 35% year-over-year

First Quarter Fiscal 2021 Business Highlights

  • McAfee ended the quarter with 18.9 million Core DTC subscribers, adding over 885,000 net new subscribers in the past three months compared to 668,000 net new subscribers during the previous quarter
  • Signed a multi-year extended agreement with Fujitsu Client Computing to deliver best in class consumer security solutions to Fujitsu device users
  • Renewed an agreement with the UK electrical retailer Dixons Carphone to offer McAfee consumer security services
  • Signed an extension & expansion agreement with the consumer division of Lumen, a US based service provider
  • Entered into a definitive agreement to sell certain assets together with certain liabilities, comprising substantially all of the Enterprise Business to Symphony Technology Group (“STG”) for $4 billion and announced a special one-time dividend of $4.50 per Class A common share upon transaction close

Commenting on the Company’s financial results, Venkat Bhamidipati, McAfee’s Executive Vice President and Chief Financial Officer added, “Continued strong demand for our consumer security offerings in the quarter, along with our laser focus on operational discipline, resulted in 25% year-over-year growth in Adjusted EBITDA and 35% year-over-year growth in unlevered free cashflow generation.”

Financial Outlook

McAfee provides the following expected financial guidance for continuing operations for the quarter ending June 26, 2021:

Net Revenue of $430 million to $434 million

Total Adjusted EBITDA of $161 million to $165 million(1) which includes an estimated $40 million to $45 million of stranded costs

For the full year ending December 25, 2021, McAfee expects the following for continuing operations:

Net Revenue of $1,770 million to $1,790 million

Total Adjusted EBITDA of $693 million to $703 million(1) which includes an estimated $150 million of stranded costs

The financial outlook is subject to important assumptions and risks referenced in the section entitled “Forward-Looking Statements” below, which investors should read carefully.

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