SANTA CLARA, Calif., July 26 /PRNewswire-FirstCall/ -- McAfee, Inc. (NYSE: MFE) today announced preliminary unaudited results for the second quarter ended June 30, 2007. These results are preliminary because, as previously announced, McAfee has determined that it will need to restate its historical financial statements to record additional non-cash charges associated with past stock option grants and to reflect the related tax impact for stock-based compensation expense over a 10-year period. McAfee believes this restatement is likely to result in aggregate non-cash charges in the range of $100 million to $150 million. In addition, McAfee expects the restatement to include other adjustments to certain balance sheet and income statement accounts that will affect its previously reported results. McAfee intends to file restated financial results and related periodic reports as soon as practicable.
"I am very pleased with McAfee's second quarter results. We reported our 10th consecutive quarter of record revenue. Revenue grew 13% year over year to $314 million. GAAP earnings per share diluted grew 55% year over year to $0.30 and non-GAAP earnings per share diluted grew 37% year over year to $0.41," said Dave DeWalt, McAfee's chief executive officer and president. "More importantly, McAfee has demonstrated through consistent performance and steady growth that our security risk management strategy is working to serve the evolving needs of our current customer base, while attracting new customers."
DeWalt continued, "As the threat environment changes rapidly, we continue to hear from customers that McAfee's approach meets their needs for integration, simplification, return on investment and comprehensive protection. Across all segments of our business, from Consumer/Small Business to Mid-Market to Enterprise, our goal is to become the trusted advisor customers turn to for all of their security solutions."
All results and guidance reported today are presented without taking into account any adjustments to either current or previously reported results that will be required in connection with the restatement and should be considered preliminary until McAfee files its amended historical financial statements and its Form 10-Q for the second quarter ended June 30, 2007.
$ in millions, except per share and % change data Q2 2007 Q2 2006 % Change Total Net Revenue $314.3 $277.4 13 GAAP Operating Income $41.1 $27.7 49 GAAP Net Income $49.4 $31.4 57 GAAP Net Income Per Share (Diluted) $0.30 $0.19 55 Non-GAAP Operating Income* $73.2 $58.3 26 Non-GAAP Net Income* $67.1 $48.4 39 Non-GAAP Net Income Per Share* $0.41 $0.30 37 (Diluted) Deferred Revenue $907 $808 12 Cash & Equivalents & Investments $1,414 $1,154 23 * A complete reconciliation of GAAP to non-GAAP results is set forth in the attachment to this press release.
North American revenue of $163 million accounted for 52 percent of second quarter 2007 revenue, up 8 percent from $151 million in the second quarter of 2006. Outside North America, second quarter international revenue was $151 million, up 20 percent from $126 million in the second quarter of 2006. Compared with the second quarter of 2006, revenues from Europe, the Middle East and Africa grew by 14 percent, Japan grew by 15 percent, Asia Pacific grew by 53 percent and Latin America grew by 80 percent.
Revenue from corporate customers grew to $182 million in the second quarter of 2007, a 9 percent increase over the same period last year. Second quarter corporate business was driven primarily by sales of McAfee's Total Protection solutions for enterprise and small and medium businesses and appliances, as well as execution in our management business. During the quarter, we closed 266 deals over $100,000, 24 deals over $500,000 and 11 deals over $1.0 million. This is the largest number of deals over $1 million closed during any quarter in the last five years.
Consumer revenue was $132 million in the second quarter of 2007, a 19 percent gain over the same period last year. During the second quarter of 2007, we signed or extended 19 agreements and launched 70 new or enhanced online partners, including deals in Japan, Germany, the Netherlands, Peru, Brazil and North America. McAfee also continues to aggressively distribute McAfee SiteAdvisor, the world's first safe search and surf technology, which has already been downloaded over 65 million times by Internet users worldwide.
McAfee expects net revenue in the third quarter of 2007 of $305 million to $325 million.
The Company expects third quarter 2007 GAAP net income of $0.23 to $0.28 per share and non-GAAP net income of $0.36 to $0.41 per share on a diluted basis.
For the full year 2007, McAfee expects net revenue of $1.260 billion to $1.300 billion.
The Company expects full-year 2007 GAAP net income of $1.07 to $1.27 per share and non-GAAP net income of $1.61 to $1.71 per share, each on a diluted basis.
This guidance reflects an assumed 24 percent GAAP tax rate and a 27 percent non-GAAP tax rate. See the reconciliation of projected GAAP net income per share to projected non-GAAP net income per share attached to this press release.
