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McAfee (MCFE) Reports a Breakeven in Q3 Earnings, Revenues Up Y/Y

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McAfee (MCFE - Free Report) reported third-quarter fiscal 2020 earnings of breakeven against the year-ago quarter’s loss of 2 cents per share.

Revenues of $723 million also surpassed the consensus mark by 0.7% and were up 10% year over year.

The Zacks Consensus Estimate for earnings was pegged at 37 cents per share.

Markedly, McAfee completed its Initial Public Offering (“IPO”) on Oct 22 and raised roughly $586 million in proceeds.

Quarterly Details

Consumer revenues (54.3% of total revenues) grew 22.7% year over year to $395 million in the reported quarter. However, Enterprise revenues (45.7% of total revenues) of $333 million decreased 2.1% year over year.

Similar to its cybersecurity peers FireEye (FEYE - Free Report) and Fortinet (FTNT - Free Report) , McAfee benefited from strong demand for security solutions and expanding subscriber base. The company added 669K net core Direct to Consumer (“DTC”) subscribers in the reported quarter.
 

McAfee Corp. Price, Consensus and EPS Surprise

McAfee Corp. Price, Consensus and EPS Surprise

McAfee Corp. price-consensus-eps-surprise-chart | McAfee Corp. Quote

 

As of Sep 26, core DTC customers were 17.3 million. Core Enterprise customers were 1,525.

Gross margin expanded 200 basis points (bps) on a year-over-year basis to 71.3%.

Adjusted EBITDA expanded 470 bps year over year to 36.4%. Consumer adjusted EBITDA increased 27% year over year to $181 million. Enterprise adjusted EBITDA increased 27% from the year-ago quarter to $84 million.

Meanwhile, research & development expenses as percentage of revenues decreased 240 bps on a year-over-year basis to 12.1%.

Moreover, sales & marketing expenses as percentage of revenues decreased 220 bps year over year to 25.5%.

Further, general & administrative expenses as percentage of revenues decreased 240 bps to 8.5%.

Operating margin expanded 530 bps year over year to 34.8%.

Balance Sheet

McAfee had cash and cash equivalents of $348 million as of Sep 26, 2020.

Moreover, the company paid down $525 million in high-cost debt using IPO proceeds to hit leverage ratio of 3.4x.

Further, McAfee expects to declare $37.5 million quarterly dividend in the fourth quarter of fiscal 2020, to be paid on first quarter of fiscal 2021.

Key Q3 Developments

During the reported quarter, McAfee expanded its relationship with Amazon (AMZN - Free Report) . This Zacks Rank #3 (Hold) company and Amazon Business Prime partnered to solve cyber security and IT resource challenges for small businesses. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Guidance

For the fourth quarter of fiscal 2021, revenues are expected between $732 million and $742 million.

Adjusted EBITDA is expected between $254 million and $264 million.

 

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McAfee Corp. (MCFE) - free report >>

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