=Symantec (SYMC) reported earnings on Thur 3 Nov 2016 (a/h)

Symantec Corporation SYMC reported modest second-quarter fiscal 2017 results wherein its revenues surpassed the Zacks Consensus Estimate while its adjusted earnings (excluding deferred revenues fair value, amortization, restructuring and other one-time items but including stock-based compensation) matched the same. The company’s adjusted earnings came in at 15 cents per share.

Quarter in Detail

Symantec’s revenues of $979 million increased 8.1% year over year and surpassed the Zacks Consensus Estimate of $966 million. Moreover, quarterly revenues were above the mid-point of the company’s guidance range of $960 million to $990 million (mid-point: $975 million). The robust top-line growth was mainly driven by strong performance at the company’s Enterprise Security segment.

Furthermore, adjusted for deferred revenues fair value, revenues were $1.015 billion compared with $906 million in the year-ago quarter.

Segment-wise, the Consumer Security division witnessed a 4% year-over-year decline in revenues, while revenues at Enterprise Security increased 18% on a year-over-year basis. Moreover, adjusted for deferred revenues fair value, Enterprise Security revenues surged 26%.

Symantec’s adjusted gross profit of $851 million was up 11.5%, primarily due to a higher revenue base and lower cost of goods sold. Consequently, as a percentage of revenues, gross margin improved 270 basis points (bps) on a year-over-year basis to 86.9%.

However, adjusted operating income declined 11.3% year over year to $211 million due to higher adjusted operating expenses. Consequently, adjusted operating margin contracted 470 bps year over year to 21.6%.

On a non-GAAP basis, operating income grew 5% year over year to $296 million while margin contracted 200 bps to 29.2%. However, non-GAAP operating margin was 520 bps higher than the upper end of the guided range of 21% to 24%.

The better-than-expected margin was mainly driven by strong top-line growth and realization of cost savings ahead of time. As per Symantec, it realized $100 million of cost savings through its cost restructuring initiatives and synergies from the newly acquired business, Blue Coat.

Adjusted net income for the quarter came in at $98.7 million or 15 cents per share compared with $160.8 million or 23 cents. The year-over-year decline was mainly due to higher operating expenses, which were partially offset by increased revenues and gross profit.

However, on non-GAAP basis, the company posted earnings of 30 cents per share which was a penny higher than the year-ago quarter and also came in better than the guided range of 18 cents to 21 cents.