The Company's balance sheet at June 30, 2007, included cash, cash equivalents, and investments of $1.414 billion.
Deferred revenue was $907 million at the end of the second quarter, a 12 percent increase over the second quarter of 2006. Approximately 85 percent of revenue during the second quarter came from recognition of deferred revenue on the balance sheet.
During the second quarter, the Company generated approximately $85 million in cash flow from operations. Days sales outstanding (DSOs) were 46 days.
During the quarter, McAfee's enterprise business made available a beta version of ePolicy Orchestrator 4.0 (ePO), the next major release of the award-winning McAfee security management software. Also, new versions were added to McAfee's risk and compliance products with the release of McAfee Foundstone 6.0, McAfee Remediation Manager 4.5 and McAfee Policy Auditor 4.5.
In addition, McAfee became the largest security company to offer a complete data loss prevention solution with the release of McAfee Data Loss Prevention. At Interop in Las Vegas, McAfee announced the McAfee IntruShield 10 Gigabit Ethernet platforms, the first and only network Intrusion Prevention System appliances to deliver performance of up to 10 Gbps and the highest gigabit port-density available in the industry.
McAfee announced an increased focus on the rapidly-growing market of security products for mid-sized companies. McAfee is building out its sales force and retooling its products to better compete for the security business of organizations with 100 to 1,000 users. As part of the mid-market push, McAfee unveiled the Secure Internet Gateway (SIG) 3000 appliance, designed as an all-in-one device that blocks spam, viruses, malicious Web sites and spyware.
On the consumer front, McAfee announced several partnerships. Scottrade, Inc. will provide McAfee's flagship all-in-one firewall, anti-virus, anti-phishing and anti-spyware software to the 1.6 million Scottrade customers and M & I Bank, a top 35 bank nationally, will offer both their consumer and small and medium business customers VirusScan Plus, McAfee Internet Suite and Total Protection Solutions for Small and Medium Business subscriptions.
In Canada, Scotiabank will offer VirusScan Plus, McAfee Internet Suite and Site Advisor to its 1.2 million online banking customers. McAfee also updated its "The State of Search Engine Safety" study on search results that link to potentially dangerous Web sites. Meanwhile, McAfee announced that SiteAdvisor is now available in 15 languages, continuing to prove the popularity of the world's first safe search and surf technology.
McAfee's top-ranked security threat and research organization held a successful media road show in three United States cities and Munich. During the quarter, Avert Labs also published the second issue of Sage, a semi-annual journal for security executives and technical personnel. The publication covers topics including cybercrime, Microsoft Windows Vista security, spyware, spam, cell phone security, data leakage and security risk management.
In addition, Avert Labs researchers also published articles, blogs and white papers on various topics, including spam, rootkits and the mind games cybercrooks play to trap victims. Avert Labs researchers continue to be widely quoted in the media as security experts.
Dave DeWalt took office as president and chief executive officer during the second quarter. The Company further bolstered its executive ranks, including naming Joseph Gabbert as executive vice president of human resources, David Milam as chief marketing officer and Joe Sexton as senior vice president of North American sales. Additionally, Todd Gebhart was promoted to senior vice president in charge of McAfee's consumer, mobile and small business group.
DeWalt joined other industry CEOs in Washington, D.C. for the Business Software Alliance CEO Forum, calling for legislative action on patent reform, immigration and cybersecurity. During this conference, DeWalt met with the U.S. Secretary of Treasury Henry Paulson, U.S. Secretary of Commerce Carlos Gutierrez and various leaders in the U.S. Congress.
Demonstrating the importance to the Company of expanding its intellectual property portfolio, McAfee added 19 patents in the second quarter and now holds 279 total patents.
McAfee received wide recognition and won various awards during the second quarter. In June, McAfee won a Stevie Award for "Best Support Organization" at the 2007 American Business Awards. In May McAfee's Technical Support Organization was lauded with a 2007 "STAR Award" from the Service & Support Professionals.
Additionally, McAfee products ranked first or second in 15 product reviews. For example, McAfee SiteAdvisor received accolades from PC World. Also, McAfee ePolicy Orchestrator and VirusScan Enterprise scored first in a Windows IT Pro test and VirusScan Enterprise with AntiSpyware Enterprise received a Gold Medal from Information Security Magazine.
