Cynthia Hiponia - Symantec Corp. Gregory S. Clark - Symantec Corp. Nicholas R. Noviello - Symantec Corp.

Good afternoon. My name is Ian and I'll be your conference operator today. At this time, I would like to welcome everyone to the Symantec Corporation's Fourth Quarter Fiscal Year 2019 (sic) [2018] (00:11) Earnings Call. [Operator Instructions] Thank you. I'd now like to turn the call over to Ms. Cynthia Hiponia. Ma'am, you may begin.

Thank you. I'm Cynthia Hiponia, Vice President of Investor Relations at Symantec, and I'm pleased to welcome you to our fourth quarter and full year fiscal year 2018 earnings results. We've posted the earnings materials and prepared remarks to our Investor Relations Events webpage. Speakers on today's call are Greg Clark, Symantec's CEO; and Nick Noviello, EVP and CFO. This call will be available for replay via webcast on our website. I'd like to remind everyone that all references to financial metrics are non-GAAP, unless otherwise stated. Please refer to the CFO commentary posted on the Investor Relations website for further definition of our non-GAAP metrics. Please note, non-GAAP financial measures referenced during this call are reconciled to their comparable GAAP financial measure in the press release and supplemental materials posted on our website. We believe our presentation of the non-GAAP financial measures, when taken together with corresponding GAAP financial measures, provides meaningful supplemental information regarding our operating performance for reasons discussed below. Our management team uses those non-GAAP financial measures in assessing our operating results as well as when planning, forecasting and annualizing future periods. We believe our non-GAAP financial measures also facilitate comparisons of our performance to prior periods and that investors benefit from understanding of the non-GAAP financial measures. Non-GAAP financial measures are supplemental and should not be considered a substitute for financial information presented in accordance with GAAP. Today's call contains forward-looking statements based on the environment as we currently see it. Those statements are based on current beliefs, assumptions and expectations, speak only as of the current date and, as such, involve risk and uncertainties that may cause actual results to differ materially from our current expectations. Please refer to the cautionary statement in our press release for more information. You will also find a…

Thank you for joining us, and good afternoon. We were pleased with our performance in the fourth quarter and FY 2018, delivering operating results across the business above the guidance levels we provided in our last earnings call. We're also pleased that we exceeded our full-year EPS guidance based on our second half performance and good results from our cost control initiatives. In Q4, our total revenue was driven by performance in both Enterprise Security and Consumer Digital Safety. Our operating margin exceeded our guidance as a result of revenue growth and continued cost and operating efficiencies. We generated strong cash flow from operations, which should benefit going forward from our continued business momentum, deferred revenue, and the drop off of costs associated with our restructuring initiatives. In Enterprise Security, our Integrated Cyber Defense platform gained traction with customers attracted to our value proposition of an integrated platform with best-of-breed solutions. We saw continued adoption in Q4, with our deals greater than $1 million again exceeding 100. We also had a large number of deals greater than $5 million in the quarter. Our-best-of-breed solutions were also recognized by industry analysts. In FY 2018, we were named a leader in the Gartner Magic Quadrant for Managed Security Services, Endpoint Protection Platforms, Cloud Access Security Brokers, CASB, and Secure Web Gateways. We were also named a leader in the IDC MarketScape for Mobile Threat Management in FY 2018. As we've discussed on prior calls, to grow our Enterprise business, we've focused on integrating our Enterprise sales force and our product offerings to bring to customers an Integrated Cyber Defense platform. We believe our third and fourth quarter results indicate the successful integration of our sales force and the success of our Integrated Cyber Defense platform strategy. Now turning to the market and…

Thank you, Greg, and good afternoon, everyone. All references to financial metrics are non-GAAP, unless otherwise stated. Please note, we've posted information on our financial metrics as well as other tables and reconciliations of GAAP to non-GAAP metrics in our supplemental materials and CFO commentary to our Investor Relations website. I will start with a high level view of our Q4 and full year fiscal 2018 results. Recall that the first three quarters of fiscal year 2018 and fiscal year 2017 include results from our WSS/PKI solutions that we divested in Q3. For comparative purposes, our organic growth rates discussed are adjusted for acquisitions and divestitures. As Greg mentioned in his comments, we were pleased with our performance in the fourth quarter with both Enterprise Security and Consumer Digital Safety revenues above our prior guidance. Looking at organic revenue growth in constant currency, adjusted for acquisitions and divestitures, total company year-over-year revenue growth was 4%. This included Enterprise Security segment growth of 1% and Consumer Digital Safety segment growth of 6%. At the same time, year-over-year deferred revenue, adjusted for acquisitions and divestitures, was up 21% for the total company, 34% in our Enterprise Security segment, and 3% in our Consumer Digital Safety segment. We look at the combination of in-quarter recognized revenue and deferred revenue as a strong indicator of the health of our business segments. In our Enterprise Security segment in the fourth quarter, over 80% of our business was ratable. Our Q4 implied billings was $937 million. Contract duration for our ratable business was approximately 18.5 months in Q4, up from slightly under 18 months in Q3; approximately 16.5 months in Q2, and approximately 15.5 months in Q1. We calculate contract duration as total order value divided by annual order value for ratable orders with a term…

As I look back on the fiscal year 2018, I'm pleased with how we executed for the year. When we launched our new go-to-market strategy in Enterprise at the beginning of fiscal year 2018, we had a vision of how our sales force could market and sell our Integrated Cyber Defense platform. Our strategy is resonating with customers. Enterprise customers are designing us into their security architectures and adopting our platform. As our customer workloads move to the cloud, we have launched a suite of cloud-hosted products ranging from CASB, WSS and DLP in the cloud to bring security into the cloud as our customers make this transition. Our enterprise customers are rapidly adopting the subscription-based ratable form factors of our on-premise solutions based on their evolving buying preference for cloud and subscription form factors and the breadth and differentiation of our solutions. Our FY 2019 guidance reflects our expectation that our Enterprise Security segment revenue will become more ratable on an annualized basis in FY 2019 compared to FY 2018. In our Consumer Digital Safety segment, our goal in FY 2018 was to start to leverage the significant cross-sell opportunity of the Norton and LifeLock installed base and transform the traditionally PC-centric business to a growing Consumer Digital Safety category. We accomplished this with a platform that includes endpoint security, mobile, identity protection, Wi-Fi privacy and cyber safety in the home. In FY 2018, our Consumer Digital Safety segment experienced rising ARPU with an annual retention rate of approximately 83% and digital safety adoption rate of approximately 11%. These statistics validate that our strategy of cyber safety platform that includes protecting against malware and identity theft and enhances privacy in cyber space is resonating in the market. In summary, fiscal 2018 was a significant year in Symantec's corporate evolution, the latest chapter of which started with the divestiture of Veritas in fiscal year 2016. Since then, Symantec has undertaken two transformational acquisitions with Blue Coat and LifeLock while delivering substantial margin improvement. In the last year, Symantec continued to sharpen its strategic focus by divesting its Website Security and PKI offerings to DigiCert and completing several tuck-in acquisitions, including Fireglass and Skycure. We believe our strategy to drive organic growth and leverage our scale, innovation and capital to create industry-leading platform solutions across our enterprise and consumer segments is working. Thank you for joining us this afternoon.

Ladies and gentlemen, this does conclude the Symantec Corporation's Fourth Quarter Fiscal Year 2019 (sic) [2018] (27:15) Earnings Call. You may now disconnect.