mcfe-8k_20201224.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 24, 2020

 

McAfee Corp.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-39651

84-2467341

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

6220 America Center Drive,

San Jose, CA

 

95002

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (866) 622-3911

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.001 par value

 

MCFE

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


 

 

Item 2.02 Results of Operations and Financial Condition.

On January 11, 2021, McAfee Corp. (the “Corporation”) posted supplemental historical quarterly non-GAAP financial information to the Investors page of the Corporation’s website (the “Supplemental Financial Information”). This Supplemental Financial Information does not revise, restate, or otherwise amend any previously reported financial information of the Corporation. A copy of the Supplemental Financial Information is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 2.02.  

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1, shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

 

Item 7.01 Regulation FD Disclosure.

The information set forth under Item 2.02 is incorporated by reference as if fully set forth herein.

 

Item 8.01 Other Events.

On December 24, 2020, the Corporation caused McAfee, LLC, its indirect wholly owned subsidiary, to prepay $300 million of the outstanding U.S. dollar-denominated term loan tranche (the “First Lien USD Term Loan”) under McAfee, LLC’s senior secured credit facilities (the “First Lien Credit Facilities”). The prepayment of a portion of the First Lien USD Term Loan did not result in any prepayment or other penalty under the First Lien Credit Facilities.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit

Number

 

Description

99.1*

 

Supplemental Financial Information

 

*

Filed herewith.

1


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

McAfee Corp.

 

 

 

 

Date: January 11, 2021

 

By:

/s/ Venkat Bhamidipati

 

 

 

Venkat Bhamidipati

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

(Principal Financial Officer)

 

2

mcfe-ex991_17.htm

 

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