The new McAfee Secure Internet Gateway (SIG) 3000 received a positive review from CRN Magazine and McAfee Data Loss Prevention received a positive review from InfoWorld. Meanwhile, the McAfee Foundstone appliance won the "Excellence in Risk Management" award from the readers of the Info Security Products Guide.
Non-GAAP net income and non-GAAP operating income for the second quarter ended June 30, 2007, exclude amortization of purchased technology and intangibles expense, non-cash stock-based compensation charges, retention bonuses and severance payments related to acquisitions, gain or loss on sale of assets and technology, restructuring charges (benefits), and SEC and compliance costs. Non-GAAP net income assumes an effective tax rate of 27 percent for 2007. Management believes that the 27 percent non-GAAP effective tax rate reflects a long-term normalized tax rate under the global McAfee legal entity and tax structure as of the period end. Management uses non-GAAP net income and non-GAAP operating results to evaluate the Company's operating performance and believes that excluding these items enhances the ability of management and investors to evaluate McAfee's comparable historical operating results.
Management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted gross profit, operating income and net income, which we will refer to as "non-GAAP gross profit," "non-GAAP operating income" and "non-GAAP net income." Non-GAAP gross profit excludes amortization of purchased technology and non-cash stock-based compensation charges. Non-GAAP net income and non-GAAP operating income exclude amortization of purchased technology and intangibles expense, non-cash stock-based compensation charges, retention bonuses and severance payments related to acquisitions, gain or loss on sale of assets and technology, restructuring charges (benefits), in-process research and development charges, SEC and compliance costs, provision for income taxes and certain other items. Management used a 27 percent non-GAAP effective tax rate to calculate non-GAAP net income in 2007 and 2006. Management believes that the 27 percent non-GAAP effective tax rate in each respective period is reflective of a long-term normalized tax rate under the global McAfee legal entity and tax structure as of the respective period end.
Non-GAAP gross profit, non-GAAP operating income and non-GAAP net income are supplemental measures of our performance that are not required by, or presented in accordance with GAAP. The presentation of these non-GAAP financial measures are not intended to be used in isolation and, moreover, they should not be considered as a substitute for gross profit, operating income, net income or any other performance measure determined in accordance with GAAP. We present non-GAAP gross profit, non-GAAP operating income and non-GAAP net income because we consider each to be an important supplemental measure of our performance. Management uses these non-GAAP financial measures to make operational and investment decisions, to evaluate the Company's performance, to forecast and to determine compensation. Further, management believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance when planning, forecasting and analyzing future periods. We further believe that these non-GAAP financial measures are useful to investors in providing greater transparency to the information used by management in its operational decision making.
In calculating non-GAAP gross profit, non-GAAP operating income and non-GAAP net income, management excludes certain items to facilitate its review of the comparability of the Company's operating performance on a period-to-period basis because such items are not, in management's review, related to the Company's ongoing operating performance. Management uses this view of its operating performance for purposes of comparison with its business plan and individual operating budgets and allocation of resources. Additionally, when evaluating potential acquisitions, management excludes the items described above from its consideration of target performance and valuation. See the footnotes to the "Reconciliation of GAAP to Non-GAAP Financial Measures" for a discussion of the specific categories excluded from GAAP net income in the calculation of non-GAAP net income.
We believe that the use of calculating non-GAAP gross profit, non-GAAP operating income and non-GAAP net income also facilitates a comparison of McAfee's underlying operating performance with that of other companies in our industry, which use similar non-GAAP financial measures to supplement their GAAP results. However, calculating non-GAAP gross profit, non-GAAP operating income and non-GAAP net income have limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for GAAP gross profit, operating income and net income. In the future, we expect to continue to incur expenses similar to certain of the non-GAAP adjustments described above and exclusion of these items in the presentation of our non-GAAP financial measures should not be construed as an inference that all of these costs are unusual, infrequent or non-recurring. Investors and potential investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool.
In addition, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the Company's financial results for the foreseeable future. The Company compensates for these limitations by providing specific information regarding the GAAP amounts excluded from the non-GAAP financial measures. The Company further compensates for the limitations of our use of non-GAAP financial measures by presenting comparable GAAP measures more prominently. The Company evaluates the non-GAAP financial measures together with the most directly comparable GAAP financial measure.
Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with our GAAP net income. For more information, see the consolidated statements of income and the "Reconciliation of GAAP to Non-GAAP Financial Measures" contained in this press release.
This release contains forward-looking statements, which include those regarding the preliminary unaudited results for the second quarter ended June 30, 2007, and guidance on expected operating results for the third quarter and full year 2007, the anticipated timing for McAfee's filing of the restatements of its historical financial statements and related periodic reports, expectations regarding McAfee's business strategy, relationships and opportunities, and the benefits of McAfee's security solutions. Actual results could vary, perhaps materially, and the expected results may not occur. In particular, McAfee will be required to make adjustments to its unaudited preliminary second quarter results, as well as to its financial results previously reported for prior periods, as a result of its review into past stock option grants and the announced restatement. In addition, actual results are subject to other risks, including that McAfee may not achieve its planned revenue realization rates, succeed in its efforts to grow its business or combat effectively the security threats of the future, build upon its technology leadership, leverage its relationships and opportunities to the degree expected, or capture market share, notwithstanding related commitment or related investment. The Company may not benefit from its strategic alliances or partnerships as anticipated, customers may not respond as favorably as anticipated to the Company's product or technical support offerings, the Company's product and service offerings may not continue to interoperate effectively with newly developed operating systems, the Company may experience delays in product development or the release of previously-announced products, the Company may choose not to deliver a previously-announced product, or the Company may not satisfactorily anticipate or meet its customers' needs or expectations. Actual results are also subject to a number of other factors, including customer and distributor demand fluctuations and macro and other economic conditions both in the United States and internationally. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in McAfee's filings with the SEC including its annual report on Form 10-K for the year ended December 31, 2005, and its quarterly report filed on Form 10-Q for the first quarter of 2006.
The completion of the ongoing review of past stock option grants will result in prior period non-cash stock compensation charges and related tax effects and is expected to result in other adjustments which will affect the preliminary unaudited results and full year guidance reported in this release. Therefore, all results reported in this release are unaudited and should be considered preliminary until the Form 10-Q for the second quarter ended June 30, 2007, is filed with the SEC.
McAfee, Inc., the leading dedicated security technology company, headquartered in Santa Clara, California, delivers proactive and proven solutions and services that secure systems and networks around the world. With its unmatched security expertise and commitment to innovation, McAfee empowers home users, businesses, the public sector, and service providers with the ability to block attacks, prevent disruptions, and continuously track and improve their security. http://www.mcafee.com.
McAfee, SiteAdvisor, IntruShield, Foundstone, VirusScan, Avert, Total Protection, AntiSpyware, ePolicy Orchestrator, Remediation Manager, Policy Auditor, Data Loss Prevention, Intrusion Prevention System and Secure Internet Gateway are registered trademarks or trademarks of McAfee, Inc. and/or its affiliates in the United States and/or other countries. McAfee Red in connection with security is distinctive of McAfee brand products. All other registered and unregistered trademarks herein are the sole property of their respective owners. © 2007 McAfee, Inc. All rights reserved.
McAFEE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Preliminary and unaudited) June 30, December 31, (1) 2007 2006 Assets: Cash and marketable securities $1,413,823 $1,240,169 Restricted cash 557 950 Accounts receivable, net 161,844 170,655 Prepaid expenses, income taxes and other current assets 156,837 163,752 Property and equipment, net 96,135 91,977 Deferred taxes 584,434 461,184 Goodwill, intangibles and other long term assets, net 662,451 671,722 Total assets $3,076,081 $2,800,409 Liabilities: Accounts payable $37,876 $35,652 Accrued liabilities 243,523 285,994 Deferred revenue 906,635 894,568 Accrued taxes and other long term liabilities 62,582 133,118 Total liabilities 1,250,616 1,349,332 Stockholders' Equity: Common stock 1,726 1,726 Treasury stock (303,270) (303,074) Additional paid-in capital (2) 1,699,790 1,450,049 Accumulated other comprehensive income 33,241 28,662 Retained earnings (2) 393,978 273,714 Total stockholders' equity 1,825,465 1,451,077 Total liabilities and stockholders' equity $3,076,081 $2,800,409 (1) As previously disclosed, the completion of the restatement of our historical financial statements will result in prior-period, non-cash stock compensation charges and related tax effects and in other adjustments to certain balance sheet and income statement items that will affect our previously reported results as well as our preliminary unaudited results reported in this release. As noted below, certain of these prior period adjustments have been reflected in our preliminary balance sheets as of December 31, 2006 and June 30, 2007: Prior-period Adjustments (in thousands) Estimated increase to total assets, primarily related to tax effects of adjustments to liabilities and equity $1,102 Estimated decrease to total liabilities, primarily related to decreased foreign tax liabilities and deferred revenue, net of increases related to legal settlements and payroll taxes $(2,134) Estimated non-cash compensation charge associated with acceleration of unvested stock options held by former chief executive officer in the fourth quarter of 2006, estimated non-cash compensation benefit for correction of options modified in the fourth quarter of 2006 and estimated retained earnings impact as a result of above adjustments 3,236 Estimated increase to total liabilities and stockholders’ equity $1,102 While these prior period adjustments have been reflected in the preliminary balance sheets reported in this release, they have not been reflected in our income statement for the three months and six months ended June 30, 2006. We expect both these balance sheet and income statement results to change, perhaps materially, pending completion of our restatement of our historical financial statements. (2) As of January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes." As a result of the implementation, we recognized a decrease of $126 million in the liability for unrecognized tax benefits, of which $101 million was accounted for as an increase to the January 1, 2007 balance of additional paid-in capital and $25 million was accounted for as an increase to the January 1, 2007 balance of retained earnings. McAFEE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (Preliminary and unaudited) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Net revenue $314,267 $277,364 $628,501 $549,331 Cost of net revenue (1) 62,819 51,905 124,241 100,181 Amortization of purchased technology 8,515 5,226 16,327 9,067 Gross profit 242,933 220,233 487,933 440,083 Operating costs: Research and development (1) 53,256 48,293 104,001 91,979 Marketing and sales (1) 94,415 92,996 183,567 177,954 General and administrative (1) 39,104 41,578 83,077 77,872 SEC and compliance costs 9,148 3,352 14,200 3,772 Amortization of intangibles 3,556 2,846 6,233 5,639 Acquisition retention bonuses and severance 2,410 2,344 4,660 3,263 Restructuring (benefits) charges (77) 568 3,049 1,119 Loss (gain) on sale/disposal of assets and technology 7 129 (1) 153 In-process research and development - 460 - 460 Total operating costs 201,819 192,566 398,786 362,211 Income from operations 41,114 27,667 89,147 77,872 Interest and other income, net 18,632 7,996 32,587 19,930 Income before provision for income taxes 59,746 35,663 121,734 97,802 Provision for income taxes 10,353 4,300 26,172 25,549 Net income $49,393 $31,363 $95,562 $72,253 Net income per share - basic $0.31 $0.20 $0.60 $0.45 Net income per share - diluted $0.30 $0.19 $0.59 $0.44 Shares used in per share calculation - basic 159,800 159,418 159,799 162,163 Shares used in per share calculation - diluted 163,613 161,404 163,339 164,113 (1) As of January 1, 2006, the Company accounts for stock compensation expense under SFAS 123R, "Share-Based Payment," which requires stock compensation expense to be recognized based on grant date fair value. Cash and non-cash stock-based compensation charges are included as follows: Cost of net revenue $678 $971 $1,631 $1,895 Research and development 2,986 3,882 6,564 7,442 Marketing and sales 4,307 6,440 9,856 11,240 General and administrative 2,547 4,377 7,943 8,664 $10,518 $15,670 $25,994 $29,241 McAFEE, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (in thousands, except per share data) (Preliminary and unaudited) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Net revenue: GAAP net revenue $314,267 $277,364 $628,501 $549,331 Gross profit: GAAP gross profit $242,933 $220,233 $487,933 $440,083 Non-cash stock-based compensation charges (A) 597 971 1,546 1,895 Amortization of purchased technology (B) 8,515 5,226 16,327 9,067 Non-GAAP gross profit $252,045 $226,430 $505,806 $451,045 Operating income: GAAP operating income $41,114 $27,667 $89,147 $77,872 Non-cash stock-based compensation charges (A) 8,560 15,670 23,805 29,241 Amortization of purchased technology (B) 8,515 5,226 16,327 9,067 SEC and compliance costs (C) 9,148 3,352 14,200 3,772 Amortization of intangibles(B) 3,556 2,846 6,233 5,639 Acquisition retention bonuses and severance (D) 2,410 2,344 4,660 3,263 Restructuring (benefits) charges (E) (77) 568 3,049 1,119 Loss (gain) on sale/disposal of assets and technology (F) 7 129 (1) 153 In-process research and development (G) - 460 - 460 Non-GAAP operating income $73,233 $58,262 $157,420 $130,586 Net income: GAAP net income $49,393 $31,363 $95,562 $72,253 Non-cash stock-based compensation charges (A) 8,560 15,670 23,805 29,241 Amortization of purchased technology (B) 8,515 5,226 16,327 9,067 SEC and compliance costs (C) 9,148 3,352 14,200 3,772 Amortization of intangibles(B) 3,556 2,846 6,233 5,639 Acquisition retention bonuses and severance (D) 2,410 2,344 4,660 3,263 Restructuring (benefits) charges (E) (77) 568 3,049 1,119 Loss (gain) on sale/disposal of assets and technology (F) 7 129 (1) 153 In-process research and development (G) - 460 - 460 Provision for income taxes (H) 10,353 4,300 26,172 25,549 Non-GAAP income before provision for income taxes $91,865 $66,258 $190,007 $150,516 Non-GAAP provision for income taxes (I) 24,804 17,890 51,302 40,639 Non-GAAP net income $67,061 $48,368 $138,705 $109,877 Net income per share - diluted: * GAAP net income per share - diluted $0.30 $0.19 $0.59 $0.44 Non-cash stock-based compensation adjustment per share (A) 0.05 0.10 0.15 0.18 Other adjustments per share(B)-(I) 0.06 0.01 0.12 0.05 Non-GAAP net income per share - diluted $0.41 $0.30 $0.85 $0.67 Shares used to compute Non-GAAP net income per share - diluted: 163,613 161,404 163,339 164,113 * Non-GAAP net income per share is computed independently for each period presented. The sum of GAAP net income per share and non-GAAP adjustments may not equal non-GAAP net income per share due to rounding differences.
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, see items (A) through (I).
Items (A) through (I) on the "Reconciliation of GAAP to Non-GAAP Financial Measures" table are listed to the right of certain categories under "Gross Profit," "Operating Income," "Net Income" and "Net Income per Share" correspond to the categories explained in further detail below under paragraphs (A) through (I).
While we currently do not believe a non-GAAP net revenue metric is meaningful, GAAP net revenue has been provided to enable an understanding of the relationships between GAAP net revenue and the GAAP and non-GAAP financial measures included in the table above. As an example, this facilitates non-GAAP expense to revenue analysis. The non-GAAP financial measures are non-GAAP gross profit, non-GAAP operating income, non-GAAP net income and non-GAAP net income per share - diluted, which adjust for the following items: non-cash stock-based compensation, amortization of purchased technology and intangibles, SEC and compliance costs, restructuring (benefits) charges, acquisition retention bonuses and severance, loss/(gain) on sale/disposal of assets and technology, in-process research and development, income taxes and certain other items. We believe that the presentation of these non-GAAP financial measures is useful to investors, and such measures are used by our management, for the reasons associated with each of the adjusting items as described below:
McAFEE, INC. AND SUBSIDIARIES PROJECTED GAAP REVENUE AND RECONCILIATION OF PROJECTED GAAP NET INCOME PER SHARE TO PROJECTED NON-GAAP NET INCOME PER SHARE (in millions, except per share data) (Preliminary and unaudited) Q3 FY'07 FY'07 Projected GAAP revenue range $305M - $325M $1,260M - $1,300M Projected net income per share reconciliation: Projected GAAP net income per share range - diluted $0.23 - $0.28 $1.07 - $1.27 Add back: Projected non-cash stock-based compensation adjustment per share, net of tax (1) $0.05 - $0.09 $0.27 - $0.37 Projected other adjustments per share, net of tax (2) $0.04 - $0.08 $0.12 - $0.22 Projected non-GAAP net income per share range - diluted* $0.36 - $0.41 $1.61 - $1.71 * We believe that providing a forecast of the non-GAAP items set forth above is useful to investors, and such items are used by our management, for the reasons associated with each of the adjusting items as described below.
McAFEE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED REVENUE BY PRODUCT GROUPS (in thousands) (Preliminary and unaudited) Three Three Three Three Three Months Months Months Months Months Ended Ended Ended Ended Ended June March December September June 30, 31, 31, 30, 30, 2007 2007 2006 2006 2006 McAfee Corpor- ate $181,923 58% $185,717 59% $173,134 57% $167,969 58% $166,183 60% McAfee Cons- umer 132,343 42% 128,517 41% 132,082 43% 119,811 42% 111,181 40% Total MFE $314,266 100% $314,234 100% $305,216 100% $287,780 100% $277,364 100%
SOURCE McAfee, Inc.